Marketing Budgets are Wrong

Marketing Budget

No More Marketing Budgets Please

Marketing budgets are not a thing. Really, they aren’t. If you have one, it needs to go. Here’s why…

Imagine this scenario. You give me a dollar today, and I give you $1.10 back. That’s a 10% return on investment. This is a scenario you be willing to play out all day every day. Am I right?

Marketing Budget

Your marketing efforts should equally provide a return through advertising and other efforts. Your program should largely be measureable and if it’s providing a return, it’s basically a money machine. A well devised program should continually increase in scale to yield more profit. If your money machine is working, why would you limit it by placing a cap? Unleash the beast!

5 Common Reasons for a Marketing Budget

Reason #1: Protecting against losses

Often a marketing budget is enacted for under-performing programs. To protect against losses, management will create a budget to limit the amount of exposure a business has with running campaigns either by channel or across all of them. Don’t protect losers. Support winners!

Reason #3: The business plan

Whether a business is considered a startup or an established enterprise, a business plan often dictates that there should be a marketing budget. After all, we have budgets or better yet, predicted costs for other things such as employee salaries, rent, insurance  and other costs related to the business. Marketing is fluid. It’s a two way conversation, not a static line item.

Reason #3: You don’t have a strategy

Most likely you have a budget because you don’t have a strategy. A budget is a simple way of creating the semblance of a strategy by helping bucket costs into groups like digital marketing with advertising, SEO (search engine optimization), SEM (search engine marketing), content marketing, offline promotions, branding and TV or other media. A marketing manager has to decide how to allocate funds strategically. The reality is, this is not a strategy. A strategy has an outcome and then steps to get there. It’s iterative and focused. Budgets aren’t plans.

Reason #4: There has always been one

Marketers coming into an organization or taking over a budget can feel stifled by how things have run historically. Stepping into a new role comes with baggage, expectations and bias. If there has always been a budget, it can be difficult to initiate change. Businesses that are stagnant and not evolving die. Don’t be a statistic. Stay relevant

Reason #5: You don’t know what else to do

Marketing budgets provide structure and safety. They feel like an accomplishment. Whether you are new to marketing or experience, deciding what to do next is hard. Working with a budget is fulfilling as you find your way.

No budget? But why?

Let’s rethink the marketing budget. I am not advocating recklessness. If fact, I’m suggesting a careful and metered approach to marketing. A budget does not answer questions about what is working well and what we could be doing better. In order to answer the question “how should I be allocating money to allocating” we need to employ test-based marketing. Budgets don’t make us better, tests and understanding do.

Test Based Marketing

Reviewing Marketing Test

Each test is its own budget with a hypothesis. We either prove the hypothesis, prove that it was incorrect or determine that we need more data. Tests have a finite amount of time and money but by no means only happen once.

Test-based marketing approaches allow us to learn, iterate and grow our business. Once we learn what works and understand why, we can repeat with confidence. No marketing program can continue on auto pilot and there is always room to do better.

Test based marketing budgets force us to evolve and adapt to the market and our customers. We can cater our experiments to our level of risk tolerance. We won’t always be right and when we are, what works today might not work tomorrow.

Your business deserves to move away from marketing budgets and to start focusing on tests. Be clear on your goals, measure objectively and ensure you can achieve the proper scale to get meaningful data and results. If you’re interested in test-based marketing or planning your strategy I’d love to talk with you and share ideas.

If you liked this article, please feel to like, share and recommend it. I would also appreciate comments and feedback. Thanks for reading!

Attribution, why it’s flawed and you shouldn’t use it

Humans like to categorize things to help make sense of the world. When talking about marketing, attribution is a trap that marketers fall into. On the surface attribution makes sense when explained, but when you dig deeper you see how it hurts marketing programs and the bottom line for both marketers and publishers.

I’m no marketing historian, so I can’t tell you where the concept of marketing attribution starting popping up. I can tell you it it is becoming more pervasive each and every day in the world of digital marketing in particular. Attribution needs to go. It doesn’t align with business goals and successful relationships between marketers and publishers. Let’s examine it a little more.

Brand Marketing

I’m calling marketing based on a CPM (cost per mille) billing model, brand marketing. Essentially, a brand buys inventory at an agreed upon price (either ahead of time or in real-time based on programmatic bidding) and then agrees to pay for it, regardless of the outcome. Digital marketing has transformed quickly on the timeline of marketing evolution. In the “early” days everyone was paying a CPM, a billing mechanism that was familiar from the days of print advertising. Publishing on the web grew and as a result digital advertising exploded in popularity and scale. Savvy marketers, especially those rooted in direct response are used to measuring everything. Digital became more prevalent and yet it wasn’t measured in the way that it could be. This got people talking.

