The implication of this 50 year old survey resonates today, as we struggle with 9+% unemployment and 25M+ people either unemployed or underemployed.  Marketers have to maintain or establish a brand that is trusted, to capitalize on a buyer who is reluctant to risk scarce resources on new products.  Conversely, if the trust is lost, so is the buyer.

This is reflected in this 2009 chart on Brand Trust from Concerto Marketing Group.

Maintaining a brand is one of the more difficult tasks.  In the market, the brand is under attack from competitors who are offering new features, discounts or blended services that are aimed at taking away the brand’s customers.  In the company, the pressure is on the development and manufacturing functions to make the same product, but at a lower cost.  While each change to the product/service may be subtle or appear inconsequential, the cumulative effect over time may cause customers to notice and reject the brand.  Or, the change can come from well intentioned causes, as NECCO found out with their wafers.  Regardless of the cause, once the trust in the brand has been lost, so is the customer.

Marketing’s role in this environment is clear… to do everything to maintain the status quo and to clearly communicate the brand’s value proposition.  50 years ago this was done by print and point-of-sale advertising, today it is done via Facebook pages, twitter and other social media tools.  The objective however is the same; reinforce the brand’s image, its message and its value.

At the same time the Marketing department has to fight the internal battle against changing the product.  This should include significant testing of any changes before allowing them to be introduced, as well as maintaining and expanding the same level of frequency and reach that was used to establish the brand in “good” times, regardless of the cost.

Typically, selling to a customer who knows you costs less than trying to sell to a new customer.  Knowing that customers trust your brand and are buying it provides a base or foundation…providing that you maintain that trust.  At the speed with which changes occur in today’s market, failure to maintain the buyer’s trust can be fatal to a brand.

If internal changes are planned for your brand in 2012, whether in formulation or resources, have you fully tested their impact?  (By testing I mean better testing than what Bank of America and Netflix did before they changed their products.)  Can you anticipate the external attacks and how you will respond?

RHM

11/7/2011

That the “Occupy” movement has gained visibility and traction over the past few weeks is an interesting commentary on our times.  The demographic studies done a few days ago as to who is part of the group seems to dispel the myth that they are white suburban hippy want-a-be’s.  What is clear at this point is that the group is dissatisfied with any one of the following:

• Lack of jobs and/or unemployment
• Student loans
• Mortgage rates/foreclosures/loss of housing
• Wall Street players making inordinate amounts of money
• The demise of the American dream that if you work hard, you will be rewarded
• The inability of elected officials to act positively

My interpretation of this social upheaval and dissatisfaction is less nuanced.   I believe that the average American is born with a fundamental sense of Fair Play.  We intuitively know when something is right and when something is wrong.  The “Occupy” people are expressing this feeling that something is not fair and is wrong, and they want it to be made right.  This does not mean that they want hand-outs, or a more socialistic society, or stronger government intervention.  They want things to be more in balance and more equitable.  (An example of the inequality can be found in this NY Times chart: http://www.nytimes.com/interactive/2011/10/26/nyregion/the-new-gilded-age.html?ref=politics)

What does this mean to Marketers?  Dick and I have written before about “under-promising and over-delivering” and the need to exceed expectations.  If my assumption about Fair Play is correct, the practice of exceeding expectations is now a requirement for every company. 

This does not mean lowering prices, or giving things away.  It means being responsive to customers, whether B2B or B2C.  For example:

• Making it a practice to solve a customer complaint on the first call, or within a designated period of time.
• Beating or meeting all communicated delivery dates, whether it is a product or services.
• Including all elements of a purchase at the time of purchase, not “nickel and diming” the purchase experience.
• Deciding not to charge for something that has been free or bundled in…the Bank of America debit card charge and Netflix streaming video change are two current classic examples of creating customer dissatisfaction.

I am sure that you can implement other actions that are specific to your business or service.  The point is that in America today there is a growing desire for Fair Play in all things.  Recognizing this, good marketers will ensure that their products and services do not run against this current, or if they do, make the appropriate changes.

Do you even know how your products are perceived in the market or do you act with the hubris of BofA and Netflix?  If this movement gains more steam will you win or lose?

RHM ­- 10/27/2011

Q4 is the usual time for pulling together plans and budgets for the following year.  In the past, I have written about the problems and issues that this process generates, but decided this year that a checklist might be of better use.

  __  Strategy, goals and objectives – Are the goals and objectives for 2012 articulated?  Is the strategy to reach these goals and objectives clearly spelled out, with priorities specified?

__  Budget and staffing – Is the budget for 2012, even at an approximation level, available?  Is the headcount forecasted to go up, down or remain the same?

