It Is Rocket Science:

How “Science” is Displacing “Art” in Marketing
and Creating a New Generation of Practitioners

By Carol Phillips,
President BrandAmplitude, LLC and
Instructor, University of Notre Dame
8/1/04

A new generation of marketing practitioners armed with entirely new approaches are causing the “Segmentation Era” to give way to the “Interactive Era” in marketing.  This paper examines the reasons and implications of this important shift. 

Brand marketing is in transition again.  The “Segmentation Era” which began in the late 70’s and valued insight, inspiration and creativity is giving way to new customer-centric model that values deep customer knowledge, empirical results and efficiency. 

The driver of this shift is “Interactivity”.   Sophisticated customer data tools, in combination with a relentless pursuit of marketing efficiency, are making marketing practices more measurable and accountable. The result is a new more scientific era in marketing.

Email, web chat, “customer care” centers, infomercials, etc. are characterized by direct response techniques.  Efforts designed to evoke a response result in customer interactions that generate new, customer-level data.  This data informs future efforts to engage customers in new interactions creating an iterative cycle of stimulus response.  Scientific marketers, using campaign analysis tools, shape new campaigns on the results of the last.  As these practices drive to the extremes of “automated” or “rules-based” marketing, the result is decreased emphasis on classic approaches to brand building. 

In-depth customer information enables and drives an organization-wide focus on customers.  Customers, rather than brands, are increasingly viewed as a company’s most important asset.  Little wonder “loyalty marketing” has seized the imagination of executives.  At the same time “branding”, the darling of the corporate suite in the 90’s, is now handled as more of a corporate function than a marketing function.  This shift makes sense, as customer relationships are more likely to focus on the company and its unique knowledge rather than the benefits or features of a particular offering. 

In other words, branded products and services are becoming simply one more tool in building profitable corporate customer franchises.  These corporate franchises can be leveraged across many related products and services.  For evidence, you have to look no further than the consolidation that has occurred in financial services, telecommunications, computer equipment, consumer electronics and other categories where a few powerful corporate brands have leveraged their reputations across vast categories and allowed the efficiencies of brand halo’s and cross marketing to drop to the bottom line.

Marketers are increasingly viewed as the place to go for insights and leadership on how to satisfy customers… rather than the four P’s of product, price, promotion and place.  Successful marketers are incorporating customer-centric principles in their efforts to build loyal franchises.  This is evident in a variety of marketing trends:

• “Customer experience” is increasingly views as the best opportunity for brand differentiation.  Experiences are by definition subjective and varying.  Indeed one person’s perception of the same experience will differ widely from another’s or even from their own at a different time and place.

• Defining, and measuring, the existing experience as it occurs at every customer interface, and comparing it to the customer’s ideal as well as to competitive experiences is increasingly viewed as the role of market research.  This is quite different from the old brand/needs gap analysis, in that it involves a higher level of complexity. 

• The concept of “brand preference” as a marketing goal is fast becoming archaic.  How can one brand be preferred over another when the basis of preference is situational and therefore subject to change?  Instead, the concept of “customer intimacy” will come to stand for a special kind of relationship with a brand characterized by mutual understanding, respect and dialog.  High equity brands are now called “lovemarks”.

• A “relationship” orientation increasingly underlies the development of marketing programs, and in effect; all marketing is becoming “relationship marketing”.

Each example above suggests that as the “art” of marketing gives way to scientific application of empirical rules, the fundamental objectives and concepts of brand marketing need to be reconsidered.  After all, when every customer has a unique relationship with a company based on personal preferences, the value of the brand (and its potential for competitive differentiation) rests more in product/service communications, distribution and delivery than in the product or service itself. 

Today’s most successful brands, among them Dell, Amazon, Starbucks, freely acknowledge that differentiating through innovation in products and services is necessary, but no longer sufficient for building brand loyalty.  What makes customers return to these brands over and over is less about the product than the means of obtaining it and the surrounding “customized” service.

Marketers who are on top of these trends are in a good position to lead a transformation within their companies.   Armed with compelling business cases showing dramatic potential gains in customer revenue and profitability, Marketing VP’s and their teams are building powerful alliances with Sales, IT, Customer Service, retail distributors and other channels to re-invent their business processes to support and enhance customer relationships.  “CRM” techniques, customized services, information management will all be leveraged to cost efficiently build branded customer connections.

