A new website. Open a twitter account. Get on Facebook. Connect to everyone on LinkedIn…but keep putting up billboards to generate “buzz”. Disguises, nothing short of a facade. These do not define the execution of disruption marketing.

In 1995, a Harvard Management Professor named Clayton Christensen coined the term in an article about disruptive technologies. In the article the authors discussed the development of technologies that,

…offered less of what customers wanted in established markets…they offered a different package of attributes valued only in emerging markets remote from and, and unimportant to, the mainstream.

How is this applied to marketing? First, I don’t believe that disruptive marketing is radical marketing. I don’t believe that disruptive marketing can be defined as simply anything that is the opposite of a firm’s existing marketing strategy nor do I believe that disruptive marketing is defined as a new website, a twitter account, et al, labeled as disruptive.

Disruption marketing refers to a strategic shift that is disruptive to established marketing organizational structure and process based on a focus on new or emerging definitions of the market.

To be more specific, disruption marketing is based on a redefinition of markets and then refocusing both the marketing organizational structure and strategy to individually engage them. It begins by segmenting the firm’s market as a set of almost infinite niche markets instead of one homogenous market and once defined, applying strategies that includes tactics (attributes) precisely targeting each of those independent markets. The strategy is based upon aligning tactics closely to the emerging markets that are remote from or underserved by the competitive environment. Who wouldn’t want to be in a market with no competitors?

Complex?

Yes, but effective?

Examples are all around you: Amazon. iTunes. Your iPhone 4s. These brands redefined the markets from their competitive environments, segmented those markets almost on an individual level then built marketing strategies to convey the attributes that were relevant.

Status quo?

No. And the probability for failure when attempting a disruptive approach lies in the status quo. Christensen found that failure for disruptive technological innovation was a function of the organization and the process. If the organization attempted to employ a disruptive approach internally, using existing organization and process, the strategy would nearly always fail. What is required is not only a commitment to a disruptive approach but the creation of a semi-autonomous entity to do it. In other words, the team that is running your present marketing strategy cannot be called upon to design and execute a disruptive strategy concurrently with the existing strategy. It is also illogical to assume that a firm has the luxury of suspending current marketing while implementing a new approach. In fact such suicidal marketing would be a very bad choice. Perhaps now you see the basis for this point, it doesn’t work. Organizational structures, culture and processes are the status quo model sustaining current sales.  So firms must sustain current efforts while trying to implement a different approach. It will not work to simply task them with implementing a new model while managing the old and hence, the need for an autonomous or semi-autonomous model becomes not only obvious but presents the least risky decision path for the firm.

Is a disruptive marketing approach the right one? In most cases, I’d say the answer is no. Many firms lack the real courage to embrace the type of organizational and process change required. It goes against their conventional wisdom and in fact will be contrary to the marketing that has brought them to today. A very difficult change indeed. Yet for those visionary leaders that recognize that innovation and brand life cycles are highly correlated, it can be the catalyst for a new and sustainable growth phase.

excerpts from Bower, Joseph L. & Christensen, Clayton M. (1995). “Disruptive Technologies: Catching the Wave” Harvard Business Review, January–February 1995

In prior posts and in conversation, I have made multiple references to FORMO’s precision-guided approach to marketing. My personal experience from over 20 years of luxury marketing combined with the knowledge gained from the implementation of highly effective marketing plans in recent years resulted in the evolution of the precision-guided marketing model. The basis for this model is the field of luxury marketing. Within luxury marketing, brand marketers are faced with a highly discriminating and generally elusive market. In our experience the response to traditional marketing is very low making an adequate return on investment difficult to produce without a large and sustained finanical effort. Which quite honestly is beyond the budgeted resources for most of the brands that I’ve analyzed. Consequently it was necessary to reinvent the strategy, to try a different approach.

That approach is the the FORMO model. Its theory is based not on the attributes of the brand but on the characteristics of each person in a brand’s target market.

If you understand each individual in your target market then you can employ a much more efficient marketing strategy that focuses your brand on the touch points where it crosses the interests and passions of each person. In the attached diagram, I’ve provided an example of this application for a luxury brand.

At the center of the marketing strategy is the market, not the brand.

