Marketing Intelligence by Iain Johnston

So if you are running a creative business, or indeed any professional services firm, how should you spend your scarce marketing budget?

I suppose this begs the question: “what budget?”

We’ll have to suspend the normal subject matter of this column at this point. Here, we’re not talking about the £1-30m our clients spend every year. We’re discussing the normally hard-won and constantly under threat marketing budget for our own agency.

I have worked in a range of such businesses, but many of them have evolved a level of marketing budget at between 2% and 5% of revenues, typically towards the bottom end of that scale. So an established £10m revenue direct marketing business might have its own budget of about £200-500,000, whereas a small fast growth design business of £1.5m fees might still feel able to commit £100,000 to 3^rd party promotional activity and cost.

These numbers probably include the cost of 0-3 dedicated marketing staff, but exclude new business people.

The absolute level of budget should of course be a function of what the objectives are in marketing terms, in most cases driven by short term new business goals and longer term profile and reputational plans. Stable businesses without ambitious growth plans can probably achieve all they need with relatively limited funding and resource. More aggressive plans will inevitably necessitate deeper pockets.

So back to the “how to spend the budget” question. Conceptually, I view marketing activity as a 3-D sphere, with the essential non-negotiable activities right at the core, and the nice-to-have not so critical stuff around the outside. The marketing activities are a bit like the layers of an onion from core priorities at the centre, to more peripheral things further out.

Let’s assume I’m running a £5-8m creative business and I have managed to hire a good B2B marketing manager. I might now have £80-150,000 to spend as an annual investment.

In allocating priorities, I’d start at the core, and ask myself, “if I only had £10k, what would it go on?” I might decide a credible holding page on the internet was the minimum first step, plus some business cards.

Then I’d work on through each additional £10-15k, adding layers to my marketing budget onion, each time asking “what is the next priority”. Sometimes as you work your way outwards, you top up the budget on some earlier priorities. For example, you might decide after you have a credible presence on the web and some business cards, you next invest in a decent creds deck (£5k), a basic PR retainer (£20k), a contact database (5k plus subscription to marketing intelligence tools) and some outbound direct marketing (£10k). You might be up to £50k+ by now, and the next £25k you allocate to take the web site from digital brochure to interactive portal. Then you carry on adding more new activities (event attendance £10k, sponsorship £10k, some client dinners and hospitality £15k), and then top up PR £20k).

Easy to spend £150k, isn’t it?

I guess every business is different, but however you end up prioritising your budget in your business, I’d still urge you to test the budget in two more ways:

1. slice your onion straight through across all the layers of activity so you get in any one month a small slice of each activity: does each activity that month support the others, are they consistent, and do they build together?

2. ask yourself for each £10-15k, is there a better use of that money? What specifically do we hope to achieve from that activity and is there a more cost effective way of doing it?

By far the most effective business to business marketing events I have been involved with have been some which don’t actually cost very much money. Gaining a speaker slot at the right conference can be priceless in terms of exposure, reputation and even new business leads. Such things often cost just the time and expenses of getting the right person there to speak. Similarly many networking events can be superb for business development activity, and cost very little to do.

In most cases it is our time that is actually the biggest driver of success. The more we invest, the further the budget goes, and the more the activity is likely to deliver useful results.

As you might expect from someone who pitches an alternative approach to clients, I have strong views about challenging traditional media channels and priorities.

It never ceases to amaze me why we sometimes persist with a formula, no matter how well rooted in historic performance or current research, which simply takes what we spent last year and tweaks it up. Or in the case of the last year, down.

Nevertheless, with our clients, most of whom are typically spending £1-30m per annum in support of a brand, there is normally enough cash to go around. They can cover off all the basics (guidelines, internal launch, channel comms, PR etc), and after this core, the old approach used to be a question of whether to devote this % or that % to TV, events, DM, web etc.

Over the last few years, the mix has changed, and over the last 18 months, there have been some irreversible 2012-scale seismic disturbances.

