If You Build It, They Won’t Come.

by John San Filippo, jmsb@johnsanfilippo.com
www.johnsanfilippo.com

This has happened to me a number of times. Maybe it’s happened to you, too.

You stumble across a hole-in-the-wall restaurant you never even noticed before. The food is absolutely fantastic. The employees treat you like family. And the prices make it possible to take the whole crew out for dinner without breaking the bank.

Then one day you show up hungry as can be, only to find locked doors and a “closed” sign. What went wrong?

Most likely, the owners suffered from what I call “Field of Dreams” syndrome. They thought that if they created a great restaurant, people would magically appear at their door. In other words, they thought they didn’t need and/or couldn’t afford marketing. Truth be told – and as time proved – they couldn’t afford to not market.

Of course, “Field of Dreams” syndrome isn’t limited to just the food-service industry. In fact, I see quite a bit of it in the financial technology space. Companies large and small view marketing as somewhat of an extravagant expense – a nice-to-have rather than a must-have. The real fallacy here is looking at marketing as an expense at all.

If you had purchased 1,000 shares of Apple stock in 2003, it would have cost you about $14,000. That’s not chump change. However, if you had held it until now, it would be worth around $1.4M. Please, please tell me if you think there’s a single person on this entire planet who would moan and groan about the expense of having to shell out $14,000 for Apple stock, given this scenario. Clearly any sane person would view this as an investment, not an expense. And they’d be damned happy about it.

With that thought in mind, it blows me away that companies grumble at the thought of putting money into marketing – an endeavor that’s proven to help grow companies and contribute to the bottom line. Marketing is an investment and – executed properly – it carries a measurable and favorable ROI. If your marketing isn’t making you money, you’re doing it wrong. There’s no other way to say it.

The big question is: How much should you really be spending on marketing? Google around and you’ll find varying opinions, but they all seem to fall within the range of 5-10 percent of total revenue. And in fact, that appears to be what B2B companies are actually spending. A survey conducted by CMOsurvey.org based on 2013 data showed that in the B2B sector, both product and service companies spent about eight percent of total revenue on marketing. That’s across all revenue sizes.

Interestingly, it was the smallest companies – those with less than $25M in revenue – that spent the most on marketing as a percentage of revenue. These companies spent over 11 percent of revenue on marketing. Incidentally, the lowest spending revenue range was $500M-$1B, at only 3.5 percent.

Is your marketing investment at least somewhere in the general ballpark of the numbers I shared above? If not, do you think it’s because you know something everybody else doesn’t, or because everybody else knows something you don’t? I hate to break it to you (okay, honestly I don’t), but if you’re under-investing in marketing, you’re really doing your company a disservice.

You know the old saying. You have to spend money to make money. That’s not exactly true. You have to invest money to make money. And when you invest wisely in marketing, you can make more money than you ever thought possible.

That is all.

Print Is Dead?

by John San Filippo, jmsb@johnsanfilippo.com
www.johnsanfilippo.com

"Half the money I spend on advertising is wasted; the trouble is I don't know which half." – advertising and marketing pioneer John Wanamaker

And so it’s been for the 100 years or so since these words were first spoken. Marketers know that, on the whole, traditional advertising works. However, using print advertising as an example, it’s very hard to know which ad, in which edition of which publication, pushed that customer to the next level. That’s because marketing has always been a cumulative endeavor.

Now along comes digital marketing with its promise of precise targeting and precise measurability. Digital marketing is truly awesome. You can track and monitor the online behaviors of customers and prospects, see exactly which programs are working and which ones aren’t, refine and redefine your strategy, and in the case of Google AdWords and other PPC venues, only pay when you get some kind of actual result.

Who needs print advertising when you have digital, right? It’s tempting to look at the struggles of the newspaper industry and declare that print is in its death throes. But is it really all print or just newspapers?

Newspapers used to be the most efficient way to find out what’s going on now (or more accurately, what went on yesterday). Today I can click on Google News any time of the day or night and find out what’s happened in the last 15 minutes. So it makes sense, given what people were trying to accomplish with newspapers, that the majority of readers would gravitate to online news.

However, it’s a different story for magazines, and trade magazines in particular. According to Statista (www.statista.com), trade magazine ad revenues understandably took a big dip in 2009, but have continued to steadily rebound ever since. What’s more, trade magazine ad revenue is expected to continue that trend through at least 2016. If you’re a doubter of print advertising, I’d argue that the people spending those dollars know something you don’t, namely that print advertising works.

Sure it might work, but digital works better, right? After all, you can track and measure digital to a degree not possible with print.

Not so fast. Trackability and measurability don’t make a particular form of advertising more effective, just more convenient for marketers. It’s easy to take digital marketing results to the bean counters and say, “Hey, look what we got for our money.” The same can’t be said for print – but that doesn’t mean print is ineffective.