__  Support groups – Are all the support functions (customer support, field services, product services, etc.) in line and capable of supporting the plans.

__  Events – Are all the major events/milestones known, i.e., new product introduction in Q1, major trade show in Q3, major partnership agreement in Q1?

__  Cost and profitability – For multi-product companies, are the costs, by product, going up, down, or remaining the same?  Will pricing remain the same or change?

__  Policies – Is there any need to change or modify customer facing policies or social media policies?  For example, has the current “Response” policy and procedure been effective?  Is the policy about employees discussing the company on Facebook and twitter clear and being followed?

__  Target market – Have you identified the target market?  Is it (audience) the same as it was in 2011?  Does it have the same segmentation?

__  Campaigns – Are there developed campaigns (strategies) to support all the marketing activities?

__  Marketing mix – Is the 2011 allocation of Marketing spend applicable to 2012?  For example, should more resources be devoted to social media, or to trade shows?

__  Tactical product pans – Will the 2011 tactical plan be effective in 2012?  Specifically is the “volume” product still competitive and profitable, is the “loss-leader” able to generate sales, and are there contingency plans in place in the event of competitive inroads?

__  Sales relations – Is there agreement on what constitutes a qualified lead?  Is Sales looking for additional support in the form of Product Managers?  Are Sales’ lost sales reports meaningful in helping to define the Marketing mix?

__  Social media – Which 2011 metrics have been the most useful to Management?   How can these be improved or expanded in 2012, and at what cost?  Additionally:

• Is this the year to redo your website?
• When is the last time you updated your SEO activity/measure?
• Do you have a content calendar with confirmed inputs for Q1, the year?
• Can you improve your utilization of content?
• Are you up-to-date on the latest Facebook, LinkedIn, and twitter changes?

This checklist is meant to be a memory jogger, as each company and situation is different.  The point is that in approaching the 2012 budgeting process without a checklist, key things can be overlooked or forgotten.  The importance of a checklist has been proven by pilots and doctors, and should be used by all good Marketers.  (See: The Checklist Manifesto: How to Get Things Right by Atul Gawande)

Have you constructed your checklist for 2012 yet?  How many items are checked off?  What other items would you add to this checklist?

PS.  If all this is confusing, you can find help in our Marketing Resource Optimizer (MRO) product.  Click here to obtain a copy of Part 1.

RHM  10/20/2011  

One way NOT to raise prices is to follow Bank of America’s example…increasing prices for a regularly used item with little or no concern for the impact.  The fallout for B of A has been catastrophic, ranging from members of Congress telling people to get out of that bank, to being denounced on the Jay Leno show as “screwing one American at a time.”  Masspirg has even put up a page on How To Close Your Bank of America Account: https://secure3.convio.net/engage/site/Advocacy?cmd=display&page=UserAction&id=3316

In today’s environment, buyers want and are demanding more.  You can raise prices if you offer more.  For example, what if Bank of America had done one of the following 3 things:

1. Offered to pay the fee at any ATM machine for a monthly fee of $5.00, on an opt-in basis.  I think the majority of B of A customers would have gone for this, as the convenience of being able to use any ATM at any time for a minimum cost is significant.  The cost to B of A in today’s electronic world…extremely small.  Plus the concept of offering something new and better would have differentiated them from their major competitors.

2. Borrowed from the phone companies, and instituted a volume plan, i.e., your first 10 ATM transactions a month are free, over 10 we charge your account $3.00, over 20 we charge $5.00.  Customers are used to rate plans and work with them.  While this may not have raised as much revenue, it would be acceptable by all, preserving the bank’s image.

3. Tied the $5.00 charge to a bundle of other services, i.e., your account now costs $5.00 a month and includes no charge overdraft protection, 3 credit reports a year, 50 free checks and your ATM card.  Here the impression is that there is a bundle of goods and services that differentiate the bank’s offerings from others, and have a perceived value to the customer.

The lesson learned from the Bank of America debacle is that you must know your customer, and fill their needs.  Today’s customers are value conscious.  They do not appreciate the arrogance of banks (who they feel were bailed out while the bulk of Americans are suffering) who arbitrarily raise prices with no value add.

In all likelihood your customers reflect the mood of the general population.  At the same time, as CMO you are probably being asked, along with your engineering and manufacturing counterparts, to increase profitability.  In pricing your products consider the buyer and give them more real or perceived value than they expect.  In doing so, you will be able to raise your prices without the severe backlash that has engulfed B of A.

