Marketing Expert's Corner

This article written in 2004
 

Marketing Scalability

Microsoft, IBM, Oracle -- the 800 pound gorillas -- can do things in the market that nobody else can duplicate.  At the other end of the spectrum, clever startups may get more than their fair share of visibility with almost no resources.  The central enigma of marketing is that the effectiveness of marketing activities is situational.  Results depend on your size and commercial environment.  The marketing that worked for you two years ago, or that worked for a competitor last month, may not work for you now.  The challenge is not to find some perfect marketing strategy, but to take the right action for your current situation.  


Most of the time, the word scalability implies scaling something larger.  But in marketing, it is important to be able to scale something down and have it still work.  Let's start with this side of the coin.

Most marketing tactics have a minimum threshold to be effective.  You could execute it on a smaller scale, but it would lack critical mass and have no impact.  The general principle is that repetition is required for any lasting effect, and in most cases at least 6 repetitions are needed before anyone will notice you.

So what are the "don't bother" thresholds -- the levels below which you shouldn't even attempt a marketing tactic?   Note:  just because an item is in the list belowdoes not mean I recommend it to anyone.  That said, here are the minimum "real costs" (including travel and time) involved with doing the following in the US:

  • Banner Ads - $3000 a month
  • Google/Overture Keyword Ads - $600/month
  • Print Ads - at least 6 repetitions, each $4000
  • Radio Ads - $15,000 a campaign
  • Sponsorships - $2000 a month 

  • Snail-mail to rented lists - $20,000 per shot
  • Email blasts to rented lists - $5000 per shot

  • In-person seminars (at hotels, etc.) - $200 per attendee for a 2-hour event
  • Tradeshows - $15,000 a day for big shows, $2000 a day for small "table-top" shows

  • Press Releases - at least two a month, with wire service fees of $1000 a month
  • PR agency retainer - $8000 a month
  • Industry analyst subscriptions - $18,000/year

  • Collateral (white papers, data sheets, customer case studies) writing, design and production) - $1000 per page
  • Annual report writing/design/production - $10,000
  • Multimedia CD (demos, video clips, etc.) production - $10,000

  • Web Events - $1000 a month
  • Web site - $80,000 a year

These numbers may be surprising, but if you want to have a measurable, repeatable impact, they really are the minimums.  These thresholds usually rise over time, so beware.  It's true that very small companies can use guerilla marketing tactics that are less expensive, but they are typically doing things with very narrow reach, with minimal expectations regarding long-term results.  

Looking back over the last 5 years, it is impressive how many costly and ineffective tactics have been abandoned by early-stage companies.  Marketing groups have been able to increase the bang/buck by using PDFs and WebEX to replace print collateral and seminar roadshows.  As I said in DTR#12, we all need to design marketing tactics that are much more modular and less labor intensive.  

In my experience, what I call "shoe-leather" marketing (involving real effort, but not much outlay) is actually the most effective.  Activities that cost basically you nothing except time -such as community building, speaking and writing opportunities, and lead cultivation (as opposed to lead generation) - can steadily and subtly build your credibility with potential customers.  Shoe-leather marketing can be incredibly effective, but it cannot yield on a quick schedule.  Shoe leather is neither fast nor predictable enough for a VC-funded company.  That said, it's a pity that more companies virtually ignore these kinds of "slow burn" tactics.

In any case, the real issue isn't "how much do I spend," but "what should I be spending on?"  This isn't easy:  all too often, executives and VCs will give you all kinds of advice that is way wrong.  It's most dramatic when they have been hit with a great sales job and signed the company up for an all-in-one program costing $100,000 and promising nothing about results.  Even without these poignant executive misdirections, strategizing and designing a marketing program is hard.  It starts with self awareness:  who are you as a company?  what do your prospects think about you? what is your reputation, and what messages and behaviors will be congruent?  what will be innately attractive to your audience?

In a way, a marketing program is like a song:  the words need to tell a story, the chords need to fit as a progression, and the performance has to be both professional and seductive.  A single flaw or blunder will break the spell cast by an otherwise perfect song.  So it is with many parts of marketing:  perfection is required.  Ironically, perfectionism isn't. 

But enough already with the "Small is Beautiful" scalability issues.  Let's look at the other face of the problem. 

Scaling Up Is Hard to Do

Small companies always assume that scaling up wouldn't be hard at all:  all you do is throw more money at the problem.  Trust me, it isn't that easy.

The first part of scaling up marketing is achieving objectives reliably and on schedule.  If you need to generate 1,000 leads or 20 press mentions per quarter, for example, you'll need techniques that can be executed repeatably.  The problem is, many marketing tactics simply can't be done more than a few times before their effectiveness drops precipitously.  If your competition is pounding hard on a marketing tactic, the last thing you should do is clone their tactics just as they are getting burned out.  So, finding enough of the right things to do is a real issue here.

The second scalability issue is the execution engine:  making sure that everything happens the right way with minimum management.  Big companies outsource many of their programs, so selecting and managing multiple agencies is a key success factor.  Given the trend for leaner marketing budgets, finding agencies with the right domain expertise, price/performance, and scaling capability has become tougher.

The third upward scalability issue is overhead and coordination.  Although large companies don't need to spend as high a percentage of revenues on marketing as smaller companies do (they're bigger, they have a clear reputation, and they have market power), marketing operations have spotty economies of scale.  Often, there are diminishing returns -- 100% more marketing dollars may be only 25% times more effective.  Big marketing departments spend a lot of time in meetings, and the waste on politics can be simply unbelievable.

The fourth scalability issue with large companies is the need to market through channels. Partners bring leverage and more "feet on the street," but they require handholding, training, and channel-ready materials that allow for no-brainer execution.  Do not expect channels to add any value in the marketing and sales area:  they are expecting you to make the phones ring for them.

The fifth area of scalability is international -- or more properly multinational -- marketing.  For a company with any subtlety in the marketing message -- hardware, software, or services -- it is not effective to market outside of North America the way you do in the US.  This is not just a matter of language:  each country will have differences in the competitive environment, spin control, press and analyst cultures, economic sensitivities, regulations, and sales style.  It is extremely rare for a US-based marketing organization to excel anywhere else:  each major country will need its own marketing team, PR agency, and event budget.  Headquarters must control corporate marketing and oversight, but nearly all national operations should be done in-country.  

The final scalability issue is monitoring, measurement, and budgetary justification.  As the marketing activities become larger, there are more calls (from Sales, the CFO, and the CEO) for quantitative measures and analytics.  If you don't have a serious amount of infrastructure in your web, channel, and SFA systems, any numbers you generate will be (at best) indirect indications of marketing effectiveness.  Often, the numbers used to justify a program are good enough to survive internal politics, but they won't stand up to any serious scrutiny and can't help you identify and fix underlying problems.

The upper limit of marketing spend is the ability to operate responsibly, without huge waste.  That limit is very high indeed:  Microsoft spends more to market its products than it does to develop them, and a Microsoft product launch program can be hundreds of millions of dollars.  Being more realistic, most high-tech companies with a direct channel would find it difficult to responsibly spend more than 15% of revenues on marketing.  But if you work exclusively through indirect channels, this percentage can be twice as high.

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