FIVE FACTORS DRIVING MARKETPLACE COMPLEXITY

IN THE FUTURE OF MARKETING

The Greek philosopher Heraclitus said, “The only thing that is constant is change,” and nowhere does

this seem truer than in the world of consumer packaged goods marketing. Change seems to happen

more frequently and with more severe consequences than ever before.

Christopher Brace

The systems he is referencing are those based on the outdated, industrial formula for success we discussed

in the last white paper, “The Future of Marketing — Changing Marketers’ Mindsets.” We need a more stable

foundation — emotional truths — on which to handle the major factors that will drive marketplace complexity

over the next ten years.

BIG DATA DIGITAL/SOCIAL MEDIA

OMNI-CHANNEL SHOPPING

DECLINING BRAND LOYALTY

ROI MEASUREMENT

A 2011 IBM global study of CMOs1 identified increasing complexity and turbulence as their number one

concern for the future (results confirmed in the 2014 study).2 This makes us ask, “What’s making marketing

so much more complex?” The two biggest factors are uncertainty and ambiguity, but it’s the latter that

is having the most significant impact. Uncertainty is when you know the variables in the game but you

don’t know their values. Ambiguity is when you don’t even know the variables. Today, CPG structures and

processes focus on dealing with uncertainty when, in reality, they need to be concerned about ambiguity.

There is a disconnect between the types of problems companies need to solve and the ones they are

structured to solve. When we don’t know what we don’t know — ambiguity — our gears come to a grinding

halt. In a 2012 Fast Company article, “This is Generation Flux: Meet The Pioneers of the New (And Chaotic)

Frontier of Business,” author Robert Safian stated:

“Public, private, and government institutions have structures and processes built for an industrial age, where efficiency is paramount but adaptability is terribly difficult. We are finely tuned at taking a successful idea or product and replicating it on a large scale. But inside these legacy institutions, changing direction is tough. We have been trained to expect an orderly life. The expectation that these systems provide safety and stability is a trap.”

1. From Stretched to Strengthened: Insights from the IBM Global CMO Study, 20112. Stepping up to the challenge: CMO Insights from the Global C-Suite Study, IBM Institute for Business Value, 2014

The immense power of today’s computers is facilitating

the analysis of massive amounts of data collected

through digital and social media. This analysis of big

data is often heralded as the panacea for all marketing

problems. How many times have you heard this in the

halls of your company, “If we only had more data we

would know exactly what to do!” The fact is, companies

don’t know what to do with the data they already have.

They frantically try to run the perfect set of analyses that

will give them all the right answers. The problem with

panaceas is they rarely prove to be the solutions they are

promised to be, and big data is no different.

There are two major caveats to keep in mind when it

comes to big data. First, the analysis is often done in

isolation of the company’s key strategic growth initiatives,

so too often hard to activate immediately. Secondly, big

data is heavily behavioral in nature, and consumers and

shoppers’ behaviors change continuously. By the time a

company analyzes the data and draws conclusions from

it, the behaviors on which it is based may have already

changed. This is not to say that big data is not relevant,

because it is extremely relevant. However, we need to

link data directly to the company’s key strategic growth

initiatives so it creates as well as captures value for the

brands. We also need to realize and accept the limitations

of data.

BIG DATA DIGITAL/SOCIAL MEDIA

Digital and social media are also being sold as

cure-alls. We can connect with our consumers

and shoppers at almost any point in their day

with technology. This has led marketers to believe

that if we push the right offer identified through

analysis of big data — no matter when that offer is

pushed — then we’re successfully using digital and

social media. The problem is, just because we can

push an offer doesn’t mean we should. One of the

biggest challenges we as marketers face is: are we

connecting with our consumers and shoppers at the

right place and time, with a message that contains

the right amount of emotional resonance?

The companies and brands that are connecting

successfully are the ones who understand the

strategic role digital and social media can play in

the telling and deepening of the brand story. By no

means should we ignore value-added offers, but

we need to understand that monetary incentives

are not the only way to convert consumers into

shoppers. There are two ways to persuade shoppers

to purchase your brands: you can manipulate them

or inspire them. Today, we spend most of our efforts

manipulating via price promotion. We need to start

inspiring shoppers with stories that strike the right

emotional resonance. There is a physics principle

applicable to this topic: as resonance increases,

resistance decreases. The more emotionally resonant

our messaging, the more successfully we overcome

consumers and shoppers’ resistance. Emotion is the

new currency in the game of conversion.

