What to do in a downturn? Where are the best market opportunities? What to do differently?
Lets start with the global economic crisis. What should marketers do? What is great marketing in tough and uncertain times?
Nothing matters more than staying close to customers in a downturn – understanding what matters to them now, retaining the good ones you already have, and doing more for them.
Staying close to customers (or consumers, depending on your type of business) is simple, but its easy to forget or de-prioritise in a downturn when operational things seem to matter more. Here are 10 imperatives for staying close to customers:
1. Focus on the “best” customers – those who want to work with you (prefer you, recommend you), and are profitable for you to serve.
2. Research their changing priorities – customers priorities change in a downturn, so find out what matters now, what’s essential, what’s not.
3. Develop more relevant propositions – meet their specific needs more clearly, for example by bringing products together to solve problems.
4. Communicate in appropriate ways – downturns are less about “individuality, outdoors and adventure” and more about “family, home and security”
5. Serve them more personally – thereby understanding them better, and doing what matters for each customer individually
6. Build relationships not transactions – don’t push more at them, or just discount your prices (which just throws money away), and creates a yes/no culture
7. Share their pain – do more for them, for example with better payment terms, a lower priced entry point, or by adding an extra product or service
8. Connect them with others – add more value by connecting like-minded customers together – consumers to share a sport or interest, businesses to share ideas and opportunities
9. Keep talking to them – in a downturn its easy to forget customers, at they time they want most support and reassurance – regular newsletters, cheaply distributed by SMS or email.
10. Energise them – its a tough world, confidence is low, the media is full of gloom – give customers little reasons to smile, to be happy, to talk about something positive.
Reset, rethink, reinvent ... Same rules but with a new context for thinking ...
Are the old rules of marketing dead? What are the new rules?
“Old” marketing is not dead but it needs to be applied in new ways, so for example
1. Strategy needs to be driven by the best market opportunities, rather than just trying to sell more
2. Innovation needs to be more than products, innovating service and support, channels and relationships too
3. Communication needs to be more pull than push, engaging customers when and how they want, using media that helps them, physical and virtual
“New” marketing is really about
1. Outside in rather than inside out – thinking like a customer, rather than thinking about products
2. Integration rather than fragmentation – making the combined effect of all sales, service and marketing activities have more impact
3. Driving business rather than waiting for others – being the customer champion, the business innovator, the growth driver
Now is our time ... Aldi spending three times more on advertising this year ...
Does a downturn change the rules again?
The financial “crisis” is a major challenge for financial markets, but now also, together with high oil prices, having an effect on all markets. But downturns are really opportunities for marketers. Some of the challenges are
- To keep working, don’t panic, people still want to live, they still have money, its just they make more careful choices
- To focus more than ever on retaining the best customers, working with them, understanding their priorities, doing more for them
- To seize the opportunities of changing markets, of falling competitors, and preparing for the next upturn
- To drive innovation in both markets and companies – changing the value equation, accelerating new ideas to market
Learn to love recessions ... Entrepreneurs love downturns because they shake everything up.
What are the characteristics of companies which are successful in marketing?
Companies who champion marketing start everything they do from the “outside in”
a. They define their purpose by what they do and seek to achieve for customers, rather than just what they do and seek to achieve themselves
b. They develop strategy based on the best external opportunities, in markets, rather than just selling more of what they have
c. They make decisions based on a deep understanding of their customers, and then consider how to make money from delivering it
d. They communicate as a dialogue with customers, perhaps through advertising, but also through many other media, and best of all, word of mouth
e. They drive future profits, and therefore their market value, based on making the right choices about customers and markets
f. They sustain and secure these profits, reducing risk (particularly in a downturn) through strong brands and relationships
g. Marketing is much more than advertising, much more than the traditional “4P” of product, price, promotion and place. Marketing is the driving force of business.
The new marketers ... customer champions, business innovators, growth drivers ...
What makes a marketing director successful? Which companies have been most successful?
