The new marketing? Or old lamps for new?

I’ve just finished reading one of last year’s most important marketing books, “The new marketing – transforming the corporate future”, by Malcolm McDonald and Hugh Wilson (Butterworth Heinemann 2002).

Those of you who know me may find it strange that I am recommending a book from the Cranfield stable. After all, I’ve been pretty public in my condemnation of the acute conflict of interest that arises when business schools become profit centres, whether as institutions or for the members of staff that work in them. 

These universities are no longer (perhaps never were) places where business people can go for a deeply critical but positive analysis of what makes for success and failure, and for a thorough review of tools and techniques for creating success and avoiding failure, from all over the world. Instead, they are institutions where the academics focus on developing their own simplistic concepts – ideally ones that can be represented in four box matrices so that they can be easily memorised by the baffled MBA student (most of whom are focused on obtaining the qualification rather than improving their management capability). Indeed, at a research conference last year, a presentation from one of these universities was described by a senior, well-published professor as “bad MBA material”. These institutions, are often characterised by attempts to cultivate alumni loyalty using the same techniques – journals which parade their current gurus, invitations to events where the poor past students can rub shoulders with their similarly entranced colleagues. I have a simple test for identifying these universities. When you read books or articles from their staff, see how often they talk about “our research at university X” relative to the frequency of reference to research done elsewhere, particularly to real research rather than untested concept generation.

Of course, this is not to say that all those who work at these universities fall into the same trap. Nor, I hasten to admit, can I claim to have avoided the trap entirely myself. For the sad thing is that there is a “show biz” side of being a professor of management – one that requires one to perform rather than follow the true professorial vocations of searching for truths and helping one’s students, whether they be in one’s own institution or amongst the many (hopefully) that read one’s work. Worse, this side is encouraged by clients who should know better – whether commercial clients or seminar organisations. It is also encouraged by professional institutions that allow themselves to be uncritically influenced by these “gurus” as to what should be taught in management.

I’d like to think that there is now much higher awareness of how easy it is for government, companies, experts, indeed any organisation or individual, to fall into the governance trap of conflict of interest. However, sadly I still see many examples of overweening respect for academic authority – often my own! That’s why I begin many of my lectures by planting a seed of doubt – I ask the audience, “Why should you believe me?” I have very good reasons for asking this question, and they’re not related only to the above discussion. It’s because in our customer management auditing work, we normally find a big gap between what senior managers say their companies are doing (and the consultant/academic language they use to describe it) and what their companies are really doing. Spin, pure spin!

Now, back to the book. Why do I describe it as important? Because of what it tries but only partially succeeds in doing. The title is the clue. It uses the term “transformation” in the context of marketing. It’s an area I’ve been examining (mainly from the perspective of customer management) for around three years, though the focus has really sharpened in the last year. This book covers many of the elements required. I strongly agree with its fundamental premise, which is that the way that information and communications technology has developed has made an enormous difference to the way marketers could be working, but that in many cases it simply hasn’t made enough difference. So the book describes many of the things that could happen to identify and deliver improved value to the customer through improved planning and implementation. These include much wider use of e-business, CRM, integrated marketing communications and multi-channel strategies and techniques, and better integration with strategies and activities in the entire company. None of the content is revolutionary, and little of it is new. Almost none of it is evidence based (hence my comments above). But it is a solid review of an emerging menu.

So what’s the problem? The problem is that it doesn’t address why for all but a few companies (typically the leading edge companies quoted in the book) marketing is being carried out much as it was 20 or 30 years ago. Yes, there has been some acceleration, some greater precision – particularly when it comes to targeting. Yes, direct marketing techniques have been diffused much more widely. Yes, we know much more about our customers. Yes, we do give them more relevant offers. I could go on. But does this count as transformation? In my view, the answer is very definitely “No!”. In fact, I couldn’t find a definition of transformation in the book. In fact, in the section entitled “A definition of new marketing” (pp10 onwards), all it does is to say that the new marketing is characterised by its focus on the value proposition for customers – which I thought was the basis of marketing anyway. This is a brutal paraphrase, but I think fair.

