Marketing Reboot #2: The Great Marketing Thinkers: what do they have to say about the current crisis?

Welcome to Marketing Reboot !

Numberly is happy to invite you to a 30-minute Marketing Webinar: a Back to Basics to refresh your memory with key marketing concepts.

You can watch the replay of the webinar or read our article below!

In his article “Marketing Myopia“, published in 1960 in the Harvard Business Review, Theodore Levitt asked a question that is a fundamental contribution to marketing and market orientation: “What business are we really in?”. He takes the example of the American railways facing competition from air transport. The rail companies define their market narrowly: that of the rail players. But, according to Theodore Levitt, they should define it as the mobility market. Theodore Levitt also takes another recurring example, that of the oil industry: “The oil industry is implicitly defined as starting with the search for oil and ending with its distribution from the refinery”. Levitt thus suggests a “beginning to end” process: start with customer needs, then create a service to satisfy these needs, give satisfaction and finally find the necessary raw materials.

Levitt gives us three recommendations to define its market without short-sightedness. The first is to distinguish between sales and marketing. The second is to take into account the fact that production can create pressures towards high product turnover that we should be wary of. The third is the consequence of R&D on marketing because it could only serve product sophistication and does not respect scientific methods by putting marketing at the end of the chain.

In 1994, 40 years later, we saw a paradigm shift with the appearance of relationship marketing thanks to the work of Christian Grönross who contrasts it with transactional marketing. For him, turnover comes from the relationship with each customer and not from a series of anonymous transactions. The emergence of customer orientation marks the appearance of the moment of truth principle: moments that influence the customer experience and that must be taken into account in the study of this experience. Since the publication of this work, many changes in the structure and behaviour of companies have been observed, as shown in the case of Harvard’s “Reinventing Adobe”, which examines Adobe’s takeover of Omniture and the way in which Omniture, a product company specialising in software, transformed itself into a service company by leveraging its software rather than selling it directly.

In 2004, Lemon and Rust published work that led to a model that is still in consensus. This model is based on the transition from a product scenario to a service model, with an extension of the skills required, and many insights that are created through direct contact with the consumer.

And the essential contribution of this in-service research is the fact that relationship marketing is becoming an investment and not just a cost.

Marketing ROI is a positive change in customer value: it is the delta of Customer Equity in relation to the cost of achieving it.

Formula for marketing ROI:

∆ = Customer Equity – Cost of the investment

The performance engine of marketing investment therefore consists of the “Customer Equity” (= sum of individual CLVs) from which the marketing investments are subtracted.

The ROI, on the other hand, is stimulated by customer attraction, development and retention.
If we look at this formula, we can see that increasing the CLV increases the customer equity and thus the marketing ROI.
If we keep the same investment cost but increase the Customer Equity, we can see that customer relationships create value. Customer Equity is therefore a real performance driver to maximize the ROI of a marketing campaign.

Customer relationships are therefore a source of value. To understand this mechanism, it seems important to understand what a successful customer relationship is. Rob Morgan and Shelby D. Hunt propose in their work the Engagement-Trust Theory. In highlighting these two concepts, they propose a simple yet important equation:

Successful customer relationships = commitment + trust

This equation allows us to break down the principle of fruitful relationships, allowing cooperative behaviour, in order to identify the levers:

• Commitment, i.e. the conviction that an ongoing relationship with a third party is so important that it justifies maximum effort to maintain it;
• Trust, where a party has confidence in the reliability and integrity of a trading partner.

To create this commitment and trust, Morgan and Hunt identify three actions:

1. The consolidation of relational, utilitarian, hedonic and symbolic benefits by eliciting client feelings of money economy, convenience, exploration, entertainment, distinction and belonging;
2. The consolidation of the client’s shared values allowing him to identify himself and optimize his commitment;
3. Avoiding opportunistic behaviours because when a client identifies such behaviours, his confidence decreases and so does the investment he makes in the relationship.

Therefore, “successful” relationships involve two entities: customers and brands. While customer equity has already been considered, brand equity is also a significant contributor. Based on the work of David Aaker, “Brand Equity” has a major impact on customer choice: faced with two strictly identical alternatives, the consumer directs his choice towards the alternative with the strongest brand equity.

David A. Aaker’s work questions us on the definition of a brand. The American Marketing Association (AMA) defines a brand as a name, term, design, logo, symbol, or combination of these elements that identifies a company’s products and services and differentiates it from its competitors. A brand thus allows customers to save time and energy in their choices. It serves as a guarantee of the quality of the product or service and allows the customer to optimize the best choice in the product category according to his or her own criteria.
The brand is therefore a company resource, an “asset” since it has a measurable value. This measurable value is the brand equity, i.e. the added value that the brand brings to a product.

To build a strong brand, it is necessary to develop an identity, the way marketers want the company to be perceived; and not just a brand image. Indeed, identity is different from image because brand image simply refers to the way the company is perceived by the customer. For David A. Aaker, the focus should not only be on the purely functional benefits of the product or service. It is necessary to take into account the emotions that the brand may evoke, its personality traits and symbols to better differentiate it from the competition.

It therefore seems that four main traits characterise strong brands and need to be worked on to better differentiate themselves from the competition: brand loyalty, brand awareness, perceived quality and brand associations. Reinforcing these main traits means increasing the value exchanged between the brand and the customer and, therefore, between the company and the customer.