How Much to Spend on Lead Generation

How much of your marketing budget should you spend on lead generation? According to marketing executive Chuck Besondy, the magic number is 42%. See the following article to find out why.

One of the first duties of an interim marketing executive starting a new engagement is to assess the marketing budget. How much is being spent on what activities and what is the expected result?

Within the marketing programs budget there should be three categories of investment: Environmental, Lead Generation and Channel Readiness. Research has shown clearly that B2B companies that invest at least 42% of their budget on Lead Generation grow revenue faster than companies in their industry that spend less than that level.

The definitions are straight-forward.

Environmental programs are for branding and letting the market know your company is in a particular category.

Lead Generation are programs that place buyers into the funnel.

Channel Readiness programs are those that make the direct and in-direct sales channel effective.

The research (1400 companies around the world) didn’t reveal any patterns in the sample for spending in the Environmental and Channel Readiness categories, but it was clear that spending too much in Environmental or Channel Readiness at the expense of Lead Generation was harmful to revenue growth.

Before making changes to a marketing budget the smart interim marketing executive will first assess for each product the stage of the market (per Geoffrey Moore), what the appropriate go-to-market strategy is for each market, and then what percentage of budget should be allocated to environmental, channel readiness, or lead generation activities to support that go-to-market strategy.

Take a look. Are you spending less than 42% of your marketing programs budget on lead generation? If so, this is probably restricting your revenue growth.

This article can also be viewed at Chuck Besondy’s blog, One Riot One Ranger.

Photo by malamantra

Salience and Sales

by John Moore of Brand Autopsy

In January, Hyundai did a major ZAG. Other car companies decided to play the “Zero Down. Zero % Financing.” card as well as the “Employee Discount for Everyone” card to rescue drowning sales. Hyundai didn’t. Hyundai zagged while others zigged.

Hyundai introduced an alternative marketing program that didn’t rely on the same easy credit, wallet-stretching gimmickry that got us in this current dismal economic mess.

Understanding the lack of confidence consumers have with their job stability, Hyundai created a marketing program to reduce the risk in buying a car. The program was called the Hyundai Assurance plan. Its mechanics were simple: if you lost your job after buying a new Hyundai, you could walk away from your loan or lease and return the car to Hyundai.

In marketing, salience occurs when a business designs a marketing program that connects emotionally and rationally with consumers. In business, sales occur when people buy stuff.

The beauty of the Hyundai Assurance marketing plan is in its salience and its sales. With a 10.0% unemployment rate on the horizon, it’s no secret people lack confidence about when their next paycheck is coming. Sales results of the Hyundai Assurance marketing plan are astounding.

Overall car sales in the United States have declined about 40% from the same time last year. (Yikes!) Hyundai car sales aren’t in decline. Nope. So far this year, Hyundai has recorded an increase of nearly 5.0% from the year prior.

As marketers, we must applaud Hyundai for designing an effective marketing program that drives both salience and sales.

SOURCE:New York Times Magazine article (Rob Walker) | March 22, 2009

Photo by mbaylor

This article was originally posted on Brand Autopsy and is licensed under the Creative Commons 2.5 license.

The McDonaldization of Starbucks

by Charles Sipe

I once jokingly made the comment, “Starbucks is going to become the McDonald’s of coffee”. I don’t think that is too far from the truth now based on recent events. Starbucks recently started promoting “value meals”, a breakfast sandwich and a small latte for $3.95. They also started selling the instant coffee packets called Via for 3 for about $3. This may be part of a strategy to grow sales in response to the economic recession, but at what point does it become commoditization of the brand? You can now get a cup of coffee for less than a dollar, if you buy the Via instant coffee and mix it yourself. Has Starbucks lost sight of their vision to bring the experience of a Italian coffee house to the masses, and sacrificed it to maximize sales? I would argue that Starbucks has been on this path for some time, ever since they replaced hand ground coffee with automatic espresso machines and started with the drive-throughs which made their service more convenient but took away from the experience. That was the turning point where it because less about the Star and more about Bucks. However when you focus too strongly on the bottom line and not enough on customer experience, the brand starts to die and you start looking more like a commodity.

Has Starbucks become a value brand like a WalMart or a McDonald’s? This may not be such a bad strategy when you consider the millions of Americans who have become accustomed (or addicted) to picking up a cup of coffee at the drive through on the way to work. Having a prepared cup of coffee every morning has become more of a need than a want. Starbucks will probably have tons of customers who need their services for many years to come. But, when you sacrifice the quality associated with your brand by becoming ubiquitous or selling your product in a powdered form, you open yourself up to be easily substituted. Is Starbucks that much better than the corner espresso stand where the barista still knows your name? If a Starbucks clone, such as a Caribou Coffee or a Tully’s is convenient, will people still go the extra mile to have Starbucks? One of the major problems with a value focus, rather than a brand focus, is that $4 dollar coffee is rarely a value. Now it’s McDonald’s that is trying to be different from Starbucks with a recent billboard that read “4 Bucks is Dumb”.

