What’s the next big idea in marketing? Not just a buzzword or fad, but a theme that will inform everything marketers do? Well, you’re about to read it here first, and it’s summed up beautifully by a neat and pithy quote below. But let’s start with a pressing issue.
Customers are becoming an expensive nuisance. Yes, of course companies die without them. But dealing with them – trying to understand them, reach them (both physically and with information), interact with them and transact with them – is eating up a rising proportion of the available time, money and effort.
Consider the list of things you have to do. There’s market research, advertising and direct marketing. There’s database management, customer relationship management, channel management, call centres and complaint handling. There’s delivery, returns and customer service – not to mention credit-scoring, invoicing, payment-handling and chasing bad debts.
Indeed, a few years ago, the McKinsey Institute estimated that over half of all labour activity is accounted for by “interaction costs”: “the searching, co-ordinating, and monitoring that people and companies do when they exchange goods, services or ideas”.
What’s more, relative to the costs of actually making the stuff that consumers buy, these costs are rising dramatically. Economists John Wallis and Douglass North recently estimated that 45 per cent of the US economy is focused on “transacting” – defined by them as all the costs companies incur taking their goods or services to market. That is double the proportion of a hundred years ago.
And that 45 per cent itself is an underestimate, because it focuses on just one side of the coin. If companies spend an awful lot of time, money and energy dealing with consumers, consumers must also be spending an awful lot of time, money and energy dealing with companies: understanding what different companies and brands have to offer, reaching them (both physically and with queries and so on), interacting with them and transacting with them (making payments, ensuring delivery, making returns, complaining).
In other words, the combined costs companies and consumers incur in dealing with each other are rising to equal or exceed the costs of the value they actually exchange.
This raises an important question: are today’s marketers focusing their skills and efforts on the right challenge? Historically, marketing has generated enormous benefits for companies and customers alike by creating product alignment – making sure companies make what people want to buy. This is a vital economic function, because making what people don’t want to buy is simply wasted effort. The better aligned a company’s products are to what the market wants, the more value is released for both sides.
However, marketers have all but ignored “marketing alignment” – aligning the things companies do in order to go to market with the go-to-market or buying needs of consumers. In fact, if anything, misalignment rules the roost. Marketers may focus obsessively on meeting the needs of their customers when it comes to what they sell, but when it comes to how they sell it, a completely different priority takes over. At that point, meeting the needs of the company by closing sales takes over – the aim is to get customers to do what the company wants them to do (buy the brand), rather than to get the company to do what the customers want. As a result, the two sides’ duplicate each others’ efforts, work at cross purposes, clash head on or leave important gaps.
The emerging marketing agenda, then, focuses, not on product-based alignment, but on marketing alignment: understanding consumers’ buying needs and using marketing skills and resources to meet them. It means moving beyond helping sellers to sell, by helping buyers to buy.
John Caswell of Group Partners sums it up by saying we are moving from “vendor-efficient supply chains to consumer-efficient demand chains”.
Or, as Tesco chief executive Terry Leahy put it recently: “We try to operate our business as a genuine ‘pull system’.”
It is difficult to overestimate the ramifications of such a shift. Today’s product-focused marketing is part of an integrated system of mass production, distribution and communication. Its value is generated by Caswell’s “vendor-efficient supply chains” that can make and sell in huge quantities and at low cost. Marketing’s role is to serve the system’s core purpose: helping sellers to sell.
If Caswell is right, then under the emerging system every element (including making, distributing, and communicating) is increasingly driven by demand – and that demand is information coming from the customer (inquiries, requests, orders, specifications). The aim is not simply to improve the consumer’s go-to-market experience in order to sell more effectively, but to open up a new type of consumer value. Companies compete, not just over product value, but over “go-to-market” value: helping the buyer to buy. Product value and cost become just part of the total cost and value of the purchasing experience.
This creates an entirely new test of marketing success. Under the old system, the acid test of value was whether consumers were prepared to buy the product. Under the new system, the acid test of value is whether the consumer is prepared to “buy” the company’s marketing. Go-to-market processes are not only companies’ biggest problem, they are also the biggest opportunity.
We can see omens of this everywhere: in CRM, channel management and permission marketing, for instance. Unfortunately, many of these initiatives are compromised, distorted and even rendered counter-productive by attempts to shoehorn them into the old priorities of vendor-efficient supply.
What’s needed instead is to use such tools and concepts to create new types of mutual value. How can consumers’ and companies’ go-to-market processes (research, communication, logistics) be aligned and streamlined to save both sides time, money and effort and help them reach their go-to-market goals?
The search for such value requires a rethink of everything, from market research to distribution, via marketing communications. But it is worth the effort. Arguably, companies like Dell and Tesco have been successful because they have begun to understand this. If so, companies that continue to pursue good old-fashioned vendor-efficient supply risk being left behind.