Ted Grigg's Reflections about Direct Marketing

I have two long time friends. They are both CMO types with tremendous direct marketing backgrounds. And neither seem to be able to land jobs that make sense anymore.

One of these friends tells me that he is unemployable at age 54. No, not because of his age, but because he can't find a decent employer to work for.

That's a switch. Now employers have to make the grade with skilled employees? I know we are told to do this. But in reality, most of use do not get three executive level offers concurrently that allow us to pick and choose the best. We will accept offers even when the employers show significant weaknesses. After all, no one is perfect.

But it appears that some companies are under the illusion that there are perfect candidates out there only to realize 23 months later that neither the candidate nor the company were perfect. (According to a recent Execunet research report, the average CMO tenure is 23 months).

It reminds me of the famous Paul Newman movie Cool Hand Luke when the cruel warden said to the prisoner, “What we have here is a failure to communicate”. Companies often expect far too much from their new CMOs while at the same time expecting far too little from themselves. So there exists a miscommunication with unmet expectations.

As an example, even though both of my friends have over 25 years each of marketing experience making over $150,000 base a year in the last five to ten years of their careers, they were turned down after third or fourth interviews based strictly on length of tenure in their past roles.

One candidate had 7 jobs with ever higher levels from job to job in the last 20 years with an average of 2 to 4 years at each company. His skill falls clearly in the "change agent" category. The other candidate has 30 years with one company demonstrating regular promotions and clear marketing and management contributions over time.

The reason given by the prospective companies for not hiring them sounds like the same old saw.

1. The one with the 7 jobs had too many job changes and was not offered the position even though many on the hiring committee wanted him as part of their firm.
2. The other candidate had too few jobs. The hiring company felt his long tenure with a single company demonstrated a lack of initiative and diversity.

Companies say they want change agents, diverse experiences, proven expertise, strong interpersonal skills... and the list goes on. But who can qualify on all counts? No one. So companies hire based on old maxims rather than attracting deep talent and taking responsibility for the tenure of their employees propagating people they consider desirable.

They want resilience, but seem unwilling to return the favor.

I thought maybe these were excuses for other problems on these candidates. But I see this story repeated time and again with other companies and people I know well.

So the evolution continues. Employees are now corporations unto themselves and must make their own way in the work world moving from company to company at an ever increasing rate.

Has the time come for many CMOs to ask. "You may need me, but do I really need you anymore? What will you give me that I can’t do better on my own?"

Are you having these thoughts? If so, then maybe it is time for you to expand your horizons.

Its a big world out there that is limited only by your desire and imagination.

What concerns you most about striking out on your own? Do these same risks not exist on the employer side as well? What about finding that "perfect company"? Does it exists? I'd love to hear from you and what you need to take that leap.

If you are a freelancer, independent consultant (like me) or a small business offering marketing services to companies, then this blog speaks directly to your #1 problem. That is, stabilizing your business to yield consistent and profitable revenue.

Unlike most businesses that sell widgets or commodity items with a known value, we sell ideas and thinking. And specifying a project's thinking to outline the needed talent and money requires clients who have been there and already know the general parameters of the work we bring to the table. In other words, educated clients who truly understand the services we offer are getting scarcer.

This brings me to one of the causes for poor stability with freelancing. New business requires an inordinate amount of time, money and effort to acquire for the independent or two man shops.

Compounding this challenge for freelancers includes other related problems.

    •    As professional thinkers, we lack interest in selling on a daily basis. This is not our strong point. We want to practice our trade and hope referrals will be sufficient in bringing a steady flow of assignments. But 95% of the time, this does not happen, regardless of the level of our expertise.

    •    Knowing that we do not like new business activity, we stop all networking and contact efforts when we are overloaded with work. After all, we have to implement what we sell. We really don't have the time for new business even though we know better. So we experience these incredible swings between too much to do to very little to do.

    •    As very small businesses, we have insufficient capital to advertise online with SEM services or paid search or any other form of advertising that professionals might want to use. Added to this are leads form prospects that are not qualified and want to trade time for equity in high risk start ups or pay inadequate fees.

