five strategies for eliminating waste in marketing.

 

  • Target the smallest possible market.
  • Establish a brand community.
  • Eliminate direct competition.
  • Develop the optimum product.
  • Focus on lifetime value.

 

 In the late 1800s – businessman- John Wanamaker famously said – ‘Half the money I spend on advertising is wasted; the trouble is I don’t know which half.’ There are four things you should know about this observation:
It is as valid in 2022 as it was in the 1800′.
  • Advertising is not the only area of marketing where there is waste.
  • The waste has not stopped with the trend toward digital media.
  • Waste is not and should not be inevitable.
 
There is no doubt in my mind that waste in marketing is as rampant in 2022 as it was in the 1800s. One researcher suggested that 60% of all tracked advertising is wasted.
I regularly see waste in all areas of marketing – with content marketing high on the list. Research has indicated that up to 60% of marketing budgets are wasted.

The big digital channels propagate a myth that digital advertising has eliminated waste. Experts suggest, however – that between 30% and 60% of digital advertising is indeed wasted.

There is no reason to tolerate waste, and the key to eliminating waste is to reduce the dependency on advertising and other avenues of communication, including content marketing. 

ELIMINATING WASTE

Now more than ever, businesses need to be driving down the cost of marketing or, at the very least, expecting a superior return from their expenditure. The following discussion addresses five simple strategies that almost any business can implement to reduce waste in advertising and marketing more generally.

TARGET THE SMALLEST POSSIBLE MARKET

For as long as I can remember, marketers have been saying that trying to be all things to all people is a sure-fired receipt for failure. It is very difficult, if not impossible, to develop a product that meets or exceeds the expectations and demands of all markets. Further, targeting ‘everyone’ is expensive and highly wasteful. Despite this, many businesses still insist on targeting as big a market as they can, thinking that ‘the more people I target, the more sales I will secure,’ when the truth is very different. The truth is – that it is almost always better to target the ‘smallest viable’ market.

When approached about an investment opportunity, venture capitalist Mark Cuban considers three critical questions:
  • The market being targeted.
  • The strategic competitive advantage.
  • The level of customer focus.
In terms of the market, Cuban favours targeting the smallest possible viable market or audience, given that the market or audience is viable. ‘Marketing expert Seth Godin coined the term (minimum viable audience or market). He says that the minimum viable audience is the smallest group that could possibly sustain you in your work (and achieve a commercial level of profitability).

Targeting the smallest possible viable market or audience facilitates:
  • Understanding.
  • Targeting.
  • Customisation.
 
The smaller a market or audience, the easier tr is to understand, and the greater the likelihood a business can understand it very well. The smaller the market, the more targeted the marketing can be and the greater the likelihood of minimising waste. The smaller the market is, the easier it is to customise or personalise the product, the customer experience, the pricing strategy, and promotion.

Targeting the smallest viable market or audience is especially important for a start-up or in any business where resources are limited, and waste is the least affordable. Point to the importance of producing products that are remarkable and superior in terms of customer needs, Godin noted – “If you make something everyone wants, you have to be average,” He goes on to note that average products achieve average sales – at best.
Targeting the smallest viable market has several advantages, including:
  • The smaller the market, the more homogeneous it can be.
  • The more homogeneous a market, the easier it is to understand.
  • The easier it is to understand, the easier a market’s expectations can be met.
  • Meeting and exceeding expectations drives sales repeat sales, referrals, and margins.
 
The most cost-effective and profitable approach to marketing involves:
  • Identifying the smallest viable market or audience.
  • Customising a product that exceeds the expectations of that market.
  • Customising the pricing, distribution, and promotional strategies to that market.
  • Maximising sales and margins secured from that market.
 
 Some marketers question this notion on the basis that it can restrict growth. This need not and should not be the case. Growth can be readily facilitated by:
  • Maximising the potential of a brand in its smallest viable market.
  • Developing a new brand for a new smallest viable market, or
  • Developing new products for your existing market.
 
Many marketers, including Seth Godin, favour developing new products for your existing markets – facilitating relationship marketing and even’ permission marketing.’ Both are legitimate strategies. That said, many businesses also create new brands (with varying levels of real difference from the existing ones) to customise and market to a new market.

The core issue here revolves around customisation of the product, the customer experience, and the marketing—the greater the level of customisation, the greater the likelihood of maximising profitability. Customisation is a significant trend in marketing in 2022.

ESTABLISH A BRAND COMMUNITY.

I have written a great deal about the importance of a brand community. This is because I see them as an inexpensive and indeed cost-saving initiative that almost any business can use to reduce the cost of marketing and maximise return on investment. Consider:
  • 86% of businesses report that brand communities provide insights into customer needs.
  • 66% of companies say they turn to brand communities for product development.
  • 64% of companies state that the brand community has improved their decision-making.
 
Brand Community is a series of relationships between customers or consumers and a brand and among the different consumers. It’s a group of people who have or feel they have a relationship with our brand and then develop relationships with each other around their appreciation or like for our brand.’ Providing a forum for discussing all marketing issues, brand communities work well in both the B2C and B2B environments.
Some 60% of Fortune 500 businesses in the United States in 2022 have established an online brand community. A brand community can be online or offline. They seem to work best when they are both. Online discussions are less expensive to facilitate and easier to make ongoing. Offline discussions can be more personal and better encourage trust and authenticity. The benefits of an online community or panel include the capacity to use digital data. In addition to monitoring discussions, it is possible to monitor what community members are most interested in.

In a small business environment, establishing an online brand community involves:
  • Identifying the market to be addressed.
  • Define a clear purpose and goal.
  • Identifying the optimum online platform.
  • Establishing a management process.
  • Develop rules and protocols.
  • Inviting the market to join the community.
  • Engaging the market and adding value to their lives.
  • Communicating openly and honestly with the market.
 
One of the most successful brand communities was that established to bring Harley Davidson back from the jaws of bankruptcy. Here are some other examples of thriving brand communities – https://blog.smile.io/8-best-brand-communities/.
While brand communities are common worldwide, they are less common in Australia. This needs to change if Australian businesses are going to realise their potential cost-effectively. Research suggests that effective brand communities facilitate:
  • More accurate decisions – 54%.
  • More cost-effective decisions – 27%.
  • More competitive decisions – 14%. 
 
Above all else, brand communities facilitate maximising the lifetime value of each customer.

ELIMINATE DIRECT COMPETITION. 

After Elon Musk, Peter Thiel is perhaps the best-known founder of Pay Pal. Working in Silicon Valley as a venture capitalist and author. Peter Thiel authored the book – ‘Zero to One’. A core message in this book is that great businesses have no competitors. Theil is strident in his condemnation of the notion of competition and equally strident in his view that businesses need strategies to limit competition. Quotes attributed to Thiel include:
 
As far as the broader community is concerned, high levels of competition may be a good thing, especially if this competition drives innovation and competitive pricing. However, as far as businesses are concerned, competition can damage profitability by putting pressure on prices and the need to invest more in promotion.

The importance of eliminating competition might be the only subject about which Thiel and I will ever reach an agreement. Limiting direct competition is most certainly an important consideration for marketers and an increased focus of great businesses. Working to eliminate or at least minimise the competition should be a key focus of marketers in 2022.

While I am not advocating the systematic execution of the teams working for your competition, I will argue that competition can be a choice in many and perhaps most cases. Indeed, there is no doubt in my mind that every business should strive to limit the number and quality of competition and that most businesses are in a position to reduce and potentially eliminate direct competition.

The point here is that while differentiating a product from its competition might be beneficial – being seen as different is much more important. Differentiation is the business of using a strategic competitive advantage to set a product apart from its competition. It is the business of:
  • Positioning a product so unique that it is viewed as having little competition.
  • Uniquely categorising a product, it is seen as distinct from the competition.
 
For a time, despite the multitude of brands on the market, there was only one vacuum cleaner – the Hoover. While there were many options, there was effectively only one ballpoint pen on the market – the Biro – by Bick. There was only one smartphone to speak of initially – the I-phone, so much so that mobile phones are often called I-phones – regardless of the brand. These are just some of the many examples of a product having no effective competition – due to effective differentiation.

While a Rolls Royce and a Mini are both cars – they are not competitors. While they have a lot in common, they are very distinct regarding what they offer and target. The same can be said for a Rolls Royce and a Ferrari. These are both high-priced cars, but they are not competitors. They are different classes or categories of vehicles targeting different markets. This is true for so many products. A silver service restaurant does not compete with a takeaway restaurant. Again, they are various categories of products.

The right strategy can effectively set a product apart from would-be competitors and reduce or even eliminate the competition. Such a strategy might involve differentiating based on:
  • Product characteristics.
  • Pricing
  • Application.
  • Prestige.
  • All of the above.
 
Perhaps one of the best examples of effective differentiating a product is Coke. While the flavour of Pepsi is preferred by up to 80% of consumers in taste tests – Coke well and truly outsells Pepsi. Coke has a 45% market share, while Pepsi has a 26% market share. While Pepsi is a soft drink, competing with other soft drinks – Coke is a lifestyle product, competing with almost no one. Coke owns the lifestyle space.

DEVELOP THE OPTIMUM PRODUCT.

New York University professor Scott Galloway once noted that the one thing that sets Facebook, Apple, Amazon, Netflix and Google apart from their competitors is not great advertising but – a ‘fucking great product.’ This is contrary to the view propagated by most advertising agencies that it is “great creative” or” a great media plan” that sets a great business apart. The fact is that – the starting point of every cost-effective marketing strategy or campaign is a “great product”.

But what is a ‘fucking great product?’ Perhaps, the more important question is – ‘who defines a great product?’ 

A great product is a product that the target audience believes is a great product. The market determines what products are great, and it is a foolhardy marketer that relies on their intuition to identify or develop a great product. Identifying a great product involves:
  • Understanding the expectations of the target market.
  • Creating a product that exceeds those expectations.
  • Monitoring market views and modifying the product accordingly.
 
Research and empirical evidence suggest that the most cost-effective approach to developing a great product involves using:
  • A brand community.
  • Co-creation.
 
A brand community provides for relationships that many businesses use, especially in the United States, to determine customer needs and expectations cost-effectively. A brand community can also enable co-creation. Co-creation enables the target audience to work with the business to develop a product they will purchase and repurchase – and design an environment where they will feel comfortable making a purchase. Another strength of co-creation is that it is not expensive or difficult to organise – and can be used just as effectively by small businesses as it can be the largest. Co-creation also fosters empathy through collaboration. It assists with generating ideas, identifying and solving problems, developing implementation plans, product development and fine-tuning, customer experience design and fine-tuning, and creating a pricing strategy. Co-creation involves:
  • Understanding the market.
  • Establishing interests of that market.
  • Leveraging market knowledge to fine-tune the product.
  • Maintaining communication to facilitate ongoing development.
 
Two critical points to remember here are:
  • Co-creation is as powerful in defining the optimum customer experience as it is the product.
  • The product is as much the brand as it is the good or service.
 
Research has highlighted the growing importance of the customer experience. Co-creation can understand the customer journey, identify the touchpoints along that journey, and establish how to exceed expectations and each touchpoint.

Perception is every bit as important as reality. While modifying the product based on the customer’s expectations is an opportunity, it may not always be the best option. In many cases, modifying the brand or perception of the product may be as important and potentially more effective.  

Ultimately, the brand and the perceptions it creates will drive sales and margins, etc.

FOCUS ON LIFETIME VALUE.

To appreciate the importance of customer lifetime value, consider the following:
  • Repeat customers spend 67% more in months 31-36 of a relationship than in months 0-6.
  • Repeat customers spend 300 times more than first-time customers.
  • Referred customers are four times more likely to purchase.
  • Referred customers have a 37% higher retention rate.
  • Referral customers spend 25% more than un-referred customers.
  • The probability of selling to an existing customer is 60 – 70%, while the probability of selling to a new customer is just 5 – 20%.
  • 92% of consumers respond positively to recommendations or referrals from friends. 
  • 52% of businesses cite repeat business as the primary driver of profitability.
  • 45% of businesses cited new customers as the primary driver of profitability.
 
These numbers highlight the fact that maximising profitability while requiring a level of enquiry is as well served by maximising:
  • Conversion rates.
  • The average sale per customer.
  • Margins.
  • Repeat business rates
  • Referral rates.
 
Research also suggests that:
  • These factors need to be addressed before the enquiry rate – to maximise the return from each enquiry 
  • These factors are as important as enquiry rates, especially in maximising profitability.
 
Unfortunately, while most businesses I come across have a reasonably strategic and documented advertising or promotional strategy, few such businesses adequately address the conversion rate, average sale, margins, repeat business and referral rates in the marketing strategy. There remains a poor recognition of the importance of documenting a comprehensive marketing strategy focused on maximising the lifetime value of each customer.
 
INSIGHTS
  • Some 60% of all marketing expenditure is wasted. 
  • Some 30% of all digital advertising is wasted. 
  • The 60% waste in marketing can be eliminated. 
  • The 30% waste in digital advertising can be eliminated. 
  • The key to reducing marketing costs is to get closer to the customer.
 
ANOTHER PERSPECTIVE
 
 RECOMMENDED READING
 
 ACTION

To reduce the cost of marketing while improving results:
  • Target the smallest viable market.
  • Establish and leverage a brand community.
  • Eliminate or at least minimise the competition. 
  • Have your market define a ‘great product’ and then deliver it. 
  • Focus on the lifetime value of each customer.
 
 QUESTIONS

Questions for which all marketers should have the answer:
  • Given that targeting the smallest possible market reduces costs and increases returns, what does your minimum viable market look like?
  • Since 86% of businesses report brand communities providing insights into customer needs – why don’t you co-create your customer’s experience?
  • Given that your direct competition can be reduced, if not eliminated cost-effectively – what is your strategy for doing just that?
  • Given the positive impact of product co-creation on profitability, what processes do you have in place to leverage it, and why not use a brand community to facilitate it? 
  • Given that 92% of consumers respond positively to recommendations or referrals from friends, what is your strategy for facilitating them and is it embraced by all staff?
 
STATISTICS
Statistics every marketer should know.
  • Repeat customers spend 67% more in months 31-36 of a relationship than in months 0-6.
  • Referred customers are four times more likely to purchase.
  • 92% of consumers respond positively to recommendations or referrals from friends. 
  • 52% of businesses cite repeat business as the primary driver of profitability.
  • 45% of businesses cited new customers as the primary driver of profitability.
 
So – place a higher priority on lifetime value. 

 

No tags

Five Tips For Reducing
The Cost Of Branding.

Burning money on branding is more common than most marketers think. Because few businesses truly understand what a brand is and how branding works, advertising agencies, branding agencies and design studios have become expert at spending their client’s money without effective accountability.

Burning money on branding is more common than most marketers think. Because few businesses truly understand what a brand is and how branding works, advertising agencies, branding agencies and design studios have become expert at spending their client’s money without effective accountability.

1. Get out of the boardroom.

Perhaps the two most concerning issues about branding are the lack of understanding about what brand and branding are and the propensity to develop brands in the boardroom, perhaps with the help of a consultant.....

TO RECEIVE CONSUMER INSIGHTS AND PRACTICAL MARKETING TIPS WEEKLY AND OTHER BENEFITS...
CLICK HERE