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CAMBRIDGE MARKETING REVIEW Review

CHANGING CUSTOMERS

CHANGING CUSTOMERS FEATURES

Making Sense of Big Data by Steve Messenger The EU Data Protection Act - How do you process your customer data? FEATURES

Peter Fisk: Marketing Mash-up Forecasting the Future for Profit Paul Fifield and John Greenhough: If It Aint Broke... VIEWS

Lego’s Longevity Strategic Digital Marketing CIM’s Book Reviews

ISSUE 8 SPRING 2014


Cambridge Marketing College has produced a set of handbooks available from Amazon now


CONTENTS

CONTENTS 5 EDITORIAl 7

MEET THE EDITORIAL BOARD

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UPCOMING THEMES CHANGING CUSTOMERS

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Making Sense of Big Data: as easy as ABC? Steve Messenger describes the current context and challenges of Big Data.

14 The EU Data Protection Regulation: changing how you hold and process customer data The aim of the Regulation is to harmonise the current data protection laws across the EU member states. The current situation is “monitor” but don’t panic. 19 No longer ‘Us’ and ‘Them’ We all remember the days when adverts just simply told us what to buy and where from. Big advertising corporations spent time and money creating adverts for a specific group of individuals and placed them in our favourite magazines and between our guilty pleasure TV programmes. However, times are changing, the push is becoming a pull. 23 Measuring the Things You Fear the Most Marketing is consistently accused of being unable to measure its own effectiveness. Unfortunately this view is equally consistently justified by marketers who either refuse, or are too afraid, to measure the impact of what they do in a regular and transparent way.

FEATURES

28 Forecasting the Future for Profit Markets are complex and multidimensional but it is possible to forecast the future behaviour of a market with a high degree of accuracy. This article looks at how using a unified market model across the organisation allows marketers to understand the complexity of their marketplace.

34 Marketing Mash-up Peter Fisk explores the best new ideas in the world of brands, innovation and marketing. 38 A day in the life of….Anne Godfrey, CEO of the Chartered Institute of Marketing This issue steps into a day in the life of Anne Godfrey, Chief Executive Officer of the Chartered Institute of Marketing. 40 IF IT AIN’T BROKE…(AS THE WELL KNOWN SAYING GOES)…BUT WHAT IF IT IS BROKE? During our research into the challenges of the new business reality, several senior executives pointedly remarked to us that the first big issue for senior management teams was not finding new solutions but seeing the problems in the first place. This article we focus on whether there is a problem. VIEWS

48 Strategic Digital Marketing This article looks at the effect digital has had on the marketing industry and highlights how important it is for marketers to address digital marketing from a strategic perspective. 50 Marketing Book Reviews by Dawn Southgate Looking for a good book to get your teeth into? Then explore these three books that have been chosen by Dawn Southgate, Head of Information at the Chartered Institute of Marketing. 52 Lego’s Longevity Nick Wake looks at the enduring appeal of Lego and examines how the brand has evolved over the years to remain relevant within the children’s toy industry. 55 THE YIN-YANG OF BRANDED CONTENT MARKETING Justin Kirby draws on his research for his new book ‘The Best of Branded Content Marketing: 10th Anniversary Edition’, to look at what content marketing actually means, and how to develop a branded content marketing strategy. CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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Publishing Editor: Emma Garland Publishing Director: Andrew Hatcher Chairman: Charles W. Nixon Editorial Board: Charles Nixon, Andrew Hatcher, Anne Godfrey, Peter Fisk, Debbie Frost, Phil Ore, Roger Palmer, Theo Dingermans and Emma Garland. Contributors: Charles Nixon, Andrew Hatcher, Lorna Brocklesby, Jonathan Davenport, Nick Milner, Kay Sharpington, Peter Fisk, Anne Godfrey, Dawn Southgate, Nick Wake, Paul Fifield, John Greenhough, Steve Messenger, Sarah Nagra, Kiran Kapur, Justin Kirby, Don Moyer, Melissa Nixon and Shane Minett. Contact: Cambridge Marketing Review 1 Cygnus Business Park Middle Watch Swavesey Cambridgeshire CB24 4AA Tel: +44(0)1954 234941 Fax: +44(0)1954 234950 Email: cambridgemarketingreview@marketingcollege.com Issue VIII Spring 2014 ISSN 2047-962X Printer to put FSC logo in here Design and layout by Lorna Brocklesby Front cover photograph:

Subscribe to Cambridge Marketing Review An annual subscription of 4 issues costs: PRINT • £95 – hard copy print editions, accompanied by 4 digital (PDF) editions • £75 – specially discounted rate for Alumni of Cambridge Marketing College Please contact the editor, Emma Garland, to subscribe: Tel: +44(0)1954 234 940 Email: cambridgemarketingreviewmarketingcollege. com »»

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Diagrams and illustrations redrawn by Lorna Brocklesby/Kirsty Jones. Cambridge Marketing Review is published quarterly by Cambridge Marketing Press Printed by Cambridge Digital Press, Cambridge: www.cambridgedigitalpress.com The views expressed in contributions to Cambridge Marketing Review are not necessarily those held by the publishers. ©2014 Cambridge Marketing College. All rights reserved. You may photocopy this journal for collaborative study purposes.

Feature in our next journal Submit an article to us and it could appear in the next Review. It is a great achievement to add to your CV and can help boost your reputation. All ideas and thoughts on marketing related issues are welcome. Email: cambridgemarketingreview@marketingcollege.com for more details. Most Cambridge Marketing Review articles are accompanied by a word cloud from wordle.net. You can use our clouds to assess the themes of the article: the larger the word, the more times it appears in the text. If you would like to comment, please contact the editor, Emma Garland. Tel: +44(0)1954 234 940 Email: cambridgemarketingreview@marketingcollege.com

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CONVENTIONS: • We are marketers not marketeers; we are not cavaliers. • We practise marketing not advertising or PR. • When we refer to products, we mean products and services. Otherwise we refer to offerings.

CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014


EDITORIAL

EDITORIAL From Emma Garland, Publishing Editor of Cambridge Marketing College.

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elcome to the first issue of 2014. Last year saw the launch of our very own Marketing Handbooks. These ten Handbooks, written by our own tutors, who are all professional marketers, cover everything you need EMMA GARLAND to know about the key elements of the marketing mix. A special thanks to Kogan Page for making it all possible. This year we will be building on these with new publications and the Cambridge Marketing Review biweekly radio show on 107.9/1 FM which launched in February. We have made some interesting changes to Cambridge Marketing Review too. We have packed in some new regular features and our upcoming themes for the year have been set by our brand new Editorial Board, which met for the first time earlier this year. You can find out more about the Board on page 7. And to keep you up to date with the Review on a more regular basis, we will be sending out monthly newsletters, packed with exclusive online articles, so you can now get your Review fix between issues. The Annual Dinner Don’t miss out on this year’s Annual Dinner at St John’s College, Cambridge on Wednesday 9 July, with this year’s special guest speaker, Gregory Roekens, CTO at Abbot Mead Vickers BBDO. Gregory, who was recently named as one of Campaign’s top five creative technologists to watch, will talk about how technological innovations are causing new consumer behaviours and how they are fuelling a new form of industrial revolution. For more information and to book your place, contact Shane@marketingcollege.com. This issue Back to the Review, this issue is focused on ‘Changing Customers’. It considers changes in customer behaviour, sophistication, and tolerance. The focus shifts away from B2B and B2C towards ‘relationships’. How is your customer influenced? What new priorities do they have? How might these change as some economies recover and others slow down? How do you research behaviour and

manage superior buyer knowledge and cynicism? What is the future for bricks and mortar and physical customer interaction? This edition includes a new, regular marketing mash-up from Peter Fisk, an insightful look at the challenges facing Anne Godfrey at the Chartered Institute of Marketing in ‘A Day in the Life of’; and a nostalgic look at the longevity of Lego by Nick Wake. We hope you enjoy this issue and if you would like to subscribe to further issues or write an article for us, please get in touch at: cambridgemarketingreview@marketingcollege.com. We look forward to hearing from you soon. Emma Garland Publishing Editor

Emma joined Cambridge Marketing College in August 2012 and quickly made her mark managing some of the College’s on-going publishing projects, including study guides, the Review and more recently the College’s own Marketing Handbooks. She has over 9 years’ experience in corporate communications, working with listed stock-exchange quoted companies and currently works for Soup Creative Ltd, a creative video production studio in Chester.

CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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EDITORIAL BOARD

editorial board

Meet the Editorial Board he Cambridge Marketing Review Editorial Board is made up of professional marketers from around the world, with wide-ranging areas of expertise. We are delighted to have the following people on board, who have already contributed a wealth of knowledge and insight:

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Charles Nixon Charles is Chairman and a founding director of Cambridge Marketing Colleges. He has many years’ of marketing experience across a broad range of industries including textiles, software, telecommunications and financial services. Charles has an MBA from Warwick Business School and is a Fellow of CAM, CIM and the Royal Society of Arts. Andrew Hatcher Andrew is the Managing Director of The Applied Knowledge Network Ltd. He has a long history of assisting with the identification, development and management of innovative solutions within large and small companies across the business spectrum. Andrew is a tutor at the College and is also Publications Director of the Cambridge Marketing Review. Anne Godfrey Anne was appointed CEO at the Chartered Institute of Marketing in August 2012. Previously CEO of the GTMC, Anne has had leadership roles in a diverse range of membership organisations including the Law Society, where she was director of commercial and membership services and the CBI where she was commercial director. Peter Fisk Business and innovation, brand and marketing expert and founder of GeniusWorks. Peter is an experienced consultant and coach, a well-renowned keynote speaker and business author of six books.

Debbie Frost Debbie is Director of Communications and Public Affairs at Facebook, based in San Francisco. Debbie has an LLB (Honours) in Law from the University of Warwick and has worked as Head of International Communications at Google, as well as European Communications Manager at Nike.  Phil Ore Phil is currently Managing Director at Elmwood Australia (Brand Design). Phil has a wealth of experience in the telecommunications industry where he “re-invented” himself several times from an engineer through to sales and finally marketing. Roger Palmer Roger Palmer, former Dean of the Business School at Bournemouth University. He has varied commercial experience in the chemical, manufacturing, food and pharmaceutical sectors. He started his career as a research scientist with ICI and after taking his MBA held positions as Marketing Director of a large manufacturing company and then Chief Executive of the UK/Ireland division of a multinational pharmaceutical business. Theo Dingemans Theo, based in The Netherlands, is an experienced Chartered Marketer, manager and self employed consultant in Marketing and Business Administration with over 25 years’ experience in international marketing and interim-management in profit and not for profit organisations. Theo is also the Regional Manager for BeNeLux for Cambridge Marketing College. He has a KHO Diploma in Business Administration, the CIM Postgraduate Diploma in Marketing as well as a Master of Arts in Marketing. He is also a MCIM and a Chartered Marketer.

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upcoming themes

This year’s upcoming themes Following discussions with the Editorial Board and other marketing experts the following themes for 2014 have been proposed: 2014 Q3 Edition: Marketing Influence This edition will focus on what skills, knowledge and behaviours marketing practitioners need to have in order to increase their input to and influence on executive strategy making and key decisionmaking. It will consider the need for better financial understanding and skills so that marketing is recognised as essential for growth; more in-depth understanding of strategy creation and implementation; the importance of HR and team compatibilities; training development planning; and strategic effectiveness and measurement. 2014 Q4 Edition: Agile Marketing This edition will focus on the challenges and opportunities that new skills and technologies create for faster and more effective marketing responses to changing market/customer structures, attitudes and desires. It will consider the new capabilities and mindsets required; the integration of marketing approaches across technologies and media; and how these can be orchestrated to deliver dynamic and effective marketing responses in elements such as pricing, channel usage and product/service creation. 2015 Q1 Edition: Different/Future Markets This edition will focus on how different markets demand different approaches, dependent on industry, geography, growth stage, culture and a range of other parameters. It will consider how ‘older’ economies (Canada, Italy, and the UK) are adapting to the change and how newer economies (Indonesia, Brazil, and parts of Africa) are leapfrogging old ideas. It will focus on the need for a global mindset and the potential to reshape markets with new strategic thinking and innovation.

If you are interested in writing an article, be it an opinion, a review or your findings on any of the above themes, then get in touch with us at Cambridgemarketingreview@marketingcollege.com. We look forward to hearing from you.

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CHANGING CUSTOMERS

Making Sense of Big Data: as easy as ABC? Steve Messenger describes the current context and challenges of Big Data. He illustrates how brands can gain competitive advantage by gaining deeper and more accurate insight into how specific drivers of consumer behaviour impact on current and future share of wallet, so that they can tailor their marketing programmes more effectively and profitably to individual customers and segments.

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s brands fight the ever raging battle against their competitors, they are under greater pressure to delve deeper into increasing volumes of what is now termed ‘Big Data’ in order to gain a more accurate understanding of the current and future buying behaviour of their STEVE MESSENGER customers. But how can this be done? As practitioners in the field, we have developed a model for separating and then analysing consumer data across three dimensions: attitudinal, circumstantial and behavioural to reveal an ‘Effective Net Preference Score’ (ENP). This results in a true picture of the key drivers of consumers’ motivations and their preferences for differing brands. Results from our research and work with major brands prove that brands do not have to be overwhelmed by the sheer volume of customer data when there is in fact a simple solution. Challenge:The complexity of Big Data The classification of Big Data in itself is a challenge, and the irony lies in the fact that not much of it is that ‘big’. Indeed Big Data would be more accurately described as “unwieldy data” because it is ”analogous” in nature, comprising pictures, video, random Tweets, Facebook posts and other information which is not easily classifiable or grouped together. In addition, compared with the volumes of conventional data available – for example a single UK supermarket chain generates over 30 million pieces of transactional information every day – much of the brand data collected by Social Media monitoring platforms only goes back 30 days and fits into one Excel worksheet. 

“Big Data is “analogous” in nature, comprising pictures, video, random Tweets, Facebook posts and other information which is not easily classifiable.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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“brands delve deeper into ‘Big Data’ in order to gain a more accurate understanding of the current and future buying behaviour of their customers.” Though the requirement for marketing data analysis is widely agreed upon, the actual tools and procedures available today can vary due to their complexity. Indeed currently, the main challenge with Big Data is that the tangible potential advantages of such information are stymied by the lack of customer/consumer-facing systems to analyse the data in real time. This in turn makes it difficult to use the information for anything other than gathering general views. The challenge for brands is therefore to find a structure and process to extract the most valuable information from this data, especially as it is within this data that brands can find out more about their customers than ever before. Current Methods of Data Collection Loyalty programmes are of course very popular with brands and, because of their benefits, they are popular with customers too. Recent research 1 from SAS and Conlumino (2013) shows that UK consumers are keen to sign up for such programmes (and agree to the tracking of their purchasing habits), with nearly 95% saying that they owned more than one loyalty card, and 90% of adults claiming that they used loyalty programmes regularly. It also goes further than that: around 40% of British consumers said that they would be less likely to use a retailer if they did not have a loyalty scheme in place. From our research we have found that in Europe as a whole, more than 112 million retailer loyalty cards have been issued, and cumulative investments made in the people and IT to support and leverage these schemes run into many billions of pounds. Brands have been benefitting from loyalty card schemes in two ways: as a data source of consumer purchasing behaviour but also as a means of distributing and tracking in real-time the take-up of Money Off Next Purchase (MONP) coupons to stimulate additional spending. However, so far the opportunity to use them to increase long term brand preference has largely been missed. This begs a new approach from brands, one which will result in a more accurate view of current and future spending patterns amongst customers by identifying more accurately their customers’ true motivations and true preferences for differing brands. This in turn requires better

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systems to integrate data from differing sources, distil it into the three key dimensions we assert are relevant, and then respond to the implications. Solution:The New ABC Model Anthropologists have known for a long time that it is the mix of attitudes and circumstances that determine people’s decisions. In essence the combination of people’s views on “What’s possible?” and “What’s important?” will determine their view of “What’s best?” and ultimately that combination will be what drives their behaviour. Conveniently, the key areas that brands need to focus on in order to be able to leverage all types of data, irrespective of source, can be tagged the ‘ABC of Big Data.’ • • •

Attitudes Behaviours Circumstances

A: Attitudes As analysts and practitioners, we have begun by leveraging methods of consumer understanding forged over decades in the market research industry that help to classify attitudes into five key dimensions and then refining these through extensive research conducted with major companies. These five dimensions have been proven to influence choice behaviour and when combined with an understanding of the consumer’s current circumstances (which now means where they are and what they are doing, not just who they are and where they live) form the key motivational drivers that determine actual observed behaviour. The five key attitudinal measures are: • Relevancy (Right Product/Service) • Identification (Right Brand(s)) • Accessibility (Right Means) • Value (Right Price) • Confidence (Right Way) In fact, all we are doing here is thinking like the user/ buyer: • Will this do the job I need? (Is it a soft drink?) • Is this a brand I am happy to be associated with? (Do I like its image/reputation?) • Is it obtainable? (If I believe it is only in pubs I am less likely to look elsewhere) • Is it value for money versus the other options open to me? • What is the risk it will not deliver its functional promise? (i.e. quench my thirst?)