    •    We are further challenged by undisciplined prospects or clients who have stagnant businesses and want marketing help in three easy lessons with a magic bullet. Then when you have pity on them and provide some sound advice, they will say that they tried that already and it didn't work. And upon cursory examination, it is clear the client implemented the idea without skill and overlooked elements essential to success. All they really want is for you to parrot their own, unsuccessful ideas.

Fortunately, there are some smart and reasonable clients out there. But how do we find more of the them without breaking the bank? What efforts have you used to attract new clients? We are all eager to learn better ways to stabilize our assignment flows.

Advertising agencies are in trouble. At least that is the conclusion drawn by a recent Forrester Research study that says:

“… despite sales growth, their earnings per share lag behind the S&P 500 and profit margins are squeezed.”

As most of you know by now, I have worked for, managed and even established direct marketing divisions for general advertising agencies over the years. And if you have also worked for or with agencies, you probably share my love/hate relationship with them.

To begin with, agencies attract entrepreneurs who tolerate agencies’ lack of stability and low quality management in exchange for stimulating, intellectual environments that thrive on creative problem solving. But this freewheeling style also contains an Achilles heel.

In their unrestrained efforts to solve their clients’ problems, they neglect their own.

In a February 23, 2007 Forrester Research report entitled Help Wanted: 21st Century Agency, its author Peter Kim wrote this subhead. Firms With A Vested Interest In Traditional Media Models Need Not Apply.

His report summarizes the agency challenge.

"Agencies continue to influence the marketing function; however, they struggle to help clients capitalize on emerging channels and technologies. In the meantime, marketers are diffusing agency power by turning to a portfolio of players in search of specialized expertise. As marketers select new agency partners, they must revise their evaluation criteria to build an integrated marketing team."

Kim's client research analysis found the following weaknesses.

1. Advertising agencies overestimate the role they play
2. Customer-centric marketers stem agency power
3. Agencies must become client-centric — or perish
4. Lack skills in emerging channels
5. Overstate their role in marketing success. "Almost all agencies (93%) believe their contributions drive their clients’ marketing success, while only 63% of marketers [clients] feel the same."
6. Agencies must be held more accountable for results. "Despite the fact that agencies wield influence over a majority of the marketing budget, 76% of marketers [clients] do not measure the return on investment of their lead agency relationship." As one marketer admitted, “We are only now beginning to measure our return on programs we implement... Other interesting statistics show that "69% of marketers feel their ROI is too difficult to measure.“

What does all of this mean?

Simply stated, agencies are finding that the speed of change is outpacing their ability to keep up. They continue to hold on to the past and bemoan the emphasis going increasingly to sales results rather than continued wholesale adoption of sacred strategies such as awareness and brand building for their own sake.

For direct marketers, this channel integration and performance based evaluation trend took too long to happen.

But we can hardly sit on our laurels. The front line struggle has taken on all weak spots such as online analytics, reliable sales channel attribution, and balanced media integration.

What other trends do you see that are upsetting the apple cart for direct marketers?

 

Freelancers, consultants and small direct marketing agencies can make the difference between success and failure for multi-million dollar businesses. But you would never know it by the way prospects and clients sometimes treat us.

I have great clients who do not fit the descriptions below. But I must admit that I have worked for such clients in the past and find that they permeate the new business scene. So my chances of working for one of them again are very real.

For the last quarter of a century, clients have demanded speculative work requiring no remuneration as a rite of passage for their new business. But this trend has exceeded the original bounds.

It is one thing to create plans and speculative creative work or research for a prospect with a $10 million budget and another thing to do the same for a prospect with less than $100,000 who expects the same treatment.

Many prospects do not understand the effort it takes to come up with a campaign budget. Or if they do, they still require that the consultant spell out for them what it will take to solve the problem.

They are not content to know what YOUR time budget requirement is. What they really want is a turnkey budget to solve a problem without paying you a dime to create the solution.

The time required to answer this question costs the same as it would for a large budget. And winning the business --- which is by no means guaranteed --- barely pays for the process of coming up with such a budget!

Most consultants will price out the PROCESS for the prospect to solve the problem. But they will not provide turnkey budgets unless there is at least a 75% chance of winning the business.

Or better yet, many consultants will charge the prospects for the time and skill required to come up with the turnkey price required to solve the problem.

