One of the reasons that sustainability is such a big issue for all of us is the way the marketplace has shaped up in the last few years. A telltale sign is the initial public offering (IPO) market. The once-vibrant activity of bringing new companies to the stock markets has shriveled up, and with it you have a graphic description of a relative lack of innovation in the economy.
I say “relative” because there is plenty of innovation going on within established companies; it’s just that new company formation is down, and that’s important. Innovation by new companies defines new category formation, while innovation within established companies is mostly about product line extension and improving existing products while lowering their production costs. While each is important, even vital, the innovation patterns are predictive, to a degree, of demand in the marketplace.
The demand in this market is for incremental improvements in products that companies and individuals already have. For example, while new cellphone users enter the market each year, the business opportunity is more targeted at existing users coming off contracts and looking for the next gadget. However, what should that gadget have?
Win Some, Lose Some
Unfortunately, existing customers can be a notoriously fickle bunch. Existing customers can upgrade, and vendors hope they will, but the urgency of upgrading is much less than what’s found in first-time buyers. Then there’s the attrition issue. There’s no reason why a customer has to remain loyal at the end of a contract. Customers can and do take their business and their phone numbers to the next company with a better offer, a nicer gizmo.
The process goes in both directions, and that is the reason we call it a “zero-sum” market. It can be encapsulated in the old phrase, “win some, lose some,” except that modern companies and their shareholders understand the former and block out the latter, which brings up the central point of this piece.
To be successful in a zero-sum marketplace, a company has to exist on a sustainable footing. One of the pillars of sustainability in this situation is marketing research. For a long time, marketing has been seen as a one-way street focused on blasting messages that we all hope stick enough to generate leads that salespeople can pursue and close.
This type of marketing works very well in emerging markets with new categories being formed for the simple reason that nearly everyone — or at least a big population — needs the new category product. Every warm body is a lead, and everything that comes into marketing gets shoved at sales, where the sorting happens.
Things are very different in a zero-sum market for the above reasons and many others. For one thing, sales has to do a better job of qualifying, of understanding which customers really will buy the upgrade, and which will sit on the fence. If that’s true, then marketing’s job has to change too. Marketing still needs to be that part of the business that gets the message out, but increasingly, marketing has to develop a serious research function too.
Research in this case means gathering unique data about customers’ attitudes and behaviors, which it can use in crafting messages and helping sales to qualify. The marketing research function has been around for a long time, but it is something that larger firms would engage in. Research is time-consuming and can be expensive to conduct.
The 80/20 Split
Fortunately, social media has come along, and some of it is quite good at helping with the research function. However, we’re far from the point at which social media is highly effective in the research effort for two reasons. First, too often we think of social media and social CRM as essentially outbound tools — things that we use for messaging. In this effort, there is no difference between a zero-sum market and an emerging market. The tool is used to get a low-cost message out to a large population of friends in the hope that a small percentage of them will buy something.
The second reason is that we haven’t fully embraced the idea of researching before messaging. This is ironic and not universally true, but true enough. Community-based social tools predate the outbound variety by several years, and there have been some great success stories of companies reaching out to customers to mine their minds.
For the sake of sustainability in a zero-sum market, I think what’s needed is a synthesis of the outbound and the inbound, in a roughly 80/20 ratio. Twenty percent research should be able to drive 80 percent messaging, but that’s not all. The 20 percent research will do a lot to inform other parts of the business about what’s important to the increasingly fickle customer and enable product development, for instance, to better do its job.
Taking this approach marketing stands to gain status within an organization moving up from the perception that it only spends money on hard-to-quantify projects. This could be marketing’s golden age.
Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at [email protected].