Understanding Marketing Supply Chain Risks

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Understanding Marketing Supply Chain Risks

When we think about our marketing, we think often in terms of what we do, the activities we undertake. The more analytical among us will think about outcomes and measurements – leads we generate, sales we nudge, etc. But not nearly enough of us think about marketing operations from a truly operational perspective.

Why? For the same reason that we tend not to think in terms of data science or statistics; logistics and operations are separate professions. However, if we turn our gaze to those other professions, there may be ideas we can import to improve our marketing substantially.

The Marketing Supply Chain

Let’s think about marketing operationally for a moment. Forget everything about campaigns or persuasion and think about it as though it were a defined, mechanical process like manufacturing.

If marketing were manufacturing, what would be our output? Probably something like marketing qualified leads or a sales mechanism of some kind, be it ecommerce, a sales team, a brick and mortar store. We produce qualified audiences of buyers.

What are our raw materials we need to make this product? Audiences of relevant people. People who could be buyers, but aren’t yet.

From this perspective, our customer is the sales mechanism.

Our marketing budget, then, is what our buyer pays for our product.

And we spend our budget to buy different audiences. Some audiences are bought with our labor and efforts, like audiences we get from organic search. Other audiences are bought outright from different suppliers like ad networks.

Viewed like this, marketing’s supply chain is easy to see. Our suppliers in turn have to get their supplies from others, and our buyers have to convert our audiences into a product like revenue.

So, what’s the point of this thought exercise? By viewing marketing as a supply chain, as a manufacturing process, we can more easily understand the supply chain risks we face.

Marketing Supply Chain Risks

How much of your supply chain is unstable and at risk?

This year we saw no shortage of supply chain disruptions, from the pandemic to a ship getting stuck in the Suez Canal. Businesses that didn’t have backup plans and contingency plans were hit hardest; some went out of business entirely because they had no inventory to work with; they had pivoted to just-in-time manufacturing, and because their supply chain was so brittle, so inflexible, the slightest disruption broke things.

So, look at your supply chain, particularly upstream. How stable is it? Do your suppliers constantly change their prices? If you do any kind of advertising, the answer to that question is an unqualified yes. If you rely on things like organic search, not only is your supply chain unstable, it’s also unpredictable. Your supplier may send you lots of supplies one day and none the next – and there’s no clear way to negotiate better terms.

Downstream, how stable is your supply chain? Does your buyer change what they’re willing to pay? Again, anyone who’s been through marketing budget cuts – which is an organization effectively saying they’re not willing to pay more for the product – has experienced an unstable downstream supply chain. Even demand may change; the customer – our organization – may want to buy less marketing. When the pandemic struck and demand fell off a cliff for many things (and skyrocketed for others), customers spent less, and our organization may simply have lost its ability to pay for our outputs.

So, our supply chain may have substantial risks and instability in it. What’s the solution? How do we create a more stable marketing supply chain?

Building a Better Marketing Supply Chain

As with any supply chain, the answers are straightforward (but not easy). We need diversity and resilience.

Diversity in our supply chain comes from having multiple suppliers, and more reliable suppliers. Just as a manufacturing organization may have multiple partners from which to source parts, we need multiple suppliers and partners to source audiences from.

Run an attribution analysis on your marketing. If all your audience comes from one or two sources – especially sources not under your control, like Google organic search – then you are at risk from supply chain disruption. Strive to have a more balanced portfolio of suppliers. Work to create more relationships with reliable suppliers, which in marketing would be influencers, partnerships, people and organizations who share your audience but are non-competitive. If you had two or three reliable partners who could supply you with audiences, then you could break the habit of needing to rely on, say, paid ads or organic search.

Resilience in our supply chain comes from having inventory. A shock to the system in regular manufacturing means that you draw down what little inventory you have on hand. This is what has broken so much of modern manufacturing today, why shortages are occurring with greater frequency. Because so many manufacturers have so little inventory on hand, even a small supply chain disruption can break an entire business.

From a marketing perspective, if we are simply buying our audiences from paid ads, and a supply chain disruption happens – say, prices double – then our marketing will break. We won’t be able to meet our obligations. How do we avoid that? By having inventory on hand.

How does a marketer have audience inventory on hand? Unlike physical goods which take up space in a warehouse, marketing inventory only has operational costs: maintaining strong relationships with our audience. Providing them constant value. Creating communities. Having powerful owned media properties like an email list. All these are effectively stored inventories of an audience. By building and keeping strong our relationship with our audience, we build our inventory of our own audience. When our buyers ask for more supply, or when our other suppliers fall short, we have inventory to draw down on.

Here’s a starter exercise: take your single largest supplier of audience, be it Facebook ads or Google organic search. If that supplier dried up tomorrow, what would be your fallback plan? How would you compensate for the loss of that supplier? Build plans to deal with scenarios like this.

Build Your Marketing Supply Chain

Your next steps should be clear. First, chart out your existing supply chain. Who are your buyers? What are they willing to pay (i.e. your marketing budget)? Who are your suppliers, and how much do your supplies cost?

Run the aforementioned attribution analysis and understand how at risk your supply chain is from disruption. Build scenarios for disruptions and have plans on hand for when your supply chain breaks. If the pandemic has taught us nothing else, it illustrates our need to plan ahead and be ready for disruptions.

Once you’ve built an understanding of your supply chain, start mitigating risks. Identify new suppliers; build diversity and resilience into your marketing so that disruptions have less of an impact. If you do this well, you’ll be ready for whatever the world throws at you, and may even seize a competitive advantage from other companies who aren’t as well prepared.

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Almost Timely News, 24 October 2021: Marketing Supply Chain, Social Listening, Building Strategy – Christopher S. Penn – Marketing Data Science Keynote Speaker

October 23, 2021

[…] Pop quiz: what’s in your marketing supply chain? […]