Marketing models must change

14 July 2011

NEW YORK: Brand owners must now become "marketing organisations" which spread responsibility for customer engagement across their entire corporate structure, McKinsey has argued.

"Customers no longer separate marketing from the product - it is the product," the consultancy said in a new study.

"They don't separate marketing from their in-store or online experience - it is the experience. In the era of engagement, marketing is the company."

Factors stimulating this trend include the rise of DVRs, websites such as YouTube, smartphones and tablets, which are revolutionising consumer media habits.

Similarly, shoppers are increasingly looking to social networks, blogs, forums and user reviews to research, and connect with, brands.

As the amount of touchpoints proliferates, traditional "push" marketing techniques have been undermined and the importance of functions beyond the control of communications teams, like sales, IT and call centres, has grown.

"In essence, companies need to become marketing vehicles, and the marketing organisation itself needs to become the customer-engagement engine," the study said.

Online retailer Zappos was named by McKinsey as one firm deriving a significant competitive advantage from its rigorous approach to serving consumers.

"Great companies all have strong cultures. That's our number one priority at Zappos," said Tony Hsieh, Zappos' CEO.

"The second ingredient is that all great companies have a vision that has a higher purpose, beyond profits or being number one in the market."

Air carrier Virgin America has also attempted to ensure passengers receive a differentiated service.

"The real key is people and developing the chemistry and the attitudes, in our staff, that create the right experience for customers," Steve Ridgway, Virgin Atlantic's CEO, said.

"And at the end of the day, that really matters. After all, we fly exactly the same planes as everybody else. We fly them under the same very strict safety rules."

In replicating such success, corporations must abandon models where specific divisions effectively "own" responsibilities like CRM and merchandising.

"Companies will be better off if they stop viewing customer engagement as a series of discrete interactions and instead think about it as customers do: a set of related interactions," said McKinsey.

"CMOs will increasingly be held accountable for the performance of groups that don't report solely to them."

At the organisational level, marketing could ultimately be divided between "core" activities, like branding and agency management, remaining largely unchanged, and duties that are "disbursed" throughout the company.

"Marketing is touching so many more parts of the company now," said John Hayes, CMO of American Express.

"It touches on service; it touches on product development. We need to organise in a way that starts to break down the traditional silos in the business."

Procter & Gamble, for example, has a specialist team buying digital advertising across different geographies, and which is located within its purchasing arm but staffed by marketing experts.
McKinsey recommended setting up cross-functional marketing "councils" to encourage coordination, alongside possibly building online forums to solicit consumer feedback and assistance in the creation of new products.

Cementing third-party alliances is also vital, proven by Nestlé's team dedicated only to Wal-Mart, and covering everything from promotions and logistics to innovation and design.

Wal-Mart thus has a single point of contact with one of its biggest suppliers, Nestlé benefits from enhancing its ties to the retailer, and both firms accrue detailed shopper insights, which are growing ever more valuable.

"Marketing is going to become a much more science-driven activity," Duncan Watts, a research scientist at Yahoo, said.

"The kinds of questions that we can ask are much more sophisticated and require a whole new science."

Data sourced from McKinsey/Huffington Post; additional contet by Warc staff