Marketing: Is it the Right Decision?

From time-to-time, I am asked if I would MarketingDecisionrecommend that a company should invest in “marketing?”  If you are in business, obviously you should market your products and services, but the “what, where, how much, how do I know it worked” should go into making that decision.

Many companies rushed to the web in the early days of the Internet, which was to be the end all in reaching the end customer only to realize that their efforts, many times very expensive, went unrewarded.

Why do marketing initiatives miss the mark?

Like anything else, you need to know what you are doing!

Know the Customer
The key objective to effective marketing is to know a lot about the customer you are trying to reach.  This requires a degree of research, practical knowledge and, more likely, legwork to get out and interact with prospective customers and discover their real needs.  Validate that you marketing message will be affective.

  • Test your message and approach.
  • Determine if your product or call to action will respond to customer needs.
  • Measure the response of the customer to take the next step and contact your sales channel or buy your product.

This sounds simple but surprisingly “know the customer” is overlooked. Too many assumptions are made on who the customer is, their needs and what will cause them to respond to a marketing offer.

“Know the customer” should not just apply to new customers that you are trying to reach, but also to people currently buying your products or services.  Do not take your current customer, for granted, as they can be your best promotion platform for referrals.  Knowing the customer may be confused with customer service, but if you do not continue to meet the needs current customers have, they can quietly withdraw from doing business with you and direct their purchasing with competitors that are responding to their needs.

Example: Solving a Problem
When I was in aerospace, it was difficult to market to the right decision maker. You could spend a lot of money and not really know if you reached the right decision maker(s) and influenced new business. Therefore, I resisted a number of marketing proposals and scaled back our marketing industry conferences where we had the opportunity to influence decision makers face-to-face.

However, one of our technical writers proposed writing a handbook on how our units were used during takeoff and landing.  We reviewed the copy and found it to be very educational, even within the company.  We printed a limited number and they were well received. More were printed and the handbook went onto become a major marketing tool for us educating buyers and engineers who specified our products. The handbook solved a customer problem where it helped the customer understand the actual use of the product by the pilot when flying the plane.

Target Resources
There is a wide array of marketing tools – web sites, direct mail, email, media (radio/TV), industry magazines, product shows, etc.  As a business you may not be able to afford to use more than one or two of these at any one time.  Consequently, you will need to align your resources of people and money behind the marketing tool that will give you the highest return. Spreading your staff and money across a large number of marketing channels will dilute the effectiveness of any one channel and significantly reduce your ability to measure success.  Select one channel and maximize your potential to be successful in that channel.

Measure Effectiveness
Many companies spend a tremendous amount of money and energy marketing without a clear method or intent to measure the effectiveness of the program or campaign.

Example: Wasteful Habit Marketing
One company that I worked with had a line item for advertising (marketing) in the Yellow Pages.  When I asked them if the Yellow Pages was effective in reaching new customers.  The answer was no, they did not record if a lead or order was generated by looking in the Yellow Pages, web or by referral.  Informally, they said that the majority of new business was due to referrals.  When I asked why did they spent so much on Yellow Pages advertising without knowing if it resulted in new business , and they said, that it was “just what we have always done.”
Example: Profitable Target Marketing
On the other hand, we designed a system for one company that enabled them to do an amazing job of tracking their effectiveness with every campaign.  The company was a retail point-of-sale fast-food home delivery business and they targeted residential and commercial locations using a database of all known addresses in the city with direct mail, recorded each coupon when an order was placed and which campaign it was related to.  Calculating the effectiveness of the campaign was quickly determined.  Since the campaigns were directed to certain demographics of the city, they could identify the more successful campaigns and where in the city they were successful.  Consequently, they collected tremendous information on how to stimulate profitable business and develop new effective marketing campaigns.

Marketing is Not Free
I was often at odds with my marketing team regarding their budget.  I viewed marketing on a ROI (Return On Investment) basis but my team wanted to measure the dollars on a revenue basis or how much revenue would be generated by the marketing campaign.

Marketing ROI
The dollars used to fund marketing campaigns come from the bottom line.  If your business operates on a 5% profit, then a $100,000 marketing campaign needs to produce revenue that, after subtracting expenses, will equal or exceed the amount of money spent on the campaign.  In this example then the revenue would need to be $2,000,000 of new business. This was normally more than the estimate I got from my marketing team.

Marketing Spend and Cash Flow
Another key issue relates to the time frame when the ROI will occur.  If the inflow of business does not occur within a reasonable period of time, the spending on marketing will impact your cash flow.  When trial testing the marketing campaign make sure you know what the delay time is so that you can prepare for any impact if any, on your working capital.

Summary
I view marketing as a valuable business strategy, but it must be coupled with strategic actions defined by specific returns.  Despite the resistance of your in house or contracted marketing resources, you need to reduce the marketing plan into a measurable activity and evaluate the plan on a cost/return basis.

Marketing people can be very persuasive, that is why they are in marketing, but you, as the owner, you need to hold the line and insist on financial accountability that will protect the bottom line of your business.

Use the following checklist to develop effective marketing programs:

  • Do you know the customer?
  • What customer problem is being solved?
  • What marketing method will work best?
  • Are we proficient in using that marketing method?
  • Have we trial tested the campaign?
  • Do the results of the trial meet or exceed our objectives?
  • How will we measure the effectiveness of the campaign?
  • What is the ROI and period of return on this campaign?

Marketing can be the right decision for you but make sure you subject it to a rigorous process and hold the campaign accountable to deliver results. Do not just do it as the company above did just because it was “the way they always did it.”

Comments

  1. Great article, Mike. I think some of the answers to your excellent list of questions stem from understanding why clients need one’s products or services. Identify the why, and often the what, how and where fail into place nicely. — Peter Busacca —

  2. Thanks Peter. The key to understanding the why is moving from what we want the customer to buy to what problem the customer needs to solve. We can get too enamored with our offering (product or service) and expect the customer to accept it on our terms, overlooking or not recognizing their needs. The ROI of solving a customer need can be easily calculated, accepted by the customer. THis will be far more acceptable to the customer than for the customer to understand the ROI based upon the marketing claims of the product or service that we are marketing.

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