The turnkey pricing process to solve a direct marketing problem requires strategy formation, tactical implementation steps and creating estimate specifications for the printer, the lettershop, the telemarketing service, the service bureau, list rental costs, projections of counts for the target audience ad infinitum.

Most clients have no idea that pricing in our business means that the campaign requires hours of planning and preparation before pricing can happen. The consultant must create the campaign and create specifications in a vacuum without adequate input from primary research or the client to price the campaign with any degree of accuracy.

Just once, I would like to say something like this.

“Before we can price your campaign, we need to know what it is. What is the size of your target markets with net list counts? What media mix do you need? Give us the specifications for your direct mail and collateral materials. (And the list goes on.) If you cannot answer all of these questions, then we need $10,000 to come up with the specifications to achieve your sales objectives.”

Unfortunately, clients want a lot for no upfront commitment sometimes caring little about what our small businesses must go through to earn even the smallest projects.

The only solution to this problem comes back squarely on the shoulders of the consultant. Refuse to provide turnkey budgets without financial commitments for preparing such campaigns. We must turn away this intentional or unintentional abuse.

Without such discipline, the consultant cannot succeed long term.

The major reason for accepting this treatment in the first place lies with the agency or consultant that does not possess a proactive and successful new business program.

Without an active new business plan that works, agencies allow themselves to get trapped in a no-win situation. They feel obligated to accept ANY business that comes down the pike regardless of its size or quality.

Are you are one of those agencies or consultants that accepts anything that comes down the pike. Ask yourselves why you are doing this. I think you will conclude that it has to do with the fear of turning any business away when you do not see other options for attracting new business.

This vicious circle of giving away the store has little to do with prospect abuse and a lot to do with our own ineffective new business strategy.

So set out today to solve this problem for your organization. Only a projectable and consistent new business strategy will cure what ails you.

Have you been guilty of letting clients and prospects abuse your professionalism and talent? If so, why do you do it? Do you think the problem can be solved? If so, what advice would you give the rest of us to control the situation?

 

After nearly 25 years of selling consulting services, it surprises me to find so many clients that have no idea about whether or not they are paying appropriate fees.

The problem sometimes gets out of control when a client knows that they are making $70/hr in net salary while paying a consultant $200/hr. So the client always feels cheated.

I reality, this client may actually make more money than the consultant.

Here’s how consultant’s typically set their hourly rates. Artists and copywriters use a similar approach. In some cases, they simply charge what the market will bear. But they often under price their services due to a lack of understanding of how rates should be set.

If a consultant made $150,000/year on his last assignment, then he wants to at least break even when striking out on his own. In reality, anyone taking the leap to set up his or her own business should make more money.

One major feature to remember is that a $150,000 salary carries at least a 30% load on top of the $150,000 for benefits and other overhead costs. These include the employer’s portion of the social security tax, group insurance, paid holidays, vacations, computers, other business support expenses, retirement and/or tax sheltered savings accounts such as 401K’s with some employer matching and so forth.

All of a sudden that $150,000 was really worth $195,000 (150,000 X 1.30).

But let’s assume that the consultant only needs to match the $150,000 in fees. What should his hourly rate be?

First of all, no consultant can sell, invoice his clients and implement projects 20 days each month. The best he can do if he is very successful is to invoice 10 days of his time each month.

Here’s how it works.

Assuming 10 days of billable time each month, the consultant needs the following rates for his services to make a gross base of $150,000 WITHOUT BENFITS or reimbursement of business expense overhead.

Monthly rate:        $150,000/12 months    = $12,500
Daily Rate:           $12,500/10 days          = $ 1,250
Hourly rate:          $1,250/8 hours            = $ 156/hour

At $156/hour, this successful consultant is really netting far less than he made as a full time employee.

To truly match his salary and benefits for a gross of $195,000/year, the rate would total the following.

Monthly rate:        $195,000/12 months    = $16,250
Daily Rate:           $16,250/10 days          = $ 1,625
Hourly rate:          $1,625/8 hours            = $ 203/hour

At $203/hour, this consultant cannot afford to bill less than 120 days of his time each year. Few independent consultants manage to bill this many days.