We’ve been doing some work on marketing transformation at IBM – work we’re just starting to publish very tentatively, not just because we know we’re treading on hallowed ground, but also because this ground is new territory, and we’re not sure of our footing. We define marketing transformation as combining the best in marketing, sales & service from anywhere in the world to change how marketing works. Nothing is ruled out. It includes merging marketing with other functions. It includes abolishing or outsourcing marketing. It includes marketing taking over accountability for new areas. It includes destroying the boundaries between marketing, sales, service, human resources, operations, logistics and so on. It includes making radical changes to marketing strategies, processes, organisation, targets etc. Transformation requires answering strategic questions. For example, how can my marketing be twice as effective at half the cost? How can I accelerate my marketing activities so I can do everything at four times the speed and half the cost without sacrificing quality? But it also involves dealing with more tactical issues, such as the cost-effectiveness and quality of specific marketing activities.

So far, we’ve identified three main types of marketing transformation (whoops – you see, these are as yet untested concepts!). We’re trying to sort out how to research this properly – offers welcome. The first is internal - marketing gets much better at doing what it should do. The second is corporate - marketing drives changes which not only change marketing but change many aspects of the corporation. The final one is supporting – the organisation is transforming & marketing must change to support the transformation. Note that doing the second may not require the first, as marketing may be ahead of the game, while the third normally involves the first – marketing may be behind the game. In my (unresearched) view – we are working on an article on this at the moment - IBM’s own marketing transformation - which is far from complete, has been supportive.

You ask me for examples? In my view, the most stunning ones include those that derive from e-enablement (e.g. web-based marketing as practiced by, for example, low cost airlines, book retailers). However, I’m more fascinated by those that apply more thoroughly than ever before the principles that we know work. For example, our business partner E.piphany, one of the leading CRM software suppliers, has many examples of situations in which, when up-to-date and accurate customer data is made available to call centre or branch staff when the customer calls in (inbound marketing), sales (and customer satisfaction) levels escalate. The proportion of contacts (compared with outbound marketing, when the supplier contacts existing customers) that result in both qualified prospects and sales often increases twenty or forty fold. Gartner research (see, I’ve referred to someone else’s research!) has confirmed that these figures are not flashes in the pan.

Is this transformation? Well, if you knew the work that needs to go into cleaning the data and making it available for the CRM software to present it to the staff member handling the customer call, into training and motivating staff to want to sell while being sensitive to the reason for the call, into devising compensation systems that don’t lead staff to push at the wrong time, you would call it transformational. It requires changing marketing emphasis, breaking down functional barriers. It requires marketing (or marketing thinking) to have a very strong influence on what happens in branches and call centres, and on web sites. You can roll it back into product design as well, as you discover much more quickly what your current customers really want, now! And the gain is transformational too – it’s not trivial.

However, mindful of my comments earlier in this column, you must determine whether you need to transform, and what you need to transform. Transformation costs some money, but more importantly, it takes a lot of management time and effort. Surprisingly, I have not seen any general evidence that you need to hurry, because it’s very rare that your competitors succeed in transforming themselves so quickly as to threaten you. Sometimes the pressure is insidious. For example, if your competitors get much more value per customer than you do by using inbound marketing, then they are under less pressure to recruit new customers. Their experience of inbound marketing tells them accurately which kinds of customer are likely to yield greater value, so they can be more selective about whom they recruit, and can concentrate their marketing spend on attracting potentially more valuable customers, leaving you with the rest. Over the years, the value of your customer base will decline relative to theirs. That’s truly insidious!

Back to the book. I recommend it to everyone because it’s a fair start. It’s a recognition that much of what we’ve written before about marketing needs to be rewritten. Old methods of marketing planning must be tossed out because they generated a deep rut for many companies. Change management and project management disciplines must become an integral part of the marketing managers role. Senior marketing managers should be appointed not for their track record in managing a stable state, but for changing how they do their marketing to meet their companies’ needs. The new paradigm (ugh!) is emerging. For example, I’m working on another project to investigate what happens to marketing (and other customer-facing disciplines) when companies move from selling products (including service products) to selling true services (e.g. outsourcing).

So do buy the book! Read it! Tell me if I’m right or wrong! And tell Hugh and Malcolm what you think too.

About the Author: Merlin Stone is IBM Professor of Business Transformation at Surrey University, IBM's Business Research Leader and Director of QCi Ltd and the Database Group Ltd.