Like Revolut, those companies that capitalise on the potential of marketing now will be the ones that will thrive and grow in the post-pandemic world, writes Ebiquity’s Christian Polman
As the full economic toll of Covid-19 continues to sink in, there’s little doubt that one major casualty has been the marketing and media industry. Organisations have put an often necessary focus on cutting costs to survive the period of turmoil – the effects of which continue to reverberate across business and society.
But the toll has been particularly large on media and marketing – with big effects on most of the industry. This was predictable – advertising contracted harder than the broader economy in the wake of the 2008 financial crisis, and took 8 years to recover.
With double-digit shrinkage and a global recession now a reality, many CFOs are challenging marketing colleagues to return cash to the business. Some categories held or even increased marketing expenditure because of the opportunities offered by the pandemic – most notably FMCG’s biggest spender, P&G, which grew its annual advertising expenditure by 8.5% to $7.33bn in the 12 months to June 2020 . Unilever also recently announced an increase in marketing spend through the second half of the year .
Yet many, if not most, CMOs have found themselves in the front line of cost-cutting.
Business is now moving into a new phase of the pandemic. Large sectors of the economy have been able to open up again, from non-essential retail to restaurants, from automotive to cinema, albeit trading in the new but restricted ways necessary to minimise community infection.
In this context, I have read and heard a lot of discussion in recent months about the need for marketers to get back to basics. Even before the pandemic, the argument goes, many brands lost sight of the 4Ps of marketing. By focusing just on communications, simply getting their message out there and sustaining brand presence, many marketers have forgotten how to pull the levers of Product, Price, Promotion, and Place.
These fundamental principles are of course important, but I also believe that focusing just on the 4Ps in fact misses the point about the critical role that marketing can play to influence consumer behaviour, drive business innovation, and help business recover and grow. If we get it right, marketing can drive the broader economic recovery the world so desperately requires.
But first, marketers need now to balance their increased specialism and expertise in the tactics of digital marketing with the imperative to remain commercially relevant and influential right across the business.
Old thoughts, new resonance
Peter Drucker is well recognised in the business history books as not only a brilliant business mind, but also the grandfather of modern management practices. It is now almost 70 years since the Austrian-born, US-based management consultant wrote what is undoubtedly a fundamentally important statement about the role of marketing in business:
“Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
The fundamental implication of Drucker’s observation is that to fulfil its potential, marketing needs to be embedded right across a business, cutting through silos and functions that weren’t even thought of or possible when he was setting out his blueprint for success. Marketing isn’t just one of many functions within business, it is one of only two absolutely critical functions that define whether a business is successful or not.
As David Packard, the co-founder of IT hardware business Hewlett Packard, said: “Marketing is too important to be left to the marketing department.”
Marketing isn’t just the domain of marketers. It’s the domain of business. Businesses that infuse their organisation with good marketing principles are those that thrive and grow. This is especially true post-pandemic.
Speaking the language of the C-suite
The fact that marketing is still, too often, not embedded into the culture and the structure of business is also in part down to CMOs’ failure to speak the language of the C-suite. This problem is compounded by the limited understanding of the critical role that marketing can play in organisations across both board rooms and C-suites.
The general perception remains that marketing is largely about communications, and CEOs with this mindset often miss the mark when hiring marketing talent, in that way preventing marketing – as a core business function – from delivering its full business impact, let alone from driving business success.
Combined, these challenges help to explain CMOs’ ongoing short tenure in the C-suite. According to executive research firm Spencer Stuart, CMOs are in post for just 41 months in the top 100 US advertisers, compared with 76 months for CEOs. This is the second year in a row that CMO tenure has fallen – it stood at 43 months just two years ago, according to this long-running, longitudinal study.
This disconnect at the C-suite is changing, however, and this will need to accelerate post-pandemic if marketing is to play its full part in driving recovery and growth. Those CMOs who have gained C-suite credibility and traction are those who use top- and bottom-line sales performance metrics to assess the impact of their discipline on overall commercial performance, against core business objectives.
By deploying the tools and techniques of marketing effectiveness – from market mix modelling to brand equity modelling, from testing and learning to properly-leveraged price and promotions – CMOs actively structure marketing to optimise investment and in this way make the discipline more vital to business.
They are also the ones who know how to infuse marketing principles throughout the organisation – making the business about marketing and fulfilling Drucker’s promise.
Marketing thinking across an organisation: Revolut
Consider the case of fintech business Revolut. Frictionless customer experience has been at the heart of the company’s promise from the very beginning, close behind the lead product proposition of highly competitive foreign exchange transaction fees.
This manifests itself in ease of use in all aspects of the customer experience, from signup and adding funds to making transfers and keeping track of transactions.
These same principles have now been applied to Revolut’s product extensions, including payments, cryptocurrencies, stock trading, rewards, and access to exclusive deals via partners.
The Revolut consumer always has a sense of power and control over their own experience. What’s more, rewards for adding friends – combined with a freemium model that draws consumers in and then converts them to a subscription – are marketing- and incentive-led propositions that are baked into the business’ overall operating model.
This all helps to grow the brand, plus deepen the relationship between the brand and its customers, and it is the result of building marketing thinking into all aspects of the business.
Revolut’s success in converting consumers to subscribers shows the value consumers ascribe to them. Investors clearly agree, with the company currently valued at more than $5.5bn, making the business the highest-valued fintech company in Europe.
This all adds up to show that Revolut is a different kind of company from those that have come before in this sector – a classic disruptor. It is, in Drucker’s terms, a company led by marketing and innovation.
Marketing in its broadest sense has a critical role to play in helping brands to recover and grow again in the wake of coronavirus. In part, this requires businesses to appreciate what marketing can achieve as one of the two key drivers of business growth.
To do this, CMOs need to help all of the C-suite appreciate and understand how marketing contributes to achieving business objectives and driving ROI.
This article was featured in Mediatel.