KEXINO Marketing Blog | Start-up & Small Businesses Marketing Tips
The KEXINO Marketing Blog provides thoughts, opinion, tips, and Marketing, content creation and communications services for startups & small businesses designed to build awareness, reputation, trust - and sales.
Here’s something to think about: Unless your business has more than 50% market share (highly unlikely) then the majority of your potential customers are buying from your competition.
When I say that to the stereotypical ego-driven business owner, their reaction is often a scrunched-up facial expression. “That’s only because customers don’t know how much better we are than the competition”, they’ll say. “If only we could get the word out – better marketing, sales, etc. – we’d be top dog.”
Sure, better marketing and lead generation will increase market share. But a reality many CEOs or CMOs fail to admit to themselves is that, sometimes, customers are happy buying from elsewhere.
Perhaps it’s that, regardless of industry, most businesses today do a pretty good job of serving their customers. Sure, some do it better than others. But if there was some kind of “customer satisfaction threshold” for the businesses selling in your market space, most of them would pass the minimum level.
Every business is upping their game – they have to. Apart from the occasional outlier, businesses have had to improve the presentation of what they sell and how they sell it in order to stay in business. Perhaps that manifests itself in creating an improved product or service, delivering more effective marketing, providing a better buying experience, or all of the above. No matter what it is, that threshold level continues to move upward.
Every Business Looking To Deliver A Better Customer Experience
The internet has had two major influences on this position. Firstly and most obviously it’s brought customers and brands closer together. No longer are you limited to buying a widget from the store downtown when you can buy it from pretty much anywhere in the world. In order to remain relevant, organizations have had to reconsider the value they’re providing over and above the supply of the product or service concerned.
The second effect has been in terms of a social proof quality buffer. In the old days you’d buy a widget from someone, find out it wasn’t very good, resign yourself to never buying from that place again, and move on. Today word of mouse – social media, online reviews, etc. – means poor quality has fewer places to hide.
Customers Buy Elsewhere Because Of How You’re Treating Them
Do you know what the biggest source of lost revenue is for your business? It’s not your product, your pricing, or your distribution. It’s not your branding, marketing, location, or even your competition.
The biggest lost source of revenue for your business is the customer you didn’t even know about.
The customer who came to your website but left after 10 seconds because your site is too slow, or they couldn’t quickly and easily find the information they were looking for.
The customer who drove right past your store because it looked shabby from the outside, or there wasn’t convenient parking.
The customer who tried to call you, but hung up because they got lost in your automated menu system – “press 1 for sales, 2 for support…”
The customer who got so fed up receiving yet another irrelevant impersonal email that they unsubscribed from your list.
Ignorance isn’t bliss. It’s lost revenue.
Clearly it’s important to ‘stand in your own queue” – to take a step back and pragmatically evaluate the buyers journey from the customer’s point of view.
Many marketers or business owners will say they’re doing that already. But the issue is the ‘rating system’ is skewed. You can bring in all the management consultants, secret shoppers, or customer evaluation providers you want. The problem is they’re giving ratings based on your rulebook instead of your customers’.
Finding Meaningful Competitive Advantage (Hint: It’s Not “Quality”)
I speak with business owners pretty much every day. So many times when asking them about what they see as being their organization’s competitive advantage, they’ll use the word ‘quality’ as part of their answer. “We produce a higher-quality product”, “All of our people have a commitment to quality.”
Now I’m not saying the quality of your product or service isn’t important: of course it is. What I’m saying is that quality just as important to every single one of your competitors. The point is that, as far as the customer is concerned, the quality of whatever you’re selling is a given. Basing your competitive advantage or USP around ‘quality’ is like saying your taxi is better than everyone else’s because it has four wheels: the ‘fit for purpose’ stuff is implied. Quality is useless as a describer of competitive advantage.
So should you focus around what you do better than the competition? You can certainly try, but in the real world it’s very difficult. Why? Because if we’re honest with ourselves, it’s probably not true. Unless your widget is so amazingly better than anything that exists anywhere else at any price, customers are going to keep buying elsewhere for reasons that make total sense to them. Today it’s extremely difficult to compete by being ‘better’.
Don’t for one second think of diminishing the quality of what your competitors are producing. Customers are buying from them and are happy with what they’ve bought. Perhaps you say your widget is more expensive because you believe it’s ‘better’ than what the competition sells. That may be true, but did you consider the possibility that, just maybe, customers don’t value ‘better’ in their decision-making process? Perhaps they’re happy with good enough and paying less. What’s your answer to that one, Sherlock?
Your meaningful competitive advantage isn’t about what you do well. Its about what you do differently than everybody else.
Knowing Your Customers Better Than Your Competitors Do
We know it’s easier to sell to an existing customer than to a new one. Yet in many industries high customer churn rates are seen as the norm. Retaining loyalty is hard, and getting harder.Having to find a bunch of new customers every year just to offset what’s considered ‘natural’ churn is not only a pain in the proverbial, but restricts ultimate growth.
But what if customer attrition was more to do with legacy sales and customer experience assumptions and processes, rather than some kind of business de facto behavior? Rather than putting it down to “that’s just the reality of our industry”, businesses could look at ways to better serve an increasingly demanding customer base.
Supposing you implemented a program to treat existing customers better. We’ve all seen businesses offer gifts or incentives as a marketing tactic to drive new customer business. “Sign-up for 12 months and get your first 2 months for free”. “Take our credit card and enjoy a lower rate of interest for the first 12 months”. But where’s the love shown for existing customers? The customers who remain loyal, continue to buy, and maybe even recommend your business to their friends? What if you treated existing customers the way you treated new ones? What if – heaven forbid – you treated them even better?
If you could reduce customer churn from say 20% to 10%, what commercial effect would that have on your business?
What you Say & Do Is Not Always What They Understand
Not matter what you’re selling, there are people thinking about ways to disrupt how customers buy within your industry. Maybe those ideas are coming from competitors you know about, but perhaps they’re not. Think about how it took outsiders to disrupt industries like music distribution (Apple, then Spotify) or transportation (Uber) or accommodation (Airbnb).
The way you organise, design, and position your business may well be with the best intentions. But it doesn’t necessarily follow that customers perceive the process and value exchange in the ways you expect. If you’re just doing what (you think) you’re supposed to do, you’re missing opportunities.
Take a step back to evaluate who exactly each customer interaction touchpoint is designed to benefit – you or your customer. Compare it to how your competitors buyer journey is perceived – then adjust accordingly.
Why do we continue to talk of a “digital” marketing campaign, when everything in marketing is now digital?
There can be no doubt digital marketing technology gets more than its fair share of coverage. Marketers seem obsessed by the new. One week it’s Facebook live videos, or maybe Snapchat. The next week it’s Virtual Reality, IoT blockchain-powered AI iBeacons delivering hyper-targeted chatbots from voice search.
Learning about such technologies is certainly interesting. But it’s also a distraction. It’s a distraction because, as a marketer or business owner, it’s too easy to be believe the BS. Before you realize it you’ve been seduced into thinking the latest shiny object is going to totally transform the marketing landscape forever, and it’s all going to happen “within a year or so”. The truth is usually very different.
