Under increasing pressure to obtain results, professionals in Marketing departments must assign increasingly tight budgets in the most efficient way possible, focusing on return on investment, revitalizing traditional practices, and simultaneously developing new abilities.
It’s time to accept the fact that company leadership mistrusts Marketing. The mission of this business area has traditionally been seen as a tactical support to sales, but never as a strategic focus. In times of crisis, the Marketing department is usually among the first to feel the effects of budget cuts – also, its contribution to business growth is not recognized as it should be –, and there are very few Marketing positions with a place on the Board of Directors.
It seems very easy to this department’s directors to argue for a budget of 1 million euros, and they usually face problems when they must show the results of their strategies, both in terms of sales increase and profitability. Meanwhile company directors, under pressure from stockholders and increasingly cutthroat competition, demand them to be financially accountable. How can we make Marketing show quantifiable results? How can we get Marketing departments to be considered with the same confidence, respect, and strategic focus as the rest of the company’s areas?
Therefore, it is time for Marketing people to keep very much in mind the company’s finances, and to make serious and tangible efforts to increase its productivity. If it pays due attention to return on investment, it will be able to make more efficient use of the budget. And if it achieves this goal, Marketing will go from an intuitive art to a precise science.

Marketing: from intuition to precision

All companies still rely on traditional Marketing strategies, but the majority see increasingly low performance from them on a daily basis. Those that worked before do not currently obtain the same results. For example:

• Product differentiation is increasingly more difficult to achieve.
• Company mergers and acquisitions reap as many failures as successes.
• Globalization offers fewer opportunities: the good markets are saturated, and there’s no money in the weak ones.
•  The failure rate of new products is extremely high.
• Price reduction is a strategy that no longer works, because there will always be a competitor that launches similar products or services at lower prices.
• Raising prices doesn’t work either, because differentiation is not usually marked enough to make the customers willing to pay more.

"Segmentation is one of the best ways to innovate, because instead of finding a great market, it allows us to identify a market segment that no one has developed."

However, it is out of the question to say that Marketing is on the verge of collapse. This field’s professionals face numerous challenges, but solutions are within reach. It’s a matter of opting for resource optimization and, above all, innovation. There are measures available to companies to improve their efficiency, among which we can mention, for example:

•  Purchasing materials in a more efficient way.
•  Cutting communication and transport costs or closing sales offices with low productivity. Hewlett-Packard, for example, used to assign an office to all of its sales reps, until the directors discovered that by giving them a computer and a mobile phone to organize tasks from home, they obtained the same sales results and, moreover, they saved large sums of money that they had previously been spending on offices.
• Optimizing the investment in advertising. Procter & Gamble did it successfully by working with advertising agencies under a pay-by-results system.

How to improve Marketing’s effectiveness

Similarly, if the goal is to improve Marketing’s effectiveness with innovative ideas, companies can take measures such as the following:

• Substituting the most expensive distribution channels for other, less costly ones. This is something that banks do very well: they encourage their customers to make banking operations from ATM’s, or from their homes through “e-banking”, instead of doing it at their branches.
• Putting the advertising budget to use in other activities, such as public relations or user community training. While the efficiency of investments in advertising and Marketing is clearly being questioned, the effectiveness of press relations, public relations, and promotional activities such as product placement, is on the rise.
• Adding or substituting product characteristics. The simpler, the better.
• Investing in technology that improves the quality and level of the company’s services. This goes beyond simple investment in CRM programs or “contact centers”. It’s a matter of giving the company technological tools that improve the efficiency of management process, but this step must be accompanied by efforts in the data analysis and interpretation on the part of company management.

"If it pays due attention to return on investment, it will be able to make more efficient use of the budget. And if it achieves this goal, Marketing will go from an intuitive art to a precise science”