Bye bye lots of TV, broad channel comms, and print. Hello social media, reinvestment in product and design, and (especially digital) PR.

However, the core components survive.

But when we look at how agencies spend their own marketing budgets, there don’t seem to be so many tried and tested formulae.

How should a design business organise its £250k spend between its own promotional and reputational priorities? How much should a PR business spend on its own PR? Indeed this raises another point: agencies can actually be very poor at doing for themselves what they preach so passionately to clients. Phrases like “look at the shoes of cobblers’ children” and “physician heal thyself” come to mind.

I’d argue in fact that most agencies should NOT do their own design/PR or indeed any marketing in-house:

1. if you build web sites and fully integrated online platforms for major global companies, are you really best placed (and most cost effective) to produce your own 10 page “creds online” effort? Surely you can do what is required technically, but are you really good at B2B channel comms which may be the key skill to get your agency known?
2. can you really be sure you will get the optimal service and priority as an internal client versus “real clients paying real money”
3. can you really be objective about your business, and distil out of your own culture, heritage, people, clients and products the essence of your brand?

Or actually, are you better off getting an independent agency to do this for you?

Forget The Apprentice, Design for Life is the next bit of so called reality TV to attempt to appeal to a wider audience.

Philippe Starck is the “guru” this time, though our own Dick Powell seems to be getting more air time and I would hope the audience can already see who is talking more sense

Think I’d rather be mentioned in the company of Thomas Edison (12 min 19 secs in if your IT hierarchy will let you stream 652mb).

Once again Dave Trott gets to the heart of the issue. The contestants on the show are labouring under the misapprehension that the challenge is about Design. Of course it isn’t. It’s entertainment.

Still, it’ll keep me going until the next instalment of the Sir Alan Show comes along.

As well as being a world famous product designer, and on the BBC again this week, Dick Powell also organised our latest Loewy Masterclass, this time the theme was Pitching.

Neil Christie of wieden & kennedy whose presentation was extremely well received, has beaten me to it and already summed up proceedings well here, and Wadds from Speed has already posted his take on the event.

In answer to the comment on Neil’s blog, this was a closed event, the second such event Dick has organised for us, and a raging success so far, based on:

1. the audience feedback forms (too many positives to ALL have been bribed).

2. the improvements in our win rate since the previous masterclass in June

My only concern about the whole thing was that I failed to apply the lessons of the previous and this masterclass to my own presentation. We tell our people not to pitch for a project that we haven’t got the time or bandwidth to do justice to. No excuses, I clearly knew in advance I was going to struggle to prepare properly for the event, and two weeks earlier had suggested Dick cut me down to just 15 minutes. As it turned out, I didn’t make enough time, and had to opt out at the first coffee break to get back to the joys of conference calls at the office. So I missed some of the star turns which followed.

Ok so the conference call went really well (about much more at a later date), but better to do one thing brilliantly than two things just about OK.

Still, over 100 people in the audience did get huge value from the whole thing, and they’re already asking Dick about the next one.

Huge thanks to Neil, Roger, Tim, Richard, Phil and Al for their excellent presentations, and of course Dick, Lucy and Hayley for organising the whole thing - superb.

We’ve moved.

We’re in our wonderful new home in Park Street, in the heart of the South Bank.

If you have read my previous 32 posts, you will know I believe the culture of an office and its setting in the local environment do have a material impact on how a business performs.

I’ve worked in all parts of London, and each appeal in different ways.

I’ve spent my fair share of time working in the City, that thrusting hotbed of deals and excess. I’ve been there in boom times (floating businesses in the late 1990s) and not so good times (client meetings more recently). During the day, I love the professionalism, the confidence, the not-quite-masters-of-the-universe-any-more-but-still-pretty-good projection of possibility, the can-do mentality. I like that everyone dresses that little bit smarter, business suits rather than jeans. But I’m not so keen on the City after about 7pm when the whole place becomes a ghost town.

