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Increasing the Productivity of Your Marketing Dollars

By Richard Nagele
President, Advantage Marketing Information

Transforming Research Into Insight

Advantage Marketing Information
35 Steamboat Avenue - Historic Wickford, RI, USA 02852
(401) 294-6910 | Fax (401) 294-6661
Affiliated Offices: Pasadena, Calif., USA and Niigata City, Japan

Increasing the Productivity of Your Marketing Dollars

By Richard Nagele
President, Advantage Marketing Information

Achieving dramatic and profitable growth is possible today. The key is applying a word more often associated with manufacturing than marketing: productivity.

In order to understand the relationship between productivity, marketing, and corporate profitability, you'll need to consider three areas:

1. Marketing as a productivity tool

2. Use of marketing techniques inside the company

3. Analysis of the productivity of specific marketing efforts.

Marketing as a productivity tool

Investments in equipment, education or a new site are generally made to increase the amount or value of goods or services sold, reduce unit costs, or both. Marketing investments should be made for the same reasons. The result should be new customers or increased usage by existing customers.

Increasing sales from the same investment in plant, equipment, and people generally results in lower unit costs or productivity increases. When budgets are tight or margins stressed (due to increased labor or other costs), it's tempting to cut marketing investments. A reduction in promotional spending doesn't require a difficult compensation or layoff decision, so it's a relatively easier short-term decision to make. The problem: reduced marketing investments generally mean reduced sales. Declining productivity and profits are the most likely result.

This is not to suggest that marketing budgets should never be reduced. Rather, it is to emphasize the point that marketing investments directly affect total organizational productivity. It is vital that any cuts be made with this point of reference in mind.

Increase use of "internal marketing"

Our firm recently interviewed a manufacturer's marketing and sales staff. Significant differences were found between what marketing and sales thought about the company's goals. In addition, attitudes varied significantly among salespeople regarding key product benefits.

People in this organization don't have a clear vision of what the company is. And if the paid staff doesn't understand the company, how will the customers?

This company is not unique.

Further, front-line people in what are often considered low prestige jobs can cost you business. These are the people who can solve customer problems quickly - or create them. Your internal marketing program must reach these people – not just executives and the sales force.

Everybody in an organization should be solving problems and addressing opportunities (a marketing related function). Since everyone should have this concern, everyone should be considered a marketer.

In the past, most companies limited the internal use of marketing to some sales-training, occasional sales meetings, pep rallies, and perhaps, a company newsletter. This isn't enough.

Many of the same techniques used to sell customers and solve their problems can also be used to motivate, involve, and increase the productivity of people.

To increase the effectiveness of internal marketing, develop a clear positioning statement for the company (in no more than one paragraph or - better – in one sentence).

Communicate this statement about what the company is to everyone using every available channel of communication that makes sense given the size of your firm. Consider use of internal media (e-mail, newsletters, corporate video, direct mail–messages inside pay slips, billboards or posters), personal selling (one-on-one communications), etc. Reinforce the message constantly.

Develop a marketing information system that uses everyone's ideas. It's amazing what an assembly-person can tell management about what's wrong with a product (and product decisions are marketing decisions).

Design compensation programs that reward solving customer problems and productivity improvements.

Use marketing techniques to develop a marketing mindset and a customer orientation in the entire organization. Over time the organization will become much more responsive to the market place, and, as a result, much more productive.

Evaluate existing marketing programs for effectiveness

Most organizations have a significant percentage of their marketing investment fixed in ongoing programs. Too often analysis is based solely on budget, i.e. how much more (or less) do we allocate this year than last.

The marketplace has changed dramatically over the last decade. Programs that once made sense may be over-funded or irrelevant today. One organization we studied showed that 30 to 35 percent of the budget was completely wasted, while significant growth in new niche markets was being constrained by a severe lack of resources.

A complete analysis of how and why money is being spent is an extremely difficult task. Many "sacred cows" might be touched. Fundamental assumptions will be questioned. People often become defensive if this process is not effectively explained to them - and marketed.

Research is often the best place to start. First informal, then in a more systematic approach that includes a rigorous look at specific segments or niches, strategic approaches and specific tactical tools used, for example, media.

An article in Fortune Magazine some time ago noted that Xerox is interviewing 40,000 customers a month in order to stay in touch with customers and solicit ideas regarding problems and new products. While this level of commitment is more than most can afford, study after study has shown the value of staying close to the customer.

Many companies have potentially valuable allies in this process. Better advertising agencies and consulting firms can often provide good strategic as well as tactical suggestions. Serving clients in different industries often allows them to provide input on what has worked elsewhere. The same is true for some research firms.

Many marketing advisors would love to experiment with new techniques. But experimentation entails risk. Given the risk-averse nature of many organizations, service providers often feel constrained when suggesting innovative ideas. Without risk, there is no significant growth opportunity.

Experimentation in marketing can lead to ways to redefine business. In redefinition comes the opportunity for dramatic double-digit growth (or more).

One important thing to remember about marketing is that virtually anything can be tested prior to broad implementation. A two-month test with key customers can pay tremendous dividends, both by reducing risk and strengthening the ideas.

Finally:

Develop relationships with key customers. Listen to them for new product and strategy ideas.
Be specific when defining target markets and businesses to be in. Remember, it's difficult to determine if goals are met if they haven't been carefully defined.
And think about Parieto's Principle. Paraphrased, 80 percent of profitable business will come from 20 percent of the market. Track this 20 percent and take care of them.
Track changes. Trends begin as small shifts and build momentum. The 20 percent of your customers that are providing profitable business today may change.
Reduce the time it takes to get things done. Focus on innovation, not only in products or services, but in processes used.
Viewing marketing as a productivity tool and concentrating on increasing the productivity of marketing can yield dramatic improvements in competitiveness, growth and profitability. While increasing productivity is a constant day-to-day battle, it can be done. Challenging assumptions, looking for innovative ways to do things and nurturing a marketing customer-oriented culture will provide a strong foundation for success.

Advantage Marketing Information - Main office: 35 Steamboat Avenue - Historic Wickford, RI, USA 02852
Affiliated Offices: Pasadena, Calif., USA and Niigata City, Japan