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Customer Manufacturing Update |  |
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Dear Mitchell, Here is your September Customer Manufacturing Update. This month we're looking at how to determine if you are wasting money on your marketing communications efforts. The old saying, "Half the money I spend on advertising is wasted, and if I knew which have, I'd quit spending it" can become obsolete. All you have to do is understand how to use a readily available tool.
If you have friends or colleagues who would
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What parts of your marketing mix are working, and which aren't? Marketing Mix Modeling has been around for some time. It is a staple in the business-to-consumer marketing arsenal (at least in larger companies). However, the techniques have not been applied by the business-to-business marketer for several reasons. All of which are no longer relevant. This month's white paper introduces the concept of Marketing Mix Modeling, and while touching on how mid-sized business-to-consumer companies can use it, the paper's real focus is on how it can now be used effectively in business-to-business markets by large and mid-sized companies alike.
There is a very old quote which drives the age-old question mentioned above and often attributed to John Wanamaker, which most of you have probably heard at one time: "Half the money I spend on advertising is wasted, and if I knew which half, I would quit spending it." Many people claim to feel that way. We have always had our doubts based on behaviors we have observed. The point was brought home again while reading a Business Week article, "Ask Your Doctor If This Ad is Right for You" that discussed the $4.7B in direct-to-consumer (DTC) drug advertising and its proven lack of effectiveness. In truth, the article went on to suggest that some of the ads may actually be turning consumers off to the very drugs being advertised. (It was amusing to find a DTC drug ad in that very issue of Business Week.) The article noted that other than the Boniva ads featuring Sally Fields, which cost half as much as some other campaigns, and showed an increase in sales of 11% and was the mostly frequently named drug by consumers (Sally should get an increase in her endorser fees), most, if not all, of the other campaigns were failures. Based on 12,500 patient interviews only 23 patients requested a specific drug. Even worse, Ambien, the 5th most advertised drug, was often remembered more for its adverse side-effects (which must be listed by law) than for its benefits. Further, there does not seem to be enough follow-up by the drug companies to close the loop with the doctors they are recommending their viewers talk with. Why then do the drug companies run these ads? As our Principal, Neil Reckon likes to say, "Don't know, can't say, hard to tell." If they truly believed what Wanamaker is alleged to have stated, they would stop advertising. But there is no sign of that. In fact the only movement we can find to reduce DTC advertising by the drug companies is Al Franken's proposed bill to make marketing expenses non-deductible for drug companies. (Apparently he was not trying to be funny.) Based on our commentary in last month's Update, we would love to see how many pages it takes Congress to define Marketing.
Ok, we have a theme going this month ... at least so far. However, in this case we are looking at the entire aspect of Marketing, not just Marketing Mix. The recent focus on two Arab travelers from the U.S. to Yemen via Amsterdam who were detained due to strange luggage contents, got us thinking about the whole issue of passenger screening and lessons which Marketers can learn from this subject. (Ok, we are twisted, but we fly a lot and we think about Marketing a lot, so it is not really too big a stretch.) Last year there was an attempt to blow up a U.S. airliner by a passenger which resulted in an acceleration of advanced screening methods including full body scans. However, with that particular passenger there were some specific clues:
So what is the lesson here for us in running our businesses more effectively? Simple, it is much cheaper to get it right in advance than to try to make up for it afterward. The cost of full body scans, in terms of equipment deployment, additional passenger delays and frustration is much greater than simply connecting the dots and targeting this person. To the best of our knowledge this is the only person who has traveled to the U.S. in the last several years with the intent and potential ability to blow up the plane. Screening everyone to have caught him seems foolishly expensive when he could easily have been caught prior to boarding the flight from the information available. The correlation? It is much less expensive to get the front-end of marketing right than to try to make up for it on the back-end. This year, most retailers did a stellar job of having the "Goldilocks amount" of merchandise on the shelf for the holidays. (Not too much, not too little.) This will likely translate into much higher profits for them on a slight increase in sales. The U.S. car makers (most of whom went bankrupt) focus their marketing on moving the cars they build (special pricing and promotions, discounts, etc.) rather than on the front-end of marketing where getting the right cars to market would mitigate the need for discounts. A reminder once again of what Philip Kotler said a while ago, "...most of the impact of marketing is felt before the product is produced, not after."
We all face low-priced competitors. Some of them are good and have driven costs that don't add value out of the process, which forces all suppliers to get better. However, many of them are just hoping they can get some business by offering a low price. And the value they offer may not even be worth that low price. As our friend Ted Steinberg often says when asked how much his services cost, "You mean if you buy them from me, or if you don't buy them from me?" The Office Depot is ran a terrific commercial to demonstrate this point. (That is not the point of their commercial, which is to sell banners and other products, but we liked the content of the story in the commercial and have no comment on its ability to achieve Office Depot's goals.) As Roy Field's, former Group Executive for Teledyne used to say, "If you can't fix it, feature it."
We appreciate any feedback you can provide to help us make sure these Updates give you value each month. Feel free to respond to this e-mail with any comments or suggestions for future topics or ways we can make these Customer Manufacturing Updates more valuable to you.
Thank you for your interest, and if we can provide
any
additional assistance in sales, marketing, strategy, or
innovation to help you increase your sales,
let us know.
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