The dawn of marketing’s new golden age

Marketers are boosting their precision, broadening their scope, moving more quickly, and

telling better stories.

 

February 2015 | byJonathan Gordon and Jesko Perrey.

 

Science has permeated marketing for decades. Fans of the television drama Mad

Men saw a fictionalized encounter when an IBM System/360 mainframe computer

physically displaced the creative department of a late-1960s advertising agency. In

reality, though, the 1960s through the early 1990s witnessed a happy marriage of

advertising and technology as marketers mastered both the medium of television and

the science of Nielsen ratings. These years gave birth to iconic advertising messages in

categories ranging from sparkling beverages (“I’d like to buy the world a Coke”) to credit

cards (“American Express. Don’t leave home without it”) to air travel (“British Airways:

the world’s favourite airline”).

 

Until recently, marketers could be forgiven for looking back wistfully at this golden age

as new forces reshaped their world into something completely different. These new

trends include a massive proliferation of television and online channels, the

transformation of the home PC into a retail channel, the unrelenting rise of mobile social

media and gaming, and—with all these trends—a constant battle for the consumer’s

attention.

 

The resulting expansion of platforms has propelled consistent growth in marketing

expenditures, which now total as much as $1 trillion globally. The efficacy of this

spending is under deep scrutiny. For example, in a survey of CEOs, close to three out

of four agreed with the following statement: marketers “are always asking for more

money, but can rarely explain how much incremental business this money will

generate.”1 Chief marketing officers (CMOs), it appears, don’t disagree: in another

recent survey, just over one-third said they had quantitatively proved the impact of their

marketing outlays. 2 Paradoxically, though, CEOs are looking to their CMOs more than

ever, because they need top-line growth and view marketing as a critical lever to help

them achieve it. Can marketers deliver amid ongoing performance pressures?

In this article, we’ll explain why we think the answer is yes—and why we are, in fact, on

the cusp of a new golden age for marketing. At the core of the new era are five

elements that are simultaneously familiar and fast changing. The first two are

the science and substance of marketing. Leading marketers are using research and

analytics to shed light on who buys what, and why; who influences buyers; and when, in

the consumer decision journey, marketing efforts are likely to yield the greatest return.

That understanding, in turn, is making it possible for marketers to identify more

effectively the functional benefits that customers need, the experiences they want, and

the innovations they will value.

 

But this isn’t just another missive on the power of big data. Organizational simplicity is

fueling speed, and story is pulling things together while inspiring both the customer and

the organization. Happily, the story just seems to get better as creative minds express

themselves through digital means, and it then echoes and expands through social

media and user-generated content. As you’ll see, the emerging new rules for marketing

extend well beyond data and analysis, crucial though those are, and even transcend the

marketing organization itself.

 

Science

Advances in data, modeling, and automated analysis are creating ever more refined

ways of targeting and measuring the returns on marketing investments, while

generating powerful new clues about why consumers behave as they do. Long gone is

spending guided mostly by intuition and focus groups. Instead, organizations are

seeking greater precision by measuring and managing the consumer decision points

where well-timed outlays can make the biggest difference.

 

Big data is a term that’s often used to describe this transition. But it’s not just big data;

it’s also big research. A major consumer company investigating the decision journey for

its products recently undertook a consumer study, collected through online surveys, on

a massive scale and at a speed that would have been unimaginable in the days of mallintercept

interviews. The project, which involved more than 10,000 surveys over the

course of a month, uncovered material differences between how the company and

consumers were thinking about the category, while also explaining what drives choice

at each stage of the journey. These insights are now being used to change brand

strategy, product-portfolio design, and marketing campaigns. The potential impact runs

into billions of dollars in additional revenue.

 

While much recent marketing science has played out in the measurement and targeting

of advertising and promotion expenditures, many consumer companies are increasing

their focus on in-store behavior: how promotions, traffic flows, and physical engagement

with products affect sales. Capturing and analyzing data on such issues has become

more feasible in recent years thanks to low-cost sensors that can be embedded in

products, as well as the ability to capture and analyze huge amounts of unstructured

data from store videos—and even to track shoppers’ eye movements.

 

The impact goes beyond marketing and product teams. Marketing science is boosting

the precision of real-time operating decisions. At a major hospitality company,

marketing analysts are able to get a read on the performance of a particular property or

category over a weekend and then drill down on individual customer segments to

assess how to make improvements. If the data show that a profitable segment of

weekend travelers are shortening their stays, the company can create special offers

(such as late checkouts or room upgrades) to encourage repeat business.3 Or consider

how one industrial-products company revamped its highly fragmented portfolio of more

than 500 SKUs sold to customers in a diverse set of industries. Prices varied widely

even for the same products, without any clear reasons as to why, hindering efforts to

manage margins. An analytical tool that could scan 1.3 million transactions helped the

company redraw customer segments, identify products with opportunities for pricing

flexibility, and recommend new prices. Ultimately, it reset about 100,000 price points.

 

More scientific marketing means that CMOs and other senior leaders need enhanced

analytical skills to exploit data possibilities more fully and stay ahead of the whirl of

developments. One CEO we know believes it’s time to create a position—marketing

technology officer (MTO)—that’s rooted both in technology and domain knowledge.