The Rise of Performance Marketing

Very quickly marketers started pulling the biggest con on digital publishers. They convinced publishers that digital advertising couldn’t possibly work and if it did work, they’d have to show it through measurement and metrics.

Advertising technology was born out of the need to manage scale, relationships and the desire to track performance for the most trackable medium and channel that has ever existed. Marketers convinced technologists with little marketing background that performance media is a thing, shifting the onus of responsibility onto the vendor instead of being a hand in hand partnership. The majority of vendors, whether they be ad networks, demand side platforms, supply side platforms, exchanges (they are all ad networks with different flavors of marketing and clients) failed to come up with solutions to proving out that digital marketing works and are now stuck with the burden of digital marketing’s history of how things are done.

For publishers lucky enough to attract CPM relationships, the hope is some sort of post view conversion attributed to their inventory. Publishers, not wanting to lose customers and therefore large amounts of revenue were very quickly duped into signing agreements based on performance marketing, metrics predicated on clicks (CPC) or actions such as conversions (CPA). Performance marketing agreements are very clear signals of a tenuous relationship and one where the marketer is saying they don’t believe in a publisher’s value or ability to attract an audience that aligns with the customers they are after.

Let’s be clear, no one clicks on ads, and even the highest of conversion rates is a low percentage number. As a publisher, allowing for performance marketing puts all of the risk on you where you give up valuable real estate, and strategically build content around the ad placements with the hope that someone will click on an ad (intentionally or mistakenly). This isn’t a winning business plan.

Attribution, The Accountant’s Nightmare

Accounting attribution

If you’re a brand, the deal you’re getting through performance marketing feels pretty good. You’re only paying for clicks or conversions and aren’t taking on the monetary risk of a CPM based media buy. Anyone looking at this type of relationship between a buyer and seller would have a few questions in their head about how this plays out in real life. One key constituent is the accountant.

The Brand Accountant

On the surface, this relationships seems great, in reality, beads of sweat and fits of frustration are seen on any accountant’s face having to deal with billing. If you’re like most marketers, you aren’t putting all of your eggs in one basket with respect to supply partnerships and where you run your ads. After all you need reach and are convinced that digital marketing doesn’t really work right? This creates a tough situation.

First of all, accounting for clicks is straightforward.

  • If I pay ten cents per click with Publisher A and I get thirty clicks on my ad, I owe Publisher A $3.00. As a marketer you are also running ads on Publisher B and Publisher C.
  • If publisher B charges five cents per click and you get twenty clicks, you owe $1.00.
  • Publisher C charges twenty cents per click and you also get 10 clicks. You owe $2.00.

Let’s say these publishers are news sites. Presumably there is some overlap with the audiences. You may or may not be double-paying for clicks from the same person on two different sites. You’re OK either way, but do you know? Furthermore, if you look at the cost per click alone, your accountant is probably asking you for cheaper clicks. They’re all the same right?

The likelihood of someone clicking on an ad and converting right away is very low. This is why we have lookback or conversion windows. Yay, plus one for publishers here. This presents a not so straightforward challenge. If I as a consumer click on two ads, the first one on Publisher A and the second one on Publisher C, and then subsequently convert during the lookback window, who gets credit. Who do I attribute the conversion to? Anyone in adops at brands that “buy into” attribution will want to optimize spend toward the publisher that generates the most conversions. If we are paying a CPA this question is of even greater concern. The accountant doesn’t want to pay twice especially if you are paying a commission as in affiliate marketing. The economics of the deal are even harder to swallow when you pay twice. Imagine paying three times or more? This leads to a problem for publishers.

The Publisher Accountant

On a regular basis, publishers reconcile with their demand sources. Imagine the accountant’s dismay when they look at their earned revenue on the income statement and then learn through the reconciliation that a third of their revenue is now gone as a result of attribution based on rules such as “first click” or “last click” or “fractional” attribution. In the accountant’s mind and the publisher as a whole, they provided valuable real estate for the marketer to display a message about a product or service. The real estate is ephemeral and once that pageview is gone, the real estate and revenue opportunity is gone forever. Ultimately a number of consumers converted as a result of relevant messaging and now the publisher is being told that they won’t get credit for some of their value. It’s a raw deal. It’s no wonder why there can be a contentious relationship between a marketer and a publisher.

