Letters from the Global Province


	LETTERS FROM THE GLOBAL PROVINCE

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	Return to the Index of Letters from the Global Province GP29Jul04: Sales: Branding Again Shooting Birds or Catching Fish. Basically there are a couple of ways of making sales. Either you shoot them down or they come to you. For most of the mass market era, we took a shotgun, cost be damned, and pumped lead into the skies, hoping to knock as many pigeons—i.e., customers—down as possible. Right now, as we transition out of the mass era, we are using rifles, and assuming that with careful targeting, we can hit a choice quail, duck, or wild turkey on the wing, and then send a bird dog out to retrieve. The idea is to hit many less prospects, but to hit the choice ones that count. You should understand that any form of marketing that has targeting in its name is expensive and probably a poor return on investment. Nonetheless, targeting is the craze of this moment. But then there’s catching fish. We put a worm or fly down in the water and wait for the fish to come to us. Stream fishing. It’s more subtle. Less energetic. We use the inquisitive hunger of fish to lure them into our clutches. Sight and sound and touch are compounded. This is allure. It’s very, very related to “word of mouth,” which, at the end of the day, is the most effective form of marketing. Marketing Is Being Turned Upside Down. Marketing, sales, and everything we do to pry dollars out of customers are changing like crazy for all sorts of reasons. We ignore the tumult in the marketplace at our peril. Let’s think about what’s happening: Growth is stalled. Many markets have flattened, and it’s hard to make a sale. We’re reducing prices to move product, and taking quality out of the product so that we can afford the new price point, the sales incentives, and all the new costs driven by weak or disappearing markets. We are coming to grips with stagnant markets and saturated customers through a stew of tactical maneuvers. Mass markets are disintegrating. We hear, ad nauseam, that mass markets are disappearing and that one has to devise products with different bells and whistles for different segments. The life of each product becomes shorter, as we try to keep us with the whimsical tastes of each segment we are serving. The discounters have become the only big, steady buyers, but they eat away at all our profits, given their relentless quest for ever cheaper prices. The media don’t work. Network TV no longer reaches 90% of America, and it raises prices even as it reaches half of its former market. Newspapers erode just a bit more each year. Special purpose media—very targeted magazines, narrow cable channels, in-store promotions, pyramid sales squads—try to hone in on audience segments with just the right demand characteristics. But even these relentless targeted campaigns are in trouble, because consumers are building up resistance to the endless assault of sales messages that plagues their environment and delivers telemarketers into their homes just as they are sitting down for dinner. This combative micromarketing is alienating the consumer and driving him or her away from brands that were once esteemed. Consumers are at war with spam in its multiplicity of forms. Companies are very, very much more aware of the wastefulness and high cost of marketing, driving them to comb through their sales options and compute returns on alternate tactics. Almost 80% of network TV buys turn out to be losers when one does short-term campaigns: repetitive long-term TV placements turn out to be a decent bet about 50% of the time. The old adage mouthed by CEOs seems more painfully true than ever: “Half or less of everything we spend on marketing is useful. The rest is worthless. If we only knew which half really works and which does not.” Necessarily, there’s a passion on to find out what wins—what brings in profitable sales, but the math ain’t simple and the analysis is confusing. The Outcome. Some smart companies realize that it is now cheaper to invent new and better products than to rejigger their advertising. They’re putting their energy behind product development. But most are into micromarketing—targeting narrow segments and hitting the poor occupants of those segments with all sorts of firepower. You probably realize that you are in their sights, because some sort of barrage seems to be hitting everyone with a dollar in the pocket. A slew of pretty good articles talks about this bruising micromarketing in great detail. See, in this regard, Business Week’s “The Vanishing Mass Market,” July 12, 2004, p. 61ff. Also, look at The Economist’s “The Harder Hard Sell,” June 26, 2004, pp. 69-72. Both recount the almost lemming-like march of company marketers into supersegmented marketing, which generally adds up to a nasty, expensive scrap with competitors in small, crowded marketplaces. The analysis provided by the journalists is good, but we would caution you, as you will see below, against their advice to join in these zero-sum marketing games. Right analysis—wrong conclusion. However, some companies shine here. Notably, that age-old super suds salesman Proctor and Gamble. Once upon a time its network TV spending accounted for 90% of its marketing budget. No longer. In its very successful launch of non-prescription Prilosec, only 25% of its dollars went to TV. With recent annual spending of $4.4 billion on marketing, just over 10% of sales, P & G’s company-wide unit growth is now close to 9%. The last time its spending mounted to 10% of sales, back in 1998, its unit growth was in the 4% arena. Good execution of narrow channel marketing can reap a harvest for the right kind of consumer marketer. Back to Fish. However, we believe the consumer, as well as the corporate customer, are getting to be smarter buyers and that these buyers are simply sick of being jabbed by marketing pinpricks. The customer is using Tivo to screen out TV adds, and he will find ways to shield himself from the plethora of other adverts coming at him. We think longer term that it’s time to lay down lures in the water. That will drive companies to provide horribly accurate product information that tells the user how to get good results at low cost from a product, even suggesting alternatives to their own that may work better for some applications. Straight poop becomes the strongest form of advertising. Allure marketing includes taking over more chores from the time-and-stress burdened buyer. UPS, for example, now offers a string of end-to-end distribution services that go way beyond its traditional focus on point-to-point package delivery. Such comprehensive help even builds enough rapport with corporate customers that they send more plain vanilla delivery business its way. What, we ask, will bring more business across the transom? Battering ram, assaultive micromarketing may even drive some people away. We cannot emphasize this point enough. It simply does not make sense to add more static to the lives of horribly busy people. Instead, we think, you have to put together a repast that is so appetizing and so good looking that people just can’t stay away. The software industry often gives free trials of its wares away to potential customers over the Internet. AOL seems to have built its awesome customer base by simply letting potential customers use its services for a few hours. Again and again, the cheapest way to make a sale often adds up to giving a little or even a lot of the product away. Very Individual Branding. As we mentioned in our 14 July letter, “The Great Cork Controversy,” it’s time to make very individualistic products, one of a kinds. The technology is arriving to deliver products that more closely embody the needs, desires, specifications, and personality of a customer, binding the customer to us. Toyota is now able to deliver semi-custom cars that include more option choices where modifications can be made after the order is placed—on much shorter schedules. Land’s End lets you buy jeans that are much better crafted to your shape. We’re only a few years away from autos or clothing that have more of your idiosyncrasies built into them. There’s to be a “you-ness” in all that you treasure. Branding, as we knew it, when a Cadillac was the stuff of adventure, romance, and fantasy, has long since disappeared. But information and genetic technology combined with the economics of a more global marketplace make it desirable and imperative for a different kind of branding to stage a comeback. Only through branding can we realize an acceptable return on investment. Now the brand is about tremendous uniqueness. Back to Top of Page Return to the Index of Letters from the Global Province

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