October 01, 2012

The Direct Marketing Success Pyramid

I tend to focus on things I can prove, numerically.  

Today, we'll go down a different path.

There are few things that get under my skin like the "Eight Easy Steps To Success" posts that are designed to generate page views.  We read about how important it is to "know the marketplace" or "understand the customer".  Then we move on to the next article, with nothing to retain.

Why not print (or download) a PDF of the image here, titled "The Direct Marketing Success Pyramid"?  Click here for your own PDF copy.

Here, we have ten building blocks for achieving greatness as a direct marketer.  You need to get the foundation right (the bottom four building blocks) before you build discipline around the other six building blocks.  

It isn't easy.  If it were, everybody would be rolling in 15% EBITDA, right?

Let's look at the four foundational building blocks.

Merchandise:  There's probably nothing more important than merchandise.  Think about the iPad, or the iPhone.  People gladly pay 2x or 3x or 4x as much for one of these devices as they pay for competing product.  Think about the profit generated by being able to sell a product at a healthy gross margin?  We spend too little time thinking about merchandise.  Pretend you are Best Buy for a moment.  You are selling product that is available at a thousand other online or retail locations.  What is the compelling reason to buy an iPad at Best Buy vs. an Apple store?  Where possible, merchandise should be under your control, if it isn't, this building block disappears and it gets harder to sustain success.

Creative:  Creative encompasses all aspects of presenting merchandise to a customer.  If you are Best Buy, then Creative is really important, because Creative is one of only a handful of things that differentiate Best Buy from others.  I include images, video, social, copy (content), channels, and devices in Creative.  So much of what you read about (trade journals, vendors, consultants, bloggers, the Twitterati) focuses on this building block.

Finance:  Oh, I know, this one is boring, and is one you probably don't think about much ... or don't want to think about.  But this is so important, folks.  Finance is more than Accounts Payable.  Finance is about determining appropriate price points, setting reasonable customer acquisition budgets, marketing budgets, capital investment strategies.  Great Finance teams add two to three points of EBITDA per year through strong financial leadership.  This money gets reinvested in the business (or is funneled directly to your bonus check), minimizing finance costs, accelerating future growth and EBITDA.

Service:  You can define customer service in a million different ways.  Or you hear a company name like "Zappos", and you immediately think about good Service.  Most of us are capable of providing mediocre Service.  Ten percent of companies provide outstanding customer service, earning reputations in the process, reputations that increase customer loyalty, generate incremental profit, and fuel future success.  Mediocre Service is required.  Exceptional Service is a differentiator.

If we assume that your company is at or above average on Merchandise, Creative, Finance, and Service, then your company moves up the pyramid.  The following concepts are less quantifiable, but are just as important.  Without Merchandise, Creative, Finance, and Service, the following six building blocks are largely meaningless.

Passion:  My all-time favorite quote comes from an Executive, who told me ... "we simply don't have a new story to tell the customer for a few months."  You know, if we don't have passion for our business, why in the heck should we expect our customer to have passion for our business?  Look at your staff.  How many of these folks have passion for your business?  Can you count them on one hand, or do you have four dozen people with passion?  You can will a business to success with passion, if you have Merchandise / Creative / Finance / Service solved.

Excellence:  This is the opposite of "Best Practices".  The polar opposite, folks.  Best Practices are all about copying what somebody else did in an effort to achieve credibility.  Excellence is different.  Excellence requires discipline and structure, a desire to compete, to win, to innovate, to take measured risks.  Excellence requires non-stop practice, not "Best Practices".  Far too few of us want to invest the effort to be Excellent, we'd rather find short cuts.  Be honest, look around your team, how many would you label as somebody who "pursues Excellence?"  The latter point is critical.  Not everybody can be Excellent.  Everybody can "pursue Excellence".

Knowledge:  Real knowledge is earned, not copied.  Successful Direct Marketers don't rely upon surveys of 882 customers from research organizations.  Instead, Successful Direct Marketers know more about their customers than competing brands know about their customers.  Improved knowledge is frequently worth one to two points of EBITDA on an annual basis ... as any analytics expert knows.  The best Direct Marketers share knowledge across the enterprise, and are fully able to articulate complex business concepts to all employees.  Knowledge and Communication go hand-in-hand.

Vision:  A business leader recently told me that "my customers will continue to shop from catalogs for twenty years, and during that time, I will take market share from those who abandon catalog marketing."  That's vision, folks.  Now, you may 100% disagree with this person, but think about the advantages this business has over other businesses?  While other businesses debate the merits of being "omnichannel", this business focuses all employee efforts on one goal ... merchandising an outstanding catalog.  Vision yields focus, and focus feeds off of Passion, Excellence, and Knowledge.

Evolution:  Successful Direct Marketers evolve.  In the catalog marketing world, folks evolved from cash orders in envelopes to call centers taking orders with credit cards to e-commerce orders to mobile devices.  Successful Direct Marketers don't have to be first movers, but they have to be movers!  Vision helps expedite Evolution.

Chemistry:  I put this at the top of the pyramid, and for good reason.  You can master Vision, Evolution, Passion, Excellence, Knowledge, Merchandise, Creative, Finance, and Service, but without Chemistry, you won't experience Success.  Chemistry is the ability of people, of co-workers, to care about each other so much that the collective performance of each individual, as a team, is greater than the sum of individual performances.  You can't measure Chemistry, you only feel Chemistry.  Once you've felt Chemistry, you know that the alternative is just Work.  When you feel Chemistry, you don't ask for a pay raise, you don't question staying until 6:15pm to get something done, and you don't hesitate to visit the Hospital to see an ill co-worker.  When you have team Chemistry, you look forward to meetings, you rally around ideas, and you are open to different approaches to problem solving.  When you have team Chemistry, you put the needs of others (especially customers) above your own needs.  Chemistry is earned, it happens when we trust each other.  I can recall two instances, in almost twenty-five years, where I was part of a team that exhibited great team Chemistry, and was part of a third team that came close.  In sum, those instances consumed three years out of a possible twenty-five.  Yes, Chemistry is that hard to achieve.  Many of the good lessons taught by popular religions manifest themselves via Chemistry.

Yes, you can have team Chemistry, but without the other nine building blocks, you're unlikely to experience success ... you'll have a lot of fun, but not as much success.

I know, you're going to say "but he forgot Talent ... you've got to have Talent, or you're sunk."  Hogwash.  I've taken over highly talented teams that wanted to kill each other ... those teams created unimaginable headaches for the Human Resources team ... I know this, I've lived it.  And the most talented team I ever worked with was at Avenue A, back in 2000 ... an analytics/marketing department of maybe 30 people, all pulling in different directions, no Knowledge, no Vision, no willingness to Evolve, absolutely no Chemistry.  Talent is largely useless when you don't have Merchandise / Creative / Finance / Service solved, and when Management fails to foster Passion / Excellence / Knowledge / Vision / Evolution / Chemistry.  Conversely, I've been part of highly mediocre, largely untalented teams that produced record profit ... because they nailed most of the ten building blocks.

Ten building blocks.

As a business leader, you can isolate each building block.  The first four are building blocks that you focus on every single day.  The final six building blocks are much harder to achieve, but are every bit as important as Merchandise, Creative, Finance, and Service.

It is my opinion that these ten building blocks determine Success.  When I visit a company, it is easy to see which of the ten building blocks a company executes well, and which ones require a bit of focus.  I'm confident that you can look at your own company, and easily measure success via each building block.

Ok, time for your feedback.  Thoughts?