Meet any marketing person today and she will tell you how rapidly marketing is changing.
In the world's most competitive market-the USA, where arguably the discipline of marketing is most evolved, it is all about how the emergence of digital is destroying long-running shibboleths and paradigms of media and marketing .
Meet a marketing person in India and he will talk about the emergence of modern retail (there is now a pause in the march of modern retail but before we write it off please take your mind back to the time when mobile services seemed to be a dead-in-the-water category in value-conscious India) and the increasing fragmentation of the media.
However I believe that the paradigm shift that has come to marketing is not in about how people consume media, analog or digital or where people shop (traditional or modern), it is not even about changing demographics (aging societies in US and Japan or the youth-dominated societies of India and China) .
It is about a tectonic shift on how people across the world see themselves and their lives.
This shift is from lives and self-image anchored in stability to lives and self-image geared to change. My 75 year old mother, 3 months ago started ,for the first time in her life going regularly, to the gym in our apartment complex ! My 20 year old son with regularity cannot stand today what he deeply admired just yesterday. And I am quite sure that the marketing services agency business that I own and run, with two other partners, will change its business model every quarter or so, not because it will be badly run but because it will be well run.
Marketing 1.0 was about displaying the wares. With the emergence of mass manufacturing and mass media emerged Marketing 2.0. At the core of marketing 2.0 is the brand. The brand is based on the premise that if a marketer establishes a relationship with a consumer beyond the transactional, such a relationship will become the growth engine of the business. Implicit in the notion is that, in essence, the value system of the consumer seeks relationships. The track record of brands over the past six to seven decades suggests this was true.
However what if today's consumer does not seek relationships but instead seeks change, continuous all pervading change? Would not such a state call for a new kind of marketing?
Premised on the above argument I propose for consideration a new marketing framework. I choose to call this framework: Marketing To Change.
The framework I am now beginning to build is based on a framework for change that
John P Kotter proposed in his seminal book "Leading Change. Why Transformation Efforts Fail".
Kotter's model of change has been created with reference to businesses attempting to change to better meet business challenges.
The essence of the model are the eight steps to change.
Step One: Create Urgency
"If many people start talking about the change you propose, the urgency can build and feed on itself."
Step Two: Form a Powerful Coalition
"To lead change, you need to bring together a coalition, or team, of influential people whose power comes from a variety of sources, including job title, status, expertise, and political importance."
Step Three: Create a Vision for Change
"When you first start thinking about change, there will probably be many great ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember"
Step Four: Communicate the Vision
"Don't just call special meetings to communicate your vision. Instead, talk about it every chance you get"
Step Five: Remove Obstacles
Recognize and reward people for making change happen.
Identify people who are resisting the change, and help them see what's needed.
Take action to quickly remove barriers (human or otherwise).
Step Six: Create Short-term Wins
"Nothing motivates more than success. Give your company a taste of victory early in the change process"
Step Seven: Build on the Change
"Kotter argues that many change projects fail because victory is declared too early. Real change runs deep. Quick wins are only the beginning of what needs to be done to achieve long-term change"
Step Eight: Anchor the Changes in Corporate Culture
"Create plans to replace key leaders of change as they move on. This will help ensure that their legacy is not lost or forgotten"
The application to marketing of the above model would be to view the consumer as an entity whose purpose in life is to make change happen every minute of her life and the brand's and through the brand the marketer's objective is to enable the consumer in this purpose.
Lets see if we can then work out eight guiding principles of Marketing 3.0 based on Kotter's eight steps.
The "Create Urgency" principle: Can the brand enable the consumer to record and reinforce the change she desires?
The "Form A Powerful Coalition" principle: Can the brand enable the consumer to find and communicate with other people who are in the same frame of mind and do this as the frame of mind changes?
The "Create A Vision for Change" principle: Can he brand enable the consumer to find a pattern in the changes she experiences and desires that inspires her?
The "Communicate The Vision" principle: Can the brand enable the consumer to megaphone the inspiration in order to reinforce it?
The "Remove Obstacles" principles: Can the brand provide outlets to withdraw and vent her frustrations as a step towards overcoming obstacles?
The "Create Short Term Wins": Can the brand set up a self-directed 'pat-on-the-back" system for the consumer?
The "Build on the Change" principle: Can the brand enable the consumer to run a virtuous cycle between change and achievement?
The "Anchor in Culture" principle: Can the brand enable the consumer to recognize her need for change in the need for change in the organization she works in and the society she lives in?