Loyalty is a very tricky subject especially within the

context of marketing; it’s often discussed but largely

misunderstood. Some scholars such as Dr. Byron

Sharp of the Ehrenberg-Bass Institute don’t believe it’s

reasonable to assume we can affect brand loyalty. In

fact, these scholars don’t support that building loyalty

is the purpose of marketing at all. Yes, loyalty is on the

decline, but this does not mean it’s now out of reach

for marketers. To deny loyalty as a goal undermines a

key aspect of what marketing should be about. Today,

marketing’s sole purpose is to sell things: a mentality

that drives brands to resort to cheap manipulation

through price promotion that is anything but cheap.

But what if marketing were about building deeply

emotional relationships that are leveraged to sell goods

and services? We would then be forced to realize

that real brand loyalty consists of both emotional and

behavioral loyalty.

Rather than focusing solely on behavioral loyalty, as

we do today, brands need to switch their attention to

developing emotional loyalty. The more emotionally

loyal the consumer, the easier it will be to translate that

into shopper loyalty. Concentrating our efforts and

dollars on building emotional loyalty up front means

investing less effort and money on the backend to

trigger desired behaviors.

Omni-channel is a big buzz word in CPG today.

In fact, many companies are wondering if omni-

channel marketing is the natural evolution of Shopper

Marketing. We don’t subscribe to this notion for a

few key reasons. While shopping across multiple

online and brick-and-mortar retailers will continue

to increase, they all still share the same entity: the

shopper. Shopper Marketing, in its simplest definition,

is the recognition of the shopper as a new strategic

target which does not change with an increase in

omni-channel shopping. While omni-channel is a

very relevant and important topic within Shopper

Marketing, it is not a replacement for it.

Another reason we do not subscribe to the above

notion is that omni-channel will quickly evolve to

borderless shopping. Today, the lines between online

and brick-and-mortar are blurred, but in the future,

those lines won’t exist at all (Maybe we are there

already?). We have only just begun to think about the

implications of borderless shopping. Take for example

Amazon’s Dash Wand and Buttons, which allow people

to purchase instantly when the need is triggered. This

is real borderless shopping and it is the reality of our

future as marketers.

DECLINING BRAND LOYALTY

OMNI-CHANNEL SHOPPING

Marketing’s ability to prove that it adds real financial value to corporations seems to be

under some debate as of late. This has spurred a firestorm of discussion around how

to best measure ROI and attribution. A vast majority of companies are measuring the

performance of each tactical function — social, digital, print, TV, shopper, trade, etc —

separate from the other tactical functions in the marketing plan. Put more simply, if

you have $5 in your marketing plan: $1 each for TV, print, digital, shopper, and trade,

companies want to know the return on investment of each individual dollar. This approach

is propagated by the fact that each function has a vested interest in out-performing the

others because it means greater funding next year. The concern about this approach —

measured through marketing mix analysis — is that marketing has become much too

complex to make these calculations reliable. Can a black-box formula make distinctions

between the sales attributable to TV versus print or trade that even the consumers and

shoppers themselves cannot make?

Another, possibly better approach, is to measure the $5 plan in an integrated manner

and then run test-and-learn scenarios. For example, let’s say the combined $5 plan gets

a payout ratio of 5:1 in year one. Then, in year two, we move $.50 from TV to digital and

$.50 from trade to shopper to get a payout ratio of 6:1. We’re still getting the information

we need to make informed decisions but in a more realistic manner given the complexity

of today’s marketplace.

Known as these five factors are, few CPG companies have adapted their business

practices to provide themselves a stable enough foundation on which to sustain these

changes. And these are only a few of the difficulties organizations will face in the future

of marketing. Not only are there other well-discussed challenges like shifting consumer

demographics, customer collaboration, and corporate transparency, there are additional

less-discussed difficulties we will cover in the next white paper, “Five Hidden Factors

Impacting the Future of Marketing”. While organizations exert great effort towards

changing internal processes believing this will solve these challenges, they spend little

time challenging the thinking that goes into those processes. To successfully contend with

the increasing complexity in the future of marketing, we must first change how we think,

then adjust our processes accordingly.

ROI MEASUREMENT

Christopher Brace is the CEO and founded Syntegrate Consulting in 2006. He can

be reached at brace@syntegrate-consulting.com.

Syntegrate Consulting is an insight-based strategic consulting firm that specializes

in helping clients build better brands, communications, and go-to-market

strategies that create new value in the marketplace through syntegration: the

bringing together of dissimilar research, knowledge, insights, and people to create

something completely new.

Please visit our website at www.syntegrate-consulting.com.