A Simple Formula for Marketing: 1-1-1
Let’s see if we can combine 3 ideas - and keep it simple. But before we get into the details, a bit of background might be in order.
Our Book
As some of you may know, Joanne O’Connell, and I are in the throes of writing a book on marketing. Our hope is that our book will be different from other books on this topic. Our premise is that a valuable place to start is by measuring the performance before developing a new marketing strategy. As a bonus, we extend this idea and include the steps to develop a sound marketing strategy.
In other words, start with designing and building a way to measure and track performance, figure out what is working and what isn’t, and then, work on developing a new marketing strategy.
A Marketing Funnel that is Measurable
The title of our book, at the moment, is “A Guide to the Fundamentals of Intentional Marketing.” The book has 5 Stages,
Stage 1 – Prepare Yourself
Stage 2 – Build the Funnel
Stage 3 – Maximize Performance
Stage 4 – Achieve Alignment
Stage 5 – Evaluate the System
And 12 Steps which I won’t bother listing - you will have to buy the book.
Maximizing Performance
In our model, designing and building a funnel that measures how people flow from top to bottom is where most companies should start. Our assumption is that it is difficult to make improvements and maximize performance if you don’t have a measurement system.
A critical assumption is that measures at each level need to be gathered to populate the funnel. This may sound obvious but with many of the managers that we work with, they listen and nod their heads in agreement, but they have no idea where to get the right data and how to add the numbers to the funnel. In many cases, they have never even designed the funnel for their company.
As mentioned, we start working with companies by setting up a system to measure performance. This gets us to Stage 3 where we can maximize performance using the campaigns related to the existing funnel. But what if the investments in marketing are not working well and performance is mediocre at best? If this is the case, then we start working with companies on Stage 4 which is Achieving Alignment.
Achieving Alignment
In our model, alignment is achieved when the market learns and knows about the company’s products as a result of the marketing campaigns initiated by the company. That is a mouthful; let me explain. The alignment that we are talking about is between the Product, the Market, and Marketing. These three components need to be in line and working together. If any one of these is out of alignment, sales and revenue will be less than optimum.
An interesting aspect of our model is that the information needed to achieve alignment is acquired from outside the funnel - literally, outside the organization. Again, you’ll have to buy the book to see how this all fits together.
In the meantime, this diagram illustrates the building blocks of alignment.
The Building Blocks for Alignment
Using 1-1-1
You may be asking, What is 1-1-1 all about? The answer is that 1-1-1 is a simplified version of alignment that marketing managers can learn and use. The “ones” represent key components of a simple marketing campaign: 1 product, 1 market, and 1 channel.
Here’s an example of how to implement 1-1-1. Start with the product. Let’s say you are selling new windows for residential homes.
Next, think about the market. Of course, every homeowner needs windows. But do all homeowners need new windows? Probably not. So, who does? The key is to choose a segment of the market that is most likely to need new windows. One group will be people who are currently living in older homes. The logic is that their windows may be wearing out - the handles and hinges are broken. Or maybe the insulation factor is poor, and heat is leaking out. A bit of research and analysis will help you expand on the characteristics of this group. Most likely this group will be middle-aged couples in older neighborhoods that have an interest in improving the functioning and value of their homes.
At this point, we know the product we are selling, and we know who the likely buyers are.
The next step is to pick a marketing channel to reach this market. This step can be overwhelming because there are so many options but let’s keep it simple. A place to try is with ads on Facebook. Everyone is on Facebook. Ads are cheap. Boosting a post is cheap. Let’s invest $1,000. That should by us 10,000 impressions and hopefully some calls from prospective buyers.
One product. One Market. One Channel. Easy.
Now, here’s the secret sauce. Since you already have a performance measurement system in place, you can evaluate the success of your effort and your investment. Let’s say out of the 5,000 “impressions” you get a 0.4% lead conversion rate, meaning that 20 people contact you. Over the next few months, 4 households decide to get new windows installed - that’s a 20% close rate. If each sale is worth an average of $5,000, your total revenue will be $20,000. Fantastic.
ROMI
Let’s do some math to calculate the return on investment. The formula is Revenue minus Investment divided by the Investment. In this case, $20,000 - $1,000 = $19,000 divided by $1,000 gives us 19. This means that for every $1 we invested in 1-1-1 we generated $19 in revenue (less the cost of marketing). Excellent. We made an investment, and we generated a strong return. This is what marketing is all about.
“It’s not working”
What happens if this campaign goes south and we don’t get the results that we hoped?
Let’s say that our investment and impressions are the same: $1,000 and 5,000. However, the lead conversion rate is only 0.2% and the close rate is 10%. That gives us 1 sale for $5,000. ROMI, in this case, is 4; meaning that for every $1 that we invested we generated only $4 in revenue. Not great.
If this is the case, we have to figure out where is the problem. Is it with the product? Not likely because we have been selling windows for years. Is it the market? Probably not because we have done our research and people in this market are proven buyers. That leaves the problem to be with marketing. If this is true, then we need to really look at why ads on Facebook are not working.
There could be any number of reasons. We can even ignore why results on Facebook are so poor and just move on to another channel.
Let’s try door handle hangers. We can include unique details about our windows and an easy call to action like a phone number. Door hangers are cheap - maybe $3 each. Print up 400 for $1,200. Simple, but will this work?
We can start in the neighborhood where we have a current client and place 20 every morning before we start to work. If there are 4 of us on the crew and we do 5 each, that should take us about 15 minutes. In one week, we should reach 100 homes. In one month - 400 homes.
$1,200 investment
400 impressions in a month
2% lead rate
8 prospects (but more qualified)
37% close rate
Only 3 sales, but each sale is $7,000
$21,000 in revenue
ROMI is multiple of 16.5
ROMI is lower but revenues are up. Nice.
Old-school marketing is a beautiful thing.