The Marketing Blender

Is it Time to Stop Growing?

Laura Ries has an interesting post over at her blog, The Origin of Brands.

In a nutshell, her post suggests that “backwards is the new forwards” when it comes to branding. In other words, it’s a back to basics approach that often rescues companies who lose their brand focus in their quest for growth.

In my view, it usually plays out something like this:

- Well defined brand enters market with awesome marketing strategy

- Customers flock to the brand and rapid growth ensues

- Brand gets really big and is celebrated as a success

- Company goes public, or if already public, they start to attract serious attention from analysts

- To meet the constant, quarter-by-quarter demand for growth in revenues, company branches out into products or services that it wouldn’t have originally considered part of its brand experience

- Company delivers revenue growth over the short term

- Customers who made the brand big in the first place become somewhat alienated by the lack of focus in the brand

- Some of these customers stop buying

- Growth slows

- Analysts write that growth is slowing

- Company gets worried that growth is slowing

- The quick fixes put in place to drive short term revenues are now weighing the brand down

- Company makes “gutsy” call to get back to what made it successful in the first place – recapturing the original brand experience that has been lost

- Customers return to the “revitalized” brand

- Everyone’s happy, for now.

Laura’s post tells the story of Starbucks, a company that found itself going through a version of the above.

Here’s a question I’ve asked myself about this cycle that seems to perpetuate itself with brands (especially those that go public):

When is it time to stop growing?

Some would say growth is the ultimate goal of all businesses, but as you can see, growth at all costs tends to be pretty costly.

Your company should always be focused on growth, but overextending or overexpanding your brand may end up being counterproductive. 

Your brand may reach a point where growth slows, and you shouldn’t ruin the brand for the sake of trying to achieve the growth rates you enjoyed during the growth phase of the brand.

Maybe your company needs to launch a new brand, or maybe it’s time to sell high and move on.

Brand Equity is often your biggest asset. Wrecking it to please the street for a few quarters isn’t a good long term business proposition.

When the Competition Runs a Marketing Promo for you...

Tim Horton's has once again rolled out their popular “Roll Up the Rim to Win” promotion. But this year, there's a twist - and it's not something the people at Tim's had planned on.

First a quick history lesson for those south of the border. Tim Hortons is the 800 pound gorilla of the coffee business in Canada. It's a cultural icon. Part of its rise to the dominant market position in the market was a clever promo the chain first rolled out in 1986. After drinking your coffee, you could "roll up the rim" for a chance to win a prize, ranging from a free coffee to cars and cash. It was an instant hit and remains the company's number one promotional campaign each year.

Meanwhile, second fiddle Country Style (actually third behind Starbucks)has struggled to chip away at the mighty Tim's empire. They even came up with a promo of their own – called “Turn up a Winner”. It's the very same promo as Tim's – you roll up the rim of the cup to win a prize. The copycat promo hasn't helped Country Style – in fact Tim's handily expanded their lead over rival coffee and donut chains in recent years.

So what do you do when you're the number 3 player in the market, and can't find a winning promo even when you copy a successful promo run by the market leader?

How about hijacking the market leader's promo...literally.

Country Style's latest promotion offers Canadians with a losing Roll up the Rim cup from Tim Horton's the chance to exchange that loser for a free coffee at Country Style. (Imagine a promotion where an empty Coke bottle got you a free bottle of Pepsi.)

I think Country Style made a brilliant move here, for a few reasons:

• - As the number 3 player, Country Style promotes the high quality of their coffee when compared against other coffee chains. This cleverly devised promotion will give many first time customers a chance to sample their product and experience Country Style's higher quality for themselves.

  
  

• Even better, because of the nature of the promotion, they are guaranteed to attract Tim's drinkers and their losing cups. That avoids the common problem of many promotions – offering discounts to your existing customers (coupons, etc) while trying to attract new business.

• The timing is great – in recent years, many Canadians have noticed an appreciable drop off in winning cups at Tim's. By making a losing Tim's cup the centre of the offer, Country Style is taking a subtle jab at their larger competitor.

