What the Rise of Strategy Meant (and Means) for Marketing

Many marketers now believe that the marketing function in many companies has less influence than it should have - or once had.

As one example, they frequently point out that the marketing function is usually responsible for creating and running promotional programs, but often has little or no influence over the other three "Ps" of the marketing mix - product, price, and place.

The idea that the fundamental purpose of a business is to understand customer wants and needs, and create products or services to satisfy those wants and needs emerged in the 1950s. As this concept gained traction, many marketing scholars embraced the view that the marketing function in a well-managed company would direct much of what the company does.

In my last post, I explained that the marketing function in most companies never gained the broad authority that marketing scholars anticipated. What actually happened was that strategy development became the primary mechanism senior company leaders used to make major decisions about the future of their business.

Over the past six decades, the strategy discipline has become the dominant method for describing the purpose of a business and creating the "recipe" for its success. In the words of Walter Kiechel:

"Strategy's coming to dominance as the framework by which companies understand what they're doing and want to do, the construct through which and around which the rest of their efforts are organized, eclipses any other change worked in the intellectual landscape of business over the past fifty years." (Emphasis in original) [Walter Kiechel, III, The Lords of Strategy:  The Secret Intellectual History of the New Corporate World (Boston:  Harvard Business Press, 2010)].

The rise of strategy to the dominant position in the hierarchy of business management tools effectively prevented the marketing function from gaining expansive decision-making authority in most, though not all, companies.

To understand how this happened, we need to look at what a complete strategy encompasses and where strategy is made in most organizations.

The What and Who of Strategy

Roger Martin, one of today's leading authorities on strategy, defines strategy this way:  ". . . strategy is an integrated set of choices that uniquely position the firm in the industry so as to create sustainable advantage and superior value relative to the competition." [A.G. Lafley and Roger L. Martin, Playing to Win:  How Strategy Really Works (Boston:  Harvard Business Review Press, 2013)].

Martin goes on to describe strategy as the answers to five interrelated questions. The following illustration shows Martin's five core strategy questions and some of the subordinate questions that business leaders must answer to create a complete strategy.

Veteran marketers will recognize that answering some of these questions will require strategy makers to use several marketing principles and methods.

For example, the "Where will we play?" question will require strategy makers to decide whether and how to segment their market and select their target market. And the "How will we win?" question will require them to determine how they will deliver value to customers that is distinct from, and superior to, the value offered by competitors.

The rise of strategy also constrained the marketing function's decision-making authority because of who formulates strategy. In most companies, strategy development was (and still is) led by the CEO, and usually involves some or all of the company's C-level executives.*

So, as senior company leaders increasingly used strategy to define the purpose of their business and create their gameplan for success, they absorbed several market-related decisions into the strategy development process. As a result, those decisions became "strategy" decisions rather than "marketing" decisions.

Under these circumstances, the influence of the marketing function across the company will be largely based on the contribution it makes to the success of the company's strategy.

To maximize the influence of the marketing function, most marketing leaders will need to reframe the function's mission and objectives to make clear that the function's first priority is to support the company's strategy and strategy-making process.

In my next post, I'll explain how marketing leaders can use this approach to increase their influence with other senior company leaders and enhance the influence of the marketing function throughout the company.

*****

*In larger enterprises with multiple business units or brands, each business unit and brand will likely require a distinct strategy. These strategies are typically developed by each business unit leader or brand manager with input from his or her leadership team.

Top image courtesy of  Stefan Erschwender via Flickr (CC).

How to Make Sustainability Marketing Effective Marketing

(This is the third of three posts discussing the use of environmental claims in marketing. The first two posts in the series can be found here and here. This post describes how marketers can make environmental claims more compelling for potential buyers and thus more effective at driving revenue growth.)

Many marketers at companies offering sustainable products or services have been featuring environmental messages prominently in their marketing campaigns, and this shouldn't be surprising. After all, numerous surveys have found that most people are concerned about the environment and support actions aimed at improving environmental sustainability.

But many surveys have also revealed a substantial and persistent disconnect between the views people express about sustainability in surveys and their actual buying behaviors. This say-do gap can be attributed to several factors, including:

• The impact of the social desirability bias on survey findings

• The failure of some surveys to capture how important sustainability is to survey respondents compared to other factors that influence their purchase decisions 

• The higher cost of many sustainable products

• How convenient it is to purchase sustainable products (compared to "non-sustainable" alternatives)

While all these factors have contributed to the say-do gap in specific instances, marketers also bear some of the responsibility for the gap because we haven't consistently communicated the benefits of sustainability in ways that produce changes in buying behaviors.

