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Resurrect your brand using Six Sigma thinking By Kevin Clancy
and Peter Krieg There are three tectonic shifts taking place in marketing today that are rocking the practice to the core. One, companies are making unprecedented investments in marketing measurement systems. Two, marketers are moving dollars out of traditional media, in particular network TV, into non-traditonal, or alternative, media. And three, seeing the often dramatic successes of Six Sigma—the methodology for achieving defect free products 99.99 percent of the time—in operations and logistics, CEOs are eagerly pushing its application to the marketing function. Though the business media has widely reported on all three shifts and all have been the topic of extensive conversation and CMO speeches at numerous marketing conferences this year, to date no one has explored the relationship between these three seemingly independent, yet extraordinary alterations to conventional marketing thinking. In all three cases, demands from the corner office for greater accountability are the catalyst for change. "Marketing in many ways has gotten a pass from being held accountable," explained Jim Speros, the chief marketing officer at Ernst & Young and former chairman of the Association of National Advertisers. "CEOs and CFOs of major corporations hold finance organizations accountable for driving results, yet marketing has not historically been held to the same standard. Now CEOs and CMOs are driving requests for more metrics and more accountability." As BusinessWeek recently reported, "companies in every segment of American business [are] obsessed with honing the science of measuring marketing performance." According to Professor Phil Kotler of Northwestern's Kellogg School, 90% of CMOs surveyed consider marketing performance measurement a significant priority. A 2004 survey by the Association of National Advertisers similarly found that measuring marketing effectiveness was the second most important priority of its members, falling just behind building and maintaining their brands. Advancing technology has allowed the collection of much better data faster, subsequently improving measurement exactitude and timeliness. These aren't your father's measurement tools; the application of state-of-the-science marketing tools, sophisticated algorithms, and vanguard modeling techniques has made what once seemed impossible—linking marketing investments in advertising, for example, directly to market share, sales, and profits—not only doable, but commonplace. You'd think marketers would be delighted with their technology-enabled measurement capabilities, but strangely, in a recent survey of senior marketing executives, Patrick Marketing Group found that just over 80% indicated that they were actually dissatisfied with their ability to measure marketing ROI. Fewer than 20% of marketers in a CMO Council poll of top technology marketers said their companies employed, "meaningful, comprehensive measures and metrics for their marketing organization." This high level of dissatisfaction does not stem purely from an inability to get to the hard measures CEOs and CFOs like. A quick run down of mounting evidence from a variety of sources that demonstrates across-the-board disappointing performance explains the long faces:
In other words, it's not the measurement tools that have marketers in knots; it's the poor results they are reporting. There the CEOs and CFOs are...looking for answers about how to reverse these sad outcomes. Often they hone in on TV advertising, frequently the largest dollar allocation in the marketing budget, and want to know what their marketing team is doing to address the problem. Marketers, their confidence in traditional media shattered, are responding by reallocating substantial dollars to non-traditional media. Even though there is little information about its performance or existing tools in place to measure it, with less clutter and, in many cases, lower costs—not to mention lots of hype—non-traditional media looks like a much more attractive (i.e., safer) investment. Between installing measurement systems and buying what they believe is more effective media, marketers may feel as though they are making the practice more accountable. But using supporting elements of marketing accountability to improve performance is like fighting cancer with a thermometer and aspirin—it doesn't get anyone closer to a cure. If marketers would expand their attention beyond measurement and media for just a moment and take a big picture look at why the numbers are so bad, they'd see their marketing strategies are flawed. With the help of their brand new measurement systems, marketers are measuring with ever-increasing precision the impact of, not the decline of traditional advertising, but of ill-defined targeting, weak positioning, unprofitably configured products and services, mediocre ad campaigns, giveaway promotions, poorly allocated budget dollars, and so on. In order to make the practice more accountable and improve performance, marketers have to fix strategy and execution. Enter Six Sigma. Many have heard the term "Six Sigma" bantered about in business conversation, but until recently it hasn't entered the marketing lexicon. This methodology for process improvement got its start at Motorola in the late 1980s when the company launched a large-scale quality improvement effort and dubbed the initiative "Six Sigma." The name was a reference to the statistical term for standard deviation and the company's goal to deliver defect-free products and services 99.9997% of the time. Other companies, most famously GE and 3M, subsequently adopted this same approach to improving manufacturing and operations and generated impressive financial improvements. The dramatic successes in other functional areas have many CEOs chomping at the bit to apply the methodology to marketing. The guiding principle of Six Sigma thinking is the careful measurement and analysis of unimpeachable data to determine why a process is not working as well as it could or should and taking the meticulously-managed steps, guided by the data, to fix the problem permanently. Six Sigma marketing is a call to abide by this code of conduct and develop and launch extraordinary marketing programs that deliver performance well above the disappointing average most programs return these days. A Six Sigma approach to developing the components of