• The price for the promo is right – direct promotional costs are next to nothing (no promo cups!) outside of some free coffees.

• It's buzzworthy – the promotion has already made news and is getting postive word of mouth.

Will it change the face of the coffee chain wars in Canada? Hardly.

But when you're a number 3 player without the money or resources of the market leader, you've got to pick your spots and concentrate your marketing efforts in areas where you can have an impact.

This is a clever example of taking a competitor's promo and using it to draw attention to your own brand message. We'll see how it goes for Country Style...

Rethinking the 80/20 Rule

A few years ago I wrote an article for MarketingProfs.com aimed at providing readers with a new way of looking at the 80/20 rule when it comes to segmenting clients based on volume.

My main argument was that companies should start looking below the line a little further. While it may be true that 80% of your volume is coming from 20% of your clients, it does not automatically follow that getting more business from the very valuable 20% would drive increased profitability. In fact, the most profitable customers in your database might not be in your top 20% today.

The article was subsequently featured in the Globe and Mail (Canada’s National Business Newspaper, for those reading south of the border).

I think the article is still very relevant today – I’ve pasted it below:

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Here's why tapping your top-volume clients for further growth doesn't always work.

In most marketing circles, the principle behind the 80/20 rule applies to the relationship between your revenue and your customers. That is, 80% of your business results are being driven by 20% of your clients, or pretty close to it.

It's considered easier and more cost effective to grow your business by increasing the business volume your existing clients do with you, as opposed to bearing the higher acquisition costs associated with hitting the open market and trying to grab the attention of clients who don't currently deal with your company.

It is no surprise, then, that many marketers are investing heavily in identifying and segmenting their "top 20%" with the intention of developing marketing campaigns and sales promotions just for this elite group of customers, with an eye to acquiring more of their business. After all, they are clearly heavy users of your company's product or service and are apparently willing to spend money with your company versus your competition.

However, such an approach overlooks the fact that many companies identify their top 20% of clients on a volume basis. This creates a phenomenon that I call the 80/20 Volume Paradox: While your top 20% of clients may be driving a big chunk of your business and displaying all of the signs that they represent a great target audience for your marketing efforts, they may not deliver a strong ROI on further business development efforts. Why? Two possibilities:

1. They're tapped out. There are only so many hotel stays or onsite computer consultants that a client can want or need. As a result, marketing efforts aimed at this group may produce only a minimal incremental lift in volume.
2. They're buying cheap. Of the incremental volume you succeed in generating from this group, it will likely be at a lower margin, as high-volume clients generally buy at a lower price. This is especially true in business-to-business relationships, where contracts are often structured to include significant volume discounts.

To address these shortcomings of some of the traditional approaches to driving business through your top volume clients, here are two fresh approaches to looking at your top clients that put a slightly different spin on the 80/20 rule.

Think margin, not volume

Instead of identifying the top 20% of your client base in terms of volume, use margin instead. Identify the top 20% of your clients as measured by total margin, and cross-reference that list against your previously identified top 20% by volume list. You may be surprised to find that the two lists are not quite the same.

Your top 20% by volume are probably already being rewarded with volume pricing and various discounts. As a result, you might find a gem or two on your top 20% by margin list—clients who are doing moderate volume with your company, but at higher prices and therefore higher margins. Get the same sales lift out of this higher-margin group and you'll add more to the bottom line than by pursuing your volume clients only.

As an added bonus, higher-margin clients doing less volume with you may not be "tapped out" and may have room to increase their demand for a product or service. And, they are still your clients, which means you can approach them with marketing programs and promotional offers while enjoying the low acquisition costs that come with knowing your target audience.

Think 90/30

Instead of identifying your top 20% by volume and targeting them, perhaps you should cast your net wider and target the next 10% of your clients based on volume. Instead of 80/20, shift your thinking to 90/30—driving 90% of your business from 30% of your clients.

Looking below the 20% line will uncover some clients where a great "share of wallet" opportunity may exist. In this group, you are more likely to find clients who are giving at least some of their business to your competition, representing a great opportunity for you to consolidate their purchases with just one company: yours.

