“What is it that makes budgeting for marketing so much more difficult now than it used to be?” James H. Martin, Associate Dean, Director of Graduate Business Programs and Professor of Marketing at John Carroll University, has been hearing this question a lot lately. To learn more, he spoke with a panel of experts including Sara Stashower, Visiting Professor at John Carroll University; Jason Therrien, CEO at Thundertech; and Tom Bernot,CMO at Optiem. All three had similar perspectives on this problem. They all said that there is a fundamental shift in thinking about marketing from the traditional view to a new perspective, but not all companies have made the shift yet.
Smart Business learned more from Martin about their collective insight.
What is the traditional view?
The traditional view of marketing communications has the primary objective of pushing out a non-interactive campaign message that gives the marketer total control over the communication process. This happens in three basic steps:
- First, you create a campaign message you think your target market ought to hear.
- Second, you select those media that will allow you to tell that message to the most people in your target market at the lowest cost per impression.
- Third, you evaluate the success of the campaign based on changes in sales (or awareness levels, or knowledge, or brand attractiveness, etc.).
Because technology has added what seems like a tidal wave of options for media and performance metrics, the task of allocating a marketing budget across communication channels has exponentially increased in complexity.
From this view, allocating marketing resources has become a much more complicated problem simply because there are so many more options from which to choose.
Is there a better way to think about it?
The traditional view of marketing is based on the premise that communication is a controlled one-way process and media represent efficient mechanisms to get the message out. Unfortunately, this frames the problem in a way that doesn’t match the real value of the new media. You need to re-frame your strategic thinking from the traditional view of marketing communications to a new way of looking at the problem.
This new view has an entirely different premise regarding marketing communications. The new approach is based on developing opportunities for conversations with your customers on topics that are important to them and that you can contribute to because of what you do. Engaging your customers in conversations brings them closer to you. It builds trust and confidence in your brand. It creates an affinity to you that the old approach simply cannot accomplish. And that’s the real value with the new media.
But, to do this well means you have to want to talk with your customers, not at them. You must want two-way communication. You provide your expertise and they provide their input. It's about which media are the best conduits for those conversations, not which media are the best at pushing your message to your customers. This is not just a different way of saying the same thing. This is a different way of thinking.
How do you know what conversations to have?
In which conversations you engage depends entirely on who you are and on who your customers are. But, here are some pointers. Start with your expertise. Then think about who your customers are and what they want to know about.
Having trouble figuring out what your customers want to know about? Whether your customers are OEMs, suppliers, distributors, retailers or consumers, customers want to know about things that will improve their lives. They want to know how to experience less uncertainty, they want things to be easier, they want problems solved, they want to be healthy, they want to grow as a person or as a company, they want to feel connected to others, they want to feel like they are part of something important, they want a life fulfilled, they want to understand, they want to feel like they can make a difference, they want fewer hassles, they want job security, they want to do their job better, they want to be successful, they want to be entertained, they want to learn...
Conversation topics are limitless. As a company, you have expertise. How can you use this expertise to add to any of these conversations?
How do you have these conversations?
This question has a different flavor from the traditional question of how to allocate budget across media. The question is now about the best venue for creating a conversation and how to connect across media to engage and continue the conversation. The answer is a function of what conversation you are having and with whom you are having it. You want to construct a network of conversations that engage your customers in a way that builds affinity with you and your brand. The result of this engagement is that customers will want to go to your website for your expertise.
Ultimately, marketing communications is about sales, but the more direct question now is about the effectiveness of the conversations you have with your customers. Engaging customers with content that matters to them and inviting them to participate in that content will bring your customers closer to you.
James Martin, Ph.D., is Associate Dean and Professor of Marketing, Boler School of Business, John Carroll University. Reach him at firstname.lastname@example.org.
Companies everywhere are going over their budgets with a fine-toothed comb. So where does intellectual property fit in?
Your IP assets are one of the most valuable parts of your business and you should treat them as such, says Steven M. Haas, a partner with Fay Sharpe LLP.
