13 Ideas to use analytics to improve the credibility of marketing investments.

Nov 10, 2019 | Governance, Marketing

 

Marketing is all about making assumptions about the future, and how your investment in marketing activity will enable you to deliver revenue and commercial sustainability.

Therefore, making informed assumptions then testing their validity as you implement, reassess and improve is a vital part of the exercise in investment optimisation.

CFO’s and CEO;s do not trust marketing: they are often seen as the makers of nice adds and suppliers of pens and mousepads to their children, they do not carry the credibility quotient of an analytical profession.

For a marketer, having credibility in the ‘c-suite’ is essential. You are seeking resource allocation decisions to be made on the basis of your best estimates of what the future holds, an imprecise exercise.

Therefore, tracking the performance of previous estimates, being transparent about those that did not work, while improving those that did,  is an essential part of building credibility.

Essential to continuous improvement of the returns from marketing investment is the ability to allocate scarce resources where they will deliver the most bang for the buck.

  • Shift revenue generating activity from low margin products to  those with higher margins. To do this you need to be able to segment revenues and margins by customers and product, as well as by actuals and percentages.
  • Focus investments in those larger opportunities at the expense of the smaller, maintenance ones. Unfortunately these are often the easier ones to ‘sell’ to the corner office, and it looks like useful activity so it is often the default. Explicitly dropping lower return projects in order to fund those with higher returns, and/or more strategically consistent outcomes builds credibility.
  • Increase investment in reducing customer churn, and increasing lifetime value. Recognising the costs of customer acquisition Vs the cost of retention explicitly, usually makes this an obvious strategy,  often ignored, particularly in commoditised markets.
  • Increase investment in attracting higher share of wallet for strategically important customers. Defining the depth and breadth of the ‘customer wallet’ usually leads to interesting debates that must be sheeted back to strategy, and where strategy is absent or thin, this debate throws a light on that situation.
  • Focus resources in the growing part of the portfolio where there is some level of product differentiation that customers value. As Warren Buffett has said often: ‘Price is what you pay, Value is what you remember’. Understanding the price/value trade-off your customers make is challenging, as there is so much inherent variation between customers and the context in which a purchase decision is made, but being able to articulate the quantitative parameters of those trade-offs builds great credibility.
  • Automate repetitive tasks while increasing the personal engagement at the close of the transaction cycle. The locus of power in the purchase decision has moved from the supplier to the customer by virtue of Dr Google. Potential customers no longer need sales reps, the most expensive part of the sales budget, to provide information, but customers still do often need the reassurance of another person to make the final conversion. Use your most expensive sales resource where you generate the best return from the investment.
  • Move into adjacent market areas, after demonstrating the risks and rewards of such a move.
  • Collaborations through the value chain to deliver leverage to your capabilities.
  • Increase investments in actionable marketing and market intelligence, and demonstrate the impact of good intelligence in the past.
  • Optimise high performing segments. Being explicit about the optimisation of current performance as a means to fund commercial sustainability builds credibility, and enables the more risky ventures to be supported by senior management.
  • Understand the customer journey and focus on the areas where conversion rates can be improved. Conversion rate dashboards are now relatively easy to set up and monitor in real time, and offer transparency and opportunities to improve by being tactically agile.
  • Increase investment in strategic account planning for strategically important customers. This may not always  be your biggest customers, it is those most aligned to your strategic aspirations, where a deepened relationship will deliver long term revenue sustainability.
  • Use the accountants tools, financial ratios, NPV and IRR, in your arguments, showing rolling results that give insights to the trends happening, and providing analysis that explains the trends.

 

Marketing will increasingly become the key  differentiator between success and failure in commoditising markets. Failure to build the credibility with the ‘c-suite’ necessary to make the long term investments in marketing required, will result in a shortened commercial lifespan.

 

Header cartoon courtesy of Tom Fishburne at www.marketoonist.com

 

 

9 process management questions from the World Cup finals

Nov 8, 2019 | Leadership, Management

The process drives the outcome, right?

Well, mostly.

So long as the process directs the actions to be taken, the order in which they are taken, and is able to withstand external pressure when it is brought to bear, then yes, it will drive an outcome.

We can look at an outcome and grumble, unexpected, unfair, and so on, but we cannot change it, although we can change the practises that drove it,

Competitively we can also disrupt the processes of others, and have our own disrupted, both internally and externally.

I watched the All blacks demolish the Welsh in the fight for third in the Rugby world cup. Demolition was one description, the All Blacks simply executed their processes with precision, focus and excellence, and the Welsh had no answer. How could anyone beat that?

Well, the previous week England did just that, they beat the All Blacks to go to the final. They beat them by disrupting their processes, not allowing them to execute in the manner in which their processes dictated they should, which would bring the outcome desired, a win.

As a result, England played the Springboks in the final, lucky to be there by beating the Welsh in the 78th minute. While England were the deserved favourites, they were beaten by a team that did to them what they had done to the All Blacks the previous week. The English processes were disrupted, and they were forced to play the game the Springboks preferred. For an hour it was a slug fest, anyone’s game, although the Springboks had the better of the set pieces, by a good margin, and then two pieces of individual brilliance sealed the fate of England.

