September 20, 2010

Are We Marketers Just Plain Stupid?

There's a reasonable chance that you or somebody you know is attending Shop.org's annual Summit next week. And you'll ask me ... "Why aren't you attending?" ... or ... "Why don't they ever invite you to speak?"

The latter question comes up all of the time ... "Why don't the big US-based conferences ever invite you to speak?"

I've been consulting for three-and-a-half years now, and there's one thing I've learned that is a "best practice" if you want to be invited to speak at US-based conferences.
  • "Follow the storyline."
The storyline is the script that folks want you to follow. And the more we follow the storyline, the less we pay attention to what really matters.

Remember, the storyline is designed to maximize the return on investment for those who host conferences.

The storyline fails us, over and over and over again, because the storyline isn't designed to maximize our return on investment.

Honestly ... go poll 100 companies that are similar to yours. How many of the 100 companies generate 10% of their sales via Social Media? Seriously, go poll 100 companies that are similar to yours ... you'll find fewer than five of one hundred that generate at least 10% of their sales via Social Media. So if Social Media is where all the cool kids hang out and is so vitally important, then why isn't Social Media a vehicle that drives sales on a consistent basis for all but a few retailers?

Now go check out the conference agenda for your favorite industry conference, and you'll find a buffet of Social Media topics ... "Eight ways to reap the rewards of employee blogging" or ... "The future of location-based micro-services" or ... "Nine tips for success on Facebook and Twitter from a panel of industry experts."

Fortunately, Social Media is harmless ... it costs nothing, so there's no risk to it ... you should experiment in low-cost endeavors, right?

The worst fraud perpetrated on us this year is Groupon. This is not a low-cost endeavor.

Groupon represents "the smartest men and women marketers in the room". They truly are. We, on the other hand, are just plain stupid.

Where else but in marketing would one cut the price of an item by 50%, then share half of what is left with a company that does a great job of driving traffic? Groupon gets $5 to spread across the cost of driving traffic, while you are left with a curious math problem ... how do I generate profit when I have $5 and I have to pay for the $10 cost of goods sold?

It's sort of like what happens when you make $4,800 a month in salary and you have to pay $9,600 a month in mortgage payments and other expenses. Would you run your personal life that way?

Go ask the merchant who is responsible for the sales of widgets what happens to her if she generates negative gross margin dollars ... SHE LOSES HER JOB!

But in marketing, WE CELEBRATE THIS OUTCOME AS A SUCCESS! Seriously, in what profession other than Wall St. or Marketing is losing money considered a success? Maybe the average Chief Marketing Officer keeps his job for only twenty-three months because, as a marketing community, we follow the storyline, constantly giving up profit dollars in order to adhere to the storyline.

The storyline offers us a lot of low-probability routes to profitability ... enticing us with tantalizing treats that work for some, but seldom for the masses.

Social Media is always part of the storyline, but is more like a roulette wheel, generating significant sales and profit for maybe 3% of participants. As one popular Social Media consultant recently said ... "It's where the cool kids hang out." You want to generate profit, you don't want to be a cool kid ... right?

Mobile may be really important in a few years, but it sure isn't going to be the key factor that determines Holiday sales effectiveness ... YOUR MERCHANDISE will be the key factor that determines your Holiday sales effectiveness, it has always been about YOUR MERCHANDISE! Are you focusing on an iPad app, or are you focusing on how to sell merchandise on an iPad app?

E-mail was promised to be the "best return-on-investment" of any marketing vehicle. And yet, I keep analyzing e-mail campaigns that deliver $0.08 or $0.12 net sales per e-mail delivered, yielding $0.03 profit. That's awful, pitiful, just plain lousy ... and yet we're told that e-mail and social media are like peanut butter and jelly ... yup, they sure are ... they're like a teaspoon of peanut butter and jelly when what we really need is a full sandwich to satisfy our hunger.

The men and women at Groupon are the smartest marketers in the room.

We, however, are just plain stupid. We willingly give up profit in exchange for traffic that is loyal to Groupon, traffic not loyal to us. And if you don't agree with me, then go find a dataset of actual customer purchase transactions from a real retailer or online brand, and prove to all of us that you'll make up what you lose on the Groupon transaction in long-term profit (or even short-term profit). Go get the data, and present your analysis for all to see ... I'll even publish your results here on this blog if you can prove to me that you have actual customer data from a real retailer or online merchant that validates your result.

The storyline is leading us astray.

I don't get asked to speak at a lot of mainstream conferences, and for good reason. As you know, we focus on actual customer behavior on this blog, using actual customer data to validate actual profitability. This data, unfortunately, isn't always congruent with the storyline told at mainstream US-based conferences. One wonders if our blind allegiance to the storyline is causing us to become stupid marketers.