Three questions to help set realistic marketing growth targets
In his recent article on Mumbrella, "The forgotten 'P' of marketing," Ryan France references the 'spiral of doom.' As he notes, the spiral will be hauntingly familiar to many marketers. But if the spiral of doom ultimately leads to bankruptcy, what might lead to the spiral of success?
The spiral of doom
The spiral of doom stems from one fundamental problem, setting increasingly unrealistic sales growth targets. Desperate to meet shareholder and C-suite expectations, managers resort to the most obvious means to boost short-term sales: discounting.
Initially, retailers and their customers are eager to buy at lower prices, but as demand is satiated sales slow again. After months of stalled growth, increased discounting, and eroding margins, marketing and innovation spending are cut to help make the numbers for the year. But, as noted in this post, problems compound over time. Eventually, market share starts to erode. Competitors take the lead; the company becomes reactive not proactive. The spiral continues.
A three-pronged turnaround strategy
The phrase 'spiral of doom' was coined by Jim Kilts, a man whose success was built on turning around famous brands and companies, including Kool-Aid, Nabisco, and Gillette. As noted in this article, his recipe for success was basic: control costs and reinvest in innovation and marketing. When Kilts arrival at Gillette, sales and earnings had been stagnant for five years but there was plenty of cost to redistribute: from excess inventory to excessive SKUs, from slack financial control to a dysfunctional supply chain.
So, the first prong of Kilts' turnaround plan was a policy of Zero Overhead Growth. But that was not going to help boost long-term sales. As the second prong, he introduced a policy of Functional Excellence seeking to implement best-in-class operational performance at the best possible cost. Thirdly, after these policies began to gain traction, Kilts implemented his Total Innovation policy, a layered innovation program with game changing innovation at the top, incremental innovation in the middle, and ongoing improvement at the bottom. Sales growth accelerated, and in 2005 Gillette merged with Procter & Gamble in a deal worth $54 billion.
What can a marketer learn the turnaround textbook?
Today, this is the textbook for a turnaround. And following the textbook is usually a safe bet unless the cutting cost also cuts essential capabilities. But what can a marketer learn from all this, apart from do not let your sales colleagues piss away your future budget on volume discounts?
Set realistic goals
One of the most important things that Kilts did was to set realistic growth goals for Gillette. By promising topline earnings growth of 3 to 5% he set realistic targets against which the company could consistently deliver. Investors may not like slow growth as much as fast, but they appreciate reliability over uncertainty, and they certainly prefer growth to no growth.
So, do not over promise, it will only initiate your own spiral of doom. Remember, you cannot have a strong brand without a strong business, so do not make yourself responsible for fixing someone else's problem. Be realistic about what your marketing can and cannot do, and over what time frame. Put numbers to your plan, otherwise, your stakeholders are going to question your efficiency, lose confidence, and seek to trim your budget.
And before you set the expectations of others, make sure your own expectations are realistic. Ask the following three questions to figure out the likely productivity of your marketing campaigns.
1) How many people is my campaign likely to influence each year?
Marketing should not just target people in-market today but future buyers as well: new category entrants and repeat buyers. But unless you are marketing an impulse product, people only buy when a need arises, and most people do not need your category right now. Marketing success plays out over time as new buyers enter the market. So, what is the likely inflow of new customers to the category each year? What is the interpurchase interval for existing category users? And what degree of switching is likely? Knowing these facts should give you a reasonable idea of how quickly your marketing can build sales traction over time.
2) How much leverage is my campaign likely to have?
3) Is your budget scaled appropriately?
There is a basic rule of thumb for established categories, brands that set their share of voice (SOV) higher than their share of market (SOM) are more likely to grow. An effective marketing campaign will beat the category average, an ineffective one will see the brand lose market share. However, it is unlikely that your campaign will be so effective that you can afford to ignore the basic relationship. Use the SOV/SOM relationship to help set realistic growth expectations.
Stand and deliver
Brands are not built over quarters; they are built over years. And people always want more from their marketing spend, but there is a limit to what marketing can achieve on its own, and you will not benefit by over-promising. So, make sure you set realistic growth expectations for your brand, set goals and timelines you can achieve, and then deliver on them by making sure your campaign is as effective as possible.
The spiral of doom
The spiral of doom stems from one fundamental problem, setting increasingly unrealistic sales growth targets. Desperate to meet shareholder and C-suite expectations, managers resort to the most obvious means to boost short-term sales: discounting.
Initially, retailers and their customers are eager to buy at lower prices, but as demand is satiated sales slow again. After months of stalled growth, increased discounting, and eroding margins, marketing and innovation spending are cut to help make the numbers for the year. But, as noted in this post, problems compound over time. Eventually, market share starts to erode. Competitors take the lead; the company becomes reactive not proactive. The spiral continues.
