Beyond Auteur Marketing

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Learning from P&G, outlining the law of customer value, and why there’s no retail market for digital advertising.

A few years ago, P&G announced they were scaling back their targeted Facebook ad spending. Since then, they’ve made additional cuts to digital expenditures: $200 million in 2017, $750 million in 2018 (a sizeable portion of which they’d doubtlessly earmarked for digital). P&G made these cuts for a variety of reasons, all of which are high in the funnel and relatively easily addressed by ad vendors and marketing agencies.

Complaints included:

  • too many views by the same target customer
  • low average view time
  • contextual issues (ie., ads appearing in conjunction with controversial or undesirable content)
  • too much segmentation (ie., mass media channels reach horizontal audiences better)

Far more interesting than these is P&G’s claim that halving their marketing spending had little impact on overall sales. Consider the scale of that:

P&G — one of the largest ad customers in the world — stopped spending three-quarters of a billion dollars on marketing and saw virtually no impact on sales and growth.

This suggests the disconnect between marketing costs and the value they create may lie outside the funnel entirely. (In a digital context, as I’ll argue, this is almost certainly the case.)

In this reality, what’s the relevance of marketing as a professional practice? When you learn your creative, messaging, ads, and even engagement data couldn’t transform hundreds of millions of dollars into any demonstrable value, what does the next day of your career look like?

Let’s take a trip up that river, into the heart of darkness, and see what we find.

What is Marketing Anyway?

Sometimes marketing is used casually (and synecdochically) with sales — especially in legacy markets — but this is very misleading. Marketing does occupy more of the funnel than it used to, but selling is very much its own discipline (and an important one at that). In the tail-to-tooth framework of business development, one might say marketing is supply and support and sales is combat infantry.

As a day-to-day job, the parole of marketing generally focuses on awareness, messaging, creative, lead flow, and, in progressive organizations, relevant data and analytics. Hence the nature of P&G’s complaints to their agencies and ad vendors. When a company doesn’t meet its goals, marketing stakeholders almost always turn their attention to the top half of the funnel:

  • “Should we use other channels?”
  • “Could we increase awareness?”
  • “Could we build better creative?”
  • “Could we drive more engagement?”

The third is perhaps the most seductive and insidious. When people on a marketing team don’t know what else to do, when they really lose their way, they obsess over creative. It’s an opinion-driven democratic space with low barriers to entry, and it’s easy for anyone from the janitor to the CEO to make a contribution. (And it feels so immensely satisfying when you do.)

“What about a green button? That might help. What if we used this picture instead? When was the last time we re-considered our logo? This layout is a little off at this particular resolution. The person in that video is a little young.”

Confusion about correlation and causation (and outright irrelevance), working without some sort of objectivite razor — creative is a dangerous, massive body with a deep gravity well. How many months and years have organizations lost swirling and speghettifying in that loopy eddy, tumbling toward something they can never reach, asking questions that have no answers?

This is the essence of “auteur marketing.” It’s any act motivated by the marketer’s preferences rather than the audience’s desire.

In aesthetics, the ego-centric model has absolute value. Working back from whatever your audience wants is the essence of “selling out.” Conversely, the best marketing gestures are ego-annihilating and organized around what John Keats called “negative capability.” Marketers are the servants of their audiences, and there’s a proportional relationship between the impact a particular marketing act has and the ability of its creator to inhabit the minds, experiences, and desires of the target audience.

Getting the ratio right, wrapping it around a great product, and building a system in which marketing insights and product features continually reinforce one another — this is the molecular structure of exponential value curves. Get the ratio wrong, whether there’s a great product or not, and we find ourselves in the never-was charnel pit of ideas, products, and startups.

“Is this heading for the Louvre?” our team likes to ask itself. “No? That’s fantastic. What a relief. I didn’t really want to compete with Delacroix, David, or da Vinci today anyway.”

“Then let’s build fast and get v.0.1 in front of an audience as quickly as possible.”

That simple mindset allows us to start working back from the audience response as quickly as possible and helps us avoid losing sight of the ultimate role of any marketing asset: customer acquisition. If a video, landing page, ad, image, &c. helps do that, it succeeds and so do we all.

In P&G’s case, as in so many others, obsession with the upper reaches of the funnel is effectively irrelevant. Scraping a huge portion of the machine did nothing to stymie P&G’s growth. As such, it seems unlikely that answering a few questions about awareness and creative, and making a few tweaks here and there, would have had that much of an impact.

We need other answers, other models.

