Marketing Bullseye 2: Think Six Sigma
Six Sigma has migrated from manufacturing (to reduce COGS) to the front office (to reduce marketing opex). Also called Business Process Improvement (BPI), it’s the ‘new thing’ that promises to improve the bottom line in a business world where margins are going down yet marketing costs are going up. But BPI can also, and should, improve revenue and margin.
The concept behind Six Sigma/BPI marketing is not really new, especially if you’re a direct marketer who is used to measuring everything you do and improving your campaigns. Also, I don’t think it’s as complicated as some might think.
The back of your shampoo bottle suggests the process: Wash, Rinse, Repeat. How would you change that process if I asked you to wash in 1/2 the time and rinse with 1/2 the water, and get your head clean without repeating. I’d like to say I’ve figured out how to improve the process, but with so little hair now, I don’t think I have to!
Six Sigma employs useful tools, such as brainstorming, fishbone, paretos, process maps (with swim lanes!). You were probably already using some of these. How about Design of Experiments with Full Factorials! Oooh, fun! This can actually be pretty cool tools, which I used in database marketing segmentation. But they are not critical for understanding or using Six Sigma principles to hit the marketing bullseye.
I think 80% of Six Sigma/BPI value in marketing is simply understanding the measures of your marketing process and executing continuous improvement projects on processes that effect these measures.
I got my Six Sigma "Green Belt" at Dell a long time ago — which means I improved a process using Six Sigma tools and measured significant cost savings / margin impact. In all my Six Sigma experience the two most important concepts changed my way of thinking: DMAIC Define, Measure, Analyze, Improve, Control.
This is the basic process for improving process…essentially the Six Sigma Methodology. The tools you use help you in these steps. Most of the marketing meetings I attend go straight to Improve, and even forget Control once something is improved. The problem when we skip Define, Measure and Analyze is we could implement the wrong strategy or process to improve. Looking through the lens of DMAIC changed the way you think about any marketing problem or improvement.
This is a simple formula that captures the idea behind process improvement, and the importance of measurement. Y equals the output (or impact, results of your marketing) and x are the inputs (measurements). The function on x are those processes that effect the inputs. Essentially, if you can measure the inputs, you can improve them…and therefore improve the output. Resulting in more efficient, highly effective marketing.
Here are four steps to applying Six Sigma, or business process improvement, to the marketing organization:
1. First, realize there are three sources of revenue for your company:
a. Adding new customers b. Getting existing customers buying more c. Getting existing customers buying more frequently
2. Identify the processes you do within your company to effect each of the above sources of revenue. Keep an eye out… every day employees make a choice to start a new process vs. improve an existing one.
3. Break down these processes into steps.. Identify the variables that effect the quality (output) of each step. In marketing, sometime quality is a subjective thing…but if you’re measuring your marketing results for each step and the end result (ex: response rate), than quality can be quantified.
4. Now, choose a problem or process to improve and go at it using the DMAICR framework. “Define” and “Measure” the problem or process, “Analyze” why it’s performing poorly, “Improve” it based on your analysis, and “Control” the process to sustain results.
Here’s an example:
Why do emails drive low margin sales compared to average web site visitors? You may reduce the definition of problem around your product selection.
So you Define that process to improve (how you select products) and measure a baseline of results (margin per email).
Analyze opportunities for improvement…i.e. AB split testing or previous email results.
Improve your email process…perhaps a weighted model of margin x response rate to maximize margin.
And finally, put Controls in place to sustain tne process…create weekly dashboard and workflow tracking for email production and testing.
There…you’ve done DMAICR…Define, Measure Analyze, Improve, Control, & Report.
Now do it again for something else in marketing. And again. Simple as wash, rinse, repeat!