The Garage Sale Marketing Budget

February 21, 2011 By 1 Comment

I find it fascinating that the process for setting marketing budgets for most organizations is archaic and based on tradition vs. good practice. There are two fundamental flaws. First, your marketing budget, which includes those investments spent to keep current customers and find new ones, should not be financed by short-term debt. Second, your marketing budget should NOT be set as a % of sales. I propose that your marketing investment needs to be set as a function of your BHAG!

I was sitting in a seminar digesting altoids and trying to understand the global financial crisis and the real estate meltdown. It hit me when one of my former business school finance professors talked about the fundamental problem of financing long-term assets with short-term debt. If you finance a long term asset with a short term loan, you will have to refinance at some point. Interest rates could move against you or markets could dry up (like we have seen recently) or the asset value could drop (making it difficult to refinance). When you do this, you run the risk of losing your long-term assets when the bank decides not to renew your short-term debt. Many businesses are currently being forced to shut their doors for this very reason.

In other words, I am talking to the CMO who is facing a doubting CEO. I am talking to CEO’s and management teams that face a doubting board. You need to match the duration of your financing with the duration of your assets. In other words, you need to match the duration of your marketing investment with the duration of your brand. How long do you expect your brand to last? I understand how easy it is to cut the marketing budget. How many times has a cut in the marketing budget actually increased the value of the organization or decreased the likeliness that the company will be stronger in the future? I cannot find any evidence. I see a cut in the marketing budget to be short-sighted and made out of fear which results in a slow down in growth.

If your marketing budget is the vehicle that creates, maintains and grows the value an organization, why would you risk setting your budget on a quarterly and for some monthly basis? I am not saying that organizations should move marketing investments to different vehicles. I am saying that if you are not committed to investing in your most important asset (your brand) over the long-term, you may just be setting yourself up for disaster especially when there is a downturn in the economy.

I am also amazed that most marketing resources recommend that companies should set budgets based upon a % of sales. Guess what happens when sales fall? You guessed it, the marketing investment also declines. This can create the death spiral. When sales fall for growth companies, this should NOT be attributed to marketing saturation. In fact, I would argue that a sales decline is more likely due to companies missing the need in the market place, failing to execute, lacking a marketing plan that is thorough, insightful and actionable and lacking focus.

One of the strategies that is better than a percentage of sales is to estimate what your direct competitors spend in marketing support and then try to at least match that amount. While this may be a better strategy, I do not agree that this is the best alternative. See my blog entitled, General Motors Case Study on Marketing Strategy . GM has lost over 25 points of market share during the last 26 years (1982 to 2008). GM spent $3.0B in advertising in 2008 vs. Toyota’s $1.76B and GM’s market share FELL by 4.5 points and Toyota’s rose by 1.2 points. Why would Toyota match GM’s marketing budget?

My recommendation is to set your marketing budget based upon your strategic marketing growth plan. Do you have a BHAG (Big Hairy Audacious Goal) to hit over the next 10 years? What does this look like in regards to geography, employees, revenues, markets served? I met an amazing entrepreneur last week, Henry McGovern. Henry went to Eastern Europe in 1992 with nothing but a tennis racket. Then he started a company that became a billion dollar business. Henry started AmRest (WSE: EAT),the largest independent restaurant operator in Central and Eastern Europe. Henry now has over 400 restaurants and over 16,000 employees. He shared with me his BHAG: “To the be the largest restaurant company in the world”. He started with a tennis racket. Dream Big, Plan Big, Get Big.

What are your 3-5 year growth goals? Do you have this number in mind? How many units do you need to sell? What new products do you need to deliver? What team do you need in place? What will it take in resources to support your growth goals and hit your plan? Your marketing investment (much better term than “marketing budget”) needs to be based upon your strategy to hit your growth plan. In order to hit your BHAG and your 3 year goal, you need to determine what you need to hit this year to be on track. To hit this year, you need to have a 90 day plan. If you do not hit your plan, are you going to reduce your investment?

Especially during this time of uncertainty, are you planning on a growth strategy that made you successful in the first place? Do you believe in your business? If you do, your marketing investment needs to be tied to your BHAG.

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General Motors Case Study on Marketing Strategy

February 20, 2011 By 1 Comment

“Does anyone in your household work for an advertising or marketing agency,” the caller asked. (Oh Fudge I thought). “Yes mam”, I replied. “Well, thank you for your time, good night,” the caller said as she clicked off to dial another unlucky soul.