Continuing our trip upriver, as we float deeper into the hazy miasma, let’s free our minds a bit. Moving further and further from the known world, while critters chirp and the water laps our boat and the steam engine hums along, let’s abandon day-to-day occupational concerns. Let’s loosen our grip on material realities and rise to a higher plane. Let’s zoom way, way out and expand the concept of marketing beyond its usual occupational expressions.

Consider the emerging flywheel model. It essentially turns an entire organization into a marketing machine and makes a simple, implicit, and radical point:

Marketing is anything that adds value to an organization.

It can be a landing page, an ad, a conversation, a handshake, a customer service experience, great UI, a follow up call, a discussion over dinner, an efficiency gain, one customer sharing her positive experience with another — any act or asset that attracts new relationships or nurtures and reengages existing ones. It’s less of a professional role or a set of tasks and more of a cultural spirit that pervades, and then exudes from, an organization.

Marketing contributes “over 50% of firm value,” does it? In this model, that seems too low by half. Marketing has become immanent and diffuse. It’s everywhere and in everything. It’s the omnipotent specter of every enterprise.

Like the flywheel model, marketing as an object of analysis — the langue of marketing — is far moreinclusive than marketing-as-parole. Defining it as “the study and management of exchange relationships” gives marketing the standing it needs to frame, influence, and analyze things like customer value. With a seat at the adults’ table, it can say to its sibling disciplines accounting and sales, “I’m more than creative and raw awareness. Like you, I can answer quantitative questions. We have one sap and one root. Let there be commerce between us.”

When it comes to digital marketing in particular, this kind of abstract presence (“I’m everywhere and in everything”) and quantitative standing (“I can do math”) are really important. So let’s leave creative and awareness behind. Let’s go off the grid and float deeper into the jungle outside the pipeline. Let’s go native in that wild place-beyond-parole where sales, accounting, and marketing bleed into one another and Kurtz, prose-poet CMO of his own mad state, freestyles a much deeper truth.

As marketers, this is the frontier space we need to do our best work. No more auteur thinking. No more creative eddies. No more old restrictions and limitations. We’re all the way upriver now, and this is where we belong.

The Law of Customer Value

In our search for abstract models and precise quantities that can help liberate us from auteur marketing, perhaps we hear something like the following one evening, as we sit around the campfire with Kurtz. Let’s call it the law of customer value:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

In other words, if you sell goods or services in relatively small quantities and at relatively low price points (“retail”), and your customer conversion rate from digital hovers around 5%, as it almost always will, you should never burn time or money on digital marketing campaigns. It’s unlikely you will see any sort of return on your efforts. (Try it for yourself here.)

In short:

There’s no retail market for digital advertising.

This isn’t a B2B vs. B2C issue. Resorts like our friends at The Hermitage in Nevis, car dealers, rug merchants, and custom suit makers sell to consumers at price points worth thousands of dollars. Google, Alibaba, and Amazon sell a range of services to other businesses for dollars and even pennies.

No, this is very specifically a customer value issue, namely:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

I’m not privy to P&G’s specific sales figures. However, for the sake of argument, let’s assume the following represents something like an average single-trip shopping list of a typical P&G customer in the United States:

When I get to the register, my bill will be $36. Most of these items will last my household more than a month so let’s assume I repeat this purchase every other month ($36 * 6 = $216). Assuming we’re shopping somewhere that uses a 50% keystone, my gross value to P&G is about $108 per year. (Deduct the cost of ongoing marketing, R&D, and logistics expenses, and we can probably shave off another 20-30%. For simplicity’s sake, I omit these additional costs).

Obviously, family sizes and personal needs differ, but $66.83 billion in sales (P&G’s 2018 gross revenue) in $108 increments would give us about 619 million global customers: ~8% of the world’s population. About half the US population shops at Walmart each week (the world’s largest retailer) so, at ~4.5x that, we’re probably within range for P&G’s total global customer base.

However, even if we double the proposed customer value ($216 / 309 million customers / 4% of the world’s population) or quadruple it ($432 / 155 million customers / 2% of the world’s population), we’re still far below the $750 threshold. In fact, to have an average customer value of $750, P&G would be deriving all their global sales from just 89 million people: .12% of the world’s population, 36% fewer people than shop at Walmart in a given week, roughly the combined populations of California, New York, and Texas.

