Casper Berry, The Society for Marketing Professional Service(SMPS) Build Business conference’s final speaker, advocates for intelligent risk-taking. He described his success as a professional poker player before evolving to be a motivational speaker. Poker, he observed, at Las Vegas is the one game where you can win with your skills, as you are playing against other players, not the house (which takes a small fee for each hand played, and doesn’t really care who wins.)
He provided a simple example to explain the point. Say you have an opportunity to win $4,000 on a $400 bet, and the probabilities are that three out of four times, you will lose. Should you bet the hand?
The argument would be that you have effectively a one-in-four chance of winning, so your “potential” would be $1,000. And you have a three-in four chance of losing, so your “loss” would be $300. The differential becomes your “go/no go” analysis — and clearly it makes sense to wager the bet when there is a $700 positive calculation. (In fact you would either win $4,000 or lose all of your $400 — and the latter will probably happen.)
Berry’s point is that we are often far too risk-adverse. If we can gather enough information to make informed decisions about the statistical probability of something working well, then we shouldn’t be afraid to take the risk. But we paralyze ourselves and fail to see/seize these opportunities.
Of course, although he didn’t go directly into this counter-argument, you could argue that we take excessive risks either (a) because we have inaccurate or incomplete information or (b) we fail to appreciate the serious opportunity costs in getting things wrong.
Take for example the decision to enter RFP competitions. There’s an old adage (and it appears to be backed up by plenty of data) that if you don’t have personal relationships or real connections with the organizations issuing the RFP in the months before the opportunity becomes public, you have virtually no chance of succeeding. It doesn’t matter how technically proficient you are — in fact you most likely will get to the worst place possible; the short-list — with virtually no chance of winning (thus dramatically increasing your pursuit costs.)
So there you are, with a constant flow of “opportunities” and the seemingly lucrative chance of winning the big one. And it seems, if you are following Capser Berry’s observations, you should not be afraid to “go for” these opportunities even if you have only a one-in-10 chance of winning. Heck, it doesn’t cost that much to prepare a RFP response, and you might just end up winning the jackpot.
These contradictions are magnified because the best practices argument is you should instead focus on determining your ideal client organization, spend significant effort and time in creating relationship-building opportunities, and hope that somehow down the road you’ll be on the inside to learn about the RFP (and perhaps even be called on to help draft it.)
Wow, that is nebulous and I dare you to figure out a good way to measure your effectiveness in this process especially since the relationship-building requires often extremely time-consuming indirect steps, namely connecting through participation in relevant client-focused associations. While occasionally you can hit an instant jackpot, more likely you will need two to-three years of association engagement and probably several hundred (thousand) hours of voluntary commitment before you know if the entire process is worthwhile. Yes, the data (as Berry indicates) would make the risk worthwhile, but gosh, it can be a long haul to reap the rewards.
Where do you go with this information?
- First, do what you can to develop some basic metrics. One effective metric-building tool will be to set a metric for business development/relationship/marketing time in your internal accounting and project/time calculation systems. This will give you data on how much you are spending on soft as well as hard costs for marketing, and allow you to weigh your risks/rewards more carefully.
- Second, indeed there is nothing wrong with playing the game even though you will lose most of the time IF you have data to validate the probability of success and your likely rewards versus cost for playing.
Yesterday, as I learned some American history (visiting Independence Hall in Philadelphia) in a free — but planned well-in advance tour — I reflected on whether the visit to the SMPS conference had provided a worthy yield on investment.
The answer, in actual measurable business development opportunities — the most practical way to assess Return on Investment (ROI) — No.
Was the trip worthwhile, regardless? Here, I assessed my success in boiling down costs, by staying at an AirBNB place rather than a hotel, using public transport, and minimizing expenses in virtually every practical way without degrading the travel experience. Overall, the four days travel cost about $600 Canadian all in — so obviously this wasn’t a budget-breaker.
Let’s take more risks. But before you dive in the deep end, check your data and consider whether you have the stomach and patience to take the long road to success.
Have you discovered an effective strategy for measuring and managing your marketing risk and ROI? Please share your thoughts by email to firstname.lastname@example.org or as a comment here.