Marketing as a profit centre?

SmallbusinessCan

Content marketing has been on our mind for a while now. Ten years ago we created SmallbusinessCan. Co-created with and funded by Ulster Bank. The rationale was to embrace social media, design a platform to engage with small business and create a  distribution, communication and publishing channel for Ulster Bank. The only focus was on being helpful to business through content, events, workshops, training and mentoring.

The plan

Part of the plans was to create an open source community for innovation and product testing. The end game was to create a SmallbusinessCan bank. Pure content marketing. It was way ahead of its time (I am aware that I am boasting) and Ulster Bank should be very proud. It could not have been done with their support and some people who stuck their neck out (you know who you are).

www.business-achievers.com

The platform is now re-named www.business-achievers.com, and the same principles and ideas still apply. We learned a lot in those years (and happy to share those lessons with anyone interested). That is why I am delighted with “Killing Marketing: How Innovative Businesses Are Turning Marketing Cost Into Profit”.

Marketing as a profit centre

It could not describe better the thinking behind www.business-achievers.com and then stretches it even further. It puts marketing on its head in a very interesting way. Consider making your company into a media company. How would that look like? Consider making that a profit centre? What would that do?

The future of marketing

“Killing marketing” wonders about the future of marketing. Here are a few views:

• The short answer is five words long: “make things worth talking about.” The longer answer is that the marketer now needs to be in charge of everything the company does. Seth Godin, author, speaker
• Marketing is headed for a major transformation. If you think it has changed over the past five years, you ain’t seen nothing yet. John Hagel, author, founder of Deloitte’s Center for the Edge Innovation
•  There will be a shift from talking at the world to making the world talk. People don’t necessarily want to be marketed to, so brands should look to create engagement and conversations at every consumer touch point. We aim to make everything we do a catalyst for conversation. Chris Brandt, CMO, Taco Bell
• Owning your audience. In a world filled with incredible new tools to cultivate community, customers, consumers, and fans are more accessible than ever. Look for more direct conversations. Linda Boff, CMO, General Electric
• Creative energy will see a shift away from agencies and towards publishers and platforms. An increasing number of the brightest creative minds will abandon standalone agencies for creative divisions of media companies and tech companies. Spencer Baa, Chief Strategic Officer, Vice Media
• Marketing 3.0 is evolved. In the first stage, marketing was transaction oriented, focused on how to make a sale. In the second stage, marketing became relationship oriented, how to keep a consumer coming back and buying more. In the third stage, marketing has shifted to inviting consumers to participate in the company’s development of products and communications. Philip Kotler, author, professor

CCDVTP

The book goes back to Drucker first: The purpose of marketing was CCDVTP. Create, Communicate, and Deliver Value to a Target market at a Profit.

Content marketing

Content marketing is where organisations create relevant and compelling content, gear it toward specific audience groups, and then, over time, see positive behaviour changes in the audience that, ultimately, are profitable to the business. In general, enterprises create and distribute non-product-related content to impact their business in three ways:

1. Increase revenue (sales goal, or winning customers)
2. Save costs (savings goal, or creating customers at a lower cost)
3. Create more loyal customers (retention goal, or keeping customers)

The question

Can we move marketing from the cost line of the financials to the revenue line? Can marketing serve multiple business models?

Salesforce

Cloud CRM giant Salesforce holds an event in San Francisco every year called Dreamforce. It is one of the most valuable physical events in the world, drawing in over 150,000 people and hundreds of sponsors each year.

Johnson & Johnson

Johnson & Johnson operates BabyCenter.com as a completely separate division of the company. BabyCenter reaches more than 45 million parents a month from every corner of the globe through its 11 owned and operated properties in 9 different languages. In the United States, 8 of every 10 mothers use BabyCenter.

LEGO

LEGO’s The LEGO Movie was created as a for-profit initiative. On a $60 million budget, worldwide grosses of the movie totalled nearly a half a billion dollars.

Marketing becomes media

Red Bull, Johnson & Johnson, and Arrow Electronics still market their products like other organisations, including advertising and traditional public relations. But these enterprises, through their content-driven and audience-building initiatives, drive value outside the day-to-day products they sell and are monetising it directly. They are, in every sense of the word, “media” companies.

Marketing = publishing

In the view of the authors, the marketing skills of tomorrow are equal parts marketing and publishing.  As marketers, we’ve been so keenly aware of how the world has changed around us. But we haven’t changed marketing at all. The authors don’t mean the purpose of marketing, or why it exists. Rather, they mean the function of marketing and how it works.  The purpose of the business, as Peter Drucker said 60 years ago, is “to create and keep a customer.’ He also said, “Marketing is the distinguishing, unique function of the business.” So the only question is, how is that done?

