Marketing: An art or science?

Wednesday, 26 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

By Lewie Diasz

The age-old definition of marketing

The forefathers of marketing, Theodore Levitt and Phillip Kotler, defined marketing in an era where baby boomers and the generation X prevailed and marketing has profoundly evolved ever since and the evolution can be classified into different eras.

The evolution begins from a hunter-gatherer orientation to agriculture orientation and then the early 1900s where demand exceeded supply leading into the production era or industrialisation, which is a term coined by economists. History then records the product era until the 1960s, the sales era in the 1970s, the marketing era in the 1970s and beyond, the societal marketing era in the 1980s to a value based marketing era in the 1990s.

Although marketing has evolved to what it is today, it is evident that many organisations are still engrossed in an earlier orientation and often strategically drift away from business reality.

Many textbooks and practitioners still widely use the age old definition of marketing put forward by the Chartered Institute of Marketing, borrowed from Phillip Kotler, which was crafted 30 years ago. They go on to define marketing as a management process responsible for identifying, anticipating and satisfying customer requirements at a profit and later added “in a socially responsible manner”.

The American Marketing Association defines marketing as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for its customers, clients, partners, and society at large. Does the above definition encompass and reflect strategic marketing in the 21st century? Should it be an academic definition or a guide to practitioners?

The CIM definition coins “satisfying” a customer; however, will satisfying a customer be sufficient today or should the post purchase experience “delight” the customer than the pre purchase expectation? How can the marketer attempt to reduce any consumer cognitive dissonance by augmenting products and services with tangible, explicit value that would delight rather than merely satisfy?

Let us reflect for a moment on the numerous ways in which the world has changed in the past 30 years. If Facebook were a country, it would have been the third largest in the world with over 500 million active users (which may end up being the largest eventually), an era of space tourism, globalisation, cloning, to shorter industry life cycles and faster adaptation and diffusion of technology.

The internet (ecommerce/email) did not exist when the definition was proposed and there were certainly no mobiles phones (SMS/MMS) around when the widely used definition was introduced. Digital/satellite TV was unheard of and we lived in a world without Starbucks, Google and Body Shop and Blackberry was just a fruit.

The current definition may also need to clearly classify customer requirements into customer needs, wants and demands. As articulated by Abraham Maslow, needs are a generic condition which pre exist and wants are what marketers create through brands, advertising messages, sales promotions and other forms of encoding. Demands are wants backed by the ability to purchase. You may want many brands but may only be able to demand (afford) a few.

How should marketing change?

What should be the role of marketing? Can marketing professionals unlearn, converge, challenge or reinvent what we have learnt thus far and craft a new definition, which is right for the times? Marketing is an evolving management discipline and the definition must evolve taking in to account the strategic role it needs to play in business in fuelling the corporate strategy.

I recall as the Vice President of the Sri Lanka Institute of Marketing, we approached the Organisation of Professional Associations (OPA) a few years ago and made a formal request to the esteemed association to include marketing as a profession. The immediate reaction amazed me and the formal response explained that marketing could not be recognised as a profession in Sri Lanka, especially to be kept on par with other professions which had obtained membership already.

When we examined this further there were other professions such as engineers, lawyers, gemmologists, doctors, accountants, architects, secretaries, economists, quantity surveyors, bankers and nurses.

If marketing needs to obtain greater recognition, the profession must be highlighted as a core business function and should be relevant taking into account how marketing is expected to change in the next five years. Marketers may need to re-evaluate themselves and look at the skill and competency gaps and learn the art of playing a strategic role to fuel corporate strategy rather than focusing on marketing as a tactical function (marketing execution).

Marketing creativity vs. marketing accountability

Do marketers understand business? Marketers need to earn their respect in the boardroom and soul search to identify any gaps in boardroom skills and competencies. The modern marketer may need to master the skill of measuring marketing more effectively and be metric, dashboard or ratio oriented in an attempt to move away from being a mere creative geniuses and progress to being accountable, responsible marketers. ‘Marketing finance’ is a new term coined to bridge this divide.

A handful of marketers gauge the financial impact of their marketing strategies and are not familiar with analytics, predictive and measurement tools such as the balance score card, decision trees, predictive modelling (multiple regression analysis), time series analysis, scenario planning, hypothesis testing and marketing ratios such as ROMI (Return On Marketing Investment). They prefer to choose PowerPoint rather than Excel to present a business case and fail to effectively project their creative ideas into commercial business opportunities.

