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Part I
New paradigms and
philosophical insights
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Toward a new marketing paradigm
Yoram (Jerry) Wind
Abstract
The increasing importance of the segments of empowered and skeptical consumers coupled with the enormous advances in science and technology and the challenging and changing socioeconomic realities around the world have resulted in increased complexity and uncertainty in doing business. In the same way that innovations such as the iPhone challenged and changed the mental models of the mobile phone industry, the mental models of marketing must be challenged and transformed in order to keep pace with the rapidly changing business world.
This chapter examines 10 traditional mental models of marketing, explains how they are becoming obsolete, and offers new approaches. It further delineates 12 fundamental tenets of advertising that similarly need to be transformed to represent a more holistic, network-based, co-creative and experimental way of thinking. Finally, it looks at the mental models of marketing research, moving beyond the traditional methods of surveys and panels to obtain a portfolio of innovative approaches, including listening to consumer conversations on social networks, gaming and other platforms. Through its exploration of the mental models of marketing, advertising and marketing research, this chapter provides an introduction to the challenges facing marketing in the changing business environment, and initial insights into how to overcome them.
Keywords
Mental models, marketing strategy, advertising, marketing research, empowered consumers, open innovation, segmentation, co-creation, adaptive experimentation, ROI of marketing, Customer Managed Relationship (CMR), network orchestration, social impact, silos, touchpoints, on-demand, Big Data, empirical generalizations.
Introduction
It is well established that our mental models or mindsets determine the way we see the world, make decisions and act (Wind and Crook 2004).
Therefore, if we are to get the most out of this volume on āthe future of marketing,ā we must (1) understand our mental models of marketing, (2) check to see to what extent they are still consistent with the changing business environment, and (3) if they are not, explore the development of new mental models.
Before starting our discussion it will be helpful if you, the reader, could identify your mental models of marketing.
My mental models of marketing are ā¦
If you have difficulty doing it, and if you are a practitioner, try listing the key (and often implicit) assumptions of your marketing strategy. If you are an academic, try listing the key assumptions of the marketing strategies of firms you follow or of your own research.
My key assumptions are ā¦
Having done this please answer the following questions regarding 10 possible key determinants of successful marketing strategy. Please do so by rating each on a 10 point scale where 10 is ācompletely agreeā and 1 ācompletely disagree.ā
Key to successful marketing strategy are:
| 1. | Controlling my branding strategy ā¦. | _____ |
| 2. | Focusing on targeting the segment of my heavy users ā¦. | _____ |
| 3. | Having an effective CRM system ā¦. | _____ |
| 4. | Focusing on each of the 4Psā¦. | _____ |
| 5. | Understanding the 3Csā¦. | _____ |
| 6. | Understanding the consumer purchase funnel ā¦. | _____ |
| 7. | Centering the strategy on a benefits-based positioning supported by product featuresā¦. | _____ |
| 8. | Basing the strategy on insights from consumer surveys and FGIs ā¦. | _____ |
| 9. | Basing the resource allocation on the results of marketing mix modeling ā¦. | _____ |
| 10. | Focusing the efforts on the selected optimal strategy as reflected in the advertising campaign ā¦. | _____ |
If your score is 50 or higher, then you are still subscribing to the traditional mental model of marketing that ignores the transformative power of the empowered and skeptical consumers and the advances in technology that facilitate it.
The premise of this chapter is that the increasing size and importance of the empowered consumer segment, the technological advances powering it and the other changes in the business environment (as illustrated for example in the 2012 āDid you knowā video: httĀp:/Ā/wwĀw.yĀoutĀubeĀ.coĀm/wĀatcĀh?vĀ=YmĀwwrĀGV_ĀaiEĀ/) all require challenging the mental models of marketing.
We all accept the fact that the iPhone challenged and changed the mental models of the mobile phone industry, iTunes challenged and changed the mental models of the music industry, Facebook and Google challenged and changed the mental models of digital advertising, and breakthrough innovations have challenged and changed the mental models of the industries they targeted. Consider for example the illustrative brands listed in Table 1.1, all of which challenged and successfully changed the mental models of their industries.
