Jonathan Gordon and Jesko Perrey at the McKinsey & Company blog have an interesting and longish post on the Dawn of Marketing’s Golden Age. While most of the post focuses on changes in marketing and why that has created a new golden age, there are a few nuggets worth thinking through from a digital transformation perspective. But first, the marketing component:
The resulting expansion of platforms has propelled consistent growth in marketing expenditures, which now total as much as $1 trillion globally. The efficacy of this spending is under deep scrutiny. For example, in a survey of CEOs, close to three out of four agreed with the following statement: marketers “are always asking for more money, but can rarely explain how much incremental business this money will generate.”1 Chief marketing officers (CMOs), it appears, don’t disagree: in another recent survey, just over one-third said they had quantitatively proved the impact of their marketing outlays.2 Paradoxically, though, CEOs are looking to their CMOs more than ever, because they need top-line growth and view marketing as a critical lever to help them achieve it. Can marketers deliver amid ongoing performance pressures?
In this article, we’ll explain why we think the answer is yes—and why we are, in fact, on the cusp of a new golden age for marketing.
Since when do you see anyone without qualifications state that the massive investment in additional spending will pay off? You don’t see it often, but I agree with the sentiment. The changes have huge potential to benefit those who make such an investment. McKinsey gives five reasons why this will happen:
- Science: Big data and the methods and tools let you do so much more.
- Substance: By taking away the advertising message as the main medium, marketers have evolved to create relationships of substance.
- Story: A great story remains an important part of marketing.
- Speed: You can accomplish much more with a new set of tools. Imagine getting a 10,000 response survey and analyzing it in a month.
- Simplicity: the technology changes are forcing smart companies to simplify their organizations and allow for easier change.
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Now as you think about that, note the digital transformation occurring:
The impact goes beyond marketing and product teams. Marketing science is boosting the precision of real-time operating decisions. At a major hospitality company, marketing analysts are able to get a read on the performance of a particular property or category over a weekend and then drill down on individual customer segments to assess how to make improvements. If the data show that a profitable segment of weekend travelers are shortening their stays, the company can create special offers (such as late checkouts or room upgrades) to encourage repeat business.3 Or consider how one industrial-products company revamped its highly fragmented portfolio of more than 500 SKUs sold to customers in a diverse set of industries. Prices varied widely even for the same products, without any clear reasons as to why, hindering efforts to manage margins. An analytical tool that could scan 1.3 million transactions helped the company redraw customer segments, identify products with opportunities for pricing flexibility, and recommend new prices. Ultimately, it reset about 100,000 price points.
That’s good, because digital innovation, transparency, and customer-centricity have raised expectations across the board. In automobiles, as sensor technologies proliferate and onboard computing power increases, consumers are now starting to expect that collision-avoidance and digitally-enabled safety systems will become part of manufacturers’ offerings. (Luxury carmakers already are making sophisticated safety options part of their marketing story.) In retail, brands like H&M, Topshop, Uniqlo, and Zara have harnessed the consumer’s desire to have it all by bringing mass-market prices to the colors, fabrics, and designs of high fashion. Simultaneously, Amazon and other digital players are pressuring brick-and-mortar retailers, which are responding both by retooling their supply chains to enable faster restocking and one-day delivery and by creating new advertising messages around the in-store pickup of online orders.
These technologies are now impacting the physical world in more positive ways. They do so through the use of digital tools related to marketing and to back office operations.
In other words, digital marketing is just a small part of the digital transformation story.