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Don E. Schultz on What Companies Can Do to Integrate

Don E. Schultz on What Companies Can Do to Integrate Brad Berens

Our opening keynote speaker at this week's iMedia Agency Summit was Professor Don E. Schultz, and his talk was an exciting, high-level look at "Marketing on the Edge: New Frameworks for a New Era."

I had the privilege of sitting down with Don to talk in more detail about some of the practical details involved in what we might call next-generation marketing: who should lead the charge within a marketing organization or more broadly within a corporation? What can agencies do to help integrate a brand? Who is doing integration right, and if you're just starting out, what's a good first step? What will the marketing department of the future look like, and how do we get there?

You'll find a lot of answers -- as well as even more questions -- in the pages that follow.

Author note: Don E. Schultz is Professor Emeritus-in-Service of Integrated Marketing Communications at the Medill School at Northwestern University. He's also president of the consulting firm Agora, Inc., and is on the faculties of Cranfield School of Management, Bedfordshire, UK; Queensland University of Technology, Brisbane, Australia and Tsinghua University, Beijing, China. He speaks around the world, writes prolifically and was founding editor of the Journal of Direct Marketing.

Brad Berens: Our topic today is, practically speaking, what can companies do to integrate? At a more basic level, what are the things that a company should do? When I say company I am thinking primarily of a big brand, but also of the agencies that have to interact with those brands. What are the signs that a company is ready, or far from ready, for integration? To turn that into a slightly smaller question: you and I have chatted before, and you have mentioned how marketers are all about outbound messaging. They talk, but they do not listen.

Don E. Schultz: That’s correct.

Berens: So, my question is, if you are a brand marketer reading this article, and you are thinking, "Okay, I want to see whether or not my company has any hope of integrating," where do they look? Where should they be looking in their company, both in the marketing department and elsewhere?

Schultz: Well, the first thing they have to do to get to any level of integration is to stop thinking about products and start thinking about customers. That sounds really easy,; but it’s really difficult for organizations. That’s because of the organizational structure. By and large, most structures are vertical silos with one product in a silo, another product in another silo and so on.

The job of the person who is responsible for the product is to get rid of of what has been made. That’s the most difficult part, because in a silo, you really don’t want to think about integration. You don’t want to think about marketing. What you want to think about is: What can I do to get people to buy right now? It's all short-term. It’s not customer-focused. And it is difficult for an organization to get out of that system once it has been established.

The only way you can really start to integrate is to start thinking about customers as income flows. By that I mean, customers generate flows of income for the firm. If you start thinking about customers as income flows, it allows you to next say, "Are we trying to acquire a new income flow? Are we trying to retain an existing one? Are we trying to grow an income flow we have? Are we trying to migrate that income flow from one product category to another, and so on?"

If you get that kind of focus, if you start thinking about customers, what you then start to do is think about all of the ways customers touch you, or you touch them. Suddenly it becomes apparent what has to be done in the organization. Generally, that occurs when someone says, "Gee, we are not treating our customers very well; What is their experience with this company?"

When you start to investigate that, what you find is the finance people are doing a certain form of billing, or doing a certain kind of follow-up that customers think is harassing because they haven’t paid their bills. Or, you have an operations group who doesn’t deliver products on time because they don’t think it’s terribly important. Besides, they have other things they are worried about. You have people like HR, who have failed to train the employees, or don’t prepare the employees to respond to customers and so on. It’s only when you start to think about the customers, the people who drive the business, that creates the first step in integration. It forces the firm to think about: What do we really need to do? And, how do we need to do these kinds of things to make customers happy so they will continue to give us a flow of income.

Stovepipes, or silos, or whatever you want to call them are not going to go away. There will continue to be marketing, sales, finance, operations and so on, separate and independent of each other.

The real challenge is: how do you think about how all of those silos contribute to either acquiring, maintaining or growing the firm’s income flows? Once you start doing that kind of thinking, it becomes fairly apparent the firm needs a horizontal system to bring the organization together. Management is not going to take the silos away so alignment becomes critical. .

That should start you thinking: How do I align the organization? And, how do I bring things together? And, how do I build horizontal systems that allow the firm to focus on customers, as opposed to focusing on products?

As I said before, that generally occurs when the company first understand that customers are income flows.

Berens: Is there an example in your mind of a company that is doing this right?

