How to set a marketing budget that works

How to set a marketing budget that works

Nov 21, 2016 | Governance, Management, Marketing

Pretty obvious question, particularly at this time of the year when organisations are starting to think about the preparation of the 2017 budget.

In many  enterprises, the marketing budget is set by the boss and the finance people.

They see marketing as a cost, so typically it becomes a percentage of revenue. They agree a targeted revenue, then apply a percentage.

What absolute bollocks

If marketing is a driver of revenue, then the more you spend, the more productive you should be, and when well done with metrics and sensible discipline, the more money you get at the top line as a result.

Therefore the challenge is for marketers to come up with sensible marketing plans, that promise to deliver on the strategic objectives agreed by the enterprise.

Marketing then becomes  an investment, not a cost.

Zero based marketing will have its day, when the marketing planning  is done reflecting the strategic drivers and priorities of the enterprise, and answers the question ‘what are the best ways to deliver on the objectives?’.

Do that and you generate the revenue, and marketing becomes an investment, the effectiveness of which can be measured.

Thinking about marketing as an expense is about the most common stupid assumption in the corner office, but is well ingrained because marketing people have lacked the balls and organisational grunt to back their convictions that it is otherwise. When confronted by reasonable, but difficult questions marketers without the necessary experience, knowledge, or intellect,  break into generalisations, weasel words and fluff.

Use cascading S.M.A.R.T. goals to forecast and measure the impact of the tactics employed to achieve an outcome, any outcome, not just marketing.

Pretty sensible acronym.

Specific. Measureable. Agreed. Realistic. Time bound.

I know the BEHAG (Big Hairy Audacious Goal) crowd will trot out JFK’s BEHAG to reach the moon by 1969, that galvanised the space effort, but most of us do not have the resources of the US at our disposal, so lets just take a powder and be realistic.

Set realistic enterprise goals, then have them drive the allocation of resources to marketing, and indeed elsewhere, hold people accountable, and have continuous learning loops in place. Only a fool makes the same mistake twice.

I once had a very confronting shouting match with the MD of a business I worked for who drove the whole budgeting process from the bottom right hand corner of the P&L. Somehow, magically, a number appeared, and he drove budgets backwards through the business. It was a reverse auction between functions, who could promise to deliver the most for the least?

Problem was that the promises were extracted in a strategic vacuum, and meant little.

The shouting happened as the finance guy offered up a chunk of his budget that had been earmarked to integrate the reporting systems of several businesses we had taken over the previous year to deliver reliable and timely sales and margin numbers. At the time (it was over 20 years ago) I stated it was not worth spending marketing budgets if I could not track the outcomes, and the priority was therefore the sales information, not the promised revenue resulting from the marketing expenditure because it could not be reliably measured.

I smile now, but at the time, it was not fun, and was just another nail in my corporate coffin.

Should we be rethinking our Unique Selling Proposition?

Should we be rethinking our Unique Selling Proposition?

Nov 15, 2016 | Marketing, Sales

From the dawn of marketing time, the Unique Selling Proposition has been a foundation idea. I wonder if it holds the same attraction now, post the digital reconstruction of marketing, or should we be rethinking our approach.

The USP was intended to communicate what you did that nobody else could, or would. That was fine in the days before the marketing world was global, as in your local area you could pretty easily be unique, but that is no longer the case.

Any idea that emerges that generates traction with customers will be copied very quickly by competitors, making it no longer unique. Anyway, just because an idea or claim may be true, there is no compulsion that customers should believe it.

Perhaps this boils down to making an appeal to people’s hearts rather than their minds. This has always been the case, but in a homogenised world, takes on even more importance.

When I think about my own behaviour critically, there are a few things I notice that presumably are pretty common. If so, why are we not using them more in place of claims of bigger, faster, better?

Choice. In most cases, there is more than one product that solves whatever challenge I am facing. In making a choice, being sure of the ability of the product to deliver the solution is worth money to me.

