The Impact of Social Media on                Marketing StrategyRichard FullertonMay 2012Slideshare.net version
There are no secrets. The networked market knows morethan companies do about their own products. Andwhether the news is go...
About this document• This document is a précis of a dissertation of the same name  produced by Richard Fullerton for his M...
About this document• One additional benefit is that it does contain some material which  was cut from the original dissert...
ContentsAbout this document            2. Exploring Marketing        3. The3. The Decline                                 ...
Background to the Study• The a priori assumption is that social media have eroded  marketers’ control1 and the power is no...
Research Objectives1. To explore the contemporary issues raised by the literature    within strategic marketing.2. To esta...
Background to the Social Web                          8               Return to Contents page >
What are Social Media?   Social                      Description                       Examples   mediaBlogs           Ind...
Rise of the Social WebWhy Consumers use Social Media• They see social as a more trustworthy source of information than  or...
Rise of the Social Web       Why Organisations are adopting the Social Web       • It’s where customers are (interacting)1...
The Power of Social Media • Powerful because they amplify “consumer-to-consumer   conversations in the marketplace”1. • Ac...
The Strategic Nature of Social Media    • Not just another traditional marketing communications tool1.    • Evidence of it...
The Strategic Nature of Social Media                                            Evidence that social media                ...
Exploring Marketing and Strategy   Since this study seeks to identify the impact of   social media on marketing strategy, ...
What is Strategy?• An organisation has two levels of strategy:1   1. Organisational strategy – defining what businesses th...
What is Strategy?• Numerous definitions of Strategy:       – “Strategy is the route to achievement of specific objectives ...
Alternative views of Strategy• “Strategy is revolution; everything else is tactics”1. In  contradiction to the ‘fit’ model...
Effectiveness & Efficiency & Strategy• UK organisations that are inward-looking are adopting the wrong  approach to strate...
The Impact of the Internet on Strategy• Consider the impact of the web on strategy – could it be a model  for its impact o...
Challenge to the Hierarchy of Strategies• Organisational strategy structure has traditionally been hierarchical –  below C...
Challenge to the Hierarchy of Strategies• The reason for this revision is that studies have shown that the  traditional po...
What is Marketing Strategy?• The Author’s study has shown that some academics define marketing  strategy in almost tactica...
What is Marketing Strategy?• Thus the link between corporate and marketing strategy comes  from the latter’s ability to cr...
Value as the Marketing Paradigm    • Numerous scholars assert that Relationship Marketing has been      displaced as the c...
Progress check...About this document            2. Exploring Marketing        3. The3. The Decline                        ...
The Decline of Marketing   The Author’s reading has revealed that many   academics believe Marketing to be in decline.    ...
Marketing in Decline• According to many academics, Marketing is in decline1.• For others, marketing is ‘in crisis’2, ‘dead...
The Loss of Ascendancy of Marketing• Marketing has a reduced role and influence       – Doubts exist about its value1 and ...
The Loss of Ascendancy of Marketing    • Diminishing Corporate Marketing function           – Marketing has all but disapp...
The Loss of Ascendancy of Marketing• Disconnect between marketing and corporate strategies1.       – In fact, “many CEOs b...
The Challenge of Value Creation• The challenge for marketing is to ensure it fulfils its promise to  deliver consumers sup...
The Challenge of Value Creation• Difficulties in creating value           – Since marketing is ‘dis-integrated’ or ‘centri...
The Challenge of Value Creation• Difficulties over how Value is created           – Traditionally, value creation occurred...
The Struggle for Innovation• The need for Innovation           – Product innovation is key to long-term profitability1 , h...
The Struggle for Innovation • The stifling of Innovation (cont.)           – The ‘innovation spiral’, whereby a downward s...
Rise of the New Consumer     • Characteristics of the New Consumer              – The ultimate aim of marketing is to chan...
Rise of the New ConsumerProblems with the Consumer Buying Decision-Making ProcessThe dominant theory amongst academics for...
Rise of the New ConsumerThe Communications Spiral• However a problem exists in stages 1-3 above – a downward communication...
Rise of the New Consumer• The marketing funnel metaphor demonstrates the problem:                                      Sou...
The Rise of the New Consumer• The transparency of the market − that the internet promised   to bring by enabling brands an...
The Limitations of Relationship Marketing• As revealed earlier, relationship marketing is no longer considered  the curren...
The Limitations of Relationship Marketing• And whilst CRM involves sophisticated data storing and  mining techniques, from...
Questioning of the Marketing MixThree problematic areas of the Mix11. Lack of customer orientation            – The Mix’s ...
Questioning of the Marketing MixThe menace of the Marketing Spiral• It is suggested that the 4Ps  are each operating as fo...
Questioning of the Marketing Mix• Tactical marketing is subject to the spirals – what is required  to escape the marketing...
The Challenge for BrandingIntroduction to Branding• Because the Mix has reduced ability to contribute to a competitive  ad...
The Challenge of BrandingThe Rising Importance of Brand Equity• Definitions of Brand Equity:     – “The differential effec...
The Challenge of BrandingBrands and Value• Brand equity creates value for the organisation in 6 ways1.      1.       Enhan...
The Challenge for BrandingBranding and Strategy• “Brands can transform markets, and change competitive structures”  becaus...
The Challenge for Branding    Reasons for Brand decline    • Weakening of brands              – Brand loyalty has seen a d...
The Challenge for BrandingReasons for Brand decline (cont.)• Erosion of trust      – Via brand extensions1.      – Via mar...
Progress check...About this document            2. Exploring Marketing        3. The3. The Decline                        ...
Marketing’s Mid-life CrisisThe Marketing Concept under pressure• Academia began questioning the whole concept of marketing...
Marketing’s Mid-life CrisisLack of Market-orientation in Organisations• Many firms just pay lip-service to customer-orient...
Marketing’s Mid-life Crisis What the Academics and Practitioners say • Marketing has reached a “mid-life crisis”1, is “bro...
Marketing’s Mid-life CrisisWhat the Academics say (cont.)• Marketing’s core problem: “Products and services are facing com...
Conclusion to the Decline of MarketingAs a result of this analysis of the state of marketing, the Authorbelieves marketing...
Conclusion to the Decline of Marketing• Challenge 4: Innovation is key to creating and adding value but there is an  innov...
Conclusion to the Decline of Marketing• Challenge 7: The marketing mix is captive to a marketing spiral which  produces a ...
The Promise of the Social WebThis section seeks to show to what extent Social Media canaddress the challenges to Marketing...
The Promise of the Social WebAs a result of the challenges identified for marketing earlier, thefollowing questions arise ...
Restoring the lost art of Engagement                  A: Can social media enable brands to re-connect with their customers...
Restoring the lost art of EngagementUnderstanding Customer Engagement• As a concept, customer engagement is hard to lock d...
Restoring the lost art of EngagementDrivers for Customer Engagement• Firms are increasingly pursuing strategies that promo...
Restoring the lost art of EngagementThe Key to creating Engaged Customers• It is argued that the ‘typical’ marketing appro...
Restoring the lost art of EngagementExamples of Engagement via Social Media• Southwest Airlines in the USA revised its Nut...
Restoring the lost art of EngagementMeasuring Engagement• The two biggest challenges for social are ROI and measurement1.•...
Influencing Buyer Behaviour via Social Media       B: Can social media enable organisations to influence buyer behaviour o...
Influencing Buyer Behaviour via Social Media    How Social Media influence the Buying Process• As a result of the  convers...
Influencing Buyer Behaviour via Social MediaSegmenting the Social Web to find Brand Champions• The key is therefore findin...
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The impact of Social Media on Marketing Strategy

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Academics tell us that Marketing is in decline. At the same time, Social Media are having an enormous influence on not just Marketing but on the organisation itself. This academic document, a précis of a dissertation, explores the parlous state of Marketing and asks if Social Media can assist in revitalising Marketing. 8 managers in 7 top brands are interviewed in an attempt to explore the powerful conceptual framework developed. The conclusion finds some common ground between academia and practitioners but establishes a clear difference of view on the degree of Social Media’s impact on Marketing, Strategy and the Organisation.

