During the last few months, I’ve been teaching and advising some students over at Stanford University on Entrepreneurial marketing (in a class taught by Chuck Eesley).
My key thesis is that Marketing is Dead. In many ways, old news. And, the more helpful and less theatrical lesson: Marketing in the 21st century is always about the product and the purpose it serves.
You can no longer expect to have a so-so or weak product and then marketing your way to winning the market. For example, a current public situation: RIM/ Blackberry lost its ability to build devices that the perceptive business or consumer audience wanted, but then spent tons of money on advertising. What would have worked 10 years ago, doesn’t work anymore.
So today, you have to start with killer products that serve real needs. Evernote, Fast Company, and General Mills are all companies that make great products. But they do something else that causes them to be known: they have a purpose that is bigger than them. Evernote allows their users to obsess about being informed, information-connected, and productive. Fast Company engages the hearts and minds of the pioneer. General Mills applied their efforts to eating better. Each of those is bigger than what each actually sells in an app, a magazine, or a cereal, respectively.
So, what replaces marketing is shared purpose. Through it, you have the basis on which to engage in a community. You no longer talk at people; you co-create with people. I’ve already shared why this is a key norm in the social era.
To make this real, let’s talk about five ways to do that:
– Have a bigger goal. Have a reason to care that reaches beyond you / your product / your company. The secret is that it’s something people actually care about outside your organization – something they are already pursuing, and you happen to also be pursuing it. You then get to band together to go after common goal. All the effort is then about participating in a dialogue with fellow travelers. The better you are at serving the goal, the more the fellow travelers turn to you when they need to buy something and the more trust they have in your brand.
– Participate in conventions already in play. All of us know that colds spread through a very common convention, the handshake. One sneeze in a room full of 1000 people can then infect people all-day, and all-week long. (Yeah.) Long before foodspotting, people would take pictures of their food, thus allowing there to be a site where that becomes publicly shared, and thus create more meaning to restaurant menus. If friends today solicit fashion advice via email (private forums), asking them to be public about that advice might not work. What is the convention or habit of the people you want to engage with? How can you take become a part of it?
– Focus on pleasure. People share that which they enjoy. Hence, the funny cat videos that are shared around the web more so than Economist articles or policy documents. Or using the virus metaphor, an overwhelming number of viruses are transmitted sexually, or by taking drugs that increase pleasure. On a practical level, just visit a local Apple retail store and you see this same push on pleasure. It’s pretty, and clean, and lets you immediately start playing. All the while, no one focuses on getting you buy anything. It’s pleasure personified. I can’t go downtown without my son wanting to go into the Apple store to check out the latest apps. People aren’t just there to buy products. They come to share their passion and interact with other enthusiasts. While other retailers struggle, Apple can barely keep up with the demand. Why? Because it’s fun. Hence my advice to Best Buy recently – become social thru Pinterest as the new reason for people to come in and check out home entertainment or fitness equipment because all of a sudden you become a magnet for what’s hot. You can accomplish your purpose and have fun. So back to you: What’s the part of your purpose that is entirely about pleasure? Tap into it.
– Go to the tribe. Just like viruses need people to spread; to have shared purpose, go to where the people are. Enclosed spaces such as hotel conference rooms and airplanes are wonderfully efficient in spreading the flu (The TED conference has something participants affectionately call the TEDCold.) But so are populations of people who care about what you care about. That’s why I actually think that tradeshows will continue on, in interesting formats and conferences matter more so than ever before. In the end, each of us needs to be infected by new ideas, and to find people in our tribes that care about we each care about. So, if you are about fashion, you need to find a way to weave yourself into places people care about fashion, already shop, and share – so that you become involved (and maybe even central) to the conversation already going on. Then be infectious with your ideas and purpose, one person at a time. Never talk mass, talk personal.
