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January 27, 2006

Read All About It

"NEWS is what someone wants to suppress. Everything else is advertising.” - Reuven Frank, former head of NBC news

The Economist has a very interesting survey of the PR industry. You should take a look.

As all of us in the start up business know, outside of online or DR advertising, the most impactful way to get your brand and message out there with less resources is public relations. Now it seems the rest of the world is taking notice of this as well. Including P&G. Just like everyone else they are increasingly turning to alternatives to big media advertising because they want a measurable return on investment from their campaigns.

"In a recent internal study, P&G concluded that the return was often better from a PR campaign than from traditional forms of advertising, according to Hans Bender, the firm's manager of external relations. One reason is that in comparison with many other types of marketing, PR is cheap. In P&G's case, it can represent as little as 1% of a brand's marketing budget."

Spending on PR in America has been growing strongly and reached some $3.7 billion last year. PR spending will grow by almost 9% a year. This is faster than the overall market for advertising and marketing. Wow.

Other commentators on this trend are Laura and Al Ries. Their book, “The Fall of Advertising & the Rise of PR” asserts “PR has credibility... Advertising does not.” Their advice, much like that we give to most of our portfolio companies, is that a marketing campaign should start with publicity (or online marketing) and shift to advertising only after the PR objectives have been achieved.

Good food for thought. But here is a counter

"The advertisement is the most truthful part of a newspaper." - Thomas Jefferson

Posted by johnza at 08:45 AM | Comments (0) | TrackBack

January 06, 2006

Practical Segmentation Continued - More Paul Wang Thoughts

Paul Wang really is amazing. Another approach he outlines takes his simple segmentation a step further. In How to Manage Customers he first outlines a segmentation approach based on lifetime value and then marries this with a stunningly simple and powerful ROI based approach to segment your marketing efforts:

• The top quintile, our Gold customers, are where the bulk of our revenue and profits are generated. We must treat these customers with respect. Don’t, necessarily, market to them. Provide them with super services – service so good that you could not possibly afford to provide it to every one of your customers. The marketing dollars should be aimed at the second, third, and fourth quintiles. To the second quintile, you tell them how close they are to qualifying for Gold. You tell them how wonderful it is to be Gold, and how easy it would be for them to move up.
• The bottom quintile may actually be losers – with a negative lifetime value. Why try to retain these people? Why reactivate them? Why spend expensive service dollars on them? On the other hand, we need to manage them properly. Maybe some of these bottom quintile people may be young college graduates just starting out in life. They may have very low incomes and no children now, but they have a great life ahead of them with hundreds of dollars of spending during the next forty years. Why alienate them too early? Find out why they are in the bottom quintile. If they have a legitimate excuse and a reasonable future potential, keep them in.
• Come up with a ROI for [each} segment. The formula looks like this: ROI = (Lifetime Value of Customers in the Segment) / (Investment in the Customer Segment). In doing this, it is useful to look at three activities [as investments in the sectment]: acquisition, retention and reactivation of customers. Each may have different costs and success rates. Using this information, we can determine where to put our marketing dollars.
• What can typically result? That it's better to retain customers first than acquire new ones. That the sweet spot for marketing spend in not in the top or bottom but in those that can be influenced by spend to go up to higher quartiles.

Very useful way to think about these issues.

Professor Wang also had a bunch of great maxims (from a speach in New Zealand):

• When making promises, we have to be true to ourselves and to what we represent.
• Desperation advertising over promises what the brand can deliver
• Marketing courage is over delivering - making promises we keep
• Effective marketing is hard work - it's about doing ordinary things extraordinarily well at all times.
• Achieving long-term competitiveness requires capitalizing on investment opportunities, not in ability to reduce cost.
• Marketing approaches begin with either "Who," "What" or "How." Traditional marketing starts with "What," the product. "Who" is the customer; "How" is the process.
• Companies need to concentrate on core competencies. If they are expert at process, their marketing approach should start with "How" and then move to "What" and "Who."
• If you want to cultivate customers, you must start with "Who."
• Differentiation is key. The first level is imitation; the second, improvement; and the highest, innovation.
• In "Me Too" marketing, 80% of offerings bring in 60% of revenues and 40% of profits. In "Unique" marketing, 20% of offerings generate 40% of revenues and 60% of profits.
• When facing large competitors, always mislead the enemy, fight on your own ground at your own time, and strike when the moral effect is greatest.
• With small competitors, never refuse battle or show a sign of hesitation. When you get the enemy on the run, keep him there.
• Volume is not necessarily driven by price. If value is eroded as prices are decreased, volume will drop. Similarly, providing value innovation will help increase volume even if prices are increased.
• Value propositions can be emotional, economic or functional. No proposition can fully cover all three. More relevant and unique appeals go all the way on the emotional and functional axes, but only half way on the economic axis.
• Emotional connections make it most difficult for customers to switch brands.

