Traditional Marketing Is On The Way Out

A number of signs point to an inconvenient truth for many businesses — traditional marketing is on its way out. In place of this broken model, America's most innovative companies are implementing new, more authentic techniques based on peer influence and community building. Bill Lee, the author of The Hidden Wealth of Customers: Realizing the Untapped Value of Your Most Important Asset, explains how you can join them.
 
Consider for a moment the annoying, interruptive, often obnoxious nature of traditional marketing. Dinnertime phone calls from strangers in noisy call centers. Glossy pictures of the latest fashions worn by models that barely look human. Crowded store shelves with head-spinning arrays of options arranged in no discernable order (I just need some toothpaste!). Company web sites that give us no clue what the business actually does. Hype. Spin. Pushy salespeople.
 
It's hard to believe these are the methods and tools of a profession designed to attract and persuade us to become customers, according to Lee. Especially when "we the buyers" increasingly ignore them.
 
"A number of studies are showing that people no longer pay much attention to traditional marketing, as they progress through the buyer's decision journey," reports Lee. "Instead, buyers are checking out product and service information in their own way, often through the Internet, their social network, customer reviews or just plain word-of-mouth. It seems clear that marketing, as we currently practice the discipline, is on its way out."
 
The inability of traditional marketing to engage buyers hasn't escaped the notice of CEOs, the ones who approve company ad budgets. A pair of wake-up-call studies, by the London-based Fournaise Marketing Group in 2011 and 2012, found that more than 70% of CEOs believe their chief marketing officers lack business credibility, lack the ability to generate acceptable growth, and lack the ability to explain how their programs will lead to increased business. Nearly four in five CEOs complained that CMOs couldn't explain how brand equity can be linked to recognized financial measures, such as firm equity.
 
A bitter pill for mainstream marketing executives, perhaps, but Lee claims you can hardly blame the disgruntled CEOs when you consider the logic behind traditional marketing in light of today's world.
 
Consider this: "Companies hire people who come from outside the buyer’s world, and don't necessarily share the same interests — employees, agencies, consultants, and the like, expecting them to persuade buyers to hand over their money," Lee confirms. "Yeah, right! There is no respected research on group behavior suggesting that such an approach is conducive to influencing people to either take action or to change."
 
Of course, not everyone in the marketing world clings to worn-out methods. In fact, Lee works with a pioneering group of forward-thinking marketing executives who are successfully replacing this increasingly dated model with something that customers actually welcome and respond to. For those who'd like to join them, Lee offers the following advice:
 
1) Go retro. Cultivate a local buying experience. It’s a myth that social networks and their technologies are creating new approaches to marketing. At their most effective, they’re doing the opposite — allowing customers to re-create the experience of shopping and buying in their local communities.
 
2) Think about it this way. How do buyers prefer to purchase a lawnmower, a haircut, a good dining experience, a movie, a car, the services of a good assistant, or a good doctor? Do they pick up the phone and call a salesperson or read through a bunch of business web sites? No, they’re much more likely to talk to neighbors, friends, work colleagues, and others in their peer networks and ask what they’ve used.
 
"Marc Benioff understood this when he was building Salesforce.com to compete against much bigger, entrenched competitors," says Lee. "He was building a better enterprise software product, and to get the word out he organized City Tour events and neighborhood street teams. The City Tour events would bring his customers together with prospects and a few other interesting people for presentations and group discussion.
 
"Benioff found that buyers were much less interested in hearing from him than they were in talking to his customers — their peers, other software programmers like themselves. When studing the numbers, he found that 80% of the prospects who attended such events wound up becoming customers themselves — in effect, an 80% close rate."
 
3) Cultivate customer sales and marketing people. Business spends billions of dollars training salespeople to build relationships with prospects and customers. But no one has to spend a dime training a customer to build a trusting relationship with your prospects. Since they’re peers, they pretty much already have one.
 
Microsoft builds on this aspect of human nature when it penetrates new markets, usually in foreign countries where they don't speak the language or understand the culture. In such cases, the firm will engage with local software users — whom they call MVPs (most valuable professionals) — many of which have built substantial followings of their own through blogging and social networks.
 
"One is known as 'Mr. Excel' to his followers, and on some days his web-site gets more visits than Microsoft's own Excel page on its corporate web-site," Lee points out. "Many companies, when faced with the same situation, threaten lawsuits. Microsoft embraced Mr. Excel. In fact, they support his activities with 'insider knowledge' and the opportunity to get a sneak preview and to test new releases. In return, Mr. Excel, and thousands of other Microsoft MVPs, wind up providing invaluable input as the firm develops new releases. They also produce its most effective marketing communications, as buyers realize that it comes from a peer they know and trust.
 
