Traditional marketing approaches run the risk of being slow and ponderous. Anthony Freeling argues that ‘agile marketing’ is a requirement to thrive in today’s environment
On 13 February 1995, Tesco launched a customer loyalty programme called Clubcard. On 23 October 1995, Safeway launched its own programme, named the ABC card. Both programmes were intended, in part, to provide new data for their marketers. But the Clubcard and ABC programmes led to very different results.
Emboldened by initial success, Safeway planned a major initiative to analyse this data and to use it to transform its marketing with new segmentations and marketing offers. But it rapidly got bogged down in detail and struggled to make the ABC card pay. Tesco, on the other hand, began by throwing away most of the data in an attempt to develop a few useful insights. When these insights were proven to be of value, Tesco slowly added complexity to its analyses and to the activities they prompted. Every year, the complexity grew and the number of activities multiplied.
Today, Clubcard is the largest loyalty card in the UK and Tesco has almost twice the market share of its nearest rival. Safeway is no more.
Why were the results of such similar enterprises so radically different? I suggest that Tesco succeeded and Safeway failed because they had a radically different approach to marketing. Safeway followed the classic marketing approach I call a ‘Big Leap’. Tesco, on the other hand, adopted a much more agile approach, responding to new information as it arose.
THE CHALLENGE FOR MARKETING
Marketing has been around in some form for a very long time, but only over the past hundred years has it emerged as a specialist discipline in its own right. It has attracted large budgets in many industries, starting in consumer-goods manufacturing but moving over time into retailing, automotive, telephony, pharmaceuticals and public services.
However, business leaders who, after all, have funded the expansion in budgets, have a surprisingly mixed opinion of marketing. Two particular gripes emerge from discussions with CEOs. First, senior management is always looking for greater efficiency and returns from marketing, yet often feels that this imperative is falling on deaf ears. Second, CEOs have consistently been frustrated both by the lack of game-changing innovations from their marketing departments and by being blindsided by competitors who do seem to come up with these innovations.
In addition, the environment is changing rapidly with a proliferation of customer segments, of sales and service channels and communication media and of stakeholders including shareholders, government and regulators and local communities. Businesses have globalised, exposing them to a wider variety of cultures, distribution networks and customer demands. On top of all that there is the increased speed of change.
In short, in order to satisfy their bosses and paymasters, marketers today need to create, deliver and communicate better offers to their customers more rapidly than ever before and as efficiently as possible. There are, therefore, three marketing challenges to be met simultaneously:
fitness – meeting customer needs and other stakeholder demands;
speed – delivered before competition;
efficiency – at a lower cost.
One complication that marketing as a discipline now faces, however, is that these three requirements often appear to be mutually contradictory. If a marketer goes for speed, does this imply quick and dirty, forgoing efficiency of spend and quite probably fitness? If the focus is on efficiency, then there is a concern that everything will slow down while the necessary analysis is performed, while creative types may complain about being ‘run by accountants’.
In addition, many marketers argue that the key to fitness is creativity, yet managers from other disciplines believe that too often the need for creativity is used as an excuse for not learning from experience or being accountable, which would harm the ability to adapt rapidly to the environment and reduce efficiency.
HOW AGILE MARKETING IS FOTTER, FASTER, AND MORE EFFICIENT
I propose that developing and adopting a theory of ‘agile marketing’ is the best way to achieve the three objectives of fitness, speed and efficiency for most companies, most of the time. Yet the current approaches to marketing are largely based on making big leaps, which I believe is the root cause of much of the dissatisfaction with marketing.
To explain why agile marketing can succeed where big leaps fail, I will use the analogy of evolutionary biology.
In contrast with theories of intelligent design, biologists believe that creatures were not created through a big leap by an omniscient, omnipotent deity, but rather through a process of continuous improvement. Life is thought of as a competitive ‘search for fitness’. Every possible creature has a certain level of fitness. Natural selection is a way to search among these possible creatures to find ones with higher fitness.