Top of mind. TOM is even more relevant than at any time in the past. We are blasted with thousands of messages every day, so being Tom when the appropriate occasion arises is gold!. A good enough solution that is there, easy to access, and offers reasonable value will get a vote.

Experience is never forgotten. Good or bad, the past influences the way we behave today. There are now a number of café’s in easy walking distance of my office. Some time ago I got a lousy coffee in one of them, probably a ‘trainee barista’ but when I pointed out politely the coffee was crap, all I got was a shrug, and explanation that the boss was  not there. No second chance will be given, perhaps irrational, as it was a while ago, and almost certainly a one-off, but  that is their problem, not mine, I have plenty of choice.

Heart. What it says about us. Sometimes we make purchase choices simply on the basis of what the choice we make says about us, and this is usually almost unconscious. I drive an old Mercedes, it is a great car, but much to my surprise, it is what that car says about me that makes it so comfortable for me. Similarly, in the days we all smoked, Marlborough was a big brand, not because there was any USP, it was just a fag, but because of what it said about the smoker. (Lucky that has changed a bit over time).

Value is always a combination of all sorts of little things, some not obvious. Convenience, availability, branding, packaging, exclusivity, design, and yes, price, as well as many other often highly personal factors.  In an increasingly busy life, changing just a little of any one of the factors can considerably enhance value.  When we compute value, again often unconsciously, it is rarely the USP that pops into our minds, there is a mental wrangle of all the foregoing, that sometimes ends up being expressed as a number relative to some other number for an alternative, called price, and sometimes as just a feeling.

Back to the question, should we rethink our USP?

To my mind the changes that have occurred in the last 20 years demand that we do so.

We used to be able to sell products, so the USP was a useful tool, but that time has passed. The power in the buying relationship has moved from the seller to the buyer, completely altering the nature of a sales process. We can no longer deliver a product and charge a price, now what we deliver is an increasingly personalised value package, for which we are paid. We need therefore to be considering a Unique Value Proposition, UVP.

It might seem just a semantic difference, but it is a huge behavioural one

 

Requiem for a master poet.

Requiem for a master poet.

Nov 13, 2016 | Personal Rant

My first year at University, 1970, was marked by many life defining events. Call-up to Vietnam and the resulting awareness of the world around me, an opening of my mind to thinking beyond the surf, sport, beer and meat pies of my youth, meeting Harvard Professor Jim Hagler who became an indelible mentor, my first serious girlfriend with the memories that linger after 45 years, and hearing the first record of Leonard Cohen.

Each in their way shaped the progress of my life, and I remain indebted to them all.

On Friday I heard of the death of Leonard Cohen, and on getting home, felt compelled to play that recording again. Mumbling along with the words of  ‘Suzanne’ “Maryanne’ and   the ‘Sisters of mercy”  coming as they did from the depths of memory with absolute clarity triggered a deep wave of feeling for times long past.

Earlier this morning, I stumbled across this podcast of Leonards last interview by David Remnick of the New Yorker magazine, and have just finished listening to it for the second time.

The 18 year old tear-away of 1970 bears little resemblance beyond the genes to the 64 year old grandfather I have become, but listening to the interview, and reflecting on Leonards words and rhythms this morning touched something deep in my soul.

You never knew me Leonard, but I feel I knew you. Godspeed.

Picture credit: New Yorker magazine.

Addendum. This post from the wonderful ‘Brain Pickings’ site adds considerably to an understanding of the depth and breadth of this great gentleman who gave us so much.

Addendum 2. April 2021. I stumbled across this black and white doco about Cohens early life, a time capsule of a unique artist. https://tinyurl.com/krd9na7x

 

The essential 70/20/10 rule for business optimisation.

The essential 70/20/10 rule for business optimisation.

Nov 10, 2016 | Governance, Leadership, Management

Most of my time is devoted to improving SME manufacturing businesses. I do it for a living, mine and theirs, and I have an ulterior motive.