I loved working in the West End, though admittedly it’s been 15 years since I was based there and a lot has changed. These days I still love the hustle of the area, the busy-ness, the buzz. I have mentioned the culture and new office environment of Speed Communications before. They are now right on Leicester Square in the heart of the West End, and some nights they have to fight with paparazzi when they leave work on a film premiere night. Their business seems to be really thriving in their new location, and after an initial settling in period, the noise and energy of the team is really building again. I must admit though, I do find the West End a bit touristy, and even outside of some of the less well trodden paths, it can be, well, I guess a bit seedy.

I worked in the heart of Westminster for a couple of years. We had a beautiful traditional office in Smiths’ Square, just off Millbank. It felt more sophisticated, more high-brow, and notwithstanding the prevalence of politicians at every turn, more respectable. Again we had to dodge the press (Tory Central Office was across the road), but at least we weren’t invited to buy theatre tickets or get two-for-one drinks every time we popped out for a sandwich. However, being the wrong side of Parliament for the rest of town, meant that we were trapped whenever there was a state visit/opening of parliament/security alert/over zealous police checkpoint or pregnant pigeon on the road. And it was, well, a bit quiet.

So for the last couple of years I have been based in Pimlico. Well, actually on the embankment, with my office facing the road noise at the traffic lights at Vauxhall Bridge. On my first day as CEO in May of last year, I made two decisions. Firstly I decided to cancel the Christmas Party (more on this in another post). Secondly, I announced we would be moving out of Pimlico. I couldn’t at the time say when we’d be moving, but I was determined to get our really bright and energetic young team out of an area that felt as though it had retired already. It didn’t help that our offices were a rabbit warren of nooks and crannies, staircases and hallways, corners and cubbyholes. In fact they were a major barrier to creative collaboration, reinforcing silos rather than wider team working.

Pimlico is “nice”, it’s quiet, it’s one of the more residential areas of central London. But it lacks spark, where’s the excitement? We did create our own little pocket of irreverence while we were there, but I don’t think any of our people have been sad to have moved away.

Which brings me back to Park Street, and the South Bank. The office are great, modern, spacious, with acres of open plan space. So much space in fact that while we wait for the other half of The Team to move over from their old office in Southwark Street we have been using half of a floor as our table football arena (I’m currently languishing in mid table mediocrity, a bit like Liverpool). And, yes, we were discussing yesterday how we could turn a couple of tables over as goals and play 5-a-side in the currently unblemished open plan space.

The surrounding area is superb. In complete contrast with Pimlico, we have restaurants, coffee shops, the odd deli, great sandwich shops, even Paul Smith. Best of all is Borough Market, which is just a peach of tradition. No wonder we have film crews here all the time working on the next Bridget Jones or Love Actually. But what I really like is that you can come out of a restaurant at 11pm, and the place is still buzzing. And it’s the locals that are still out, making it a great sense of community.

I look at the smiles on our peoples’ faces around the offices here. It just feels great.

3. “Satan fronts church campaign” <checks to see if it is 1st of April, then realises its about a church in Detroit, so anything’s possible>

Looking at the second one above, it does of course take courage and commitment to spend scarce marketing dollars advertising against someone who is trying to sell your products. Credit to Dermalogica for that. It’s good to have principles. I’m one of the first people to applaud a business that has a strong sense of its brand and how to protect it.

However, this for me smells like old style advertising. The sort of advertising we used to have in markets where you could control things. Where you could prevent people getting messages which didn’t tell your story. Advertising from the age before the internet, mobile media and self-forming user communities. The Stone Age in other words.

I can remember at business school hearing about the rules for price discrimination. One of them was you have to be able to build strong and defensible barriers between groups of consumers that you want to screw discriminate between. It is essential that in price discrimination, the different buyers have incomplete knowledge and can’t talk to each other. In classical economics terms, an imperfect market. The sort of markets that hardly exist anymore.