Pictorially, figure 1 represents this. The landscape describes how fit different possible creatures are at any given point of the landscape. The height of the surface above the base is the fitness. Where we would most like to be on this landscape is at point 2. (Note that not all these positions on the picture are creatures that actually exist – they are possible creatures.)
Suppose a real creature starts at point 1 – the question is how does its species find point 2? Although it is drawn like 
real-world mountain landscapes, this fitness landscape is continually shifting and changing. One executive I discussed this with suggested the landscape should be thought of more like waves in a sea, continuously changing in apparently unpredictable ways.
In biology, the theory of evolution through natural selection is Darwin’s answer to this question. Natural selection, at its most basic, is a continuous process of variation, selection and replication. From a parent organism different variations are created, these variations compete for resources and survival in the environment and some are selected to survive (the fittest), and the winners then replicate to create a new generation of variants.
Each of these steps is critical – variation to allow change in the population, selection to ensure the adapted organisms survive and replication to ensure there are more of the winning variants in the next generation.
Over time, the population evolves. It does so, moreover, dealing with surprises as they come rather than trying to predict them – if the environment changes, natural selection lets the species adapt.
ADAPTING TO SURVIVE
Natural selection provides a way of climbing to the peak of the fitness landscape. It moves upwards step by step. The initial creature has a variety of offspring, which can be shown pictorially as different lines on the fitness landscape.
Then the new variation that is most fit is selected. That corresponds either to moves upwards or to staying at the same level. Of course, after just one step, we have not moved far towards point 2.
The selected variant then replicates, but also creates more variants in its offspring, and the process is repeated. At each step small steps are taken in the vicinity of the starting point, and eventually the species is certain to move upwards unless it is already at the top, in which case it will stay there. So with this sequence of variation followed by selection, evolution develops ever more ‘fit’ creatures (see figure 2).
The attraction of this approach is that there is no need for a deity with a plan – natural selection ensures that the path simply moves upwards until it can go no further. Here, after eight steps the path has reached the peak at point 2.
The analogy to a creature in marketing is the marketing offer – what you put out into the marketplace to attract customer spend. The analogy works well: the marketing offer is competing for scarce resources and there are constant battles with other creatures/offers. The fittest offer is the one that best meets the needs of stakeholders. Marketing is a search for this offer, which we need to find speedily and efficiently.
The ‘business school solution’ to this problem in marketing is a big leap. Conduct market research to understand customers’ needs and wants, perform some competitive analysis, create a plan to move to the place we have identified as point 2, and then execute against that plan.
The problem with this approach, in today’s rapidly changing world, is that it is very unlikely to work. It assumes too much about the future and about the reactions of customers and competitors. However good your plan, you are likely to miss the highest point with a single leap. There is too much uncertainty for management to be confident in this approach. So most marketing innovations fail.
The theory of agile marketing applies natural selection to the problem. The analogy replaces generations of creatures competing in an ecosystem with multiple generations of marketing offer, competing in the marketplace. A company applying agile marketing will start with an offer, create and test variants on that offer, select the fittest, and then replicate it to grow its share in the marketplace.
In the rapid-moving, complex environments of consumer marketing, where nobody is God, this is an efficient way of finding the highest point.
In practice, it will often be desirable to combine the two methods of agile marketing and big leap marketing. If you believe you have a relatively good idea of what the best offer might be, you could search the landscape by an initial big leap followed by a series of evolutionary steps to reduce the margin of error.
I believe that if you have made such a big leap you should always try to follow it by agile marketing if possible, since it is much more likely that you will land on the ‘foothills’ of the peak you are searching for. Apple’s approach to multiple generations of iPod is a good example.
TEST, LEARN, COMMIT LOOPS
The challenge is how to turn the theory of agile marketing into practice. In order to apply natural selection to marketing offers, businesses need to be able to execute the three core steps of variation, selection and replication.