It would also mean an average consumer purchases something like the following in a year, which seems highly unlikely:

  • 150 bottles of Dawn (3 bottles per week)
  • 250 tubes of Crest (5 tubes per week)
  • 62 packs of Gillette razors (1 pack per week)
  • 75 bottles of Tide (1 bottle per week)

Given that it’s likely hundreds of dollars below the ~$750 minimum, P&G made a wise (albeit seemingly radical) choice to cut its digital marketing spending. In fact, it’s hard to see why they or any other retail-focused enterprise would ever spend anything on digital marketing at all. I suspect they knew that there’s no retail market for digital advertising — and pulled, using Scott Galloway‘s phrase, a “gangster marketing move” — before just about anyone else in their weight class wised up.

In a digital context, I’d argue that customer value is the central challenge of marketing. If you can’t align yours with the law above — and you should try to do that before you focus on anything else, before laboring over creative, messaging, awareness, interest, and engagement — it’s best to not engage digital at all. Use your resources elsewhere.

Taking P&G as a case study and (humbly) as a cautionary tale, I’d argue the true issue they faced wasn’t creative-, awareness-, interest-, engagement-, or segmentation-based. Instead, their digital marketing spending simply wasn’t aligned with their average customer value (nor could it ever hope to be). Simply put:

The value of the customer relationships that mass market companies try to build is probably not high enough to justify any sort of digital marketing spend.

Budget was never the problem for P&G. They could throw all the money they liked at digital ads, but because their average customer value is so low, it’s unlikely they’d ever see a demonstrable return on that spend. And if this is true for one of the world’s largest advertisers, it’s safe to assume it’s probably true for all of us:

  • for small business owners who operate dry cleaners and car washes, restaurants and local hardware stores
  • for those who sell low-cost, non-recurring-revenue items online
  • for those who run small-dollar charities and grassroots political campaigns
  • for self-published authors and most everyone running a shop situated on the long tail

So where does the law of customer value come from? Why ~$750?

Like all discoveries, these arise from a lot of trial and error, eyestrain, experimentation, some late nights and busy days, and a Gladwellian 10,000 hours of professional practice. In our particular case, we also benefited from aggregated data, a group of adventure-minded customers, and a bunch of spreadsheets that we turned into a free interactive tool.

The Primal Forces of Nature

At GoConvert, we think marketing should focus less on awareness and creative and more on building holistically healthy funnels. That is, you want expenditures at the top of your marketing funnel to have demonstrable returns at the bottom. When this isn’t happening, you want to know why:

  • Is it an awareness problem? (“Not enough people know about me.”)
  • Is it an interest problem? (“Not enough people are interested in me.”)
  • Is it an engagement problem? (“Not enough people are willing to take an action.”)
  • Is it a sales problem? (“I’m not doing enough nurturing.”)

Each of these are unique problems with unique solutions, and without visibility into where your challenge(s) lie — into which stage of your funnel is malfunctioning — you’ll likely burn resources trying to fix unrelated things. This is the holistic funnel model of marketing: like any other engine, you need the constituent parts to be firing in tidy, harmonic ratios to achieve a desirable outcome. If one part of the engine isn’t working well, including customer value, the overall machine will not work for you.

The GoConvert application helps customers identify which funnel stages are performing well and which need work:

In the example, we’re showing a strong customer conversion rate and marketing ROI, but both would likely be even higher if we increased interest and engagement and put downward pressure on lead costs (CPR). Our application color codes each pipeline stage against best-practice benchmarks, and our corresponding list of insights can help fix common issues associated with each metric and stage. Using GoConvert, our customers and admins know exactly where to focus their attention. As a result, we can keep effort and impact tightly aligned.

However, before we bring organizations like The Hermitage, UNC Charlotte, and Farm Credit of North Carolina to the customer stage, we use our performance calculator to make sure the prospect isn’t violating the law of customer value. If it is, we encourage that prospect to focus its resources elsewhere.

A clockwork mechanism for organizing digital spending, the calculator uses the real-time, ever-changing data of the GoConvert customer network and digital marketing benchmarks to help prospects estimate how well they’d perform as our customer.

Admittedly, at the moment, the output is based on only about a dozen customers and eighteen months’ worth of data. As we add more of each, the results will become more precise. However, after working with a diverse range of customers from a variety of verticals over the past year and a half, we’ve seen one thing very consistently and very clearly:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

Keep in mind that GoConvert consistently (and pretty substantially) outperforms common digital marketing benchmarks. (We’re working on “RCR”: our version of lead conversion rate.) If anything, our numbers represent a best-case scenario, meaning most campaigns that violate the law of customer value (and even some that don’t) are staggering financial bonfires, even when they get close to best-practice benchmarks.

