The Recession May Make CMOs More Numbers Driven

John Quelch wrote a thought provoking article (How CMOs Should Function in a Recession) which touches on how the recession can alter the role of the CMO in an organization. Not only do they have to come up with creative ways to stretch marketing spend further but they have to be more cognizant of the return on investment on marketing spend.

The recession will have two important, lasting results for CMOs: First, financial accountability of marketing is here to stay. Only in a few high-margin fashion-intensive categories will the shoot-from-the-hip right brain marketer survive. Second, improved accountability requires CMOs to be financially literate, to understand the balance sheet as well as the income statement impacts of marketing initiatives. The result will be a new generation of CMOs who command more respect in the C-suite and hold their jobs longer as a result.

If Quelch is right, successful CMOs in the future may require an analytical skillset that outweighs the creative skillset. In the classic debate of whether marketing is an art or science, this may give the science side the lead for now. The recent Stephen Baker book, The Numerati, describes how business is becoming more analytically driven as artificial computer intelligence is able to give marketers new insights into the behavior patterns of consumers, connecting the dots when human intuition comes up short. For example a computer sorting mountains of information from consumers online, found that Netflix users who rent romatic comedies are more likely to rent cars for the weekend. A data analysis also found that drinkers of hard liqour drinkers often buy Gatorade. These consumers likely wanted to prevent hang overs by drinking or mixing liqour with the electrolyte rich sports drink. This information could be valuable for Gatorade’s marketing department who could use this to target liqour buyers to increase sales.

Have you seen any examples of numbers becoming more important in the role of a CMO or marketing department?

The Consumer in Control

by Greg Verdino

If “the consumer is now in control” is the most often cited truism in new marketing, then “marketers need to shift from push to pull” is surely a close runner-up.

True enough, but here’s the rub. I’ve heard more than a few people in our industry elaborate on this statement by explaining that, “marketing used to be about pushing messages out to consumers, but now it’s about pulling consumers to the brand.” Um, ok but no.

Pull is not about pulling consumers in; it’s about giving consumers a reason to pull us in. Remember truism #1 – they’re in control; they (not we) decide where they go and what they experience. We’ve lost the right to pull consumers anywhere (if we ever really had that right at all.)

Pulling consumers toward our brands is really just the desired result of push marketing – we interrupt consumers as they go about their business and hope to redirect (or pull) them into some kind of brand experience. It’s still old marketing.

Pull means that we to go to them, join their communities, give them reasons to voluntarily draw us into their personal media experiences. We’re not interrupting them. They’re opting into us.

So next time someone asks you about the shift from push to pull, remember that “push marketing” is what old marketers did, “pull marketing” is what new consumers do. Different? Yes. But this is how the game is played today.

This article was originally posted at gregverdino.typepad.com and is licensed under the Creative Commons 3.0 License.

When Behavior Contradicts Attitudes

by Charles Sipe

Often times positive attitudes lead to behavior that mirrors the attitude. For instance, whether you like Obama or you like McCain, you probably voted for them. However positive attitudes don’t always predict behavior accurately. For instance, most American’s think it is important to eat a healthy diet, however two out of every three Americans are overweight (1). Most American’s think it is important to save for retirement, however our national savings rate was recently below zero, while Europe’s savings rate is about 20% and Japan’s savings rate is about 25%.

Why does behavior often contradict attitudes? One explanation is Lewin’s Equation, which describes behavior as a function of the person and the environment B=f(P+E). In other words environment often has a strong influence on our behavior.

For instance, if we personally have the belief that education is important, but all our friends think it’s a waste of time and encourage you not to study, then you may skip school or drop out. You may believe it is important to donate to charity, but if you’re broke it is difficult to donate money to the causes that are important to you.

Often marketing assumes that if we can just improve the attitude of our brand, more people will buy from us. However there may be many environmental influences that make this ineffective. I really like the Geico commercials, but I buy my insurance from Esurance because they cost less. I really like Miller, but all my friends don’t, so I end up buying Coors a lot.

As a result, focusing all your marketing resources on attitudes can be ineffective. Spending lots of money on entertaining television commercials could mean more people have a favorable attitude about your brand, but it doesn’t necessarily mean they will buy from you. If environment is a big factor in the behavior of your consumers, it is smart to invest in improving the environment side of the equation. This can include focusing on only the consumers that are in an environment that is conducive to buying from you. Pay per click ads target people who have the means and the desire to buy. Rewarding existing customers focuses on the people who have already displayed the desired behavior. Word of mouth campaigns can create a favorable environment by using social influences of an individual’s peers.

