Is This a Golden Era for Marketing Productivity?

This should be a good time to be a marketer and a consumer as well, suggests Jim Heskett. More focused sales, less waste in advertising, an industry in tune with its best customers. Is this your experience? Do you think marketing has hit its stride? Can it?
by James Heskett

Summing Up

Questions raised in this month's column about the possibility of an era of marketing productivity based on innovative research techniques evoked a number of skeptical comments. However, in defense of such techniques, B. V. Krishnamurthy pointed out that research has shown that "95 percent of new products fail within five years ... To the extent that a few, well-chosen customers might provide valuable insights into what would improve the quality of life, Professor Zaltman's ideas might be just what marketing has been looking for..."

A more common line of thinking among respondents concerned the misuse of such techniques. As Tom Henkel put it, "I'm sure the same companies that wasted time and money on poorly designed surveys and focus groups will engage in similarly misguided neuroscience and psychological marketing initiatives."

Svetodar Yosifov raised an equally interesting question of whether it is more important to obtain the thinking of a few potential customers or to focus on dissatisfied current users of a product or service. As he said, "Improving the ways in which a company listens to its customers and actually implements the customers' 'voice' into action is the way to reach a 'golden era' in marketing productivity."

Whether the real potential for improvement in marketing productivity primarily lies in the minds and behaviors of existing or potential customers will be a continuing source of debate. To the extent that both groups are important to a marketing organization, which group is addressed most effectively by emerging techniques relying on neuroscience, particularly the exploration of the subconscious feelings that may or may not drive behavior? Will such techniques enable an organization to anticipate the desires and needs of significant numbers of customers? Or will it lead to the introduction of new products and services that fail because they are ahead of their time or based on misinterpretations of consumers' subconscious thoughts? What do you think?

Original Article

Work on several fronts suggests that we should be experiencing a resurgence of productivity in marketing, measured in terms of less waste in advertising, more clearly focused sales effort, and fewer product, service, and brand failures. However, it also raises interesting questions.

The 80/20 rule describes many phenomena faced by management. That is, for example, roughly 20 percent of employees experience 80 percent of accidents on the job. And roughly 20 percent of customers provide 80 percent of sales. Focused strategies can be based on this kind of information. Recently, managers in many businesses are concluding that the proportion of a firm's customers that account for nearly all of its profits may not exceed 10 percent when one takes into account the significant impact of so-called "apostle/owners" on a business. These are customers who are loyal, "viral" in the sense that they tell many others of their satisfaction, and influential enough to change others' buying patterns.

They are also customers who identify so closely with a product, service, or company that they provide valuable advice concerning product improvements and even new product ideas. The identification and "employment" of a relatively small number of these customers on behalf of a product or service can greatly improve both the efficiency and effectiveness of a marketing strategy. And it is made increasingly viable by Internet-based services.

Similarly, the search for more effective ways of developing and positioning brands, directing marketing messages, and improving products and services may be leading away from vast surveys or focus group inquiries of consumers' conscious reactions. Instead, they may increasingly be replaced with interviews of small numbers of individuals whose unconscious thoughts and reactions, often unknown even to them, are "unlocked" through concepts based on neuroscience and psychology.

That is one conclusion that can be drawn from Professor Gerald Zaltman's thought-provoking new book, How Customers Think. Why not mine ideas in the subconscious, what Zaltman calls the "mind/brain," where 95 percent of our thinking takes place? Zaltman maintains that with relatively small numbers of in-depth individual interviews employing carefully-designed questions posed to customers representative of selected market segments, insights can be gained to increase the probability of success in building brands and positioning products and services. The process is effective in terms of both results and costs.

All of this suggests that what we experience as consumers may be influenced by fewer and fewer "voices" from the market. The promise is that we will like what we experience, because it will involve such things as fewer irrelevant messages, better availability of products and services, and product performance geared to our real needs.

Is this really likely to happen? Will these phenomena and concepts fuel a golden era for marketing productivity? Or are tendencies to place our brand, product, and service futures in the hands of so few an overreaction to the perceived waste resulting from traditional approaches to the design of marketing strategies? What do you think?

    • Anonymous

    Two thoughts:

    (1) While there is no doubt that information technology has had a tremendous impact on marketing, they key question in my mind is how marketing executives are able to use all these new data in their decision making, particularly when the data don't support their own (strongly embedded) beliefs.

    (2) For many retail brands, the quest to maximize volume is still more important than focusing on the top 20 percent of consumers who provide the top 80 percent of profits. If you don't turn, you can't stay on the shelf.

    • Anonymous

    What's old is new again! I find it interesting that "traditional" marketers are still seeking the knowledge that direct marketers have owned for years: how to productively identify, solicit, and court their best customers.

    It isn't rocket science; direct marketers use purchase patterns and demographic and psychographic information to identify prospects who are most likely to become highly loyal new customers. Then they work this customer base, drawing information from this group like water from a sponge. It is precisely the ability to test and measure that direct marketing offers and that allows its practitioners to reduce marketing waste and hone messages and product offers tightly.

    I think we are now passing through an era of improved productivity in direct mail, in particular, as evidenced by the significant declines in number of pieces mailed domestically. Direct marketers above all others recognize when it's time to pick up the ball and go home: when response rates drop below your ability to generate profits, you stop mailing, pull your infomercial, and change your strategy pronto.

    • Ian Ricketts

    We have become increasingly more efficient at creating that moment of desire in many examples of marketing. The difficulty with sustaining this desire through marketing is in staying ahead on the curve of what's going to be the next desirable product. I'm not interested in sameness. Staying on the fringe that borders exciting and too out-there is where efficiencies are possible; even an average marketing plan won't decrease efficiencies that much. Design of the marketing strategy is found first where the product stands in relationship to the curve.