Optimization and Attribution

Optimization through attribution

As we step away from the accounting nightmare that attribution creates, we can look at campaign and program optimization. I can’t tell you how many times I’ve been witness to what should be a crime against marketing when I see or overhear someone talking about optimizing campaign performance based on click through rate or their attribution metrics.

What exactly is campaign performance anyway? Before you answer, consider that a campaign is part of a marketing program. That marketing program is about creating and maintaining a relationships with a consumer, and hopefully a profitable one. If we start removing supply partners that don’t perform we are also negatively impacting our conversions and reach.

CPM campaigns are not immune to this either. While attribution started off as a way to make sense of billing it has sneaked its way into brand marketing. This sort of attribution optimization presents a myopic point of view. Publishers don’t’ generate conversions, marketers do. Don’t be fooled, everything is brand marketing and attribution is merely a way to make marketing decisions with little effort on the behalf of the brand.

What Can a Marketer Do?

Take a step back and consider what a marketing program is. A program is a mix of campaigns across partner relationships. The goal is to effectively and efficiently reach a large group of consumers, either existing customers or new ones a marketer wishes to acquire. For any marketer, that’s the job. Let that sink in.

A brand needs a cohesive message to consumers. Part of that messaging should factor in frequency and return across relationships. If I see a message on two publishers, and then convert, I was affected by both messages, not just the one which attribution strives to optimize for.

Attribution is for accountants, not for performance and revenue optimization. To understand performance we need to look at messaging over time at the person level. Publishers can be compared for reach and overlap while performance is measured through lift and engagement metrics gathered through standard test and control.

Marketers should take a stake in their programs and buy media based on a CPM. The CPM should be based on the ROI of the program and the potential for that consumer to convert. This is dynamic people-based marketing. In this way, publishers will get value for their inventory and decisions around marketing performance are based on the consumer, not the piece of content they are view on a particular publisher at a point in time.

I previously mentioned that publishers don’t generate conversions, marketers do. Publishers have no control over poorly designed creative or marketer web sites. Conversion rates are solely the responsibility marketers. Publishers provide an audience. This is true whether online or through TV and radio and yet digital publishers are held to a different standard simply because twenty years after the first banner ad was displayed, we aren’t sure if digital marketing works yet. Marketers don’t need attribution, they need marketing platforms that are aligned with their goals and that can deliver on them based on the metrics of success. The platforms should be held accountable, not the conduits for their ad placements.

If you liked this article, please feel to like, share and recommend it. I would also appreciate comments and feedback. Thanks for reading!

Marketing Isn’t What You Learned in College, Online at Work or Anywhere…

Crowd in Black and White

“People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.”
Simon Sinek, Start with Why: How Great Leaders Inspire Everyone to Take Action (on Amazon)

Marketing is flawed. Marketing is broken. Marketing suffers because of four forces that conspire against producing your intended results. These forces include college education and career training, internet research fallacies, an industry filled with companies that have poor incentives to do better and finally there are the employers hopelessly misinformed and stuck with old or incorrect information. These forces have resulted in convincing us that marketing is a set of tools and tactics instead of a way of being, an identity the permeates every thought, decision and interaction with your intended audience, a way of communicating. We’ve been taught that marketing is what we do, not why we do it.  

Why what you learned is wrong:

Marketing and its implementation through advertising and tools is broken. Innovation focuses on cost efficiency and profits for agencies and service providers instead of reducing overhead, increasing transparency and focusing on marketing’s objective of creating a relationship with a consumer for mutual long-term benefit all the while communicating brand in a way that resonates and connects.

The College Problem

Classroom Lecture

Marketing isn’t what you learned in college. The essence of marketing isn’t found in a textbook or obtained from tired lectures that are repeated each and every semester with tweaks focused on “recent innovations.” If those days ever existed they are long gone.

In college we learn about the 4Ps. Whether you studied marketing as an undergrad or as part of an MBA program or other training, you can’t escape the 4Ps, also known as the the pillars of marketing. You were probably taught early on in your coursework that if you get those down, you’re on the right track. In this case, you and your professors would be wrong.

In case you didn’t pay attention in class or you forgot what they were, here is your review.

The 4 Ps

  • Product (or Service)
  • Price
  • Promotion
  • Place

Product (or Service)

A tangible good or intangible service. Marketers understand how features translate into benefits for consumers of the product or service.

Price

Obviously this is what the product is offered at and how that compares to the market at large for exact or similar products.

Promotion

Promotion focuses on communication channels and how your message is relayed to current or potential consumers.

Place

How will you make the product available and get it into the right hands?