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The impact of Social Media on Marketing Strategy

  1. 1. The Impact of Social Media on Marketing StrategyRichard FullertonMay 2012Slideshare.net version
  2. 2. There are no secrets. The networked market knows morethan companies do about their own products. Andwhether the news is good or bad, they tell everyone.The Cluetrain Manifesto, Thesis 12. 2
  3. 3. About this document• This document is a précis of a dissertation of the same name produced by Richard Fullerton for his Masters in eMarketing degree in 2010/11.• Its aim is to make the dissertation more readable and accessible, and is aimed at practitioners as much as academic students.• There are 133 slides and most slides have a lot more information than is ‘typical’ in a slideshow. This is NOT a presentation. It is still an academic rather than practitioner document.• This research is as much about marketing strategy as it is about social media’s impact. It is not about social media strategy.• Academic and some practitioner authors are cited in support of the material on each page but full references and bibliography are available in the original dissertation only. 3
  4. 4. About this document• One additional benefit is that it does contain some material which was cut from the original dissertation due to word count and page limit restrictions.• The document consists of: – Introduction section + Background to the Social Web (section 1). – Literature Review (sections 2, 3, 4, 5). – Methodology (section 6). – Findings & Discussion (section 7). – Conclusion (section 8).• A full copy of the dissertation can be downloaded from www.newrivermarketing.co.uk/downloads• You can follow the Author on Twitter via @newriverm and connect via www.linkedin.com/in/richardfullerton 4
  5. 5. ContentsAbout this document 2. Exploring Marketing 3. The3. The Decline Decline of 4.4. The Promise of the The Promise of the 5. Conclusion to the 5. Conclusion to the About this document & Strategy Marketing of Marketing Social Web Web Social Literature Review Literature ReviewContents What is Strategy? Marketing in Decline The Promise of the The Promise of the 6. Research Methodology Contents What is Strategy? Marketing in Decline 6. Research Methodology Social Web Social WebBackground to the Study Alternative views of Alternative views of Strategy Loss of Ascendancy Restoring the Lost Art 7. Findings && Discussion Background to the Study Strategy The Loss of Ascendancy Restoring the Lost Art 7. Findings Discussion of Marketing of Marketing of Engagement of EngagementResearch Objectives Effectiveness, Efficiency Effectiveness, Efficiency The Challenge of The Challenge of Influencing Buyer Behaviour Influencing Buyer 8. Conclusion to the Study Research Objectives 8. Conclusion to the Study && Strategy Strategy Value Creation Value Creation via Social Media Behaviour via Social Media 1.Background to the The Impact of the Internet The Impact of the Internet The Struggle for Innovation Social Media bringing Social Media bringing The Struggle for Innovation Social Web on Strategy on Strategy Organisational Change Organisational ChangeWhat are Social Media? Challenge to the Hierarchy Challenge to the Hierarchy The Rise of the The Rise of the Creating Value with Creating Value withWhat are Social Media? of Strategies of Strategies New Consumer New Consumer Social Media Social MediaRise of the Social Web What is Marketing Strategy? The Limitations of The Limitations of Social Media as a a source Social Media as source Rise of the Social Web What is Marketing Strategy? Relationship Marketing Relationship Marketing of Innovation of InnovationThe Power of Social Media Value as the new Value as the Questioning of the Questioning of the Gaining a a Competitive Gaining Competitive The Power of Social Media Marketing Paradigm Marketing Paradigm Marketing Mix Marketing Mix Advantage via Social Media Advantage via Social Media The Strategic Nature ofThe Strategic Nature of The Challenge for Branding The Challenge for Brand-building via Brand-building via Social MediaSocial Media Branding Social Media Social Media Marketing’s Mid-life Crisis Marketing’s Mid-life Crisis Conclusion to the Decline Conclusion to the Decline ofof Marketing MarketingClick on any heading above to navigate to the relevant part of the document. You can return to this Contentspage at any time by clicking on the ‘Return to Contents page’ link below the page number on every page. 5
  6. 6. Background to the Study• The a priori assumption is that social media have eroded marketers’ control1 and the power is now with the consumer2.• Consumers are having conversations about brands in which the brands are not involved, forcing these brands to listen3.• Some researchers even suggest now that the consumer defines the brand4.• In the context of the study Problem, marketing strategy includes areas such as branding, consumer behaviour, the mix, relationship marketing, value creation, and organisational orientation. 1 Strategic Direction (2010). 2 Constantinides and Fountain (2008). 3 Weinberg (2009). 4 Li and Bernoff (2008). 6 Return to Contents page >
  7. 7. Research Objectives1. To explore the contemporary issues raised by the literature within strategic marketing.2. To establish the gap between practitioner perspective and activity, and the published literature.3. To analyse the impact of social media on marketing strategy.4. To create a conceptual framework of social media’s influence on marketing strategy.The following companies were interviewed as part of theresearch: first direct (two interviews); Marks & Spencer; Birds’Eye Iglo Group, Dell, Nokia, British Gas, andMoneysupermarket.com. 7 Return to Contents page >
  8. 8. Background to the Social Web 8 Return to Contents page >
  9. 9. What are Social Media? Social Description Examples mediaBlogs Individuals’ or companies’ online journals. John Battele’s • ‘Social media’ and ‘Web 2.0’ areMicroblogs Readers can often leave comments. A form of blogging that allows a user to FM Signal blog Twitter used interchangeably.Social publish short text updates, Applications allowing users to build Facebook; • But other synonyms include thenetwork personal web sites accessible to other users for exchange of personal content LinkedIn; ‘social web’, the ‘groundswell’, and communication. MySpaceContent User-generated content web sites. YouTube; ‘consumer-generated media’communitiesVirtual brand Brand-specific websites where people Flickr Lego’s LUGNET and just simply, ‘social’.communities with a common interest can interact. P&G’s BeinggirlForums/Bulletin Sites for exchanging ideas and information usually around special Numerous, all unique. • To reconcile the various types ofboardsContent interests. Applications allowing users to customise Technorati; social media and theiraggregators the web content they wish to access. Stumbleupon categories, see left.Collaborative A wiki is a web site that allows online Wikipediawebsites collaboration by allowing multiple users to(Wikis) add, remove or edit and change content.Social Users can recommend and share Digg; del.icio.us,bookmarking interesting and relevant content with one Newsvine;sites another. Reddit Sources: Constantinides and Fountain (2008); van Zyl (2009); Mangold and Faulds (2009); Stokes (2009). 9 Return to Contents page >
  10. 10. Rise of the Social WebWhy Consumers use Social Media• They see social as a more trustworthy source of information than organisations themselves.• Social media “simply unlocked an existing human need”1.• “Darwinian models” of “socio-biology” involving altruism are a factor2.• Social is popular because of its advantages – transparency, referrals, contact with others3.• A study into Facebook user experiences found most motives were curiosity, enjoyment, fun, excitement and pleasure4.• Addictive – a 1/3 of all women aged 18-34yrs check Facebook on waking before even visiting the bathroom5. 1 Meadows-Klue, 2008, p.249. 2 Palmer and Koenig-Lewis, 2009, p.169. 3 Constantinides and Fountain (2008). 4 Hart et al. (2008), cited in Palmer and Koenig-Lewis (2009). 5 Parr (2010). 10 Return to Contents page >
  11. 11. Rise of the Social Web Why Organisations are adopting the Social Web • It’s where customers are (interacting)1. • The competition are doing it2. – No evidence that online ‘buzz’ leads to sales but proof is emerging that online WOM is an indicator for sales3. • Knowledge-sharing, a ‘collaborative learning environment’4. • Productivity and workflow efficiency5. • Cost-savings as expensive call centres made redundant by support forums6. • Open platforms facilitate collaboration and increase job satisfaction and productivity7.1, 2 Fisher (2009). 6 Hoffmann and Fodor (2010); Li and Bernoff (2008).3 Liand Bernoff (2008). 7 Tapscott and Williams (2006), cited in Vany Zyl (2009)4 Van Zyl (2009).5 Van Zyl (2009). 11 Return to Contents page >
