The More Things Change…
I was struck by the premise of a recent Advertising Age article (or, at least, my interpretation of it). The headline really says it all:
"Our Ads Will Work – We Promise!"
It seems that there are some publishing institutions that are beginning to worry that they might be threatened by the disintermediation of THE LAST 10 YEARS, and that perhaps THEIR REVENUE MODEL IS BROKEN!!!
Gee…ya think???
Now, I'm not one of those "new media snobs" who thinks that everything "old" is no good (I'm over 30 myself, so I may be a little biased). But I'm also not one of those "traditionalists" who think that things should never change and that new formats won't work as well.
…I'm kind of in the middle. For example, I wouldn't (and don't) advertise my business in the Yellow Pages Phone Directory…but, if I were selling services to senior citizens, I probably would have an ad in there (and a darn good one, too!) – written in a large font with a pleasing type face.
What bothers me about this gist of the article is the underlying message:
"If, after you spend your money and it doesn't work, we'll keep doing the thing that doesn't work for you – for free – until it does work."
Really?!?!? 
For how long?
That doesn't make much sense to me. I mean, if it doesn't work when I spent money on it, why would I want to waste my time dealing with it, knowing it's not going to work?!?!?!?
An ad's effectiveness is driven by two primary variables (both of which are Marketing issues, not Advertising issues), which are:
- How well you understand and have identified / understood your target market
- How well you have crafted the ad, so as to address your target's markets wants and desires
Do these well enough and you can have an effective ad.
"'We've been preaching that magazines engage readers like no other media," said Stephanie George, exec VP at Time Inc.'"…"In an era when a lot of advertisers ask for rollbacks across the board, the guarantee is what lets us keep rates steady or ask for an increase," Mr. Kotok said. "'We'd love to give you last year's rates,' we say, 'but then we can't give you the guarantee. If you take a nominal increase, we can give you the guarantee.'"
…if "you take" a nominal increase…? What?!?
Are you going to buy me dinner first???
If they are that confident that the "ads will work", why are they waiting until now to offer it? How exactly are they going to enforce the guarantee? What if the ad buyer wants to run an ad that the ad space provider doesn't think will work? Who gets to decide?
This kind of double-talk is kind of like writing in your subordinate's annual performance review, "What can I say about George that hasn't been said? He is truly in a class by himself! He handles work assignments with unlooked-for creativity." (oh, how I miss Catbert's Performance Review Generator – why, Scott Adams, why did you do away with that???)
I think they are missing the point, which is this: mass media / image advertising is NOT direct response advertising. There is a difference; don't confuse them.
To me, this is a poor example of "Risk Reversal"; a better guarantee from the magazine would have been:
"Buy our ad space and if it doesn't convert like you think it should, we will have our copywriters & creative folks work with you for FREE, to craft and test an ad that WILL convert "browsers into buyers", for your target market."
…but maybe I'm expecting too much…
How To Set Your Marketing Budget
I get this question all of the time:
"How do I set my Marketing Budget? How much should it be and what should I spend it on?"
…and, a traditional answer is, "Anywhere from 3% – 12% of your top line revenue number; depending on your industry, competition, market maturity, and other relevant variables." And that's been a standard answer for about 20 years or so, and seems to satisfy most accountants, controllers or investors.
But it's wrong!
If you're running a business, your marketing budget isn't a function of what your current revenue. It's dependent on something else entirely.
If you want to grow your company, your marketing budget is a function of the Lifetime Customer Value (LCV).
"What is 'LCV'?" (I heard you asking that…didn't think I was listening, did you??? 
).
Lifetime Customer Value (LCV) is the all of the money that your customer will spend with you on the front end sale, any up-sales you offer, as well as the back end offers, over a pre-determined period (typically the amount of time that they are your customer).
For example, let's say you're a skin care company and your lotion sells for about $60, and assume that you get a 1% response rate to your offer (a decent response rate to an ad is about 1% – 2%; a well-crafted & targeted offer can bring in a much higher response rate…). Let's assume that on average, each customer will buy 3 more bottles from you over the next three months, and each additional bottle will cost $40; your total LCV = $60 + (3*$40) = $180.
