Marketing v1.0 Is Dead! Long Live Marketing v2.0!
This article is based on a chapter from “In Search of a New Logic for Marketing” by Christian Gronroos, PhD. Find out more about this recommended book at Amazon (click the link or on the book cover).
Greg M. Thomas revised this paper. Greg is the Director of Research at the Emory Marketing Institute. Contact him at firstname.lastname@example.org.
The field of marketing is in a crisis. The problem stems from the conceptual frameworks which are embedded in just about every mainstream marketing class. These frameworks act as the software in the minds of marketing managers and when this software code has bugs the mind of the managers are unduly hindered. We are in need of Marketing version 2.0. This is the wake-up call for the version upgrade.
In the realm of sociology there is a concept that language influences thought, known as the Sapir-Worf hypothesis. This idea that the language a person speaks provides a lens through which the person understands the world and behaves in it is a quite important analogy for the marketing discipline to understand. The takeaway is that ideas, concepts, and metaphors in marketing shape and delimit the domain of marketing in practice. As such, great care is needed in evaluating how marketing theory potentially impacts marketing practice, as when the theory obsolesces there is a disconnect between marketing practice and its optimization.
Traditional mainstream marketing’s highly structural approach focuses on marketing mix management and the 4 P model . These models are widely known and subscribed to yet they act as a straitjacket for the development of marketing theory and practice as they consist of a far too narrow set of decision making variables. Almost regardless of industry and whether the core of an offering is a service or a physical product or something else the interface between a firm and its customers have proliferated. The number and variety of customer touchpoints in that interface has grown far beyond the simplistic customer interfaces which mainstream marketing are based on.
Research has not only shown that marketing has to renew itself to be able to handle growing and multi-faceted customer interfaces, but also that it has to be developed so that when appropriate it can allow for long-term relationships with customers to develop and to be nurtured. Rigid frameworks and transaction-oriented models will not make this renewal possible. Moreover, they also make mainstream marketing overly tactical and do not allow for strategic considerations.
Given the straitjacket of its current frameworks, marketing itself lacks the ability to be strategic and this is a major concern. In addition the way marketing has developed it has severed the strings between marketing planning and strategic planning on the corporate level. Thought leaders in strategy have observed, “… in too many companies marketing is poorly linked to strategy .” As such, marketing has been boxed into being primarily tactical. This tactical orientation has taken away innovativeness from marketing and hinders marketing from being adaptive to changes in the environment .
During the past quarter of a century most of the firms’ business functions and processes have undergone a substantial change. Through automation, process re-engineering, total quality management, just-in-time logistics and other business restructuring efforts manufacturing and operations, warehousing, deliveries and many other processes have been developed and improved in such dramatic ways that a person who knew how these functions and processes looked fifty years ago would not believe his eyes today. Moreover, through the introduction of computerized systems, information technology, extranets and intranets and through downsizing, re-engineering and outsourcing management and administrative routines and processes have also changed.
Meanwhile, when coming back to his job a marketer who has spent the last fifty years on the moon would feel quite comfortable. Except the introduction of a few new communication and distribution channels no fundamental structural changes and innovations have taken place. Furthermore, marketing productivity lags behind the productivity of other functions. As reported, from 1947 to the mid-1990s manufacturing and operations costs have decreased from 50 to 30 per cent of total costs, and during the same period management and administrative costs have decreased from 30 to 20 per cent of total costs. Meanwhile, marketing’s share of total costs has increased from 20 per cent in the 1940s to 50 per cent in the 1990s. No major improvement in the relative productivity of marketing has occurred since that time .
This tepid performance has not gone unnoticed. Highly distinguished marketing professors (albeit all but one from North America) voiced their concerns regarding the status of marketing theory by calling for a ‘marketing renaissance’ in the leading journal for the discipline .
The problems of mainstream marketing are clearly recognized, but all essays seem to be restricted by conventional marketing thinking and frameworks. Very few innovative suggestions are made. However, in one essay Stephen Brown describes how prominent top management team members representing large firms discussed the importance of the customer to the firm. When discussing how to handle the relation between the firms and their customers, they do not mention marketing at all as an important actor in customer management . Brown reports: “Notably, none of the executives mentioned marketing as being responsible for the customer”. He also notes that marketing and sales seem to have a major role in “making promises to customers and generating new business”, whereas “the keeping of promises and building customer loyalty is typically considered the responsibility of others in the enterprise .”