  12. 12. The Power of Social Media • Powerful because they amplify “consumer-to-consumer conversations in the marketplace”1. • Achieve “results no media campaign can achieve”2. • WOM is a marketing tool, relationship builder, and has financial advantages3. • Negative – examples of consumer power in social: – Digg.com and its revealing of the HD DVD encryption key4; ‘Dell Hell’5; ‘United Breaks Guitars’6; Thomson Holidays’ ‘Tunisia trip hell’7. • Positive power: – 25% of Dell’s new customers come via referrals8. – The power of ratings and reviews e.g. eBags.com – 30% growth9 – Snakes on a Plane – bloggers influenced script changes101 Mangold and Faulds, 2009, p.361. 6 Ayres (2009); HennigThurau et al. (2010).2, Liand Bernoff, 2008, p.130. 7 Creston (2010)3 Harridge-March and Quinton (2009). 8 Reichheld (2006).4 Li and Bernoff (2008). 9 Li and Bernoff (2008). 125 Jarvis (2005). 10 Li and Bernoff (2008). Return to Contents page >
  13. 13. The Strategic Nature of Social Media • Not just another traditional marketing communications tool1. • Evidence of its strategic nature: – Ford’s spending of 25% of its marketing budget on digital and social media, twice the industry average. Blogging, uploads to YouTube, Facebook activity and ‘tweeting’ raised awareness of the Fiesta − unknown in the US − amongst Generation Y to 37%, equivalent to hundreds of millions of dollars of traditional advertising spend2. – Dell: social media is “probably the most important thing we do today from the marketing standpoint” (Andy Lark, VP of Global Marketing)3. – Li and Bernoff (2008) compared existing business functions within organisations with social media objectives (see next slide). • But only ¼ of marketers have made social a strategic activity4.1 Hoffman and Fodor (2010).2 Kiley (2009).3 Lark (2008).4 MarketingSherpa (2010), cited in eMarketer (2009a). 13 Return to Contents page >
  14. 14. The Strategic Nature of Social Media Evidence that social media are strategic is the fact that the 5 groundswell objectives mirror those of organisational functions. 14 Return to Contents page >
  15. 15. Exploring Marketing and Strategy Since this study seeks to identify the impact of social media on marketing strategy, it is necessary to explore strategy and marketing strategy first. 15 Return to Contents page >
  16. 16. What is Strategy?• An organisation has two levels of strategy:1 1. Organisational strategy – defining what businesses the firm should compete in and how. 2. Business unit (Competitive) strategy – role is to create a competitive advantage.• Competitive strategy theory2 broadly states that firms can follow one of three generic strategies: 1. Cost leadership strategy (low prices, standard product) 2. Differentiated strategy (added value, higher price) 3. Focus strategy (serve a particular segment very well leading to differentiation or cost leadership for this segment)• “The essence of strategy is in the activities – choosing to perform activities differently or to perform different activities than rivals”3. 1 Porter (1987). 2 Porter (1980). 3 Porter, 1996, p.64. 16 Return to Contents page >
  17. 17. What is Strategy?• Numerous definitions of Strategy: – “Strategy is the route to achievement of specific objectives and describes how objectives will be reached”1. – “Strategy is the creation of a unique and valuable position”2 obtained by activities that differ from the competition. It is also about making trade-offs* and “creating fit among a company’s activities”3. – “Strategy is about competitive advantage through differentiating against the customer’s alternatives, continuous innovation to sustain that advantage, and organizing to achieve ‘fit’§ in maintaining the advantage”4. – Strategy is “the business’s overall plan for deploying resources to create competitive advantage in its markets”5.1 McDonald, 2007, p.298. * In Porter’s context, a ‘trade-off’ is a sacrifice of part of a service in order to enhance another one. An example he gives is2 Porter, 1996, p.68. Ikea which has a clear strategic positioning compared with a traditional furniture store. The trade-off is customer service –3 Porter, 1996, p.75. but customers don’t mind and Ikea can offer things other stores cannot such as extended opening hours.4 Piercy, 2002, p.75. $ ‘Fit’ here refers to strategic fit – whether an activity contributes to overall performance.5 Doyle, 2008, p.11. 17 Return to Contents page >
  18. 18. Alternative views of Strategy• “Strategy is revolution; everything else is tactics”1. In contradiction to the ‘fit’ model, growth comes from a ‘stretch’ – a gap between strategic resources and ambitions, and trauma to the organisation is ‘good’.• Firms should pursue a ‘blue ocean strategy’ and seek un- contested market space instead of trying to compete head-on2.• Strategy is “the policies and key decisions adopted by management that have major impacts on financial performance”3.• ‘Strategy’ is an overused word, implying that its overuse has muddled its true meaning4. 1 Hamel , 1996, p.70, cited in Prassad (2010). 2 Kim and Mauborgne (2005). 3 Buzzell and Gale, 1987, p.18. 4 Brennan et al. (2008). 18 Return to Contents page >
  19. 19. Effectiveness & Efficiency & Strategy• UK organisations that are inward-looking are adopting the wrong approach to strategy. By making themselves more efficient e.g. cutting costs, instead of more effective e.g. achieving strategic goals such as a competitive position, they threaten their own survival1.• Organisations must pursue both effectiveness – “doing the right things” and efficiency – “doing things right” since an absence of either threatens survival2.• Another view is that operational effectiveness includes efficiency and means “performing similar activities better that rivals”3. But competition by this means alone is “mutually destructive”4 – so a company must adopt a different strategic position from its rivals.• Thus the logic is that “operational effectiveness and strategy are both essential to superior performance”4. 1 Wilson and Gilligan (2005). 2 Brennan et al., 2008, p.13 & 14. 3 Porter, 1996, p.62. 4 Porter, 1996, p.62. 5 Porter, 1996, p.61. 19
  20. 20. The Impact of the Internet on Strategy• Consider the impact of the web on strategy – could it be a model for its impact on marketing strategy?• The internet did not make strategy redundant or provide first- mover advantage – the switching costs were lower, not higher – and the promised benefit of network effects*, did not materialise at first1. But the latter has now been realised e.g. eBay2.• In fact the web has eroded competitive advantage traditionally enjoyed by firms3.• The internet has changed our understanding of strategy: – “Strategy is redundant”4 because of the speed of change brought about by the internet. – We should “redefine strategy as the art of surviving rapid transition”5. * Network effects: the process by which a company’s products and services become more valuable as more people use them. Examples are email, instant messaging and of course, social networks. 1 Porter (2001). 4 Piercy, 2002, p.206. 2 Kumar (2004). 5 Evans and Wurster, 2000, cited in Piercy, 2002, p.206. 3 Wilson and Gilligan (2005). 20 Return to Contents page >
  21. 21. Challenge to the Hierarchy of Strategies• Organisational strategy structure has traditionally been hierarchical – below Corporate and Strategic Business Unit (SBU) level strategy is Functional level strategy1.• But recently this concept has been challenged – a new heterarchichal relationship between the strategies has been suggested2. ‘Old’ hierarchy Source: Chakravarthy and ‘New’ heterarchy structure Henderson, 2007, p.650. structure 1 Hofer and Schendel (1978); Webster (1992); Varadarajan and Jayachandran (1999). 2 Chakravarthy and Henderson (2007). 21 Return to Contents page >
  22. 22. Challenge to the Hierarchy of Strategies• The reason for this revision is that studies have shown that the traditional portfolio planning role of corporate strategy does not lead to better performance and that “strategy formulation is not always top down”1.• Corporate, business and marketing strategies interact to define the competitive advantage of SBUs in a company. The merging of these strategies defines the degree to which a business can gain and sustain that advantage2.• The challenge of this heterarchy is continuous renewal, not just of positioning the firm in a more attractive market space but of developing competencies to defend these positions3.• Could social media be one of these ‘competencies’ and offer the organisation a competitive advantage in some way?• Can social media play a role in this ‘bottom-up’ strategy formulation? 1 Chakravarthy and Henderson, 2007, p.647. 2 Varadarajan and Jayachandran (1999). 3 Chakravarthy and Henderson (2007). 22 Return to Contents page >
  23. 23. What is Marketing Strategy?• The Author’s study has shown that some academics define marketing strategy in almost tactical terms e.g. – “the selection of which marketing opportunities to pursue, analysis of target market(s), and the creation and maintenance of an appropriate marketing mix that will satisfy those people in the target market(s)”1.• However, he argues that it should be defined strategically: – “Marketing strategy should be set in the context of overall corporate strategy”, because the marketing must be aligned to ensure the overall direction of the organisation is followed2.• And some do define it in terms of gaining and sustaining a competitive advantage3.• But the essential idea of marketing is to create value4. – “Businesses not offering value to customers are seeing their market shares eroding at accelerating rates”5. 1 Dibb et al., 2006, p.20. 2 Hooley et al. 2008, p.31. 3 Day et al. (1990); Sudharshan (1995). 4 Sheth and Uslay (2007); Doyle (2008). 23 5 Doyle, 2008, p.12. Return to Contents page >
