March 2009

What happens next
The twin crises of an ailing economy and the collapse of mass media will force the adoption of a new marketing ethos that takes its cues from open source culture. By Stephen Shaw

In hard times like this, marketers are always on the front line of despair. Faced with shrinking budgets, cowed markets, sparse audiences and reluctant customers, their outlook grows gloomier every day.

As if that’s not enough to drive marketers onto the nearest window ledge, along comes this alarming forecast: ad spending is about to drop for the third successive year – the first time that’s been seen since the Great Depression.

It all adds up to massive disruption. Marketers everywhere are under pressure to adapt, quickly and responsibly - to do more, with less (yet again); to transform past practices; and to get ahead of the social media curve.

Change merchants are full of advice, with tips on “surviving the downturn”, “navigating the recession”, “changing the game plan”. But even after marketers have climbed out of this economic crater, there will be no return to normalcy. The business climate will be inhospitable to the wasteful, intrusive, self-absorbed habits of the past.

So how should marketers adapt to this climate change? What will the world look like after this economic apocalypse? How can they win back the confidence of consumers soured on consumerism?

The new normal
Consumer faith in the market may have crumbled but expectations are higher than ever. If customers can be “always on” —“twittering” their fleeting thoughts to each other — why would they settle for anything less from the companies they buy from? Why would they pay any more than they have to, if they aren’t getting something more in return? Why would they bother putting up with indifferent service, when time is even scarcer than money?

Today, what gets said by marketers through mainstream media is actually not all that important. What customers say — to each other, every day, through new media—is what counts now. A brand is no longer in control of its identity. The media gates have swung open to swarms of individual content producers. Customers are not just passive audience members anymore: they are taking creative ownership of the brands they care about, choosing to tell their own stories. Nor are they shy about ridiculing the brands that disappoint them, their snarky reactions are amplified by viral networks.
The forces that unleashed this market storm can be found in the ethos of open source software. Sharing ideas and information, for free, are a big part of that culture. Got a problem? Let the community know and see if anyone can help. This spirit of open collaboration permeates the online world. There is now a teeming population of social colonies ready to mobilize instantly around shared causes. Corporate miscreants are singled out for their misdeeds and shamed into acts of public contrition by a chorus of indignant voices in the blogosphere.

This libertarian code of openness, transparency and universal accessibility—of everyone having equal time on the podium —is challenging everything marketers have ever known about the art of persuasion (a “black art” in the view of most consumers). According to Proctor & Gamble’s global marketing chief Jim Stengel, “What we really need is a mindset shift”, he told a gathering of ad agencies last March. “A mindset shift that will make us relevant to today’s consumers”.

Threadbare doctrines
The first step toward recovery should be an admission of addiction. And marketers have been addicted —to “reach and frequency” media; to “Big Ideas”; to pamphleteering; to brand cosmetics.
The time has come to give up the conceits of the past. Let’s start with the faith based belief that building brand equity ranks above all else. That idea is an invention of “Mad Men”. Sure, a brand is useful shorthand for what a company stands for. But a brand isn’t built through proclamations from above. It is built by surpassing expectations. By pleasing even the hardest-to-please customers. By sensing what the market wants ahead of anyone else. By standing for something more than beating investor expectations.

Here’s another canard: that something said, enough times, in enough ways, will break down the barriers to resistance. Or that an ad campaign can lure customers on sentiment alone. Admittedly, that may have been true in a monochrome era when captive audiences actually existed. But media fragmentation took care of that. And the fact is that most consumers are oblivious to the ads that blitz them daily, hiding for cover behind electronic parapets, or just too busy multi-tasking to pay any attention.

Whereas the old AIDA model assumed a straight path from awareness to interest to sale, consumers today follow a meandering trail that crosses between online and offline channels, scouting for the best deals through search engines and aggregators, using rating tools to compare products, texting their friends for advice and filtering out exaggerated claims before finally narrowing down their options. But even though that digital trail is easily traceable, it just tells you where consumers have been. Much harder to divine is where they actually want to go.

And then there is the issue of accountability, a topic marketers would prefer to ignore and for good reason. Marketing has never been able to correlate its media investments with anything more than the size of the agency bill. (Which is why marketing budgets are the first to get chopped in recessionary times like now, and the average tenure of a CMO is less than two years.) As image advertising fades in prestige and gets crowded out by more response oriented options, brand awareness as a key indicator of success will succumb to measures of customer advocacy, retention and involvement.