Table 1.1 Breakthrough innovations that challenged and successfully changed the mental models of their industries | Innovators in & | | | |
| Digital | Transportation | Retail | Products/Brands/Services |
| Twitter | Google Car | Apple Store | Viagra |
| YouTube | Tata Motors | Costco | Sayaka Endoscope Capsule |
| Google | NetJets | Walmart | Cirque Du Soleil |
| Samsung | Toyota Prius | Starbucks | Post-It |
| iPhone | Southwest Airlines | Home Depot | XNA Creators Club |
| iPad | | Groupon | FedEx |
| Facebook | Games | Ebay | Hopper |
| Napster | Microsoft Xbox | PriĀcelĀineĀ.coĀm | Google Glasses |
| MITās Media Lab Laptop | Wii | Build-a-Bear | Quicken |
| TiVo | Zynga | | Prosper Loans
Nike
CNN
ATM |
The objectives of the chapter are to (a) briefly discuss the reasons for the need to challenge the current mental models of marketing, (b) propose new paradigms for marketing strategy, advertising and marketing research, and (c) outline ways to implement new mental models of marketing.
The challenges to the current mental models of marketing
The increasing importance of the segments of empowered and skeptical consumers coupled with the enormous advances in science and technology, as well as the challenging and changing socioeconomic realities around the world, has resulted in increased complexity and uncertainty in doing business. The magnitude and speed of the changes in the business environment have led to a situation whereby most business leaders believe that their organizations are not ready to cope effectively with these changes (IBM 2010). Similarly, most CMOs believe that their organizations are not prepared to deal with the new forces affecting marketing including data explosion, social media, growth of channel and device choices and shifting consumers characteristics (IBM 2011).
The IBM Global CEO study further explored the key characteristics of those firms who were successful both before and after the 2008 crisis. Their analysis identified 3 key characteristics ā embody creative leadership, reinvent customer relationship and build operating dexterity. Effectively following these prescriptions and addressing the changing business environment requires challenging the mental models of the business, and in particular, of marketing.
To illustrate the need to challenge the mental models of marketing, letās consider the reasons why the mental models underlying the 10 questions you responded to in the introduction are no longer valid in the age of the increasingly empowered consumers.
1. Controlling my branding strategy. While branding and branding strategy are important and often viewed as major CMO roles, it is important to note that it is consumersā perceptions of, preference for, conversations about, and behavior toward the brand that determine its value ā and increasingly, companies have less control over their brands.
2. Focusing on targeting the segment of heavy users. While engaging and nurturing the heavy user segment is important, the findings of Byron Sharp clearly show that one cannot ignore the light users (Sharp 2010). Similarly, the findings of Peter Field show that campaigns focused on penetration are much more profitable than those focused on loyalty (Field 2011).
3. Having an effective CRM. While an effective CRM system is becoming a must-have component of any organizationās customer relationship management efforts, it does not address the challenge of the increasingly empowered consumers. To effectively engage the empowered consumers, firms should consider the development of a Customer Managed Relationship (CMR) platform in which the customers can manage their relationship with the firm and its competitors. American Airlinesā Sabre system that facilitated the travel agentsā interactions with all airlines and not only AA is a good example of such a development. The advances in apps allow today the development of CMR systems for customers of almost any product and service area from cosmetics to financial services.
4. Focusing on each of the 4Ps. While Product, Price, Promotion and Place are still important components of the marketing mix, they: ignore other key components (such as segmentation, positioning, and customer relationship); ignore the importance of the integrated offering across all the firmās touchpoints with their potential consumers (the interaction among the 4, and more, Ps); and most critically, they are based on the assumption that the firm is in control, ignoring the need to develop platforms to engage the empowered and skeptical consumers.
5. Understanding the 3Cs. While building oneās strategy based on the understanding of the Customers, Company and its Competitors is still important, the 3C model tends to ignore other key stakeholders ā such as the government, suppliers, retailers, partners and strategic alliances, and analysts who can have major impact on a firmās business and marketing strategy.
The 3C model also tends to ignore the importance of engaged employees as both a source of innovation and as the firmās ambassadors. And while the model should be applied globally, it is often limited to the markets the firm currently serves, ignoring other emerging markets of the future. Most critically, it ignores the needed shift from the firm to the network in which the firm is embedded.
6. Understanding the consumer purchase funnel. While understanding of consumer behavior is as important as ever, the purchase funnel concept is obsolete. The funnel fails to recognize the empowered and skeptical consumers, the proliferation of touchpoints, and the changing consumer behavior that includes the likes of the Zero Moment of Truth (Lecinski 2011) and the evolving nonlinear, dynamic and more complicated behavior captured by the concept of the āConsumer Decision Journeyā advocated by the McKinsey Quarterly article by that name (Court et al. 2009).
7. Centering the strategy on benefit-based positioning supported by product features. While benefits supported by product features are still relevant for positioning, we cannot ignore the implications of the consumer ability to compare the product features and prices of all products and services. This ability to compare product features on all screens, including smartphones, is dramatically changing the nature of retailing (as evidenced by the fear of many retailers of becoming the showroom of Amazon.com) and positioning. Positioning in the age of the empowered consumers who are power...
