Is Your Marketing Truly Disruptive_ _ Econsultancy

24/10/13 Is your marketing truly disruptive? | Econsultancy

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Is your marketing truly disruptive?by Christopher Skinner 07 October 2013 13:15 4 comments

Todays businesses are so relentlessly driven towards bottom-line metrics that they end up

being a lot less profitable than they could be.

In this post, I'll explain why creating real sustainable profit may mean throwing out shareholder value

metrics.

The modern marketer, especially when it comes to digital channels, has been conditioned to maximize shareholder value through

efficiency, challenged to create new customers and activate existing ones as cheaply as possible.

Although we are all conditioned now to view customer acquisition through the lens of CPA (cost per acquisition), it wasnt always the

accepted benchmark.

In addition to coining the terms 'management by objective' and 'knowledge worker', Peter Drucker

advocated growth strategies that emphasized growing business through customer acquisition, or 'profit

growth by tonnage'.

Later, in 1976, Druckers 'The Unseen Revolution: How Pension Fund Socialism Came to America'

predicted the negative impact mutual funds would have on corporate innovation: by maximizing

shareholder returns, companies would have less cash to build customers, and focus more on efficiency.

Notions of customer lifetime value, and overall corporate value, paled in the face of quarterly profit

demands.

Even today, despite evidence that adhering to short-term profit strategy and aligning marketing customer

acquisition goals with short-term profit forecasting is largely ineffective, companies continue to drive

towards efficiency, rather than spend on new customer creation.

This is the norm in digital marketing, where browser-based technologies (cookies) enable marketers to use their CRM data to 'remarket' to

existing customers, and create 'lookalike models' that replicate their core potential customers across the web.

This kind of digital efficiency is truly amazing, highly effective, and cheap. It shows the promise of digital marketing, where companies can

take advantage of an always-on, predictable, and cost-effective channel to activate customers.

Unfortunately, the way most marketers are handling attribution means it is also the worst channel for gaining new customers.

It is ironic that the most disruptive marketing technologies available to companies are the worst at generating profit, but this is what the

modern digital era has had on offer so far.

Digital advertising was born in the direct response world, has been bred on bottom-line metrics such as CPA, and has the genetic

infrastructure of one-to-one messaging, via an individuals cookies.

That means todays banner ads are really good at finding someone already in the market for your products, and getting them to finally

check out their shopping cart.

It also means that banner ads used for branding are being judged by the same metrics as those created for DR campaigns. That means,

until the way we measure success changes, online display ads used for branding will always fail.

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This is a huge problem for the hundreds of companies who are counting on television dollars to migrate (along with our attention) over to

mobile phones, tablets, and laptops

How do we create a new way to value digital branding efforts?

So, what to do? How can companies disrupt the current efficiency construct in digital marketing, and create a new way to value digital

branding efforts?

Seen through the lens of Clayton Christensen, author of The Innovators Dilemma, modern digital marketing has already entered its third

phase in its early lifecycle.

For Christensen, the famed Harvard Business School professor who preaches 'disruptive innovation,' there are three stages in a

companys lifecycle: Disruption, Sustainability, and Efficiency.

After the initial disruptive idea that gives birth to the company, success breeds sustainable practices that prolongs corporate life and

expands the company, and that is eventually followed by efficiencywhere best practices optimize business operations. Once the

company reaches peak optimization, the cycle needs to begin again.

Companies that cant, or wont, invest the profits gained by efficiency back into disruption will eventually be disrupted by outside forces.

Todays digital marketing is approaching total programmatic efficiency. Technology enables marketers to use algorithms to exploit a near-

endless amount of inventory, reach individuals wherever they may be found online, and bid efficiency for their attention in real-time.

The only problem with that approach it that it is almost impossible to use it to acquire a new customer. Maybe all it takes is a change in

attitude.

What if your attribution goals for display advertising were not to reach your core customer for the least amount of money, but to raise

profitability by market?

Put another way, what if your goal was to raise your sales in a particular market from 100 to 120 in a month? If that was your success

metric, then it would be obvious that the traditional digital KPIs, such as CTR and CPA, would go out the window. Sometimes the simplest

ideas are the most disruptive.

Here are several ways you can reframe your thinking around digital, and start to change the way you deploy this channel:

Connect marketing to the boardroom

Is your clients CEO thinking about efficiency metrics, or are they thinking, How do we grow the business by 20% this year? I guarantee

you that it is some form of the latter.

Changing the way your clients (or management) value your digital efforts means getting adoption of new, growth-centric KPIs. Maybe it

costs $300 for a conversion rather than $3, but that customer has a lifetime value in the thousands.

How much is a new customer worth in terms of lifetime value, market share, and their ability to bring their social circles into the brand?

As a channel, digital should be thought of as an efficient way to move your ideas into the world and engage new customers,

rather than the end of the customer journey through an established sales funnel.

How are new customers influenced?