Finding Profitable Clients

When working with company‘s that have sales revenue and profit challenges one of the first places to look and diagnose the root cause is within their sales numbers, specifically the sales pipeline. The sales pipeline typically reveals the symptoms associated with the revenue and profit challenges a company is currently experiencing or will experience. One key metric to examine is the win rate, which is the total revenue sold divided by the total revenue sold, lost and disengaged. The win rate percentage provides a factored view and insight into predicting a company‘s future sales performance. Conversely, it also reveals areas of deficiency that are impacting or will impact sales performance. Another key area is looking at how opportunities enter the pipeline. Do they enter from demand creation (the proactive pursuit of sales revenue) or demand management (reactive pursuit or sales revenue from leads, referrals and bluebirds).

Experience has shown that revenue challenged companies rely much more on demand management than on demand creation to generate sales revenue typically resulting in an unbalanced 80/20 split.

Companies with an unbalanced and unpredictable revenue stream need to ask themselves the following question: Where do we want our sales revenue to come from? When applying conventional wisdom, the answer to the question can be found by identifying your company‘s —ideal client profile“ or those clients most likely to receive significant value purchasing your product and/or service based on the alignment of qualifying characteristics and attributes between your company and the prospective client. However, going a step beyond conventional wisdom and applying biblical wisdom can help you identify not only your most profitable clients but also your most sustainable clients. The biblical wisdom referenced is found in the book —Beyond Babel“ by Gerald R. Chester, Ph.D. regarding the biblical principle of equal yoking specifically related to C4 to identify your —ideal C4 client.“

Since most companies typically do not select their clients, it is even more difficult to find C4 clients. The components of C4 include a company‘s:
1. Calling
2. Character
3. Capabilities
4.Commissioning

Calling Speaks to the heart of the company.
Will your value proposition bring lasting value to the prospective client?

Character Is the accepted worldview of a company.
Does the prospective client‘s company values and operating principles align with your company?

Capabilities A company‘s ability to assess the value proposition.
Do your services and/or products facilitate the successful completion of tasks or business challenges that can‘t be effectively addressed by your prospective client?

Commissioning The external invitation and permission to speak into a client.
Do you have the affirmation and confidence to fulfill your client‘s needs?

In conclusion, the alignment of C4 between your company and your prospective client(s) will not only help establish your most profitable C4 relationships but will also build a sustainable and predictable revenue stream

Need help growing revenues? Contact an interim marketing executive today at info@oneaccordpartners.com or visit www.oneaccordpartners.com.

Photo via flickr

The 5 Cent Hot Dog and How Value Attribution Affects Consumer Behavior

by Charles Sipe

Sway by Ori and Rom Brafman is a brilliant book about the forces than lead to irrational decision making. Understanding these forces can have many marketing applications since marketing often involves persuading customers to act irrationally.

One very interesting topic from Sway that relates directly to consumer behavior is value attribution. Basically this is when an individual is primed with a signal that forms a strong belief of the value of the item that sticks in the mind.

There are several fascinating examples of value attribution in action that are described in Sway. The authors tell a story of a Coney Island hot dog salesmen who attempted to undercut the competition by selling hot dogs for 5 cents instead of 10 cents back in the 1910’s. However, the pricing strategy didn’t work because people assumed there must be something wrong with them if they are only half the cost of the typical hot dog. Therefore people had associated a low value to the hot dogs even though they were made with real beef and tasted just as good at the 10 cent hot dogs.

There are numerous other examples of individuals who irrationally base value on one aspect of a product or person, even though additional information is present that contradicts their assumption. Sway describes an experiment in which a world renown violin player played a difficult piece on a million dollar violin at the subway while wearing jeans and a hat. Over a thousand people passed by and almost no one stopped to listen. NBA players who were picked later in the NBA draft played less minutes than players who were selected early in the draft, despite having statistics that were just as good.

The tendency of consumers to value something based on little information is very common. How can marketers use this to persuade individuals to make a desired buying decision? One method is dressing up an average product with superior packaging. Charging a higher price than competitors, having a celebrity endorse a product or advertising a single attribute that is superior to competitors can also sway consumer to assume a high value.

Enough with the Surveys!

by Charles Sipe

In the past year, it seems that customer surveys have been a trend that has spread to almost every retailer. Almost every store seems to be soliciting a survey on their receipt with an offer for a dollar off your next purchase or a chance to win $10,000. In fact, I think it has become so ubiquitous that customers have learned to tune it out. When was the last time you called a 1-800 number listed on the back of a receipt to spend your valuable time to give feedback to a company for a dollar coupon. Rating different aspects of service on a scale of 1-5, gives very little information on how to make the experience better. All it tells the company is if they are doing well or poorly, but not why.

