I had a chance to catch up with Columbia Business School professor and fellow author, Rita McGrath to discuss her latest book called – The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business (Harvard Business Review Press, 2013). I also look forward to seeing her speak about this topic at the upcoming World Business Forum held in New York at Radio City Music Hall on October 7-8.
Tell us why sustainable competitive advantage really a failed notion these days?
Because it causes companies to do a lot of dysfunctional things like just focusing on the bottom line. If you’re looking for things to stay the same and you’re looking for reasons to keep just doing what you’re doing every day, then chances are that you’re going to be taken by surprise by the changes in the environment or changes in the competitive intensity of your business or things that are just not going to take you in a positive direction.
So the assumption that change is the weird thing and stability is the normal thing is something that causes a lot of companies to get taken by surprise. That’s why I argue that if you have this bias for sustainable (as in long-lasting, not as environmentally sustainable) it sets you up to make a lot of poor decisions in an environment that’s changing rapidly.
So how should companies think about and organize themselves to take advantage of short-term sustainable advantages?
The first big thing that companies need to do is to look at the elements of their business portfolio as an integrated whole, see that some things you’re doing that are driving today’s core business and that are going to continue to drive tomorrow’s core business. And you should keep doing them. Then you’ve got some things that you’re investing in which may be candidates to be part of the next generation core business, things that you’re doing today that could lead to a big, healthy business in the future. When Apple – just to take a common example – goes from making computers to making music players, but that’s an investment in one of these new platforms.
Then you’ve got to have things that you’re working on that are what I call “options,” which are small investments you’re making today that buy you the right but not the obligation to make some kind of future investments or take advantage of some future opportunity but that you don’t necessarily have to follow through on.
What does “good” in this new age look like?
If you look in the book, there’s this set of ten growth outliers that I think get a lot of this right. The kinds of things that they’re good at doing are letting their structure change as their business opportunities change. Things like making sure that leaders don’t get too calcified in any one role or any one spot. Making sure that they do things fast, they make decisions quickly. Their pace is quicker than a lot of other firms.
The problem with a lot of companies, particularly with respect to things like innovation, is that their structures were built to serve some of their business purpose in the past. So the structure they have today was built to help deliver yesterday’s business. When tomorrow’s business requires doing something different, you might need a different structure to go after it. But very often, the phrase I hear all the time is it “falls between the cracks” of the existing business. So what you want to be thinking about is building the right structure to deliver the business of the future.
What role can marketing play in helping to define a new opportunity? Is it the classic role that marketing plays, or is it something more?
I think it’s something different, and I think the world of marketing is about to undergo the most ginormous upheaval. And it has to do with the fact that on the one hand, the analytics that form the cornerstone of traditional marketing are really changing rapidly. When I was doing my PhD, it was all about conjoint analysis and co-word grouping and feature-function maps. Today with the advent of big data and the ability to combine data across many different, previous-unrelated databases, the onus on marketing to get really smart about how they use data and what discoveries they find from them is going to be very strong. There’s going to be a huge amount of pressure for that.
So I’ll give you a specific example. My colleague at Columbia, Oded Netzer did a big data project involving the use of the entire Edmunds database. It was a big, involved study, but he was able to use social media mentions from the Edmunds database to identify the General Motors push to rebrand the Cadillac to be more in line with a European luxury car and less like an American family car, which is how many people were beginning to think of it. He was able to demonstrate that that a particular set of investments actually got traction in the perception of the brand using only social media. I think that’s totally different than a lot of the tools that are in the marketing toolkit today.
What could this mean for the average marketer’s career? What does the ability to take advantage of these sorts of transient advantages mean for marketers?
I would suggest – don’t let yourself get stale. My watchwords are – if you come to work every day and all you’re doing is coming to work every day, you’ve got a long-term problem!
Moreover you’ve really got to know what’s going on out there. And I’ll give an example of a friend of mine at a big publishing company. She’d been let go and was meeting with a friend of mine who runs the learning and development department of this particular company. This marketing woman was saying I can’t get interviews. Or if she got interviews, she didn’t get offers because they want to know about things like search engine optimization, big data, social, and she had never had to learn any of that stuff. My friend meanwhile was completely outraged because she had arranged for online courses this woman could have taken advantage of, but she didn’t. The woman just came to work and did her job. As a consequence, she wasn’t even aware that a lot of this stuff was beginning to become a real for any company she considered going to.