As the voice of the Chief Marketing Outsider, I must admit, this hurt. I did not hang up on the intruder. I wanted to play an April Fools joke on her. The reason telemarketers do not trust us is simple: MARKETERS LIE. They (not me of course) do anything and everything to convince our bosses, investors, friends and neighbors that we know what the hell we are doing and more importantly what the customers want when we try to convince “the man” what budget to approve, what products to build, and what strategy the company needs to follow.

Take GM for example, back during the financial crisis in 2009, 8,000 managers received a company car and gas FREE even after asking you and me to keep them in business through taxpayer loans. I must admit, as an employee of GM, this sounds like a damn good perk. GM has even described it as a “Product Evaluation Program”.

The tragedy of this story is not the perk itself. It is the problem that GM has completely missed the slow boat. How can GM marketers, the ones responsible for designing, managing and growing the company’s future, understand the needs of the customer when they do NOT have to go through the same process that you and I go through when purchasing and maintaining a car? Over the last few years, it is no shocker why GM did not get the memo on why consumers want more fuel efficient cars. In fact, one of the damn employees complained that during the high gas prices, he had to swipe his company paid credit card TWICE to fill up his large SUV. (Sidenote: This is not the time to debate whether fuel efficient cars is a good thing or whether the overall impact of a hybrid is better or worse for the environment. This post is about mandating that marketers better become, learn and think “customer” or they will lose focus. In 2008 and 2009, GM consumers wanted to spend less of their overall budget on GAS!!!).

Value is created by meeting customer’s needs (See A Note on Garage Sale Marketing Strategy). This perk is just the tip of the iceberg on how GM has failed to practice the fundamentals. Marketing is not rocket science. Understand what your customers and non-customers need by observing first hand how they become a customer, use your product or choose alternatives. AND, actually be a customer. GM, hello, McFly, anybody in there?

One final bit of truth that most of us ignore: start spending time with non-customers. In GM’s case, spend time with those that use public transportation. Spend time with the carpoolers. Spend time with telecommuters. This may just give you insight into a new blue ocean and unlock the future of GM.

GM has lost over 25 points of market share during the last 26 years (1982 to 2008). How is it that GM spent $3.0B in advertising in 2008 vs. Toyota’s $1.76B and GM’s market share FELL by 4.5 points and Toyota’s rose by 1.2 points?

The next time a telemarketer calls me, I am going to tell them that I work for GM.

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The CMO’s Role in Evaluating Mergers & Acquisitions

February 4, 2011 By Leave a Comment

Dear Board, CEO, Founder and Chief Marketing Officer,

What role does your CMO play in evaluating M&A decisions? I was not surprised to read that the M&A market for 2010 and expected for 2011 is being lead by “Strategic Buyers”. A strategic buyer is a company that is ultimately looking to grow its business and has come to the conclusion that it is cheaper to purchase/merge than it is to do it oneself or outsource. In your organization, is your CFO or CMO leading the charge on determining your growth strategy?

According to the article, “Although the M&A market has been subdued in 2010, the author has seen strategic buyers pay strong prices for carefully considered acquisitions. “In addition to the distressed deals, there have been acquisitions by strategics who are looking for niche, highly synergistic businesses…” he says. “These corporate buyers are looking to buy a technology to leapfrog their competitors or add a product line that will make them more competitive.”

A CMO has 3 roles in an M&A transaction that leads to growth:

  1. Front-End Needs Analysis
  2. Culture Fit and Strategy Alignment
  3. Operational Analysis

Front-End Needs Analysis: A CMO better be leading the charge on the front end to determine IF a company should build, buy or outsource BEFORE the CFO, Board and Management Team decides to merge or acquire. Those companies sitting on cash that want to take advantage of this market can choose to invest it to improve the operations and/or replace old assets (increase efficiency), invest it in internal growth (the marketing budget), or invest it in M&A activities. The CMO must be working closely with all parties to communicate to the management team, CFO and Board that the company needs to look outside the company for strategic growth BEFORE there is an opportunity.

Culture Fit and Strategy Alignment: A CMO also has the responsibility to protect the culture and company’s focus by making sure an M&A transaction is inline with the vision and future plans of the company (not a one off hail mary) and the cultures are a fit. Otherwise, the “good deal” becomes the pit of despair.

Operational Analysis: Finally, the CMO must understand and evaluate whether the operations can improve as a combined entity. Throwing an M&A transaction over the wall to the operations team is not fair play. In fact, in some organizations, the CMO’s team is responsible for evaluating and modeling the true costs of implementing an organization into the current company. Whether it is the marketing team, finance team or operations, the marketing executive must be willing to sign off that the transaction will drive the expected growth, drive the expected profitability and drive the expected cash.

What do you think? And why is M&A a CFO discussion and rarely finds itself into the marketing trade publications?

Are you in the Pit of Depair? Tell us your war stories.

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Culture as Important as Cash Flow, Revenue, Customers?

February 4, 2011 By Leave a Comment

Marcie Zlotnik, Co-Founder, Chairman and CEO of Startex Power, opened up her keynote speech this at a conference I attended with the words “Culture is as important as Cash Flow, Revenue and Customers.” She caught my attention.

Where is the evidence that Culture truly is as important as a business and marketing strategy as driving cash flow, revenues and more and happy customers?

In Marcie’s case, Startex Power has received the J.D. Powers award for Residential electricity in Texas, Houston Business Journal Top 10 Best Places to Work and distinction as one of the fastest growing private companies. She credits her success and the company’s success to the strategy of building a culture that is INTENTIONAL, MEASURED and CONSTANTLY EVOLVING. She ended her speech with a saying, “a satisfied employee pays dividends above and beyond customer service.”

Here are a few others Champions of Culture that have also found success in focusing on building, maintaining and growing their culture:

  • Patagonia – Founder Yvon Chouinard built a company that has built a culture of building the best products, causing no unnecessary harm, and using business to inspire and implement solutions to the environmental crisis. This not only happens to be their mission statement, it’s built into the fabric of everything they do including their people. What are the results? In this economy, Patagonia is having the best year they have ever had for the second year in a row.
  • Whole Foods – John Mackey states that there are those companies and underlying leaders that subscribe, live and continually walk in a conscious capital environment from the beginning. He uses the word “intrinsic”. Great word. These are the leaders that believe that the purpose of business is more important than the profits of business. Hiring employees to fuel a purpose (vs. lure of profits as the end-game) requires a powerful and consistent culture. When I walk into any Whole Foods across this country, I find a consistent and harmonious theme that the people of Whole Foods are cut from the same mold. When I spoke to John, he told me that culture makes good business sense, look at his profits.

What do you think? Do you believe this is true or just Culture Washing? Some marketers would like to say that all of them practice great “branding”, but what does this really mean? We will discuss this and more in future barks. Stay tuned.

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Strategic Pricing Exercise with Wild Turkey

February 3, 2011 By Leave a Comment

My father was an entrepreneur and executive that built an IT services enterprise. He drove a van. Then he converted to one of the original mini-vans. I was embarrassed. My friend’s parents drove cool vehicles: Suburbans, station wagons with 3rd seats facing backwards, anything but a mini-van (& it was puke brown). In my friend’s station wagon, we used to make faces and “kept up relations” with the cars behind us back then. I wonder if our generation started the road rage epidemic? 

I remember my father driving to his offices throughout Texas (Yes, in the Mini). Then one day, Southwest Airlines changed his travel habits. My father began to fly. He also began to ONLY travel using Southwest Airlines to all of his offices located throughout the South. As someone who dreamed of being “first class”, I couldn’t understand why my CEO Dad was traveling common style. This could have been due to his loyalty to SWA’s free Scotch promotion, but more likely, it was his loyalty to the low prices and convenience of getting to his destination is less time.

When is the last time that you considered your pricing strategy? Most of us take a cost plus approach to almost everything. If SWA tried this, we would not be talking about them. I want to challenge you to work on an exercise that starts with arriving at the ideal pricing to dominate a market, and then work backwards to arrive at the costing that will get you to that plan. It may just save your company.

Try this approach and let me know what it reveals.

  • First, determine your “Usual Suspects”: all of those products and services that most closely resemble your offering (this is your traditional Competition).
  • Second, determine your “Non-Customers”: all of those products and services that do not take on the same form as your offering BUT perform the same function.

Take Southwest Airlines. “We’ve always seen our competition as the car. We’ve got to offer better, more convenient service at a price that makes it worthwhile to leave your car at home and fly with us instead.” (Colleen Barrett, executive vice president). This is not the time to be proud of your offering. What are all of the ways a customer can solve the same problem that you fix but in different forms?

