I had a lightbulb moment in the car yesterday listening to the Revenue Vitals podcast. It wasn’t a flash of insight so much as a flash of synthesis. I’ve been driving a lot lately, so I also had time to listen to the amazing Acquired podcast, specifically the three-hour episode on Costco. In fact, since I was driving down from Oregon and I loved the material, I listened to it twice.
I won’t attempt to summarize the episode, but my God I love Costco. From its complex and intertwined origins to its values-driven culture to its relentless — and I mean relentless — focus on execution, it’s an operations dream. Set a margin target and then operate as efficiently as humanly possible in order to deliver the lowest prices to your customers. When you get savings, don’t increase the margins, decrease the prices. A small margin on a huge volume is still a huge amount of profit. Goosebumps.
And all of this without even mentioning the hot dog. Go take a long drive and listen to the episode. You’ll love it.
My favorite part of the episode is where they discuss what makes Costco work. In business, we love stories with magic wands. Strategists loves cases where, with enough analysis and thought, you identify one key lever that changes everything. Heck, I think I’m a strategist and I love those stories, too. But the answer to every question in business isn’t always about one thing.
Searching for Costco’s one thing is as fruitful as searching for El Dorado. There isn’t one. It doesn’t exist. Instead, there are 50 little things. That all work together. Excerpt:
I want to say a Jim Sinegal quote, “This isn’t a tricky business. We just tried to sell high quality merchandise at a lower cost than everybody else.” I think it’s hilariously farcical. He’s both right and so cheeky. This is an extremely tricky business. […] We’ve talked about a bunch of it in this episode. It’s the 50 little things that they do that all synchronize with each other that makes it work. You don’t do one of those and it falls apart.
That was a few weeks ago. Yesterday, I was in the car again, listening to the Revenue Vitals episode with Alice de Courcy from Cognism discussing how to scale a demand engine. And a light bulb goes off. The trigger was this conversation with host Chris Walker around minute 25. Quoting Chris:
I seriously want to double click on the point that these non-sexy, quote-unquote boring things are typically the things sitting right in front of your face that will drive the highest impact without a lot of money. I collect feedback after we complete engagements and customers will sometimes say, “I wish you brought a lot more innovative, sexy ideas,” and I say, “well, I brought you the three ideas that are sitting right in front of your face that are going to double your pipeline.”
So I think there’s a balance here between new, sexy things […] and how are we going to convert our website demos by 2% more each year so we can get $6M in additional revenue. The things that are sexy [to me] are the things that drive results.
Great marketing machines are like Costco. There is no magic wand. There is no secret lever. It’s about 50 little things, all working together. And that’s one reason why people have trouble understanding them. This may be obvious, but I’d never previously seen it so clearly. CMOs show the funnel slide in board meetings with stages and conversion rates. But no one really understands the machine. They ask a few random questions, usually about channels. The inevitable attribution conversation follows. You can almost feel them searching for the one thing. (Or the one cock up.) But in this case, there isn’t one.
Alice calls this concept loops. I think of it as concentric circles. You build marketing programs out from a core of ongoing, proven programs to the edges of new, experimental campaigns. That’s why when I present marketing, I like to discuss high-level concepts that people can easily understand. Here are the three big themes for the quarter. Here’s our demandgen machine, shown in concentric circles of provenness. And here’s what it’s producing, ending always with the number of opportunities it produced and at what cost for each.
You want to dive into the machine? We can do that — I love the machine — but that’s like asking what makes Costco work. Let’s schedule a three-hour meeting to discuss it — and I’m not stonewalling here. But if you want to jump into the machine to try and help optimize cost/oppty (which is usually the intent), then you need to understand how it works. Or more cheekily, that’s why you pay me. But if you’re interested, really interested, then let’s jump in.
For more on the notion of a marketing machine and how to build one, see this deck or watch this video. And a quick thank you and shout out to former dbt Labs CMO Janessa Lantz for her kind words on that deck and on Kellblog in general.
