Plan for SuccessAn effective marketing plan is part and parcel of successful A&D firms. by David Shepherd
"You can't very well communicate your unique competitive advantages if you don't have the personnel, infrastructure, overhead, etc. to support those advantages."
Barely one out of five A&D firms have any sort of formal marketing plan. The alternative, of course, is like rolling the dice with your fingers crossed.
Few firms know the three things that are crucial to marketing success— the average value of a new client, the cost to acquire a new client, and the return on investment of marketing dollars spent.
Firms consistently confuse marketing effectiveness with marketing efficiency, when only the former matters. The result is that most marketing activities rarely scale to the point at which positive results are even statistically possible.
While our survey uncovered more than fifty tactics that firms use to market their services, I'll use one of the most pervasive — postcards—to point out that the conditions cited above cause the vast majority of firms to set themselves up for failure with every marketing effort.I'm using postcards in this example because nearly a third of firms surveyed regularly use them and the costs are easy to calculate. However, I'm really using postcards as a surrogate for any marketing activity. In fact, if you just heard yourself say, "We tried postcards and they were worthless … we'll never try that again," you, especially, need to keep reading.
In the absence of a detailed marketing plan, marketing activities are typically conducted on an ala carte basis, and the idea to try something—anything— often occurs when business is slow, which is also when cash is short, meaning that marketing activities not included in a budget are almost guaranteed to be under funded. They are typically done on the cheap.
The marketing plan is also where a firm would identify several things that are crucial to a successful marketing campaign, including:
- The company's unique competitive strengths
- A description of the company's ideal perspective client
- Specific offers that will attract ideal prospects to consider your services
These must be understood before any marketing message can have impact. In fact, the very definition of marketing is (or should be), "the process by which a firm communicates its unique strengths to those who value and will pay for them."With that in mind, let's get back to postcards. Suppose a firm decides, in the absence of a plan, to do something—anything. The collective wisdom becomes, "Let's send out 500 postcards with a picture of that great job we just finished." Rough cost, about $250, or $0.50 each.
Now, direct mail response rates can be all over the board depending on variables such as the proper identification of target markets, the message, the frequency, etc. In the absence of historical data, I typically come up with a ballpark response rate of .005, or half of one percent, which means that this particular postcard "campaign" is most likely to generate between two and three responses (500 x .005 = 2.5).
But another rule of thumb says that it typically takes 10 interested prospects to result in one serious client. Statistically, at least, the odds are that a mailing of 500 pieces will result in zero clients, and I can already hear the detractors the next time someone proposes a similar effort. "We tried that before and it was a total waste of money!"
But the truth is, the campaign was not conducted in a manner that gives any valuable feedback— pro or con. In this case, it would be better to draw no conclusions than to draw the wrong ones.
Here's how I would approach a postcard campaign. Instead of starting with a budget, I would work backwards and ask the more important question: How many pieces must we send in order to get the response we need? If we assume that one out of every ten prospects becomes a client (and bless you if you actually have data that is different from this) then you need ten prospects. Based on our ballpark of a .005 response, you need to send out 2,000 postcards (10/.005)—four times the ala carte amount. Similarly, your marketing budget will need to be closer to $1,000 than to $250, again a fourfold increase.
And how will you know whether it was worth the additional cost?
That's easy if you know the average value of a client, or AVC. In other words, in terms of gross profit, how much does an ideal client contribute toward your bottom line? If that number is, say, $10,000, then this simple little postcard campaign should generate a whopping 10:1 return on your marketing investment when properly funded. Clearly, this is a campaign that you should repeat endlessly, and yet it is precisely the same campaign that was branded a "bomb" when not scaled to the necessary volume.
Perhaps even more important in the long run is that when marketing results are carefully measured, they can be dramatically improved over time. The company that has a plan would not just do a single mailing, for example, but would test a mailing to larger lists, and then a small list many times. They might change the wording, or value, of their offer, while still others would test different words for communicating their unique strengths.
As these tests reveal the more successful components of a campaign, that .005 number can easily double or even triple. Tell someone that you "only" expect a 1.5 percent response from your next marketing campaign and they'll probably feel sorry for you, when in fact you would be absolutely thriving.
My last word on the importance of a marketing plan (which may not need to be more than three to five pages), is that it really should be part and parcel of your overall business model. That is, you can't very well communicate your unique competitive advantages if you don't have the personnel, infrastructure, overhead, etc. to support those advantages.
The idea of planning for businesses goes in and out of vogue, but I think it's more important today than ever. In fact, I've launched a "Business School Boot Camp" just to walk A&D principals through this process. Sometimes we call it business planning, and sometimes we call it business modeling, but whatever you call it, before you launch your next marketing initiative, please become one of the few, one of the 20 percent, who actually plan to succeed.
David Shepherd is president of Designing Profits, Inc. His next major conference is "Designing Your Future," February 8-11, 2006 at the Bahia Principe Tulum Resort on the Riviera Maya, Mexico. For information, please visit www.designingprofits.com. You may e-mail your comments to David at [email protected].