CEOs: Get marketing strategy the first time

Not long ago I got a call from the straight-shooting CEO of a large electronics retailer based in Dallas. “Dr. Clancy? Ah’m readin’ your book here, and ah want to know if we should stay in the retail business or if ah should fire all these fuckers and do somethin’ else.”

We talked for a long while—he was a fun guy and very smart. We concluded by saying that it would take us about 6 months to do a thorough evaluation and another 6 to 12 months to develop and implement a plan to overhaul his business.

“You haven’t heard me son. Ah have to make a decision here. Ah need somethin’ in about six weeks. What can you do for me? Work with me here, son. Ah probably need two weeks to think about it—so what can you do for me in, like 30 days?”

Although I loved being called “son”—it made me feel 20 years younger—I said we couldn’t do anything meaningful in 30 days. The most he’d be buying would be my mind and that of my colleagues, and that’s a form of testosterone-driven decision making. “That’s probably what ah need here, son. Some boys with testosterone who can make a goddamn decision.”

For almost 30 years we’ve been working with companies that are loaded with testosterone; indeed, the global marketplace is swimming in testosterone. One result is the poor performance of marketing programs for both consumer and B2B companies that I’ve talked about in seven different books. As I write, of course, I recognize that American management consulting firms have trained top executives to believe they can get 80 percent of the way to a great decision on judgment alone—and the remaining 20 percent takes too much time and costs too much money. We reject this idea for the same reason we reject the idea that the best way to make a decision is to use a Ouija board.

Management consultants have no empirical basis to back their claim, while we have 30 years of marketing evidence to prove that judgmentally, intuitively, hormonally generated marketing programs do not work. The conventional wisdom is not a surefire path to success. Maybe the management consultants can get you 40 or even 60 percent of the way there; they are very smart and have pedigrees from top schools. But 40 or even 70- percent is insufficient to compete successfully in the new millennium. Moving to the 80 percent-plus mark has become de rigueur.

We did not work for the tall man from Texas.

Rigorous Analysis of Unimpeachable Data

Throughout my career I’ve talked about the importance of marketing. Marketing is the business function that drives results. Yet I’ve maintained that few marketing programs work, and my company has offered guidance to better, more profitable programs.

The fact is that it takes time to develop great marketing strategies, powerful marketing plans, and to implement transformational marketing programs. Too many execs pick a target in a flash. Make a positioning decision because intuition tells them the message makes more sense. Set a price without any real strategy or research. Write a marketing plan in three weeks. Create and produce a new TV campaign in eight weeks. Implement the whole thing in another 60 days.

This is not the way to treat a new product or service or program you want to be profitable, never mind a business you want to thrive. These folks should be branded “Death-Wish Marketers.”

Every executive in every industry has a reason why a decision must be made immediately, the product introduced next week, and the program set by the end of the month. They are lashed by a sense of urgency that, we have said facetiously, seems to be related to hormones. If you’ve got the ball under your arm, damn it, hit the line and run. If you’re running in the wrong direction, you’ll find out later, okay? Making decisions quickly is the intuitive thing to do. Corporations reward fast decision-making and frown upon taking pains. Don’t get ready and aim. Fire! And fire some more.

Super Bowl Sunday 2009 is the best, and most expensive, example of this craziness that we can think of. One $3 million spot after another, with little brand connection and no positioning and zero effectiveness. Testosterone gone wild.

Clearly there are times when you need to fire before you’re ready or fire before aiming. A competitor has just introduced a new product based on state-of-the-art technology. A rival has broken a campaign that talks about your brand in a pejorative manner. An enemy has just reduced it price to zero margin levels to wipe your product off the shelf. An Internet site has just opened a whole new product category. But these are uncommon skirmishes in the marketing wars.

More often than not, it does not matter whether the company introduces its campaign in September or January, delays the new Web site four months, or pulls all advertising until the first of the year. Managers need time to consider alternatives and weigh options. When they have the time—which is most of the time—the counterintuitive approach is to do it right. This means undertaking rigorous analysis of alternative decision options based on hard data using criteria related to profitability.

Recently a client approached us to help in the transition from a conventional but effective direct marketer into an e-commerce company that would quickly—five months later—lead to a big-time IPO. They added “.com” to the company name and began to shift marketing and distribution activities to the Web site. We cautioned that they were moving too quickly; the target marketing, positioning, product, and pricing strategy for the Web customer were not necessarily the same as for the traditional customer. We recommended that they study the market to compare and contrast the two types of customers and to provide insights that would prove invaluable in developing the new Web-centered business.

Company management countered that they wanted to take advantage of the equities market while it was still hot. The CEO called for a three-month time frame to develop the Web site sans strategic research and another two months for the road show and launch. Men at work. The 28-year-olds building the site were neither great strategic thinkers nor brilliant creatives, so the outcome was mediocre at best. The site failed, the IPO faltered, and the business went into Chapter 11.

Often we ask executives, “Why don’t you have the time to do it right when you can make time to do it over and over and over again?” This “field of dreams” e-commerce company spent many millions of dollars trying to make the radical transition from one business environment to another, and now there is no money left to do it over again.

So our first point is that executives need to spend more time making critical marketing decisions.

You need a manager’s creativity, intuition, and judgment, but you need to balance it with rigorous analysis of unimpeachable data. Only with both the data and the analysis can one hope to make decisions—strategic and tactical—that, if not optimal, are close to it.

The people who put together marketing programs are smart, and they seem to have an answer to every question you ask. But the answer, after analysis, often does not connect with the reality. We’re particularly impressed with the explanations produced by advertising agency account managers. They’re glib, articulate and persuasive. But you have to remember that ad agencies are in the spin business. Much of what they say sounds as if it makes sense even when, on close inspection, it sometimes makes no sense at all.