I feel for Dermalogica’s customers. Wonder if they’re thinking “why can’t I buy this product at Boots if it suits me?”.

A bit like when consumers find out the marketing they’ve been peddled is bollox. Or even very high quality and genuinely intentioned innovation gets twisted on receipt. Customers become cynical, they distrust the brand, and they rebell against the company. Like when this piece of brilliance, spawned these two (and many other) parodies.

But the guy from the third piece explains a pragmatic approach. In answer to the question “why is the church promoting Satan?”, Adam Dorbland, the church’s youth pastor, said that ‘Jesus wants us to be creative’ and ‘use whatever it takes to reach people’.”

All good stuff, but only if the message is rooted in fact, is based on some fundamental truth.

By taking an ad out to shout to the world they’re in the middle of a row with an influential distributor, Dermalogica are in an interesting position.

Why aren’t they focusing on their own positive agenda about the brilliance of the product, rather than airing their dirty linen in public? It could of course be another bit of “any publicity is good publicity” routine. And the risible £500 reward they are offering to distributors who blab on how Boots are getting hold of their product has all the hallmarks of a stunt.

But focus on the consumer. The company wants the consumer to think the product is exclusive, only available through high-end Spas and the like. But I think consumers like choice, and they resent restrictions, they want to be treated as grown-ups. So the ads are just as likely to drive more traffic to Boots stores. Hope that’s what Dermalogica intended, but I suspect not.

I’m not sure I would want to reach my customers with the message that I don’t trust them to make informed decisions.

London is famous for many things. The city is a cosmopolitan mix of people and is world famous for the Houses of Parliament, Buckingham Palace, the London Eye, the River Thames, and red London buses. And black taxi cabs.

While I understand the merits and environmental efficiency of public transport, I must declare a prejudice: I get too hot on the Underground in the summer. So I spend a fair amount of time travelling between our various London offices sat in the back of black cabs. Quite rightly, our wonderful London cabbies are world renowned for their knowledge, their conversation, their love of cyclists and their shy and retiring nature.

These cabs are on the outside in the same form as they were 40 years ago, but under the surface, the technology has changed dramatically. In addition to the intercom which allows the driver to listen in to your innermost thoughts and conversations better than ever, and the mirror in an impossible position over your left shoulder, some also have this so called “in taxi entertainment system”. The barely visible screen down by the floor relays a loud and endless reel of adverts interspersed with some poker tournament footage taken from late night channel 456. The controls are on the side console (under the impractical mirror) and make my sky remote control look simple. Clearly they are designed to confuse (colours and symbols) sufficiently so that people can’t turn off the sound, thereby risking missing out on the important messages being delivered by the system.

Full marks for the idea of sprucing up the journey and attempting to grab some commercial gain from otherwise dead time. Zero points for actually delivering something that the customer really wants and values.

So, my wife and I were on holiday in New York last week.

New York is of course famous for lots of things, including the ubiquitous yellow cab. Locals will of course tell you that a point of differentiation between yellow cabs and the London black cab, is that New York cabbies are universally from Iran or the Phillipines, are always on their cellphone, have very little local knowledge, and will never stop for you if it’s raining or you are late.

But the thing that really impressed me last week was that every single yellow cab I entered had an interactive touch screen display that made our feeble London attempt at in-cab entertainment look pathetic.

EVERY cab had a system that:

1.                  is easy to use, intuitive interface, touch screen, and specifically easy to mute

2.                  has moving gps-based map display of the local area (updated constantly) so you can see where you are, and if you so wish the route to your destination.

3.                 allows  zoom in/out, places of interest.

4.                  provides a side channel (configurable) with a choice of entertainment, local tourist information and weather.

5.         ok, there were ads too.

It was almost as if the designer had actually researched with taxi users what they would appreciate, and come up with something that met their needs.