In reality, technology takes a lot longer to become useful in the real world. Watching a T-rex walking around the carpark from my phone screen is cute and kind of cool. But unless you can show me a real, repeatable use case on how (for example) augmented reality is going to sell more of my product in the next 12 months, business owners and marketers have got more urgent things to worry about.
Moreover the incumbent systems that are supposed to be rendered obsolete never really go away. For example digital music downloads were supposed to kill-off CDs and vinyl LPs, yet today more people are buying records and CDs than downloading them. The inevitable result is we prioritize the novel over the established. We revere ‘digital’ marketing and ignore (or even deride) existing, proven marketing initiatives – even if they may do a better job.
By viewing marketing as consisting of two separate disciplines – ‘digital’ and ‘traditional’ – business owners and marketers are missing a trick. Because today the best results occur when combining the right mix of tactics to deliver on the strategic business result. Some of them may be ‘digital’. Some of them may be ‘traditional’. But all of them are Marketing – and that’s the point.
“Traditional” Marketing Channels Are Dead? Don’t You Believe It
People who like to think they know a bit about marketing (Dunning Kruger effect, anyone?) seem to automatically dismiss many existing customer communications tools in favor of the new and the novel. Not only is a marketing campaign using the new technology considered ‘better’ than one executed using established (and proven) tactics. But the introduction of this new shiny innovation means the way we’ve done things in the past is now somehow obsolete.
If you’re gullible enough to believe such hype, you’ll be thinking that radio is dead. So, by the way, are billboards. Oh, and don’t forget that millennials no longer watch TV (even if we don’t know what a millennial actually is), so the goggle box must be on its last legs too. Clearly, designing any marketing campaign to include such channels is a waste of time and money. Digital marketing is the only marketing worth doing, since it seems to be the only marketing anyone talks about.
Except that it’s all nonsense.
Today, pretty much everything in marketing has a digital component. So if it’s all digital, why are we even using the word? What additional clarification does it serve when it’s ubiquitous and pervades everything we do?
Defining some elements of Marketing as ‘Digital Marketing’ may have had some justification in, say, 2005. But it certainly has no reason to exist today.
Radio Has Never Been A Stronger Marketing Channel
Let’s start with radio.
Radio – at least analog radio – is dying. But what you won’t read about is how digital radio is not just taking its place but growing in real terms, year on year.
How come? Because today’s radio isn’t just a digital version of what we used to know as ‘radio stations’. Radio broadcasting used to be thought of as catering to a small local audience, occasionally going as far as nationwide. Today, digital means radio now has a global audience.
You know what else is radio? Podcasts. Podcast advertising grew 85% year-on-year in 2017. Those number don’t seem consistent with something that’s supposed to be dying, do they?
Radio is digital.
Print Had A Wobble. But It’s Looking Healthier
Outdoor advertising isn’t going irrelevant – it’s going digital
Newspapers? You’d be hard-pressed to find any mainstream newspaper in any country that doesn’t make more money from digital subscriptions than from newsstand sales.
Sure, the industry took a huge hit about 10 years ago. But publishers are finally working out how to monetise their business in the digital world, and newspaper ad revenues have been rising over the past few years. But we don’t tend to read about that very much.
Billboards and newspapers are digital.
Is It Digital? Is It Traditional? Who Cares?
At the end of the day “digital” is just a word. So where’s the harm in continuing to use the term ‘digital marketing’ ?
Because by definition ‘digital marketers’ aren’t seeing the full picture.
By focusing on a media execution rather than the best mix of tactics and channels for the business outcome, digital marketers are short-changing their bosses, clients, and businesses. Looking at newer tech-based customer outreach methods in isolation without considering the channels frequented/preferred by the customer (however old-hat you may personally think they are) is missing the fundamental point.
It’s not a case of using one over the other. It’s about picking the right mix of channels as appropriate for the product, market, customer.
For example, from our own experience we’ve often found the sweetspot is a mix of print and PPC advertising, supported by more targeted initiatives such as content marketing. Last year we designed a series of direct mail marketing campaigns for a client who saw fantastic results when compared to the “email / blogging / social media blast” formula they’d been doing for years. Why? Because many of their customers preferred printed materials to an email. Sure, every client execution is different – meaning every recipe is different. But surely the better way forward is openly embracing all the tools we may have available, regardless of personal preference or familiarity?
Making The Facts Fit The Result
Marketers and business owners seem to love putting halos on successful companies. They’ll make a judgement on a well-known business based on (for example) its digital strategy, justifying the strategy’s validity by looking at the company’s performance. Which is ridiculous.
Firstly, from the outside there’s no way of knowing if a particular strategy is actually driving company performance, or is an attribution of it. Is it successful because of its digital strategy, or for other reasons? In order to make a determination on the performance of any strategy, it’s imperative to separate dependent from independent variables.
Secondly, if the only basis for your reasoning is by using a successful example you’re making the result fit the narrative. For example I can give you a list of companies where the CEO is bald. But that doesn’t mean all companies with bald CEOs are successful.
In order for any such argument to hold water, there needs to be a comparison free of confirmation bias. If you decide that [insert whatever marketing tactic here] is essential for business success, are you basing your reasoning on performance? In which case, where are the examples of companies that did the same, but failed?
The Right Tool For The Job
Please don’t misunderstand me: I don’t want to give you the impression I’m against digital tactics and/or channels. As an agency we’re running digital-centric campaigns for clients every day. Digital is great. But it’s not the only tool in the toolbox.
What I’m saying is that, today, the idea of separating ‘digital’ from ‘traditional’ is ridiculous – it’s all Marketing. Not only is it short-sighted because of the overlap from an execution standpoint. It’s short-sighted because the destination point of all this stuff – the customer – doesn’t see things as a zero sum game. There’s no such thing as an ‘online-only’ or ‘offline-only’ consumer, any more than one who only ever watches one TV channel.
The answer lies somewhere between the two extremes. The best marketing execution is most often a combination of initiatives derived from both camps, developed from an understanding of customer behavior and expectations and in alignment with the business strategy upon which the marketing plan must deliver.
If you want to know where a business is today, look at their sales. But if you want to know where a business will be tomorrow, look at their customer service.
Typically whenever you read about the importance of customer service in a business, it’s in relation to organizations selling software. Moreover, the software product or service concerned is usually deployed in the cloud, making the measurement of customer experience somewhat easier.
Online software interfaces can be tied to a bunch of measurement analytics algorithms at the back-end, which makes getting realtime input on frequency of use, interactions, feature reach, etc. pretty easy. In those kinds of businesses there’s often an overlap of Customer Experience with User Experience (inevitably abbreviated to “CX” and “UX” apparently for no other reason than to keep outsiders at bay).
The importance of customer service should be clear to any kind of sales situation. But what about businesses without an online customer interaction component to their product or service? What about if you’re selling pizza, making vacuum cleaners, or printing limited-edition t-shirts? And while we’re on the subject: when exactly did we start talking about “customer experience” instead of “customer service”? Aren’t we talking about the same thing?
Customer Service vs. Customer Experience: What’s The Difference?
Before we dig down into the weeds, it’s probably a good idea to first define what we mean by “customer experience”, as well as how it differs to “customer service”.