Signs of the new marketing reality are all around us.  The ability to interact with customers in increasingly personal ways via the Internet, as well as the traditional direct response venues of mail and telephone have combined with powerful analytic tools for analyzing the wealth of data generated from these interactions to drive new levels of creativity – and efficiency. 

Today, Morris the Cat and Charlie tuna are rarely seen in media, but to judge from their web sites, they have created multiple ways for customers to interact with and become involved with the brands, including a Morris Calendar, submitting a Morris story, signing up for Morris “Purrks”, ordering merchandise, entering your cat in a contest to star in a movie with Morris, telling a friend about new products, and more.

One agency reports its client, Volvo used the Internet exclusively to market its sports utility vehicle, selling out the first season’s worth of cars without spending “a dollar on traditional marketing”.  

Most famously, BMW, used traditional 30-second TV spots, movie theatres and magazines to advertise their advertising.  In 2001, BMW spent tens of millions of dollars developing five minute “filmlets contracted with high profile film directors and made them available exclusively and for free at BMWfilms.com.  Nielsen Net Ratings reports that BMW Films.com had 1.1 million visitors in June 2001.  The cost of those high quality exposures?  In traditional media terms perhaps as much as $100-$200 million dollars due to the lack of waste – every viewer was guaranteed to have some level of interest.  Yet the program cost nothing beyond the production. 

More recently, the Wall Street Journal (7/29/04) reported that Chrysler used low cost, $250,000 video games to create an online “experience” for potential Jeep purchasers.  The results were, in their words “shocking”.  Over 250,000 people have played the game, 40% of whom are potential purchasers.  Hundreds of limited edition Jeeps have been sold – at $29,000 apiece.   Currently over 50% of Chrysler’s $1.6 Billion communications budget is allocated to television.  Given these results, we can expect the emphasis to change.

In the mass marketing model “target audiences” are passive recipients of messages that they absorb regardless of level of interest.  Who doesn’t recall “Uh Oh Spaghettios” regardless of whether they have ever eaten them or not?.  In contrast, customers in the Interactive Era are active and in control.  They participate, or refrain from participating, in a relationship based on the degree to which the company is able to anticipate, fulfill or exceed their unique expectations.   The margin for error in this environment is razor thin:  the customer is literally a click away from competitors. 

Consequently the marketing rules are transformed: It is safe to say that in the interactive marketing era, all marketing is relationship marketing.  The focus is on the customer because the customer is in control.   Today, customers have many more opportunities to interact with brands. They not only view advertising and go to a store or dealership, they search for information on the web site and through 800 numbers, email service reps, chat with other users, access technical help lines, and more.  Each interaction is an opportunity to reinforce the brand and thus enhance customer revenue/loyalty --or undermine it. Successful execution of brand strategy now requires the support of every customer-facing business process to create and sustain a profitable customer relationship.

One company that has embraced the benefits of the Interactive Era is Staples.  While their   store distribution system is one of the largest, they have extended their capacity far beyond brick and mortar operations.  Staples has Internet-enabled 80% of its largest customers and driven online capability to about 70% of its total base.  While its web site gets a lot of attention, its b-to-b extranet serves 14,000 organizations and 3.3 million individual users online and is credited with improving sales as well as customer satisfaction. 

Staples has striven to create “electronic intimacy”, collaborating actively with customers to control costs by reducing costly small orders by 45% and increasing average order size by 15% over an 18 month period.  This and other efforts have in turn increased customer satisfaction:  Staples Contract reports a 35% reduction in returns when orders are placed online, compared with orders via phone or paper catalog.  According to Staples, the credit goes to “the richness of the online experience, better order accuracy and a greater sense of ownership in the process by online customers.”

In the classic marketing paradigm, it is the responsibility of the marketing department to identify and communicate what makes the brand special, the “brand promise”, “and essence “or” value proposition”.  Marketing Communications teams are charged with credibly explaining why the brand can be trusted to consistently deliver that on that promise.  Agencies supported their effort by efficiently delivering relevant messages to the “target audience”, usually through direct or mass media, in order to stimulate a response – enhanced awareness and attitudes and ultimately purchase.   