  • Third, determine what price range you will need to attract this larger market (in SWA’s case, those people that drive cars) in order to compete.

Your price range needs to attract the mass of target buyers that fall into both the Usual Suspect and Non-Customers so that they will have a compelling reason to buy.

In SWA’s case, they priced their fares  based upon the cost for someone to drive instead (not for someone to fly using another airline).

In the case of Ford and the Model T, the Usual Suspects were over 500 automakers in the United States that built custom-made luxury autos. Henry decided to focus on the horse-drawn carriage as his competition instead of the luxury custom made shops. The carriage offered the same utility as the automobile but it was very different in form. The Model T was designed and priced to compete against the horse carriages.

  • Finally, determine the cost structure that you will need to deliver in order to make a profit on your new determined pricing.

In Ford’s case, the Model T had to offer the same utility as a horse drawn carriage that could travel anywhere (smooth and uneven roads, during rain or shine) and was easy to maintain. As a result, Ford achieved a breakthrough in innovation by limiting options that did not enhance utility and by creating an assembly line that could use interchangeable parts. Ford was able to achieve a competitive cost position that allowed him to price his product against the mass market, automobile owners and horse carriage owners (Where is Ford’s cost position today?). Back then, the 500 other auto manufacturers focused on customization (high prices, low utility).

What operations breakthroughs can you uncover by turning your analysis around and focusing on your pricing first to arrive at your achieved cost targets?

One last thought on promotional pricing. When Braniff Airlines moved into Texas to take SWA head on, it offered flights from Houston to Dallas at 50% of SWA’s prices. In response, SWA did something absolutely brilliant. SWA cut it fares to the same price BUT for those passengers that paid the full fare, SWA would give the customer a bottle of liquor (or an Ice Bucket for “the Mormons who claimed they don’t drink” according to Herb Kelleher). Herb told a group of us a few years ago that in 1973 during the promotion, Southwest Airlines was the #1 distributor of Whiskey in Texas.

Cheers and Bottoms up to that!

Now that I think about it, I think my Dad flew SWA for the Wild Turkey

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Garage Sale MBA

February 1, 2011 By Leave a Comment

In my final post on my Garage Sale MBA experience, I wanted to give my a few key takeaways…

The Chief Marketing Outsider is not going to let this current economic mad max beyond thunderdome economy crush the pack. He is going to sell everything he owns if he has to. Last weekend, we tried to sell everything that we didn’t want. It was a huge success, but why?

Here are a few amazing lessons that the CMO learned from that one day startup experience.

#1 – Craig’s List is Today’s Newspaper. New Media is Today’s Media. It is not that Craig’s List is “New Media”, but rather it is “FREE” Media. We advertised using Craig’s List to a demographic that has one of the lowest percentage of computer ownership in the US (According to the Pew Research Center study fielded in 2007, Latinos comprise 14% of the U.S. adult population and about half of this growing group (56%) goes online). How did this demographic figure it out? It is cheaper to look online than it is to buy a newspaper. When you add the number of cell phones out there, our target demographic can advertise amongst themselves through non-traceable means. When you think about it, Craig’s List has created an efficient marketplace that keeps prices down. This advertising channel fits the demographic and the marketplace: Cheap Goods. (For all of you techno-forwards out there, this point is many years old but still very important. The local newspapers are not out of this game yet. They still have the most local sales reps and they are starting to wake up).

#2 - Jim Collins was only partially right. Not only do you need to get the wrong people off of the bus, but you also need to get the head trash, mental garbage, and bad culture off of the bus. I believe that this takes time, but is critical to success. Take the garage sale. We did not throw ourselves off of the bus; we threw away old things that we did not need anymore. The exercise of identifying the bad from the good and then consciously placing the bad in the “to be thrown off the bus pile” is critical to the success. The CMO has a saying in his household. Remember Fully & Forgive! Can you identify those failed ideas and bad strategies that you have tried in your past? Can you now recognize the failures and not make them again?

Roy Spence’s book, It’s Not What You Sell, It’s What You Stand For discusses this concept that he calls DUMP THE GARBAGE. “Leaders of purpose have garbage to dump: grudges, guilt, greed, mistakes, losses, remorse. Holding onto those feelings will only create more of it. Whatever is on your mind will show up in your organization and in your life. Dump the Garbage. Do it early and often.”

