Hagel’s thesis gives marketers a new philosophy of a’s not i’s

Based on a talk he gave to a conference on marketing innovation organised by Columbia Business School, Hagel notices three trends: the rising value (and price) of consumer attention; the falling cost of production and distribution compared to

In the age of the ‘reverse market’ brands must nurture their customers, as the way they act and access information alters the balance of power

Based on a talk he gave to a conference on marketing innovation organised by Columbia Business School, Hagel notices three trends: the rising value (and price) of consumer attention; the falling cost of production and distribution compared to the rising cost of customer retention; and “the systematic and significant decline in interaction costs that make it easier for customers to identify vendors, find information about them, negotiate with them, monitor their performance and switch from one vendor to another if they are not satisfied with performance.”

Together, Hagel argues, these trends mean we are moving from the old three I’s of marketing to tomorrow’s three A’s.

His three I’s are: intercept – target and expose customers to your message wherever you can find them; inhibit – make it as difficult as possible for the customer to compare your product or service with any other options; and isolate – enter into a direct relationship with the customer and, wherever possible, remove all third parties from the relationship.

His three A’s are: attract – create incentives for people to seek you out; assist – the most powerful way to attract people is to be as helpful and engaging with them as possible – this requires a deep understanding of the various contexts in which people might use your products and a willingness to “co-create” products with customers; and affiliate – mobilise third parties, including other customers, to become even more helpful to the people you interact with.

Overall, Hagel argues, marketers need “a shift in mindset. Rather than viewing markets as places where vendors seek out customers and try to sell them as much stuff as possible, successful players will recognise that we are increasingly participating in ‘reverse markets’ where customers seek out vendors when it is relevant and then negotiate to get as much value as possible from the vendors they deal with.”

If Hagel is right, we are effectively talking about a transition to a new marketing eco-system.

Different types of eco-system

Today’s eco-system has four dominant species: providers of products and services (often misleadingly termed “brand manufacturers”); distributors and retailers; communicators and media owners; and consumers who exist at the end of the line and are sold to. Of course, there are many sub-divisions within each of these species, and many different relationship patterns – between different types of product and distributor for example. But the species characteristics and functions are familiar, as are those of other familiar niche players such as agencies, consultants and so on.

However, the emerging reverse market eco-system has a different cast of characters. Product and service providers still play a major role, but there is a disruptive new kid on the block – the organiser and orchestrator of the new reverse market, which offers of search, comparison, expert, peer review and advice services for consumers going to market.

This new species is muscling itself into a pivotal position within the commercial eco-system and treading on everyone’s toes along the way. As a result, a growing range of product and service providers are realising that tried-and-tested “three I” marketing strategies are losing traction. Meanwhile, retailers and media owners are discovering to their dismay that the new kid is exercising functional salami on their underlying business models.

In media for example, we are witnessing an accelerating separation of commercial messaging and information exchange (advertising) from the provision of news and entertainment as the new kid carves out a new role as centre of gravity for shopping-related information. In retailing we are seeing a similar separation of the exercise of choice from the provision of product and service availability. Many distributors are losing their first-port-of-call “destination” status as consumers increasingly visit the new kid first, to seek out information about what to buy and from where, before even setting foot in a shop.

Now, the point about eco-systems is that species co-evolve within them, with each species carving out its own role in response to what all the other species are doing. So when a new kid comes along, it sets off a chain reaction of change.

That’s why in marketing today, deep uncertainty is unavoidable. Old, dominant species are being edged aside. But they still retain much of their historical power and they have no intention of giving up easily. The new kid is clearly gaining ground, but nobody knows how far he’ll get, how fast he’ll get there, or in which markets (the new eco-system is likely to look quite different in different environments such as packaged goods, fashion, financial services, pharmaceuticals, etc). Also, as Rupert Murdoch could tell you, no one has a clue as to how far inter-species breeding can go, or what new hybrids might be formed.

Practically speaking, this means it’s not possible for companies to simply switch from one model to another. We need to evolve. On the one hand, we need to learn how to manage a model that’s in decline but that will probably never disappear completely. On the other hand, we have to simultaneously co-evolve with the new kids and learn how best to “attract, assist and affiliate”.

A new role for marketers

This is effectively a new agenda for chief marketing officers. Yesterday, the job revolved around how best to manoeuvre the organisation and its brands through a relatively fixed set of relationships, processes and channels. Today, CMOs have to navigate their way through the white water rapids of multi-levelled change: from “how and why marketing works”, through specific bits of skill and knowledge, channels and channel relationships, routine processes (what does the term “campaign” mean in the context of buyer-driven reverse markets?), metrics, the setting and divvying up of budgets, and future strategy itself. Administrators of established structures (“markeaucrats” as Hugh Davidson once called them) need to give elbow room to canny experimentalists and change managers.

Right now, one thing stands in the way of this urgent evolution: the belief that “the internet” is very important, but is ultimately just another communication and distribution channel sitting next to other communication and distribution channels – something that leaves the same old seller-push marketing eco-system intact. This is a way of appearing to embrace the need for changing while not really changing at all. It won’t remain a viable option for much longer.â¢

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