Informational

(First published as an exclusive article for “Progressive Distributor”)

Few would argue that we are now in an economic recession. The pundits’ endless debate now centers on whether it’s going to be long or short, the landing hard or soft, the impact on the financial markets, the effect on other economies and their effect on America and so on. My first question is: so what? The problem of this macro-perspective is that it speaks little of your business or mine, yet we often wallow in the media’s doom-and-gloom forecast.

Like lemmings, too many business leaders accept these editorials as a foregone diagnosis of the state of their business. It is a self-fulfilling prophecy: They become a contributing statistic to the depressed economy. Like lemmings mimicking another’s behavior, they react identically and fall off the cliff together.

Yet every downturn, crash, recession, or even depression has winners that succeed. Companies not only survive, but thrive, in the negative environment. What are they doing differently? If misery loves company, do the joyful seek a different path? I would suggest two key ideas that can significantly contribute to making this recession not your recession.

Stay out of it
First, resolve not to contribute to the recession. Make a choice not to suffer like everyone else. Instead, be proactive and prosper. Hyatt Hotels in the early ’80s is a classic case study in this behavior. The recession, never good news for luxury hotels, hit its peak during 1981-1982. Several cities already had a glut of hotel rooms but Hyatt resolutely went after new guests, rewarded loyal clients, made cuts only where they were not visible to the guest experience. They opened new properties, hitting the competition hard in several new markets where aging competitors were unable or unwilling to reinvest in their existing properties.

Get on the offensive
Second, take business away from your competition, which will increase your market share despite the total pie shrinking.

Sounds simple enough, but the challenge is in the implementation. There are only three effective ways to get more business.

• Gain share of wallet. Increase business from your existing customers.
• Promote loyalty. Encourage clients to continue to engage in profitable behavior.
• Target customer acquisition. Acquire new business from your competition that looks like your best customers.

Effectiveness in each of these areas is highly dependent on the quality of the relationship. Customer relationships are no different from marriages or friendships. They require an understanding of the other party (which entails investing time and other resources). Understanding your customer requires knowledge – gathering comprehensive information, behavioral knowledge and transactional data. It requires a disciplined investment of time and resources in an intelligent process. The technology that holds this all together is often categorized as Customer Relationship Management (CRM).

Practical solutions
Working with Sony soon after its successful launch of PlayStation, we ascertained that to increase market share and sell more games (their bread-and-butter in terms of margins), Sony would have to learn about their customers. Since it sold both the hardware and software through retailers, it had no direct contact or knowledge of its customers, except for the few warranty cards that purchasers returned.

By developing a cutting-edge relationship program that tapped into the psyche of gamers, we challenged the gamers to tell us who they conquered in what game. As a reward, they were admitted into the PS Underground, a “stealth” Web site and loyalty program that gave them inside information on new developments and tips on existing games.

Within 12 months, Sony built a base of 40,000 customer names into a comprehensive customer knowledge bank of 500,000 enthusiastic gamers with known genre preferences. This information was then leveraged into targeted, personalized, marketing campaigns that both gained a greater share of wallet and engendered loyalty, making them resistant to new game launches such as Nintendo 64. Sony crushed Sega, and greatly mitigated the threat from Nintendo’s launch of N64.

Although the implementation specifics are certain to be different from your industry, the underlying principles are directly relevant. Understand your customer by investing in the relationship: leverage the knowledge relevantly.

So how do you go about this?

• Walk in your customer’s footsteps. What does a day (or days) in the life of your customer look like? By analyzing the interactions between your organization and the customer, you can identify key touch-points where data and information are gathered or exchanged.
• What would the ideal path look like? Dialogues with an organization’s different stakeholders yield mission-critical customer knowledge requirements. Interviews with customers breed greater understanding of the customer’s needs.
• Perform a gap analysis between the current and the ideal.
• Throughout the process it is important to identify the systems (both processes and technology) that may aid or hinder the relationship and the ability to assimilate or leverage customer knowledge.
• Finally, isolate key points of inflection, areas that are critically important and have significant economic impact. Improving these areas will yield the best return on investment.