Schultz: Everyone uses Tesco as the best example, because that is what Tesco is known for-- customer focus. FedEx also does a very good job of this, as does UPS, because they are organized around customers and customer groups, not products or services. Since they are organized around customers, they can see how the customer responds to their efforts to meet their needs, their requirements, their wants.

The best firms that have this customer alignment and integration are those that have good customer data and, more importantly, do something with it.

The people who have the most difficulty are those who have some distribution system in which a retailer, or channel, or other customer-contact exists between them and the end user. What we tend to find is that the firms who are best at integration tend to be those who have good customer data, and those are companies in the service or the business-to-business areas. 

Automobiles are awful. The automobile manufacturer does not really know what the customer is doing, because that is all in the hands of the dealers.

Berens: You would think that automobile manufacturers, retailers and dealers would be thinking about customers as income flows, because their big hope is that people will continue to buy Ford if they bought Ford in the past… that people will buy the extended warranty.

Schultz: If you go back to when General Motors first announced it was going to close numerous plants, and lay off loads of employees, the press interviewed the head of the auto union; he said: "Essentially the reason we have this downsizing problem is because we’re making cars that people don’t like, or people do not want. If we made a desirable product, we wouldn’t have all these problems." So, the major problem is marketers don’t know their customers or prospects.

Most organizations are focused on what they can make, not on what customers want. But, if I own a toothpaste plant -- a toothpaste factory -- all I can make is toothpaste. So, I have to find ways to get people to buy my toothpaste. 

It’s the organizations that are able to understand customers -- that identify the customers it wants to serve, and then figure out what products and services they want -- that are the most successful and are the most integrated.

The challenge, of course, is that most of our marketing concepts have come from a manufacturing view. Most of the kinds of businesses we have today, however, are almost all service-driven organizations. Remember, Procter & Gamble, and Unilever, and Colgate-Palmolive, and all of those CPG guys were inventing marketing back in the '30s, '40s and '50s? Their view was: I make a product; I put it out on the shelf; I communicate with prospects; that is, I told you what it was and where it was, and you went to the store and bought it.

There were not any customer-touching people involved in that process. Today, if you look at what is driving our businesses, it is almost all people, and people oriented. That’s where many of our marketing concepts fall apart. We don’t have very good ways to manage, or involve, or get our people to focus on what is important to customers… the other people. That’s because we have trained them to focus on what is important to the company, not the customers.

Berens: Talking about customers as income flows, and talking about the transition from product to service, I am worried that the people from different CPG companies might be thinking, "This does not have anything to do with us. There is no long-term service contract with a can of Pepsi. Once you have finished that box of Kleenex, we want you to buy the next box, but no one is going to be calling us about a warranty on a box of Kleenex." 

So, in terms of integration and the kinds of things we were talking about way at the beginning, I wanted to see if you have anything to say to the brands that are not representing services, and that are not representing high-consideration purchases like automobiles, or plasma screen televisions that have service contracts. What is happening with CPG?

Schultz: One of the big problems is much of the consumer decision processes for CPG products is now occurring in the store. That’s not to say in-store has not been important in the past, but much consumer attention is now focused on the shelf. That’s a problem for CPG firms. Historically, national brands have dominated in the retail channels. But, a shift is occurring-- a shift to retailer or store-owned brands and  private labels. There is an increasing focus by the retailer on trying to build its own brands, rather than simply trying to promote the national brands at low prices.

For example, let's say I am Kroger and down the street is Safeway. From a Kroger standpoint, there is no real value in promoting Coke or Pepsi, because Safeway has got Coke and Pepsi too, so, the only thing we are doing is competing on who has got the best promotion on Coke or Pepsi this week.

As Kroger, what I want to do is to build something I can own or control. To create something that makes me unique from Safeway. And, one of the things that makes me unique from Safeway is having my own private label, and my own brands. This has been going on in the U.K. for several years: There, the premium quality products and lines are being developed and marketed by the private labels, by the retailers, not the traditional manufacturer.

The national brands are the fighting brands. If you look at that situation over the long-term for the national CPG brands, one of the questions you have to ask is, how long can this keep going on? And, how long can the national brands be the fighting brands against the premium quality brands of the retailers? That, to me, is the real challenge for the CPG firms.

