William Lever, 1st Viscount Leverhulme famously made the quote about advertising, “I know half my advertising isn’t working, I just don’t know which half.” but it is often misquoted as “…half my marketing budget…”. But that seems pretty accurate if you have ever worked in marketing. I recently read “Free Prize Inside” by Seth Godin and he seems to think pretty much most of it is wasted. The money should not be going on marketing campaigns but on incremental improvements.
The basic premise is that if you spend all your money on R&D you’ll have perfect products but be unable to sell them as the price set to break-even has to rise to accommodate the sunk costs. Similarly if you spend all your money on media you’ll have lots of awareness for your products but the price to break-even again rises the more you spend. The really clever thing is he puts those ideas on a single chart. Then plots profit against break-even price – the “free prize” is the space between. This is the zone within which innovation is cheap and (hopefully) abundant.
The shelf lives of products are getting shorter so incremental innovation is ever more important and Godin has some good advice for incremental marketing (finding “edges”) but some of it is contradictory – saying it is counterproductive to spend so much on media and then later talks about Land Rover in the context of an aspirational product. That looks to me to be saying that if you are going to invest – invest very big or not at all. This is Michael Porter strategic territory but Godin says that differentiation is not in itself “remarkable”. The edges Godin refers to are the potential areas of innovation or value-creating brand attributes – the trick though is not to second guess the market with huge step changes in product but to have lots of incremental innovations – some fail some win. If you change the ones you fail on then you haven’t lost a lot because its incremental. What I like especially about Godin’s book is that he recognises that ideas themselves don’t get implemented without a champion and big ideas don’t get implemented without being championed by someone having a “champion” track-record. How true.
Ultimately, you need a sustainable system. The Toyota Way is a solid treatise on developing not only great products but great companies – the Toyota Way is a framework that can lead to consistently profitable “lean companies” so long as you don’t treat it as a rigid system and as long as you don’t get obsessed with measuring everything. The trick is to have an open company that has respect for the individual (and their ideas) and is by and large single-status. In such an organisation incremental innovation can flourish and you can claim your “free prize” – you may even be able to identify which half of your marketing budget is wasted!
© Gareth Gadd 2013
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