Finally, check out his book: Strategic Database Marketing an excellent guide.

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January 05, 2006

Now You're Ready (for a very good tagline)

I have bemoaned the lack of good taglines for some time. I have always thought that less is more and that if you can get the essense of your marketing down to 1-5 words that really work and aren't just B.S. then you have done your homework right.

Well, I have a Leatherman and geek that I am I wear it to the office. I love the thing. And I like being able to always have a Philips head screwdriver, corkscrew and pliers avaiable at my side for those sticky board room situations. And therefore I just have to take moment to praise their headline:

Now You're Ready

It's big. It's simple. It's specific and it totally captures what Leatherman means.

Hear, hear!

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January 04, 2006

Leveraging the Optimal Synergy of Maximal Nonsense

I just got this wonderful book as a gift: Why Business People Speak Like Idiots : A Bullfighter's Guide, by Brian Fugere, Chelsea Hardaway, Jon Warshawsky

I know a lot has already been written about this but boy, it made me blush for all the times I have used such absolutely useless jargon and taken way to long to say something simple. Made me think of some good quotes for the day:

• "I have made this letter longer than usual, because I lack the time to make it short." - Pascal
• "Give me six hours to chop down a tree and I will spend the first four sharpening the axe." - Lincoln (also credited with the above quote); and...
• "Don't give me none o' that jibba-jabba!" Mr T. (in the dedication to the above book.

In addition to writing this book, guys also wrote a piece of software that reviews your documents and points out the BS. They wrote this while consultants at Deloitte & Touche (which originally gave the software away for free but now is no longer associated). One blogger wonders how consultants have enough time to focus on building such a tool instead of adding value and leveraging customers' potential. If you haven't already checked it out, you should, download it here.

For more on how to fight this kind of bull, check out the website and the blog, which also keeps track of some of the most egregious instances of marketing BS such as:

• Blockbuster announcing the end of late fees but not meaning it.
• Dumb corporate anthems (vs. jingles which I think are a lost art); and
• Microsoft's ads on Your Potential Our Passion which I won't comment on out of loyalty to my former employer.

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Paul Wang - a God of Customer Segmentation

Several years ago I went to a lecture at the excellent Northwestern School of Integrated Marketing Communications. It was by this young guy, Paul Wang, and the down to earth, insightful and practical things he had to say about customer segmentation have never left me.

What was great about what he said was that it really guided you to stay focused. Not just on the easy wins but on the ones that will pay. Great sales people cut folks out of their pipeline that are going to waste time and energy to sell. Professor Wang directs strategic (and database marketers) to do the same thing, not just in the short but in the long term.

Specifically, he has broken down the type of business buyer into three groups - program buyers, transaction buyers and relationship buyers:

• "A program buyer is one who follows some sort of internal procedure to make their business purchases. This is typical of governments or mature industries which have developed manuals which govern their buying process. Typically, such buyers try to spread their purchases of any one category among several suppliers according to a fixed schedule. Such program buyers are almost immune to external marketing stimulus. They are highly unlikely to be early adopters. One of the first steps in finding early adopters, therefore, is to identify the program buyers, and eliminate them from consideration. Your sales force and your common sense can help in this task."
• "The transaction buyer... are primarily motivated by price. They are willing to shop around for every purchase... and actively compare prices. Loyalty is almost unknown to these buyers. You can keep your warehouse open on a Saturday afternoon to meet an urgent need for such a buyer. The following Tuesday when they have a big additional purchase, they will bid it out, rather than giving it to you in return for your exceptional service only three days before. These buyers are also unlikely to be early adopters... If you are on sale, they will flock to buy from you. When your competitor is on sale, they will desert you. By keeping track of the ebb and flow of buyers as your prices change, you can often identify these transaction buyers, and eliminate them from your product launch portfolio."
• "The relationship buyer... are customers who like your products and services. They have built a relationship with your employees. They think of your company as their primary supplier of your category. They do not want to be bothered to have to shop around every time they make a new purchase. They look for quality, good service, helpfulness, friendship and information. If you can supply these things, they will stick with you when your competition is on sale. If you have a new product, they will be the first to want to hear about it. It is to these good people that we look for our product launch."

I love this segmentation. It had a strong influence on our own "regular, seeker, doubter, sleeper" segementation. It's great because it give you direction. Focus on the folks who can be loyal, who will generate the highest life-time value. Do the minimum for those who won't be influenced by your marketing anyway and avoid the temptation of dragracing for customers who will desert you on price later anyway. Clearly not just for business-to-business customers either. For more on this segmentation read here.

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