Berens: What is the big national brand supposed to do? In another conversation, you once said to me that CPG companies are dead in the water because the retailer now controls the marketplace. Do they just give up?

Schultz: I suspect they are not going to give up. But, from the manufacturer’s view, what they really have to start thinking about is: how do I better partner with the retailers? How do I help them build their businesses at the same time I am building my own business? And a large part of the challenge, and major part of the difficulty, is historically the manufacturer and the retailer have essentially been adversaries. That hasn’t helped either one of them.

Today, the real challenge, I believe, is -- from a supermarket standpoint -- how is any retailer going to deal with Wal-Mart. That’s because Wal-Mart has got is the very best distribution system in the world. No one is ever going to beat them at that.

What the CPGs have to do is have to find increasing ways of becoming closer partners with the retailers in terms of capturing, sharing and using information and data. But then you run into restraint of trade and other regulatory issues.

We have a group of our graduate student working on an analytical system using supermarket data. They are using the customer and product data the supermarket chains capture. Half the students are working on how could or would retailers use that data? The other half of the class is looking at: how would manufacturers look at it and use it?

The goal is to get them to bring the two parties together through common data. What we’ve found is that there is great value in the data the retailer has; but, the typical retailer doesn‘t have the analytical skills and capabilities to use the data. The manufacturer has the skills inside to do the analytics, but they don’t have access to the data. Somehow, we need to bring those two parties together in some way.

Berens: So, what the marketing department has to add to the equation there is the skill and understanding of consumer behavior, the ability to have, perhaps, allied products that will all link together in ways that will be a more satisfying experience for the consumer?

Schultz: Absolutely true. What we are trying to do, and what we have the students working on this quarter is: what products are purchased together? Not what products are sold individually, but if you buy cheese, then do you also buy chips? And, do you buy mustard? And, do you buy pickles? That sort of thing. You can start to look at how customers shop, and how they put their market baskets together, as opposed to just how they buy cheese.

Berens: If you are a CMO, or a VP of marketing, if you are leading up interactive, here we have you, Don Schultz, telling us that we have intractable problems, but where do they go? What is the first step that they can take that would be in the right direction?

Schultz: I think the first thing they need to do, and what I have always told organizations, is to look around your company and see what kind of customer data you have inside the company.

The interesting thing is that most organizations have literally tons of data on customers, but it is all squirreled away in various and sundry functional silos. Research has some of it, marketing has some of it, sales has some of it, accounting has some of it and so on.

We simply can’t bring all of the information we have about customers together inside the organization because of the functional silos. That’s what prevents us from being customer focused.

So really, the first thing an organization can do is conduct an audit of all the kinds of customer information that is available within the organization-- where it is, who has it and how you can bring it together.

We are working on a project, right now for a financial services company. When we started working with them, we asked, "What kind of data do you have?" They said, "not very much." Then we started talking about various types of information they were capturing, where it was, how it was stored, that sort of thing. It has taken us about four months to get all that data together, because the company had never thought about looking at customers and where the customer data was, because they were always focused on products and product data. So, when you turn that around, what you find is that there is a huge amount of information inside almost every organization about customers-- who their customers are, what their customers are buying and where they are located.

But, because the organization is focused on products, they never get around to looking at what customer data they have, and how they could use it.

Berens: I want to talk about some of the practical obstacles to making these changes. In order to have somebody be responsible to get, aggregate and then start to make sense of all of that data, one of the things that you have got to do is assign some budget to it. You have to make it somebody's job. Where should that budget come from? The CEO?

Schultz: Ideally it would be coming from the top of the organization, because that is really what is going to drive the organization forward. Typically, however, it will fall inside the information technology group, or it may fall inside marketing or in some cases it will fall inside research. But, the cost really has to be an organizational expense, not a departmental or group expense. That’s because if you give the money to a specific group, it will take the budget, get the data and it will squirrel it away somewhere in its silo because, remember, information inside companies is power.

Berens: Right.

Schultz: That’s the major struggle for most firms. What you must have is somebody at the very top who says, "We’re going to start looking at the customers. And, we are going to share the data across the organization." That takes a very enlightened CEO.

Berens: We are not talking about something that is going to happen at a lower level. We are talking about something that has to be championed by a CMO, and then has to be driven by, or at least acquiesced to, by a CEO-- that is a tall order.

Schultz: It is a very tall order when the CEO does not believe that the CMO is capable or qualified to do that kind of job.