The real challenge for any independent consultant is to figure out how to keep the work flowing on a regular basis so he will average that 10 days/month of billable time. He must also bill a fair hourly rate based on his skill and experience level.

Most capable consultants I know cannot project their income annually or even monthly. The peaks and valleys are deep and the hourly rate seems inadequate to make up for the valleys.

So what most of us in the consulting business end up doing is invoice by the project with guaranteed pricing hoping to keep our hours under control.

Have you sold your hourly rate using a different approach? If so, how do you calculate your rate? If you bought consulting services in the past, how did you evaluate the consultant’s worth?

Imagine yourself working in an insurance company as head of a division that sells individual insurance products directly by phone and the Internet. Now imagine that your internal direct marketing team exceeded both volume and ROI goals for 2007 by a wide margin.

Then something unbelievable happens. Top management decides to pull 100% of your direct marketing budget for 2008. Can such a thing happen? Actually, it just did.

What's worse, this top management expects the direct group to exceed their 2007 sales goals in 2008 WITHOUT an advertising budget. So this state of affairs begs the question. Why do top managers make these kinds of decisions?

Here are some of the probable reasons they happened in this case.

1.    The company leader only understands the product he grew up with. In this case the leader knew group insurance, but had little to no knowledge about what it takes to market individual products through either agents or direct to the consumer.
2.    As a group insurance driven insurance company, the sales model relies 100% on independent agents who receive commissions on all sales AFTER the product is sold. In direct marketing, the model requires fronting the money to drive sales at a later date once the advertising runs its course. Some companies possess such a strong culture of spending money after the sale that they cannot tolerate the “risk” of spending the money first to make the sale.
3.    Companies that promote top leaders only from within inherit the culture these leaders grew up with over the years within the company. This encourages inbreeding that looks at the world through clouded lenses. Needed change and innovation cannot overcome the status quo.

This company will continue to prosper so long as the agency force that focuses on group sales does not loose ground to the Internet and other direct sales. This has already happened in the individual products arena.

What advice would you give to this company? Have you experienced a similar scenario?
 

I was reading a blog from a recruiting firm recently bemoaning the escalating talent shortage as baby boomers retire. Depth of expertise lags behind demand in numerous industries. In fact, the writer postulated that this shortage was driving companies to go outside of the US for talent.

In my view, poor management of today's knowledge worker is the greater crisis --- not the lack of talent.

Case in point: I don't have the statistics, but I can tell you that I am getting a record number of calls from recruiters asking for referrals for top jobs. Many of them are for experienced direct marketers with specific industry expertise. These jobs typically pay well over $200,000/year plus bonuses and equity. So the jobs are there and the money is not a problem.

But the experienced professional direct marketers I know tell me that these jobs are often transient and unstable. So they are resistant to move because they may find themselves on the street in six months. Companies have lost credibility with employees because these same companies have demonstrated zero loyalty to the people who built their organizations.

And the children of these older workers have lived through that pain with their parents.

In her book entitled The Manager’s Step-by-Step Guide to Outsourcing, Linda R. Dominguez lays out compelling statistics about the coming talent shortage in this brief summary taken from an Execunet book report.

"This shortage is predominantly caused by the large number of workers (Baby Boomers) leaving the sector to retire. According to the Bureau of Labor Statistics, between the years 2000 and 2010, the number of Americans between the ages of 55 and 64 will jump 47.2 percent, while those aged 25 to 34 will increase only 2.8 percent. The number of workers aged 35 to 45 will actually drop 13.7 percent. The shrinking numbers of workers between 35 and 45 indicate the severity of the coming labor shortage. Simply stated, we will need to import labor or export jobs."

This is probably true, but not the only reason for the talent shortage.

In my opinion, corporate America has not trained their people to manage well as a whole for the last two decades. Combine this lack of attention to people development, declining employee loyalty and demographic trends with management that does not have the vision to address the core issues they can control. What you are left with is indeed a talent crisis

The talented DM people I know are available for real jobs with excellent bosses who know how to lead rather than micromanage. Great jobs that allow top talent to stretch their skills in an unfettered environment are more rare today than four leaf clovers.

