Dr. Sundar Bharadwaj is The Coca-Cola Company Chair Professor of Marketing at the Terry College of Business, University of Georgia and Senior Research Fellow at the Indian School of Business. Prior to that, he served as a Professor of Marketing at the Goizueta Business School, Emory University. He is also a co-founder of the Marketing Capabilities Institute.
Bharadwaj’s research focuses on business problems relating to current and long-term financial returns and risks to marketing investments in brands, customers, innovation, and marketing capabilities and strategy. His other streams of research include societally sustainable marketing strategies and competitive strategies for emerging market firms. His research has been published in the major academic journals, including the Journal of Marketing, Journal of Marketing Research, Marketing Science, Management Science, and Harvard Business Review. His research has been recognized by numerous awards from among others, the American Marketing Association and the Academy.
As background, we’ll start with mentioning the HBR article Is Your Marketing Organization Ready for What’s Next? by you and your colleagues. In it you begin by pointing out the changes in technology, societal issues and the climate crisis have raised expectations for marketers’ social performance. What does this mean for the future of marketing? Can you tell us about your survey?
Thank you for featuring this article and giving me the opportunity to talk about the article and the research behind it. We talked to over 120 senior marketing executives with titles ranging from Chief Marketing Officer, Chief Digital Officer, Chief Customer Officer etc., from both digital natives and immigrant firms with varying levels of digital capability. These were in-depth interviews that lasted between 45 minutes to 60 minutes each. The HBR paper was also informed by a few implementations of the work.
The future of the marketing function will be enhanced if marketers are clear about their mission and in a position to communicate their value proposition to the firm in terms of the value they create externally to consumers and the value they create internally to the firm. Marketing serves as the engine to drive customer demand in a firm and thus plays a critical role in delivering growth. The changes in the marketing landscape regarding digital platforms, data richness, analytics and changing consumer expectations regarding their needs and expectations of brands are wonderful opportunities, if the marketing function gets their value proposition right. This should then lead them on the path to assess the appropriateness of marketing capabilities they have versus what they need to fulfill their mission. We believe that the framework in our paper offers firms a structured approach to designing an organization that fulfills its mission.
Why do marketing leaders struggle with their transformation efforts?
We asked managers of 493 large firms as to how satisfied they were with the operating effectiveness of their marketing and less than 20% were satisfied. Fundamentally, the marketing function was adding new siloed teams of performance marketing, content marketing, social media marketing, mobile marketing etc., in addition to the brand teams and leading to fragmentation and confusion. Moreover, talking to managers even within the same firm about the role of marketing led to very different responses. Some viewed it as having the capabilities to use machine learning and AI to predict consumer preferences, while others felt it was about story telling capabilities. Some managers felt that technology was eating strategy, others felt that they did not know their roles anymore, and still others felt that marketing was dived into two camps of brand and performance marketing. In summary, managers felt that firms were just adding new capabilities instead of integrating them with existing processes. In addition, there is a fair bit of confusion as to what should be in-house and what should be out-sourced was paramount. Firms had launched large numbers of individual initiatives towards marketing transformation (in one firm we saw 42 ongoing initiatives) and none of these were connected. Taken together, most marketing transformation were struggling to reach their potential.
What are the three areas you found that marketers can create the most value for customers?
We see three areas that firms can drive firm growth by adding value to consumers. It is important to note that firms can be heterogeneous in the relative importance they place on these three options and it is the very rare firm that can compete on all three equally. First, firms can add what we label as Exchange value, which is by matching offerings to individual customer needs and context in ways that facilitate transactions. Here firms draw on rich data they have on consumer transactions and build predictive models using machine learning methods to personalize offerings to individual consumers. We provide Allstate, StitchFix, Alibaba and MTailor as examples of firms that do this effectively. The second approach is what we label as Experience Value, which is to deliver increasing convenience and enjoyment across the customer journey. The goal here is to remove hassles and frustrations for consumers and create satisfaction with the purchase process Delta Airlines emerged as a good example of doing this using their mobile app to enable searching for flight options and purchase tickets, provide flyers information about traffic and typical driving time to the airport, offering selection of in-flight dining choices, boarding gates, and information on baggage status and arrival information as well. Some of these activities during the journey may serve as additional revenue streams as well, in addition to the enhancing consumer satisfaction and loyalty. The third approach is to deliver Engagement Value by deepening and expanding the meaning, community, and purpose around an offering. Firms do this by creating brand purpose, taking stands on social, racial and environmental justice issues, building consumer communities, optimizing connections to strengthen relationships. We saw that firms such as REI, Danone building strong purpose and Salesforce and Glossier as illustrative of building and leveraging communities. It is important to note that some of these areas of value are new, but others are not. The point is that a modern marketing organization needs the right balance of foundational and new sources of value.
And internally you have created a framework which maps out three areas of company value as well – what are they, and how does the marketing function succeed in these three areas?
We find that marketing can add value to the firm in three ways. First, the marketing organization can create Strategic Value by guiding the discovery of new growth by leveraging branded platforms, revenue streaming, and marketing model innovation. This involves going beyond traditional line extensions to moving to totally new categories, like Target has done with its Roundel media network business that creates content for clients using its own consumer data. We also see Caterpillar as a good illustration of building a new business model from data captured by sensors on its equipment. Second is by creating Operating Value by facilitating stronger organizational links to nurture agility and synergies. Increasingly the marketing organization has to build and motivate a coalition of functions (operations, finance etc.,). This involves developing shared language, common frameworks (such a customer journey etc), key behavioral indicators (such as trust, diversity, and inclusion) and marketing technology solutions. The third source is Knowledge Value which is created by building and leveraging information loops to Increase causal understanding and enable resource optimization. The marketing organization has traditionally been the voice of the consumer, but the new environment has increased possibilities for data generation and developing knowledge and insights using machine learning methods. Also a big change is marketing changing from a consumer of third party syndicated data sources to generating their own first party and granular consumer level data is an important change. For example, the Coca Cola Company with its Freestyle vending machines captures in real-time and location specific data on consumer preferences for products (mixes of various drinks). This has enabled to launch a number of new products as a consequence. Being a producer and consumer of data should also help the marketing function collaborate with the IT function to develop databases that serve as the “single source of truth”, an important requirement for effective marketing transformation.
So, taking these six dimensions of value. Where does the CMO begin?
First, CMOs have to decide the relative mix of the 6 values that they see their marketing organization create for the firm. On the consumer side, they need to decide if they want to emphasize one of the three options and have a lesser focus on the other two. For example Chobani, the yogurt brand has focused on Engagement as the primary source of value creation for consumers and Experience and Exchange have played a more limited role. On the other hand, JustFab a women’s fashion digital native, has focused on creating personalized offers thus emphasizing Exchange value with Engagement efforts playing minor role. Similarly, they need to focus on the relative importance of the firm side of value. A company we interacted on the consumer end has a major focus on Experience and a minor focus on Exchange and Engagement and the firm side has focused on Knowledge Value (has a firm direct to consumer approach), a lesser role on Operational Value with Strategic Value not being on immediate importance to them. This provides them with a mission for the marketing organization.
Second, they need to assess the fit of their marketing capabilities to the requirements of the mission. Through our research, we have identified 72 marketing capabilities that can help deliver the six value dimensions. In our article, we illustrate this and provide a link to get a quick assessment and benchmark of the firm’s marketing capabilities. Third, use that input to design the change your marketing organization needs. The gap between where the firm is at and where it should be (given the mission) should guide the firm on the capabilities needed, and the resources that can be re-allocated. The firm can then decide on the location (in-house or outsource) of the capabilities and the design of the marketing organization and the skills required. As you might notice, these steps are flipping the conventional approach, which usually begins with an organization chart of the different functions and who reports to whom and then decide how to operate. Here, our research suggests that firm’s need to decide the marketing mission, the capabilities required for it, the fit of the organization and then design the structure. We believe this approach is what is needed for the modern marketing organization.
What are you working on now?
On this project, we are continuing on fine-tuning our measurements of capabilities, collecting data across firms (we encourage your readers to use the link to participate and gain from it) and from consumers on the new sets of expectations (as well as existing ones) from different sectors. We are also creating a community of marketing practitioners interested in marketing capabilities (see Marketing Capabilities Institute) and encourage your readers to join.
At a personal level, working on research on artificial intelligence’s role on marketing, on sustainability and social impact of marketing actions and marketing in emerging markets.
Thank you for this wonderful opportunity. I have enjoyed reading your work and glad to share mine.
Thank you so much!
INTERVIEW by Christian Sarkar.