And, that is one of the biggest problems. Remember, the average tenure of a CMO is now what…18 to 20 months? So, the CMO comes in, puts a program in place and does not even get to see the second year before they are out the door.

Berens: So, this is something that, if you are CMO and you have just been named, then your first order of business should be this kind of a holistic overview of all of the customer data, and customer information and customer institutional knowledge.

Schultz: That is absolutely true. At least that’s what it should be. But, go look at what the first activity of most new CMOs is when they come in. What’s the first thing they want to do?

Berens: Product changes?

Schultz: No. They want to have an agency review. They want to redo the advertising and the promotions. That’s typically where they start. They start with tactical activities, because those are the things that are the easiest to do. Sort of like re-arranging the deck chairs on the Titanic. Unfortunately, that’s not going to keep the ship afloat.

Berens: In defense of a CMO, changing the advertising is also a way of making a visible change. It may be a tactical change, it may be superficial, but it at least makes them look like they are doing something.

Schultz: That is absolutely true. I can say, "Look what I have done." So, the first task is commonly an agency review, because the agency is the easiest one to beat up on and show your newfound power.

Berens: Back with the brand marketers, let's drop down from the C level for a minute. I am thinking now about the new director of interactive-- someone who has reached a point of some responsibility, some real decision-making power when it comes to budget.

It sounds to me like one piece of advice that you have for them, (and I am hoping you will have the more articulate Don Schultz version of this), is that these people should be going out and hanging out a little bit with the customer support people. Until the time that such a person is a CMO, or has the ear of a CEO, he or she should be doing some very tactical field trips in order to try to get some of this information, even if it is only impressionistic, that eventually the corporation should be devoting big resources to overall.

Schultz: Yes, that’s absolutely true. Let me tell you another story. Last week, I was in the UK, as I told you. I was doing a session at the Henley Management Centre. I did a full day on Marketing Metrics and Measurement. In the room at Henley were marketing professors; faculty who were teaching advertising; people who were teaching finance; accounting professors and people who were teaching logistics; there were people who were teaching performance management; there were people who were teaching operations management. In fact, almost all the disciplines in the school were represented.

When you get groups of people like that in a room, and you start talking about how you measure marketing and other things, you get very rich, very clear, very concise, very accurate approaches to the questions. That is, what should the firm be investing in, how the firm should be measuring the impact and effect of marketing and what the firm will get back, and so on, using a variety of approaches.

This was one of the most interesting and innovative sessions I have conducted for a long time. Lots of discussion. Lots of good ideas. It reminded me that most of the things that need to be done in an organization are interdisciplinary. And, the problem is, most of the time, the marketing people are trying to do it by themselves, and they simply can’t. It takes an organization to do marketing, not just a group of marketing people.

Berens: And, that is why we need to have the high-level support, or why the more junior marketers have to take it upon themselves to go on a kind of informational safari.

Schultz: True. That’s part of the problem, and part of the challenge. By and large, because the functional silos do not talk to each other, it becomes difficult to measure any of the impact or effect of marketing. The marketing people can’t do that by themselves. It requires other people in the organization be involved.

Again, marketing is not something a group of people do. Marketing is what the organization does.

Berens: By that logic, if I am a cost-cutting CEO looking at my bottom line, my first question is, then, what do I need a marketing department for?

Schultz: Well, unfortunately, that’s a really good question. And, it’s an even more important question if they are not doing anything-- if they are not providing any value. What I argue is, the marketing department ought to be the one that is aligning the organization. They should be the ones that know enough about customers, consumers and the organization to be able to say, "I can build, or help build these horizontal systems that are required. I am the one who can do the internal alignment that is necessary inside the organization."

Berens: But, then, who is left to make the television buy for the Super Bowl?

Schultz: Quite honestly, you can hire that out. That’s not necessarily something that has to be done inside the organization. There are lots of tools, tactics, techniques that can be outsourced, rather than having those done by employees. I was on a telephone conversation about three weeks ago with the chief strategic officer for Ford. He said, "We are going to outsource almost everything, including strategy."

Berens: What is going to be left?

Schultz: Well, that is a good question. But, Ford believes that their solution for the problem they have today is to focus on outsourcing and cost-cutting.

