Professor Kumar is one of the world’s leading marketing scholars and the author of “Intelligent Marketing”.
In 1960 the American Marketing Association’s Journal of Marketing published a landmark article by a Pillsbury executive named Robert Keith titled “The Marketing Revolution”. In a succinct 4-pages Keith chronicled the evolution of marketing at Pillsbury from the founding of the company in 1869.
The point of the history lesson was that Keith had concluded that business was undergoing a radical change in philosophy that would transform marketing from a peripheral role to become a dominant function. He stated that “Companies revolve around the customer, not the other way around”, and that “As the concept gains ever greater acceptance, marketing is emerging as the most important single function in business”.
Pillsbury’s new purpose, he announced, was no longer to simply make and sell baking products but to “satisfy the needs and desires, both actual and potential, of our customers”. The Marketing Department, up until then limited to managing advertising, would “direct and control” all of the processes that took its products from the assembly line to market. Newly created brand managers would have full accountability for the P&L of each product.
Keith’s prediction was not inherently revolutionary – the legendary management consultant Pete Drucker had said much the same thing six years before, declaring that “There is only valid definition of business purpose: to create a satisfied customer”, and that “the business enterprise has two – and only these two – basic functions: marketing and innovation”. But for most businesses, marketing was still largely associated with “pushing” products into stores so they could be sold. The idea that marketing, as a central controlling function, could become a business driver was farfetched given its narrow mandate at the time.
Soon after Keith’s article appeared, many prominent marketing academics came forward to make a similar case – most notably, the renowned Harvard Professor Theodore Levitt who that same year wrote his famous HBR article titled “Marketing Myopia”, saying that “to continue growing, companies must ascertain and act on their customers’ needs and desires, not bank on the presumptive longevity of their products.”
Keith’s so-called revolution turned out, in the end, to be short-lived. For a while, marketing did rise to prominence as a strategic function, involved in every aspect of product development and commercialization. But that is certainly not the case today. Marketing’s role has shrunk in importance, reduced to what it started out doing, looking after advertising and promotion. That’s how most CEOs think of marketers, as the ad department. But the other irony is that for businesses to succeed today, they must actually follow Keith’s prophetic advice: switch from selling products to as many people as possible, at the highest price possible, to creating valuable customers by anticipating and meeting their needs.
Professor V Kumar calls this “transformative marketing”: placing customers at the centre of the organization. And making it happen will indeed require a revolution in how business operates. Because today marketers are still expected to push products, driven by an inside-out, rather than an outside-in, orientation. And that “myopia” makes businesses vulnerable to being blind-sided by events.
Professor Kumar was an early champion of customer relationship management and engagement. A former editor of the Journal of Marketing himself, he has published hundreds of scholarly articles and is acknowledged as one of the top marketing academics in the world. His latest book, “Intelligent Marketing”, explores the implications for marketing as new-age technologies like AI and IOT begin to transform society.
I started by asking Professor Kumar to characterize the state of marketing today (the V incidentally stands for Viswanathan).
V Kumar (VK): This criticism that you mentioned, has been levied even as far back as 15 years ago, that marketing lacks accountability and so we need some kind of response to that. So in the last 15 years, the transformation that has occurred has led to where we are today, which is we are in a transformative mode. And I’ll give you examples of how and where we have reached.
So in the 80s and 90s, we were spending…like marketing budget … it was more of an aggregate level spending, the traditional advertising. You had the TV advertising, broadcast media, print advertising, billboard advertising, where we could not directly tie any of those expenses to the outcome measures. Because the primary purpose of advertising marketing spend was inform, persuade, and remind – nothing contributed to generating sales.
Come to 2000, where we have the database marketing coming in, we were able to track what at the customer level, you know, what they are buying, how much they are buying, when they are buying. And then our communication to customers also became individual. So we could tie exactly how much you spend on Mr. Stephen Shaw, and how much he’s buying so I can measure the elasticity at each customer level.
So that was the birth of the accountability period in terms of… But then why the criticism prevailed even in 2000, 4, 5, 6, is the fact that majority of the spend was still residing in traditional advertising. The shift started occurring only at that point in time. And today, majority is digital spend and very little traditional marketing.
So in this process of last 15 years the shift, there are three things that happened. One, the amount of money spent on digital kept increasing – the amount of money spent on traditional kept decreasing, that’s one thing. Second, the elasticity, the effect size of traditional advertising also started decreasing over time, even for the same amount of spend that you were doing, the effect was going down over time, and the digital effectiveness was going up. So we use time-varying effect size models to capture this. So we have demonstrated in our own studies, many studies, that spending shift and effect is also changing. And the third is that within the digital now, also there is a big shift like from Facebook like saying ad expenditures are going down, to Tik-Tok live streaming – they are eating up much of the spending. So it is like customers self select what they want to see. It’s like they go to a restaurant, look at the menu, and I want this item, that item, like this is what I want to see.
And so you pick that and you customize or you personalize whatever you want to see. And this is going to prevail. Because of this, and what made this possible in this 15-year transition, is the technology. Fifteen years ago, I was building models. Today, the models that I built are all automated with even more intelligence with AI. So I’ll give you a lot of examples as we walk through. But this is one major shift in terms of what it is. Second is who to spend the money on. Is it on me or you? How much to spend, and when to spend. We precisely know your buying pattern and so we can target the spend. We built these models for many companies 15 years ago, across 17 industries. But today, it’s become quite common, like AI absorbs our models and then even do a better job. I wouldn’t say a better job I would say it’s a faster way of delivering this. So this is happening.
So this is where the shift… So as a result, the marketing function has become more important now. And one beautiful change that is occurring is companies like Amazon, Microsoft, Facebook, they’re all offering marketing academics with analytics frame of mind, with analytics skillset, 25%-time jobs, fractional jobs at Amazon. So many of my colleagues are spending three months in a year, or three months equivalent of time in a year, building these models and showcasing how marketing is so important in every organization. (10.0)
Stephen Shaw (SS): This seems to be a perception challenge that – marketing used to have a fair amount of sway and influence over corporate strategy. It seems to me that there’s been diminishing influence over the years. Marketing today…it seems to me, the perception of marketing by other areas of the organization and incidentally, the CEO, views it as the ad department. So I’m just wondering, given everything you’ve just said, is it time to modernize the mission, the model, and the remit of marketing, tie it more closely to corporate vision and strategy than it is today?