Negative Cost Marketing

Posted on Saturday 2 July 2011

Negative Cost Marketing (NCM) is all about getting other people to pay some or all of your marketing costs, in effect, turning your marketing function from a cost centre into a profit centre.

NCM is a specific form of Guerrilla Marketing*. The 1964 Tribute Band (Beatles) does this with an ingenious promotion during concerts. They encourage their audience to get out their cell phones to call a friend to let them listen to their next tune.

(* More on Guerrilla Marketing Basics: http://www.eqjournal.org/?p=643.)

I estimated that their cost for reaching out to 31,500 people during a typical year for them is a negative $6 million. (For more info, see: 1964 The Tribute Band and Guerrilla Marketing, http://www.eqjournal.org/?p=383.)

Disney is doing something similar with their 22 ESL (English as a Second Language) schools in China. Essentially, Chinese parents are paying Disney to market Disney products and services (e.g., Shanghai Disney Resort opens in about five years) to their kids. No doubt they are also learning some English along the way too.

Disney does not break out results for Disney English in China but they do say it’s profitable (Bloomberg BW, June 19, 2011).

Another example closer to home is the manner in which Tony Greco and Greco Lean and Fit Centres use their charitable foundation (The Foundation to Fight Obesity in Children) as a stalking horse* for their fitness centres.

(* For more on stalking horse marketing, please see: http://www.eqjournal.org/?p=1541.)

Involvement in the Foundation by kids and their parents to fight childhood obesity almost certainly leads to more adult participation in Greco fitness programs—either by the kids when they grow up or by their parents dealing with fitness issues themselves. The amount of earned media Tony receives for his Foundation is remarkable.

The Foundation has its own BOD, financial statements and fundraising objectives. It operates separately from Tony’s for-profit Lean and Fit Centres yet it undoubtedly raises Tony’s profile and serves a broader marketing purpose at no cost to Lean and Fit.

I have always been amazed at how many people today are prepared to wear advertising. Whether they are sporting Under Armor, Calvin Klein or their favourite sports team’s apparel, people are essentially paying these for-profit businesses for the privilege of advertising their brands.

There are places where you can look for people, groups or corporations willing to pay some of your marketing costs: you just need to identify those who have a special affinity for your products and services or those whose clients benefit from using your products or services.

Charities and not-for-profits know how to exploit these relationships. They are learning to sell to their partners not so much on the basis of CSR (Corporate Social Responsibility) but on hard-headed concepts like, by supporting our cause, you will drive more customers to your locations…

One of the local charities I am very fond of is Christie Lake Kids who do wonderful things for children in deep distress. It costs about $900 to send a kid to Christie Lake Camp for ten days and all but $20 of this is funded by partners. (20 bucks is all the kids, their parent, parents or guardian can afford to contribute.)

How would it be if we could find a local retail partner that would donate 1 cent from every dollar of sales for, say, a two week period every year to fund kids going to camp? Do you think the retail partner would benefit from a sales surge in this annual fortnight-long promotion? I do.

So while the cost of marketing for CLK is negative, the cost to the retail partner might also be negative (that is the 1% of sales going to CLK might be offset by the margin on the increase in sales during the period of the promotion). So we might be able to combine Negative Cost Marketing (for CLK) with Negative Cost Selling (by CLK to its retail partner), a happy condition wouldn’t you agree?

(For more on Negative Cost Selling, please refer to: http://www.eqjournal.org/?p=732, http://www.eqjournal.org/?p=713 and http://www.eqjournal.org/?p=482.)

Apple has leveraged its brand marketing efforts with both types of NCM: people with an affinity for Apple products are unpaid brand ambassadors and businesses that exist within the Apple ecosystem like, say, their app developer community, do much of the heavy lifting when it comes to selling, for example, the iPhone.

Facebook also uses some NCM although I am not sure if it is by accident, design or discovery. Zynga (maker of the Farmville game among others), which filed for an IPO this month, exists almost entirely within the Facebook community and serves to hugely increase user engagement with the FB platform, a type of marketing that FB probably could not achieve on its own.

This doesn’t cost FB a thing.

It doesn’t matter how you get to NCM, by accident, design or discovery. Many things in the field of entrepreneurship are discovered and cannot be planned or designed in advance which is one reason why entrepreneurs constantly seem to be able to pull rabbits out of their hats or escape ‘certain’ disaster more often than Flash Gordon.

It is also why you need to actually launch your enterprise, force yourself out of the nest, rely on using your own wings to fly: you cannot anticipate, in advance, no matter how carefully you plan matters, where you will end up in three months, six months or three years. You can only do it, by doing it.

NCM requires you to ask: “Who benefits from my efforts?” When you discover that, ask them to pay for part of your marketing program or to become a sponsor for what you do. Even for-profit businesses can find sponsors*.

(* Please refer to: How to Get Sponsors for Practically Anything, http://www.eqjournal.org/?p=1649.)

In any event, if you are going into marketing as a career or, as an intrapreneur/product manager, you are responsible for launching a new service or building a new division at an existing firm or, as an entrepreneur, you are launching a new enterprise, your job security/your next promotion/your business success could be enhanced if you can turn your marketing costs neutral or, quite possibly, negative.

Prof Bruce

1 Comment for 'Negative Cost Marketing'

    November 10, 2011 | 7:09 pm

    I find the talk about EQ Journal » Negative Cost Marketing all a bit meaningless. Governments and central banks round the world have done everything they can to preserve failed financial institutions, and lending that was imprudent from the start. We will not have a proper sustainable recovery without an end to deficit spending and lots of financial institutions going bust. I find discussion about mortgage finance and home loans a bit meaningless. I also think the home prices have to fall a lot even now. I mean why would you want to own a home in Spain or France? Isn’t it much more cost effective to rent? Regards, Lindsay Witt

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