Customer service is generally considered to be reactionary. It comes into play after the customer has interacted with the business at some point, usually for a particular reason. Examples of customer service could be:
To find out more about a product prior to purchase – information on size, color, price, delivery options, whatever.
During the purchase phase, perhaps to request a quote or change the order quantity.
An interaction occurring after the purchase has been made. To arrange a return because the size isn’t right, the product arrived damaged, or maybe the customer has simply changed their mind.
Customer experience, in contrast, is defined in a much broader sense. Sure, it includes the reactionary processes involved in customer service. But it goes further to include everything influencing the buyer journey across, as well as within, the organization. As a result, customer experience can be thought of in both reactive as well as proactive terms.
Customer experience refers to all touchpoints a customer may have with a business including – but not exclusive to – the traditional interpretation of customer service. Customer experience includes elements of branding and marketing, for example. It may be an influencing factor in product management decisions, R&D priorities, and even the content and tone-of-voice used for the company’s social media efforts.
Customer Experience Touches Every Business Department
The influence of customer experience touches virtually every department in the business. It’s how and where customers are exposed to your brand, and your products. It’s how your website looks and works, or how friendly and knowledgeable your in-store staff are. It’s how your distribution partners deal with retailers. It’s how your product or service is delivered to your customers, how they use it, and how any after-sales issues are handled. As with branding, customer experience is demonstrable and tangible evidence of an organization’s core values, aims, and goals.
Because of this, customer experience teams should be part of the Marketing department rather than, say, under Support. Now more than ever, with ever-wider customer choice and more effective competition, customer experience is an integral and crucial driving factor for sales. It should be treated as such.
As I mentioned, for those businesses selling online software tools controlling and managing each stage of the customer journey is a little easier than for manufacturers, or sellers of ‘physical’ products. If you’re selling widgets via distributors you’re a couple of stages removed from where the action happens. While you’re probably (hopefully?) getting feedback on how to improve things, there’s a delay before the intel gets to you.
A key infrastructure component lies in the development and active management of the feedback process itself. Nominating people who represent key stages in the buying journey process to implement and report back on current customer expectations vs. experience. The second initiative is having direct or indirect teams proactively reaching out to people fitting particular customer segments. Speaking with users to understand use case and fit-for-purpose expectations, as well as to unearth key influences that may drive current and future purchase behavior.
Great Customer Service Is A Part Of Any Great Business
Customer service should be considered a strategic business tenet, worthy of attention at executive level in much the same way as any marketing or sales strategy. If suitably defined and executed, an effective customer service position not only delivers increased perceived business and product value. It helps increase customer retention and provides marketing opportunities in terms of testimonials and brand advocacy. It helps product management and R&D create fit-for-purpose products and services, and prioritizes development roadmaps. It can even boost staff morale, as a clear and tangible demonstration of business ethos.
Many businesses see the process of finding the right a marketing agency as pleasant as a colonoscopy. And just as messy.
Finding a small business marketing agency that checks all the boxes for your particular commercial needs can be a stressful and laborious experience. Whether you’ve appointed agencies in the past or this is your first time, there’s a bewildering array of choice. Go for a big name agency, or a smaller ’boutique’ style provider? Should you stay local, or widen your search? Can your small business justify the cost?
One of the main reasons finding the right agency seems as elusive as inserting a USB cable the right way round first time is that, at first glance, many agencies seem to be saying the same thing. They all boast they can help you grow market share, reputation, and sales. All have similar competences and offer outwardly-similar services. Lots of them have super-cool looking websites with flashy design, amazing work examples, gushing client testimonials, and maybe a free eBook or three.
So where do you start? How on earth do you sort out the wheat from the chaff? How are you meant to sniff out the heroes from the zeros and appoint an agency who gets what your business is about, offers the right blend of services – all for a price that won’t have you reaching for a Xanax? Here are some tips to help you evaluate prospective agencies and make the right choice.
Integrity, Professionalism, & Accountability
On a comforting note – unless you’re unlucky to find a total lemon – at the end of the day pretty much any agency is going to be able to provide the services your business needs. Sure, some will be more creative in their approach; or maybe offer a wider range of services. But in my book what’s absolutely crucial when evaluating any kind of business partner (marketing agency or otherwise) are more down-to-earth criteria.
What do I mean? I’m talking about an agency’s integrity, professionalism and accountability. For example if they say they’re going to call you tomorrow at 11am, that’s what they should do. If they end up calling at 11.30am without a good reason, to me that’s signaling they don’t value your time.
Other red flags? If you’ve been led to believe a particular marketing initiative was going to cost X while the invoice lists a bunch of hidden extras, that’s not cool. Similarly if no-one returns your call or email within one business day, they better have a darn good reason.
I see conflict of interest as a sign of integrity too. As a client I wouldn’t want to engage an agency that was working with a competitor – I’m sure you’d feel the same way. We’re sometimes placed in a position where we need to turn down a client project because their business is in conflict with one of our existing clients. I think most reputable agencies would do the same. However I have heard stories…
When they screw-up - and they will, eventually - how do they deal with it? Agencies are full of humans, so we can’t escape the basic fact that human beings occasionally make mistakes. What separates a good business from a great business is less about making a boo-boo, but more about how the boo-boo is addressed.
As a small business, you should be investing in an agency in ways more than just the supply of a set of services. To get the best from your agency, they need to be considered as a partner, a peer - rather than simply as a supplier. If you’re going to open-up your business to that level of intimacy you need a partner reflecting similar values and priorities to your own organization.
The Importance Of Communication
Marketing agencies are all about communication, so you’d think that this was a given, right? You’d be surprised. You’d think that this was a given, right?
Part of the success of working with an agency lies in efficient communication between everyone involved. That’s not just in terms of accessibility (see above) but in terms of understanding your business. It’s unrealistic to expect them to understand all the ins and outs of your product/service, business, and industry as a whole. However, I don’t think it’s unreasonable to expect everyone involved in the project to know enough to, for example, answer low-level sales questions.
If the agency isn’t taking the time to understand what’s happening below the waterline, they’re just going through the same motions as they are with every other client on their books. Your business deserves better than that.
For some small businesses - and indeed individuals - the physical location of the agency is an important factor. Supposing you’re planning a campaign with postcards mailed out to addresses with ten miles from your store in downtown Chicago. In such a case it may not make sense to appoint a marketing services provider based in San Francisco, or London, or even Sydney.
Conversely, supposing the best mix of capabilities, understanding, experience, and service comes from an agency based in a difference timezone – or different country? If you’re targeting a national or international audience, then you shouldn’t necessarily discount them just because of location. (Of course, since we’re based in Europe while 80% of our clients are in the US, I’m bound to say that, aren’t I?) As long as you get the quality, service, and value you’re expecting, where’s the issue?
It’s not marketing unless it sells. Unless every marketing effort is geared around a commercial-driven action as it relates to the business strategy, no-one knows how well the plan is doing. Every action must be accountable to the strategy. If your agency’s idea of marketing is all about tactics (social media, ads, email blasts, etc.) without relating it back to the overall strategic plan, the chances of success are going to be more about luck than judgement.
If the first thing your agency does is plan Facebook ads, blog articles, email newsletters, or Instagram images; save yourself a bunch of money and stress by running in the opposite direction. They should be sitting down with you to find out what business goals the marketing plan is designed to address. They should be looking at the industry as a whole (as well as your place within it) to understand the general direction of travel and competitor landscape.