Technology is not the ultimate panacea for cultivating effective customer relationships. Technology implementations, like CRM solutions, must be accompanied by a strategic process that examines the organization’s customer relationship practices and incorporates communication.

Whether you are a veteran player or a new entrant, experience reveals most have yet to master this combination of art and science called CRM. For example, the marketing department of a relatively new bank entered vital information about their customers into a contact management program. Loan information was entered into a custom-built system, and the regular banking information was entered into a third application. Despite professing a client-centric philosophy, the systems were disintegrated. No one performed a comprehensive analysis of the bank’s customers.

In summary, make this recession not your recession by choosing to grow your business wisely through the intelligent practice of effective customer cultivation.

So what is marketing?

Marketing is not sales, although marketing supports sales by generating qualified leads and effectively communicating who you are, what you do in the minds of customers, prospective customers and other stakeholders.

Marketing is not advertising, although advertising is only one of the 100 weapons in the marketing arsenal. Your marketing strategy will dictate whether or not it is an appropriate for your business.

Marketing is not your brand, although branding is key to your marketing success.

Marketing is EVERYTHING you do. Everything you do, (and don’t do), sends a message to the marketplace. Although these messages vary in their communications impact, your brand is the assimilation of these varied messages in the mind of the audience.

A key essential of the marketing process is to build a brand in the mind of your target audience. Wouldn’t it be wise to decide what the message should be and ensure that all communications reflect this message?

So what is a brand?

A brand is not your logo or tagline. A brand is more than a mere label and more than the product itself. It is the combination of values, promises and guarantees that frames the relationship between you and your (prospective) customers. A brand is the expectation of certain benefits between you and your (potential) customers.

According to Regis McKenna, famed consultant to Apple, Intel and others and the author of Relationship Marketing, “a successful brand is nothing more than a special relationship.”

Where’s the proof in the above quote? Ask any competitor, and they will tell you that customer bias, or loyalty to an established brand, is one of the biggest obstacles they face in increasing their share of market.

But what makes a brand powerful is the effectiveness of your branding strategy, your ability to create a mood, thought, feeling, and definition for that brand in the mind of your target audience. The power of a brand lies in its ability to influence purchasing behavior.

Since a brand exists within the mind of the customer, it can be affected positively or negatively by intentional and unintentional messages from you. Also, it cannot be arbitrarily changed, improved or “managed” without the participation of the customer.

Highly effective branding can be so impactful that consumer sees the brand synonymously with the product … tissues have “become” Kleenex, antiseptic first aid bandages “are” Band-Aids, Coke “is” cola. Branding can be so effective that the name itself is unnecessary, Nike’s swoosh logo is often unaccompanied by the company name. And yet, we all know exactly what is being advertised. Nike clearly conveys “action,” with powerful emotional appeal. Other brands have also become indistinguishable from their emotional appeal: Volvo with “safety”, Ivory with “pure and gentle.”

So if the perception of your brand is the assimilation of any received message that you send (or are not sending), wouldn’t it be wise to first plan what is the message you want to send and then ensure everything you communicate supports the key messaging?

All too often companies relegate the importance of branding and thereby lose the opportunity to give clients and customers a frame of reference when making purchasing decisions. People will buy brands they recognize, regardless of whether or not they know or believe the claims, simply because there is comfort in that which is known.

How powerful can a brand be? The most powerful brands of all are those that create a need in the mind of a purchaser that was not there before. Take for example, bottled water. American tap water is clean and drinkable, yet Evian is worth millions today. A 1.5 liter bottle of Evian sells for 20% more per liter than Budweiser, 40% more than Borden’s milk, and 80% more than Coca-Cola. That’s the power of a brand.

Strategic Branding

Since you cannot be all things to all people, effectively addressing customers’ needs, which are then re p resented by your brand, will require differentiating yourself from your competitors and identifying your target market segment.

