[00:00:00] Matt Bailey: What a difference a year made for this retailer. From one of the best holiday seasons ever to crashing and only seeing barely 60% of that mark the next year. They felt so well positioned to take advantage of the previous year’s momentum but were shaken and left with foundational questions answering the holiday post-mortem.
I was brought in to audit this company, and what I found at the root of the collapse, well, it wasn’t a lack of effort. And it wasn’t a lack of content or vision. It was plain and simple. It was a lack of business experience.
[00:00:50] Bumper Intro-Outro: Welcome to Endless Coffee Cup, a regular discussion of marketing news, culture, and media for our complex digital lifestyle. Join Matt Bailey as he engages in conversation to find insights beyond the latest headlines and deeper understanding for those involved in marketing. Grab a cup of coffee, have a seat, and thanks for joining.
[00:01:23] Matt Bailey: Well, dear listener, I can tell you that there are many people who have been in this industry for years and yet have little contributable experience. I can tell you that there are many young up and comers who have developed their own side projects and have applied what they’ve learned into a personal project, which has given them real hands-on experience.
You see, for this retailer, I audited their performance over the years, and they were climbing the revenue ladder every year. They were establishing a sustainable business with clear appreciable growth, but then one of their employees left, and they decided to bring in an exciting new marketing director with an impressive resume and some big ideas. This director had a lot of experience in digital marketing.
But one of the first things this director did was to pull budget from the email and paid search campaigns, citing their “old fashioned” approach. The owners went along with the plan, as the MD was full of ideas, confidence, and vision. The new marketing budget invested heavily into creating video and ad content for a complete ad and social media blitz for the holiday season.
But what this director did not do was to evaluate how those other channels were contributing to the past holiday sales and the impact they had on the overall revenue, and more importantly, the profitability of the company. You see, these channels, email and paid search, were generating an incredible return on ad spend. That means for every dollar that was spent, there was a return between $18 and $20 in revenue, and when you pull budget from great return on ad spend channels, you lose three times.
First, you lose by taking budget away from a proven reliable channel. Second, you lose the potential revenue that would have been realized. You aren’t simply taking a dollar out of a spend, you’re taking $20 of revenue for every dollar. Third, you lose again when you put that budget into something that has no return. It would’ve been better and more profitable to leave the money on the table than to spend it in unproven and underperforming channels.
The analytics don’t lie. Comparing year over year performance alongside the marketing plan exposed a clear pattern. Less emails went out to existing customers. In years prior, emails to the customer base made up at least 35% of holiday sales. With less emphasis and the bare minimum, the customer base accounted for less than 20% that next year.
Similarly, the paid search budget, slashed, performed as admirably as it could, mainly recycling the efforts of the prior year, but only producing 40% compared to the performance of the prior year. These solidly performing but demoted channels were replaced with a programmatic ad campaign targeting lookalikes and behavioral factors and a TikTok campaign to reach younger audiences.
Now, number one, the programmatic ad campaign generated amazingly impressive numbers of engagement and impressions. Despite not generating any sales, the marketing director was excited about making such an impact and generating such engaging excitement. Digging into the analytics even further showed that a significant amount of the “engagement” was obviously bot-driven and very little human activity. That’s what cheap CPMs will get you.
The video campaign designed to capture younger audiences was interesting. A few moments getting acquainted with the current customer base may have prevented this disaster. You see, this was an upscale boutique type of product. The average customer was a mid-40’s female. But ignoring this type of important information to reach a younger demographic, it takes a special kind of arrogance and misplaced confidence displayed mainly by inexperienced marketers who are looking to educate their clients or follow the headlines instead of the data.
As I mentioned in a previous podcast, the age 50 and older population of the U.S. holds more than 90% of the spending power. Gen Zs and Millennials are around 2% of the spending power. I’m not saying to neglect the younger audience. What I am saying is that when you have a product that already appeals to an older audience, and the older audience is primarily your customer, shouldn’t you look to expand and develop that same audience as it has a greater potential for return? There’s your lookalike.
Delivering these findings from the audit was an uncomfortable experience. I’ve learned over the years that when delivering an audit, especially if there’s bad news, just expect that the person who made those decisions will be in the room. And this was no different. The owners of the business were shocked, and they felt completely betrayed by their new marketing director. They had no choice. The director did, either apologize and learn from the mistakes or double down on what they did.