So the point is I think you’d need to constantly be thinking about where are your skills in relationship to where the demand is going to be? Are you learning new things? Even if you don’t directly and immediately see the connection between your job and those skills, are you learning something new on a regular basis?
It’s apparent that there’s a missing vital component in the quest to modernize marketing. Today’s marketing organizations are aggressively modernizing, automating and adding more digitally centered marketing tactics as they focus on their mandate to discover prospects and create new customers. To meet the challenge, CMOs have turbocharged Marketing Ops teams and are building their “Marketing Clouds,” leveraging marketing automation to nurture prospects, adding CRM to manage pipeline and customer relationships, while spending millions on branded websites and social pages, coupled with billions on media to promote their offerings. We are not connecting that media investment, the prospects generated, nor their data, with our marketing systems and processes. Integration between the two is a critical missing link.
The prospect marketing effort, which is predominantly driven by third-party media investments in content syndication, search and advertising, is still very fragmented and, worse, seldom measured or optimized. Disconnected and unable to adequately track and optimize media spend, marketing organizations struggle with lead velocity, mixed data quality and a lack of ability to attribute results back to the source or measure ROI. This is a tough hit for marketing executives as they realize how much money they’re actually spending on media to create prospects—$40 billion+ on digital advertising alone in 2013, according to the IAB.
Here are 3 areas of focus for CMOs and marketing pros who are out to modernize their approach in order to drive a higher return on media and technology investment should consider:
- Integrate third-party media investment and data with marketing systems and processes. Today, engaging with the media community (publishers, affiliates and other sources) combined with the internal marketing processes necessary to get data into systems, requires numerous manual processes—hours of data scrubbing and lots of spreadsheets passed between media providers and marketing teams. A more efficient approach is to automate by integrating the prospect and lead data garnered from media campaigns and partners directly with your marketing automation system and/or your CRM. Ensuring the data is delivered directly into your current systems eliminates numerous manual, resource-intensive tasks.
- Validate prospect information in order to inject quality, actionable data, and thereby increase lead velocity and lower media costs. Once you decide to directly inject prospect data from your third party media sources, it becomes essential that the media-driven data you’ve paid for is validated, cleansed and formatted for your marketing systems (Eloqua, Marketo, Salesforce, Pardot, etc.). This not only ensures that you get what you paid for from your media investment, it also allows you to more rapidly get down to the business of nurturing and developing customers.
- “Close the Loop” to garner actionable insights that can be applied to optimize media campaigns and marketing programs. Today, we have the ability to gather data from every campaign we run but most of it we can’t and don’t act on. Whether you leverage banners, email, content syndication, telemarketing, search or a combination and whether you utilize cost per acquisition, lead, sale, click or incoming call, you need to analyze marketing performance data by media channel, media source, creative, content, offers and campaigns all in one place. Then you can more easily acquire insights that can be applied to optimize campaigns by focusing on higher performing tactics, redistributing media spend across the most successful media sources, and applying the resulting audience data to fine tune targeting parameters.
Taking action on the missing link is a necessity. If you are investing in media to generate prospects and acquire customers, be certain to connect those media programs with the rest of your marketing systems and process.
This post was written in collaboration with Integrate – learn more about Integrate at http://www.integrate.com
With constant access to a growing list of channels and devices, today’s connected customers are no longer satisfied with vanilla, one-size-fits-all experiences and offers. To stand out in the increasingly crowded and competitive marketplace, many C-level executives from the world’s most iconic brands are not content with just “Keeping Up With the Joneses.” Instead, they are actively seeking opportunities to better understand their high-value customers across every channel and device.
The reason for this is simple: These customers are more often than not brand loyalists and willing to persuade others to become regular brand purchasers if they’re kept happy and engaged consistently in every single place they are interactive with brands. But the task of keeping brands happy and engaged beyond one big “win” isn’t easy. It requires CMOs and the entire business, for that matter, to combine their internal resources with technology that’s both powerful and agile enough to boost customer engagement and revenue long term. And a brand’s success today, in this hyperconnected and digitally dependent environment we live in, depends heavily on leveraging digital to reward high-value customers. Rather than spout out a to-do list of tactics that show high-value customers they’re appreciated, here are some specific benefits instead that can be derived from deep and sophisticated forms of segmentation:
Don’t confuse high-value customers for high-volume customers.
