Tuesday, November 17, 2009

Marketing Dollars and Sense: Spending effectively today to market for the future (Part 2)

As can be seen in part 1, neither type of marketer really instills confidence about the future. On the one hand, the all marketer spends a lot of money on marketing and gets no ROI, but is always at the top of the stack when a customer needs something. Conversely the nothing marketer spends no money so there is no ROI to be concerned with, but must spend core business time on direct marketing to replace any lost customers. In both scenarios the lesson learned is that effective marketing should be a balance of current costs and growth.

For the companies that find themselves in the all category of marketers, effective management of marketing dollars will come from instituting metrics to evaluate the success of a particular marketing method. A lot of times what you will find in an all marketer is free spending and no evaluation of the effectiveness of the spending. Even using ROI, which I don’t recommend because marketing costs are rather abstract and revenues from marketing are theoretically untraceable, would be a good start. However considering the abstract and theoretical complications of ROI, other simple metrics are available to gauge marketing effectiveness. One of the most rudimentary but effective metrics is asking the question “how did you hear about us?” to your customers. For my all company this simple procedure of asking our customers “How did you hear about us?” when they called in to place an order generated a ton of useful information for our company. Our procedure had our one inside sales person mark off how customers heard about us in an excel sheet. This helped our company to lock into which methods of marketing were most effective to reach our customers and generate sales. Promotional fliers that were sent out weekly generated almost no sales interest, while small 20-page glossy catalogues sent out quarterly or left by a salesman at a cold call generated the most sales interest. More than this we found that internet marketing on our website and via e-mail generates some interest, but not as much as I.T. experts would lead us to believe it does. Based on the results we were able to save money by cutting the least effective methods. In this way we are now controlling our costs AND staying in front of our customers.

For the companies that fall into the nothing category of marketers, effective management is more about letting marketing do some of the customer contact work. The nothing marketers will have a hard time seeing the correlation between sales and marketing. Even simple firsthand metrics like the “how did you hear about us” questions don’t provide ample evidence to justify spending the money on marketing. Recently I sat down with the owner of my nothing marketing company and talked about the current customer base. We noticed that year on year there is a large level of attrition among our existing customers for various reasons. Fortunately the owner always finds a new customer to replace the lost ones. Typically however, he is only usually able to line up business to replace what he had lost and does not bring additional business to the company. This obviously isn’t a real recipe for growth. I tossed him a little “did you know” that believe it or not the time and effort he puts in pursuing replacement customers IS marketing. I told him however, that if the company was doing more traditional marketing to potential customers with similar interests as existing customers he wouldn’t have to be in two places at once. He wouldn’t have to invest as much of his time and effort looking for new revenues to replace lost ones. Considering that he is the chief new business generator, and his own HR department, and his own legal department, etc., he was better able to appreciate what marketing could do to make his job much easier. As a result we incorporated some marketing dollars in the operating budget for next year. Obviously, we made sure to install metrics to gauge the effectiveness of the new marketing expenses. This way he will be able to see if our marketing is driving new business to the company or not.

Overall, no matter what type of marketer you are or you work for, marketing should be a priority for 2010. For the all marketers in the group, finding a metric that works for you to help control costs and get more bang for your buck is crucial. If you are a nothing marketer, a cost-benefit analysis of your time spent on personal marketing efforts and compare it to what other things you need to be doing with that time may help you see the light. If 2009 was about cutting costs to stay in the game, then 2010 needs to be about getting greater efficiency from your costs. So spend the money on marketing, but remember that if it doesn't make dollars, it will never make sense!

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