Doing Advertising the Right Way - Part 2

Recap: Some of the time-proven lessons of advertising legend, Rosser Reeves, on whom Jon Hamm's character in Mad Men is based in part.

Lesson 2: The ideal life expectancy of a good campaign is forever
Here's an experiment that Reeves' firm conducted for a major brand 50 years ago.  The finding may surprise you - it certainly surprised me.  But it's just as applicable today to a marketing campaign as it was then.
Objective: Determine how long someone remembers an ad campaign (keeps it in their head).
The experiment: the penetration (unaided recall) for a major brand's campaign was 50% - which meant that 50% of the U.S. population sample knew it, and 50% didn't.  Six months later, with the same campaign - and same $ spend - still running, the same group of people interviewed a half year earlier were asked the same unaided recall questions.
The astonishing finding: half of the people who first recalled the campaign had forgotten it - no great surprise.  But half of the original group who could did not recognize the campaign now knew it!  The penetration remained the same after 6 months - it stood at the same 50% of the U.S. population.  Reeves' company found that this repeatedly held true for other campaigns conducted by similar companies.
But Reeves observed something else, too.  Most companies and their executives change campaigns after a year even if the penetration is high.  In other words, if penetration shoots up but sales do not, most executives do not have the patience to stay the course.
These learnings led to three principles which, by all accounts, hold true today.

1. When building or maintaining penetration, changing a story (the campaign theme) has the same effect as turning off the ad spending.  
2. If you run only brilliant campaigns, but change them often, a competitor who sticks to a good campaign will often pass you.
3. Unless the product becomes uncompetitive, a great campaign will not wear itself out.

Lesson 3: The average buyer will only remember one strong claim or concept.
Today we call it information overload.  But buyers have been suffering from it for decades.  In their landmark 1981 book, Positioning: the battle for your mind, Jack Trout and Al Ries coined the term tryanny of choice - the overwhelming number of products and attempts to promote them faced by the average buyer.  Marketers must not only compete with direct competitors in the product arena, but for mindshare as well.  Print, radio, TV, web, social media.  People can and will remember only so much.
From further experiments in penetration Reeves made two interesting and related discoveries:

1. As your penetration goes up, your competitors' penetration will go down, i.e. there is a finite amount that the average buyer will remember about all competitors in a product category.  I.E. if you increase your penetration from 25% to 50%, the aggregate penetration for all your competitors will, when tested, decrease from 75% to 50%
2. But, what happens in one product category does not affect the buyer's recall in other product categories.

The implications are twofold:

1. Great campaigns fuse all of the product components into one memorable message.
2. Increasing your own penetration also decreases the penetration of your competitors.

Lesson 4: Ultimate Selling Propositions are the levers that pull demand
In the 1950's Reeves developed what we know today as the value proposition.  His firm's experience showed that flash and dash (Reeves called this "show-window" advertising) could sell advertising contracts to clients, but sustainable value propositions were what moved the needle on generating demand and, ultimately, sales.  His firm backed this up (bear in mind they were a leader in their day) with a mound of evidence.

Reeves defined USPs precisely, as having three ingredients:

1. A customer proposition that confers a specific benefit to the buyer.
2. The proposition must be unique, i.e. competitors cannot or do not offer or mention it.
3. It must be compelling enough to pull customers, i.e. materially drive up penetration.

His firm's well-executed research showed that claims of usage (#1 seller) and preference (cosmetics used by the stars) were significantly more effective when the campaign revealed why.  This is what USPs are about.

Reeves observed that finding truly compelling and unique differentiators as the basis for USPs was difficult.  Over time, competitors catch up.  Just like they are doing with the iPhone and the iPad.  The data showed that there are three strategies that can be pursued to get ahead of the competition:

1. Find a relevant and compelling USP
2. Improve the product
3. If the product cannot be improved, preempt the competition with an attribute that is unique to the product (or firm) and deemed compelling by the competition

The third strategy is especially intriguing - a topic for an entire blog in its own right.

Doing Advertising the Right Way - Part 1

I'd never heard of Rosser Reeves until a few months ago.  Now I wish I'd heard of him 30 years ago.
Quick Bio: Rosser Reeves, former Chairman of Ted Bates & Co., is a TV advertising legend whose work would be instantly recognizable by Baby Boomers, e.g. M&M's "melts in your mouth, not in your hands".  He was enormously successful - so much so that Jon Hamm's character on Mad Men, Don Draper, is in part based on Reeves.

I came across Reeves' while researching the origin of value propositions - a term popularized by Harvard Business School pundits like Michael Porter.   Turns out that Reeves was a pioneer of this concept as well, having invented the Unique Selling Proposition in the early 1940s.  Reeves' work is so well-regarded by the likes of Al Ries, Jack Trout and Seth Godin that I had to get my hands on Reeves' classic book, Reality in Advertising, published in 1960.

