Category: B2B marketing

How you pay your employees is part of your marketing budget

So here’s the thought experiment: Say you’re starting a retail business. Doesn’t matter what you’re selling; let’s just assume it’s something really nice, something people really want…the new iThingamabob®, for instance. Okay, now hire some people to sell it for you; pay them minimum wage, make them work long hours without overtime, don’t provide them benefits, treat them like paper towels, and let them know you’ll fire them if they sit down on the job or look at you funny. Now sit back and enjoy how they’ll work their butts off for you to sell your products and give your customers great customer service.

Of course, this is a “straw man” thought experiment. Common sense will tell you they won’t work their butts off and they won’t give your customers great service. They’ll be sullen and won’t care if your customers are happy or not.  They’re probably also exhausted because, in order to make ends meet, you’re probably only one of their employers. And they’ll be out of there the first chance they get to work for anybody who pays them more, or even treats them like human beings. So you’ll have to spend more money on a recruiting firm to keep replacing them. And your unemployment insurance premiums will go up. And you’ll have more shrinkage in inventory (they’ll get their compensation somehow). But hey, you’re at least saving your customers money by being stingy with your help.

Your employee costs should really fall under your marketing budget.

Employee compensation (not to mention simply treating employees like you value them) can actually be measured as an investment. In a recent article in The Atlantic by Sophie Quinton, the case is made that the incredible growth and success of three retailers, CostCo, Trader Joe’s, and QuikTrip, is a direct result of how well the employees of those companies are compensated. While an average checker in the U.S. makes about $20,000 a year (putting her or him below the poverty line), the average checker at these three companies makes double that. Yes, on the books that makes for higher cost of sales. And yet, in spite of those higher costs, those companies boast higher revenues and greater earnings, even during the Great Recession, and even more than low-cost rivals like Wal-Mart. (see MSN Business: Why CostCo is walloping Wal-Mart) Hmmm. Why do you suppose that is?

Could it possibly be because those employers are smart? Apparently they don’t see their employees as consumables, like cleaning supplies and cash register tape. They also realize that the morale and job-satisfaction of their employees has a direct relation to how they relate to their customers, and their customers’  experience shopping there.

In other words, they seem to regard their employees as part of their marketing.

It’s Rule #6: Give Love to Get Love

In our book, The Unbreakable Rules of Marketing, Rule #6 is Give Love to Get Love. It just doesn’t mean loving your customers (and your shareholders), it means loving your staff.

Your employees are the human face of your company. In order to get the very best from them, they have to feel like they are valued. Their morale has to be high. And they have to feel like they are taken care of. This includes not only making sure that their hourly wage is livable, but that they have health and dental, maternity leave if they need it, adequate time off, and an environment that is conducive to productivity.  As CostCo’s CEO, Jim Sinegal once put it, “This is not altruistic, this is good business.” *(See NYT “How CostCo Became the Anti-WalMart”)

As an actual experiment yourself (vs a thought experiment), go into one of these stores and notice the customer service, the attitude of the employees toward you and each other. Ask for help and see what happens. If you don’t have a CostCo, Trader Joe’s or QuikTrip handy, then you must surely have a Starbucks (another successful company that attends to the well-being of its employees). Then go into a store known (fairly or unfairly) for stingy employee compensation, say, oh,  I don’t know–Wal-Mart, for instance–and notice the attitude of their employees.  Again, ask for help and notice the level of enthusiasm. Is it any wonder why CostCo is stealing Wal-Mart’s lunch money…I mean market share?

Okay, that’s fine for retailers, but what about B2B?

Even if you are a B2B business, this Give Love to Get Love rule still applies when it comes to your employees. Countless studies from MIT’s Sloan and other business schools have demonstrated that good employee compensation leads to better products, more solid customer relations, more efficient operations, more productivity, lower turnover, and higher profits. Even while so much manufacturing has gone to low-wage countries like China and India in recent years, the “high-paid” U.S. still remains, per-capita, the most productive in the world, by a wide margin.

When I was just starting in my advertising career, I worked for an agency in L.A., DJMC (Davis Johnson Mogul & Colombatto–now Davis Elen). Even though my gruff boss, Bob “Collie” Colombatto, liked to hear himself say, “I don’t need to thank my employees. I thank them every two weeks in their paychecks,” he did thank us very warmly in those checks. We were extremely well-compensated. We had luxurious benefits (by today’s tightwad standards)–full medical and dental. And the company was overly generous with its holiday bonuses. As a result we all worked like maniacs for those guys. During the six years I was there, we in the creative department were not only raking in the meaningless industry awards, the company grew over 500% in billings to $100 million. So all that butt-reduction work and overly generous compensation was paying off–and the Bobs (Colombatto and Davis) were generous in sharing the profits with their employees. We would have done anything for those two, and they knew it.

Years later, when some colleagues and I started our own agency, we were resolved to create the kind of company we ourselves would want to work for. In my mind that model was DJMC. So we paid our staff well. Though we were a small company and weren’t mandated to do so by state law, we provided healthy benefits (medical and dental). We were generous with holiday bonuses. We were generous, too, with our employee policies. And when the company took a systemic hit from the economy, we, the owners, took the hit first in our own compensation rather than take it out of our employees.  The result was dramatic growth and profitability, an industry low in employee turnover, and extremely efficient operational costs. Our employees showed us their love by working like maniacs and bending over backwards for our clients. And our clients, in turn,  loved us by hiring us like maniacs. It was a maniac’s love fest all around.

It cost something. But it made us more.

