When you’ve gained a new insight about change in your industry, you may assume that its implications are obvious and you need to rush into action. But before you start sprinting down what looks like the desired path, it’s worth considering some alternatives. Consider the experience of some firms that may have jumped the gun.

Hurry Up and Wait?

That’s what the team at a boutique financial services firm wished they’d done when they first realized that their target customers were beginning to seek – and pay a premium for – multi-product solutions from a single provider rather than “picking and choosing” among products from many companies. The first reaction of the boutique firm was to mobilize its in-house product development teams to begin building out an expanded product portfolio quickly.

However, within three months the strategy team realized that they’d underestimated the time and costs of developing and marketing so many new products against strong competitors in domains where the firm had little brand recognition. They were able to call off the fast-track development effort and began assessing alternative strategies. The team ultimately decided to expand their firm’s portfolio by becoming a distributor of other providers’ established products, which the firm was able to accomplish far more quickly and profitably than if they’d developed new products themselves.

Seek Multiple Responses to the “So What?” Question

When I coach strategy teams, I use a number of techniques to help them unearth high-level implications of any new insight before they rush into formulating action plans. At this stage, it’s valuable to engage managers from multiple functional areas because with their varied perspectives, they can each envision very different implications of a newly understood change in the industry.

For example, if you’ve realized that your firm is being outmaneuvered by a rival with new technology, here is how managers in various functional areas might assess the implications:

• Finance: “We need to invest in a third-party partner who can help us catch up in this arena.”
• Marketing: “We need to develop alliances with professional groups who know how to promote our existing proven products with various stakeholders.”
• Human resources: “We need to hire new tech talent who have skills that do not now exist in our organization.”
• Operations: “We need to acquire some new capabilities that will lower our production costs.”
• Legal: “We need new types of contractual relationships.”

Give All Participants a Conversational Green Light

Each of these possibilities can shed light on new strategic options worth consideration. For any discussion of high-level implications, I encourage teams to agree on a few rules that will maximize participation and increase the likelihood that important options will be identified. For example:

1. Agree that no question is out of bounds – Get all questions out on the table.
2. Encourage participants to ask novel implication questions – What have you never considered?
3. Ensure that participants understand it is an iterative process – Surface all the big possibilities now; you can evaluate them in more detail later.
4. Ask participants to identify additional possible implications – What else are we missing?

These are just a few of the techniques for assessing implications in my book The Insight Discipline: Crafting New Marketplace Understanding that Makes a Difference. I  also encourage you to read and comment on my other blogs.

The post Not So Fast! When You Get a New Insight, Don’t Jump to Conclusions appeared first on ���������.

7 Big Problems Blog Series: The Insight Discipline

Most marketing departments assess their market position based on a standard set of their “greatest hits” reports, routinely tracking the same metrics such as market share, profit margin, and competitive position. But by focusing on a limited set of market indicators, you will certainly miss new opportunities and threats that could dramatically impact your business overnight.

Here are three ways to get out of your “analysis rut” by taking a fresh perspective that can lead you to breakthrough insights about your marketplace:

1. Scrutinize nontraditional competitors

Most analyses of competitors tend to focus primarily on the big players—that is, the current dominant market-share rivals.  But try taking a closer look at your other competition, namely:

• small rivals,
• emerging competitors,
• substitute-product providers, and
• new alliances. 

Some of the innovations from these players will likely become game-changers in your market. Can you identify what those innovations are and how you could respond?

2. Get a different kind of customer feedback

Market research that focuses mainly on the needs and opinions of your current customers leaves out a big part of the market picture. If you invest more time getting feedback from lost customers, you will likely learn far more about what it takes to excel in the market—and how and where your competitors are beating you. Remember, your satisfaction surveys with current customers tell you nothing about how the customers who have left you experienced your products’ flaws, feel about your service levels, or want you to change the way your sales force engages with them.

3. Consider the wider impact of changing consumer preferences

Take a broader look at evolving attitudes of your target customers that could affect your market position. For example, if you were in the automotive industry focusing exclusively on car-buying preferences – such as the relative appeal of electric vs. hybrid vehicles – you would have been blindsided by the market impact of many millennials’ preference for using ride-sharing services such as Uber rather than owning a car. Seek out research on consumer and demographic trends that could have a profound impact on your target market.

Similarly, take a broader perspective in analyzing the strengths and vulnerabilities of your company and your competitors—not just in the finished products but also in factors such as raw materials, labor supply, equipment, and capital.  For example, the market leadership of the tech and industrial product manufacturers that rely on rare-earth minerals in China was recently thrown into jeopardy as China threatened to block U.S. access to those minerals. Try to identify your company’s vulnerabilities and strategies for protecting your position as well as how to capitalize on a competitor’s loss of a strategic advantage.

These are just a few of the techniques in my book The Insight Discipline: Crafting New Marketplace Understanding that Makes a Difference. I  also encourage you to read and comment on my other blogs.

