Low Budget Marketing: How to Successfully Compete and Win

Low Budget Marketing

This is a guest post by Julian Padurariu*. 

Low budget marketing is one of the most popular topics during marketing conferences and training camps I frequently attend.

As a marketing practitioner, I have been confronted with this exact challenge starting with the first serious projects I was involved in as a Marketing Manager or consultant during the early 1990’s, in post-communist Romania.

In those early days of free market economy local brands were invariably launched on a significantly lower budget than those of the direct competition, usually multi-national brands that wanted to establish a local presence.

The “low budgets” challenge has been the driving force behind my continuous search for new solutions, not just on a creative level, alongside my advertising colleagues, but also on a business model level.

Build Loyalty Through Gamification

One of the innovative solutions I strongly believe in is the concept of “gamification” – an extremely useful method to increase clients’ loyalty.

For those of you less accustomed to the term, “Gamification” at its origins, is a reverse-engineering technique used in the gaming industry, by adding game elements and dynamics in non-game environments (such as a business), in order to increase users involvement.

If this concept sounds new to you, it’s not too late to consider exploring it. Gartner estimates that it would take another 5-10 years until gamification reaches the “productivity plateau“.

But before looking for new solutions, we must understand the limitations of classical solutions.

We must adjust the way of thinking in such a manner that we would not allow ourselves to think “well, company X or Y – market leaders– succeeded, so I must succeed too”.

I would call that “a dwarf’s trap“: The dwarf wants to be a dragon, and struggles to throw flames out of his mouth.

I have bad news for you: the dragon’s strategy will never work for the dwarf.

Forget Mass Advertising

One of the “flames” the dragon is using to get the message out is mass advertising. New entrepreneurs who plan to start a business, be it a new online trading platform or selling potato chips, might be tempted to consider mass advertising to promote their new ventures.

Mass advertising should not be part of the ” low budget marketing” tool-kit.

People in advertising will tell you that the first rule of mass advertising is “Big or Nothing.“ The “Big or Nothing“ rule has been scientifically proven: success in media depends on two big parameters: quantitative and qualitative.

Qualitative parameters are extremely important and can compensate for the quantitative ones only up to a point. I will elaborate on the topic later on.

Quantitative ones though are pretty straightforward: you can’t get a fair media visibility unless the “coverage“ (how many people you reach) and “frequency“ (how many times you reach them with your message) components position you above the “efficiency threshold” and outside the area of excessive exposure.

In our low budget situation, before entering the actual exposure area, the concern lies obviously with “the efficiency threshold”. This is where the “Big or Nothing” concept originated from – when you have budgets that don’t help you go over “the efficiency threshold” barrier, you are better off allocating your low marketing budget elsewhere.

As for the quality indicators, they are obviously a lot more difficult to manage.

The lower the budgets, the more I need to emphasize how important being consistent is. That is, consistency of your marketing actions and the message being communicated.

Consistency allows companies with a low marketing budget to communicate efficiently.

One word of advice: the saying “measure 7 times, cut once” applies to low marketing budgets as well: Before pulling the trigger on your next campaign, think about the desired effect it should have on your target audience. Otherwise, every change you make while the campaign is running will get you back to square one.

When it comes to relevance, things get a bit complicated. Being relevant in business means how the consumers perceive you. Generally speaking, relevance is closely connected to with the answer to the question “Who are YOU?”

Vitamins versus Painkillers

In his very successful book “Hooked: How to Build Habit-Forming Products”, Nir Eyal divides the problems businesses are trying to solve into two categories: “vitamins” and “painkillers”.

According to Nir, “vitamin” solutions are “nice to have” people can live without. “Vitamins” usually come in the form of enhanced product features, rather than radically innovative products. Consumers have a choice to pay a price premium for a “vitamin” solution, or leave without it.

Businesses that offer “painkiller” solutions solve a burning need. “Painkillers” don’t require price premiums-they solve a real problem in a certain way, for which there is already a set budget. “Painkillers” are much easier to sell once the need-solution connection is clearly presented.

To illustrate the difference between “vitamin” and “painkiller” solutions, think of your cell phone. The device itself solves a “painkiller” need: the need of people to communicate remotely. The Camera feature on most phones in a vitamin: people can leave without taking pictures with their phones (although some might argue otherwise).