In the less digitally savvy days, brands and their teams of analytics “experts” would navigate through Excel spreadsheets with massive amounts of data. In those days, there was sometimes confusion and lack of knowledge as to what constitutes a high-value customer. As a result, high-volume customers would often be mistakenly categorized, and subsequently treated, as high-value customers. But the reality was, and still is today, that people who interact with a brand frequently aren’t necessarily going to be the ones that have the most value from the perspective of consistent engagement, conversions and sales across multiple channels – from being inside a physical store to making a last-minute purchase on their mobile devices or shopping from their PCs. So it was common for those brands to see a huge surge in traffic for a short burst of time, but after the excitement faded, so did the engagement and ROI.
Marketers today need to adopt a more realistic and accurate definition of value that’s based on “the combination of opportunities to convert and increase potential order value, and maximizes both, while at the same time, yields your highest value customers.” But identifying the best customers online and serving them the content they need is easier said than done. The key to obtaining a 360-degree view of high-value customers means personalizing and differentiating every message by offering an array of online content to drive maximum conversion and revenue uplifts.
To get there, the modern brands of today must, and I repeat must, push beyond the basic forms of personalization – think product recommendations or ads that chase you around on the Web. Instead, these brands are likely to be best served by leveraging the power of technology, real-time data and automated segmentation to effectively profile individuals who are in actuality high-value customers. That identification is the first hurdle that brands need to overcome. From there, it’s all about extending personalization across every device and channel to delight and please consumers with the most humanly relevant, easy-to-navigate and engaging offers.
Tap into the beauty of data to boost cross-channel ROI.
The urgency to identify high-value customers online is being fueled by a number of factors. First, the online channel represents the biggest growth opportunity for most brands. According to a new Forrester Research global eCommerce report, e-commerce revenues are going to continue to grow in 2014 as customers’ online buying habits evolve. Meanwhile, a new study released by IBM in 2014 reveals that brands stand to lose $83 billion due to poor customer experiences.
When you think about it, that’s a lot of revenue that could be left on the table if brands don’t put every segment of their customers first. For example, brands are able to gather intelligence on channels shopped — including Web, tablet, mobile phone or store — and then integrate data from a CRM system, POS, DPM or other source to help augment customer profiles. By combining intelligence on shopping history, search history and Web behavior, this combined intelligence can help brands identify when to offer an in-store promotion, extend a seasonal offer or make a product recommendation. If brands are able to identify their high-value customers, then they can scale the business more efficiently and ensure that every decision and action they make is focused on delivering the right actions defined by the right data.
Discover unique attributes of unique markets.
One common challenge that today’s brands face is a tendency to make decisions based on data points as opposed to data profiles. In these instances, it’s not that uncommon for brands to use pre-existing data models to identify their buyer personas as well as the content and offers they deliver on their websites and mobile sites.
By using automated segmentation and targeting, brands should be able to detect segments unique to their brands and industries. This process turns traditional targeting on its head because buyer profiles and offers are all determined by real-time intelligence gathered against real-time customer behavior. One example of such a data profile could be a “weekend shopper” persona. Based on their digital behavior and purchase activity, these shoppers may spend significantly more money (at multiple channels) than mid-week shoppers. So it’s more than likely these shoppers would be frustrated and intolerant of being shown irrelevant and mismatched offers that would better suit mid-week shoppers. That is where many brands today realize that even with all the benefits of technology, they have made shoppers that much less tolerant and patient with poor experiences.
Move away from campaign analysis; bring it back to the customer.
One of the ways brands have traditionally gathered intelligence on customer behaviors is through basic A/B testing of different content and offers. Building on the quantifiable value of testing, many innovative brands are now shifting from campaign-driven analysis to a more holistic and accurate customer-driven analysis. By doing so, marketers can get a more robust and humanistic view of every single customer segment, as well as being able to identify which segments are performing better than others. With businesses – across all teams – being challenged to consistently demonstrate ROI, this ability to gauge the value of high-value customers and appropriately target them with the best content on the best devices at the best times and places, is especially critical to success.
In a company, the term “culture” is often defined by qualities such as an organization’s business values, overarching mission statement, operational style, working languages, technology and operating systems, personality traits and in-office habits. Basically I tend to think of a company’s culture as the delicate balance among those inexplicable qualities that make your employees do the things they do. It’s those traits that cannot always be written down on paper that often make employees and their company culture stand out amidst a crowd of “so-so” performers. And it’s often what keeps customers happy and coming back year and after.