Today’s most successful marketing leaders have through important talents
· Customer champions – they encourage the whole business to think and serve customers better, bringing people together with a passion
· Business Innovators – they are the creative force for change and new ideas across the business, driving innovation into profits
· Growth Drivers – they are the starting point for strategic thinking, where to focus effort, how to be different, what matters most.
This requires strong collaboration, strategic thinking and practical delivery of projects with colleagues across the business, not just n their own department.
Examples of excellent marketing organizations include P&G, GE, Disney, Visa, Google. No one person is the leading marketer in these companies. It’s a team effort, often with a number of marketing directors championing each market segment, and where the CEO is often the lead marketing thinker. People like AJ Lafley, Jeff Immelt and Steve Jobs.
Global impact ... connected and interdependent markets, but with different responses ...
How do different companies around the world address the economic crisis?
This crisis, more than any other, is global. We now live in a truly connected and mutually dependent world. The money we invest or lend from banks comes from a global banking system, connected a lightning speed through satellite and internet, and our aspirations as consumers are fuelled by global fashions and icons with the help of everyone from MTV to Zara.
In the last month I have visited Singapore, London, Santiago and Istanbul. The message is the same, the impact on financial institutions, corporations and consumers is the same all around the world.
However there are some differences by cultural – in Singapore they are more used to crisis, having suffered badly from SARS and the Asian tsunami in recent years; in Turkey they are more used to economic crisis with hyper inflation and devaluation as people spent more than they had; in London it is largely an institutional crisis, which then became a lack of consumer confidence; and in Santiago people still see the world positively but maybe that’s just their optimistic culture.
The key impact therefore is on consumer confidence – there are more optimistic and pessimistic cultures, and some more resilient who are looking for the opportunities, and others more fragile. Overall there is still lots of money around, it’s just not flowing. Overall, even if a company goes into “recession” that just means that it goes back to last year’s outputs and profits, which weren’t too bad were they? The problem comes when banks and media, and therefore consumers, panic.
Companies similarly take a mixed view. Those with high fixed cost bases – like retailers (those that buy lots of stock) or construction companies (who have lots of land) – are most concerned, and often resorting to massive discounting. Others can flex their cost bases (like airlines, who can ground their aircraft, and reduce flights). And some see the opportunities (like online retailers, home entertainment companies).
Open your eyes ... adapt and innovate to the changing priorities of customers
Many companies try to save cash. What are the consequences, and the alternatives?
Imagine there was a global shortage of food – you could lock down your doors, don’t go out, and save your food, eating less and hoping it will last longer – but eventually it will run out. Or you can change the way you work, and go find new sources of food to sustain you over time. Start fishing, get some chickens, or grow your own vegetables!
Likewise the companies that purely focus on saving cash, on reducing cash are short-sighted and will eventually starve to death, particularly if this is a long downturn.
Businesses need to focus more than ever on sustaining and generating revenue, and ideally by finding new sources of revenue too. Of course they need to be careful with how they spend money, but they need to spend it – in smarter ways.
Sustaining core revenue streams means focusing on your best customers, doing more for your customers so that they keep buying, maybe even buy more from you than from other places, and maintaining their confidence through more relevant propositions and more personal service.
Finding new revenue streams means looking for the growth markets, maybe in different geographies or adjacent sectors, or by being more focused on niche segments. Don’t be restrained by your existing physical or mental borders, and look for ways to innovate in ways consumers want now.
Look at many of the great companies that emerged during the Great Depression of the 1930’s. Companies like Motorola because people wanted to communicate, Tupperware because people wanted an alternative to expensive materials, and Disney because people still wanted to smile.
The new business world ... from west to east, big to small, business to customer
What will happen next in the global economy?
Nobody knows, but it’s unlikely to get better quickly.
Therefore it means businesses need to adapt to the changed world – and adapt quickly if they are going to survive.