  24. 24. What is Marketing Strategy?• Thus the link between corporate and marketing strategy comes from the latter’s ability to create a competitive advantage by “leveraging a firm’s unique skills and resources to implement a value-creating strategy that its competitors cannot implement as effectively”1.• So the Author’s preferred definition is: “Marketing strategy seeks to deliver superior customer value by combining the customer-influencing strategies of the business into a coordinated set of market-driven actions”2.• Note that it is now argued that value is jointly created between the customer and the producer3, a recurring theme in this research document. 1 Barney (1991), cited in Varadarajan and Jayachandran, 1999, p.121. 2 Cravens and Piercy, 2009, p.13. 3 Prahalad and Ramaswamy (2004a); Payne et al. (2008). 24 Return to Contents page >
  25. 25. Value as the Marketing Paradigm • Numerous scholars assert that Relationship Marketing has been displaced as the current paradigm1. But there is no consensus amongst academics on the replacement marketing paradigm2. • A full examination of marketing paradigms is outside the scope of this study but Various replacement candidates have been suggested, such as Electronic Marketing3 and Experiential Marketing4, but there is strong support in academia for Value Marketing5, the choice of the Author as the current paradigm. • Value is a universal requirement. Coca Cola now talks about ‘value marketing’ and not ‘brand marketing’6. • For the new paradigm candidate list, see Appendix B in the full dissertation at www.newrivermarketing.co.uk/downloads1 Wilson and Gilligan (2005); Piercy (2002); Kotler (2008). 5 Piercy (2002), Poiesz and van Raaij (2007), Porter (1996),2 Egan (2008). Cravens & Piercy (2009), Doyle (2008), McDonald (2007).3 Wilson and Gilligan (2005). 6 Piercy (2002).4 Pine and Gilmore (1998), Schmitt (1999). 25 Return to Contents page >
  26. 26. Progress check...About this document 2. Exploring Marketing 3. The3. The Decline Decline of 4.4. The Promise of the The Promise of the 5. Conclusion to the 5. Conclusion to the About this document & Strategy Marketing of Marketing Social Web Web Social Literature Review Literature ReviewContents What is Strategy? Marketing in Decline The Promise of the The Promise of the 6. Research Methodology Contents What is Strategy? Marketing in Decline 6. Research Methodology Social Web Social WebBackground to the Study Alternative views of Alternative views of Strategy Loss of Ascendancy Restoring the Lost Art 7. Findings && Discussion Background to the Study Strategy The Loss of Ascendancy Restoring the Lost Art 7. Findings Discussion of Marketing of Marketing of Engagement of EngagementResearch Objectives Effectiveness, Efficiency Effectiveness & Efficiency The Challenge of The Challenge of Influencing Buyer Behaviour Influencing Buyer 8. Conclusion to the Study Research Objectives 8. Conclusion to the Study && Strategy Strategy Value Creation Value Creation via Social Media Behaviour via Social Media 1.Background to the The Impact of the Internet The Impact of the Internet The Struggle for Innovation Social Media bringing Social Media bringing The Struggle for Innovation Social Web on Strategy on Strategy Organisational Change Organisational ChangeWhat are Social Media? Challenge to the Hierarchy Challenge to the Hierarchy The Rise of the The Rise of the Creating Value with Creating Value withWhat are Social Media? of Strategies of Strategies New Consumer New Consumer Social Media Social MediaRise of the Social Web What is Marketing Strategy? The Limitations of The Limitations of Social Media as a a source Social Media as source Rise of the Social Web What is Marketing Strategy? Relationship Marketing Relationship Marketing of Innovation of InnovationThe Power of Social Media Value as the new Value as the Questioning of the Questioning of the Gaining a a Competitive Gaining Competitive The Power of Social Media Marketing Paradigm Marketing Paradigm Marketing Mix Marketing Mix Advantage via Social Media Advantage via Social Media The Strategic Nature ofThe Strategic Nature of YOU ARE The Challenge for Branding The Challenge for Brand-building via Brand-building via Social MediaSocial Media HERE Branding Social Media Social Media Marketing’s Mid-life Crisis Marketing’s Mid-life Crisis Conclusion to the Decline Conclusion to the Decline ofof Marketing Marketing 26 Return to Contents page >
  27. 27. The Decline of Marketing The Author’s reading has revealed that many academics believe Marketing to be in decline. 27 Return to Contents page >
  28. 28. Marketing in Decline• According to many academics, Marketing is in decline1.• For others, marketing is ‘in crisis’2, ‘dead in the water’3, ‘in mid- life crisis’4, ‘at saturation point’5, or even ‘broken’6.• This section examines these controversial assertions, including: – Marketing’s decreasing role within the organisation. – Problems with value creation and innovation. – Difficulties with influencing consumer behaviour. – The limitations of relationship marketing. – Criticism of the Marketing Mix. – Exploration of the current issues facing branding. – Marketing’s mid-life crisis.1 Kumar (2004); Parsons and Maclaren (2009); 5 Poiesz and van Raaij (2007). Grönroos (2009); Webster et al. (2005). 6 Lovatt (2010).2 Grönroos (2009).3 Piercy (2002).4 Wilson and Gilligan (2005). 28 Return to Contents page >
  29. 29. The Loss of Ascendancy of Marketing• Marketing has a reduced role and influence – Doubts exist about its value1 and future role2. – Executives are united in stating that marketing is an ambiguous concept with unclear responsibilities3. – Less than 10% of the board’s time is spent discussing marketing and customer-related issues4. – The ‘tyranny of P&L’ - an obsession with short-term financial metrics5. – Marketing is seen as a variable cost that can be cut6. – Resources are being shifted to Sales, with the latter taking over more responsibility for customer management7. – Marketers are creative thinkers but lack the analytical skills of IT, finance and data analysis required in business8. – Marketing has lost credibility9 and needs to “regain its seat at the table”10. 1 Kumar (2004). 6 Sheth and Sisodia (2005). 2 Wilsonand Gilligan (2005). 7 Webster et al. (2005). 3 Webster et al. (2005). 8 McGovern et al. (2004). 4 McGovern et al. (2004); Kumar (2004). 9 Sheth and Sisodia (2005); Grönroos (2009). 5 Webster et al. (2005). 10 Webster, 2005a, p.124. 29 Return to Contents page >
  30. 30. The Loss of Ascendancy of Marketing • Diminishing Corporate Marketing function – Marketing has all but disappeared at corporate level1 – Responsibility for marketing has been given to the SBUs2 but this often fails because SBU managers lack marketing skills and are driven by short-termism3. – Few CEOs have marketing experience4 so Chief Marketing Officers (CMOs) are appointed to fill the gap left by the corporate marketing function but often lack the necessary strategic and analytic skills5. – Marketing is now a cross-functional process6 with a disappearance of boundaries between marketing and other functions7. This gives rise to a Marketing paradox:  “The deeper marketing is embedded within an organization and becomes the defining theme for shaping competitive strategies, the more likely is the role of marketing as a distinct function to be diminished”8.1 Webster (1992) & (2005a); Wilson and Gilligan (2005); Wind (1996). 6 Cravens and Piercy (2009).2 Kumar (2005); Webster (2005a). 7 Poiesz and van Raaij (2007).3 Webster (2005b). 8 Day, 1992, p.323.4 McGovern et al. (2004). 305 Webster (2005b). Return to Contents page >
  31. 31. The Loss of Ascendancy of Marketing• Disconnect between marketing and corporate strategies1. – In fact, “many CEOs believe that marketing is failing at the strategic level because marketing efforts are not aligned with the strategic goals and overall strategy of the firm”2. – “When marketing activities are tightly aligned with corporate strategy, they drive growth. But in too many companies, marketing is poorly linked with strategy. Marketing may seem to be performing well according to standard metrics, like the number of repeat purchases customers make, but if the companys strategy is to, say, build market share, simply boosting repeat purchases isnt enough. In many organizations, marketing exists far from the executive suite and boardroom. Marketing managers are rarely held accountable for ROI and rarely expected to explain, exactly, how what they do supports corporate strategy... its a case of myopia. No one in the organization sees the relationship between marketing and strategy well enough to diagnose the problem and begin to fix it. The failure of marketing strategy is a crisis that requires attention at the highest levels of the organization-from the corporate board itself”3.1 McGovern et al. (2004).2 Kumar, 2004, p.19. 313 McGovern et al., 2004, p.72. Return to Contents page >
