It is July 4 on Madrona Island, so it is time for the big Coho Bay Independence Day Parade. This year, 67 local merchants, politicians, and non-profit groups are scheduled to parade through the three-block downtown corridor. The Fetzer Footwear float is #1 in the pecking order, so the picture illustrates the view that Lauren and I have as we lead the parade. Not surprisingly, Lauren is wearing a beanie cap on this 57 degree morning, but does not have her iPod Touch with her today. Lauren is munching on a hot dog she purchased at a stand hosted by the Lion's Club ($4), stationed at Madrona Bank (a bank that did not receive TARP money).
We begin the 1mph drive through the three-block business district in Coho Bay.
Lauren: "Can you believe the crowd? This might be the biggest turnout we've had in the fifteen years I've been doing this."
Kevin: "I'm freezing. Does it ever get warm here?"
Lauren: "July 5 is the unofficial start of summer here on Madrona Island. June is often called 'Juneuary' because the temperatures are in the low 60s and there is plenty of drizzle to go around. We'll be in the 70s and sunny in just a few days. Now be honest, would you prefer that it be 98 degrees with a dew point in the mid 70s, like it is in Philadelphia today, or would you prefer this?"
(Lauren adjusts her driving gloves, gloves she's wearing because it is cold out, not because she is having trouble driving the giant hiking boot that is the Fetzer's Footwear entry in the parade).
Lauren: "Here, take a handful of Tootsie Rolls and toss them to the kids. Make sure you don't throw them at the dogs, dogs can die if they eat chocolate."
(I toss a handful of Tootsie Rolls at a throng of enthusiastic children. Many of the Tootsie Rolls bounce off of the skulls of the children, prompting disapproving looks on the faces of the adults lining the business district here in Coho Bay).
Kevin: "Why exactly are you paying me to ride a float in the Coho Bay July 4 Parade?"
Lauren: "What do you think the ROI is of paying $150 to have this float in the Independence Day Parade, Kevin?"
Kevin: "Probably zero."
Lauren: "That's right. I doubt that a customer in Charlotte cares that we are in this parade. This community depends upon us, Kevin. We spend $150 to be in the parade, five dozen other organizations pay $150 to be in the parade, and all of a sudden you reach critical mass. Now the parade is big enough to draw a big crowd. The crowd is big enough that you can't be a resident of Coho Bay and miss the parade, it's what everybody will talk about. These people could spend this cold morning at home watching a hot dog eating contest on ESPN, or they could be out here being part of their own community."
Kevin: "Even if it is 57 degrees with a wind chill in the low 40s in early July."
Lauren: "That's exactly why you are out here. You'll be able to tell the story of how you needed to buy a hot chocolate from the Booster Club. And not surprisingly, the Booster Club benefits as well."
Kevin: "So everybody is dependent upon each other in a way, right?"
Lauren: "Exactly. Everybody played a role in making this parade a success. Did you see entry #27 ... that guy is riding a unicycle while carrying an America flag ... that's it ... but he paid his $150 and he's participating. Now let me ask you a question, Kevin, how do you separate out his impact in making this parade a success from the impact our float is having, and how do you separate out the impact of the Booster Club selling hot chocolate and the Lion's Club selling hot dogs for $4?"
Kevin: "You couldn't. They all contribute to the success in an undefined but dependent manner."
Lauren: "This is where you fail, Kevin. You always want to parse our business into tidy little components. You want to demonstrate that the Tacoma Mall store drives 3,000 visitors to the website, you want to prove that search drives customers to a landing page the yields a 9% conversion rate."
Kevin: "I don't think I'm the only person who wants to do that. My entire industry works hard to allocate success to the marketing components that created success."
Lauren: "Will you please wave at the folks, Kevin? And smile, too."
Kevin (waving): "Alright."
Lauren: "But how do you truly know which marketing component created the success? You've done this work with my business, you'll tell us that 32% of an order came from paid search, 22% from affiliate marketing, 8% from our blog, 12% from our Facebook presence, 9% from YouTube, 4% from having a regional store presence, and 23% was organic in nature. Well guess what? We hired a consultant before you, and gave her the same task. She told us that 23% of an order came from paid search, 9% from affiliate marketing, 13% from our blog, 17% from our Facebook presence, 10% from YouTube, 0% from having a regional store presence, and 28% was organic in nature. Who is right, Kevin, you, or the consultant we fired three months ago?"