I agree that the above principles are abstract but that is where a new paradigm always begins. You will agree though that the above principles portend a completely fresh brand and marketing templates.
It is also clear that no one brand will embody all eight principles. In fact brands will be positioned by which principle or set of principles they embody. Going a step further maybe the product and service categories of the future will be driven by a matrix of the eight principles and everyday functional needs.
While the first stating of a new paradigm might be abstract but every valid paradigm must begin in reality. I have begun the search for looking for examples of Marketing To Change already happening in markets across the world. I invite you to join the search.
Tuesday, August 18, 2009
Wednesday, July 22, 2009
Break On Through To the Other Side
Creative writing has always been my first love. I have over the past decades started writing many a novel and then let each one of them wait for me to come back to them.
This time I intend going public with the act. I am going to attempt writing stories live on this blog.
My fiction writing style is in the fabulist streams of consciousness style and those who cannot digest that do not fret. I will continue posting blogs on brands, marketing etcetera in my usual style.
For those who you enjoy reading streams of consciousness, here is an open invite to help me write this. Post your suggestions in the comments section or email them to me and be sure they will create their ripple in the stream as it bubbles along. Also I will thank you in the postscript.
The title of this work of fiction I am now beginning to write live on the web is ‘Break On To the Other Side’. Jim Morrison fans will get the reference. It also signifies my attempt to overcome the resistance within me that has kept me from giving full play to my creative self.
Here goes.
Break On Through To the Other Side
Chapter One
Growing Taller
My mother grew taller as she aged beyond fifty. By then I was stuck at five feet two. How do you think I felt? We lived near a private beach. My dad’s job was to keep the beach clean. Pity he never did like the sea or think much about its salubrious effect. No wonder than that he died at forty. That left my mother with radiant good health and me.
The private beach belonged to a hot-eyed mafia queen. As my father’s body burned on the pyre, he walked up to my mom and offered her the job my Dad had. She accepted. Not surprising considering she had one thousand two hundred rupees in soiled ten rupee notes and me as the legacy Dad had left for her.
My mother loved the sea. She spent hours more than she really needed to tending to the beach. And with each passing day her simple underclass look began to subtly change. I can swear her nose started to straighten and, despite of her being a natural adherent to the truth, grow longer like Pinocchio’s.
I had no one else to share the wonder of this metamorphosis with so I shared it with her, talking to her about her in the third person. And this habit stayed with me. I lived now with two mothers. The one I talked to. And the one I talked to her about.
Decades later when I had a private beach of my own, my mother was six inches taller than me as we walked the beach on summery moonlit nights. And once at nineteen, at five feet two, I had been an inch taller than her. And that was not all. She looked twenty years younger. How do you think I felt?
By then I was an adept. Adepts don’t feel. They just do. Nike would have loved to have me as their brand ambassador. Only that I never wore athletic gear in my life and at five feet two, weighed ninety four kilograms.
Adepts live in more dimensions than the three that dear reader you live in. Unless you are an adept yourself but then adepts never, ever read anything at all.
As I walked down the beach that summery moonlit night with my taller, younger, much better looking mother I was experiencing wraith like rain falling across swathes of bare naked trees pulsing with the white light of far way lightening.
You do not get to own a private beach by being in one place at a time, especially if you were born to people whose job it was to clean one.
That bare-naked wood in the pouring rain was getting my bile up. Exactly what I wanted as I stared across the conference table at that long-nosed, impossibly thin aristocratic bitch who was trying to screw me out of a couple of million dollars more.
Once upon a time she had been good in bed but now she practiced the art in board rooms. I touched the button on the side of chair and imperceptibly my chair gained height as hers sank at the same rate.
Adepts love technology and never use magic when good old technology will do.
She snorted. She saw through this one. Apparently this particular invention of mine, as so many before, had been plagiarized and made sort of common place among the cognoscenti.
I had many secret admires or so I liked to believe. I was now out of those rainy woods and kicking back my heels in the plush push back seats of the neighborhood multiplex. They were playing my story there.
My mood improved. I even managed to smile at the bitch and gave her not just the couple of million dollars more she was haggling for on the divorce settlement but a couple of million more. She looked ready to give me a farewell blow job then and there but then I was walking with my saintly mother on my private beach on a summery moonlit night. Wasn’t I?
- To be continued... soon
Sunday, July 5, 2009
The Death of Macho
Once in a while comes a take on the world that is breathtakingly simple as well as breathtakingly deep..
“The Death of Macho” by Reihan Salam published on the Foreign Policy website on 22tn June is one such event.
