The word 'risk' is a synonym for danger. It implies bad things and inspires fear, so it’s not altogether surprising that it is most commonly put into sentences next to words like ‘mitigate’ and ‘averse’.
But that misses the point. Anyone who works intimately with risk will tell you that it is – or at least can be – a good thing. It’s the forerunner to success, and often the only way to make a splash. John A Shedd put it best when he said “A ship is safe in harbour, but that’s not what ships are for”, and he’s as right today as he was then.
The average person will take a risk if the likelihood of reward outweighs that of failure by around 1.7 times, i.e. you’d probably bet £10 on a coin toss if you stood to win an additional £20 by getting heads, maybe not if you only stood to win £15.
Psychological research also shows us that those of us who are more risk averse (those who wouldn’t take the first bet) tend to choke under pressure when faced with the possibility of huge returns, whilst risk takers only crack when huge losses loom. From a business owner’s perspective, those who struggle to deal with potentially hugely lucrative opportunities don’t fit the profile of the dream employee, so a healthy acceptance of risk is something we must all learn to embrace.
Going back to the 1:1.7 risk/reward ratio, an understanding of what constitutes acceptable risk is all very well if you’re an investment banker or an Atlantic City high roller, but it doesn’t translate so well to the intangible.
For marketers, getting a clear handle on what is a good risk to take can be a little less clear; a situation further complicated by the creative nature of marketing. In this context, things that present no risk, by definition have a limited chance of success. Successful marketing is all about making people sit up and take notice, and doing that means working with ideas that are both new and different, two words that traditionally make risk officers flinch.
Handily however, there’s a risk ratio for marketers too (or at least one that works well). It’s called the 70:20:10 ratio and it says that businesses should spend 70% of their time and money on things that will develop their core business. For marketers this is safe, trusted, reliable, non-risky marketing strategies – the kind of stuff marketers do every day. 20% should be spent on things related to that core business – slightly more edgy campaigns and techniques that might not guarantee results, but also don’t stray too far from the beaten track.
The 10% is where the risk comes in, along with the greatest chance of big rewards. For innovators this is all about trying something new. For marketers it’s where the bold, punchy, double-take campaigns spring up. We’re talking Apple’s 1984 Superbowl ad, TNT’s 2012 “push to add drama” stunt, and for an example that’s a little more B2B, our own Google Supermarket C-Suite event this year.
Taking that last example, it quickly becomes clear why risk is so integral to marketing. This brand new concept of a fully immersive pop-up sales event themed around the ‘escape game’ fad pushed the envelope, but in doing so it attracted the attention of some of Google for Work’s hottest prospects, resulting in a 1500% ROI and Google’s quarterly pipeline target being smashed by 313%. Would that have happened with an e-shot?
In marketing it isn’t just a numbers game, and it never could be. Taking risks is a necessary part of all the best campaigns, because without it, you can’t have originality.
If you’re struggling to find those original ideas that define your brand and drive unprecedented sales, then get in touch, or download our No Idea guide, for practical advice and a framework to stress-test your ideas and make sure you are taking the right kind of risk.