These observations that customer management is considered an issue for other organizational functions than marketing and the fact that marketers are given responsibility only for the tactical tasks of persuading customers to buy should be a serious warning signal for mainstream marketers, academics and practitioners alike, to wake up and throw away their blinders and, provided that they already have started, continue looking for a new marketing logic. While others take over the responsibility for interpreting customers’ thoughts, preferences and expectations and turning them into strategic and tactical customer management, marketing’s basic framework keeps the marketers’ thoughts and actions within the borders set by the 4 Ps of the marketing mix. Mainstream marketing continues to be oriented towards doing something to customers, instead of seeing customers as people with whom something is done. This conclusion made over two decades ago is still very much valid . As a consequence of this development marketing has become less relevant for top management and corporate decision making and hence also for shareholders. An unfortunate additional consequence is that marketing has become increasingly less relevant for customers as well.
A stream of studies and reports from the US as well as from Europe demonstrates that marketing’s impact on the thoughts and decisions of top management has been declining and the customers’ voice has become less important for corporate decision making. Gradually marketing is losing its credibility and the marketing function is in decline . Although this is not the case for every firm everywhere, nevertheless it looks like a trend. Increasingly marketing professionals seem to be less represented on the board of directors and even on top management teams. According to a large study of US firms, less than 10% of the boards’ time is spent discussing marketing and customer-related issues . In another US poll almost half of CEOs interviewed make the point that marketing organizations need improvement . This view is echoed in a European study by McKinsey, which indicates that over 50% of CEOs interviewed have a negative impression of their marketers . Another study from the US demonstrates that chief marketing executives do not last long before they are replaced .
Mainstream marketing seems to have pushed marketing into a vicious circle: Because of its frameworks and models marketing has become overly preoccupied with tactical issues and less strategic, which makes top management less interested in listening to marketers and more inclined to turn to others to make strategic decisions regarding organizational alignment, brand strategy, capabilities building, and customer management, which in turn makes marketing even less strategic and more tactical.
This same inclination also makes marketing become viewed as an expense instead of an investment. As a result, long term investments in marketing capabilities are hindered. And when the economy cycles through a downturn marketing is one of the first departments to be downsized. Since there is strong evidence that investments in marketing capabilities lead to strong firm performance this management nearsightedness is quite disturbing .
The facts that marketing as the only business function has remained untouched by major structural and managerial changes and that marketing’s productivity constantly has diminished clearly demonstrate that marketing, still dominated by conventional frameworks and models, is doing a remarkably bad job in taking responsibility for the management of customers. Mainstream marketing is preoccupied with wrong activities, and is utilizing wrong and less effective resources, or is at least only partly doing the right things.
The productivity of marketing cannot be improved within existing frameworks and structures. As long as marketing’s major responsibility is customer acquisition and promise making, the costs of marketing will continue to grow, and its effectiveness will continue to go down. Owning only this customer communication interface disconnects marketing from the rest of the activities of the organization, and makes the organization engineering or finance led. As such, organizations are basing value creation activities on intuition, and as we all know from the field of the psychology of decision making our intuition is often dead wrong. Taking charge of the Internet and interactive and mobile communications media in use and turning to direct marketing channels and event marketing have offered no real innovative and structurally new improvements. The development of brand management and adoption of branding terminology in marketing is quite often only more of the same when the underlying assumptions and concepts are unchanged. Marketing as a discipline is in crisis. And marketing as a business practice responsible for customer management is losing credibility. This is in due in part to the fact that CMOs in title are quite often more limited in function to that of a Chief Communication Officers; this because the holistic view of marketing is missing.