Precision-guided marketing model by FORMO

The elements of their life that are most important to them are described in the first ring. I’ve adjusted the typeface so that the items that would have the most importance are the largest. As you can see, things like family, business, health all play very important roles in how we behave as consumers. But it is nearly impossible to act on those things as a marketer. But if you expand those primary factors outward into specific elements driven by those factors you find the actionable element. In other words, the very high motivation concerning family and children  is evidenced in selection of camps, sports & art activities; education, etc. Within these specific categories, I find the opportunity to cross their path as a brand.

If I can find ways to position my brand, authentically and honestly, within those secondary elements then I intersect the behavior of the consumer with the presence of my brand. I create a natural and logical connection.

Does it work?

Indeed and it works very well. You really have to go no further than your own behavior as a consumer. Put yourself in the center, create your first ring of important factors and expand that outward into the specific elements. Now consider the brands that are in that space, you know them.

Precision-guided marketing model by FORMO

The financial audit is a necessary and important element in the operation of most corporate entities. The auditors validate and verify that the financial statements accurately reflect the business condition over the reporting period and to ensure that the statements were prepared according to the accounting industry standards. Pretty straightforward, yet they do nothing to validate and verify that the forward looking forecasts reflect the potential revenues of the company. But I challenge you, is that any less important than the financial audit?

Is an audit of the assumptions that underlie the sales forecasts for a company important? If so, who should do it?

In this particular case, I’m focusing on the hospitality industry but it could just as easily be real estate, construction or luxury consumer goods. My point is that they all generate sales forecasts based on marketing and sales plans. Yet most if not all accept the assumptions in those sales plans as completely valid and develop forecasts based on those assumptions.

Skeptical about the importance of this? Here’ s a simple test: Go back to your last two annual forecasts and determine the error of that forecast from the actual numbers. Now go back and review the marketing plans that were submitted to develop those forecasts. Chances are the error in the forecast was significant, so was the forecast wrong? NO.

The assumptions were wrong.

The assumptions I’m speaking of were either explicitly stated in the plan or assumed (dangerous thing to do with a company’s projected revenues). These assumptions were marketing effectiveness, ROI, lead generation, market conditions, sales team effectiveness, advertising ROI, PR ROI, etc.

To help the luxury hospitality brand in particular here is a look at FORMO’s mind map diagram of they key areas in a hospitality audit. The map is extensive and concentrates on the large functional areas that underlie the assumptions in a marketing plan.

So what is it worth to an organization to do this? Simple, go back to the earlier exercise and consider the amount of error in that annual forecast. So what is it worth to you?
FORMO – Hospitality Audit

A luxury hotel, like any other business, is driven by cash flow. That cash flow is forecasted based upon basic economic assumptions about supply and demand. All very straightforward. Yet the risk for any resort hotel is not in the forecast but rather, the assumptions. The assumptions are at the foundation of every action in a marketing plan. For example, an advertising line item is used to buy campaigns. The campaigns are assumed to increase demand and thus generate more inquiries, bookings and ultimately revenue. So if the assumption is that advertising increases demand, then the risk is in the assumption itself. Does advertising increase demand? How do you know? How much?


Which belies my point: Do typical luxury resort marketing plans measure the performance of each of these tactics to determine if the assumption is indeed valid and therefore draw any conclusion about the efficacy of the tactic? In short: Are we measuring the advertising campaign to see if it does what it’s supposed to?


In my experience the typical resort marketing plan is filled with vague generalizations like:


“…generate buzz…”
“…drive sales…”
“…increase brand awareness…”


Or the plan cites a direct tactical measurement of bookings. While measurement of bookings is indeed important, it only provides a part of the picture and often provides no measure at all in the case of a magazine ad or PR media hit.


The bottom line (literally speaking) is accountability. The marketing director is held accountable for the plan but how about the results and measures? Indeed, the marketing director should be held accountable for the results BUT ALSO for quantitative and qualitative measures to validate or invalidate (and then rethink) every tactic in a marketing plan.


What I am suggesting is something new to the typical resort marketing plan…an audit. The term comes to mind from the audit of financial statements by independent parties in order to establish their validity. A marketing audit should be conducted on the resort’s marketing plan to challenge its assumptions, ensure there are valid performance measures and ultimately help the accountable parties do a better job or push them to rethink flawed assumptions and INNOVATE.