They should be segmenting new and existing customers by meaningful and tangible criteria. They should be analyzing your current customer acquisition processes. Only then should they be proposing a tactical plan that seeks to deliver on the strategic goals you’ve defined together.
For us, part of our business-first focus is about providing advice and recommendations to clients at a business level, rather than just a marketing one. Our clients seem to really like that about us. We’ve found that businesses of all sizes, but small businesses owners in particular, welcome having a confidant. A consigliere – a bit like Tom Hagen, Robert Duvall’s character in The Godfather movies. Perhaps it’s something as trivial as sending over a link to a pertinent news article or blog post. Or maybe it’s something more in-depth where a client looking for advice, guidance, or opinion in order to make an informed decision. It’s having someone who’s got your back.
Your appointed agency should be constantly informing and educating you. Giving you ideas and insights about better marketing efficiencies, but a whole lot more too. Ultimately they should be pushing you. Providing you with new ideas and tactics that are maybe even a touch outside your comfort zone. They should care enough to disagree with you, if necessary. They should challenge you – and vice versa.
However, as with all things, we’re talking about looking at context. Originality and creativity is what many clients say they want, but part of the agency’s job is to understand the unspoken limits. The goal is to push the envelope, without tearing it up altogether.
Not Just An Agency, But A Business Partner
If you treat your agency as little more than a ‘supplier’ than the ultimate success of your marketing efforts will be capped accordingly. At the same time if your agency acts in the way of a ‘supplier’ and you feel they’re simply going through the motions, that should set alarm bells ringing.
In my experience the most mutually-effective client/agency relationships are true partnerships. If there’s mutual respect, integrity, and recognition from both sides, there’s an odds-on chance you’ve found a long-term strategic business partner to help you realize your business goals.
Everyone’s talking about how business needs to break down internal departmental silos. Why it’s important for the Sales department and the Marketing department to play nicely with each other. Why other departments such as Customer Services, Support, and even R&D should be in considered in the mix too.
Then there’s the Finance department. And that’s where – more often than not – businesses of all sizes run into a brick wall. How come? Because there seems to be a basic communication disconnect between Finance and Marketing. This is fundamentally based around the different goals each department has, as well as language each discipline uses.
On the one hand, Marketing brings insights based on understanding what customers perceive as the value the business brings to them, and which they’re prepared to pay for. Finance, on the other hand, brings efficiency in the operations of the business with ways to deliver that customer value at the lowest possible cost.
The Problem: Contradictory Approaches To Business
This is where the methodology and processes of Finance and Marketing significantly diverge. Left to its own devices Marketing typically over-promises and under-delivers, pushing-up business costs against a return that doesn’t sufficiently justify its position. Taking to extremes the operational costs end up being too high, so the organization goes out of business.
Finance, in contrast, aims to engineer business cost structure from an assumption that “all costs are bad” and should be avoided, ultimately under-delivering on the customer value component. The result of reducing costs by too much is the value element is eroded. The customer no longer sees the product or service as being worth the purchase price, so the business no longer becomes sustainable.
A different approach, but the same end result.
The language of Finance is the language of the business in general. Based upon the underlying strategic goals and measurements set out by the CEO, part of the job of the CFO is to communicate information in strictly ‘business’ terms. It’s where you hear about things like Balance Sheets, ROI, cashflow, and EBITDA.
Clearly, Marketing’s message to the C-Suite/stakeholders should be seen as equally important. However since Marketing uses a different set of language terms unique to its own environment, much of what is said flies straight over the head of the average CFO. Even worse: CMOs sometimes use Finance-derived terminology in different ways to how CFOs would. The result is confusion, ambiguity, and even outright distrust.
Perhaps it’s because Finance sees itself as being driven from the head, while the classical view of Marketing is that it’s primarily driven from the heart. As a result, because there’s not a ‘one-size-fits-all’ endlessly-repeatable model for delivering marketing results, finance people get uncomfortable.
It’s a bit like how some in the medical professions have issues with the placebo effect. It’s not that doctors don’t believe the placebo effect works, because there’s plenty of authoritative evidence showing it does. It’s that they have no idea how and why it works. In the same way, Finance has an ingrained discomfort with marketing not because they think it doesn’t bring results, but because they can’t make a pivot table out of it.
Finance & Marketing: Why Can’t We Live Together?
So is the underlying issue primarily one of language? Partly, yes. The choice of language is certainly one part of the problem. But the bigger issue is for marketers to have a better understanding of the finance world. They need to recognize how Marketing’s thought processes and measurements are different to what Finance people understand. Moreover they need to be aware of the need to reframe information and reporting to be more attuned and receptive to a Finance-centric mindset.
Let me give you an example. Supposing the Marketing department designs and implements a successful content marketing campaign. They put together a range of communications collateral – articles, eBooks, podcasts, videos – supported by a targeted social media and email initiative addressing a handful of carefully-researched audience segments.
The result is what Marketing deems to be a resounding success. Pageview metrics for the articles are through the roof. There are thousands of eBook downloads, millions of video views, and gazillions of ‘likes’ and ‘shares’ on social media. These translate into increased site visits, reduced bounce rates, and even a higher SEO ranking. The Marketing department are ecstatic to report how all this activity will result in increased audience mindshare, and ultimately an increased market share for the business. Happy days, right?
Except the CFO hasn’t got a clue what all of this actually means, in real terms.
What Finance is looking for is how all of this translates into what rocks their world: cashflow for the business. Sure, they’re just as happy about all the extra traffic and visibility but, from where they’re sitting, there doesn’t seem to be anything tangible to justify the popping of champagne corks.
Business Departments Separated By A Common Language
What the CMO forgot to factor in to the equation was something every marketer needs to consider above everything else: Know Your Audience. To get the CFO more enthusiastic they need to report the results of their efforts in finance terms. What the CFO wants to hear is something along the lines of “Based on our experience with similar programs in the past, we conclude that if the business spends $X on this marketing initiative we will increase revenue by Y% over the course of Z timeframe.”
Now we’ve changed things around and presented things in a way where Finance can get excited, we’ve got something the CFO can work with.
Of course, Finance is going to want to know the details – process, metrics, implementation, and so on. But Marketing already has all of that. First we show how we decide on customer segmentation from conducting research, interviews, data-mining, and so forth. Then we show how the segmentation work leads us to design a customer value proposition, then we define channels – social, advertising, content marketing, email, pricing, distribution, whatever.
We educate the Finance team on how we see these decisions and actions will influence customer buying decisions, and how using metrics such as brand mindshare and perception, recall, and feedback can be used to measure effectiveness within a specific cohort.
Of course efforts to influence customer thought processes isn’t enough – we need to convert those thoughts into actions. Which is why Marketing measures factors such as site visits, time spent per visit, bounce rates, email clickthroughs, landing pages and 101 other metrics that are overlaid with purchase data to validate what and how Marketing-initiated efforts have had on buying behavior.
Once the purchase changes are measured, we’re a hop and a skip away from calculating the true cost of those purchases and acquiring those customers. Then it’s a simple case of comparing the cost increase to the cost of the marketing programs themselves.