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Whether you’re preparing a marketing plan for a business, a product, or a promotional campaign, you know the typical drill: Analyze the usual sources (financial reports, industry forecasts, technology outlooks, etc.) and then chart your course. 

But with so much data available, why do marketers frequently disappoint their senior management or clients for failing to provide any new insight about how their market is changing and what it will take to win in the future?

A common lament I hear from senior executives is that the reports and recommendations they receive from their marketing teams, market research firms, and consultants too often just confirm what was already common knowledge.  For example, a conclusion such as the statement “Customers’ buying behaviors are becoming more difficult to predict” hardly offers any meaningful strategic guidance. 

Frankly, the majority of “insights” I see in marketing plans and customer and competitor analyses ��Dz�’t qualify as what I believe a true insight should be — namely, new marketplace understanding that makes a difference to thinking, decision making and action.  In other words, a true insight needs to be a combination of both

1. An “Aha!” discovery (the “new marketplace understanding” that dramatically overturns your prior assumptions, beliefs and projections); and
2. An important driver that will change managers’ thinking, decision making, and action.

I’ve developed an approach to help marketers get beyond the obvious to reach true insights, which I’ve outlined in detail in my new book The Insight Discipline: Crafting New Marketplace Understanding that Makes a Difference. 

Here’s a recent case in point illustrating the benefit one management team gained by using the insight discipline to reevaluate its historically staid market-dominant product.  When the team applied the insight discipline to conducting a more rigorous analysis of the technology drivers in their marketplace, they reached an “Aha!” discovery:  namely, the trajectories of three product and component technologies would likely intersect to give rise to a new breakthrough product within two to three years. 

And how did the team’s sudden realization about the potentially short life of their current product make a difference?   It caused them to think about their market in radically different ways.  As a result:

• They began reversing prior R&D commitments to extend the current product line, instead appraising how to redirect resources toward developing new product functionalities;
• They started upgrading manufacturing technologies, launched a new branding initiative, and began a first-time-ever exploration of using partners for new product development; and   
• They undertook a series of customer visits aimed at identifying latent customer needs.

It’s worth learning how to use the insight discipline to reach a keener understanding of your own market opportunities.  In future blogs, I’ll share tips and techniques to help you apply the insight discipline. Your new insights could make all the difference between winning or losing in your marketplace.

I’ve developed a number of techniques such as these to help marketers get beyond the limitations of their traditional analyses to reach critical insights, which I’ve outlined in my new book The Insight Discipline: Crafting New Marketplace Understanding that Makes a Difference. I also encourage you to read and comment on my other blogs.

The post Getting Beyond the Obvious: Finding Real Insight in a World Overflowing with Data appeared first on ���������.

In the United States, you’ll observe that the condiments aisle of a typical grocery store has over 20 mustard brands. Within these mustard brands, there are often five to eight variations that reflect different tastes (e.g., horseradish, sriracha). In my local market, the mustards take up about six feet of shelf space and run from the very bottom shelf to the top shelf. There are literally hundreds of bottles. As such, the mustard category is an excellent example of a highly contested market.

We have been preoccupied with revenue growth in highly contested markets for the past 20 years. As former senior partners of a global consulting firm, we developed a systematic approach to organic growth that challenges conventional wisdom (it is the focus of our new book published by ���������, The Organic Growth Playbook). We’ll be producing a series of blog posts on ama.org devoted to this topic. We want to stress that we’ll be focusing on organic growth challenges in general – not simply the book content. That said, this being the first blog, herein we will focus on a few of the principles found in the book.  

In brief, we have found that the conventional marketing wisdom that permeates all of our textbooks is woefully unreliable. It works sometimes, but more often than not, it does not produce revenue growth. So, what is this conventional wisdom? It typically follows two basic stages: (1) it begins with a focus on refining the product positioning to make it as unique and differentiated as possible, and then (2) effort shifts to activating the target segment with a campaign focused on brand choice (i.e., choose French’s mustard on your next trip to the store). The owners of the major mustard brands (Gulden’s, French’s, Grey Poupon, and relatively new entrants like Heinz) are all following this approach today – with very mixed results.  Instead, we would argue that mustard brand owners need to ask themselves three unconventional questions:

1. Is positioning the right card to play?
   While positioning is often necessary for growth, it is not sufficient for growth. Sure, positioning a product uniquely in the minds of target customers (e.g., Grey Poupon’s exclusive, symbolic position) can be beneficial. But the hard truth is that customers often ��Dz�’t buy brands they like and think are really different. Even when the brand claims a unique location in mind of target customers, sales ��Dz�’t automatically follow.  Instead, sales are a result of a behavior change. The behavior change may be switching from French’s mustard, bringing new users in the mustard category, purchasing a greater volume of Grey Poupon, or other changes. Our key point is that many brands are positioned “well enough” in the minds of their target customers. As such, the key is to look for specific behaviors to change that can drive brand sales.
2. Are we fighting a barroom brawl with our competitors at the brand choice stage of the buying process?
   The brand choice stage is a very tough game to play, since everyone is focused on winning share. Instead, Grey Poupon would be better off exploring nonobvious early stages of the buying process to explore where it can influence customer behavior. We call this activity “exploring upstream buyer behavior” to look for high-yield behaviors to change. Over the past 20 years of client work, we have always found that the path-dependent behaviors that occur early in the decision process shape downstream brand choice behavior. It could be a product trial at friend’s home, tasting the mustard at a local restaurant, or simply observing the use of the brand on a cooking show. These are just ideas – the firm would need to map the process in fine detail – to look for the high-yield opportunities.
3. Are we practicing “peanut butter marketing” and spreading our marketing communication investment across all stages of the buying process? 
   When we see brands that spread money across many marketing activities, this typically means that the brand owners have limited knowledge of what marketing tactics work the best.  In contrast, a focused marketing spend on one behavior that is upstream can pay enormous dividends. We have seen many winning strategies in which the brand team allocates 70%–80% of its spend on that point of the buying process. Having observed Grey Poupon in the marketplace, we see a whole host of marketing spend across a range of television, internet, and in-store communications. This suggests an “ushering of the consumer throughout the buying process” rather than a focused spend on one customer behavior.

In sum, these three nontraditional questions represent a different way to tackle flat brand sales.  This does not mean that we throw away the concept of positioning; rather, it implies that positioning by itself does not necessarily lead to sales increases. Instead, it must be supplemented with a behavior change orientation and targeted spend on key upstream behaviors.

The post Strategies for Success in Saturated Markets [The Mustard Case] appeared first on ���������.

The most recent index, which surveyed marketers from across B-to-B and B-to-C businesses of various sizes, put marketers’ confidence at 130. For context, a neutral score of 100 would indicate that marketers believe that customer spending, marketing budgets and investment opportunities have been and will remain stable.

“The outlook marketers have on the positive end is definitely up,” Joris Zwegers, the survey’s administrator and vice president of global research at Kantar Consulting, says. “The proportion of marketers who are pessimistic about customer spending in the next six months has remained stable, but there are now more marketers who hold a very positive outlook.”  The shift in proportions suggests some marketers who previously projected stable spending, budgets and investment climate have changed their view and now anticipate growth in these dimensions.

Marketers also gauged their performance against competitors. Fifty-six percent of marketers report that they feel their revenue growth outpaces their competition. This closely reflects 2016, when 53% of marketers evaluated their revenue growth as better than competitors. Regardless of competition, 59% of marketers are confident that their revenue will grow in the next six months.

Customer Centricity

The index captured marketers’ evaluation of how customer-centric​ their organization is on a scale from zero to 100. Marketers gave their organizations an average score of 74, one point higher than in January 2016.

Though the distinction between individual points is not significant, Zwegers says by viewing the results in 10-point brackets, trends emerge about the tendency of firms to place customers at the heart of their decision-making.

“Companies that score 90 or higher are exceptionally customer-centric,” Zwegers says. “A company like Amazon will sit exceptionally high on this scale. The category below still places a lot of emphasis on the customer, but things like internal process may occasionally be prioritized over an individual customer’s needs.”

Companies at the bottom of the scale are either exceptionally product-focused or put money-making or internal process at the forefront of decision-making with little regard for the customer.

Zwegers says disruptive companies, such as Amazon and Netfilx, are driven by customer centricity, and CEOs of other companies are noting their success and taking a keen interest. “It is clear that being more customer-centric is good for business, but translating a desire to become more customer-centric into organizational behaviors isn’t easy. That’s where companies struggle,” he says. “They’re still trying to balance those [behavioral] shifts with existing culture, structure, processes and the demands to deliver growth every quarter.”

Budgets

Current marketing budgets show the strongest investment in media placement (21% of budget) and creative (20% of budget). Marketers were asked how they would distribute their funds if their budget were to increase or decrease by 10%. In both scenarios, media placement was most likely to be adjusted. Zwegers infers this is due to the short-term impact that media placement has on brand performance and the ease of reallocating funds to this category as budget changes necessitate.

“Innovation, research and analytics investments are more difficult to change in the short term and may also be deemed too critical to chip away at,” Zwegers says. “If marketers spend less on generating insights, that will hurt them more in the long run [than spending less on media placement]. Cutting money from media is relatively easy and might also be seen as the safest because it’s a short-term step back versus messing with the fundamentals of how they want to drive business in the long term.”

​The Influence of Marketing in the Organization

More than 60% of marketers report that they believe marketing’s influence and power in their organization will increase in the next few years. Just 8% of marketers report they feel this influence will decrease, and the remaining 32% feel their influence will stay the same.

Compared to January 2016, this outlook is slightly less positive—at that time, 64% of marketers believed their influence would increase, and 7% believed it would decrease—but over the span of the two years since then, the fluctuation in this metric averages out to 63.8% optimistic and 7.2% pessimistic, indicating consistent outlook over the past two years.

The biggest threat to marketing, according to marketers, is the rest of the organization’s failure to understand marketing’s capability and value. Technology could be a way to validate marketers’ impact, but a lack of adoption of these tools is also a threat.

Marketers expressed that their leaders, CMOs, are most lacking in knowledge about digital marketing. Despite its necessity in competitive marketing plans, digital marketing evades many seasoned marketers because of its recent emergence.

This mismatch of skills and experience was also reflected by 34% of marketers who responded that they are not confident that their organization has the right operating model, including staff, team structure, processes and tools. Just 27% said they are confident in their operating model, and 59% reported they are unsure.

“Marketing teams are often still organized based on how marketing was done 10 to 15 years ago,” Zwegers says. “In the old model, the most senior marketer in an organization typically had done junior marketing roles before rising to that position. Today, that’s no longer the case. Most CMOs haven’t been in a digital role because it simply didn’t exist or was limited [when they were starting out]. If you think about marketing in the digital age, that structure doesn’t suffice anymore. You can’t expect your managers to have the answers because they haven’t done that job before.”

Marketers expressed the most confidence in their teams’ capabilities, their organizations’ investment in the right customers and cohesive brand positioning. Nearly half reported confidence in all three, while the proportion that reported a lack of confidence ranged from one-fifth to one-fourth.

“The bulk of marketers have the basics nailed down,” Zwegers says. “But the toolbox and possibilities of digital marketing is expanding, and those possibilities are a bit daunting and somewhat nebulous. The number of people with true experience in using all of these tools is relatively small.”

Measuring ROI

Marketers continue to lack confidence in their ability to show return on investment, as little more than one-third report they believe their team understands the ROI of their marketing plans. This could be a function of the lack of adoption or understanding of technology that could effectively report this critical metric of performance. Demonstrating value and ROI of marketing remains an imperative but elusive goal for many.

Survey Composition and Methodology

The survey results comprise the responses of 396 marketers. Ages ranging from younger than 35 to older than 56 were represented. Most respondents identified as managers (30%), but nearly 50% identified as vice president or higher. They represent organizations smaller than 101 employees (36%) as well as larger than 10,000 (14%). ���������t a quarter were B-to-B marketers, and 17% were specifically B-to-C. The rest considered their business to be a blend of the two. The respondents were mostly female (56%). The survey was administered via e-mail from January 23, 2018 to February 12, 2018.

The post Marketers Are Confident ���������t the Economy and Their Brands in 2018 appeared first on ���������.

The ���������’s first intellectual agenda is meant to serve as a source of guidance and inspiration for marketing professionals as well as academics. In it, we lay out the “seven big problems” marketers face in the boardroom and in the marketplace. These problems are a large part of that intellectual agenda, and will help us hone in on how we inform and inspire you, the marketing community.

Here, we dive into the questions that stem from each of the seven problems. ��������� thought leaders discuss the “what” and “why” of each pillar problem, while we leave the door open indefinitely on the “how.” After all, marketing is about rolling with the punches.

Randy Guard

EVP and CMO at SAS

For most companies, businesses that offer similar products or services are no longer the only competition. To maintain customer loyalty in a crowded marketplace, it is important to forge relevant partnerships with other companies in your space. An auto manufacturer can no longer be solely concerned with other car brands; now, it must be aware of the rapidly growing popularity of ride sharing, for example. When partnering with new market participants, data is the common thread in how companies interact, and smart analysis of this data is the key to success.

Richard Labot

Global Director of Network Operations at Geometry Global

In the global professional services sector, creating teams of partners in a new market efficiently fills talent and capability gaps that would normally take time and investment to fill when going it alone. Like any ecosystem, balance is key to success and those involved have to be aligned to a common goal. There need to be clear responsibilities, rules of engagement and a financial model that encourages participation and collaboration of all parties. Previous experience working together, familiarity with the inter-company process and like-minded corporate cultures round out a best-in-class ecosystem.

Ravi Prashad

SVP of Strategy at GALE Partners

Shaping the future isn’t easy—it requires ambition, humility, and expertise. Objectively understanding the risk-reward equation will help winning firms place the right bets. Global experts living in the future are invaluable if they tailor their expertise to the individual firm. Too often, so-called experts trot out popular trends without an objective understanding of what might work for a specific client. Winning firms partner with global experts who apply innovation, understand their unique business and build marketing solutions that emphasize operational capabilities.

Kurt Hawks

SVP of Cross Device and Video at Conversant

To better predict competitive shifts in our marketplaces (or create them), companies must be laser-focused on the behaviors, needs and preferences of the end consumers within those marketplaces. As such, companies must strike strategic partnerships that best enable them to gain a single view of their consumers, seamlessly identify consumers across all devices and channels and measure the incremental effectiveness of marketing programs in real time. True consumer insight results in the ability to anticipate the future needs of consumers and create competitive shifts rather than react to them.

Rand Fishkin

Cofounder of Moz

Transformation, like any major upheaval, is going to be a serious struggle for organizations that ��Dz�’t embrace learning and evolution. The type of competition companies faced in the past is different from the competition and disruption they now face due to technology. Companies in sectors such as transportation, media and retail have been learning harsh lessons throughout the past decade. Meanwhile, plenty of incumbents in areas such as health care, finance and energy are feeling invincible, but I suspect they will have the same tough comeuppance in the decades ahead. Digital media moves fast. In just the past 10 years, we’ve seen the rise of multiple platforms that touch millions (Twitter, Snapchat, Instagram, LinkedIn) or billions (Google, Facebook, Whatsapp). That requires digital marketing teams to move fast, too.

Mary Hinesly

Professor at the University of Michigan’s Ross School of Business

We can see that digital technology is changing how businesses are run and expand globally. Globalizing your company requires a different approach to thinking about how value is created. There are many companies that require a digital audit to learn what is currently being used and how it is being used in their organization to nurture globalization. Mobilizing and inspiring employees through a cooperative culture will streamline digital technology roll outs and help your company to globalize more quickly.

Christopher Vollmer

Principal at PwC

In leader organizations, senior management has a compelling point of view about what the future looks like and how they must transform to win in it. Brand purpose is injected into the key moments valued most by users. Content, products and services are available where users can easily find them. Digital is integrated with the physical. Their organizations know how to team, partner and work across traditional silos. Tough calls are made regularly on legacy businesses, talent and infrastructure to invest for growth and drive the company forward. Leaders recognize that digital is more than a clever reallocation of marketing spend. They see digital transformation as an opportunity to win in a world where every brand interaction is just one step from purchase.

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Steve Jobs seized the moment with iTunes and the 99-cent song. But even downloads have been unable to check the sales decline of music products. Streaming has overtaken the music industry as the engine of growth. Streaming is not another product. It is a business model that uses digital technologies to sell music as a service, meaning access without ownership that is available on-demand and paid for by use or by subscription. The two biggest services are Pandora, a personalized radio service, and Spotify, offering a catalog of music.

Service-based offerings are not new, but technology has made it possible for such offerings to make inroads into categories that have long been exclusively product-centric. Digital disruption does not reward traditional centers of power. It re-channels the flow of industry revenues. Unless incumbent brands give up old ways of operating, new sources of value and growth will elude them because the new flow of revenue will not renew existing streams or automatically redirect new streams to incumbents. Consumers can get the benefits they want in new ways. The old ways aren’t coming back.

As it will in all categories, digital disruption is forcing the music industry to remake itself. There are four critical lessons brands can learn from the digital transformation of the music industry.

1. Look to Experiences for Value and Growth

In music, this is seen in the booming opportunity to build value from live concert experiences. Music festivals have become a worldwide cultural phenomenon, to the point that observers now worry about “.” Clubs, live streaming, awards shows and house concerts are part of this, too. Live music is buoying an interrelated ecosystem of auxiliary revenue streams such as food, transportation, lodging, clothing and other merchandise.

The service-based business model of live concerts offers value and growth that premium music products can no longer command. Historically, music ticket prices have risen faster than inflation. This continues, even as the value of recorded music products is falling. In 2015, the average live music ticket price hit an all-time high. Technological innovation in virtual and augmented reality will add even more value to live experiences.

Brands in all categories can include an experiential layer, even for low-involvement products that are purchased habitually. This could entail things like personal curation or concierges, instruction, insider access, collaboration or technology enhancements. Brands must look at the future differently and think about how to use experiences to build more value.

2. Relationships Win Out Over Branding

This is obvious in music, where the shared experience has always been powerful. But music is not the only thing that people want to share. People rely on social guideposts for everything. Digital disruption brings relationships to the forefront in all categories.

In fact, building closer, stronger relationships with customers is critical for brands that want to compete for experiences. In the world of digital platforms, it’s all about winning the competition for relationships, which is why Amazon has a soup-to-nuts ecosystem of customer engagement. Amazon uses brands to build its own relationship with customers. No brand is safe unless it secures its own relationships.

3. Small Brands Have a Bigger Opportunity in a Marketplace Upended by Digital

The prevailing narrative about digital is that it is winner-take-all. Indeed, this has been borne out many times. Network effects are the reason. They create natural monopolies. The more people in a network, the more value it has to people. So people migrate to the biggest networks, which makes them even bigger and thus even more valuable, which in turn, attracts even more people. Pretty soon, almost everybody is in one network.

But network effects matter only when networks are essential to the value of the brand, which is not the case for most brands. Music demonstrates this because digital disruption has opened up the industry rather than narrowing it down.

More artists, not fewer, can get a share of the business nowadays. In 2000, the top 100 tours commanded almost 90% of annual concert revenues. In 2014, this figure was halved to 44%. Certainly, the biggest artists still command the lion’s share of revenues from music product sales and streaming. But artists are more likely nowadays to see more types of opportunities to build a steady, long-term career, rather than having just one long shot at success.

The transformation of categories by digital has shaken loose a lot of new opportunities for brands and companies willing and able to pursue value and growth in new places.

