Is your fiscal year also your calendar year? If the answer is yes, then you have my sympathies. Your budget season has probably begun, negotiations will be tough, and the outcome is uncertain.
The background for 2011 negotiations will be the experience of 2010, a year in which marketing budgets rose cautiously at best, as I show in my latest research. This was despite the fact that marketers who responded to Forrester's February 2010 Global Marketing Leadership Online Survey were more than twice as likely to see signs of economic recovery in their industry as to not see them. B2B marketing leaders fared worse than their B2C counterparts:
The areas of marketing that fared the worst were those that were viewed as being expensive, and with low or uncertain ROI. For B2B, that meant sponsorships, trade shows, and traditional media. For B2C, it meant print advertising, agency fees, and direct mail. Conversely, all of the growth areas were related to digital media in one way or another.
So what does that mean for CMOs entering budget season? My advice would be to focus on measurable program elements that are designed around business objectives. That sounds obvious, but the surprising truth is that many of the CMOs whom we surveyed said they were shifting budget to areas they considered "strategic," which falls far short of this standard.
Love it or loath it, we can't escape the marketing funnel. It's under our collective skin.
Why? For a start, most marketers agree that only some of the people who are aware of their product are actually considering it. And only a portion of these people will go on to prefer it, buy it, and perhaps become loyal users. We could illustrate this observation in a number of ways. For example, we could draw a dartboard with "total addressable market" as the largest outside circle and "loyal customers" as the smallest circle in the center. Likewise, drawing a funnel is a natural and useful way of making this very basic point.
If only marketing were that simple. In truth, marketing is a messy business. For example, moving from awareness to consideration and preference might be sound advice for a rational shopper, but actual buyer behavior involves heavy doses of emotion and chaos. And loyalty is not the end of a customer's journey; it's a state that the marketer must cherish and sustain, hopefully leading to positive word of mouth.
On top of this, one can imagine a boorish marketer taking the funnel a little too literally. Draw it with the wide end at the top, and you can imagine some marketers believing that the more water they pour into the top, the more water they will watch gush out of the bottom. Of course, most marketers are smart people who use the funnel without abusing it, but it would be nice if we could find a model that was 100% idiot proof.
What a week! The high level of discussion around the Online Retailer Expo & Conference 2010 should dispell any doubts about Australia's near-term future: Online and multichannel retail have entered a period of rapid expansion. That was the theme of my colleague Patti Freeman Evans' conference keynote. It was a theme of both of my sessions at the event. It will be a theme of research that we expect to release shortly. And it was a theme reinforced by countless private conversations we had in Sydney and Melbourne last week: Expect continued growth and increasing competition, from home and abroad, and from both traditional retailers and new entrants, including some firms you certainly weren't expecting. Indeed, there are exciting times ahead.
So far, so good. But how will we get there? As competition increases, how will online and multichannel retailers attract and retain the most profitable customers and increase their lifetime value? Marketing leaders must answer this question, and they must answer it with more sophistication than is common in Australian online retail today.
A common use would be to measure and compare the ROI on a range of acquisition tactics, such as search advertising and banner advertising. So far, so good — if acquisition is the start and finish of marketing.
When Unilever launched its "Dirt Is Good" campaign, the company probably imagined parents like myself breathing a sigh of relief as we learned to love our children's mess. However, the tagline has a double meaning. To my mind, "Dirt Is Good" perfectly summarises the chaos that is global marketing — mess that can be as puzzling as a finger painting, and just as satisfying.
With the "Dirt Is Good" tagline, Unilever actually supported four different brands of laundry detergent: Persil, Skip, Via and Omo. To complicate matters further, these brands occupied different positions in different markets. Take Omo, for example: it's a premium brand in Brazil; a second tier brand in Australia, France, and South Africa; and no longer sold in Britain, Ireland, or New Zealand, where Unilever promotes Persil as its premium brand instead. Compare this to Marketing MBA Fantasy Land, where the perfect tagline falls out of the brand architecture, which aligns with the product offer and the product's corresponding position in the market.
Global marketing is one big mess, and the CMOs who win will be those who Create An Adaptive Global Organization, to borrow a phrase from my latest report. In other words, CMOs must create a global marketing team that uses data and customer insight to learn, adapt, and grow in real time, anywhere in the world.
One of the recommendations in my new report, Web Site User Experience 2010: Australian Banks, is that Australia's "big four" banks should study online retailers as as precursor to fixing their own broken website search systems. At present, these banks serve up a hodge-podge of media releases, FAQs, customer memorandums, product pages and more in their search results, giving users little clue about which search results they should click and why. By contrast, leading online retailers provide highly usable search results, which they help users to effectively preview, sort and refine.
But banks are far from the only businesses that need to look beyond the narrow confines of their own industry.
For example, when speaking with pharmaceutical marketers in Sydney yesterday, I was reminded that almost no Australian marketers in that industry set aside a portion of their budgets as internal seed capital, funding marketing experiments that are small enough to fail gracefully, but audacious enough to perhaps exceed all expectations. Big pharma, at least in Australia, could learn from how the leading global consumer packaged goods companies are supporting marketing innovation with devices like internal seed capital.
When your data is myopic, it can lead you in the wrong direction. That's a lesson that The Coca-Cola Company learned famously with its failed attempt to launch a sweeter, milder Coke in response to consumer taste tests. And it's a point I find myself making time and again in my conversations with heads of marketing and other business leaders. Now, thanks to a stunning recent blog post from Eric Ries, I have a new way of explaining this point: "the local maximum problem". Eric visualises the myopic use of data like this:
Whenever you’re not sure what to do, try something small, at random, and see if that makes things a little bit better. If it does, keep doing more of that, and if it doesn’t, try something else random and start over. Imagine climbing a hill this way; it’d work with your eyes closed. Just keep seeking higher and higher terrain, and rotate a bit whenever you feel yourself going down. But what if you’re climbing a hill that is in front of a mountain? When you get to the top of the hill, there’s no small step you can take that will get you on the right path up the mountain. That’s the local maximum. All optimization techniques get stuck in this position.
We've seen it happen a thousand times before: a marketer gets excited about an emerging field like customer analytics or social media marketing, develops a sensible plan of action, and then runs face-first into reality, which looks something like this:
"HQ has already signed off on my budgets for this year; this will have to wait until next"
"Maybe if I can get Peter, Paul and Mary to agree to this at the regional marketing love-in, we can work together to convince global to consider it in the future"
"I heard the trial in North America is going well; but by the time the roll-out progresses through Europe, Asia, Latin America and Africa, a year will pass"
"Stuff it; let's just do our own thing; HQ can worry about process and efficiency later"
In other words, adaptive brand marketing is hard for any company — but especially for multinational enterprises. But the world does wait for your next global conference call. Customers keep buying and talking and changing their behaviour, as do your competitors. MNCs have no choice other than to stay nimble in the age of the global matrix, which is the topic I'll speak about at Forrester's Marketing Forum 2010 in Los Angeles in April. See you there.