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CHANGING CUSTOMERS

Clearly, if a brand has a high proportion of consumers agreeing with all of these, then they are likely to be progressing towards achieving sales performance growth and maximising their market share. They have created a higher level of ‘Brand Pull’ or ‘Brand Preference’ that, other things being equal, will lead to their brand being chosen more often than the competition. To make this more practical we can simplify the process by taking a weighted score across the 5 dimensions that enables companies to rate their brands on a scale of what can be termed Effective Net Preference (ENP). This then becomes a summary measure of customer favourability or attitude towards their brands which can then combined with the circumstance information to predict future individual behaviour. Mining Big Data to see how well brands are doing on these dimensions is now a feasible option. Our research and experience working with major brands shows that there are strong links between the ENP score and share of wallet at the individual customer level, as highlighted in the chart below.

B: Identifying Behavioural Data Behavioural measures are straightforward: recency, frequency, weight of purchase, share of wallet, penetration and other measures are well-known. It is important, however, to use data that is reflective of the consumers’ actual behaviour in order to prove the case that the models are truly predictive as well as descriptive. Claimed behaviour can suffer from ‘selective memory’ and, depending on the market, the answers given may well be different from actual behaviour, making it much less reliable. When it comes to research, the degree of brand loyalty may also be much greater than consumers would claim when doing, for example, a brand price trade-off research exercise. Such exercises are notorious for producing price sensitivity results based on pure rationalisation, with very little emotion factored in. Consequently, the price sensitivities they produce are not borne out in reality. However, claimed behaviour (from whatever source) can be used provided it is recognised as such and is ‘calibrated’ to actual behaviour using, for example, actual transactional data.

Share of Wallet vs. Effective Net Preference

Share of Wallet

Vulnerables

Opportunities

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Effective Net Preference (ENP) The relationship between Effective Net Preference (ENP) score and share of wallet at individual customer level.

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In other words calibration enables brands to use claimed data from research and social media sites to obtain/extrapolate estimates of what the real financial benefits or impacts will be, rather than having to base them all on less reliable, purely claimed, behaviour. And as mentioned above, the other key difference between claimed and actual behaviour is that actual behaviour is driven by both attitudes and circumstances, whereas claimed behaviour is mostly driven by attitudes. For example, people will aspire to buy ‘better quality’ brands and consequently in many research studies, claimed purchasing of market-leading brands is often higher than reality. Whilst people may aspire to these brands, they do not necessarily have the disposable income to buy them every time, if at all. This is an example of how ‘circumstances’ combine with ‘attitudes’ to create the actual ‘behaviour’ that is seen in transactional data. The theoretical model 2 underpinning this approach was first applied in the USA (Dick and Basu, 1994, from The Academy of Marketing Science at New York University) and has been proven to be very accurate in its predictions. It is based on anthropological science and is no doubt one of the reasons why Google is spending so much money tying together seemingly unrelated databases - the better the picture you have of people’s attitudes and circumstances the more reliable your predictions of individual behaviour become.

“Analysing consumer data across three dimensions: attitudinal, circumstantial and behavioural to reveal an ‘Effective Net Preference Score’ (ENP).” C: Challenging Consumer Circumstances Understanding consumer circumstances remains the final challenge. The ability to respond to real-time customer circumstances is probably still a futuristic idea for most retailers and manufacturers, although the means to make it a reality is developing rapidly. The use of mobile technology is facilitating this but for marketers the one big danger lurking in this new technology is that it drives more and more marketing funds towards short term, non-brand building (in fact, brand destroying) activities like price promotion.

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“the main challenge with Big Data is that the tangible potential advantages of such information are stymied by the lack of customer/ consumer-facing systems to analyse the data in real time.” The biggest challenge of all is make sure that the technology is used to enhance brand strengths not undermine them. But that is a separate debate. Examples of the Benefits of the ABC approach: Three Case Studies 1. We work with a company that provides airport transfers between central London and one of London’s key airports. By reviewing behavioural data, we were able to understand who did what, and when; attitudinal data revealed customers that preferred differing modes of transport and why; and the circumstance data showed that, when other things were equal, people were much less likely to use the service if they came from Germany. After discussion with the client, we discovered that the client currently had no German website. This simply illustrates the benefit of the ABC approach: identifying and understanding the difference that each element makes. 2. RedRoute worked with a well-known mobile phone company which wanted to use a third party brand on their phones. We interpreted their Big Data to identify the attitudes of people who would be attracted by such a proposition; and helped them to use their customer database to identify whereabouts in the country they would be located. Stores were stocked and prices were set accordingly. They had the most successful take-up for a new phone to date. But this was only achieved because of the overriding vision that attitudes and circumstance are what drive behaviour. 3. Our third example is from our work for a major UK DIY retailer. We used data combining transactional information (from their loyalty card programme) with Big Data on both attitudes and circumstances gathered from customer surveys

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Conclusion With popular retailer loyalty schemes tracking behaviours, and Big Data giving views into attitudes and circumstances, the opportunity to understand What? and Why? has never been better. Every brand can now have an ‘ABC Kaleidoscope’ that combines the retail picture of consumer behaviour with the Big Data picture of attitudes and circumstances, and one which empowers brands to make better decisions. At RedRoute we are currently using these models and methods to help major brands make the most of Big Data, to help them tailor their marketing programmes effectively and more profitably. We are helping brands serve customers of today and tomorrow. The two big challenges that are currently being addressed are real-time analysis and response and, more fundamentally, using Big Data to enhance the customer experience not cheapen it. Several years of IT investment will be needed before the first of these will have been tackled effectively and RedRoute is working with both retailers and shopping centre landlords to help them realise the opportunities. For the second challenge, the way forward is for clients to use the ABC approach to track customer

“Claimed behaviour can suffer from ‘selective memory’ and, depending on the market, the answers given may well be different from actual behaviour, making it much less reliable.”

CHANGING CUSTOMERS

and other interactions. From this a model of expected customer visit frequency was developed. This model proved to be 82% accurate in predicting future customer visit frequency and spend throughout the following 12 month period. It enabled the retailer to identify some key circumstance features that drove up visit behaviour (such as having recently moved into a new house or their level of exposure to above-the-line marketing activity) and the mix of attitudes and circumstances that would indicate which parts of the store customers would be most likely to buy from. The value to the client of using this information was very substantial, amounting to over £130m per annum in incremental sales.

sentiment, measure the current Effective Preference Score for their brands and then use the technology to manage their scores upwards, not let the technology drive them to giving way everincreasing levels of discount just because the customer seems to be in the right place at the right time.

“EVERY BRAND CAN NOW HAVE THE ‘ABC KALEIDOSCOPE’ THAT COMBINES THE RETAIL PICTURE OF CONSUMER BEHAVIOUR WITH THE BIG DATA PICTURE OF ATTITUDES AND CIRCUMSTANCES.” References SAS. (2013) Study: 95% of UK consumers appreciate customer loyalty programs. SAS press release, 13th September, https://www.sas.com/ news/preleases/retail-highperformance-analytics.html accessed on 8th Feb 2014 Framework. Journal of the Academy of Marketing Science, 22, 99-113

Steve Messenger is a co-founder and Head of Data Analysis, Modelling and Insights at leading marketing effectiveness company, RedRoute International. Steve co-founded RedRoute International in 2007 and the company’s clients over the years include Viking Direct, Office Depot, Heathrow Airport and Shepherd Neame. With a wealth of market knowledge from experience working both client and agency-side, Steve is a guest lecturer at the Institute of Promotional Marketing, a full member of The Marketing Society and a fellow of the Institute of Direct and Digital Marketing.

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The EU Data Protection Regulation: changing how you hold and process customer data The aim of the Regulation is to harmonise the current data protection laws across the EU member states. Businesses which are based outside the EU but target EU citizens will also be affected (such as US based companies). It would appear that the current situation is “monitor” but don’t panic. Originally due to come in mid-way through 2014, the rules will not now come into place until 2015 at the earliest.

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here is a hype cycle around changes to legislation, particularly anything that affects businesses. The draft legislation is announced; experts and vested interests start scare stories, everyone panics. There is then a long period of negotiation and when the final legislation is in place, it is not as bad as we KIRAN KAPUR were led to believe. If you remember the hype around the so called “Cookie Law” (part of The Privacy and Electronic Communications Regulations), you will remember that when the regulations were first discussed, there were warnings about the end of online marketing. The rules have been in place for a while now and are embedded. Consumers are used to a cookie statement on a website and marketers still use cookies to collect information. The EU Data Protection Regulation has been through a prolonged hype stage of the cycle. It has gone from hype to quiet. The original EU proposals were set out in 2012 and caused consternation. The then Justice Minister Helen Grant said that the annual cost of complying with the draft rules would be between £100m and £360m for UK businesses, public sector organisations and charities. Organisations, such as the DMA (Direct Marketing Association), led calls for amendments to the draft (my favourite was their eye-catching “Data Protection 2013 - 180 days to save your industry”). The proposals were amended by the EU in October 2013 and a new draft created. Partly due to the efforts of lobbying groups such as the DMA, the amended proposals are more workable and less exciting. Much less has been written about these. A brief internet search will uncover plenty of scare stories about the earlier proposals and lots of advice (some now unnecessary) on how to prepare your business for these major changes. Very little is available on the new draft. If you do any research on this, note very carefully the date the article was written. As with all EU legislation, there is a long process of negotiation and much changes between drafts and the final text. Will it affect me? Yes, if you hold customer and enquirer data. However, the legislation will not come into force before 2015.

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If you are designing a new CRM system or any other system of storing customer data, design these changes in so that you do not have to make expensive changes later to the way your customers’ data is stored. How will it work? There are a number of key issues and note that the fines are draconian. The fines in fact have increased between the first and second drafts (possibly as a reaction to the “Snowden” leaks). The fines for breach are up to a maximum of the greater of 100m Euros or 5% of global turnover (this was 1m Euros or 2% of turnover in the first draft). Some key issues: This article is based on the draft proposals published in October 2013. There will be further amendments. There are many issues around the draft and these are the ones that caught my eye. 1 Being accountable: this will entail establishing a culture of monitoring, reviewing and assessing your data processing procedures. The aim is to minimise data processing and retention, and build in safeguards to all data processing activities. 2 Explicit consent: organisations will have to obtain explicit, freely given, specific and informed consent from the individuals whose data it is holding. Consent must be obtained through a statement or “clear affirmative action”. Consent cannot be given through silence or inactivity on the part of individual. Consent is also not given just by using a service. Consent is purpose-limited. Once the purpose ceases, consent no longer exists. There has been much concern about whether this would affect marketing profiling information, The new draft suggests that it is possible that profiling for marketing purposes may not require full prior explicit consent. However, more clarification is needed. The intention of this consent is best understood in the words of the EU commissioner, Viviane Reding: “People need to be

CHANGING CUSTOMERS

In the language of the EU, there is a huge difference between a “directive” and a “regulation”. • A Directive sets out a goal that all EU countries must achieve but each country can decide how to implement it into their own legislation – thus inevitably delaying the implementation and giving businesses plenty of warning. • A Regulation means it will be directly applicable to all EU member states. It must be applied in its entirety across the EU without any changes.

“MONITOR BUT DON’T PANIC.” informed about the processing of their data in a simple clear language they can understand. Internet users must be told which data is collected, for what purpose, how long and how it will be stored. They need to know how it might be used by third parties, they must know their rights and to whom they can address if they think their rights have been violated.” The October 2013 draft also introduces an interesting idea of using standard symbols to explain what happens to data. I understand that this idea may not be taken forward into the Regulation, but it shows the level of clarity the EU is aiming for. Here are some examples given in the draft: 3 “Privacy by design” requirement: this means that when you are designing new systems for holding data (such as a new CRM system) or modifying your current system, you must consider how to minimise the impact on an individual’s privacy. Privacy settings should be the default position. It is not clear if this will be a requirement to change current CRM systems. 4 Data Protection Officer: any company processing personal data of more than 5,000 individuals must appoint a Data Protection Officer. The exact role of this DPO is not defined. 5 Right of erasure: this was originally drafted as a “right to be forgotten”. Generally, this means an individual can ask an organisation to delete personal data stored about them “without delay”. There is a right for organisations to claim that they have a legitimate, legally justified reason to keep the data in their database, but this would be for very specific purposes, such as the archives of a newspaper.

“people need to be informed about the processing of their data: which data is collected, for what purpose, how long and how it will be stored.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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No personal data is collected beyond the minimum necessary for each specific purpose of the processing.

No personal data is disseminated to commercial third parties.

No personal data is sold or rented.

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Intra-group international data transfers: this means transferring data held on EU citizens outside the EU, perhaps for storage or data processing. If your business wishes to do this, you must have a legitimate and justifiable basis for transferring personal data to jurisdictions that are not recognised as having adequate data protection regulation. There is concern that this will affect holding data in the Cloud, depending on where that data is stored. 7 The new “European Data Protection Board”: will be tasked with producing guidelines on a wide range of areas such as methods of verifying consent when processing children’s personal data. What should you do now? The UK Information Commissioner’s Office recommends that you start to review 3 areas of your data in preparation of the full changes:

(1) Consent Whatever is finally in the wording of the Regulation, it is clear that organisations will need to ensure they have explicit consent. So the ancient rule of “qui tacet consentire videtur” meaning “s/he who is

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silent consents” does not apply to holding data. So, start reviewing: 1. What do you do with data that you hold? 2. Do you have explicit, informed consent from your customers and enquirers to carry out your answer to Q1? 3. Can you prove this explicit, informed consent? If the answer to 2 or 3 is no, then start sorting this out now. In the words of the ICO, “In the future you may also need to be able to prove that somebody has knowingly given you their consent, so start thinking now as to how you gather and document this.” Right of Erasure If an individual revokes their consent, or if you did not have their consent in the first place, then you need to be able to erase personal data if you are asked to do so. Make sure that your systems can do this. (2) Breach Notification It may become compulsory to notify the Data Commissioner if there is a breach of data security. Start preparing by making sure you know what information on individuals is stored where. Then if there is a security breach, you will know who is affected and what data may have been compromised or lost.