In the end, ask yourself this question: Which affects future revenue more? A marketing plan or an audit of an accurate financial statement?


So why not use the same approach? At best you may help the marketing team to do better, at worst it’s an independent validation.

To nearly everyone involved in the hospitality business, the STAR report is the periodic answer to the question, “How did the hotel do compared to our competition?” Yet I challenge conventional thinking by asserting that the STAR report can also be one of the most underutilized quantitative measures of marketing effectiveness and ROI.


1. Apples to Apples – Consider this: the STAR report by definition provides quantitative data on how a hotel compares to its competitive set over a defined period. The marketing plan is designed at its core to improve a hotels performance against its competitive set over a defined period.


2. Its the delta – A marketing plan should be designed with a simple objective: to improve and then allocate the resources in an optimized manner to most efficiently drive statistically significant improvement. And yet many plans fail to identify how improvement is measured other than broad generalizations or trend data, i.e. improve buzz, awareness, group pace or web traffic. While each of those qualitative measures or trends may be a precursor to improvement, only a direct measure against a competitive set can validate the tactics contained in a marketing plan by indicating the ROI on the marketing investment.


3. How much? – Since the STAR report is numeric it is then possible to perform some very simple ROI period analysis on the indices. For example, a quarterly REVPAR index of 98.0 compared to the competitive set that improves to 99.0 in one quarter is obviously a 1% improvement, so the next step is to correlate that to marketing resources/tactics. If the marketing plan/budget required an expenditure of $250k in the same period (ignoring period effects which I’ll discuss later), then its easy to see a positive correlation. $250k resulted in a 1% improvement in the index, hence the tactics worked. Five minutes with the hotel controller can convert these into ROI for presentation to the owner.


4. What is a marketing expense? – To simplify I would suggest that a marketing expense in a particular period is the gross sales & marketing costs including payroll, advertising, etc. I typically suggest the gross expenditure since I assume that the question is return on total marketing investment and not just advertising because the results in a STAR report reflect the coordinated efforts of all sales & marketing components and not simply advertising.


5. But… – There are several assumptions that underlie this simple analysis: 1. The STAR Report reflects a rational competitive set, 2. There are no seasonal effects that are divergent among the competitive set, i.e. a ski resort compared to a summer lakeside hotel, 3. There is a period effect with some marketing expenses, group bookings are generally reflected many periods in advance of the actual group and advertising for the summer can commence in the winter. In those cases, you can use period effect to predict an improvement in a future period and then validate.


6. It’s not the only one -I’m suggesting this ROI analysis as one of several tools that should be employed to evaluate sales & marketing but it is by no means the only one. It should be used to highlight a potentially ineffective strategy, which should be further investigated on a line by line basis. Additionally the measure can be applied to specific STAR Report measures other than REVPAR namely occupancy or ADR if those are the strategic marketing goals for the period.


Hospitality marketing is defined by many effective strategies and tactics but it is also far less innovative than many other industries. The movement towards direct measurement of marketing ROI is commonplace in many industries. Holding the marketing director accountable for ROI is one way to drive innovation. If you’re held accountable for a measured return on each dollar invested, then you’ll question each and every expenditure to ensure that it’s an optimal decision.


Or you’ll be checking out.

1. Analytics – Scour your analytics in minute detail. Understand the real strengths and weaknesses of your current site from the perspective of your Users (clients). Luxury marketing is niche marketing, applying broad generalizations about your discriminating clientele will fail.


2. Understand your users (audience) niche – What type of mobile device to they use, what will they use a year from now. What are they looking for in your site? How do you make it sticky and bring them back? Do you really know them? Do your personas reflect real knowledge about the audience and their online habits or simply base demographics.


3. Understand and aggressively employ great ideas in design – Pay attention to what is happening in web development and information architecture. Listen to the conversations and then apply the points to your project. Don’t rely simply on your own expertise but be humble enough to accept that you don’t have all the ideas, there are a lot of great thinkers out there talking about fascinating and relevant topics that can measurably improve your site, challenge conventional wisdom in your marketing team.