Why Marketing Needs To Learn The Language Of Finance
We’ve almost got the CFO on our side. We’re not quite there yet, but we’re on the home straight.
What’s still missing is pivoting this (currently) marketing-centric data view into something easy to digest for the Finance department. This may look like a simple table showing the number of newly-acquired customers against the cost of acquiring them, versus the status-quo. Or it may be breaking down the Customer Lifetime Value of newly-onboarded customers versus existing ones. It all depends on the particular business concerned, and the stated commercial priorities of the organization as a whole.
By connecting marketing efforts to financial results we’ve not only presented the marketing plan and results as a business use case. We’ve presented our work and the report in ways that Finance can understand. The CFO has a new-found respect and appreciation for the work of the marketing team and is more likely to fight for them when budgets are being set, since they now have a working understanding of what goes on over yonder.
Marketing Is Everyone’s Job
Marketing isn’t just the job of the Marketing department. It’s the job of the entire business. The more that Marketing and Finance can work together, adapting their local datasets and verbiage to each others’ world, the easier it becomes for the organization to make validated business decisions.
Why should customers buy from you, rather than the gazillion other businesses selling pretty much the same thing? What’s special, unique, or innovative about what you sell, compared to the competition?
I’ve talked about the difference between price and value before, and the dangers of disappearing down the rabbit-hole of thinking all you need to do to gain customers is offer your product at a better price than the competition. But what do we actually mean when we talk about ‘value’?
Simply using the word ‘value’ opens-up a can of worms, since its meaning depends on who’s using it. For example you can deliver your product or service more efficiently than your competitors. This is one of the competitive advantage strategies from Competitive Strategy, Michael Porter’s seminal work on the subject. If you don’t know the book, it talks about how a business can gain advantage over the competition in 3 ways:
Cost Leadership – delivering your product more efficiently than the competition, allowing you to sell your stuff cheaper while maintaining a healthy margin. That could mean selling online when everyone else sells on the high street. Or perhaps your raw materials supplier gives you a better rate because you order in larger quantities.
Differentiation – being seen by your customers as being somehow unique, based on criteria they themselves have deemed an indicator of value. That last part is key – being different for the sake of it doesn’t work: it has to be in a way that your audience sees as having tangible value over the competition.
Focus – Targeting a narrow segment within a broader marketplace, with a view to dominating that space. For example, aiming to be the best manufacturer of left-handed can openers in South-East Australia. No, I don’t know where I came up with that example either…
Business Value Proposition vs Customer Value Proposition
Another way of thinking about value is in terms of the business itself. If you sell stuff at a high level of profitability and don’t have high costs doing it, your business is worth more than someone else who’s selling the same stuff but barely breaking even.
Alfred Rapport’s book gives arguably the best explanation of business value analysis, sometimes called ‘shareholder value analysis’. It outlines the ways in which business decisions influence the bottom-line, measuring a organization’s ability to earn more than its total cost of capital – thereby creating value to shareholders. From a strategic level, it describes various frameworks that can be used to determine how best to generate value. For example perhaps reinvesting profits in the current business model won’t generate as great a shareholder value as using that money to invest in new business areas.
The Importance Of Communicating Customer Value
There are other ways of looking at value (such as an accountant’s definition) but the one I want to talk about is the perception of value from the point of view of the customer. After all, nothing happens until there’s a sale, right?
Hopefully, we all agree that getting people to buy your stuff simply because they can buy it cheaper from you isn’t a long-term business plan. No matter what you sell, there will always be someone, somewhere, who’ll sell it cheaper. Moreover, if you have a product that you make for $8 and sell for $10, giving a 5% discount means you have to increase sales by 33% to make the same profit. Give a 10% discount and you’d need to double your sales. Ouch.
Discounting is a mugs game. Selling cheap is for marketers who have run out of ideas.
The only way to build long term business value and ongoing sales success is in delivering – and communicating – a differentiated value positioning that potential customers can appreciate. Perhaps customers value the fact your widget is available in blue, while everyone else only sells them in red. Or maybe your products are so well made they last twice as long.
And here is where many businesses go wrong. The important part of customer value communication isn’t about your widget being available in blue. It’s about how buying a blue widget means the customer doesn’t have to faff about painting it. Similarly having a widget that lasts twice as long isn’t the inherent ‘value’. It’s that the reduced downtime increases customer profits. It’s not about what your product or service does. It’s about what it does for them.
It's Not About What You Do. It's About What You Do For Them
So having a customer-benefits led value proposition is clearly A Good Thing. If customers determine your product or service is better (in whatever ways they measure ‘better’) it potentially enables you to close more deals, reduce the sales cycle, reduce discounting, and increase profitability.
A no-brainer, right? In which case, why do so few businesses have a value-added customer proposition? Based on the thousands of business owners I’ve spoken with over the past 11 years, I’d say that less than 2% of small businesses can articulate a commercial differentiation advantage on whatever it is they’re selling.
Why is this a problem? Because without a customer-benefits led value proposition, customers don’t see a difference between your product or service, and your competitor’s.
Result: the customer buys on price. Even if you didn’t lose the sale, you’ve certainly lost a chunk of margin.
Perhaps you’re a small business owner who’s been ‘playing’ at marketing (i.e. trying stuff out that you’ve read about on the web, with mixed results). Or perhaps you’re in a marketing role but haven’t had any formal training or education in marketing. Where should you start along the path to creating a value proposition model?
OK, I'm On Board. Now Where Do I Start?
Well, you don’t start with Facebook. Neither do you start with Twitter, Instagram, or Google Ads. You don’t redesign your logo, or build a new website. You start with your customers.
Spend some time with your accountant, or Finance Director. Take your existing customer base and divide it into segments based on profitability. Find out which are your most profitable customers (as well as your least profitable ones). Note we’re not talking just about products; look at the entire customer profitability profile. If you’re like most businesses, you’ll probably be surprised to learn where the majority of your profits come from.
Once you have that list of most profitable customers, spend time with them and ask them questions. If it makes sense to take time out to go and visit them, that’s great. If you can’t, then call them on the phone.
Don’t just find out about how and why they bought your product. You probably know the answer to that already. What you want to do is find out about them, as individuals. Their lives, their business, their hopes and fears. The goal is to better understand a particular segment of your market, so that you can use this information to help build what will ultimately become a value proposition for that audience profile that you can quantify from the point of view of the customer.
At the end of the day, once again we’re talking about strategy. Tactical niceties such as digital advertising, content marketing and social media might make the headlines, but they won’t bring you sales. Before any of that stuff we need to get back to basics and do our job, away from the arts and crafts ‘making it look pretty’ perception nonsense that plagues marketers wherever they’re to be found.
What’s the single biggest problem smaller businesses have when marketing their product or service?
Is it reach? Is the problem based on you finding it difficult to reach the right kinds of customers, in the right places, at the right time?
Is it messaging? Do you you feel the way you’re describing / communicating /positioning whatever it is you’re selling could be improved?
Is it budget? If you had a marketing budget five times larger than what you have now, would that solve your marketing problem?
Improve Your Business To Improve Your Marketing
The biggest problem, as I see it, is the result of the combination of two separate issues:
Most marketers and small business owners are trying to sell something that, if they were being honest with themselves, isn’t that great.