Take, for example, a global footwear brand. This brand’s primary foothold may have been from brick-and-mortar stores around the U.S. But as consumers quickly ditch in-store shopping in favor of the speed, ease of use, convenience and massive array of product options made possible by online and mobile devices, a brand’s digital marketing culture matters, a lot. It can make all the difference in customer engagement and loyalty on one level. But most important, it can also very drastically impact actual sales figures and revenue across multiple channels. So let’s look at some of the prevailing digital “values” that could either help or hurt a brand’s bottom line.
The “other” dominates our attention. We spend our marketing dollars and resources in search of ways to “one-up” our competitors.
We see this a lot among brands. The marketplace is highly competitive these days. Consumer budgets are drastically lower, since the 2008 financial collapse. Attention spans and free time are often very limited. Consumers, in turn, demand much more from their experiences with brands, regardless of where these experiences occur and what devices they are using.
Because of these challenges, we often see brands looking to digital marketing to move the engagement and revenue needles in the right direction. But then they get stuck because their digital focus becomes all about showmanship and facing off in a tit-for-tat competition with others in their same space. What good will that approach do? Not much. It will only make your customers feel more frustrated, less appreciated and more unlikely to interact with your brand. If you can’t make every single interaction and experience customers have with your brand a positive, engaging and intuitive one—whether it’s in-store, online, mobile, social or email—you should expect to say goodbye to them relatively quickly.
We can no longer envision “big ideas” and creative marketing without the support of big data.
There once was a time when the “creative” process of branding and marketing was left solely to agencies and their teams of art directors, creative designers, copywriters and everyone else who spent a good portion of their days drawing and sketching out brand concepts and stories. On the other side of the proverbial “brand” table sat the numbers and analytics “geeks,” as they were often called. These teams would crunch numbers, run hundreds of equations, and compile long and arduous Excel® sheets.
Well, that divisive line between creative and data is no longer existent. To be a brand that’s challenging the status quo, inspiring consumers to smile, laugh, cry and even debate what’s acceptable, as well as getting consumers to spend more time and more money with them, we have to use data to support those “big ideas.”
No two consumers will ever want an identical experience, so we continually test and learn.
A recent poll by Korn/Ferry among senior executives indicates that 53 percent of them believe their companies should allocate budget to explore new marketing channels through a “test-and-learn” approach, in order to remain competitive; but half of the respondents feel that their marketing departments do not receive enough budget to do so.
Can chief marketing officers transform the way they market by simply employing a test-and-learn philosophy? Well, yes and no. Let me explain. If a brand is simply going to try a bunch of random “tactics” without any real reason or purpose behind them, there won’t be much value in it. Just look at how many brands these days are jumping headfirst into the responsive-design game. They’re doing it because they are being told by either the C-level executive team or the board of directors that mobile is where they need to be. So they go after a quick fix and rush into responsive design without any real thought, strategy or testing behind it. That’s a big mistake.
On the other hand, the real value of a test-and-learn digital culture lies in being patient, spending the time to analyze all of the data available (CRM, online, mobile and social), and identify what’s working and what’s falling through the cracks. That allows you to formulate a very calculated and strategic hypothesis and then test against that, until you can create an experience—be it online or mobile or social—that’s as relevant, seamless, easy to use and engaging as possible.
As mobile devices continue their gains in popularity and usage worldwide, more consumers are interacting with brands at various stages of the buying life cycle—from browsing, researching and comparing products to reading reviews, sharing their experiences and making actual purchases. The digital affinity of consumers, who once were bound by a very tactile customer experience of seeing and touching products in-store, has put a lot of pressure on CMOs to become the boss of their online customer experience.
While being a CMO connotes leadership and authority, it doesn’t inherently mean brands need to be forceful or intimidating in how they speak with their online customers. What does work is a smarter and more nuanced approach to listening to their customers’ explicit actions and using those actions to become more relevant to each individual customer. Brands that get this approach see it pay off with greater respect, trust, loyalty and, of course, revenue.
So to help CMOs master their online customer experience, I have outlined five surefire rules they should follow to get customers to respect, trust and spend more dollars more often with them across multiple channels.
Rule #1: Don’t shout and bulldoze your customers into clicking and buying.