– Manifest the purpose fully. Whatever it is that you decide your shared purpose is, don’t do it half-heartedly. Whatever it is – complete the picture. One of the companies I advise is a start-up focusing on telling the story of indie fashion houses, so I’ve encouraged them to tell the full story. Don’t just have pictures, have video. Have a person wearing it. Have the designer talking about why they made it the way they did. Have the curator tell how they might style it on a person. In other words, complete the story that becomes their promise of “story” in its full manifestation. One of the reasons that Fast Company is an amazing brand is that their writers embody this pursuit and passion for entrepreneurship, and they themselves are the pioneers of what’s next. They embody it in their events, and who they feature, and even in their advertising /sponsorship choices. That’s integrity, and in doing so …even the advertising is part of the purpose of the magazine. What is the manifestationo of your purpose in its full (not half-hearted) format? Do that.
Purpose. It’s the new marketing.
(And before you all pile up on me that I’m not reflecting marketing fully… please remember that I started my career in the analytic side of marketing (research, pricing). I have a deep love and appreciation of the different roles of product pricing, go-to-market, competitive differentiation, etc that make up the marketing value chain. I’m not discounting the strategic parts of making sure there’s a business model, but I’m focusing on the part that the vast majority of people think of as “marketing”. You and I might know this is more about promotions than the full range of marketing but most people don’t recognize this distinction.)
I hear you, Nilofer. But the real deal here is that marketing STRATEGY is not dead. It is Marketing EXECUTION that needs a loud wake up call to the world you describe. Ever since I became re-engaged with business through social media, I noted a severe lack of attention to marketing strategy. Social media seems to have given marketers a free-wheeling license to be tactical versus strategic. Clarity and purpose in strategy is more important than ever. Take Red Bull for example. I consider them one of the best marketers of the day. They are also the most strategic.
Nilofer, Great thoughts as usual.
1. Most (not all) smart marketers know deep inside that the old model is broken, given the fundamental power shift between establishment (brand owners, producers) and the masses ( consumers).
2. Purpose led branding/marketing has been around for sometime, and is one amongst many new approaches which need to be embraced more. The last CMO of P&G Jim Stengel championed it internally, wrote a book and started a company around that. It is not the silver bullet.
The reason why meaningful change in the marketing model has not yet happened (at least) in the CPG industry is very simple : You cannot execute a new strategy with legacy structure and skills.
STRUCTURE- P&G created brand management in the 50s. Most CPG companies are largely structured in the same core manner but with added complexity and departments. Adding a digital marketing manager internally ( ala in-house marketing research) doesn’t do anything. It just creates more complexity and another gatekeeper.
SKILLS- Most CMOs ( and people under them) have been brought up in the school of ” a throughly researched big idea/USP pushed via smartly planned paid media”. How many brand marketers of today really know the ABC of Search marketing, Content marketing, Community Management. These topics do not yet feature in year 1 training of P&G ABMs.
People do what they know. If they don’t know, they ignore or obfuscate. If pushed, they revert to tick box behavior.
A fundamental re-tooling is needed. A marketing ARAB SPRING is brewing. We have to train people for the new battle-field. There is too much fluffy leadership/ team work training for middle and senior marketing managers and not enough technical training. We need to take away their (content spraying) artillery and give them smart drones. They also need the marketing equivalent of the marine’s night vision glasses. And we cannot run the Army the same way as before with these new tools. If this sounds scary, it is. That is why we have the deer in headlights situation.
For a shift to happen, we have to first admit that we (I) don’t know. And then we start asking things, like, “what would I need to ask and answer to know more?”. The question becomes the way in which we explore the new domain.
I saw JIm Stengel give a talk at TED2012 and I found NOTHING in his story that suggests he’s actually thinking differently. Instead, I saw him just talking differently. “Oh, values MATTER,” he says.. as if somehow that is new… and I’m sure he’ll get plenty of consulting biz from using all the right words. But the key is that you have to be willing to not know long enough to come at this thing from a different state of being.
There’s a lot of people sharing the tools of this new work.
Nilofer, thanks for your response. 2 different things being discussed I think :
1. The new ” marketing” model ie new skills, new structures.
This is an easier fix and 90% of companies are thinking on these lines ( and lining the pockets of consultants)
2. The UN- marketing i.e what replaces marketing.
The latter is clearly more fundamental and hopefully more big companies will adopt it.
