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Creating Value

Enhancing your marketing productivity is all about getting the biggest bang-for-your-buck.


Marketing productivity is all about getting the biggest bang for your buck. Its measurement is simple— the ratio of revenues to expenses—but its pursuit can be a minefield. Once you reach the stage of contract negotiations, the only ways to enhance your marketing productivity are 1) stop cutting your prices and 2) create value, instead of providing services. Actually, there is only one way—doing both in an integrated manner.

The reality is that customers always want a lower price; the only difference is that in good economic times, we feel less compelled to give into it.

We tend to give in to those pressures due to concerns about breaking even. Moreover, because of decreased primary demand, and because we expect to have lots of excess capacity—since you cannot “inventory” an empty seat—we believe anything we get for an otherwise empty seat is gravy. How wrong that is.

The people who are not attending meetings and conventions are not likely to change plans if you reduce price. Price is a small part of the total cost of attending and is not usually the major deterrent. Rather, travel costs, entertainment expenses and time away are.

Since cutting price is not likely to drive higher incremental volume, the net result is that you leave money on the table. You end up cutting price for people who would have come anyway, without getting any significant bump in revenue. Net effect: You lose.

You would be far better off taking the money you’d give up through a price cut and spend it to give an additional service—one that would either, say, decrease travel or entertainment costs or facilitate the time away. Now your “product” looks better and you are changing something that might increase attendance.

This approach offering extra services, instead of price cuts lies at the heart of “value-added selling.” The economics behind why we do it are simple. Let’s suppose I need to create an additional $200 in value to get someone to buy from us. If I create that value via a price cut, the cost to me is $200. However, if I give services with a retail value of $200, the cost is always less than $200, by whatever my normal gross margin would be.

However, that benefit exists only “on paper” or “in theory” if you are giving services that the customer does not value. Often, this happens because we try to throw in something cute or gimmicky, instead of taking the time to ask, “what does the customer really need?”

Instead, ask yourself two questions. First, what pre-meeting tasks must the attendee perform? For example, what materials do they need to plan, gather, set up, prepare or confirm?

Second, what must the attendee do AFTER the meeting to monitor, evaluate, clean up or modify, in preparation for the next meeting? Ask these questions and you will understand why travel, entertainment and office-away-from-home services are excellent areas in which to add value.

The greatest threat to marketing productivity comes when we manage it “at a point in time” instead of “over time.” At a point in time, marketing is an expense that is charged against current revenues. Thus, when revenues are expected to be down, we spend less. Were we managing over time, we’d know this is a time when we should be spending more and spending smarter.

Spending less usually means we compromise the quality of a participant’s experience. If we let that happen, we find we need to spend even more to convince them to attend when times return to normal. They may attend events, just not yours. In short, we may protect productivity today, but at a cost of productivity tomorrow.

Despite the economy, stay committed to quality and value. That is a theme of many meetings this year. Maybe, going forward, we just need to practice what we preach.



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