I want my grandchildren to have a better life than me, and while I have had a great life, the pace of  improvement has faltered noticeably over the last 25 years as the productivity of our economy has floundered, and the flow through benefit to living standards has reduced to a trickle.

I put it down to the decline of manufacturing.

We have taken the easy way out, as an economy and society, and taken the benefits before they were able to be sustained.

Short term gain, long term pain.

The evidence is everywhere, from the short termism of the stock market to the supposed microscopic attention span of millennials, self indulgence of baby boomers,  and the politics of who gets what of the tax take ripped out by the three levels of government and their acolytes.

I believe that without manufacturing, the process by which we gain leverage, the decline will continue. There are only so many baristas and hairdressers we need, and they offer no leverage, as you can only make one coffee at a time.

To the rule in the header.

Almost all small and medium sized manufacturers I work with, from those resilient few remaining who supply into FMCG markets, to those in engineering and service manufacturing (like printing) the formula for optimisation is reasonably consistent.

70/20/10.

70% of the time, effort and investment needs to be devoted to the foundations of the business. The numbers, financial and otherwise that deliver meaningful measurable and actionable planning and feedback loops on the allocation of their resources to their core business. In effect it is improving on the things that made you successful in the first place, but which have not evolved as quickly as the competitive  environment around them, so they are being squeezed.

20% of the effort and investment into adjacent areas. These are the places that will in all probability spawn the new product category, class of competitor,  demanding but value driven customer, and the emerging niche market that technology has enabled. This adjacency leverages some of the capability developed in your core market in a different way, stimulates capability development, and delivers you asset productivity.

10% of the effort is playtime. This is the messy, risky, scary, and significantly disconnected from your core, innovation and change initiatives. it is from this effort that the product and business model disruption that will change everything can emerge. Way better to be on top of the changes, anticipating and planning for them, rather than being taken by surprise and belted by them.

The numbers vary, and the nature of the resources allocated varies, but in rough form, 70/20/10 seems to hold across business sizes, models and market types.

 

11 rules to ensure customers love you

11 rules to ensure customers love you

Nov 8, 2016 | Customers

Customers and potential customers always remember how their needs and expectations were managed through the sales process. It is all part of the experience of doing business.

However, In my experience, B2B businesses are often poor at effectively managing these pre-sale customer touch points. Many seem to think that their widgets are the best in the world, and customers should be grateful they supply them, at the very least, they should be prepared to respect that our life is not easy.

Repeat to yourself: “Customers do not care about my problems, only theirs” in the mirror every morning.

Following are 11 simple rules, evolved out of the cock-ups I have seen over many years.

# Customer communications should always be acknowledged, and a customer should certainly never have to send anything twice, and worse still, to different people.

# Following the above, when a customer says something to one person, it should be heard by the whole company.

# A customers time is their most valuable resource, never, ever, ever, waste it

# Sweat the minutia. Even a tiny mistake in the paperwork, or packaging, can bring undone lots of good work elsewhere, so be a zealot for the detail.

# Do not expect the customer to play any role in your QA. A product failure is your complete failure, not just a mild annoyance easily remedied.

# Customers should never have to ask for a progress report, they should be available on an ongoing basis.

# Let potential customers set their own pace through the sales process. While it is often a delicate balance between closing a sale and letting it slip away through lack of expected attention, few like to be pushed.

# Share best practice that emerges amongst all your customers. Helping to make them better in their markets is in everyone’s interests.

# Customers love to be loved, show gratitude and respect at all times,

# Never moan about how hard you had to work to deliver their product, they do not care, you just sound like a spoilt child.

# Over deliver what you promised, no fanfare, no hype, just unexpected value.

 

Finally, the old adage that the customer is always right is rubbish.

However,  strategically important customers, the ones you really want for the long haul, the ones that make you a better supplier, they are always right.