Once the difference between “vitamins” and “painkillers” is understood I believe the answer to the question “Who are YOU?” can be much more easily structured by using elements of the problem you’re trying to solve, the market you’re targeting and the resulting solution.

Let’s think of Netflix. Who is Netflix? Netflix is an online movie rental company that targets movie lovers with easy access to a huge selection of content from the comfort of their house, without charging late fees.

Choose a “Descriptor”, Not a ”Tagline”

The lower the budget, the more important it is for a business to choose a “descriptor” rather than a “tagline”, as you might not have a second chance to become visible to a potential customer.

My suggestion is to put creativity aside for a moment and look for a descriptor, the essence of your business compressed in a few words that clearly define positioning or the solution to potential customers ‘problem.

Hootsuite is the Social Media Management Dashboard. No poetry here, but anyone can decrypt on the spot what Hootsuite is all about in the very crowded segment of online apps.

Think “Community”, Not “Target Audience”

If you are thinking about sending messages to your  “Target Audience” instead of building a “Community”, your low marketing budget will quickly evaporate.

When you have a low budget, “community” can represent a very powerful force that can work to your advantage.

Unlike the dragons that have a message to send to the “target audience” through advertising, you must build a community and manage it bit by bit as you see fit.

Even some dragons, such as Apple, Bosch, Ducati, Harley Davidson, Nike, have understood the importance of building a community.

The members of their communities not only act as true brand “ambassadors”, but are also generators of ideas meant to improve products and services.

The major difference between “target audience” approach and “community” approach is the way the information flows. With the “target audience” approach, the information is spread by the “only transmitter” to “receivers”, somewhat like an artist on stage trying to entertain us with his performance.

With the “community” approach, the company sets up a conversation platform that is accessible to the masses, which is being used not only to receive the company messages, but to become “message transmitters” within a given area of influence.

The task of transforming a potential client, who had just stumbled across your company website, into a brand ambassador who would eventually set up a local fan club for your brand, might seem impossible, or extremely expensive.

This is not the case. Generating community involvement happens gradually, but almost naturally and effortlessly if guided accordingly.

In the end, the solution to the question “How do I make to most of my low marketing budget?” is provided by answering some vital questions:

  1. Who are you (as a business)?
  2. What solution does your business provide: a vitamin or painkiller?
  3. Do you use a business descriptor or a poetic tagline?
  4. Are you an entertainer for the “target audience” or a community facilitator?

Julian Padurariu is one of the most famous business strategy consultants from Romania. He began the entrepreneurial life in 2005 with the opening of Jack Trout’s consulting office in Bucharest. Based in Vienna since 2008 he is actively involved in many European countries through various consultancy projects and  workshops focused on entrepreneurship and innovation. With a General MBA from Webster and a Professional MBA from Vienna’s Wirtschaftsuniversität specializing in Entrepreneurship and Innovation, Julian Padurariu is a major supporter of entrepreneurship, often bringing to attention innovative concepts and business design methods around the concepts of positioning and differentiation.

You can contact Julian via LinkedIn.

How to Perform An Industry Analysis Using Porter’s Five Forces

Porter's Five Forces

Important business decisions such as entering a new category or market segment require in-depth strategic analysis. Some of the more important questions that need an answer are:

How attractive and profitable is the category I plan to penetrate?

Is it feasible for my company to enter this category?

What are my chances of successfully compete in the category?

Porter’s Five Forces is a industry analysis framework that helps business executives assess the attractiveness and profitability of a specific category or industry.

According to the famous business strategist and Harvard professor Michael Porter the five factors below impact the strategic decision making process:

Barriers to Entry

Entering a new industry or product category poses some obstacles, or challenges, to new entrants.

Barriers to entry include:

-the cost of entering a new market (financial and non-financial)

– the size of the players currently operating in that market

-the legal requirements required to become a player in the category

-the level of difficulty in building brand acceptance with consumers

Generally speaking the higher the entry barriers, the less attractive the segment or category.

The computer microprocessor market is dominated by Intel, and, to a lesser extent, AMD. No other company has managed to pose a real threat in this category, in part because the entry barriers are very high.

Financial costs aside, gathering the knowledge, creating manufacturing capabilities, and building acceptance among consumers keeps competition away.

Supplier Power

Suppliers can greatly influence the attractiveness of a specific category. Hence, supplier power needs to be taken into account when performing an industry analysis. Some things to look at include:

-the number of suppliers in the category

-the difficulty in switching from one supplier to another

-the ability of suppliers to integrate vertically and manufacture the product themselves

-the criteria suppliers impose on new customers

Usually an industry dominated by only a few suppliers means less bargaining power for your firm.