4. Visual comes last – If you get the strategy and architecture right, your site will perform very well. Visual design is important but it does not precede the absolute of getting the foundation right. A great building does not begin with a rendering, it begins with engineering and planning. Web Development is no different.


5. It’s all connected – The web is giant cobweb of information about your brand. Your job as a strategist is to find those connections and make logical sense of them. Your website should be at the center of this “cobweb” and your branding the silk that links it all together. Your site must seemlessly provide and connect to all of the content and related content chunks that exist in your brand’s universe.


The result: The site for the Turks & Caicos Sporting Club at Ambergris Cay that we launched last week in collaboration with our digital partners at {e} house studios.


Click here to visit The Turks & Caicos Sporting Club at Ambergris Cay

Ok, there are more than 8 but I couldn’t help but share these, and I’ve come to the conclusion that the level of understanding of digital strategy is generally weak or the industry has become so mired in tradition that bad practices are being mistaken for best.  Here’s my list:

1. Website’s are for e commerce. Wrong, websites are for clients (guests). If a booking engine is the only thing on your site that engages them, then the answer is yes. If, however, your clients want and need more out of your digital platform that dates, rates and space, then this is a seriously flawed assumption. The fundamental question is one of strategy not e commerce tactics. And that question begins very simply, What are your clients looking for online? Do you know or are you assuming?


2. Style over content. I didn’t originate it but truly, CONTENT IS KING, repeat CONTENT IS KING. Every top performing site in every single industry has content directly relevant to their client base. If your web experts are showing  you visual designs before addressing strategy, substance or content…start over. Or if you think you’ll have a better website if you have more FLASH or another visual design…start over. The point is that a strategy about your content is fundamental to increasing the performance of your site.


3. Don’t use a Copy Machine. Don’t copy other hotel’s websites and don’t hire web development companies that give you the same site they gave somebody else, unless of course your hotel owner, asset manager or board has asked you to finish in second place. If you are considering web developers or agencies, look at their portfolio, if their portfolio sites all have similar IA (Information Architecture) run away.


4. Go Big. Mad Men is a fictitious television show. In the digital sphere, innovation and great marketing can come from a one person shop, a small firm or a mega agency. Big does not guarantee success. Recently I worked with a client that used the “biggest name in Hospitality Websites”. Sounds good but too bad that firm didn’t know squat about strategy. This is not about buying power, the ability to run focus groups or massive staff. It’s about finding a partner that can understand your clients and what they need in an online experience and creating a strategy that is unique to you…and measurably effective in adding value to your hotel.


5. Non-expert experts. The IT Department is not synonymous with web development or digital strategy. True professionals that they are, they are no more qualified for web strategy than the rooms executive is in designing a Food &Beverage POS system. All geeks are not alike. Beware of advertising agencies masquerading as web development companies, those are not the same. Marketing Services has increasingly become a niche industry, don’t be afraid to mix and match. The bottom line is to drive the value to your hotel.


6. Misunderstanding web metrics or worse, ignoring them. Do you read and actively analyze your metrics to understand what your clients are doing, consuming and most importantly, ignoring on your digital platforms? Do you know the percentage of your visitors that watch your virtual tour? all of it? And if they bounce or exit from that page? Is your web development company digging deep into these metrics or are they touting the growth in visits? Have you asked about your PageRank and how this strategy will raise it?


7. SEM solves everything. Yes indeed, if you sell SEM (Search Marketing). But if you are a hotel marketing chief then you need to be as concerned about quality as quantity. Do you know if more visit traffic has a strong positive correlation to increased engagement, bookings or loyalty? Think of SEM (Marketing) as a tactic but SEO (Optimization) as a strategic outcome. There is a very big and important difference to the value you add to your hotel’s revenue strategy.


8. Digital Marketing = Website. Wrong. Digital marketing is a cobweb of interconnected pieces, in fact I’ve diagrammed this cobweb on the FORMO website. The silk that connects the pieces is your brand positioning. From Facebook to Websites, SEM, SEO, micro-sites, Twitter feeds, advertising splash pages, and YouTube videos ~ these are components of an underlying digital strategy. This strategy should form the basis of  your marketing plan. If it’s not, which in the hospitality industry is very likely, then you need help. Seek expert help before your competitors find it.


