Flipping the Marketing

Models Flipping the Marketing

Models Don Schultz, Ph.D.

Professor Emeritus-in-Service

Medill Integrated Marketing Communications Dept.

Northwestern University

AMA Western Michigan

11 November, 2015

Everything We Ever Learned About Marketing and Branding

Is Now Obsolete!

Everything We Ever Learned About Marketing and Branding

Is Now Obsolete!

A Rather Strong Statement

But, One I Believe Can Be Supported

A Rather Strong Statement

But, One I Believe Can Be Supported

And, Even If It Can’t, I Already Have a

Return Ticket to Chicago

And, Even If It Can’t, I Already Have a

Return Ticket to Chicago

So, Let’s Press On!

So, Let’s Press On!

The World of Marketing and Marketing Communication Is in

Turmoil…..

The World of Marketing and Marketing Communication Is in

Turmoil…..

What We’ve Always Done Before Doesn’t Seem to Work

What We’ve Always Done Before Doesn’t Seem to Work

Use of supply chain models

Focus on economies-of-scale

Continuous product improvement

Bigger marketer spend

More “feet-on-the-street” sales models

“Good enough” competitors

We Continue to Spend More With Unknown or

Unmeasurable Returns

We Continue to Spend More With Unknown or

Unmeasurable Returns

Our Conundrum:

I Guess That’s Why I’m Here!I Guess That’s Why I’m Here! I’m a radical thinker

A futurist

An explorer

A data-weenie

And, I’m a Tenured Professor in a Private University – about as much security as professors ever get

Today, At NU, We Find We’re in the

Same Boat as You

Today, At NU, We Find We’re in the

Same Boat as You

My Current NU Assignment:

What Should We Be Teaching Students in 2020?

My Current NU Assignment:

What Should We Be Teaching Students in 2020?

Core IMC Concepts

Brands/ Branding Financial

Analysis

Consumer Insights

Market Research

Comm StrategyMedia

Mgmt

Internal Mkt. Comm.

Data Analytics

Content Mgmt

Marketing Mgmt

What We Teach NowWhat We Teach Now

Other Units in Our Program Other Units in Our Program

Applied Neuromarketing Consortium – interdisciplinary research center

Retail Analytics Council – research on intersection of online and offline retailing

Omni-Channel Initiative – using software to identify, understand and communicate with consumers

Spiegel Research Center – cooperative research with industry to improve marketing results

One Over-riding Theme:

Everything Starts With the Customer!

One Over-riding Theme:

Everything Starts With the Customer!

Because They Are the Only Ones with Money…..

Everything Else Is a Cost!

Because They Are the Only Ones with Money…..

Everything Else Is a Cost!

Here’s Our Current Model Here’s Our Current Model 1. Customer Identification From Behavioral Data

2. Valuation of Customers/ Prospects

3. Creating & Delivering Messages & Incentives

4. Estimating Return-on-Customer- Investment

5. Budgeting, Allocation, Evaluation &Recycling IMC

It Assumes Marketers Decide What to Say, When to Say It, the Volume Level It Should be

Said…..

Although Circular, It’s Still All Linear and Outbound!

It Assumes Marketers Decide What to Say, When to Say It, the Volume Level It Should be

Said…..

Although Circular, It’s Still All Linear and Outbound!

What Should We Do?What Should We Do?

We’ve Identified Four Global Challenges to Current Marketing Methods

We’ve Identified Four Global Challenges to Current Marketing Methods

1. Digitalization

2. Financial planning models

3. Business models

4. Organizational and structural challenges

1. Digitalization Is -- and Isn’t -- an Issue

1. Digitalization Is -- and Isn’t -- an Issue

Isn’t an Issue: Isn’t an Issue:

For consumers, users, viewers, buyers, etc. it isn’t an issue It just happens – if I like it and

it’s fun, I use it

They adapt and adjust easily and quickly

Digitalization is now part of the landscape

Is an Issue: Is an Issue: It’s the marketers who have digitalization

problems

It doesn’t fit the current structural or management sets, suites or planning models

Digitalization requires substantial organizational change

That’s the most difficult task for any manager

Marketers No Longer Lead Customers ……..

We Follow Them

And, in Too Many Cases They Are Much More Agile and Adaptive

Marketers No Longer Lead Customers ……..

We Follow Them

And, in Too Many Cases They Are Much More Agile and Adaptive

The Challenge?

How Can Marketers Keep Up?

The Challenge?

How Can Marketers Keep Up?

One Way……

Listen to Them!

One Way……

Listen to Them!

Less Talking, More Listening!Less Talking,

More Listening!