It's out of print, so only available second-hand through rare book sellers.  Thanks to Abe Books I found one in good condition at Bank of Books in Ventura, CA.

Rosser Reeves is to advertising what Benjamin Graham is to value investing.  He's a writer who cuts to the chase and knows how to take a wealth of experience and insight and condense it into succinct powerful lessons.  For any of us who have spent our lives in sales and marketing, his are the kind of teachings you wish you knew when you started out.

His advice and the principles he describes are just as fresh and relevant today as they were 50 years ago.  In fact, I'd say the Reality in Advertising is a must read for every budding social marketer (and a few pros who haven't quite figured out the plot in my view).

I'd be selfish not to share (heck, who's got $95 and the patience to find an out-of-print copy).  So here you go, everyone.  I'll share a few of Reeves' lessons in my next four blogs.

Lesson 1: Advertising cannot by judged by sales alone
It wasn't Reeves' creativity that made him successful.  It was his mastery of measurement and data.  Most marketers are familiar with this lament from Reality in Advertising, "I know that at least half of my advertising money is being wasted.  My problem is - I do not know which half."
He knew that most marketers often incorrectly attributed a rise - or fall - of sales to a campaign.  And, he had the data to prove it.  He used a very simple formula to measure advertising effectiveness:

Penetration = % people who recall a campaign (brand, slogan, etc)

Usage Pull = [% customers who recall a campaign] - [% customers who don't]

Not rocket science so far, is it?  But consider that Reeves' firm amassed the data for several $B of advertising (big then - today it's $500B annually) by America's top firms.  It was the largest study of its kind ever done at the time.  And it tells an immensely powerful story  - just using two simple bar charts.
The first, a frequency distribution bar chart, shows the penetration for 78 of America's largest advertisers - coincidentally starting with the highest penetration (78%) and descending rather uniformly to the lowest penetration (1%).  Uniform, yes, but there are surprises.

• One bar represents a company that spent a hefty amount to score 5% penetration in a year.  Its biggest competitor spent less, and in less time, to garner 60% penetration - 12X more awareness.
• Two companies spending an identical amount in advertising score penetration of 44% of America vs. 1.8%
• An advertiser chose to use a gimmick which was remembered by 38% of the market ... but only 9% could recall the message.

The second bar chart shows usage pull.  It, too, shows 78 bars - but this time some rise above the horizontal line (a story that works because it pulls new customers) while other bars fall below the line (showing net customer loss).  About half the 78 companies show positive usage pull, and half show negative ... irrespective of the penetration.

• An advertiser with a pull rate of 20% changed its campaign (story) and its pull dropped by half to 10%.  But as sales were increasing, the company did not have a clue that its advertising was now only half as effective.
• One advertiser's value proposition (its story ... the crown jewels) is neatly tucked away in a corner of its advertising, largely unnoticed by most readers.  But those who do register it have a pull rate of 18%.
• A brewery spends $100m (today's dollars) running highly memorable imagery that scores high on penetration but, digging deeper, actually is recalled by those who drink less of its beer!  And the company is none the wiser.

But, Reeves offers hope.  Those companies that do the measurement and apply the principles show advertising performance 34% higher than the average performance for all advertisers.  That's like getting the punch of $4m advertising for only $3m.

When Marketing Strategy Mimics the Bumblebee

I like bees - especially bumblebees.

Did you know there are about 250 species of bumblebee worldwide?  They are social insects, not given to solitary pursuits except when it comes to foraging for food - flower nectar and pollen.  The hair on their legs is ideally suited to capturing pollen, in turn enabling them to pollinate flowers as they travel from one to the next.  And travel they do!

They'll travel up to 2 miles to find especially intriguing flowers (experiments show they are attracted to particular shapes, colors and fragrances).  They don't fly in straight lines nor in any predictable order.  If a particular flower catches their attention, off they go.  At speeds of up to 30 mph.  It is this frenzied, random activity that is so well captured in Rimsky-Korsakov's Flight of the Bumblebee.

Sometimes the bumblebee comes to mind when I'm asked to review an organization's marketing. That I'm asked at all usually indicates that either the engine is not firing on all cylinders, or that someone - often the CEO - is not at peace with the way things are working.

When I show up, before delving head-first into specifics it's helpful to get the lay of the land - some perspective and context-setting on the organization and its approach to marketing.  Sometimes I get a crisp synopsis of the marketing plan.  Often I'll receive a general outline with an admitted aside that the plan needs updating.  And sometimes (more often than you might think) I hear the buzzing of the bumblebee ....

Like the flight of the bee  - never in a straight line, moving unpredictability from one flower to the next - l am told of a strategy that is agile, fluid, dynamic, continually reinvented.  Like fingerprints, no two weeks of marketing are the same.  The teller is filled with pride that as many balls stay aloft in the air as they do.  I hear a different story.  Chaos in search of calm.  The entropy of the universe retreating into its own black hole.  Carpe diem! served up like a rich, hot and frothy latte.