Recent Research Provides Important Insights

Making sustainability an effective marketing tool has been a tough challenge because there hasn't been much research on what kinds of sustainability claims are most appealing to potential customers. However, two recent studies have provided several important data points on this issue.

The Public Inc. Survey

The first study is a 2024 survey conducted by Ipsos on behalf of Public Inc. (the "Public Inc. Survey"). This survey was conducted July 11-24, 2024 with a nationally representative sample of 1,510 US adults and 1,508 Canadian adults.

The NYU-Edelman Study

The second study is a 2023 research initiative conducted by the NYU Stern Center for Sustainable Business and Edelman (the "NYU-Edelman Study").

For this research, NYU and Edelman partnered with nine consumer brands from various industries. The researchers conducted a survey with a sample of the US general population and asked respondents for each brand to rate the appeal of 30-35 marketing claims, which included a mix of conventional product claims and environmental claims.

The researchers used two robust survey techniques to obtain an appeal score for each claim and to identify the combination of claims that produced the maximum overall appeal.

The Formula for Effective Sustainability Marketing

Collectively, the Public Inc. Survey and the NYU-Edelman Study provide robust evidence about the attributes that make sustainability claims appealing to potential customers. They also identify two steps that you must take if you want to be successful at using sustainability claims in your marketing efforts.

Focus on the Right Goal

First, you must always remember that your primary objective is to drive increased sales of a sustainable product or products, not to evangelize the cause of sustainability.

This distinction is critical because it largely determines which sustainability claims you will use and how you will frame those claims.

The focus on increasing sales is not solely a matter of economic self-interest. The surest way to advance sustainability is to increase sales of sustainable products. As the authors of the NYU-Edelman Study report wrote:  ". . . consumer demand will be a key driver for companies to scale investments at the pace necessary to combat climate change and other urgent issues."

Recognize the Diversity of Your Target Audience

The target market for your sustainable products - and therefore the target audience for your marketing campaigns - will consist of potential buyers with substantially different levels of interest in, and commitment to, sustainability. So, your sustainability claims must take this diversity into account.

The Public Inc. Survey identified five consumer segments based on the percentage of their purchases that are conscious, i.e., purchases of "products or services made with consideration for social, ethical, or environmental factors."

The researchers found that only 9% of the surveyed consumers made conscious purchases at least 75% of the time. Forty-five percent (45%) of the surveyed consumers made conscious purchases less than 50% of the time.

Three Ways to Make Sustainability More Appealing

Based on the findings of the Public Inc. Survey and the NYU-Edelman Study, there are three steps you can take to make sustainability claims more compelling for potential buyers.

Step 1 - Link sustainability claims to "conventional" product performance claims

• The NYU-Edelman Study evaluated the appeal of sustainability claims and conventional product performance claims (which the study report calls "category claims").

• In this study, product performance claims were found to be "paramount and non-negotiable" and were more compelling than stand-alone sustainability claims.

• However, the researchers also found that claims that combined sustainability and product performance elements extended brand reach and were the most compelling claims tested.

Step 2 - Make sustainability personal

• Both the Public Inc. Survey and the NYU-Edelman Study found that sustainability claims were more appealing when they expressed how sustainability provides tangible benefits to the buyer or to the people or things the buyer cares most about.

• Specifically, the NYU-Edelman Study found that the surveyed consumers cared most about themselves and their families (health, well-being, etc.), saving money, local farms and farmers, their children and future generations, and sustainable sourcing.

• Conversely, both studies found that science-oriented claims like "carbon neutral," "net zero," and "bio-degradable" did not perform well with consumers. The NYU-Edelman Study did find that the performance of science-oriented claims is improved when they are tied to a personal "reason to care."

Step 3 - Emphasize the aspects of sustainability that deliver present-day benefits

• The Public Inc. Survey found that consumers are more likely to respond to sustainability claims that focus on immediate or short-term benefits.

• As the report's authors put it:  "They [consumers] want to know how their purchase makes their life better or easier now, not in some distant future."

A Final Point

Marketers who include environmental claims in their marketing communications must ensure that they have adequate scientific evidence to support those claims. And the same is true for environmental claims used on product packaging.

Without such supporting evidence, you run the risk that your company can be accused of greenwashing, which refers to making false or misleading claims about the environmental impacts of a product or company to make it look more environmentally beneficial than it actually is.

In the United States, the Federal Trade Commission is the federal agency primarily responsible for regulating environmental marketing claims, and all 50 U.S. states and the District of Columbia have laws prohibiting false or deceptive advertising that can be used to combat greenwashing.

Equally important, the number of private class-action lawsuits involving allegations of greenwashing is increasing, and some have resulted in the award of substantial financial judgments against companies found to have engaged in greenwashing.

The important lesson for marketers is:  Only make an environmental claim if you have the evidence to back it up.

The top image is a version of the universal recycling symbol and is in the public domain. Accessed via Wikimedia Commons.

More Evidence Regarding Small Business Marketing Practices

A few weeks ago, I published a post that discussed some of the major findings of a survey conducted by Target Marketing magazine regarding the marketing practices of small and mid-size companies. Recently, Clutch (a B2B market research firm based in Washington, DC) published the results of its 2017 Small Business Digital Marketing Survey. Because these two studies addressed similar topics, I thought it would be interesting to compare and contrast their findings.

Both of these studies focused on smaller companies. In the Target Marketing survey - which produced 725 responses - 50% of the respondents were with companies having less than $5 million in annual revenue, and 22% were with companies having annual revenue of $5 million to $50 million.

In the Clutch survey - which produced 350 responses - 46% percent of the respondents were with companies having less than $1 million in annual revenue, and 26% were with companies having annual revenue of $1 million to $5 million.

Both studies indicate that marketing spending by most small companies will increase or hold steady in 2017. In the Target Marketing survey, 37% of respondents said their 2017 marketing budget would be higher than in 2016, and 40% said their budget would stay the same compared to 2016. In the Clutch survey, 49% of respondents said their marketing budget would increase in 2017, and 33% said it would remain flat.

Both surveys also asked participants how their spending on specific marketing methods would change in 2017. The following table shows the percentage of respondents in each survey who said they plan to increase spending on each identified method or channel. (Note:  The Clutch survey focused exclusively on digital marketing methods.)

The Clutch survey also provides a couple of additional data points regarding small business marketing practices:

• Over two-thirds of the survey respondents (68%) reported spending less than $100,000 on marketing and advertising in 2016, and 41% said they spent less than $10,000.
• About half of the respondents (49%) have 1 or 2 employees working on digital marketing activities, while 28% said they have 3 or 4 digital marketing employees.

Top image courtesy of Jax House via Flickr CC.

The Welcome Decline of "Marketing Myopia"

In 1960, Theodore Levitt wrote a landmark article for the Harvard Business Review titled "Marketing Myopia." Forty-four years later, HBR editors commented that Levitt's article "introduced the most influential marketing idea of the past half century."

Levitt's central argument was that companies will cease to grow if they define their business too narrowly - in terms of specific products or services rather than in terms of customer needs. In one of the most memorable passages in the article, Levitt argued that railroads were in decline "because they assumed themselves to be in the railroad business rather than in the transportation business."

For the past few years, I've argued that many marketers are now afflicted with a new strain of marketing myopia, one that is characterized by an almost exclusive focus on marketing communications and the technologies that support them. As practiced in many companies today, marketing means marketing communications and not much more. In terms of the venerable 4P's model of the marketing mix, many marketers are devoting almost all of their time and energy to promotion, and they have largely ceded responsibility for product planning, pricing, and distribution (place) to other business functions.

Recently, I've seen some evidence suggesting that the new strain of marketing myopia may be on the decline. Earlier this year, the Association of National Advertisers (in association with McKinsey & Co. and GfK) conducted a study that primarily focused on the disruptive forces that marketing organizations are facing. The study included a survey of marketing professionals that was fielded in July and August of 2015 and generated 384 responses.

In this study, survey participants were asked to indicate their level of agreement with ten statements that described how marketing's role in their organization could be expanding. The table below shows the percentage of survey respondents who "strongly" or "somewhat" agree with each statement. Percentages shown in red indicate significant increases compared to the 2014 edition of the survey.

These survey results suggest that marketers are taking a bigger role in shaping business strategy and in designing new products or services and new business models. Hopefully, these findings indicate that the attitudes about marketing are changing in many enterprises.

The "prime directive" of marketing should be to develop a deep understanding of potential customers, including their needs, goals, desires, and behaviors. Marketers use this understanding to craft more effective communications with customers and prospects, but these same "marketing" insights should also be used to guide the design, development, distribution, and pricing of products and services that will win in the marketplace.

