More and more competitive environments; consumers that are more and more prepared and demanding; progressively more complex markets…Traditional techniques of old Marketing are not up to the new challenges presented by scenarios that are difficult to understand and attend to. It is time to take a step forward and lay the foundations of a New Marketing, one that places the customer at the center of its activity and combines imagination with scientific knowledge in order to achieve the best results and contribute to companies’ sustained growth.
Intuition and experience are no longer sufficient as basic tools for strategic decision-making. Marketing and Sales directors must aspire to have the most valuable and rigorous information, as well as defending Marketing as an absolutely indispensable asset for the company’s competitiveness. Unfortunately, it isn’t always that way. Productivity of traditional Marketing techniques continues to fall. Recent studies on the impact of television advertisements in the United States reveal that advertising only earns a return of 32 cents for each dollar invested. A study recently undertaken by Deutsche Bank revealed that only 18% of advertising campaigns achieve a positive ROI in the short-term. Similarly, traditional direct Marketing campaigns achieve increasingly lower results, and the failure rate in new product launches also increases.
The outlook is certainly not very encouraging. Recent data reveals the saturation that consumers feel, faced with what they increasingly see as an aggression on the part of Marketing and advertising. Stopping to look at some figures can be insightful: the average consumer is exposed to an average of between 3,500 and 5,000 advertisements per day. Close to 60% of the public claim they feel “bombarded” by Marketing and advertising actions. The majority of the audiences these campaigns are aimed at admit paying less and less attention to them. Only 36% declare that they pay complete attention to television advertisements. Among those that say they don’t pay attention, 79% say they “channel surf” during commercial breaks, while 53% lower the volume of the television. 65% percent of those surveyed defend greater limits on Marketing and advertising, and an alarming 14% would welcome a complete prohibition. 70% of those surveyed say they are willing to buy products that protect against these advertising “aggressions”, and a very worrisome 54% avoid purchasing products and services that have made them feel “overwhelmed” with advertising.
To this relatively hostile market context – the Consumer Confidence Rate in the United States is at quite low levels in certain sectors - is added the challenge that Marketing directors have yet to face in order to grant this discipline the real value it deserves. Marketing’s credibility has gradually been decreasing not only among consumers, but also within the companies themselves. Some data do not even require interpretation: less than 57% of financial directors believe that investments in Marketing help to support the long-term growth of their companies; more frustrating data: 27% of CFO’s consider investments in Marketing only as a good short-term tactical tool; and one more figure that won’t surprise many people: 32% of financial directors say that the Marketing budget must be the first one to go when the economic context becomes adverse.
In the 2003 financial year, only 20 of the 100 companies quoted on the selective FTSE 100 stock market in London had a member with experience in Marketing and sales on their Board of Advisors. Similarly in 2003, in the top 20 of the ranking of the 500 greatest companies in the world by the prestigious publication Fortune, only General Electric had a corporate vice-president for Marketing on their Board of Advisors. The conclusion reached from all these figures is, at the very least, worrisome: Marketing is still on the periphery of the strategic decision-making process.
Without a doubt, we must admit that there is a growing trend that is very critical of Marketing as a discipline, which is frequently accused of employing very extensive resources, saturating consumers, and in return obtaining progressively diminishing results. The basic question is: why? We must admit that there is still much work to be done. The majority of companies in our environment–some of a size and reputation that would surprise many– don’t know the profitability of their products, services, and Marketing actions in-depth. Many of them are not even capable of rigorously comparing their prices with those of the competition, analyzing the information they receive and measuring distribution costs, effectively quantifying the impact of their direct Marketing and advertising actions, optimizing their sales force’s efficiency, and controlling the entirety of the machinery that moves the sales and Marketing departments.
Many of these criticisms are true, and old techniques of traditional Marketing must look for new paradigms that open innovative paths generate a new climate of understanding with markets and consumers, and above all, that maximize results and grant this matter the real value it brings to the company.
The prestigious professor at Kellogg University, Philip Kotler, considered unanimously to be the “father” of modern Marketing, asserts that one of the keys to the strategic turn Marketing must take is putting the customer at the center of all plans. Kotler contends that we must pass from “information asymmetry” –where all the control resides in the hands of the providers-, to “information democracy”, in which information moves freely between companies and consumers; the latter are perfectly up to speed with what’s cooking in the market; exchanges between consumers and companies are “dialogues, not monologues”, and the New Marketing is guided by the maxims of “connecting and collaborating” with the customer. “Consumers want to have conversations with their providers, they want to have a dialogue, to participate and control, even if it’s only partially. We are evolving from a short-sighted, unidirectional Marketing, to a new way of Marketing in three dimensions”, sums up Alan Lafley, CEO de Procter&Gamble. “Information asymmetry”, as described by Kotler, still prevails in the majority of companies and markets. Information is provided little by little, customers feel frustrated by the scarce power they are given, and companies are bent on a market vision of “order and control”. These types of errors in strategic management, based on ignorance of the customer’s growing power, have cost many companies dearly. Let’s not forget that the recommending power of the consumer is greater and greater, and that criticisms of a product, service, or provider are usually much more persuasive than compliments. We live in an environment in which word of mouth is beginning to have much less influence than “word of mouse”. A quick look at the Internet shows the detracting power the new universe of customers possesses, which orbits around the Internet.