If the cost to acquire the lead is $60, and you get 1% to buy (400 customers), and each customer is worth $180, then you are getting a 300% ROI on your spend (…here's where you pull out your HP-12C & check the math…):
Formula: Return On Investment = Revenue Earned / Cost Incurred
$72k = revenue from the campaign (400 * 180)
$24k = advertising cost (400 * $60)
==> netting you a 300% ROI on your ad spend.
Is this a good return? It depends. It's better than what you'll find on Wall Street or in a bank, but it depends on crafting a good offer for a targeted list. In this example, we projected the kind of return we wanted to get, against our acquisition costs, which enabled us to gain the $72,000 in new revenue. If you've been in business for more than a year, you should have (or be able to figure out) what your LCV is. If you're a startup (as in the company above), you can either use industry comparables or <shudder> use the 3% – 12% of revenue as an estimate. If you do the latter, then set up your operations so you are measuring & tracking this number going forward, and document all of your assumptions about that figure, so you can adjust it based on actual market performance.
…but here's where it gets exciting – that was only one offer focused on one product!
Once you have a customer who has purchased from you and has the Know / Like / Trust Factor with you, you are in a position to ethically position your company to be considered for future purchases. In our example, the skin care company could position another product of theirs or one from their partners.
Or, let's just keep it simple and assume we only used that one offer on a bigger market segment, or improved the incremental performance of that offer? Again, incremental improvements add up to incremental sales…
Bottom Line: Any additional incremental revenue at this point just makes your ROI that much better.
In general, your ability to make profits upfront depends on:
- your product or service
- targeting the right market for your product or service
- your ability to craft and present a persuasive offer in a compelling manner
So, the question isn't, "How to set my Marketing budget?" The question you should be asking is, "How high is high?" "What are my financial targets I want to hit by when, and what are the upfront costs we need to incur to hit those targets, in terms of time, money & people?" This comes from your business strategy & your operational plan. Give me those data & I'll give you an accurate answer.
…not having a quantifiable answer to these questions is a result of laziness and reacting to your business, instead of thinking and managing your business, more than anything else…
An Email That Made My Day, Before It Even Started
As I was checking my email this morning, I read one that was from our design team (we're re-branding & re-organizing the company – more on that later). They were sending me the proofs to look over, along with a brief explanation from the team with their thoughts on each one. The design process entails three rounds of iterations, and we'll generally have three options to review in each round. Pretty straight forward….
…but what struck me is what they had to say about Option 3:
"Option 3 comes from our experience of working with Fett Marketing. The concept is that Fett looks at the foundation of our business, and out of this foundation we see growth. Believe it or not Chris, this is unique! We work with a lot of marketers and 90% of them are too busy working through tactics to worry about the foundation of those tactics. My two cents is that this unique ability of Fett is what you should be leading with."
I always think it's cool when a company's essence is repeated back to that company, especially when it is just given as straightforward feedback. What moved me was that this IS what we're about here. This IS a unique aspect of our company. We're not a typical marketing firm / SEO company / graphic design company / copy writing & ad agency / social media / "local marketing" / etc.
…and because that is unique, it sometimes makes it hard for prospective clients to understand us (sounds like a "marketing problem", eh?? 
) – which is part of the reason why we are going through the re-branding project.
At Fett Marketing, we've assembled a team of people and partnerships that brings all of the tools & resources that the business needs to drive growth in their company. You see, there is always opportunity for growth – especially in this economy!
But the above quote is what is embodied in the very essence of our company. Yes, you need to be able to execute on your tactics, but without an integrated strategy and a solid foundation, you are simply wasting your money. It's better for you to go to Vegas & put it all on "Black 32", or else put it under your mattress (I would have said to put it in a bank account, but they don't seem to be able to do a good job of that these days). Either way, you'll have more money or more fun, and at least that's something…but (and I'm about to be uninvited from all of the marketing parties with this next statement):
Spending money on Marketing, with ZERO accountability for results is just plain stupid!
