Friday, February 04, 2005

Can We Face Reality?

Sherlock Holmes and Dr. Watson go on a camping trip, set up their tent, and fall asleep. Some hours later, Holmes wakes his faithful friend. "Watson, look up at the sky and tell me what you see."Watson replies, "I see millions of stars.""What does that tell you?"Watson ponders for a minute. "Astronomically speaking, it tells me that there are millions of galaxies and potentially billions of planets. Astrologically, it tells me that Saturn is in Leo. Time-wise, it appears to be approximately a quarter past three. Theologically, it's evident the Lord is all-powerful and we are small and insignificant. Meteorologically, it seems we will have a beautiful day tomorrow. What does it tell you?"Holmes is silent for a moment, and then speaks. "Watson, you idiot, someone has stolen our tent."

If Reality can fool Watson, it can fool us, too.

Assembly-line thinking has taken marketing as far as possible. Scale has been a powerful weapon that we used cleverly. But it has been overtaken by customer-demand for variety and relevance. Product options, channels, media and finely sliced segmentation have led to complexity that has given rise to Customer Relationship Marketing technologies to help us manage complexity.

Take one industry as an example. In 1980, there were 458 mutual funds for customers to compare. Ten years later, this grew to 3,081 funds and by 2003 we had 8,126. The Rule of Complexity states that the amount of information that must be compared is (N squared - N). If each fund has just 5 options, then there are a total of [(8,126 x 5) squared – 8,126] permutations to manage. You are confused. Your sales and service teams are confused. The consumer is confused.

Marketing, sales and customer care responded by putting their work into assembly-line silos that further strangled management systems. Booz Allen Hamilton estimated that this complexity increased cost of operations by $1.5 million per $1.0 billion in assets. One bank measured the hidden personnel cost of complexity at 52% of its total processing labor cost.

Nothing but a fairy tale could make this reality sound simple to anyone. But the answer is not to return to 458 product options available in 1980. The answer is to find new ways of doing the work of marketing, sales and customer care.

We are shifting from mass markets with their economies of scale to personalized markets driven by customer demand. There is a huge gap between what we are still doing as marketers and what we must be learning to do. We must adapt new ways of thinking and new skills for execution. We must cause growth. We must do it efficiently. We must manage the unexpected. We must do it without exposing our companies to increased risk.

In traditional marketing, this would be the Situation Analysis that leads to the Marketing Strategy. This should be where we shine. We’re trained to analyze situations and come up with solutions. But if we’re so good, why do most marketing programs fail?

In part, I see us as victims of our own positive thinking. We believe in what we do. We believe we can save the world. But all too often, we see a vision that does not exist. We ignore the facts and believe what we want to believe and we convince others to follow us.

Senior executives will have to pay more attention to how their marketing strategies and tactics meet customer need. But it will not be the same marketing of the past. It will be one based in the new realities.

Keep in mind the facts. Most new products fail. Most direct response marketing programs fail – 98% failure rate. Whenever we launch something new, the odds are against our success. It is easy to get excited about a new product or promotion and be blinded to the facts. Flawed thinking or unsupported optimism at the strategy level is the single largest potential for wasting corporate resources.

"Facing reality sounds simple - but it isn't. Self-delusion can grip an entire organization and lead the people in it to ridiculous conclusions." -- Jack Welch, "Jack: Straight from the Gut"

Waste is the Enemy of Contextual Marketing.

Facing reality is not always easy or popular, but the only way to succeed is by coming to grips with reality. Programs fail for a reason and we have a responsibility to understand why they went wrong. Face reality, then act decisively. Don’t boil the ocean in one day. Fill the holes where things are not working until you emerge with a True North and a system for doing more effective and efficient Lean Marketing.

My experience counseling many Fortune 1000 companies tells me we still have a lot to learn about facing reality.

The Roadblocks to Seeing Reality

We don’t get the real facts. I once worked for a brilliant General Manager of a company that made built-in appliances for residential builders. We wanted to verify some of our conclusions by researching the target market. We knew he hated market research, but he begrudgingly allowed us to do the research – only after he wrote the answers to the survey down and put them in a sealed envelope in his drawer. We did the research and then he pulled out the envelope. He was mostly right, except that he totally missed the price point that homeowners would be willing to pay for the product. He missed the value.

That would be a remarkable example, except that in one variation or the other, I have seen this repeated more times than I can count.

Here’s another variation of the same theme – also repeated day after day by managers. We form our picture of the customer from sales call reports or by making joint calls with our sales reps. That’s a good source of input, but it should be balanced by input from more objective methods. During a sales call, two things are happening. You are trying to convince the prospect to buy and they are trying to fend you off. Both actions then distort the real truth. Failure to observe reality increases risk of marketing failure. And we are failing at too high a rate.

Excessive Enthusiasm.

J. M. Barrie wrote that “We don’t see things as they are, we see things as we are.” That’s part of the problem. But we also see things the way we want to see them. I watch new Brand Managers come on the scene with a big idea they feel will pave the way to personal success. Given that motive, they see only the reality that supports their solution. (Confession: I’ve done this myself.) Being good marketers, we can convince others that our version of reality is true.

But the result is the same. The program gets launched despite unrealistic odds of success and then comes up against reality where it dies a very public death.

When I get invited by clients to come back in and review the programs that went wrong, the first thing I typically see is a set of vague objectives that had no measurements and were not supported by any substance. If there are no measures, it is hard to see where the failure occurred.

When we fail to face reality, we let marketing programs go forward that have no chance success. Worse, we miss the opportunities that existed for even greater success.

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