#3 – Many executives are afraid to have a garage sale. It is beneath them. Are you one of these leaders? While preparing for the garage sale, The Chief Marketing Outsider was talking to a few potential collaborators (see note on Marketing Strategy) to help us build the product that we were going to position as the “largest children’s clothing sale”. One of these potential collaborators declined because they “do not do garage sales”. Are you afraid? Is taking out the garbage beneath you? A garage sale is the recognition that you need to remove the old to prepare for something better. Someone else values your past mistakes, failures, worn out goods and is willing to pay for them. If having a garage sale is beneath you, maybe you are holding onto bad strategies and unable to admit your weaknesses. If you do not make room for the new, your house will continue to be plagued by the old. (NOTE: please do not send the CMO any angry messages about how you take your @#$% STUFF to the Goodwill instead of having a garage sale. Well, that’s nice. All you are doing is giving your stuff to a middle man to have the garage sale for you!!!).

#4 – Cleaning is therapeutic, you make room for Spring, New Growth. The Chief Marketing Outsider’s close friend pointed out to the CMO that you need to cut back the plants in order for them to be able to grow. The exercise of preparing for a garage sale is painful but very therapeutic. Remember fully and forgive! We need to make room for the new. To do this, we need to get rid of the old. How many of you own or work for product based companies? Have you asked your operations team about how much old inventory is sitting on the shelves that needs to be written off? I am amazed about how much this practice is rampant amongst the small and very large clients. Most of these companies do not want to write down the assets which impacts their balance sheet.

#5 – Collaborators are Critical. The CMO and family wanted a successful garage sale. We believed that in order to maximize our positioning in the marketplace and our offering to the customers, we needed to align with others to help LIFT our offering and reputation. We ended up partnering with a clothing company that had old children’s clothing inventory that needed to be moved. This partnership helped us have the “largest selection of children’s clothing” in the entire city of Austin for garage sales that weekend. The CMO has observed that those companies that want to “preserve” their revenues and territory by not bringing in collaborators usually stay small. Their growth stagnates. I may write a book on this very topic (I DARE YOU TO PROVE ME WRONG!)

If you are greedy, too good to have a garage sale, do not like cutting back the old, and not aware of how to connect to your customers, you will fail.

CHEERS

The Chief Marketing Outsider

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Garage Sale Marketing: Marketing Activities

February 1, 2011 By Leave a Comment

Finally, we get to the part that many marketers and non-marketers alike consider the cornerstone of marketing. See my post regarding the role of the CMO to understand that you can not win on PART III if you fail on PART I & II. This is where we discuss the MARKETING MIX, the 4P’s, some now call the 4 E’s, etc…

“The advantage of solving the positioning problem is that it enables the company to solve the marketing mix problem. The marketing mix – product, price, place and promotion – is essentially the working out of the tactical details of the positioning strategy.” Market Management by Phil Kotler

Product / Experience: Value Delivered to the Customer. In our case, we delivered clothing to many many babies and children. The true value that we delivered was one place for parents to come and provide clothing for their children through multiple growth cycles. If we just thought we were selling crap, our sale and communications about our sale might have failed. See baseline.

Place / Everyplace: This is the network on which we sell our goods. It is also how a company keeps connected with customers for a variety of tasks including demand generation, delivery of goods, product customization, etc… Since we were selling simple goods, we moved all goods to one place, our house, and opened the garage doors. We did act as the “middle man” for the clothing company and our next door neighbor who needed to get rid of his lawn mower. (You would be proud of the CMO. When the eyes of the men, the ones that had to be there because their wives dragged them to my house, looked at the lawn mower, the CMO jumped into play and sold that bad boy).

Promotion / Evangelism: How are we going to drive awareness of our sale to our target customer? In our case, we needed to attract people within driving distance to our sale. The old way to do this was advertise in the paper, but that cost money and overhead for the sale of inexpensive goods. As Chris Anderson discusses in his notes and now book about the Long Tail, the internet, new media (Craig’s List) has developed an easier, more efficient aggregation tool to allow people to find and buy niche products. New Media is Free Media. We advertised on Craig’s List and it drove 5x more people than the paper advertisement did for our neighbors just 4 weeks prior. We also put up signs in our neighborhood directing the drivers to our house and alerting the locals.

IMPORTANT NOTE: The baseline neighbors did not “position” their value to the market. Remember, your marketing vehicles may just suck because your positioning and strategy sucks.

