Marketing and urban myths

One of the most successful marketing strategies that the world has seen, which has been employed by professional service firms across the world for about 100 years, is called 'Thought Leadership'. Yet, because it's not an fmcg strategy, neither the agencies nor the marketing academics have really studied it. As a result, it has not been generally used by the marketing industry, despite its staggering success.

Thought leadership is a vast, influential and diverse range of activities, which, at its best, produces systematic, iconic work like the McKinsey Quarterly or Interbrand's annual publication with BusinessWeek. The worst, though, was mocked by The Economist and called 'Thought Followship', because it is frequently just the erratic, whimsical jottings of partners from different disciplines tying to 'market' themselves between projects.

Professional service firms are probably worth about $700 billion worldwide and it has been estimated that, in the developed economies, about one in five people work for them. Looking at just one of the firms in this country, Deloitte UK, demonstrates how successful they are. They bill just under £1.5 billion per year from their clients for various advice and accountancy projects. On that revenue, they earn higher net margins than many of their clients and that profit is divided every year between about 600 people, who are called partners, giving them around £700,000 each (Source: Deloitte Annual Report).

Although there are many reasons for this success, thought leadership is one powerful tool used to build income, enhance reputation, create new services and exert influence.

It works because it influences management thinking throughout the western business world, marketing specialists included. But, at the same time, it generates the business equivalent of 'urban myths', causing, in some cases, immense damage.

SOME FAMILIAR 'URBAN MYTHS'

Most thinking business people would have heard, for instance, '50% of my advertising budget is wasted, I don't know which 50%'. Many would recognise: 'It costs more to recruit a new customer than retain an existing customer'. And, hundreds have heard conference presentations that say: 'The average dissatisfied customer tells 13 other people if they have a difficulty or experience bad service'.

Yet these are manufactured ideas, which, like urban myths, circulate among management networks, gaining influence. In a busy job where people don't get time to think, they make decisions, policy, arguments and presentations, with these ideas clustered in the back of their minds. They become de facto strategies. Real professionalism in marketing is standing back from this mighty machine and saying, 'Does that make sense here?'

Here are some examples.

Globalisation

We have been told that 'Everything is becoming more global' and this is a typical quotation to illustrate it:

'And then in London, a man could order by his telephone, sipping his morning tea in bed, the various products of the earth, in various quantities that he might see fit, and reasonably expect their early delivery upon his doorstep.'

Interestingly, though, this quotation is from John Maynard Keynes, talking in 1920, about his life in London during 1914. Maybe globalisation is not such a new concept. Like many of these ideas, it is older, multi-faceted and frequently re-hashed. It can also cause damage.

Now obviously in the political arena, the great trading blocs of the world mean that the nation state is probably becoming less important, and global interdependence is an issue for politicians to handle. There is also freer movement of money across the world and that will probably increase further through the electronic age. Also the volume of international trade has increased dramatically over the past few years.

Yet I think that Theodore Levitt went too far in his 1983 article on 'Globalisation in marketing' in the Harvard Business Review. He suggested that international trade would soon be dominated by 'global brands', entities that everyone across the world would buy. As a result, we, in the marketing profession, should move towards common global marketing, ignoring any variation due to local taste or culture. Which would mean that:

'Those marketers who are recognising local cultures are being lazy ... that every person across the world, has the same aspirations, they want their children to be educated, they want people to be healthy ...'

And so within 20 years of 1983, there would be a number of global entities in each of the leading product categories, which would be recognised across the world. He said that:

'Different cultural preferences, national tastes and standards are vestiges of the past. Some die, and some, like Italian food, become global propositions.'

In fact, the opposite has happened in the years since. We have seen a re-emergence of national cultures and the failure of many bland global offerings. Nevertheless, when this was first argued, some companies were damaged. For instance, when I was at PWC, we advised a leading consumer goods company. Its share price had been marked down because its competitor had three or four 'global brands' while it had none. As a result, it was losing investors, it was being criticised heavily in the business press and the CEO's job was threatened. In response, he said he would acquire, and yet the industry analysts knew that there were no global brands open to him. Most were owned by families that wouldn't sell.

So this company was suffering because it had no global brands. We analysed its worldwide portfolio and found, amongst its thousands of products, several with real potential. For example, in Venezuela, a product that had been launched with no real marketing or sales support had become a hugely successful market leader. There were more: in China, in Hong Kong and in Germany.

We called these 'cultural icons', because the firm could turn the Venezuelan product into a Hispanic brand. It could then be taken across the whole of South America, up into Miami and across into Spain. A product in Germany could become a Germanic brand in Austria, Serbia and down through Hungary. A Chinese brand, from Hong Kong, could move into mainland China and down through Southeast Asia.