Quantity versus quality

One of the things that is often misstated in this digital content and media revolution is that the creation of content has become democratised. This isn’t true. The creation of original content isn’t any easier today than it was before Gutenberg invented his printing press. It still takes specialised talent and time to focus on quality.  What has been democratised to the point of overload is the production and distribution of content.As the production and distribution of content has become more commoditised, this means that the value of original, high-quality content continues to increase.

Attention is king

The ability to garner and hold attention from an audience with original content becomes increasingly valuable to any endeavour that desires that the audience do something, whether that be to buy, donate, vote, become loyal, or spread the message. Read “Paid attention“.

Trust is king

In today’s world, we as consumers have tools that filter through the noise for just exactly what we want. And once we consumers find and trust the source of the things we like, we tend to begin to rely on it as a continual source of that information or entertainment. In a transformed news media environment, complete with “fake news” and mistrusted outlets, brands such as the New York Times, the Washington Post, the Atlantic, and others are seeing an exponential increase in subscription

Content is king

Amazon, the world’s largest retailer, has launched Amazon Studios and will spend more than $2.6 billion on original content for its Amazon Prime service in 2017. Netflix…

Distribution is king

In the early 1980s (pre-digital), it wasn’t the creation of original content that was so expensive; it was the production and distribution of the content. The average cost of producing a four-colour, full-page advertisement was approximately $8,000. That is approximately $20,000 in 2017 money. Today, if you’d like to produce a four-colour full-page advertisement, according to experts, it could cost you somewhere close to $0

The only means of distributing content were to leverage your own mailing lists, get the content placed (for purchase) in a retail outlet, or “rent” a media company’s access to audiences. So, the cost of original content (read “risk”) was high.

With early digital, you could produce your original content using prosumer (or enterprise) technology, and the cost of both production and distribution dropped. Thus the risk came way down, and businesses’ appetite for producing more and more content went up. So, why not produce as much of it as we possibly can? But it stopped working.

Google changed its algorithms to reward “quality content” Facebook and the other social platforms decided that organic reach wasn’t going to be something attained for free any longer. New media suddenly looked a lot like old media—protective of the relationship with their audience and loathe to simply give access away.  Suddenly, quality became the word.

You need to control your own media channels

Forward-leaning marketers realised that they too could compete in this environment. They no longer had to depend on traditional media for production and distribution. Businesses with smart marketing could leverage inexpensive production and distribution and aggregate their own audiences. The challenge to these marketers: not only did they need to create original content for the media—they had to become the media.

American Express

For example is American Express’s OPEN Forum, an educational source and community where small business owners can learn from business thought leaders and each other. This forum reaches more than a million unique visitors per month—and now represents the source for 50 percent of the company’s small business credit card applications.

Audience is king

Having a singular focus on audience, and building a loyal audience directly, gives you the best understanding of what products ultimately make the most sense to sell. Owned media experiences—and the audiences they build—can add multiple lines of value to their businesses, and thus change not only their marketing approach but their entire business strategy.

The Kicker

It is the strategic use of content that will not only build audiences and drive the creation and retention of customers; it will do so at a profit.

Minimal Viable Marketing

Marketing is the activity that most companies wish they didn’t have to do. Most businesses are striving for what I call “minimum viable marketing.” For many business-to-business (B2B) companies, there isn’t a strategic marketing leader in the organisation. It’s simply a collection of people who do marketing-like things.

Marketing has not changed

Marketing has not changed in 60 years. Most marketing departments, despite the fact that they now have a twin department called “digital marketing” these days, are still focused on the same functions. They create, run, and iterate temporal campaigns across traditional (read “expensive”) media flights and hope for improving results on getting their message to resonate in front of rented audiences.

Marketing has lost control

Then, simultaneously, they support other efforts—from sales to e-commerce to public relations and other departments with creative assets that can feed those departments’ time-based campaigns. But its efficacy—or at least the perception of efficacy—continues to degrade over time. In short, companies have lost “control” of their story.

Marketing is 12% of revenue

In the 2016–2017 CMO Spend Survey, research firm Gartner found that marketing budgets increased to 12 percent of company revenue. The biggest increases were in digital, where content, digital commerce, and digital advertising were the biggest categories. Marketing has adopted the new technologies, learned the new language of speaking in 140 characters, become customer-centric, and diversified our investments to address the fragmentation of audiences.

Marketing has become day trading

But as has been the case for more than 100 years, our marketing investment is still almost entirely predicated on our current relationship with the media. And it still all about maximising the reach while minimising the cost of frequency. Unfortunately, this speed and technology has evolved marketing into much more of a day-trading investment rather than long-term value investing.