I cannot let  this go by without reference to the Australian Wannabees. It seems they had no process, or at least not enough to make an impact when it really counted, against good opposition. How can you have a stable repeatable and yet agile process when those whose responsibility it is to execute are never the same people. The trial, mix, and match of team selection is hard to fathom, and makes building a robust, repeatable process next  to impossible, no matter how great the individual players may be.

In addition, processes must be designed with the end in mind.

No good designing a process that gives you an outcome then putting in place people to deliver the outcome who are not instantly aligned to the behaviours necessary to deliver that outcome.

Designing a process, then executing on it consistently while under pressure, are different. Both are challenging, but they are not the same thing.

  • How robust are your processes?
  • Will they be disrupted by competitive pressures?
  • Are they sufficiently agile to accommodate the unexpected?
  • Does each element of the process fit comfortably into those on either side?
  • Does each element of the process compound to build the impact of the whole?
  • Are you measuring the performance of each element?
  • How responsible are the people in ‘hands-on’ control of each element for the performance of their part?
  • Is there alignment between the processes and the desired outcome?
  • Has the overall objective been broken down progressively into its component parts?

Robust, repeatable processes are the foundation of performance, will yours withstand the pressure?

 

What do bees know about marketing strategy?

Nov 6, 2019 | Collaboration, Marketing

 

Bees are essential to our survival, they are fascinating insects. There is much we can learn from their habits, the outcome of millions of years of evolution. They do not just fly around at random, pollinating as they go, they are highly organised, focused, collaborative, and each plays a specific role in the hive.

As a kid, I used to watch my grandfather catch bees in his fantastic rose garden, cultivated to attract bees. He captured them in a bag, and made them sting him on his knees, believing it eased his arthritis, born of a life of physical labour. Modern medicine has isolated a molecule in bee venom that is associated with arthritic pain relief, demonstrating again, that old wives tales are sometimes true.

Back to  the question, what do bees know about marketing strategy?

It turns out, a lot.

Advertising and mutual benefit.

Flowers, which attract the bees, need to tell the bees that there is something they like, nectar, on offer. However, there is a mutual benefit, as the bees pollinate the flowers as they take the nectar. A mutually beneficial arrangement, with many variations across the varying ecosystems.

Value proposition.

To attract bees, plants that need to be pollinated, have flowers, the bigger and more decorative, in general the better. They want the bees to be attracted, be rewarded for the visit, and return, so they offer lots of nectar. The flower is an attractive façade that makes a promise, fulfilled by the nectar. This encourages the bees to return, which is much better than a once only visit. Bit like building a brand. Invest, attract, and work towards repeat business.

Communication and referral.

Bees communicate, they signal to each other when they have found a good source of nectar by doing elaborate ‘dances’ in the air. ‘Word of wing’ advertising perhaps?

Selective Resource allocation

Plants use a lot of their limited resources producing flowers. Being a world where nothing happens on a whim, it follows that there is more value in the allocation of resources to creating flowers than to alternative uses. Perhaps flowers are just plants with an advertising budget?

Collaboration and innovation.

Bees have roles in the hive. One role is of the explorer. These bees ignore the ‘word of wing’ of their colleagues, and range more widely looking for new sources of nectar. This is a necessary function, as if there was not exploration, the nearby sources of nectar would be consumed, and with no alternatives found, the hive would die out. In commercial terms, these are the R&D or Innovation bees. They are making the investment now, so the longer term survival of the hive is assured.

Not always as it seems

Not everything that appears attractive is valuable.  Orchids are rare, beautiful, and highly evolved, and are traps for the unwary bee. Usually orchids are a one stop shop for a bee, the scent of the orchid lures the bees in, they pollinate the orchid, but then cannot get out. Once word gets around the bee community these plants are dangerous, the bees avoid them, which is why orchids are an early flowering group of plants, and are widely scattered, so the bees have less opportunity to spread the word of the danger. They are like that really  nice looking restaurant in a tourist area, the locals avoid it like the plague, but the tourists go in, and get fleeced, but the owners know the tourists are a once only visitor, so it does not matter, as there is no tomorrow, it is a once only transaction.

 

Metaphors from the natural world abound in management literature, for a very good reason: we can learn a lot from them.

 

6 ways leaders disrupt the ‘Lemming Effect’

Nov 4, 2019 | Governance, Innovation, Strategy

 

It is a confusing world.

On one hand, change is everywhere, and the pace of change is increasing as we watch. On the other, generating change in an organisation is really hard; we humans do not   like change, despite what we sometimes say. We are hard wired to resist it in the absence of a compelling reason, some set of circumstances that leaves us absolutely no option.

In the 50’s, psychologist Solomon Asch ran a series of ground-breaking experiments where he showed the power of conformity.

He shows a group of subjects two cards, one with three lines in it of different lengths, the second with a single line.  The question was, which of the three lines on card A was the same length as the line on card B?

