The dawn of marketing’s new golden age
Marketers
are boosting their precision, broadening their scope, moving more quickly, and
telling better stories.
Science
has permeated marketing
for decades. Fans of the television dramaMad Men saw a
fictionalized encounter when an IBM System/360 mainframe computer physically
displaced the creative department of a late-1960s advertising agency. In
reality, though, the 1960s through the early 1990s witnessed a happy marriage
of advertising and technology as marketers mastered both the medium of
television and the science of Nielsen ratings. These years gave birth to iconic
advertising messages in categories ranging from sparkling beverages (“I’d like
to buy the world a Coke”) to credit cards (“American Express. Don’t leave home
without it”) to air travel (“British Airways: the world’s favourite airline”).
Until recently, marketers
could be forgiven for looking back wistfully at this golden age as new forces
reshaped their world into something completely different. These new trends
include a massive proliferation of television and online channels, the
transformation of the home PC into a retail channel, the unrelenting rise of
mobile social media and gaming, and—with all these trends—a constant battle for
the consumer’s attention.
The
resulting expansion of platforms has propelled consistent growth in marketing
expenditures, which now total as much as $1 trillion globally. The efficacy of
this spending is under deep scrutiny. For example, in a survey of CEOs, close
to three out of four agreed with the following statement: marketers “are always
asking for more money, but can rarely explain how much incremental business
this money will generate.”1 Chief marketing
officers (CMOs), it appears, don’t disagree: in another recent survey, just
over one-third said they had quantitatively proved the impact of their
marketing outlays.2 Paradoxically,
though, CEOs are looking to their CMOs more than ever, because they need
top-line growth and view marketing as a critical lever to help them achieve it.
Can marketers deliver amid ongoing performance pressures?
In
this article, we’ll explain why we think the answer is yes—and why we are, in
fact, on the cusp of a new golden age for marketing. At the core of the new era
are five elements that are simultaneously familiar and fast changing. The first
two are the science and substance of
marketing. Leading marketers are using research and analytics to shed light on
who buys what, and why; who influences buyers; and when, in the consumer
decision journey, marketing efforts are likely to yield the greatest return.
That understanding, in turn, is making it possible for marketers to identify
more effectively the functional benefits that customers need, the experiences
they want, and the innovations they will value.
But
this isn’t just another missive on the power of big data. Organizationalsimplicity is
fueling speed, and story is pulling things
together while inspiring both the customer and the organization. Happily, the
story just seems to get better as creative minds express themselves through
digital means, and it then echoes and expands through social media and
user-generated content. As you’ll see, the emerging new rules for marketing
extend well beyond data and analysis, crucial though those are, and even
transcend the marketing organization itself.
Science
Advances in data, modeling,
and automated analysis are creating ever more refined ways of targeting and
measuring the returns on marketing investments, while generating powerful new
clues about why consumers behave as they do. Long gone is spending guided
mostly by intuition and focus groups. Instead, organizations are seeking
greater precision by measuring and managing the consumer decision points where
well-timed outlays can make the biggest difference.
Big data is a term that’s
often used to describe this transition. But it’s not just big data; it’s also
big research. A major consumer company investigating the decision journey for
its products recently undertook a consumer study, collected through online
surveys, on a massive scale and at a speed that would have been unimaginable in
the days of mall-intercept interviews. The project, which involved more than
10,000 surveys over the course of a month, uncovered material differences
between how the company and consumers were thinking about the category, while
also explaining what drives choice at each stage of the journey. These insights
are now being used to change brand strategy, product-portfolio design, and
marketing campaigns. The potential impact runs into billions of dollars in
additional revenue.
While much recent marketing
science has played out in the measurement and targeting of advertising and
promotion expenditures, many consumer companies are increasing their focus on
in-store behavior: how promotions, traffic flows, and physical engagement with
products affect sales. Capturing and analyzing data on such issues has become
more feasible in recent years thanks to low-cost sensors that can be embedded
in products, as well as the ability to capture and analyze huge amounts of
unstructured data from store videos—and even to track shoppers’ eye movements.
The
impact goes beyond marketing and product teams. Marketing science is boosting
the precision of real-time operating decisions. At a major hospitality company,
marketing analysts are able to get a read on the performance of a particular
property or category over a weekend and then drill down on individual customer
segments to assess how to make improvements. If the data show that a profitable
segment of weekend travelers are shortening their stays, the company can create
special offers (such as late checkouts or room upgrades) to encourage repeat
business.3 Or consider how one
industrial-products company revamped its highly fragmented portfolio of more
than 500 SKUs sold to customers in a diverse set of industries. Prices varied
widely even for the same products, without any clear reasons as to why,
hindering efforts to manage margins. An analytical tool that could scan 1.3
million transactions helped the company redraw customer segments, identify
products with opportunities for pricing flexibility, and recommend new prices.
Ultimately, it reset about 100,000 price points.
More scientific marketing
means that CMOs and other senior leaders need enhanced analytical skills to
exploit data possibilities more fully and stay ahead of the whirl of
developments. One CEO we know believes it’s time to create a position—marketing
technology officer (MTO)—that’s rooted both in technology and domain knowledge.
Knowing what can be automated, when judgment is required, and where to seek and
place new technical talent are becoming increasingly central to effective
marketing leadership. That is intensifying the war for specialized talent as
traditional marketing powerhouses bid against high-tech companies for needed
skills.
Substance
As more advanced marketing
science and analytics take hold, they are making it increasingly natural for
marketing to go beyond messaging and to shape the substance of the business,
particularly the experiences of customers, the delivery of functional benefits,
and the drive to develop new products and services. Armed with information
about customers and a company’s relationships with them, the CMO is
well-positioned to help differentiate its products, services, and experiences.
That’s good, because digital
innovation, transparency, and customer-centricity have raised expectations
across the board. In automobiles, as sensor technologies proliferate and
onboard computing power increases, consumers are now starting to expect that
collision-avoidance and digitally-enabled safety systems will become part of
manufacturers’ offerings. (Luxury carmakers already are making sophisticated
safety options part of their marketing story.) In retail, brands like H&M,
Topshop, Uniqlo, and Zara have harnessed the consumer’s desire to have it all
by bringing mass-market prices to the colors, fabrics, and designs of high
fashion. Simultaneously, Amazon and other digital players are pressuring
brick-and-mortar retailers, which are responding both by retooling their supply
chains to enable faster restocking and one-day delivery and by creating new
advertising messages around the in-store pickup of online orders.
Marketers are well placed
to help their organizations meet the rising bar by, for example, making the
case for customer-care initiatives and for consistency in the customer
experience. A better one became the heart of a marketing campaign at European
energy supplier Essent, a subsidiary of RWE. To ensure that the company
delivered on the promise, the CEO named the chief of marketing to lead the
initiative. Among the successes: making customer onboarding less cumbersome by
cutting process steps from seven to two. Marketing also took the lead in
efforts to create new products that customers wanted. The CMO led a cross-functional
team of sales, IT, and product development to produce Essent’s smart,
Internet-connected E-thermostat, for instance. Some of its functionality was
cocreated with customers.
Similarly, marketing has
taken a leadership role in designing and setting standards for Daimler’s highly
digital customer-experience brand, “Mercedes me.” The digital platform provides
customers with automated appointment booking, personalized financing, a chance
to cocreate ideas, access to maintenance data from sensor-enabled automobile
diagnostics, and even quick access to Daimler’s car-sharing and taxi
services—for use on business trips, for example. (See “Marketing the Mercedes
way,” forthcoming on mckinsey.com, for more on the role of marketing at the
company.)
These efforts and many more
like them are extending marketing into the guts of the business, and most would
not have been possible just a few years ago. The power of today’s digital tools
and the scientific approaches they make possible are not only enabling a more substantial
role for marketing but also giving it opportunities for real-time impact.
Story
Even as marketing reaches
new heights with technology-enabled measurement, the importance of the story
hasn’t diminished. But ways to tell it are morphing continually as the stuff of
storytelling encompasses richer digital interactions, and mobile devices become
more powerful communications tools. In this world, creativity is in greater
demand than ever.
Google’s
“Dear Sophie” advertisement is an example of the modern art form. It tells the
story of a father writing to his daughter as she grows up, with the narrative
demonstrating how Google search, Gmail, and YouTube can be new channels of
human connectivity.4 (For more on how
Google seeks to connect, see “How Google breaks through,” forthcoming on
mckinsey.com.) P&G’s “Pick Them Back Up” spot for the Sochi Olympics (part
of the ongoing “Thank You, Mom” campaign) is another moving story. It
dramatizes the moms who were there for their kids throughout the years of hard
training, who picked them up when they fell, and who deserve celebration as the
unsung heroines. It’s hard to watch these commercials and not tear up, at least
a little.
Chanel’s
recent launch of the new No. 5 perfume offers a good window on how stories are
evolving beyond traditional video. Over a decade after their first
collaboration, creative chief Karl Lagerfeld has again partnered with film
director Baz Luhrmann to produce a short film on a woman whose lifestyle
embodies the brand. Their latest effort—“The one that I want”—stars model
Gisele Bündchen and features the perfume, along with clothing and other Chanel
products. Beyond the film itself, a series of YouTube videos extend the
campaign with shorts on the making of the film, interviews with Luhrmann on
both projects, behind-the-scenes footage from Chanel’s studio, and more.5 All of this is
designed to amplify the lifestyle message of the fragrance’s launch in a way
that traditional TV or print couldn’t accomplish.
New media also dictate that
marketers relinquish control of the story as digital interactions with
customers become more frequent. Customers want to interact with stories and
modify them on social media. Following the kinds of story rules that once made
board members and CEOs comfortable is no longer feasible. Social-media programs
are consuming a larger share of many marketing budgets. A number of major
consumer companies are using interaction centers to monitor and participate in
social-media conversations as they develop, sometimes including the promotion
of discussions on corporate social-media channels.
Agency-management issues
also are an important piece of the puzzle. Talent scarcity, evolving digital
storytelling, and perceived institutional rigidities have opened new debates
about the best ways to access creativity. Some companies, like Chanel, are
enhancing their control over the story with supplemental digital content. Other
global marketing leaders are bringing in-house more of their story muscle,
particularly when it involves lighter message content for social media.
Agencies are responding. Many are acquiring more digital talent and working to
break down silos to overcome perceptions that they are actually geared to
bigger productions and may lack the digital and story skills to handle new
content in an agile, integrated way. All this is very much in flux, suggesting
that leaders who aren’t asking fundamental questions about the roles of (and
fit between) agencies and internal marketing teams stand the risk of being left
behind.
Speed
In a digital economy,
marketing is no longer a “batch” process but a continuous one. Consumer
preferences change with stunning velocity, as do the dynamics of markets and
product life cycles. This culture of urgency means that marketers need a new
agility, plus the management skills and organizational clout to bring other
functions together at a higher clock speed.
How speed is achieved, of
course, will vary by company and industry. A number of CMOs we know are setting
the terms of how functional units should collaborate and spelling out what the
entire organization needs to know to get new products to market at a stepped-up
pace. In these cases, marketing becomes the glue across the organization,
providing oversight and coordination.
To
speed up its digital tempo, Nestlé’s marketing organization launched
digital-acceleration teams. These specialists train business units and
functions in the skills needed to be effective in digital marketing and social
communications. Nestlé’s country units have adopted the approach, as well,
allowing them to adapt the digital training to local market conditions, while
adhering to core, company-wide standards.6
At Google, lead times for
new products are continually shrinking. Internal teams are attuned to putting
products in front of consumers and then, in real time, to bringing back
insights in a cycle of testing, learning, and iterating. Marketers are central
to this process: they work to develop close relationships with
product-development teams in order to inject their knowledge of user needs into
how products are developed. That helps create a vision of the product from the
user’s eyes, and one that engineering teams are eager to create. Achieving that
shared vision between product developers and marketers is a key element of
speed in formulating new products and features. The time-to-market benefits of
better information and more fluid collaboration extend to a wide range of
companies, sectors, and business functions. Consider, for example, how data and
collaboration are increasing the speed and agility of B2B sales teams. (For
more, see “Do you really understand how your business customers buy?,”
forthcoming on mckinsey.com.)
Simplicity
Complexity is the enemy of
speed, which is a big reason why a number of leading marketers are reforming
their organizations. Too often, expanding geographic footprints, product
proliferation, and new arrays of channels and digital specialties have led to
complex hierarchies, silos, communication gaps, and redundancies. But these can
be tamed.
For example, one
telecommunications company realized that a cumbersome organizational structure
was getting in the way of delivering the top-notch customer service that the
CEO had designated as a strategic priority. He created a unit combining
existing call centers and a newly formed social-media customer-care group. The
leader of the unit reports directly to him. Proximity to the top of the company
allows the new team to collaborate more smoothly across the organization, while
signaling the importance of the customer experience.
Many consumer marketers are
using technology to reduce complexity. They are embracing internal social-media
platforms to encourage the generation and sharing of ideas, which helps speed
up problem solving across the organization. Daimler, meanwhile, reorganized its
marketing and sales departments around the idea of the “best customer
experience.” It created a new customer-experience function bundling several
headquarters functions into one that maps the entire customer journey, with the
goal of locking in a consistent brand experience throughout the world.
Simplifying working
relationships with advertising and other media agencies is another goal for
many marketing organizations. Trade-offs abound: specialist agencies have
expertise in new digital-content formats and delivery channels, but they aren’t
always full-service shops. Larger agencies offer more services, but the
strengths of many still lie in traditional media. Marketers building teams of
employees with strong skills in digital content and delivery are bringing more
activities in-house, but bulking up can create complexity and slow things down.
And of course, simplicity can’t come at the expense of great creative output.
In our work with global
marketers, including many leading-edge practitioners, we are seeing significant
progress in each of these five dimensions. As you think about the implications
of science, substance, story, speed, and simplicity for your organization, we
suggest that you ask yourself five questions:
1. Are we taking advantage of
the science of data and research to uncover new insights, or are we working off
yesterday’s facts, assertions, and heuristics?
2. Do we fully exploit the
power of marketing to enhance the substance—that is, the products, services,
and experiences—we offer our customers, or are we just selling hard with a
“me-too” mind-set?
3. Do we have a clear brand
story that echoes through cyberspace, or do we feel that we aren’t quite
capturing hearts and minds?
4. Have we created simplifiers
within our organization, or have complex matrices become a logjam?
5. Are we faster or slower to
market than our competition?
Although this may seem like a lot to handle,
the rapid changes and fast-breaking opportunities facing marketers in the 21st
century suggest to us that the best ones will have good answers to all of these
questions. In our opinion, those that do will not only enjoy above-market
growth, they will define the next golden age of marketing.
byJonathan Gordon and Jesko Perrey
http://www.mckinsey.com/insights/marketing_sales/The_dawn_of_marketings_new_golden_age?cid=mckgrowth-eml-alt-mkq-mck-oth-
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