In this situation suppliers are able to raise prices, reduce the quality or availability of products, with direct negative impact on your firm’s performance.

Buyer Power

Buyers in a specific category could have a great impact on a new entrant’s profitability. The more bargaining power buyers have, the less attractive the market segment.

Some factors that influence buyers’ power are:

-the number of buyers in the category

-a buyer’s ability to choose from multiple offerings

-the availability of substitute products

-a price driven category

Let’s say you decided to become a real estate agent. With the slowdown in real estate activity in most parts of the world, pursuing a career in real estate is a tough decision to make.

The number of potential buyers is relatively low, while competition from other agents is fierce.

A home buyer can choose to be represented by a real estate agent or look for a house on his/her own (availability of alternative options).  As a result of buyers’ power, many real estate agents are willing to work on very low commissions.

Competitive Rivalry

The level of competition is usually a very good indicator of a segment’s profitability. A market is less attractive if:

-there are many competitors available to service a stagnant or shrinking market segment

-the barriers to entry are low

-substitute products are readily available

-competition is very price-driven

-there are strong rivalries among competitors

The level of competition in the higher education market has been greatly impacted by technology. No too long ago the classic method of getting an education or learning a new skill was to attend a local college or university.

Today, local colleges and universities face strong competition from many directions: international institutions (via distance learning), independent websites that offer online courses (such as Coursera and Udemy), and private businesses and individual consultants who are experts in a particular field.

Threat of Substitute Products

The attractiveness of a market segment is in part dictated by consumers’ ability to choose from alternative products.

Let’s take the hotel industry as an example. When looking for a place to stay, consumers have many options: hotels, bed and breakfasts, private accommodation, camping, etc. The threat of substitute products in the hotel industry is very real.

Porter’s Five Forces could be used as part of an effective SWOT analysis, to highlight the external Opportunities and Threats a firm is facing. In order to have a complete picture, another industry framework, such as Resource Based View, has to be used to analyse Internal Strength and Weaknesses a firm could use to its advantage

Marketers are not Magicians

Photo Credit: ThaQeLa on Flickr

This last article of the year is about expectations. More precisely, top management’s expectations of marketers, and vice-versa.

Top management believe Marketing’s role is to grow the business. A very fair expectation.

We are given a product, a distribution channel, an existing (or not) customer base, and a certain budget, and expected to work our magic and improve the bottom line.

There is only a small problem with the above scenario.

Marketers are not magicians.

We can’t just take any product portfolio, any brand perceptions, and turn them into bigger profits. We have our expectations as well.

My personal expectations from top management are the willingness to focus and a commitment to innovation.

What could “focus” mean at the micro level?

Focus is narrowing your offering enough that you become the category expert and thus the number one choice.

Focus is reinforcing a single message, which should be your brand’s differentiation idea.

Focus is allocating your Marketing budget to only a few, high-impact initiatives, and execute them properly.

Focus is a long term commitment to only one or two ambitious goals.

Innovation does not mean that companies should invent something new every year. Innovation is the company commitment to reinvent itself in order to maintain its competitive advantage.

Let me explain why I think innovation is key to a company’s success. This is what’s happening in most categories:

One competitor launches a innovative product and service.

Customers are pleased and the company prosper.

Competitors notice the success and eventually catch up.

Your brand’s competitive advantage becomes a point of parity, something that customers expect to get.

In order to stay competitive, your brand needs to reinvent itself.

No Marketing expert can save brands that lack focus and adaptability. The market is too competitive, the consumers too picky.

That’s it from me for this year. I wish you and your families happy holidays and a prosperous 2014!

Best Workplace for Marketers: Small or Large Company?

Photo Credit: Manu_H on Flickr

Most of us dream of running our own company. But until that day arrives most of us will have to pursue a career in the corporate world.

The company you work for can have a great influence on your career path, turning it into a rewarding journey or an experience you want to forget. The company size plays a big role in the final outcome.

Which brings me to the question I want to address today: As a marketer is it better to work for a smaller, private enterprise, or for a Fortune 500 company?

New graduates often dream of working for a well-known established company that brings credibility to any resume and provide career advancement opportunities, flexibility and training.

But is this still the case?