Reihan take is that “for years the world has been witnessing a shift of power from men to women. Today, the Great Recession has turned what was an evolutionary shift into a revolutionary one”
Foreign Policy (FP) magazine and now website has a track record for publishing seminal pieces of work. I would put Reihan’s work at par with Samuel Huntington’s “The Clash of Civilizations” first published in FP many years before 9/11.
Reihan besides being deep is witty. For example, in support of his central contention he calls the current recession he-cession.
One of the trends Reihan spots in support of his thesis is the increasing emergence across the world of women as the leaders of their country. A corollary occurs to my mind: Did India, as in so many seminal shifts in history, take the lead in this one too? Did macho in India begin to die when Indira Gandhi became the ‘only man in the Cabinet’?
Humor aside, has Reihan unearthed something that heralds the coming of a world very, very different from the one we live in?
In Hindu mythology and even in Jungian consciousness, the female principle is of nurture. If nurture become the operative word in the world (it is certainly has not been for all of mankind’s history) will it produce a golden age or will global civilization wither and die in the absence of man’s aggressive quest for dominance?
To some the answer to the above question may be obvious. Others might dismiss it because it is based on what one of my erstwhile colleague used to call a “critical assumption”. Either way you would do well to spend some time reading Reihan’s magnificent article.
“The Death of Macho” by Reihan Salam published on the Foreign Policy website on 22tn June is one such event.
Reihan take is that “for years the world has been witnessing a shift of power from men to women. Today, the Great Recession has turned what was an evolutionary shift into a revolutionary one”
Foreign Policy (FP) magazine and now website has a track record for publishing seminal pieces of work. I would put Reihan’s work at par with Samuel Huntington’s “The Clash of Civilizations” first published in FP many years before 9/11.
Reihan besides being deep is witty. For example, in support of his central contention he calls the current recession he-cession.
One of the trends Reihan spots in support of his thesis is the increasing emergence across the world of women as the leaders of their country. A corollary occurs to my mind: Did India, as in so many seminal shifts in history, take the lead in this one too? Did macho in India begin to die when Indira Gandhi became the ‘only man in the Cabinet’?
Humor aside, has Reihan unearthed something that heralds the coming of a world very, very different from the one we live in?
In Hindu mythology and even in Jungian consciousness, the female principle is of nurture. If nurture become the operative word in the world (it is certainly has not been for all of mankind’s history) will it produce a golden age or will global civilization wither and die in the absence of man’s aggressive quest for dominance?
To some the answer to the above question may be obvious. Others might dismiss it because it is based on what one of my erstwhile colleague used to call a “critical assumption”. Either way you would do well to spend some time reading Reihan’s magnificent article.
Tuesday, April 28, 2009
The Matrix: The Coming Era of Database Marketing
Happy to inform my regular readers that Aqumena is progressing well.
As we at Aqumena dig into a wide variety of client situations, I encounter epiphanies that I then catalogue for further delving into.
A blog posting is to me is the most useful initiation of further investigation as it potentially co-opts many into the act.
In our marketing analytics practice, we were discussing the promise of integrating databases including operational sales data, post-but media data, data from syndicated studies like the retail and consumer panels etc when this epiphany about the Matrix gripped me.
The thought is that as soon as we accept a database, a research study or a data stream as representative of reality we are in fact integrating the available data on to the entire universe.
For example if we accept the NRS (or the IRS) as representative reality consisting of say, 500 million people, what in reality it means is that we are fusing, assuming the sample size of the study is 100,000, to 5000 individuals in the universe of 500 million people.
Subsequently if you accept a consumer panel of 10,000 household as representative of reality you are accepting that every record in the panel represents 20,000 households in your universe consisting of 200 million households (on the formulation of an average household size of 2.5 members from your 500 million individuals of age 15+ represented by the readership survey).
Marrying the picture of reality that the readership study presents with the picture of reality the consumer panel presents is an unquestionably valid activity because both are true representations of the same reality.
Based on the same principles, a U&A study of 5000 sample size or a price sensitivity study of sample size 2000, as long as they are accepted as valid representations of reality, can be married to the readership and panel data, individual by 500 million individuals.
The marrying of data (variously known as data fusion, data threading and data integration) is done through complex algorithms that dance to accommodate and integrate such that each view of reality that a data stream offers is valid within the overall picture of reality that is being produced.