Pricing / Exchange: The product, place and promotion drive the perceived value of the goods that we were selling. In our case, we found that by NOT putting price tags on our merchandise, we were able to increase our profits. This is not always the case. The CMO has spent many years in pricing. I found that during this exercise, the buyers would pay more for our CRAP than we thought our crap was worth.

Did our marketing strategy exercise really work? Did our positioning and focus on our target bring buyers that would pay more? HELL YES!!! In conclusion, following marketing strategy does work. Our understanding of the customer, our positioning of our offering, our strategy to create the best value and our execution of the marketing mix turned our garage sale into a sell out.

And I just thought that business school blah blah blah was for the birds.

DAMN, it works. I should have paid attention the first time.

The Chief Marketing Outsider

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Garage Sale Marketing: Target Market

February 1, 2011 By 1 Comment

Part Deaux: Garage Sale MBA

Now that we spent NO time considering the 5 C’s (Customer needs, Company skills, Competitors, Collaborators, Context), we need to take step 2, determining who our target market is going to be, how to segment the market and how to position our goods/services to meet the needs. Well, let me be honest here, we gave this NO thought, but the CMO did do onsite research during the sale and determined the target based on three very common levels.

Demographic: Most users were 35-55 female, some male (85%/15%) that seemed to have lower incomes (no, I did not ask, “what is your annual household income” but I did get to keep a few mufflers and oil streaks).

Geographic: These people came from around here. Over 85% of the people drove to the sale, but there were a surprising 15% that walked. Interesting. See my note on Garage Sale MBA.

Lifestyle: These people were value oriented looking for basics. The GAP learned this lesson when they tried to stray into fashion.

Other: Finally, 100% of the participants were parents, parents, parents with small children.

Here is my favorite part of the entire marketing strategy process: the Positioning Statement. This is how we want potential buyers to see us. The Note on Marketing Strategy gives us a simple template (that I use all of the time):

(INSERT: Our Product/Brand) is (INSERT: Single Most Compelling Idea/Claim) among all (INSERT: Competitive Frame) because  (INSERT: single most important support).

In Our case here it goes:

The Chief Marketing Outsider’s Garage Sale is the largest children’s clothing sale among all current weekend’s garage sales because we have aggregated two former children’s clothing partners to bring in two cars full of inventory along with our truckloads of saved clothing.

Here was our gamble: We were targeting parents who needed to clothe their children during a recession. The baseline garage sale was just selling “garage sale”. People did not know the benefit of showing up. Dolan tells us that “value is created by meeting customer needs. A firm needs to define itself not by the products it sells, but by the customer benefit provided.”

Now that we have determined the target market and positioned our service to meet the market needs, we get to the fun CMO activities: Specifying the plan for the marketing activities to achieve the desired positioning.

Posting tomorrow with Part III: Garage Sale Marketing: Marketing Activities

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A Note on Garage Sale Marketing Strategy

February 1, 2011 By 2 Comments

Let’s be honest. I learned more from holding a garage sale in one weekend than getting my MBA.

The Chief Marketing Outsider was wondering if it was possible to take MBA institutional marketing speak and strategy and apply it to the simplest business, the Garage Sale. 

My favorite and simplest note on marketing strategy comes from Professor Robert Dolan’s “Note on Marketing Strategy”. I am going to use the concepts from this note and apply it to the garage sale that took place just a few weeks ago. Can you apply “Marketing Strategy” to a garage sale? You be the judge.

First, let’s set a baseline. Our street just held a garage sale less than 5 weeks ago. The results were terrible. The neighbors advertised a “generic” garage sale in the major city’s newspaper the day before and put up signs around the neighborhood the night before. If we apply our marketing strategy to our garage sale, will the results be any different?

Marketing strategy involves two major activities:

  • Selecting a target market and determining the desired positioning of the product/service in the target customer’s minds and…
  • Specifying the plan for the marketing activities to achieve the desired positioning.

PART I: Okay, do we really need to select a target market and blah blah blah? Well, the answer is well, let’s try it anyway. I think that we assumed that there is a target market and that we positioned our products to sell in that market.