I hope this is helpful, my list is not all encompassing and I’m absolutely certain that my peers in the digital sphere can add another copy block, but the point is that a Digital Marketing Strategy is perhaps the single most important factor for any hotel.


If you are the equity fund owner, the General Manager, The Marketing Director or even a bellman, it is the factor that will ultimately add the most value to your hotel. If you don’t believe me, then ask your General Manager how much business they got through Expedia back in the day.



Robert@formosite.com

1. Launches fail. The era of the sales launch weekend was not only short lived but it is effectively over. The over-used strategy was to create hype and a false sense of urgency around buying up front. And while the strategy may have driven initial sales when cheap money was available, that is certainly not the case today. Luring buyers with hyped up launches and attempting to create a false sense of urgency in this market can have the opposite effect. Not only will it fail to lure buyers but it has the potential to create a brand image of conveying misleading information. In other words, the entire market knows that real estate development is at a very low point, using misleading statements about the market that are easily verifiable on Google will only damage the marketing efforts. The developer and brand will not be trusted and sales risk rises in a negative correlation to brand trust.


2. Investor speculators are out of the market – focus on the user. The marketing strategy of a development should be based on the eventual residents. Who are they? What do they want in a development? What elements of their particular lifestyle can you satisfy to the degree that they will buy? The marketing then focuses on those lifestyle elements as the core-messaging strategy. Defining a marketing strategy based on investment potential or speculative buyers, as in the case of vacation or second home property, is a very low return, highly risky strategy. Instead valid marketing strategies focus on the lifestyle interests of buyers. If you find the sweet spot between your brand and their personal passions and needs, the demand curve shifts upward.


3. Digital rules. Every one of your potential buyers will research the development online. They will search competitor properties, evaluate your lifestyle amenities and validate or disprove any claims you make. Consequently digital marketing must be the core around which all of your marketing is based. Chris Anderson, Author of The Long Tail: Why the Future of Business is selling less of more said, “Your brand is what Google says your brand is, not what you say your brand is.” While this generalization highlights the extraordinary influence that search and other digital media have on a brand, I believe that the relevance to real estate developers is to understand the dialogue and the nature of information, then build a strategy to optimize the multitude of touch points across digital networks.


4. Customization and niche marketing. Ask any development marketer about tactics and undoubtedly you’ll hear direct mail. Of course it will be qualified that the response rates are typically 1 – 3%. BS. Response rates on direct mail (printed) are probably closer to 0 than 3% and the response rates on digital (email) are why spammer’s exist, i.e. the response rate is a fraction of a percent. Both tactics can work, if you are prepared to undertake a massive and sustained effort. For example a .01% response rate yields 10 leads from 100,000 people. An alternative strategy is based on highly customized or niche direct marketing tactics that leverage the enormous potential of database technology with variable data publishing (both print and digital). The example I typically use is imagining a typical direct mail campaign of 5000 pieces. Each person gets the same piece except for the mailing label; now imagine 5000 different pieces going to 5000 different people. Each recipient’s piece was made specifically for them based on their preferences, likes and needs embedded in the database. This hybrid can easily yield double-digit response rates. Reliance on “spray and pray” marketing tactics are not only ill-advised in today’s market but can add significant risk to developer absorption assumptions. Variable data with it’s highly customized and niche targeting can reduce risk in absorption and decrease costs over the long run as ROI increases.


These are just four of the laundry list of common mistakes that are at the core of failed marketing strategies. I’ve highlighted just a few of the emerging trends that are powering successful marketing strategies in many diverse sectors. If you are a developer, marketer or funding source the entire list of common mistakes and emerging trends should be at the top of your marketing meeting agenda.


FORMO not only prepares some of the most innovative marketing strategies in the industry today but we also consult to groups looking for expert eyes to ad value to their own strategy.

Excellent blog post on the ineffectiveness of trying to influence customers in the new media. This article is highly consistent with the strategies promulgated to our clients. Old strategies in new media do not work. As Albert Einstein said,

“You cannot solve a problem from the same consciousness that created it. You must learn to see the world anew.”