Returning to our P&G case study, if the customer goods behemoth had approached us, we would have immediately seen that they violate the law of customer value. No matter how much we’d like to take their money, no matter how large a budget they offered us, we would need to tell them they aren’t a good fit for GoConvert (or, by extension, any digital marketing effort).

Combining P&G’s highest theoretical customer value from above ($432) with a $1 million budget, we see this:

Why is this the case? Because organizations always lose numbers as audiences make their way through the funnel, and customer conversion rates from digital hover around 5%: 100-300% lower than average sales “win” rates of 10-20%.

“I want to see the formulas for the table above.” Download here. “I want to review benchmarks, &c.” Click here. “I want even more documentation.” Email us at info@letsgoconvert.com. We have a lot.

For a digital campaign to generate sufficient ROI — that is, generate more money at the bottom than went in the top — we must harmonize the ratios between metrics like awareness, click through rates, lead conversion rates, and customer value.

Digital marketing is a system with fairly predictable outcomes. Long-standing benchmarks like these would be familiar to just about any digital marketer worth his or her salt. Even if we can’t say digital offers single, defined points of “truth,” it does offer abstract, recurring ranges, scatter fields that appear regardless of industry, vertical, or target audience.

Ebb and flow, tidal gravity, ecological balance — these are primal forces of nature, as another Kurtz figure reminds us. They cannot be controlled, but they can be respected and accommodated. We can supplicate ourselves to them and be rewarded. Or we can shake our fist at them and be punished. Because of these forces, no amount of budget thrown into the funnel will generate a positive ROI if your customer value isn’t high enough.

Note that P&G’s $200 million returns the same as $1 million:

Budget isn’t the issue. Customer value is. If it isn’t high enough, you’ll always lose money when spending on digital.

To see the inverse, consider one of GoConvert’s customers. It has a customer value just shy of $2k. Spending $199,998,000 fewer dollars than P&G, this customer has a reasonable expectation that it can generate a positive ROI from digital marketing spending:

Imagine being in our position, and you begin to understand the paradoxical, counterintuitive landscape of digital marketing that one finds upriver.

The GoConvert sales team should turn away one of the largest advertisers in the world (P&G). Unless they can work on increasing their customer value, it would be irresponsible for us to work with them, no matter how much money they gave us. But we can help just about any businesses with any budget that also has a > $750 customer value generate solid returns from their marketing spending.

Why? Because digital marketing is not about budget. It’s about customer value:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

P&G effectively underwrote a mass-media money furnace for 75 years. That system privileged awareness and reach above all else. And awareness and reach, unlike authentic interest, engagement, and conversions, can be purchased. When P&G and other legacy companies turn the 20th-century playbook to digital, very little happens unless it’s also yoked to higher-than-retail customer values.

As such, if Facebook asks you if you want to boost a post, remind yourself:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

Want to test some keyword ads on Google? Ok. But first, remind yourself:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

Get an email from a PPC vendor who promises to help you reach hundreds of thousands of people in a targeted network of relevant prospects? Fantastic. But first, remind yourself:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

See an interesting, relevant publication that offers diverse forms of exposure to its readers? Exciting opportunity! But, again, first, remind yourself:

If your customer value is ~$750 or less, it’s virtually impossible to generate any positive ROI from your digital marketing spending.

Boost posts all you want. Drive all the clicks and traffic and awareness you want. Position yourself to targeted audiences. But unless you have a higher-than-retail customer value, it’s likely going to be a wasted effort. First, focus on boosting your customer value through transaction frequency or transaction value. (Simply adding more customers of the same value isn’t likely to help.) Then, once you’re north of the ~$750 dead zone, you’ll be ready to initiate a digital marketing spend that has a reasonable ROI expectation.

When you get to that point, be sure to contact us. We’ve made it upriver, and we’re ready to help.

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Quimby Melton

Founder/President

Quimby is the founder and president of Studio Hyperset. He started Studio Hyperset in 2006 after studying Transatlantic literature and culture, new media, and humanities computing at the Universities of Georgia (AB, 00) and Nevada, Las Vegas (MA, 03; PhD, 08). He has a background in literary studies, media production, front-end development, and project management. His current primary duties involve helping clients frame solutions that meet their needs; scoping and managing Studio Hyperset's growth strategy and business development pipeline; finding and developing talent; and, most importantly, supporting the SH team.