4. Brands Must Get Outside of the Data

Streaming services and other digital music platforms use algorithms to classify people’s tastes and then predict what people might like to hear. Such algorithms are not unique to music. Recommendation engines, to mention one example, are commonplace.  

One criticism of algorithms is that they lock people into echo chambers of existing tastes, thereby shutting people off from new or different things. In fact, this is exactly what digital delivery and distribution platforms are trying to achieve. To survive, brands need to get outside of the data.

This is the paradox of the digital era. Old-timey analog or non-digital connections have become more, not less, important. Analog is critical to mastering digital. Brands want to drive algorithms, not be driven over by them. The good news is that brands have many options for doing this, some of which are already familiar, like traditional media, sponsorships, partnerships, placements, apps, tie-ins, opinion leaders and personal solicitations. Digital makes these more important, not less, as it ushers in an era of algorithms. Brands must find ways to escape the commoditizing pull of algorithmic modeling.

The music industry is learning as it goes. The marketplace of music as a service is a work in progress, but it is the future. Brands in all categories must rethink their propositions and business models. Music offers some lessons and guidance, but brands must approach the digital future with a willingness to experiment and a commitment to reinvention. As every musician can attest, perfection takes lots of practice. That is perhaps the biggest lesson that music has to teach brands.

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Accumulating studies pinpoint the impact of increasing numbers of marketing drivers, customer behaviors and resultant financial outcome metrics. For example, the list of potential drivers has expanded to incorporate many digital and mobile marketing investments in new formats, delivered through new media platforms and sales channels. We understand more about intermediate steps in the process leading to financial outcomes, such as customer satisfaction. Our comprehension of the effects of marketing is becoming more refined, often including both impact on financials and how marketing responds to financial performance.

Understanding marketing impact often includes both the macro view at the market level over time, and the micro view at the individual level, such as customer segments or purchase occasions. Understanding costs is also becoming more explicit in research, where cost elements are identified within total economic value measures to isolate marketing’s impact from things that are outside of its domain.

Converging evidence shows that management executives and board members with marketing experience contribute in positive ways to business performance. This has implications for recruiting, selecting and training people in marketing to achieve business improvements.

Going forward, we need more insights on business questions as currently defined, based on research of new strategies, drivers and talent. However, we may also need to get new perspectives on what marketing ROI is by asking different questions.

Business decision-makers need guidance to manage financial performance. This can come from tools that enable them to experiment with alternative actions via simulation or further data analysis. Research into data visualization and dashboards could be useful for this purpose. Flexibility in changing inputs and assumptions is key. Precision is less relevant since this is about predicting an uncertain future. The priority is potential financial benefit and risk to the business under alternative scenarios.

No single marketing analysis tool will be the determining factor in decision-making. Companies have a portfolio of decision options. While some may represent large investments and happen quickly, others will unfold over time and require numerous adjustments.

Implementing a strategic decision may require another level of support to manage the intervention. For example, when J.C. Penny switched to everyday low prices and discontinued price discounts, its executives didn’t consider potential resistance from customers. When Netflix pivoted to online streaming, its executives didn’t anticipate the impact on the legacy business. These interventions might have been more effective if marketers had gamed out unintended consequences and how to work through them.

Much of the available research on financial performance is based on relatively stable markets and companies. This stands to reason since there’s a compelling need to draw on historical data to understand what works. However, digital marketing, mobile marketing, Big Data and artificial intelligence are fundamentally different from history.

Ad spending, for example, has shifted toward digital, which now exceeds TV ad spending. The change is shifting the variable costs of advertisers for different types of impressions. More ad buying is taking place on digital platforms. The nature of creative development is changing to adapt to new media. The number and types of people required to work on this part of the marketing process are different. From a marketing ROI perspective, the cost base of existing business models is changing for advertisers, creative and media agencies, research firms and support services. At some point, this is a change in kind, not just degree.

This type of structural change should be examined for all of the cost drivers in marketing ROI work. The sales force is one of the most powerful elements of the marketing mix. How does this change when digital technology influences B-to-B selling with more digital content, more AI and CRM software and fewer salespeople?

A more radical change in kind is the shift in business models by disrupters. How many companies will fundamentally alter the structure of the market like Google, Facebook, Amazon, Uber, Netflix and Airbnb? These companies created new industries and new competitors, and they impact the marketing activities of other industries. Facebook now leads the mobile advertising category, something that barely existed five years ago.

How many successful disrupters will continue to disrupt? Which of the large-scale moves—such as Amazon’s foothold in bricks-and-mortar stores or Google providing ordering services for Walmart—will endure?

What’s the likely impact of new business strategies reported in the press? Will Facebook invest substantial sums in acquiring video content and compete with Netflix, Amazon and HBO? Would this change Facebook’s revenue model from its current base in mobile advertising to other forms, such as consumer subscription? How would this change advertisers’ plans for content creation and implementation?

Apple is poised to make significant investments in augmented reality for its phones. In addition to stimulating demand, how will this feature impact advertising, sales and customer management applications for marketers?