I doubt it will happen soon as the vested interests are quite strong.
Great post and thanks Nilofer for co-teaching with me and mentoring students in the class! The students really got a lot out of it and I look forward to doing it again next year!
Those students are amazing to hang with. I would highly endorse teaching with you because it’s so rewarding. You do an amazing job of creating the forum to ask the right questions.
There’s a central thread that runs through this posting which–I’d have to say–gets to the heart of an equally large, if not larger, point. It’s a point that a few in the business community, like you, really get. But it’s one that eventually everyone will have to contend with. And it’s embodied in your assertion that “what replaces marketing is shared purpose”. Yeah, I know few other folks are talking about “shared purpose” too–but I’m not convinced most really grasp what’s really going on here. (However, this article affirms my hunch that you do.)
On the one hand, shared purpose can refer to a common belief or joint undertaking–something we hold and/or do. And this will continue to be an important driver in the business world, Yet, based on what I’ve been seeing, I strongly believe that what is going to move and shake things in years ahead–actually, what’s moving and shaking it NOW–is the understanding of shared purpose, not of what we do or believe, but as a communal re-defining, or re-articulation of who we are.
It’s about the process of discovering or–better yet–unearthing what makes us who we are as individuals and as a species–and, for us, that process is morphing right before our very eyes. But unlike in generations past when art, philosophy, and religion had something of an exclusive claim on such territory, we are now entering an era when commerce will play an equally self- defining role.
Yeah, I know it’s a bit abstract and airy-fairy. But I think it’s also where the train headed. That’s clear just by the companies you hold up as the the exemplars. General Mills, Fast Company– and I might add–Apple and Facebook, they seem to deeply own the fact that the social era isn’t just about selling into **groupish-ness**, it’s about providing platforms and experiences that afford the opportunity to connect with others for the purpose of discovering something new and **mutually meaningful** (key point!) about our lived experience. (This is what makes it very, very different from fanaticism or cult-like indoctrination. There, the power and meaning are held at the top and others are wooed or charmed into surrendering something of themselves. Here, the power and, more importantly, the meaning is constantly being re-created on the front lines.)
Two last points: (1) while I think ill-intentioned corporations are certainly out there and–more than ever–we need to be responsible and conscious consumers, I don’t think the shift I’m talking about is one of corporations taking over our lives. I think it’s more about the the long-standing mental divisions that separated the various domains of the human experience becoming more porous and interdependent. And (2) while this move towards a more collective experience does indeed seem to threaten the longstanding Western ideal of the independent free-standing self that we each work to develop and express, all this is only a threat if we hold onto the assumption that each of us–at our deepest–is really is free-standing and alone. I’m with those who seem to believe that something greater than all that is beginning to be expressed, but I don’t think any of us can yet fully know what that greater thing will look like.
We’ll only know when we get there. And maybe, not even then. But I do know that shared purpose is a central thru-way on the path.
I’ll just leave this here.
Isn’t this a little bit like leaving a turd on someone’s front door?
I’ve seen this, and several other posts like it. Several friends have sent them along, without making any comment on the original posts. I can see that I wasn’t giving you enough attention by ignoring the act.
But here’s why I did ignore it:
– I don’t understand the value of making fun of people online. I do this to share ideas. You don’t need to agree or even read it. But in this turd post you make fun of what I do, the name of this blog, and so on. How has that kind of malicious energy EVER lent more value or more kindness into the world? Because that’s how i want measure the quality of what I spend my energy on.
– Yes, I can see that I could have edited a sentence or two to lend more fidelity. I could have said that what i told the Stanford students was that they shouldn’t build a company planning on spending money to promote the product. You want the product to have pull, not push. It was one theatrical sentence that I then qualify to say it was theatrical. I specifically say that marketing is more than promotions but most people only see it that way. And the entire focus of the post is about the axis of “it’s more than”. So one very short sentence (out of how many?) was taken intentionally to then out of context and entire posts done to make fun of a person. Listen, it’s a blog, not a magazine article and not a book. There should be liberty to explore ideas and sometimes make mistakes.