"In such ways, the MVPs are helping Microsoft penetrate and grow markets more effectively and cost affordably than the corporation could do using traditional marketing approaches staffed by hired outsiders," he adds.
 
4) Build strong customer communities. Consider Harley-Davidson's success in creating a sense of community around its bikes. Three decades ago, the public associated Harleys with gangs and outlaws, which turned off consumers. The company worked hard to change its image … first by getting police departments to start using their motorcycles, and then by working assiduously to build a customer community of middle-class (law-abiding) customers that morphed into today’s famous million-person HOGs (Harley Owners Group). Today, Harley-Davidson HOGs, far from being outlaws, position themselves as extended family: the brothers (and now sisters) you never had.
 
It's not just sexy products like Harleys (and iPads) that can create large communities of customers — which in turn attract large numbers of buyers. One of the most successful customer communities is Procter & Gamble's BeingGirl. Interestingly enough, it consists of teenage girls and is formed around feminine care products.
 
"The key to forming customer communities is not to try to build them around your brand — a common and obvious mistake marketing departments make," affirms Lee. "Rather, ask what your product or service means to the customers. Or, what could it mean. P&G realized that its feminine care products could symbolize the difficult, scary, exciting transition that teenagers are making into becoming young women."
 
5) Get customers involved in the solution. A few years ago when toy maker LEGO launched Mindstorms, its robotics building-block kits, hackers almost immediately started altering the code to allow the robots to do more. In circumstances like this, most firms call their legal departments and start issuing cease and desist demands. Indeed, faced with a similar response when it issued a comparable line of toys, Sony did just that. But according to Lee, LEGO took a smarter approach.
 
"Basically, LEGO executives did the math. One thousand or so hackers — or more to the point, enthused and technically advanced customers — were coming up with robots that could do amazing things, which the seven internal developers had never thought of. One of the hacker-created robots could solve a Rubik's cube. As the company (and their other customers) realized the value the hackers were creating, LEGO further embraced them. Now its customer community numbers in the tens-of-thousands, and continues to develop amazing arrays of robotic toys. Ones that are far beyond anything the company might have developed on its own."
 
Meanwhile, 3M and other companies are systematizing customer-led innovation. Rather than wait passively for customers to begin altering or hacking their products, they’ve learned how to proactively pursue and find customers, or users, who would be most likely to unearth breakthrough innovations. MIT professor Eric von Hippel has coined the term "lead users" to describe them, and works with 3M's healthcare business to develop a system for finding them. The result was an eightfold improvement in revenues from innovations developed with the help of such customers, versus innovations developed by 3M's internally developed process.
 
"What makes this particularly significant, of course, is that 3M's product developers are among the most innovative in the world," says Lee.
 
6) Help customers build social capital. Why do customers engage so enthusiastically in helping companies develop, market, and sell their products — in effect, growing their businesses? While many pundits think you need an incredibly sexy product, like anything developed by a once-in-a-century genius like Steve Jobs, then you've missed the point. All it takes is a business that changes customers' lives for the better, which is something far more replicable, even if you're making feminine hygiene products.
 
What all these companies, and others featured in Lee's book, do is facilitate the building of social capital by helping their customers affiliate with their peers in customer communities. They thus build their own status and reputation, and learn and grow in the process. Often, they also include service to a larger purpose.
 
Enterprise software-maker SAS Canada, according to Lee, addressed an unexpected decline in its customer retention rates by engaging some of its leading customers, termed Customer Champions, in an effort to retain customers and bring the defectors back. "The Customer Champions organized live forums in more than 20 major markets around the country, presented and brought in local speakers, contributed to an e-newsletter that SAS started, and more. The result was to completely restore the firm’s retention rates to its previous high levels.
 
"Why," he queries, "did the Customer Champions put forth such an effort? Because it gave them a chance to affiliate more deeply with their peers — other software managers and engineers — enabling them to play a leadership role in their peer community. It gave them substantial status and recognition, as well. Plus it increased their knowledge and expertise by better understanding how to address the needs of other SAS customers."
 If you think all of this sounds more appealing than the old manipulate-them-into-buying techniques, according to Lee, you're not alone. "When companies commit to depending on authentic customer advocacy to grow their firms, it not only improves their marketing results, it also improves their organizations. That's because it's hard to mask substandard performance, and customer discontent, with your products and services if they're the ones you rely on to tell the world how great you are."