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Be Aware Many in the marketing industry are worried about the implications of the Regulation and many issues are still unclear. The legislation will be subject to more changes before it is finally implemented. Be aware that you will be hearing a lot more about the Regulation between now and 2015.

“Will it affect me? Yes, if you hold customer and enquirer data.” References Proposal for a regulation of the European Parliament and of the Council on the protection of individual with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation) Available from http:// ec.europa.eu/justice/dataprotection/law/index_en.htm http://ico.org.uk/news/

get-new-rules-right-says-expert/

blog/2013/one-small-step-foreu-parliament accessed 14 February 2014 http://www.itlawgroup.com/

http://www.marketinglaw.

resources/articles/212-draft-eu-

February 2014

privacy-regulation-amendmentsapproved accessed 13 February 2014

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(3) Privacy by Design The Data Commissioner says “this sounds scary” but it is not very clear what it actually means. For the moment, when you are designing new systems for holding data (such as a new CRM system) or modifying your current system, you need to minimise the impact on an individual’s privacy.

Cambridge Marketing Handbook: Law Marketing and the Law by Kiran Kapur (2013), published by Kogan Page. Marketers should be aware that there is a large amount of regulation and legislation that is relevant to their work, and that ignorance of the law is never an excuse. However, many feel very unsure how the various rules and regulations affect them. This handbook is an essential and uniquely accessible guide to the key legal issues all marketers need to know about and navigate. Written by a marketer, rather than a lawyer, it is designed to give practical guidance on all the necessary aspects. It examines the key issues that affect marketers in marketing communications, including both traditional media such as advertisements and social media. Legal language is very precise, and often complicated, so this handbook uses colloquial language for clarity. Each chapter includes clear summaries, examples and flow diagrams to help marketers understand how to comply with the law.

accessed 13 February 2014 http://www.europarl.europa. eu/news/en/news-room/ content/20130502BKG07917/ html/QA-on-EU-data-protectionreform accessed 12 February 2014

co.uk/article-preview/one-stepforward,-two-steps-back-foreu-data-reforms accessed 11

http://searchcloudsecurity. techtarget.com/tip/Theproposed-EU-data-protection-

http://www.out-law.com/en/

regulation-and-its-impact-on-

articles/2013/October/data-

cloud-users 7th February 2014

protection-reforms-delayed-but2015-deadline-gives-time-to-

Disclaimer Kiran Kapur is the author of The Marketing Handbook – Law, published by Kogan Page (2013). I am a marketer not a lawyer. This article is not intended to provide legal advice or to be a substitute for legal advice but to give general information.

Kiran has worked predominately in Financial Services with expertise in customer relationship marketing and customer communications. As a consultant, she has worked as project manager for companies including Liverpool Victoria, Barclays, London Life and Cazenove. Kiran has taught a wide variety of courses at the College in Cambridge since 1999 and is the Distance Learning & Overseas Course Director, and a CIM examiner.

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CHURN

P

eople go to war for many reasons. Protecting freedom, family, or country is generally considered a noble one. Undercutting a competitor is not. The top line is a potent weapon—but one that must be wielded with finesse, not machismo. As a strategy, price cutting can be difficult to sustain; against more efficient competitors, it’s impossible. In his first-rate book Competitive Solutions: The Strategist’s Toolkit, R. Preston McAfee points out that price wars between equals produce injuries on both sides and victory on neither. So launch hostilities only when you’re sure you have an overwhelming advantage and can drive the other guy from the market.

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Used with permission. Originally appeared in the Harvard Business Review Panel Discussion column.

Drawing © Copyright February 2005 Don Moyer.

By Don Moyer

Of course, if a competitor attacks, you’ll have to put up your dukes. But in peacetime, it is wiser to invest in areas such as R&D, customer service, and marketing, which justify raising prices, not lowering them. After all, cheap - unlike rich and thin - is something you can be to excess.

Don Moyer has collected his series of cartoons as a book, entitled 64 Drawings. It is available from Blurb at www.blurb.com/bookstore/ detail/949041

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No longer ‘Us’ and ‘Them’ We all remember the days when adverts just simply told us what to buy and where from. Big advertising corporations spent time and money creating adverts for a specific group of individuals and placed them in our favourite magazines and between our guilty pleasure TV programmes. However, times are changing, the push is becoming a pull.

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o longer does the customer expect one-way broadcast from an organisation. They are looking to develop relationships and co-create content with their favourite brands. This is a hard pill to swallow for some marketers who are being forced to relinquish control of their beloved brand identity to their enthusiastic customers.

SARAH NAGRA

Digital World The digital world has made a twoway conversation between brands and customers not just possible but something that is now expected. And the type of information shared on social media sites is very different from anything we have seen before in marketing. Rather than just information about the latest product being launched or special offers available, customers now expect brands to be more personal and reveal more of their identity and values. Today communication should not just be about sharing knowledge, but also sharing values and nurturing relationships. There are many good examples. H&M has developed a wonderfully engaging presence online using backstage pictures, interviews and giveaways Direct Line has used their Facebook fans to develop their mobile application. Rather than assuming they know what their

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customers want, they have used their customers’ knowledge to create a useful, new piece of technology. Lippincott, a brand strategy and design firm, commissioned research to look at how to be a “human era brand”. They found that where brands were ‘human’: open, honest, excited, and even flawed this was the result of more than a marketing or social media strategy. It encompassed the culture of the organisation; how they make decisions and how their employees act. Brands that ranked highly as ‘human’ included Emirates, Virgin Atlantic, John Lewis and Yo Sushi! Yo Sushi! has even changed its 4 Ps based on social media feedback. It took advice on the product they served, the design of their restaurants, how they promoted the organisation and even who and how they employed staff. Opening up and sharing with customers builds trust and in turn they will share their likes, dislikes and what they want from your product or service. Rather than paying huge amounts of money for surveys, focus groups and data, use your brand advocates as a source of market research.

“two-way conversation between brands and customers.” Dangers OK, so you have set up your social media platforms and you have started creating some content. Great! But remember you are in the public eye, people are watching you and they are expecting you to respond if you are using an instant response site such as Twitter. Back in the day, if a customer had a problem they would call you and complain to a few friends and family. That was damaging enough, but now they can share their grievance on their blog, your Facebook page, on Twitter, or on a review site for millions of people to see. So you need to be on the ball about responding to problems quickly, openly and constructively. Otherwise you might end up in the predicament British Airways found themselves in last year when Hasan Syed complained about his father’s lost luggage via their Twitter feed. To make matters worse not only do customers have the channels to vent their anger publically about a problem, they can advertise this fact: Hasan, to add insult to injury, paid $1000 out of his own money to promote the post as an advertisement on Twitter to make sure it got maximum exposure. It took over four hours for British Airways to reply by which time the story had been taken up by bloggers and shared and retweeted around the world. It had gone viral!

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To use a more personal example, last Christmas I ordered an expensive, engraved pen from Aspinal of London. On 18 December, despite having placed the order nearly a month earlier, I had still not received my gift. To make matters worse, their customer service team kept sending me information which conflicted with the advice given on their website, and then I received an email asking me to review my purchase online….. which, of course I did:

I am pleased to say, however, that within 24 hours I received a call from customer services assuring me that my order would

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Control Control is not something people like to give up, especially marketers. However, learning to let go and stop spoon feeding customers allows you to co-create with your advocates. Customers want to choose how and when they see your content, rather than being dictated to. It may be scary to relinquish control of your brand, but if someone is passionate about what you do, don’t stifle it, embrace it. Sara Rosso loves Nutella, she even launched World Nutella day and has nurtured a 40,000 strong audience to share her recipes and news. However, rather than inviting Ms Rosso to write articles for the Nutella website or asking her to promote the product with them, Nutella sent her a cease or desist letter. There was a huge backlash from her Nutella obsessed audience and she even gained coverage for her World Nutella Day on networks such as NBC and CCN. In addition, if you are going to make the most of social media, make sure you do it whole heartedly. Shell Robshaw- Bryan loved Rocket Dog shoes and followed them on Facebook and Twitter. Whenever they advertised a competition for free shoes she always entered. But when winners were not drawn when scheduled, and posts started to be deleted she became disillusioned and lost her faith in the brand. A brand advocate was lost. If you are going to plunge head first into a two-way relationship make sure you have the support and resources to do it properly. A good example of where an organisation has let their customers do some of the work for them is the Philippines Tourist Department, which decided not to create any of its own content but instead invited people to submit their photos and stories in response to their marketing campaign “It’s more fun in the Philippines”. The result was a 16% increase in visits to the country.

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be with me in time for Christmas, and when I missed the delivery scheduled, they even offered to rearrange delivery for me. They managed to turn around my perception of their customer service in one phone call and now I am telling you about it. The impact of a bad review can be enormous but it can be turned around.

“The impact of a bad review can be enormous but it can be turned around.” Willing to share A common theme is that customers are happy to share with brands if there is going to be a benefit to them. Mastercard research showed that 21% of customers will tell you anything for a reward. This does not have to be monetary; it can be exclusive content for fans. Customers are also happy to share preferences if they believe it will lead to a better experience for them. Lays crisps created an application in conjunction with Facebook to change the ‘Like’ button to “I’d eat that” to get new flavour ideas. In the USA they had over 4 million submissions of new flavours. Sharing; where and how Although there may be a willingness for brands to build two way relationships with their customers, knowing which platform to use can be another hurdle. There are many similarities between them: half of your followers or people liking you are probably already your customers. However there are differences between platforms. For example, research by Constant Contact (2011) showed that more people interact with brands on Facebook than through other social media channels. However, they are more likely to make a positive comment about your brand on Twitter than on Facebook (ATYM Marketing, 2011). Interestingly, across both platforms 75% of customers say that they would not stop following or unlike a brand. If you get someone engaged with your brand on Facebook or Twitter, they are likely to stay with you. Of course, Facebook and Twitter are not the only social media platforms. They may have introduced the idea that customers will

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“It may be scary to relinquish control of your brand, but if someone is passionate about what you do, don’t stifle it, embrace it.” share ideas with you and help create your content, but sites such as Pinterest and Instagram are taking this to a new level. A study by Digitas and Curalate (2013) found that on Pinterest 70% of content was created by users and only 30% by the brand itself. Bricks and Mortar There has been endless debate about whether the internet has rung the death toll of the traditional bricks and mortar shop. But will anything ever be able to replace running fabric through your fingers, talking to a shop assistant or that elation once you have finished a day of shopping? The key is to integrate the two worlds, rather than forcing customers to choose. Some brands have already taken up the mantle with great gusto. A good example is Burberry which has included RFID tags on certain items which trigger video content of the garment on the fashion runway to play on large screens in the store. Although this is a relatively high cost digital / in-store integration there are things that can be done more easily and cheaply. For example, driving digital customers back to the stores with in-store loyalty offers or in-store only products. Or even more simply, offering free Wi-Fi. I have been into stores that encourage customers to share pictures with them on Instagram or download their App, but do not offer Wi-Fi. Not only are their customers far less likely to bother, the store has also missed the opportunity to collect key customer data by asking for their email address in order to connect

“In addition, if you are going to make the most of social media, make sure you do it whole heartedly.” 22

to the internet. This gives you the chance to see the touch points a customer has with your brand whether they are in-store or online. So, the way we deal with our customers is changing but it is not unrecognisable. Edelman’s 2013 consumer survey brandshare found that 91% of customers wanted to be involved in the design and development of products. And more importantly 90% wanted to be asked what they wanted, not told by organisations what the next product would be. Customers still want the best deals and information from their favourite brands, but they now expect to be part of the process and opening up a dialogue can bring real rewards for both sides.

“IT’S not just about sharing knowledge, but also sharing values and nurturing relationships.” References Image: http://econsultancy.com/ blog/62450-how-h-m-usesfacebook-twitter-pinterest-andgoogle Image: http://business.time. com/2013/09/03/man-spendsmore-than-1000-to-call-outbritish-airways-on-twitter/

Image: http://www.insideretail.com. au/2013/11/26/walmart-burberrylearn-disney/ Edelman’s 2013 consumer survey brandshare

Constant Contact (2011) ATYM Marketing, 2011) Digitas and Curalate (2013)

Sarah Nagra is currently Marketing Officer at the University of Essex Campus Services. She previously worked for Suffolk Trading Standards, which was winner of UK Public Sector Digital Award ‘Best use of social media’.

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Measuring the Things You Fear the Most Marketing is consistently accused of being unable to measure its own effectiveness particularly when it comes to attracting and retaining customers. Unfortunately this view is equally consistently justified by marketers who either refuse, or are too afraid, to measure the impact of what they do in a regular and transparent way.

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survey by Adobe called its ‘Digital Distress’  study discovered that while 76% of marketers believe measurement is important, only 29% think they are doing a good job. What is even ANDREW HATCHER more pressing is that for those clients commissioning marketing services, almost three quarters highlighted accountability as their main frustration with the outcomes. So it is clearly an issue in all quarters and one that should attract the specific attention of marketers. Marketers will often hide behind the excuse that things are “just too hard to measure”, but in the digital marketing world of the 2010s that is not really good enough anymore and there are fewer and fewer places to hide. It is odd in a way that the fear of measurement is just that, a simple and sometimes irrational fear of bad news, rather than being seen as an opportunity to measure or coordinate success. The starting point for resolution, as often with irrational fears, is to confront the fear head on, realise that it is not nearly as terrifying as you think and ultimately overcome it with seemingly simple and effective strategies. So what is it that marketers fear? There is little research on this subject as you might expect, but anecdotally it appears that marketers are afraid of being ‘found out’. They are worried that the deliberate investment in marketing activities either cannot be shown to have delivered a tangible return, or worse still, can clearly be shown not to have done so.

“While 76% of marketers believe measurement is important, only 29% think they are doing a good job.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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Either way the sense of uncertainty drives a focus on facesaving tactics and the delivery of a myriad of what are often called ‘vanity metrics’ – numbers and statistics that are based on fact and may look impressive but which reveal nothing about the health or return on investment of the underlying marketing mix. Proudly reporting the number of hits on a website, for example, is pure vanity as it is obvious in most cases that it is the quality of the hit that really matters not the quantity.

“Proudly reporting the number of hits on a website, for example, is pure vanity.”

So get the tape measure out! The first step in solving this common, and sometimes paralysing, problem is to take the bull by the horns and decide which measures are really the ones that you fear the most. Which measures, if accurately and repeatedly reported could destroy the influence of marketing or worse still lose you your job? Conversely, by turning the whole situation on its head, which measures, if accurately and repeatedly reported, could propel marketing influence forward and get you the recognition you crave?

The three most commonly feared marketing metrics seem to be: • Total Cost of Customer Acquisition (CAC) and marketing’s percentage of the total cost of acquisition – how much does it actually cost to acquire a new customer (or keep an existing one) and what percentage of that cost can be attributed to marketing? This leads to difficult question Number 1: “Does marketing actually add any value to the acquisition of new customers?” • Lifetime Value (LTV) of acquired customers and the ratio of LTV to CAC – How much revenue/ profit does each new customer create over the period they remain a customer and how does this compare with the cost of acquiring them in the first place? This leads to difficult question Number 2: “Are the customers we are acquiring actually worth the effort?” • Return on Marketing Investment (ROMI) – what identifiable profit (revenue is nearly always vanity) has specific marketing activities generated? This leads to difficult question Number 3: “Does marketing generate profit or is it just a cost?”