You may also uncover clients not as likely to be receiving heavily discounted pricing with competitors, since their purchasing is more fragmented. This gives you the option of using some pricing leverage to build volume. (Of course, building volume at the client's current rate would clearly be preferable.)

This group of clients is also less likely to be tapped out—perhaps they can be encouraged to purchase more of the service you offer, or perhaps you can wrestle a higher share of wallet out of these clients buy getting some portion of their business that is currently going to a competitor.

It is important to understand who the clients are that are driving the majority of your business, and even more important to retain their business. However, growth within your client base is often not as simple as identifying your top-volume clients and milking them for more revenue.

Don't be afraid to put a different spin on the 80/20 rule the next time you analyze your client base. You may find that turning down the volume focus will allow you to identify other good marketing opportunities among your clients.

Selling More to your Existing Customers

One of the golden rules of marketing is that increasing sales among existing customers is more profitable and more likely to be successful than pitching to the mass market.

But you have to know your customer first, and know how much they might be willing to buy. Otherwise you risk making them a lousy offer.

Case in point - last April I went online and bought two tickets to a Jays game. This was probably the first time I'd ever ordered baseball tickets online for a game.

   

About a week after the game, I received a call from a friendly Blue Jays telephone sales rep, who left me a voice mail about a special offer. Evidently they had my name from the original credit card purchase and were prospecting their list, like any good marketer would.

I was intrigued. I wondered if I would be able to get a discount on a future game, or possibly better seats for the same price. It was early in the season after all, and there will still plenty of unsold tickets for those April and May games.

Here's the offer I got when I called back – buy tickets for 10 additional games and get a small discount on the face value of the tickets.

Were they serious?

There was so much wrong with this offer:

• As a one time customer, was I really going to commit to 10 additional games at two tickets per game? They were asking me to go from spending $100 to spending $1,000. That's a massive jump.

• The discount was very modest and the offer was available on their website – I'd hardly call it an “offer”, and it certainly wasn't exclusive.

• There was no alternate offer available. Once the rep knew I wasn't going to commit to 10 games, there should have been an alternate 2 or 3 game offer available. Instead they went with an all or nothing offer – either the guy buys 10 times what he originally bought, or he buys nothing.

Your existing customers are more likely to be interested in buying more of whatever it is you are selling. But getting them to buy more is like climbing a ladder. It is next to impossible to do unless you take one step at a time.

When making offers to your existing customers (especially new ones), consider what the next logical step would be in their relationships with you, and make them a good offer to take that step.

I would have gladly taken the next step and committed to one more Jays game, maybe 2 in response to a good offer.

Not 10.

You Just Proved Blog Advertising Works!

You’ve probably seen a similar piece of advertising on benches and other outdoor advertising spaces in your community. It’s intended to be a “gotcha” – you look over at a bench or a bus shelter, and see a message that reads something like:

“You just proved outdoor advertising works!”

This is typically accompanied by a phone number to call to advertise your business in that same space.

Clever...but not true.

Looking at an ad doesn’t mean it “worked”. (Can you remember any of the ads you saw on TV last night – you saw ads on TV, didn’t you? How come they didn’t “work”?)

Getting an ad to “work” takes a lot more than catching a fleeting glance from a passerby. The ad itself would have to be memorable, well targeted, timely, and so on. It needs to be part of a meaningful market position and/or brand message.

There is some irony in these advertising messages. Those who own the advertising space on outdoor signs and benches need to sell it to businesses to make money. So they push the concept that simply owning advertising space for your business is the key to making your advertising work.

Of course once they’ve sold the space, they’ve cashed in their chips. Whether your advertising actually works or not has no bearing on the commission they’ll make from selling you the ads.

The even greater irony – the space where they placed that clever message was clearly unsold inventory – so instead of running an ad for a paying customer, they ran their own ad to attract a paying customer.

If the ad copy read “Nobody else saw the value in buying this space – how about putting your ad here?!” – do you think anyone would buy it?