Communal spirit
In spite of their adherence to threadbare doctrines, the job of marketers has never been more important. Because consumers are anxious to be heard – and today, the way most companies are structured, there is no one paid to listen. Market researchers aren’t trained to listen – their job is to search for proof points. Marketing, on the other hand, is the only group in charge of shaping future demand. It should have only one mission: to improve the lives of today’s customers – while anticipating the needs of the “text me” generation to follow. To avoid irrelevance, marketing must turn its energies from “telling and selling”, as Jim Stengel puts it, to a singular goal: creating value for customers.

Never mind Marketing 2.0 and all of that experimentation with new media. That’s just to see what sticks. Real change will only occur when openness and collaboration find expression in the selling and servicing of customers. The ultimate goal is not simply to persuade: it is —to use that frequently heard phrase—to engage. But those words, applied conventionally, are simply a euphemism for entrapment. To mean anything at all, they have to capture the zeitgeist of the open source culture: the willingness to treat customers as partners and not targets, to form a reciprocal pact where the exchange of ideas and information becomes a form of social currency.

What is needed is a next-generation marketing model that caters to hyper-informed and socially active consumers: one where marketing functions as a service, delivering escalating value with each interaction. This is not about incrementalism: moving the budget chips, say, from free TV to pay-per-click, or from direct mail to e-mail. And it is most certainly not about search engine optimization or mobile messaging or widgets. It is about reimagining the purpose of marketing and its interplay with society at large.

Age of enlightenment
Gaining insight into what customers value—and why—should be the starting point. But here’s the paradox: we have more data than ever to make marketing decisions, yet many decisions get made the way they always have: on a skewed version of the truth. More data does not always lead to greater knowledge, just as greater knowledge does not always lead to deeper insight. Because insight is dependent on abstraction—on the ability to amalgamate disparate bits of knowledge into a larger truth. But marketers tend to be regimented thinkers, who are often caught up with their own reflection in the mirror. They usually favour a literal interpretation of the facts over poetic speculation.

Marketing strategy is all about visualizing the possibilities —looking forward—thinking what no one else has thought. It is about standing out from the crowd: not just for the sake of being different, but to make a difference. It is also about making the right choices: knowing which markets to focus on, how much to invest, what opportunities to pursue. But mostly, strategy is about meeting the needs of customers - looking out for their interests - doing what’s right, always.

In this age of pervasive computing, smart devices, intricate, sprawling communication networks, every customer interaction can be a moment of truth – in fact, it often is. Today brand perceptions are formed on the quality of the customer interface. A great design will make that experience stand out. And that design works best if it is designed around the goals of key customer segments. That’s why the concept of segmentation remains valid even with the atomization of audiences and the shift to mass personalization. “If you’re not thinking segments,” Theodore Levitt once wrote (“The Marketing Imagination”, 1986), “you’re not thinking.” He added, “To think segments means to think beyond what’s obviously out there to see.”

What will really propel marketing into an age of enlightenment is access to the same “cloud computing” technology powering the consumer revolution. It is now quite feasible for marketers to skirt the IT roadblocks and deploy the CRM 2.0 applications they need to truly “engage” customers. The software-as-a-service model makes those tools affordable and easy to implement. In the time it takes IT to write a business case, marketers can be collaborating with customers, establishing listening posts and creating online communities for knowledge pooling. Instead of searching for customers to target, marketers can be inviting them to participate in the innovation process.
As the economy pulls out of this steep nosedive, marketers should take advantage of the lull to assert a more progressive vision. To do so means mastering new disciplines and becoming more courageous and less formulaic in their thinking – not easy for marketers hooked on mass media. It means listening to the “voice of the customer” instead of obsessing over “share of voice”. It means aiming to improve the experience of customers instead of merely trying to improve the aim of their messages. It means using technology to build trust instead of data banks. Above all, it means recognizing customers for what they represent: the sole reason for being.
A new model – for a new economic order.

This is the end of Part 1 of a five-part series by Stephen Shaw on the transformation of marketing. Stephen Shaw is senior vice president, Strategic Services with Kenna, a provider of managed solutions for marketing and sales. He can be reached at 905-361-4046 or via email: sshaw@kenna.ca