“The overriding factor to keep in mind is that your intellectual property budget should not be considered overhead,” Haas says. “It should be considered part of your overall strategic plan, generating assets for the company.”
Smart Business spoke with Haas about how companies should evaluate the budget for their intellectual property.
What should companies keep in mind when developing an IP budget?
Your IP assets can slow down your competitors and increase their cost and uncertainty, and hopefully provide you with a proprietary market position. Another thing to consider is that banks and financial institutions love to see IP assets for financing, and for mergers and acquisitions. Patents, trademarks and copyrights are all critical assets. Also, by being proactive with your IP you can prevent problems down the road.
Your IP assets can be not only a sword but a shield for you, relative to your competitors.
How should companies determine how much should be allotted to their IP budget?
As your company develops new products and as you work with an outside counsel, it’s important to develop a plan to protect those innovations within whatever budget you can afford. Your outside counsel can certainly help you prioritize. There is no rule of thumb for how much you should be spending on your IP, like a certain percentage of total sales or something similar.
Businesses should keep in mind that these costs are often cyclical. For small and medium-size companies, it’s common for IP costs to ramp up when new products come out. But over time, things even out. There will be a cycle with fewer fees. The costs follow your product innovation cycle.
There are trends in industries where technological advances and customer-driven improvements contribute to a cycle with more fees. The budget for patents in particular is very cyclical for small and medium-size businesses.
What are some tips for controlling your IP budget?
There are several strategies companies can use. First, it's important to have a patent committee or person at your company responsible for interfacing with outside counsel to make sure that you are protecting what you need to protect and not wasting money on things that are no longer important. Depending on the size of the company, most companies have a person or committee that will interface between inventors, engineers and the business units on one hand and outside counsel on the other. That way you have a single point of contact with the firm, preventing mistakes, duplication of effort, and funds being spent where they shouldn't be.
With high turnover at today's companies, it's not uncommon for the patent lawyer/outside counsel to have been there longer than many others at the company, as a constant presence over many years and stages of the company. Rely on that experience.
Another tip: maintaining old patents is very costly. Once you receive a patent you have to pay maintenance fees four, eight, and 12 years after the patent is granted. The fees increase each time, so if a patent is no longer relevant to your product mix, you should cull your portfolio and make sure you are not spending your budget on these items.
Small companies — defined as companies with fewer than 500 employees — can receive a small entity discount from the U.S. Patent and Trademark Office.
What should companies do about international patents?
Foreign patent costs are very expensive. You have to be rigorous in terms of deciding to pursue patents and other intellectual property in other countries. The decision has to be justified by your sales or distribution in that country. You also must have a realistic ability to enforce the patent in that country, because the maintenance costs are so huge.
Most foreign patents require yearly fees, known as annuities, to keep them in effect. Many companies spend too much on foreign protection and ignore new projects, a decision that rarely makes the most business sense.
What are some other tips for patent budgeting?
Try to eliminate layers. Work with the lawyer at your outside counsel who is directly responsible for your matters. If you eliminate layers, you eliminate cost.
For some companies, using the provisional patent application can reduce costs. It is a less formal patent application, with a lower expense, but it can preserve patent rights — temporarily at least.
It's important to be proactive and avoid litigation, which can be extremely expensive from a direct cost aspect and because of the time involved. Work with patent counsel to avoid IP conflicts with your competitors. It can save you tons of money and headaches down the road. The earlier we see these issues, the more we can do to help you design around someone else's patent, invalidate the patent or come up with an alternative way forward.
All companies are very focused on budget right now. Outside firms are very willing to work within a set budget and to provide and build target billing estimates or fixed fees. We are very flexible about working with company's budgets, because that is what companies demand now. So don't be afraid to discuss budget issues with your outside counsel. There is always a plan that works for both the client and the lawyers.
Steven M. Haas is a partner with Fay Sharpe LLP. Reach him at (216) 363-9149 or email@example.com.