So it may be useful to investigate each of these terrifying measures in turn starting with the easiest which is usually the cost of acquiring a customer.

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Figure 1: A well balanced business model where income value is greater than cost of acquisition.

“which measures, if accurately and repeatedly reported, could propel marketing influence forward and get you the recognition you crave?” Cost of Acquisition (CAC) As with many of these measures, nailing down what needs to be measured may be half the battle. In this case, the question is usually “what costs do you need to include when considering how a customer is acquired?”

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=

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Customer Acquisition Cost

All Sales and Marketing costs incurred in a period The number of new customers acquired in the same period

Cost of Acquisition

It may be tempting to assume that only some marketing costs are orientated towards acquiring customers until we consider what is actually done to communicate, inform and influence customer choice. In reality it is better to consider everything that is involved in that acquisition process. The list should include at a minimum the cost of: • Sales staff • Marketing staff • Transport – cars, trains, flights • Entertainment • Communications – phone and Internet • Sales demo units • Technical sales support • Website development • Any consultants • Trade shows • Office costs • Administrative support • Computer hardware and software • Executive time (which is often real and expensive) At the first level it is necessary to understand all these costs and to set them against all the customers acquired to get an average cost of acquisition. Later stages of the analysis can start to look at which customers cost more to acquire than others and more specific measures can be created against smaller segments. Lifetime Value of a Customer (LTV) The lifetime value of a customer is, of course, highly dependent on the type of customer acquired; does the customer represent a single or infrequent buyer at one end of the spectrum, or are they a more regular or even a subscription buyer at the other? If they are a single purchase customer, the equation is simple in that the profit created from the single purchase must equal or surpass the cost of

LifeTime Value of a Customer

=

acquisition or else the sale is ultimately loss-making. The measure becomes more complex once the buyer has the potential to buy more from you, more regularly and over a longer period of time. This model then requires you to look at the value derived from the ongoing profit stream derived from that customer over time often referred to as the ‘net present value’ of the profit stream of that customer or more simply how much is each customer worth today assuming they stay with you for a fixed period. Lets look at an example here. For AKN Associates: The cost of acquiring 20 customers (CAC) over the last year was £127,500, or £6375 per customer. AKN also knows that: • Customers usually stay with the company for an average of 5 years. • Each year the customer spends an average of £3000 with AKN • It costs AKN £400 each year to support each customer So it is easy to see that in each year AKN’s income per customer is £3,000-£400 = £2,600 The tricky issue arises when we want to know how much £2,600 in each of the upcoming 5 years is worth today – its Net Present Value. Luckily there is a way to calculate this which involves taking account of how many years ahead the money arrives and at what rate the value of that income in the future reduces by each year (the discount rate). There is a simple function on most advanced calculators that allows you to calculate this and in this case assuming five years income and a discount rate of 10%, the Net Present Value of income from each customer comes out at £9,856. This then allows us to work out the actual Lifetime Value (LTV) of each customer which in this case is £9,856 - 6,375= £3,481.

Lifetime Income Value of a Customer

--

Cost of Acquisition of that Customer

Lifetime Value of a Customer

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Return On Investment

--

Gain from the Investment

=

Cost of the Investment

Cost of the Investment

Return on Investment

From a marketing point of view as long as this LTV figure is positive then acquiring more customers in the same way is a solid strategy and more money should be invested in marketing as a result. Evidence that a measure is really worth the effort! This is a mild simplification of the process but the principle of working out whether a customer is worth going after is a hugely important one. One warning, however, which is that like any other model its usefulness is entirely dependent on the assumptions that are made to calculate it, and those that believe a single model can reliably and regularly represent reality can fall into an easy trap which leads on to the next set of issues. Return on Investment (ROI) The measure that seems to be feared the most is perhaps unsurprisingly the most complex one – Return on Investment. On the face of it ROI seems like a fairly simple measure and can be summarised as shown in the figure above. The problem arises when it comes to analysing the ‘investment’ that is used in a marketing campaign. ROI has its roots in measuring the impact of a one-off capital project such as buying new machinery or stock. In general it is accepted that marketing campaigns are treated as expenses rather than as investments – technically marketing costs are a P&L item, not a balance sheet item. Now you may say that this is just splitting hairs but it becomes important when comparing for instance one marketing campaign to another. If the decision is made by comparing the ROI for each project, say an adwords campaign versus a radio campaign, the ROI measure only works if the amounts spent are the same.

Return On Marketing Investment

=

{

So another measure may work better and that is commonly called Return on Marketing/Marginal Investment (ROMI) and is usually identified as the contribution attributable to marketing (once marketing expenses are removed), divided by the marketing invested.

So let’s assume our AKN Associates has just spent £20,000 on a programme of marketing. Specific measurement of the outcome of all these activities has shown that together they have created new incremental revenue of £200,000 over a period of 12 months at a 25% profit margin. So the simple ROMI of this activity would be {£200,000 X 25%} – £20,000 = 1.5 £20,000 Conversely, but following the same approach, if the programme cost £15,000 and created £100,000 in new incremental sales at 12% profit margin, the return-on-marketing investment would be negative at positive at a ROMI of - 0.2. Calculated as: {£100,000 X 12%} – $15,000 = - 0.2 £15,000

So the question is what does this ROMI figure mean for us in the end? Simply, when the ROMI index is positive, the investment

Incremental Revenue Attributed to Marketing

x

Profit Margin

{

--

Marketing Expense

Marketing Expense

Return on Marketing Investment

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Reality bites Now, even with the required desire and enthusiasm injected, the ability to create accurate and repeatable measurements in any organisation may not be that easy to produce and the ‘too hard to measure’ mantra can easily find its way back into the discussion.

So a second leap of faith may be needed. This leap is necessarily founded on the belief that it is better to measure inaccurately (at least initially) than never to measure at all. In the end if you do not measure it, whatever it may be, it will inevitably come back to haunt you when someone else measures it and holds it up as evidence against you. So despite all the mathematics there may need to be a separate internal campaign to encourage and promote the value and advantage to be gained from good measurement. Ultimately all the writing and reading in the world will not actually measure a thing, so what is needed is commitment from marketers to be bold enough to measure something accurately and repeatedly. I would go further and say that we should all spend half an hour of our time trying to work out which marketing measurement we fear the most – any of those mentioned above will do – and then spend another half an hour working out how to measure it either completely or if that is too complex at least partially.

“The measure that seems to be feared the most is perhaps unsurprisingly the most complex one – Return on Investment.”

“what is needed is commitment from marketers to be bold enough to measure something accurately and repeatedly.”

“it is better to measure inaccurately (at least initially) than never to measure at all.”

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in the marketing campaign is cash-flow positive. This means that ROMI can be used to estimate the potential benefit from increasing spend on particular media or campaign types and can also be used to forecast the impact of budget changes.

Andrew is the Managing Director of The Applied Knowledge Network Ltd which develops new approaches to strategic planning and implementation through software and training. Previously, he was VP of New Ventures at Reuters in New York and worked as part of the company’s highly successful Greenhouse corporate venture capital group. After a period in Singapore establishing a spinout online seafood trading company, he returned to the UK where he has since been involved in the creation of a number of new businesses including Investing for Good (Social Investment) and the Working Knowledge Group (Enterprise Training). Andrew was educated initially as a Mechanical Engineer and then later in business with an MBA in International Business from Cass Business School. He is the author of “Inventuring - Why Big Companies Must Think Small” (McGraw Hill, Mar 2003) Andrew Hatcher’s latest book, ‘Cambridge Marketing Handbook: Services’, offers a fresh perspective on the world of services marketing, examining the transition from the information age to the Age of Awareness and what this means for the marketing of services.

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Forecasting the Future for Profit Markets are complex and multidimensional but it is possible to forecast the future behaviour of a market with a high degree of accuracy. This article looks at how using a unified market model across the organisation allows marketers and their businesses to understand the complexity of their marketplace and map the interactions between the core structural elements in their market. By applying theories such as Diffusion of Innovation and combining all available insights to create one picture of market behaviour, businesses can invest in the right markets and target the right segments. As a result the organisation can benefit from increased sales volumes, reduced costs, time efficiencies and better company-wide strategic alignment.

Forecasting the Future for Profit o be an effective marketer, you need to understand your market. If you really want to understand your market, you need a model. Over the past 30 years, the collection and availability of market data has grown rapidly thanks to technology and, particularly, the internet. As a result the complexity of the information available about the market has grown substantially. However, having ‘Big Data’ and other information about the market is not the same as understanding the market. To truly understand a market and its dynamics, a marketer needs to know how all of the structural elements interact, both now and in the future.

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Nick Milner

Kay Sharpington

What is a market model? A market model is a mathematical representation of the market, constructed from historic data about elements such as vendors, price points, geographic regions and technologies over time. The model shows how these different elements interact with each other over time. This Jonathan is then used to forecast future trends in Davenport these elements and the consequences for the market. This insight into the present and the future enables companies to position themselves more effectively in the market, target and market to the segments that are growing or have high growth potential and give themselves a competitive edge. It also provides awareness of how consumer choices and needs will change over time and differ by region. The modelling process To generate an initial forecast, statistical techniques are applied to the collected data to create a forecast line. This can be created using regression analysis and time series analysis (including Box-Jenkins and Holt-Winters methods). However, the results from statistical techniques need to be altered to take account of the underlying

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FEATURE

market trends. The art of modelling lies in understanding consumer and market behaviour, applying theories such as Diffusion of Innovation and considering the impact of regional market dynamics. Market theories such as penetration curves, market life-cycles and disruption of technology should be considered and integrated into the forecast. This will ensure that the forecast incorporates the longerterm market trends. The company’s regional market intelligence and on-the-ground knowledge of the market should also be taken into account in the forecast, to ensure the model is fully aligned with the company’s own view of the market dynamics and direction. Source of essential insight A market model combines all available insights data to show a full picture of market behaviour, which is essential for marketing strategy and planning. The market model will show the multiple interactions between structural elements. Examples include: which countries and regions will grow, and where growth will slow or even decline; behaviour of different customer segments; competitor behaviour; how the average selling price will alter and how this will be different for differing markets. There are various methods of collecting relevant market data, each of which address a specific aspect of a business’ future performance. However, in isolation none of them give a full picture of the long-term market and should not, therefore, be used for developing strategy. Internal view: A company may choose its strategy based on internal information, such as recent sales or brand tracking, and therefore set targets such as ‘the previous quarter’s sales +10%’ or ‘launching product X in the next year’.This fails to take account of changes in the market’s growth rate or trends towards certain product types or features. Historic view: Whilst historic data provides a useful starting point, it is not always a good predictor of the future. Looking at past information does not provide any significant understanding about the future direction of the market; this requires a different methodology. Qualitative view: Purely qualitative descriptions of market behaviour rarely capture all the relevant information. Even when a description is very thorough, it cannot capture the interactions between variables in the way a market model can. A purely qualitative view will therefore not produce a robust outcome.

“The art of modelling lies in understanding consumer and market behaviour, applying theories such as Diffusion of Innovation and considering the impact of regional market dynamics.” UNDERSTANDING CONSUMERS AND THE MARKET Statistics-based models can provide accurate short-term forecasts in mature markets. However, research in technology markets shows that purely statistical (quantitative) modelling techniques cannot be relied upon to provide accurate forecasts without introducing an understanding of consumer behaviour theories. Adoption rates of new technology can grow and decline more quickly than statistical techniques can respond. What is required is an understanding of the causes of growth at different stages of a market life-cycle.

“If the Marketing department provides one model with a unified view about the market, this provides the basis for a company to derive significant strategic and economic benefits. These benefits are as valid for small companies as for very large companies.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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Figure 1 Consumer product S-curves Source: North, S. (2012).

Penetration curves Most market growth follows the form of a penetration curve (also called a logistic function curve or S-curve). Figure 1 shows how these are consistent across a range of products. In the early stages of penetration consumer adoption is slow, as many are unaware of the product or unable to afford it. As more people become aware of the new technology, the adoption rate accelerates as customers choose to make their first purchase. When the market reaches 50% penetration the adoption rate slows, as the product is widely known but there are fewer people left in the market to purchase for the first time. As the market approaches full penetration (where the majority of the target population has bought the product) the rate of growth slows and the market is maintained by repeat purchases. Each of these consumer segments has different attitudes and preferences that the marketer needs to understand. In reality these smooth penetration curves may be disrupted by external influences that the forecaster should take into account.

For example, as we can see in Figure 1, during strong growth in the adoption of ‘autos’ there was a period when penetration declined. This was due to the Great Depression followed by World War II, when metal and fuel were needed for the war effort and the sale of new cars was banned. Diffusion of Innovation The Diffusion of Innovation theory (Rogers, 2003) claims that adoption is driven by social influences that affect various consumers (in B2C markets) and enterprises (in B2B markets) with or without their explicit knowledge. Rogers describes five groups of adopters with a different attitude towards innovation. Innovators are the first to adopt new technology and represent 2.5% of the total market. This group is willing to risk failure of a new product because they believe it has, or will have, a high utility. Early Adopters comprise a larger proportion (13.5%) of the market and understand the utility of new technology better

Figure 2 Diffusion of Innovation (Rogers, 2003).

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because of the experiences of the Innovators. Innovation continues to diffuse through subsequent groups in the population (the Early Majority (34%), the Late Majority (34%), and the Laggards (16%) with each group taking its lead from the previous group, and from the changes suppliers make to products to make them attractive to the total population. Figure 2 illustrates how progress through these stages significantly affects the market growth rate. The groups have different characteristics, so different marketing approaches are needed for each one. Diffusion of Innovation has been observed to follow logistic function (or penetration) curves across many different technologies including radio, television, VCR, cable, refrigerators, dishwashers, electrification of households, telephones, cordless phones, cellular phones, personal computers, broadband and the Internet (Moore and Simon,1999). Combining market volume data with demographics and Diffusion of Innovation Theory produces a good modelling approach in the technology sectors. Types of market Consumers and the market behave differently depending on the market’s stage of maturity. Broadly speaking, there are three types

“In both success and failure it is important to ask questions about why the market behaved as it did and feed this back into the model.”

of market: growing markets, mature markets and declining markets (see Figure 3). The correct forecasting methodologies need to be adopted depending on the stage of development of the market. However, it must be remembered that one market might be growing and maturing in different regions simultaneously. Furthermore, not all markets leave the growth stage – some fail to reach maturity stage and move straight to decline (Moore,1990). Market life-cycle – disruption of technology There is a continuous cycle of innovation and disruption across most markets. The length of time that a market remains in maturity before declining depends on the level of innovation present in or pertinent to the market. “Incumbents lose their market leadership (i.e. dominant market share) when faced with disruptive technological change” (Danneels, 2004). This occurs when customers in a mature market stop buying its products and start to adopt the products from a new, substitute market instead. The shift from film to digital cameras is one such example. DEFINING THE MARKET A company’s target market is a section of its larger ‘addressable’ market, which consists of all the sales of a product or service by all the suppliers (i.e. the company and its competitors) to all the customers in a defined geography over a specific time period. Identifying too narrow a niche in the market means a company may miss the wider opportunities available, lack awareness of potential threats, and have a distorted view of the company’s actual performance within the market. Conversely, defining too wide a market will not enable a company to see the finer detail of what their target market is doing and will not enable marketers to understand their customers sufficiently. The market model can then be used to track the behaviour of the target market.

Figure 3: Market Life Cycle Source: Johnson, G., Scholes, K. and Whittington, R. (2008).