Knowing what can be automated, when judgment is required, and where to seek and

place new technical talent are becoming increasingly central to effective marketing

leadership. That is intensifying the war for specialized talent as traditional marketing

powerhouses bid against high-tech companies for needed skills.

 

Substance

As more advanced marketing science and analytics take hold, they are making it

increasingly natural for marketing to go beyond messaging and to shape the substance

of the business, particularly the experiences of customers, the delivery of functional

benefits, and the drive to develop new products and services. Armed with information

about customers and a company’s relationships with them, the CMO is well-positioned

to help differentiate its products, services, and experiences.

 

That’s good, because digital innovation, transparency, and customer-centricity have

raised expectations across the board. In automobiles, as sensor technologies

proliferate and onboard computing power increases, consumers are now starting to

expect that collision-avoidance and digitally-enabled safety systems will become part of

manufacturers’ offerings. (Luxury carmakers already are making sophisticated safety

options part of their marketing story.) In retail, brands like H&M, Topshop, Uniqlo, and

Zara have harnessed the consumer’s desire to have it all by bringing mass-market

prices to the colors, fabrics, and designs of high fashion. Simultaneously, Amazon and

other digital players are pressuring brick-and-mortar retailers, which are responding

both by retooling their supply chains to enable faster restocking and one-day delivery

and by creating new advertising messages around the in-store pickup of online orders.

 

Marketers are well placed to help their organizations meet the rising bar by, for

example, making the case for customer-care initiatives and for consistency in the

customer experience. A better one became the heart of a marketing campaign at

European energy supplier Essent, a subsidiary of RWE. To ensure that the company

delivered on the promise, the CEO named the chief of marketing to lead the initiative.

Among the successes: making customer onboarding less cumbersome by cutting

process steps from seven to two. Marketing also took the lead in efforts to create new

products that customers wanted. The CMO led a cross-functional team of sales, IT, and

product development to produce Essent’s smart, Internet-connected E-thermostat, for

instance. Some of its functionality was cocreated with customers.

 

Similarly, marketing has taken a leadership role in designing and setting standards for

Daimler’s highly digital customer-experience brand, “Mercedes me.” The digital platform

provides customers with automated appointment booking, personalized financing, a

chance to cocreate ideas, access to maintenance data from sensor-enabled automobile

diagnostics, and even quick access to Daimler’s car-sharing and taxi services—for use

on business trips, for example. (See “Marketing the Mercedes way,” forthcoming on

mckinsey.com, for more on the role of marketing at the company.)

 

These efforts and many more like them are extending marketing into the guts of the

business, and most would not have been possible just a few years ago. The power of

today’s digital tools and the scientific approaches they make possible are not only

enabling a more substantial role for marketing but also giving it opportunities for realtime

impact.

 

Story

Even as marketing reaches new heights with technology-enabled measurement, the

importance of the story hasn’t diminished. But ways to tell it are morphing continually as

the stuff of storytelling encompasses richer digital interactions, and mobile devices

become more powerful communications tools. In this world, creativity is in greater

demand than ever.

 

Google’s “Dear Sophie” advertisement is an example of the modern art form. It tells the

story of a father writing to his daughter as she grows up, with the narrative

demonstrating how Google search, Gmail, and YouTube can be new channels of

human connectivity.4 (For more on how Google seeks to connect, see “How Google

breaks through,” forthcoming on mckinsey.com.) P&G’s “Pick Them Back Up” spot for

the Sochi Olympics (part of the ongoing “Thank You, Mom” campaign) is another

moving story. It dramatizes the moms who were there for their kids throughout the

years of hard training, who picked them up when they fell, and who deserve celebration

as the unsung heroines. It’s hard to watch these commercials and not tear up, at least a

little.

 

 

Chanel’s recent launch of the new No. 5 perfume offers a good window on how stories

are evolving beyond traditional video. Over a decade after their first collaboration,

creative chief Karl Lagerfeld has again partnered with film director Baz Luhrmann to

produce a short film on a woman whose lifestyle embodies the brand. Their latest

effort—“The one that I want”—stars model Gisele Bündchen and features the perfume,

along with clothing and other Chanel products. Beyond the film itself, a series of

YouTube videos extend the campaign with shorts on the making of the film, interviews

with Luhrmann on both projects, behind-the-scenes footage from Chanel’s studio, and

more.5 All of this is designed to amplify the lifestyle message of the fragrance’s launch

in a way that traditional TV or print couldn’t accomplish.

 

New media also dictate that marketers relinquish control of the story as digital

interactions with customers become more frequent. Customers want to interact with

stories and modify them on social media. Following the kinds of story rules that once

made board members and CEOs comfortable is no longer feasible. Social-media

programs are consuming a larger share of many marketing budgets. A number of major

consumer companies are using interaction centers to monitor and participate in socialmedia

conversations as they develop, sometimes including the promotion of

discussions on corporate social-media channels.