2. Financial Planning Models 2. Financial Planning Models

Stop looking backward……accounting ROI

Start looking forward…..forecasting actuarial returns

Think of Customers as Income Flows to the Firm

Think of Customers as Income Flows to the Firm

Build customer risk and value models

Measure and manage customer income flows…..those are the “lifeblood” of the firm

Build based on Internal Rates of Return – invest to meet IRR, not control spending

Determining Customer Financial Value

Determining Customer Financial Value

OurBrand

Consumers

Total Customers

Annual Demandper Customer

Share of Purchases

(%)

$ C-BV = P x BR x SOP x M

Contributionto Brand

Penetration

X

BuyingRate

Brand Y

XBrand X

Share

Units/Revenue/

Gross Margin

Margin

X

If We Know the Value of a Customer,

We Can Invest Appropriately

More Forecasting, Less ROI

If We Know the Value of a Customer,

We Can Invest Appropriately

More Forecasting, Less ROI

3. Most Companies Have the Wrong Business Model

3. Most Companies Have the Wrong Business Model

Marketers Have Inherited a Mass of Often Irrelevant Planning Concepts and

Approaches

Marketers Have Inherited a Mass of Often Irrelevant Planning Concepts and

Approaches 4Ps and product management

Supply-chains

Internal KPIs

Hierarchy of Effects and funnels

Customer attitudinal models of success

Traditional 4Ps Supply-Chain Model

Traditional 4Ps Supply-Chain Model

Customers/End UsersCustomers/End Users

Supp

liers

Raw

mat

eria

l

Asse

mbl

yBa

tch/

line/

Conti

nuou

s pr

oces

s

Fina

l Pac

kagi

ng

Manufacturer

DistributorsAgents &Brokers

Retailers

We Put “Value” Into the Product….

Assuming Customers Would Extract It……

With a Profit for Us!

We Put “Value” Into the Product….

Assuming Customers Would Extract It……

With a Profit for Us!

But, We Don’t Know If What We Put

In Is the “Value” Customers Want

But, We Don’t Know If What We Put

In Is the “Value” Customers Want

That’s Why Supply Chains Are All

“Sales Based Models”….

Sell What We Have Made!

That’s Why Supply Chains Are All

“Sales Based Models”….

Sell What We Have Made!

What We Really Need … What We Really Need …

Marketing/Sales

Customer-Driven Demand-Chain Model

Customer-Driven Demand-Chain Model

Customers/End Users

SolutionSeeking:

Wants/Needs/Desires

Recognized/Unrecognized

Co

ns

ide

rati

on

s

Appropriatenessof Solution

Knowledge of Solution

Value/Sacrificeto Obtain

Access to Solution

Ma

rke

t P

lan

nin

g

Marketing/Sales

Production

R & D

Admin

Intermediaries

Based on What Customers Want and Need…..

Relying on What They Are “Saying” and “Doing”

Based on What Customers Want and Need…..

Relying on What They Are “Saying” and “Doing”

Using Data Customers and the Marketplace Have Created

Using Data Customers and the Marketplace Have Created

Network #1:Customers

Network #2:Data

Network #3:Analytics

Network #4:Marketing Planning

Network #5:Communication Delivery

The Data Flood The Data Flood

Creating Customer Focus With a “SIVA” Model

Creating Customer Focus With a “SIVA” Model

Solutions – what problems, issues, wants and needs customers have?

Information – what knowledge, experience, background, details customers need?

Value – what value will customers receive and what will the have to give up?

Access – where do customers want to buy, how do they want to learn, how do they want to acquire

Recognizing Marketing Must Be Networked, Dynamic and

Non-Linear

Recognizing Marketing Must Be Networked, Dynamic and

Non-Linear

Recognizing Customer Patterns as the Critical Ingredients

Recognizing Customer Patterns as the Critical Ingredients

We Must Become Collaborative Marketers and Communicators

and Share That Value With

Customers

We Must Become Collaborative Marketers and Communicators

and Share That Value With

Customers

More on Research and Understanding,

Less on Campaigns and Short-Term Incentives

More on Research and Understanding,

Less on Campaigns and Short-Term Incentives

4. A Major Internal Challenge: Organizational Structures

4. A Major Internal Challenge: Organizational Structures

Most Organizations Are Still Based on

“Command and Control”Lines and Boxes

Most Organizations Are Still Based on

“Command and Control”Lines and Boxes

Marketing Sales Country C Region X

CEO

We Still Look Like ThisWe Still Look Like This

Marketing SalesHuman

ResourcesIT/Digital Operations

Source: Adapted from Cranfield School of Management

Where Are the Customers?Where Are the Customers?

We Must Put Customers at the Center of the Organization?

We Must Put Customers at the Center of the Organization?

Customer Centric Model

We May Have to Change the Content of All the Bubbles

We May Have to Change the Content of All the Bubbles

Needed: Horizontal Planning Processes That Focus on Customers

Needed: Horizontal Planning Processes That Focus on Customers

Source: Adapted from Cranfield University

Marketing Finance Sales InformationTechnology Operations

CEO

Cu

stom

ers

Strategy Development Process

Value Creation Process

Channel Management Process

Information Management Process

Performance Management Process

Final Thought

If We “Flip the Marketing Models”,

Will Companies be Ready for Our Students When They

Graduate?

Final Thought

If We “Flip the Marketing Models”,

Will Companies be Ready for Our Students When They

Graduate?

Network #1:Customers

Network #2:Data

Network #3:Analytics

Network #4:Marketing Planning

Network #5:Communication Delivery

A Data-Driven, Real-Time Business Model

Our Goal…

Based on a Customer-Focused Response Model

Based on a Customer-Focused Response Model

Solution(s) – Customer Pain Relief

Information – Sorted and Supplied

Values – Input and Outcomes

Access – Client’s Where and When

S I V A

Can We Reach Our Goals?I’m Betting We Can Adapt and

Adjust

If We Don’t, I’m Out of a Job!

Can We Reach Our Goals?I’m Betting We Can Adapt and

Adjust

If We Don’t, I’m Out of a Job!

Don E. Schultz Ph.D.dschultz@northwestern.edu

If you want to discuss, contact me at