In particularly, companies who grew “fat” in the good times need to fundamentally change their diet, and even their habitat. Luxury brands, non-essential items, or occasional purchases. They need to tune into the changing priorities of consumers, the new competition, change their positioning, change their business models to still make money in a very different market.
And as a result, the world will be different again afterwards.
Just like when the dotcom bubble burst, we didn’t give up on internet-based companies, but the ones that survived, and the next generation were different – they used the power of networks, to connect people not just sell, to offer more value and convenience, not just trivial products, to change the world old companies work too.
In particular, consumers will favour the companies who cared for them in the tough times, and the new market leaders will be those who were prepared to change, to invest, to innovate during the tough times.
Marketing Genius applies the left- and right-brain genius of Einstein and Picasso to the challenges of marketing, brands and innovation. Why have you chosen this approach?
From the vision of Apple to the insight of Zara, the passion of Nike and entrepreneurship of Jet Blue, the community building of My Space and thrill of Agent Provocateur, today’s leading brands think and act differently.
Customer insight and creativity are important, but must be combined with the analytical and commercial rigour that drives strategy, innovation and profitable growth.
The “genius” of business today lies in resolving a number of different paradoxes: the ability to connect outside and inside; markets and business; customers and shareholders; creativity and analysis; promises and reality; today and tomorrow.
Today’s leading business and marketing leaders have much to learn from both Einstein and Picasso, one who started with mathematical rigour then thought creatively, the other who was generally mad, but still embraced the theory of his practice.
“Genius” is about seeing things differently, then having the belief to do different things.
In recent years business has favoured a highly analytical, logical, measured approach. Indeed our obsession with left-brain precision, has perhaps led us to forget our right-brain imagination – to see the bigger picture, to make connections and instinctive judgements.
We need both – wider vision and disciplined focus, radical creativity and rigorous metrics – recognising that creating exceptional value for customers is the only sustainable way of delivering superior returns to shareholders.
This is what the book Marketing Genius is all about, and what my company - the strategic innovation firm, The Foundation - is currently helping leading brands like Marks & Spencer, Volkswagen and O2 to achieve with significant impact on customers and performance.
You have said that too many businesses are obsessed with their inside – how to do what they do better. What is the root cause of this?
Too many businesses are obsessed with their inside – how to do what they do better, reduce their cost base, automate their processes – rather than their outside. This important but limiting preoccupation - plus the blinkers of functional silos and industry conventions - means that businesses often miss what matters most.
Similarly, the obsession with more data, more analysis, more measurement, and more process leaves little space for intuition, creativity and the bigger picture. We look to employ people who are masters of the spreadsheet, rather than for their different skills and experiences. It is a recipe by which companies will converge to sameness, for incrementalism, and ultimately for irrelevance.
Ask Kodak, the market leader in photographic film for many decades, who within a handful of years found that their market had disappeared, swallowed up by alien digital worlds led by the likes of Sony and HP. They had not even been on their radar screen, until it was too late.
What’s the root cause? Blinkered thinking, obsession with the short-term, fear of challenging the status quo, inertia and plane simple laziness.
The best opportunities and biggest challenges are outside not inside. Market change and its implications are often discontinuous, requiring more significant responses. They should be the starting point of any business strategy rather than a consequence. Market-thinking should be at the heart of decision making, and market-thinkers at the heart of business.
Apple watched the market for music fragment and blur into chaos, as new technologies disrupted the industry model and consumers began to rebel, new entrants challenged the economics and old formats quickly became obsolete. Apple brought together an innovative solution in the form of hardware and software – iPod and iTunes – to offer a way through this turmoil, to redefine the industry dynamics, with a compelling and profitable solution
You suggest that in order for companies to enjoy more success they should strive to build dialogue with customers on their terms, in their time and place, rather than product-push, mass-market campaigns. What are some of the ways in which organizations can do this?