Photo by Robert Couse Baker

Are Brands Becoming Less Relevant?

Over on the Customer Experience Matters blog, Bruce Temkin explains why he has declared the death of brands.

“It’s simple: Companies have let profits replace purpose. As firms optimize left-brain management techniques for squeezing out additional profits, they’ve lost something very important — their raison d’être. True brands are more than just marketing slogans, they’re the fabric that aligns all employees with customers in the pursuit of a common cause.”

While I think it’s a far stretch to say brands are going to die, I do think that brands have become less relevant in the current environment. The DVR and the internet have changed the way people are consuming television media which has traditionally been the main brand builder for large cap companies. According to MediaPost: “In 2008, Nielsen estimated penetration of DVRs at 25% of U.S. households. This percentage is expected to climb to 41% of homes by 2012, according to research conducted by MAGNA Global Research.” The internet has also changed how people find information on products. Consumer’s don’t have to rely as much on brands to estimate value before they buy.  They can read comprehensive reviews online or find out the aggregate customer ratings of a product.

In addition the emergence of social media like Facebook, blogs, and Twitter, has accelerated the spread of word of mouth. A brand’s reputation is much more volatile, as bad PR or rave reviews can spread through online communities like wildfire.

One of the most successful brands of late is Zappos which has been able to grow to a billion dollars in sales with no television advertising. Instead they have used social media like Twitter to help spread of the word of their world class service. Like Seth Godin likes to say, the TV Industrial Complex, in which companies like P&G would rely on television ads to build a brand, is no longer a viable strategy. Companies that are best able to adapt to the new media landscape will have the best chance of sustaining their brands and stay relevant with consumers.

Interim Executive Question: Can the Costs of Poor Brand Performance be Measured?

Question:  Can the costs of poor brand performance be measured?

The cost of poor brand performance is real and it can be measured.  The elements of cost are tangible and often already measured by companies, including: rework, error correction, concessions, lost opportunities, and customer attrition.   Each one of these elements increases your cost of service, selling, support, and overhead as remedies are implemented to correct them.  These costs can have an exponential impact across the transmission systems:  that is, each element or system that fails, or any inconsistency between them or against the brand promise tends to compound the noise in the communication and impact the perception of the customer.  Why is there such a compounding effect?  Remember that for business to business customers, the sum of all of their experiences and all the communications with your entire firm over time serve to create their perception of your brand.  When one element disappoints the customer, it is automatically compounded by another element – even though they may seem totally unconnected from inside your company.  Left unchecked, the customer’s disappointment will grow and negative perceptions will expand beyond simply the issues at hand to become a general perception of your whole business.

While the cost of negative brand efficiency may be difficult to measure precisely, the direct impact of poor performance and quality on each of the communications systems can be measured.  Many businesses have sophisticated processes, software and even six sigma quality improvement programs designed to measure and improve that performance and increase profitability.  These initiatives do not often measure systems across the enterprise and rarely, if ever, do they measure the effectiveness and consistency of communication and performance of all of these systems with the intended brand strategy of the business.  Managing each one of those issues in isolation and not in a holistic manner aligned with the brand strategy will result in an exponential drain on energy and resources required to deliver sustained profitable growth.

Photo via flickr

Obsessive Branding Disorder

by John Moore

Lucas Conley’s Obsessive Branding Disorder book is receiving some nice media attention. And for good reason … it’s well-written and provocative.

Conley’s book began as a Fast Company essay from Oct. 2005. He’s since beefed up the premise and added in lots of relevant and unique case study examples.

For the cynical marketing crowd, which includes me, this book will be right in your wheelhouse as it delves deep into the superficial side of the arts and sciences of modern branding.

To give you a taste of Conley’s take, below is my trademark pending WHAT ? — SO WHAT? — WHAT NOW? summary of Obsessive Branding Disorder. (Just kiddin’ on the trademark-pending quip. Tom Ehrenfeld is the rightful owner of this idea.)
WHAT?
“Branding is corrupting our culture by heralding emotion over reason, surface over core substance, and packaging over experience.” (p. 197)

“More than marketing, advertising, or positioning, branding is an all-in-one ideology—a facile reduction malleable enough to govern all facets of modern business.” (p. 5)

“By abandoning the trusty, dusty principles of business—innovative products, good service, solid management—for the idealism of branding, companies reveal the true escapist appeal of their new religion.” (p. 10)

