More and more competitive environments; consumers who are more and more prepared and demanding; markets that are progressively more complex... the traditional techniques of old marketing do not measure up to the current challenges posed by scenarios that are difficult to attend to and understand. It is time to take a step forward and lay the foundations of a New Marketing that puts the customer at the center of its activity and combines imagination and scientific knowledge in order to achieve the best results.
The productivity of traditional marketing techniques has not stopped its decline. Recent studies on the impact of television advertisements reveal that advertising only receives a return of 32 cents for every dollar invested. Direct marketing campaigns are receiving fewer and fewer positive responses, and the failure rate of new products is also increasing.
The outlook is, of course, not very encouraging. One study that we divulged in the previous edition of this publication stressed consumer’s saturation, which they consider more and more frequently to be aggression on the part of marketing and advertising[i]. Let’s recall some data: the average consumer is exposed to an average of between 3,500 and 5,000 advertisements per day, and 60% of the public say they feel “bombarded” by marketing and advertising actions.
To this context is added the challenge that marketing directors face in making this a valuable discipline. Some figures that don’t require interpretation: less than 57% of CFO’s believe that investments in marketing serve to support their company’s long-term growth; 27% of financial chiefs consider investments in marketing to be merely a good short-term tactical tool, while 32% say that the marketing budget should be the first to go when the economic situation is adverse[ii].
In 2003, only 20 of the 100 companies quoted in FTSE 100 had a Board of Directors with a member working on marketing and sales tasks. In the same vein, in Fortune’s ranking of the “top 20” of the 500 largest companies in the world, only General Electric had a corporate vice-president of marketing on their board of directors.
It must be recognized that there is a growing reticence towards marketing, which is accused of using extensive resources, saturating consumers, and obtaining diminished results in return. Many companies do not know the real profitability of their products, services, and marketing actions. Some of them are not even capable of rigorously comparing their prices with those of their competition, analyzing the information they receive, or effectively quantifying the impact of their direct marketing and advertising actions.
Recently, in association with Daemon Quest and the HSM Group, Philip Kotler, the father of modern Marketing, visited our country. The prestigious Professor at Kellogg University urgently called for the acceptance, once and for all, of the customer’s growing power. Kotler insists that we must move from "Informational asymmetry" –where all control lies in the hands of the providers-, to "informational democracy", in which information moves fluidly between companies and consumers, and the exchanges between customers and companies are “dialogues, not monologues”. This New Marketing is guided by the maxims of connecting and collaborating with the customer. “We are evolving from a short-sighted, unidirectional marketing, to a new three-dimensional marketing”, Alan Lafley, CEO of Procter&Gamble, recently predicted.
Marketing directors must involve the customer in decision-making. This process must be done in basically two ways: doubling efforts to truly get to know the customer (Marketing Intelligence) and involving the final consumer directly –especially in the case of companies with B2C activities- in the design and positioning of the product or service. Large multinational companies such as Dell, IKEA, or Amazon.com, have understood this strategy perfectly.
The paradigms of New Marketing are burying the famous "five P’s" forever, and substituting them with the “three V’s”. Valued customer + Value proposition + Value Network [iii].
In terms of customer value, a refined segmentation is absolutely key. Does every company know which segments are of most value to them? Regarding the value of the proposition, the company must make crystal-clear the which differentiating element it wants to bring to its product or service proposition. Finally, the value of the company, which Anglo-Saxons refer to more as “value network”, must cause the company to ask itself about its ability to revolutionize its sales and distribution systems, exactly as such successful multinationals as Dell or IKEA have done.
One of the indispensable characteristics of New Marketing is that it should always be conceived, at every stage of its development, from the customer’s point of view, and not from the famous “Five P’s”, variables which are entirely geared towards the seller, the provider.
We marketing directors cannot resign ourselves to a reductionist vision of the market.