Kevin: "Well, obviously, there is a level of confidence associated with each number, each number could vary by a certain percentage. It's possible we both are right."
Lauren: "Exactly. And if both of you are right, and your numbers differ that much, then why bother going through the exercise? I mean, honestly, your paid search budget will vary dramatically if you trust your number over her number. Pay attention to your vendor partners, Kevin. The really good ones willingly acknowledge that the percentages vary, and that there isn't a right or wrong answer."
Kevin: "Must be fun to be a person in the marketing department who reports to you, huh?"
Lauren: "Why, because I challenge assumptions? I mean, honestly, the numbers are garbage, Kevin. It's fool's gold. Here's what you do. You have a marketing budget, and you trust your marketing staff to spend it in the most efficient way possible. Their job is to deliver a 15% ad-to-sales ratio. They can spend the money anyway they see fit, they can experiment, they can try new things. But at the end of the year, the ad-to-sales ratio had better be 15%, or their budget will be cut."
Kevin: "A lot of folks would say that you have dramatically oversimplified a process that is inherently complex, a process that requires complex mathematical algorithms."
Lauren: "Look at this parade, Kevin. This isn't Independence Day, this is 'Dependence Day'. Every person in the community, the businesses, the hot chocolate, the police who make sure this goes off without a hitch, the street cleaner who scoops up the Tootsie Rolls that you errantly tossed at innocent children, they all depend upon each other. This event only works if everybody plays a role. Who would ever go through the process of allocating credit to each person, then prioritize next year's parade based on who contributed the most credit to making this a success?"
Kevin: "So you're saying that all marketing activities ultimately depend on each other in some way. Does that mean that you have to execute all marketing activities, do you have to be multichannel as the pundits would say?"
Lauren: "Heck no! That guy on the unicycle probably won't be here next year. That doesn't mean that the parade will be a failure next year, somebody will enter and will juggle bowling pins with mini-flags on them and that will capture the fancy of the crowd. Every channel and every marketing activity has a season, if you will. Seasons change. I'm looking for my marketing team to adapt and change, while keeping the ad-to-sales ratio under 15%. As long as it is under 15%, they can spend more. When they go over 15%, I throw the hammer down on them. And I know your next question. Yes, I trust that my marketing folks are actively measuring the ROI of everything they do. This isn't like they are throwing darts and making guesses, Kevin."
Kevin: "And yet, people love tradition. They come to this parade because they know that the Fetzer's Footwear boot float will lead the pack through the business district."
Lauren: "People are odd, Kevin. They say they like tradition. But go watch the video of this parade from 1992 on YouTube. You had the baggy pants bunch dancing to MC Hammer songs, they aren't here today and nobody misses them. You had an entry from the local organic farmers who were upset with President Bush for saying he hated broccoli. Heck, there were a bunch of kids out there walking around with pumpkins on their heads, they literally carved out pumpkins and wore them during the parade, they called themselves the 'Pumpkinheads'. Who knows what that was about? And they haven't been seen since ... imagine if they did that today and it got on Facebook and they couldn't get a job because they were the 'Pumpkinheads'? Anyway, I digress. All I can say is that all of that stuff is gone. What people care about, Kevin, is that the 4th of July parade still happens every year."
Kevin: "So in the case of Fetzer's Footwear, nobody cares about the marketing tactics you use. All people care about is that you have quality, stylish merchandise at a fair price. Your merchandise is like the parade. The styles you offer and the marketing you use to offer the merchandise to the customer, all of that can change."
Lauren: "Exactly, you get it! Now get off the float, it is time for us to talk with the press."
Kevin: "The press? What press?"
Lauren: "The Madrona Monitor, it's been the voice of the islands for more than eighty years."
Kevin: "I thought people were odd, that they didn't care about tradition?"
Let's look at a quote from the 10-K at Restoration Hardware (you read 10-K statements from publicly traded companies ... right ... righ...
Look at the first four rows of our life table (values of 0/1/2/3). These are the first 12-15 weeks after a customer buys for the firs...
So Amazon created a major shopping event out of nothing, and now they're killing it in July (a month when nobody can sell anything ot...
We spent the past two weeks talking about the events and influences that shaped what I call "The Great Eight". My Influence...