– Several good friends stopped writing their great blogs that added value because of this kind of behavior (that escalated) to be personal demeaning and derivative on purpose. It took all the fun out of writing for them. That’s not right.
Hope you enjoyed leaving your turd at the door. Since I value comments, I’m going to go ahead and let it be there.
I agree with you completely. This is the same kind of inflammatory commentary that has poisoned political debate so thoroughly.
There is simply no place for it, no excuse for it. Disagree? Fine. Do so professionally! – or don’t say anything.
If you wouldn’t say it in public in front of a group of fellow professionals in person, don’t post it.
I don’t mind the debate. In fact, I welcome it. Unlike so many people who turn off comments (even Seth Godin, who clearly doesn’t want a conversation), I think a conversation and dialogue are key to how things get advanced.
The fact that another reader/commenter thinks I show/have confirmation bias gives me an opportunity to point out things and facts (Given 2 biz that are ~identical, if 1 requires substantial marketing and other not, Wall Street will value the 1 with organic growth.) but we couldn’t have that conversation without an exchange. I still may not convince him because he might have his own confirmation bias. I thought the derivative post with its’ eye-rolling making fun thing was just done at the expense of an individual. And I’ve just never found that to be a way to spend good time.
We’ve all got work to do. Let’s get on with it.
Nolifer, thank you for opening this discussion. And thanks, too, particularly to David for his comments. I am heavy on the tech side, light on marketing. Your insights into this amazing time we live in and the changes we see, predict, and are struggling to define are refreshing.
Do delete, desseminate, Nolifer.
(just a quick side bar note, my name is not Nolifer, it’s Nilofer.. like those cookies Nillawafers. And so Nil-o-FUR is the phonetic but if you call me Nil or FUR I’ll find you in real life.. )
My sincere apologies; it was an honest mistake. I had become so incensed by the individual who had dropped the url/response that I jumped in to add support to you and I made the careless mistake. As I look forward to having more conversations with you and others in the future, I will be sure to address you correctly.
I wasn’t bothered! Not at all. I realize how many people probably stop themselves from commenting because my name is unfamiliar so I’m glad to educate. Thanks for being so receptive to it.
I can empathize with name-strain, completely. My last name is: Heckler. So you can imagine how well that’s gone over in my travels through life. Besides, I live near campus and do some work for Stanford. As such, your threat of hunting anyone down who couldn’t get it straight put me on guard.
Nilofer, I have to disagree—and, no, I won’t leave a burning bag of turds here. I have seen no empirical evidence to date that confirmations your assumptions. Rather, judging by how you present your case, I see these as examples of confirmation bias. I suggest you refer to Alan Hedges’ “Testing to Destruction,” Andrew Ehrenberg’s papers in the Journal of Advertising Research (1997,2000, 2002) and Byron Sharp’s “How Brands Grow” for a tested, data-supported understanding of how and why people buy products.
I appreciate the resources.
And I’m well aware that pieces of this are early and unproven. But several pieces are proven and known facts; that there are ways that purpose can fuel markets and create efficiencies for a company. I sometimes write very intensive research focused locked down pieces to “prove” things but I also use the blog to sometimes develop an idea. Both are entirely valid as part and parcel of process. If you look at both (and there’s 7 years of writing here, some of it is incredibly case-study oriented), you’ll see that I am exploring threads to understand the new framework as it emerges. (which implies of course, that at time, it’s not proven.)
And to add to this thesis via a fact: (originally quoted and referenced/researched in this Yes & Know post originally http://nilofermerchant.com/2011/11/07/what-does-wall-street-reward/):
All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple. Think about this simplistic example. There are two stores in the middle of town. One has a product/service that customers love, and as a result, customers flock to the store day in and day out all on their own. These customers then tell other potential customers, and through this “word of mouth” process, the customer base grows even larger. The second storeowner advertises frequently, and all new customers are a result of this advertisement and promotion (which obviously costs $$). Which business would you prefer to own? Which one would likely have higher cash flows? If you have to “buy” or “rent” your customers, you have a non-optimal business model – plain and simple.