An “outside-in” approach to business starts with the market. A market strategy – defining where and how to compete, and what to do for short and long-term commercial success - must sit at the core of a business’ decision-making framework. This requires fundamental choices, about which markets to focus on, and how to be positioned within them - less about legacy and capability, more about opportunity and customers.
An outside-in brand defines what it does for customer, rather than what it does itself. Outside-in innovation starts by redefining context before considering products and services. Outside-in communication is less about blanket campaigns, more about customer-initiated dialogues. Outside-in channels are no longer an extended arm of suppliers, but trusted agents of customers. Outside-in relationships are more based on communities than transactions.
Amazon, for example, uses its intelligence and imagination to anticipate and meet the needs of each customer. Not only did Jeff Bezos and his expeditionary marketers seize the new “whitespace” by leveraging virtual technologies and physical delivery, but they harness customer power, fundamentally doing business on customer terms, and doing it profitably.
In the next 5 years we will see a fundamental shift from conventional “push” advertising that tries to sell every customer the same product in the same way at the same time, to much more ambient “pull” media which build ideas in people’s minds. This background-like positioning establishes the brand ready for when customers want to search and buy, supported by a range of more interactive media through which the customer can choose to connect on their terms.
You have said that most of us in the western world typically have everything that we need so our wants are more emotional and unarticulated. What are the implications of this for today’s marketers?
In a western world of fulfilled needs, marketers need to work smarter to explore what customers would like or love, rather than just what they functionally need. On one side, this is about more sophisticated learning techniques – understanding people’s emotional triggers, observing their actual behaviours, changing their attitudes and perceptions – whilst on the other side it is about having the insight, creativity and boldness to create new solutions.
This is not about that age old accusation thrown at marketing of “selling people what they don’t want” but about understanding how to solve customers problems, or enhance their lives, better.
Big opportunity areas would include:
- Health-driven nutrition, lifestyle support, and well-being.
- Technically converging solutions in communications
- More ethical and environmentally-sourced products
- Reframing offers for the affluent, youthful 55+ babyboomers
- Low cost alternatives, redefining value, for lower income groups
- More effective work practices, virtual, collaborative and flexible
- Stronger, more aesthetic design solutions fusing function and form
And perhaps the biggest of all, tapping into the so-called “bottom of the pyramid” - the enormous growth markets of China, India, Russia and Brazil. Although this too needs insight and imagination, to create solutions that are relevant and responsible, rather than naively seeking to impose Western values and global sameness.
According to one of your articles, customers are “more informed and less tolerant. Gone is the day when we fit into a well-defined segment, or adhere to average market research statistics.” Given these observations, can there ever be such a thing as customer loyalty?
Yes. Customers are looking for brands (and companies, products and people represented by them) that they can trust and hang onto in a fast changing, confusing and intimidating world.
However this trust must be earned through much more than a database-driven, sales-driving CRM programme. Companies cannot force customers to have relationships with them, and indeed people have become wise to the more crass “points mean prizes” or even “points mean pennies off” initiatives. Look at the early day successes of AirMiles, and the struggle of Nectar; the loyalty to more personalized services like First Direct, rather than big banks like Barclays. The direct marketing campaign that results in an automated phone call telling you that you’ve won a free holiday, has probably destroyed more trust than anything, and is probably the laziest, unprofessional form of marketing.
People build relationships with people like them – customers with customers – who have similar aspirations (so attracted to a similar brand values), and similar practical needs (products and services). We naturally gravitate to people like ourselves. And as society becomes more fragmented, new types of communities emerge, often based around a particular issue and interest (eg new baby, football, downloadable music, politics). Brands can facilitate rather than drive such communities (Huggies, Coca Cola, BBC, Private Eye etc). As such people grow loyal to each other, this loyalty also rubs off on the community-enabling brand too.
Neuroscientists have found that consumers typically choose which brand to buy within 2.6 seconds. If, then, choosing a brand seems such an impulsive affair, can gigantic marketing budgets and intensively planned marketing campaigns really be justified?