The CFO (Chief Financial Officer) feels the pulse of the investor whilst CMO (Chief Marketing Officer) dwells in the comfort of customer proximity. Marketers need to move out of this silo and unleash their creative instincts and learn investor lingo that fuels corporate strategy without floundering when questioned on the financial impact of their strategies. Importantly marketers are perceived by the Finance Department as unaccountable and irrational, claiming the focus is on expenditure instead of revenue and sustainable profitability. Some other departments claim that marketers promise too much and deliver too little internally and externally, whereas accountants are perceived to be less novel, routine and mundane with their ideas.

The 21st century marketer needs to be a lateral thinker, visionary and be unconventional in approach whilst being insight driven as opposed to mere information-driven. What is an insight? It’s something that’s ‘in sight’ and under your nose but you don’t see it.

A value based approach

Marketing has evolved from a transactional to a relationship to a value based approach today, where creating sustainable shareholder value is the aim of the marketing division through the creation of superior customer value. However, some of the widely-used marketing techniques are outdated and may be sending marketers in a wrong direction.

Many of the marketing academics in the early 1960s were economists, where marketing was more of an art than a science. Theories such as Ansoff’s Matrix were developed based on the acquisition strategies of manufacturing companies in Chicago in the 1930s and designed to go to infinity in both directions, and it has been vastly simplified into the 2 by 2 matrix we see today.

AIDA was developed in 1924 in a book titled ‘The Psychology of Selling Insurance’ but is loosely used in marketing communications today without any evidence of it being tested. Consider the many flaws in concepts like product life cycle and Maslow’s Hierarchy of Needs.

Your conventional marketing tutor might request you to listen to customers because they know what they want and tell you that you do not know what they want. We call this market research! However, Steve Jobs, who’s leading Apple into its peak performance today, says: “Apple does not listen to its customers and that’s the success of Apple. Customers don’t know what they want and it’s our endeavour at Apple to introduce a product and tell them they want it! Surprisingly they keep believing us!” (Source: Bloomberg documentary)

Take for example the new Mac Book Wheel that has been introduced by Apple, which replaces the conventional keyboard! Did we want our keyboard replaced? Or will Apple convince us? Log on to YouTube and see for yourself!

However, will the marketer attempt to satisfy the customer at the expense of profit? In the credit card business, high end customers who spend a lot of money and settle their bills at the end of the month in full without paying any interest are the most demanding customers but at the same time the most unprofitable.

Strategic marketers will need to align all organisational resources so that it does create superior customer value, which will eventually result in the creation of sustainable shareholder value. The definition of marketing does not articulate this clearly and it has been the missing link in marketing for a long time.

Market led vs. marketing led organisations

Is marketing the core strategy that everyone in the organisation must be engaged in, or merely the marketing department, or is it largely becoming a sales promotional and advertising discipline, with much of marketing’s territory stolen by finance, operations and HR?

Consider the seven Ps by Vrooms and McCarthy where most Ps intended to be used and influenced by marketing are left to other departments. For example, most company CEOs or the R&D head in the central operations team engineers new products and re-engineers the old with marketing involved in campaign development.

Marketers generate pricing options but the policies, costing and margins are set by the finance department. Distribution is a role increasingly controlled by the logistics or expansion teams in the operations department. Consider the organisational structure of the large modern trade retailing giants in Sri Lanka and you would see that the sales function or distribution is aligned to the operations department with marketing playing the branding and marcom roles.

However, the function on managing the promotional mix is a dominant part of the marketing function and in most cases the only ‘P’ managed and influenced out of the seven Ps. Physical evidence is managed by the service, logistics or operations teams and all people-related decisions are spearheaded by HR and processes are managed and re-engineered by the operations team.

The concept of market orientation is broader in scope than marketing orientation. The marketing mindset is a business philosophy and must not be confined to a particular division within the company. Everyone’s job is to be a part-time marketer and the full time marketers must play a strategic role and fuel corporate strategy.

Narver and Slater in their paper ‘The effect of market orientation on business profitability’ define market orientation as a culture where beating competition through the creation of superior customer value is the paramount objective throughout the business.

The paper goes on to add that a company must be customer oriented, competitor orientated, responsive to changes, display cooperation amongst functions and have an emphasis of profit rather than turnover to be classified as a market led organisation.

Another behavioural definition is put forward by Kohil and Jaworski (1990), which explain market orientation as “an organisation wide generation of market intelligence, dissemination of its intelligence across departments, and organisation-wide responses to it”.

My definition of market orientation is a combination of the above definitions and is less complex. An organisation is market led when “the philosophy of marketing is practiced throughout the organisation in all departments”. This is easier said than done!

Marketing orientation is usually confined to a vertical pillar in the business and the challenge to a market led CEO is to break this paradigm and encourage all functions in the organisation to be part-time marketers. Nigel Piercy argues that in a truly market led organisation, the marketing department will disappear!