If a company wants to find out how they are doing on customer service, superficial surveys are not going to give a very accurate picture. They are usually flawed because they are not a random sample if they have any type of incentive to participate. A much better way to find out how you are doing is to monitor the web to see what people are saying about you or even placing a suggestion box in a visible location. Tools like Twitter and blogs greatly amplify the power of word of mouth and it is very easy for companies to monitor what is being said to gather feedback on what can be changed or improved. What if you established a company blog that focused on solving customer issues, thus creating a conversation with customers about your products. Customer service surveys are obsolete and worthless when compared to other ways of learning about your customers.

Photo by Robyn Gallagher

Executive Insight: Study Shows People Willing to Pay More When Products are Touched

A new study shows that simply touching a product can increase the price consumers are willing to pay for it.

From Retail Customer Confidence:

Researchers from The Ohio State University and Illinois State University tested how touching an item before buying affects how much they are willing to pay for an item. A simple experiment with an inexpensive coffee mug revealed that in many cases, simply touching the coffee mug for a few seconds created an attachment that led people to pay more for the item.

While this is pretty intuitive and retailers have been using tactics that increase the feeling of ownership for years, it is interesting that there is evidence that touching an item increases its value in the eyes of the consumer. Increasing the sense of ownership can have a tremendous effect on the perceived value of an item. In the recent book Predictably Irrational, the author asks Duke students who were lucky enough to win a lottery for basketball tickets to sell their tickets. The students who had already established a sense of ownership of the tickets would only sell their ticket for about a thousand dollars. Conversely the author asked students who had lost the lottery how much they were willing to pay. These students would only pay a couple hundred for tickets.

Retailers can take advantage of this effect by making it easier to consumers to touch products on the sales floor. Instead of stacking boxes for display on the sales floor they could take the products out of the box or from behind the glass so that consumer can hold the actual product in their hands. Apple, which has one of the highest sales per square foot, does a really good job of allowing people to touch their products.

Photo by Ping Ping

Executive Question: What is Happening to Our Business?

Headlines often appear about US jobs heading overseas and companies selling off parts of their existing company. Why is this going on?

Related to overseas jobs, companies in every product category must create products with the highest value to the customer. With a global market, come global competitors. Oversees companies have labor rates that are a fraction of domestic labor rates. Domestic manufacturers can’t compete on price and overseas manufacturers have proposals into some or more of your customers…or they will soon. In addition, the internet allows proposals & RFP’s/RFQ’s to be done on-line; diagram’s, design plans, and architecture can be done over the internet rather in person.

The companies that are thriving are focused on their core competency. This trend began with large companies about 20 years ago as they looked to outsource non-competency areas, like the cafeteria to organizations such as Marriott. Another example is Boeing selling their floor panel & air duct plant in Spokane, Washington. Boeing is a world class complex systems integrator applied to the most complex products today; commercial airplanes, space station, F18….. not floor panels and cockpits. Carrying this trend forward, businesses are exploring every aspect of their work flow & looking at what aspects can be outsourced; with outsourcing comes a move from a fixed cost to a variable cost structure. Those new companies that are flourishing are those that are picking up small niche’ aspects of business & developing deep, best in class expertise.

Customers are doing both, in most cases; looking for the lowest cost and disposing of parts of their engineering & manufacturing processes.

This applies to how we sell to these companies and customers. Their buying process is changing and therefore so must our selling process. As an example, it now becomes to important to consider such questions as:

How do we add value beyond the lowest cost?
Who is the customer? For example, is it, “The company that bought the floor panel & air duct plant or is it Boeing?”
Whose contract do they buy from?
Should we become the outsourcer to the division to retain the business?
What is the competition doing to react to this?

This is the playing field and the winners will understand the buying process and create a new sales process to meet or exceed customer expectations, learning from their experiences to create a new sales process for the next time and the next customer.

The winner will not be the low cost supplier but the business that brings value in alignment with shifting trends.

Jeff Rogers is co-founder of OneAccord Principals, which helps companies grow revenues with interim executives that can serve your organization on a project, interim, or permanent basis. He has been involved in both sales and management development for the last 25 years and has taught every aspect of selling: prospecting, presentation, closing, and answering objections. You can contact Jeff at Jeff.Rogers(at)OneAccordPartners.com.

