Lairig Marketing

Planning For the Turnaround - Part 3

Part 1 recap: While everyone craps their drawers due to the economy, you smile about the recession strategy you put in place months ago. You now start thinking about a recovery strategy for early next year.

Part 2 recap: You create a high-level budget estimate for an acquisition-weighted marketing strategy, revenue based and driven by informed metrics such as cost-per-customer-acquired.

Before we conclude with Part 3, two quick updates.

First, I mentioned Monday that the sooner Wall Street flushes itself the better - was Tuesday soon enough? Now, as I type, Asian markets are down 10%. How soon until Bernanke steps in with an emergency cut to 1%? [UPDATE: OK, so he cut to 1.5 after I went to sleep.]

Second, a survey was just released with two data points that ought to stifle the canard “now is the time to advertise.” Point #1: Epsilon surveyed some CMOs and assorted other marketing execs, with 65% saying their ad budgets will decrease because of the troubled economy. Point #2: 94% agreed with the statement "a tough economic period is precisely the time when marketing plays a key role." How noncommittal.

The Fudge Factor

I mentioned yesterday to inflate your budget calculation by 35%. Here’s the explanation:

- 10% is to give back to the CFO so he or she feels like they beat you down

- 10% is for customer research

- 7.5% is for consulting support (such as positioning work, channel strategy, etc.)

- 7.5% is for training

Get the latter two on the calendar early in the year. Otherwise, you might find yourself in a “give back” dilemma later in the year when the CFO comes looking for discretionary spending to cut.

Reverse the Acquisition Funnels

Map out the different channels the new customers will flow through. For each channel, reverse the funnels to determine the number of prospect touches required. Multiply by average media cost for each channel, and sum all channels. Tweak this model until it jives with your total acquisition budget, calculated as shown in Part 2.

Make the Case

Turn all this math into a compelling story about an acquisition and growth strategy. The owner, CFO, et al. should appreciate that much more than a list of tactics randomly spliced together.

It’s all a bit mechanical and boring, indeed. But the strategy part isn’t supposed to be sexy.

I’m living proof of that.

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With what’s going on in the world, Yom Kippur should be a national holiday. So I’m going to do my part. “See” you Friday AM.

Planning For the Turnaround - Part 2

Monday’s blowout on Wall Street should quiet those “get out there and advertise!” guys. An underwear-staining day for them, no doubt. The other good news: the sooner we get a couple more meltdown days like that, the better the odds of a springtime revival. As promised yesterday, here’s the continuation of your guide to “turnaround planning” (with a final[?] Part 3, tomorrow).

Strategic Choices - Acquisition Versus Retention Versus…

The strategic choice you should have made at the beginning of this year was to overweight your budget toward existing customers. (The great direct marketing veteran Ray Shultz

tracked a survey that found most marketers were doing the opposite, for some reason.)

Your choice next year should be to overweight acquisition, something like this:

- 60% acquisition

- 15% retention

Wait, you say, where’s the other 25%? Increasing share of wallet - a far different strategy than retention.

P.S. Don’t worry about costs for staffing, training, etc. We’ll tackle those tomorrow.

Fun With Numbers - The Marketing Revenue Baseline

For this step, you’ll need the total revenue objective for next year, split by new and existing business. Then determine how much of the new revenue Marketing will be accountable for. Convert that to units of sale and number of customers, then multiply by your average cost-to-acquire-a-customer. That’s your first pass at a budget for acquisition.

First-pass for retention and share of wallet will be in the ratios discussed above (e.g., retention = 15/60 times acquisition).

Add all three, and multiply that total by 130% (this factor will be explained tomorrow). Finally, add this year’s Marketing staffing cost (no headcount increase next year).

Now, as a check, multiply 2009’s planned total revenue by the average percent equivalent marketing expense over the last two years. See if this is within 25% of what you calculated above.

Metrics & Measures

There were many inputs - ratios and such - discussed above, some you probably don’t have at your disposal. They are so essential to marketing strategy development that you should consider assigning someone to collect and analyze any missing data points throughout 2009 so that your 2010 planning will be more precise.

I’ll try and wrap this up tomorrow, and reveal that 130% fudge factor.

Notice we haven’t discussed tactics?

You can get those anywhere.

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WATCH FOR THIS…So much hoo-hah over the 30% ramp-up in online traffic to brokerage sites during Armageddon last week. ShareBuilder’s traffic tripled. Wanna bet the increase in the number of trades placed didn’t match?

What If You Had Unlimited Marketing Money?

Odds are you would be in the movie business. Imagine someone handed you $100 million and said, “Get out there and promote Spiderman 3. Spend like a drunken sailor.”

The film business is well known (and envied) for having marketing budgets that, as a percentage of sales, are many multiples above most other industries. Lots of TV and print advertising of course, driven by the strange economics of movie distribution.

But you would have thought the investments in online marketing would start to measure up by now. Talk about turning an ocean liner around. Have a look at www.meetthespartans.com/ as an example. Dreadful.

This AdAge article illustrates well the polar opposites of money-that-burns and money-that-earns in movie marketing:

http://adage.com/mediaworks/article?article_id=124758

First the bad.

"Universal Pictures wanted to promote the final film in the Bourne trilogy, 'The Bourne Ultimatum'…Universal's solution was a street-game concept that would engage consumers…in the U.K. Wannabe assassins accepted three-week missions during which they used water guns to try to squirt assigned targets before being tracked down by the people assigned to them…Some 160 people participated, and the last remaining player won a cash prize."

By my calculations, one million people went to see the film in London and environs during opening weekend. I guess it would have been 999,840 without the promotion. And could the “cost per lead” have been less than the price of a movie ticket?

Now the good, from the same article.

