Editor's Note: Harvard Business School professor John Quelch writes a blog on marketing issues, called Marketing Know: How, for Harvard Business Online. It is reprinted on HBS Working Knowledge.Many dismiss marketing as manipulative, deceptive, and intrusive. Marketing, they argue, focuses too much of our attention on material consumption. More recently, Benjamin Barber, in his 2007 book Consumed, claims that marketing is "sucking up the air from every other domain to sustain the sector devoted to consumption." He is correct. Coca-Cola, Nike, and Starbucks command more loyalty among many consumers than any political party, trade union, church, or mosque. Indeed, Starbucks founder Howard Schultz sought to make his coffee shops the "third place" in our lives, after home and work. Marketing is an American success story. No country on earth is better at marketing than the United States. The latest Interbrand listing of the most valuable global brands reveals seven American brands in the top ten and sixty in the top hundred, more than twice the expected numbers based on the United States' command of 28 percent of the world economy.
“In most product categories in most countries, there are strong local brands reflecting local tastes that coexist alongside global brands.”Marketing by producers to consumers is as old as the bazaar. But modern marketing is more than just selling. It involves the design of products and services in response to consumer needs, latent or explicit. It involves branding these products and services, communicating their benefits to intermediaries and end consumers, and distributing them. All of these activities involve value creation. In return, producers extract value through the prices they set in the marketplace. The advent of commercial radio and, after World War II, commercial television enabled marketers to drive home the benefits of their national brands and to announce quickly the launch of new products and services to a nationwide audience. The willingness of producers to build their brands through advertising supported the emergence of a diverse array of media for the American consumer to enjoy. Moreover, these investments in marketing attracted talented businesspeople into the marketing field. Best practices in marketing were documented so its effectiveness improved over time.
Why Marketing Developed In The U.S.By the 1960s, American brands had benefited from so much cumulative investment in marketing that they were unquestionably the strongest brands in the world. There were three reasons why marketing developed in the United States ahead of Europe. First, the sheer size of the U.S. demanded it. Second, the ambitions of American inventors and entrepreneurs demanded the broadest possible distribution. The Wal-Mart mission, for example, is to lower the cost of living for everyone everywhere. Third, American society was open to marketing while, in Europe, business or "trade" was viewed as less worthy a profession. Marketing in the United States benefited mightily from the endorsement of management guru Peter Drucker, who famously stated: "Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs." Warren Buffett, America's most celebrated investor, has religiously invested in companies with strong brand names such as Coca-Cola and American Express. To this day, the proportion of company chief executives who have risen through the marketing ranks is much higher in the United States than Europe.
The marketers at Wal-Mart, Google, and Lenovo are in the best tradition of Henry Ford and his Model T. They seek to democratize access to their products by bringing good quality to the mass market at an affordable price. And not just the domestic mass market, the global mass market. In his landmark 1983 article "The Globalization of Markets," Harvard Business School's Theodore Levitt wrote of "the one great thing all markets have in common is an overwhelming desire for dependable, world-standard modernity in all things, at aggressively low prices." With the fall of communism in the 1980s and 1990s, American brands, ambitious, confident, and flush with capital soon established beachheads in the emerging economies. Local consumers, long denied access to Western brands and often victims of shoddy local imitations, were quick to try and adopt the former forbidden fruit.
Was this democratization of access to American brands a Trojan horse for American cultural imperialism? No. In most product categories in most countries, there are strong local brands reflecting local tastes that coexist alongside global brands. Retailing and distribution remain largely local. And American consumers show a desire for increasing cultural variety in their life experiences, eating more often at ethnic restaurants and vacationing more often in faraway places. In many categories, increased global demand drove costs and retail prices down, prompting global production to shift to economies with lower input costs. The manufacture of personal computer components is now concentrated in Asia and manufacturers are constantly seeking to drive costs lower still in order to hit retail price points that will enable additional millions of poor people to buy in. As prices have fallen, Asian brands such as Asus and Acer of Taiwan have gained share while IBM sold its PC business to Lenovo.