Photo by vshioshvili

Managing the Environment: The Broken Window Theory’s Effect on Consumer Behavior

by Gareth Kay

There’s a ton of good stuff out there about how people really do things, and how behavior really spreads (Mark clearly has contributed a huge amount to this). And as someone working in advertising, it’s often quite depressing learning that it’s not what we do that really matters, but what people do to what we do; that advertising hasn’t got the strong influence we might like to think it does (shock horror, people don’t do what we tell them or think about things how we ask them to).

So, is there a role and future for communications? Well, perhaps there is but it’s a little different to what we tend to think. This week’s New Scientist has an excellent article about some research at the University of Groningen that empirically proves the ‘broken window’ theory. Here’s an excerpt:

In the most striking experiment, Keizer left a €5 note protruding from a fully addressed envelope that itself was poking out of a mailbox. The team discovered that people were less likely to steal the money if there was no graffiti or litter on or around the mailbox.

With no litter or graffiti, 13% of the passers-by stole the money. Thefts doubled to 27% when the mailbox was daubed with graffiti, or to 25% when it was surrounded by litter. “It’s quite shocking that the mere presence of litter doubled the number of people stealing,” says Keizer.

In another experiment, motorists returning to collect their cars were three times more likely to trespass through an illegal, 200-metre short-cut to the car park if bicycles had been illegally locked to railings next to the forbidden entrance.

A massive 87% took the short cut when they saw the illegally parked bicycles, despite a police sign saying “No Trespassing”. This compared with 27% trespassing when the bicycles were not locked to the fence.

Another experiment in a cycle park bearing a clear anti-graffiti sign, revealed that cyclists were twice as likely to leave litter if the researchers had daubed graffiti on the walls. The team attached bogus flyers to the bikes’ handlebars to put the owners in a situation where they had to decide whether or not to litter.

So, perhaps we should think about communications as being more about environment management, creating an environment where people are more likely to behave in a favorable way. About seeding the right environment where behavior is more likely to take hold. Which puts us squarely back in the culture business…

Image by Nesster

You can read more great marketing content by Gareth Kay at his blog Brand New.

Predictably Irrational: Marketing Applications of Consumer’s Irrational Decisions

by Charles Sipe

I just finished reading Predictably Irrational and think it is a must read for all marketers executives because of all the marketing applications Dan Ariely describes in his book. Here is a list of some of the marketing applications of social psychology that I found most interesting and useful for marketers.

The Influence of Free
Ariely describes several experiments which show that people are more likely to choose something that is free because of the strong influence free has. In one experiment he discounted a premium chocolate to an attractive price but discounted a Hershey’s Kiss from 1 cent to free and this altered the behavior of customers dramatically with many more people choosing the Hershey’s Kiss. He observes that we often make irrational decisions when we are presented with a free option such as taking a radio promotion shirt that we don’t even want. Another example he uses is when Amazon advertised their free shipping and got a substantial boost in sales. Free has a tremendous influence on consumers.

Price Priming
In some experiments Ariely primed subjects to write down the last two digits of their social security number and then had them bid on items for sale. He found that people who wrote down higher numbers were willing to pay more for the items and suggested that priming people with high numbers can influence them to pay more. He also auctioned off a poetry reading and depending on whether he asked how much they were willing to pay to attend or how much they would need to get paid to attend, greatly influences the price they were willing to pay. This suggests that the price consumers are willing to pay can be influenced by priming them with a suggestion.

Herding
People tend to assume that a restaurant must be good if it is crowded or there is a long line to get in. This effect is called herding and has a great influence on perceived value. But Ariely also suggests that there is self herding, where we assume something has value because have often bought a product or service in the past. Many customers of Starbucks go to Starbucks simply because they have been customers many times in the past. Ariely says this is irrational because we often bypass a cost-benefit analysis when we buy out of habit. He also observes that Starbucks was able to create an experience so different from anything else on the market that people were not anchored to what they previously paid for coffee. Soon customers became accustomed to paying much higher prices for coffee and never asked if the high cost was worth it.

Placebo Effect
The placebo effect may be one of the most powerful effects in psychology and represents the cause to a lot of our irrational decisions. In the middle ages kings had “the royal touch” and it was widely believed that people could be cured from debilitating diseases just from being touched by the king. Marketing can use the placebo effect to create a belief in the mind of consumers that is so strong that it becomes a reality. Marketers can actually improve the satisfaction of customers by using the placebo effect in this way, thus creating real value.

Predictably Irrational has many more interesting examples of how psychology can affect the behavior of people. Economic theories often assume that humans will act rationally, but most marketers know that consumers often act irrationally when making purchasing decisions. If you are interested in understanding the irrational decisions that consumers often make, then it would be irrational not to pick up this book.

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