Why Do Commission Sales Driven Organizations Not Understand the Need for Advertising Budgets?.

Written By Ted Grigg

Imagine yourself working in an insurance company as head of a division that sells individual insurance products directly by phone and the Internet. Now imagine that your internal direct marketing team exceeded both volume and ROI goals for 2007 by a wide margin.

Then something unbelievable happens. Top management decides to pull 100% of your direct marketing budget for 2008. Can such a thing happen? Actually, it just did.

What's worse, this top management expects the direct group to exceed their 2007 sales goals in 2008 WITHOUT an advertising budget. So this state of affairs begs the question. Why do top managers make these kinds of decisions?

Here are some of the probable reasons they happened in this case.

1.    The company leader only understands the product he grew up with. In this case the leader knew group insurance, but had little to no knowledge about what it takes to market individual products through either agents or direct to the consumer.
2.    As a group insurance driven insurance company, the sales model relies 100% on independent agents who receive commissions on all sales AFTER the product is sold. In direct marketing, the model requires fronting the money to drive sales at a later date once the advertising runs its course. Some companies possess such a strong culture of spending money after the sale that they cannot tolerate the “risk” of spending the money first to make the sale.
3.    Companies that promote top leaders only from within inherit the culture these leaders grew up with over the years within the company. This encourages inbreeding that looks at the world through clouded lenses. Needed change and innovation cannot overcome the status quo.

This company will continue to prosper so long as the agency force that focuses on group sales does not loose ground to the Internet and other direct sales. This has already happened in the individual products arena.

What advice would you give to this company? Have you experienced a similar scenario?

Ted Grigg

Ted Grigg is a direct response strategist who helps growth-focused companies reduce risk by identifying weak assumptions before they become costly mistakes.

Over the course of his career, Ted has evaluated several hundred million dollars in direct response testing across direct mail, digital, print, television, telephone, and other channels. His work combines direct response strategy, acquisition economics, customer analysis, creative evaluation, offer development, and disciplined testing.

Ted has worked on both the client and agency sides of the business. That experience gives him a practical understanding of the pressures facing executives, marketing teams, agencies, and service providers—and of the problems that arise when activity, media volume, or creative preference replaces a clear economic objective.

His consulting work helps organizations examine such questions as:

  • Are acquisition goals economically realistic?

  • Is the allowable Cost Per Sale supported by customer value?

  • Are targeting, offers, creative, media, and response paths working together?

  • Are tests structured to produce reliable business decisions?

  • Are unproven assumptions being treated as facts?

  • Is the organization measuring sales outcomes rather than convenient proxies?

Ted’s experience includes the development of direct mail and multichannel acquisition programs for insurance, healthcare, financial services, technology, nonprofit, manufacturing, retail, transportation, communications, government, and business-to-business organizations.

For a national direct-to-consumer insurance company, he developed a direct mail format that defeated established controls and helped expand the productive use of compiled prospect lists from less than 10 percent to more than 30 percent of total direct mail circulation within one year. He also planned Medicare lead-generation programs for more than 60 regional and national HMO and PPO organizations, with some programs exceeding sales projections by as much as 60 percent.

Ted founded Wyse Direct, a direct marketing division of Wyse Advertising in Cleveland, where he developed acquisition programs and helped launch a new technology product for Seiko Instruments by generating a predictable flow of qualified sales leads for its national sales organization. As vice president of new business development for the Grizzard Agency, he helped broaden the agency’s strategic capabilities and pursue new commercial and fundraising opportunities.

He is the author of The HMO/PPO Marketing Plan—A Step-by-Step Guide, published by Executive Enterprises, and has written numerous articles and conducted webinars on direct response strategy, testing, creative development, and marketing economics.

Ted earned a Bachelor of Arts degree from Abilene Christian University and completed two years of graduate study at Texas Tech University. He is the founder of DMCG, LLC.

http://www.dmcgresults.com
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