Rewriting the marketing effectiveness rulebook

When Peter Fisk was made chief executive of the CIM, one of his aims was to make marketing a boardroom issue. Alan Mitchell suggests how he can do it

Dear Peter, congratulations on your appointment. By now you’ll be getting down to your task of developing a new strategy for the Chartered Institute of Marketing. It’s time to throw some stones into the pond.

When we chatted about your appointment you said you wanted to be open to ideas from the margins because that’s where innovation comes from. So here goes.

You’ve certainly set yourself some bold goals. You want the CIM to become the leading body of marketing globally; to engage not only junior marketers in training but help consultants, academics and senior marketers become (as you put it) “a driving force of strategy and change in organisations”, thereby raising marketing’s reputation at chief executive and board level. The question, of course, is how.

Here’s a suggestion. The secret lies with your former work at PA Consulting: marketing effectiveness. But it can’t be marketing effectiveness as we know it, because that particular bandwagon is now as much a part of the problem as the solution. We need to reframe the issue.

Let’s go back to absolute basics. The core economic function of marketing is to deliver two prerequisites of successful wealth creation: efficiently and effectively matching supply to demand, and connecting buyers to sellers.

Trouble is, if you divide all wealth creation into two core buckets of “making” and “matching and connecting”, productivity gains in “making” have inexorably outstripped those in matching and connecting.

It’s difficult to get a precise handle on this, but here are some pointers. Back in 1986, economists John Wallis and Douglass North estimated that about 45 per cent of all US economic activity was devoted to what they called “transacting”. That’s all the costs companies incur in taking their goods or services to market – not just the money spent by marketing departments, but distribution, signing contracts, covering risks, and the like. Over the past century, transaction costs have doubled as a proportion of all economic activity and are continuing to grow rapidly.

Ten years later, the McKinsey Research Institute found that on average (it varies by industry) over a half of all US labour activity was devoted to what they called interaction costs: “the searching, co-ordinating and monitoring that people and companies do when they exchange goods, services or ideas”.

Not long after, Unilever chairman Niall Fitzgerald talked candidly about his company’s costs structures – with 50p in the pound spent on getting a product “to the factory gate in a form ready for consumption”, and the other 50p on everything else – marketing, selling, advertising, retailers’ mark-up, and such like. This proportion was “crackers”, he declared.

Hopefully you are beginning to get the picture. Broadly speaking, in advanced industrial nations, marketing (in the broadest sense of the term) now accounts for 50 per cent of corporate costs – and the figure is rising. As your own research at PA showed, it’s now three times more important as a pivot of profitability than improved operational efficiency. In fact, driving improved marketing productivity is now the central challenge for most businesses – with potentially huge benefits for the economy as a whole.

So first we need to reframe our notion of marketing effectiveness to embrace its real economic role and importance. As long as we see it as an issue for departments and people with “marketing” in their titles we will never achieve anything more than incremental improvement.

Second (and sorry to say this), a prime purpose of this quest should be to reduce its relative costs (and therefore, budgets). Those who see “proving marketing effectiveness” as a means of persuading finance directors to spend more on “marketing” are driving in the wrong direction.

Third, we also have to jettison the assumption that better matching and connecting equates with “helping sellers to sell”. It doesn’t. Matching and connecting is as much about helping buyers to buy as helping sellers to sell. In fact, the reason why so much marketing is so ineffective nowadays is because marketers neglect this basic truth.

It’s often noted that consumers love brands but resist marketing. That’s because brands deliver value to people as consumers. They’re the product of “good” matching and connecting: finding out what people want and giving it to them; changing what the company does to benefit the customer.

But marketing in its “help sellers sell” mode focuses on the needs of the seller, not the buyer, trying to change what the buyer does (attitudes, behaviours) to benefit the company. The customers of marketing are buyers, so why is it, Peter, that marketers believe themselves exempt from the mantra “identify and meet your customer’s needs”?

Finally, to achieve real productivity breakthroughs we have to rethink go-to-market mechanisms. From scratch if necessary. Our current system of marketing is the product of an era when there were no efficient and effective mechanisms for consumers to send “Here I am, this is what I want” bottom-up messages to companies. So companies developed a barrage of tools and techniques to fill the information void with their own “Here we are, this is what we have to offer” top-down messaging.

But changing technology is relegating those original circumstances to history, which means that our entire edifice of tools, techniques, methods and measures risks becoming a historical hangover: an anomaly. There’s never much mileage in making anomalies more “effective”. If that’s what our quest for marketing effectiveness becomes, we’re in trouble.

So here’s my suggestion. Pursuing real marketing effectiveness could unleash enormous advantages for both companies and customers, catapulting the CIM and marketing to the top of the boardroom and strategic agenda. Just as you want. The opportunity is truly massive. But it requires genuine thought-leadership, which not only spreads best practice but invents new best practices for the whole company, and not just marketing departments. It may also involve slaying some sacred cows.

So Peter, will you seize this opportunity?

Alan Mitchell, asmitchell@aol.com

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