Visualizing a much more extensive target is necessary in order to sell more and better. Let’s look at Nike: they have gone from defining themselves as a manufacturer of sports footwear, to talking more generally of the "sports market". Roberto Goizueta, ex-president of Coca-Cola, described it perfectly: "We have a 35% share of the soft-drink market, but only a 3% share of the total beverage market”. This holistic vision is beginning to infiltrate many companies that have understood that they mustn’t measure their successes according to specific segments, but rather according to the entirety of the market. The legendary Jack Welch, ex-president of General Electric, is the best example. He asked all of his Product Managers to redefine their markets in such a way that each would have a 10% share.
Many experts believe that, along with the aforementioned one, there is another vision which is just as valid that advocates super-specialization in niches where there are certain companies that operate as a quasi-monopoly. According to the most ambitious ones, the ideal situation would be a combination of both strategies: becoming a giant as extensive and diversified as Procter&Gamble, and being a "Super-Nicher" in each segment[iv].
Whatever the situation, the customer must be at the center of any strategy that wants to be included under the umbrella of New Marketing. Many companies have understood it that way, launching products that can be “perfected” by the final public. This is the case with M&Ms, which offers its consumers the possibility not only of choosing the color of its chocolate tablets, but deciding it. Or breakfast cereals from any brand that offer infinite variations to satisfy the widest range of customers.
Moreover, it is absolutely necessary to change the messages being sent from companies, and the way in which they are sent. And here again, the best resource is exhaustive market knowledge and...imagination, which some detractors claim is lacking. Experts such as Philip Kotler, Merlin Stone, Peter Sealey or Martha Rogers recommend letting the customer decide, leaving them to manifest their preferences and, most importantly, not overwhelming them.
How to obtain more, and especially better customers? It’s the million dollar question, but there are some clues. We must forget traditional relational marketing and transactional marketing campaigns, and instead think about more collaborative campaigns.
Sponsorships, television appearances, street-level promotions, festivals, celebrity endorsement… A clear example of this new tendency is the recent launching of the BMW Z3, which appeared in the most recent James Bond movie, showed up on the incredibly popular Jay Leno show, had its own DJ on the radio, its own web site… It’s true that not all companies have the same resources, but new channels are turning up to introduce our products and services, which are apparently resoundingly rejected by consumers who are saturated by conventional channels.
Putting into action these key factors, which constitute the paradigms of what we are calling New Marketing, is not possible without an essential ingredient that we have saved for last: intelligence and science. All of the expert recommendations we have tried to list; all of the trendsetter; all of the new suggestions are based on a point without which any advancement is impossible: in-depth, real, true, and rigorous knowledge of customers and markets. It is urgent that we incorporate scientific marketing, capable of giving this material the relevance it deserves. Why do the great majority of financial chiefs base their decisions o score cards, and why do Marketing directors continue to use tools as necessary but insufficient as experience and intuition? Philip Kotler often makes the following equation: "NT+OO = EOO". That is to say, "New Technology + Old Organization = Expensive Old Organization"... put another way: if an organization’s structures are obsolete, new technologies will do nothing but skyrocket costs without increasing efficiency.
Scientific marketing is imperative for any company with the desire to make accurate decisions. Applying Marketing Intelligence strategies allows any company to know about the customer minority that generates 70% of a company’s profits; figuring out how demographic, geographic, and social factors condition the purchasing process; designing more accurate and economical marketing campaigns, calculating how much it costs to incorporate a new customer into the portfolio, predicting which customers have a high probability of moving to the competition… It’s a matter of finding models, conclusions, correlations, patterns, or tendencies that support strategic decision-making and that reinforce marketing, not as the first investment a financial director is willing to eliminate in a time of crisis, but rather as a vital ingredient for the company; an authentic science capable of contributing solidly to any company’s long-term growth.
In the United States, concepts such as Customer Asset Portfolio Management or Customer Equity are becoming more and more common. These concepts recognize the customer’s value as an active ingredient of the company; an ingredient as valuable and quantifiable as any other... In their efforts to claim marketing as a valid asset, certain companies stand out. Some examples: