How marketing has lost the plot

How marketing has lost the plot

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Author: Hugh Davidson

I started in marketing 50 years ago, joining Procter & Gamble in 1959, the year The Marketing Society was founded. When I finished writing Offensive Marketing1 a bit later, I saw the book as a challenge for marketers to raise their game to Procter & Gamble and Johnson & Johnson level.

It is a challenge that, 50 years later, most marketers have failed to meet. The gap between the best and the rest has narrowed, but remains wide. A few, like Wal-Mart, FedEx, PepsiCo, Toyota and Tesco, have joined the best, but the number remains disappointingly small.

Ted Levitt's statement remains true: 'When it comes to the marketing concept today, a solid stone wall seems to separate word and deed. In spite of the best intentions and energetic efforts of many ... the effective implementation of the marketing concept has generally eluded them.'2

Since 1959, others – both practitioners and academics – have shared my obsession with bridging the Levitt gap. There are many outstanding marketers today, whom I greatly admire. Marketing has spread from a handful of detergent and confectionery companies 50 years ago, into high-tech, retailing, business-to-business, services, non-profits, and even government.

The Marketing Society, CIM and IPA3 have contributed importantly to this. Although marketing and marketers have taken a lot of stick, and will get more in this article, they can be proud of their achievements. There are hopeful signs. Marketing can change the world. But whole industries with a marketing bypass remain – e.g. financial services, travel and energy (see Laurie Young's article) – despite exceptions like First Direct, Nationwide and Kuoni.

In recent decades, one question has continued to trouble me: 'Can good marketing people transform companies with a marketing bypass?' I had seen excellent marketers join companies that were not customer driven, and leave in frustration, or even get fired.

Eventually, the likely answer clicked: 'Marketers can transform these only by persuading CEOs to adopt and implement customer-driven vision and values.' So I interviewed 125 global leaders in the US and UK, and confirmed this. The result was The Committed Enterprise, a book targeted at global CEOs, but also read by marketers.

You may wonder why I am still going on about best practice marketing after 50 years.

It's because I have as much belief today in marketing's potential as in 1959, and remain impatient to see it fully realised. To echo Richard Reed, 'Our job is to upgrade capitalism, to develop ... a new and improved version.'4

So my farewell effort is a new book: LISTEN! A Call to Revolution for Marketers. LISTEN! will be launched in 2010. I hope it will offend many people, and spur them into new directions.

THE SIX UNCHANGING WEAKNESSES OF MARKETERS

Effective marketing practice has been stifled by six enduring weaknesses, which have persisted for 50 years. Unless marketers fix them, effective marketing will remain a minority activity. Here they are.

1. No Agreed Definition of Marketing, or of What Marketers Do

Over 50% of people in finance, operations and IT have little or no idea what marketing is. Most of the rest, in both the US and UK, think it's advertising and promotion. 70% of CMOs in Europe say marketing's role is not clearly articulated within their organisation. Confusion remains between the marketing approach to business, involving every employee, and the role of the marketing department. There is an urgent need for agreed definitions for 'marketing' and 'marketers' – brief (under 20 words), clear to non-marketers.

2. No Agreement on Top Marketing Performance Indicators (MPIs)

Finance has four measures applicable to any business: revenue, PBT, cash flow and ROI. What is the marketing equivalent? Six possibles include market share, net promoter score, relative quality/customer satisfaction, price, investment levels, and some measure of innovation.5 If we don't have agreed measures, they won't be respected or reported.

3. Narrow Focus of Marketers

Early practitioners expected marketers to lead corporate strategy, business planning, mergers and acquisitions. This hasn't happened. Finance dominates these areas. Marketers have rarely controlled customer service, typically managed by cost-driven operations people; or contributed importantly to shaping vision and values, where most CEOs are desperate for skilled advice.6 Finally, most marketers passively accept their existing markets and segments rather than identifying new segmentation opportunities.7 Is it too late to change all this? No.

4. High Failure Rate of New Products/Services

This has continued at 80–90% for four decades. The high failure rate not only wastes resources, but also erodes respect for marketers.

5. Marketers' Inadequate Analytical and Numerical Skills

The left brain is analytical, the right intuitive and creative. Based on observation of thousands of marketers in 15 countries over 50 years, I conclude that most have stronger right brains. Yet the essential tasks of marketers are left brained: analysis, strategy, planning, developing briefs, cost management, budgeting.8

THE EMPTY MARKETING SANDWICH (see 'The abuse of marketing principles', below) Marketing still consists of a three step process:

1. identifying unserved needs

2. meeting them with superior and profitable products/services

3. communicating their appeal.

This essential principle is not delivering, and here's why:

  • about 90% of new products/services fail.10
  • the vast majority are 'pimply little me-too's or me-three's'1
  • there is a decline in consumer trust, and increasing gap between promise and delivery – the 'most likely driver of such scepticism is repeated bad product experiences.'11

Practice in step 1 seems to be improving.11 The impact of step 3 is influenced by the two prior steps. The real weakness is step 2. There is no beef in the marketing sandwich.

Worryingly, step 2 is usually implemented internally by marketers, while the others are largely executed by external agencies. Reasons for the empty marketing sandwich include:

  • genuine innovations can be expensive; budgets are annual.
  • innovation and commercial development are time consuming; marketers lack time, turn over quickly
  • attitudes – many marketers believe they are in commodity markets, where it is impossible to develop superior propositions, sustainable over time; P&G's CMO said, 'We don't believe there are any commodity categories _ I think that is a cop-out – bad marketing and an excuse'12
  • quick-fix mentality – lazy marketers quickly develop a 'me-too' offer, and brief external agencies to 'use your creativity to deliver a perceived advantage'.

Fortunately, a handful of companies, such as Apple, Google, 3M and Reckitt Benckiser, still do real innovation. For the majority who don't, the long-term consequences of serving empty marketing sandwiches will prove dire. The internet searchlights of blogging, social networking and comparison sites will increasingly focus on the filling, and mercilessly expose empty sandwiches.

The recruitment profile of marketers needs redefining, including more with prior experience in other departments, or an engineering background. Marketing business people are required. Many marketers are not commercial.

6. Marketers are Poor Listeners

I enjoy the company of marketers, but most, especially men, prefer talking to listening. Contrast that with engineers or accountants – they listen well.

Listening is essential to understanding others (especially customers), gaining respect and learning. Poor listening is linked to the other five weaknesses.

That's why my new book is called LISTEN!.

THE ABUSE OF MARKETING PRINCIPLES

The principles of marketing are enduring, little changed in 50 years. But practices to implement them have developed greatly.

Marketing has been a success for marketers, creating millions of marketing jobs worldwide. But rather than transforming businesses into places where marketing principles can flourish, marketers have often accepted environments where it is impossible to apply them (see the section headed 'marketers have failed to make organisations customer focused', below).

As marketers successfully established functional roles, they became more and more involved in daily maintenance work, leaving little time for strategy or innovation. Multiplying, they became more specialised.

Marketing is at heart entrepreneurial, centred on focused innovation. Yet the short timescales of companies,9 and the focus of marketers on day-to-day operations, have created a void. In attempting to pursue valid marketing principles within this unfavourable environment, many marketers have abused them. A prime example is the 'empty marketing sandwich' (see Box).

4. THE POISON OF DARK MARKETING

Marketing and marketers rank 'at the very top of the professional bastards' table, beside estate agents and traffic wardens'.13 Some would say they have truly earned their reputation as spinners and temporisers. That would be a little unfair. Most marketers are honest, and care about customers and quality. But fundamental questions are now being asked14, like: is marketing inherently evil? Is branding designed to mislead?

The success of books like No Logo and Fast Food Nation were a wake-up call to marketers. Bright spots keep sparking, but trust in brands,15 and the quality of customer service are declining.

Does this reputation matter? Yes, because it erodes ability to attract the best talent, and encourages more regulation.16 How have things come to this, when marketing was once seen as the route to a better future for customers? There are four reasons.

  • People associate marketing with selling, advertising, and promotion. They do not give marketers credit for product, service and value improvements.
  • Until fairly recently, marketers did not take ethics seriously. There is a long history of poor practice.
  • Some in sectors like tobacco, politics, financial services, mobile telecom, and travel, have routinely practiced Dark Marketing. Unfortunately Dark Marketing can be profitable.17
  • Most importantly, marketers keep churning out me-too products and services. This is unethical, and criminally lacking in ambition.

These elements have fed poison into the marketing system. Dark marketing covers actions that mislead, annoy or exploit customers, treat them unfairly or risk harm. This includes false claims, targeting the vulnerable, invading privacy, defective products, opaque pricing, spam, astroturfing, poor customer service and negative campaigning. Let's stop all this.

Marketers are now at the forefront of business ethics. Some are responding well, as on obesity, low-temperature washing, fair trade, green products and micro packaging. However, barriers to countering dark marketing persist.

  • Ethical Marketing is unlikely to happen unless organisations have strong values and convert them into demanding practices. At present, most don't.6
  • Companies lack an integrated approach to Ethical Marketing, because customer touch points are managed by different departments.
  • Marketers have not clarified their role recustomers. Is it to make their voice heard? To be their advocate? To achieve balance between their need for benefits, and the firm's need for profits? It is all three.

Marketing is a vocation and a movement rather than a profession, but strong ethics are essential to its success. The CIM and the American Marketing Association (AMA) have developed codes of ethics. Now is the time to impose these on all practitioners, and to fearlessly expose unethical practice, through the oxygen of naming and publicity. A good start would be to build ethics into marketers' employment contracts, already a requirement for members of The Market Research Society.

5. BLACK HOLE OF SHAREHOLDER VALUE

Rather than challenge this destructive concept, marketers have tried to adapt to it, with unfortunate consequences.9

Shareholder value encourages short-term profit maximisation and financial manipulation. At its heart is the narrow financial accounting model, which 'reports spending cutbacks as increases in reported income, even when the reductions have cannibalised capabilities for creating future economic value'.18

Shareholder value gained sway in the 1980s, influenced by economists like Milton Friedman, who declared that 'managers' sole responsibility was to make money for shareholders'.19 It was fuelled by fads like 're-engineering', which enabled senior executives to earn blood money by downsizing thousands. It was designed for a bygone age where shareholders were committed to companies, customers had less power and employees were less assertive.

While shareholder value was initially beneficial in shaking up sleepy companies, and forcing more effective use of assets, it has been a disaster since.20 Its weaknesses have been demonstrated twice this century. First, companies that took shareholder value to extremes – Marconi, Enron, Sunbeam, WorldCom, Global Crossing – collapsed, and others were cheaply acquired. More recently, it was the turn of banks, the most enthusiastic shareholder value practitioners. Shareholder value has been a disaster because it ignores customers.

It hasn't even worked for shareholders – the real value of world equities is lower than it was ten years ago. But shareholder value did well for CEOs and senior bank employees, which is why many still like it.

As a concept, shareholder value is tottering; high time to finish it off and move to stakeholder value. The core stakeholder value question is, 'Who are our stakeholders, and how do we prioritise them?' The main ones are customers, employees and shareholders. The logical sequence for considering their claims is the formula for 'The Committed Enterprise':6Committed customers + Motivated employees = Happy shareholders.

In 1999, Peter Drucker wrote, 'Probably within ten years or so, running a business with (short term) shareholder value as its first ... goal and justification will become counterproductive'.

The future is stakeholder value, balancing the interests of shareholders, employees, customers and the community, and providing an environment where marketing can flourish. Customer-driven companies like Procter & Gamble, Johnson & Johnson, FedEx and Colgate, have been quietly practising stakeholder value for decades, delivering value to all stakeholders.

MARKETERS HAVE FAILED TO MAKE ORGANISATIONS CUSTOMER FOCUSED

Marketers have spent too much time hobnobbing with their external agencies, too little on changing the culture of their organisations or building strong internal relationships with senior management.

Good marketers are instinctively customer focused; 50 years ago, there were only a few thousand marketers outside the US – now there are millions. So why haven't they convinced companies that looking after customers is the primary task of every employee? One factor is that people from best practice marketers have spread the techniques of marketing widely, but not its philosophy.