The empirical data backs this up. You will be hard pressed to find a company with a heavy marketing spend with a high price/revenue multiple. Perhaps the very best Internet company that invests heavily in marketing is Netflix (marketing is about 15% of sales in recent quarter). When it comes to execution, Netflix is considered by many to be the best of the best. So you have a company that is highly regarded for their management prowess, and that is growing over 50% year over year. Yet, they trade at 4X 2011 revenue estimates and 3X 2012 estimates. And this is the best of the best. The majority of companies that are heavy marketers trade at price/revenue multiples well below Netflix.
Consider another point. Most of the companies that have really high multiples, and that have been highly respected by investors all have or have had organic growth: Yahoo, Ebay, Google, Facebook, Skype, OpenTable, Baidu. These business models did not require marketing. The picture included below is borrowed from a Skype slide deck from a few years back, and does an amazing job of highlighting the difference between “bought traffic” and organic growth. As Niklas highlighted, the cost of acquiring a new Skype user was $0.001, versus $400 for Vonage, a very heavy marketer. Which company deserved a higher price/revenue multiple?
Thanks for the reply, Nilofer. I have questions about your two store example: Are the two stores selling the same thing? Are the market shares equal? What is the % size of each stores’ best customers (i.e. how many buy the product 100% of the time) in relation to the overall customer base over a one-year and two-year period? What percentage of each stores’ customer base are switchers?
What is the negative binominal distribution? It is important to understand that, regardless of brand, the light or occasional buyers consume more than the heavy buyers (as proven by Ehrenberg way back in 1959) because of sheer numbers. This is why it is usually foolish to target one segment of buyers rather than trying to reach them all because to increase sales over the long term you have to attract buyers from across the board.
You will need to show me the empirical evidence of this. As for finding companies with heavy marketing costs and high P/E ratios, it depends on the industry and the size/market penetration of the company (e.g. P&G vs Bob’s T-Shirts). Unilever and P&G have high spends because their market share is large, as is their penetration. Their brand marketing has to increase salience (because persuasion doesn’t work and never has) of the brands in multiple categories and that requires mass communications and big bucks. What’s more, they are mature companies dealing with established brands and market share in each category rarely changes, thus there is little speculation of future P/E. It is the newer companies that see the rampant speculation of future P/E, sometimes to absurd levels like FB purchase of Instagram, which to me borders on insanity and a sign of the possible collapse of high-flying social media IPOs.
Yes, the example is equivalent companies. The point is about cost of customer acquisition.
When brand marketing was about out-spending the other, the one with the bigger budget one.
The question of most profitable customer is a good one, but it assumes that profit is a derivative of volume. (you need to have enough to average out fixed costs of the organization) That’s why i think the Ehrenberg example is somewhat outdated.
The point I’m making: the social era with its ability to connect people to causes, you have a chance to create more momentum / adoption if one “product” has purpose, the other doesn’t. The lever moves.
“Hence my advice to Best Buy recently – become social thru Pinterest as the new reason for people to come in and check out home entertainment or fitness equipment because all of a sudden you become a magnet for what’s hot”.
Marketing is dead?
Are you for real?
I checked, and I really am real. A real and imperfect person. Writing ideas out in the world. Getting some things right, some things wrong.
Now, are you understanding what I’m trying to say? That’s a different question.
1. Marketing as a promotions emphasis is dead / dying. Where once companies could build an okay product but market it well, that’s no longer viable. Regular readers of Yes & Know know that I’ve already pointed out that all other things being equal, the company that spends more to get a customer is going to be less valuable. The startup context of this post (the full post in context is that these were notes to an entrepreneurial class) is that I want them to learn to build a product that can be viral because of purpose.
2. I also make the point that the “marketing is dead” comment was purely theatrical. I get that the post that probably brought you to this site was great at picking out at line out of many and left behind the more tempering comment. That said, I agree it was a stupid line.
3. The Best Buy reference is best understood if you are willing to read some more. It’s a 1200 post about the shifting value chain. (http://blogs.hbr.org/cs/2012/02/why_porters_model_no_longer_wo.html) Before you read it, you might want to remember Porter did more than 1 model. The net of it is that Best Buy needs to find a way to be relevance in a social era and not just be aisles of products you can buy easier/better at Amazon.