If the brand manager tells you tomorrow he’s spending $800,000 or $80 million, make him demonstrate that it is the right amount of money. Because, as we have seen, managers sometimes pull figures right out of the air. We ask, “How did you come up with an $80 million ad budget?” They respond, “Our experience says that’s what it takes to do a successful new product launch.” Or “The agency recommended it.”: Or, “That’s what you need to buy 5,000 gross rating points on prime time television with a print and radio overlay.” There’s always a reason, even if the reason can’t be defended.

An Exhortation to the CEO

Our counterintuitive recommendation is that if top management wants innovative marketing programs to be right the first time, it needs to set aside a special team, a skunk works team, people who have the time to do it right. (Or use outside experts to help.) This special team should involve not only the chief marketing officer, but the CEO and even the CFO. The more involved the senior people, the more likely the plan will be supported and implemented correctly.

We recognize that this suggestion makes one more demand on the CEO’s time. We also know that every business book in every field urges—demands—the CEO’s involvement for the authors’ advice to succeed. The chief executive must be concerned with strategy, with operations, with finance, with human resources, with ever single facet of the business. The more involved the CEO, says the author, the more likely things will get done. Yet the CEO, like everyone else in the organization, has to set priorities. There are only 16 hours in the average CEO’s workday. Something has to give.

We argue that marketing deserves special consideration because marketing drives the business. Marketing is the organization’s point of contact with customers and prospects. If the chief executive is involved with anything, he should be involved with marketing because everything else is secondary. No customers and prospects, no business. Hire a gnome from Zurich to worry about the finances, but for heaven’s sake get involved in marketing. The business’ future depends on it.

And that requires senior executives who know enough about marketing to ask the hard—and relevant—questions. It does not mean that the CEO must be a marketing scientist. It does mean that the CEO knows when a marketing program is likely to thrive and be profitable.

A CEO does not have to understand the theory of choice modeling or the nitty-gritty of simulated test marketing to know that both are fare more useful marketing research tools than focus groups and web based concept tests. CEOs need not to master scientific sampling procedures but they must realize that small groups of people roaming shopping malls are shaky foundations for multimillion-dollar marketing decisions. CEOs do not have to know exactly who so much market research is flawed (although it helps) as long as they can spot good stuff when they see it.

Too much marketing floats free of any reasonable constraint. We can measure marketing performance, and performance should be measured against clear objectives that are not “we ant to improve awareness” or “We expect product trial to be up significantly as a result of this campaign.” A clear marketing objective is “Will we increase our market share by two points in the next 12 months.” Or “Will we increase sales per square foot by 15 percent in the next year.” Or “Will we sell every Saturn we bring into our showrooms during the next 100 days.” Or better yet “We will increase P&G’s Tide bottom line by 20 percent during the next year.

Objectives should be specific, realistic, and measureable. We don’t promise more than we can deliver, and we know when we’ve delivered what we promised. Marketing managers should remain in the job long enough to be rewarded for their successes and be held accountable for and learn from their failures.

Companies Are Under Extraordinary Pressure

Consumers are changing. People are dramatically reordering their spending priorities, which means that much of what we know (or thought we knew) about market segments five years ago is probably wrong today.

Consumers are overwhelmed by product choices. Is there any person in America today who wants more variety among shampoos, computers, cell phones, juices, television sets, analgesics, cereals, toothpaste, automobiles, ice cream, paper towels, microwave entrees, soft drinks, soups, or telephone services? Do we need more Internet sites to buy books, CDs, pet supplies, participate in auctions, find a job, a car, a travel destination, get our hourly news and weather, make investments, or buy PCs?

Business-to-business buyers are overwhelmed by the tens of thousands or companies trying to sell them products and services: financial services, computer hardware and software, insurance, office supplies, advertising media, janitorial services, telecommunications, furniture and equipment—even management consulting. And with the Internet having taken off, particularly business-to-business auction sites, the choices are dizzying.

Companies are therefore under extraordinary pressures. Yet they must innovate to grow. They must create new products and services and successfully reposition and restage established one. They must invest their marketing dollars wisely. Stockholders, boards of directors, and senior executives will not tolerate million-dollar marketing investments being made foolishly. They will demand accountability, demand a fair return on the marketing investment and demand the CEO’s involvement.

There is an alternative to intuitively appealing, death-wish marketing: marketing intelligence that fosters counterintuitive thinking and moderates testosterone. Executives who think counterintuitively do not make pure judgment calls, do not use their competitors as guides to action, do not seek short-term results. They know manufacturing costs and understand the relationship between costs, revenue and return on investment. Marketing today is more science than art. The data and the tools currently exist to dramatically improve a company’s marketing programs. All that’s required is the will to use them.

American business, as always, faces an uncertain future particularly in the current recession the worst we have experienced since the Great Depression . Lead by financially oriented managers during the 1980s, 1990s and 2000s, a frenzy of mergers and purges, acquisitions and divestitures, expansions and downsizings have resulted in a new business landscape. Financial wheeling and dealing, searching for the magic bullet in reengineering, portfolio analysis, self-directed teams, total quality management, value chain analysis, killer apps, and a balanced score card have had their run. It is time for responsible chief executes to recognize the overwhelming, overarching power of marketing.

With counterintuitive marketing programs that follow the principles this article has outlined, your business will thrive in the new century as you create an inspirational vision and aspirational mission directed toward profitable market targets with powerful positionings, memorable advertising, quality products, sensible pricing, and cost efficient levels of customer service. Your marketing plan will be built on logic and hard data, not intuition and prayers, and your implementation will be as carefully thought through and executed at every step in the process. Finally, you’ll monitor everything you do, not just to get a report card but to improve performance. It’s the best way we know to survive in this economic downturn and be successful in the next decade.