They’re taking that lousy product / service and choosing to market it poorly.
The root cause of both these issues lies in the level of emotional involvement of the people within the business.
In many cases, this is a good thing. Having an obvious passion and enthusiasm for the product being sold consciously and subconsciously impacts every part of the business. From a marketing standpoint, when customers feel the authenticity around how you sell the product they’re more likely to include you in their buying decision. However the whole thing breaks down when people allow their biased emotions cloud how the product – and the business as a whole – is actually perceived by customers.
Before you can seriously improve your marketing, you need to ensure the business itself is up to scratch. To misquote David Ogilvy, marketing is what you’re obliged to do when you don’t have a great product.
Yes, the product may be a little rough around the edges. But what people fail to see is how hard it was to for us to make it. OK, sometimes we don’t answer emails particularly promptly. But most customers don’t understand the difficulties in building a factory, or setting-up an organization.
The cold hard fact is, more often that not, you wouldn’t be selling it if you weren’t being paid to sell it. You wouldn’t be talking about it, marketing it, or advertising it. If it wasn’t for the fact you worked there, you probably wouldn’t buy it.
The result is marketing that shouts, rather than informs, using old-fashioned tricks and tactics that haven’t worked in years. Marketing has changed, but the general understanding of what’s now required hasn’t kept pace.
Marketing – And Business – Complacency
For hundreds of years, having a less-than-perfect product that’s not particularly well marketed didn’t necessarily mean going out of business. There’s no cast-iron Darwinian Theory to suggest that bad businesses all eventually go under, any more than businesses that ‘do things right’ (whatever that is) have a guaranteed path to success.
There are plenty of (usually) small businesses ticking over just fine. Sure, the product could be improved in a number of ways. Yes, due to the internet we’re steadily losing sales we’d have won in the past. But sales are still coming in and bills are still being paid.
However, complacency is the refuge of the mediocre. Sales may well be bouncing off your break-even point today. But you know it’s just a matter of time before new customers voice their misgivings with the idiosyncrasies that existing customers have put up with. Once the tide has turned, it’s often too late.
So the first thing you’ve got to do is make things better.
Skipping Over The Hard Stuff
But what is ‘better’? That depends on you.
Better doesn’t (have) to mean Six Sigma quality, because we’ve already got that. Better can look like a lot of things. Maybe it’s fixing the product. Or maybe it’s improving the presentation. It could be an incremental change – a feature, size, color, or pricing. Or perhaps it’s how you do business.
Getting clear about what your own ‘better’ looks like is often the single hardest part of marketing. As a result, it’s the part that everyone wants to skip over.
Instead of looking inward, marketers and business owners want to look outward. They want to have a new tagline, a new website, or new brand livery. They want an email newsletter, PPC ad campaigns, or an explainer video.
But the reality is a new corporate or product tagline isn’t the answer to your problem. Neither is crafting an elevator pitch, designing a brand new whiz-bang website, or spending a fortune on digital advertising, martech, AI, VR, or whatever other shiny new thing is preoccupying people’s attention this week.
Before you can determine whether any of that stuff is important, you need to work out what your own, personal, unique, ‘better’ looks like. Hiding behind tactics and tools – only to blame them when things don’t work out – wastes time and resources. Ultimately it simply serves to delay facing up to the bigger questions that need to be answered.
Being The Change You Want To Happen
As marketers, business owners, or salespeople, we’re all in the business of change. But change is hard. As human beings we’re wired to avoid the prospect of change whenever we can.
As the same time, the biggest ideas in business history only reached significance because of people accepting, and ultimately embracing, change. Automobiles, television, and internet shopping all took years to catch on, as consumers eventually rejected the status quo.
At its most fundamental, marketing is about effecting change. Changes in values, aspirations, or habits. It could be argued that you haven’t made an impact on anyone until you’ve changed them in some way. Marketing is about helping someone solve a problem, changing their perception / attitude / culture / behavior for the better.
The challenge is educating, informing and/or entertaining your audience with your marketing story to ultimately effect that change. To be perceived as the change you want to happen. To create messaging that resonates, that tells people something they’ve been waiting to hear and are open to believing.
To take them to a place where a change may happen, that solves a problem, and delivers on its promise.
Whether we call ourselves a business owner, salesperson, or marketer, there’s a common underlying end-goal to the job we do. Fundamentally, sales and marketing is about using a variety of means and methods to influence an individual to purchase a particular product or service.
And it’s always an individual. Whether you’re selling baby food to a new parent or an enterprise-level solution to a 50-location multinational, it’s a living and breathing human being that decides.
Psychology’s Role In Marketing
It amazes me how little conscious attention most businesses pay to psychology when looking at how to best present their value offering to their audience. I’ve added the word ‘conscious’ to that last sentence for a reason.
Skilled salespeople are sensitive to non-language communication. They can ‘read’ a person’s emotional reaction to something said or written, and use this information to direct the conversation. Perhaps the pitch was planned to focus on how your widget was available on a wider range of sizes compared to the competition. But after hearing a remark from the prospective client about green credentials, you start talking about how your widgets are manufactured using environmentally-sustainable production processes.
Such tactics have their roots in psychology – the understanding human behavior. Since most buying decisions have a strong emotional component, it seems crazy for any business to dismiss the psychological aspect of sales and marketing.
Marketing, in particular, is all about influencing behavior. Whether it’s convincing people to switch brands, pay more, or buy more often, it seems odd that we’re not having more conversations about behavior change and buyer psychology. It seems pretty hard to create any kind of message based on an underlying intention, if we fail to fully grasp how that intention will be harnessed by the people we’re aiming to influence.
The Pratfall Effect: Showing Off Your Imperfections
Imagine you’re in an important meeting, giving a pitch to a big potential client. Near the end of a perfect presentation, you accidentally spill the contents of your coffee mug all over your discussion papers and impeccably-tailored suit. D’oh!
Your pitch was pertinent, insightful, and well-presented…right up until the screw-up at the end that made you want to hide under the desk in embarrassment. If only you hadn’t blown your chances right at the end, right?
Wrong. According to a psychological observation called The Pratfall Effect, your chances of getting the sale just went up, not down.
In 1966, social psychologist Elliot Aronson, together with colleagues Ben Willerman and Joanne Floyd, published The effect of a pratfall on increasing interpersonal attractiveness. What the study found was that people thought to be competent who then make some kind of blunder or mistake – what Aronson describes as a ‘pratfall’ – are considered more likable as a result.
However that doesn’t mean that everyone who makes a blunder becomes more likable. There are other influences such as gender and perceived expertise that contribute to the perception. If someone is considered an expert in a certain area and makes a mistake, they will become more likable. But if an average person makes a similar boo-boo, they will often be viewed in an (even more) negative light. Competency seems to be the core piece of context. If that part is a given, then showing a vulnerability or pratfall increases the desirability. You can read more about The Pratfall Effect here.
Example of Kintsugi By Haragayato [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons
In Japan, there’s a practice called Kintsugi that uses glue mixed with gold to fix broken items of pottery. Kintsugi thinking is the bowl or cup that’s been repaired is now more ‘valuable’ than before – the gold being used to highlight its imperfection.