I typically learn that the organization has nothing resembling a written plan, and that its marketing department operates like the NORAD Centre at Cheyenne Mountain, ready to spring into action when the alarm sounds.  (I once had an executive tell me that the market was evolving so quickly that a plan would be obsolete before it was finished.  I asked if his people just did whatever they wanted when they came to work. He said no, giving detailed examples of their roles. I offered that if that was the case then he indeed did have a plan - just one that was in his head. I got one of those, Yeah, well, duh!, looks and decided to move on.)

In such situations the strategy is starkly clear: approach it one day at a time, with Bobby Fisher deciding every move.  Everything is built for tactical swiftness, game score is kept (but usually not the win-loss record) with nothing glued or fastened.  As the briefing goes on I often find myself shifting metaphorically from the bumblebee to the caffeine-addicted gamer, reacting to obstacles and threats through lightning-quick reflexes and by blasting the whatever out of his opponent.  Should I get to meet some marketing staff I find they fit one of two molds: the highly creative and adrenaline-fueled who yearn for the eleventh hour, and the reserved I'll-just-do-what-I'm-asked-because-it-pays-well who have built up an immunity to their surroundings.

These are tough assignments - usually because any attempt to change the status quo is off-limits, and earns a look to suggest my sanity is in serious doubt whenever I raise it.

What's particularly fascinating to me may surprise you: a strategy like this often achieves great results - certainly in the early going.  But - and here's the 'gotcha' part ... the reason I'm blogging about this - I don't see it work well as organizations get larger.  It breaks down fast.  It doesn't scale.  When an organization gets to a certain size (this varies) the seams start coming undone.  What may have only needed a day to work its magic before now stretches out to weeks.  When the boss is absent the team, unsure how to respond to unexpected market changes, doubles down on what they were last told to do.
No!   This is decidedly not how Steve Jobs operates (I do get this come-back).  Mr. Jobs may be in complete control of Apple's marketing, but Apple is well-operationalized for speed and scale, and the marketing strategy is well-codified, communciated and reinforced across the company.  It is anything but a strategy du jour.

Transitioning from small to big can be challenging, to be sure.  But it need not imply a loss of either control or agility.  There are numerous examples of Fortune 1000 companies that not only market well, but are geared to respond swiftly and vigorously.  Apple.  P&G.  Clorox.  Google.  They can do what their smaller rivals do and yet stay ahead of them.

Mimicking the bumblebee can be a great way to start a business, but it's no way to grow one.

It Pays to be CEO (for now)

In Monday's blog I advised that it is a good use of one's time to pay attention to trends - the least risky alternative to placing bets on forecasts and outright predictions.  I wrote that without having sat down and gone through the Sunday papers (a car drives by at 4am and faithfully heaves some 5 pounds of print onto my driveway on Sundays).
The San Jose Mercury News published its annual What the Boss Makes survey of CEO pay among Bay Area firms, accompanied by the opinion of business writer Chris O'Brien - whom I've come to regard as one of the best business writers this side of the Mississippi.  Suffice it to say that, by any yardstick, CEO's make a lot.  (If you're like me, it's always fun to scroll down through the names of companies you know, and run your finger over to the salary, bonus and stock options columns.  Wow!)
Now, Chris likes to have fun when he writes, and he customarily awards laurels along with the barbs (unlike the WSJ's survey which tends to be spartan with its opinions .... until this year).
Then, I happened upon an article in the New York Times by Gretchen Morgenson - another writer whom I recommend who happily lifts up stones and peeks at what is underneath them in her Fair Game column.  This week's is titled Paychecks As Big as Tajikistan.  As of this writing it's only the 8th most emailed article (mortgage woes and selling big diamonds in China beat it out) but I encourage you to read it.  It's an easy and eye-opening read.
It references a report in The Analyst's Accounting Observer ($7500 annual subscription if you're interested) published by R. G. Associates that goes into intricate detail in assessing executive pay among S&P 500 companies.  The editors gave the article and interesting title - "S&P 500 Executive Pay: Bigger Than ... Whatever You Think It Is."
Here are a few highlights that caught my attention:

• Among the 483 S&P 500 firms surveyed, 2010 executive pay increased yr/yr by 13.9% to $14.3B - just shy of the GDP of Tajikistan (pop. 7million).
• One-third of these firms paid more to their execs in cash compensation than they paid in audit fees (to protect shareholders) and, in 32 companies, executive pay exceeded what they remitted in income taxes.  In 24 companies this amounted to 2%+ of net income from operations.
• From 2008 - 2010, 179 of the companies awarded raises to their executives even though shareholder value declined.  Eleven companies paid total compensation amounting to 1% or more of their market capitalization.