    • Anonymous
    • Fortune 250 manufacturer

    As in any profession or trade, the notion of better efficiency is alluring ... but is this a "golden era"? I don't think so. I suspect there are bellwether consumers, but finding them and assuming that their judgments will remain at the top of the heap seems preposterous. What determines marketing waste, in my mind, is a willingness to spend resources on trivial differences in a fight for overestimated benefits. The consumer doesn't create that dynamic; the managements of companies do. Bad strategies and poor design thinking with limited differentiation seem bigger culprits than the tools now in use to support marketing.

    Why will our society tolerate spending tens of millions of dollars a year for a celebrity endorsement when it drives the cost of the product or service up ... and frequently, at least in my view, can't possibly pay for itself? Why put demand creation in the hands of so few? Surely we can be more creative than that!

    • Tom Henkel
    • President, Baiting Brook Research, Inc.

    I'm not sure "golden era" accurately describes the challenges facing marketing. I am also not convinced that the months ahead will prove to be a particularly more productive time for marketing.

    I do agree with Professor Heskett's basic argument that the currently accepted approaches to marketing (and the evaluation of marketing effectiveness) need updating. New marketing techniques will undoubtedly gain popularity. Some will turn out to be fads; others will have long-term staying power.

    New marketing techniques will not, however, necessarily improve productivity. I'm sure the same companies that wasted time and money on poorly designed surveys and focus groups will engage in similarly misguided neuroscience and psychological marketing initiatives. I am also certain that companies that ignored the results of surveys and focus groups will ignore the results generated by newer marketing techniques.

    The companies that best understand their market, products and customers will ultimately enjoy the strongest marketing success. Continuous awareness of market conditions coupled with a commitment to rapidly adapt to changes in the marketplace are the real hallmarks of marketing success. New tools and approaches to marketing will only prove effective when used as part of an intelligently managed marketing program that has the strong support of senior management.

    • C.J. Cullinane

    I do not believe there is a major change in marketing productivity. There has always been an apostle/owner crowd that has loyal followers. The "tattoo" companies/brands (companies or brands that people have tattooed on themselves) such as Harley Davidson, Corvette, and Nike have a following that buys clothes, novelties, and tattoos.

    Professor Zaltman's mining of ideas is similar to a "spybot" in our computers. It scans and compiles marketing data, then forwards this information to a central date center. But, I believe, our wants change faster than the response of the marketers. Also, sometimes what we really want is not what we say we want.

    The emphasis on productivity, be it marketing or manufacturing, is more cost-containment than a quantum breakthrough in methods.

    • B.V. Krishnamurthy
    • Executive Vice-President and Professor of Strategy, Alliance Business Academy, Bangalore, India.

    Two reports in the print media during the last month render this question very relevant. The first report suggests that at least eight out of 10 new products fail. The second indicates that 95 percent of new products fail within five years. What then is one to make of terms that have appeared on the marketing horizon in the last decade as the ultimate solutions—pinpoint marketing, customer lifetime value, customers as partners, et al.?

    Professor Zaltman's prescription appears to be an attempt to simplify, indeed demystify, many of the complexities that have besieged marketing in recent years. The more use of sophisticated tools and techniques, the higher the probability of failure, or so it seems.

    One is reminded of the great Akio Morita's intuition overruling the market research data relating to the Walkman, resulting in one of the greatest product triumphs. Perhaps, Professor Zaltman's ideas are an indirect call to an increased use of intuition and gut feeling, whether at the conscious or subconscious level, as opposed to the use of rigorous techniques and tools.

    At a different level, one also needs to address a more fundamental question: How often do consumers buy products which they cannot do without, and how often do they buy due to external pressures—saturation advertising, intense promotion, or peer pressure? It is time for marketing and marketers to realize that the concept of diminishing returns may be around the corner for marketing concepts and strategies as well.

    The future of marketing productivity may well be determined by the extent to which products can improve the quality of life in a holistic sense, rather than trying to create needs where none exist. To the extent that a few, well-chosen customers might provide valuable insights into what would improve the quality of life, Professor Zaltman's ideas might be just what marketing has been looking for rather elusively.

    • Anonymous

    To understand our market, we should segment it and analyze, with the greatest possible precision, its desires, hopes, preferences, illusions, and current possibilities, as well as its closeness to and distance from the products we will offer it. [Original response in Spanish: Para conocer a nuestro mercado, debemos segmentarlo y luego analizar lo más preciso posible: sus deseos, sus esperanzas, sus gustos, sus ilusiones, sus posiblidades actuales, su cercania y lejania con los productos que le ofreceremos.]

    • Svetodar Yosifov Business Development Specialist Naftex Bulgaria Holding

    In my opinion, the case of business today reaching a "golden era" of marketing productivity has little to do with observed phenomena about the proportion of customers accounting for the profitability of the company.

    My experience has shown, and scientific research has proven, that optimizing a different ratio is more relevant when creating a marketing strategy for the business environment today. The 5/95 ratio is the percentage of voices of unsatisfied customers actually reaching management's ears.

    All of us are familiar with the cliché "What you can't measure you can't manage!" In the case of the above laid-out thoughts, we can transform the phrase into: "It is impossible to manage something that you don't know exists!"

    Improving the ways in which a company listens to its customers and actually implements the customers' "voice" into action is the way to reach a "golden era" of marketing productivity. In this way, marketing strategy will cater more closely to the needs of the customer and will actually treat the customer as a partial employee and a free advertisement.