Aronson’s research suggests we can view people in a similar way to Kintsugi. Assuming there was an inherent ‘value’ at the start, we find people, products – and even entire businesses – more appealing when they’re seen to exhibit some kind of a flaw, weakness, or idiosyncrasy.
Revealing Flaws Can Increase Appeal
The Pratfall Effect can be seen everywhere – from the famous ads by Avis or VW, to the behavior of so-called reality TV “stars”, even to politicians. It’s a great example of something that goes against what we’d all initially assume: that showing your flaws makes your business more appealing, rather than less.
How come? Perhaps one reason is based upon the growing awareness/intelligence of buyers in relation to brands. All things being equal, as consumers we don’t believe what businesses tell us. If a brand drops the façade and admits a weakness, they’ve put their reputation on the line through the demonstration of their honesty. As a result they become more attractive, and more trusted.
Another potential reason lies in buyer suspicion. I’m sure we’ve all had the experience where a product or service we’ve bought hasn’t lived up to our expectations because something about it was ‘hidden’ from us prior to purchase. This experience has led consumers to conclude that anything they buy has a flaw somewhere. If a brand doesn’t own up and tell them where it is, they may come to their own conclusion – however inaccurate it may be.
Don’t Hide Those Bad Reviews
Showing your business weakness isn’t confined to the product or service itself. It can expand to every part of your customer-facing presentation.
They came to two main conclusions. Firstly, they found that having reviews for whatever you’re selling was very important. The likelihood that someone would purchase a product that had 5 reviews or more was 270% greater compared with a product without any reviews.
OK, that’s not exactly earth-shattering news – social proof is widely known to influence buying behavior. But their other finding is quite interesting.
They found that when all the visible product reviews had a near perfect rating – 4.9 out 5, or even 5 out of 5 – it corresponded to fewer people going on to buy that product.
There’s a temptation for businesses to hide any of their less-than-stellar reviews. But what the research suggests is that’s exactly the wrong thing to do. We’re on the look-out for the catch – because we’ve learned from experience it’s always there, somewhere. Consumers have learned the hard way that if something looks too good to be true, it usually is.
Warts And All: A Demonstration Of Honesty
So if we can accept the notion that admitting your business, product, or service has flaws and imperfections, then why do so few brands apply such thinking to their marketing?
The same reason why their website says dull, uninteresting things and is designed like 1001 other sites.
Why they continue to sell via reps, distributors, or resellers rather than via channels more aligned with current customer buying expectations.
Why their marketing communication is crammed with outdated clichés and comes from uninspiring and ineffective positioning conceived years ago.
Because they think it’s safe. Oftentimes what’s in the best interests of the brand is not in the best interests of the marketer. If your “warts’n’all” campaign results in poor sales, lost revenue, and reduced market share, waving Elliot Aronson’s research paper at your boss probably isn’t going to save your job. If you’re after security and safety, having the guts to show your failings is probably a step too far.
However if you want the best chance of growing your brand after years of sales complacency and stagnation, pointing out your imperfections (before your competitors do) is sure to get you noticed.
There are many games where the player who goes first has a greater likelihood of winning than their opponent. It generally goes by the term ‘First-Mover Advantage’.
In chess, for example, unless both players are equally-matched mega grandmasters, White has a statistically higher chance of winning. In tennis, the player who serves the ball is more likely to win the point than the person receiving it. In order to win a set, a player usually has to ‘break’ the opponent’s serve – i.e. win a game against the inherent first-mover advantage.
In the game of Go, the super-strategic board game invented in China around 4,000 BC said to be far harder to master than chess, the first person to play has such a greater chance of winning that Player 2 gets a bonus of up to 7.5 points.
There’s a school of thinking that maintains the first significant business to serve a uncontested market has an advantage over competitors coming into the space at a later stage. The idea is that since you have the market to yourself, you’re able to build brand ubiquity and loyalty before everyone else. Blue Ocean Strategy, the well-known business book with over 4m sales and available in 40 languages, is basically about securing first-mover advantage.
There many examples of businesses who pretty much owned a particular market niche or product category by introducing a product or service where none existed before, dominating the segment for years afterwards.
One of my favorite examples is Kodak. In 1889 Kodak were the first company to mass-produce cameras. The box-shaped camera came preloaded with film enough for 100 exposures, and when you had finished the roll you had to send the whole camera to Kodak for processing. For more than ten years the only prebuilt, ready-to-shoot camera you could buy was from Kodak.
First-mover advantage can provide business credibility and acclaim. Since you’re the main player in a space without a existing dominant incumbent, customer identification of your product or service centers around your business – and your business only.
The headstart gives you a clear path regarding sales, marketing, advertising, brand recognition, and public relations. Additional signals such as intellectual property, copyright, patents, or trademarks help bolster first-mover position.
First-Movers Are More Likely To Be Failures
But for every business that succeeded – however briefly – with a first-mover advantage strategy there are hundreds that failed.
Most people may think Amazon pretty much invented buying books over the web, right? But in 1992, two full years before Amazon was founded, a gentleman by the name of Charles Stack launched Book Stacks Unlimited.
Google wasn’t the web’s first search engine. In fact it doesn’t even crack the first ten. Before Google was founded in 1998 there were players such as Archie (1990), Excite (1993), Yahoo!, Lycos, and AltaVista (all 1994).
One of the biggest challenges for a business owner in being first in your market are the expenses you have to bear. Often, these are costs that subsequent competitors may not need to incur. By ‘expenses’, I don’t just mean in the financial sense.
For example, one of the problems faced by those early-to-market social media channels was the expensive investments they were forced to make in hardware, networking, and communications. Third-party cloud computing services didn’t really exist at the time, so organizations had no other choice than to build their own. Those early pioneers didn’t have access to pre-built optimized infrastructure like AWS (used by Spotify, Pinterest, Airbnb and Netflix) or Google Cloud (Shazam, Evernote, Domino’s, Feedly, Vimeo) – making life that much harder.
Trying to sell a product or service to people having no previous point of comparative reference, or understanding of the problem being solved, is always going to be an uphill struggle. Effective control of resources is key: selling into a new market space mandates first-movers to spend time, money, and effort to educate their target market. What problem does the product or service solve, why do they need it, how is it used, and so on. There’s often a case of reverse engineering: working out what the product or service needs to do, in order to deliver the expected result.
Those months/years of educative efforts, of course, will work against you when competitors eventually see the opportunity. They’ll arrive into the new market you’ve spent so much time convincing people of its validity. By warming-up the audience, you’ve made their life easier.
The First-Mover Advantage Myth
It would seem that for many industries, there are more first-mover disadvantages than advantages. Clearly it’s easier to sell into a pre-educated market than build one from scratch. Just as it’s easier to improve on someone else’s original idea than start with a clean sheet of paper.
No first-mover business is ever completely insulated from rival challengers. For example Tesla, one of today’s media darlings, was an early entrant into a new niche. Today, the company faces increasing competitive pressure in a market space it pretty much created from nothing. The question is whether the automobile manufacturing division of the company can maintain its lead in luxury electric cars while facing the imminent commercial onslaught from established automotive juggernauts (sic) such as VW, Nissan, Ford, BMW – and a gazillion Chinese manufacturers – who are collectively investing tens of billions in the required technology, software, and infrastructure.
