Insights
Marketing
Engaging customers today requires the commitment of the entire company—and a redefined marketing organisation.
Over the past decade, marketers have adapted to a new era of intense customer engagement. They have introduced new features like social media management, changed processes to better integrate advertising campaigns online, on TV and in print, and hired staff with web expertise to manage the explosion of digital customer data. In our experience, however, this is not enough. To truly engage customers for whom "push" advertising is increasingly irrelevant, companies need to do more outside the confines of the traditional marketing organization. Ultimately, customers no longer separate marketing from the product—it is the product. They do not separate marketing from their experience in-store or online - it's the experience. In the era of engagement, marketing is the business.
This shift presents an obvious challenge: If everyone is responsible for marketing, who is responsible? And what does this new reality mean for the structure and charter of the marketing organization?
To avoid this, companies of all types must not only acknowledge that everyone is responsible for marketing, but also take ownership of it by creating new relationships between the function and the rest of the organization. In essence, companies must become marketing vehicles, and the marketing organization itself must become the customer engagement engine, responsible for prioritizing and stimulating dialog across the organization when it comes to developing, building, operating, and innovating cutting-edge approaches to customer engagement.
As part of this change, the marketing organization will look different: There will be more distribution of existing marketing tasks across other functions; more boards and informal alliances coordinating marketing activities across the enterprise; closer partnerships with external vendors, customers, and perhaps even competitors; and a greater role for data-driven customer insights. This article provides some real-world examples of these types of changes.
The boundaries of marketing are being redefined every day. While there is no definitive map of how companies can successfully navigate the age of engagement, we hope to help executives—not just marketers—draw such a map.
More than two years ago, our colleagues David Court, Dave Elzinga, Susan Mulder and Ole Jørgen Vetvik presented the results of a study of 20,000 customers across five industries and three continents. Their work showed how collaborative the buying process has become and how difficult it is to influence customers by relying only on one-way push advertising. In the words of American Express, Chief Marketing Officer John Hayes, "We have moved from monologue to dialogue. Mass media will continue to play a role. But their role has changed."
In the last two years, this evolution has accelerated. More consumers are using digital video recorders to fast-forward through commercials from TV and consuming video content on websites like YouTube and on mobile devices. Billboards along rail lines and bus routes are having a hard time catching the attention of people absorbed by their smartphone screens. Meanwhile, more and more empowered, critical, discerning and price-sensitive customers are using social networks, blogs, online review forums and other channels to quench their thirst for objective advice on products and to find brands that seem to care about building a relationship with them. Individuals even post their own commercials on YouTube. In short, the ways (or touchpoints) that customers use to interact with businesses have continued to multiply.
The problem for many companies is that the very thing that makes push marketing so effective - tight, relatively centralized operational control over a well-defined set of channels and touchpoints - hinders it in the age of interaction. Many touchpoints, such as calls to customer service centers and interactions between sales reps and customers, are outside the traditional marketing organization, with little or no permission to reach out to other business functions or areas. Companies have traditionally divided responsibility for touchpoints among various functions. However, a comprehensive strategy for engaging customers across these points is rarely developed, and when it is, there is often no system for executing or measuring performance.
To engage customers wherever and whenever they interact with a company - in a store, on the phone, responding to an email, blog post, or online review - marketing must permeate the entire organization. Companies like Starbucks and Zappos, for whom superior engagement has been a critical source of competitive advantage from the start, already exhibit some of these characteristics. But these companies are not the focus of our interest; rather, they are the actions that anyone can take if they want to achieve world-class customer engagement.
The starting point is a shift in thinking about customer touchpoints. Companies typically think of themselves as "owned" by a particular function: Marketing, for example, is responsible for brand management; Sales, for customer relations; Merchandising; or Retail, for the in-store shopping experience. In today's marketing environment, companies are better off looking at the customer relationship not as a series of discrete interactions, but as customers do: as a series of interrelated interactions that, taken together, make up the customer experience. This view should spur a new dialog among members of the leadership team about who should design the overall system of touchpoints to create a compelling customer experience, and who should then build, operate, and innovate the individual touchpoints in line with that overall vision. There is no need to worry about traditional functional or business responsibilities: Whoever is best positioned to tackle an activity should do so.
