CRM is dead: popularity and penetration are the keys to marketing success.


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This post was first published at where I am a Pro Blogger.

OK so now I have your attention, perhaps a bit of an explanation. I’ve been looking at some thought leaders comments over the last weeks and trying to assess the importance and correctness of their theories and strategies.

One in particular caught my eye because of its connection to the CRM field, Kevin Roberts’ notion that great brands have emotional connections with their buyers and, hence, are ‘Lovemarks’. It seems that there are some commentators out there that think this worldview is wrong because there is simply no empirical studies to support these contentions – everything Roberts claims is anecdotal and so can be explained away by many other factors such as better customer service.

It is argued that many of the axiomatic and popular marketing truisms prevailing today simply fail to properly stack up to careful empirical analysis, because they have not been tested. This has major implications for accepted marketing belief about understanding brand loyalty, the relevance of market segmentation or that advertising works.

These new theorists argue that popularity or penetration is everything. If you have more popularity or penetration, your brand retains more loyalty – a view that is totally contrary to the popular theory that increasing the share of requirements of loyal consumers is the most effective way of building brand success. It they are right, this has serious implications for anyone working in the CRM field. Why, because in this model, CRM is less important: resources will be focused on old fashioned mass media which tells and sells rather than on developing lasting relationships with loyal customers.

As a proponent of purposeful positioning for all brands, I am sometimes challenged to explain how it is possible to expect that consumers will create emotional connections with brands operating ‘low involvement’ categories. If these theories are correct, and what we are talking about here is not just some flash in the pan conceptual study (see below), marketing for all such low involvement categories should be about increasing penetration at all costs.

Behind the scenes, it is beginning to look like some major organizations are beginning to incorporate some of the thinking here. Quietly, an increasingly metrics based study of marketing dynamics is driving decision making in major brand powerhouses. That’s not to say that they are forsaking their current market truisms, but they are adding a new context and gaining competitive advantage from so doing.

Where did all this begin? It is founded in the increasingly exposed and discussed work of Andrew Ehrenberg an academic and statistician who died mid 2010. His works are not widely read because of their complexity – who among us has heard of his concept of negative binomial distribution? They are, however, increasingly being explored and integrated into forecasting models and metrics analyses used by some of the world’s most prolific marketers.

Empirical statistical analysis of this type has been subject to some antipathy with marketers and their agencies because it goes contrary to the business model that they have established to keep the industry alive and kicking, but it has not been ignored. From Australia to Europe Ehrenbergian concepts now underpin analytics used by Nielsen, Unilever and P&G.

So shouldn’t the rest of us be looking at this as well? Well, this empirical analytical approach appeals to any business leader who wants to understand the direct financial implications of a specific marketing activity – something we all know is extremely difficult to pinpoint because of the wide range of variables that need to be considered – and also anyone, like me, who is increasingly agitated by the specious content-driven nature of marketing today.

I have already suggested that in “low involvement” categories it is possible to have sympathy for the view that penetration trumps loyalty. Proponents of this approach now think that it can, and has already, extend into much higher involvement categories.

Here’s the argument: Once upon a time, when it was a small side player in the business, Apple was all about customer loyalty. Steve Jobs’ aspiration, however, was to rival Microsoft and the company had to grow. Apple’s growth was not about getting more and more product into the hands of its small loyal customer base, no, it was all about getting more and more penetration through mass media advertising and exposure. Penetration trumps loyalty.

This sort of throws the world on its head. Sophisticated CRM applications are redundant because mass media is the vehicle for profitable growth. Brand loyalty is just a figment of marketers’ imagination, designed to justify their ever increasing spend. Consumers are not really interested in talking to brands on Twitter, Facebook or Tumblr, but to their friends and acquaintances.

Actually I think that there is some truth in the metrics based approach and it should be incorporated in a lot more analyses. I think that standard scan and panel data analyses are inadequate because they fail to offer a deep enough understanding of the dynamics that drive the metrics. Similarly, I have seen too much market research that is meaningless because the agency was briefed to ask the same questions that everyone else asks, but don’t get to the kernel of how we will be able to alter consumers’ behavior.

Notwithstanding, I remain a believer in developing purposeful positioning for brands because I do believe that is the key to retaining consumers over the long term, because a brand needs to mean more to them than just the functional benefits that are delivered. Is this true for all categories? Even those with low involvement? – Yes. Perhaps we did not have a detailed empirical explanation for every factor, but I can confirm (albeit anecdotally) that purposeful positioning works as well in the consumer tissue category as any other.

Republished with author's permission from original post.

Richard Kohn
Results driven, inspirational innovator with extensive global experience. Blue-chip experience in FMCG, B2B & professional services. Respected for delivering actionable & game changing business solutions across all aspects of a commercial operation.


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