Now, these figures may surprise, shock, or even anger you.  Some of this data represents extremes - really out there! extremes. I can tell you that, as an executive myself at a Fortune 2050 firm, neither I nor my colleagues saw anything hovering at the oxygen levels implied in the R.G. A. report.
I'm not blogging to suggest that executives should be pilloried, or that there is a conspiracy of Board members to reward the few at the expense of shareholders.  Far from it.  I've worked along with CEOs who, in my experience, earned their keep.  It's a 7x24 job.  And, in the past 20 years, Wall Street and shareholders have turned it into "final exams every 90 days!"  Expectations are high, unrelenting, and seemingly unstoppable.  If bubbles didn't exist it's as if the market expects executives to create them - but without the fallout.  Hell, who wouldn't want top dollar to deliver against that kind of expectation.
But I am blogging to state that I'm seeing a trend regarding executive pay.  I'm coming across too many articles and OpEd pieces to ignore it.  The trend I'm seeing is eerily similar to that in government pensions: the party's over, let the hangover set in.  The economic environment is not kind to those at the right end of the bell curve, and I don't see it letting up.
But my question: will we see a corresponding re-leveling of shareholder - and Wall street - expectations to create sanity on both sides of the street?  I hope so, but it's not a prediction I'm comfortable making;-)

Facebook Poised to Overtake Yahoo in Display Ad $

An interesting forecast in Monday's eMarketer (remember: be skeptical of forecasts, and pay more attention to the trend at work): FB is expected to double its Display advertising revenue this year.  When it does so, it will overtake Yahoo's #1 position.

There are three other bits of interesting "trend" data in the tables accompanying the article:

• Display ad revenue is expected to maintain its overall 20%+ yr/yr growth through 2012.
• Google's yr/yr growth is expected to dip this year (still a respectable 34%) then bounce back in 2012.  Not sure why this is ... could it be the Admeld acquisition?
• Share of the Big 5 display ad companies (FB, Yahoo!, Google, Msft and AOL) is expected to grow even further - from 38% in 2009 to 53% in 2012.  Someone out there's feeling the pinch!

What's this all mean?

Well, the numbers themselves are less impressive than the general trends they point to.

• Marketers are mildly bullish on overall marketing spend two years out, but particularly bullish on the shifting spend to online media.  It's only going to get larger.
• Given all the online ad choices, display ads are among the faster-growing (see the outlookin my June 10 blog).  My best as to why: there's a long history with display advertising (print, mind you) and an enormous amount of data to show what does and doesn't work.  It's a market that today's agencies (let's face it; most of them have their heritage in the "old" media) understand.  It's the safe bet.

There are three implications to all of this.

1. Just as network TV duked it out for audience size to set ad pricing, so too will the big online display advertisers.  There's an enormous amount at stake - for ad-selling companies, agencies and advertisers alike.
2. That said, pricing is going to become, shall we say, interesting - especially in the social media space.  Going are the mass demographic generalizations that come with Nielsen data, being replaced with the laser-like demographics that accompany online media.  Also on the ascendancy is the allure of targeting micro-markets in fulfillment of the one-to-one marketing world put forth by Rogers & Peppers in the 90s.
3. Lobbying on privacy and user data is highly likely to get even more intense.  The value of online advertising in any form is significantly enhanced by the ability to associate specific and often precise information about users.  With almost $500B spent on all forms of advertising there is simply too much at stake to risk having too tight a lid put on consumer data.

Trends, Forecasts and Predictions

If you're looking for a definitive list of trends to keep an eye on I'm sorry to disappoint, but this is not it.

Each year I read any number of reports and articles that attempt to cast some light on the future - most of it directional, some of it fairly precise.  Irrespective, most of it's not very good.  I inevitably find myself wondering more about the thought process of the writer, and less about the forward-looking outlook.

A few years back I found myself in an impromptu debate with the CEO of my firm when I presented some systems, software and services market forecasts partly based on some work done by IDC.  He was of the opinion that IDC was a rear view mirror research company, and lacked any credible capacity to predict unexpected occurrences in the industry, e.g. like a disruptive innovation.  I agreed, but stated that as they captured the conventional thinking of the herd, their outlook at least had the value of presenting the wisdom of the crowd (albeit, an edited wisdom).

He did not agree one bit, as evidenced by the pulsating vein I could see on his forehead from my position at the podium 30 feet away.  He planted an enormous stake in the ground at my feet, and as I looked around the room at my colleagues a few minutes later (it was not a swift execution) I could almost visualize a few of them roasting marshmallows on the open flame that had ignited.  The point graciously conceded, I continued with my presentation, allowing the smoke to clear.


There's a lot to be said for being forward-looking.  It's hard to move forward in business unless you have some expectation or opinion about the future.  But acting on someone's view of the future is akin to acting on a stock tip: it's risky.  I liked how Warren Buffet responded to an undergraduate at a large presentation he gave when he was asked how he forecasts macroeconomic effects.  Buffet's response: I don't - it's simply not knowable.


