five tips for reducing the cost of marketing. 

  1. To reduce marketing costs – engage with customers, not competitors.
Research in the United States in 2018 found that businesses satisfying an accepted criterion for being considered ‘customer focused’ were on average 60% more profitable than business not considered customer focused. Further, 58% of marketers believe being customer-centric aids profitability.

Another study found that 90% of marketers in the United States were developing or implementing strategies that would enable them to offer a more customer-focused and’ individualised’ product.
Jeff Bezos, CEO of Amazon, contends that ‘the most important single thing is to focus on the customer. Our goal is to be the world’s most customer-centric company. 

Over recent years, much has been written about the FAANG group of businesses – Facebook, Amazon, Apple, Netflix and Google. These are arguably the most successful businesses in the world. Each has in place sophisticated technology designed to provide high-quality data on every aspect of the customer experience, customer needs and wants, and to identify strategies that will increase customer loyalty and encourage them to spend. 

These businesses use highly sophisticated algorithms to monitor customers within an inch of their lives. The aim is to know them as well as it is possible to know them and be able to address their needs as well as possible.

Most importantly, and unlike many other businesses, these highly successful enterprises focus far more on their customers than they do on their competitors. Jeff Bezos explained, ‘we’re not competitor obsessed, we’re customer-obsessed. We start with our customers and work backwards.

The more a business understands its customers, the better it can exceed the expectations of those customers and acquire more customers on the back of referrals. The more a business understands its customers, the more it can exceed its expectations, drive repeat business, and increase margins through customer loyalty.

INSIGHT – Stop wasting time studying your competition. Out all of the available resources into understanding and responding to your customers – or target markets. 

QUESTION – What makes your business truly customer-focused and more appealing to customers?
  1. To reduce marketing costs – become their shrink.
Most businesspeople claim to understand their target market. In my experience, however, few do. Most rely on intuition and very simplistic data to develop a less than optimal understanding of their target market. Many businesses I come across that base their conclusions about their market, and therefore their strategies on assumptions, intuition, common sense or personal experience rather than:
  • Consumer insights.
  • Client data.
  • Market research.
Very few businesses in Australia use market research effectively to underpin strategy despite the mountains of evidence that research can and should lead to reduced costs and better returns. Indeed, there can be a cost in market research, but as technology improves, That cost can be moderate and readily recovered.

I come across very few businesses where there is an appreciation of consumer insights, behavioural economics or consumer behaviourism, despite its power in informing marketing strategy – and the ready availability of data at little or no cost. 

Much of this data is available online.

I come across very few businesses that systematically collect and analyse the wealth of client data that can be readily and inexpensively accessed and leveraged. There is a lot we can learn from the thoughts, comments and behaviour patterns of our customers and potential customers.
Indeed, Australian businesses lag well behind their compatriots around the world.
I often hear Australian businesspeople suggest that:
  • ‘We don’t have the budget for market research.
  • ‘We offer our customers as much choice as possible.
  • ‘We don’t have time to analyse client data.
That said, these businesses:
  • Seem prepared to burn thousands of dollars on poorly conceived marketing.
  • Fail to learn that too much choice inhibits sale (a finding from many studies)
  • Seem to have the time to get it wrong over and over( because they don’t understand)
An investment in understanding who the market is and what will deliver optimal outcomes will almost always save money in the medium term – identifying opportunities and reducing waste.
Of course, for this to occur, the understanding needs to be based on:
  • The right questions asked the right way.
  • The right insights considered in context.
  • A comprehensive base of customer information.
It is wasteful not to commit to understanding the target market in a way that does not rely on common sense, personal experience and intuition – all of which has been found to be unreliable in many a study.

INSIGHT – All the tools available to you to develop the best possible understanding of customers and potential customers. Get in their heads to understand how they think and feel.

QUESTION – How do your customers FEEL after interacting with your business?
  1. To reduce marketing costs – audit annually.
Each year’s budgeting season represents the ideal opportunity to review the year past and the year ahead, along with the strategies and processes being put in place – before setting a new budget and signing off on a new strategy. While many businesses do this, my 30 years of experience suggests that few do it in the in-depth and systematic manner that will maximise the potential for cost savings and an increased return on investment.

I would argue that the Marketing Audit represents the most in-depth, systematic and cost-effective approach to undertaking the required review. A marketing audit, in addition to being scalable, can deliver cost-effectively:
  • Strategy
  • Systems
  • Organisation
  • Processes
  • Functions.
To maximise its impact, the marketing audit needs to be:
  • Comprehensive
  • Independent
  • Systematic
  • Periodic
To maximise its impact, the marketing audit needs to address the:
  • Environment
  • Objectives
  • Strategy
  • Organisation
  • Systems
  • Productivity
  • Functions
The process of completing a marketing audit should involve:
  • Scoping
  • Data gathering
  • Data analysis
  • Reporting
  • Action
Specific action is the critical outcome and will lead to reduced costs and an increased return on investment.