Developing a great customer engagement strategy and experience depends on understanding exactly how people interact with a company during their decision-making process. This interaction can be with the product itself or with service, marketing, sales, public relations or any other element of the business.
For example, when the Starwood hotel group sought to improve interactions with its customers, the company analyzed data about them and identified unique demographic groups staying at its more than 1,000 properties. In 2006, the company unveiled specific new positioning for each part of its brand portfolio, ranging from Four Points by Sheraton to the Luxury Collection and St. Regis hotels.
Each brand seeks to provide a different customer experience, ranging from the way guests are greeted by staff to the type of toiletries offered in rooms. Crucially, Starwood wanted to design not only the experience it wanted for each type of hotel, but also how it would actually be delivered. As a result, the company had to decide what coordination was needed between the different functions, who would operationally control the various touchpoints, and even what content customers wanted on the company's website, in loyalty program mailings, and in other forms of communication.
Starwood's experience underscores the fact that despite the growing influence of digital touchpoints, such as social media, effective customer engagement must go beyond just communications and include the product or service experience itself. "At the end of the day," says the CEO of Virgin Atlantic Airways Steve Ridgway , "we fly the exact same planes as everyone else. If our customers get off the plane happy and talk about it and get others to come to us and then come back themselves, that's a tremendous marketing tool."
Once a company has determined how it wants to engage with its customers, it needs the organizational requirements to make it happen: adding staff, building a social media network infrastructure, restructuring customer service or changing reporting structures. Functions far removed from marketing often play an important role, so one or more marketing teams at headquarters may need to build capabilities in other parts of the company. One global energy company took this approach and then largely disbanded the group when those capabilities were in place.
Assigning responsibility for building touch points is increasingly important as Web-based engagement forces companies to create "broadcast" media. Some have built publishing departments to meet the ever-increasing demand for content for corporate websites, social media, internal and external publications, multimedia sites, and coupons and other promotions. Many luxury goods companies, for example, have built editorial teams to "socialize" their brands: transforming customer relationships by creating blogs, digital magazines, and other content that can dramatically increase both the frequency and depth of interactions.
LVMH Moët Hennessy-Louis Vuitton, for example, launched an online magazine last year, NOWNESS, that offers what the company calls "informational references" about its luxury brands. The site presents a daily multimedia story with little pure advertising, and (in conjunction with LVMH's efforts on Facebook, Twitter, and YouTube) seeks to deepen customers' relationships with the company's brands. British luxury brand Burberry has launched a similar project with its Art of the Trench website. French company Chanel has been using its own creative and artistic directors for years to develop content without relying on the help of external agencies.
Content-driven strategies like these require creative people who can meet customers' ever-growing need for timely, relevant, and compelling content in a variety of media. They also provide an opportunity for productive dialog within the organization about the role of marketing versus other functions in creating key touchpoints that drive engagement.
For companies in industries as diverse as consumer goods and financial services, digital technology has changed the expectations of customers who, for example, visit a single website and want a seamlessly integrated relationship across all touchpoints. Meeting these expectations requires extraordinary operational coordination and responsiveness in activities ranging from delivering on-site services to creating online content to dealing with a customer care issue that pops up on YouTube.
Behind the scenes, this new reality creates a need for coordination and conflict resolution mechanisms within and across functions, as well as budgeting processes that allow for flexibility and quick action when needed. PepsiCo, for example, has sought to create a central point of contact for its digital marketing efforts by creating the role of chief digital officer: an executive without line responsibility who drives the application of best practices across the beverage company's global digital efforts.
Companies also need a clear approach to monitoring touchpoints and renewing them as needed. For example, at one large hotel chain, a single group circles the globe and acts as a "monitor and fix" team SWAT. It meets with hotel licensees, educates them on the company's customer engagement approach and management of key touchpoints, demonstrates new behaviors, and trains staff on new operating procedures. Given the speed at which information is shared today, constant monitoring and adaptation - indeed, continuous improvement, as it long ago took hold in the operating world - will inevitably infiltrate marketing and grow in importance.
