Memo to Marketing

The marketing function has been under increasing pressure to deliver. Its challenge is to see new business opportunities before they become obvious, to lead the market and not be led, to have a proactive vision rather than a copycat mentality. To accomplish that, a “facts-based” analysis — using quantitative data from customer surveys, market studies and other sources — can help tremendously, enabling companies to take calculated risks with greater confidence. But such approaches can sometimes be dysfunctional, leading to endless statistical analyses that obfuscate key points. Or they might focus on yesterday’s issues instead of tomorrow’s opportunities. Companies thus need a broadened approach to marketing research that takes into account conversations with customers, observations from the field and insights from executives, among other alternative sources of valuable information. The goal is to enable — not stifle — innovation. To this end, marketing must perform seven key tasks within an organization.

Create a meeting place.

Marketing research needs to facilitate a dialogue between those executives with challenges and those with solutions. Any solution should be based on more than just mere opinion; at the same time, the brainstorming does not need to be narrowly data driven. The aim is to find nonintuitive solutions, that is, value-creating approaches that could be beyond the scope of the research. In other words, research data should enable people to be curious, to ask, “So what?” and to think the unthinkable. But that process must be part of a dialogue — hence, the need for a meeting place.

Consider Nestlé S.A.’s launch of LC1, a new yogurt. In the early 1990s, the company’s yogurt business was losing market share, despite much input from marketing research on how to reformulate the product, the packaging, the advertising and so on.

But then Nestlé learned about Yakult, a fermented milk-based drink produced by Yakult Honsha Co. Ltd. that contains probiotic bacteria. The health-based product was enjoying considerable success in Japan, and Nestlé’s managers were intrigued. Receptive to new ideas, they discussed Yakult at an open-ended brainstorming session with a wide range of participants, including people from R&D. At this meeting place, the atmosphere was open and nonthreatening, and the participants were more than willing to bounce around new ideas. As a result of this collaborative environment, the company decided to add probiotic bacteria to its yogurt — and the LC1 success was born.

Consider radically new opportunities.

Conventional business models and other sacred cows can be unnecessarily limiting. But rather than challenging the status quo, marketing research often consists of a self-congratulatory look at past successes. Instead, it should seek inspiration from listening to early adopters and lead clients. A company can often tap into novel opportunities by interpreting stories from those customers. Indeed, when marketing combines such information with traditional statistical data in a fact-based decision-making process, the result can help transform a company’s fundamental business model.

Daimler-Benz AG’s launch of the Smart car —an economical, two-seater just over eight feet long — is a case in point. Although a broad range of consumers had consistently given Mercedes-Benz’s products excellent ratings, a few core customers had remarked that the vehicles were less than optimally suited for congested city driving. The feedback advocated for Mercedes-Benz to develop a smaller, more economical car. That notion received almost universal rejection within the organization at first, because it ran counter to the company’s corporate brand of luxury and quality. But thanks to the persistence of that vociferous minority of core customers, some parts of the company (but not all) gradually came to realize that the feedback was not so much a criticism as it was an opportunity. Viewing it as such, several managers became less defensive toward the radical idea of developing a microcompact vehicle. Overall internal resistance remained strong enough, however, that the product couldn’t be launched in-house. So the then Mercedes-Benz AG developed the Smart car by establishing a freestanding joint venture with an unlikely partner — SMH, today the Swatch Group Ltd., the watchmaker known for its trendy designs.

Break down silos.

A belief that “we know best” can be devastating for innovation. Such an attitude is frequently fostered in silos — divisions, departments or other groups within an organization. The epitome of that type of thinking occurs when marketing insights are seen as belonging to certain parts of a company (just as customers sometimes are), rather than as the property of the entire organization. To discourage this, marketing must view itself as part of a general management team and not as a member of any silo. Instead of specialized, solo-oriented thinking, it should consider valid viewpoints from eclectic groups of managers and employees alike. The axiomatic base of marketing research must not allow it to become myopic, and local information shouldn’t be seen as belonging to any particular group.

Consider the ABB Group, with its myriad responsibility centers spanning a broad range of businesses in industrial automation and power technologies. At one point, the company had more than 2,000 operating units with independent profit-and-loss responsibilities. An analysis of those various business units revealed that they viewed their customers as belonging to them and not to ABB as a whole. Similarly, specific operating units were possessive about the core technology and supporting know-how to serve key customers. To overcome this silo mentality, top management took various steps, including the launch of an internal campaign calling for broader cooperation. When coining a slogan that would signify the need for change, management initially considered “Borrow with pride” but rejected it in favor of the stronger “Steal with pride.” Of course, ABB wasn’t condoning illegal theft, but the company did want to emphasize that all customers and all relevant know-how belonged to the entire organization, not to any specific units or departments.

Support experimentation.

All too often, people fall prey to excessive data analysis, carrying out market test after market test, ad infinitum. But marketing research should lead to decision making, not decision-making myopia. In other words, marketing research should enable — not delay — action. In particular, it needs to support experimentation so that companies can try out things faster in order to learn faster — or, as some have said, to “fail often to succeed sooner.” The keys here are systematic learning and recognizing that setbacks are a necessary part of the process. If people are afraid to fail, they might play it safe and hide behind endless data analyses. Top management must encourage more learning by not stigmatizing those who experience setbacks, and marketing research needs to play an important role in supporting that attitude.