The brain is a incredibly complicated device, but we can draw some parallels to the brain sat in the back of our computers. The ROM stores information in the background, which can be tapped into when required and built over time. The RAM is more of a temporary place for information as it is used to support the work in hand.
Brand building – the long-term development of a strong idea, positioned carefully in the market, relevant to certain audiences, and with an increasingly positive reputation – is need to carefully build over time in the consumer’s ROM, their background memory. We do this by ensuring that a brand has a strong sense of purpose aspirationally and functionally, clear differentiation from competitors, and relevance and empathy with its customers.
Driving sales – come the moment in the shopping aisle when the consumer needs to make a choice, we need to ensure that our brand is quickly and foremost accessible from the ROM, to bring it forwards into the consumers foreground, RAM if you will. It is then best positioned to drive emotional preference and physical behaviour. What makes a brand easy to access form background to foreground is its simplicity of message, its strength of empathy, its logical and emotional offer. It also needs to be catchy – which is why we explore the idea of memes, and their particular relevance to proposition design and communication structuring, in the book.
Many people argue that Customer Relationship Management (CRM) is “a waste of time and money as has already been well proven in its very short existence.” How would you react to this?
It depends what you do with it. Installing a CRM system is unlikely to do much for your business, unless it is accompanied by much more.
Amazon uses customer knowledge to learn about customers through every interaction, to personalize offers and communication. Tesco has a very successful database-enabled programme that profiles, understands and anticipates customers needs and wants, British Airways have survived a torrid decade in the airline industry because of the loyalty it has built up with its key business travelers. And the lifetime value of these customers (and indeed their future profit potential) is likely to far outstrip the capital investments required to generate them.
But such initiatives require far more than an IT solution. From a relationship-driving strategy and segmentation to the right propositions and prioritization, more personal experiences and empathy to aligned management and metrics. CRM is a business model, not a software package.
From your research, which companies are your personal favourites for their innovative and memorable approaches to marketing?
Nike – because there is unbelievable passion for sporting excellence in every person at Nike’s World Campus at Beaverton, Oregon. Phil Knight, a passionate athlete turned accountant turned creative marketer is the man who turned a $35 swoosh into a $12 billion business.
Google – because, in a complex world, customers need to start somewhere, and most marketing activities today start with a customer’s Google. Power has fundamentally transferred to customers, with little space in an “outside in” world for traditional campaigns and distributors.
Jones Soda – because, as its founder of the maverick soft-drinks upstart himself admits, “nobody needs or wants my shit … but they love it”. Marketers need to be more radical and bold to stand out from the crowd. Check out their flavours (Turkey and Gravy, anybody?) and labels too.
You can read more of my favourite brands, and track them as they develop further by visiting my website at www.MarketingGeniusLive.com
What is the typical view of customers inside the business?
Most companies are blinkered.
They see the world on their terms – the products they make, the markets they serve, the timeframes in which they operate. They think everybody needs a new washing machine, and have little interest in what people do with it once they buy it. They develop campaigns to persuade everybody to buy one, when the company wants. Channels for the company’s convenience. Price to ensure a profit. Service that is standard for everybody.
They don’t understand the customers’ world.
Customers have bigger viewpoints – they buy products for a purpose, for example because they have a new baby and so need to wash more, or they have a skin allergy to dust, or they just love soft fabrics to cuddle up to. They want it when they move into their home. Not at the shop but fully installed. They care more about what happens when things go wrong, than some fantastic new gadget.
Most companies don’t think like customers, and so their propositions are not focused on what matters, their service is not relevant, and they miss opportunities to do and sell more.
How do you get beyond the numbers – to see the customer as a real person?
This is why the more enlightened customer thinking companies now use “immersion” techniques, spending time with individual customers to understand their broader lives, their needs and wants, but also their dreams and motivations. This is far more insightful than average research statistics which is largely meaningless...
Have you ever met the average person? No. But most companies develop average products, delivered with average service, in an average way, for average people.