The technology of data fusion is a developing technology but there can be no quarrel with the basic validity of the concept of welding together various views of reality, as represented by valid data streams, into a comprehensive view of reality that gets richer and more detailed as the data streams increase.
The culmination of this simulation of reality is the Matrix, the creation on a vast computer database a simulation of reality in all its complexity.
In previous times computer power was a severe limitation to simulation exercises.
I remember trying to simulate a cricket match when I was a student at IIT, Bombay back in 1976. The computer was an IBM 360. It took me months to do what can be done today on a low-end notebook in about 10 minutes.
Today weather modeling systems, with increasing effectiveness, model trillions of individual parameters using supercomputers and an array of sampling protocols across the world.
Modeling systems that consist at most of 7 billion parameters (assuming a world population of 7 billion) based on an array of operational and sampling based data streams is well within the affordability range of a major global consumer company.
Modeling a consumer universe of 200 million people is well within the affordability reach of a large size consumer company in India.
Marry the Matrix to the addressability that the emergence of the Internet,the mobile phone and the RFID chip represent and you can perceive the dawn of the age of micro-marketing.
As we at Aqumena dig into a wide variety of client situations, I encounter epiphanies that I then catalogue for further delving into.
A blog posting is to me is the most useful initiation of further investigation as it potentially co-opts many into the act.
In our marketing analytics practice, we were discussing the promise of integrating databases including operational sales data, post-but media data, data from syndicated studies like the retail and consumer panels etc when this epiphany about the Matrix gripped me.
The thought is that as soon as we accept a database, a research study or a data stream as representative of reality we are in fact integrating the available data on to the entire universe.
For example if we accept the NRS (or the IRS) as representative reality consisting of say, 500 million people, what in reality it means is that we are fusing, assuming the sample size of the study is 100,000, to 5000 individuals in the universe of 500 million people.
Subsequently if you accept a consumer panel of 10,000 household as representative of reality you are accepting that every record in the panel represents 20,000 households in your universe consisting of 200 million households (on the formulation of an average household size of 2.5 members from your 500 million individuals of age 15+ represented by the readership survey).
Marrying the picture of reality that the readership study presents with the picture of reality the consumer panel presents is an unquestionably valid activity because both are true representations of the same reality.
Based on the same principles, a U&A study of 5000 sample size or a price sensitivity study of sample size 2000, as long as they are accepted as valid representations of reality, can be married to the readership and panel data, individual by 500 million individuals.
The marrying of data (variously known as data fusion, data threading and data integration) is done through complex algorithms that dance to accommodate and integrate such that each view of reality that a data stream offers is valid within the overall picture of reality that is being produced.
The technology of data fusion is a developing technology but there can be no quarrel with the basic validity of the concept of welding together various views of reality, as represented by valid data streams, into a comprehensive view of reality that gets richer and more detailed as the data streams increase.
The culmination of this simulation of reality is the Matrix, the creation on a vast computer database a simulation of reality in all its complexity.
In previous times computer power was a severe limitation to simulation exercises.
I remember trying to simulate a cricket match when I was a student at IIT, Bombay back in 1976. The computer was an IBM 360. It took me months to do what can be done today on a low-end notebook in about 10 minutes.
Today weather modeling systems, with increasing effectiveness, model trillions of individual parameters using supercomputers and an array of sampling protocols across the world.
Modeling systems that consist at most of 7 billion parameters (assuming a world population of 7 billion) based on an array of operational and sampling based data streams is well within the affordability range of a major global consumer company.
Modeling a consumer universe of 200 million people is well within the affordability reach of a large size consumer company in India.
Marry the Matrix to the addressability that the emergence of the Internet,the mobile phone and the RFID chip represent and you can perceive the dawn of the age of micro-marketing.
Tuesday, March 10, 2009
Bonfire of the Vanities
I have smiled at shallow triumphs
And long mourned the loss of what I did not own
I have dwelt long in the shadow of my desires
I have constructed an ego built of my senses
And with foolish bravado fought the chimera of misery
I have looked for God in vain meditations
And reserved action for the pursuit of Mammon
I have sought love in the cravings of flesh
When love was within and all around manifest
I have played to weakness when strength beckoned
And belittled myself to myself
Enough say I, enough this night
This Holi night, as I go back millennia
People hunched around an ancient hearth
A primeval force, pure and cleansing
This bonfire of the vanities
And long mourned the loss of what I did not own
I have dwelt long in the shadow of my desires
I have constructed an ego built of my senses
And with foolish bravado fought the chimera of misery
I have looked for God in vain meditations
And reserved action for the pursuit of Mammon
I have sought love in the cravings of flesh
When love was within and all around manifest
I have played to weakness when strength beckoned
And belittled myself to myself
Enough say I, enough this night
This Holi night, as I go back millennia
People hunched around an ancient hearth
A primeval force, pure and cleansing
This bonfire of the vanities
Tuesday, February 24, 2009
Mind your client’s business. The return of jolt selling to B2B marketing
As a consumer research and later an advertising professional I mostly think B2C market but I do B2B marketing.