At the end of the day, no matter how many advertising impressions you have delivered across channels to a potential buyer, people are

most highly influenced by their neighbors. That can happen across a dinner table, or in a more scalable way through social networks.

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The Social Media Statistics document is part of

Econsultancy's Internet Statistics Compendium package, a

comprehensive compilation of internet statistics and online

market research with data, facts, charts and figures that are ideal

for presentations, business cases or client pitches, RFPs and

understanding the marketplace as a whole.

Driving that kind of word of mouth happens at the very top of the funnel through branding efforts, as well as through influencing your existing

customers through branding and communication efforts.

Those efforts are the most impactful when it comes to new customer acquisition, but most expensive when judged by todays KPIs.

Again, the digital channel can be a place to think big, and create a brand, not just drive existing customers into a shopping cart or 'find a

dealer' page.

Test and scale

Growing new customers is expensive, and you cant start nationally overnight. Making a commitment to digital branding means taking a

few DMAs, or even neighborhoods, and trying to understand where you have the best chance of growth.

Once you understand how to grow sales in the Upper West Side from 100 to 150, then you understand what it takes to get profit

optimization on a market-by-market basis.

Apply the results of each expansion to the baseline strategy, and build profit growth brick by brick.

In summary...

There is nothing wrong with using todays highly efficient digital marketing technologies to drive activity among your existing customers.

Programmatic buying is on the ascendancy for a reason: its an amazing direct response channel, and it is as efficient as you can get,

based on todays DR-focused metrics.

Bringing true disruptive innovation to your digital marketing practice may mean having to abandon those metrics when it comes to new

customer acquisitionand apply some 1973 thinking: profit by tonnage.

When applied correctly, the branding-heavy 'profit by tonnage' approach will be the most efficient way to scale your business,

because sustainable profit growth can only come by adding new customers.

Christopher Skinner is Managing Partner at MakeBuzz, LLC and a guest blogger on Econsultancy.

Topics: Advertising Data & Analytics

Recommended research

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Digital Workshop: Using Social Media to Influence Influencers



2013 is the year of going "beyond the like" to build deeper

engagement, with successful brands leading the way in allowing

(satisfied) customers to do the heavy lifting on their behalf. This

Digital Workshop presentation includes slides and instructions for

the audio replay of this session. Download for an intense hour of

learning how to define, identify and build innovative influencer

initiatives for your organization. Presented by Ana Garcia Doyle.

Robert G

5:17PM on 7th October

2013

Its very easy to say that large scale brand advertising will

acquire new customers and deliver the goods over time -

but much more difficult to prove it.

Does Chris have any hard evidence based examples

that showed the spend now reap the rewards later effect

in action...? How do we track and measure it?

Scraberous


2013

How many people are still going around using the

'disruptive marketing phrase' when they actually mean

rebellious. The phrase actually refers to a negative thing,

the customer being expected to deviate from their

normal daily way of consuming products or messages

(hassle).

A truly 'disruptive product' is the new type of BMX bike

that uses 22" wheels instead of the conventional 20" - its

a better product (faster more controllable etc) but the

customer has to buy a whole frame and wheelset and the

22" tyres. This has disrupted their normal buying

behavior - but they're sticking more rad tricks.

'Disruptive marketing' - cool new buzzphrase but use it

properly. derp

Christopher Skinner

(Author)

Managing Partner at

MakeBuzz, LLC


2013

Robert G, thanks for your comment. Quick answer: Our

methods for tracking and measurement are geo-based,

usually down to the zip-code level.

Let me give you an real-life example: A few years ago

we ran digital awareness media for a new telecom

product in a few cities across the UK. We then

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measured total sales lift for the product in those specific

areas, not just online tracked orders. Sales doubled, and

the campaign was highly profitable.

Here's the best part: the store sales outperformed

ecommerce nearly 2:1. Which means if we'd been

looking at direct-tracked we would have severely

undervalued that media and likely shut it down.

Instead we took the secondary metrics we got from the

test areas (Cost-per-Acquisition, Media frequency, etc)

and applied them to new cities. The more it worked, the

more reassured the executives became on the accuracy

of the model and we were allowed to scale.

That's how a different framework for measurement can

vastly affect a business.

Christopher Skinner

(Author)

Managing Partner at

MakeBuzz, LLC


2013

Scraberous,

No, the marketing itself is not disruptive. We do use

modern media but we are not in the business of

marketing innovation or disruption.

We are in the business of disruptive frameworks that

empower businesses to select the right amount of

marketing to grow. Sadly, that is disruptive. Most digital

marketing is "flat." Just look in Google Images and type

in "google dashboard" or any one of your favorite

analytic platforms. I see complexity and no growth. I also

see this during my many visits to agencies and clients.

We have to solve the problems within the framework and

grow businesses to as big as they should be. That is

sadly, disruptive.

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Is Your Marketing Truly Disruptive_ _ Econsultancy