Outdoor ads on benches and bus shelters may be useful for your business, but simply having ads in high traffic areas is no indication of whether your ad will “work” or not.

Niche Marketing Tips – Top Down or Bottom Up?

Niche marketing is all the rage these days. Sometimes, I think it’s misunderstood.

You could look at niche marketing as a staircase. The top step is the mass market. The steps below are niche marketing opportunities, and they get smaller as you go down the stairs.

In the coffee market, Starbucks made a killing by taking just one step down from the mass market. They focused on the niche for premium coffee served in a “premium” environment.

Part of their success can be attributed to how they looked at the coffee market. They took a top down approach to finding a niche, versus a bottom up approach.

Top-Down Niche Marketing -- look at a big market and drill down to find the largest possible market for a niche offering. In my view, Starbucks didn’t have to look far. Because Starbucks took just one step beyond the mass market, the niche was big enough to support consistent growth.

Bottom-Up Niche Marketing -- race to the bottom of the staircase with the smallest imaginable niche and then get to work on meeting their needs. To carry on the coffee example, bottom up niche marketing might start with 12 oz, organic, fair trade coffee, served in 100% biodegradable cups in cafe’s using only renewable energy sources.

There’s nothing wrong with the “bottom up” example, but it’s a (fictional) example of starting at the bottom and finding a very small niche. Maybe it’s sustainable, maybe it’s not. But it’s certainly small.

My observation is that some companies start about 9 steps down the staircase and try to work their way up. But in their haste to find the next hot niche, they blow right past a bunch of empty stairs on the way down.

Starbucks stopped on the first step beyond the mass market and built a strong brand.

The next time you are evaluating a niche marketing opportunity, ask yourself how many steps beyond the mass market you’ve taken, and before you commit, figure out who’s standing on the steps above you.

Tell Me a Story...please

The next time you have the opportunity to give a business presentation in front of a group – coworkers, colleagues, professionals, clients, employees, etc – tell them a story.

It’s an overcommunicated society. Your audience is bombarded with messages from morning til night. The odds are radically stacked against you if you are hoping to just dump everything you know on them.

Most people will remember 1 or 2 things from your presentation (if they remember it at all).

It’s up to you to decide what those 1 or 2 things should be, and then present those key points in a way that makes them memorable for the audience.

The day after a presentation, when people head back to work or to their business, the lasting effect from your presentation will be the feeling you created when talking to them, not the content you told them about (since they’ll only remember 1 or 2 things).

So, how do you get people to remember what you want them to remember – and how do you create that feeling that stays with the audience long after your presentation is over?

Give them a "mental anchor" – that’s a (poorly thought out) term I use for anything that helps the audience anchor the knowledge you are imparting to something they can actually remember when they wake up tomorrow.

By anchoring your facts and figures and brilliant thoughts to something they can remember and recall whenever they need to, you’ll be giving your audience a chance to keep your key messages in their memory for a long period of time.

A "mental anchor" could be:

A story – "Let me tell you an amazing story about a lady named Jane Smith that will change how you look at retirement planning."

An analogy – "Fixing this problem is a lot like building a new house – it starts with a strong foundation. Let me tell you about the foundational improvements we’re going to make this year to turn the business around…"

A piece of uncommon logic or a surprising fact – "As the economy slows down and companies look for cost saving opportunities, you should maintain or even increase your spending on marketing and advertising...here's why..."

An unusual comparison – "Our company is the Microsoft of the mouse trap business."

A Well-Told joke – (you’re on your own here!)

An Observation – "With these changes, our company now has the largest R&D department in the industry – twice as big as our larger competitor. It's like having double the horsepower under the hood at the Daytona 500."

Your audience’s capacity to remember numbers and facts is very limited – and facts and figures alone don’t inspire feelings or emotion.

You need to anchor the numbers and facts to something far more interesting in order to be remembered.

The Smallest, Fastest Ad on TV

One of the hottest advertising properties these days is advertising space on a NASCAR race car. A quick look at the cars that will line up for the Daytona 500 this weekend proves the point.