I have worked at two large and successful agencies with diametrically different approach to selling their services (in the business of advertising you just don’t sell your services to potential clients but every major campaign or activity that you create and execute for a client is an act that succeeds a multi-step sales process).
One agency sells a final creative product. The starting point for it is the client brief. They rather scrupulously stay away from even probing the client’s business and marketing strategy.
Over the last decade or so, as the economy has boomed, this agency climbed the charts quickly and become by all reckoning the agency that represented the face of an advertising business that also boomed.
The agency’s creative product is constantly top class. And they did it by investing in resources and systems that were geared to converting a client-given advertising objective into breathtaking disruptive advertising that at the same time delivered on the objective fair and square.
I would call this approach to B2B selling as an approach that focused on the richness of the product-feature. It is akin to say an IT hardware selling on the efficacy of the machines in perhaps innovatively meeting clearly understood client needs expressed in terms of specifications.
The other agency made the client’s business its primary business. The top resources in the company were people who could and would sit at the table with the client company’s senior management and not just discuss the company’s business and marketing strategy but debate it.
The agency made its business to know everything they could know about the client’s business and market. Its middle and junior level would spend time and resources interacting with not just the marketing people in the client company but the sales people.
In many cases the agency co-crafted in many cases the marketing strategy with the client and crafted by itself the advertising objective. The agency than got on to creating advertising that met this objective.
The company’s biggest bottom-line contribution came when the agency managed to change the client’s perception of their own business! For example a client actually pulled investment in a new plant to manufacture the next generation of products as the agency proved to them that the market for the current generation still very large and profitable. Of course, this required a greater marketing and advertising thrust now instead of when the new plant would have opened two years later.
Such game-changing contributions allowed the agency to sit at the highest table with the client and enabled to make top dollar on that business.
Very many times the beginning of this game-changing contribution could be pinned to a seminal meeting where the agency’s top team delivered a ‘jolt’ to the client, a powerful marshalling of arguments that shifted client perceptions about their own business and established a fresh paradigm.
Not surprisingly, given the smaller share of resources and time allocated to the creative process, the agency delivered a middling-quality product (some will immediately argue that the best approach is to combine the approach of agency 1 and agency 2 but that would be, in my mind, asking uncle to be aunt too).
The agency did extremely well in the decade after liberalization that the Indian economy and companies were getting used to the new economic climate and testing opportunities, flexing muscle that had been until then in disuse.
Over the last decade or so, as company after company muscled their way to high growth under managements much more confident, this agency fell back to mediocre growth. It still was successful and but also-ran successful.
I would term this agency’s approach to B2B selling as a mix of solution-selling and consultative. It is what happens when an IT hardware company spends time and resources in developing along with the client the RFP, so to speak and then with the business locked supplies the hardware.
Over the last year the cycle has come full circle. The boom is gone and companies and managements should be searching for new paradigms.
But all indications are that most companies and managements are frozen in the headlights. They have cut out discretionary spending and frozen budgets whose principal strategy is cost-cutting.
Advertising agency budgets are being slashed and agency one- the ‘creative’ agency in the B2B product selling mode, by all reports, is also frozen in the headlights, busy with its own cost-cutting strategy.
Agency two is less talked about and more opaque. Some reports indicate that during the boom years the agency had nurtured self-doubt.
Its business and marketing strategy making and debating skills diminished as it flailed about to strengthen without much success its creative resources and product.
I do not know whether this agency realizes it,but with the “recession” the times are good for this agency to climb the market share chart and perhaps be the growth leader over the coming decade.
However it must go back to not just the old ways but raise the bar further by making the development and administration of the paradigm- changing jolt to its client’s central strategy.
To do so the agency will need not just to go back to the unmatched strategic capabilities it had in its heyday but surpass those by a significant margin by strengthening resources and systems that allow them to:
- Identify a problem that resonates well with management of client and target companies. For example, the need for a car company to escape the vicious cycle of unhappy dealers and falling sales.
