A formula for marketing effectiveness (T x M = E)

One of the most powerful marketing formulas I’ve been exposed to is T x M = E. Developed by GE Asia-Pacific, this formula aims to balance and improve the process of marketing decision making. It’s also designed to balance the allocation of resources between technical and motivational activity. 
A few implications from the formula are as follows:

1. Technically perfect activity has a limited effect. Consider the perfect new product that fails to capture people’s imagination (10 x 0 = 0).
2. Human motivation has a multiplying effect. Consider the flawed product, that appeals to an underlying human need (2 x 8 = 16).
3. The best marketing effect is achieved by balancing technical expertise and motivational understanding (5 x 5 = 25).

To illustrate this formula, here's a small example from back home in Australia. 

In the late nineties, there used to be a local candy company called Binka’s (manufacturers of jujubes and gummies). Competing against global players like Mars, Nestle and Cadbury, Binka’s were struggling to maintain sales and in real danger of folding.

With their back against the wall, what did they choose to do? They focused their energy on understanding customer motivations. This is what they found:

1. The candy category was primarily about losing control with fun and indulgence.
2. However parents were also attempting to gain control by eliminating bad indulgences.
3. In jujubes or gummies, this meant eliminating bad artificial colors and flavors.

Based on these findings Binka’s made a minor tweak in technical expertise (T) and a major shift in human motivation (M). Without changing their technical product, they used their brand to tap into a deeper motivation - shifting from Binka's to The Natural Confectionery Company:
What was the effect of a minor re-branding based on a deeper understanding of human motivation? Here’s some year-on-year sales data from ACNeilson:
 
- Year 1: Sales volume increased by 84%
- Year 2: Sales volume increased by 262%
- Year 3: Sales volume increased by 540%
- Year 4: Sales volume increased by 866%
- Year 5: Sales volume increased by 976%

7 comments:

Anonymous said...

I think Swatch did the same thing. An inferior product, focused on different motivations.

Beto said...

I just didn't understand why both T and M must form 10 as an add. They don't belong to the same class therefore we might have thought of T as 10 and M as 10, resulting in 100 in the formula - the best of the best world. It's not difficult nowadays to think of a company whose product can be technologically enhanced and aimed by the majority of the target. In a sense, that's what Apple and Google have been doing...

Nick Black said...

Hey Beto,

The total of 10 (or 10 each if we use your idea) represents the sum of all resources an organisation has available in order to try and achieve the effect (E). This may include any number of tangible and intangible resources including capital, time, staff, energy etc.

Ideally an organisation would have the resources available to achieve perfection in technical expertise (T) and motivational understanding (M) – however, in reality this is unlikely. Most projects have finite resources and as such require sacrifices.

This is where the formula kicks in. What do you sacrifice?

Anonymous said...

http://www.cadbury.com/ourbrands/featurebrands/Pages/TheNaturalConfectioneryCompany2.aspx

Anonymous said...

While the idea of a pure scientific approach to effective marketing sounds appealling, its application might be challenging. We can't rule out the fact that T & M theory is plausible.....but another factor like mode of implementation and others might be taken foregranted.

Anonymous said...

The Natural Confectionary Company products also belong to one global company which is Cadbury.

Nick Black said...

Cadbury bought the company in 2003 (following its re-launch success).

Also interesting to note how they kept the brand at ‘arms-length’ from a consumer perspective.