Yesterday, I attended the 12th Annual Entrepreneur’s Growth Conference, a high-quality event that really provides business owners at all levels with good new ideas and strategies. This most recent conference was no exception.
One of the more interesting parts of the day for me was the afternoon keynote, delivered by the CEO of Dick’s Sporting Goods, Ed Stack. I had the opportunity to ask Mr. Stack a question at the end of his keynote. I’ll provide a paraphrased recollection of it here for your reading pleasure.
Me: “For small businesses, it is relatively easy to measure the effectiveness of marketing activities because they reach out to very few people with very targeted methods and often have direct contact with the people that they marketed to. With larger companies, it seems more difficult to know what works and what doesn’t. For example, you guys have television commercials and you did a product-placement spot on the Celebrity Apprentice. How does a big company measure its marketing performance and understand what works and what doesn’t?”
Stack: “You can’t always measure marketing performance. For things like sale ads, you can determine how much more a product sold if it was featured in the weekly ad. But it is tougher with things like commercials. You don’t know if they worked. And the Celebrity Apprentice – we’d probably like to take a mulligan on that. If we had the chance to do that over, I’m not sure we’d do that. But it is part art and part science. J.C. Penney once said ‘I know that half of my advertising budget is wasted – I just don’t know what half.’ So, for big companies you don’t always know what worked and what didn’t.”
Part of the value that a well-trained procurement department brings to the spend it touches is a reduction or elimation of wasted spend. And marketing services are beginning to become a more and more common category sourced by advanced procurement departments.
The one caution that I would offer to those procurement departments is to not get too scientific with managing marketing spend as they try to reduce wasted money. As Stack noted, “It is part art and part science.” Marketing professionals sometimes should take risks. Part of marketing is differentiating the company from its competitors. And that means not doing what everyone else is doing, even if it means going down an unproven path. Sometimes it will work, other times it will not.
CEO’s understand that there is a risk of waste. And they are willing to accept that waste, if not expect it. Don’t get so overzealous trying to restrain waste that you restrain an opportunity to hit the proverbial “marketing home run.”