- Develop the jolt point-of-view about the issue- one that links with marketing, sales and consequently marketing communication strategy. As a strictly illustrative example (jolt point-of-views do not come easy and certainly not in the process of writing an article) say the refiguring of commercial relationship with dealers with the marketing and sales budgets being entirely concentrated on micro-marketing programs in each clearly identified dealer catchments.
- Figuring out the jolt point-of-view is one thing, administrating the jolt is quite another. It requires B2B communication and presentation skills of the highest order and must therefore be consciously nurtured.
However the agency must be careful with not going for the jolt strategy where it is not applicable. It is quite likely that a majority of sell situations will be amenable to the jolt strategy. However there will be areas where it will be immune.
For example a start-up that is already figured around a disruptive strategy in a market where the established players are frozen. Or say in a “comfort-food” category that actually booms in a downturn.
It will be evident to the thoughtful reader that the jolt strategy will be relevant to a wide variety of B2B categories and marketing situation.
In fact think tanks are already at work on this facet.
My nascent perceptions on the difference between the business strategies of agency 1 and agency 2 were crystallized by an article that I came across in the latest issue of HBR (my immediately previous post was also based on a HBR article. This venerable repository has started humming again as it does in every structural transition).
If you have anything to do with B2B marketing read it.
In a Downturn, Provoke Your Customers
by Philip Lay, Todd Hewlin, and Geoffrey Moore
HBR.org March 2009
I have worked at two large and successful agencies with diametrically different approach to selling their services (in the business of advertising you just don’t sell your services to potential clients but every major campaign or activity that you create and execute for a client is an act that succeeds a multi-step sales process).
One agency sells a final creative product. The starting point for it is the client brief. They rather scrupulously stay away from even probing the client’s business and marketing strategy.
Over the last decade or so, as the economy has boomed, this agency climbed the charts quickly and become by all reckoning the agency that represented the face of an advertising business that also boomed.
The agency’s creative product is constantly top class. And they did it by investing in resources and systems that were geared to converting a client-given advertising objective into breathtaking disruptive advertising that at the same time delivered on the objective fair and square.
I would call this approach to B2B selling as an approach that focused on the richness of the product-feature. It is akin to say an IT hardware selling on the efficacy of the machines in perhaps innovatively meeting clearly understood client needs expressed in terms of specifications.
The other agency made the client’s business its primary business. The top resources in the company were people who could and would sit at the table with the client company’s senior management and not just discuss the company’s business and marketing strategy but debate it.
The agency made its business to know everything they could know about the client’s business and market. Its middle and junior level would spend time and resources interacting with not just the marketing people in the client company but the sales people.
In many cases the agency co-crafted in many cases the marketing strategy with the client and crafted by itself the advertising objective. The agency than got on to creating advertising that met this objective.
The company’s biggest bottom-line contribution came when the agency managed to change the client’s perception of their own business! For example a client actually pulled investment in a new plant to manufacture the next generation of products as the agency proved to them that the market for the current generation still very large and profitable. Of course, this required a greater marketing and advertising thrust now instead of when the new plant would have opened two years later.
Such game-changing contributions allowed the agency to sit at the highest table with the client and enabled to make top dollar on that business.
Very many times the beginning of this game-changing contribution could be pinned to a seminal meeting where the agency’s top team delivered a ‘jolt’ to the client, a powerful marshalling of arguments that shifted client perceptions about their own business and established a fresh paradigm.
Not surprisingly, given the smaller share of resources and time allocated to the creative process, the agency delivered a middling-quality product (some will immediately argue that the best approach is to combine the approach of agency 1 and agency 2 but that would be, in my mind, asking uncle to be aunt too).
The agency did extremely well in the decade after liberalization that the Indian economy and companies were getting used to the new economic climate and testing opportunities, flexing muscle that had been until then in disuse.
Over the last decade or so, as company after company muscled their way to high growth under managements much more confident, this agency fell back to mediocre growth. It still was successful and but also-ran successful.
I would term this agency’s approach to B2B selling as a mix of solution-selling and consultative. It is what happens when an IT hardware company spends time and resources in developing along with the client the RFP, so to speak and then with the business locked supplies the hardware.
Over the last year the cycle has come full circle. The boom is gone and companies and managements should be searching for new paradigms.
But all indications are that most companies and managements are frozen in the headlights. They have cut out discretionary spending and frozen budgets whose principal strategy is cost-cutting.
Advertising agency budgets are being slashed and agency one- the ‘creative’ agency in the B2B product selling mode, by all reports, is also frozen in the headlights, busy with its own cost-cutting strategy.
