“Show me the incentive and I’ll show you the result.”
That’s what Charlie Munger says, one of the greatest investors in human history.
Over the past 10 years, the rules of marketing effectiveness have become clearer and clearer thanks to the valiant efforts of academic figures like the Ehrenberg Bass Institute and independent researchers like Les Binet and Peter Field.
But the remarkable thing isn’t how much we’ve learned about marketing, but how few marketers actually follow the evidence.
Are B2B and B2C Marketing Really Different?
Why do marketers invest in refuted strategies? The most common explanation is ignorance. Most marketers have never heard of, let alone read, How Brands Grow.
In this week’s column, however, we’d like to offer a less common – but more plausible – explanation: The marketing industry is paid to make wrong decisions.
Marketers are neither ignorant nor stupid. We only respond to incentives.
The incentives behind the segmentation
Who is your target customer?
Let’s start with the evidence: your target customer is everyone who buys your category.
If you’re the CMO of Coca-Cola, your target is pretty much anyone with a mouth, that’s roughly 7.8 billion people. When you’re the CMO of Microsoft, your target is everyone who influences IT decisions, which is at least 14 million professionals in the US and UK alone, according to LinkedIn data.
In the minds of marketers, brands grow by hyper-targeting certain subsegments of the market or by focusing only on their highest-spending customers. But here on planet earth brands grow by targeting the category and attracting lots of customers in many segments. The “law of double buying” shows that brands in the same category sell to the same customers and not to their own niche. And the “law of double risk” shows that brands grow by attracting new customers, not by increasing customer loyalty. These laws apply to every category and market, both B2C and B2B, as the evidence shows.
But even if every marketer knew the “Laws of Growth”, would we actually follow the evidence? Let’s look at the incentives to understand the results. B2C CMOs often spend hundreds of thousands of dollars hiring consulting firms to create sophisticated models that break the category down into a dozen customer personalities, each with a cute name like Upwardly Mobile Millennials. B2B CMOs do something similar, spending months developing propensity models that forecast the growth that comes from a hyper-targeted ABM strategy targeting six financial services accounts in Estonia.
Of course, if we were to replace the complicated segmentation with a simple segmentation like “reaching everyone with a mouth”, an army of research consultants would have to find different jobs. And the CMO would have to admit that he wasted large sums of money on useless reports. And the programmatic providers who claim to be able to target “Upwardly Mobile Millennials” would see sales fizzle out faster than a freshly opened can of Coke. “We will address everyone who can buy from us” sounds nowhere near as smart as “We will only address the most valuable sub-segments”. And nobody wants to sound stupid in a meeting, virtual or otherwise.
The segmentation is simple, but the incentives require it to stay complicated.
The incentives behind Creative
Should you develop new ads or re-run old ads?
The evidence is crystal clear. You almost certainly don’t need as many new creatives as you think. The idea that creativity wears out is a myth. Saying the same thing over and over again will make your brand more memorable.
If every single buyer in the category hasn’t seen your old creative, why might you need a new creative? And since most buyers forget about ads, it probably makes sense to periodically show the same creative to remind buyers that you still exist. In some cases, you can run the same ad for 27 years without reducing returns. We know this is true because Coca Cola did just that with its Christmas advertising in the UK.
But would 99.9% of marketers repeat the same ad for 27 years? Of course not. Finally, what would the CMO be talking about in his upcoming Marketing Week interview? And Cannes doesn’t give away lions for dusty old campaigns. You are promoted to change things, not keep things the same. Oh yes, and the creative agency that is paid to develop new creative, strong objects corresponds to our recommendation.
Running old creatives can make the brand famous, but not the marketer. To borrow a quote from Upton Sinclair, “Don’t rely on someone to understand something when their work depends on them not understanding it.”
The incentives behind “optimizations”
How often do you have to “optimize” your marketing?
How about once a year? All the evidence available suggests that marketing is a long-term game: 95% of the buyers you reach aren’t currently in the market and won’t be for months or even years. Given that businesses only buy commercial banks every five years and consumers only buy cars every ten years, the likelihood of an immediate sale is slim to none. If the average B2B sales cycle is six months, you’ll have to wait at least that long to measure incremental sales.
For example, let’s say you have a well-branded, attention-grabbing creative, and if you can reach as many buyers as you can through the right media channels, your job is as good as done. You can sit back in your swivel chair and turn your thumb.
Okay, now we can hear you screaming over the computer screen. “Nonsense!” you say. “That is gross negligence.” Sure it is. Or maybe you are worried about what the 5,000 marketers in your company will be doing all day if you have a “set it and forget it” strategy. You need constant coverage, or that’s what the people who pay you tell you to provide constant coverage. And what are you going to say to the sales manager? That your campaign is working hard to generate future cash flows while you chill and explore new sourdough recipes?
Brands need a light touch, but the incentives require a heavy hand.
To freeze the results, freeze the incentives
To be clear, we are not claiming that anyone has bad intentions – just bad incentives. The problem is not the people, but the system. As an industry, we need to look for new solutions that could rebalance the interests of the company and the marketer.
- Could we pay consultants to make things easier, not more complicated?
- Could creative agencies get paid more the longer the ad runs?
- Could we encourage marketers who leave their (successful) campaigns alone?
We have no answers. But we can tell you one thing for sure: you will not change the results until you change the incentives.
Peter Weinberg and Jon Lombardo are the heads of research and development at the B2B Institute, a think tank at LinkedIn that studies the laws of growth in B2B.