First Mile Problems

I was recently interviewed by Tim Furey, CEO of MarketBridge, on The Last Mile Podcast. Among our discussion of SAC, CAC, LTV, ROI, other three-letter acronyms, we also spent time on “first mile” marketing problems.

As a practicing performance/direct response marketer, I’ve always first asked myself or my clients a few strategic, or “first mile” questions. Questions like:

  • Who is your target audience?
  • What is your allowable?
  • What is your objective with this campaign, product launch, etc?
  • What does success look like?

I’ve had senior product managers, or product marketing leads respond with blank stares when I ask these questions. As a classically-­trained direct mail (OK–I’m a “junk mail” guy), I learned to start with the allowable. Knowing unit economics and fixed or overhead costs, won’t guarantee a winning campaign or new channel test. But at least you won’t be in the situation of losing money on every sale, but making it up in volume.

I recall one vivid example in a company I worked for. I controlled what today we’d call our CRM inventory. That meant, email, the equivalent of in-app messaging, push notifications and the like. We knew exactly how much we could talk to our customers without hurting retention, and how much of that inventory had to be allocated to communicating about things like credit card problems.

All inventory was allocated in one way: by LTV. For every opportunity to speak to our customers, we calculated and tested carefully the LTV lift provided by the touchpoint. If it didn’t drive incremental LTV, we didn’t send the message.

Apparently my team wasn’t providing enough inventory to help one of the product managers grow some new product. That person came to me to complain. I asked the question “what’s the allowable?” and received a blank stare. Now this particular product had been in development for well over a year and the total investment had been multiple millions of dollars. I just figured that somebody bothered to calculate what it would take to make money. Silly me.

It turned out the product manager didn’t know how the product’s P&L worked. Luckily (or sadly) for him, I had the unit costs ready for our meeting so we did a little white boarding in my office. It turned out the economics­­, even at scale (meaning millions of MAU) were so poor that the break­-even SAC was right around a dollar. Allowable to make any kind of reasonable margin was tens of cents.

After doing the math, I asked the product manager what channels might work at, say $0.25 SAC. The maddening thing? The person had no idea. They assumed:

  • They’d be able to spray and pray and get “free” impressions
  • “Everybody” would want the product (which is the only way the fantasy of “spray and pray” has of working)
  • The go­-to­-market plan would magically take care of itself

When he asked me what I’d do, my response was simple: Fix the economics, because marcom wouldn’t save you. If you couldn’t, kill the product immediately. If the allowable had been even $10 (still low for a B2C continuity product) maybe there could have been a few digital channels that could have worked.

What happened? That product trickled along for a couple of years before finally being put out to pasture. Oh­­, and another company actually made millions on the exact same product. Why? They did the math first and got the first mile right.

Now, what about the target audience (B2C) or maybe the TAM if you’re a B2B marketer. The problem I’ve seen increasingly over the last 10 or so years is a logical and strategic flaw that used to be called “Chinese Marketing” when I was in graduate school. There’s probably a better term for it now, but the flaw was “if I can just sell one left shoe to just one percent of all the people in China, I’ll be a rich shoe merchant.” The problem: There’s no such thing as a segment as big as all the people in China. Or New York State, or New York City, or the Upper East Side, or… You have to segment the target audience!

How do you teach segmentation? It’s not intuitive and you have to be taught. But it is teachable. I learned an old saying years ago:

“You may not know who will buy your product, but you are sure who won’t buy it.”

Imagine you work at The Brady Campaign and are looking for donors and supporters. You always know who to suppress: members of the NRA, among whom you’ll pull exactly 0%.

A few minutes spent with the marketing manager or product manager on suppression or “anti­-targeting” (which is the fancy, overcomplicated digital marketing way of saying suppression) can sometimes yield a world of performance improvement.

The root causes of first mile problems make me sound like a “you kids get off my lawn” kind of guy:

Untrained marketers. Check your marketing department. How many of them are trained, i.e. have degrees in the subject matter that you’re paying them good money for? Don’t tell me “you can learn marketing on the job.”

If your spouse has brain cancer, are you going to hire a self­-taught brain surgeon? If you get audited by the IRS, are you going to bring a self­-trained accountant? If you’re charged with manslaughter, are you going to be represented by somebody who read a few legal textbooks? I didn’t think so. So why would you put millions of dollars of shareholder money in the hands of people that can’t tell you when to use conjoint analysis or can’t calculate arc elasticity of demand?

Tactical focus. As both a consultant and employee, I’ve sometimes been told that “we need an influencer strategy.” Now what they really meant was that they wanted to try influencer marketing as a tactic, i.e. a channel test. And that may not be a bad idea at all. But without a sound marketing strategy, any channel is as good as guess as any other channel.

Building a Snapchat or Tik Tok “strategy” sounds like so much more fun than doing the boring blocking and tackling of developing sound strategy. Particularly if one is untrained in the creation of proper marketing strategies.

Takeaway: I’m not saying we shouldn’t try new things. But let’s get the first mile right by building marketing teams populated with properly-trained marketers. Lets lead with strategy. And let’s talk LTV, SAC, CAC, ROI, IRR, WACC so that we, as marketers, can sit at the adult table. And win.

This entry was posted in Direct Response, Marketing, Media, Philosophy, Rants, Strategy, Tactics and tagged , , , . Bookmark the permalink.

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