Marketing directors must involve the customer much more in their decision-making process, if they want to increase their success rate. This process of involvement must be done basically in two ways: redoubling the resources used in really getting to know the customer (customer intelligence) and directly involving – especially in the case of companies with B2C activities – the final customer in the product or service’s design and positioning. Certain multinational companies have understood this strategy perfectly, such as Dell (which “invites” its customers to participate, via Internet, in the design of their PCs), Ikea, or Amazon.com, which promotes its customer’s reference powers by encouraging them to recommend books to other customers...
The New Marketing paradigms without a doubt give increasingly less value to the famous “5 P’s” and substitutes them with the “3 V’s”, as Phillip Kotler proposes. Customer Value, Value of the proposal, Value network. In terms of customer value, a finely tuned segmentation is absolutely key. Do all companies clearly know what their highest value customer segments are? In terms of the value of the proposal, the company must know crystal-clearly how much added value they want to bring to its product or service offer: If it won’t mean clear benefits or cost reduction…perhaps the product or service is not good enough. Finally, the value network must make the company question its abilities to revolutionize their sales and distribution systems, as such successful multinationals as Dell or Ikea have done.
Identifying potential customer’s value expectations; selecting the values in which our company is willing to compete; rigorously analyzing the ability of our company to respond to these value demands; communicating and accurately selling these values in the messages launched onto the market, and finally, offering the promised value and constantly improving the company’s processes of value generation and measurement are five key steps to adapting to the new challenges of increasingly complex environments…
One of the indispensable characteristics of New Marketing is that it should always, in every phase of its development, be conceived from the customer’s point of view. The company focus is over. Going back to the traditional “Five P’s”, let’s remember that they are variables that are completely focused on the seller, the provider of products and services. They are not about customer variables, as the new Marketing rules demand. There is also the need to offer overall solutions on the market, not simply products. This strategic turn was just successfully developed, for example, by Scania, one of the world leaders in truck manufacturing, who changed their focus from the product –“the vehicles”- in order to offer solutions – “the best guarantees on the market”-.
The Ten Commandments of New Marketing
Marketing directors cannot conform to the reductionist vision of the market we have experienced up until now. Visualizing a more extensive market is one absolute demand in order to sell more and better. Let’s look at the almighty Nike: it has gone from defining itself as a sports shoe manufacturer, to talking more generically of the “sports market”. It’s what Roberto Goizueta, ex-president of Coca Cola, described perfectly with the following phrase: “Coca Cola has a 35% percent share of the soft drink market, but only 3% of the total drinks market”. We live in an increasingly globalized environment, where localist or restrictive focuses cannot keep up with winning strategies. That “extended” vision of the market that Roberto Goizueta mentioned is beginning to impregnate 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.
In its growth strategy for the coming years, Citicorp has admitted that it has a moderate share of the financial market in general, which includes much more than merely the banking sector, in which the entity operates. The best example is The all-powerful Jack Welch, ex-president of General Electric, who asked all of his Product Managers to redefine their markets, in such a way that they had a 10% share in each of them. These are examples of how to aim high…and wide.
Numerous experts believe that together with the expansion of focuses and markets, there is another, equally valid vision that defends super-specialization in niches where there are specific companies that operate as quasi-monopolies. The ideal situation, according to the most ambitious ones, would be a combination of both strategies. That is to say, becoming a giant as extensive and diversified as Procter&Gamble, and being able to be a “super-nicher” in each segment you operate in.
However it turns out, the customer must be at the center of any strategy that wants to fall under the New Marketing umbrella. Many companies have understood this and have begun a pro-active dialogue with the consumer that is bringing them attractive results. Many companies launch products that can be “perfected” for the final consumer. This is the case with M&Ms, who offers its consumers the possibility not only of choosing, but also deciding the color of the chocolate bits that have made the brand famous. Breakfast cereals are another example; every brand offers various possibilities, impossible to count, in order to satisfy the most varied consumers. The company approaches the customer…or the customer approaches the company; and the second option is always the preferred way to favor a smooth and permanent exchange.