To me, forward-looking views come in three varieties, each with its own pluses and minuses:

• Trends are directional tendencies.  They look out years into the future.  They offer a high degree of wiggle room as there is no attempt to be quantitatively precise with regard to speed or extent.  There not always easy to spot, and those who make a practice of picking them do not bat 1,000 (John Naisbitt's wildly popular bestselling Megatrends largely hit the mark, but not entirely).
• Forecasts are estimates of future conditions.  They're typically based on quantitative models, and usually confined to short term outlooks (from days for weather, to several quarters for economic variables like GDP).  I've observed that people like forecasts because they are concrete and specific.  And therein lies the problem: they are only as valid as the models on which they are based.  Those models are imperfect in that they invariably rely on assumptions that are a placeholder for knowing.  Remember: the vast majority of economists and Wall Street prognosticators, all equipped with exquisite forward-looking models, missed the 2007 financial crisis entirely.  
• Predictions are a statement of what will happen.  They require little in the way of time or expertise to make, and they don't rely on complex models.  Predictors are notoriously wrong.  Just look at the annual track record of investment picks - you're still better off closing your eyes and buying an index than you are buying the majority of mutual funds within the investment category.  And Nostradamus?  His celebration aside, try understanding his predictions as they were originally written - as quatrains - and compare these to their interpretations.  If ever there was a leap of faith, it is these.

My advice: read everything you can find on the trends in the business(es) that you invest in or follow.  Recognize that the value of forecasting lies in stating a possible future - not a guaranteed one.  When it comes to predictions you will suffer no harm if you regard them as entertainment, enjoyed in the company of others over a glass of good wine.

From Weiner to Burger

This past March, Boulder, CO-based ad firm Crispin Porter + Bogusky lost its Burger King account after a 7-year run.  Read on, friends 0 the story doesn't end there!

CP+B revived BK's "King" mascot -  18th century era figure wearing a large plastic head of a bearded, forties-something, perpetually smiling king with a gold crown who would romp around TV commercials performing mildly Fellini-esque skits.  CP+B did a number of TV commercials for BK, moving in to social media towards the end of their contract.  Here are a couple of relatively recent spots in the SM vein.

• Facebook's Friend Sacrifice  http://www.youtube.com/watch?v=F1AsycJNl7o
• Augmented Reality  http://www.youtube.com/watch?v=YhSc9TlCDBI

Creative?  Yes.  Effective?  You be the judge.  (hint: remember, they lost the contract)

I have to hand it to CP+B, though.  After losing the contract in March they didn't pack up their tent and go home.  This past Monday CP+B commandeered Direct TV's channel 111 and made this offer to viewers: spend 5 minutes watching a rotating Whopper and get a free one.  Watch for even longer and you can stuff yourself with Whoppers.  For those of you who are not DirectTV subscribers, here you go.

http://www.geekosystem.com/burger-king-whopper-channel/

By mid-Friday viewers had spent over 10,000 hours watching rotating Whoppers, earning almost 75,000 free Whoppers.  Unfortunately, the promotion ended Friday evening at midnight, so you're out of luck.

Multiple Choice question: The takeaway(s) from this undertaking is:

• [a] the agency got the laugh last
• [b] this is more fun than clipping coupons (Groupon, beware!)
• [c] there's evidence of a disturbing demographic among DirectTV subscribers
• [d] beats camping overnight outside the Apple store to get an iPad 2
• [e] all of the above

Congressman Weiner's ... um, well...

I attended a private all-boys, white-shirt-jacket-and-tie high school.  About halfway through the 9th grade our Health Studies teacher, an unquestionably celibate man who had devoted his career to teaching, announced that we had arrived at the sex education part of the curriculum.  Two classes would be devoted to it the following week.

No one especially enjoyed Health Studies, preferring to use it to do homework instead.  But when the following week rolled around not a single fourteen year-old permitted himself that distraction, nor was there any need to take attendance - no one was about to skip sex education week.

Our teacher did an admirable job in the first class, using a few clinically bland charts that graphically depicted what we either already knew, had accepted on faith, or fervently hoped to be true.  He set aside 20 minutes for general questions in the second class.  He set it up something like, "You are growing into men, so now is not the time to be shy."  It was to be his undoing.

I cannot honestly recall specific questions put to him, but I vividly recall the frenzied excitement as we sought to understand what were, to us, secrets of the universe jealously guarded by adults.  I also remember one classmate whose questions were solely meant to demonstrate his reservoir of personal experience as he looked around the classroom grinning.  The real capstone to that class was a series of, shall we say, moral questions, all of which fit under one theme: just how far is too far?

I can still vividly see our teacher standing at the front of the class when the bell sounded, exasperated with both hands in the air as if he was signaling a touchdown, his face reddening, almost shouting as he said:

Gentlemen, it's very simple: keep your pecker in your pants.