Are these Fortune 500 companies the ideal workplace? The answer is not that obvious and starts with your personal definition of the “ideal workplace”.

Let’s take a look at some advantages and disadvantages of working in small and large companies.

Advantages of Small Businesses:

  • More diverse Marketing responsibilities. A smaller Marketing department means that you will most likely be involved in a variety of projects, which will give you hands on experience in multiple areas. Large companies tend to hire specialists in each specific area: research, strategy, communication.
  • Your work will be visible.  In small companies your opportunity to make a quantifiable impact on the business is generally higher.Your positive contribution will be noticed and your opinions taken into account, since there are fewer levels of management that can take credit for your accomplishments.
  • More work flexibility. Small companies are more willing to change the rules on which the company operate and accommodate your needs better, in particular if you are considered an important member of the team.
  • A closer relationship with your co-workers. If you are a sociable person this is something you might appreciate. In small companies you will be treated like a human being, not just like a number, which is the case with large companies.
  • A faster way to express your concerns and grievances. Many small businesses lack an HR department, so you can discuss your issues with your manager and even the owner.

Disadvantages of Small Businesses

  • Lack of marketing resources. Small businesses cannot afford the marketing budgets the big guys spend every year. As a result you will have to accomplish more with less.
  • Difficulty attracting A-level Marketing agencies.  You would think in today’s economy every business would be happy to add to their client list. However many big name agencies and PR companies have certain budget expectations that small businesses just can’t afford.
  • Your failures will be noticed. In a small company you’re less likely to be able to hide or blame somebody else for your mistakes.
  • Benefits package might be smaller. Small companies are usually not able to offer benefits such as pension plan, free training and medical benefits that employees of Fortune 500 companies enjoy.
  • More vulnerability. For small companies each customer is important to the company survival. A loss of big customers or an unfavorable market condition might lead to insolvency and loss of jobs.
  • Fewer possibilities for career advancement. In most cases the only opportunity to advance in your career is to change companies.

 Advantages of Large Companies

  • Big marketing budgets. It’s no secret that big companies can afford to spend more on marketing. Your biggest challenge will be not to get the money, but how to effectively allocate the budget. You will also work with the best agencies as they tend to gravitate towards large companies.
  • Better opportunities to advance in your career. If one of your career goals is to move up the corporate ladder then a big company is more likely to fulfill your ambitions. These corporations have precise rules in place on how to get promoted so you will have a clear picture of what you need to accomplish to move up.
  • The benefit packages are better. Big companies are big for a reason-they are very successful at what they do, including attracting and retaining the best employees. Working in big companies usually means a better benefit package, although things might change for the worse in the near future. A lot of billion-dollar companies these days prefer contract work and outsource as much work as possible in their never ending quest for bigger profits.
  • Less vulnerability to external threats. Unlike small companies where one customer can account for the vast majority of the business, big firms have a more diverse customer base. Consequently, a temporary market disruption or the loss of an important customer will not have a huge impact on its performance (but it might have on yours if your responsibility was to make that customer happy).

 Disadvantages of Large Companies

  • Performance is always under scrutiny. This is not necessarily a bad thing unless you have to justify your existence on a weekly or monthly basis. Like it or not Wall Street is unforgiving, and all employees work towards the common goal: better dividends.
  • Very difficult to make an impact. One of the biggest source of dissatisfaction among employees of large companies is that their work is not sufficiently acknowledged and recognized. This might be temporary-once you climb up to a position that will offer you more direct access to the decision makers your work will become noticeable.
  • Change is slow. Large companies are famous for their decision making process. Multiple layers of management and a very formal communication process contribute to frustrating delays and even abandonment of projects.
  • A more impersonal workplace. If you work in a place that employs 2000 people chances are you won’t probably know all your co-workers. That being said, you might be lucky to work in a small team inside a big company, so you can get the best of both worlds: the family-like environment of a small company and the big resources of a large corporation.

 What about Job Security?

No company can guarantee your job, regardless of its size. The safest job is the one YOU create for yourself. That is, owning your own business.

You might think that you are safer in a bigger, more financial solid company. But that’s not necessarily the case. Layoffs are frequent in large companies, usually affecting hundreds or even thousands of employees at once.

The only way to influence your job security is to arm yourself with a set of in-demand skills that will allow you to land on your feet in case you loose your job.

I am very interested in hearing your personal experience: do you prefer small companies or big corporations? Please share your thoughts in the Comments section below.