In the traditional model of sales, salespeople often acted and operated under the premise that being louder, pushier and more forceful was the way to win over, or bulldoze, consumers to get them to say “yes.” There was a notion that salespeople could wear down consumers into succumbing to their will and, as a result, get them to make a purchase.
While that approach may have resulted in a one-time sell, we would all agree that it isn’t the most effective way to generate repeat, long-term loyalty and purchases from customers. Today’s customers have almost limitless choices and options at their disposal. If they can’t find a product in-store, they can easily and quickly type, click, tap and purchase away on a number of competing online sites. If they’re strapped for time, they don’t have to wait (for hours) to get in front of their desktop/laptop computer at home. Instead, they can browse, compare and shop from thousands of product options on a brand’s mobile-optimized site directly from their iPhone, Samsung Galaxy, Apple iPad or Google Nexus tablet.
Even more than convenience, consumers aren’t as easily swayed by hyperbole, outlandish claims or dubious offers. Brute force and fear are no longer profitable strategies. It’s the brands that are authentic, humble and real that get consumers to keep their eyes (and hands) on their online and mobile sites longer and ultimately clicking through multiple areas of the site to the checkout or to request a quote.
Perhaps more important, it is almost impossible to guess at what ideas and appeals will resonate most with your buyers and entice them to buy. Lower costs? Free shipping? Sustainable materials? Thirty-day guarantees? Bigger images? Different CTA? Guess if you want. But the only way to truly know for sure what attracts your customers is to test and learn what they really want. More important, it is to use the big data from your tests to tailor what you’re saying, doing and offering across all devices. The most successful online marketers aren’t browbeating; they’re influencing by showing value. They are experimenting and exploring all the time.
Rule #2: Listen to your customers and make their lives simpler and more productive.
The reality is that customers will be more accepting and responsive to messages and offers that have real value. If there is no perceived value, they’ll click away without batting an eye. At the end of the day, consumers want the same thing from the online customer experience as they do from the products they’re buying. Simply put, it needs to solve a problem. If your customer experience isn’t solving a problem for your customers, you’ve got a big problem on your hands, and all the fancy design work you can imagine (and spend money on) won’t make any difference.
The key to rule #2 is not to guess at what problem drove the customers to your site. Instead, it is to serve up only what your customers truly want based on what you know about them as well as what they have previously asked or searched for. Recommend products that make sense for them, not for you as a brand. By listening to your customers’ needs and digital footprints, you can tell a lot about them and what types of messaging and offers are likely to resonate with them and make them more willing to spend money repeatedly across all devices with your brand.
Rule #3: Be in more than one place at a time.
Consumers don’t just look for and buy products in one place. They’re using multiple devices simultaneously throughout their day and juggling dozens of activities at once. In this “Age of the Customer,” the adage of “I can’t be in two places at one time” no longer rings true. For brands that want to get customers to experience and interact with them and their products/services consistently and repeatedly, it’s important to be in more than one place at a time and deliver a consistently great experience in all of these channels.
Rule #4: Never pistol-whip new visitors.
For your website’s home page, the easy way out is to display three, four or even five offers, rotating in sequence. On the surface, it makes sense: The more “stuff” you show, the better your chances are of finding something that a given customer may like. Better yet, it also satisfies all those internal groups that are clamoring for exposure on the website.
However, this approach is problematic because the data shows that few visitors (other than your internal teams) ever get to the end of your rotating banners on your home page. This is because there is an average of a 50 percent drop-off after each banner. Experience also shows consumers do not have the time or the patience to wait for the right offer to appear. It’s much more effective to test home page offers (to quiet those internal groups) and use that data to personalize the offer based on who is visiting your website.
Rule #5: Cement boots do not create loyalty.
In all cases, you will make more money across multiple channels from customers who return again and again. The long-term revenue opportunity lies in building trust and loyalty with visitors who keep coming back and recommend your site to their network of friends and family.
What is the best way to get customers to sign up for newsletters or emails? What should you say in your follow-up communication to customers? Should you offer exclusive products or discounts? How should you greet repeat visitors and what should you offer them? Have you tested and experimented with this content? These are all great questions brands should be asking themselves when optimizing their online presence.
There’s a reason why Amazon garners such incredible repeat business. The online giant understands which groups of consumers they are actively selling their products to and integrates those consumers’ digital history, preferences, behaviors and actions into their customer experience across all devices. If brands want to learn anything from Amazon, it should be that engagement across multiple channels is less about muscle and more about smarter marketing.