Friday, July 25, 2008

No Midas touch - the rules of marketing spends

At a very fundamental level, marketers create and sell dreams. This is good. The danger lies in getting sold on this themselves. In business - marketing represents the tip of the iceberg. 9/10ths have to be below the surface. If there's nothing down there, its a hollow dream we sell and this can backfire like crazy. Here are some simple rules to prevent this from happening :
1. Impact focus : continuously examine strategies from the perspective of impact - but that's not enough. Having envisaged the impact of strategy - it's very important to work back from desired impact through all required actions and dependencies. This will give a clear reading of the probability of converting strategy to impact - only focus on the high probability strategies. The most common mistake we make in this area is in strategy that under rates the competition - after lots of spend, we realise headway is not being made because the other guys are too strong in the supply chain, are too well entrenched perceptually etc. Another common error is over estimating the market potential - and spending the marketing $ on this estimate. High probability strategies need to be disproportionately invested in.
2. Never listen to "If-then" : Lets invest in a campaign for that new business, if they create a sales force they will need it. Do not fall into this trap - when they create a sales force we will certainly do it. There has to be certainty below the surface for the dream to survive above it. This tends to happen a lot in organisations that mix up product development and business development functions. It is very advisable to create BD campaigns (which is where most marketing $s go) on offerings and channels that are available on ground. This is really where test marketing comes in. Test marketing is only partially to do with getting the mix right - in which case people who have complete confidence (misplaced though it may be) in the existing mix would just avoid testing. The importance of test marketing for the marketer, is to know that offering / channel really is solidly on ground.
3. Clearly demarcate controls : Who spends the money - and how; is often more important than why the money is spent. It makes great sense to align spend control by competency - and not by business. Business understands what is required, but does not have the channel or content competency to decide how to manage necessary resources. Give your media buyer the accountability to control the spend - and you will have a better control job. Alignment of controls by competency also paves the way for item no. 4 .....
4. Create dummy P&Ls : many functions in marketing appear to be support - and not directly business impacting. This should be changed - and the best way is to generate a notional p&l for each function with a clear output ask. Lets take research as an example. My research team has created a notional rate card of all research products they churn out for the rest of the business. When a research project completes, the notional value is updated. The team has a mandate of generating 10x on spend as their outcome. Last year, we spent $ 600 K on procuring research - the team generated over $ 6 million worth of notional outcome as per their rate card. The p&l approach makes the most inward team business facing - and squeezes productivity out of every dollar spent.
5. Choose who you spend on : Any marketing organisation is spending on a portfolio of offerings embracing some form of production and sales. There are leaders involved in bringing product / service to market and selling it once it reaches. Not all such leaders are good at leveraging marketing investments - whether branding investment in a specific product line, or promotional investment for a specific sales team. While keeping overall strategic considerations in mind, it is crucial to bet on horses that really run - those leaders who show best utilisation of the marketing $ should get more of it.
While these 5 rules appear fairly common sensical - it is by flouting one or many of them that I have seen some of the most wasteful marketing expenditure in my career. It becomes more interesting when you realise - just adopting a few of them is not good enough. Some of them are at cross purposes - if you think for a minute you will realise it is very easy to get into trouble by flogging rule 5, if rule 1 is not in play. If you do manage to adopt these - profligacy is one thing your marketing outfit will never be accused of.