Best Buy's 70 Percent Solution
By aiming to get innovative marketing programs 70 percent complete before launching them, the electronics retailer gained more marketing knowledge than it would have achieved with a more conservative approach.(originally published by Booz & Company)
It seems more difficult today than ever before to be a successful marketer. Whereas marketers once all had essentially the same choices of tools and media — newspapers, magazines, in-store advertising, television spots, or radio — they must now think about data mining, international advertising, interactive media, partnerships, customization, buzz marketing, and more. A wealth of choices is often an opportunity for innovation, but not so for most marketers, who are often dissuaded from creativity by an increasing demand for short-term organic growth.
Do marketing leaders really face unique pressures, compared to executives in other parts of an organization? Statistics suggest that the answer is yes. According to a recent study by the Association of National Advertisers, the average job tenure for a chief marketing officer (CMO) is 23 months, the shortest for all C-suite positions. Given that track record, I was fortunate to have lasted nearly five years as CMO of Best Buy Company.
There are two reasons that marketing is in the bull’s-eye in many companies. First, everyone can see what the marketing arm is doing, as well as which competitors are doing better. Few people would accost a chief information officer at a company party to make suggestions on data architecture, but colleagues are only too willing to share their thoughts about whether the latest ad campaign strikes their fancy. Second, a lot of marketing innovation is tough to measure. Although there is empirical evidence about the speed of technology, the length of supply chains, and the cost of manufacturing, the effect of a marketing campaign is more difficult to quantify, especially in its early stages.
Marketers who rely exclusively on programs that can provide immediate, predictable results, such as promotional sales or a standard TV or print campaign, are doomed to be left in the dust by innovative competitors more prepared to develop bold new promotions attractive to their customers. Yet marketers who devote too much time to innovative but unproven techniques can miss out on short-term returns that, however limiting, cannot be ignored. Success is driven by picking your moments for innovation, setting reasonable expectations, and knowing your company’s culture. Marketers must stay objective at all times, but also maintain the passion to create something new and different.
Unfortunately, many of the most promising areas for innovation have not been tried and therefore lack metrics for judging response. Is there any way to accurately project the effect of a partnership with the Rolling Stones to deliver an exclusive DVD? It’s nearly impossible to roll out a major PR event or loyalty program with any estimate of up-front monthly return on investment that is much more than a guess.
To satisfy both long-term and short-term needs, marketers should devote the bulk of their budgets to predictable endeavors with calculable returns on investment (ROI). (I refer to this type of marketing management as “Ready, Aim, Fire” because we plan meticulously before we act.) But do not try to prove ROI on every tool or program. Instead, project your return against the total budget and set aside a portion of the marketing budget for a small group of uncertain, or “Ready, Fire, Aim”–style, projects — in a word, innovations.
Want to try a new partnership deal, jump into a new medium, sponsor a NASCAR driver, or try e-couponing? Do so on the smallest scale possible and then measure the effort once it is in place. Stop the promotion if it’s not working and expand it if it is, but don’t spend an inordinate amount of time trying to project its brand impact and financial return unless you really have a way to do that. Instead, set broad expectations based on the best logic you can muster.
At Best Buy, we faced the unknown when we had the opportunity in 2003 to partner with the advertising agency National Cinemedia, AMC Theatres, and cell phone providers to sponsor faux movie previews that would run during the “golden minute” right before the feature starts. The message was to turn cell phones off. Each “preview” ended with a cell phone ringing followed by a tragic consequence, such as the discovery of a stealth World War II U.S. submarine by the enemy when a cell phone rings in the boat. Needless to say, the true impact of this project was impossible to measure initially. But we decided to take the risk, and it paid off: The campaign was viewed by thousands and thousands of people, it helped add an aura of edginess and irony to consumer perception of Best Buy, and it placed our brand in an entirely new medium in a relevant way.
During my tenure at Best Buy, if a calculated risk was not moving the financial meter during its allotted time frame, we did not hesitate to shut it down, see what we’d learned, and refocus the energy and money on a new innovation. We applied what we called the “70 percent rule” to calculated risks: We tried to get our plans 70 percent complete before launching them. Once the idea was out there, we learned from it, whether it worked well or fell flat. Overall, we would rather have taken 20 small steps and have been right 13 times than have taken five big steps and have been right four times. The opportunity to gain new marketing knowledge is greater with more endeavors, and the chance to explore more ideas results in more innovation.
Of course, there’s a caveat. If an idea is so expensive or so important to a company that failure would be catastrophic, it probably makes sense to take the time to get it 90 percent right before moving forward. For example, at Best Buy we spent a year building our loyalty program — a program to attract repeat customers by rewarding them with financial incentives and other benefits. We then tested it as the “Reward Zone” for one year in one region on a limited number of products to generate feedback, see if the idea had merit with consumers, and find out if our systems would work. The program now has more than 8 million members. We were still years behind some of the best-in-class players in the market, but — because we couldn’t afford to get it wrong — we knew that the program required a high level of investment in research. When a national rewards program fails, it can be a huge embarrassment for a company, and it is virtually impossible to relaunch.
Whichever marketing choices are made, it is important to innovate within the existing parameters of a company’s brand. That’s easy to say but hard to do, because marketers often feel pressure from their functional peers and other managers to do what competitors are doing. They’ll hear, “Let’s have a Web site like Company Y and an incentive program like Company Z, advertising like Company A and community giving like Company B.” The best advice I ever received as a marketer was to make sure that each brand and each company has to find its own way.
The sweet spot where marketers can succeed is small and probably getting smaller as the marketplace gets faster, more global, and more customized. The ability to keep up with that marketplace will be driven by achieving the right balance between tried-and-true endeavors and the innovative tactics that require calculated risks. We learned at Best Buy that striking the right balance is a never-ending task; it takes a combination of judgment, savvy, good math, and, most likely, a little luck.
Michael Linton (email@example.com) is the former chief marketing officer at Best Buy. He left the company in August 2006.