Nestlé’s experience with LC1 provides an example. Initially, the company launched the new yogurt in France with a heavy emphasis on the product’s functional properties —“helping the body protect itself” — a direction that marketing research helped to set. But consumers did not necessarily want a medicinal food; they wanted a good, healthy and pleasurable eating experience. The setback in France told Nestlé that the company had to communicate the yogurt’s healthy properties in a different way. This was an important lesson that Nestlé’s top management “allowed” those involved with the project to learn. Instead of being penalized, the same team and its manager were given the chance to relaunch the product in Germany. At other organizations, the manager’s career might have been finished. But Nestlé backed him and his team, realizing that because radical steps were necessary to stem the company’s market-share erosion, mistakes were going to be par for the course. The result: LC1 became a huge commercial success not only in Germany but also elsewhere, eventually capturing a large share of the health segment of the yogurt market.

Enable top managers to represent the customer vis-à-vis their own organizations.

Senior executives often need to play the role of customer advocate with regard to their own organizations. To be effective in that role, they must have strong consumer insights. Marketing research needs to support that effort. Top managers should regularly talk to customers to create the context for incorporating inputs from market research into their strategy. It is vital that the CEO and other senior executives should then use those insights to challenge their own organization in terms of how to shape customer-driven R&D, manufacturing and so on. In this respect, marketing should be a catalytic force that supports top managers’ understanding of their customers.

Consider Medtronic Inc., a leading manufacturer of medical implants. The company’s marketing research, like the R&D function itself, had typically focused on medical science. But Bill George, former chairman and CEO, helped ensure that the patient viewpoint also would be represented, creating a better foundation for both interpreting and acting on the marketing research. For instance, although much of the company’s expertise had traditionally centered on heart pacemakers, George did not limit his thinking to that market. Realizing that a different segment of the population suffered from strong and often uncontrollable tremors, George and others at the company applied Medtronic’s expertise in neurology to the search for a possible treatment. He strongly supported the subsequent R&D that eventually led to the development of electrodes that can be implanted in the brain to relieve the tremors. This effort helped steer the company into a whole new area of product applications.

Help determine where to allocate resources.

Key strategic projects need major commitments of resources for developing novel products, entering new markets and so on. Timing is often essential in order to gain first-mover advantage and to prevent others, especially main competitors, from taking the initiative. Marketing must help senior executives to choose such key strategic projects by identifying new growth opportunities and by strengthening management’s confidence in them. At the same time, however, top management cannot afford to be distracted by seemingly promising opportunities that lead nowhere. Marketing research thus must play a crucial role in raising relevant new facts without creating disarray. It should help test critical assumptions without obfuscating the process with insignificant details. In short, marketing research needs to help senior executives distinguish between the relevant and the trivial.

Novartis AG’s introduction of Gleevec, a new cancer drug, is a case in point. Gleevec (called Glivec outside the United States) has the ability to “find” cancer-affected cells. Marketing research helped focus on that fundamental attribute, as doctors had continually expressed their frustration with cancer drugs that typically attack healthy as well as cancerous tissue. By fully realizing the tremendous value of a drug with accurate targeting capability, chairman and CEO Dan Vasella and others were able to push the project forward, despite the skepticism of many conventional researchers, and Novartis was able to bring Gleevec to market.

Keep moving everyone forward.

Decisions that have been made should not be revisited routinely. Whenever issues are reopened, momentum slows, making it more difficult for the CEO and other senior executives to keep the organization moving forward. Momentum is crucial for coping with the performance pressures facing modern organizations. The lesson for marketing research is to support this momentum — not to distract but to keep people focused, not to sow unnecessary seeds of doubt but to help build confidence. Marketing should enable top managers to implement the next steps of their strategy and to make any necessary adjustments to keep that plan on track. Of course, sometimes companies do have to say,“Stop, this isn’t working.” Marketing research in those cases should help provide everyone with a reality check — “Are we really progressing as we think we are, or are we just deceiving ourselves?” But even in those unfortunate instances when a company needs to regroup, marketing research should still keep people moving forward toward an alternative plan of action.

The CEO of a large consumer electronics company in a fiercely competitive field comes to mind. “We do not necessarily have better technology, better science or better executives,” he once commented. “But when we make a key decision, then we go for it. We always try to improve on it, but we do not look back at point zero. … Our marketing-research function — supported by us at the top — truly helps us to keep the momentum.” That’s not to say that companies should ignore warning signs that they’re heading down the wrong path. At the same time, neither should they allow themselves to get stuck in analysis paralysis. After all, even the right decision becomes wrong when it’s made too late.

A New Role

The days when marketing research could provide value and justify its existence through narrowly defined, axiomatically grounded statistical analyses and tests are long gone. Marketing must now become a key driver of innovation that ensures greater value creation in the modern organization. It must support top management in a catalytic way, becoming more proactive (instead of distractive) and driving the market (instead of being driven by the market). To accomplish this, marketing must perform a number of vital internal tasks in addition to various external ones (which are often viewed as marketing’s “normal” agenda).

In summary, marketing research must become a model for innovation rather than follow a strategy of incrementalism based on the mere administration of brands. To do this, it must learn to embrace ambiguity by recognizing the importance of both data and intuition. The goal is to be at the forefront of seeing new business opportunities that are based on facts and insights, rather than politics and ill-founded opinions. In this respect, the task of marketing has become increasingly difficult — and more important — than ever before.