Achieving Brand Loyalty: An Impossible Task?

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If you’re like me you carry at least one loyalty card in your wallet. I have about six of them: grocery store cards, gas station point cards and frequent flyer program cards.

The question becomes: should these brands count on me as a loyal customer and a true brand advocate?

The truth is I have no loyalty card from the brands I am truly loyal to.

Building a strong brand that generates a loyal following is every Marketer’s dream. In an ideal world our customers will  act as brand advocates and take our business to the next level.

Easier said than done.

Any marketer who manages a real brand, in a real company, with real competition can confirm how much time and effort it takes to make even the smallest incremental step towards achieving brand loyalty.

That being said Marketing is under a lot of pressure to build a brand that will turn first time buyers into repeat purchasers.

Brand Loyalty: A Definition

Brand loyalty is achieved when customers purchase your company’s product and service repeatedly, are willing to step out of their comfort zone to own it and recommend it to others.

The benefits of a loyal customer base are well known.

It costs up to six times more to attract a new customer than to keep an existing one. Moreover, these customers are the best source for getting new business through referrals and recommendations.

Types of Brand Loyalty

Canadians have an obsession with loyalty programs.

According to this Marketing Magazine article “92% of Canadians are a member of at least one loyalty program and, on average, are members of 6.4 of them.”

These statistics look great for brands that have a loyalty program in place. But does the high subscription rate translate into consumers being truly loyal to that particular brand?

In reality there are different “types” of brand loyalty:

Convenience loyalty-this is the case with my grocery store loyalty cards. The only reason I subscribe to them is pure convenience . I shop there anyway, so why not take advantage of discounts, free products and exclusive member promotions? I would not consider myself loyal to these brands. I am sure a new loyalty card will show up in my wallet if a new store opens closer to home.

Incentive-driven loyalty-some brands “buy” customer loyalty through incentives and other short term promotions. Many Facebook “Fans” fall into this category, as many brands use exclusive social media deals to increase their virtual fan base . This type of loyalty is short lived, as these incentive-seekers are probably also members of your competitors’ loyalty programs for the same reason.

True loyalty-these customers truly believe in your brand and are immune to short term incentives from competition. The only way to loose these true loyalists is to provide a bad brand experience on a consistent basis. These customer segment deserves your full attention as they can be easily converted into brand advocates.

Cult loyalty-brand such as Harley Davidson, Apple, Lululemon and Mini managed to create communities of brand fanatics who are living the brand and are on a mission to attract more followers. Their loyalty goes beyond the actual purchase of the product and into adopting the brand philosophy as a way of life.

Can Brand Loyalty Be Achieved?

Achieving brand loyalty looks like mission impossible to some companies.

Why is it so difficult to keep customers happy and coming back? Below are some possible causes:

Lack of a differentiated offering. Loyalty starts with the first experience with the brand. True brand differentiation, while a valid strategy on paper, is being pursued by only a few companies. In addition, faced with increased competition and constant price pressures, Marketing is often required to deliver immediate results rather than building a long term relationship with the customer.

A multitude of choices. Most categories face fierce competition that gives consumers plenty of choices. Moreover, line and brand extensions contribute to the confusion. Even Apple, after the death of Steve Job, has fallen into the line extension trap: iPad Mini, cheaper iPhone, etc. Extensions only dilute the brand and confuse consumers, who tend to navigate from brand to brand in search of the best value. Hence, less loyalty.

Flaw in current loyalty programs. Most loyalty programs are based on “the more you buy the more you get” principle which does nothing to encourage true loyalty. The purchase size or frequency cultivate incentive-driven loyalty. If the incentive is taken away, customers transfer their loyalty to competition. True loyalty is achieved when an emotional bond is created between the brand and customer.

Brand loyalty is difficult to achieve, but not impossible.  It all starts with the genuine desire to offer the best possible brand experience that is consistently delivered.  In time, your customers will reward you for your efforts.

How Would You Describe Canada In A Single Word?

I’ve been fortunate enough to see  a few countries on different continents during my personal and business travels. I always end up comparing the place I visit to the one I call home, Canada, and reflect on how lucky I am to live in such a great country.

It’s difficult to rank what I like best about this vast land: the ethnic and cultural diversity, the respect that people show for each other, the tolerance and acceptance, its peacefulness and natural beauty. Or maybe the fact that so many immigrants that land at the airport with just two suitcases and many hopes and dreams end up fulfilling many of them.