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Identifying the structural elements to track within the market The core elements of any market model are the product or service volumes. To create a useful model, the volumes can be grouped into customer segments, price bands, technology groups, disease categories, geographies or any structural element. The more factors the model includes, the larger the size and complexity. Take a simple example of a forecast model of the UK PC market with volumes divided into two price bands – under £400 and £400 and over. If the two price groups are then divided into desktops and laptops, the size of the data is doubled. If the data is then split into England, Scotland, Wales and Northern Ireland the market model becomes four times larger. Further elements can be added to look at segments (students, households or business), and the share of 5 other competitors (PC suppliers). If all of the above factors were included over 12 quarters this would result in a 3,456 cell model, before any summarisation. Despite the challenge of building and maintaining a model with lots of elements, the benefit is a forecast that exactly matches a marketer’s needs over the time frame of interest. It is clear that even with a small number of elements it is not possible to see all the data interactions and market dynamics without a model. Forecasting accuracy Forecasting accuracy can be improved by adding new data as it becomes available. The scientific method (hypothesis, experiment, knowledge and refine hypothesis) can be applied to market models (forecast, collect future market data, understand, re-forecast).

Regularly updating a model means the marketer can refine their understanding of the market. This may lead to new variables being added (e.g. moving from country level forecast to individual sector forecasts within the country). Measuring forecasting accuracy enables the marketer to identify where and how the market dynamics differed from the forecast. In both success and failure it is important to ask questions about why the market behaved as it did and feed this back into the model. This will increase the accuracy of the next period’s forecast and help a company to understand current and future customer behaviour better. New hypotheses about consumer adoption rates and competitor behaviour can then be scientifically tested in the marketplace, resulting in greater ongoing market understanding. Benefits of the market model Having ideas about the market are not the same as having a formal market model used across all departments. Departmental targets are based in part on ideas (which may be personal or informal) about what the market is doing or about to do. If the Marketing department provides one model with a unified view about the market, this provides the basis for a company to derive significant strategic and economic benefits. These benefits are valid for small and large companies. Save time Market data is needed by different departments at different times. Long term forecasts may be required for Board strategy, Investor relations or R&D, whilst shorter term forecasts are useful for marketing promotions and planning and temporary personnel recruitment contracts. If each plan or business case requires a trusted individual market forecast, the process is slowed. A single model therefore saves time. Align the whole company When a company uses one model, it allows alignment from top to bottom. A model commissioned by the Marketing department can provide the concrete data and insight and ‘One Truth’ (a

Figure 4 The market model has many uses across the company.

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“To be an effective marketer, you need to understand your market. If you want to understand your market, you need a model.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014


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“A market model combines all available insights data to show a full picture of market behaviour, which is essential for Marketing strategy and planning.” company-wide accepted view) about the market. This can be used by the Board, Finance, Marketing, Sales, Product Management and Development, Operations, Investor Relations, and HR departments (See Figure 4). This means each interaction between departments can start with “what are we going to do?” instead of “what is going on?” The model allows departmental figures to be checked against the model for feasibility, as the model is based on the company’s own strategy and fed into by all departments. First mover market advantage Diffusion of Innovation theory describes different types of consumers with different attitudes to risk, product maturity, product features, price and other factors. A well designed model will help predict when the market is entering different stages and how consumer behaviour will change over time, allowing the company to change marketing, sales, product and distribution plans for maximum economic benefit. First mover advantage can catch competitors off-guard and increase market share. Share the output of the model The leadership team can use extracts from the model in the form of PowerPoint presentations to share with teams of employees. Detailed reports (sometimes called Deep Dives) on part of the model can be produced to look at market behaviour in individual countries or sales territories, in specific product sectors or of specific competitors. Sharing some of the data with all employees and with the market (via interviews, articles and presentations) is necessary; this increases clarity of understanding and helps to build company reputation. Conclusion Markets are complex and multidimensional. A market model allows marketers and their businesses to understand this complexity and is the only way to map fully the interactions between the core structural elements in the market. By selecting appropriately from the tools and techniques available it is possible

to forecast market behaviour with a high degree of accuracy using a market model. This accurate understanding of future consumer adoption rates and competitor performance plays an essential role in marketing and strategic planning. By combining all available insights to create one picture of market behaviour the business can invest in the right markets and target the right segments. As a result of this the company can benefit from increased sales volumes, reduced costs, time efficiencies and better company-wide strategic alignment.

References Dann Danneels, E. (2004) ‘Disruptive technology reconsidered: A critique and research agenda’ Journal of Product Innovation Management, 21(4), pp 246-258 Johnson, G., Scholes, K. and Whittington, R. (2008) ‘Exploring Corporate Strategy’ 8th Edition. Pearson Education Limited Moore, G. (1990) ‘Crossing the Chasm’ Harper Collins

Moore, S. and Simon, J. (1999) ‘The Greatest Century That Ever Was: 25 Miraculous Trends of the last 100 Years’ The Cato Institute: Policy Analysis, No. 364 North, S. (2012) ‘Speed of Adoption Risk’ http:// theinnovationofrisk.com/speedof-adoption-risk/ Rogers, E. (2003) ‘Diffusion of Innovations’ 5th Edition. New York: Free Press

Nick Milner, PhD is the Managing Director at Milner Strategic Marketing Ltd. Nick has had significant strategy and marketing experience across a range of enterprises from small start-ups to companies listed on the London and Indian Stock Exchanges. He has 25 years of experience in building market models and forecasting. Nick is a Fellow of the Chartered Institute of Marketing, a Freeman of the Worshipful Company of Marketors, a Chartered Marketer and a Chartered Psychologist. Kay Sharpington is a Market Analyst at Milner Strategic Marketing Ltd. As part of the Market Analysis team she assists with building market models, forecasting, customer analysis and competitor analysis. Kay is a Cambridge University graduate with experience in statistical analysis, regression analysis and econometric modelling. Jonathan Davenport is a Business Consultant at Milner Strategic Marketing Ltd. He leads the Market Analysis team, directing the construction of market models, forecasting, customer analysis and competitor analysis. Jonathan is a Chartered Marketer, with a strong business to business sales and marketing background, developed over a number of years working in the energy and telecoms sectors.

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Marketing Mash-up Peter Fisk explores the best new ideas in the world of brands, innovation and marketing.

Crowded and contagious 00 million viewers across the globe sat down to watch this year’s Super Bowl. With marketer’s eyes focused on the $4 million 30 second ad slots, you could be forgiven for not realising that the Seattle Seahawks won. This year’s most recalled PETER FISK ads, by Chrysler and Coca Cola looked back and forwards. Whilst the Detroit car maker madegot Americans nostalgic with the help of Bob Dylan, Coke celebrated today’s multi-ethnic nation, where beauty lies in its diversity. It was a telling moment, when Madison Avenue convention was outgunned by crowd-sourced Atlanta vision. But the real winners thought differently. Marketing is much more than advertising, and marketers have realised they can make budgets go further, and engage people more deeply. Online competitions, over many months, created the real buzz. Dorito’s “Crash the Super Bowl Contest” challenged snack-loving fans to create their own ads, with a $1 million prize. In the business world, software brand Intuit offered their spot to others. Leading in the crowd voting was the National Organisation to Reform Marijuana Laws which was subsequently disqualified, creating even more coverage for them and Intuit.

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Liquid and linked Content marketing is where many brands are now focusing their imaginations. Beyond the superficial images and slogans of

“Beyond the superficial images and slogans of campaign-based advertising, today’s best content is authentic, relevant, topical, collaborative AND EVOLVING.” 34

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campaign-based advertising, today’s best content is authentic, relevant, topical, collaborative and evolving. Last year Oreo demonstrated the power of real-time marketing, tweeting “You can still dunk in the dark” moments after an unplanned power shortage. That takes empowered and agile marketing. The majority of creative ideas do not come from ad agencies but from consumers today, fuelling both innovation and communication, whilst experiences are collaborative and participative, rather than delivered in standardised and passive ways. Back at Coke, Jonathan Mildenhall and his creative team, have sparked a revolution with “liquid and linked” content, which works across audiences and platforms, fuelled by stories and topicality, personal and constantly evolving.

Immersive and instant The Consumer Electronics Show is the moment tech-companies showcase their latest innovations. This year’s event in Las Vegas was dominated by wearable tech and 3D printing. Oculus Rift, the virtual reality headset, has been a long time coming, but is set to redefine the possibilities of immersive gaming, and many other sectors too. In health care, for example, Intuitive Surgical has transformed the ability of doctors to perform automated heart surgery, faster, cheaper and with more precision. Personal health care is likely to transform our lives. From Jawbone to Nike+ we can already track our fitness, but Scanadu, with a clip-on monitor the size of a small coin, will soon allow us to check our blood pressure, and much more, as often as we check our mobile phones. Small and connected “internet of things” technologies will change everything. Geak is an intelligent ring, slots on your finger and controls your mobile phone through movement. Every marketer knows the power of “time and place” today, harnessing big data to pinpoint consumers when it matters most. When consumers take 2.6 seconds to choose a brand, every

influence, and every second, can matter. ChefJet stood amidst the innovations in 3D printing for its ability to print your favourite food on demand, particularly now that multi-substance printing is possible. It looks like a microwave, but it could transform shopping and eating, diet and lifestyle. Time to buy your own 3D printer? Not quite. Far better to visit your local branch of 3DHubs, the Dutch company is launching “maker spaces” in every big city, either branded shops or individuals sharing their own printers, creating new communities of entrepreneurs. Amsterdam leads the world with over 500 locations.

Chinese and Creative From Alibaba to ZaoZao, China is where our future is rapidly being shaped. Jack Ma’s e-commerce platform already connects most of the world’s businesses, making size and distance irrelevant. Vicky Wu’s pre-summer fashion site allows huge numbers of “new middle” consumers to choose from a huge selection of designs before they are made, giving many new designers their chance to shine. Xiaomi, the Andriod-based smartphone brand, led by rockstar CEO Lei Jen, sold out the first batch of 100,000 MiPhones (not iPhones) in 83 seconds last October. In his first year of business he sold 7.2 million devices, and Xiaomi is already regarded as a $10 billion company. China’s real skill is in creating new business models for new markets. Once the Chinese learn to build emotional brands, Apple and Google, even Coke, should be worried. Fast Company’s “Most Innovative Companies 2014” rankings are inspiring as always. Google leads the way, largely thanks to the moonshot-thinking round the corner from the Googleplex, where its <X> projects are taking shape. Nest was snapped up to shape the intelligent home, Google Glass launches soon, whilst driverless cars and intelligent cancer therapies will follow.

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“Xiaomi, the Andriodbased smartphone brand, led by rockstar CEO Lei Jen, sold out the first batch of 100,000 MiPhones (not iPhones) in 83 seconds last October. Xiaomi is already regarded as a $10 billion company.” Which is just as well for the search engine, because back in China, Tencent is rising fast. Its QQ social network will soon replace the diminishing Facebook, in a way that brings search, networking, retailing and banking together. WeChat, its fastgrowing instant messaging brand, will make it fast and viral. So if you are looking for new markets, the combination of Alibaba and Tencent could be transformational in how you make, distribute, engage and sell.

Hot Cool and Yours Sochi’s Winter Olympics took place under warm blue skies, and cost more than any other sporting event. Maybe it is a foretaste of what is to come, like in Qatar. The tagline just seemed to capture

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the over-hyped excess. Not surprisingly, bank and vodka brands lead the way in Russia. At a time when football clubs are the playthings of billionaires, and iconic events are the vanity projects of oil-rich nations, sports should remember that they are built on the passions and goodwill of everyday fans. Many of the long-term Olympic and World Cup sponsors are questioning the value of their investments. Just like the unrealistic extravagance of the $4m 30 second slot, marketers are realising that they can engage people more deeply through more creative and effective experiences.

“The majority of creative ideas come from consumers. experiences are collaborative and participative, rather than delivered in standardised and passive ways.” Most interesting on Fast Company’s list was the non-profit organisation which took second place. Bloomberg Philanthropies is making a bigger difference to the world than even Bloomberg, through a new business model for charities that engages companies in solving big problems. Like Google, it seems that big brands are realising that a purpose beyond profit, about how they can make life better, really does drive new thinking. Also in the top 10 innovators is Airbnb, the start-up rent-your-room website that has recognised that facilitating the connections between people is far more powerful than with the business itself. As the flagship of “collaborative consumption” it offers every business a new idea for making money – utilising, sharing, renting - whilst offering travellers a more interesting place to stay.

Peter Fisk is a bestselling author, keynote speaker and expert consultant. He is founder of GeniusWorks, helping companies to develop more innovative strategies for brands and marketing. He was recently nominated to Thinkers 50 Guru Radar, as one of the world’s best business thinkers, and is visiting professor at IE Business School, Madrid. His new book “Gamechangers: Are you ready to change the world?” will be published in 2014. Find out more at www.theGeniusWorks.com or email peterfisk@peterfisk.com.

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ANNUAL LECTURE WITH GREGORY ROEKENS GREAT HALL ST JOHN’S COLLEGE WEDNESDAY 9TH JULY 7PM

This year, The Marketing College’s annual lecture will be delivered by Gregory Roekens, the Chief Technology Officer of BBDO Abbot Mead Vickers. Gregory will talk about how technological innovations are causing new consumer behaviours and how they are fuelling a new form of industrial revolution. Gregory is a recognised thought-leader and was recently named one of Campaign’s ‘top five creative technologists to watch.’ Drinks on the Backs will precede the annual dinner, to be followed by the lecture. Early bird tickets are £60 for bookings received before Tuesday 1st April. To book your place call 01954 234 940 or email shane@marketingcollege.com

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A day in the life of….Anne Godfrey, CEO of the Chartered Institute of Marketing This new feature will focus on an individual that has strategic or major tactical responsibility for marketing. This issue steps into a day in the life of Anne Godfrey, Chief Executive Officer of the Chartered Institute of Marketing. .

What does the Chartered Institute of Marketing do? IM is a chartered professional body with 35,000 members around the world. We try not to take the not for profit descriptor literally! We are an SME with a turnover of about £15 million and our ANNE GODFREY revenues are generated in almost equal measures by membership fees, education and training. We exist to support and develop sales and marketing professionals throughout their careers.

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Anne’s average day The morning starts with a necessary diversion to the local Costa. Nothing quite like caffeine to set you up for the day! What happens next varies hugely and encompasses corporate governance, change management, organisational design, assessment of research findings, budgeting & business planning, stakeholder management, preparation for speaking opportunities or just the day-to-day decisions involved in managing a team and running a membership body that is also a hotel and conference centre. On a good day, I will make time to write a prioritised to-do list and be able to tick off at least half the actions before I leave some time that evening. On a bad day the list never gets written and I do the CEO’s version of fire fighting with important, but unplanned, meetings and decision points. It is, however, never dull. As for what I achieve, that depends on how successful I am at managing my own time, prioritising activities and learning to say “no”!