An art or a science?

My initial exploratory research carried out on a cross section of a sample of marketers revealed some interesting insights. To my amazement many didn’t understand the question at first and from those who did, almost all of them responded in favour of marketing being more of an art than a science.

The sub functions within marketing which are functions requiring more creativity such as branding, new product development, sales promotions, PR and advertising suggest that marketing is more of an art. Increasingly R&D, segmentation, marketing research, data analysis and marketing metrics justify marketing to be more of a rational science. The successful marketer may need to be a “right brain” creative as well as a “left brain” scientist.

Increasingly all creative, intuitive or qualitative concepts of marketing are metric driven. Take the example of services marketing which has moved into customer life cycle management from acquisition, engagement and churn to customer lifetime value metrics.

Brand management, which is to manage the functional aspects of the product and the emotional perceptions of the user, is extended into the science of valuing brands through analytical projections or quantitative valuations rather than mere opinions and perceptions. Marketers are failing to engage both analytical and creative sides of their brains.

Take the age old debate of creativity versus effectiveness between the advertising and marketing fraternity where practicing marketers today will question the advertising cost per inquiry (call, visit or web), advertising cost per sale and profit per ad to instil marketing accountability and a move towards a science with a clear rationale and justification rather than an art.

Strategic marketing specialists must think beyond the sub functions of marketing execution and must be equipped with the right ammunition to deliver customer value, which will result in the creation of superior shareholder value. This then will move our profession from being perceived as a tactical function to a strategic function. We will never be classified as a strategic function if we don’t link our efforts to balance sheet growth, dividends and the appreciation of the share price.

One proposal is to sub divide marketing into specialisms like a scientist may draw a distinction between chemistry, biology and physics which are in turn sub divided in to hundreds of sub disciplines. Will this ensure marketers becoming experts in their field rather than expecting them to be a jack-of-all-trades and then criticised for not understanding operations and finance?

Sustainable competitive advantage

A competitive advantage is the means by which a company can outperform its competitors and earn the share of hearts, minds markets and higher than average profits. Every firm needs one! Should marketing take on the accountability to craft and deliver a competitive advantage that is sustainable or should it be left to another department within the company? A competitive advantage can be a superior product benefit, a perceived advantage, low cost operations through scale advantages or a unique product feature or benefit amongst many others.

A competitive advantage needs to be crafted over a period of time and resources deployed and therefore require investment in time and money. The current definition of marketing does not encourage us to think about outperforming competitors! This in my opinion makes the widely used definition irrelevant because everything we do in business is about outperforming competitors and earning disproportionate profits.

A new definition for marketing

A student once wanted me to name the best book of marketing so that he may purchase it and I had no hesitation to say that it was the Oxford Dictionary instantly because some of the most complex words in management or marketing (including marketing) is simplified and crisply defined in the Oxford than in any other text book. Consider words such as strategy, diversification, dissonance, stimuli, rejuvenation and globalisation, to cite a few examples.

The Chartered Institute of Marketing introduced a new definition in 2007 and encouraged a debate, which defined marketing as “a strategic business function that creates value by stimulating, facilitation and fulfilling customer demand. It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits. With a customer centric view, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioural change and a sustainable business future.”

The new definition proposed above captures some important changes; however it may not be widely used because of its length and may also have a few overlaps. It takes courage to be different and marketers need to start by attempting to define marketing appropriately and may be even have their own definition of marketing and to unleash the profession’s true promise, marketers need accountability, creativity and courage; but the greatest of these is courage. So here’s a bold step in that direction and I wish to propose the following as an alternative to what has been presented so far: “Strategic marketing is a process of creating superior customer value resulting in the creation of superior shareholder value and a sustainable competitive advantage.”

I have kept is short, crisp and attempted to capture concepts that may guide us practicing marketers and students.

References

Davis J, Measuring Marketing, John Wiley & sons (Asia) Ltd, 2007

Farris P, Bendle N, Pfeifer P, Reibstein D, Marketing Metrics, Wharton school publishing, 2007

Throp D, The future of Marketing, The chartered Institute of Marketing, 2009

Mintzberg H, The rise and fall of Strategic Planning, Prentice Hall, 2000

Bloomberg television, game changes, January 2010

Throp D, Shape the Agenda: Tomorrows world, The Chartered Institute of Marketing, 2007

Kotler P, Keller K, Marketing Management, Prentice Hall, 2005

Throp D, Marketing in a Recession, The Chartered Institute of Marketing, 2009

(The writer is a Chartered Marketer and holds an MBA. He is also a senior tutor at Strategy Business School and the former Vice President of SLIM. Please send your comments to lewiediasz@gmail.com)

COMMENTS