He would go around the room, asking the question, and each person successively deliberately gave the wrong answer, until he got to the last person, the only real subject in the room. In an overwhelming majority of cases, the last person agreed with everyone else to the obviously wrong answer.

We are hard wired to conform, to agree with the group, to avoid being an outlier, even when the group is wrong; we still find it hard to do anything other than conform.

Evolutionary psychology at work.

Being outside the safety of the group, where cooperation added to the odds of survival, you conformed or you were expelled from the group, which meant you quickly ended up as sabre toothed tiger shit.

Not an attractive prospect.

There are not too many sabre toothed tigers left around, but the safety of the group is still a driving force in our behaviour, so we have to change the mind of the group.

  • Create a catalytic event. When confronted by a crisis, where the status quo has clearly failed to deliver, change is suddenly made easier to implement.
  • Identify the opinion leaders in the group; convince them, let them do your persuasion work for you. ‘Local’ networks and opinion leaders are very powerful as change agents. Conversely, they are in a position to block any change they do not like.
  • Identify a ‘keystone’ change, one that forces other changes, that that clearly demonstrates the value of wider improvements that can be achieved. Managing a manufacturing business as a contractor, we had an assumed  capacity problem, that necessitated long runs to inventory to service demand. The result was slow inventory turn, redundant stock that could not be sold, and excessive working capital, all problems stemming from the capacity limit. On analysis, the real problem was in the scheduling of the production process, which created a bottleneck at a key piece of machinery. This was solved by rejigging the timing and order of activities, changes that were strongly resisted by staff until a mandated trial clearly demonstrated the substantial productivity benefits that accrued.  This one  change led to significant improvement in almost all other productivity and financial KPI’s.
  • Create stories that the group members can relate to, that demonstrate the costs of no change are greater than the risk of change. The story related above took on a life of its own, as the staff involved rewrote history, by assuming the responsibility for suggesting and driving the ‘keystone’ change.
  • Have great clarity about the benefits of the outcome after the change, how it will be achieved, and the benefits it will deliver. Again, the story above had a knock-on effect through the business, as the results of the improvements were made very public, and credit given to the staff involved.
  • Embed the changes into the operating psyche of the organisation. Culture is elastic, and unless the binds of the past are comprehensively broken, they will spring back once the pressure is released.

Lemmings are persistent creatures, if not too bright. Put a barrier in place in front of the cliff, and they will climb it, unless there is an alternative path that is made to be more attractive in some way leads them in a different direction.

How are you disrupting the Lemming Effect in your enterprise?

 

Cartoon credit: Mike Keefe Denver Post.

 

 

The two things we have to achieve for our grandchildren

The two things we have to achieve for our grandchildren

Oct 31, 2019 | Governance, Leadership

Yesterday I listened to a hysterical condemnation of Woolworths, who had come clean to the Employment Ombudsman when they realised they had underpaid staff.

Another example of big business rorting workers, or more evidence of the impact of overwhelming complexity of a system causing self implosion?

Woolworths is the biggest private sector employer in the country, so it is reasonable to assume they have the will and resources to ensure employees are paid properly. On the other hand, with the complexity of the award systems, staggered and differing shifts, varied hours of operation, and the sheer number of people moving from one job classification to another, across locations, the complexity of the payroll must be staggering.  

Over the millennia, as we humans have become more ‘civilised’ and our social and commercial systems more sophisticated and complex, from the early Greeks through to today, there has been an increasingly delicate balance at play.

Varying supply systems and the bureaucracies that control them, deliver the means by which the surplus from our collective endeavours is distributed. While the cost of that complexity is less than the revenue generated, we continue to become more complex. Once we reach a tipping point, where the revenue generated is less than the cost of the management bureaucracies that enable it, we become pointed at shitters ditch.

Look at almost any part of the ‘management’ systems in a democracy. There are always competing priorities, with vocal advocates on all sides. The tax system, NDIS,  defence, social welfare, personal power Vs institutional power, and on, and on, and on. In Woolworths case, the responsibility to get employees pay correctly compliant with various agreements and regulations, while remaining in control of, and extracting maximum return from the biggest expense incurred in operating, is such a balancing act.

It seems to me we have reached if not passed the tipping point.

As Hemingway asks in the Sun Also Rises:

‘How did you go bankrupt?‘

‘Two ways:  Gradually, then suddenly”

Unless we find ways to address just two challenging items, we will continue to slide, as complexity increases, goals become more fluffy,  and accountability diffused .

Those two items:

Priorities.

Focus.

We have to identify and prioritise the few key things upon which the future of our children and grandchildren are based.

We then have to focus resources on their achievement. It will be long term, incremental, and politically difficult, but the alternative is ugly.

The challenge is the same for any enterprise as it is for the country, only the scale is different, along with the accountability. After all, politicians have 3 or 4 years to make a start, depending on the location, while public companies have  to make adjustments quarter by quarter or be castigated by the stock markets.

I wonder if we mere mortals have the grit and foresight to act?

A very rare few do, they are not mere mortals, they are true leaders.

Have you seen any recently?

 

Cartoon credit: Scott Adams and his mate Dilbert.