It’s not an expense; it’s an investment.

I’ve said this before. And I’ll keep saying it: What you spend on marketing is not an expense (in spite of what your accountant may tell you), it’s an investment. You should expect a return on what you invest in marketing. But I’ll go further with this and state, categorically, that what you spend on your employees is also a marketing investment. Their enthusiasm to work their butts off for you, to represent you to your customers, either in the quality of the products they make or in the service they provide, will pay you back in direct proportion to what you invest in them. So invest generously. Then look for the return.

We all see what we want to see

Math won’t help you, little fella.


Last week there was a sad story in the New York Times about a respected particle physicist at the University of North Carolina, Paul Frampton, a PhD from Oxford, falling for one of the oldest scams in the book. He’s now languishing in an Argentine prison for drug smuggling (actually, he’s just under house arrest at a friend’s). You have to read the original story for details (the Physicist, the Bikini Model, and the Suitcase Full of Trouble). But the gist of it is, here was this brilliant scientist, undoubtedly a measurable genius, who believed he was having an online love affair with a gorgeous, European model forty years his junior. They never met in person or spoke on the phone; only chatted online or texted. When she wanted to meet him in Bolivia, of all places (she was going to be on a photoshoot in La Paz), he leaped at the chance. And then, after he flew to La Paz to meet her, she texted him that her plans got changed (OMG) but could he pick up a suitcase of hers at the hotel and meet her in Brussels, flying through Argentina? She said an e-ticket was waiting for him at his connection in Buenos Aires and…


How could a Beautiful Mind like this fall for such a blatant, old scam? Of course, any half-wit could see he was being set up as a drug mule. And of course, the Argentine authorities saw it as well. That’s why they were waiting for him when he landed in BA. But how could he not see what was happening? Even his friends were urgently shaking his shoulders that this was a scam; that he was being “catfished.”  But he wouldn’t believe it. Oh no, this twenty-something, gorgeous Czech model he’d met through online dating was madly in love with a 68-year-old particle physics geek. Why isn’t that plausible? What’s not to trust?

It’s because, genius or no, Professor Frampton was subject to the same tendency we all have when it comes to judgment; we see what we want to see. Don’t confuse him (or us) with the facts. It’s almost like we want to be rolled. So thousands of otherwise perfectly intelligent people every year still fall for Nigerian 419 scams. And college football players have what they think are real, online love affairs with young women they never met. And, of course, there’s snake oil we buy from DRTV ads, promising that our “Low T” can be cured by smearing this gunk on our armpit (just don’t get near any women or children).


Our hapless, lonely professor even used his prowess at math to “prove” he was right about his love object. This was the same person who had developed an algorithm to determine, to five standard deviations of certainty (99.99994%), that the experiments being conducted on the Large Hadron Collider were, in fact, seeing evidence of the Higgs Boson. He used (or misused) the same algorithm to determine that the probability that Ms. Czech Republic 2010 was in love with him had the same level of certainty. I’m not kidding.

Guess what. Math can’t prove everything. I got a C+ in Statistics 312 in college and I could have told him that.


In our book, The Unbreakable Rules of Marketing (now on Amazon! shameless plug), this almost self-willed blindness falls under Rule #2: Perception is Reality. People believe what they want to believe, and they see the world the way they want to see it. They’ll even select data and facts to fit their belief. This is a well-researched and proven behavioral phenomenon called Confirmation Bias. And it can be used for good. Or –as with the Professor and the Model–evil.

In marketing you obey this rule to cultivate loyalty in your customers, recognizing what they want to believe and gently reinforcing it or nudging them away from it. The application of the rule doesn’t itself constitute a scam, because you can (and should) use it to persuade people to believe beneficial things, or genuinely improve their lives. But you can use it to snooker people, too. Even PhDs.

The Second Unbreakable Rule is ethically neutral. It just describes how confirmation bias applies to marketing.


The educational level or IQ of the person you’re cultivating doesn’t have any bearing on whether they can be influenced or not. In fact, I would contend, through personal experience, that the higher the degree, the more prone they are to manipulation…er…persuasion. That’s because, besides hobbled like the rest of us with confirmation bias (seeing what we want to see), they also suffer from over-confidence in their perspicacity. I call it the Rock Star syndrome. Success in one, narrow field leads to the self-delusion that you are an expert in all fields. Just look at me.

I’ve sat in on marketing focus groups with PhDs, listening to them describe themselves as being unswayed by the blandishments of brands; they pick their instruments based on hard, cold data. Then we all watched them get emotional about why they hated (not just didn’t prefer–hated) this brand of scientific instrument over another. When presented with the cold, hard data about the brands they favored or disdained, they said they didn’t believe it. Or, they picked out the data that conformed to their emotional prejudices. We all do.

So I love advertising to scientists, bless their hearts. Wrapped up in their intellectual hubris, they tend to be some of the more persuadable people because they are completely unaware of the role (or, in the case of poor Prof. Frampton, the roll) of emotion in their decision-making. They tend to think they are all Mr. Spock.

I know a sales-engineer with one of my hi-tech, B2B clients who describes a technique he uses called “The Illusion of Data.” Stick a chart or a graph in your ad, load it with irrelevant numbers like Throughput Rates, Torque, AXT (Alien Crosstalk–this is a real measurement), or Noodles per Furlong, and engineers won’t even look carefully at it; they’ll just assume that, “OMG! Look at the stats on that baby!”

I would never do such a cynical ploy, though. No. I respect the intelligence of my audience.

Wanna be my girlfriend?