The business side of woodworking May 2014
Kerry Knudsen

Technology: Art or Kraft?

It should be a surprise to nobody that I am fascinated by the cult of marketing. It’s like watching a train wreck: you know nothing good is happening, but you can’t look away.

Take last Friday’s edition of Ad Age Daily, for example. The topic was performance-based compensation for ad agencies. You and I may have been living on performance-based compensation for decades, but ad agencies abhor it. In Ad Age, Tom Finneran, executive vice president of agency management services for the American Association of Advertising Agencies, says, "There has been a lot of debate and interest in this topic but, the truth of the matter is, we haven't cracked the code on how to do it. It's disappointing to everyone that so-called value-based compensation has not gained greater traction. Everyone would like to get to value-based. Nobody quite knows how to implement it."

I may be way off base, here, but I wonder if the code that needs cracking is to provide some value and then base compensation on it? I know that sounds trite, but something has to crack, and I’m not sure there is a code. There is, however, a long-standing faith in technology as the new means of communication. Finneran was talking about digital.

Have you stopped to ask yourself the meaning of the word technology? Before it was hijacked to mean everything, technology meant the scientific study of the industrial or practical arts. Digital technology was not even a dream at the time, so, when digital technology finally came along nobody knew what it was, had no name to give it and, with a now-endemic disregard for precedent, stole the term and banned its traditional use.

Looked at another way, technology seems to mean taking a human endeavour and applying a tool to it to make it faster. The plow, then, would be a technological advancement over the shovel, which was an advancement over the fingernail, etc.

Interestingly, whenever technology is applied to a human endeavour it standardizes it. In crops, the rows got straighter, the distances between plants got more regular, fertilizer and water application were more even and could be assessed and yields improved. After all, if yields don’t improve, technology makes no sense. Are you listening Tom Finneran?

The digital revolution makes every bit of sense in manufacturing. The more you can standardize, the more you can control. The more you can control, the better you can manage. The better you can manage, the more money you can make. Up to a point.

People don’t actually like standardized products. They like customized products. Of the people reading this note, what percentage owns the same year, model, colour and trim package of car? My guess would be between three and 10. That means over 90 percent of people do not own the same car. It also means if price were the determining factor, everybody would be driving a Lada. Cheap is not value.

Some would argue that, when it comes to a cheap macaroni-and-cheese dinner, over 90 percent of Canadians choose Kraft. However, I checked; Kraft is not the cheapest macaroni-and-cheese dinner, and it is also far from the most expensive.

So why do people choose Kraft? My guess is that it’s a value-based proposition. That is, Kraft Dinner may not be as desirable as a Canadian Living, two-hour, gruyère-and-cheddar offering, and may not be as cheap as other boxed dinners, but it hits a value point people accept. I also guess that much of the value perception is based on advertising in print and television, so people learn and people buy in a value-based compensation model.

Back to the train wreck. Did you know that, on average, trade shows in North America are spending three times as much money per attendee on digital marketing as they are on traditional means? In a value-based compensation model, this would suggest to average trade-show managers they should cut costs and move to efficiency. But no. In absolute paroxysms of faith, they increase their losses in the hope to make it up in volume. (I absolutely never use the word paroxysms — too complicated. However, in this case I defy you to find a better one.)

People don’t like being pestered by e-mail. In fact, on July 1, Canada’s Anti-Spam Legislation (CASL) goes into effect, with penalties of up to $10,000,000 per violation. You can take that as an indicator. In our 2013 Readers’ Survey, 90 percent of you said you do NOT want daily e-mail updates from magazines. And, while this e-letter enjoys a high level of popularity among readers, over 80 percent say the MONTHLY frequency is “just right.”

If I were to follow the e-marketers’ lead, I would ignore the laws you pushed Parliament to pass, ignore the reader surveys and bomb your mailbox daily, then look stupidly in a circle to figure out what the code is.

The error in the agencies’ thinking is that communication is not a technology. Communication is a set of behaviours (some of which incorporate technology) that people use to influence the behaviour of other people. The absolute, mandatory underlying foundation of communication is trust. Even with liars we need to know their addiction to fabrications has to operate within limits. If we cannot depend on anything that is said or written, we cannot cross a street, build a house or sell a product. Everything falls apart. I believe there is even an old story about that written somewhere.

Digital ad agencies seem to have lost track of that. Currently, they appear always to be seeking the “out” clause — the reason the surveys, the standards and the laws don’t apply to them. As the result, they think they are having trouble implementing a value-based compensation structure.

They are not.

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