Most of us want to see the good in people. We want to believe that our employees show up with good intentions, are self-motivated, and without constant provocation, will always try to improve our organizations and extract the most value for our business.
It feels good - believing in people. It is a show of trust and team-building. However, believing that your employees are on a constant, obsessive hunt for providing the most value to your business all the time is self-deception, and is likely leading your marketing team to leave anywhere from 15-40% profit margin on the table.
This isn’t meant to be cynical, nor is it placing judgment, to observe that we humans, left to our own devices, will not extract the most value for the companies we work for - it is simply true. What you do with this information could mean the difference between a double-digit year of profit and shuttering your business.
My own experience in applying this view of human nature to business is grounded in digital marketing, but make no mistake, it is applicable to all fields. However it’s true to say that the digital marketing industry now is enjoying a peak moment of self-deception, or in the case of publishers themselves, outright deception.
Self-deception in marketing
In marketing, there are three key areas where most teams deceive themselves. For one, most marketing teams budget and plan their media buys one-year in advance. Marketing plans with a one-year time horizon are usually based off of the previous year’s spend, and have an expected growth rate based on an additional cash infusion. This is absurd. This assumes that the correlation of budget to return on ad spend will remain constant in the next year, which is almost never the case. In addition, planning in this way allows for no flexibility to be responsive to tactics that are proving to work. Businesses are simply not that predictable, and it is deceptive to plan in this way.
Secondly, marketers deceive themselves by focusing on the amount of spend, versus what is truly important - the operations of their spend, or "the how." Here is where true insight lies – especially in the details. Understanding the how, and digging into the most minute details and tactics is where business uncover incredible insight that has tremendous overall impact. Instead of focusing on where and on what channels, marketers must dig into the operations to learn where are we seeing trends, waste, or something unexpected. Rarely are teams tasked with reporting on these learnings, and more often are they asked to simply report on how much and where money was spent. Companies who obsess over these tactics, and who are finding huge success, include Netflix, Expedia, and Booking.com.
Marketing organizations should be structured around challenge, scrutiny, and constant testing
However, without a structure to force this, we as humans cannot get there ourselves. The most successful companies we work with and see in the market have a culture and built-in structures that demand constant challenge - Amazon being a stand-out example. One thing I am consistently shocked by when I speak to marketing organizations is how few people make such big decisions. When selecting a digital marketing agency, why not test two agencies against each other? Why not have teams of people recommend where and how to spend your $500m budget, instead of one person? There are simple structures, though not now intuitive, that force debate and challenge over where marketing is best focused.
A big theme now is media transparency – demanding more transparency from agencies and the big publishers Google and Facebook. The most important thing is transparency into the tactics of how your money is spent, yet it is less important if this happens via an agency or an in-house team. Certainly Google and Facebook have measures in place that do not provide visibility. Both Amazon and Expedia circumvent this by not giving their conversation data to Google and Facebook – which is essentially telling an auctioneer exactly what you are willing to pay, knowing they are incentivized to raise the price because they take a big, fat, juicy cut. However, transparency is nothing without a culture of challenge and scrutiny.
Dave Atchison is co-founder and chief executive of New Engen