Marketing Symphony utilizes a three-step process to develop brand  strategy:

• brand positioning,
• brand personality and
• core proposition

Each element requires choices. This in turn results in a number of tactical branding communications vehicles, addressing both your target audience needs and enable you to achieve your objectives. Strategically controlling your branding messaging and vehicles can raise your offering beyond the mundane, to give your brand ‘wings’ and an enduring ability to stand out from the competition. In addition, your brand must be sustained through consistent communication to internal and external audiences and stakeholders and allowed to evolve as your target audience needs develop.

(Originally authored in September 2000)

Alvin Toffler, in his introduction to Future Shock, said, “Change is the progress by which the future invades our lives.” September is often a month of change, the future is invading our lives a little … our children are back in school a new year – new teachers – a new grade. You may find the rhythm of business changes, and of course, we have all been hoping that the weather would change!

Well we finally got a brief respite this week with our first
rain in 70+ days! But then it went back to 90-degree heat and no rain – unfortunately that was only an incremental change – we went from the 100s to 90s. No inspiration on change there. A perusal through my collection of business and marketing books was a little disconcerting. The problem with books on change: books are static; change, by definition, is dynamic. There is, then, almost always a lack of synchronicity between what the reader knows of change in life, and what he or she experiences on the page. It does not help that the topic seems to attract writers who–in many instances–never oversaw any change efforts at all. Thus, most books on change are stern little sermons about pulling up your socks and looking for opportunities in adversity, peppered with snake-oil aphorisms, mantras of dubious efficacy (“Reframe, restructure, revitalize, renew,” comes to mind).

Another popular approach is anecdotal: a story of how people did–or didn’t–survive whatever grisly processes a particular company was going through. Many strategic leaders at companies, abetted by a sense of urgency and bevies of willing consultants, have convinced themselves that all they need to do to change is to decide to do it and then tell the troops, in the manner of “Star Trek’s Captain Picard, to “make it so.”

But isn’t the urge and the ability to “make it so” two separate things? Any kind of change is an organic process composed of many competing elements, an inevitable, unavoidable force with a life of its own. “Discontinuous,” as opposed to incremental, change is especially so. It is shaped by external forces–technological, competitive and regulatory innovation or the decline and rise of whole industries and regional economies–that engineer a radical break with the past. I have found that my strategic work in the last five years increasingly deals with clients facing discontinuous change brought on by external forces. Naturally, the commercial applications of the Internet have been a pervasive driver to change.

Why are we so resistant to change? Is it the fear of moving from that which is known to that which is unknown? I have seen many companies go through: “rational” resistance to change; the search for people to blame; increased informal communication, faction formation; the emergence of informal leadership; realignment of relationships, etc. However, the radical redirect that discontinuous change heralds, often requires a transformation of the culture in an organization. It means changing the values and worldviews of its people. People don’t come by their values lightly and they don’t check them at the company door, so they surely don’t give them up easily.

Psychologists argue that people experience change as loss — even if they accept the need or inevitability of it. Change, like loss, requires time to repair.

An interesting collection of essays: “Discontinuous Change: Leading Organizational Transformation” was compiled by consultants from the Delta Consulting Group in New York. No one will be surprised to learn that C.E.O.’s loom large as change agents, though they might be surprised that the authors zero in on senior management, rather than the much- maligned middle management, as a major source of resistance to change. In addition, to believe they have a stake in the future and in not being an obstacle to change, middle-level employees must feel that the discomfort is being spread around equitably and that the company is willing to help them gain skills and opportunities they can use to move forward in their careers, wherever they end up.

In counseling our clients in branding and marketing matters, a quote from an esteemed colleague often comes to mind: “it’s like trying to ask a goldfish describe the water they are swimming in.” Discontinuous innovation compounds the problem in that they are often no longer in the gentle creek they knew so well, but they are about to merge into the perils of the Amazon River! Bon voyage — the future is about to invade your life!

