Six Sigma Marketing...Made Simple

Last week I was invited to speak at a new conference on Six Sigma marketing. Over the past couple years I’ve watched this topic heat up, but you know it’s starting to tip when there’s a conference!

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. It’s like modifying the instructions on the back of the shampoo bottle: “Wash, rinse, repeat…but wash 2x more vigorously the second time.”

Six Sigma employs useful tools – such as brainstorming, fishbone, paretos, process maps (with swim lanes). You were probably already using some of these. Other tools, like Design of Experiments with Full Factorials…well, maybe not.. If you understand this stuff, it’s pretty cool…but not critical to implementing Six Sigma marketing.

I think 80% of Six Sigma/BPI value in marketing is simply understanding what you do in marketing, and executing continuous improvement of those processes with measured results.

Here are four principles to apply 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. (See Workback Waterfall). 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 that ne process, and Report results.

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!

Comments

[Eric Reidenbach]

I found this idea to be very interesting. As a practitioner I have develped for my clients a Six Sigma Marketing approach that integrates the fact-based methodology of DMAIC with the process of competitive planning. The goal of SSM is the growth of top line revenues and market share. SSM represents a significant modification and departure for both disciplines. For this to work however requires the substitution of value as the strategic measure in the place of satisfaction. The DEFINE stage focuses on identifying specific product/markets for targeting. MEASURE involves the creation of a competitive value model for each targeted product/market. The model captures the VOM (voice of the market) and drives all subsequent stages. ANALYSIS requires the learning of unique value tools: The Competitive Value Matrix, The Customer Loyalty Matrix and the Competitor Vulnerability Matrix. Taken collectively these tools focus on the three sources of revenue growth cited in a couple of the posts. The IMPROVE stage uses a modified Cause & Effect Matrix that links CTQs (Ys) to specific value streams and processes (Xs) and a Value Mapping approach that allows the isolation and improvement of processes based on the CTQs. Finally, the CONTROL stage has two objectives: to monitor changes made in the IMPROVE stage and to reduce customer defects. Customer defects are defined as the transactions between a company and a customer over the course of the ownership experience. Acheiving Six SIgma customer retention means failing on only 3.4/million transactions.

[Kyle]

Good job on summarizing an idea!

As a direct marketer I fully understand the beauty of "wash, rinse, and repeat", and I just want to point out that continuous improvement, the core idea of 6-sigma marketing, could also undermine innovation. So we have to be careful.

Japanese companies are good examples. Although 6-sigma was first introduced in the U.S., Japan embraced it like nobody else did. The result? Japanese companies were making the world's best-engineered, top quality products while Palm introduced Pilot, Apple introduced iMac (and later iPod), and Dell invented its business model.

There is always a tough balance to strike between improving what's already there and creating something new. So is here in marketing.

That's why I like Nick's comment above because it sort of bridges the paradigms of branding(which has a tradition of trying out new things difficult to measure) and direct marketing (which, in my oppinion, overlooks the value of doing things drastincally new).

[vivek]

it gives me lot of information about six sigma

[Nick Wreden]

Well, I appreciate the blurb, and I totally agree with this post. I would only make two points. First, Six Sigma represents a strategic branding system, along with Balanced Scorecards. Companies need to look at both. They also need to incorporate tactical branding systems, like campaign and lead management.

I would also delve a little deeper into principle #1 above:
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

How you do this is an emerging concept called brand penetration. Long story short, this is essentially, customer, account and product penetration. Branding strategies need to incorporate all three in conjunction with customer planning (targeting limited sales and marketing resources at the customers with the biggest opportunities for brand penetration or other sales growth.)

Nick

[Laura]

there was a great article on the Six Sigma for Marketing at http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&ID=971