Academically these are good thought exercises, but marketing is so much more than this tactical framework. The 4 Ps provide context and clarity of vision and a scaffold for which to discuss ideas, values and the value of your product or service itself. They are perceived as the nuts and bolts for a plan for “putting the right product and/or service  in the right place, at the right price, at the right time.” Marketing literature will discuss this ad nauseum. Some key challenges with the model include the following:

  • Product suffers greatly in this framework because it is presented as static and flowing through a product lifecycle instead of evolving and ever current. The product isn’t the singular widget. You are the product and what you produce is a detail.   
  • Price suffers because a decision to buy is rarely about price but rather the perceived value a product and/or service maintains in the eyes of the purchaser. Price is built around the package including your company, team. Again it’s not about the widget.
  • Promotion is unfairly weighted against the other buckets. A marketing maxim is that your message and your brand are your product among other things. Get this wrong and you won’t find success.
  • Place is easily at odds with product and at the same time is inherent in the product. You can’t have one without the other.

Your product and/or service should solve a pain point, one of considerable value and importance to the consumer. From there, your job is to get them access to it or into their hands. Beyond that, how you package everything and build your brand are deciders on whether you win or lose.

Academia is often late to the game with tactics especially as they relate technology. To be sure, talking about tools and technology is far easier than talking about identity, values and relationships. Unfortunately this misses the mark in teaching what marketing truly is.

Internet and Offline Research Bias

Google Search

Marketing isn’t learned from the garbage you read online, find through Google searches that lead to opinion articles on blogs and newspapers or by reading any of the selfagrandizing thought pieces put out by industry press and guest writers. If the first things that come to mind are ad campaigns, analytic tools and conversion rates, you’ve fallen into the trap.

Online, the amount of noise to filter through is seemingly endless and at times deafening. The amount of useless and confusing search engine optimized information is even greater. Publishers of online content will lay traps for their prey with content that ranks well in common search results. Driving content to topical pages generates advertising revenue or worse yet, affiliate commissions from “programs” that promise to teach the ins and outs of marketing. When it comes to marketing knowledge online, altruism is hard to come by.

As far as your Google searches go, those tips, trick, strategies and tactics you learned to get more users and conversions?…unlearn them now. Don’t depend on them. They aren’t what’s important in your marketing success story. They are fleeting at best and usually outdated much like a stock tip read in Money magazine.

Those business books you read were undoubtedly inspirational. In many cases the authors were lucky, in most cases they were pioneers, in almost all cases, the real story isn’t the story itself, it’s the context of the story. The real story is the person or team behind the story.

The Industry Echo Chamber

Trade Press

Trade articles, particularly those focused on technology and written by industry experts aren’t much better for gaining an understanding about marketing. They often aren’t more than thinly veiled sales collateral and content marketing pieces. In short, they are well written advertorials. Trade articles represent the structure of an echo chamber, validating how smart we are and how much value we who provide advertising or marketing products and services provide our clients. I say we because I too am guilty of creating noise in the chamber (Back to Basics or The Mobile Advertiser’s Dilemma, Say No to the Blame Game in Mobile, The Mobile Publishers Conundrum: Native Apps or Browser Based) as promotion for my fledgling company at the time, Media Armor.

Your Job and Employer

Analytics

For the web, if you’re not in Martech or Adtech, then you’re likely the consumer of one or more products or services based on technology for delivering a marketing message such as an email or display ad or perhaps insights about your business. Offline, you may be seduced by agencies or industry experts that produce collateral and TV spots. Much like any consultant, these providers can’t know as much about your business as you do. They may be good at the how, but they will never be good at your why.

Marketing isn’t what you learned from your job or employer either. You see, marketing is the execution of your brand through communication. It’s not the tools, frameworks and numbers themselves. Those are just the the details. For business owners and employees, marketing is a hard fought battle that starts before you’ve even settled on a company name and product and/or service offering.

Businesses relying on one or more solution are vexed with two issues, one figuring out if a product or service is actually providing value and a return on investment and secondly, who to pay when working with vendors, some of which provide similar or complementary offerings. Not wanting to get burned by every new shiny object, many businesses will rely on performance based payment methods. Accountants trying to allocate costs into the right bucket will happily work with vendors that can attribute performance. Employees, especially those working for small and lean operations will be tasked with proving instant results, staying ahead of the curve while reducing cash burn.

The vendor, now being in the unique position of expert will craft strategies for closing the sale by answering objections through deal structures and metrics that fail to confirm marketing’s value such as pay for performance and it’s related cousin, attribution. Buckets don’t tell the whole story.