Although it seemed last week like we walked the whole city, we did catch quite a few cab rides. But far from resenting the mini-screen ads on our various trips, they were delivered as part of an interesting package. I guess this has been the challenge of media channel owners for ever.

It think this is a theme I will return to……

My son is about to start his GCSEs.

[Just let me pause at that point while all over 40s lament the demise of O' Levels, and how everyone these days get A-star GCSEs for just turning up to school.]

He’s taking maths, like everyone else, because it is compulsory. Like long hair, l33t speak and  not tidying your teenage bedroom.

Over the school holidays in between the joys of summer camp, foreign travel and the huge global community that is his facebook friends list, he has been working through some maths papers, the better to prepare for next term.

[I'll pause again to duck the torrent of teenage angst at blowing his cred with his mates for doing school work when there are perfectly good music tracks to rip to CD, raves to plan, and parent-avoiding parties to sort out]

I had a look at his Maths papers. Now I did Maths A’ Level (and they were much more difficult in my day……), but I have to confess, that even at 14, he is going beyond what I can remember or understand.

Sticking with simpler stuff, there is a mathematical formula that helps understand the importance of every element of the planning, producing and implementing a marketing campaign.

Think of the success of a particular marketing campaign as a function of many variables: product quality, market growth, customer spending patterns, stock availability, competitive action, marketing noise/distractions, service quality…..before we even get to the creative quality of the ad or the focus and clarity of the message. I have written many times about the importance of actually being able to deliver the product or service you are promoting.

I guess my maths point is that the overall success of the campaign is a the result of a multiplicative function. If all of the variables are good, the overall result will be good.

But if just one of the variables is weak, or indeed zero, the end result will still be zero.

Let me spell out what I mean. Think of measuring each variable (e.g award winning creative treatment, or stock availability) on a scale from 0% to 100% where the low end of the scale is zero e.g no product availability (you can’t find it anywhere), and 100% means it is ubiquitous (you can’t even turn around instore or online without falling over it).

Try it:

100% x 100% x 100% x 100% x 100% x 100%……[you get the idea]…..x 100%  = 100%

ie 100% success, the best result you could possibly get.

You get one thing wrong, (e.g. your product is out of stock, your service capacity is down because of server problems or staff shortages), then substitute a 0% for one of the 100%s, and the answer is 0%.

100% x 100% x 100% x   0%   x 100% x 100% ……………….. x 100%  = 0%

ie 0% success. Zero. Nil. Zilch.

So any one element of the marketing mix, any facet of the customer purchase decision, and single piece of the overall jigsaw can ruin your result, no matter how brilliantly you sorted everything else.

It can be the unglamourous stuff that cocks it up for us too. Great product, brilliant strategy, beautiful messaging, spot-on segmentation and audience preparation, then terrible production means the ad is out of focus on the page. Or great concept for a market share boost, superb negotiation with retailers re gondola-end placing, fantastic new product extension, let down by a point of sale technical fault meaning the product falls over on shelf and looks crap.

So forget the detail being boring, it’s really exciting when these guys look after the detail that often gets overlooked, and these bright young things know how to make it really work in the last 10 seconds before a customer decides what to buy.

Last year I wrote in this column about how your own staff can determine whether your multi-million pound investment in a marketing communications campaign succeeds or fails.

I wrote about how the brilliantly trained Virgin Trains staff can live and breathe their brand and keep passengers smiling, even when the rail network is in chaos, the wrong type of rain is falling, and a badger is on the line.

And as my friends at The Team will tell you, the best service brands are rooted not just in some head of marketing’s ideas for glory, they need to be built on the strongest possible foundations of staff involvement, engagement and everyday action.

More recently, just before my recent holiday (about which more later), creativematch carried my thoughts on the theme.

It is nearly always logical in early stages of planning a campaign with clients that we discuss how a particular communication or message fits in the wider context of their plans and the market. We would always want to address how the campaign will be trained in with staff ahead of time, so they are ready to “live and breathe” the messaging when it hits the media. There is nearly always complete agreement that we should plan appropriate levels of time, critical path and budget to ensure we get the brand right internally before heading out to our customers.