You see, the issue was not about digital marketing knowledge. The marketing director had a lot of knowledge. The issue was a lack of experience in core marketing principles and a lack of experience in business. A focus on just the digital rather than basic marketing practices and understanding how business works, it leads to disaster, and it happens more often than I care to say.
It’s interesting that in this business, we still continue to call it digital marketing, when in all honesty, digital is the tactic. Marketing is still the main player. Digital is how you execute the marketing, and there are many channels within digital to make it happen. You can’t escape the fundamentals of business and marketing just because you play in the digital playground.
Business experience creates an understanding of revenue and profit. It creates a conscious, relentless drive to connect every activity to business value. I look back and my best analysts that I ever worked with were ones that focused on increasing profitability, not visits. They looked for things that inhibited the user experience and tied them to revenue and profitability, not engagement. They understood that what happens in the CRM was just as critical to business success as the SEO.
When I talk about business experience and business acumen, it’s this skill that enables a person or a team to know what to do, why to do it, when to do it, what to expect, how to measure, and how to react. Business acumen is the foundation of a sound marketing plan. Knowing how to take the objectives of an organization and develop strategy based on those objectives. Then knowing how to execute that strategy across channels with clear goals, measurements, and performance expectations.
[00:10:00] I have no problem exploring and testing new channels or new technologies. We should be exploring these and educating ourselves about these. And educating ourselves not just on the potential or the popularity, but also about the pitfalls, the legalities, and potential problems that they may cause, both to business, and to people, and to kids. Sometimes when it comes to business, I don’t think enough marketers consider the social impact of their choice of marketing channels. I think so many times in this business, people are willing to sacrifice ethics and social responsibility for reach.
I realize that this skill, business acumen, draws from the other skills in this series, and it does. It neatly dovetails so many other skills as business experience is drawn from digital and media literacy, writing, analytics, user experience. When you operate in those spheres, you will naturally learn and apply core marketing principles, business expertise, and an appreciation for informed decision making that builds a business.
Marketers have a reputation for playing sleight of hand, the distraction technique of avoiding basic revenue and financial accountability by constantly pitching the latest tech or platform. The problem is that the constant presentation of the new digital tactics has become a replacement for disciplined strategy. Marketers lose their seats at the big table when they focus on the latest and greatest and avoid presenting real data that means something to the financial bottom line of the organization.
You see, my earliest experiences with digital taught me a valuable lesson, and you may have heard this story. I was building websites for lead generation, and it was a part-time hobby. I had limited time and limited budget, and one night I had to ask myself, “What am I going to do in the hours that I have and what activity is going to be the most profitable?”
I didn’t know it at that time, but I asked the right question, and it changed how I did everything. You see, I asked about profitability, and it set me on course to track and learn what was making money and what was the most important activity contributing to that.
Now, I found that more than 80% of my leads came from search engines, but I also found that search engine leads contributed a very small amount of sales. Less than 10% of my leads came from PR activities, such as writing articles and advertising on other websites. Those activities accounted for more than 80% of my sales.
If the question was, “What brings the most visits to my site?” I would’ve focused on search. If my question was, “What brings the greatest number of leads?” I would’ve focused on search. And I would’ve focused on the least profitable activity. Now, that was for my business, and by asking a business question, it enabled me to properly order my marketing priorities, and it caused me to measure the right things for the intended outcome.
And this informed my agency. Clients were always listing their goal as more visits, more leads, but I would have to press them to find out what was really important, what they really wanted. And invariably we would get to profit.
But the problem there is that it means that now everything is on the table and up for examination. Not just the marketing, but the operations. Not just the acquisition, but the retention. Not just the lead capture, but the lead nurture. The goal of profitability means that every part of the business and the customer journey is up for examination and optimization.
Running a business and marketing a business successfully requires a knowledge of how these two areas work together. Marketers who understand how business works will be a high value commodity in the next decade, as there will be thousands of marketers who know how to get digital impressions, likes, and engagements, but how many of them will know how to examine business objectives, create marketing campaigns and strategy, and structure tactics for profitability?
So, what do you think? Am I on track or do you disagree? I’d love to know what you think about this skill or any of the other skills I’ve covered so far this series. Go to the show page and leave a comment or email me directly at firstname.lastname@example.org. That’s S I T E L O G I C, sitelogic.com. I’d love to hear from you. Until then, I look forward to our next coffee and conversation on the Endless Coffee Cup. Thanks for listening.