As the chief marketing officer works with the chief executive and other members of the senior team to establish a common approach to designing, building, operating and renewing customer touchpoints, he or she also needs a new kind of marketing organization. For marketing to truly become the customer engagement engine that orchestrates the delivery of an end-to-end customer experience, it must evolve along four critical dimensions.
As marketing becomes ubiquitous, the marketing organization is increasingly defined by a set of hard-coded responsibilities, such as branding and agency relations, and a set of responsibilities distributed among the functions and groups best able to manage and use the information generated by customer interactions. Procter & Gamble, for example, has established a digital media ad buying group within its buying function. The group spans geographic boundaries, reflecting the global nature of the medium, and although it is based in buying, it is made up of people with marketing experience.
In companies where marketing organization responsibilities are split between core and decentralized activities, CMOs are increasingly held accountable for the performance of groups that do not report exclusively to them. When CEOs ask to see the marketing organization chart, they will see a complex web of solid and dashed lines that show the roles that marketing plays in designing, building, or operating touch points throughout the organization.
The diagram also shows where marketing activities are embedded in other functions. For example, a large logistics company deploys marketing resources in each distribution district to tailor enterprise-level marketing initiatives to local conditions. This approach alleviates complaints from salespeople who feel bombarded with marketing directives from headquarters by providing them with simple, tailored ideas for increasing sales in their regions.
While leading companies have long used marketing advisory boards to improve management coordination, the new marketing organization will require many more of them, with greater representation from other functions. For example, one global financial institution established a digital governance council with representatives from all customer-facing business units. Its goal was to ensure that data and analytics are shared, that customers have the same experience regardless of channel (e.g., websites, branches, call centers, or ATMs), and that IT systems meet customers' digital engagement needs.
More robust formal and informal external partnerships will also be critical. Customer forums, such as Virgin Atlantic Airways 's to develop a taxi sharing app for smartphones, are one example. Better structured relationships with distribution partners can also improve engagement. Consumer goods company Nestlé, for example, manages its relationships with retailers Wal-Mart Stores through what it calls the Nestlé- Wal-Mart Team. This unified, cross-business and cross-functional group is responsible for everything from in-store activities to advertising, logistics, innovation and product design. The result is that Wal-Mart has a single point of contact for one of its largest suppliers, Nestlé has a closer relationship with the retailer, and both companies develop a better understanding of and closer relationship with packaged food consumers.
Gaining comprehensive customer insights, which has always been a key component of effective marketing efforts, is even more challenging and important in today's world. Companies need to constantly listen to consumers across all touchpoints, analyze their behavior to derive patterns, and respond quickly to signs of changing needs.
One consequence of this is that the type of talent required to gain such insights will change. There will be more emphasis on problem-solving and strategic marketing skills than on traditional market research skills such as designing surveys and conducting focus groups. Some companies will also rely on the help of external partners, a pattern already seen among several insurers and healthcare payers that do not have the time or budget to build the necessary data collection and analysis capabilities internally and on a large scale.
The Insights Group's position within an organization might even change. In one upscale hospitality company, for example, responsibility for customer insights gathering has been completely outsourced from the marketing function. The group now reports directly to the head of strategy, who uses the information gained to reshape key business elements such as pricing, sales targets, and property selection for development.
The significance of all these changes is amplified by the exponential increase in the volume of customer data and the intensity of analytics required to process and effectively use that data. Without cross-functional collaboration and a clear division of roles, it will be impossible to collect, aggregate, derive insights from, and disseminate the data generated by every customer interaction. The sheer volume of data is extraordinary: social media gaming company Zynga, for example, generates five terabytes (the equivalent of about 1.5 million song files) of customer click data every day. In addition, "marketing is becoming a much more science-based activity," says Duncan Watts of Yahoo! Research. In practice, this shift points to a shift toward sophisticated data analytics, similar to the revolution that has already taken place in industries such as financial services, airlines, and others where revenue management is important. Some marketing organizations are already moving in that direction: to send targeted emails to customers, for example, the retailer Williams-Sonoma analyzes an integrated database that tracks some 60 million households by criteria such as income, home value, and number of children. These emails achieve response rates 10 to 18 times higher than randomly sent emails. Such capabilities do not necessarily have to be built internally: Many companies are entering into creative agreements with external parties to share data and jointly test alternative marketing tactics.