(…and as my Dad used to say, "Stupid ain't against the law!" Yep, true enough…thanks Dad…)
Four of the businesses we met with this week have a wide revenue range, from $0/yr (startup) to $15M/yr, and have been in business from less than a year to over 30 years. One thing they all have in common – they lack a consistent approach to marketing, and consequently they can't hold themselves or their vendors accountable for the results (that's true for the Billion dollar companies we've worked with in the past too; these are just the most recent examples). When we asked them questions like:
- what is your cost to acquire a new customer?
- what is the lifetime value of a customer?
- what is the current ROI on your marketing spend, per channel or per campaign?
…none of them could give us an answer (…and these were the EASY questions…)
But it's not their fault!
Nobody told them how they should market their companies, or that they could hold their marketing people accountable for results. They've had to figure it out on their own, the hard way. If he were still alive, John Houseman would have been a great spokesperson for us, because:
"We make money the old fashioned way – we eeeaaarn it!"
All of these owners started these businesses because that's what the love to do, and they were good at it! But in order for them to be able to do what they love, they need other people to participate with their company – through sales, by being "customer advocates" / raving fans, etc.
It's about the relationships FIRST, and the business SECOND…and that's where good marketing comes in to play.
Marketing should move a prospective customer to take action – join your list, buy your product or service, pass along an offer to a close friend or colleague, etc.
Search Engine Optimization (SEO), Social Media, Video or <INSERT LATEST "THING" HERE> won't bring in more sales. These things could make you more visible on the Internet – but you still need a compelling offer, targeted at the right customer – and then you need to be comfortable with the fact that people buy in their own time and for their own reasons (that doesn't mean you can't induce them to buy sooner!). You still need to understand your market and how to package & present your products or services, so that your customers want them.
Want to know the best way to see if you've got a Marketing company that knows what they are talking about?
Ask them about their level of accountability with what they are proposing to you, and then listen to their answer. It's best if you can do this in person, so you can watch their body language…
…you can actually, physically see the "bad" marketing firms squirm in their chairs! It's kinda funny…
(…and it's true, too…)
Free Money From Google
Did You Know That Google Will Invest in YOUR business?
One of the best ways to get free advertising was to offer a discount coupon in a coupon book, which the coupon book publisher would then sell. The coupon publisher would make money off of the sales, and the people buying the coupon book would save money – if they redeemed the coupon. There was typically little to no cost to the business owner, and it would generally would position their business well. Whether or not the coupon was redeemed, the business owner still got the market distribution and potential increase in their market's awareness. The upside? Typically a very high response rate (better than 68% in many cases) – especially if the coupon book was heavily promoted and the coupon offer was compelling and well-written.
Local Businesses can still get some traction with coupon books – provided their advertisements are tied into their online presence. But there are many more options for business owners today – and one of the most overlooked is the coupon offer that comes with your Google Business Listing (Pssst – did you know there was one???) – and Google Coupon Feeds. Whether you market your products and services locally, many businesses are missing out on a FREE opportunity to market their business AND have Google promote you to the world. And with the Internet becoming increasingly mobile and interconnected, you can make sure your offer is presented directly to your customer when they are near your store and looking for a solution. In most cases, business owners should include a coupon of some sort in there.
So, what makes a good offer? Just about anything your customers would want. Offering a discount? Then give them a specific dollar figure versus a percentage. In most cases, numerical dollar figures have more of an impact, and carry more meaning, than a percentage figure does.
Many business owners we speak with aren't even aware of this feature. When you use yours, however, just make sure you don't make the mistakes that our hapless owner made in the picture above! In your business, grammar and math both count!
Brainstorm For Business Success
An engineering lab client regularly brainstorms with customers and even prospective clients, as part of new product development.?? In fact, one such session resulted in a design simplification – saving them over 70% on their manufacturing costs for a particular part.? Going out of your way to establish rapport with your customers, and regularly communicating 
with them, can pay huge dividends.? Doing so has never been easier than it is today, with tools such as Twitter, Facebook and LinkedIn.?? Establishing a professional presence for your company on each of these will enable you to attract interested people to your company.