marketing strategy, most importantly targeting and positioning, will have a transformational effect on performance. Targeting: A Case of Benign Neglect Behind every great marketing strategy is a great target, yet the targeting decision is one of the worst made decisions in marketing today. Very little time is spent considering the options and even less money is invested in research to help inform the decision. It's made quickly, usually based on intuition and superficial information about category usage, demographics, SIC codes, psychographics, or "needs." Not surprisingly, the folks that account for the most revenue-the so-called "heavy buyers" or the 15% or so of the market that accounts for 80% of sales-often look like the best prospects on paper so become the natural target selection for a majority of marketers. In fact, target group revenues and profitability are often curvilinearly related and heavy buyers often turn out to be the least profitable target to go after. Revenues do not equal profitability. The heaviest buyers in any category are often more price conscious than the other 85% of the market and, because they tend to look just like any other buyer in the category, they're difficult to isolate through media vehicles and in commercial databases. Add to these undesirable characteristics, they aren't particularly loyal—they're on the look out for the best deal, they're buying so much after all—and all your competitors are likely interested in their business and spending money to get it. Profitability plain and simple is the measure of an exceptional (i.e., financially optimal) target, the characteristics of which include:
To find the most profitable target group for your company to pursue, we recommend considering hundreds, thousands, even tens of thousands of alternative factors that could be used to segment the market. Consider all possible market drivers: category involvement; buyer motivations; media habits; sociographics, psychographics; lifestyles; lifestage; attitudes; values; database variables; and more. Test all the potential variables to determine which ones are related to current and potential profitability to determine a customer's (whether an individual or a company) economic value in the market place using several proxies for profitability, such as decision making power, openness to your brand, personal influence, cost to reach and impact, and, importantly, price insensitivity. Finally, take the 10 to 25 most predictive variables to create segments and pick your target. Positioning: A
Case of Criminal Negligence Choosing to mean one thing to one group of people, instead of all things to all people, is such a terrifying prospect for many marketers, they choose not to do it at all. As a result, a stunning 93% of primetime TV advertising has no trace of a positioning, a.k.a., the reason to buy one brand and not another, and we all know about the current performance of this type of advertising. And even more disturbingly, according to a recent Copernicus and Synovate, consumers indicated that they perceive very little difference among the leading brands in 40 of 46 major product and service categories. For those trying to
buck the trend and actually stand for something, a word of caution about
developing a positioning. One of the most frequently made marketing mistakes
is to take an attribute or benefit buyers say is most important to them
and turn it into a brand's positioning. But when a customer of, say, a
bank indicates "offers on-line banking" is a "very important"
attribute, this isn't the same as saying they presently have a problem
with it—that it's important to them and no brand currently offers
it. In fact, many of the characteristics buyers say are most important
are often the basic needs and requirement of a product or service-the
table stakes—and are, therefore, already addressed by every brand.
They're the price of entry for doing business in a particular product
or service segment. Great positionings, like great products, are often addressed to buyer problems. The bigger the problem your brand can solve for the financially optimal target—not everyone and anyone, but the specific group of people you've determined will be the most profitable—the bigger the market response. To uncover the big problems, we suggest balancing judgment and professional opinion about buyer needs with qualitative research to uncover a list of 300 or so buyer problems. Next, measure each problem in a survey of a minimum of 300 customers and prospects on three dimensions:
Multiply #1 by #2 by #3, and you've got yourself a "Problem Score." Finally (#4), rate each problem in terms of how expansive and difficult it would be to correct the problem—from (1) "There's an easy, inexpensive solution" to (5) "This would be difficult and expensive for us to fix." Multiply the "problem score" by #4 and you have a useful rank order of where the best positioning lies. The key positioning opportunities are obviously where the problem is big and the solution feasible and relatively inexpensive to provide. What Six Sigma Can Do For You The business case for Six Sigma targeting and positioning is fairly straightforward. Consider that the typical advertising campaign with average targeting and positioning and its effects on new product market share. For the standard new consumer packaged good, about 2000 GRPs will earn you just short of an 8% share. Meanwhile a campaign with even just Three Sigma targeting and positioning will earn the same share with a mere 850 GRPs. Two thousand prime time GRPs cost $27 million, while 850 GRPs cost about $12 million. A Three Sigma campaign saves you 55% of your original investment! Add to this that, once you have a Six Sigma targeting and positioning in hand, all the other strategic decisions—product/service configuration, advertising creative, media, customer service—fall into place, saving even more. Clearly, while building measurement systems and considering new and emerging communications vehicles are important elements of making marketing more accountable, they are supporting elements. Measurement systems and media plans are only as good as the strategic inputs that go into them. A Six Sigma approach to marketing is the missing piece in the marketing accountability movement today; it will make the difference between making marketing more effective and just generating more of the same disappointing results.
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