Thursday, February 21, 2008

Transforming Marketing - by Mohanbir Sawhney

Mohanbir S. Sawhney is the Tribune Professor of Technology and the Director of the Center for Research in Technology and Innovation at the Kellogg School of Management.

The post is based on an article in CMO magazine (a publication of CXO Media, Inc.), September 2004

Seven-point manifesto for chief marketing officers to transform marketing:

1. Market the marketing department.

It is the CMO’s responsibility to define and communicate the “value proposition” of marketing to everyone in the organization by understanding the needs of internal customers. To do this, CMOs need to learn the languages of CFOs, CEOs and R&D and then clearly define how marketing adds value to the company. They need to identify a few key, high-level marketing priorities, and they need to link these priorities to the company’s growth and profitability objectives.

2. Change the marketing mind-set.

The traditional marketing mind-set is a command-and-control mind-set that relies on selling to passive customers whose demand and perceptions can be influenced and manipulated. In an age of information democracy, passive customers are dwinlding. CMOs need to evolve their organizations to a “connect and collaborate” mind-set—where the company collaborates with customers to create, deliver and share value. Cocreation of value with customers requires creating a shared vocabulary, shared interests, shared platforms and shared trust with customers.

3. Earn credibility through customer expertise.

Marketers often complain about the lack of authority and lack of influence over their colleagues in engineering, operations or finance. The simple fact is—nobody will give you a seat at the table; you have to earn it. And the best way to gain power is through knowing your customers better than anyone else in the organization. Customer expertise will provide marketers with the courage of conviction they need to promote their point of view to other parts of the organization. Remember that you cannot outsource customer understanding to market research vendors and then be an expert on customers. You have to get in front of customers and get inside their lives.

4. Focus on the customer experience.

Too many marketing organizations limit themselves to the products and services that they make, without realizing that it is the total customer experience that matters most in differentiating yourself and delighting customers. Focusing on the customer experience requires marketers to think holistically about every single customer touch point and every stage in the customer lifecycle. It also demands a total quality approach to designing and improving the customer experience. It is the CMO’s responsibility to ensure that every employee in the firm understands how he or she impacts the customer experience. Good customer experience incidents and poor customer experience incidents need to be captured and shared with all employees.

And it is the responsibility of marketing to orchestrate the customer experience across all channels, partners, business units and stages in the customer buying cycle.

5. Think in process terms.

Marketing has traditionally thought of its activities in terms of the infamous four P’s (product, price, promotion and place). This is a functional view of marketing activities, and it fosters the mistaken impression that marketing functions are independent activities. Instead, marketing activities should be conceptualized as a set of logically related value-creation processes. Drawing insights from the business process reengineering literature, marketing needs to be organized around processes, not functions like channel marketing, audience marketing or product marketing. These value-creation processes include the processes for understanding, defining, realizing, delivering, capturing, communicating and sustaining value. Each process has a set of activities and deliverables, and these processes together constitute the new work of marketers.

6. Create an ROI culture.

Marketing must conform to the adage, “If you can’t measure it, you can’t manage it.” CMOs need to promote a return on investment mind-set that should permeate every marketing initiative. Marketing initiatives need to be derived from marketing objectives, and marketing initiatives need to be evaluated on a set of objective metrics. In simple terms, marketers need to define where they want to go (objectives), how they will get there (strategy), what it will take to get there (resources), and how they know if they get there (metrics). Creating an ROI culture does not mean every marketing initiative has to be quantified in terms of incremental revenue. Marketers can rely on intermediate metrics that follow customers through the “hierarchy of effects”—from creating awareness to changing perceptions, to creating demand, to enhancing loyalty and retention. More difficult but equally important questions that CMOs need to tackle include ways to optimize marketing spending across channels and establishing the financial payoffs of longer-term marketing investments.

7. Embrace technology.

Marketing activities largely remain manual. This situation is beginning to change with the development of exciting new technologies for marketing resource management (MRM), marketing analytics and customer intelligence gathering. CMOs need to embrace these technologies to improve the visibility of marketing operations, to improve the efficiency of marketing processes, and to institutionalize best practices that have been encoded in software and tools.

Marketing is the most fascinating area of management, marketers need to combine qualitative insights and intuition with quantitative analysis and rigor.

Marketing is the key to continued business success in a competitive world. However, marketing needs to change with the times if it is to stake its claim as the function that creates the most value for the organization. As marketing leaders, CMOs need to combine their passion for customers with a business value mind-set, creativity with rigorous analysis and brand-building strategies with hard-nosed tactical execution.

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