As a direct marketing practitioner, I was tempted to write that CEOs and CMOs are finally catching up.
Catching up to what, you may ask.
They are realizing that strategically driven direct marketers had it right all along. It's not just about demand generation, positioning or branding as important as these all are. But that these were never the goal of marketing, but rather strategies to achieving the ultimate goal -- ROI.
For decades agencies and their clients thought that if they focused on demand generation, that sales would automatically follow. In the background, direct marketers were seen as second class citizens who were concerned only about short term sales. Except perhaps for a few such as David Ogilvy who undertood better the value of the direct marketing discipline. Rodney Dangerfield reflected the reality of the direct marketer's plight when he said, "I don't get no respect"!
But lo and behold came the digital age, where the customer rules. And every marketing expenditure must be measured based on its ability to yield profitable revenue within a financially acceptable timeframe.
Instead of soft quantification for millions of dollars spent on awareness advertising, CMOs must now give hard justification for their budgets.
Those days of anecdotal evidence are gone forever. And CMOs everywhere are still adjusting to a world direct marketers have championed for decades.
In what I consider to be the best research on this subject, IBM conducted a study in 2011 that aimed for 1,000 participants. In this Global Chief Marketing Officer Study, more than 1,700 CMOs from 64 countries spoke face to face with IBM Interviewers for an hour. Here is a brief analysis of the results as I see it.
Determining ROI the number 1 issue facing CMOs today
"Most CMOs are struggling in one vital respect — return on investment (ROI). Our research shows the measures used to evaluate marketing are changing. Nearly two-thirds of CMOs think return on marketing investment will be the primary measure of their effectiveness by 2015. But proving that value is difficult. Even among the most successful enterprises, half of all CMOs feel insufficiently prepared to provide hard numbers".
Let's be honest. In the past, most CMOs were not required to provide hard evidence that their strategies were working in the form of monthly or weekly ROI reports. But with increasing pressures brought on by the global economy, an increasing flood of competitors facilitated by digital media and a slow growth economy, organizations are keeping a tighter rein on their marketing expenses.
CMOs must now focus on deeper knowledge of customer behavior and not just markets
Many direct marketers become frustrated with agency educated CMOs who rely on market reports rather than a deep understanding of the behaviors exhibited by their own customers.
"One reason most organizations struggle to get the customer insights they need is that they still focus on understanding markets rather than individuals. At least 80 percent of CMOs rely on traditional sources of information such as market research and competitive benchmarking to make strategic decisions. Similarly, more than 60 percent rely on sales, campaign analysis and the like."
In the new world, CMOs must get a better handle on where buyers look for information, move from channel to channel and ultimately reach the buying decision.
It is no longer enough to know how segments make the purchase decision, but how each individual customer makes a purchase. This knowledge forms the foundation of the CRM strategy by customizing the message, selecting the preferred channel for repurchase and other steps each customer uses to purchase your product instead of a competitor's.
CMOs finally understand the need to marry up with IT
If you have read other posts on this blog, you know that direct marketers consider the relational customer database as the core of any significant marketing program.
Without it, any analysis of ROI tied to specific channels or testing is impossible. In fact, the ROI analysis relies wholly on the quality and quantity of the CMOs understanding of individual customers.
"The data explosion tops the list of headaches. More than 70 percent of the CMOs who think it's important say they aren't fully prepared to deal with its impact".
As one CMO stated: "I don't see how we can go forward without embedding IT into marketing."
Gearing up the staff to handle the analysis needed to run a state-of-the-art marketing effort
Marketing demands more now than just great creative concepts and flawless media execution. More than ever, customer insight comes more from understanding behavior than primary research.
As direct marketers have said for some time, what customers do and what they say end up dramatically different.
In the new world, data driven marketing makes companies more competitive. It also makes customer driven CMOs invaluable to the company because they understand customers better than any one else in the organization.
Pertinent and accurate knowledge of customer behavior requires a different skill set from the traditional marketing group.
Now marketing teams need analysts and digital experts who possess marketing know-how.
CMOs grapple with this staffing question. What is best? Marketers who have an understanding of digital or digital technicians who have some knowledge of marketing.
My contention is that you should be open to both options.
"Likewise, nearly two-thirds believe they will need to change the mix of skills within the marketing function and enhance its analytics capabilities. A telecommunications CMO in China summed up the general view when he noted, "Re-thinking our skills mix within the marketing function and aligning with IT are priorities for us."
The bottom line
CMOs must move from soft results analysis to hard ROI evaluation criteria as quickly as possible. They must also find a way to shore up their own skills in database marketing, analytics and CRM. Then integrate these concepts into the company's DNA starting with the CEO and then moving over to IT and ultimately overall operations.
There is one application where direct mail still dominates and flourishes.
The volumes are low and the lists highly qualified. And that is in the area of Business-To-Business (B2B) lead generation for large ticket services or products.
In this age of rightsizing, realignment and relentless change, executives must protect their time. They are averse to any form of change or risk taking. They react negatively to traditional sales approaches where salespeople waste their time by trying to be friends before selling their worth.