Marketing has become execution

We’ve invented real-time marketing where technology and research companies promise to “unlock your data” to provide you with return on investment in “real time.” Marketing departments are now fascinated with predictive analytics, artificial intelligence, and machine learning. As a result, thoughtful strategy has given way to execution. Deep insight has given way to failing fast. Innovation has given way to acceptable inefficiency.

Marketing is becoming less effective

Because of ad-blocking technology, advertising click fraud, and other technology issues, it’s simply becoming more expensive to maintain the effectiveness we’ve enjoyed. That is the reason we see digital ad budgets go up.

Kill it

The question; What if we killed marketing and restructured it completely?

• What if we went from campaigns where we try to reach customers with frequency and persuade them to “buy now” to an editorial strategy approach that created valuable experiences for audiences that actually want to hear from us?
• What if we started with how paid media advertising can support our owned media original content strategy?
• What if we stopped spending all our time trying to optimise digital advertising to make it ever cheaper, and agree that creating original content requires different talent, is a more expensive endeavour, but can add more and different kinds of business value than simply clicks, conversions, and sales?
• What if we looked at marketing as a business model rather than as a functional cost centre?
• What if we could create a marketing function that creates so much value for audiences and consumers that it begins to pay for itself?

The old rules of marketing are dead

In July 2012, the Fournaise Marketing Group interviewed more than 1,200 CEOs from around the world. It found that 80 percent of CEOs don’t trust the work their marketing units do

A lot of CEOs are trying to figure out what the heck marketers did that added any value at all. Indeed, the challenge of measuring the value of marketing is certainly not new.

The assessment of marketing performance often called marketing productivity analysis remains a seductive but elusive concept for scholars and practitioners alike. It is elusive because for as long as marketers have practised their craft they have looked unsuccessfully for clear, present, and reliable signals of performance by which marketing merit could be judged.

Hence the use of simple metrics such as ROI (return on investment), or ROMI (return on marketing investment), or even ROC (return on customer), the goal has been the same: maximise the profitable return on the investment of the marketing effort.

If measurable marketing is of interest, consider BITS 

Marketing and innovation

Unfortunately, marketing, as we know it, is not seen as an investment. It’s currently a cost that sometimes, in total, provides benefits for the money spent.  Today, when ROI comes up, it’s usually because marketers are being asked to make a case for the success of something that’s never been done before. Ironically, this brings us right back to the first problem. Our only frame of reference to make that case is our past performance. Which is the kiss of death in innovation terms.  Think Return On Destruction.

Not-to-copy

As marketers, we have to ask ourselves if the marketing we are doing today can withstand the realities of the future. Everything we do as an organisation can be copied, except for how we communicate.

Attention is king 

The key is looking to the investment we are making as one that is not focused on the immediate return of transactional clicks, visits, paths, time on site, or even purchases, but rather the accumulation of attention and access to an audience we can monetise over time.

Marketing as a way to build an asset

• How much more valuable is Red Bull as a company because it has a marketing strategy that draws revenue and positions its brand as a company that can sell any kind of product that its audience wants. Because Red Bull has accumulated a loyal audience, it is no longer limited to selling an energy drink.
• How much more valuable is Arrow Electronics as a company because it has 51 digital magazines, websites, and an audience that is loyal to that content
• How much more valuable is Lego the media company, rather than Lego, the manufacturing company?

Return On Audience

The metric needs to be ROA. Return On Audience. Achieving a long-term return on the one asset that will save our business: an audience.

The new marketing model

The new media business model and the new marketing business model are the same. Media companies, like Dennis Publishing, will drive revenue from both traditional media products (subscriptions and advertising) and products and services (selling cars). Product and service companies, like Arrow Electronics, will drive revenues from selling products and services (they sell industrial electronics equipment) as well as selling traditional media products (subscriptions and advertising).

Arrow

Arrow owns 51 media properties in the electronics media space, becoming the largest media organisation in the industry (in terms of unique visitors and time spent). The media properties are housed in a completely separate division of Arrow, called AspenCore, creating a very real firewall between the main company and the media properties

Jyske Bank

Jyske Bank, the third largest bank in Denmark in terms of market share. Jyske Bank completely transformed how it operated as a marketing department. As its marketers say, the bank is a media company that happens to have its own bank.

By creating a 24/7/365 newsroom, the bank has been able not only to develop content that is good enough to build a loyal audience—but it gathers the point that it is getting its content picked up by national Danish television networks. As the editor in chief of the effort, Lasse Hoegledt has said, “If you can’t control the media, you must become the media.”

Transforming marketing

It is the strategic use of content that will not only build audiences and drive the creation and retention of customers; it will do so at a profit. It will transform marketing as we know it today into something new. It will evolve the entire practice of marketing and can move some or all of the functions of marketing from a cost centre to a profit centre. Moving from CMO to CCO. Chief Content Officer.