"Additionally, Universal partnered with search giant Google to create an online game…and allowed players to…[track] rogue agent Jason Bourne across three continents, solving clues that bring them closer to revealing Bourne's identity. The game used Google tools including search, Maps and YouTube. Google promoted the game though search results…"

Movie marketing and the internet are made for each other.
- The content: story lines, visuals, characters, interactivity, video, music, etc.
- The demos: young males
- The cost: way cheaper than TV, bigger reach than water-pistol fights

We’re not there yet, and I’m not sure what the missing ingredient is.

But we know for certain it’s not money.

Maybe the CIO Should Be the CMO Too

Well, it’s Friday, so it must be “recession topic” day. This time around though, instead of promoting more solid ideas for how marketers can succeed in these difficult economic times, we can simply look to our Information Technology brethren. Last Saturday’s New York Times article, “Belt Tightening, But No Collapse, Is Forecast In Technology Spending,” brought tears to my eyes.

http://www.nytimes.com/2008/01/26/technology/26spend.html?_r=1&scp=1&sq=technology+spending&st=nyt&oref=slogin

Here are some key passages, with commentary from yours truly:
“Overall growth in technology spending may fall from 7% last year to 4% or less this year, according to estimates by IDC…”

Most advertising pundits believe if it were not for the Olympics and presidential race this year, we would be seeing flat to falling advertising spend in the U.S. (i.e., negative growth).
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“Despite the economic slowdown, Pitney Bowes will make some targeted new investments that the senior management team has agreed are priorities to help the company become more competitive.”

Imagine getting a group of senior managers to agree that a marketing initiative with a longer-term outcome, no matter how positive, would survive the cut. I can’t.

“To make room for spending on new things, managers must make cuts in the spending for basic operations…In a survey of 300 CIOs last month, IDC found that personal computers and mobile devices were the hardware products that would face spending cuts first…at the top of the budget-cutting list were office programs and desktop operating systems.”

In marketing, as we know, the little things are the only ones you get to keep when times are tough. Those IT guys must have it backwards, eh? (*dripping with sarcasm*)

Kept budgets up, got strategic initiatives funded, set priorities well. CIOs have scored the proverbial corporate hat trick.

Anyway, if nothing else, having CIOs take over Marketing will solve the CMO tenure problem.

Will This Poll Be Wrong Too?

Who knew political pollsters could generate so much controversy by getting one primary wrong? It’s a good thing no one ever goes back, ever, to see how business predictions come out.

The CMO Council, some 3000 senior marketers in more than 50 countries, released survey results on 2008 budget expectations last week. How timely, given the U.S. slide into the “Big R” and the global equities market meltdown.

The report is highlighted in a release at the CMO Council’s site. http://www.cmocouncil.org/

“…37.6 percent of [the 800] respondents say annual budgets will not change in 2008, while 33.1 percent expect to increase spend by up to five percent, and almost 10 percent say their budgets will grow between six and 10 percent. Only 7.6 percent expect to see budget increases greater than 11 percent.”

If you’re keeping score at home, that’s 38% flat, 51% up. By deduction, I get 11% down.

Now the juicy part. Here is how the report was introduced:
“POSITIVE OUTLOOK FOR MARKETING SPEND REPORTED BY CMO COUNCIL”

Here’s what I would have said:
“MARKETERS WARY ABOUT 2008, AS HALF SEE NO INCREASE IN BUDGET”

We have to assume the poll was done no later than mid-December 2007, and maybe much earlier, in order to be tabulated and reported last week. Also assume there were a few Larry Kudlows and Ben Steins in the respondent pool, who might be less sanguine after the first 21 days of this year.

If there is some positive spin here, I’d say it is the opportunity for marketers to put everything under the microscope before too much gets set in stone. Revisit the business and marketing strategies, set appropriate priority levels for all plans, and turn up the dial on measurement.

That way, when Finance calls, you’ll be ready.

Weekend Homework: A Stimulus Plan for Marketing

I hate to end the week on a down note, but I’ve got a sense the newspapers, talk radio, and TV commentary this weekend will be “all recession, all the time.” Look at what Jim Cramer wrote a full day before the market dropped a gazillion points on Thursday.

http://www.thestreet.com/p/_htmlrmm/rmoney/jimcramerblog/10398953.html

“We are in the heaviest, most intense deflationary spiral of our lives.”

“We can't seem to get any closure whatsoever on the toxic residential mortgage debt, and it doesn't take a genius to see that credit card and auto debt are next.”

“Ladies and gentlemen, like a few other times in my 29 years -- 1979-1981, 1987 and 1990 -- there's nothing good happening.”

This is going to be a tough year for the Marketing function. If consumer debt does indeed go “toxic” broadly, those in discretionary industries will have a year miles beyond tough.

The funny thing is, you probably don’t know it yet. Whether you’re client side or agency side, marketing budgets most likely aren’t set. Promotional calendars aren’t firm. Campaigns aren’t approved. Everyone is waiting for the bell to go off so the new year can finally, really begin.

And when the CEO or President comes in Monday and says “Holy shit, did you see the news this weekend? We’re going off a cliff!” the heavy Finance artillery will slowly roll, on the hunt for “fat” to cut.

So here’s some thinking you can do this weekend. Figure out the existing customers you’d want to put a fence around. Most money, volume, visits, profit, – whatever the right metrics are for your industry. What can you do to keep them and get more from them, and what does that equal in dollars? You’ve just figured your minimum retention budget.

I’ll post about new customers sometime next week. For now, though, think less about fishing and more about harvesting. Unless you’re in a recession-proof industry or you’ve got a new Jobs-like product ready to roll, acquiring new customers in the next six to nine months will be a battle and a half.

So…how would you go with the horses that brung ya?