Wednesday, March 11, 2009

Three Sigma Marketing

We at marketmambo recently realized that almost half of our entire lifetime has been spent in marketing. Perhaps a fact such as that would have once been a badge to be worn proudly, or at least with a minimum of shame.

In that time marketing has gone through several evolutions, some of which were jarring, some more subtle. In the latter category is the increasingly dominant role of process in the development of marketing ideas. Marketing has always had a non-linear, non-rational side that strikes many as, well, sloppy. Accounting-types see in this inefficiency and unnecessary cost. Those of the manufacturing mindset link a lack of method to an implicit loss of quality.

Some friends of ours who are also marketers have recently gone through six sigma training at the suggestion of their corporate leadership. As a reminder, six sigma is a manufacturing discipline developed at Motorola that refines processes so that they make products that increasingly fall within acceptable tolerances. Six sigma refers to the number of standard deviations (sigmas) within which the output falls. Put more simply, six sigma means that 99.997% of what you make is right.

We have a hard time arguing with anyone who wants to save time, save money or make things higher quality. Certainly marketers could be faster, cheaper, better. But can the principles which guide accountants and manufacturers also successfully serve the marketing department?

According to an article in the March 2008 of Harvard Business Review “When Should a Process Be Art, Not Science” there are processes within organizations, and within the disciplines of that organization, which can be yoked to the horses of rigor, and those which should be allowed to run off the reins. The authors explain how to recognize the two situations and offer suggestions to better manage the business “arts”.

Embracing or Eliminating Variability

In many business disciplines, let's stay with accounting and manufacturing as examples, consistency of output is an appropriate indicator of success. We don't want two accountants to look at the same set of numbers and arrive at radically different conclusions, or the same accountant arriving at one conclusion on Monday and something all together different on Friday. We want manufacturers who make break pads that stop our cars all the time. We want the vaccines we give our children to always be free of side effects. In all these cases variability is bad, and the more one unit of output looks and works like the one before it, the better off we all are.

But according to the authors, consistency is not the dominant goal to be prized by all disciplines. The dividing line comes down to variability. For some situations, the things that go into the front end of the process are, unlike truckloads of aluminum ore, variable from case to case. Judgment, or “art” must be added to the mix in these situations if we are to have any hope of achieving satisfaction with the outcome.

There are also situations when the end-users of the process, the customers, don't want consistency, don't want their “widgets” to operate exactly like everyone else's widgets. For some customers, a product that is different, that is unlike all others, or most others, or maybe even unlike any others is an indicator of success.

And here lies the needs of most marketers. Marketers value products that act differently and are more attractive than their competitors. They value advertising campaigns that set them apart from others, that, as is commonly said, “break through the clutter”.
Marketers want “cheaper”, maybe now more than ever; they want “faster”; and with corporate leadership's demand for results, they want “better”. What sets marketing apart from other business disciplines is that “different” is an important ingredient into getting to “better”.

Artists In Training

The authors also offer several suggestions for managing an “artistic” business process.

According to the authors, as a first step managers need to be clear as to which of their processes are “science” and which are “art”. For the former managers should develop discipline which increases efficiency and reduces variability. For the the processes which are more akin to art, managers should should create an environment that supports art. “Artists” need continuous exposure to their customers to prevent them from developing an idiosyncratic view of what is relevant and valuable.

Managers must also develop training programs which go beyond simple skills. Corporate artists need to learn to thrive with ambiguity, uncertainty and incomplete information. Training could also shift from traditional classroom models to apprenticeships in which less experienced professionals learn from the judgment of more experienced artists.

Finally, artists need continuous feedback on the results of their efforts, so that they can hone their judgment to best meet the needs of their customers.

Three Sigma Marketing

Many years ago we had a conversation with the Marketing Director of a very large company. He spoke to us of what he called the chocolate chip cookie problem. This is the hypothetical case of the company that makes and markets chocolate chip cookies. One day, someone from accounting performs an analysis that if the average number of chips in a cookie is reduced from 8 to 7 the company will reduce its costs and increase its profits. Success being the foundation upon which all disaster is built, the company repeats the logic from quarter to quarter until its customers soon determine that this company makes bad chocolate chip cookies.

“Art” is the chocolate chips in the marketing cookie.

John Wanamaker, founder of the department stores which bore his name, is famously credited with saying “Half of my advertising is wasted, the problem is that I don't know which half”. By our assessment we would agree to his estimate. Perhaps good marketers are 70% effective, and 70% effective translates into two-sigma, in case you were wondering.

For most of its history, marketers waved their outstretched hand across their domain and declared it “art”, as if that designation forever absolved them from any accountability in either costs or results.

But as is often the case in human affairs, business is swinging to the other, equally wrong, extreme of forcing marketing to aspire to the discipline of accounting and manufacturing, and by doing so, diminishing its ability to create value.

So marketmambo announces a new designation for success in marketing, we call it “Three Sigma Marketing” and have created a button that any marketer could display with appropriate pride. If you feel you can do better have at it. But what three sigma marketing tells the world is that this company aspires to be both right and different, and that customers can expect from them products of unique value, and while we may miss the mark about 10% of the time (hence three sigma), we'll take that risk so that we can be brilliant the rest of the time.

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