The essence of the first two of these is already present in many businesses in the form of test-and-learn processes. Just as with biological evolution, marketers start from an existing offer and create variations by testing new offers. They then measure what works by identifying metrics for each variant. From what they learn, one or more of these variations are selected for further tests to create another set of variants and the marketers learn some more. Again some of the variants are selected.
Once the business is satisfied with the fitness of the selected variant, it winnows out the failures and copies the winner by committing significant resources to rolling out the successful offer into the marketplace. Immediately the business also embarks on testing new variants in order to improve fitness still further. The process then repeats (see figure 3).
The trick is to combine insights with random experimentation. Marketers using testlearn- commit loops are often surprised by what actually works better
BUILDING ON SUCCESS
Marketers have traditionally been able to create variations. To improve the efficiency and speed of the process marketers can use their insights into the marketplace to make judgements about where the fitness landscape goes ‘up’ as a guide to which variants to create. The trick is to combine insights with random experimentation. Marketers using test-learn-commit loops (TLC) are often surprised by what actually works better, demonstrating the value of just trying out some things.
Marketers can improve their judgements for creating variations by building their intuition and immersing themselves in the customer experience. The challenge with ‘test’ is to find ways of experimenting cheaply and rapidly.
To meet the overall marketing criteria of fitness, speed and efficiency, it is not desirable to copy every variation across the entire market. ‘Learn’ is the stage in the loop where this is avoided. It depends critically on measurement and on reviewing test results against clear objectives. I believe that this is the weakest element of the TLC loop for many marketers.
In some industries, learning can be achieved through realistic trials. For example, in retailing, a new merchandise offer or a price experiment can be conducted in-store with little or no impact on the broader chain. The test and learn parts of the loop can be repeated as many times as required, the business can copy only the successful ones, and the experiments can be continued through further test-and-learn trials.
In other industries it may seem impossible to learn through marketplace trials – for example, project-based B2B marketing. But with creativity it is usually possible to get closer to a valid learning approach than currently; for example, in project-based B2B it is possible to ‘float’ possible offers in the dialogue with a client to gauge attractiveness. Computer simulations, behavioural market research and data analytics all provide ways to improve learning.
The key to speed and efficiency in learning is to retain outstanding awareness of the market situation and of which offers are fit and not fit, balancing analytical rigour with intuition.
Commitment is where the decision is taken to commit the business’s resources to a new offer. This is in some ways separated from the test-and-learn parts of the loop because it is often more ‘strategic’ and the responsibility of people at a higher level of the organisation. It will often involve far broader implementation and delivery challenges than the initial test-and-learn process.
In traditional terms, this may not be seen as a marketing process at all, if we are referring to the overall product or service offered by the company. The key to speed and efficiency in committing resources is to have outstanding executional capabilities, both to kill unsuccessful experiments fast and to roll out selected variants through the business system.
This is where agile marketing differs from most current versions of test-and learn marketing. Many proponents of test-and-learn can identify offers that would work in the marketplace, only to discover that they cannot execute them.
Three critical requirements for successful commitment are good communication between the marketers and the decision-makers, integration of operations between marketing and other functions and the ability to scale up delivery operations rapidly.
CONCLUSION
By thinking of marketing as a search in the fitness landscape for peaks, agile marketing can reduce the margin of error for marketers as they try to improve their offers. It stands in stark contrast to the more common big-leap marketing.
The drive towards continuous improvement has become the mantra in manufacturing, logistics and procurement. It is taken as a given that good companies continually reduce costs. Yet there has been no parallel trend in marketing. Managers might assume that their products or services will keep improving, or that their marketing activities will become ever more effective – but how? I believe that agile marketing is the answer. Some companies already operate this way. However, to retain the support of CEOs and other functions, more marketing needs to be more agile more of the time.
Anthony Freeling is a Fellow of Hughes Hall, Cambridge and a director of Ashridge Strategic Management Centre [email protected]