When I started to work at General Electric, marketing had the cachet of social media. It was new; it was different; it was going to revolutionize business. Every advertising agency wanted to be its clients’ “marketing partner.”
Advertising people would talk about the future of marketing and how lucky we were that advertising had the inside track. For decades, Advertising Age called itself the “International newspaper of marketing.”
What is marketing?
In those days, marketing was an omnibus concept that gathered all of a company’s exterior activities under one umbrella. As General Electric’s 1952 annual report put it, “The marketing department will establish for the engineer, the designer, and the manufacturing man what the consumer wants in a given product, what price he is willing to pay, and where and when it will be wanted. Marketing will have the authority in product planning, product scheduling, and inventory control, as well as sales, distribution and servicing the products.”
Facing internal resistance, few companies actually put product planning, sales and distribution in the hands of the marketing department. Chief marketing officers might control massive marketing budgets, but lacked control over other corporate functions that deliver the financial results to justify those budgets. If the marketing department controls the “investment” but not the “return,” how can a company holds its CMO responsible for ROI — Return on Investment?
I’m not advocating corporate reorganizations to put more functions under control of chief marketing officers. It’s too late for that. Furthermore, there has been a huge change in top management’s attitude about the role and function of marketing.
I remember the head of the transformer department at General Electric telling a group of advertising people as he pulled out a pencil: “I can get more business with this pencil than you guys can get with all of your advertising.”
That might have been true years ago. But today, marketing is the No.1 concern of most corporations. Unfortunately that doesn’t necessarily include marketing people. As Georges Clemenceau once said, “War is too important to be left to the generals.” Top management has taken over many of the strategic elements of marketing.
Among management types, the most admired chief executive today is not Bill Gates or Jack Welch, it’s Steve Jobs. As Ad Age reported, “Mr. Jobs was involved in every aspect of the marketing, down to the copy on TV ads.” Apple co-founder Steve Wozniak told the BBC, “I would say marketing was his greatest strength.”
We have entered a golden era of marketing, but it might not be the golden age of marketing people. According to the editors of Advertising Age, “Today’s marketing shops want to be known as brand consultancies or idea companies.”
Why is that? Because “marketing” is too broad a concept for a service business. Marketing is the essence of what a company is all about, the essence of what a company is trying to do. If you hire a marketing company to handle your marketing, then what is left for your company to do?
The better word.
Over the past few decades, it’s become apparent that there’s a better word to describe what today is called the “marketing” function — “branding.” I expect that in the future a CMO will become a CBO, chief branding officer.
Why not? Branding has become his or her most important role. In addition, there’s a new approach many companies are using that dramatizes the importance of the brand. I call it: Branding first, sales and profits second. If you can build a brand, then you should be able to figure out a way to turn that brand into a profitable enterprise.
That ties in with one of the biggest problems in business today: Distribution. A lot of products could be successful if they could get on the shelves of supermarkets, drugstores, convenience stores and other outlets. But how do you get on the shelf?
“Put my wonderful new product on your shelves,” says the entrepreneur, “and it will become famous.”
“Make your product famous,” says the distribution, “and we’ll put it on our shelves.” Distribution has a valid point.
Amazon.com is a good example.
Today on the stock market, Amazon.com, Inc. is worth $103.6 billion. Sales last year were $34.2 billion and net profits were $1.2 billion.
But that’s not the way the company started. Founded in 1994, Amazon lost money for nine years in a row. On an overall basis, Amazon didn’t break even until the company was in its 15th year.
Compare Barnes & Noble with Amazon. In the late 1990s, Barnes & Noble introduced an e-reader and in 2001, followed with an e-bookstore. But early sales were discouraging and the company discontinued its e-reader in 2003. Big mistake. Branding first, sales and profits second. It wasn’t until November 2007 that Amazon launched the Kindle, which rapidly became the leading e-reader brand. Barnes & Noble was forced to play catch up with the Nook, launched two years later in November 2009.
That’s not the way you build a brand. If there’s an iron-clad rule in marketing, it is this: Brands are built by being first in a new category. Not just first in the marketplace, but first in the mind. That’s why a new brand pioneering a new category has to stick around long enough to penetrate the minds of potential customers.
Groupon is another good example.
In its first three years, Groupon, Inc. had sales of $745 million and managed to lose $416 million. But the company built a brand and this year Groupon is planning an initial public offering valuing the company at something like $11 billion or so. Imagine that. A money-losing company that’s less than four years old is going to be worth as much on the stock market as Omnicom ($11.1 billion) and a lot more than Pubicis ($6.1 billion) and Interpublic ($3.8 billion.)
That’s the value of building a brand.
What’s next for marketing?
Maybe nothing. It’s time for the powers-that-be in the marketing community to shift gears and focus on the essence of what the current marketing function is all about. Not just an abstract name for a wide range of activities involving consumers in some fashion, but a simple, single concept that top management can instantly understand. A simple, single concept that is certain to get more important as the years roll by. Branding.ABOUT THE AUTHORAl Ries is chairman of Ries & Ries, an Atlanta-based marketing strategy firm he runs with his daughter Laura.