While a successful future for electric vehicles, or EVs, seems pretty much a given, companies such as Tesla will increasingly have a tougher time competing. Battery technology and EV drivetrains will inevitably become generic and commoditized – as anti-lock brakes are today. The current ‘sexy innovation’ in EV circles is autonomous driving – an area Tesla is so far behind compared to developers such as Google sister company Waymo it’s untrue. Perhaps Tesla’s future role (and cash cow) lies in the supply of components such as batteries to other manufacturers. Just like how an iPhone today uses a screen made by Samsung.
Ultimately It’s The Market That Decides
Markets aren’t dominated by those who got there first. Eventually, market domination is determined by whoever is first to best meet the needs of the customer. In an evolving market space this means accepting those needs may be unclear today, but will quickly evolve and solidify over time.
Instead of constantly looking to new market opportunities, perhaps a more lucrative – and sustainable – path forward lies in better understanding the pain points of customers in the markets you already serve. Offering a better product or service in the space you already occupy.
The early bird may catch the worm. But it’s the second mouse that gets the cheese.
There seems to be no end of people more than happy to spend $1,500 on a smartphone so they can listen to music, check their social media channels, or message their friends. But those exact same tasks can be done equally well using devices costing a quarter as much. Part of the conspicuous purchase is seeking to display wealth, rather than any particularly pragmatic reason. Marketing is no different.
The reason for the recent exponential growth in digital-centric marketing initiatives can be put down to many things. For instance digital marketing efforts lends themselves very well to the delivery of targeted, personalized messages to audience segments sliced-and-diced in ever more granular ways. There can be no doubt well-executed digitally-based marketing efforts have the potential to enrich and enliven the level of engagement a consumer may have with a particular brand. Whether they’d want to engage with the brand in the first place, however, is another question…
The other side of a digital-only marketing execution is one of expense. Not so much if it’s necessarily cheaper to market to an audience using digital channels over what we could call more ‘traditional’ ones. But whether digitally-born marketing initiatives seem to be more about efficiencies and ROIs at a campaign level, rather than looking at the effectiveness of a marketing engagement plan over the longer term.
But is the growth in popularity of digital marketing tools the result of their proven effectiveness, flexibility, metrics analyses and all the other bullet points? Or is there a significant proportion of marketers and business owners using (exclusively) digital marketing techniques because they see it as being less expensive?
Taking the argument further: does the customer’s perception of the cost of a particular marketing tactic influence their reaction to the message being delivered?
Marketing Spend Is A Show Of Product Faith
Supposing your favorite store was having a promotion on a set of kitchen knives – and you happened to be receptive to buying a set. One way the store could reach you would be to send you an email or newsletter. They’d probably be a nice photo of the knives, supplied by the manufacturer, against a white seamless background. The email might address you by your name, and may even mention something about your location.
However there’s one part of this story I have neglected to mention to you until now: the set of knives we’re talking about are from a brand you’ve never heard of. Also, they’re priced at $500.
Now, imagine the same grocery store placed huge poster ads on every billboard within a 5 mile radius. The ads feature an photograph of the knives, but this time they’re in a high-class kitchen setting surrounded by expensive utensils and gadgets. The ad also features a photo of a well-known chef, with a quote from them extolling the many and varied virtues of the knives. Near the bottom of the ad, you see the $500 price tag.
Seeing all this costly advertising would you, as a consumer, look at the set of knives in a different way?
Clearly, by spending so much on marketing and advertising, the store is demonstrating their faith and confidence in the product, right? If the knives were of a low quality, or didn’t live up to the value promise surrounding their promotion, the seller wouldn’t risk making such an up-front investment. Since we know putting an ad on a billboard costs a lot more than sending out an email, there’s a difference to the way the product promotion is perceived.
To a certain extent, any investment in marketing is a bet on a positive expectation and outcome. Your bet, or stake, is the money you spend. The expectation comes in the form of sales of your product or service – it’s a public manifestation to your faith in the future popularity of whatever you’re selling. Clearly, if you didn’t believe in how great your product or service was, you wouldn’t spend money marketing it.
A Great Product Sells Itself? Don’t You Believe It
But doesn’t a good product sell itself? Apart from occasional outliers, I don’t think it does. There’s a case to be made that in order for a great product to sell well, it needs to be seen to be marketed in the way people assume a great product would be sold.
For example, supposing you were in your local discount store and stumbled upon a brand new iPhone XS Max for sale for $100. Since you know a new iPhone XS Max sells in the Apple Store around the corner for around $1,500, you’d look upon this so-called ‘bargain’ with suspicion. Firstly, discount stores don’t sell Apple products. Secondly, if it was a real iPhone, why is it priced at only $100? If, however, the store was selling the phone for $1,000, you may be tempted to look a little closer.
It’s nigh-on impossible to express any sufficient level of credibility of the value promise, unless the extent to which you promote the promise is commensurate with the significance of the product or service concerned.
“Costly Signaling” In Marketing Strategy
Coined by Israeli evolutionary biologist Amotz Zahavi, the term Costly Signaling refers to how certain animals and plants have developed extremely obvious signs as a way to deliver credible communications. The ‘costly’ aspect refers to the inordinate amount of evolutionary effort it takes to produce such signals.
An example of ‘Costly Signaling’ can be found with flowers. A flower may have elaborate petals and an strong smell to indicate to passing bees it contains a lot of nectar. As a result, bees have evolved to ignore flowers that don’t have extravagant petals or heavy scents.
You could say the bees ‘trust’ the petal-heavy flowers, because if they didn’t have the nectar they couldn’t afford to produce the petals – the payoff wouldn’t be there. But in the same vein flowers with great dollops of nectar inside them but without lavish petals get ignored by the bees.
Do you see where I’m going with this?
What Costly Signaling is saying, in evolutionary biology terms, is in order for a species to thrive and grow in number, it needs to convince another organism of something. In order for the message to be convincing, it has to contain some kind of ‘costly’ demonstration.
Marketing Is A Question Of Trust, Not Expense
Which brings us back to marketing. Just as in the natural world, the extent in which you make yourself distinctive has a connection to the extent to which you can be trusted to deliver the goods.
Does marketing have to be expensive in order to work? The answer depends on your definition of ‘expensive’ (geez, what a marketing-like reply to a straight question!).
For example, using images from a stock photography site for your Facebook ads is a quick and easy way to get a campaign completed and out of the door. But you can bet the same image has been used (and seen) by your audience a hundred times already. Perhaps it was even used by your competition without you being aware. Generic imagery and poorly-written, unimaginative text sends out the wrong signals.
There are a gazillion suppliers only too happy to handle your content marketing needs. But if the end result is badly-executed and doesn’t move the needle in terms of audience reaction, you’ve both wasted your money and sent out the wrong signal.
Expensive Marketing Is Any Marketing That Doesn’t Work
Effective marketing isn’t necessarily expensive. But it requires the identification of what information signals the buyer perceives as having credibility. Once identified, it’s a question of delivering messaging consistent with those signals, via the appropriate customer channels – digital, traditional, whatever.
Marketing doesn’t have to be expensive in order to be effective. But it has to be effective in order to be worth it.