After the news about Greece referendum results broke, I felt a need to look at this whole matter a bit deeper. Browsing the internet about crisis in Greece, found that an article on Wikipedia gives a pretty good overall explanation of events. Throughout this little research of mine I could not stop thinking about a recent conversation that holds a few similarities to the situation in Greece. I was at the IRCE about a month ago and had an exchange with the COO of an online retailer. She came to our booth to learn more about our marketing revenue attribution product. In turn I probed her about her business.
Turns out they spend $1M/month on online marketing through affiliates, paid search and retargeting. A lot of this goes through the agency. They have some in-house staff but it’s the agency that executes the strategy. When they question the agency on declining sales the answer is to spend more. The company’s original proposition was low-cost fashion apparel. They had in-house designers and sales skyrocketed the first five years. Now sales are flattening. As a strategic shift the company is opening boutique stores but the operating costs are growing. While the COO did not say so exactly, I got the sense the company is in the red with no respite in sight.
In my opinion this company shares two symptoms with Greece.
- Firstly, they keep spending more money than they see realized in revenues. Much like with Greece where, as G. A. Provopoulos, Governor of the Bank of Greece, has put it “public spending kept increasing, while revenue could not possibly keep pace, leading to large deficits and historically high levels of public debt”.
- Secondly, the results measurement process are weak. As in Greece’s case, “data on government debt levels and deficits had been misreported by the Greek government”.
That said, the Greek crisis is very complex with potentially global repercussions. I cannot prescribe a way out. But I do feel my client, the COO can find a way out. Here’s how…
Measure the (true) marketing returns
Be it a large corporation or a small family business, spending more than earning is a way to bankruptcy. But what could been done to avoid it? There is no simple answer. It obviously involves identifying the source of the budget imbalance, redistributing it and tightening the belt. This would be apt for our retail contact.
I realize it’s the agency running the marketing, but there needs to be a suitable measure of performance. I would prescribe a dashboard to fulfil at minimum the following measures
- What’s the contribution of each marketing channel to sales (online and offline) ?
- What is the relative contribution of each campaign per channel?
In the company level, decisions can be quite radical and results (be it a positive or negative ones) manifest rather fast. For that reason, each step has to be carefully thought through. In the case of agencies driving the marketing machine, there should be a proper dashboard enabling companies to react in respect to the actual situation rather than trusting third party persuasions. Having a reliable measurement big amounts of money can be saved and even bigger ones can be pulled in when the focus is directed to the right strategies. Hence, the company will know when and how much to fill the gas tank or what is the speed they are going. In other words, the budget can be optimized accordingly, avoiding arbitrary superfluous spending.
I’ve written more on marketing revenue attribution tools (read more about it in the previous post).When the actual impact of selected marketing strategies is known, more educated decisions can be made.
Failing to have suitable measurement in place leads to bad decisions. Budget is based on approximations and hopeful expectations. Hope is a substantial value but not when it comes to effective decision making. Our colleagues across the Atlantic are discovering this the hard way.
Take action! on the measurement
Only having the information does not heal the company completely. It has to be used appropriately. A healthy communication within the company itself and with the third parties is very important (as the mentioned COO suggested) in order for the marketing measurement to provide an advantage. Taking measurements and applying them is a complex matter but it is a crucial tool. It can help save companies from a distressing situation and it should not be a one time fix but a part of daily operations to keep the company growing.
As the antagonist tells our protagonist-in-training in the clip below – “training is nothing. will is everything… the will to act”.