Faced with crisis, maintain the value proposal

When the economy is in a recession cycle, the dilemma is the following: do we cut the Marketing budget or do we invest more in obtaining new customers? While many of its competitors opted for making cuts, Dell Computer, for example, decided on aggressive Marketing. And the results it’s obtaining are very good. Dell knows that the best time to gain market share is when the competition is bent on cutting costs.
In times of crisis it is important not to cut the value proposal. An intelligent company doesn’t do it. On the contrary, it “lives its brand name”; it believes it in and honors it. It’s true that this is a difficult option, because traditionally in times of economic cutbacks, departments considered “not strategic”, such as Marketing, suffer the greatest damage. But in the long run it is worth differentiating a company from the competition by betting on the brand, its products, and its services, while the others retreat.
Here’s an example: what do we think about Volvo? We immediately associate it with safe cars. In recent years, many of its customers have asked the Swedish automobile company to include a GPS system in its cars. Volvo resisted, because it believed that the GPS screen distracted the attention of the driver. Finally, the company responded to its customers’ requests, but only after developing a safer GPS system. That is how you honor a brand.
The business world is as a point of inflection that demands the re-vitalization of many traditional Marketing abilities —such as advertising, sales promotion, public relations, and sales direction—, while at the same time developing new abilities, mainly in terms of segmentation, definition of the target audience, and positioning. In fact segmentation is one of the best ways to innovate, because instead of finding a great market, it allows us to identify a market segment that no one has developed. In other words, it is the key to finding a sub-group with unsatisfied needs. Therefore, another recommendation for innovating in marketing is opting for intelligent segmentation strategies that truly open markets. Investing in the location of new niches may demand certain resources, but the results amply reward the investment in an environment as fiercely competitive as today’s.

“Lateral Marketing”

In order to satisfy needs that other companies have not thought of, one option is to devise products and services that create new categories or new markets. In recent years, I’ve been developing a somewhat unusual technique that consists of applying “lateral thinking” to Marketing. What does “Lateral Marketing” consist of? It basically consists of associating our product or service with a completely different idea that will allow us to open the door to a new future in business.

"Intelligent segmentation strategies are one of the best ways to innovate in Marketing"

Some companies have already done something similar. In Japan, the convenience store chain 7-Eleven installed computers in each one of its 5,000 points of sale, so that its customers could surf the Internet and order on-line. Apart from offering “convenience”, the company’s strategists thought that if those orders arrived directly at the stores, each one would see more consumer traffic and, when the customers CAME in to pick up what they had bought, the company could sell them more products. In short, 7-Eleven joined the concepts of food and warehouse, and it discovered a new business.

The failure of CRM technology

Many people were sure that CRM (Customer Relationship Management) technology would be the Marketing’s salvation. The pressure was so great that a large number of companies began to buy technology and software in order to know more about their customers. That enthusiasm has clearly dwindled in recent years, since different studies indicate that 40% of CRM investments have yielded disappointing returns on investment (ROI).
Among the principal causes of failure are corporate cultures that do not focus on the customer. Because if a company lacks the firm willingness to know everything possible about is customers, and its members are not set on offering value to customers, the simple addition of software will not automatically make that company geared towards the customer. It will only be a tool that will generate many costs and little use.
So, should we invest in the famous database Marketing? Before answering that question, it is essential to be very clear about the following realities:

•  It requires an enormous investment in gathering information about individual and potential customers.
• It demands constant information updates.
• It requires a large investment in hardware and software.
• Specific critical information may not be available.
•  It demands the integration of information about customers from different sources.
•   It requires the presence of professionals who are well-versed in “data mining” techniques.
• It involves training employees, distributors and providers.

The next question is: do all companies need CRM? The answer is “no”. For example, this tool will not benefit companies that have high customer rotation, or those in which there is no direct contact between the salesperson and the final buyer. On the other hand, other companies are in a better position to invest in CRM. For example, companies that gather large quantities of information, such as banks, insurance companies, or credit card companies. With a CRM system, companies like that will make much better use of the data they have. It will also be useful to companies that can engage in cross-selling and induced selling, such as General Electric and Amazon, who, because they don’t sell just one product, can find out through in-depth investigation whether the customer is interested in other products besides the one they purchased.

Partner relationship management

The ability to relate to business allies is of vital importance, especially because no one wins alone anymore, but rather through the construction of networks and teams. Leading companies dedicate a great deal of time to this type of relations. For example, automobile companies no longer manufacture all the parts of their automobiles. They have become assembly companies that ask one of their allies to design their seats, and another to provide brakes.
There is no shortage of companies that have little idea of which customers they make money with. If two customers purchase 1 million euros worth of products, companies assume that both are equally as profitable. But one of the customers calls incessantly, takes up time, demands price discounts, and expects special service, while the other one is always satisfied. Therefore, a rigorous analysis of customer profitability will reveal the differences. The truth is, companies need more ability when it comes to knowing what customers, what segments, and what channels are most beneficial to their business.
In essence, Marketing aims at identifying the nerve center of the market: a group of people who are willing to buy a specific product. And one of the main problems many companies face is not having found an answer to the question, “why should a customer buy our product or service?”