Alan Rosenspan

Direct Marketing
and Mail Order
Association
www.nmoa.org

Marketing Warfare
By Alan Rosenspan

Before I begin, I must confess. I'm not one of those people who believe marketing should be compared with war.

I know it makes marketers feel more empowered, lets them believe their jobs are more dramatic, and of course, it sells a lot of books.

We're all familiar with titles like "Leadership Secrets of Attila the Hun" and "Guerilla Marketing."

But as the American Civil War General William Tecumsah Sherman said, "War is hell" – and then proved it by burning down the city of Atlanta

Fortunately, marketing is a lot less painful.

The only way marketing can be compared with war is that we often face difficult barriers to success, and we must engage our competition in creative and innovative ways.

And the most significant barrier right now is the economy.

Sam Walton, the founder of Wal–Mart, was interviewed during the last recession in the 1980's. He was asked "What are you going to do about the recession?"

He said, "We don't plan to participate."

And they didn't – Wal–Mart has grown from strength to strength in the past twenty years. Which is why that's just the kind of thinking I would like to recommend to you. The results can be far–reaching.

In a recent article in The New Yorker, James Suroweicki, wrote about the real recession.

"In the late nineteen twenties, two companies – Kellogg and Post – dominated the market for packaged cereal. When the Depression hit, no one knew what would happen to consumer demand.

"Post did the predictable thing: it reigned in expenses and cut back on advertising. But Kellogg doubled it's ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Crispies.

"By 1933, even as the economy cratered, Kellogg's profits had risen almost thirty percent and it had become what it remains today: the industry's dominant player."

So should we be cutting back on marketing, or is this an opportunity to increase our market share? Before we answer that question, we have to determine exactly what marketing is – and what role it plays in business.

Expense versus Investment

Business–guru Peter Drucker knew the utmost importance of marketing. He wrote:

"Because the purpose of business is to create and keep a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs."

So do you really want to handicap your business by cutting back on a basic function? (Ironically, many companies who cut back on marketing also cut back on the other basic function – research.)

But there are different forms of marketing, and it is important to understand the role and value of each.

General advertising is mass marketing – usually print or TV. It can rarely be accurately measured – because so many factors impact it's effectiveness. Therefore it is usually regarded as an expense.

And when a downturn comes along, it's often the easiest one to reduce. (April 20, 2009)

Direct marketing is one–to–one marketing – usually through direct mail, the Internet, SMS and telemarketing.

One of it's great virtues is that it can be measured down to the very last dollar. You know exactly how much you spent, and how much revenue and profit it produced. Therefore, it should be regarded as an investment – usually with a known rate of return.

So in a downturn, it's budget should be increased – because that's exactly when you need it most.

And you may want to consider re–allocating your budget – just like Kellogg did by turning to radio advertising, which was a relatively new medium at the time.

Now my aim is not to convince you to simply increase your marketing budget. I suspect that would be a tough sell in virtually any economic environment.

However, there are ways to make your marketing dollars work much harder for you. I have five basic recommendations, and a number of specific tips to share with you.

First, you need to keep your best customers

This, of course, is always true. But in this ragged economy, consumers and businesses are taking a long hard look at the companies they work with, and asking questions like:

Do we really need this product or service?

Is it worth the money?

Is there a better alternative out there?

So the customers you currently have – the ones you may be taking for granted – are now more vulnerable than ever before.

Paradoxically, most companies "accept" the loss of customers fairly easily – much more so than they would accept the loss of merchandise.

Imagine if your company "lost" 20% of all your products in a year. They may be disappearing from your warehouse, your retailers, or during shipping.

Wouldn't you be concerned?

Wouldn't you turn over every stone in an effort to find out why you're losing so much product?

Of course you would – but losing 20% of your customers can have a much more devastating long–term effect on your business.

In his 1996 classic, The Loyalty Effect (since updated) Bain consultant Frederick Reicheld, reported that, on average, U. S. corporations lose half their customers in five years.