  32. 32. The Challenge of Value Creation• The challenge for marketing is to ensure it fulfils its promise to deliver consumers superior value. – “Today’s marketing challenge is to bridge the widening gap between brand and customer value which is increasingly generated through supply chain leadership, networks of relationships, and individualised customer service”1.• Difficulties with the concept of value – The problem with value is that it means different things to different people, and ultimately it is defined by the customer2. – The concept is riven with paradoxes e.g. Ryanair – the low-frills, cheap airline – and Starbucks, which charges £3 for a cup of coffee (which customers are willing to pay for)2. – What matters is perceived value – it is this that attracts a customer or lures him from a competitor3.1 Maklan and Knox, 1998, p.47.2 Piercy (2002).3 Rust and Oliver (1994). 32 Return to Contents page >
  33. 33. The Challenge of Value Creation• Difficulties in creating value – Since marketing is ‘dis-integrated’ or ‘centrifuged out’ to various parts of the organisation, it is without a ‘centre of excellence’ so companies find it hard to create value and deliver it to customers1. – Difficult to create value in increasingly crowded markets, with the impact of the internet, and with increasingly sophisticated customer databases each ‘competing’ against the other2. – Brands can only now compete either on price or by consistently adding value. This is increasingly hard as brands exhaust ways of doing this e.g. 24hr delivery is no longer a competitive advantage3. – “Added value, as the core concept of marketing, is gradually but definitely becoming an illusion”4.1 Webster et al. (2005).2 Poiesz and van Raaij (2007).3 Poiesz and van Raaij (2007).4 Poiesz and van Raaij, 2007, p.8. 33 Return to Contents page >
  34. 34. The Challenge of Value Creation• Difficulties over how Value is created – Traditionally, value creation occurred during the exchange of goods or services with the customer1. – The term ‘delivering value to customers’ is no longer accurate2 and firms cannot continue to rely on extracting costs from value chain activities – efficiency savings − as their main source of value creation3. – Scholars now suggest that this ‘value-in-exchange’ concept has been superseded by one of ‘value-in-use’4. – There is no ready-made value embedded in products − value is created in the use of the product by the customer and not during exchange5. – The proposal therefore is that the consumer is now the co-producer (co-creator) of value6.1 Kotler(1972); Hunt (1976). 5 Grönroos (2008); Payne et al. (2008).2 Grönroos (2009). 6 Vargo and Lusch (2004).3 Prahalad and Ramaswamy (2004b).4 Gummesson (2002); Vandermerwe (1996);Woodruff and Gardial (1996). 34 Return to Contents page >
  35. 35. The Struggle for Innovation• The need for Innovation – Product innovation is key to long-term profitability1 , however, long- term growth requires continual breakthroughs in all areas, not just product development2. – Successful innovation is a major business challenge and can be categorised by how novel it is, and the extent to which customer value is created3.• The stifling of Innovation – Instead of innovating, firms compete head-to-head for a greater market share but this is the road to long-term decline4. – Organisational transformation agendas include “downsizing, overhead reduction… portfolio rationalisation” – anything but innovation5.1 Webster et al. (2005).2 Piercy(2002).3 Cravens and Piercy (2009).4 Mauborgne and Kim (1999).5 Hamel and Prahalad, 1994, p.124. 35 Return to Contents page >
  36. 36. The Struggle for Innovation • The stifling of Innovation (cont.) – The ‘innovation spiral’, whereby a downward spiral exists because of the pressure to innovate, high innovation frequency and shorter innovation duration e.g. laptop market1. – Innovation is intrinsic to marketing but real innovation that abandons the ‘rule-book’ is rare2. – Increasing lack of creativity in advertising3. – 6 obstacles to innovation include: lack of resources, a short-term focus, a lack of a systematic innovation process, it’s judged too ‘risky’, that financial targets deter it, and that “we punish innovation failure but don’t reward innovation success’’4. – An organisation must harness the creativity of all its people – innovation should not just be the preserve of the R&D department5.1 Poiesz and van Raaij (2007).2 Piercy(2002).3 Sasser (2008).4 Loewe and Dominiquini, 2006, p.24.5 Loewe and Dominiquini (2006) . 36 Return to Contents page >
  37. 37. Rise of the New Consumer • Characteristics of the New Consumer – The ultimate aim of marketing is to change behaviour1 but marketers are finding it increasingly hard to do this2. – The new consumer has changed: He/she is more demanding, more discriminating, less loyal, and more willing to complain3. Additionally they are ‘time-starved’ and low on attention and trust4. – Modern consumers are involved, independent, better informed and more critical5. – They are existential6 and strive for self-actualisation as they seek to close the gap between their real and ideal selves7. – They are “smart” and demand “openness and transparency”8. – This media-, advertising-, brand- and technology-literate consumer presents one of the biggest challenges facing marketers9.1 Brennan et al. (2008). 6 Christopher (1989).2 Poiesz and van Raaij (2007); Wilson and Gilligan (2005). 7 Burnett and Hutton (2007).3 Wilson and Gilligan (2005). 8 Piercy, 2002, p.58.4 Lewis and Bridger (2000). 9 Wilson and Gilligan (2005).5 Capon and Hulbert (2000); Lewis and Bridger (2000). 37 Return to Contents page >
  38. 38. Rise of the New ConsumerProblems with the Consumer Buying Decision-Making ProcessThe dominant theory amongst academics for how and why consumers buy isa five-step process: 1. Problem definition A stimulus from the internal or external environment causes a need to develop in the consumer. Information is collected in order to satisfy the need. 2. Information search Problem exists here Process of problem-solving – criteria for comparing products 3. Evaluation of alternatives is established. 4. Purchase A product or service is selected. Consumption of product followed by 5. Post-purchase evaluation evaluation to check if need has been met. Source: Author’s own based on Dibb et al. (2006); Wilson and Gilligan (2005); Constantinides (2004), Cravens and Piercy (2009). 38 Return to Contents page >
  39. 39. Rise of the New ConsumerThe Communications Spiral• However a problem exists in stages 1-3 above – a downward communications spiral1 exists caused by competitive pressures between brands which force them to increase message frequency, thereby increasing clutter2.• There is a “feeling of overwhelming mass media spam”3. Increased number of communication attempts Stronger urge to Information communicate overload for consumers Decreased impact of average message1 Poiesz2 Rotfeld and van Raaij (2007). (2006); Keller (2009). The Communications Spiral3 Rotfeld, 2006, p.181. 39 Return to Contents page >
  40. 40. Rise of the New Consumer• The marketing funnel metaphor demonstrates the problem: Source: Li and Bernoff, 2007, p.101. – Brands end up ‘shouting’ at consumers to gain their attention and engage in ‘interruption marketing’1. – There is too much advertising from competing brands, as well as conversations occurring between consumers via social media within the funnel2. A battle of wills occurs, with consumers trying to avoid commercials whilst marketers are continually thinking up ways of slipping past consumer defences3. – But marketers persist with the funnel because they can still measure the effectiveness of their campaigns via trusted methods4. 1 Godin (1999). 2 Liand Bernoff (2008). 3 Weber (2009). 40 4 Haven et al. (2007). Return to Contents page >
  41. 41. The Rise of the New Consumer• The transparency of the market − that the internet promised to bring by enabling brands and products to be compared easily1 – is lost2. Due to the overload, consumers cannot make rational choices. – Organisations are guilty of ‘overmarketing’3. – “Marketing has become its own competitor”4. – In reality, “the marketing funnel is a broken metaphor that overlooks the complexity social media introduces into the buying process”5. 1 Kapferer (2001); Sinha (2000). 2 Poiesz and van Raaij (2007). 3 Author. 4 Poiesz and van Raaij, 2007, p.8. 5 Haven et al., 2007, p.1. 41 Return to Contents page >
  42. 42. The Limitations of Relationship Marketing• As revealed earlier, relationship marketing is no longer considered the current paradigm. However, this does NOT mean brands do not want relationships with their customers since its role remains to help build a competitive advantage1.• The benefits of (e)CRM*2 include no acquisition costs, limited need to incentivise, less price-sensitivity of customers, more referrals and increased spend per relationship3.• But there have been high failure rates of CRM systems4 and the dot.com crash in the early 2000s was caused largely by the failure of the firms to build relationships and thus gain repeat business5.• Additionally, high customer churn rates of 10-30% remain, in spite of CRM6. * In the academic community, the terms ‘relationship marketing’ and ‘CRM’ are used interchangeably.1 Harker and Egan (2006). 4 Fosset al. (2008).2 Parvatiyar and Sheth (2001). 5 Chaffey et al. (2009).3 Chaffey et al. (2009). 6 Brennan et al. (2008). 42 Return to Contents page >