The new marketing mix

• Events
• Digital
• Email List Rental
• Webinars
• White Papers
• Virtual Event
• Magazine
• Insights
• Online Training
• Advisory Services
• Research
• Awards

The direct revenue models

• Traditional Advertising
• Native Advertising/Sponsored Content
• Sponsorships
• Conferences and Events
• Premium Content
• Content Products
• Syndicated Content
• Donations
• Subscriptions

The indirect revenue models

• Products
• Affiliate Sales
• Data
• Services
• Retention
• Cross-Sales

The most successful organisations in the future will leverage not one part, but multiple parts of the media marketing model. Just as investors diversify their portfolios with multiple stocks and/or mutual funds, so do companies need to diversify the revenue streams generated from their marketing.

Decrease sales costs

One of the biggest opportunities from looking at the value of a loyal audience is how it can decrease the cost of sale. The quality of data will improve. Loyal fans will provide their high-quality data because they value the content being delivered consistently. Thus, they provided accurate and rich sets of data to the organisation. Not to mention the increase in customer loyalty and word-of-mouth referrals

Decrease in research and development costs

Among the largest costs in any company are new-product research and development costs. Utilising a loyal audience to become an ongoing platform of customers to tell you what to make is an asset indeed.

The need for a new operating model

In 2016, a study found that 89 percent of marketers believe that their digital marketing efforts are simply not working. Seventy-one percent report that their digital programs often fail to meet their expectations. In 2015, Google released research that says 56 percent of digital ads are never seen. Only 26% of marketers believe they have the right operating model (people, structure, processes, and tools to be competitive).

Marketing is strategy

The authors believe marketing is transforming from creating its value by simply describing the experience the customer will have with the product or service being offered to leading the entire business strategy, by focusing experiences that deliver value that go well beyond the product or service. Or where experience meets design.

The content questions

You need to start with the content questions. Highly scrutinise the content. If the information isn’t truly differentiated, with limited competition, there is very little chance you will break through and gather attention.

1. What is the content niche you are planning to cover?
2. What other companies are providing this kind of information?…
3. Is there a possibility to purchase an existing external asset instead of developing a new one?
4. Where will these stories be found? Who in the company has the expertise to help? What internal assets and other content do you have already?
5. What resources (staffing and otherwise) do you not have that you will need?
6. How will the stories mainly be told (audio, video, textual)? Remember, you want to focus on one key content type and one key distribution platform (a blog, a magazine, an event series, a podcast, a video series, etc.).
7. What design issues will make or break the program?
8. What platform makes the most sense to distribute the content?
9. Are you creating a new content brand, or are you weaving into your existing product or company brand?

 The distribution and measurement questions

1. How will the information be found by the audience?
2. What current assets do you have to distribute the content? What partnerships can be leveraged? Is there paid budget available?
3. How will you know the initiative is successful?
4. What subscription tools will you use to capture audience information?
5. What key assets need to be created in order to capture the necessary data?
6. What other departments should you bring in to maximise impact?
7. What technology are you missing to enable collaboration and measurement? What are must haves and what are nice to haves?
8. What internal communication will you need to make sure the programs gets and keeps buy-in
9. How quickly, considering the buying cycles, can you tie initiatives to sales, cost savings or customer loyalty
10. What eternal issues need to be worked out so you can tie subscribers to revenue?… Some highlights have been hidden or truncated due to export limits.

You need to define your Minimal Viable Audience

MVA has three components:

1. You’re receiving enough feedback from comments, emails, social networks, and social media news sites in order to adapt and evolve your content to better serve the audience.
2. You’re growing your audience organically thanks to social media sharing by existing audience members and earned media. 3
3. You’re gaining enough insight into what the people in your audience need to solve their problems or satisfy their desires beyond the free education you’re providing.

What is our core fan base? Do you have fans, or do you have a list? Who takes action when you ask? What is the difference between subscribers that subscribe and engage in your content versus those that do not? Do they buy? Do they buy more? Do they stay longer as customers? What is the exact behaviour change?

What can you stop doing?

And the best and last question about your marketing. Which of these things can you stop doing? As business professor Michael Porter famously says, “The essence of strategy is choosing what not to do.”

• How about the newsletter that goes to 20,000 customers who don’t read it?
• How about the resource centre that no one uses?
• How about that display advertising that isn’t working any longer, and that we’re paying a 30 percent premium for?

What would happen if we just stopped? Who would miss it? What would we lose?

I am in

You can understand that I am bought into the thinking of the authors. With Business-Achievers we are on the right track. You could be too.