Astute business leaders are now recognizing that providing great customer experiences is becoming the primary driver of competitive advantage. Recent research by Gartner found that 89% of companies expect to compete mostly on the basis of customer experience by 2016. Marketing should be the business function that takes the lead in helping the company to deliver great customer experiences, and that requires marketers to focus on much more than marketing communications.

Top image courtesy of Daniel Olnes via Flickr CC

Why Your View of Data-Driven Marketing is Probably Too Narrow?

One of the most profound changes in the marketing landscape over the past few years has been the dramatic growth of data-driven marketing. While the specific practices vary from company to company, it's almost certain that a large majority of companies are now using data-driven marketing in some form. The attraction of data-driven marketing is so strong that for many marketing thought leaders and practitioners, "data-driven marketing" has become almost synonymous with "effective marketing."

Last fall, GlobalDMA and the Winterberry Group conducted a major research study that demonstrated marketers' commitment to data-driven marketing. This research included a survey of more than 3,000 marketers, advertisers, service providers, technologists, and publishers from 17 global markets. Here are three of the study's major findings:

• About 80% of survey respondents said that data is important to their current marketing activities, and more than half (57.1%) described data as "critical" to their efforts.
• More than 90% of respondents said that data is becoming more important to marketing efforts, and over three-quarters (76.7%) said that data is growing "substantially" more important.
• A vast majority of survey respondents (77.4%) said they they are confident in the data-driven approach to marketing.

The GlobalDMA/Winterberry study also found that most marketers are using data primarily to improve the effectiveness of marketing communications. When survey participants were asked to describe the primary focus of their data-driven marketing activities, 68.5% chose "Targeting of offers, messages, and creative content." When survey participants were asked what factors were responsible for driving their investment in data-driven marketing, the top choice (selected by 52.7% of respondents) was "Demand to deliver more relevant communications to customers/be more 'customer-centric.'"

Therefore, it's fair to say that, as currently practiced, data-driven marketing is primarily about data-driven marketing communications. And while improving the effectiveness of marketing communications is obviously worthwhile, data can and should be used to support other marketing functions that are equally important to business success.

Marketers now have access to more information about customers and prospects than ever before, and this voluminous data can help marketers develop a deeper understanding of customer needs and desires. Companies can leverage this understanding to develop products or services that are more inherently attractive to the company's target market. More than forty years ago, Peter Drucker captured the role and importance of understanding customers when he wrote, "The aim of marketing is to know and understand the customer so well that the product fits him and sells itself."

Data-driven marketing should be about improving the effectiveness of marketing communications, but it should also be about providing part of the intelligence that company leaders need in order to bring the right products or services to the market in the first place.

Image courtesy of Dushan Hanuska via Flickr CC.

Customer Experience is the New Competitive Battleground in B2B

One of the most widely-discussed topics in marketing circles over the past few years has been the growing importance of providing outstanding customer experiences and managing customer experiences effectively. Forrester Research says that businesses of all kinds are now operating in the "age of the customer" and that this new competitive environment places new demands on company leaders, particularly marketers.

There's a growing recognition among marketing thought leaders and practitioners that customer experience is quickly becoming a new basis of competition for B2B companies and a primary driver of competitive advantage. For example:

• Recent research by Gartner found that 89% of companies expect to compete mostly on the basis of customer experience by 2016.
• In the 2015 Digital Trends report by Econsultancy and Adobe, 22% of surveyed business professionals said that customer experience represents the single most exciting opportunity this year, up from 20% in the 2014 edition of the survey.

We're also beginning to see evidence that providing great customer experiences contributes to superior financial performance. For example, in its 2014 Customer Experience ROI Study, Watermark Consulting found that from 2007 through 2013, customer experience leaders generated a total return that was 26 percentage points higher than the S&P 500 Index (77.7% vs. 51.5%). Over the same period, customer experience laggards posted a negative total return of -2.5%.

A recent survey by Regalix Research provides additional important insights regarding the state of customer experience management in B2B companies. The Regalix survey clearly revealed that B2B marketers recognize the importance of effective customer experience management. Eighty-six percent of survey respondents said that delivering superior customer experiences is extremely critical to their company's growth, and 81% said that providing good customer experiences is a strategic priority. 

Respondents also recognized, however, that they have more work to do to achieve their customer experience goals. Only 58% said that their company's approach to customer experience management is "highly focused."

The marketers surveyed by Regalix also identified several challenges to effective customer experience management. For example:

• Only 23% of the respondents said that the attributes of their company's brand are well defined.
• Only 28% said that employees across their organization fully understood the key attributes of their company's brand.
• Only 21% said that the quality of interactions with target customers is closely monitored.

Effective customer experience management requires the involvement of virtually every business function in a company. However, I suggest that marketing is the most appropriate function to take the lead in a company's customer experience management efforts.

Why Traditional Marketing Hasn't Died

After reading a newspaper account of his illness or death, Mark Twain famously wrote, "The report of my death was an exaggeration." We can make a similar statement about the health of traditional advertising and marketing techniques.

It's been fashionable for several years to predict the impending demise of traditional advertising and marketing tactics such as TV, radio, and print ads. Marketing thought leaders have advanced this view in many of the best-known and most influential marketing books published during the past two-plus decades. Some of the notable examples include The One to One Future by Don Peppers and Martha Rogers, Permission Marketing by Seth Godin, The New Rules of Marketing and PR, by David Meerman Scott, and Inbound Marketing by Brian Halligan and Dharmesh Shah.

Based on these predictions (and many others like them), we would expect to see the use of traditional advertising and marketing methods in a free fall, but that hasn't happened. ZenithOptimedia recently estimated that global advertising spending will grow 4.9% in 2015 and reach $545 billion by the end of this year. Magna Global has predicted that global ad spending will grow 4.8% in 2015 to $536 billion.

So, were all of the well-respected marketing thought leaders simply wrong? Not completely. Research clearly shows that digital marketing, content marketing, social media marketing, and inbound marketing are the fastest growing segments of the marketing industry. And to some extent, these segments are growing at the expense of more traditional marketing methods and channels.

It's also clear, however, that many companies - particularly larger enterprises - are not close to abandoning traditional advertising and marketing methods.

Companies are still using traditional methods and channels for several reasons. First, there's a lot of inertia in large organizations, and the primary cause of the inertia is fear. Even when company leaders recognize the need for change, fear of the unknown and/or fear of making a mistake will cause them to implement changes gradually and incrementally.

But more importantly, companies are still using traditional advertising and marketing methods because they still work. They may not work as well today as they did in the Mad Men era, but they are still more effective than some marketing thought leaders would like to admit.

Traditional advertising and marketing methods still work because they benefit from several deeply-ingrained characteristics of human judgment and decision making. For example, numerous studies by psychologists have demonstrated that the more often something (an idea, an image, a brand or product, etc.) is presented to people, the more they tend to like it. Psychologists refer to this phenomenon as the mere exposure effect.

The mere exposure effect exists because we humans have a natural tendency to prefer things that are familiar and therefore are easier to mentally process. As I discussed in an earlier post, the psychological equation is familiar = easy to process = good (or true or safe). And mere repetition produces familiarity.

Equally important, research also shows that the mere exposure effect operates - and may even be more powerful - when we aren't consciously aware that a message or other stimulus is being repeated.

The mere exposure effect explains why repetitive advertising and marketing messages like TV and radio commercials and print ads can influence our attitudes and preferences even when we believe that we are paying little or no attention to those messages. The existence of the mere exposure effect also provides part of the explanation for why traditional advertising and marketing methods still work.

Where B2B and B2C Marketers Agree and Disagree

Salesforce.com recently published the results of its 2015 State of Marketing survey. The 2015 survey was conducted online in October and November of 2014 and generated over 5,000 responses. The survey was directed to marketers in "Salesforce Marketing Cloud locations," so the respondents may not be a representative sample of all marketers. Still, the number of responses makes this a significant piece of research.

The Salesforce.com survey included a nice balance of B2B and B2C participants. Fifty-six percent of the respondents were from B2C companies, and 44% were affiliated with B2B enterprises. The survey found significant similarities in the viewpoints of B2B and B2C marketers, but the results also revealed a few interesting differences.

Both B2B and B2C participants in the survey were optimistic about marketing budgets for 2015. Eighty-four percent of both B2B and B2C respondents said they plan to increase or maintain their level of marketing spending in 2015.

B2B and B2C marketers differed somewhat in how they viewed their most significant marketing challenges. The table below shows the top three challenges identified by B2B and B2C survey respondents.

B2B and B2C marketers differed more significantly on the issue of where they plan to increase marketing spending. The top five areas for increased spending identified by B2B marketers were:

1. Content marketing (66% of B2B respondents)
2. Marketing automation (66%)
3. Mobile applications (65%)
4. Location-based mobile tracking (65%)
5. Social media advertising (64%)

The top five areas for increased spending identified by B2C marketers were:

1. Social media marketing (74% of B2C respondents)
2. Social media advertising (74%)
3. Social media engagement (73%)
4. Social media listening (68%)
5. Location-based mobile tracking (68%)

These differences in spending priorities are understandable and not at all surprising. Many B2B companies sell complex products or services, and it can be difficult to communicate the value of these solutions in a social media environment. So, it doesn't surprise me that B2B marketers are more focused on creating content, which almost certainly includes longer-form resources such as videos, white papers, and e-books.

