For all the spending devoted to marketing, few marketing strategies deliver lasting results. Standout products and services are rare.
Various “panaceas” have been introduced into marketing and sales departments in recent years. Unfortunately, most have had the curative power of 19th-century patent medicines. Take customer relationship management (CRM), once heralded as marketing’s “smart weapon.” Huge amounts of money have been invested in CRM systems and loyalty programs. In 2000, for example, the top 16 European retailers alone spent in excess of $1 billion on loyalty programs. Yet the correlation between customer loyalty and profitability is often weak or nonexistent. Recent Harvard Business School research into loyalty programs, for example, found that long-term customers were as expensive to serve as non-loyal customers, or even more expensive.
There is a growing recognition, even in sectors where marketing has traditionally taken a backseat, that a more rigorous approach to marketing is now required. In industry after industry, marketers are being asked to transform their practices.
At the $152 billion industrial and finance company General Electric, for example, CEO Jeff Immelt has stated that “sophisticated marketing” is now one of the company’s three imperatives, along with risk taking and innovation. “Jeff has launched us on a journey to become one of the best sales and marketing companies in the world,” David R. Nissen, CEO of GE Consumer Finance, recently told Business Week.
In the financial-services sector, marketing has taken on heightened importance as institutions conclude that their options to grow through acquisitions and product differentiation are diminishing. “The financial-services business is commoditizing; if you think this is still a relationship business, you are kidding yourself,” the executive vice president of one bank told us. The chief marketing officer of another bank explained that marketing is increasingly expected to use analysis to identify — and in some cases create — new markets for financial-services products.
For marketers in other industries, from pharmaceuticals to telecommunications, the challenge is no less urgent.
Marketing with Rigor
We are not the first to suggest that marketing needs to become more scientific, nor will we be the last. The debate about whether creativity or analysis is more important in marketing has been around for years. But the idea that there has to be a trade-off between the two, we believe, is flawed. It is not the case that by doing more analysis, marketers need to be less creative; in fact, the reverse is true. By being more scientific, they can focus their creative efforts on the activities that will yield the best return on the investment.
At Procter & Gamble, for example, Chief Executive A.G. Lafley has brought new rigor and creativity to the company since 2000. In the past two years alone, P&G has raised its new product hit rate — the percentage of new products that deliver a return above the cost of capital — from 70 to 90 percent. And that’s in an industry where half of all new products fail within 12 months of launch.
This is not the first time that Booz Allen has been directly involved in demonstrating the point that a more rigorous approach would greatly benefit marketing. Back in the 1950s, a young Booz Allen consultant named Conrad Jones was asked by the son-in-law of Clyde Cessna, founder of the eponymous small-plane manufacturer, “Where’s that airplane in every garage we hear about?” Apparently, official sources had made the brash prediction that there would be 300,000 private planes by the early 1950s. The prediction did not materialize.
An in-depth investigation by a Booz Allen team revealed that there was little evidence to support the claim. The team then analyzed the private plane market and found that potential customers were in the top 2 percent of financial strata. On the basis of this finding, they redesigned Cessna’s sales strategy to focus on potential purchasers rather than enthusiasts. They developed a training curriculum, tracked sales data, and created a market index, helping Cessna Aircraft Company define an industry that endures today. Fifty years later, Booz Allen’s Customers, Channels, and Marketing Management group has helped hundreds of leading corporations improve marketing, sales, and customer relationship programs.