This attitude is key in establishing the culture of “informational democracy” that Philip Kotler speaks of. Large groups such as General Motors have understood it in this way, including “Auto Choice Advisory” on their web site. The same is true for the Customer Forums created by Cisco so that their customers can express their needs and exchange opinions about the solutions the company offers.
Together with the new focuses that must reign in the new organizational cultures, it is absolutely necessary to change the messages being sent from the companies into the market, and also the way in which these messages are being launched. And here again, the best resource is exhaustive knowledge of real and potential customers,as well as... imagination, which some detractors claim is scarce. Experts like Kotler, Merlin Stone, Kotler, Merlin Stone, Peter Sealey or Martha Rogers recommend letting the consumer choose; allowing them to express their preferences, and above all, not overwhelming them. In Marketing and advertising campaigns, another increasingly effective trend is to offer very practical and informative contents in each action, or other added values such as leisure and entertainment.
How to get more, and above all, better customers? That’s the million dollar question, but there are clues. Let’s forget traditional relational and transactional Marketing campaigns, and let’s think about more collaborative campaigns. Sponsorships, television appearances on programs with large audiences, street-level promotions, festivals, celebrities…One clear example of this new trend is the launching of the BMW Z3, which was able to appear as just another star in the last edition of James Bond, and which burst on the scene on the very famous Jay Leno Show on American television, had its own DJ program on the radio, its own web page…
Evolution of Marketing Strategies
| Transactional Marketing | Relational Marketing | Collaborative Marketing | |
| Period | 1950’s | 1980’s | Since 2000 |
| Value Vision | The company limits itself to offering |
The relationship with the customer extends to the long-term |
Creation of common experiences |
| Market Vision | A place where supply and demand are exchanged |
A place where several offers converge | Forum where value is created through dialogue |
| Role of Customer | Passive buyers To whom is offered |
Relationship portfolio that that must be cultivated |
Demanding and active Consumers that participate in the creation of value |
| Role of Company | Defining and creating value for the customer |
Attract, increase and retain the most loyal and profitable customers |
Involve the customers In the definition and creation of value |
| Interaction with the customer | Surveys to explore needs and obtain feed-back |
Observe customers and adapt to their changes |
Active dialogue with customers and communities |
It’s true that not all companies have the same means or resources, but new channels are prevailing in order to introduce our products and services, which are apparently being rejected in mass by consumers who are saturated, as we have seen, by what are considered conventional channels…Advertising and direct Marketing must be more precise; the “bombardment” of the consumer must end or become definitively counterproductive; messages must have added value and consumers must be reached by new channels that surprise them, respect their privacy, allow them to participate, and avoid making them feel pressured.
Without reversing the fortune that BMW dedicated to the aforementioned Z3 launching, the sports shoe brand Vans has connected brilliantly with the young public because of its involvement in the sponsorship and launching of
Skateboard tournaments, Surf tournaments (Triple Crown), etc... Their identification with their “target” segments is complete. This is an example of how to successfully open new promotional channels.
The activation of all these key aspects, which constitute the paradigms of what we call New Marketing are not possible without an essential ingredient that is expressly reserved for the end: intelligence and science. All recommendations from experts; all creators of trends; all the new suggestions are based on a point without which any advance is impossible: in-depth, real, true and rigorous knowledge of customers and markets, real or potential. Scientific Marketing is becoming an absolutely urgent matter, capable of giving this material the authentic relevance it deserves.
Why do the great majority of financial directors base their decisions on score cards, while Marketing directors continue to be guided by tools as necessary but insufficient as experience or intuition? Philip Kotler often makes the following equation: “NT+OO = EOO”, that is to say, “New Technology + Old Organization = Expensive Old Organization”... to put it another way: if an organization’s structures are obsolete, new technologies will only raise costs without increasing efficiency.
It is imperative that scientific Marketing is used in any company with the desire to get their decision-making process right. The application of scientific Marketing strategies allows any company to know who the minority is that generates 70% of the company’s profits; figuring out how demographic, geographical, and social factors condition the purchase process; designing more accurate and affordable Marketing campaigns, calculating how much it costs to incorporate a new customer into the portfolio, predicting which customers have a high probability of migrating to the competition…
It’s about discovering models, conclusions, correlations, patterns, or tends that support strategic decision-making, and that establish Marketing not as the first investment any financial director would be willing to eliminate at times of crisis, but rather as a vital asset to the company; an authentic science capable of contributing definitively to the long-term growth of any company. New concepts are arriving from the United States, such as Customer Equity or Customer Asset Portfolio Management, which pre-suppose customer value as an asset of companies. The mission of Marketing directors is for these concepts to extend and lead to accurate Marketing strategies that contribute to generating tangible results for companies and, at the same time, rescue the importance of Marketing as a value-generating discipline for the company.