INSIGHT – Undertake a full marketing audit at least annually and ideally more often to identify the opportunities for cutting costs and increasing returns. 

QUESTION – Exactly how many marketing dollars are you wasting because you don’t have all the facts?
  1. To reduce marketing costs – think with objectivity and clarity.
Steve Jobs often commented on the importance of passion, as have many others. The argument was that nothing great was ever achieved without passion because you need passion to devote all of the time and resources required to make anything great. 

I find this argument very difficult to argue with. Like anyone who has started a business or anyone who has succeeded in business, I suspect. The heart is the inspiration and drive for a great business or a great branding, marketing and communication strategy.

That said, success and cost-effectiveness in branding, marketing, and communication come from the head. More specifically, it comes from:
  • Objective thinking.
  • Critical thinking.
  • Lateral thinking.
I would argue, however, that these three types of thinking are all too rare in 21st-century branding, marketing, and communication. Far too much contemporary marketing thinking is not based on sound information and is far too dependent on subjective assessments. How often do we hear marketers say things like:
  • ‘I assume’ – rather than ‘the evidence demonstrates?’
  • ‘I would…’ – rather than ‘consumer research shows?’
  • ‘Most people…’ rather than’ 94.5% of those surveyed?’
Such statements, often drawing on unreliable intuition, are all too common and, for many businesses – very expensive. Far too often in contemporary marketing, we see decisions being made based on information that is not assessed critically enough. How often do we hear marketers say things like:
  • ‘It worked for …… therefore it should work for us’.
  • ‘It said in THE WEST (media) today that…. – therefore…’
  • ‘the market size is … therefore there are opportunities for us.’
Again, I have found such comments to be all too common. For too often, we see a lack of lateral thinking that contributes to a lack of innovation and the genuinely fresh ideas that can move a product, service or business forward. Have you ever heard marketers say things life:
  • ‘It is what it is – we can only work with what we have got.
  • ‘…… worked last time (suggesting that it will work again)’.
  • ‘If we drop the price (rather than innovate) we can increase sales.
I have been amazed at how resistant businesses and, in particular, boards are to true lateral thinking. They seem to lack the capacity and courage to embrace lateral thinking.

INSIGHT – Thinking is the starting point for every cost-effective marketing strategy. Such thinking should ideally be applied to reliable and relevant data – not intuition. 

QUESTION – What evidence do you have that your intuition is a sound basis for decision making?
  1. To reduce marketing costs – continually innovate.
Unlike the great brands of the world, including Apple ($18.75 billion or 7% of its net sale in 2020) and Volkswagen (US$16.5 billion or 7.6% of revenue), Most Australian businesses spend very little on innovation (1.79% of GDP, well below the OCED average of 2.37%) – and it is costing them. Increasing the investment in innovation can be an effective pathway to reducing costs and increasing income.
For some reason, Australian management think they are smarter and have better intuition than international businesses.

The godfather of disruptive innovation, Clayton Christensen, notes three types of innovation:
  • Efficiency
  • Lifecycle
  • Disruptive
Efficiency innovation is all about reducing the cost of production; something Australian businesses are considered good at. This is an essential form of innovation. While it does not necessarily cut marketing costs, it nonetheless delivers savings.

Extending the lifecycle of a product or service is equally important but far less common in my view. Further, in this area, real marketing savings and real increases in return on investment can be achieved.
Extending the life cycle of a product or service by fine-tuning it to ensure it better addresses the changing needs of consumers can drive sales with little or no increase in communication. Indeed, I would argue that creating the expectation of innovation can actually decrease the cost of communication.

International businesses like Apple and Samsung are continually innovating and, in so doing, extending the life of smartphone technologies, and there is an expectation in the market that such innovation will continue to occur between major disruptions.

In Australia:
  • Product innovations are much fewer.
  • Service innovations are rare indeed.
  • Research and development is a low priority.
I would argue that this approach is costing Australia a great deal both in terms of foregone revenue and in terms of wasted expenditure on advertising and communication in general.

I would argue that Australian businesses are spending far too much promoting yesterday’s product or trying to convince the market that their product is cutting edge. When being cutting edge might be so much more cost-effective.

I would further argue that disruptive innovation is even less common in Australia. We are paying a big price for our reluctance to develop and invest in new technologies and business models to increase product or service accessibility and affordability.

INSIGHT – In addition to identifying new products and services to increase revenue, use innovation to cut costs and save money directly and indirectly. Every business needs an innovation strategy. 

QUESTION – What makes your success less dependent on innovation than a multinational?

Many businesses are wasting a fortune on marketing. A more strategic marketing approach – relying less on advertising, focusing more on behaviour change will help business reduce marketing costs – as will understanding the psychology of the customer, continually innovating, auditing annually and thinking objectively – free of uninformed and unreliable intuition.

D. John Carlson
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