“A key challenge for marketers is the ongoing ‘democratisation’ of the conversation between a brand or business and its customer or consumer.” 38

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“Our proposition has to be relevant to any marketing professional, in any sector, at every stage in their career.” What is the biggest marketing challenge for the CIM,the leader in Marketing Education? CIM’s biggest marketing challenge is how to target a diverse range of products and services to an equally diverse customer base. How do we deliver integrated, measurable, marketing campaigns that showcase best practice to an understandably demanding audience? In addition, as a leading provider of marketing education, we need to remain current and provide relevant qualifications and training to an ever more fragmented profession. The methods of delivery also need to reflect new ways of learning and range from face-to-face to blended learning and online. How do you measure the marketing effectiveness of CIM’s own activities? CIM has a number of KPIs which we use to measure the success of our marketing and business activities. These include membership numbers, number of training delegates, revenue & profit by product type, engagement in social media platforms, number of attendees at regional, sectoral and corporate events, awareness of research and thought leadership activities and presence in the national and trade press/media. Add to that an expectation that our team uses all of the metrics we demand of professional marketers and you have a very interesting environment. What marketing measurement/metric do you fear the most? I think, at this stage in CIM’s development, that our customer acquisition cost (CAC) would be the scariest metric. We have recently created an integrated sales and marketing department which is working with our customer experience team to map the customer journey, assess our touch points, and improve our lead

generation, marketing effectiveness and conversion rates. Ask me again in six months and it may not scare me quite so much.

FEATURE - GODFREY

What element of the marketing mix is most important to you on a daily basis? I would say that currently the most important ‘P’ for CIM is product. Our proposition has to be relevant to any marketing professional, in any sector, at every stage in their career. It then has to be priced appropriately, marketed effectively and delivered efficiently around the world. No simple task for a small business based in Cookham.

What’s the biggest challenge you see for marketers in the next 2 years? A key challenge for marketers is the ongoing ‘democratisation’ of the conversation between a brand or business and its customer or consumer. This has been much talked about in recent years but few have truly embraced the implications of this change. We believe successful organisations will be those who cope best with this new dynamic over the next 24-36 months, because it’s not just the competition that might outsmart you – it’s now your customer.

“It’s not just the competition that might outsmart you – it’s now your customer.” Join the CIM Membereship of CIM provides you with the structure and resources to build your knowledge and develop your career as a professional marketer. Whether it’s through sharing knowledge, bringing you together with the right people or providing practical advice, we can help you take the next step. Below are some great reasons to join: • The Marketer • Cutting Edge • Marketing resources • Consultants’ Directory • CPD and Chartered Marketer Status • Market Interest Groups

Anne was appointed CEO at the Chartered Institute of Marketing in August 2012. Previously CEO of the GTMC, Anne has had leadership roles in a diverse range of membership organisations including the Law Society, where she was director of commercial and membership services and the CBI where she was commercial director.

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IF IT AIN’T BROKE…(AS THE WELL KNOWN SAYING GOES)…BUT WHAT IF IT IS BROKE? This article is the first in a series of two. During our research into the challenges of the new business reality, several senior executives have pointedly remarked to us that the first big issue for their senior management teams was not finding new solutions but seeing the problems in the first place. So, in this first article we focus on whether there is a problem. Depending on your verdict, you may be interested in the second which puts shape to the solutions.

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t seems such a long time ago since the heady days when we all ‘earned’ more from the appreciation of our house values than we did from working. Then there was the realisation that the Good Times had gone. Mervyn King, then Governor of the Bank of England, informed us that we had moved from PAUL FIFIELD NICE times (Non-Inflationary Continuous Expansion) into what a journalist soon dubbed the NASTY (Nightmare of Austere and Stagflationary Years) times. Christine Lagarde, managing director of the IMF, has recently called it the Great Recession, a structural economic shift of similar magnitude to that of the 1920s. But the structural change is not JOHN GREENHOUGH just economic in nature. It has also exposed structural weaknesses in the conventional approach to running, growing and managing our businesses. To understand these better we should start by understanding where we are now and then remember how we all behaved when things were ‘NICE’. What do business leaders want? To shine a light on this we have been closely analysing a host of CEO surveys since 2008. A picture has emerged from the swirling business mist. We have summarised the key wants and challenges, and supplemented these with the characteristics of the new business environment (see Figure 1). There were no big surprises in the results – the challenge was to manage a successful business, in difficult times, with existing skills. Well, if you ask the question… As with all research, taking respondent answers at face value only gives part of the answer. However, if we marry that data with what they are actually doing about it a pattern starts to emerge. What help is at hand? Perhaps an obvious choice to solving business problems is to grab and try to apply a well-respected management tool or two. But which?

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Figure 1

FEATURE - FIFIELD & GREENHOUGH

According to a recent survey by Bain & Co. the top ten management tools are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Strategic planning Benchmarking Customer relationship management Mission and vision statements Strategic alliances Core competencies Customer segmentation Knowledge management Change management programmes Outsourcing

“THE GREAT RECESSION HAS EXPOSED STRUCTURAL WEAKNESSES IN THE CONVENTIONAL APPROACH TO RUNNING, GROWING AND MANAGING OUR BUSINESSES.”

Managers also rated their usage and satisfaction of a larger selection of tools (see Figure 2). None of this makes great reading for managers looking for answers to the complex myriad of issues set out in Figure 1. Strategic planning has been at the top of the pack for many years so deserves some further inspection. This shows that the leading strategic planning tool was the SWOT analysis due to its ease of analysis and application. Unfortunately though, strengths and weaknesses were usually determined by what the organisation believed it was good at (or not so good), rather than focusing on the views of the people who actually make the purchase decisions. Why do so many lauded management tools have low satisfaction and usage? To help answer that let’s look closer at how managers managed in the Good Times. A constant stream of Bright New Ideas From the start of the last growth period in the 1960s a conveyor belt of potentially explosive ideas were the order of the management day. From the scientific Time & Motion to the more esoteric Excellence and the societal Triple Bottom Line, each gathered their advocates and, for a time at least, were hailed as the long sought panacea to all management ills – a claim that each in turn failed to substantiate. But never fear, a brighter, newer idea was soon to take us all by storm – and would surely, this time, prove to be the Holy Grail. Amidst a growing fanfare Big Data currently holds the mantle. Take a trip down memory lane and see how many of the popular management ideas of the last 60 years you recognise

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Figure 2

(see Figure 3). All were popular. All were well-intentioned. All grabbed the attention of business managers. Very few delivered the expected benefits or proved to be very durable. Why did they fail to gain traction and become ‘Fads’? As so many Bright New Ideas were not proving durable surely something was missing? But what was it? In seeking some answers we had some serious Unlearning to do. Somehow we needed to put all the accepted theory and accumulated wisdom behind us in an attempt to see the situation afresh. If it sounds easy, believe me it is not. The good news is that we started to see what was going on. Here are some of our conclusions. 1. All these tools were designed to try to solve, or improve something, yet there was often a tendency to focus on the symptoms rather than identify or address the underlying cause. 2. It was also difficult in many cases to see the direct link between the process and measurable financial outputs, a vital component for any solution to have staying power. 3. Being able to implement a newly devised solution effectively is also critical if the rubber is to hit the road, yet the practical difficulties associated with implementation or how to overcome them were rarely given adequate attention.

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4. Most of these management ideas also focused on just one element of the organisational mix (leadership, decisiontaking, processes, skills, customer interface, etc.) as though improvements in that area alone would lead to improvements in the overall system. However, organisations are not linear and strategic business issues cannot be solved effectively in isolation. Analysing them we discovered that few of these management ideas attempted to solve more than one problem (or should we say symptom?) at a time. 5. Furthermore, our research to date strongly suggests that the effectiveness of the whole business system (its ability to deliver results) is only as strong as its weakest link. For example, improving ‘Element X’ by 50% will be strongly diluted if there is no improvement in, poorly performing, ‘Element Z’. 6. The biggest conclusion however was that none of the seventy five management ideas that we analysed took its lead from the market (the source of cash flow). A few brought the market in at some point in the thinking, but at that stage it tended to be a just another (even cursory) input rather than the lead driver. And many methods pretty much left it out altogether, as they focused on improving the inner workings of the organisation - as if these could be isolated from the source of cash. In short, no wonder nothing worked all that well or stayed around for all that long.

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Figure 3

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So, how are organisations responding? Being unable to hitch a ride on the coat tails of macroeconomic growth, what are companies doing? The primary response is to counter the uncertainty that surrounds the new ‘rules of the game’ by drawing in activities and waiting for the Good Times to return – they always do after a ‘recession’ don’t they? Good question. Whether the Good Times come back or it is Game Over, the behaviour of firms, especially large firms with business and market share to lose, has been to harbour cash. This has created some of the most pristine balance sheets seen for generations, but unfortunately says little about the performance or resilience of the underlying business. It is has also become popular to talk a lot about innovation, but it is not so widely practised by established players. And as Clayton Christianson (of disruptive innovation fame) has noted, much of this is ‘efficiency innovation’, which he defines as reducing the cost of making and distributing existing products and services, rather than innovation that disrupts the market, creates competitive advantage and has the power to transform performance. Efficiency innovation has the advantage of recycling cash and therefore has little short term effect on return on capital (ROCE) and keeps the all-important balance sheet looking its best. He has also spelled out the economic consequences of

this approach: “Disruptive innovations create jobs, efficiency innovations destroy them.” As a strategy, waiting for the macro-economic indicators to improve is only viable if investors are patient and the business can guarantee a meaningful share of the bigger pie. In our view this is no normal downturn but a structural shift, meaning that future improvements in GDP will not be shared equally. Rather, we contend, it is likely to be skewed heavily towards those that have adapted to their respective changing market landscapes as well as new entrants who have positioned themselves to exploit the opportunity gaps.

“AN OBVIOUS CHOICE TO SOLVING BUSINESS PROBLEMS IS TO GRAB AND TRY TO APPLY A WELLRESPECTED MANAGEMENT TOOL. BUT WHICH ONE?” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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The second, more promising response, comes from managers who recognise that the Good Times will not permit, as a psychologist would term, a reversion-to-type. These managers know that they need to be doing different things to adapt successfully to a different and changing business environment. Their problem is they don’t know what to do. A recent IBM survey of global CEOs showed that top business leaders recognise the need to transform the organisation and even its business model, but admit they do not know how. This was supported by another study from the London Business School, which made uncomfortable news for the marketing profession, for, whilst CEOs believed the biggest challenges lie in the market they do not consider that their marketing people have the skills to address them. Our research also shows a growing dissatisfaction with finance-driven techniques such as cost control and financial engineering, as confidence wanes in their ability to deliver the sustainable performance and results that business (and their investors) are demanding. We are also seeing a growing stress between current activities and desired results in relation to the market-driven performance drivers such as customer retention, loyalty, innovation and differentiation. And yet so far we see little evidence that this is translating into a real appetite or indeed any effective means to address these challenging issues at their core. To sum up the state of play, some businesses are still managing to keep their owners happy, but there are growing concerns about how long this can be sustained. For example, a survey of over 1200 global executives (Bain & Co., 2013) revealed that 55% are concerned about meeting future earnings targets. On top of this it is estimated that up to 30% of UK companies are ‘Zombies’. That is, they are generating enough profit to meet their financial obligations and stay alive but insufficient to invest in ways which could get the business out of its cash flow trap. Then there are businesses whose difficulties have become visible for all to see. Let’s remind ourselves of a few examples. Unexpected consequences - corporate failures and performance shocks Healthy-looking balance sheets can mask all manner of underlying issues such as performance difficulties, loss of competitive advantage and structural weaknesses in the market strategy or business model. All these things are bubbling away beneath the surface just waiting for a trigger that will generate an eruption. When these eruptions happen they also seem to surprise and shock the companies themselves. Every few weeks we see another established player having the value of their business downgraded, often in the hundreds of millions, sometimes billions of pounds (see Figure 4)!

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Nokia was a stand-out example. Less than three years ago they had the highest global market share, and then, all too suddenly, they were posting enormous losses and looking over the precipice. By comparison Apple at the time had a single digit market share, yet over a third of global profits within the sector. And remember Yell? That is where your fingers used to do the walking, but walk no more. Now called HIBU, in an attempt to re-invent themselves in the digital world, they are not doing much better. An organisation which just a few years ago was worth nearly £4bn, has been reduced to a derisory fraction of that. Media reports at the time described them as being in the directories business. For anyone who understands how markets work, that very definition lay at the heart of the problem itself. Then there was Blackberry, or Research In Motion (RIM), who may be one of the best examples of an innovative company that completely lost its competitive edge. Five years ago, RIM was the only smart-phone company of any size and it had nearly captured the entire corporate market. But it made a fatal mistake in playing to the stock market’s demand for revenue growth, and whilst it was doing so failed to adapt its offer for consumer use, or notice alternative suppliers rapidly gaining buyer preference in the business market. In the travel sector there were also numerous casualties. Thomas Cook for example just managed to avert collapse. Its new CEO, Mr Meysman, blamed “grandee groupthink” for the business’s deluded strategy of competing in the mass market with online-only rivals. The fact that customers were much less interested in package holidays of standard duration to the popular destinations of yesterday was probably also a contributory factor. Comet disappeared from the High Street, and HMV went into administration. Their existing business models had lost competitive advantage and management practices failed to adapt.

“‘EFFICIENCY INNOVATION’ DEFINED AS REDUCING THE COST OF MAKING AND DISTRIBUTING EXISTING PRODUCTS OR SERVICES RATHER THAN INNOVATION THAT HAS THE POWER TO TRANSFORM PERFORMANCE.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014


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FEATURE - FIFIELD & GREENHOUGH

And let’s not forget Tesco with its first profit warning in twenty years, an announcement that promptly knocked 20% (£6bn) off its market value. Tesco have the biggest market share, but it is not loved by customers in the way Waitrose, or even Sainsbury’s, are. The new CEO, Philip Clarke, blamed the problems on a decision to concentrate on cost savings rather than customers. The company told investors that it had pushed too hard on costs for too long and to the point where customers began to notice. In our words, they appear to have been completely unaware of the perceived quality/ value balance of those that gave it a share of their custom. A recurring theme is that companies were mis-aligned with the changing preferences and values of customers, and are being forced to pay for it. What do the independent, professional, city analysts have to say? In many cases their conclusions and recommendations are as surprising as the performance shocks themselves. To cite one typical response from the specialist retail team at ING chewing over the performance difficulties at Tesco, “We feel that deeper price cuts are the only way to prevent Tesco customers from switching. This may be an unpopular decision in the short term, but we believe it will pay off longer-term.” Their argument continues. “Without this strategy we think

the company will be unable to convince Tesco-tired customers to come back to the store.” These recommendations are backed up by what seems to be the only performance theory in town – good old economies of scale, or bigger is better (remember Nokia?). “Ultimately, lower prices should lead to higher volumes, higher sales and higher profits, which in turn can be reinvested in lower prices. If Tesco continues on its current track and maintains its price premium, we think the company will be unable to convince Tesco-tired customers to come back to the store.” Oh dear, they seem to have missed the whole point. Are there any common factors? What is being missed? From these and other examples, our research has been able to identify a number of contributing factors: • Internal dominance: Many organisations suffer from an obsession with what happens inside the organisation rather than what is happening outside. This is not surprising after decades of single-minded focus on eking out more and more efficiencies to reduce prices which seems, even today, to be the only game in town – the trouble is it does not seem to be working. The idea that it is the world outside the organisation that provides all the threats, opportunities – and all the cash

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flow – can be difficult to grasp if you are looking through an internal lens. Business schools and MBAs: When we look at what business education and the training industry have to say, we do not find too much comfort here either. A GreenField analysis of 20 MBA programmes (in the USA, UK & Europe) identified that a typical syllabus was 90% focused on internal issues (mainly efficiency drivers), and only 10% on understanding the outside world. In addition, more and more voices are being raised against the 1970s-inspired MBA programme suggesting that it is no longer fit-for-purpose. At the heart of this criticism is the silo approach to content that reflects the current structure of large businesses but ignores the customers’ need for value delivered by collaboration across all functional areas. Specification for the ‘ideal’ business manager: The search for talent (a fad?) continues apace with more and more recruitment and search agencies creating descriptions of the type of senior decision-makers that organisations may need for the future. And the need for this ‘talent’ to think differently and be open to new ideas is clearly coming through. Unfortunately, in almost every case it is reported that these specifications are diluted by the client, and in the final analysis organisations are continuing to recruit ‘more of the same’ – that is, people who will fit in rather than stand out. Assumptions about the market: Specifically that the organisation has a deep and true understanding its market, typified by a claim we often hear, “What I don’t know about my customers isn’t worth knowing”. Assumption is the most insidious of diseases, it bears no symptoms and the more senior the afflicted person the less likely he or she will be disabused. Add this to the fact that most organisations have remarkably little information (not to be confused with a recent, and distracting, fad, ‘Big Data’) about current customer perceptions of value, and even less about what they might value in the future to drive innovation investments, and you have a truly toxic mixture.

