Volume 198: Why Marketing Must Lead.
Why Marketing Must Lead.
tl;dr: Uncertain times require a muscular return to mutualism.
My apologies for Off Kilter's hiatus for the past three weeks. One of my all time favorite global brands invited me to do a leadership talk, which took up almost all of my focus. If anyone else is interested in me talking to them about the things I write, please let me know.
Having published recently on the challenges of Measureship, I’ve had a series of fascinating conversations that invariably circle back to the role, future, and value of marketing. As a result, I’ve been thinking a lot on the topic, not least because it’s central to the book I’m writing via this newsletter (update coming soon).
As we zoom out, it’s becoming increasingly clear that we’re approaching the exit ramp off of a destructive era we might label ‘digital snakeoil,’ during which the Ad and Martech Industrial Complex transformed marketing practice in its image, primarily based on what we’re now beginning to realize was little more than fantastical, mythical, rhetoric. For example:
The myth of last click attribution.
The myth of the long-tail.
The myth of one-to-one targeting at scale.
The myth of lookalike audiences.
The myth of performance marketing.
I could go on.
As an alarming body of empirical evidence builds around these myths, we’re left with a singular conclusion: The technology firms we looked to as guides through the chaotic transition from analog to digital were primarily in it for themselves. Rather than adding value and influence to the marketing function, they’ve systematically extracted value and influence from it until we are where we are: A business function heavily dependent upon black box technologies paying significant taxes to feudal digital landlords. One that is viewed internally as a tactical, non-strategic department, riddled with vanity metrics, inefficiencies, and non-contribution to business outcomes. While externally, it is perceived as being astoundingly unethical (“advertising practitioners” bumping along at 8%, alongside used car salespeople, and just above Senators and Members of Congress in dead last place).
Something had to change. So on the positive side of the ledger, there’s now a fast-scaling and serious reaction to this extended period of ‘digital snakeoil’ which labels itself ‘evidence-based marketing.’ It’s doing the hard yards of unravelling this period of fantastical thinking that marketing has been so captured by.
As a result, digital myths are slowly but surely being replaced with empirically based concepts such as Binet & Field’s 60:40 rule (of thumb), Ritsons ‘bothism,’ marketing science’s 95:5 rule (of thumb); focus on mental and physical availability; distinctive assets and category entry points, a resurgence of marketing-mix-modeling (MMM), and a smorgasbord of econometric and academic studies we see demonstrating the real business impact of varied forms of brand and activation-focused advertising on the business. And last, but not least, a cottage industry of folks on LinkedIn re-presenting as relevant-to-today, intellectually rigorous 20th century concepts.
However, as crucial as this shift is, and even as my LinkedIn feed fills with an increasing volume of—shock horror—sensible advice (I never thought we’d see the day), I don’t think we’re going anywhere near far enough. I can’t help but feel that we risk swapping an extended era of digital snakeoil for a new one of joyless nihilism that’s resolutely focused on treating the symptoms while failing entirely to acknowledge the underlying condition.
I’ve talked before about the challenges of Measureship. An increasingly dominant management orthodoxy that discards qualitative context as irrelevant, while viewing all management decisions through an inwardly focused lens of flattened, overly-simplistic quantification, with its adherents proclaiming true faith in the holy trinity of productivity, efficiency, and incremental optimization…irrespective of its dimishing returns nor how value-destructive the decisions being made under the guise of this faith are so obviously becoming.
In seeking sources of alternative management metaphors to help us break free of the Measureship trap, I've become fascinated by the field of regenerative economics and its borrowing of metaphors from the natural world. Regardless of how much we may or may not buy the underlying economic premise of regeneration and circularity as it applies to capitalism, it certainly provides a wealth of compelling new management metaphors when considering the corporation's relationship with its customer.
One metaphor deeply relevant to my worry about evidence-based marketing treating the symptoms rather than the underlying condition is the concept of symbiosis, specifically the differing symbiotic relationships that occur in nature. I first noticed this because ‘mutualism’ caught my eye, which in nature is defined as
“A symbiotic relationship where two or more species interact, and each species benefits from the interaction.”
This instantly sparked the memory of my undergraduate education many aeons ago, where marketing was defined as the understanding and delivery of “mutual value exchange” between the corporation and its customer.
Because marketing was presented as the singular business function focused on balancing value delivery to the outside as well as the inside of the corporation, it was deemed the keeper of this form of enlightened self-interest.
