A New Model for Marketing

In the article ‘A new model for marketing’ in McKinsey Quarterly of November 2004, the consultants stated that “more than half of the CMOs we talked with said that a major restructuring of marketing models will be needed to solve this Rubik’s Cube of segments, products, channels, and media in a profitable way. “

McKinsey interviewed 40+ CMOs worldwide covering multiple industries, and concluded that “their biggest concern is that an explosion of customer segments, products, media vehicles, and distribution channels has made marketing more complex, more costly, and less effective.”

The issue is the transformative complexity of all aspects of marketing at a time of pressure for with enhanced returns on marketing programs:
• The Markets – segmentation
• The Competition – aggressively targeting in profitable segments
• The Products – product line extensions, new products, new (sub) brands
• The Distribution Channels – fragmentation, many new (sub-) channels
• The Advertising Media – fragmentation & new media
• The Marketing Data – mountains of data, little answers.

As society is becoming both more multi-cultural due to immigration and more separated due to polarizing income groups, customer segmentation has become prolific leading to an overall diverse customer base. Meanwhile, competitive drive for growth coupled with supply chain transformation trigger companies into targeting micro-segments of demanding customers.

All this led to a doubling of consumer products, and a complexity of distribution channels as companies need to utilize more and new distribution channels such as the web and third party tele-sales providers. Advertising needs reflects these trends. “Twenty years ago, big companies used one advertising spot on three television networks to reach 80 percent of the US population; now they need up to 20 messaging and media programs to get the same reach.” states McKinsey.

The New Model of Marketing

To profitably respond to the fragmentation explosion, business must adapt its prior marketing plans and associated organization structure along new segmentation paradigms to control cost, to ensure quality of niche service and to realize ROI and growth.

How?
1. Tackling channel migration, steering customers into the right channels.
2. Rethink brand portfolios, e.g. offer fewer, distinctively positioned brands per segment and/or focus on fewer segments.
3. Address overall cost of service & customer interaction.

In sum, major restructuring of marketing models will be needed to solve marketing’s new Rubik’s Cube.