And that, much to our chagrin, was how sex education week ended.  As far as advice goes, however, though not everyone liked it you had to appreciate its brevity and clarity.

Congressman Anthony Weiner was definitely not in that class, and I'm certain he did not attend my school.  When I saw the Twitter photo of the Congressman that circulated last week it was as if the advice had, though some other route, reached the Congressman.  Alas, that advice did not serve Mr. Weiner well.

There's a reason the Twitter belongs to platforms called social networks, and not private networks - they're built for easy sharing en masse.  With a simple click.

I genuinely feel for the Congressman.  His problem began when he clicked the wrong button.  But his fate was sealed when the evidence - not of his folly, but of his judgment in choosing to deny it - spread virally on social media as quickly as had the original photograph.
There are two things I'd wager occurred as a result of this:

1. A good many casual Twitter users logged onto their accounts and got reacquainted with Twitter Basics (if they'd ever read them to begin with).  Some will have exhaled a small sigh of relief.  
2. More than a few executives - and politicians - will have now really understood what viral means, and will have asked a staffer to explain this stuff again and tell them just what it can do.

Finally, in keeping with the spirit of advice proffered by my 9th grade teacher, I'll offer my own advice when it comes to using social networks.

Check the settings twice; click the send button once.  In that order.

When the Multiplier Effect Becomes Irrational

At lunch with a colleague recently, he recounted a story of his interviews with a Fortune 1000 company for a senior role.  As he got deeper into the interviews two things became clear.  First, the company wanted a game-changer - someone who would rock their world and leave competitors eating their dust.  Second, there was one caveat: he couldn't make any material changes.  When he asked how he could be expected to turn everything on its head when most everything was off-limits, this was the reply: that's why this job needs someone special.

When he finished his story I said, Welcome to the multiplier effect: the expectation that big improvements in results require only small changes in behavior.

If you've studied macroeconomics you know the multiplier effect - the underpinnings of monetary policy and the fiscal TARP program.  An economist likely defined it in Wikipedia - yikes! - explaining why most of us only took one marco course in college, and why journalists prefer to substitute the more understandable term, ripple effect.  Here's a definition for the rest of us.

• The multiplier effect is what's at work when the government prints - or spends - $X that increases the money supply -  or GDP - by more than $X.  Or, how a little begets a lot.

The multiplier effect just isn't for macroeconomists, though.  Archimedes discovered a similar effect using of levers and pulleys.  Engineers know this as mechanical advantage in which the output force is larger than the input force - the greater the output advantage, the greater the multiplier.
The multiplier effect also seems to apply to patients who, counseled by their physician to lose weight, exercise and change diet, ask: is there a pill I can take instead?

Bernie Madoff understood it, too.  He knew that investors were wise to Ponzi schemes, but bet that if he made the ROI mulitplier large enough - just not so large as to be ridiculous, though - that they would suspend common sense, and he'd have a good thing going.  And for a time he surely did.

Recently I blogged about how half of the start-up CMOs I had met with shared a similiar story: their CEOs and Boards expected that, because social media is essentially free, that they could attain huge marketing results with the same spend, and pretty darn good results spending less money.  Guess how this story is likely to end.

It is with this last example that I want to link back to my friend's story.

The multiplier effect is alive and well in business practice.  It underlies the principle of price elasticity and many marketing practices, e.g. when $X in promotional spend yields far more than its equivalent in margin and revenue (most promotional spend wouldn't make much sense if that were not the case).  What I've observed increasingly over the past few years, though, is the belief that new technologies are creating ever higher multipliers on steroids.  I'm not talking 10X or 20X ...  but 100X, 1000X or more.

In the past decade CRM systems, predictive analytics, social media and new online services have changed the economics of marketing and sales, making them more productive.  I've seen cross-organizational marketing spend achieve gains of 40% - 60% and some new practices yield 3X and 10X improvements in output.  I've also seen exceptional one-off examples - all involving social media - that have topped these figures.  I just haven't seen the results repeated, and certainly not sustained.

I'm all for continually raising the bar and up-levelling standards.  But planning on a world in which small inputs are expected to achieve extraordinary results is, at best, bound to disappoint

How I Learned the Practice of Execution

When I became a new sales manager I learned from a master -  Mark Stevenson.  Mark rose within the ranks of Xerox during the 1960s and 1970s.  He was a taskmaster, a motivator, and brilliant with customers.  I consider him one of the finest sales and marketing executives I've known.  His long suit was execution.  In his own visceral and unrelenting way he taught his managers three lessons that have stayed with me.

1. Manage the activities that lead to outcomes.
2. Never confuse activities with outcomes.
3. You can't expect what you don't inspect.

He devised a management system that every sales person and manager at every level of the organization was required to use.  It gave you no choice but to learn how to execute on the revenue side.  I see those same principles embedded in today's CRM and SFA systems, and used by particularly effective managers and executives.  No sales or marketing manager can go wrong knowing them.

So, here is what Mark taught me.

Manage Activities, Not Outcomes: Sales pipeline may be a significant predictor of sales but, contrary to conventional wisdom, it is not what creates sales.  What truly drives sales are the activities that generate revenue opportunities and move them through the sales cycle - prospecting, calls, benchmarks, demos, proposals and similar sales-advancing activities.

Mark's view was that your pipeline - or funnel - was a reflection of how well you planned and executed.  He insisted that attempting to manage pipeline was like attempting to manage the bathroom scale to control one's weight.  (As an aside, Mark did not like the depiction of vertical funnels as he believed they created the mistaken impression that gravity would do some of the work.  As a result, they were always displayed horizontally.)

When his VP's reviewed their sales outlook with Mark he expected them to know the planned activities for every prospect in their pipeline, no matter where it was in the funnel - names, timelines, details - and codify it in writing.  He could not possibly review thousands of prospects, so he would pick several at random.  If you were not prepared he let you know in no uncertain terms.  To say that this kept everyone on their toes is an understatement.  His process cascaded down through each management level to every sales rep in the organization.  Tedious?  Yes.  But it engendered an enormous level of disciplined, concrete planning across the organization.  

Here's the surprise.  Most everyone not only liked his system; they loved it.  They loved it because it worked.  It kept them focused on the right things, and the right things led to results.

Never Confuse Activity with Outcomes: While Mark firmly believed that outcomes could only be achieved by managing the activities that spawn them, he took great pains to ensure that managers did not fall into the trap of doing activities for their own sake.  There had to be a predetermined payoff.

This was most evident when marketers reviewed their progress with him.  A manager might describe how a seminar series had resulted in a doubling of normal attendance, and offer details to prove that attendees fit the desired buyer profile.  Mark would congratulate the presenter and then ask, what did you accomplish?  After  a few moments of uncertain silence the presenter might begin to summarize what was just shown.  Mark would put up a hand and say, I know, you had over 300 attendees, but I want to know what happened following this.  How many sales calls have been made?  How much has pipeline increased?  How much revenue is forecasted this quarter from them?  How many competitors will we displace?

Mark cared about three outcomes: revenue, growth, and satisfied customers.  Everything you presented to him had to concretely demonstrate one or more of these payoffs.  He set the bar high for his organization: everything everyone did had to attain those outcomes, or had to achieve a concrete milestone towards achieving them.

People in his organization not only learned the distinction between activities and outcomes, but learned an important principle: every planned activity has to have a payoff beyond its own completion.

You Can't Expect What You Don't Inspect: If you haven't already gathered, Mark was not the kind of executive to put the organization on autopilot.  He believed in luck, but he didn't believe in counting on it.

Mark was not the kind of manager to let you treat your plans and forecast like a tax return, sending it in and keeping your fingers crossed that you weren't audited.  He wanted accountability.  Reviews occurred monthly.  They were focused, concrete, and specific.  Everyone entered those reviews knowing that they had to have a clear line of sight to their objectives, and had to describe an executable plan of tangible, time-lined, budget-constrained actions to increase the odds of achieving those outcomes.

Though his management system was like being dunked in ice water for new sales people and managers, most of them not only caught on within 90 or 120 days, but many would go on to perform at the top of their game.

... Such is the wisdom of Mark Stevenson - an executive who embedded the principles of good execution across his organization.

Koko's Birthday

I've been helping The Gorilla Foundation for the past few months.  Heard of it?  Probably not.  But I'll lay odds that you or your friends have heard of Koko - the 260-pound lowland gorilla who communicates with humans.
Koko was a one year-old at the San Francisco Zoo who was not doing well when Dr. Penny Patterson took her under her care, raising her on a private preserve in Northern California.  A psychologist completing her PhD, Dr. Patterson wanted to study whether gorillas could communicate with us in an intelligible way.  Turns out they can.
Koko proceeded to learn an abbreviated form of ASL (American Sign Language) that enables her to use over 1000 signs to communicate.  She understands about 2000 spoken words, and can read at a corresponding level.  I'm not exaggerating (check it out by viewing the links two-thirds of the way down this page).

