Innovation AND Optimization: The Keys to Exponential Growth

Nearly everyone believes in the importance of marketing and fundraising optimization strategies. You know: Digital marketing. Direct response. Platforms and channels. Segments and funnels. Social media. Pixels. Ads. AI. Video. Images. Copy. Offers. Targeting models. All that good stuff.

When we argue about these things, we’re mainly arguing about which strategies and tactics are most important and how to best employ them.

Where we go somewhat wrong is when we think of these, as we commonly do, as the boundary definitions of “marketing.” In reality, these make up only one element of our marketing mix: promotion. And it’s an important part of marketing. When great audience and product strategies start pushing a company or nonprofit up the growth curve, it’s smart promotion that comes along to push results up to a higher and longer peak.

But eventually, an organization will pass that peak. If that organization has become over-reliant upon promotion strategies — usually because of their predictability and thus comparative comfort — then it will likely be ill-prepared to ascend a new growth curve.

As may be true for you, there are indelible memories from my own career that illustrate this truth. Two stand out.

The first was in my third year at Circuit City headquarters in Richmond, Virginia. Fresh off of being heralded in Jim Collins’ 2001 bestseller Good To Great, Circuit City — though optimistic — was starting to show some wear by 2003 in its simultaneous battles with Best Buy and Walmart. Though their $10 billion in sales would increase to $12 billion by 2007, the store-level and corporate profitability metrics told a clear story of rapidly slowing growth that needed strategic innovation in audience focus, as well as in product or service experience.

From my perch as manager of targeted marketing, leading a marketing analytics team, I couldn’t see it. To me, the young gun with the freshly minted MBA, sophisticated data-driven solutions were always the answer. As I said often, and not without some arrogance, we didn’t “need to guess what was happening with our marketing efforts, we could know.

Gina, the consultant I most admired at the time, and a partner in the analytics firm we used for our most advanced work, saw things differently. “I know what you mean, Allen,” she said in her wonderful Russian accent, “but you know these strategies mainly provide results at the edges. The big gains — the really explosive growth — is driven by the people with big vision who can create new things that people love.”

Gina was right. Our new targeted marketing operation, while exceptionally high-speed and wildly profitable, was generating tens of millions of predictable revenue … in a company that needed to compete for billions. We were extending the current growth curve, but we weren’t creating a new one. Optimization can’t do that.

A short while later, a select group of us from the marketing division — now in deep concern over the apparent business crisis — met offsite with an innovation facilitator for a few days to plot out a new strategy. We arrived at a new audience development strategy: Zoomers. We identified Zoomers as the huge sector of wealthy Boomers who, while not the technophiles who enjoy researching the latest consumer electronics and figuring out its uses for themselves, had a great appetite for buying and enjoying new technology, if someone held their hand through the purchase and setup process.

Circuit City, with its Boomer brand, calming store layout and exceptionally knowledgeable (and accordantly well-compensated) salespeople was ideal for owning the Zoomer business.

This was an amazing consumer audience — the best a consumer electronics company could hope for — and a new audience strategy for the ages.

But the C-Suite wouldn’t go for it. They believed in merchandising and real estate, not marketing.

The result is quickly understood by searching for your nearest Circuit City.

One would think I would have learned the lesson of the limitations of optimization strategies. One would be wrong.

Several years later, as leader of mass donor fundraising at a medium-sized ($50MM) national ministry, I found myself in a similar situation. Just two years removed from high-fives all around for reaching an all-time revenue high, we were in decline, and all the most advanced, empirical data-driven strategies and tactics weren’t helping.

The first solution? More analytically driven optimization strategies! Better statistical models. More sophisticated segmentation. Longitudinal multivariate experiments. More offer and messaging tests. Didn’t help.

The next solution? Research … I was sure the solution was research. Super-de-duper sophisticated research. That’s how we’ll learn what the problem is — that’s the ticket!

And, look, we did learn some things. We learned about our audience. That’s what quantitative research does well.

The problem was that we weren’t doing what we should have done to know our audience as real, live humans. To know what they loved but didn’t even know they loved. To grasp what would have fired their imaginations, versus that which was merely nice to have.

We humans are tricky. We will love something — a product, a service, a community — for a while. But, eventually, a human grows tired of what an organization is offering. And what ministries offer — what our “product” is at its core (if I might use the contextually crass marketing term for discussion purposes) — is an experience. And shouldn’t ministries, inherently called to provide people with an encounter with Christ, be able to provide the greatest experiences of all?

The problem was that our ministry had done no work at all, for many years, on providing donors with an experience with the ministry that would excite them. In that way, we weren’t focused at all on our “product.”

In the “4 Ps of marketing” parlance, my doubling and tripling down on optimization was all a misguided attempt to solve a product problem with promotion solutions.

That doesn’t work.

So, what does work?

That’s an important question, because every nonprofit is somewhere on their growth curve. And, wherever they are, they need to be preparing their innovation portfolio to become their new growth strategies, when the current strategic growth portfolio peters out (as it most certainly will).

On Thursday, September 26, at 9 a.m. PT / 12 p.m. ET, we’ll be talking about why every ministry should be developing new audience and new experience strategies to fuel growth, as well as the methodologies used in developing them. To be clear, this web briefing isn’t a dream about the future. It’s about real strategies we are using right now with awesome clients to help them grow. Stay tuned for more information to come!