However, as I reflect upon the transformation of the marketing function through the Measureship era, including both the digital snakeoil sold by tech firms and what is now being recommeneded by evidence-based acolytes, I can’t help but conclude that the modern form of symbiosis between the corporation and its customer has shifted heavily from mutualism toward parisitism, with marketing leading the way. To put this in context, in nature, parasitism is defined as
“A symbiotic relationship where one organism (the parasite) benefits at the expense of another (the host), causing some harm, but not necessarily death, and is adapted structurally to this way of life.”
If we look more closely at corporate behavior, it’s clear that rather than ‘enlightened self-interest’ and a focus on mutual value exchange, the commercial pressure on marketing to drive immediate-term results has led to its structural adaptation to the practice of self-interested value capture, which, as we now know, tends to slide quickly and entropically toward value extraction, which weakens rather than strengthens the corporation, ultimately leading toward value destruction. (Nike, cough, Starbucks, cough, cough. Walgreens, drops dead, sold for parts to private equity for just 10% of its previous market peak).
The evidence of corporate paristitism is all around us in our addiction to easy profits, from banks ever increasing ATM fees, to CPG/FMCG corporations engaging in simultaneous price rises and shrinkflation based on backward looking elasticity calculations (the problem with projecting such curves forward is that rather than continuing predictably toward infinity, they instead tend to hold for a period until very suddenly and abruptly everything drops as consumers simultaneously say “enough already.”), to automotive manufacturers hell bent on becoming subscription platforms none of their customers want (note the source, customers hating something has never stopped a management consultancy from recommending it), to seemingly simple things, like extremely low response rate email retargeting.
Email retargeting is a perfect canary in the coalmine of the negative externalities of Measureship in modern marketing. The closed quantitative models used by marketing dashboards solely focus on metrics demonstrative of quantitative value-capture-to-the-corporation, such as open rates, click-through rates, and conversion rates. Actual sales from such behavior consistently bump along in the low single digits, often as little as 1% or less. However, the corporation lacks two things: First, it has no idea how many sales from a 1% retargeting conversion would have happened anyway. Nor, and this is very important, does it have any metrics or qualitative insight into the potentially harmful impact of such behavior on the 99% of people who don’t convert. I don’t know about you, but almost daily, I get hit so hard, so often, by email retargeting after a single interaction with a brand, that I mark the sender spam and vow never to buy from them. None of this negative equity is structurally captured by the Measureship construct that marketing has become, yet as I’m sure we can all relate, the problem is real. Now, magnify this phenomenon by the totality of your martech and adtech stack, and we begin to see the true scale of the challenge that faces us.
As a result of our structurally adapting marketing for parasitic rather than mutualistic behavior, there is no doubt that we’re now well along the path of weakening corporations, brands, and the marketing function itself.
When markets are good and the economy is on a growth trajectory, as the US has been since the financial crisis of 2008/9, it’s easy to miss the weakening effect on the corporation of such a relationship with its customer. After all, a rising tide lifts all boats, and corporations have become incredibly adept at capturing and extracting customer value that is then magically transmogrified into wealth creation for shareholders via the medium of record corporate profits.
But, and this is a very important but, as the economy looks increasingly likely to enter a volatile and uncertain recessionary period (if this has not already happened), the market reaction may well be for the host (customers) to turn on and increasingly reject the parasite (corporations and their brands).
Now, we could be all woe-is-me about this, and there is no doubt that those corporations that have most deeply adapted their marketing function toward Measureship-focused value extraction are about to feel a world of pain, but the flipside, as always, is opportunity.
If we look back through economic history, there tend to be two types of winners that both survive tough economic times and then accelerate faster out the other side toward newfound riches:
Those with the strongest balance sheets, which provides a structural financial advantage through tough times. As a result, these corporations can, for example, hold down prices for longer (in an inflationary moment) or invest relatively more heavily in brand advertising (in a more normal recession), with the sure knowledge that historically, such behaviors accelerate business performance out the other side.
Those that act in the most muscularly mutualistic fashion in empathizing with the needs of a recessionary customer and creatively innovating value propositions and marketing motions accordingly. For example, during the 2008/9 financial crisis, unlike its peers, which all relied on discounting, Hyundai became the signal in the noise by leaning into people’s fear of losing their jobs. As a result, it launched the “Hyundai Assurance Program,” where anyone buying a Hyundai was reassured that if they lost their job or income within the next 12 months, they could return the car at no penalty to themselves. This led to Hyundai delivering an 8% lift in automotive sales in the US as the broader market dropped by 21%, which increased its marketshare by a third from 3.1% to 4.3%, and, fascinatingly, because it wasn’t a discount-driven offering, helped the brand shed it’s low-cost, discount image forever.