There seems to be a trend away from print advertising in the fintech space. Just thumb through your favorite trade pub and you’ll see what I mean. Many big names are conspicuously absent. I suppose there’s safety in numbers. If your competitors aren’t spending money on print, why should you?

Marketing is all about differentiation. So here’s a bold prediction: At some point, some fintech company with a few dollars to spend is going to realize that it can differentiate itself from the pack by simply including some print ads as part of its larger marketing strategy. If you’re the only one doing it, you’re going to stand out. And if you’re the first one doing it, you’ll enjoy the luxury of looking at all your competitors through your rearview mirror.

That is all.

We Don't Need No Stinking Social Media Strategy

by John San Filippo, jmsb@johnsanfilippo.com
www.johnsanfilippo.com

There are two popular schools of thought in the B2B marketing space when it comes to social media, and fintech marketing is a perfect case in point.

 

One school says that, while social media may be great for marketing frozen yogurt, running shoes or discount vacation packages, it's really incapable of moving the needle in a B2B environment. Sure, create a half-assed Facebook page so you can put the little "F" logo on your website, but don't bother putting any real effort into it. After all, social media never sold a core data processing system, for example, and probably never will.

 

The other school says that every business must have a strong social media strategy and those who don't, move forward at their own peril.

 

Being the contrarian that I am, I of course think that students of both schools should be riding the short bus.

 

First of all, completely ignoring social media is a bad idea, no matter what business you're in. I always remind people that B2B is really a misnomer. Your business doesn't sell products and services to other businesses. Your sales and marketing team sells products and services to people who run other businesses. In other words, it's always about people selling to other people. And all people are social. Why wouldn't you try to connect with your potential buyers in a digitally social setting?

 

Where I take exception with the idea of a "strong social media strategy" is the implication that social media should be managed separately from the rest of your marketing -- that you can hire a college intern to tweet or twiddle or twittify or whatever you call it, without much regard for the rest of your marketing program, and that should be all you need.

 

Let's be clear here. Social media is a tactic, or I suppose, a collection of interrelated tactics. Strategy is the thoughtful combining of available tactics to create a unique program with measurable objectives. So what you need is what you've always needed: a strong and comprehensive marketing strategy. 

 

That means combining all the tactical resources you have at your disposal -- including social media. In some situations, social might take center stage; in others, its role may be minor. But social media should always be used as an integrated component of your overall marketing program.

 

Social media is, well, social. It doesn't want to be locked in a closet with your intern. It wants to mix and mingle with all your other marketing tactics. Set your social media free!

 

That is all.

Of Fans and Brands

by John San Filippo, jmsb@johnsanfilippo.com
www.johnsanfilippo.com

This past weekend, I went to Target to buy a new fan for the house. For the size I wanted, Target offered two options: a Honeywell fan for $15, or a Vornado fan for $45. Which brand did I want?

First I considered the two names just on their own merits. Honeywell as a name for a fan says absolutely nothing to me. What’s a Honeywell? A hole where bees hang out? Even with no prior knowledge of Honeywell as a company, it’s pretty clear that this is a case of a brand being foolishly extended into the home fan market. In other words, it’s obvious that whatever the company does, it doesn’t make most of its money selling fans.

But what about Vornado? Now that’s a name for a fan! Clearly this name combines the words vortex and tornado. I’ll be perfectly honest here. I’m not really sure what a vortex is. I do know that every time I see this word, it always seems to be mentioned in conjunction with some sort of spiraling motion. And everyone knows what a tornado is.

A fan that can turn my living room into a spiraling tornado? That’s exactly the kind of fan I was looking for. One point for Vornado.

Of course, I wanted to look beyond the names themselves to the brands they actually represent.

What do I know about Honeywell? Right or wrong, my belief is that Honeywell is like a GE or a Westinghouse; they make a lot of different things for a lot of different industries, both large and small. How big a role does the fan business play in Honeywell’s bottom line? Probably not very big. Or put another way, I doubt very much that Honeywell puts a lot of effort into producing a top-notch fan. When I consider the probable margin on a $15 fan, I have to wonder why a company the size of Honeywell even bothers.

What do I know about Vornado? Absolutely nothing! So I turned the box over to see what I could learn. As best I can tell from the packaging – which admittedly may not tell the whole story, but nevertheless tells a great brand story – Vornado is a small company in Kansas that specializes in (you guessed it) fans. It only makes sense that a company that specializes in fans would make a better fan. One more point for Vornado.

What about price, though? Is a Vornado fan really worth three times as much as a Honeywell fan? I think that in the age of Walmart, people have been conditioned to reach for the cheapest item… I take that back. What I really think is that in the age of Walmart, many marketers believe that people have been conditioned to reach for the cheapest item. Clearly this is not the case – at least not universally.