In the 1950s, Peter Drucker defined the primary purpose of any business as to create and retain customers. Sam Walton, the founder of Wal-Mart, said, 'we put the customer ahead of everything else ... if you're not serving the customer, or supporting the folks that do, then we don't need you'.

Many companies think they are customer focused. Few are. A Bain Study showed that 80% of companies believed they were providing a superior customer experience, but only 8% of customers thought so.21

Reasons for lack of customer focus are embedded above:

  • shareholder value still rules
  • marketers have limited influence in shaping vision, values, practices
  • they lack control over key customer touch points, like pricing, customer service, selling standards
  • they have become specialised functionaries, markocrats with a narrow approach, not seeing the task of spreading the Marketing gospel as their job
  • company attitudes to customers, innovation and quality are determined by CEOs and Boards, not by marketers, who have too little influence at Board level.

Does this really matter? After all, most of the world's 25 most profitable companies are not customer driven.22 Yes. The power and transparency of the internet is changing things rapidly. This will increasingly harm the bottom line of those organisations that exploit or underserve the customer. Follow the vision of Jeff Bezos, founder of Amazon, 'When people look back at Amazon, I want them to say that we uplifted customer-centricity across the entire business world'.23

Now is the time for marketers to lead the revolution.

REFERENCES

1. Davidson, J.H. (1972) Offensive Marketing (1st edn). Cassell.

2. Levitt, T. (1969) The Marketing Mode; McGraw-Hill,

3. Burkitt, H. and Zealley, J. (2007) Marketing Excellence. John Wiley; and Field, P. and Binet, L. (2007) Marketing in the Era of Accountability. IPA Data Mine, WARC.

4. Richard Reed, co-founder Innocent Drinks, The Brands Lecture, British Brands Group, 2008.

5. List influenced by: Ambler, T. (2003) Marketing and the Bottom Line. FT Prentice Hall; Davidson, J.H. (1998) 'The next generation of brand measurement', Journal of Brand Management, July.

6. Davidson, J.H. (2002) The Committed Enterprise – How to Make Vision, Values and Branding Work. Elsevier.

7. Yankelovich, D. and Meer, D. (2006) 'Rediscovering market segmentation,' Harvard Business Review, February.

8. McGovern, G., Court, D. and Quelch, J. (2004) 'Bringing customers into the board room,' Harvard Business Review, November.

9. Lodish, L. and Mela, C. (2007) 'If brands are built over years, why are they managed over quarters?', Harvard Business Review, July/August.

10. Christianson, C., Cook, S. and Hall, T. (2005) 'Marketing malpractice – the cause and the cure', Harvard Business Review, Dec.

11. Michelson, C. (2008) TNS Global, 'trial or bust', Marketing, 3 July.

12. Interview with Jim Stengal, Fortune, 17 September 2007.

13. Ritson, M. (2008) 'ASA ruling shows we lack sensitivity', Marketing, July.

14. en.wikipedia.org/wiki/Marketing_ethics

15. Young & Rubicam Brand Asset Evaluator.

16. Dianne Thompson, past President of CIM, 'The heart and soul', Marketing Business.

17. McGovern, G. and Moon, Y. (2007) 'Companies and customers who hate them', Harvard Business Review, June.

18. Kaplan, R. and Norton, D. (1996) 'The Balanced Scorecard'. Harvard Business Press.

19. Skapinker, M. (2005) 'It is time to knock shareholder value off its pedestal', Financial Times, 23 February.

20. Bruce, R. (1999) 'Value added problems', Accountancy, August; Kay, J. (2005) 'A misleading obsession with share prices', Financial Times, 7 June.

21. Quoted in Meyer, C. and Schwager, A. (2007) Understanding customer experience, Harvard Business Review, February.

22. Davidson, J.H. (2007) Analysis of the Fortune Global 500 (2007 edn).

23. Kirby, J. and Stewart, T. (2007) Interview with Jeff Bezos, 'The institutional yes', Harvard Business Review, October.

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Author: The Marketing Society
Posted: 09 Jul 2012
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