Given the soaring popularity of NASCAR over the last ten years or so, it’s no surprise that companies are lining up to promote their brands with a decal or sticker on the body of one of the brightly decorated stock cars that whip around in circles a few hundred times every weekend.

The association is obvious for some companies. Bud, Pepsi, Valvoline … all of these brands are long time NASCAR sponsors, drawing on its mass appeal to drive sales for their mass marketed brands. Even Viagra sponsors a car.

So here’s my question – how much did the company pay for the small red ad in front of the tire on this car (pictured below):

When the car flies past the camera, can you even seen this ad? I can't even see it in this still picture.

I wonder what the phone call between the brand manager who bought the ad and their boss would sound like.

“Yes, we can get our ad on the car…no, not the hood….no, not the roof…..yeah it’s sort of near the tire….you can see it clearly when the car is just sitting in the pits and the camera zooms in on the tire guy….”

Here’s how I look at sponsorship marketing:

• If you have the cash and it makes sense, go ahead and plaster your brand identity on an event/concept/race car, etc
• If you don’t have the cash, don’t settle for the equivalent of buying the ad by the tire. Be a big fish in a smaller pond – as an added bonus you might find that the smaller pond is also more narrowly targeted.

 

“You want a new engine with that oil change…?”

Measuring the wrong thing can be deadly for your business.

Everytime I drive into my local drive through oil change retailer, I feel like I’ve walked into a low budget electronics store where everyone is on 100% commission.

For those of you who haven’t had the experience, while the technician is changing your oil, the other employees come to your window two or three times to offer you additional services that your car might need like a fuel injector cleaning, radiator flush, and so on. These services are typically overpriced and your car may or may not actually need them.

Now I’m all for having employees offer multiple services to clients to drive incremental revenue -- but their dogged, relentless pursuit of that one extra sale in the in oil change bay is probably pushing some customers not to come back. 

It makes me wonder if some businesses are measuring/teaching/rewarding the wrong things.

In this case, the local oil change franchise seems to be measuring:

Incremental sales revenue per car, achieved by aggressive sales tactics

Perhaps they should be measuring:

Incremental sales revenue per car, achieved by aggressive sales tactics

MINUS

Lost oil change revenue from clients who made one visit in the last 12 months, refused extra services, and did not return.

I wonder if there’s a profitable niche out there for car owners who actually want just an oil change when they go to get their oil changed?

I wonder if clients would pay a premium for faster, hassle free service where nobody tried to hard sell you anything else?

The lesson I took away from my experience is that businesses need to watch more than just one metric to gauge overall success.

That, and customers have long memories.

Radio Advertising for Small Business Owners – Part 3

If you didn't catch Parts 2 and 2 in this series, you can find them in the archives on the right hand side of the blog...

So you’ve committed to a multi-week radio advertising campaign. Now what?

You’ll need to create your ad. Most stations will put the ad together for you in house, and in many cases they’ll do it at no extra charge. But…you get what you pay for.

If you opt for an in house ad produced by the station, here are some guidelines to get the best ad for your money:

Use a Popular Station Personality – instead of a nameless announcer, try to line up one of the stations regular on-air personalities to record your ad. My local sports radio station runs an ad for a shoe store featuring the popular afternoon talk show host – and it’s one of the few ads I remember because of his distinctive voice and the implied endorsement.

Use your Own Voice – you can be the star of your own radio ads, and you don’t need a great booming radio voice – but you do need character. Your voice needs to be different, folksy, friendly, deep, etc.

Be in Charge of the Message – you can’t expect the local radio station to “get” your brand message after a 3 minute talk with you. Give them any marketing materials you can to give them further insight into your brand and your target market. If you have an idea, give it to them in explicit detail. This is not intended to knock those who create ads for radio stations – it’s more a recognition that they are put in a hopeless predicament and need as much info as possible to create an ad that you’d actually want your customers to hear.

Radio can be an affordable advertising option for small businesses -- following the tips in this series will help you get your campaign off on the right foot.