  43. 43. The Limitations of Relationship Marketing• And whilst CRM involves sophisticated data storing and mining techniques, from the consumers’ perspective it is still a crude tool involving “aggressive email, phone and internet promotions. With or without their permission”1.• It is also suggested that the relationship between loyalty and profit is much weaker than is realised, and existing claims about loyalty, such as that it costs less to serve a loyal customer, are being challenged2.• Some question not just the return that companies get for investing in CRM, but whether it actually works! It should not be CRM but CMR, the customer management of relationships where the customer dictates the relationship3. 1 Urban, 2004, p.79. 2 Kumar and Reinartz (2002). 3 Newall (2003). 43 Return to Contents page >
  44. 44. Questioning of the Marketing MixThree problematic areas of the Mix11. Lack of customer orientation – The Mix’s origins lie in the era of mass marketing which did not accommodate the needs of the consumer.2. The Mix lacks the ability for personalisation – Mass customisation/ mass individualisation is desired by the consumer.3. Lack of strategic content – This renders it deficient as a framework for marketing planning in an environment where strategic opportunities and threats are defined by uncontrollable and external factors.• As a result, the Mix’s ability to give a brand the differentiation it requires to offer value to the consumer and competitive advantage is in doubt2. 1 Constantinides (2006). 2 Wilson and Gilligan (2005); Poiesz and van Raaij (2007). 44 Return to Contents page >
  45. 45. Questioning of the Marketing MixThe menace of the Marketing Spiral• It is suggested that the 4Ps are each operating as four, Innovation spiral Communication spiral downward spirals creating a marketing spiral1.• Since each spiral is downward, the output of the mix is an increasingly undifferentiated, Price spiral Distribution spiral commoditised product or service2, effectively ‘Walmartisation’3. The Marketing Spiral1 Poieszand van Raaij (2007).2 Roberts and Alpert (2010).3 Prahalad and Ramaswamy (2004a). 45 Return to Contents page >
  46. 46. Questioning of the Marketing Mix• Tactical marketing is subject to the spirals – what is required to escape the marketing spiral is strategic innovation1.• “There is an urgent need for a reconsideration of the marketing paradigm. Marketing needs a new strategy”2.• The mix should “not be considered as the foundation of Consumer Marketing management any longer”3.• The model’s rigid decision making attributes have become a “straitjacket (sic) for the development of marketing theory and practice”4. 1 Poieszand van Raaij (2007). 2 Poieszand van Raaij, 2007, p.40. 3 Constantinides, 2006, p.413. 4 Grönroos, 2009, p.352. 46 Return to Contents page >
  47. 47. The Challenge for BrandingIntroduction to Branding• Because the Mix has reduced ability to contribute to a competitive advantage, marketers have switched attention to the Brand to seek differentiation1. Branding is now a priority2.• Growing brand equity creates value for the organisation3, however this is made difficult because often the marketing function is distanced from top management4.• Branding must be a key part of any marketing strategy because “branding is strategy”5.• Brands have a strategic role and can influence the corporate direction, indeed survival, of organisations6.• But the paradox is that brands are in decline so marketers face a major challenge. 1 Wilson and Gilligan (2005). 5 Piercy, 2002, p.471. 2 Aaker and Joachimsthaler (2000); Kapferer (2005). 6 Cravens and Piercy (2009). 3 Aaker (1992). 4 McGovern et al. (2004). 47 Return to Contents page >
  48. 48. The Challenge of BrandingThe Rising Importance of Brand Equity• Definitions of Brand Equity: – “The differential effect that consumer knowledge about a brand has on their response to marketing for that brand”1. – “The value of a brand as a signal to consumers”2.• Brand equity, if measured, is a better way of providing an understanding of short and long-term performance than traditional financial methods3.• Consumer-based brand equity (CBBE) is an intangible asset that can offer a sustainable advantage4, and differentiation is the “anchor of a brand’s equity”5.• So scholars are building brand equity models that link brand development, marketing activities and the resulting customer response to long-term shareholder value6.• Thus the building of brand equity is now a key objective for marketers7. 1 Keller,2003, p.60. 5 Thomas and Kohl, 2009, p.9. 2 Erdem and Swait, 1998, p.140. 6 Webster et al. (2005). 3 Christodoulides and de Chernatony (2010). 7 Webster et al. (2005). 4 Christodoulides and de Chernatony (2010). 48 Return to Contents page >
  49. 49. The Challenge of BrandingBrands and Value• Brand equity creates value for the organisation in 6 ways1. 1. Enhances the efficiency and effectiveness of marketing. 2. Strengthens brand loyalty. 3. Enables higher margins via premium pricing. 4. Provides a platform for brand extensions. 5. Offers leverage in the distribution channel. 6. Creates a barrier to stop customers switching.• Brands offer value to consumers by2: – Assisting in identifying and interpreting products. – Giving confidence and saving time in the purchase decision. – Offering a psychological comfort via brand association.• But the traditional (offline) branding model, whereby customers are passive recipients of value, is not represented online. Here customers are “active co-producers of value” via social media and thus they also add value to the brand3. 1 Aaker(1992). 2 Dibbet al. (2006); Cravens and Piercy (2009); Aaker (1992). 3 De Chernatony, 2001, p.191. 49 Return to Contents page >
  50. 50. The Challenge for BrandingBranding and Strategy• “Brands can transform markets, and change competitive structures” because of their effect on consumer perceptions, e.g. Virgin Direct and The Sainsbury Bank which were able to grab market share in the banking sector quickly by leveraging the strength of their brands1.• Companies are increasingly looking to revitalize dying or dead brands as a strategy because of the high costs of launching new brands e.g. Puma and Ovaltine’s revival2.• “Traditional brand engineering no longer works” and value for customers is increasingly being created by business processes outside the auspices of brand managers3.• However, at the same time, forces are working against the brand... 1 Piercy, 2002, p.471. 2 Thomas and Kohl (2009). 3 Maklan and Knox, 1997, p.120. 50 Return to Contents page >
  51. 51. The Challenge for Branding Reasons for Brand decline • Weakening of brands – Brand loyalty has seen a decline, notably in retailing, as a result of discounting and promotion wars1. – Impact from competition2. – Brand switching by ‘new’ consumers who are less loyal3. – ‘Category killers’* such as Ikea and Toys ‘R’ Us have forced prices down, de-valuing brands and undermining company brand-based strategies4. • Internal forces – Incorrect managerial strategic and tactical actions e.g. raising prices with no increase in benefits5. – Day-to-day pressures distracting managers from brand management6. – Funds being taken away from brand equity-building initiatives in favour of those which offer immediate results, such as retail promotions7. * A ‘category killer’ is a ‘destination store’ which consumers visit with the sole intention of purchasing items in one product category which are offered at low prices. Examples are large discount toy chains, sporting goods chains, and office supply chains.1 Dibb et al. (2006). 5 Thomas and Kohl (2009).2 Thomas and Kohl (2009); Piercy (2002); Sinha (2000). 6 Aaker(1996).3 Lodes and Buff (2009). 7 Webster et al. (2005). 514 Piercy (2002). Return to Contents page >
  52. 52. The Challenge for BrandingReasons for Brand decline (cont.)• Erosion of trust – Via brand extensions1. – Via marketers’ actions, such as audience manipulation and offensive products 2. – Via charging premiums for undifferentiated products3.• Loss of control – Marketers are ceding much control of brands to consumers4, and brand communities and social networks now lay claim to ownership of brands and they influence the brand choices of consumers as well as company decisions5. – Branding strategies have been turned upside down – branding now occurs via consumer actions within social media and “post-internet branding is about facilitating conversations around the brand”6. 1 Loken and John (1993); Gürhan-Canli and Maheswaran 4 Sawhney et al. (2005); Muniz and O’Guinn (2001). (1998); John et al. (1998). 5 Christodoulides (2008). 2 Rotfeld (1998). 6 Christodoulides, 2009, p.142. 3 Sinha (2000). 52 Return to Contents page >
