The Transformation of Marketing

Descriptions of how marketing is changing usually refer to new digital capabilities and media channels. But a more foundational transformation is also taking place – one that is elevating marketing into a critical, core company capability and shifting the scope of what marketing entails.marketing transformation

Two Harvard Business Review articles, published a half-year apart, shed light on this profound marketing transformation.  The first, Marketing Is Strategy, by Ivey Professor Niraj Dawar explains that activities traditionally relegated to marketing have become drivers of value creation and sources of competitive advantage.  He describes these activities as “downstream” (vs. upstream activities like sourcing, production, and logistics) and observes, “The center of gravity for most companies has tilted downstream.

Strategy is shifting downstream, from products to customers

Competitive advantage, Dawar writes, is increasingly developed outside a firm in its external linkages with customers, channel partners, and complementors (i.e., other companies that make products or services that increase the perceived value of an offering – Intel is a complementor to Microsoft.)  For example, customers’ habits, brand associations, and networked lives produce customer connections with brands that are more powerful sources of competitive advantage than companies’ upstream physical assets because replacing them is difficult and takes a long time.   So establishing and nurturing those connections has become a strategic imperative.

Dawar also observes that “Companies are increasingly finding success not by being responsive to customers’ stated preferences but by defining what customers are looking for and shaping their ‘criteria of purchase.’”  He points to Volvo as an example, describing how that brand set the bar on automotive safety and shaped customers’ expectations for features like airbags and active pedestrian detection.  The domain of strategy, therefore, has expanded beyond how to improve the product to include how to segment the market and how to position the brand.  Influencing the importance customers place on various purchase criteria and introducing new, favorable criteria has become a critical means to establishing competitive advantage.

According to Dawar, a firm’s product or service remains an essential ingredient in demonstrating the brand’s positioning, but developing the right product should not be considered more strategically important than deploying the right communication or distribution.  As such, innovations that reduce customers’ costs and risks – innovations in marketing – are just as important to pursue.  Dawar illustrates his point with the success of the “Hyundai Assurance” program, in which a customer was offered the option of returning a newly purchased car if he lost his job.  He writes, “Hyundai didn’t innovate to sell better cars – it innovated by selling cars better.

Marketing has become too important to be left just to the marketers

As the strategic importance of marketing has increased, the scope of what marketing entails has changed.  The new capabilities that the marketing function has taken on is the subject of the second HBR article, The Ultimate Marketing MachineEffectiveBrands consultants Marc de Swaan Arons and Frank van den Driest partnered with Keith Weed, chief marketing and communications officer of Unilever, to undertake a comprehensive marketing leadership study to understand what separates the most effective marketing organizations from the rest.  They discovered that “’Marketing’ is no longer a discrete entity…but now extends throughout the firm, tapping virtually every function.

Marketing is no longer a siloed staff organization.  It’s no longer enough to align marketing with company strategy; marketers are actively engaged in creating it.  And often marketing is connected to the rest of the company through organizational design (e.g., the rise of the chief marketing and information officer) or function (e.g., partnerships between marketing and IT on customer analytics.)

Marketing is deployed internally as well as externally.  Marketers now use brand purpose to inspire customers and employees alike, and they tap the programs, messages, and tools that reach customers to engage, align, and connect the people inside their organizations as well.  “To deliver a seamless experience,” the article’s authors explain, “all employees in the company…must share a common vision.

The authors also write about marketing’s role in focusing organizations and uniting global companies by communicating strategy.  Marketers help achieve internal cohesiveness by developing and communicating a single growth strategy for the brand and setting key performance indicators such as revenue growth and profit as the brand success metrics.

Peter Drucker’s insight has become a reality

These two articles describe the significant changes that are transforming marketing today.  The notion that marketing is a key business driver, though, is not a new one.  Long ago Peter Drucker told the business world, “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”  His insight is now becoming a reality.

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