His book goes on to prove that even a 5% improvement in customer retention rates could increase a companies profits by 25 to 100 percent.

So how can you keep your customers during difficult economic times? I have four suggestions:

1. Stay in contact.

Not just to sell things, but to keep your name in front of your customers, and to demonstrate your commitment to their business.

A survey is a great way to do this – since you are asking them what you can to improve your service to them. You'll get a great response; good reactions even from those who don't respond ("they really care about my opinion") and it may even identify customers who may be at risk.

2. Show them you understand.

Times are tough for everyone; think of something you can do to make things easier for your customers. Can you offer them a better price? Better terms? Can you add something that may not cost you much, but will save them money? All of these things will be appreciated by your customers.

At the very least, make sure to tell them you understand. You might even begin your next direct mail letter or e–mail with something like, "We're all under a lot of pressure in this economy. That's why our company is offering you…"

Several years ago, a financial services company asked me to create advertising for their Gold fund.

The only problem was that gold was at an historic low. I could choose to ignore this, and hope people didn't realize it. Instead I capitalized on it.

My headline read, "Will you catch Gold on the Ground Floor?" It was the most successful ad they ever ran.

3. Make them feel valued.

Mary Kay built her multi–billion dollar cosmetic business based on a simple idea.

She had a sign put up in her office that read, "Everyone has an invisible sign hanging around his or her neck. It says ‘Make me feel important."

The more you make your customers feel important, the more likely they are to stay with you – even during difficult economic times.

4. Use Pareto's Principle.

Vilfredo Pareto lived in Italy about 100 years ago. After graduating at the top of his engineering class, he entered the business world and eventually became the managing director of a huge iron and steel company.

But Pareto had a change of heart. He quit his job, moved to a small villa, and began writing articles and giving public lectures against the government.

He felt strongly that too much money was concentrated in the hands of just a few families. In fact, his research showed that 20% of the population owned 80% of the wealth of Italy.

This equation became known as "Pareto's Principle," and was later adopted by marketing and management experts.

Today, most of us know it as the 80/20 rule. And what it means is that 80% of your business will come from 20% of your customers.

Of course, it's not true of every business – and you may you may be thinking – 80/20 is far too one–sided. And you'd be right.

The new rule says that 90% of your profits will come from 10% of your customers.

Because of this, many large companies have stopped marketing to their unprofitable customers, and even want to discourage them from shopping.

Best Buy, the top U.S. consumer electronics store, is one example. They don't want people who just come in and purchase their special sale items. They're just not profitable – so they simply won't mail to them.

Again, the 90/10 rule may not apply to your business – but there is very often a small percentage of customers who are responsible for a large amount of your profits. And that's why it's more important than ever before to identify, protect, and reward them.

Ironically, just as your customers are more vulnerable these days, so are everyone else's – which leads me to my second suggestion.

Second, you need to attract new customers

Many companies do cut back on marketing during difficult economic times.

That means that the bad economy may actually afford you an opportunity to attract more customers away from your competition.

Customers who were previously satisfied with less – are now asking for more. And when they do, you can be right there to catch them. How can you do that?

1. Add value.

Think of ways you can add value to your product or service that your competition doesn't have.

Let me give you an example: Many companies use an automated inter–active phone system. "Press one to get more information. Press two for a brochure. Press three for…

"Companies love them because they save money. Consumers hate them. So several companies – such as Capital One – have actually included "talk to a live person" as a benefit of their product.

But doesn't it cost more? Southwest Airlines has always resisted the temptation to cut costs on customer service. When you call, you always speak to a live person. Funny how they are always one of the only airlines to make a profit.

2. Measure everything you do.

And then do more of what works. In a difficult economy, it becomes even more important to know the return of every marketing dollar you spend.

Sure, that giant billboard looks great – but can we quantify how many extra sales it produces? Maybe that same amount of money would be better invested in an e–mail campaign. Direct mail is working well? Great, let's find more lists to mail to, or mail more frequently.

3. Cherry–pick your prospects.

You may not be able to afford to market to everyone – so make sure you are marketing to prospects with the highest potential.

Can you select those prospects that might spend more on your products or services? Is there any way you can target your competition's best customers?

Third, you need to focus on the most profitable kind of marketing

There have been many articles on how "all marketing is turning in to direct marketing."

But that means much more than simply using the Internet, or including a toll–free number in your advertising.

You need to embrace the philosophy of direct marketing; not just the tools and techniques. And that philosophy is simple:

Return–on–Investment (ROI) is everything.

And your ROI can actually go up dramatically in a bad economy. Here are a few ways to help improve it.

1. Give prospects a reason to act faster.

There's no question that people are postponing buying decisions.

The CEO of a high technology company recently wrote, "Even after our sales people have convinced the chief information officer of the product's technical merits, the chief financial officer's decision takes forever."

That's why it's not enough to give people a reason to buy your product and service. You must also give them a compelling reason to act now.

This principle, by the way, can also be applied to your offer. Don't leave it open–ended – put a deadline on it. "You must respond within 30 days" can be an excellent way of increasing response.

2. Create offers that accelerate the sale.

One of my software clients recently offered a expensive golf club. It was a valuable offer and generated a good response. However it didn't lead to a single sale.

I recommend offers that are more focused on your product or service. By this I mean offers that will help someone make a buying decision or even speed up the sales process.

For example, I created an information–based offer for a data analysis company. It was called "10 Things You Must Know When Evaluating Data Analysis Software."

The advantages of this offer were threefold. (1) It was only of interest to people who were actually in a buying or evaluating mode, so it was highly targeted. (2) It helped define the buying criteria for prospects so they knew what to look for, and (3) It accelerated the sale since it answered all the prospects' questions.

3. Reduce your fulfillment costs.

Instead of printing 10,000 fulfillment brochures, you may want to consider setting up a template and printing them as you need them. This is called "print on demand" and it makes good sense in this economy.

Another way to save money is to print a folder rather than a brochure. This becomes the "wrapper" for a fulfillment kit that can include separate price sheets, testimonials, product specs, case histories and almost anything else.

Whenever something changes, you can easily replace that single element – without having to reprint an entire brochure.

4. Use this time to build relationships.

Even if people are not ready to buy now, that doesn't mean you should stop marketing.

As a recent advertisement for the Wall Street Journal said, "Out of sight. Out of mind. Out of business." They cite a study that shows that companies that remain aggressive during a downturn gain share from their competitors.

This is an excellent time to build awareness of your company and add value. So that when corporate budgets are freed up and your prospects are ready to buy – they'll know you and buy from you.

Fourth, you need to embrace technology

When times are good, it may have made sense to keep doing things the way you've always done them.

But not today. Many businesses have been revolutionized by new technology that allows them to bring better products to market faster than ever before.

And the technology of marketing itself has changed.

Digital printing makes it possible to personalize your direct mail and fulfillment materials more cost effectively. There is no longer any sound financial reason to send the same thing to everybody – when it is so much more effective to version it and personalize it.

Search Engine Marketing has grown into a vital part of your web strategy. And it's changing constantly. What works one week with one ISP may not work one week later. You'll need to keep on top of that.

Social Media is maturing – with millions of new users every day. How can you incorporate that power into your marketing?

And SMS has just about taken over the world – as one of the only ways to effectively reach younger target markets.

Finally, you need to be more courageous than ever

And perhaps this is finally where we can compare marketing with war.

The economy will put a lot of pressure on companies – and just like evolution: it will be survival of the fittest.

Success will go to those companies who can stay the course; adapt when necessary; keep and attract new customers; and invest intelligently in their marketing programs. In addition, we're all gong to have to be more creative with our marketing than ever before.

Difficult times call for bold and innovative solutions. This is no time to cut back on your marketing investment. This is the time to review what you are doing, how it is working, and how to make it work even harder for you.

Alan Rosenspan is President of Alan Rosenspan & Associates, a direct marketing consulting and creative firm.
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