  53. 53. Progress check...About this document 2. Exploring Marketing 3. The3. The Decline Decline of 4.4. The Promise of the The Promise of the 5. Conclusion to the 5. Conclusion to the About this document & Strategy Marketing of Marketing Social Web Web Social Literature Review Literature ReviewContents What is Strategy? Marketing in Decline The Promise of the The Promise of the 6. Research Methodology Contents What is Strategy? Marketing in Decline 6. Research Methodology Social Web Social WebBackground to the Study Alternative views of Alternative views of Strategy Loss of Ascendancy Restoring the Lost Art 7. Findings && Discussion Background to the Study Strategy The Loss of Ascendancy Restoring the Lost Art 7. Findings Discussion of Marketing of Marketing of Engagement of EngagementResearch Objectives Effectiveness, Efficiency Effectiveness & Efficiency The Challenge of The Challenge of Influencing Buyer Behaviour Influencing Buyer 8. Conclusion to the Study Research Objectives 8. Conclusion to the Study && Strategy Strategy Value Creation Value Creation via Social Media Behaviour via Social Media 1.Background to the The Impact of the Internet The Impact of the Internet The Struggle for Innovation Social Media bringing Social Media bringing The Struggle for Innovation Social Web on Strategy on Strategy Organisational Change Organisational ChangeWhat are Social Media? Challenge to the Hierarchy Challenge to the Hierarchy The Rise of the The Rise of the Creating Value with Creating Value withWhat are Social Media? of Strategies of Strategies New Consumer New Consumer Social Media Social MediaRise of the Social Web What is Marketing Strategy? The Limitations of The Limitations of Social Media as a a source Social Media as source Rise of the Social Web What is Marketing Strategy? Relationship Marketing Relationship Marketing of Innovation of InnovationThe Power of Social Media Value as the new Value as the Questioning of the Questioning of the Gaining a a Competitive Gaining Competitive The Power of Social Media Marketing Paradigm Marketing Paradigm Marketing Mix Marketing Mix Advantage via Social Media Advantage via Social Media The Strategic Nature ofThe Strategic Nature of The Challenge for Branding The Challenge YOU ARE Brand-building via Brand-building via Social MediaSocial Media for Branding HERE Social Media Social Media Marketing’s Marketing’s Mid-life Crisis Mid-life Crisis Conclusion to the Decline Conclusion to the Decline ofof Marketing Marketing 53
  54. 54. Marketing’s Mid-life CrisisThe Marketing Concept under pressure• Academia began questioning the whole concept of marketing in the 1990s. – Suggestions arose that it lacks strategic intent1 and thus cannot add value2. For this to happen, marketing must become a “strategic activity rather than a supporting activity”3. – The concept is unclear as to how the organisation should compete, how to align its capabilities, and in understanding the customer4. – “Something is amiss, that the (marketing) concept is deeply, perhaps irredeemably, flawed… and… is… on the brink of serious intellectual crisis”5. – However, it is also suggested that the problem in the past has lain with marketing managers who have not understood marketing as a concept6. 1 Varadarajan and Jayachandran (1999); Wilson and 5 Brown, S., 1995, p.42. Gilligan (2005). 6 Hooley and Saunders (1993) 2 Poiesz and van Raaij (2007). 3 Poiesz and van Raaij, 2007, p.47. 4 Varadarajan and Jayachandran (1999) . 54 Return to Contents page >
  55. 55. Marketing’s Mid-life CrisisLack of Market-orientation in Organisations• Many firms just pay lip-service to customer-orientation1 and in fact are product-oriented2. This is the “customer conundrum”3 – they can only find customers by slashing prices4.• To become more customer-focused, corporate marketing can help build capabilities5, but this function is disappearing! And anyway, instead of trying to influence customer behaviour, brand managers need to “go back to basics and seek to better align their marketing with people’s needs”6.• Two types of organisation7: – Left-handed ones are financially-driven and look to grow profits by cutting areas such as costs, or trimming the marketing mix. – Right-handed ones are market-driven whose main focus is satisfying the customer.• “There are now two types of corporation: those with a marketing department and those with a marketing soul”8. The latter are the top performing companies.1 Webster (2005b) . 5 Kumar (2004).2 Poiesz and van Raaij (2007). 6 Christodoulides, 2008, p.292.3 Piercy, 2002, p.18. 7 Doyle (1994).4 Doyle (2008). 8 Brown, A. (1995), cited in Piercy, 2002, p.6. 55 Return to Contents page >
  56. 56. Marketing’s Mid-life Crisis What the Academics and Practitioners say • Marketing has reached a “mid-life crisis”1, is “broken”2, is “dead in the water”3, is “suffocating under its own weight”4, “appears to be in decline”5, is “no longer delivering”6, “no longer seems to make sense”7, and should be given “the dignified burial it deserves”8. • Twin paradoxes: “Consumers have more choices that yield less satisfaction. Top management has more strategic options that yield less value”9. • Marketing is becoming less successful at its purpose – to synchronise supply and demand. Consumers buy products they do not need, or cannot use because they do not understand them10. • Paradox: “Marketing is becoming more important, but less visible”11. • “Customers evolved, but did marketing?”12. • “There doesn’t seem to be any time for marketers these days to actually do any marketing”13.1 Wilson and Gilligan, 2005, p.22. 8 Holbrook and Hulbert (2002) , cited in Egan, 2008, p.14.2 Lovatt (2010). 9 Prahalad and Ramaswamy, 2004a, p.4.3 Piercy, 2002, p.6. 10 Poiesz and van Raaij (2007).4 Poiesz and van Raaij, 2007, p.10. 11 Poiesz and van Raaij, 2007, p.48.5 Wind, 1996, p.6. 12 Meadows-Klue, 2008, p.245.6 Wilson and Gilligan, 2005, p.33. 13 Lee (1997) cited in Piercy, 2002, p.288. 567 Poiesz and van Raaij, 2007, p.39. Return to Contents page >
  57. 57. Marketing’s Mid-life CrisisWhat the Academics say (cont.)• Marketing’s core problem: “Products and services are facing commoditisation as never before… if consumers do not see any differentiation they buy smart and cheap”1.• Many CEOs of major companies are frustrated at marketing’s inability to produce measurable results2.• Some warn against those who believe that social media offers a panacea for marketing, by suggesting it is a cause of some of its problems3.• A.G. Lafley, CEO of Proctor & Gamble, told his executives: “We need to reinvent the way we market to consumers. We need a new model”4.• “Somewhere along the journey of marketing, the skill to listen has weakened and the art of engagement lost in favour of ever grander and louder messaging techniques... doing little to create true dialogue with the customers”5. 1 Prahalad and Ramaswamy, 2004b, p.7. 4 Weber 2009, p.11. 2 Kumar (2004). 5 Meadows-Klue, 2008, p.245-246. 3 Sasser (2008). 57 Return to Contents page >
  58. 58. Conclusion to the Decline of MarketingAs a result of this analysis of the state of marketing, the Authorbelieves marketing and the organisation face the following ninechallenges:• Challenge 1: There is no agreement on the current marketing paradigm. Until this is agreed, marketing thinking will remain diverged, pulling thinkers and practitioners alike in different directions.• Challenge 2: There has been a loss of ascendancy of marketing in organisations and marketing as a corporate function has all but disappeared. Since this is so, marketing competence must somehow be dispersed across the organisation in order for marketing to ‘regain its seat at the table’.• Challenge 3: Organisations should pursue value-driven marketing strategies but marketers are finding it extremely hard to create value for customers, when there is difficulty over the concept of value itself, and when there is no marketing ‘centre of excellence’ in many organisations. 58 Return to Contents page >
  59. 59. Conclusion to the Decline of Marketing• Challenge 4: Innovation is key to creating and adding value but there is an innovation spiral, and if organisations are not geared to innovate, how can organisations create value, differentiate and compete?• Challenge 5: Traditional marketing techniques do not work well on the new consumer, compounded by conditions of the marketing funnel due to fragmented media, intense competition, and consumers having conversations with each other. Firms must regain the ability to influence the consumer.• Challenge 6: Questions exist about relationship marketing and its ability to deliver its promise. With consumers increasingly in charge of the relationship, how can firms re-connect with their customers? 59 Return to Contents page >
  60. 60. Conclusion to the Decline of Marketing• Challenge 7: The marketing mix is captive to a marketing spiral which produces a commoditised offering, thereby frustrating the brand from creating value and differentiating. A new paradigm needs to be developed which enables the creation of competitive advantage.• Challenge 8: Branding, whilst experiencing some difficulties, offers marketers a way of creating a differentiated product and thus gain a competitive advantage. How can brand equity be built in this new era of marketing?• Challenge 9: Marketing is in a mid-life crisis. Academia is questioning the whole marketing concept. Many firms that claim to be customer-led are in fact product-led. Organisations must therefore re-align with the customer.The next section, ‘The Promise of Social Media’ is intended to showhow social media might assist in meeting these challenges. 60 Return to Contents page >
  61. 61. The Promise of the Social WebThis section seeks to show to what extent Social Media canaddress the challenges to Marketing set in the previous section. 61 Return to Contents page >