No wonder we don’t trust most companies, we don’t love most companies.
There is such a big opportunity for companies to think like customers. Its not just a soft cultural change, it fundamentally changes how you attract, serve and retain customers – and therefore it fundamentally affects revenues, profits and growth too.
What is the shift in relationship between a company and their customers?
Actually, most customers don’t want “relationships” with companies. They’d much prefer to have better relationships with real people like them.
Yet most companies persist in trying to force people to have relationships with big anonymous organisations, which just want to sell them more. CRM and loyalty cards don’t build relationships. Maybe if its a real person in the company, then you can have a relationship, but that’s rare.
Instead, companies should facilitate relationships between like-minded people – who love gardening, who love soccer, who love new business ideas, who want to meet each other. This is why networks, social networks and customer networks are becoming so important to customers and business. But networked businesses work by new rules, so you have to be careful to work with them and for them, and not against them.
At times of change, people rethink how they judge things and what matters. Similarly the winning businesses are those who seek the opportunity to disrupt the conventions, to innovate to meet changing needs, and to make new ideas happen – to serve and retain customers now, but also to survive in the upturn, when it eventually comes. Because it will.
The question is are you prepared to rethink your business now. And as a result, will you be a winner or loser. One thing is for certain, the winners will be those who stay closest to customers.
If you were asked, what three key pieces of advice would you offer the marketing managers reading this interview?
Marketers are the people who can most naturally achieve this new balance – to connect customers and business, to embrace creativity and analysis, to see the future and act on it today. They have the natural “outside in” perspective and talents to lead the business.
Marketers should be the most important, influential and inspiring professionals within the business today. Yet for too long, their capabilities have remained organisationally isolated, focused on tactical, functional deliverables, making a marginal contribution rather than the engine of growth and value creation. Businesses cannot survive in today’s markets like this.
Businesses need marketers and marketing more than ever, to step up to the challenges of market complexity and intense competition, to be the creative and commercial driving force, and to embrace customers and innovation across the whole organisation. Marketing is the engine of sustainable growth and long-term value creation.
Marketing must drive strategic direction and aligned delivery, both a stronger function and an essential mindset for business. However this requires marketers willing to change, to step up to the challenge. There has never been a more exciting time for marketing, or to be a marketer.
It’s time for marketing to take centre stage.
Finally, what interests you outside of your professional life, and why?
What hopefully comes across in the book, and this interview, is my great passion for marketing. Both in terms of the activity and how its practices can contribute enormous value to customers and business - but also for marketers - professionals who I believe have the most to offer companies today. But that requires marketers to have the confidence to stretch themselves, challenge their conventions, take more risks personally and organizationally, and work in new ways.
That’s why I took on the role of CEO of the Chartered Institute of Marketing, recognizing the importance of reframing marketing’s capabilities, perception and performance for the 21 Century business, and why its professional development and representative organisations need to step up to this challenge. It's why I wrote the book, and what I spend my talking about with companies and conferences around the world.
Outside of work, my great passion is for athletics – who is the highest, fastest, strongest?- and myself have run track to marathon since the age of 10 years old. Indeed once you first experience the feeling of winning – like I did in a early school 1500m race, its hard to let go of the search for it. I’m also a great supporter of Newcastle United, the best football club in the world. But most important is my family – my wife and two young daughters give me the energy and inspiration to do so much more, and keep my feet on the ground!
And I’m currently researching and writing my next book – about growth through innovation. In particular it will focus on how to embrace the untapped opportunity of technology-enabled networks, social responsibility in the form of ethics and environment, and the new forms of starting points and signposting which customers seek in a complex, changing world. So if you have a great insight or case study, let me know by emailing email@example.com
© Peter Fisk 2009
For more information visit www.TheGeniusWorks.com ... or to buy a copy of the book (See Genius Book), explore some of the practical implications (See Genius Challenges) and case studies (See Genius Brands) or sign up now for a live event (See Genius Live).