What ails marketing – and how to fix it
By Mohanbir Sawhney
With apologies to Charles Dickens, these are the best of times for marketing, and these are the worst of times for marketing. On the one hand, marketing has never been more important for companies as they struggle to grow and differentiate themselves from competitors. On the other hand, the value of marketing is being called into question in the executive suite. Marketing needs to reinvent itself if chief marketing officers want to gain a seat at the executive table. If marketing does not reform itself, it will die a slow death by a thousand budget cuts.
What Ails Marketing?
Marketing faces two key crises—an identity crisis in defining its role in the organization, and an accountability crisis in demonstrating the value of marketing to the organization. The Role of marketing: Marketing often plays a highly circumscribed role of marketing communications in companies. Few marketing organizations are meaningfully involved in formulating corporate strategy, designing offerings and managing partnerships. My colleague Phil Kotler recently told me about a conversation he had with a vice president of marketing at a major airline. Phil asked the VP what he did in his job. Did he control pricing?“Not really,” the marketing VP replied. “That’s the yield management department.”Did he control where and how often the airline flies or the classes of service it offers?“Not really—that’s the flight scheduling department.”
Did he control the services that the airline provides its customers on the ground?
“Not really, that’s the operations department.”
So what exactly did he control?
“Well,” he told Phil. “I run advertising and the frequent-flyer program.”
I suspect that this is the case with most companies, with marketing becoming synonymous with marketing communications, and that, too, after the fact when products have already been developed. There are a few exceptions in the consumer packaged goods arena, but even there, the rising power of retailers and the shift in marketing dollars to promotions stands to make marketing the “discipline of cents-off coupons,” in the words of my colleague Don Lehmann from Columbia.
The value of marketing: Marketing faces a crisis of accountability as CEOs and CFOs legitimately question the return on investment (ROI) they get from their marketing investments. Not much has changed since John Wanamaker, founder of the first department store, made his famous statement: “One half of my advertising budget is wasted. The trouble is, I don’t know which half.” According to David Pottruck, CEO of Charles Schwab and a former marketing head, CMOs need to speak the language of CEOs. “Almost all CEOs are focused on revenue growth,” he says. “If you don’t grow your revenues, you are sunk.” According to Pottruck, while CEOs can clearly see the benefits of paying salesmen more for what they sell, the value of marketing is often not as clear.” If CMOs are unable to quantify the value of marketing, marketing budgets will inevitably get cut, and marketing spending will gravitate toward short-term demand generation initiatives at the expense of brand and relationship-building initiatives.
Transforming Marketing: Marketing has failed to live up to the exalted position that Peter Drucker gave it more than three decades ago when he declared, “The business has two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” To claim the strategic high ground, marketing needs to reinvent itself. Here is a seven-point manifesto for chief marketing officers to transform marketing:
- Market the marketing department.
An Indian proverb says, “Under a bright lamp, there is great darkness.” Marketing departments try hard to market the firm’s offerings to customers, but they often do a very poor job of marketing themselves internally to the leadership team and to other departments. In my conversations with developers at technology companies, I have found that very few of them have a clue what marketers do at their firms. It is the CMO’s responsibility to communicate the “value proposition” of marketing to everyone in the organization. To do this, CMOs need to clearly define how marketing adds value to the company. They need to identify a few key, high-level marketing priorities, and they need to link these priorities to the company’s growth and profitability objectives. And CMOs need to learn the languages of CFOs, CEOs and R&D.
- Change the marketing mind-set.
The traditional marketing mind-set is a command-and-control mind-set that relies on selling to passive customers whose demand and perceptions can be influenced and manipulated. In an age of “Information Democracy,” CMOs need to evolve their organizations to a “connect and collaborate” mind-set—where the company collaborates with customers to create, deliver and share value. Cocreation of value with customers requires creating a shared vocabulary, shared interests, shared platforms and shared trust with customers.
- Earn credibility through customer expertise.
Marketers often complain about the lack of authority and lack of influence over their colleagues in engineering, operations or finance. The simple fact is—nobody will give you a seat at the table; you have to earn it. And the best way to gain power is through knowing your customers better than anyone else in the organization. Customer expertise will provide marketers with the courage of conviction they need to promote their point of view to other parts of the organization. Remember that you cannot outsource customer understanding to market research vendors. You have to get in front of customers and get inside their lives. As a Punjabi proverb states: “If you want to see heaven, you have to die yourself.”
- Focus on the customer experience.
Too many marketing organizations limit themselves to the products and services that they make, without realizing that it is the total customer experience that matters most in differentiating yourself and delighting customers. Focusing on the customer experience requires marketers to think holistically about every single customer touch point and every stage in the customer lifecycle. It also demands a total quality approach to designing and improving the customer experience. It is the CMO’s responsibility to ensure that every employee in the firm understands how he or she impacts the customer experience. And it is the responsibility of marketing to orchestrate the customer experience across all channels, partners, business units and stages in the customer buying cycle.
- Think in process terms.
Marketing has traditionally thought of its activities in terms of the infamous four P’s (product, price, promotion and place). This is a functional view of marketing activities, and it fosters the mistaken impression that marketing functions are independent silos. Instead, marketing activities should be conceptualized as a set of logically related value-creation processes. Drawing insights from the business process reengineering literature, I believe that marketing needs to be organized around processes, not functions like channel marketing, audience marketing or product marketing. These value-creation processes include the processes for understanding, defining, realizing, delivering, capturing, communicating and sustaining value. Each process has a set of activities and deliverables, and these processes together constitute the new work of marketers.
- Create an ROI culture.
Marketing must conform to the adage, “If you can’t measure it, you can’t manage it.” CMOs need to promote a return on investment mind-set that should permeate every marketing initiative. Marketing initiatives need to be derived from marketing objectives, and marketing initiatives need to be evaluated on a set of objective metrics. In simple terms, marketers need to define where they want to go (objectives), how they will get there (strategy), what it will take to get there (resources), and how they know if they get there (metrics). Creating an ROI culture does not mean every marketing initiative has to be quantified in terms of incremental revenue. Marketers can rely on intermediate metrics that follow customers through the “hierarchy of effects”—from creating awareness to changing perceptions, to creating demand, to enhancing loyalty and retention. More difficult but equally important questions that CMOs need to tackle include ways to optimize marketing spending across channels and establishing the financial payoffs of longer-term marketing investments.
- Embrace technology. Marketing is the last bastion for manual work in the enterprise. Most functions in the enterprise have been automated, including operations, finance, human resource management and sales. But marketing activities largely remain ad hoc and manual. This situation is beginning to change with the development of exciting new technologies for marketing resource management (MRM), marketing analytics and customer intelligence gathering. CMOs need to embrace these technologies to improve the visibility of marketing operations, to improve the efficiency of marketing processes, and to institutionalize best practices that have been encoded in software and tools.
I believe that marketing is the most fascinating area of management, because marketers need to combine qualitative insights and intuition with quantitative analysis and rigor. I also believe that marketing is the key to continued business success in a competitive world. However, marketing needs to change with the times if it is to stake its claim as the function that creates the most value for the organization. As marketing leaders, CMOs need to combine their passion for customers with a business value mind-set, creativity with rigorous analysis and brand-building strategies with hard-nosed tactical execution. In the words of Lee Iacocca, marketing must “lead, follow or get out of the way.” CMOs must step up to the challenge or risk becoming figureheads in their organizations.
Mohanbir S. Sawhney is the Tribune Professor of Technology and the Director of the Center for Research in Technology and Innovation at the Kellogg School of Management.
From CMO magazine (a publication of CXO Media, Inc.), September 2004