The nineties heralded the shift from product-centricity (selling what a company has) to customer-centricity (fulfilling customer wants and needs). This has allowed firms to not only serve large market segments but also small niches and thus increase their target market universe.

What does this take? A new value-exchange proposition, the development and management of customer relationships and loyalty, and marketing to the individual  potentially on a mass scale. To succeed in this new environment of constant change and instability requires new information, a new level of customer knowledge. Knowledge that is generated expressly for the decision at hand, not information created for another purpose entirely and then massaged on a “best can do” basis.

At Marketing Strategy 1 we are strong proponents of relationship management and the role of strategic marketing communications to effectively support our clients’ marketing goals. In the last six years much has been written on the subject. From Peppers & Rodgers seminal work: “The One to One Future”, first published in 1993 to Bain & Co’s Frederick Reichheld business classic: “The Loyalty Effect”, and from the relationship marketing guru of Silicon Valley, Regis McKenna’s “Relationship Marketing” to greatHBR articles by Professor Len Schlesinger: “Realize your customers’ fullprofit potential”, and W. Earl Sasser’s “Why satisfied customers defect”.

I know it’s hard to keep up in this day and age, so here is a good primerthat I came across that summarizes several of the aforementioned authors’work. It is located on a German Website at the University of Mannheim:

http://webrum.uni-mannheim.de/bwl/grether/Alba.html#_Toc362507130

If the “Internet changed everything,” then by definition, advertising on the Internet changed how we market. Brand-building is passé and straight selling is in; we’ve moved from “spray and pray” to ROI; from boring banners to targeted, content-rich communications; users tune out the irrelevant and engage in “permission” marketing.

“Like almost everyone else, advertisers are logging on. Advertising spending on the Internet will rise from $3.3 billion in 1999 to $33 billion by 2004, roughly 8% of all advertising, according to predictions by Forrester Research, a high-tech consultancy. A third of this will be spent outside North America, compared with 15% today. Whereas television audiences are falling, the popularity of the Web is rising rapidly. Three years from now, as many as 250 million people may well be online around the world.” – The Economist, October 1999

Everyone in marketing today is talking of the Web as a new advertising medium, but few appear to know how to make the best use of it. Most still “spray and pray,” throwing money at the Web in the hope of reaching a mass audience and building a brand, just as they did in the broadcast world. Unfortunately, this diminishes one of the Internet’s most powerful attributes: that it is interactive and relational by nature. By allowing users and marketers to talk directly with each other, in real time, advertisers can discover what someone browsing on the Internet is looking at and, by tracking such behavior, what their real interests might be. They can instantly put forward a custom-made offer. It is my contention that the Internet will on an unprecedented scale become for many organizations the delivery mechanism that truly delivers on the original 1:1 marketing promise.

The Internet may also instantly reveal whether an advertisement is working. Although this idea terrifies some agencies and marketing consultants, not Marketing Strategy 1! We are eager to measure something that has in traditional marketing been largely guesswork. For the first time, we can truly measure a client’s marketing return on investment. And by more effectively communicating the right message, to the right target audience efficiently,
you should also save money.

How people use the Web is changing. Now that the novelty of randomly exploring the World Wide Web has diminished, “click-through” rates (CTR) on banners have dropped to as little as 0.5% of the times a banner is displayed. Susan Bratton, a vice president at Excite, a Web portal,
complains that the worst advertisements are “endlessly looping, strobing, cheesy banners that obnoxiously scream out a free offer.” But users are more interested than ever in content. Some of the most effective advertisements are such examples as links in book reviews to the website of Amazon. People are starting to use the Internet with more purpose.

Yet novelty on the Web is easily imitated and soon wears off. Most marketers will continue to rely on offline media to build their brands. IBM, the second-biggest advertiser on the Internet in 1998, says that those who think the Web is for building brands are “kidding themselves.” Dot-coms and Dot- bombs especially, found that branding needed coordinated on- and offline campaigns. New brands need to be promoted where most of the people are: offline.