Since then, Koko has been the subject of several books, articles and films, and has gained quite a following.  Betty White, Robin Williams, Sting, Peter Gabriel and William Shatner have all met and interacted with her.  So have quite a few of the Who's Who in the Northern California Bay Area.
As fascinating as it is to watch and hear Koko interact and communicate in a genuine way with others, there's also the disquieting backdrop of the perils facing gorillas.  Like so many animals, they are endangered, less so from encroachment on their habitat and more so because of poachers.  Their meat is prized as a delicacy, and their hands for medicinal powers (Diane Fossey's murder in Africa in 1985 is attributed to poachers).
One of the pillar initiatives undertaken by the Foundation is educating governments and people in Africa about this plight.  Their strategy: develop empathy for gorillas by demonstrating the ability of gorillas to communicate with people, thereby pressing the reset button on attitudes regarding the exploitation of them.
Back to the bright side.
This year, on July 4, 2011, Koko turns 40.  She'll get some special treats that day, a cake, and lots of cards from her followers and admirers.  She loves the attention.  There's even a little contest for her almost 1000 Twitter followers of Koko (@KokoTweets) who can submit a haiku in honor of her birthday.  Yes, even Gorillas are into social networks, too.
If you get the chance, send Koko a greeting (she does read them!).  If you have the inclination, submit a haiku.

Death by Spreadsheet

I've been a fan of Edward Tufte for years.  You may not recognize his name, but you've certainly seen his handiwork.  He is the statistician who has made a profound impact on data visualization.  This is the practice (to me, the art) of turning data into a visual feast of information.

There are some fine examples.  Napoleon's March to Russia by Minard is a classic.  As is the London Underground map.  If you really want examples, you can spend some time and money checking them out here.

The New York Times has, in my opinion, one of the best data visualization teams in the news business.  So much so that, after reading the Sunday NYTs, I'd often clip out the graphics page, put it in my bag, and bring it to the office to show everyone as example of what we needed to do in the business.

Here are two examples of what makes the NYT graphics so good.

• The Guantanamo Detainees
• Reactions to the death of Osama bin Laden

You could see all of the foregoing represented in spreadsheets or lists.  But I've got to believe that you got the point of both of these in a flash and, if you wanted to "drill down" into the detail you had no problem doing so.  

And then there are some other fine example from the New York Times that, though not classically data visualization, nonetheless makes point across extraordinarily well.  Here are three I particularly like:

• the 2011 Japan earthquake - before and after comparisons
• another before and after - the Fukushima Daiichi Power Plant
• a mashup of data visualization and sound - Radiolab

Besides being fun to look at, there's a serious point to all of this.

A manager in a business of any size knows that she spends a good portion of her time in meetings.  As she rises in an organization - especially a very large one - meetings become the principal activity of her day.  Whether conducted face-to-face, vie conference calls or Skype, executives are exposed to an enormous amount of data about the business.  And it's typically presented in spreadsheets, lists and dashboards, all beautifully brought to life with the aid of PowerPoint.

The brain goes into overdrive to search out the meaningful cells in a spreadsheet (hint: they're not always the ones highlighted by the presenter) and to wade through the sea of red, yellow and green dashboards to figure out what is really working, and what is not.

Such devices are necessarily abstract (and often misleading) representations of the state of the business, the health of the organization's connection with its customers, and the prognosis for the future.

I've sat in many a meeting like this, and my retinas have easily received the light from 50,000 spreadsheets and slides cast on them.  If you're anything like me, the brain begins to rune out after awhile.  Probably some neurological reaction to stay sane, if nothing else.  Jack Welch had the same aversion.  So did Lou Gerstner (though he was less polite than Jack about it).

Every once and a while, though, I can recall someone presenting a complex bit of data all wrapped up in one ingeniously simple and elegant slide.  Not as flashy as the folks from NYT can serve up, but pretty good nonetheless.  And, best as I can recall, those who drew the shortest, simplest and clearest path to their point usually prevailed.

If you need further convincing then perhaps Tufte's poster makes the point.

Customer Service Tanks Even Further

Whether you're a sales manager, a marketer or run a business you owe it to yourself to read the report on customer service in July's issue of Consumer Reports.

Based on a nationwide CR survey, it chronicles the frustration leading to searing rage experienced more and more often by customers attempting to be serviced by the companies with whom they deal.

Among the gripes and statistics (some eyebrow-raising):

• The inability to get a human on the phone is the top-rated blood pressure generator, garnering an 8.9 our of 10 on the annoyance scale (10 = tremendously annoying)
• a not-surprising 64% hung up on customer service reps without having their problem solved, though a whopping 64% walked out on a store salesperson
• 65% have dealt with rude salespeople at least once in the previous year
• when it comes to online, only 2% like live chat to resolve an issue ... still fewer prefer email
• It took 6 hours for on AT&T subscriber to cancel his landline service.

On the other side of the teeter-totter though, there are bright spots: Apple, L.L. Bean, Dillard's, Crutchfield.com and Sony, to name a few.

I've been belligerently consistent (annoyingly so, I'm told) about stating one thing for years: marketing is not what a department does, it's the process of how the company defines itself to its customers.  Good companies in it for the long haul court their customers, and see customer problems as the stepping stone to enriching their brands, building loyalty, and driving the top line.  Good companies view customer service as a differentiator, not a cost that must be bludgeoned into submission during economic downturns.