Marketers must still answer traditional ROI questions in markets that are less affected by digital transformation, but more firms will be touched by structural changes, requiring new questions to be asked. It’s likely that the available marketing mix will be quite different five years from now.

Once companies accept that marketing expertise is valuable, what do they do next to outperform their competition? How should they deploy their resources to build or buy organizational capabilities? This entails costs for recruiting, training and acquiring companies with marketing skill. This requires different managerial skills to manage such talent, especially if it’s new to their company culture. How do they ensure that the marketing orientation they are seeking gets infused into the daily operations of the business?

Lots of progress has been made in linking marketing with financial outcomes of firms. The future promises more change, both evolutionary and revolutionary. Marketing experts need to be open to more development in the thinking and tools needed to create insights for a future that is increasingly hard to predict.

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AR allows users to insert a digital object into the real world via AR-enabled devices, such as smartphones. VR differs in that it instantly fully immerses users in a digital or virtual 360-degree space, using a headset, such as Oculus Rift. Beyond games, these technologies are reshaping how Fortune 500 companies conduct their marketing efforts.

For example,  in 2013 so that customers could visualize what a piece of furniture would look like in their homes before buying. The Swedish home furnishings chain recently announced its IKEA Place app, which is now available via Apple’s ARKit on iOS 11. These AR solutions help bridge the gap between virtual, on-demand shopping and the emotional connections made when one sees a product in person—and they’re only going to get more widespread.

In the world of B-to-B, the opportunities are ripe for the taking. B-to-B products and services are typically complex and hard to define, especially for global sales and marketing teams trying to communicate a consistent message. Mixed reality (a term for both AR and VR) allows marketers to simplify their company’s unique value story while keeping customers engaged throughout the buying journey. It allows users to take prospects into environments they would otherwise be unable to enter (an oil rig, data center or laboratory) and demonstrate how their solutions can aid a business. Using AR and VR requires convincing the C-suite. There are five steps you should take to make the best pitch for implementing AR and/or VR in your business.

1. Define the Problem

Before you recommend that your CMO let you build an awesome AR/VR app, clarify the problem you’re trying to solve. Is your product too big to ship to trade shows? Are your product lines too complex to communicate in a two-dimensional way? Whatever the problem may be, you need to define it and ask yourself if AR or VR will help you solve it. If your goal is to tell a story in a visually engaging way, then the answer is probably, “Yes.”

2. Get Input from Users

Once you’ve determined that AR or VR is right for your company’s needs, get input from the people who will be putting it to use. Folks working the trade show floor or the sales and marketing team responsible for selling need a more effective way to market your products. Your case can only be strengthened by truly understanding their needs.

3. Analyze Cost

Who’s going to build this AR/VR application? Any good argument must be backed up by research. Many people have tried to build their own AR/VR applications in-house, but few have been successful.

More digital agencies are now offering AR/VR capabilities, but it’s often not their sole focus. Find a company that specializes in mixed reality and in your specific industry.

4. Demonstrate the Potential Results

No one, especially not a CMO, is going to buy into your mixed reality dream unless you demonstrate that it can work. Companies that adopt interactive applications, for example, see about an 85% reduction in trade-show shipping costs and increased product win rates by up to 33%. Come prepared with statistics and case studies. Case studies are a great way to show your CMO that similar companies—competitors, even—have adopted AR/VR and seen tremendous results.

5. Schedule a Meeting

Once you’ve prepared with the steps above, schedule a meeting with your CMO to talk through your findings. Review your presentation beforehand so you can come prepared to answer questions and counter any skepticism.

AR and VR are already penetrating the B-to-C and B-to-B markets, becoming a significant component of marketing strategy. But it’s more than just a trend—it can lead to serious ROI. As long as you know what problem you’re trying to solve, how your team will implement the technology, what resources will be needed and the results you hope to see, your CMO might warm to the idea of embracing AR/VR as a marketing tool.

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Now in the unfolding age of artificial intelligence (AI), machine learning, connected smart products and robots, we’re still on that same journey to satisfy our needs, but with the assistance of these evolving capabilities and objects along the way. These capabilities and objects are organized into systems that can deliver a high level of personalized service, and they offer relief from numerous control and decision-making activities. It’s not just the consumer’s journey that’s been impacted by these technological advances. Below that journey, agriculture and the supply chain have been increasingly automated as well. What emerges are complex adaptive systems that pose an existential threat to marketing if the field cannot define its role.

Nature of the Beast

Connected smart products (aka internet of things) embody certain capabilities and skills. These objects can be physical and virtual and are often combined in a product-service system that addresses multiple steps in the customer journey. The objects can communicate with one another and their users via circuits, signals, the cloud, various devices and their associated interfaces such as touch pads and microphones.

While there are different opinions on what makes a product “smart,” it’s fundamentally about the ability to learn, adapt and operate autonomously. Analogous to human actors, smart objects take in data from the environment via sensors and receivers. They use processors to recognize patterns in the data and make predictions. These objects respond along reinforced pathways, sometimes with actuators that convert energy to motion, and they adapt when the response doesn’t produce the expected outcome.