An older gentlemen who was visiting Canada from Europe once told me: “It’s amazing to see people of so many races living together peacefully here in Canada, while in other countries people of the same ethnicity don’t seem to get along at all “. His words always come to mind when I watch the news and see what’s happening around us.

If you had to use a single word to describe what makes Canada different from the rest of the world, what would that word be? Post your answer in the Comments section below.

Happy 145th birthday Canada!

 

How to Perform an Effective SWOT Analysis

The SWOT analysis is an important and mandatory step in the decision making process. In order to develop a sound strategy the company needs to know where it stands and where it wants to go. That’s where SWOT analysis fits into the mix, as its main objective is to provide a realistic picture of the business’ strengths, weaknesses, opportunities and threats.

What Makes A Good SWOT Analysis?

An effective SWOT analysis is honest, realistic and comprehensive.

Honest because we, as professionals, have a tendency to minimize the weaknesses and highlight the strengths. That’s why it is good practice to ask members of other departments to rate your team’s performance.

Realistic because exaggerating the opportunities generates inefficiency in resource allocation, while being overly concerned about weaknesses might lead to the lack of (re)action and promising opportunities not being pursued.

Comprehensive because a successful business is the result of good synergy between all departments. No matter how great your Marketing department, if the other departments cannot deliver on the promise there is no competitive advantage to be had.

Let’s take a look at the four components of the SWOT analysis in greater detail.

Strengths

Strengths are internal capabilities that offer your company a competitive edge. Make sure you assess your strengths versus the competition, not by comparing recent internal improvements to how the company used to do things in the past. An area where you are perceived as doing a better job than your competitors is a strength. The rest are points of parity.

Examples of strengths:

  • The ability to innovate on a continuous basis
  • The ability to quickly adapt to changing market conditions
  • A high brand equity
  • An excellent company reputation
  • A global and supportive distribution network

Weaknesses

These are the most difficult paragraphs to write, because, as I said earlier, we tend to emphasis the strength and downplay what needs to be improved. One method to overcome this is to look at the weaknesses as opportunities to do things better, because these are all elements within the company control.

Weaknesses might include:

  • Lack of brand awareness
  • Not enough resources to generate the much needed brand recognition
  • Lack of distribution
  • Too broad or too narrow product assortment
  • Lack of experience in international trade (in case the company plans to expand globally)

Opportunities

Opportunities are realities or trends that develop in the market place beyond the company control that can be used to expand and prosper. Timing is critical here, as the company might only have a window of opportunity to take advantage of.

Some examples include:

  • Huge market potential
  • Change in consumer perception that favors your company’s offering
  • Fast-growing market segment
  • Weak or slow-to-react competition

Threats

Just like opportunities, these are external factors that might affect the company sooner or later. A company might be facing minor threats, or major ones that are impossible to overcome without major investments.

Below are some examples:

  • Very strong competition from both well established brands and low priced new entrants and private labels
  • Decline in the traditional distribution channel
  • Change in consumer perception that favors the competition
  • Lack of resources to create a meaningful impact in the marketplace

Each SWOT analysis is unique to a company’s situation. Although only the department managers are ultimately responsible for the final document, input is recommended from all levels of the organization. Customer feedback is also highly valuable as it brings the impartiality that a good SWOT analysis requires.

Choosing a Channel of Distribution: 5 Things to Consider

Have you ever been assigned the task of building the channel of distribution for a new brand, or a new market?  Do you plan to grow your business by expanding the distribution beyond your traditional model? Is your current distribution system loosing market share to new, more modern methods?

If you answered “yes” to any of these questions continue reading.

Here are 5 things to take into account when deciding on a new channel of distribution:

Brand Positioning

Distributing a premium brand through Walmart is not a good idea. Brand positioning and differentiation strategy has a great impact on choosing the distribution channel.

Premium brands are usually sold through the company’s own stores or specialized distributors. Coach, the luxury brand of handbags and accessories, distributes its products mainly through a network of over 500 own stores in US and Canada.

The main advantage of owning your distribution network is the full control over the brand messaging. Moreover, the company can deliver a superior shopping experience, while the sales force is solely dedicated to explaining the benefits of a single brand: yours.

For brands competing in the value segmment mass retailers and the internet are popular options. Assuming that the brand is price competitive these two channels provide the exposure and accessibility required.

