Note from Jim: Today’s column is dedicated to the memory of Stephen Gilbert CPA, 1917 – 2009. My father, friend, mentor, sounding board and business partner.
Over the years, I’ve written many times about the importance of financial acumen as a core competency for direct marketing success.
Many people seem to think direct marketing is about killer creative, or campaign management, or even great customer service. But to me, it always starts with the finances.
If I’m writing a circulation plan, it starts with the break-even analysis, right on down to the list and list segment level. Each segment of my housefile has a P&L and breakeven attached to it, then each drop, each season and each year. I do this in advance, even three to five years in advance, using historical numbers. And I do it before each mailing or other type of direct marketing campaign to measure the success or failure of every campaign I do. Remember, past performance predicts future behavior!
I’m also nuts about other financial analyses, such as lifetime value, squinch (square inch for measuring catalog space usage), cash flow, balance sheets, etc.
Now with social media all the rage, and multi channel marketing being the norm for mail order, catalog and electronic retailers, the need for financial measurement and knowledge is greater then ever.
To this day, I’m amazed at how many people I work with, smart people, still want to practice direct marketing by the seat of their pants. To me, marketing just doesn’t make much sense without financial understanding….
Too many direct marketing companies think they’re brands…
Too many direct marketers think they “know” what their customers want and, hence, perform no analysis…
Just pull the trigger and see what happens!
But, there was a time in my career — when I started my first business, a publishing company — that I had no interest in the numbers. My father, a certified public accountant, took care of that, leaving me to market, sell and manage the day-to-day operations. I made many mistakes working that way, which my dad was quick to point out. So I learned, and learned quickly, thanks to him.
Many times, the disconnect between marketing and finance has been immediately evident to me the first time I walked into a company. And many times over the years I’ve brought my dad in to work with clients and client-side companies I’ve worked with. He’d communicate the top line, help organize the finances and financial analyses, and I’d address the bottom up marketing planning. Together we helped some companies turn the corner and grow, and save a few from ruin.
Direct marketing is a numbers based business. Don’t do the math, and there are a myriad of ways you can find yourself in jeopardy. Does your company think that way? It could be critical to you and your company’s success.
What is strange is that as a kid I hated numbers — I was horrible at math — but I learned much from working with my father; a patient teacher. The principles I learned I apply every day, even passing them on to you.
I wasn’t really planning this week’s column as a tribute, but — and apologies to you for getting maybe a bit too personal — I believe it’s fitting.
We are entering a new age of direct marketing that is much more complicated. The internet has changed everything.
If you consider the impact of multichannel marketing and social media, coupled with the degree of difficulty and challenge each of these presents in terms of financial measurement, maybe this week’s column is actually right on the money!