RHM  10/6/2011  

This paragraph, in a solicitation email from Sherpa where they are trying to sell their 2012 B2B Marketing Benchmark Report, caught my attention:

To me, this reinforces the antidotal evidence that I have been receiving relating to “social media fatigue” “unproven results” and “inability to link social media actions to leads/sales.”  (See my prior post: http://firealarmmarketing.com/2011/09/20/expections-of-social-media/). 

Sitting through recent events at FutureM and MIT Enterprise Forum I was overwhelmed by “social media experts” who could talk on and on about how they successfully built brand and awareness, but could not translate this activity into basic business terminology, i.e., we did this and it drove X% incremental revenue.  I also find it interesting that the same old tired examples are trotted out (Dell, Zappos, etc.)…where are the new 2010/2011 success stores for social media?

Assuming a best-case scenario of a flat economy thru 2012, financial winners will be those that have significant market share and can exploit it (sell up, sell new features/functions) and those that provide differentiated products with significant customer service.

While word-of-mouth works well for consumer products, as the complexity and acquisition costs of a product/service increases in a B2B environment, other factors beyond a high Yelp score or backing by an influential blogger are required to close a sale.  In many B2B cases this requires establishing personal relationship with the buyer (something beyond tele-sales), extended Beta testing, and strong referrals from like-minded customers who have the product installed.

Perhaps we have gone too far with the social media frenzy and need to go back to some fundamentals.  I recognize monitoring what is being said about you and your products is a requirement, and that blogging and interfacing on community groups is essential to obtaining brand awareness and thought leadership.  These activities help, perhaps more than a cheap give away at a trade show or T-shirt, but they are no replacement for face-to-face contact that explains how your product is significantly different, coupled with a free beta test, backed up by strong customer testimonials.

Your thoughts?

9/28/2011 

Two months ago I stubbed my big toe.  Hard.  It still hurts.  After numerous x-rays, pain pills and doctor visits, the diagnosis is a “toe strain” and to “come back in two weeks.”  The doctors have done a poor job of setting my expectations, as I have no idea how long I will have to limp rather than walk normally, or what actions I should take to get better.

The expectations surrounding the use of social media are similar to what my doctors have told me…poorly articulated.  In today’s environment, businesses know that they have to use the new tools.  What they don’t know is how effective each will be and/or which ones will generate the most revenue.  In other words, no-one has been able to set the proper expectations because, frankly, no-one knows what mix of social media tools works best for each company.

The success stories that are trumpeted, i.e., Dell’s ability to move products, Zappos selling shoes with excellent customer service, Amazon’s growth, etc. can be viewed as being particular to each company.  In short, what works for them, may not work or even be applicable to you.

For example, I have yet to hear about a small hi-tech company with a limited number of customers (<2,000) selling high value (>$500K) products or services with a long sell cycle (>12 months) who can track their use of social media to increased revenue.  Many are blogging to gain thought leadership, and are using twitter as part of their customer service, but when pressed cannot say that these efforts have resulted in increased revenue.  They can point to increases in brand awareness and customer satisfaction, but linking the social media activities directly to leads in the pipeline and resulting sales is difficult.

Most corporate management is driven by expectations.  With established goals and objectives management expects people to work toward them.  In today’s world management’s goals are centered on increasing sales and decreasing expenses.  Activities that do fit into these goals are deemed expendable.  Since many of the social media activities in a B2B environment cannot be tracked directly to sales, and with the increasing pressure to cut expanses, support for the resources required to engage in social media “experimentation” may be diminishing or lacking.

Can you share a B2B example of how social media activity can be directly linked to sales?   Are you being forced to justify the time and resources spent on social media activity?  How are you doing it?  Let me know.

RHM  9/20/2011 

The Fed has promised to keep interest rates low for the next two years.  The housing “bubble” and foreclosures are keeping the housing market down, unemployment is now projected to be around 9.0%+ through 2012 and some are projecting a double dip recession.

Clients are asking for advice on Marketing strategies if we enter into a deflationary period.  In this context deflationary means that the buyer feels that the product/service he/she is going to buy will be cheaper in the future, so the right economic decision is to hold off on the purchase.  (In inflationary times, the opposite holds, they buyer thinks that the product/service will be more expensive in the future, and the right decision is to buy now.)

There are four main strategies in this race to the bottom.  One is to price your bundle of goods and services at the level of your fixed costs, which should result in a significant price reduction.

Pros – This action will drive added volume to your business with appropriate gains in market share and potentially thought leadership.

Cons – You will be seen as the price leader, which is often not equated to quality.  Additionally, if you are truly pricing at the level of fixed costs, you will have no flexibility if one of your competitors has a lower cost basis and matches your prices.  And, going forward you may have difficulty raising prices when the economy turns around.