A three-pronged turnaround strategy
The phrase 'spiral of doom' was coined by Jim Kilts, a man whose success was built on turning around famous brands and companies, including Kool-Aid, Nabisco, and Gillette. As noted in this article, his recipe for success was basic: control costs and reinvest in innovation and marketing. When Kilts arrival at Gillette, sales and earnings had been stagnant for five years but there was plenty of cost to redistribute: from excess inventory to excessive SKUs, from slack financial control to a dysfunctional supply chain.
So, the first prong of Kilts' turnaround plan was a policy of Zero Overhead Growth. But that was not going to help boost long-term sales. As the second prong, he introduced a policy of Functional Excellence seeking to implement best-in-class operational performance at the best possible cost. Thirdly, after these policies began to gain traction, Kilts implemented his Total Innovation policy, a layered innovation program with game changing innovation at the top, incremental innovation in the middle, and ongoing improvement at the bottom. Sales growth accelerated, and in 2005 Gillette merged with Procter & Gamble in a deal worth $54 billion.
What can a marketer learn the turnaround textbook?
Today, this is the textbook for a turnaround. And following the textbook is usually a safe bet unless the cutting cost also cuts essential capabilities. But what can a marketer learn from all this, apart from do not let your sales colleagues piss away your future budget on volume discounts?
Set realistic goals
One of the most important things that Kilts did was to set realistic growth goals for Gillette. By promising topline earnings growth of 3 to 5% he set realistic targets against which the company could consistently deliver. Investors may not like slow growth as much as fast, but they appreciate reliability over uncertainty, and they certainly prefer growth to no growth.
So, do not over promise, it will only initiate your own spiral of doom. Remember, you cannot have a strong brand without a strong business, so do not make yourself responsible for fixing someone else's problem. Be realistic about what your marketing can and cannot do, and over what time frame. Put numbers to your plan, otherwise, your stakeholders are going to question your efficiency, lose confidence, and seek to trim your budget.
And before you set the expectations of others, make sure your own expectations are realistic. Ask the following three questions to figure out the likely productivity of your marketing campaigns.
1) How many people is my campaign likely to influence each year?
Marketing should not just target people in-market today but future buyers as well: new category entrants and repeat buyers. But unless you are marketing an impulse product, people only buy when a need arises, and most people do not need your category right now. Marketing success plays out over time as new buyers enter the market. So, what is the likely inflow of new customers to the category each year? What is the interpurchase interval for existing category users? And what degree of switching is likely? Knowing these facts should give you a reasonable idea of how quickly your marketing can build sales traction over time.
2) How much leverage is my campaign likely to have?
What is your Total Marketing equivalent of Kilts' Total Innovation? This is not a question of either/or. The smart marketer knows they need to operate at all three levels.
- You should constantly be seeking a blockbuster, a product or idea that is going to make a large percentage of people want to buy your brand, even if they are not ready to buy right now. If yours is an established brand, you need to create something compelling enough to get people to pause and reconsider what your brand can offer them.
- But blockbuster innovations do not come along that often. As France points out in his article, there is another way to target growth with the forgotten 'P' of marketing. Marketing focused on the brands and product lines that make the best margin is likely to pay off disproportionately. If you can boost sales of those products, you grow profit faster and fund future brand investment. The secret to doing so is to boost perceptions of value, making it easy for people to pay by highlighting aspects of the brand that boost perceptions of difference and meaning.
- Lowest on the leverage hierarchy is the long, slow battle for brand salience. Unless you are marketing a great product that suffers from low salience, do not bet too much on this option. It is unlikely to pay off before you jump ship to a new job, if only because all your competitors are trying to compete for share of mind as well.
3) Is your budget scaled appropriately?
To be as effective as possible, your marketing needs to be scaled to reach and influence both current and future buyers. Just targeting current buyers ignores the huge growth potential offered by those not yet ready to buy. But your brand is not operating in a vacuum. Even if you target everyone, other brands are trying to influence those people too. You need to spend enough to counteract their efforts.
There is a basic rule of thumb for established categories, brands that set their share of voice (SOV) higher than their share of market (SOM) are more likely to grow. An effective marketing campaign will beat the category average, an ineffective one will see the brand lose market share. However, it is unlikely that your campaign will be so effective that you can afford to ignore the basic relationship. Use the SOV/SOM relationship to help set realistic growth expectations.
Stand and deliver
Brands are not built over quarters; they are built over years. And people always want more from their marketing spend, but there is a limit to what marketing can achieve on its own, and you will not benefit by over-promising. So, make sure you set realistic growth expectations for your brand, set goals and timelines you can achieve, and then deliver on them by making sure your campaign is as effective as possible.
But what else might we learn from how Kilts broke the spiral of doom for Gillette? Please share your thoughts.
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