“IT IS WELL KNOWN THAT THE FIRST STEP IN ANY EFFECTIVE CHANGE PROCESS REQUIRES A WILLINGNESS TO LET GO OF THE PAST. THIS CAN BE EXTREMELY DIFFICULT TO ACHIEVE.” 46

Minds Set It is well known that the first step in any effective change process requires a willingness to let go of the past. As we shall see shortly, this can be extremely difficult to achieve. Firstly, by using the existing (internal) lens it is very difficult (if not impossible) to see the new or changing buyer requirements that are so critical to future prosperity. Second, it often is not possible to see into the ‘mind of the organisation’ dispassionately enough to spot the things that block and constrain its ability to respond to changing external dynamics. In other words, the very stuff that should be permanently in the centre of the radar are often not being picked up by the radar at all. Thirdly, the minds of senior managers have been moulded by the business practices taught and practiced for decades. For so long in fact that the mould has virtually set. Once set, the mind will reject information that does not conform to its model. For example, presented with a compelling argument for changing the way we behave, many studies in behavioural and neuroscience have revealed a similar, startling truth: eight out of nine (88%) people will not change – even when faced with the likely demise of the organisation. We have seen some of the consequences of inaction, so the stakes at risk are high on all sides. Enough about the broken eggs, let’s get on with the omelette Our research, across a range of business issues and management disciplines, showed that many experts and commentators are quicker to identifying problems than develop effective solutions. This is not our way. Over the past few years, cognizant of all the points that have been raised, we have invested heavily in developing new solutions and a new business approach. For those who are ready to start the journey our analysis suggests that there are several Big and Difficult Steps in the process:

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Let go of the Past: Why do these lists always start with the most difficult? If you cannot let go of the past, the first and most difficult step in any corrective activity, none of the other steps will deliver any benefit. Being guided through the Unlearning process can be uncomfortable, but the end result is liberating (you can see possibilities) and sometimes frustrating (when others cannot see what is now obvious to you). Look in the Right Place: As we often quote, “An in-depth analysis of the candle will never

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And the alternative? As Charles Darwin said “It isn’t the strong who will survive, or the most intelligent, it is those who can best adapt to a changing environment.” Risk Management singularly fails to measure the business risk in doing nothing, which, in a constantly changing environment, can only mean falling behind. When the New Good Times come they are unlikely to be an extrapolation of the past and new, younger organisations, unencumbered by legacy thinking, are likely to make the running. It is also sobering to remember that customers, whether B2B or B2C, care only about obtaining whatever they perceive as value – your continued existence is not on their shopping list.

FEATURE - FIFIELD & GREENHOUGH

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reveal the existence of the electric light bulb” (if anyone knows the source please get in touch).The solutions we all seek are not to be found inside the organisation or within the conveniently-defined sector classification.The new game, and its new rules, is there to be discovered by those ready to listen and tune in to the market - without hypotheses or preconceived ideas. Mind the Gaps: The gaps that matter are those that exist between what the market values (and will pay for) and what is currently being delivered. However, identifying these gaps can be tricky because simple market research may fall a long way short of uncovering them– Steve Jobs did not conduct market research for a reason! Effective Execution: One of the Great Lessons from the past is that having a great idea counts for little unless it can be effectively implemented, and closing these gaps presents other challenges. To paraphrase Einstein’s famous words (with apologies to the great man), “We cannot close our gaps with the same level of thinking that created them”. In other words, the skills, tools, techniques and experience that were brought to bear in the past are not the ones with which to address the present issues. We will need to look beyond our current capabilities… New Breed of Manager: Good news, some help is at hand. Into the old choice between the corporate Professional Manager or Entrepreneurial Maverick we have uncovered a new breed of manager particularly well-suited and receptive to the challenges we face, and potentially well-placed to play a key role in developing and implementing solutions. More on this in the second part of this series. All of the above must be Integrated: Not technically a separate step but another major break from the past.The organisation is a complicated system and none of the above steps can be implemented in isolation – that is simply not how it works. An integrated approach is the only way to break with the past and embrace the future while taking everyone in the organisation with you.

So, is it broke? Much evidence points to the fact that many organisations have reached a watershed moment. Some managers will try to adapt themselves, their thinking and their company. Others will defend the problems with the immortal words of Homer Simpson, “It was like that when I found it!” Paul Fifield & John Greenhough © The GreenField Organisation LLP, 2014 Forthcoming Masterclass: When the eggs are broken... it’s time to make an omlette! If you think it is, and are ready to question some closely held beliefs, re-define the issues, and open yourself to new solutions we will be holding a Masterclass at Cambridge Marketing College on 10 April, 2014. For more information, contact Lorna Brocklesby on 01954 234 940.

Dr Paul Fifield - Co-Founder Paul Fifield is a widely acclaimed strategist, writer and teacher. Paul has a MBA & PhD from Cranfield and has devoted his career (and life) to being a rare breed: a business academic. Alongside his consultancy, his recent academic posts include a Visiting Professor at Southampton University School of Management, the University of Bath and Paris’ College des Ingénieurs . He is passionate about the idea that unconventional thinking has a great tradition of success. John Greenhough - Co-Founder John Greenhough is an accomplished economist, strategist, entrepreneur and investor. With a degree in Economics and a Masters from Lancaster University, he has always been fascinated with overhauling tired business approaches. With a keen eye on numbers he has a unique talent in combining left- and right-brain thinking to create and drive business models in new and commercial ways.

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Strategic Digital Marketing This article looks at the effect digital has had on the marketing industry and highlights how important it is for marketers to address digital marketing from a strategic perspective. Itâ&#x20AC;&#x2122;s not enough to simply address digital with tactics, marketers have to have a digital strategy.

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study by Adobe published this year reported that 76% of marketers believe that their discipline has changed more in the last 2 years than it has in the CHARLES NIXON previous 50. Whilst it is 20 years since the first browser allowed the www to develop, the lack of bandwidth and powerful handheld devices means that it has only been since 2007 that Digital Marketing has really taken off. It is just 6 years since the first iPhone and 3 years since the launch of the iPad, yet the implications for marketing have become significant. Add to this the rise of Social Media websites like LinkedIn (2003), Facebook (2004), YouTube (2005) and Twitter (2006) and the world of marketing has been transformed. In response to this changing landscape marketers have had to adapt and to keep their skills up to date. They now have to add to their armoury of communications tools: web based advertising alongside offline promotions; email campaigns to integrate with direct mail; and, in order to drive sufficient traffic to their website, they have to have these optimised for search engines (SEO). On top of these activities they now need to use Social Media as a new channel of communication and dialogue with their potential and existing stakeholders. However the impact is much deeper and more fundamental. It is affecting the very axes of opportunities and impacts on every aspect of the Marketing Mix. Donâ&#x20AC;&#x2122;t respond to strategic shifts with tactics Whilst there are many aspects to digital marketing, the majority approach has been to look at the tactics and especially communications tactics. Yet digital marketing should not be about chasing a dubious vanity metric on the next hyped social platform. A strategic approach needs to be taken to integrate the digital revolution into the Marketing Mix. Businesses need to re-evaluate their approach to digital marketing. As the novelty starts to wear off and the reality of a truly connected world takes hold our marketing activity needs a far more strategic approach.

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To address this Cambridge Marketing College’s new Award in Strategic Digital Marketing asks some hard questions: • Is the traditional marketing mix still fit for purpose or does it need refining? • What skills does a modern marketer need? Is there such a person as a digital marketer, or should digital be part of the ‘standard’ job description? • What has happened to the traditional model of Buyer Behaviour? Has the Process element of the Mix taken on a whole new dimension? • Is it still B2B and B2C or is it B2E (everyone) as digital media transcends the work / life divide?

The First Strategic Digital Marketing Course will take place in May 2014 in Cambridge • Morning Day One: The Impact of Digital World • Afternoon Day One: The New Marketing Mix & Changing Buyer Behaviour • Morning Day Two: Strategic Issues and Objectives • Afternoon Day Two: Strategic Digital Planning The cost of the two day course is £695 + VAT Inclusive of materials and a follow-up consultancy hour For an application form or further information email or call Charles Nixon on charles@marketingcollege.com or 01954 234 943.

In the mid-20th Century it was known as the 4 Ps; by the end of the century it had extended to seven. With the new millennium there were many attempts to add to it or to change it altogether. Whilst it can be criticised for many things, as a check list for guiding marketing activity the Mix is essential. However it does need refining and updating.The diagram above is central to the new course we have developed. Every aspect of the traditional mix is impacted by the digital revolution.

Charles is Chairman and a founding director of Cambridge Marketing Colleges. He has many years of marketing experience across a broad range of industries including textiles, software, telecommunications and financial services working for Arthur Andersen, Mercury Communications, Extel Financial and Touche Remnant. Charles is a former member of the CIM’s International Board of Trustees and is President of the CIM Cambridgeshire Branch. He has an MBA from Warwick Business School and is a Fellow of CAM, CIM and the Royal Society of Arts.

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Marketing Book Reviews by Dawn Southgate Looking for a good book to get your teeth into? Then explore these three books that have been chosen by Dawn Southgate, Head of Information at the Chartered Institute of Marketing.

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awn first shared her book reviews on Star Radio’s new specialist show, Marketing Review, hosted by Kiran Kapur, Course Director at DAWN SOUTHGATE Cambridge Marketing College. This twicemonthly radio show can be heard live at 7.00pm every other Thursday evening on Star Radio 107.9/1 FM or listened to again as podcasts on the Star Radio website: http://www.star107.co.uk/marketing-review.php. We gave Dawn the difficult task of picking just three good marketing books to review for this issue. Heading up the CIM library, we can only begin to imagine how difficult it must have been to select only three books! She has picked some really interesting books that we agree are well worth reading. The books: • •

15 Essential marketing masterclasses for your small business by Dee Blick (2013) published by Capstone and the CIM Delivering effective social customer service: how to redefine the way you manage customer experience and your corporate reputation by Carolyn Blunt and Martin Hill-Wilson (2013) published by John Wiley and Sons Hit Brands: How music builds value for the world’s smartest brands by Daniel M Jackson, Richard Jankovich and Eric Sheinkop (2013) published by Palgrave Macmillan.

15 Essential marketing masterclasses for your small business by Dee Blick This book is useful for any entrepreneur, small business owner or practicing marketer. Dee is a successful author and marketing guru and she has been working with small business owners for over 27 years. Her book provides practical steps on an array of marketing topics including marketing planning, communications and copywriting. She enlists the help of other marketing experts to give the most up to date information and each topic is considered separately so you can dip into the book at any point, although Dee does suggest reading ‘Masterclass One’ on marketing planning first. Dee also includes sections on improving your website and the use of social media tools such as LinkedIn and Twitter –

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followed by Taylor Swift; and Shakira. And, if you think those numbers are big, the top YouTube views were Psy with Gangnam Style with 1,238 million views followed by Lady Gaga with Bad Romance with 505 million views. How’s that for reach?

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emphasising that once your company starts using these routes to your audience, you will need to monitor more closely what is being said about you. There are case studies and examples throughout the book which illustrate the key issues and learning outcomes. These are particularly useful for small business owners and also provide some really interesting examples that can be used for presentations or teaching.

Do you have other marketing books you would recommend? Let us know your thoughts…Tweet us @C_M_Review

Delivering effective social customer service: how to redefine the way you manage customer experience and your corporate reputation by Carolyn Blunt and Martin HillWilson This book is very topical. It looks at how to deliver effective customer service through social media and at the impact that social media can have on your reputation. Nowadays, as many organisations will already have experienced, customers may use social media as their first choice in communicating with you. This book develops the idea of Facebook and Twitter as service channels and how to align your PR, marketing and customer service around them. The book is well laid out. The first couple of chapters provide an overview; Chapter 3 sets out the building blocks and Chapter 4 brings in the 15 competences you need to excel. Chapters 5 to 7 help you develop a better understanding of channels and Chapters 8 and 9 are the ubiquitous chapters on crisis management. There are interviews throughout to add illustrative points. Hit Brands: How music builds value for the world’s smartest brands by Daniel M Jackson, Richard Jankovich and Eric Sheinkop The bonus book I have chosen is Hit Brands: How music builds value for the world’s smartest brands. This is an area where we have struggled to find good material before. The writers are all from within the music and brand industries adding real life examples throughout the book. Music is a powerful tool for brands and brands can be a powerful tool for musicians. This book covers the history of the relationship, looks at how musicians are using social media, and considers music as identity and as an engagement tool. There are chapters of case studies including Nescafe, Barclay Card, Nokia and no brand music book would be complete without Coca Cola teaching the world to sing. This is an important book for understanding why music is powerful, not just that it is powerful. There are some fascinating facts in the book including the top 8 Twitter users listed as: Lady Gaga with 30.5 million followers; Justin Bieber with 29 million, although it could be a few more or a few less after his latest exploits; Katy Perry; Rihanna; Britney; and then the first non-musician, Barack Obama with 21 million,

Dawn Southgate, The Chartered institute of Marketing: Dawn has over 20 years’ experience supporting marketers with their information needs. She started at the CIM in 1990 prior to the World Wide Web, when there was just one fax machine and also a telex machine. Today’s world of information rarely makes it to print and CIM supply members with services to their desktops plus additional services that can be accessed by members on-site. Her information team are available to assist in identifying resources and finding answers to queries.

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Lego’s Longevity Nick Wake looks at the enduring appeal of Lego and examines how the brand has evolved over the years to remain relevant within the children’s toy industry.

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aving recently celebrated a significant birthday (which is the acceptable expression for turning 50) I am ever more conscious of the enduring appeal of NICK WAKE those brands that were a big part of my early life and which still thrive today - possibly because many are not as visible as they once were. As a child between, let’s say the ages of 8 to 14, the brands that mattered to me, as far as I can recall, in no particular order were: My Mitre football boots, my Commando comics, my Subbuteo, my Bostik glue for fixing my broken Subbuteo players, my Rucanor tennis racket, my Chopper bike, Ribena (on special occasions only) and Milky Ways – the sweet you could eat between meals without ruining your appetite. And of course there was Lego. Some forty years on, there is now a Lego movie – the latest step in the renaissance of a brand that nearly went bust ten years ago. At that time sales were dropping off a cliff amid dire predictions that the digital generation was more interested in manipulating a mouse than snapping together brightly coloured plastic bricks. The curve of the product life-cycle was well and truly in decline. But in February 2014 Lego is resurgent once more. According to a recent article in the Observer (16.02.14), there are now 86 Lego bricks for every person on earth, with around seven sets sold every second (more than 50 since you started reading this article), and all the tyres that clip nicely on to the various Lego modes of transportation, mean that Lego is also the world’s biggest tyre manufacturers. Like all things Scandinavian at the moment, Lego, which originates from Denmark, is on a roll. The characteristics of this colourful comeback - or the 8 Cs of Lego’s longevity – might be classified as follows:

Children The product has broad appeal for a target audience with enormous breadth. And it taps into one huge advantage this audience has over the older generation: imagination. With Lego you can build whatever your imagination desires. It is stimulating, safe, multidimensional and always fresh. And it seems that adults, like me, who grew up with Lego, are returning to it with their own children. The emergence of the “Afols” segment – adult fans of Lego – market it is reported, is a significant feature of the brand’s resurgence.