A second strategy is to first unbundle all your goods and services, pricing them on an individual basis.  Then provide some of the goods, features or services on a no-cost basis. 

Pros – Greater flexibility in pricing; the value of each of you components can easily be seen and it will be easier to raise prices in the future.

Cons – A price leader could gain significant market share if you delay implementing this strategy.  And, this strategy requires an obvious, quantifiable value to the various pieces.  If this is not present, then the strategy cannot be implemented. 

Some fully integrated software products and computer “appliance” vendors may have difficulty in following the second strategy. In these cases our recommendations have been to revamp their product offerings into the classic “good, better, best” offerings, with visible and quantifiable differences between the three.  With this structure, the good product can chase the price leader down, while the better and best products are available for quality comparison.  Of course the expectation should be that the “good” product will be the volume leader.

A third strategy is to offer financing terms, i.e., volume discounts, trade-in/trade up programs, delayed payments, etc.  A working assumption is that you can afford to carry the cost of financing your sales.

Pros – Financing programs add to the “stickiness” of your sale, helping to ensure that the customer stays with you for a longer period.

Cons – Too many or complicated programs can confuse the buyer, making their comparison with lower priced alternatives more difficult, resulting in your offer being rejected.

A fourth strategy is to focus on the values delivered by your product, i.e., faster greater ROI, ease of installation, ease of use, etc. as compared to the lower priced competition.  This differentiation strategy requires that your values can be quantified and easily understood.

Pros – This strategy takes the conversation away from price to value which, if it can be quantified in your favor, should move the buying decision to you.

Cons – Competitors will rapidly close the value difference, either by introducing new products/features or lowering their prices, so continuing investment in product innovation and new product introduction has to be part of this strategy.

Looking at the Japanese experience and our previous periods of stagflation, a period of deflationary activity can be expected.  Understanding your buyer behavior and planning accordingly is the key to long term survival.

As CMO, do you know what your fixed costs are and the true unit costs of each of your product offerings and have you thought through a strategic approach for deflationary times?  Having this will allow you to have in place the right strategies when your competitors start a race to the bottom.

(This is additive to the article I wrote last year about the same subject.  See: http://firealarmmarketing.com/2010/07/22/deflation-and-pricing-6-suggestions-for-the-cmo/ dated July 22, 2010.)

RHM  8/25/2011

 I stated that customer satisfaction is the responsibility of EVERYONE!

Everyone “touches “  the customer and how everyone performs their job relates to the customer being satisfied.  I also listed several steps for starting a customer satisfaction program within any company. Lastly, Marketing should always look at their activities from the customer’s “glasses.”

Several people asked about research on customer satisfaction and activities that a company can perform and linking it to either starting a customer satisfaction program or improving their current customer satisfaction program.   Well the answer is a definite YES!

There are a number of approaches, companies and experts on this subject, but they basically boil down to a relatively small number of activities that help improve customer satisfaction.

Fundamentally, customers (both B2B and B2C) are looking for value (see my posting on good value propositions) and value is benefit minus cost.    Given this basic premise, one can link activities that focus on benefits and cost, and if one improves on these activities it will result in an improvement in customer satisfaction and in most cases have a positive impact on the company’s revenue stream.

Two examples of this relationship are:  One, developing a quality product that addresses a customer’s critical issues, resulting in a perceived benefit and subsequent purchases of that product or service. (e.g. disposable diapers)  Secondly, by developing a great relationship with the customer base or creating a wonderful image of your company that will be viewed as a benefit to the customer and again resulting in a purchase of the product or service. (e.g., Apple, Disney)

Bradley T. Gale’s book titled “Managing Customer Value” talks about developing a matrix of attributes related to customer satisfaction consisting of “levers” that when improved will result in an increase to the benefit attribute or when levers addressing costs are improved will also increase the overall value and thus the potential for increased revenues.   The key point is incremental or small improvements in some or all of these attributes have a multiplying impact on the revenue improvement factor.    So just a 1-5% improvement in several areas can result in increased revenues.  

So, as I stated before, everyone can impact customer satisfaction and there are metrics that can be put in place that do not require a major undertaking to measure overall customer satisfaction AND increased revenues. 

Have you stated your customer satisfaction program; if not why not?

RHL 8/16/11

Last week my barber gave me a first hand lesson in how confidence impacts the economy.  As I usually do, I asked when I got in the chair, “How’s business?”  His response was that it was down.  “How could that be?” I asked, “Everyone needs a haircut.”  His response captured the confidence problem that is sweeping the country. 

“Assume 1,000 customers,” he said, “who usually get their haircut every four weeks, but because of their confidence in how things are going, they decide to put off their haircut by one week.  What does that do?”  I did some quick math.  If a person gets a hair cut every four weeks, that is 13 haircuts a year (52/4 =13).  If he does it every five weeks, that is 10.4 haircuts a year (52/5 =10.4). The result is a 20% drop in business (10.4/13 = .8).  Assuming an average bill of $16.00 (not counting any tip), a 20% decline in the number of haircuts translates to a $41,600 revenue decline.  Tony’s business is not off 20%, but the point was made.

So, because some of his customers are unsure where the economy is going, and feel that it may be best to economize, they are cutting back a little.  This has ripple effects through-out the economy.  Tony and Jim probably won’t take the boat or RV trip they thought about in the spring.  Their purchase of supplies is down. And their fixed costs are edging up.  To offset this they are now open to 7:00 PM on Thursday, and have kept their prices stable for over a year.

The lesson learned from this is that how the decision maker feels about the economy is often the key to a purchase or not.  If he/she can feels that this is the time to hold back, due to a lack of confidence on where things are going, they will do so, whether it be a haircut, a new set of tires for the car, a new dress, or going out to eat.  If they are confident that things are going to be better, then they may be more likely to get their hair cut every 4 weeks.

This applies to those who control the purse strings in companies.  If they personally feel that the economy is trending down, they may re-think purchases and/or commitments.  Certainly Dick and I have seen this behavior in our consulting business.

The net of all these delayed haircuts is that the economy continues to settle to a new, lower equilibrium or steady state.  After all, men do have to get their haircut sometime, and tires and cars do wear out, and new capital equipment has to be purchased.  For the CMO, this means that his product or service has to be top of mind when the purchase decision is made.  And that the product/service sold surpasses the buyer’s expectations.

I will continue to go to Tony, as I have been going there for over a decade, and it is where I learn basic economics.  But I wonder how the other product/service providers are positioning themselves as their markets sort themselves out.

My advice to help turn the economy around…go get a haircut!

RHM  8/11/2011   

The stumble in the economy could not come at a worse time.  Most companies are going into their planning for 2012, taking the first six months of 2011 as a baseline, estimating the balance of the year and using that information as the basis for 2012.  The information is not pretty and the forecasts are ugly.

This situation will produce the same old aphorisms and phrase; “Do more with less,” “Work smarter, not harder, “When the going gets tough, the tough get going” and so on.  The problem is that these trite phrases are the ones that have been repeated over and over since 2008.

There are 5 truisms that you, as the CMO, can use in planning for 2012.  If applied they will help, but not ensure that you will make the year.

1. Make sure that your product/service is differentiated.  If you have a “me-too” product you will only be able to compete on price, and no one wins a race to the bottom.  Lead with a differentiated product that offers more.
2. Provide quality.  Buyers, whether consumers or business, are looking to spend as little as possible over the long term.  They get this from quality products and service.  Poor quality reflects on their decision-making, and in the base of a business buyer, may be a career-limiting move.  Prove to the buyer that your product/service is superior in quality.
3. Service the buyer.  The day of “kiss and sell” is over.  Treat each customer as though they are unique, because they are.  The implementation of CRM tools makes it easy to personalize each buyer, both before and after the sale.
4. Match expenses to revenue.  For the next 18-24 months, the economy is going to be flat to down.  Unless you have a unique product in a growing segment, e.g., iPhone, plan on minimal growth and plan you expenses accordingly.  For example, if you are competing in an oligopolistic segment growing 2-3% a year, pouring money into building your brand may not be the best use of scarce resource.
5. Invest in Marketing.  This is not the time to cut back on Marketing.  Both Product Marketing and Product Management need to be fully funded.  The objective of most firms should be to maintain their market share, and if possible, grow it at the expense of competition.  This can only be done by fully funding marketing.  Moreover, everything is cyclical and this downturn will eventually correct itself.  When it does, those companies that have invested in Marketing will be the ones in the best position to take advantage of the upward curve.

For a related discussion on this topic, see the recent McKinsey article, We’re all marketers now…https://www.mckinseyquarterly.com/Marketing/Strategy/Were_all_marketers_now_2834

The next 18 months or so are going to be ugly.  There is no leadership emerging, either from Washington or from Wall Street.  The economy, worldwide, is drifting downward.  Companies that focus on their mission, and follow the 5 steps above will succeed.  Those that engage in attempts to win share and/or drive revenue by providing cheaper products, and choose to compete on a price basis, will lose.

Where are you in your 2012 planning?

RHM  8/4/2011