It was much more effective in terms of return on investment for this company to create a portfolio where marketing and sales costs were invested in cultural icons rather than to bet the whole company on the acquisition or the natural growth of one global brand. In this instance, globalisation was the wrong strategy.

Let's look at a few more of these ideas.

The Communication Challenge

We've been told 'Global communications is challenging the world order'. For instance, the Queen sent the world an instant message by global communications to celebrate her anniversary. It said: 'Thank my beloved people, may God bless them.'

Yet, this was Queen Victoria in 1897. By contrast, in 1760, the then Prime Minister, Pitt, talked to his foreign secretary about the fact that they hadn't heard from their American Ambassador for a year, and 'if we haven't heard from him next year, I'll send him a note'. What a difference between 1760 and 1897. By then, Victoria was ruling the largest land mass controlled by any human being ever and could send this message instantaneously across her empire through a dramatic new technology called telegraphy. It was a major innovation.

We've also been told that the rate of technology change is accelerating; this is a typical quote:

'It was only yesterday, but what a gulf between now and then. Then was the old world ...

'But this technology starts a new era ... We who lived before it and survive out the ancient world, are like Father Noah and his family out of the Ark.'

Yet this was William Makepeace Thackeray in 1863. He was talking about the vast range of innovation that was introduced in his century, including the steam engine (1814) and the railroad, the electric motor (1831) and the first fax machine (1843). The next 40 years would also see: the first telephone call (1876), the electric light bulb (1879), the first motor car (1895), movies (1895) and the first aeroplane flight (1903).

Much of this technology revolutionised life and grew very fast. Take the steam train. This was the first time in human history that mankind could travel faster than a galloping horse. Created in the first half of the 19th century, there were 100,000 miles of track in America alone by the end of it.

It created new concepts like 'the holiday' and introduced, as a small byproduct, standard time in the UK (before that there was a different time in Bristol and London). Across America, it created new cities and new jobs. Also, I have to say, there was some misunderstanding about this new technology, just as in the dotcom boom. For instance The Times published an article mid-century suggesting that ladies should not go on a train going faster than 50 miles an hour because their brains were more delicate than a man's and it would cause them damage!

My point is that technology was changing as fast during this period of time as we've experienced it. In fact, I'd argue that some of this technology was much more revolutionary to life and well-being than an extra feature on Windows.

Price Sensitivity

We've been told that 'Everything is becoming a price-sensitive commodity'. This is a very strong belief in the IT industry in particular. For instance, IBM has recently run a television advert that is part of its Thought Leadership campaign around innovation: 'A product you launch on Monday becomes a commodity by Wednesday'. There's an assumption that suppliers have to reduce prices. Yet marketers consistently create brands that buck this commoditising force; and it's the best thing we do.

Most leading brands command a healthy price premium and do so for many years. Like the 29p per can that Heinz Baked Beans command over 'own brand' in my local Tesco and the day rates a 'magic circle' law firm partner can command against a single practitioner.

The ad on the previous page is for the oldest brand I could find, Pears. I understand that this product was created in 1789 by Andrew Pears, a hairdresser in Soho. In that age you couldn't get the same product produced the same time every time. Your clothes would all be individually made, you couldn't trust the food that you ate or the water you drank. Yet he found a way to create this consistent, reliable product, and that's what brands do for the world today.

This brand has been around for 200 years. In fact, many of today's brands were created before 1900. It is simply not true that everything is becoming price sensitive, that 'it's all a commodity by Wednesday'. Nor is it impossible to produce enduring value.

Back to the Famous Three

Turning briefly back to my opening examples. 'It costs more to gain a new customer than to keep an existing one' came from a book by Frederick Reichheld called The Loyalty Effect, published in 1996 before the dotcom boom. Yet, when I joined PWC its main product was the financial audit and it cost a lot of money to service a major audit client. However, all the time I was there, companies were coming in through the door saying: please advise me. In those circumstances, it was much cheaper to serve a new customer than to service an existing customer.

'The average dissatisfied customer tells 13 people' was made famous by Tom Peters in his presentations in connection with his book In Search of Excellence. It's quoting TARP Research, part of an American government programme in consumer supermarkets across the midwest of America. But how is the experience of supermarket shoppers in the mid-west in the 1980s relevant to your business in the modern Europe of the 21st century? 50% of my marketing budget is wasted, I don't know which 50%' was attributed to the Victorian marketer Lord Lever, by David Ogilvy in his famous 1962 book, Confessions of an Advertising Man. It may have been Thought Leadership 100 years ago, but now most of our work can be measured.