In addition, we are beginning to see a new phenomenon: “Website distribution.” Instead of attempting to lure users to one’s website, marketers are placing the relevant parts of their site in a rich-media banner or an e-mail sent directly to the target audience. The banner, e-mail or content/link is the “electronic envoy” of your business.  For example, users can see video clips and views of the different Lexus models, get a brochure and find the nearest dealer, without ever visiting Toyota’s main website. Similarly, Sony Pictures promoted their film, “Muppets from Space,” using a banner that allowed users to download a free Muppets screensaver, shows a trailer and offers a game, all within the banner.

To direct the right message to the right audience requires what I call “customer knowledge.” As collaborators with our clients, we need to understand not only the target’s demographics (details such as age, income, address, position, etc.) but also the psychographics of the user’s browsing
and shopping habits, which technology can certainly support. As a consequence, the phenomenon of “permission marketing” is becoming a driving force in attainment of customer knowledge. It empowers the user to enter into an interesting new advertising value proposition: the exchange of
personal information and preferences for receiving advertising that is personally relevant. Several examples of these alliances between advertising and the consumer have become very successful: My Points, ClickRewards, as well as individual websites like E-trade.

In conclusion, it is apparent that marketing using the Web medium not only requires a paradigm shift in new thinking but an adaptability to the very nature of the way the Web behaves. Just when we begin to gain understanding of the medium, we can fully expect that it has or will change. The Web changes everything or everything within the Web is changing? We look forward to being your collaborators in thinking and creatively making your Web strategy an integral part of your marketing success.

Often I find myself counseling our clients to market with a customer-centric approach versus a product-centric approach. This thinking is supported by the results of a survey of global companies that I recently came across. The Economist Intelligence Unit and Andersen Consulting contend that “Customer Relationship Management” (CRM) is becoming central to corporate strategy. While only 18 percent of businesses surveyed are currently organized around customer type, the figure is expected to rise to 50 percent by 2002.

Since the Internet allows the (already unpredictable) customers to exercise even greater freedom of choice, major corporations must therefore craft a clear customer relationship strategy. Businesses are shifting their attention from attracting new customers to retaining profitable ones and fully realizing their profit potential. And, in some cases, they will “choose-to-loose” unprofitable customers.

“Focusing on customer needs seems the most basic, fundamental tenet of business. Yet, major corporations are just now beginning to blend strategic thinking, management resources, front-line support and technology to better understand and serve more sophisticated buyers,” said Dale
Renner, global managing partner of Andersen Consulting’s Customer Relationship Management practice. “In the wake of relentless cost-cutting, organizations are developing long-term customer relationships as a path to enhancing profitability … this shift is nothing short of revolutionary.”

Other major findings of the survey include:

• Companies are becoming more sophisticated at tracking customer profitability. Nearly 50% said that customer profitability would be a critical measure by 2002, up from 26% today.
• By 2002, 83 percent of companies expect to have customer data warehouses, up from about 40 percent today.
• More than 60% of businesses believe that “changing customer demographics and needs” and the “pressure to customize” their offerings in light of these changes, now have the most profound influences on their business strategies.
• This new sophisticated approach will be aided by the evolution in interactive technology, specifically the soaring popularity of the Internet. Companies predict their use of the Internet to collect customer data will surge 430% by 2002.

Since not all customers are created equal companies need to build viable relationships to intelligently gather more data and discern the differences among customers. This “customer knowledge” can shape their offerings and marketing propositions based on the relative value these customers bring to the enterprise.

At Marketing Symphony we are particularly excited by the Internet’s capability to build customer knowledge. In my previous life in direct marketing we were able to build databases over a few months using mail, within weeks by telephone, but now with the Internet we can literally help our clients build at the speed of light! In addition, not only is it faster but also it is qualitatively far richer. New levels of customer learning lead to an increased ability to communicate with relevance to a targeted audience that is interested.

So the future lies in developing intelligent relevant relationships … a premise that dates back to the prehistoric dawn of communication. Back to the future.