“Critics of marketing tend to overestimate the level of intentional deception and the vulnerability of consumers.”In addition to globalization, a second force enabling marketing to bring good quality to the masses is technology. Today, the Internet, supported like most of the diverse media that preceded it by brand advertising rather than subscription, is further democratizing access to markets. The ability of consumers to compare prices over the web irons out cross-border price differences and expands trade. A poor farmer in India can check commodity prices on the Internet before he sells his crop to the local buyer. Thanks to a progressive decline in data processing and storage costs, technology now enables marketers to offer consumers much more choice including the ability to tailor solutions to individual needs at only slightly greater cost. American Express and Harrah's Entertainment, both heavy investors in IT, now tailor their marketing communications to the buying patterns or sales potential of tightly defined consumer segments or, indeed, of individual consumers.
Engaged ConsumersThe interactive nature of the Internet means that customers are now engaged more than ever in the co-creation of brand meaning and the development of marketplace offerings. Procter & Gamble recently invited consumers to vote on suggested new flavors for Crest toothpaste. H.J. Heinz worked with Google to invite submissions of thirty-second video ads for Heinz ketchup; over 2,000 entries were received. Then-Senator Obama's website was an impressive vehicle for engaging voters, many of them new to politics, as donors, volunteers, and idea generators. Marketers aim to satisfy the needs of consumers at all levels of income wherever they live in the world, surely a worthy goal. Why then is marketing criticized so often? And why do marketers offer such little resistance? There are two main reasons. First, marketing is not a profession. Second, marketing is not a science.
Unlike accounting or the law, marketing is not a profession. Anyone can call himself or herself a marketer. The absence of entry barriers allows for greater creativity, imagination, and new ideas. But the flip side is that manipulation and deception of consumers by irresponsible marketers is all too common. Absent professional exams and codes of conduct, abusers of the marketing toolkit are subject only to the sanctions of the marketplace and the law. The vast majority of marketers are honest and respect their customers but, collectively, they need to work harder to expose and shut down the charlatans. At the same time, critics of marketing conflate their objection to harmful products such as tobacco with hostility towards the marketing toolkit harnessed to present them to the public.
They also tend to overestimate the level of intentional deception and the vulnerability of consumers. As advertising icon David Ogilvy famously said in an earlier era: "The consumer is not a moron. She is your wife." Perhaps marketers would be more self-confident about their contributions if marketing were a science with clear dos and don'ts. In fact, marketing is as much art as science, as much right brain as left brain. Many chief financial officers might still agree with John Wanamaker's famous adage: "Half my advertising is wasted. I just don't know which half." But our understanding of what works in marketing, how and why, has advanced greatly in the last twenty years. Low-cost data analysis enables marketers to understand what level and mix of incentives will produce behavior change, even down to the level of the individual consumer. Marketers have no interest in annoying consumers by delivering messages to those who are not interested in their products or services. It is now possible for chief marketing officers to calculate return on marketing investment and to report regularly to the corporate board progress against three or four brand and consumer health metrics that can predict subsequent business performance.
Even with these advances, marketers still do a surprisingly poor job of marketing Marketing. They do not appreciate, let alone articulate, the economic and social benefits of marketing. Marketplace exchanges are based on mutual trust between buyers and sellers. They create value for both parties. The billions of successful daily marketplace transactions are an important part of the glue that holds our society together. Good marketers offer consumers choices. Choice stimulates consumption and economic growth and facilitates personal expression. Good marketers provide consumers with information about new products and services, thereby accelerating their adoption. All these benefits are routinely overlooked as the 17 million Americans engaged in marketing, selling, and customer service routinely try to fly under the radar of social critics and go about their daily work contributing brilliantly but often unknowingly to our quality of life.
The above post is based on the article "Branded for Good" by John Quelch and Katherine Jocz that appeared in The American, November/December 2008. Join the discussion on Harvard Business Online.