Great.

But when budget pressures arrive, it’s often the internal stuff that goes first: “oh, we’ll get people together for a brief…<whispers: did you get that email out to everyone….?>”

Or worse still, it never ceases to amaze me that the internal launch of a campaign can be an afterthought. Companies will spend millions on a particular marketing campaign, with every element finely crafted, researched and fine tuned to the n-th degree, and yet the first their own staff hear about it is when they see it in a publication, hear it on the radio, or receive it themselves through their letter box.

When times are tough, most businesses scrutinise every item of expenditure. When times get really hard, this scrutiny becomes intense, with every line of the profit and loss account forced to justify itself in terms of payback, return on investment, and direct support for revenues.

We see this in our clients’ businesses, with pressures on budgets now continuous. In many cases our clients themselves don’t know from one month to the next whether their plans for the year will get clobbered from on high in the next round of budget scrutiny. Given our philosophy at Loewy has always been to look at the impact of our work in client’s markets, and to focus on the business results they are trying to achieve, we have suffered less than most in the current climate. Indeed in a number of cases we have been able to support our clients in their own internal debates around value for money and priorities.

But, when times stay really tough for months on end, successive rounds of cost savings mean that even the largest companies have to look at all expenditure, regardless of priority. You hear the words “return on investment” nearly every day. Hold that thought.

A couple of nights ago I was fortunate enough to be invited onto a discussion panel in the City, hosted by Bird & Bird, AMR International, and Trillium. The evening was entitled “How will marketing budgets be spent in the future?”, a subject dear to my heart. There were about 40 of the great and the good from the “media” industry, ie people who owned or ran agencies, publishers, radio station owners and so on. Encouraged by the rather conducive surroundings, and an entertaining initial exchange of views, I settled into the event quite well. After all, as those who know me will confirm, I always like a good audience, and this was a good audience. Interested, energetic, engaged, rewarding as a speaker. Great.

Denzil Rankin of AMR International played questionmaster really well, inspite of the ability of some of the panel <coughs nervously> to talk a lot, about anything, especially with an audience. We discussed the delights of when an upturn in marketing spend might be expected (not in the next twelve months), whether this recession would leave lasting changes on the marketing landscape (lots, far reaching, irreversible), and which channels were the most resilient (interactive, digital, direct, point of sale) and whether there were any more of those delightful chicken goujons left in Bird & Bird’s lovely catering stocks (alas, not).

We talked a lot about Return on Investment. Maybe it was the audience. Maybe it was the speakers. Maybe it was just coincidence. But every question seemed to come back to ROI as one of the key issues in media decision making and planning the right channels for communicating. All perfectly understandable, especially given the mood of the market, and this endless scrutiny I mentioned earlier.

Then came the open questions at the end, and….

BLAM!

A question that hit me right between the eyes. A question so simple, and perceptive, that it stopped the ROI bandwagon in its tracks. Gentleman on the front row raises his hand, and says, quite simply “We’ve talked a lot about ROI, but what about the importance of Brand in all this?”

I felt such a chump. I spend my life talking to people about the importance of their brand, the power of a strong brand, and indeed how a brand properly rooted in the essence of the product or service underlying it can deliver much greater resilience, market impact and share.

Yet we’d spent the whole evening discussing marketing in a recession and not mentioned brand.

Ok so I made up for it in the networking afterwards, with due apology to those recipients of my “strong brands provide the best ROI” and “brands are a pre-requisite for survival” rants over wine and nibbles.

Let this be a lesson, to me at any rate.

Whatever the pressures, whatever the perceived topic of the day. Whatever the need to save money. Keep focused on what you know is right. Deep down there, in your marketing gut, you know your brand is everything.

And order more chicken goujons for your next event.