It is very common for companies to use a hybrid distribution based on various positioning strategies. Canon sells its top of the line lenses throgh specialized distributors while the more affordable consumer versions at mass retailers such as Best Buy.

The Nature of Product Offering

Some products are more suitable to be distributed through a particular channel than other. Cars, for example, cannot be bought over the internet, but books can.

An expensive, unique product that requires a lot of personal selling has  no place in mass retailers. Typically inside these channels the purchase decision is left to the customer, with little to no intervention from the sales clerks.

The Upfront Investment

The cost of developing a distribution network is a major influencer in the decision to sell direct versus through intermediaries. Building up the company’s own distribution chanel, although more advantageous long term, is the most costly alternative.

With the rapid advancements in techology selling over the internet has become a visble option, even for small companies. However, as I said earlier, not all products are suitable to be sold online.

In most cases the cost of selling through intermediaries is lower. That being said make sure that “hidden costs” such as co-op advertising, merchandising and sales support are discussed upfront and taken into account.

Time To Market

If you are under preasure to launch a new brand quickly then selling through distributors is the quickest way to get the product into the hands of consumers. These intermediaries already have a system in place to distribute your product, and an existing customer base.

Bulding your own distribution network is the most time consuming (unless internet is an option). Many companies begin by selling through intermediaries and later decide to add the direct channel into the mix, for obvious reasons. This is not an easy strategy to implement, as management has to find ways to mitigate channel conflict.

On-Shelf Competition

Obviously selling direct means no possibility for the consumer to assess competitive offerings.  Selling through indirect presents one major challenge: the retailer’s private label.

No independent retailer will choose to build your brand over its own. Their goal is to solely to make money selling whatever brand offers the best margin.

To summarize, before you decide on your brand’s distribution strategy, make sure you consider the impact of your decision on the overall strategy.

How To Choose The Right Marketing Partners

Marketing is collaborative by definition. No matter how good the product or service, how strong the positioning, without effective collaboration any branding project will most likely suffer. Working with outside Marketing partners is almost mandatory for any company that takes Marketing seriously.

In most cases the Brand Manager has two options when it comes to working with outside collaborators: full-service agencies and individual specialists. Choosing the right Marketing partners can mean the difference between mediocrity and excellence in any Marketing project.

Full-Service Agencies

Usually positioned as the “one stop shop for all your Marketing needs”, the traditional agency model involves maintaining full-time personnel with a wide variety of skills: market researchers, brand strategists, trade show organizers, public relations specialists as well as graphic and web designers.

Some of the advantages that the full service agency model offers are:

  • consistency in communicating the brand message across different communication channels
  • easier collaboration since the marketer deals with only one agency instead of many individual specialists
  • cross-industry experience
  • time-efficient in executing integrated multi-platform campaigns

Based on my experience there are two major drawbacks to working with a full-service agency.

First, they are in most cases more expensive than the independent specialists, since they carry a lot of overhead. Although you might be interested only in a web design project, they quote you received my reflect the cost of additional personnel regardless of their involvement in your project. That being said, a lot of agencies have become very “lean”, and collaborate with independent specialists rather than keeping full-time staff, thus managing to be more cost-competitive.

Second, I find that during the hiring process agencies do a great job at “wowing” the client. They bring their best people to the table and the owner gets personally involved. Everything looks very promising. However when you get down to business you discover that you’ve been “downgraded” and your contact person is an employee in an entry-level position that doesn’t always understand your needs. That’s when the difficulties in communication and frustration start to surface.

Again, this is just my personal experience working with agencies. I am sure there are some great ones out there.

Independent Specialists

Personally I’ve always worked better and get more things done faster with the independents for various reasons:

  • they are specialists in their field of expertise
  • communication is much easier and less formal
  • less people involved in the decision making process
  • usually less expensive than the traditional agency

The big challenge is of course maintaining the brand consistency across different projects and communication platforms and preserving a unified “look and feel” of the brand. You have to be able to provide the strategic direction and detailed guidelines for each project. Time management skills are also mandatory.

So What Type of Marketing Partner Is Best For You?

Honestly, regardless of the business model, it all comes down to the individual who manages your project. I had the opportunity to work with great agency people as well as brilliant independents with excellent Marketing skills.

As a broad rule, if your projects involve a lot of coordination and multi-platform communication, and the time-to-market is short, than a full-service agency might be your best option.

