Three Steps to Identify Your Wasted Marketing

Since the 1950's, executives have been saying the equivalent of, "Half our marketing budget is wasted. The problem is, we don't know which half."

Whether you are in senior management or on the front lines, you should want to finally end this sea of red ink that masquerades as "valuable promotion." It should be intolerable not only if you work in marketing itself, but also if you work in finance, operations, engineering, design, or customer service.

Wasted marketing dollars prevent true innovation from taking place. Marketing waste makes it impossible to fund a wide range of actually useful initiatives.

The best reason to identify waste is not to cut costs, but instead to free up much-needed funds to improve customer experience, develop innovative products, and actually attract high potential customers.

I'd like to suggest that in three steps, you can find much of the waste in your marketing budget. Here's how:

1. Identify the marketing programs that you have no metrics to measure.

One of the downsides of social media is that it has led some marketers back to the sort of fuzzy results that used to be associated with image advertising. Many vendors resist any attempt to attach specific metrics to their efforts.

For example, they imply you are a hopeless Neanderthal when you ask, "In a success scenario, how much will your social media program increase our revenues?" Beware such vendors.

It is quite possible to attach metrics to a well-thought-out social media effort, or any other marketing effort that actually results in your business winning, keeping or growing customers. This doesn't mean that every marketing dollar needs to correlate to, say, three dollars of additional revenue; it does mean that you should set specific goals and track the results.

Bottom line: don't ever spend money on a marketing program unless you can measure the results.

2. Identify the marketing programs that have no benefit for customers.

Some of you just blinked, shook your head, or re-read the last sentence. You might think that I'm confused. Marketing, after all, is about growing sales for our company. Its purpose is to help our company, not our customers.

Nope.

In today's hyper-connected world, marketing must benefit your customers. It should teach them valuable information they can use immediately. It should enable them to enjoy benefits and services about which they were previously unaware. It should broaden their perspective and deepen their understanding.

Years ago, I was part of a team that CFO Magazine engaged to reach out to hundreds of financial executives to determine which CRM programs were most successful. There was one clear factor that determined whether a project proved profitable: whether or not it had a tangible benefit for customers. In contrast, projects that simply automated internal marketing functions almost never paid for themselves.

Marketing that has no benefit for customers is nothing more than spin selling, and spin selling nearly always ends up with a race to cut your prices to almost zero.

Bottom line: don't ever spend money on a marketing program unless it has clear benefits to your customers.

3. Identify the marketing programs that have attracted unprofitable or marginal customers.

I was one of the first Groupon-haters. Why? They encouraged small businesses to sell services at a loss to customers who would nearly always be unprofitable to serve.

If the only means you have to attract a customer is to cut your prices in half, you don't want to attract that customer.

Too many companies focus their marketing budgets on customers who will never be profitable to serve. Such companies are living a fantasy: they delude themselves into believing their firm has a bigger market than it actually has. They also suck the energy right out of their business.

Look at it this way. If you work like a dog 70 hours a week to make no profit, you are not running a business, you are running a charity. (Caveat: ignore the last sentence if you plan on selling your company for $5 billion; more on this if I ever am foolish enough to write an article on How to Build the Next Facebook.)

The truth is, your company could be better off diverting money from advertising into customer service or product development. Get a bigger share of the business from your most profitable customers; the way to do that is to expand the scope - and quality - of the services they find useful.

Bottom line: don't ever spend money to attract customers on whom you will lose money.

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Download a free copy of the first chapter of Smart Customers, Stupid Companies by Michael Hinshaw and Bruce Kasanoff. Bruce helps companies make business simpler; learn more at Kasanoff.com.