Mark Hughes is perhaps best known for masterminding what Time magazine called “one of the greatest publicity coups in history” when he convinced Halfway, Oregon, to rename itself Half.com as a publicity stunt for his start-up company of the same name. Mark is a consumer marketing guru with years of marketing management experience both in start-ups as well as corporate giants such as PepsiCo/Pizza Hut, Pep Boys, and eBay. He is presently the CEO of Buzzmarketing (www.buzzmarketing.com) and his book, Got Buzz, is due out in spring 2004. Mark holds an MBA from Columbia Business School and is a regular lecturer at NYU and Penn.

S is More

The economy is still dragging, and sales growth is sluggish for most companies. For many, cost savings from payroll reductions appear to be tapped out. So where can you derive earnings growth? Check your advertising dollars. Despite the fact America’s annual advertising expenditures exceed Mexico’s entire GDP, most marketing dollars are under-leveraged. If you’re looking for growth, cut advertising and cut it dramatically, perhaps as much as one third. S is more.

What is S and why is S more?

S is what every top advertiser and CEO should know: the S curve threshold of advertising. Specifically plotted on an X, Y graph, the curve flattens out where spending incremental ad dollars proves wasteful.

You rarely find marketers recommending slashing one third of advertising expense. Make no mistake: cutting advertising by one third is scary. It's scary to CEOs, scary to investors, and scarier to marketers.

In the late 1990s, I ran marketing and advertising for a company with $40 million a year in ad expense. At the time, the company was at a financial low. Everyone believed more ad spending and a new agency would resurrect us from our miserable financial hole. We should have found our S curve, spent less, and brought more to the bottom line. We might have accelerated our road to financial recovery.

One day I was chatting with a seasoned ad man about my experiences, and he asked if I was doing any local media tests where I doubled my ad dollars to see the marginal revenue impact. This hit me like a two by four between the eyes. How could I be so stupid? I was paying an agency millions of dollars a year for expert advice, yet a retired ad man showed me how to find the S. If I had known my S curve, I would have known if I was wasting money.

Fast-forward 2 years. While running marketing for Half.com, which later sold to eBay for $300 million, I faced a difficult challenge. Our CEO wisely dictated that venture capital money would not be as available, and advertising had to be cut-about 50%. Again, a marketer's nightmare.

But by cutting advertising so drastically, we were forced to think on a different plane. We had to out-think vs. out-spend. What did we do? We followed statistics. Through research, we determined how our paying customers heard about us. We tracked that data versus the costs. We did more of what produced the highest impact with the lowest cost. In essence, we discovered the steepest slope of the S curve.

Our ad agencies told me we couldn't grow the brand by following these methods. We did. We completed the sale to eBay, and we managed to grow and outmaneuver our competition with 1/10th the budget. The lesson? Temper the desire to spend more marketing money -- which takes away from the bottom line -- with S, not more.

So what's the message to CEOs looking for ways to improve earnings?

1. If you don't know your S curve, cut advertising dollars dramatically…this will force the people who spend your dollars to think in different ways.
2. Understand the statistics that produce the highest impact for the lowest cost for your brand, and create ways to do more of that.
3. Understand that your advertising message is critical to success, but everything has diminishing results.

Find your S; increase your earnings. S is more.

• Comparable customers and market segments
  Ensure that you and your allies are focused on similar target markets.
• Complementary products and services
  Your offering must dramatically increase the value to the customer of your allies' offerings and vice versa.
• Compelling value proposition
  The return on investment for participation in an alliance must exceed alternative resource allocations.

In next month's Relaunch Tip, we will share our steps to identifying and building a winning strategic alliance.

To learn more about how creating winning alliances, contact us at insights@antiphony.com.


Purple Cow: Transform Your Business by Being Remarkable
Seth Godin (ISBN: 159184021X)
Seth argues that marketing methods once tried and true are now being tuned out by consumers. Purple Cow offers a lesson in "out of the box" thinking.

In Godin's words, "Remarkable marketing is the art of building things worth noticing right into your product or service." If it isn't remarkable, then it's invisible.