If your Marketing is focused on a few channels and you want in-depth specialized knowledge, than you can’t go wrong with the independent specialists.

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The Difference Between Sales And Marketing: Can The Two Be Effectively Managed By A Single Person?

Photo Credit: Scott Maxwell on Flickr

Have you ever read a advertisement for a Marketing position that, after reviewing the job responsibilities, turns out to be a pure Sales job?

As a professional working exclusively in the Marketing department I am always frustrated by managers who don’t understand the difference between Sales and Marketing.

With the risk of generating a lot of debate here is my take on the issue.

Marketing=Sales?

In small companies there is no Marketing function to begin with. Here Marketing does equal Sales, and the few Marketing ideas come from the business owner or the Sales person.

As the company gets bigger the owner might consider adding a Marketing function, such as “Marketing Coordinator” or “Marketing Assistant”. This role is basically a pure Sales support role, whose main purpose is to provide the Sales force with catalogs, flyers and price lists.

Finally with the growth in Sales comes the need for a dedicated Marketing department that will help the company focus on servicing the relevant market, managing the 4 Ps, and build brands rather than products.

What Happens In The Real World

Sales and Marketing rarely work is sync, no matter the industry, product or target market. This statement is based on my personal experience working in the Marketing department of four different companies in various industries, from consumer package goods to the industrial sector.

When sales are bad the two departments come up with different explanations for the poor results.

Sales accuses Marketing for wasting the budget on ineffective programs, and setting the prices too high. According to them, Marketing people spend too much time in the office and are out-of-touch with the customers.

Their solution: pay higher commission to the Sales team, hire more reps and lower the prices.

Marketing in return blames Sales for thinking short-term, and focusing on satisfying an existing demand, instead of identifying new needs and expanding the market.

In their view the members of the Sales team are simply “order takers” who are just waiting for business to fall in their lap.

The difference between Sales and Marketing extends to most of the 4 Ps.

Let’s take price for example.

Sales wants lower prices that allows them to get more products out the door thus meeting the monthly target. Lower prices gives them more leverage to negotiate and close deals, regardless if the company is making money or not.

Marketing thinks more in terms of profits, and wants the sale to happen through brand building and not rock-bottom prices.

Then there is the difference of opinion regarding new products. The Sales team’s vision of a new product is usually a copy of the closest competitor’s best seller at a lower price.

Marketing believes in differentiation, in products with unique features that will offer the company a long term competitive advantage.

And finally promotion. I find that Sales people love Sales promotions, which give them “something to talk about” with the customer.

Marketing is usually cautious with using this communication tool, which in the long term cheapens a brand and decreases profitability.

The Difference Between Marketing and Sales

Sales and Marketing can rarely be performed efficiently by a single person. These two functions attract people with different backgrounds and are meant to produce different outcomes.

Marketing requires long term vision and effective strategies to make it reality.

This involves taking a comprehensive look at the company as a whole, and a good understanding of full business cycle, including identifying new market opportunities, product development, packaging, promotion, among others. Profitability is also important.

Marketing compensation is based not only on meeting the Sales target, but also on the results of the projects being implemented. Marketing people tend to think more analytically, are usually at least University graduates, are able to think long term and are excellent project managers.

Sales usually focus on short-term actions to close the deal, and meet the monthly budget. They see promotion as the ultimate tool to grow sales, and always demand lower pricing. In their view Marketing’s role is to support their efforts. While that is partly true, Marketing is much more than an administrative role.

In terms of formal education Sales people are not usually required to have a post secondary degree. The skill that is mostly valued is relationship building, and the ability to close the deal.

I don’t believe in “Sales & Marketing” titles. I never accepted to report to Sales. Marketing should report to the CEO or President, not the Sales Manager. If you have a Sales and Marketing title, you are probably dedicating 90% of your time to one or the other.

The Solution

I understand the cost savings that result from combining the two functions. But there is one more cost effective solution to consider: outsourcing one function, most frequently Marketing. Management can allocate a monthly budget they feel comfortable with, settle on a number of Marketing initiatives and execute them rigorously.

Every business needs Marketing. The reason is simple, and can be summarize in one word: competition. Sales might provide short-term satisfaction, but Marketing provides long-term success.

Companies that chose the strategy of merging Marketing and Sales into a single position make a strategic error. Marketing and Sales are two separate functions, that require distinctive sets of skills rarely found in a single person.