Why true customer value will reign supreme

Did you know, over US$100 billion in advertising spend is wasted annually? The global display advertising industry alone is expected to waste around US$11 billion in 2014 despite constant reporting on these sobering facts, many marketers are hesitant to change their current model.

And it’s likely to cost them their brands. Greater China reflects the rest of the world where, sadly, many marketers and their agencies are putting the very survival of their brands at risk, as a consequence century, interruption-based advertising models. However, at the same time, some marketers of their 20th – including many from Greater China, are leading the world with their innovative, highly evolved, value-based approaches.

Take Uber for example, recently launched in Hong Kong, this brand has reached global scale with no traditional advertising, simply via referrals. The Uber business is built on consumer insights and an enormously well executed service model. Those who have used Uber will also recall they do not allow any interruption-based advertising on their platform.

Instead, they are laser-focused on delivering value to their customers and in return are taking the world by storm, now including Hong Kong. WeChat is another good example of a 21st proposition for consumers. And like Uber it is laser focused on a delivering a service and content model.

But let’s take a look at where marketers are going wrong and how US$100 billion in marketing budgets are effectively being flushed this year. Given the rapid and fundamental shift in consumer behavior, the pace of technological change, and the vast availability of consumer data, most of today’s interruption-based, mass-media advertising techniques can best be described as ‘pedestrian’.

This marketing model is fundamentally backward. It is wasteful, increasingly irrelevant, ignores new realities, and dates back to a time that is fast coming to its end.

‘Pedestrian marketing’ is an epidemic and it’s everywhere, not just in traditional channels. Just because you’re embracing digital, doesn’t mean you’re doing it right. Banner ads or video advertising pre-runs are digital examples of the same pedestrian marketing practice.

While they are often highly targeted they still represent an obsolete model. The misleading assumption is that these techniques are evolving – from 1.0 to 2.0. The bad news is that while waste and the level of annoyance are reduced it still ignores new realities; and hence will ultimately fail; especially in our mobile-first world.

Here’s how to spot ‘Pedestrian Marketing’ in your organisation

• Going to market without a differentiated product/service that addresses a real customer need

• A limited or no test and learn agenda

• Lack of personalized experiences

• Any type of consumer interruption (especially on social media)

• A belief that pretty pictures or a little film will compensate for a true product benefit

• Over-reliance on paid media

• A focus on influencing versus enabling the customer

• Believing that an increase in social media followers or likes represents success

• Thinking that advertising and marketing are one and the same

These days, for any product or service to succeed it must truly and uniquely fulfill a customer need. This requires a fundamental shift in today’s marketing model – brands need to go back to providing what consumers really want, not what their brands like to offer. It sounds simple but the mass-advertising model has made many marketers overly confident, they’re relying too heavily on their ability to influence consumer needs, versus serving them.

How do you begin to evolve from Pedestrian Marketing practices? In a nutshell, go back to basics:

• The functions of product/service innovation and marketing need to work closely together

• Put the consumer experience at the core; and design a service model around it

• Provide true value to customers

• Go back to the basic insights around consumer behavior (e.g., behavior changes before attitudes)

• Own the consumer experience, including the underlying data

• Remember that people love a great, well told story

To my constant surprise, executives – both inside marketing and advertising firms as well as on the client side – don’t seem under any particular pressure to evolve. New technologies and consumer behavior changes are profoundly impacting each and every value chain, many still completely misjudge the power of these changes. To some extent the slow response of CMOs and CTOs is understandable.

CEOs and Boards are not setting the right incentives, CMOs are primarily rewarded for driving reach and frequency (instead of revenues) and past success combined with inertia is holding them back. Nothing will truly change until CMOs are working closely with the departments that drive product and service innovation.

In today’s reality it is not about wasting advertising dollars any more; what seems to be overlooked is that marketers risk the very survival of their brands.

The big question is, will Pedestrian Marketing be absorbed by a new model, or become extinct? Only time will tell. Should you spot signs of Pedestrian Marketing in your organization we strongly recommend implementing change fast. Just ask the likes of Kodak, Blockbuster, HMV, or Barnes & Noble.

Michael Karg, international CEO of digital agency Razorfish.

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