Discounts / Promotions / Clicks / Channels: The "Local Maxima"

Let's go back to your homework assignment from last week (click here). Read the green section (Resilient Base of New Customer Contribution $ Via Owned and Organic Traffic) and the red section (% of Revenue on Discount). In particular, focus on the red row ... read the comment in the column titled "The Realization That You Need To Change".

• "The marketing calendar is built around discount events as much as it is around new product launches. Seems like a necessary evil in order to keep growing revenue."

One of my favorite quotes from my time at Eddie Bauer was our CEO saying that we couldn't add a 34th promotional week to the calendar because we had to maintain the integrity of the promotional calendar. Via analysis or gut feel, the hill to die on was at 33 weeks. Imagine being at 31 weeks and somebody says, "yeah, let's add another week, no integrity issue there."

There's this bowl of promotional soup that interacts with direct response ... it always, always works for awhile (ask Macy's). Always. And then, it doesn't work. Years of trying to "make it work again" lead to one of those comments from marketers:

• "Facebook and Google are too expensive and the clicks they send us don't convert as well as they used to convert."

Blame is placed on Facebook and Google ... and oh yeah, they deserve blame.

The brand deserves more blame.

• It shifted from "what" it sells to "how" to sell it (discounts, promos, clicks, channels). This is a familiar transition, one that always looks good in the short term and is harmful in the long term.

This shift maroons a brand on what in math is called a "local maxima".

Look at the peak next to the arrow. That's what happens when a brand shifts to discounts / promos / clicks / channels. Any movement in any direction away from what is "optimal" (which, by the way, is most certainly not optimal) yields a sub-optimal solution, paralyzing the brand.

Where is your business on The Brand Lifecycle image? I have a feeling I know where it is, or you wouldn't be emailing me about the higher costs and lower performance of paid search.

I spent considerable time working on a framework for thinking about "what comes next". On LinkedIn I floated the framework to readers and a thousand people quickly read the argument. What comes next is already here ... I call it "Customer Media Marketing".