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“Sales were dropping off a cliff amid dire predictions that the digital generation was more interested in manipulating a mouse than snapping together brightly coloured plastic bricks.” Colour Lego bricks are instantly recognisable, not just because of their unique shape, but also because of their colour. Lego is now manufactured in a range of 51 colours, 33 of which are known as solids including the ones that are instantly familiar: bright red, blue, green and yellow. In Lego digital designer, there used to be a bigger range of 121 colours but these have recently been reduced to 52. In colour terms it looks like once you get beyond 50, even in the digital age, you are into the law of diminishing returns. Consistency Like all good brands Lego is remarkably consistent. Not just with colour, size, shape, but also with less tangible dimensions of the brand proposition. For example, Lego would not allow any characters in the new film to kiss. Unlike Ken and Barbie who were allowed to turn up the steam in Toy Story 3, holding plastic hands is as hot as it gets in The Lego Movie. Credibility The credibility enjoyed by Lego is both inherent in its quality, durability and proven appeal. Its simplicity, means that, unlike technology dependent entertainment, there is little that can go wrong. Credibility is also earned. When fans include Ed Sheeran and Britney Spears, it is cool to be into Lego. Earlier this year, David Beckham was in the news for buying a £210 Tower Bridge set because, it was reported, building it helped him calm down. Last year, he enjoyed perhaps his greatest ever accolade in a long and illustrious career, when he was immortalised in his own Lego character. Mind you, I am not sure the researchers were totally on their game on this job. Amid his myriad of hairstyles, I do not ever recall him being a bouffant blonde!

Characterisation Character development - or more accurately licensing – is now playing another huge part in the brand’s revival, though it was arguably also at the heart of its near downfall when the company expanded and diversified too quickly in the late nineties. According to Brikipedia (oh yes) there are two types of licensing: inbound and outbound: • Inbound licensing refers to properties that LEGO gains and creates licensed themes out of, for example Star Wars • Outbound licensing is where a company is given permission to use The LEGO Group’s intellectual property, such as DK Publishing and books or Merlin Entertainments and LEGOLAND theme parks. In his book Brick by Brick, which chronicles Lego’s resurgence, David C. Robertson pinpoints that the company was able to salvage itself and emerge stronger than before by returning to its ‘core values.’ This involved “making retail customers (rather than kids) their primary concern” and further expanding safe-bet licensing deals that featured Harry Potter, Lord of the Rings, and Spongebob Squarepants. Collaboration When the boundaries between company and customer become so small that your customers are co-creating products for you, that is a smart and profitable place to be. Lego do this tremendously well. In the late 1990s the company introduced Lego Mindstorms, which contained software allowing users to create their own robotic Lego creations. Lego users began hacking the software however and shared their new creations online. How Lego reacted was perhaps a turning point in the company’s fortunes. After initial nervousness, they decided to embrace the pirates. To begin with user generated ideas were vetted by Lego staff and if they passed the test, then they were placed into production. As time has moved on Lego has simply accepted the new customer collaboration ecosystem, the mere existence of which is a tribute to the strength of the brand.

“Lego is remarkably consistent. Not just with colour, size, shape, but also with less tangible dimensions of the brand proposition.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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Cost Lego has positioned itself full square in the premium category and thanks to all the Cs mentioned here is batting away the cheaper rivals with impunity. It is not only David Beckham who is perfectly prepared to pay £210 for a Tower Bridge set, the raw materials for which cost less than a $1 a kilo. In his book Robertson points out that the customer is paying around $75 a kilo. That is some serious value add and a healthy profit margin. Creativity Rather like licensing, creativity could be categorised as internal and external. After video games, books, TV shows, T-shirts, robots and theme parks, The Lego Movie might be described as the victory lap of a revival due in no small part to creativity. Externally, the emergence of You Tube has provided amateur movie makers with a wonderful platform for showcasing their amateur movie making talents. One of the most popular genres for doing this in, is Lego Star Wars. Creativity, it seems to me, is inherent in the DNA of the brand which, at its core, invites its customers, young and old, to be as creative as they possibly can be, during the noble pursuit of building something. Meanwhile marketing works behind the scenes to find ever more creative ways of keeping the curve moving upwards.

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“the company was able to salvage itself and emerge stronger than before by returning to its ‘core values.”

Nick studied at the University of East Anglia in Norwich where he gained a 2:1 BA Joint Honours in Economics and Social Studies, with German. He is a Chartered Marketer with over 20 years experience of B2B and B2C in a variety of contexts including client side (7 years with Whitbread), public sector (3 years with Sport England) and agency side (3 years with CPM Sales Promotion and 8 years with Grass Roots). Nick’s strength and passion is marketing communications – across all channels in all formats. He is now Director of Awaken Communications and tutors for Cambridge Marketing Colleges.

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THE YIN-YANG OF BRANDED CONTENT MARKETING In this first of a new series of articles, Justin Kirby draws on his research for his new book ‘The Best of Branded Content Marketing: 10th Anniversary Edition’ produced in partnership with the BCMA, to look at what content marketing actually means, and how to develop a branded content marketing strategy.

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s brands seek more medianeutral solutions to the marketing challenges they face in a media landscape that continues to fragment, they are presented with a Heinz JUSTIN KIRBY 57 of ideas about how content should be used and why. This is partly the result of the term ‘content’ being so allencompassing. But it is also about agencies trying to differentiate themselves as the lines between the various marketing disciplines continue to blur. Hence the confusing array of related terms being bandied about such as ‘branded content’, ‘branded entertainment’, ‘content marketing’ and even ‘brand publishing. There has been a demand for more clarity from clients and agencies alike, which is why the Branded Content Marketing Association (BCMA) recently commissioned research from Oxford Brookes University in partnership with Ipsos MORI. The first phase included a literature review and resulted in the following overarching definition for branded content: “Branded content is any content associated with a brand in the eye of the beholder.” This generic definition for branded content is a great first step. However, we also need to explain the context in terms of the marketing problem that branded content seeks to solve, and the strategic considerations involved. As part of my research for a new ebook, Best of Branded Marketing Content: 10th Anniversary Edition, that I have produced in partnership with the BCMA, I spoke to Jan Godsk who heads

“The number of brands putting branded content at the heart of their marketing continues to grow.” CAMBRIDGE MARKETING REVIEW - ISSUE 8 Q2 2014

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up their Scandinavian chapter. Jan is on the jury of various international creative award bodies, and was part of the Cannes Lions committee that defined the branded content award category in 2012. Jan believes that branded content and content marketing are two sides of the same content coin, pointing out that the term ‘branded content marketing’ has brand on one side of content and marketing on the other. Jan describes a left versus right brain-type split, where the brand side is more irrational and based around the audience’s perceptions. That is why the term ‘branded content’ often describes content that is more entertaining and emotionally engaging, and helps shift brand preferences and consumer behaviour. The term is used frequently in creative advertising circles to refer to storybased video content. On the other hand, Jan sees the marketing side of ‘branded content marketing’ as being more rational and productfocused. This rings true, given that much of what is described as content marketing is often more informative and used close to what Google calls The Zero Moment of Truth (ZMOT) – when consumers start searching online to find out more about something they want to try or buy. The intent is also often more sales orientated, hence the use of content marketing within the B2B arena, its close link to Search Engine Optimisation and the favoured formats of infographics, slide presentations, white papers, blogs, etc.

Journey’. Theories about emotionally engaging content having greater impact than more USP-focused content will also become increasingly both pre-tested and measured. This will lead to a better understanding of what works, when, where and why, as the number of brands putting branded content at the heart of their marketing continues to grow. The Three Circles of Branded Content Marketing In the meantime, another way of thinking about branded content marketing has been suggested by the analyst and author Idil Cakim. The Three Circles of Branded Content Marketing diagram has subsequently been developed, below, as a way of showing how social media and content marketing could become more unified.

“Have businesses lost absolute control of their brands?” There is also the term ‘branded entertainment’ to consider, where the product is featured more predominantly albeit in an entertaining context. In this sense, the term sits somewhere between branded content and content marketing, however it is usually used to refer to TV and film-type formats, such as Advertiser Funded Programming (AFP), and is closely linked to product placement and sponsorship. All this may be of little interest to people outside the marketing industry. It may simply reflect current practice, as some experts think there will be further fragmentation when more specialist areas get carved out as the branded content marketing approach evolves. However, Jan’s yin-yang explanation is a useful way to start looking at the different intent and output, as well as where it may occur in what McKinsey & Co call the ‘Customer Decision

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As Dr Dave Chaffey of Smart Insights explains, social media and content marketing have become the de facto way of explaining customer engagement approaches today, but are often considered separately. For Dave, this is a mistake because it creates a perceived need for a social media marketing strategy, rather than a customer engagement one based around content. This may sound like semantics, but it is actually about defining the problem that needs to be solved, and as the visual thinker and author Dan Roam points out, “whoever best describes the problem is most able to solve it.” The Three Circles diagram therefore acts as a prompt for thinking through the following questions as part of developing a branded content marketing strategy: • What kind of branded content is created (or co-created) by who and for whom? • How is the audience’s engagement managed?

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How is the content distributed i.e. where in the converged landscape of earned, owned and paid media, and when in the customer decision journey? How is the success of the different parts and their sum measured?

The Future of Branded Content Marketing There are many other considerations that experts around the globe raised when I interviewed them as part of my research. The full output of those interviews forms an in-depth report on the future of branded content marketing that will be serialised in forthcoming editions of this journal. In the meantime, here are some edited highlights to use as a set of triggers for thinking through a strategy, rather than as a tick box checklist or more structured framework. Firstly, it is still all about relationships. Despite all the advances in technology, the analyst and author Charlene Li thinks that marketing fundamentals will remain the same, “namely that the relationship with customers and clients will be built one person at a time.” She warns against being blinded by the light, shiny objects “to ever, ever forget that these relationships are paramount”. What has changed though is the shifting from the ‘one-tomany’ of mass communication to ‘one-to-one-to-many’. As Chris Gorell Barnes at Adjust Your Set points out, the masses are now the media: “People not only decide what, when and where they want to consume media, but also whether or not the message is passed on.” The point being that businesses have lost absolute control of their brands, which leads Chris to believe that “the brands that will thrive in this new world will be those that put the needs of the consumer at the heart of what they do. If not, they will wither on the vine.” The need for customer-centricity is only one consequence of this shift of control from brands to the masses. Another consequence is the increasing need to align branding with a branded content marketing strategy. As the veteran advertiser turned brand consultant Robert Bean explains, the walls that brands could once control have now become windows. The upshot is that brands have to be clearer than ever before about who they are, what they do and why they do it. On the one hand it is about a need for authenticity and the building of trust, because if a brand’s promise and their delivery is not aligned then their reputation can quickly suffer, particularly through social channels. On the other hand, it is about the alignment of these external factors with the internal need to have a corporate culture that has been bought into by the people making the products and delivering the services. Brands that do not marry these needs will be quickly found out to be what Robert calls ‘disorganisations’. That is why he thinks that a brand’s culture, product or service, and reputation need to be aligned around

“If the 20th century was about dozens of markets of millions of consumers, then the 21st century is about millions of markets of dozens of consumers.” what he calls the ‘Single Organising Principle’. This is akin to a clear sense of purpose, which is also an important factor of brand narrative development. Storytelling Storytelling has become an increasingly important means of engaging audiences, particularly through social channels where brands need to be invited into conversations rather than buying their way in, if they want to avoid being ambushed by ‘brand vandals’ – the title of the new book by the Chartered Institute of Public Relations (CIPR) President, Stephen Waddington. This rise and rise of storytelling forms part of the shift from push to pull communication, which is why my customer-obsessed colleagues at Tenthwave believe that the strongest social brands are narrative ones. This Three Tenets of a Narrative Brand diagram is another prompt, this time about thinking through how more authentic and narrative branding can be aligned with a branded content marketing strategy.

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Cultural Context A driving purpose is simply the tangible reason why a brand exists. For instance, Red Bull’s purpose can in simple terms be expressed as ‘adventure’. As Gretchen Ramsey, VP, Strategy at Tenthwave explains: “It’s that flag in the ground, that rally cry that everything ladders to and that is visible and visceral throughout the entire consumer experience.” Gretchen goes on to explain that the closest tenet to the consumer, personal relevance, is a feed customised for the individual user: “This includes helpful, personal visualised data (think loyalty programming and smart CRM), geo-context, as well as compelling social graph integration. Personal relevance is at nascent stages. As we learn more about how to use big data intelligently for individuals, this will become a stronger need for brands, especially for modern CRM.” The cultural context tenet ensures that the brand is culturally relevant and works in synch with societal shifts that are meaningful for the brand. For Gretchen this means capturing macro cultural trends, such as economic confidence, and micro trends, which can include fast-moving culture, such as pop culture memes and relevant news of the day. From a branded content marketing strategy development point of view, User Experience (UX) design personas or customer archetypes should be developed specifically with these cultural factors in mind – including the role they will play in terms of a customer’s social experience and conversations, and how the brand might be incorporated into these. Another way of looking at the cultural context is highlighted in a remark from Internet pioneer Joe Kraus: “If the 20th century was about dozens of markets of millions of consumers, then the 21st century is about millions of markets of dozens of consumers.” Barney Worfolk-Smith, from social video sharing platform Unruly, picks up on this when he talks about interacting with people through what he calls their “fractured passion centres”. Put simply, creating content that is useful and/or entertainingly engaging for these fractured passion centres is one way of reaching wider audiences, because if they find your content interesting, they will share it with others.

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Conclusion In conclusion, this introduction to branded content marketing aimed to provide some useful context about the intent and output of key branded content marketing approaches, as well as the strategic considerations that inform practical application. In the next issue of this journal, I will look at how and why branded content is growing in importance at the heart of marketing strategies and how it will develop going forward.

The Best of Branded Content Marketing: 10th Anniversary Edition ebook, Justin has produced in partnership with the BCMA, contains 13 case studies from around the globe – award winning examples of branded content marketing that provide inspiration, and insight into how brands and their partners are trying to solve their communication challenges in a media landscape that continues to fragment. You can find more about the book, and their ongoing research into best practice and the future of branded content marketing on the BCMA’s website at http://thebcma.info/ best-practices/ebooks/

Justin Kirby is an Internet veteran who has been writing about interactive technologies and digital marketing since the early 90s. His books include Connected Marketing (2005), Best of Branded Content Marketing (2013), and the forthcoming Best of Branded Content Marketing: 10th Anniversary Edition. He chairs and speaks at conferences around the globe, and heads up strategic content marketing at Tenthwave, the new interactive agency from the US whose clients include Facebook, Google and eBay.

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Cambridge Marketing Review - Issue 8 Spring 2014  

Issue 8 of the Cambridge Marketing Review focuses on Changing Customers, with features and articles including: • A Day in the Life of…Anne...

Cambridge Marketing Review - Issue 8 Spring 2014  

Issue 8 of the Cambridge Marketing Review focuses on Changing Customers, with features and articles including: • A Day in the Life of…Anne...

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