SO WHAT?
“Successful, enduring brands are either truly innovative and outstanding or a great value. They have never needed much advertising. They don’t have to reinvigorate their employees with brand-morale building or rely shamelessly on empty company taglines. Their products fulfill the legitimate purpose of the brand.” (p. 64)

“But the effect of … [obsessive] branding has been a steady erosion in the public’s trust.” (p. 110)

“The world is cheapened when everyone sees it with a marketer’s eye. We lose trust for each other and grow skeptical of one another as we try to determine what we’re being sold. We become more isolated and more self-conscious, more prone to rely on brands for status and to ally ourselves with other brand loyalists for company.” (p. 199)

WHAT NOW?
“To combat this obsessive branding disorder, we must acknowledge that we will always have brands—they are an inevitable medium for communication and commerce.” (p. 201)

“But if we acknowledge that we must rely on brands to some degree, and if we keep our focus on the products rather than the promotions, we can begin to extricate ourselves from a world of brand churches, tribes, and religion.” (p. 202)

“Run a good business and your brand will follow.” (from Lucas’ Oct. 2005 Fast Company essay)

This work is licensed under Creative Commons Attribution 2.5 License.

Creating and Connecting Your Brand to the Customer

Published by OneAccord.

It’s important to connect your brand identity to your customers and what you can do for them. Therefore, your design style, look and feel, photography, and all other visual design elements that represent your company’s identity should start with your customer. Does your company’s visual identity make a meaningful and relevant connection with your customers? Does the style or font and color treatment reflect the industry or style of business and products and services you offer – including perhaps how they might be used by your customers?

Let’s say you run a business that specializes in artist supplies and tools. You might agree that to make a good connection with customers, your business identity should have a logotype style that appeals to and resembles artistic styles that are familiar to that audience. A creative, colorful, and artsy image would seem most appropriate. But imagine that your artist supply store had something like the big blue striped “IBM” symbol on it. The IBM logo is so well known, and its association with the computer industry so strong, that even if you added the words “Art Supply Store” in big bold type next to this logo your customers will be very confused. Most likely, you’ll not attract too many artists to your store. The style and color of the IBM logo is well suited to the big company corporate image that it represents.

Now let’s imagine what the IBM logo might look like if we were to intentionally adapt it for the purpose of promoting an artist supply store. What if the stripes in the IBM logo were each a different bright color representing all the colors in the rainbow? And what if the “M” was stylized and also served as an artist’s cup holding a few paint brushes, each with a dab of brightly colored paint sticking up out of the cup? Would this version of the IBM logo on an artist supply store be more appropriate and appear more relevant to customers who are artists? Even if the name was “IBM”, the image and color scheme and use of creative elements that match the customers’ purpose would make this a far more appropriate and attractive store front. The use of color is a very powerful tool for communicating and establishing a direct connection with your customers.

This example also illustrates that your brand identity and the connection that it can establish with your customers can transcend business customers into the consumer realm – as long as you stay true to your brand promise and reputation. In the computer services industry, IBM is one example of a brand that has recognition far beyond the large business customers that it primarily serves.

When designing an identity, care should be taken to examine all the ways in which that identity will be communicated to your customers and the market place in general. This includes sales and marketing collateral, promotional materials, advertising, business stationery, web sites, product designs and packaging, trade show displays, software user interfaces, business cards, and so on. A consistent design style should be applied and adapted to each one of these areas so that not only will the name and logo be recognizable, but the customer will become familiar with the look and feel of each of these elements and they will recognize them as part of the same company. In essence, the customer experience across all of the visible touch points and interfaces with your company should have a consistent style and familiarity that enhances the instant recognition of your business and simplifies the customer’s relationship with you.

Don’t make the mistake of designing very complex looking marketing collateral and web site designs that feature your products in great detail, including screen shots of software, detailed technical descriptions, design look and feel elements that are derived from your own internal business – labs, production, factory floor or executive offices. You would be missing the point of creating all of this communication in the first place: to effectively establish long term relationships with customers.

In the industry for your products and services, there may be many existing elements like symbols, colors, or other visual images that are very familiar to the people who buy and use the appropriate products and services. Every community has such elements that connect the people in that community together. Your mission is to find those elements, adopt them within your identity, and become an integral part of the community you to intend to serve. Your customers will not only want to include you in everything they do, they will have a hard time thinking of themselves without you when your competitors come knocking.

Wells Fargo’s counteroffer for Wachovia has spurred Citigroup to file a complaint today to the New York Supreme Court.

From The New York Times:

“The root of the conflict is the interruption of Citigroup’s plan, announced a week ago, to buy Wachovia’s banking operations for $2.2 billion, or $1 a share. That deal was brokered by the Federal Deposit Insurance Corporation, whose officials worried that Wachovia could collapse. Regulators agreed to pick up losses over $42 billion incurred by Citigroup after the transaction.”