Gatekeepers are rewarded for keeping non-essential calls and emails away from their bosses. And those gatekeepers sometimes will allow you to email them so they can forward your email. But even gatekeepers are protecting their email addresses by insisting that you send your information via the US Post Office.
And you can pretty well forget about engaging decision makers on the phone without going through a number of hoops. Companies have designed ever more powerful sales people filters.
Let's face it. Many sales people will give up at this stage.
Reaching high level executives with any medium has challenged the best marketing minds for years. And direct marketers with just a few years of experience have tried them all.
In an effort to simplify their lives or follow the latest trend, a number of companies have refused to test direct mail believing that online represents the future and that executives live there exclusively.
Ongoing testing proves that this hypothesis is incorrect.
Attempting to generate leads using online without a multichannel approach kills new product launches.
I have yet to see a sustained, quality lead generation program directed to C level executives that does not use or rely heavily on direct mail to set up qualified appointments. Give me access to direct mail and outbound telemarketing with zero online support (except for a well designed website or landing page) and I can beat online only programs for complex product sales.
Online only lead generation may seem inexpensive compared to direct mail and outbound telemarketing. And you might get a few sales in the beginning. But online only quickly looses steam.
Direct mail with outbound telemarketing, on the other hand, will give you deeper penetration and ultimately a lower cost per sale.
In fact, direct mail often represents the core medium with support from online and outbound telemarketing.
If you want to cut through the clutter in the B2B lead generation category, then direct mail will play an important role in successful, long term lead generation directed to large corporations. Why?
- Direct mail gets attention and cuts through the clutter of online marketing without multichannel support -- especially 3-D packages.
- If well done, direct mail bypasses all but the most obsessive gatekeepers.
- Direct mail now has greater credibility and brand building qualities than email for generating new B2B business.
Unlike most business-to-consumer direct mail, businesses with high average sales for products or services continue to use direct mail unabated regardless of the postal rate increases.
I realize that that multichannel lead generation alone is no guarantee of success. Critical issues such as the messaging, value proposition and worth creation are subjects for other posts to come.
What are your thoughts about what it takes to reach high level decision makers today?
If you have worked in direct marketing, then you have seen the Logo Cops in larger organizations destroy promising direct marketing campaigns.
You know the drill.
You spend talent and money creating a great direct mail package with a strong offer. Your direct mail format cuts through the clutter by looking different. The format, though sometimes purposely unattractive aesthetically, is a proven winner. The offer meets all branding requirements by not cheapening the company's products for a one shot sale.
But the Logo Cops still manage to kill winning direct mail and creative executions in other media.
Here’s an example.
Logo cops often want to typeset the letter and follow all graphics requirements as laid out in the company's graphics manual. This is a big no-no for direct mail response.
They further modify the outer envelope to make sure all recipients see a consistent "look and feel" of all company messages. They eliminate critical teaser copy for the same reason. (The list of such stupid changes for the sake of "branding" goes on endlessly).
The Logo Cops just managed to convert a probable winning direct mail package into a sure looser.
All marketers take heed. Branding the company and its products goes far beyond the literal interpretation or focus on "look and feel" found in the company's graphics manual. Expounding on this concept alone would require writing a book.
Suffice to say that we need not ask how the creative execution supports the brand so much as how the brand supports sales. After all, the objective is not branding but selling.
I'd love to hear some of your stories related to how the misapplication of branding has hurt sales in your experience. Please share them by responding to this post.
The short answer is no… and yes.
The answer is partially "no" because today's branding advertising sells product harder than ever drawing closer to the direct marketing approach. Few clients allow their agencies to simply position the product. They want immediate and verifiable sales when they spend advertising dollars.
Many general agencies continue to hold on to what they know while moving slowly to blending their expertise in positioning advertising with direct.
So positioning advertising today moves closer to direct marketing by making offers and featuring products.
In a real sense, positioning and direct marketing advertising have always had things in common.
If one aspires to the idea that all interaction with the advertiser's audience including communications, products, services and particularly customer service work together to build the brand, then direct marketing certainly should work hard to build the brand.
Yet the answer is also "yes" -- there is a difference between positioning and direct marketing advertising because true direct response advertising possesses several key strategies not shared by brand or general advertisers.
- The direct marketing discipline seeks to track response for each promotion and evaluate sales based on actual customer behavior.
- Testing dominates the direct marketer's thinking believing that through ongoing testing, the customer ultimately determines what advertising wins and what advertising fails.
- Direct marketing looks well beyond attitudinal change to behavior change.
- In addition to front end advertising, direct marketers focus a great deal of energy on building the customer database looking for front end sales that yield the best quality customers on the back end for the best ROI over time. This is something that general advertisers rarely get involved with and certainly have little ability to track absent a relational customer database.
- By taking ownership for churn and long term customer profitability, direct marketers work with clients to build loyalty programs and upgrade existing customers. Again, general advertisers tend to focus mainly on acquisition while professional direct marketers give equal weight to both acquisition and retention.
The bottom line: Brand and direct response advertisers have much to offer each other. And the wise client knows how to allocate balanced resources for both acquisition and retention.