Agency two is less talked about and more opaque. Some reports indicate that during the boom years the agency had nurtured self-doubt.
Its business and marketing strategy making and debating skills diminished as it flailed about to strengthen without much success its creative resources and product.
I do not know whether this agency realizes it,but with the “recession” the times are good for this agency to climb the market share chart and perhaps be the growth leader over the coming decade.
However it must go back to not just the old ways but raise the bar further by making the development and administration of the paradigm- changing jolt to its client’s central strategy.
To do so the agency will need not just to go back to the unmatched strategic capabilities it had in its heyday but surpass those by a significant margin by strengthening resources and systems that allow them to:
- Identify a problem that resonates well with management of client and target companies. For example, the need for a car company to escape the vicious cycle of unhappy dealers and falling sales.
- Develop the jolt point-of-view about the issue- one that links with marketing, sales and consequently marketing communication strategy. As a strictly illustrative example (jolt point-of-views do not come easy and certainly not in the process of writing an article) say the refiguring of commercial relationship with dealers with the marketing and sales budgets being entirely concentrated on micro-marketing programs in each clearly identified dealer catchments.
- Figuring out the jolt point-of-view is one thing, administrating the jolt is quite another. It requires B2B communication and presentation skills of the highest order and must therefore be consciously nurtured.
However the agency must be careful with not going for the jolt strategy where it is not applicable. It is quite likely that a majority of sell situations will be amenable to the jolt strategy. However there will be areas where it will be immune.
For example a start-up that is already figured around a disruptive strategy in a market where the established players are frozen. Or say in a “comfort-food” category that actually booms in a downturn.
It will be evident to the thoughtful reader that the jolt strategy will be relevant to a wide variety of B2B categories and marketing situation.
In fact think tanks are already at work on this facet.
My nascent perceptions on the difference between the business strategies of agency 1 and agency 2 were crystallized by an article that I came across in the latest issue of HBR (my immediately previous post was also based on a HBR article. This venerable repository has started humming again as it does in every structural transition).
If you have anything to do with B2B marketing read it.
In a Downturn, Provoke Your Customers
by Philip Lay, Todd Hewlin, and Geoffrey Moore
HBR.org March 2009
Thursday, February 19, 2009
Brand equity is fine. But what about customer equity?
I believe the current economic turmoil is not a recession or a depression. It is a crisis of transition. Transition in the very socio-economic structure that will change, at the deepest level, the way we relate to each other and on the surface level the way businesses and economies are run.
One of fundamental changes will be the disappearance of “valuation” as a key metric. By valuation I mean the hypothetical sum of money that a potential buyer would be willing to pay if he were to acquire a business lock, stock and barrel.
This is because the business of buying businesses will largely disappear. What will remain is the business of building business and running business profitably. Those of us old enough will recognize this as the way things were two decades ago.
The above seismic shift will see the re-emergence of a marketing fundamental.
Brands don’t create wealth. Customers do.
Attracting and keeping the highest-value customers is the cornerstone of a successful marketing program.
This was the thesis of an article published by Robert C. Blatberg & John Deighton titled “Managing Marketing by Customer Equity Test” in the July-August 1996 issue of Harvard Business Review.
In 1996 the article would have been trampled under the rush of salivating CEOs and investment bankers dreaming about ballooning brand valuations. I suspect that over the coming years reprint revenues for this article will see a spike.
Simply put customer equity is the net present value of all the customers of a business discounted for marketing rate of returns.
And once concepts like brand valuations are put aside, the simple objective of a business’s marketing program should be to maximize customer equity.
Maximizing customer equity has two distinct and equally important components. Maximizing customer equity contribution from customer acquisition and maximizing customer equity contribution from customer retention.
The second half of the twentieth century was the age of the mass media. And as a direct result of this, it was also the age of mass marketing.
Mass marketing by its very nature has difficulty in measuring effectiveness of its various components and in building predictive models.
However increasingly marketing is becoming interactive with pervasive individualized media like the Internet, mobile phones and increasingly RF id triggered shopper marketing programs.
In this new age of interactive marketing it is now possible to tightly define objectives of specific components of a marketing program and measure effectiveness.
This then allows the use of “Decision Calculus” to design marketing programs and budgets to maximize customer equity.
This decision calculus works on models built on tracking cost of acquisition against percentage of target population acquired and cost of retention against percentage of current customers retained.
The calculus is based on identifying the levels of acquisition and retention beyond which the marginal utility is negative.