  62. 62. The Promise of the Social WebAs a result of the challenges identified for marketing earlier, thefollowing questions arise relating to social media:A. Can social media enable brands to re-connect with their customers?B. Can social media enable organisations to influence buyer behaviour once again?C. Can social media bring about change in organisations and make them market-oriented?D. Do social media enable organisations to create and deliver value for customers and organisations?E. Can social media help organisations to innovate?F. Can social media offer a competitive advantage to organisations?G. Can social media restore trust in brands and build brand equity?H. Can social media provide a fix to the marketing mix which, it is claimed, does not work anymore? 62 Return to Contents page >
  63. 63. Restoring the lost art of Engagement A: Can social media enable brands to re-connect with their customers?Background to Customer Engagement• Increasingly, CEOs and CMOs recognise “that long-term, sustainable competitive advantage is tied to a firm’s ability to retain, sustain, and nurture its customer base”1.• Companies need to encourage interactions with consumers to build two-way relationships because customers contribute value to firms in many ways in addition to transactions e.g. WOM, new ideas for products, mutual support2.• These non-transactional Customer Engagement Behaviours (CEBs)3 involve consumers forming emotional bonds with brands, and inherent in this are feelings of “confidence, integrity, pride, and passion”4.• Not full consensus – for some, engagement is “marketing’s new key metric”5 but for others it is a ‘management fad’6. 1 Anderson et al. (2004); Gruca and Rego (2005); Rego et 4 McEwen (2004), cited in Bowden, 2009, p.64-65. al. (2009), all cited in Van Doorn et al., 2010, p.253. 5 Haven et al., 2007, p.1. 2 Kumar et al. (2010). 6 Saks (2006). 3 Van Doorn et al. (2010). 63 Return to Contents page >
  64. 64. Restoring the lost art of EngagementUnderstanding Customer Engagement• As a concept, customer engagement is hard to lock down. There is no accepted definition of it1: – The “long-term ability of a brand to gain a customer’s attention on an ongoing basis”2. – “The creation of a deeper, more meaningful connection between the company and the customer, and one that endures over time”3. – “The level of involvement, interaction, intimacy and influence an individual has with a brand over time”4. – It is also described as being a stage beyond the measurement terms of ‘reach’ and ‘frequency’ and is likened to how far down the marketing funnel the consumer has travelled5.• Companies should see engagement as a holistic and reliable process that enables mapping of the constructs such as satisfaction, commitment, trust and loyalty – which are all difficult to measure6. 1 Tuten Ryan (2007). 2 Chaffey et al. , 2009, p.340. 3 EIU, 2007, p.2, cited in Kumar et al. (2010). 4 Haven et al., 2007, p.4. 5 Li and Bernoff (2008). 6 Bowden (2009). 64 Return to Contents page >
  65. 65. Restoring the lost art of EngagementDrivers for Customer Engagement• Firms are increasingly pursuing strategies that promote non-transactional behaviour because they recognise the value of customer engagement1.• Engaged customers contribute to brand reputation and recognition via online communities, and can be a crucial source of knowledge and thus co-creation2.• Consumers have a greater propensity to communicate via both WOM and social media when they are engaged with a brand or idea3.• The power of WOM marketing is compelling: “Engaged customers drive word-of-mouth marketing that is ten times more effective at resonating with a target audience than television or print advertising”4.• The world’s most valuable brands are finding that there is a correlation between the depth of engagement and their financial performance5.• However, building a customer-engaged organisation is one of the biggest challenges facing marketers6 with one report stating that 27% do not have a customer engagement strategy7. 1 Verhoef et al. (2010). 5 Engagementdb (2009). 2 Van Doorn et al. (2010). 6 Cravens and Piercy (2009). 3 Mangold and Faulds (2009). 7 Forbes Insights (2010). 4 Kirby (2006), cited in Roberts and Alpert, 2010, p.198. 65 Return to Contents page >
  66. 66. Restoring the lost art of EngagementThe Key to creating Engaged Customers• It is argued that the ‘typical’ marketing approach using “creative mass advertising” and “ensuring customers are ‘satisfied’” is not enough to create engaged customers because of various external and internal challenges.• Four elements that must be aligned to create engaged customers:2 o Customer value proposition o Customer experience o Brand o Internal culture• Research reveals that the simple act of completing a customer satisfaction survey engages the consumer more deeply with a firm3.• It follows that social media such as blogs, user-generated content, forums, aggregators, communities, and social networks are tools by which consumers engage with organisations and vice-versa4.• “Engagement is all about content”5 which is “no longer something you push out. Content is an invitation to engage with your brand”6. 1 Roberts and Alpert, 2010, p.199. 4 Verhoef et al. (2010). 2 Roberts and Alpert (2010). 5 Weber, 2009, p.76. 3 Borle et al. (2007). 6 Elliott (2006). 66 Return to Contents page >
  67. 67. Restoring the lost art of EngagementExamples of Engagement via Social Media• Southwest Airlines in the USA revised its Nuts About Southwest blog with podcasts, videos and other social media. As a result, visits to the blog rose by 25%, page views increased by 40% and visitors to the company’s website stayed 26% longer1.• In 2009 Burger King developed a ‘Whopper Sacrifice’ Facebook application whereby members were asked to ‘unfriend’ 10 Facebook friends in return for a free burger. This initiative resulted in the unfriending of 234,000 friends who received alerts informing them they had been sacrificed for a Whopper. This campaign was enormously successful in engaging consumers and gaining notable WOM2.• The $30,000 GillettePhenom online contest, in which consumers had to create a short video demonstrating their skill in a ball sport. They then submitted videos to their own YouTube accounts and the top 25 videos were then voted on by website viewers to determine the winner3. 1 Hoffman and Fodor (2010). 2 Hoffman and Fodor (2010). 3 Mangold and Faulds (2009). 67 Return to Contents page >
  68. 68. Restoring the lost art of EngagementMeasuring Engagement• The two biggest challenges for social are ROI and measurement1.• Four components for measuring Customer Engagement Value (CEV):2 o Customer lifetime value (CLV) o Customer referral value (CRV) o Customer influencer value (CIV) o Customer knowledge value (CKV)• The Net Promoter Score (NPS) measures how ‘energised’ a consumer is e.g. how likely he will promote a product3. However, the NPS can be inaccurate and misleading4.• ‘Buzz’ & sentiment can be measured via 36 different listening tools5*, examples being Nielsen’s Buzzmetrics or TNS’ Cymfony6§.• In a cScape survey, 44% of firms revealed that social networks helped increase their online customer engagement7. * Or ‘snorkelling tools’ (Weber, 2009). § Nielsen BuzzMetrics monitors 30m blogs each producing 500,000 to 1m posts a day (Gillin, 2009).1 IAB (2010). 5 Chaffey et al. (2009).2 Kumar et al. (2010). 6 Li and Bernoff (2008); Weber (2009).3 Reichheld (2006). 7 cScape (2010).4 Kumar et al. (2007), and Keiningham et 68al. (2007), cited in Chaffey et al. (2009). Return to Contents page >
  69. 69. Influencing Buyer Behaviour via Social Media B: Can social media enable organisations to influence buyer behaviour once again?• It was shown earlier that the more marketing tries to reach consumers, the more extreme their evasive behaviour becomes1.• But the need to be able to target consumers on the basis of their behaviour is an ever-present objective for marketers since people who have similar views will respond in similar ways to any given marketing mix.• It is therefore argued that a more psychological approach to marketing is required2. 1 Poiesz and van Raaij (2007). 2 Brennan et al. (2008); Poiesz and van Raaij (2007). 69 Return to Contents page >
  70. 70. Influencing Buyer Behaviour via Social Media How Social Media influence the Buying Process• As a result of the conversations that consumers hold with each other, the existing buying process, already complicated by the existence of the web, is made more complex.• Social media play a “massive part in influencing consumer behaviour”1. Source: Constantinides and Fountain, 2008, p.240. 1 Strategic Direction , 2010, p.6. 70 Return to Contents page >
  71. 71. Influencing Buyer Behaviour via Social MediaSegmenting the Social Web to find Brand Champions• The key is therefore finding those who can champion and influence the brand for the organisation.• Some academics see parallels between the traditional model of relationship marketing and the social web – loyalty of consumers can be earned by organisations that engage with them correctly1.• Thus participants in social networks can be advanced up this ‘virtual ladder’2 in the same way customers climb the traditional ‘ladder of loyalty’3. Source: Harridge-March 1 Harridge-March and Quinton (2009). and Quinton, 2009, p.176. 2 Harridge-March and Quinton (2009). 3 Christopher et al. (1991). 71 Return to Contents page >
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