Berens: When I first met you a couple of years ago, you were talking a great deal about SIMM (simultaneous media consumption). We have been talking today about the internal half of integration; but Scott Deaver, who is the CMO for Cendant, rather pithily and trenchantly, once said that, "Integration does not happen inside of marketing departments. It happens inside of consumers' heads." And then I think was following up on something that Jeremy Bullmore once famously said, which was that, "Brands are not built by marketing departments. Brands are built inside the minds of consumers."

The reason I am bringing all of this up is, what is the relationship between the kind of internal marketing integration and alignment that you are talking about and what is happening on the consumer side in the consumer's awareness? How does one lead to the other and back again?

Schultz: If you look at what we have been doing for the last three or four years with simultaneous media, what we have proposed has been a media consumption model.

Right now, we have primarily a media distribution model. By that, I simply mean, almost everything we do, every measure we have, every approach we have developed is based on distributing messages through the media. And, that is what we measure: distribution. How many magazines were published? How many newspapers were delivered? How many television commercials were sent out? Everything is measuring distribution. We don’t have very good measures of media consumption, certainly not in the traditional mass media.

Berens: Right. Nielsen is now just starting to measure audience awareness and engagement with the commercials -- in television -- as opposed to audience engagement with the programs. And, this is after 40 years.

Schultz: Those proposed measures though, are, as usual, fraught with problems.

Berens: What is missing from this part of the equation is something that I know you are going to be talking about in your keynote at our iMedia Agency Summit, and that is that in addition to consumers consuming media, they are also now creating media, producing media themselves. And, that media can have an extreme impact, and a profound reach. Where does the consumer creation of media fit into both SIMM and also the internal integration that we have been talking about?

Schultz: What you are talking about is a whole different form, a different way of communicating through the media. Really, what you are talking about is every customer and every consumer out there today creating his or her own internal information network.

If I am interested in buying a new car, I have an internal solution for doing that. I go talk to some friends who bought a new car. I go look at Consumer Reports. I go online. I may even walk to a dealer and kick the tires, and so on. But, I have an internal model -- an internal network -- for how I evaluate information sources and how I solve my problems.

The difficulty marketers have is, we don’t know what those internal models are, or what those internal networks are, the ones consumers have created for themselves. One of the key things we’re learning from the SIMM data is the consumers have created the ability to not only give advice, but also to get advice from multiple sources. This idea of understanding how getting and giving advice occurs in the consumer marketplace is still relatively new, and certainly it is new if considered on an ongoing basis.

What we look at now is commercial distribution (by commercial, I mean paid activities of some sort). We look at how we, as marketers, send things out ,and how we want to communicate and what we want to do to consumers or customers. We don’t look at how customers and consumers and users communicate with each other. And, that is a critically important area that goes back to this customer, or consumer-created media, which is really what seems to be driving much of this stuff today.

Berens: One of the things I am interested in, in conversations like this is sticking with the bottom line, and to talk to people about actually dedicating dollars in a marketing budget to do this. While we have been talking, for about 35 minutes, 3,500 blogs have probably been started.

Schultz: I would imagine it is a lot more.

Berens: It is an extraordinary amount of media that is being created out there. And, that is not even taking into account things like comments on blogs, or sites like Epinions, and the various aggregators of consumer positive and negative opinion. There is an infinite amount of attention that a marketing department could spend monitoring what is being said about the corporation, and the brands, and the products, and the customer experiences. So, where do they start?

Schultz: There are organizations, as you know, that do that sort of thing. They monitor websites; they monitor the blogs, and, they will file reports.

Berens: And these are very useful organizations. We have had them speak; we value them; they write for us. But, there is a difference between data that an outside consultancy is going to create and the insight that a marketer who actually, or at least ostensibly, knows something about the corporation and the product is going to bring to that data. And, that is what I am driving at: do you create an organization in your brand that is about as big as say, the PR department, or the Corporate Communications department? Do you have one poor intern who never sleeps?

Schultz: The first thing we need to do is recognize that the research methodologies we have today were developed for a totally different marketplace. Our methodologies are not terribly relevant for the kind of information we are trying to gather today. I got in trouble with the marketing research community about 18 months or so ago because  I said, "The market research industry is in a death spiral." A lot of people in the research industry didn’t think that was a very nice thing to say. But, in essence, what I said was, "The research people had become so tool and technique driven, that they are more interested in the tools and the techniques than they are in the insight, or the information, they generate."