These are modern myths and may not be relevant to your market today. They are manufactured ideas peddled by people with a stake in them, with something to sell.

PROCESS RE-ENGINEERING: A CASE STUDY IN HOW TO CREATE INFLUENTIAL IDEAS

A few years ago, a thought called 'process re-engineering' came to prominence, which demonstrates how to generate wealth from a Thought Leadership marketing programme. It introduced efficiency gains and unforeseen productivity improvements to many companies, en route making many consultancies very wealthy. This fad started in the 1990s and can, I believe, be originally credited to a consultancy, the Computer Science Corporation of America. One summer it met with people from MIT and developed the hypothesis that middle management could be cut out of many organisations and replaced with computers if top management streamlined the operational processes of their business in a structured way.

It then produced a book (Re-engineering the Corporation) and, as a result of this, the idea began to take off. For a period of time, the early adopters of this idea, which always happen to be the same companies, became enthusiastic. It was presented at conferences and if you were unfortunate enough to be with a company whose CEO supported it, you could not challenge it. For a period of time, we were all reengineering the corporation.

Then the computer industry got in on the act because it realised it could sell computers through re-engineering projects by introducing system-analysis techniques. And I remember people taking the case studies they used as examples of the effectiveness of the previous fad, called 'Total Quality Management' and re-packaging them as 'Process Re-engineering' because it would sell computers. So they did presentations at conferences and wrote articles as if it had been happening for years, adding to the cacophony of voices.

Then a really disastrous thing happened: City people become involved in the idea. They were convinced of it by the professions and started to mark down the shares of companies that had not 're-engineered'. This prompted yet more companies to take on the idea, damaging some.

At the height of the bubble two things happened. First, academics started getting good research budgets to investigate using proper methodologies. (Now most business schools tend to teach 'process management' rather than the fad.) Second, sceptics wrote articles like 'Has process re-engineering damaged corporate America?' These iconoclasts make money by challenging the idea and saying that it is not a panacea that will change the whole of business.

How do these Ideas Gain such Influence?

The point is this: Thought Leadership is a vast propaganda machine. The big consultancies, like Deloitte, PWC and Accenture, have dedicated groups of people that they call their Thought Leadership team. These can be up to 20 strong and headed by very skilful professors. Their job is to 'look across the work in the firm and create new concepts that will help clients create value in their business'.

In other words, they make up ideas to sell to you and me; and they do it very well. Somebody calculated recently that the number of 'white papers' produced by this industry every month is around 10,000. They promoted: TQM, process re-engineering, the millennium bug, shareholder value, the dotcom revolution, CRM, customer loyalty and many others. And they do it to make money.

So What to do with these Ideas When Confronted with them?

You can go along with them. Some consultants adopt each one with glee. Some keep a sensible perspective and others kick against them. Are you going to produce the latest book? Are you going to run courses on the subject? Are you, as they say in America, going to lead the 'next thing'. Be careful, though, it can compromise your integrity if you ride on the latest bandwagon. It may not be appropriate for all your clients.

If you work inside a company try not to be a corporate flea, jumping from idea to idea. Is it relevant to shareholder return and wealth for your firm? Are you going to invest in thought leadership as a marketing tool, supporting your claim to the market? Marketing professionals should keep perspective and use judgement about the effect and value of these fads.

SO IS MARKETING TRAINING THE ANSWER?

Yes, and no. When writing my latest book (Marketing the Professional Services Firm) I wanted to put the techniques currently taught at the back in an appendix, so as not to pad it out unnecessarily. I tried to create a 'marketer's toolkit' and trace them back to source. What I found was fascinating. Some, for instance, were the result of long forgotten Thought Leadership fads rather than well worked academic analysis.

Take, for example, 'AIDA' (Attention Interest Desire Action), which is taught as a mechanism to measure the effect of 21st-century marketing communications. Kotler cites its source as EK Strong, in his 1925 book The Psychology of Selling. Yet, this was before radio or TV were invented. Is this really appropriate for 21st-century multimedia?

Another is the Ansoff Matrix: new markets, existing markets; new products, existing products; producing a strategy matrix of which 'market penetration' is the least risky one. When did Ansoff do his work? It was published in 1946 and it was based on analysis of a manufacturing company's acquisition strategies in Chicago, America, during the 1930s. It was nothing to do with marketing in the first place. More importantly, though, the experience of American manufacturing companies in and around Chicago in the 1930s is surely not a powerful strategic insight for 21st-century Britain or Europe, economies dominated by services.

True marketing professionalism is applying unique judgement to each situation. You have to know marketing techniques in depth and have the experience to know when they apply.

This article featured in Market Leader, Winter 2006.