Because marketers, alongside with the rest of customer facing staff, should be the ones who know best how to translate customers’ preferences and expectations into corporate strategies and customer management programs and activities, they should be the ones who take responsibility for the entirety of customer management. However, due to the marginalization of marketing and its lack of innovativeness the voice of the customers is interpreted by people in strategic decision making that by and large, due to their level of training and experience, typically are less customer focused than marketers should be. Even the term ‘voice of the customer’ is a misnomer as customers often cannot voice their opinions either about past choices or about future innovations (thus a term like ‘customer insights’ is often better to use.) However, as long as the marketers are hostages of outdated and too narrow frameworks for thinking and doing, marketing’s vicious circle will continue to spin in a direction which is unfortunate for marketers and customers alike, and in the final analysis for the firm and its shareholders as well.
Why should the TQM movement be the one that polarized the organization around the notion of ‘customer satisfaction’ and not the marketing practice? This is because marketing’s narrow focus is creating a huge blindspot for the practice. What we call for is a complete reexamination, and total overhaul of the marketing discipline. What we need is a marketing function that is better suited to lead the organization. One where the tenure of the CMO is equal to that of the CEO and CFO and not a half-life of these executive positions as it is currently. As Sun Tzu, the ancient Chinese strategist wrote “Strategy is the great work of the organization…it is the Tao of survival or extinction. Its study cannot be neglected.” What is needed for the marketing discipline is to strategize on its own role, scope, and function. This is an opportunity for the development of Marketing v2.0.
As William Gibson, the science fiction writer, says “the future is here. It just is not very evenly distributed.” The managers that help invent the next marketing logic will benefit from its innovation as it will likely take a while to become evenly distributed. Looking for a competitive advantage? Do pull up a chair and join us in the development of the new logic for marketing.
This article is based on a chapter from “In Search of a New Logic for Marketing” by Christian Gronroos, PhD. Find out more about the book at Amazon (click the link or on the book cover).
Greg M. Thomas revised this paper. Greg is the Director of Research at the Emory Marketing Institute. Contact him at email@example.com.
Brown, S.W. (2005) ‘When Executives Speak, We Should Listen and Act Differently’, Journal of Marketing, 69 (October):2-4.
Cassidy, F., Freeling, A. and Kiewell, D. (2005) ‘A Credibility Gap for Marketers’, Research brief. McKinsey Quarterly, 2
‘CEOs Are Not Happy With Their Marketing’ (2004) Chief Executive, 201, August/September, www.chiefexecutive.net/depts/ceowatch/201a.htm
Donthu, Naveen, Naras Eechambadi, Rajendra K. Srivastava and Greg Thomas (2008) “Want more bang for your marketing buck? Build your capabilities first,” Pending publication at Marketing Management.
Day, G. and Montgomery, D. (1999) ‘Charting New Directions for Marketing’, Journal of Marketing, 63 (Special Issue):3-13.
Dixon, D.F. and Blois, K. (1983) ‘Some Limitations of the 4 Ps as a Paradigm for Marketing’. Marketing Education Group Annual Conference, Cranfield Institute of Technology, UK, July.
‘Marketing Renaissance: Opportunities and Imperatives for Improving Marketing Thought, Practice, and Infrastructure’ (2005) Journal of Marketing, 69 (October):1-25.
McCarthy, E. J. (1960) Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
McGovern, G.J., Court, D., Quelch, J.A. and Crawford, B. (2004) ‘Bringing Customers into the Boardroom’, Harvard Business Review, 82 (November):70-80.
Sheth, J.N. and Sisodia, R.S. (1995) ‘ Improving Marketing’s Productivity’. In Marketing Encoclypedia, Lincolnwood, IL: NTC Business Books, pp. 217-237.
Webster Jr., F.E., Malter, A.J. and Ganesan, S. (2005) ‘The Decline and Dispersion of Marketing Competence’, MIT Sloan Management Review, 46(4):35-43.
Welch, G. (2004) ‘CMO Tenure: Slowing Down the Revolving Door’, Blue paper, July, www.spencerstuart.com/research/articles/744/.
McGovern, Court, Quelch and Crawford (2004), p 72
Day and Montgomery (1999), p.3
Journal of Marketing (2005) “Marketing Renaissance”
see, for example, Webster Jr., Malter and Ganesan (2005)
McGovern, Court, Quelch and Crawford (2004)
Cassidy, Freeling and Kiewell (2005)
Naveen Donthu, Naras Eechambadi, Rajendra K. Srivastava and Greg Thomas (2008)