In addition, most of the recent research I've seen indicates that, while the use of social media in the B2B buying process is growing, it is still not a major source of information for most B2B buyers. In the B2C world, however, research indicates that social media plays a more significant role on the customer's path to purchase. So, it's not surprising the B2C marketers are investing more in social media.

Are the 4P's Still Relevant for Today's Marketers

One of the most enduring concepts in marketing is the idea of the marketing mix. The concept became popular in the 1960's after Neil H. Borden published an article in the Journal of Advertising Research. Borden's original marketing mix model contained twelve components. E. Jerome McCarthy later grouped these ingredients into four categories that became universally known as the 4P's of marketing - Product, Price, Place, and Promotion.

In their seminal textbook, Principles of Marketing, Philip Kotler and Gary Armstrong define marketing mix as "the set of tactical marketing tools - Product, Price, Promotion, and Place - that the firm blends to produce the response it wants in the target market."

Given the profound changes in marketing over the past few decades, it's legitimate to ask whether a fifty-year-old model of marketing is still relevant and valuable for marketers today. My answer to that question is emphatically yes, provided that marketers keep two important things in mind.

The 4P's Include More Than the Terms Normally Suggest

The terms used in the 4P model are category labels that encompass more than the literal or common meaning of the terms. For example:

• Product - The Product component encompasses both products and services, as well as complex "solutions" that consist of both products and services. The term Product really refers to whatever a company offers to the market, and several marketing thought leaders and practitioners have suggested that "offering" or "solution" would be a more accurate term for this component of the marketing mix.
• Promotion - In the 4P model, Promotion has always encompassed all of the ways that a company communicates with potential buyers. Therefore, Promotion has always included advertising, direct response marketing, personal selling, and public relations. Today, Promotion would also encompass content marketing, inbound marketing, and social media marketing even though these tactics emphasize the use of "non-promotional" content.

The 4P's Describe What Marketers Can Control, Not What They Must Achieve

The 4P model speaks from the perspective of the selling company. It has always been designed to describe factors or conditions that the selling company controls. The 4P model has never attempted to describe what is required to be successful from the customer's perspective. To use a food example, the 4P's are like a list of available ingredients that chefs can use to create a variety of dishes in a variety of ways, but the 4P's do not provide the specific recipes for dishes that diners will like.

To understand what is required to achieve success with customers, you need another model or tool. One that I've found to be useful for this purpose is the "4A" model of marketing developed by Jagdish N. Sheth and Rajendra S. Sisodia. The major components of the 4A model are Acceptability, Affordability, Accessibility, and Awareness. Each of these major components has two dimensions. I'll be discussing the 4A model in greater detail in a future post. For now, the diagram below shows the four major components and the two dimensions of each component.

The marketing landscape has changed in dramatic and fundamental ways over the past five decades. However, the core objectives of marketing and the elements of the marketing mix are much the same today as they were fifty years ago. So, as long as the 4P's are defined and used appropriately, they're still relevant and valuable for today's marketers.

Why Print Marketing is Still Vital for Some Companies

The growth of digital marketing over the past few years has been nothing short of spectacular. According to Forrester's latest digital marketing forecast, digital marketing spend in the US will exceed $100 billion in five years, it will be about $13 billion more than television advertising, and it will represent 35% of all US advertising spend.

There's no longer any doubt that digital technologies are playing an increasingly important role in the path to purchase of both consumers and business buyers. This doesn't mean, however, that all non-digital forms of marketing have lost their effectiveness. In fact, recent research indicates that traditional print-based marketing channels and tactics are still a vital part of the marketing communications mix for some kinds of companies.

The Nielsen Research

In September of this year, The Nielsen Company published a report that focused on what sources of information consumers use to make buying decisions. The Nielsen report acknowledged the growing importance of digital technologies in consumers' path to purchase. For example, Nielsen expects that online sales of consumer product goods in the US will be 2.5 times higher in 2015 than they were in 2010.

What some people will find surprising is that Nielsen's research also reveals that print marketing is still an effective component of the marketing mix for retailers. Nielsen found that today, more than half of all US shoppers use printed circulars to obtain product and sales information, and the use of printed circulars is nearly 20 percentage points higher than the closest digital marketing touch point - email. Based on its research, Nielsen concludes that print is not dead for retailers and that digital won't be replacing print anytime soon.