Don’t want to have a brainstorming session in-person?? Not a problem, if you use tools like GoToWebinar and Freemind.? GoToWebinar enables you to set up a web-based meeting for up to 1,000 participants, allowing everyone to interact as if they were in the same room.? Adding Freemind to the mix allows the Moderator (or an assistant) to capture the free flow of ideas as they come in, and display them on each participant’s computer screen.? In this way, you can literally have people from all over the world participate in the event.? If you don’t want to pay for the service, you can use a service like DimDim and host smaller brainstorming sessions.
This idea can apply to any business – the question is will you apply it?
Lights, Camera – Business!
This October will mark the third year anniversary of Google’s acquisition of the video sharing site YouTube.? If you don’t already, start paying attention to how many times a video-based result comes up in your Google search engine queries.? Don’t be surprised if there are several in the top 5 – 10 spots on Page 1.? There are two reasons why you should care.
1.? Engage Your 
Customers The Way They Want To Be Engaged. Twenty years ago, I remembered talking to a colleague of mine about a chimney sweep supply company that sent their customers a video tape (remember those?!?) twice year, educating them on how to sell chimney sweep supplies more efficiently.? The tapes differentiated him from the other suppliers, his main cost was postage (he already had a camera) and the “reality style” video is time-tested approach that works over and over again.? A real estate client of one of our consultants closed a $500,000 sale last week by using Twitter (140 characters) and a reality-style video (it was less than 48 hours from Tweet to Close).
2.? Increase Your Organic Search Engine Ranking. We cover Search Engine Optimization (SEO) elsewhere, but without getting technical, it stands to reason that if Google is going to spend almost $2 Billion to buy a bunch of video-sharing servers, then they are going to make sure they get their money’s worth.? Or, as my technical SEO colleagues would say, Google thinks video content is important and is more “news worthy and informative” and so it will tend to rank higher.
Technical aspects aside, video pulls people into the topic they are watching.? A personalized video to your suppliers, or a reality-style video to your customers, makes the viewer feel like they know you; almost as if they were friends with you.? And people buy from people they know, like and trust.? That’s a big driver behind Social Media adoption.
Action Step:
If you are not using video in your business:
Why aren’t you?? Every business can and should be doing so.? Believe me, if a chimney supply company 20 years ago could, you certainly can today.? No excuses.
If you already are using video in your business:
What’s working with it now?? What isn’t working?? How could you improve it?? Could you send personalized video messages about certain products or services?? Special offers for certain customers?? How else could you use video to increase sales?
Advertising and Tradeshows – In A Recession???
Tradeshow attendance has been down this year anywhere from 10% – 30%, depending on the show, the industry and where you get your statistics from.? Why is this good news for you?? With less traffic at the show it will be easier for your business to get noticed by potential customers and distributors.? So, what’s the best way to get the most from your tradeshow dollars?
Book early!? Missed the deadline?? Contact the show organizers and see if you can take over space from a vendor who has canceled, at a reduced rate.? By negotiating with them (remember:? you’re helping THEM by filling an
empty space in a potentially high traffic area) you may be able to get other things in addition to a rate reduction – placement in promotional materials given to the press and attendees, updates to the conference website that lists your company in a new location, etc.? And don’t forget to send out a press release (or two or three!) telling your customers that you’re going to be at the show and where they can find you (include booth location and the conference website(s)).
Bonus Tip!
The best way we’ve found to really maximize your trade show investment is to look at the exhibitor and attendee lists several weeks BEFORE you are going to be there, and schedule meetings with key potential customers or vendors.? Tradeshows are a great way to get a good view on what your market is doing, what their needs are, etc. – all under one roof!
Action Step:
When you attend your next trade show, pay attention to the traffic flow, as well as the days and times of day that seem to be the “heaviest”.? Use these metrics to pick your first, second and third choice locations when attending trade shows.? If you want to go to a show that you have never attended, find other companies who have been there before you (look in old directories that should be available online or by asking the trade show organizing group); contact them and get their opinions.