Disruptive events can change this calculus dramatically.
For example in the early years of the courier business, the courier companies used regular scheduled flights and had no real control over delivery and thus customer satisfaction. In that scenario the acquisition yield curve was far better that the retention yield curve and most of the marketing budget was devoted to customer acquisition. However as big brands like Fedex acquired their own aircraft their control over customer satisfaction increased dramatically. This resulted in a change in retention yield curves and marketing budgets shifted in favour of customer retention.
In the case of IBM the shift of the market from high-value mainframes to low-value microcomputers prompted a shift in the yield curves in favour of customer acquisition, prompting a dramatic shift in marketing strategy.
It is my belief that increasingly as Interactive Marketing replaces Mass Marketing model based budgeting will become the norm and the key metric will be Customer Equity.
The concept of Customer Equity will also add a new metric to Marketing Audits.
The true measure of a company’s financial soundness lies not in its P&L account but in the analysis of its cash flows. The marketing soundness of a company does not lie in its market share or sales growth but in an analysis of the Customer Value Flow.
In conclusion it would be worthwhile for marketing thinkers in India to start examining the concept of Customer Equity closely and evaluate their current marketing strategy in the light of this old but newly relevant concept. It will be great preparation for the times to come.
One of fundamental changes will be the disappearance of “valuation” as a key metric. By valuation I mean the hypothetical sum of money that a potential buyer would be willing to pay if he were to acquire a business lock, stock and barrel.
This is because the business of buying businesses will largely disappear. What will remain is the business of building business and running business profitably. Those of us old enough will recognize this as the way things were two decades ago.
The above seismic shift will see the re-emergence of a marketing fundamental.
Brands don’t create wealth. Customers do.
Attracting and keeping the highest-value customers is the cornerstone of a successful marketing program.
This was the thesis of an article published by Robert C. Blatberg & John Deighton titled “Managing Marketing by Customer Equity Test” in the July-August 1996 issue of Harvard Business Review.
In 1996 the article would have been trampled under the rush of salivating CEOs and investment bankers dreaming about ballooning brand valuations. I suspect that over the coming years reprint revenues for this article will see a spike.
Simply put customer equity is the net present value of all the customers of a business discounted for marketing rate of returns.
And once concepts like brand valuations are put aside, the simple objective of a business’s marketing program should be to maximize customer equity.
Maximizing customer equity has two distinct and equally important components. Maximizing customer equity contribution from customer acquisition and maximizing customer equity contribution from customer retention.
The second half of the twentieth century was the age of the mass media. And as a direct result of this, it was also the age of mass marketing.
Mass marketing by its very nature has difficulty in measuring effectiveness of its various components and in building predictive models.
However increasingly marketing is becoming interactive with pervasive individualized media like the Internet, mobile phones and increasingly RF id triggered shopper marketing programs.
In this new age of interactive marketing it is now possible to tightly define objectives of specific components of a marketing program and measure effectiveness.
This then allows the use of “Decision Calculus” to design marketing programs and budgets to maximize customer equity.
This decision calculus works on models built on tracking cost of acquisition against percentage of target population acquired and cost of retention against percentage of current customers retained.
The calculus is based on identifying the levels of acquisition and retention beyond which the marginal utility is negative.
Disruptive events can change this calculus dramatically.
For example in the early years of the courier business, the courier companies used regular scheduled flights and had no real control over delivery and thus customer satisfaction. In that scenario the acquisition yield curve was far better that the retention yield curve and most of the marketing budget was devoted to customer acquisition. However as big brands like Fedex acquired their own aircraft their control over customer satisfaction increased dramatically. This resulted in a change in retention yield curves and marketing budgets shifted in favour of customer retention.
In the case of IBM the shift of the market from high-value mainframes to low-value microcomputers prompted a shift in the yield curves in favour of customer acquisition, prompting a dramatic shift in marketing strategy.
It is my belief that increasingly as Interactive Marketing replaces Mass Marketing model based budgeting will become the norm and the key metric will be Customer Equity.
The concept of Customer Equity will also add a new metric to Marketing Audits.
The true measure of a company’s financial soundness lies not in its P&L account but in the analysis of its cash flows. The marketing soundness of a company does not lie in its market share or sales growth but in an analysis of the Customer Value Flow.
In conclusion it would be worthwhile for marketing thinkers in India to start examining the concept of Customer Equity closely and evaluate their current marketing strategy in the light of this old but newly relevant concept. It will be great preparation for the times to come.
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