The ABM Research

Research also shows that print marketing is still effective in the B2B space. Last year, The Association of Business Information & Media Companies (ABM) conducted an in-depth survey of almost 6,700 media end-users (readers, event attendees, etc.) to gain insights about how they are obtaining information to support business-related purchases. The survey focused on several kinds of digital and print media, and also included events such as conferences and trade shows.

The ABM survey found that 96% of end-users use both websites and print magazines to obtain business information. When asked what sources of information they use on a weekly basis, 73% of respondents said websites, 67% said e-newsletters, and 45% said print magazines.

ABM also asked survey participants to rate the importance of various sources of information in buying decisions. When asked about researching work-related purchases, the top three sources identified by respondents were:

• Websites - 65% of respondents
• Product information from manufacturers - 62%
• Print magazines - 48%

When asked specifically what sources of information were important for learning about new products, services, or suppliers, the top three information sources identified by respondents were:

• Websites - 80% of respondents
• Product information from manufacturers - 73%
• Print magazines - 69%

Key Takeaway

The growing importance of digital marketing channels and techniques is undeniable, but these research findings indicate that both consumers and business buyers are still using printed marketing materials to inform buying decisions. The evidence shows that potential buyers are increasing the number of information sources they use during their path to purchase. So, they are embracing the newer digital communication channels, but they are also continuing to rely on traditional, non-digital sources of information.

It's also clear from these studies and other research that younger buyers are more likely to use and rely on digital communication channels. Therefore, it's likely that, over time, non-digital marketing channels and tactics (including print-centric marketing) will become less important than they are today. For the intermediate future, however, print marketing will remain a useful and effective component of the marketing mix for many kinds of companies.

Stop Looking for "Silver-Bullet" Solutions in Marketing

In the sixteenth century, Spanish conquistadors in South America heard stories about a king who made an offering of gold and precious gems to his god as part of a religious ceremony. The Spaniards called the king El Dorado, and over time El Dorado came to mean the city of this king. According to the legend, El Dorado contained gold and precious stones in fabulous abundance. The legend was so powerful that for over two centuries, European explorers mounted numerous expeditions to search for El Dorado.

So far as we know, the "city of gold" was never found.

It's only human to long for simple and easy solutions to complex or difficult problems. At least once in our lives, most of us have yearned for a magic diet pill that would enable us to lose twenty pounds in four weeks without eating less or exercising more. Usually, we know this is just wishful thinking, but in some cases, our desire for simple solutions rises above mere wishful thinking. The number of self-help books that are sold every year demonstrates that millions of us are willing to believe that simple solutions for difficult challenges do, or at least might, exist.

The desire for simple solutions can also be found in the business world. Nowhere is this more evident than in the attempt to answer the most basic of all business questions:  What drives high performance? Over the past few decades, the effort to describe the "secret sauce" for achieving high performance has probably consumed more brainpower than any other single business topic. It has been the modern-day business equivalent of the quest for the Holy Grail or the search for El Dorado.

Since the early 1980s, dozens of books - most written by talented and well-respected authors - have purported to explain how companies achieve high performance. Some of these books describe the important attributes that high-performing companies share. The implicit (and often explicit) promise is that if you can develop these attributes in your business, you too will achieve high performance. Other books focus on specific management tools or techniques. Once again, the implicit promise is:  Use this tool or technique, and high performance will inevitably follow.

Despite the best efforts of a lot of very smart people, the recipe for high performance has remained elusive. No one has been able to get it quite right.

The desire for "silver-bullet" solutions is also widespread in the marketing world. Over the past few years, the number of marketing channels and techniques has exploded, largely because of the evolution of digital communication technologies. When a promising new marketing channel or technique appears, the marketing community often responds with great excitement. The "shiny new object" becomes the topic du jour for articles, blog posts, webinars, conference sessions, and even full-length books. As the hype machine kicks in, it becomes almost impossible not to overestimate the value that the new channel or technique will provide.

The basic problem is that success in marketing is far more complex and unpredictable than most people like to admit. The marketing world is not ruled by the kinds of precise laws that govern the natural world. For example, if I apply heat to water, the water will boil when the temperature reaches 212 degrees Fahrenheit. I can repeat this "experiment" thousands of times, and the result will always be the same. The laws of physics enable me to accurately predict that my action (applying heat to water) will produce a specific outcome (boiling water).