What can we do in the companies we work for or influence to make them better employers? What companies do you know that have bucked this trend and are managing their talented employees for the long term?

Are you getting sick and tired of leaders who watch out first and foremost for themselves before they do the health of their businesses? They abandon the employees they serve firing those who worked hard and skillfully to implement the leader’s strategies. In some cases, the leader’s incompetence lead to the disaster you are living with.

Such leaders are out to help themselves first rather than their customers or other stakeholders (not stockholders).

Are we not all looking for bosses and leaders with vision who can lead us to climb that next mountain to discover the thrill of success?

That is why character, courage, persistence, and inspiration must come from something that lies deep within the leader. It’s as if their drive comes from their belief in the vision of something greater than themselves.

I shared this thinking with one of my accomplished colleagues. He believed that such views were totally off base. So, being a glutton for punishment, I asked him why. He said that such leaders do not exist. And if he ever had a manager who professed such a point of view, he would not believe him.

So here you have two opposite ends trying to grapple with what good leaders are about. One is cynical and believes that such leaders do not exist in the world. The other is idealistic, choosing to believe that all people have the spark of greatness. And we are searching for those rare people with the spark that has turned into a roaring flame.

What is your view? Have you worked for or met such leaders? Can companies reach new heights without such people at the helm?

Just as with the artist and the copywriter, the direct marketing production manager offers unique contributions to the success of a campaign. This is particularly the case if the company this person works for produces large volumes of direct mail and Direct Response TV (i.e. DRTV).

The typical production manager in an agency or on the client side possesses a good knowledge of printing, print production or broadcast advertising. But for the direct marketing discipline, this is just the beginning.

Budget and deadline control mark the expert production manager, but knowledge beyond printing and print production are required of the DM production manager. Listed below are some of those traits I look for in DM production people.

-A thorough understanding of database list hygiene processes
-Background in lettershop work such as inkjet and laser personalization, tracking codes, insertion restrictions and postal regulations
-Skilled in uncovering savings opportunities such as mail co-mingling
-Breadth and depth of direct mail formatting options that are available on the market
-Great production managers in the direct field assist the creative team in creating affordable, breakthrough concepts
-For DRTV, the production manager knows how to keep the budget well below the average and still achieve the brand requirements   

You may have noticed that many of the qualities that are required of each direct marketing role contain overlapping skill sets. This is intentional. Each team member walks comfortably from one role to the next fully appreciating the need to share the glory of beating controls as well as the discouragement of defeat when the sales goals are not achieved.

The bulk of the accountability for beating controls often lies with the head marketers and account managers. But everyone shares the responsibility for the results whether good or bad.

As unusual, this list of skills is incomplete. I hope you will have the opportunity and desire to comment filling in any blanks. What other skills do you look for in a production manager?

Some of my clients understand fully what direct marketing can do for them. But they need help in assessing why their programs are not performing at the levels they should.

When investigating the barriers to their success, I find that their own staffs and the company itself are often the culprits. It has to do with what Peter Drucker said about today’s knowledge workers. They are no longer just employees, but private contractors.

“They respond best to the standards of excellence associated with their expertise rather than the discipline imposed by traditional management practices.”
        From the Definitive Drucker by Elizabeth Haas Edersheim

Many employees in these organizations are more focused on following the corporate line than achieving direct marketing goals. Such individuals do not think creatively abandoning the concerns of their customers for what they perceive as corporate protocol. They are closed to new ideas and more effective ways of achieving the sales goals for fear of upsetting the corporate environment.

This is often not the employees’ doing, but rather the old ideas about employee loyalty that are reinforced daily by the corporate machine.

The company must recognize the reversal of power from the organization to the individual. Leaders need to leverage the employees’ desire for excellence within their expertise and encourage it.

Assuring direct marketing success requires an environment where employees are respected for their skills. They are given clear guidance on their contribution to the organization’s goals. Peter Drucker made a daring statement during an interview with the “Harvard Business Review“ in February, 2002 in an article entitled “They’re Not Employees, They’re people.”

“In a traditional workforce, the worker serves the system; in a knowledge-based or service-based workforce, the system must serve the worker.”  

I would take this a step further. Both the workforce and the system must serve the customer.