One of the greatest marketing challenges for businesses large and small is to balance short-term tactics with a long range strategy. If you’re not mindful, you can get permanently stuck on shortsighted priorities.
I call this triage marketing.
It’s like triage in the television program M*A*S*H. Many a calm moment was cut short by the sound of approaching helicopters and Radar O’Reilly announcing, “In coming.”
What followed was managed chaos.
Outside the operating room was a doctor in triage, whose role was to examine the wounded to determine which needed immediate surgery. The rest were patched up temporarily and helped later. It was the epitome of a short-term strategy.
The marketing equivalent is to focus on quick hits: generating immediate leads for the sales team, running a promotion to spike direct orders, or other scattered activities. The trap is sprung when short-term strategy becomes the constant mode of operation.
Marketers walk a fine line here. To win at content marketing and online customer responsiveness requires real-time execution or you miss opportunities. Who wouldn’t want to be the next viral marketing or newsjacking success story?
However, in the heat of battling day-to-day priorities, it is easy to lose sight of the important long range vision for growing the business. In many cases short-term thinking is ingrained in the corporate culture.
A triage culture
I first observed this as a front line marketer in a large company years ago. There were two aspects of the culture that perpetuated a short-term mindset and shortsighted behaviors.
The first was the budgeting process and learning to game the system.
See if this sounds familiar. Your marketing budget was set in January, after a month long planning process. In April, senior management and the finance wizards would make the first of quarterly adjustments. This meant they were looking for unspent money to take back. This evolved from quarterly to monthly exercises.
How did marketers adapt? You spend or lock in everything you could in Q1. If you phased your budget to customer purchase preferences – in this case, they spent most of their budgets in the last quarter – you lose large parts of your marketing budget. It fostered a mindset that said ‘Responsible planning be damned; use it or lose it.’
A second, equally powerful culture driver was the compensation plan.
Like most companies, bonuses were paid out for reaching ever more aggressive revenue targets. The targets were based largely on new sales revenue. Since compensation drives behavior, this resulted in activity focused on acquiring new customers and new product sales.
I’m not opposed to bonus incentives or driving growth. Not at all. In my time, I made the company tens of millions of dollars and earned some great bonus checks. I also witnessed some chaotic, shortsighted and nonstrategic behaviors in the race for revenue.
One example was the pricing policy behind some of the year-end automatic shipments to subscription customers. All products were sold on subscription with the agreement that updates would be automatically shipped and billed. Want to guess where this is going?
Pricing for updates were set by the finance wizards based on the revenue needed to make revenue goals. That meant some customers where charged an exorbitant amount for very little value. In the process of meeting the short-term goal, we incurred high cancellation rates. This alienated customers and set us back for the upcoming year.
It’s too easy to forget the customer when in triage marketing mode. In the short-term, there is no incentive to invest in customer relationships critical to sustained business growth. You give short shrift to:
Triage marketing focuses on acquisition over retention. One study at St. Joseph’s University in Philadelphia found that retention pays dividends. If your business has a 70 percent customer retention rate, every revenue dollar today will be worth $4 in ten years. And an 80 percent retention rate will increase today’s revenue dollar to $6 in ten years.
Triage marketing focuses on promotions over customer loyalty. Promotions sell a product trial, but not ongoing brand loyalty. They may even attract the wrong customers, who never become loyal. It costs six-to-ten times as much to acquire a new customer as it does to keep an existing one. Conversely, a Harvard Business School study found that an increase of five percent in customer loyalty can increase overall profitability from 25-80 percent.
CUSTOMER LIFETIME VALUE
Triage marketing allows little time to create deep relationships with your best customers. Relationships continue to grow, encounters do not. For example, an automobile dealer once calculated that a lifetime of cars sold to one customer would be worth $322,000. The 80/20 principle, where 80 percent of your business comes from 20 percent of your market (i.e. your loyal customers), literally takes a lifetime.
In the past 10 years, there has been a fundamental shift in the balance of power in the marketplace from seller to buyer. Customers have greater access to reliable information on the Internet. Social networks give them unprecedented power to talk about your product and service. They don’t care about your short-term objectives.
Marketing strategies based on short-term thinking won’t win you customers or sustain your business in the long run. Back in 1973, Peter Drucker said the purpose of business is to create a customer. If you’re in triage, you need to get back to the basics. Your survival depends on it.
What are you doing to combat the perils of short-term thinking in your organization?
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American business leaders have a perception problem about how innovative we really are. Harsher critics might call it denial.
Recently, Forbes ran an eye-opening article on American competitiveness that is must-reading for every CEO and front line marketer in business today. It is a detailed assessment of a Harvard Business Review study that explores the causes behind lagging growth in business and job creation in the U.S. over the past decade.
Two findings from the study point to startling disconnects between business leaders’ perceptions and reality. While businesses are not competing globally:
- Leaders rate management as both strong and improving
- Leaders rate innovation and entrepreneurship as strong and improving
What do leaders think are the reasons we don’t compete or innovate as we should?
The most common problems business leaders cite are government regulatory policies, tax and fiscal policies and an inadequate talent pool. These are all factors, but the researchers identify a root cause leaders will not like hearing: short-term thinking by leadership.
You are what you measure
The study tracks how corporate governance began to change in the 1980s. In response to globalization, managers adopted a mindset focused on stock price and short-term growth and profitability. Over time, innovation came to be about achieving greater efficiencies and cost reductions more than creating value to customers.
At the same time, business schools reinforced this mindset. By defining profitability in terms of ratios to be measured across industries, they trained a generation of MBAs to measure short-term performance as the gauge for success.