This level of predictability simply doesn't exist when it comes to marketing performance because success in marketing is determined by the interplay of numerous factors, many of which are beyond our control. The inability to dictate future outcomes has two important implications for marketers. First, it means that the use of any marketing tool or technique won't guarantee high performance, regardless of how sound that tool or technique may be. More importantly, however, we can't dictate future outcomes because there is no universal formula for high performance in marketing. Like El Dorado, it just doesn't exist.

Uncertainty will always be a prominent feature in the marketing landscape. When we accept the inevitability of uncertainty, we can put the decisions we make on sounder footing. This approach may not provide us as much comfort as relying on simple, "silver-bullet" solutions, but it's better than wasting our time on a fruitless search for El Dorado.

When Will Price Changes Be Profitable?

Price is one of the traditional 4P's of the marketing mix, and pricing is or should be a core component of every company's business and marketing strategy. Unfortunately, many marketers today focus almost exclusively on marketing communications (the promotion component of the 4P's), and they have largely ceded the remaining components of competitive strategy to other business functions. As a result, marketers often have little influence over several factors that drive business success.

In my view, marketing should play a leading role in formulating competitive strategy, and this necessarily means that marketers must get more involved in pricing decisions.

The reality is, no marketing strategy is complete unless it addresses pricing issues and includes a strategic approach to price setting. That's because pricing can be the single most powerful tool that company leaders can use to impact profits. To illustrate the power of price, consultants with McKinsey & Company analyzed the average income statement of the Global 1200, an aggregation of 1,200 large, publicly held companies from around the world. The objective of the analysis was to quantify the profit impact of various types of financial improvements.

The McKinsey researchers found that a 1% improvement in pricing would yield an 11.0% increase in operating profits at the average Global 1200 company. By comparison:

• A 1% decrease in variable costs would produce a 7.3% increase in profits
• A 1% increase in sales volume would yield a 3.7% increase in profits
• A 1% decrease in fixed costs would produce a 2.7% profit improvement

Pricing decisions are typically based on input from several business functions, but marketing should play a leading role in these decisions because marketing is (or should be) particularly well-attuned to the company's external market and competitive environment.

One issue that arises fairly often is whether a change in prices will result in more profit. Decisions about increasing or reducing prices are inevitably challenging because of the inherent uncertainty about what the financial impact of the changes will be. Company leaders must ask themselves:  If we lower prices, will we generate enough new sales to increase our profits? If we raise prices, will we lose so much business that our profits will be harmed rather than helped.

These questions are extremely difficult to answer. In fact, to answer them accurately, company leaders must know what the "elasticity of demand" is for their products or services. And unfortunately, your company's elasticity of demand isn't something you can find via a Google search or at your local library.

The good news is that there is a simple calculation that can help company leaders make more rational decisions about price changes. The calculation is simple because it doesn't try to predict what will happen if prices are increased or decreased. Instead, this calculation describes what must happen for a price change to be profitable.

Specifically, this calculation can help company leaders answer two questions:

• How much would we need to increase sales volume in order to profit from a specified price reduction?
• How much could our sales volume go down before a specified price increase becomes unprofitable?

The measure of "profit" used in this calculation is contribution margin (sales minus variable costs), and the calculation uses the actual contribution margin (expressed as a percentage of sales) generated during a base period (usually a year). When a company reduces selling prices, the contribution margin goes down, and new sales volume must make up for that decline before profits will be improved. On the flip side, contribution margin goes up when a company raises prices, and the company can afford to lose some sales volume before profits are impaired. This calculation will tell you where those "breakeven points" are.

The formula for this calculation is:  -(Price Change) / (Contribution Margin + Price Change)

To give a simple example, suppose that your contribution margin during the base period was 80% and that you are considering a 10% price reduction. How much will your sales volume need to increase for the price reduction to be profitable. The answer is 14.3%, calculated as follows:

Breakeven Sales Volume Increase = -(-10%) / ((80% + (-10%))

Breakeven Sales Volume Increase = 10% / 70%

Breakeven Sales Volume Increase = 14.3%

If your company had sales of $20 million during the base period, you would need to increase sales by more than $2,860,000 for the 10% price reduction to be profitable.

This approach can be used to evaluate across-the-board price changes and price changes that apply to individual products or product lines. It cannot be used for individual deals.

I've created a simple Excel worksheet to calculate these breakeven points. If you'd like a copy of this worksheet, send an e-mail to ddodd(at)pointbalance(dot)com.