A reinvention agenda

We’ve only scratched the surface of the confusions and errors caused by marketing’s persuasion paradigm, but let’s leave them aside for now and move on.

Marketing as we know it is a product of its 20^th century roots. In particular, it bears the hallmarks of 20^th century approaches to value creation and exchange (economics), human motivation and behaviour (psychology), and circumstances (technologies and technological infrastructure).

On all these fronts, the conditions that created modern marketing – its theories, its practices – no longer exist. That’s why we need to ‘reinvent’ marketing: because assumptions and approaches that were valid or seemed sensible back then may not be valid any more. (.e.g the persuasion paradigm)

The key word in the last sentence is ‘may’. They may still be valid, but at the same time they may not be. That’s why we need to revisit all our assumptions: identifying what they are, testing them out against new conditions, proposing and testing alternatives.

That’s quite a journey, so hold on to your hats!

Alan Mitchell    ww.ctrl-shift.co.uk

Compensatory vs momentum marketing

 The way I’ve been talking in some of my previous blogs you may be forgiven for thinking I’m against any sort of marketing campaigns. Not at all.

Hopefully, the point I’m trying to make is a tad more subtle: there’s a big difference between those campaigns that boil down to mere bag punching, and those that actually help to move the base towards the customer.

On the surface, they may look exactly the same – same clever, creative advertising, multi-media collateral, budgets, the lot. But actually, beneath the surface, they actually mean opposite things.

Recent research by Insead professor Jean-Claude Larreche helps illustrate this point.

He tracked the advertising spends, financial and stock market performance of 119 consumer goods and services companies over the 20 year period 1985 to 2004. He then broke them into three categories:
•    The top quartile whose advertising-to-sales ratios increased the most
•    The bottom quartile whose advertising-to-sales ratios decreased
•    The middle 50 percent whose ad-to-sales ratios remained more or less constant.

What do you think happened?

The middle 50 per cent underperformed the Dow Jones index by 28 percent. The top quartile of high spenders kept in line with the Dow Jones index. So what do you think happened to the group whose ads spends fell? You might think that their financials fell off a cliff, but it was the other way round. They outperformed the Dow Jones by 80 percent.

Does this mean that the less you spend on advertising the better you will perform?

No. Looking more closely, Larreche discovered that the outperforming companies were producing products and services that customers really, really wanted and that were, in many ways, selling themselves. (In fact, these companies increased their total advertising spends over the period but their sales increased even faster, leading to a fall in the ad/sales ratio).

The companies whose ad/sales ratios increased were the ones producing duff, me-too products and services. So they were having to invest proportionately more marketing to compensate for the fact that they weren’t offering their customers good value. They were having to push harder and harder.

There are two different spirals here, one virtuous, the other vicious. The virtuous spiral is one of offering customers excellent value (moving the base closer to the customer), which delivers much greater marketing ‘effectiveness’, leading ultimately to superior economics – a lower cost base.

In the other, vicious, spiral, the company fails to move the base any closer to the customer, so it has to resort to punching ever harder to achieve ‘results’.

Key point: you cannot tell the difference between these two dynamics by looking at marketing campaigns (their strategy, execution, budgets, allocation of media spends etc) in isolation.

This simple observation is critical when it comes to trying to understand (and measure) marketing ‘effectiveness’.

Alan Mitchell     www.ctrl-shift.co.uk

Bezos' Benchmark

If you read just one article about marketing this year – an article rich enough to make you sit down and think for a while – then I recommend a Harvard Business Review interview with Amazon founder Jeff Bezos.

In it, they ask him how he decides which of many possible innovation projects to focus on, given the fact that he’s confronted with a myriad of swirling changes in technologies, competitors, market conditions, regulations and so on.

His answer is brilliant and simple. He says “we focus on what won’t change”.

What won’t change, for example, is that customers will want better value for money, better service, faster and more reliable delivery. So, if Amazon can focus its innovation efforts on these things, then in ten years’ time Amazon’s business will be “spinning faster and faster,” says Bezos.

That’s what I mean by focusing on the base of the Punch Bag rather than punching the bag itself.

There’s a lot more food for thought in that article. I really recommend you read it.

Alan Mitchell     www.ctrl-shift.co.uk

Punch Bag implications

 If I’m on to the right track about Punch Bag marketing, a couple of implications follow.

Here’s one of them. Imagine two alternative scenarios. Under the first scenario you devote your core resources and attention to moving your base (i.e. your core operations, culture etc) towards the customer. Because this is slow, hard work you only manage to move one inch in one time period. Under the second scenario, you devote your resources and attention to moving the punch bag, which gratifyingly veers 10 inches towards you as soon as you do so.

Under the first scenario – a once inch movement in the base – your initial progress towards the customer is lost in the noise of the punching match going on above it. Punch Bag effects drown out any underlying improvements from moving the base. Worse, this can continue for three, four or five more time periods – plenty of time for people to point to Punch Bag successes and say, ‘there’s lots of evidence that those people who are punching bags are getting results, and no evidence that what we are doing is working’.)

However, if you manage to sustain it long enough – seven, eight, nine inches – then something remarkable happens. While all your competitors are still stuck in the same old boxing match – going nowhere because they are fixed to the same centre of gravity – now, even their best punches can’t reach where you are with your customers.

For this to happen, quite a long list of pre-conditions have to be met. The two most important ones are, first: the company has to continue moving its base consistently in the same, right direction. This raises lots of hard questions about identifying what that direction is and knowing that you are making progress on your journey, unsullied by Punch Bag noise. If you are inconsistent, moving your base one inch north, then one inch south, you are simply replicating Punch Bag futility with your core operations and culture. Not a good idea. Stopping after a couple inches probably won’t help much either.

Second, the company needs the sort of vision and culture that sustains this direction through changing market conditions, competitor activities, personnel and so on. Not easy, or obvious, in other words.

Yet, if we look at long term consistent performers like Procter & Gamble, Tesco, Johnson & Johnson, Toyota and many others I think you would agree that overall, they fit the pattern I’ve just described. Not always spectacular, not successful every time, but with a track record of moving in the right direction and delivering long term results.

The alternative is campaign-based marketing driven by evidence of persuasion/influence. According to the Punch Bag theory, this is a disguised recipe for a sustained waste of resources and strategic impotence.

Unfortunately, many people in many organisations actually think this is what marketing is about. It is what they were brought up to do and are paid to do. It’s what the prevailing paradigm of marketing thinks they should be doing.

Alan Mitchell     www ctrl-shift.co.uk

Punch Bag Marketing

 OK. I’m still banging on about the persuasion paradigm (I’ll get beyond it one day. Promise).

The persuasion paradigm is the erroneous belief that good marketing is about changing customer attitudes and behaviours. I’m banging on about it because it reaches far deeper, with far worse consequences, than may appear at first sight.

One consequence, for example, is a circular argument that it sets up with metrics. It goes something like this: “Effective marketing changes customer behaviours in our favour. We know it’s effective when it moves the needle of our metrics (sales, market share, etc) in the right direction. Therefore, the opposite also holds true. The definition of ‘effective’ marketing is marketing that moves the needle. So, ergo, we need to focus our efforts and resources on what moves the needle.”

Once you’re mesmerised by this circular logic, it’s almost impossible to see a way out. So what’s wrong with it?

Well, I think the trap is best explained by the punch-bag analogy. A punch bag has one end that’s fixed firmly to the floor or ceiling and very hard to move. This end has deep roots. The other end, the bag itself, moves around very easily, but only so far as its fixed base allows.

In this analogy, the fixed base is the philosophy and strategy of alignment – aligning what the organisation does to what customers want. Moving the base is hard to do, requires dedicated, consistent effort over a sustained period of time, and is therefore slow. It probably won’t deliver spectacular results quickly.

On the other hand, the punch bag is the philosophy and strategy of ‘campaigns’ to change customer attitudes and behaviours, some of which can deliver spectacular, easily measurable results in very short time frames. Just look at prodding tactics such as price promotions (the P of Mad Sheep Rage).

What happens when a company gets suckered by the circular argument ‘effective = what moves the needle’? Over time, its attention, resources and strategies get sucked away from trying to move the base towards the tip of the punch bag – because that’s where demonstrable results are easiest to come by.

There’s two problems with this. First, if it’s easy for you to change customer behaviours in this way, it’s just as easy for your competitors to do the same. Which of course, they do, in retaliation. So, no sooner have you realised your quick, spectacular, demonstrable results than suddenly they seem to evaporate into thin air, leaving you back at square one. (On the other hand, if you’re successful in moving the base, it’s actually quite hard to move it back. So the gains tend to stick.)

Second, the more competitors get sucked into punch bag marketing, the more punch drunk the consumer gets. This is not consumer-focused marketing. It’s competitor focused marketing. And its rife.

I’ll return to these themes in my next few posts. Meanwhile, I’ll ask the same question as my last post in a slightly different way, how much of your company’s marketing is devoted to punching bags, and how much of is devoted to moving the base closer to the customer?

Alan Mitchell       www.ctrl-shift.co.uk

What sort of marketing are you doing today?

If you’ve got my gist so far, I’ve questioned marketing’s ‘persuasion paradigm’ – the belief that good or effective marketing is about changing consumer attitudes and/or behaviours.

Marketers believe they have a lot of evidence that their persuasive efforts work – but as I’ll demonstrate in future blogs, this ‘evidence’ is the same sort of evidence that tells us the earth is flat, that the sun orbits the earth, and that the natural state of motion is rest. It’s blindingly obvious. We see this truth demonstrated to us every day. But it’s wrong.

Coincidentally, some intriguing research from London South Bank University points us in a similar direction.

Using the first database designed to track individuals’ purchases of brands over a long period of time (in this case, six years), researcher Charles Graham discovered that despite the huge amounts of money spent marketing these brands, their market shares remained stationary.

Specifically, he finds that 106 brands’ market shares (75% of the sample)  wobbled around a plus or minus three per cent range but always stayed within this range, and that only six brands increased their market shares by more than 6%. These permanent changes in market shares were “not achieved by manipulation of the promotional mix” but by “exceptional, strategic and structural” shifts to brand architecture or via discontinuous innovation.

Says Graham, “This study seems to indicate that marketing does very little to change consumer behavior.” (Though, he adds, “The one thing the study can’t evaluate is what would happen to a brand’s share in the absence of any marketing activity.”)

The fact that market shares remain stable long term “implies limitations to the effectiveness of most marketing actions”, Graham writes in his paper What’s the point of Marketing anyway? New findings on the prevalence, temporal extent & implications of long-term market share equilibrium.

Does that mean the marketing is a waste of time and money? Well, yes and no. If you are on a quest to change consumer attitudes and behaviours permanently in your favour, then I would argue Yes, you are wasting your time chasing bogus, short-term evidence that’s usually little more than statistical noise. If, however, you are aligning what your organisation does to what customers want (and if you do this very well) you are not wasting your time at all. But that is a completely different kettle of fish.

The first type of marketing is about changing what consumers do. The second type of marketing is about changing what organisations do. Which type of marketing are you doing today?

Alan Mitchell  www.ctrl--shift.co.uk

The P of Mad Sheep

 In my Marketing magazine article on Mad Sheep Rage I only got half way through the acronym:

M for Manipulation
A for Awareness
D for Deception

S for Stimulation
H for Heuristics
E for Education

The next E is for Enticing. This is the world of sensory bombardment, gorgeous displays, feasts of sight, sound, smell and so on, so that people think ‘I’ve just got to have some of that!’. (I distinguish Enticing from Stimulation which is more about inspiration and ideas – like the fashion tips that ads in mags like Vogue offer, or the decorating tips in home and garden mags.) Good retailers are passed masters at Enticing.

Now for the next one. It's a biggie. P for Prodding.

I got the Prodding word from former Barclays Bank CEO John Varley many years ago in a House of Commons Select Committee on credit card marketing. The exchange went like this:

Mr Plaskitt MP: “I think you are constantly prodding the customer to say ‘you may not have used up your credit limit yet …”
Sir Fred Goodwin (Group Chief Executive, Royal Bank of Scotland): “No. Every business I know of advertises and tries to get customers to use its products and buy its goods and services. I do not see why we should be any different, as long as we do it responsibly”
Mr Plaskitt MP “You are prodding them to use up this credit line”.
John Varley (Chief Executive, Barclays Bank): “Marketing is prodding”.
Mr Plaskitt MP: “Thank you for that refreshing answer.”

I just loved it.

Anyway, in the Mad Sheep context Prodding is where an organisation deliberately changes the customer’s economics in some way in order to get customers to behave in ways the organisation wants them to do.

Prodding can take two forms: a prod to do something (e.g. a price promotion to get the consumer to switch from one brand to another, or an incentive to fill a form in online), or a prod not to do something (e.g. erecting ‘barriers to exit’ so that the customer is ‘locked in’.)

There are two interesting things about Prodding. First, not every Prod is equal. Some Prods align with what customers want and create win-wins between the customer and the organisation. Some are adversarial. (That takes us back to my core thesis of alignment vs ‘persuasion’).

Second, at first sight, Prodding is hugely powerful. You can see the results – often very dramatic results – in your metrics.

But is Prodding really as powerful as it looks? I don’t think so. I’ll return to that theme soon.

Mad Sheep Rage

 I've just written an article for Marketing magazine on 'Mad Sheep Rage'.

This is an acronym I use to list the different ways that advertising and marketing actually impact consumers - which is completely different to analysing marketing in terms of what marketers are trying to do, or think they are trying to do.

It follows from my observations about 'marketing schizophrenia': what happens if we look at marketing activities not through the lens of whether or not they are 'effective' in changing consumers attitudes and behaviours, but to what degree they are aligned to what consumers want?

Mad Sheep Rage shows that some marketing activities align very well (in the magazine article I talk about marketing as 'stimulation' and 'education' for example). On the other hand, some activities are completely misaligned (e.g. 'manipulation' and 'deception').

Both can be 'effective' in changing consumer behaviours. Therefore, both can deliver metrics that appear to demonstrate ROI. Does that mean that for all intents and purposes they are both equally meritorious? Or do we need to dig deeper?

I think we need to dig deeper - to analyse different marketing activities from the perspective 'is this alignment, or is it persuasion?'. Another way of putting it: does it add value from the consumer's point of view, or destroy value? If we're spending loads of money on it, surely we should be trying to add value?

Marketing Schizophrenia 2

In my previous post, I suggested that marketing - and marketers - are forever at war with themselves over two fundamentally opposed interpretations of what good marketing looks like. 

Proposition 1: good marketing means identifying and meeting customer needs profitably

Proposition 2: good marketing means changing consumer attitudes and behaviours in our favour

In practice, the split tends to take place when we move from 'the product' to 'its marketing'. When we are developing the product or service, our main concern is to identify and meet consumer needs, because we are much more likely to sell more that way. But when we are developing our marketing campaigns, our focus shifts to changing consumer attitudes and behaviours in our favour.

That's why, in general, consumers like and trust good products, and dislike and mistrust marketers and marketing. Products and services add value for consumers, but often their marketing doesn't.

That's a problem. A big problem.

It's the problem we have to address.

Marketing Schizophrenia

 To reinvent marketing successfully, I believe we have to jettison marketing’s Persuasion Paradigm: the belief that marketing is ‘effective’ when it changes consumers’ attitudes and behaviours, and that this is what good marketing does.

Persuasion isn’t marketing’s only paradigm. The other paradigm is alignment – the belief that successful companies and brands align themselves to doing what their customers want them to do.

With very few exceptions, these two belief systems are contradictory and mutually exclusive. If one is right, the other one can’t be. If you are doing more persuading, you are also doing less aligning. And vice versa.

But today, elements of both are alive and well in marketers’ minds, battling it out for supremacy. This constant warfare isn’t helpful.

If we look at marketing’s history we can see why the two paradigms grew up. If you are an industrial age company driven by economies of scale in the production and distribution of products, the best way to make a product that sells in volume is to make one that customers want to buy. Hence the mantra ‘identify and you’re your customers’ needs’. Alignment.

But then, having made it, you’ve got lots of competitors out there and if you don’t sell what you have made, you’ll go bust. So, hell or high water, you’ve got to persuade customers to buy yours, and not your rivals’. Persuasion.

To the marketer, the journey from alignment to persuasion is seamless. There is no contradiction. They are all part of the same process of value creation.

But to the consumer, they are contradictory. “One minute those marketers are doing everything they can to change what the company does to add value to the customer. The next minute they are doing everything they can to change what the customer does to add value to the company. That’s two faced. Hypocritical, even.

This marketing schizophrenia lies at the very heart of marketing’s problems. The quest to reinvent marketing is the quest to reunify it around a single, central positive paradigm.

I think it’s possible. But some sacred cows might have to go!

Reinventing Marketing

 Welcome to my new blog! In it I'm going to explore the theme of 'reinventing marketing'.

There's a lot of guff out there about how marketing isn't working, or would work better if we did this or that. But I think we need to dig a little deeper - to challenge some of our deepest assumptions.

So here goes with the big one! There's a common assumption out there that marketing is about 'changing customer attitudes and behaviours' in favour of your particular brand or product. That good marketing is about 'effective persuasion'. Endless questions follow, such as 'what tools or techniques should we deploy to achieve this goal?' and 'how do we know if we are succeeding?' (metrics).

Over the next couple of months I hope to persuade you that this assumption is wrong. Worse than that, it's toxic. It's one of the biggest reasons why marketing isn't as effective as it should be. It also means we need to rethink those questions about goals, tools, and metrics.

I hope you will join the debate.