Reinventing Marketing

by rohit on January 4, 2010

Rethinking Marketing. That’s the title of an article in the Jan- Feb 2010 issue of Harvard Business Review by Rust, Moorman & Bhalla (subscription required).

The plea ? Reinvent marketing as customer management. Not much new here, but the case is presented well. Highlights :

The old marketing : product centric

The old marketing : product centric

What reinvention is this ?

Marketing departments are usually designed for the mass market era (‘60s in the U.S. ) with mass market segments, mass media and customer transactions that are impersonal.

However, technology is now making one on one interactions possible. Plus, customers too are beginning to expect a one on one interaction with brands.

What does this mean for marketers ?

Change  (From / To)

Pushing products & brands                       Cultivate (i.e. serve) customers &                                                                                         customer segments

Transactions                                                   Customer Lifetime Value
Mass marketing                                              One-to-one marketing

What is the organization set-up required to achieve this?

Have customer managers. This is similar to having account managers in B2B companies. The point being that now even B2C companies need such managers. Customer managers can then target individual customers or target narrow segments.

The new marketing : customers first

The new marketing : customers first

Have a Chief Customer Officer position (a tricky role); incumbent’s key challenges will be to promote a customer-centric culture, get key people to regularly meet with customers and ensure availability of customer data.

Customer-facing functions like CRM, market research, R & D and customer service must now report to this CCO.

Some tips here :
– make sure CRM is under customer department, not under IT
– get R & D to interact directly with customers
– for better quality, handle customer service in-house

What metrics are needed?

Change from / to :

Product profitability Customer profitability
Sales                                 Customer Lifetime Value  (CLV)
Brand equity                 Customer equity
Market share                 Customer Equity share


CLV = future profits from customer, at a proper discount rate
Customer Equity = sum of CLV of individual customers
Customer Equity share = customer equity divided by equity of all customers in the market. This is an indicator of the organization’s long-term competitiveness.

To get above customer metrics, companies now need customer data at the individual and customer segment level (i.e. they need customer databases). This data is over and above the usual aggregate level data such as sales and surveys.

In future, customer metrics are expected to become a routine part of financial reporting, just as sales and profit numbers are today. This is another reason why any investment in getting the above customer data will be worth it.

It’s the Chief Customer Officer’s job to improve performance on these metrics.The HBR article featured here says 300 global organizations now have CCOs, up from 30 in 2003. Here is a news item giving a flavour of how new, yet topical this position is.

The Customer Organization

The Customer Organization

Where does one get customer managers from ?

Customer managers’ should have a broad perspective and training in social sciences. They need to approach people as behavioural scientists would do, as they need to understand what customers need.

Business schools will have to adapt their (marketing) curriculum to create people with this training.

Customer marketing in India

In India, we are not out of the mass market era yet, in view of rural markets and low Internet penetration. Mass market marketing will coexist with one-to-one, customer marketing.

It would appear the maximum progress in customer marketing has been by banking, followed to a lesser extent by the telecom and retail industries.

Some questions:

How far down this path have these industries actually proceeded?

How many organizations have user-friendly websites, programs to register users or members, Facebook Pages, loyalty clubs, lead management systems, opt-in programs for email and sms marketing, feedback and customer satisfaction audit processes and customer segment managers ?

How many, if at all, have a Chief Customer Officer position ?

How many have launched new products on the basis of mining customer data ?

And what of industries outside of banking, finance, retail and telecom ?

Which Indian organizations are leading with best practices ?

What do you think !?

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Ramesh January 5, 2010 at 6:23 pm

Thanks Rohit for a very good synopsis of the HBR article. While technology has no doubt changed the equation, I believe customer centricity is a very cultural thing. Organisations either have it or don’t. They can invest millions in advanced CRM or in structures, but if the concept of customer first above all is not intrinsic to the culture, they don’t seem to really make headway. Banks in India are actually a poor advertisement for customer centricity, I believe. The small entrepreneur is a much better bet.


rohit January 7, 2010 at 11:03 am

Great insight, Ramesh, about small entrepreneurs being the most customer-centric !


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