Marketing strategy begins with the customer. The CMO asks himself (in retrospect of course since entrepreneurs usually take the Ready Fire Aim approach and then look behind at the damage later) the following questions:

  • What Customer Needs do we seek to satisfy? (We are offering CHEAP crap that others may find to be worth more than us, which is $0).
  • What Company Skills do we possess to meet those needs? (We have a bunch of crap to offload to someone else, that is our skill. We have goods. We also live in a suburban neighborhood that has built in traffic. One very important point. We had an abundance of children’s clothes. More on this later.)
  • Who Competes with us in meeting those needs? (Well, do we compete against the GAP, yes, more like Old Navy. Better yet,Goodwill. Most specifically, we compete against the other garage sales going on during the same weekend.)
  • What other help, Collaborators, should we enlist to help us and how do we motivate them? (We invited our neighbors and friends who live in the boonies to throw a street wide sale, more stuff, more people, more $$$ for us, at least that is/was the goal. We also invited a children’s clothing business to come and sell their old inventory). Did we invite too many “competitors” to join us? Why do car dealers like to locate in the same area?

“Theologian John Drescher tells the story about a corn farmer who won blue ribbons for his corn year after year. Yet each year, he shared his best seed corn with all of his neighbors. ‘How do you expect to continue to win blue ribbons,’ someone questioned him, ‘if you give your best seed corn to others?’ ‘You don’t understand said the farmer. ‘If the wind carries the pollen from field to field. If I am to have the best corn, I must see to it that all my neighbors also have the best corn. If they produce poor corn, it will pollinate mine and pull my quality down.” – Dan Miller.

  • What Context: cultural, technological and legal factors limit what is possible? (Good news is that we are having a garage sale, not launching the space shuttle.)

Now that we have picked a market to be in, what next?

Check back tomorrow for Part Deux: Determining the Garage Sale’s Target Market

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The Role of the CMO

January 31, 2011 By Leave a Comment

We all love and hate our CMO. They have the coolest job and the shortest tenure of any C-level, why?

In reference to David Churbuck’s 2006 article regarding the death of CMO magazine, I want to put my stake in the sand and claim that the Chief Marketing Officer is not dead, just barely breathing. The failure of the magazine is the perfect analogy for the role itself. Hey CMO, you have NO friends. Sponsors will not pay. Why? That is another bark for another day. Here is another nail in the coffin. The average CMO tenure is less than 24 months. Read Spencer Stuart’s White Paper on The Shrinking Tenure of CMO’s. I do not share their opinion on how to lengthen the tenure for a CMO. I believe that a CMO’s life should be SHORT. In fact. I am promoting that the CMO should put a hire and fire date in any new contract.

Here is my case. What we have learned is that the CMO’s main job is…well…everything that the Wiki says it is including “sales management, product development, distribution channel management, public relations, marketing communications (including advertising and promotions), pricing, market research, and customer service”. How can one person be so good? Well, I am here to tell you that it is possible but not in long periods. What the Wiki does not state is that a CMO must fight between short-term results and long-term strategy.

A true CMO must first look out for the long-term strategy of the company. The CEO must manage the board, investors and the employees. The CMO is supposed to be the right hand person of the CEO to fight for the future of the company. Who else will re-invent the company if it is not the CMO?

Okay fine, it is the CEO, but this is exactly why I am here. Why isn’t it the CMO? See the Forbes article on creative disruption called Reinventing Titans. I believe it is the CMO’s role to reinvent. Because of this, the CMO should take the role as an inventor (or re-inventor) and move on from the company once the large ship or even the startup has caught wind. The company can hire a really good marketing executive that is good at executing the vision outlined by the CMO.

Yes, it is possible for the same person to be the executor. Are you that good?

To do this well, the CMO must create an organization that measures both long-term strategy and short-term results.The Chief Marketing Outsider believes that the CMO should create 2 key teams. The first team is planning (whereby the market research team resides). The second team is the launch and execution team. For you product marketeers out there, yes, this is what you are used to, but the rest of the marketing world is not. The main issue in corporate America today is that there lacks good measurement on long-term strategy. We will be writing future blogs on this topic and how to create dashboards and measurement systems that can measure and track long-term strategy without driving in the rear-view mirror.

In future posts, I will focus on how to maximize the CMO as the Chief Strategy Officer or best named the Chief Marketing Outsider.

For all of you CMO’s out there that are afraid to rock the boat, keep the status quo, and be the fetching dog of your boss, I am here to tell you that “the Coyote is always out there waiting, and the Coyote is always hungry.” If you won’t do it, the next CMO will…

CHEERS

The Chief Marketing Outsider

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , , ,
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