We are being constantly reminded, by scholars, practitioners, and journalists, that today’s individuals and business organizations live in a highly networked, interactive, and collaborative world.
This new reality has given rise to new customer behaviors, and to entirely new vocabularies. The consumer is dead, long live Prosumers, Trysumers, and several other forms of - – - sumers yet to be born.
- Prosumers – today’s customers are both producers and consumers; i.e., they are not just consumption machines, but also contributors and co-creators of unique value
- Trysumers – consumers immune to most advertising, who enjoy full access to information, reviews, and navigation, who love to try out new products and services – appliances, artists, outfits, food, holiday destinations – new “anything”, with post mass-market gusto
Despite this daily dose of revivalist thinking, several companies approach their customers and markets as if they were still stuck in the 1960s; an era of impersonal transactions with the customer, relying on everything “mass” – mass markets, mass media, and mass undifferentiated value. For these companies, Marketing is still a one-way street, where companies do the talking and influencing through their advertising, and customers do the listening and consuming; passively at the end of a long invisible value chain.
There is something wrong with this picture and it needs fixing. What is wrong is that most companies are still set up to market products. That needs fixing. Companies must transition from marketing products to cultivating customers!
In the January-February Harvard Business Review article – Rethinking Marketing (download here) – my co-authors (Roland Rust, Christine Moorman) and I discuss how companies must shift their focus from driving product-centered transactions, to building long-term relationships with customers by offering whichever of the company’s products the customer values most at any given time.
This can only be done if companies make products and brands subservient to long-term customer relationships. And that means – reinventing the marketing department altogether.
The essence of reconfiguring marketing as a customer department is captured in this diagram:
The traditional marketing department must be reconfigured as a customer department that puts building customer relationships ahead of pushing specific products. To this end, product managers and customer-focused departments report to a Chief Customer Officer instead of a CMO, and support the strategies of customer or segment managers.
Two key implications of this reconfiguration need additional emphasis:
- First, reconfiguration is not merely drawing a different looking organizational chart, with different sounding titles. It is a fundamental shift in allocating, sharing, and managing resources – people, budgets, and information. This has implications not only for which tasks get priority and how they are executed, but also for who is the best person to execute them. For instance, since the role of the customer manager is the ultimate expression of what marketing should be – cocreating unique value with and for specific customers – we expect them to approach their task more like consumer anthropologists and behavioral scientists (see my post on A.G. Lafley), as opposed to advertising or promotion specialists.
- Second, in this reconfigured world, being able to offer relevant consumer value at all times becomes a key driver of business success and profitable growth. For ongoing customer value innovation to become a part of the DNA of the organization, it is important that the company move from an internally focused concept of customer value creation, to a more open, collaborative model of co-creating value with customers and other key stakeholders. Integrating R&D into the customer department will go a long way to ensuring that the customer remains at the center of all value creation activities.
A migration from marketing products to cultivating customers will also require a shift in metrics to gauge the effectiveness of a company’s customer-focused strategy. We discuss four new ways of thinking about business success in this customer-led world of marketing:
- Focus more on customer profitability, less on product profitability
- Customer Lifetime Value (CLV) thinking should trump maximizing current sales thinking
- Customer equity – the sum of all CLV’s of a company’s customer base – should replace a brand equity orientation
- Companies should pay more attention to customer equity share, and less attention to market share
I hope you find the article relevant, interesting, and useful. If you’re having similar discussions in your own organizations, please share them with me. I’d love to start a conversation with you on how we need to rethink and reinvent the fundamental focus of marketing.
DOWNLOAD: Rethinking Marketing, by Roland Rust, Christine Moormon, Gaurav Bhalla, Harvard Business Review, January-February 2010.