Digital is the same but different

Fri, 30 Jul 2010

I’m sick of being told about how marketing has “thrown out the rulebook” and how “marketing theory has to be rewritten”. The hypothesis appears to be that in a digital-enabled, post Facebook, microblogging era, everything has been suddenly turned upside down. This claim is false.

That’s not to say that the impact of digitisation isn’t real and hugely significant. In fact, I’d go as far as to say that thousands of changes in business and society have together given rise to a collective gale that is poised to tear through unprepared companies and their unreformed marketing departments. But the hurricane affects practice, not principles.

There are three main areas where digital is affecting marketing today. One is data - the fact that today we live in a giant database where most things can be measured and ROI is rapidly replacing smoke and mirrors. Two is access - our vastly improved means of communicating with and selling to customers, regardless of geographic proximity. Three is interconnected consumers - people increasingly confident and able to share opinions widely and listen to those of others.

Important stuff, no doubt. But to conclude that marketing theory is rubbish or that marketing textbooks should be thrown away is a big mistake.

My contention is this: Despite enormous change, the essential tenants of marketing - targeting and relevance; differentiation, alignment and consistency; and the importance of market-based assets such as trust, reputation, relationships and user-base - remain unchanged from what they were thirty years ago. Moreover, the strategy concerning these concepts has become more important than ever.

While many marketers still cling to the paradigms of the old world - when practice was about agencies and communications rather than strategy or markets, another group of marketers think a some casually-executed digital tools - perhaps a few Tweets and a Facebook profile - will save them. Both are sadly mistaken.

Writing about the Internet in 2001, Michael Porter observed that “far from making strategy less important, as some have argued [it] actually makes strategy more essential than ever”. He went on to note that vast improvements in access lead to growing rivalry, since geographies are expanded, components are non-proprietary, and barriers to entry are reduced. And in the face of intensifying rivalry, strategy is critical.

What makes things particularly interesting is that in many cases, the timeless principles of marketing can be put into practice more readily today than in the past. More often than not, the very changes that compel us to alter marketing practice also make it easier to deploy the theory. As a result, smart marketers are now able to make better use of the principles than ever before.

For example, price elasticity as a concept has been around for many years. Only now with vastly more datapoints, real-time feedback and the ability to pinpoint-target different customers, can true elasticity be calculated easily. Similarly, the theory of segmented pricing (where different customers pay different prices, typically based on their ability to pay, thus ensuring more sales and greater overall revenues), is not a new one. But today it is much easier than in the past to access different customers and manage different product variants.

Perhaps most significant of all, the concept of advertising testing is as old as advertising (or maybe as some wags would have it, even older - it just didn’t pass). Only today, it is easy to run randomised trials of ads online - not with a test sample, but with the entire population. The ’test and refine’ paradigm as a modus operandi has very much arrived - to the point where advertisers who don’t use today it are incurring an opportunity cost.

Back to principles and practice for a moment. In much of the marketing fraternity, what has passed for marketing principles is actually a matter of practice. For instance, standard marketing practice for many years has been dominated by the creation of advertising substance - pictures, words, moving images - rather than innovation, ideas or propositions. In a data-rich, accessible and interconnected world, this has to be rectified.

To take another example, many marketing plans have a fixed 12 month lifespan. This maybe practical, but nowhere is this a principle of marketing - and in may cases it will change. The much-purported ’end of the annual strategic plan’ is already a reality in many businesses which are set up to respond quickly to opportunities and developments as they occur in an always on, interconnected universe. Provided that these organisations can avoid a permanent state of indecisive reactivity, such strategic flexibility can turn into valuable market responsiveness.

So what of our brave new digitally-enabled marketing world? Practice has to change, principles remain unchanged, and market-based strategy is more important than ever.

Chris can be contacted at enquiries@efm.com.au