What is marketing?

That’s what we’ll be discovering together. We will arrive at the deep truths we are after through thoughtful conversation and careful introspection for both the how and they why. Throughout our journey some of the themes we’ll cover as we studying marketing include:

  • Emotion
  • Creativity
  • Advertising
  • Rigid Experimentation
  • Trial and Error
  • Rational and Irrational Behavior
  • Deal Making
  • Supply & Demand partnerships
  • Reach
  • Fraud
  • Statistics
  • Analysis
  • Technology
  • An ecosystem
  • Evolving
  • Interdisciplinary
  • Sales
  • Your team
  • Why

Advertising

Getting the word out across one or multiple channels. How do we get attention and more importantly, can we keep it? We earn attention and then build on trust. Advertising as a form of communication is ongoing.

Emotion

“Advertising is based on one thing, happiness. And you know what happiness is? Happiness is the smell of a new car. It’s freedom from fear. It’s a billboard on the side of the road that screams reassurance that whatever you are doing is okay. You are okay.” – Don Draper, Mad Men

This is a myopic view, but it does have merit. Marketing’s agent Advertising is built around the notion of emotion.

Creativity

Creativity takes many forms. Humans are easily anesthetized to the same. We seek out different. When different seeks us out, we notice it.

Rigid Experimentation

Evolution requires experimentation. Success is based on creating a system of repeatable and scalable results. Without a plan, we’re just guessing.

Trial and Error

Not all right answers are known. Pioneers inherently know this. Sometimes we have to test things out to see if they work. Failures are success if you learn from them

Rational and Irrational Behavior

Not everything can or will be explained through conversation, data or experimentation. We make the best decisions we can with the information at hand. Sometimes the best laid plans go wrong.

Deal Making

Whether it’s gaining exposure through partnerships, better pricing through negotiation or converting consumers, there’s an art to the deal. We make deals with our partners, our customers and ourselves.

Supply & Demand Partnerships

Relationships matter. Preferential pricing, guaranteed exposure, long-term revenue all rely on partnerships on both sides.

Reach

If marketing doesn’t reach it’s audience, it doesn’t have effect.

Fraud

Sadly we don’t always get what we paid for. The cause can be negligence, malicious or simply not knowing any better.

Statistics

Many tools give us data. From the data we can infer knowledge.

Analysis

Understanding is achieved through analysis. When looking at programs we should see to understand “why that happened.” This can come from a combination of conversation, and qualitative and quantitative data.

Technology

There is no doubt that technology can make our lives easier and can provide efficiency and scale. There are many “solutions” to marketing problems. Technology that helps us connect efficiently and effectively is important to marketing.

An Ecosystem

No one company or product does it all or can do it all well. Even Google is part of the ecosystem, not the ecosystem itself. Every seller and provider is fighting for a piece of the marketing pie all the while competing for attention.

Interdisciplinary

Nothing is created or operated in a vacuum if it is to do well. The more varied the thinking, the better. Your customers are online AND offline. They use a variety of channels and technologies. Context is ever changing.

Sales

At the end of the day, “sales solves all business problems.” They are the lifeblood of any company. Regardless, tactics and methods can have a cost and/or a benefit.

Evolving

What worked yesterday may or may not work today. Our knowledge and understanding of consumers is increasing. Applying data and learning benefits everyone.

Your team

Everything starts with team. Your brand, your identity, values and solutions all come from the team whether a company of one or one thousand.

Your Why

You can have the best product or service offering but if it doesn’t resonate with your consumers’ core, you won’t be successful. Brands take years and even decades to build through ongoing relationship building and can be destroyed in seconds. Any action or actions that are incongruent with not only what you stand for, but what your consumers stand for will cause you to fall out of favors.

Marketing is so much more

Open Road

If you’ve read this far, you’ve reconciled with the fact that I was being slightly dramatic with the title. Sure, you’ve learned a lot from many perspectives to date. Some of what you learned has been great and worked for you. A lot of it likely was not so great and that resonated with you enough to read on. If that’s true, you are the one I want to converse with. I’ve also enumerated many tactics. To be clear, which tactics you choose and how you implement them goes back to your brand. I can’t overstate this.

Marketing requires understanding and a plan. It’s your business. Marketing is for the long term. Marketing comes from within. Marketing is your soul, your raison d’être. Marketing isn’t what you learned. Marketing is who you are and how you convey that externally with everything you do. Let’s start marketing intelligently.

If you liked this article, please feel to like, share and recommend it. I would also appreciate comments and feedback. Thanks for reading!