The attributes that make products smart rely heavily on engines and user interfaces (UIs). An engine is a core program that coordinates the operation of other programs. Search and recommendation engines are probably the most well-known, but there are many others. The UI receiving the most attention today is the voice-enabled user interface, which requires natural language capability. We’re all familiar with Alexa and Siri, but consider Garmin’s recently introduced GTN Telligence for the general aviation market. GTN Telligence provides voice control over panel-mounted avionics, which reduces pilot workload and is a step toward the digital copilot. In terms of development, facial recognition (iPhone X), augmented reality (“Pokemon Go”) and even virtual reality are not far behind voice recognition. These UIs will drive the evolution of customer relationship management from personalization to personification.

Marketing Myopia Redux?

The question remains: Where is marketing in all of this? Much of the discussion in marketing dealing with AI and machine learning is centered around impacting the buyer’s search. It makes sense that new technologies would gravitate first to the data-rich area of search and promotion, where considerable inefficiencies exist due to mistargeting, and ROI can be quickly realized. That supposition is supported by a recent survey of AI and machine learning suppliers conducted by TechEmergence. The respondents identified search as their No. 1 most-profitable application today and over the next five years. Their primary value proposition was generating new revenue for their clients with a focus on e-commerce, digital media and retail. Product development received limited mention, as did customer service, despite the widespread adoption of chat bots.

Perhaps as the application of smart digital tools to search begins to show diminishing returns, marketers will realize the need to take ownership of the entire customer journey, or risk marginalization. That involves assuming responsibility for the integration of new technologies at every step of the journey. Paramount among those steps is understanding use.

Smart products will be the competitive weapon of the future. When the most convenient and intuitive option is affordable, customers will choose it. Some smart products address convenience by providing intelligent assistance so that the customer need not open a user manual, call a helpline or make an appointment at the Genius Bar. A smart product in one domain can supplant unintelligent products in another. With Google Maps on your smartphone, do you really need a dashboard-mounted navigator? Moreover, incumbents in traditional industries face the risk of disintermediation (cutting out the middleman) or “Uberization,” when a competitor wedges a smart product into the relationship with the customer.

Finding Marketing Magic

Decades ago, Peter Drucker said, “It is the aim of marketing to know and understand the customer so well that the product or service fits him and sells itself.” This sounds like a lofty ideal, but today’s smart products are increasingly able to get intimate with customers, learn, adapt to their habits and changing needs and nearly sell themselves. Nobody is claiming that promotion will disappear, but less promotional effort is required for products that break the mold, delight early adopters and go viral (or at least receive a ton of free coverage), such as Amazon’s Echo and Echo Dot.

Alexa is a textbook example of a complex adaptive system (CAS) that marketers need to wrap their heads around. A CAS is a network of interacting entities whose collective behavior is distinct from its subparts. Think of a school of fish. A CAS lacks clear boundaries. It is self-organizing, often nested with memory; feedback loops; and behaviors that are chaotic (butterfly effect), nonlinear, unplanned and unpredictable. But the most distinguishing characteristic of a CAS is its ability to adapt and learn.

To get a feeling for a CAS, visit the Alexa Skill Store to see the many ways that Amazon has encouraged developers to create skills that leverage Alexa’s built-in capabilities. There are currently more than 15,000 skills. Skills extend the capability of the smart product to perform additional tasks, which creates a more personalized experience for the user. Alexa skills now direct and control other smart devices like home environment and lighting.

Getting Started

Most firms are not at the cutting edge of new technologies, and some have yet to dip their toes in the water. If your industry or company is among those late adopters, here are some ways that you can get things moving.

Examine the customer journey horizontally to identify where the insertion of smart technology can add convenience and/or personalization and perhaps reduce costs. Journey analytics and mapping is a good place to begin.

If a smart product is the answer, think of the offering as having three parts: your traditional product, a smart system addition and one or more UIs. The smart system will likely be hosted in a third-party cloud (such as Amazon Web Services) and will be composed of skills. Among the choice of UIs, you would be remiss not to consider the smartphone, as mobility is key.

Add a smart adapter to connect your product with its smart system. One option is a small streaming USB stick like Roku. These sticks provide Wi-Fi connectivity and some processing power to run apps.

While Wi-Fi modules and UIs are available off the shelf, skills create the unique customer experience that builds loyalty and continued engagement. Of course, someone must create those engines and skills. While writing code may not be your bailiwick, marketers should participate in software requirements specification. This involves assembling the whole (the CAS) out of building blocks such as user profiles, matching rules and learning algorithms to improve matching.

Our experience working with large automakers as well as startups suggests focusing on a specific application or skill first. While creating a platform is the holy grail in business strategy, traditional product companies and marketers are well-advised to begin with a specific application using as many components off the shelf as possible.

Put a premium on collecting feedback data on your first skill and run it through analytics and a rapid prototyping process to optimize the customer experience. ​

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