Now Marketing’s role extends well beyond identifying the brand promise to ensuring that the promise is operationalized at every point of contact.  Only when the customer’s experience of the brand matches or exceeds its perception, will the interaction result in “customer intimacy”.  Marketing is required to lead the entire organization to examine its customer facing processes and evaluate them against the ideal “customer experience” and the experience offered by competitors.  

As early as 1998, Forrester predicted that “branding and direct response will merge into a new brand experience.”  In their landmark 1999 publication, “How Do You Measure Brand?” Forrester went on to challenge advertisers to create “new online branding metrics that capture the Web’s richness and complexity by measuring quality of experience, not quantity of exposures.”

Understanding the dimensions of the quality of the ideal experience is still a challenge for most marketers.  It requires determining the right messages for each interaction point for each customer segment and for their unique point in the customer lifecycle.  New customers need a different experience than returning customers.  Loyal customers have different expectations than occasional customers. Once these ideal experiences are defined, it is then the responsibility of marketing, working with their IT counterparts, to define the most efficient “rules” for ensuring that these messages get delivered. Customer information is the engine that drives the interactive era, making IT a critical partner in marketing.  It is the responsibility of IT to aggregate customer information, and make it accessible for analysis.  IT and marketing together analyze the data to optimize the rules and incorporate customer information at the right point of contact to ensure that customers receive a “personalized” interaction that lives up to their personal definition of the “ideal customer experience”.  

Bringing the brand to life, consistently, at every point of contact to create a competitively differentiated experience that delivers against customer expectations is now the goal.  Escalating customer expectations have made that challenge enormous.  Customers now expect that companies know whether or not they are an existing customer and treat them appropriately.

Meeting this challenge requires a radical change in outlook.  Many tried and true marketing notions need to be discarded in favor of radically different concepts.  Most significant, operationalizing the brand requires marketing to lead the organization to put the customer at the center of all of its activities. 

New marketing services companies, armed with quantitatively documented rationales for their data-driven marketing approaches, are displacing the old “artistic” approaches. “Creative” functions will be increasingly mechanized and commoditized, for when creative can be evaluated empirically, “creative judgment” becomes irrelevant.  Advertising and other communications professionals will be transformed into communications scientists.  Mass Media communications will be forced to pursue new, paid-content business models, or to merge their content with sponsor content to create a new type of communications.  This is already happening with the placement of products on television shows and in movies.

This revolution will allow many winners.  Leading edge marketing services companies will invent new and better ways to help companies market efficiently.  A new industry of software solutions, consultants and services firms has been created in just a few short years to help companies leverage these new opportunities.  Online marketing, which includes online advertising, email advertising, interactive agencies, is estimated to be a  $12 billion industry, poised to overtake magazines in 2005. 

But the biggest winner of all will be marketing itself.  With the ability to measure the impact of its programs and tie those measures to corporate goals and profit drivers will come a new respect for marketing.  Marketing investments will be given greater boardroom attention and respect for their role in driving revenue.  Marketers themselves will be better able to justify their investment decisions.  

We welcome the changes! 

Resources

“Creative Execs Stress Importance of Internet”, Advertising Age, 11/13/02. 

Loden, John, D.,“MegaBrands, How to build them, how to beat them”, D. John Loden, Business One Irwin, 1992

“Perfect Pitch, a giant of 20th century advertising honored for a lifetime of work”, San Francisco Chronicle, 11/13/02

“Web Delivers Big Results for Staples,” BtoB, 11/11/02

 “The New Brand Experience,” Forrester, September 1998“How Do You Measure Brand?” Forrester, December 1999

“Online Advertising, It’s Just the Beginning”, Online BusinessWeek, July 12, 2001

“Space Invaders: Ads in Videogames Pose a New Threat to Media Industry: Marketers Pay for Placement at the Expense of TV”, Wall Street Journal, July 28, 2004

“U.S. Ad Spending Rose 6.1% in 2003: Outlays for Network TV Lag Behind as Media Buyers Defect to Cable, the Internet”, Wall Street Journal, March 9, 2004