Hope all that is helpful …
Nilofer, don’t beat yourself up here. You have a right to an opinion, one that makes one pause to consider. What got me, and others up, was the declarative way in which you presented your position. The media you talk about is new and no one knows where it will lead. Is it different? Yes. Are the techniques needed to survive in it different? No, because human behaviour has not changed. That’s why you shouldn’t dismiss Ehrenberg because his observations and data record human interactions with brands. Nothing has changed, just the way brands are presented to people. Read Ehrenberg again, especially “Differentiation or Salience” and “Brand Advertising as Creative Publicity,” this time with a mind to applying them to today’s problems. I also strongly recommend you review Byron Sharp’s book—I would love to hear your comments/review. All I ask is that as you try to make sense of the new media remember, that as a member of the advertising community, you stand on the shoulders of giants. Don’t dismiss their accomplishments as old or out of touch. They were spot on for their time and advanced how we work this craft. Things change for sure, but human nature does not and has not. Remembering that is how you will succeed.
I would love to hear your thoughts on the book. And I’m pretty sure most of Ehrenberg’s ‘law-like’ rules still hold today….
I work with companies where the theories in this article are put to work, and they show potential. These companies tend to have a younger customer base.
I work with many companies where the theories in this article are put to work, and they fail miserably. These companies tend to have a customer base age 55+.
If you spend your time working with companies that have a customer base age 55+, you’ll be likely to criticize this article. If you spend your time working with companies that have a younger customer base, you’ll be likely to find a lot in this article that resonates with your experiences.
There’s plenty of room for many different marketing strategies to work, given who the target audience is. I have clients that market with catalogs (gasp), and are generating 10% EBIT using old-school techniques marketed to an older audience. Conversely, there’s plenty of room for the ideas in this article to work as well, among a target audience receptive to the ideas.
Agreed. I was hoping the original setup that it was for a set of startups was useful but perhaps not explanatory enough.
Kevin, just some points to remember that most marketers do not, courtesy of Ad Contrarian:
People over 50 control over 75% of the financial assets of the US
They dominate 94% of all consumer packaged goods categories
They purchase almost 40% of consumer packaged goods
Even in technology categories, where marketers assume young people dominate, baby boomers “are purchasing at rates just as high as other segments, and because they are often buying for their kids, many are double-dipping.”
According to Nielsen, less than 5% of advertising is aimed at them
There is room for you to be right and for the author to be right. Both arguments largely apply to separate customer audiences.
Nilofer, your focus on purpose is the right one. Marketing is alive and well and it will never die. Just look to nature. Have you ever seen a better “marketer” than a bed of spring flowers trying to attract bees? The flowers serve a need, they market themselves well, the bees complete the transaction and value is created for the entire ecosystem. When something no longer adds value to the ecosystem, it goes extinct.
I think what you’re saying in this article is that the old mindset of marketing — whereby a company decides what to sell, how to position it, distribute it, price it, etc. and then informs the consumer through top down advertising — is dying off. What’s taking its place is the opportunity to engage in real conversations and co-create with your customers in real-time. It’s an evolution of marketing, not a replacement.
In times of rapid change, it’s more important than ever to get back to the basics. That means being crystal clear on the purpose of your business and products. When the purpose is clear, it allows for flexibility to engage in new marketing tactics and find the mix that’s right for your business.
If anyone is interested, I have a free business purpose exercise that you can use to clarify your business purpose and elevate your marketing game. http://organizationalphysics.com/tools-for-change/.
I definitely agree with the fact that marketing now days differs from marketing in the past. In the past, before social-media and the internet , if someone experienced a sub-standard product, he/she can only 1) write a letter to the producer and 2) criticize verbally with friends. Today with the advanced in social-media we have a much more efficient and accessible communication capability, example Hello Peter, Facebook, and Twitter, where one can make or break a product, and anyone can read about it with just a click on the internet. Therefore I believe the substance of marketing is more important than just a feel-good story.
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