Now, there’s a lot that’s about to be written about our entry into a new global period defined by the acronym VUCA (Volatility, Uncertainty, Complexity, and Ambiguity), driven by geopolitical, technological, environmental, and demographic disruptions.
Such an environment pressures corporations to act more strategically rather than less because it's much harder to navigate uncertain times. As a result, more weight, responsibility, and importance will be placed upon getting such decisions right rather than getting them wrong. This is why those without clear strategies can often bump along quite successfully during the rising tide of market growth, only to find that they've been swimming naked as the tide goes out into recession (to paraphrase the inimitable Warren Buffet).
As a result, corporations are now working furiously to determine and define strategic clarity in a world without any. The primary challenge is making critically important decisions about the future in an environment where the backward-looking management information we’ve become used to relying upon is no longer valid as a guide.
Put more simply, VUCA fundamentally redefines the parameters of the management practice of ‘data-driven’ decision-making.
As a result, and over-generalizing a little (please forgive me), we’re likely to see two opposing approaches:
First, those corporations that have fallen the deepest into the Measureship trap will be the most paralysed by past data no longer being predictive of future performance. As a result, they will desperately seek certainty within uncertainty, which means they will likely turn to the purveyors of certainty—management consultants—for guidance. The challenge here is that it’s only possible to peddle certainty as a product if the world itself is somewhat certain. The reality of VUCA is that no matter how much certainty McKinsey and its ilk may sell, it won’t be true. As a result, Measureship-led corporations seeking absolute certainty will almost certainly barrel straight into trouble, potentially fatally so.
Second, those corporations that have not fallen deeply into the Measureship trap will understand that there can be no certainty in an uncertain world and, as a result, will take a different tack. Rather than seek clarity through certainty, they’ll create clarity via strategic optionality. What this means in practice is that they’ll be hedging their bets by buying options on multiple future outcomes, with a primary focus on future resiliency rather than immediate-term efficiency. However, what such corporations cannot afford to do is mistake optionality for paralysis. The opportunity to win will require such corporations to move swiftly and decisively against what Amazon labels “two-way doors” (easy decisions to walk back if proven incorrect), while at the same time being extra-deliberate when dealing with “one-way doors” (decisions where it’s exceptionally difficult, if not impossible, to walk back if proven incorrect).
When entering a VUCA period where backward-looking data no longer holds and strategic optionality is critical to ensuring survival and future success, marketing has the opportunity to step up and lead by regaining its historical position as purveyors of muscular mutualism. As the Hyundai example given above proves, the ability to combine empathy for your customer with ingenuity in meeting their needs is one of the single best routes we’ve historically found for navigating uncertain times. Let’s not forget that as bleak as the financial crisis appeared at the time, it spawned an unheard-of continuity of economic growth on the other side. Let’s also not forget that Apple launched the iPhone App Store into the teeth of this uncertainty in 2008. This innovation precipitated a $1trn app-economy and became a key pillar in Apple’s subsequent dominance of the smartphone category over the next decade and a half, which in turn was critical to driving Apple from an $80bn company at the end of 2008 to becoming the first corporation in history to break the $3trn barrier in 2023.
As a result, I strongly encourage corporations to pursue option number 2 and seek clarity via strategic optionality. And within this, to treat marketing less as a tactical department focused primarily on parasitic value capture and extraction, and instead view it as a critical strategic function whose responsibilities, incentives, and capabilities should be re-oriented around a return to mutualism, with “mutual value exchange” acknowledged as its primary and most important source of value to any corporation that seeks future success. (It isn’t just me who says that marketing should be treated more strategically; renowned management thinker Roger Martin believes corporations should merge their marketing and strategy groups into a singular whole.)
However, I won’t pretend that I’m peddling certainty when I say this. The world truly is becoming more VUCA, and as a result, I could be way off base.
However, it feels achingly clear that we won’t succeed in moving forward into an uncertain future by making ‘data-driven’ decisions based on certainties of the past that no longer hold true. I also predict that continuing a parasitic relationship with a customer unwilling to bear it will do little to drive success and much to accelerate failure, no matter how much brilliance the evidence-based marketers may bring forth.
Instead, if history is any guide, the winners that will inevitably emerge from this unprecedented period will be those who get closest to the customer, understand their true needs, and use this inspiration to feed their ingenuity and business imagination to create excess value for customers and resilience and strategic optionality for themselves. As a result, positioning themselves as customer allies rather than foes as we come out the other side.
The writing is on the wall. It’s time for marketing to step up and lead. It’s time for CEOs to insist upon it. And it’s the time for a muscular return to mutualism.