Consider the Lexus brand. Is a Lexus really that much better than a Toyota? I honestly don’t know. However, by branding its luxury line differently and adding several thousand dollars to the price tag, Toyota has convinced me to believe that a Lexus is significantly better than a garden-variety Toyota. A certain segment of the consumersphere will always be willing to pay a premium price for a premium brand.

This isn’t anything new or shocking. Even Ray Zalinsky knew that the public would be willing to pay a premium price for a supposedly premium brake pad. That’s why he was so anxious to get his greedy, little hands on the Callahan Auto brand.

In short, as a brand for home fans, Vornado scored a third and final point over Honeywell, based in no small part on its higher price.

By now, it should be pretty clear that I ended up choosing Vornado over Honeywell. But here’s one thing I bet you didn’t guess: So impressed was I with the Vornado brand, I also bought a smaller $15 Vornado in addition to the $45 model.

I went to Target in search of a fan on which I could have spent $15. Thanks to better branding, I instead purchased two fans for a total spend of $60. I think there’s a branding lesson in there somewhere.

That is all.

Brand Extension Run Amok: Why I Hate Amazon

by John San Filippo, jmsb@johnsanfilippo.com
www.johnsanfilippo.com

People often tell me how much they love, love, love Amazon. Frankly, I don't get it.

I find the Amazon ecosystem a little confusing. On amazon.com, you can buy things from Amazon directly and you can buy things from other sellers. And you have to be cognizant of which is which, because the rules are different for each. It's like walking into Macy's and being told that blue-tag items qualify for free gift-wrapping, but green-tag items don't. Heaven forbid you should assemble an outfit for your sister's birthday out of both blue- and green-tag items.

I also had one bad shopping experience on Amazon. I had a confirmed order later canceled due to a "problem" with my credit card. This is a card that I use almost daily, so when the credit card company told me they could see no problem at their end, I could only place the blame on Amazon. This little blunder almost cost my granddaughter a Christmas present. And when it comes to gifts for my grandchildren, I don't give second chances.

All of this is enough to make me, as a consumer, dislike Amazon. However, it's as a marketer that I truly hate this company. Why? Because, IMHO, the Amazon brand is an absolute train wreck.

First, let's look at a couple of the classic brand examples. When I say Coca-Cola, you think of soda pop. When I say Cadillac, you think of American luxury cars. When I say Orville Redenbacher, you think of popcorn. That's how a good brand is supposed to work. But when I say Amazon, what do you think of?

Twenty years ago, this was an easy question to answer. If I said Amazon in the early days of the company, you would have thought of books. Period. Then Amazon started selling CDs ... and toys ... and power tools ... and bedroom linens ... and (insert absolutely any product here). There are also Amazon's e-readers, tablets, set-top boxes and now even cell phones. And let's not forget Amazon's cloud computing business.

So I ask you again: What do you think of when I say Amazon? To me, the Amazon brand says nothing. In fact, it says worse than nothing. To me, the Amazon brand says, "We're greedy sons of guns who want our fingers in every pie in the bakery." That's not a brand that instills any loyalty in me.

Don't get me wrong. Amazon isn't the only company to fall victim to crazy brand extension. Far from it. Just look at the American beer market. In fact, just look at the Budweiser brand. Under the Budweiser banner, Anheuser-Busch markets Budweiser, Bud Light, Bud Light Platinum, Bud (marketed in Europe), Budweiser Select, Budweiser Select 55, Bud Ice, Bud Ice Light, Budweiser Brew Masters' Private Reserve, Bud Dry, Bud Silver, Bud Extra, Budweiser Chelada, Bud Light Chelada, Budweiser American Ale, Budweiser NA, Bud Light Lime, Bud Light Lime Ritas, Bud Light Golden Wheat, and Budweiser 66.

So what do you think of when I say Budweiser? I think I'll have a Dos Equis.

Insane brand extensions like these are oh, so tempting. Marketers justify them by claiming that they're smartly capitalizing on the main brand's existing equity. That's probably true to a point. It may very well be the Budweiser name that gets Brew Master's Private Reserve noticed (assuming it does get noticed now and then). However, each brand extension also diminishes the primary brand. In the case of Budweiser, when you factor in that beer is not a rapidly growing market, it's hard for me to believe that crowding the market with 20+ variations of Budweiser will do Anheuser-Busch any long-term good. In fact, it seems like a very expensive waste of money, and ultimately that cherished brand equity.

If you're only interested in filling the coffers today, go ahead and ignore your brand. Millions have been made doing just that. On the other hand, if you're interested in long-term, sustained success, know your brand and be true to it.

That is all.