As a result, business leaders define innovation as incremental process improvements rather than breakthrough product ideas. That is how they can determine they are strong innovators when their companies are not competitive.
Think like an innovator
To revive innovation in business, leaders have to change the way they think. Beyond resetting priorities to more long-term objectives, they need to start using the other side of their brain.
Singular focus on productivity and profitability metrics give a limited perspective of your business. Creative inspiration does not fall out of a spreadsheet or accounting ledger. 3M learned this the hard way. In the last decade, it applied Six Sigma principles for manufacturing to the innovation process, and severely stifled new product development.
Analysis has its place, but innovative ideas come from the side of the brain where you explore, experiment and imagine.
For many, this is a new approach to problem solving.
Research by psychologists Joy Paul Guildford and E. Paul Torrance has identified two primary thought processes we use for solving problems: convergent and divergent thinking.
In business, we are most familiar with convergent thinking which is analytical and logical. It is characterized by arriving at the one right solution. Accountants and business analysts excel at this kind of thinking.
The other, divergent thinking is flexible, intuitive and based on associations. It is characterized by arriving at multiple, unique solutions. Artists and inventors excel at divergent thinking. This is where we get innovative ideas.
Research shows remarkably few people engage in divergent thinking. This has to change starting with the C-suite.
Leaders have to lead
This shortsighted focus is nothing short of a leadership crisis. As the proverb says, “Where there is no vision, the people perish.”
To bring about a revival of business growth and competitiveness, leaders must make a dramatic shift away from the short-term vision that has dominated the past 20 years. Awareness of the problem is the first step. But leaders must lead change.
The starting point is a renewed vision for serving customers, workers and shareholders. That means putting the wellbeing of the business ahead of their short-term rewards. Leaders must challenge the status quo of compensation that drives their behavior.
The Forbes article provides a stark account of this situation:
In his book, Fixing the Game, Roger Martin notes that between 1960 and 1980, CEO compensation per dollar of net income earned for the 365 biggest publicly traded American companies fell by 33 percent. CEOs earned more for their shareholders for steadily less compensation. By contrast, in the decade from 1980 to 1990, CEO compensation per dollar of net earnings produced doubled. From 1990 to 2000 it quadrupled.
With incentives based on short term value and stock price, executives earned more while shareholders earned less and companies innovated less. Leaders have to turn this around. They have to start thinking – and leading differently.
We need from them a new vision of success and innovation, and how to achieve it.
Without it, the people – workers, shareholders and society at large – as well as the economy will perish.
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When Andy Griffith died on July 3, the tributes and career retrospectives hit quickly. He is most remembered for the television program bearing his name which ran from 1960-1968. It was widely popular at the time and remains a favorite for new fans in syndication. One reason its popularity has endured is it combined humor with humanity and simple life lessons that resonate over time.
During the series’ run, Sheriff Andy Taylor provided many examples of servant leadership that are a great example for leaders in any capacity today. Here are five examples.
1. Earned authority
Much was made of the fact that he rarely carried a gun. While some might argue it added to the homespun feel of being Sheriff of small town Mayberry, he frequently noted his authority came with the badge he wore and how he wore it. He carried authority by earning the respect of the citizens based on exemplary conduct not by instilling fear.
In one episode he walked directly into the line of fire of a holed-up bootlegger and calmly took the rifle away while other law officers froze under cover. He later explained the shooter could have shot any of them if he’d wanted – he was just trying to scare them off. He respected Andy’s ultimate authority.
2. Let others fail
Sheriff Taylor occasionally had to risk turning over responsibility to his deputy. In one episode he had to leave town for a day and let Barney Fife act as sheriff in his absence. In his zeal to prove himself, the acting sheriff managed to arrest the entire town on minor infractions.
Upon return, Andy had to restore order and taught Barney the importance of exercising judgment in understanding the larger priorities versus going by the book. If a leader is unwilling to assign responsibilities to others, they are not taking enough risk to enable their growth and development.
3. Assume responsibility
In a story involving son Opie, Andy taught responsibility for Opie’s actions with his new slingshot. Opie accidently kills a bird leaving behind a nest of fledglings. With Andy’s prodding, Opie raises the birds himself until they are ready to fend for themselves. In the process, Opie becomes attached to them and wants to keep them as pets. Andy reminds Opie that the mother’s responsibility was to raise them up and let them go. As the surrogate, it was Opie’s responsibility too.
4. Facing fear
There are so many episodes with this theme it is hard to pick one example. One involves Andy receiving a letter from a convict he put away in prison. In the arrest, Andy had injured him in a shoot out. Now the convict was getting out and wanted to “settle some things” by paying a visit. Friends and family urged Andy to leave town to avoid another conflict. He didn’t.
In a poignant talk with Opie, he admitted to being afraid but had to face the fear. In the end the ex-con came to thank Andy for creating the circumstances for him to turn his life around and learn a trade for starting a new life after prison. Andy taught everyone that fear imagined is greater than fear faced.
5. Build up others
One of my favorite episodes is when Andy and his sweetheart get trapped in a cave. Earlier in the day Barney is humiliated when he mistakes the bank president for a bank robber. He is ridiculed by several of the men in town. Later, at a town picnic Andy and Helen venture into a cave and are trapped inside by a rock slide. They manage to escape through another entry, but not before Barney organizes a rescue operation enlisting all the men who had ridiculed him earlier. When Andy realizes this, they return to the cave so they can be saved by Barney.
After they are rescued, Andy tells all the townspeople how fortunate they are to have a take-charge leader like Barney Fife as deputy. He restored Barney’s confidence and stature in the community.
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