 

Agency-management issues also are an important piece of the puzzle. Talent scarcity,

evolving digital storytelling, and perceived institutional rigidities have opened new

debates about the best ways to access creativity. Some companies, like Chanel, are

enhancing their control over the story with supplemental digital content. Other global

marketing leaders are bringing in-house more of their story muscle, particularly when it

involves lighter message content for social media. Agencies are responding. Many are

acquiring more digital talent and working to break down silos to overcome perceptions

that they are actually geared to bigger productions and may lack the digital and story

skills to handle new content in an agile, integrated way. All this is very much in flux,

suggesting that leaders who aren’t asking fundamental questions about the roles of

(and fit between) agencies and internal marketing teams stand the risk of being left

behind.

 

Speed

In a digital economy, marketing is no longer a “batch” process but a continuous one.

Consumer preferences change with stunning velocity, as do the dynamics of markets

and product life cycles. This culture of urgency means that marketers need a new

agility, plus the management skills and organizational clout to bring other functions

together at a higher clock speed.

 

How speed is achieved, of course, will vary by company and industry. A number of

CMOs we know are setting the terms of how functional units should collaborate and

spelling out what the entire organization needs to know to get new products to market at

a stepped-up pace. In these cases, marketing becomes the glue across the

organization, providing oversight and coordination.

 

To speed up its digital tempo, Nestlé’s marketing organization launched digitalacceleration

teams. These specialists train business units and functions in the skills

needed to be effective in digital marketing and social communications. Nestlé’s country

units have adopted the approach, as well, allowing them to adapt the digital training to

local market conditions, while adhering to core, company-wide standards.6

 

At Google, lead times for new products are continually shrinking. Internal teams are

attuned to putting products in front of consumers and then, in real time, to bringing back

insights in a cycle of testing, learning, and iterating. Marketers are central to this

process: they work to develop close relationships with product-development teams in

order to inject their knowledge of user needs into how products are developed. That

helps create a vision of the product from the user’s eyes, and one that engineering

teams are eager to create. Achieving that shared vision between product developers

and marketers is a key element of speed in formulating new products and features. The

time-to-market benefits of better information and more fluid collaboration extend to a

wide range of companies, sectors, and business functions. Consider, for example, how

data and collaboration are increasing the speed and agility of B2B sales teams. (For

more, see “Do you really understand how your business customers buy?,” forthcoming

on mckinsey.com.)

 

Simplicity

Complexity is the enemy of speed, which is a big reason why a number of leading

marketers are reforming their organizations. Too often, expanding geographic

footprints, product proliferation, and new arrays of channels and digital specialties have

led to complex hierarchies, silos, communication gaps, and redundancies. But these

can be tamed.

 

For example, one telecommunications company realized that a cumbersome

organizational structure was getting in the way of delivering the top-notch customer

service that the CEO had designated as a strategic priority. He created a unit combining

existing call centers and a newly formed social-media customer-care group. The leader

of the unit reports directly to him. Proximity to the top of the company allows the new

team to collaborate more smoothly across the organization, while signaling the

importance of the customer experience.

 

Many consumer marketers are using technology to reduce complexity. They are

embracing internal social-media platforms to encourage the generation and sharing of

ideas, which helps speed up problem solving across the organization. Daimler,

meanwhile, reorganized its marketing and sales departments around the idea of the

“best customer experience.” It created a new customer-experience function bundling

several headquarters functions into one that maps the entire customer journey, with the

goal of locking in a consistent brand experience throughout the world.

 

Simplifying working relationships with advertising and other media agencies is another

goal for many marketing organizations. Trade-offs abound: specialist agencies have

expertise in new digital-content formats and delivery channels, but they aren’t always

full-service shops. Larger agencies offer more services, but the strengths of many still

lie in traditional media. Marketers building teams of employees with strong skills in

digital content and delivery are bringing more activities in-house, but bulking up can

create complexity and slow things down. And of course, simplicity can’t come at the

expense of great creative output.

 

In our work with global marketers, including many leading-edge practitioners, we are

seeing significant progress in each of these five dimensions. As you think about the

implications of science, substance, story, speed, and simplicity for your organization,

we suggest that you ask yourself five questions:

• Are we taking advantage of the science of data and research to uncover new

insights, or are we working off yesterday’s facts, assertions, and heuristics?

• Do we fully exploit the power of marketing to enhance the substance—that is, the

products, services, and experiences—we offer our customers, or are we just selling

hard with a “me-too” mind-set?

• Do we have a clear brand story that echoes through cyberspace, or do we feel that

we aren’t quite capturing hearts and minds?

• Have we created simplifiers within our organization, or have complex matrices

become a logjam?

• Are we faster or slower to market than our competition?

 

Although this may seem like a lot to handle, the rapid changes and fast-breaking

opportunities facing marketers in the 21st century suggest to us that the best ones will

have good answers to all of these questions. In our opinion, those that do will not only

enjoy above-market growth, they will define the next golden age of marketing.

 

About the authors

Jonathan Gordon is a principal in McKinsey’s New York office, and Jesko Perrey is a director in the Düsseldorf

office.

- See more at:

http://www.mckinsey.com/insights/marketing_sales/The_dawn_of_marketings_new_golden_age?cid=

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