When It Comes to Marketing, Your Gut Is Still Not Smarter Than Your Head
By Kevin Clancy and Peter Krieg
Early in 2006, Marie Chinnici, the head of marketing for Merrill Lynch's Global Markets & Investment Banking Group (GMI), had what she described as a "gut feeling'' that the marketplace may have changed since the company had launched a new marketing strategy two years prior. She wondered if the company might need to adjust its messaging to give its BtoB buyers a reason to do business with Merrill Lynch, so she and her team spent the rest of the year, as reported in Business to Business Marketing, ''talking with employees and clients to get their perceptions of what they want-and what they are getting-from Merrill Lynch and the attributes and services they seek from an investment bank.''
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Chinnici, it turns out, was on to something; the results of the research showed that some changes were needed. Business to Business named Chinnici to its prestigious "B2B Marketing's Best" list for the year, while EuroWeek, a major industry publication, lauded the company's "meticulously planned marketing approach." GMI generated record revenues in the first quarter of 2007.
We don't hear of too many marketers who run background checks on their hunches. In fact, a Copernicus and Brandweek study of 256 marketing executives found that the majority agreed with the statements, "I feel very confident making marketing decisions based on my own sense of what our customers will respond to" (66%) and "Generally speaking, I tend to make decisions quickly based on my judgment and experience" (62%).
The Failure of Thinking Without Thinking
Consider Malcolm Gladwell's best-selling book Blink, which advances the highly appealing idea in today's the-boss-needed-your-decision-on-this-yesterday world that our snap judgments and first impressions are often better than decisions made after much research and deliberation.
Gladwell's approach convinced many marketers that their guts alone were reliable guides to making choices for their businesses. More than half of the marketing executives in the Copernicus survey said, "I agree with Malcolm Gladwell, in his book Blink: The Power of Thinking Without Thinking, when he argues that senior marketing managers should rely more on intuition and judgment in making major decisions and avoid becoming mired in data" (53%).
The "power of thinking without thinking" has not proven particularly beneficial to brands, however. Take the case of Home Depot. When it first opened, it won over a steady stream of do-it-yourselfers with its superior service. Customers didn't feel they had to trade the expert help they got at their local hardware stores for savings on tools and supplies. The chain grew "largely on the strength of its skilled workers, many of whom were former plumbers, electricians, and carpenters who were eager to impart their knowledge to do-it-yourselfers," explained The Wall Street Journal in a recent profile of the retailer. The experienced service was featured in advertising and store promotions and became a central element of the chain's positioning. Customer satisfaction soared, and business boomed.
But when growth began to slow, competition increased, and profits were squeezed, CEO Bob Nardelli directed company management to start cutting costs. Labor is one of the biggest company expenses, so it is an obvious area to look for places to shave. Obvious, that is, if you aren't thinking and haven't done the research.
Part-time workers are cheaper, so the company started hiring more and imposed a salary cap. The seasoned workers who might actually know what a rotary hammer drill is—the very assets the company had built the brand on—left, and those who stayed behind were embittered. A third of the workforce was redeployed from the store floor to (presumably less expensive) overnight stocking positions, making help an even scarcer commodity. As The Wall Street Journal put it, "It left customers searching in vain for someone with an orange apron to ask about picking out the proper power tool."
Nardelli, who resigned in January, has become the subject of numerous articles about failures in management, and Home Depot continues to struggle to get back on track.
Why Nothing Is More Important Than Marketing
Chinnici and Nardelli faced the same—and all too familiar—question: How do you continue to stimulate organic growth (i.e., growth generated by a firm's existing businesses) as the marketplace changes and competition increases? Many companies see the challenge—Home Depot, for instance—as a financial or operational issue. Yet while there are likely financial and operational issues that contribute to a problem, they don't get to the heart of the matter.
Peter Krieg
Simply put, if there are no customers, there's no business. And the only purpose of marketing is to find customers for businesses. Real, honest-to-goodness organic growth comes from developing better marketing efforts for established products and launching successful new products. When we say "marketing," we're not talking about silly advertising, golf outings, or buy-one-get-one-free loss-leader promotions; we're talking about marketing—solving people's problems with products and services at a profit. Nothing is more important.
If only there were more Marie Chinnicis. Too many marketers believe they have an innate ability to make faultless snap decisions. They manage to retain this belief even as evidence mounts that their efforts aren't delivering the goods. Only two out of 10 U.S. companies grow organically by more than 2% or 3% per year; the rest hold their own or actually decline.
A Copernicus and Greenfield Online study found in 48 of 51 product and service categories in which the most marketing dollars are spent, consumers perceive the leading brands are becoming more similar over time. According to AC Nielsen BASES, 93% of estimated all-new consumer products fail within the first three years. Marketing Management Analytics, the largest ROI analytics firm in the U.S., discovered that for every dollar spent on advertising, marketers get less than a dollar back in the form of sales ($0.54 on the dollar for consumer packaged goods, $0.87 for other product categories).
This penchant for thinking without thinking may help explain why a CMO Council study found that less than half, or just 40%, of CMOs received "A" grades from CEOs on their performance.
How to Drive Extraordinary Growth and Profits with Marketing
It doesn't have to be this way. Here are three things you can do today that will drive extraordinary growth and profits tomorrow:
Find the targets worth targeting. There's a world of difference between selecting a buyer target that you think will buy a lot of your products and services and finding one that will be the most profitable to your company. A key step in the process is to come up with an extensive list of ways to segment the market—demographics, lifestyles, needs, behaviors, media habits, motivations, brand perceptions, etc.—along with a list of potential proxies for profitability, such as price insensitivity, decision-making power, personal influence, responsiveness to your brand, spending in the category, growth potential, and "findability" in sales and media databases.
Win the battle for the mind by uncovering real problems of target buyers. Positioning is the mental image or impression buyers have of your product or service or brand, the idea that sets it apart from competitors. To develop one that compels target buyers to seek out and buy your product, you have to start with a clear understanding of the buyers' problems and pains. Remember, it's not a problem if there is already an adequate solution on the market. For instance, target buyers may tell you "good taste" for a soda or "200 gig" for a data-storage product are important attributes, but if you and every other Tom, Dick, and Harry on the market already offer them, it's not an issue or, more important, a compelling point of differentiation.
Look for profitable new products and services, not appealing ones. If you're thinking without thinking, going with the most appealing new product concept—the one that many target customers say they will buy—seems like the obvious choice. Yet time and again, we've found that the most appealing new product is always the least profitable. This happens because, at the most simplistic level, the most appealing concept is a triple-shot espresso macchiato with organic soy milk for a quarter. The product may have enormous appeal, but if you sell much of it, you'll put your coffee shop out of business.
Intuition, judgment, and experience have their places in marketing decision making—they allow you to see what should be present but is not—just as they do in any business-decision area. But organic growth, in not the single but the double digits, comes from a careful balance of the emotional gut with the grounded head.
About the Authors:
Kevin J. Clancy, Ph.D., and Peter C. Krieg are leading experts on fact-based marketing and the coauthors of Your Gut Is Still Not Smarter Than Your Head: How Disciplined, Fact-Based Marketing Can Drive Extraordinary Growth and Profits (John Wiley & Sons, Inc., 2007, www.useyourheadnow.com). They speak to corporate audiences worldwide about marketing trends and advances in marketing technologies. They are chairman and president, respectively, of Copernicus Marketing Consulting, a firm whose international clientele includes several Fortune 500 companies.
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