An example: if I have a problem, and I go to one research organization that does focus groups, the first thing they want to do is go out and do some focus groups. I could take the same problem to a group that does conjoint analysis, and they want to do conjoint analysis. I go to another group and say, "I have got this problem," and they do survey research, and suddenly, it turns into a survey research problem.

We have created a large number of tools that we just simply apply indiscriminately against problems and issues without trying to understand what kind of knowledge we are trying to gain? What information are we trying to get? How can customers give it to us? What kind of response are we going to get? And, I think really what we are talking about is, you really have to rethink the whole market research area, because what you find now are professional focus group attendees who know exactly how the game is played, know what they are supposed to do. I’m not sure you get a whole lot of information from these types of focus groups but we keep doing them just the same.

Berens: And even if they were amateurs, there is a lot of research about eye witness testimony, and about the difference between what someone will say in the privacy of their own home, versus what someone will say in a focus group-- what people will say in a focus group may not even be what they actually think, or what they actually mean.

Schultz: When we invented market research -- traditional market research -- we did not have all of this communication. We had word of mouth, but word of mouth was limited primarily to your immediate circle-- your friends, your family, you neighbors, that sort of thing. Today, we have electronic word of mouth that goes around the globe.

Berens: Instantaneously.

Schultz: We need research techniques that are capable of dealing with the complexity of today's marketplace. When there were only three detergents out there, it was not too difficult to go out and talk to people about detergents. Now, when I have got three hundred detergents -- all of which do all kinds of things -- and, fifty varieties of Tide, how in the world can I gather information and get people to talk about things intelligently? The problem we have is our research has not kept up with the complexity of the marketplace.

Berens: It is also worth saying that this is still more of an art rather than a science. There is a lot of science in it, but you can have all of the tools that you want and if you do not have anyone who is able to use the tools then they are not going to be able to build anything.

Schultz: That is absolutely true. There was a thing in Marketing News recently, which I thought was very valuable. It really sort of reflects what is going on, what is happening to us. [Editor's note: Marketing News, November 15, 2006, Page 4.]

There is a little factoid that says, "Marketing analytics are taking center stage in marketing departments. Nearly three quarters of senior marketers say analytics and measurement have become more important over the past two years, according to a Coremetrics survey," and so on. "Eighty-four percent of the marketers say they are finding it tough to hire staff with analytic skills. Seventy-one percent of the traditional training and educational methods are adequate for the needs of today's marketing. Fifty percent say they need to improve their analytic abilities, and 41 percent say their search engine marketing skills need improvement." 

The problem we have is that we are turning marketing into a science, but, we continue to try to manage it as an art.

Berens: What is the solution?

Schultz: One of the things you have to do is get marketing people who -- when you start to talk about numbers -- their eyes do not roll back in their heads, and they start to hyperventilate.

Berens: This is the "Math….ewwwww" response.

Schultz: Exactly. And, that is a problem. By and large, in the university we are not doing a very good job at putting analytics in them. And the people who are already out there are in marketing, because they did not have to do analytics. That is why they went there.

"I do not have to do numbers? Oh boy, I am going to do marketing! And, if somebody starts to do numbers, then I am going to run over to communications." That is part of the issue. We do not have people who have been trained, or have the capability to do the kind of analytical work that is required in marketing today. And, we are not doing a very good job of preparing them for that in colleges and universities, and not even in our training programs.

Berens: I think that is particularly vivid and on point with the growth of interactive media and interactive marketing, which is, at least allegedly, much more measurable than some forms of traditional marketing.

Schultz: You really have to be comfortable with numbers to be in that field today. And, there are lots of people who are not very comfortable with numbers.

Schultz: Let me tell you a story. I cannot tell you who the organization was, because that would create problems for me. But, about two or three weeks ago, I was working with a fairly large association. They invited a group of CMOs, 16 or 18 of them, to spend a day discussing the future of marketing. We got them all in a room, and we said, "Okay, what kind of a marketing organization do we need for the future? What kind of skills do you need? What kind of people do you need? What kind of capabilities do you need to have?" (This is a true story). At the end of six hours, they had no solution. They did not know.

Berens: When you ask somebody a question like that, usually they will start with what they have, and they will edit out the parts they do not like, and that is easy to do.

Schultz: The one thing on that they all agreed was "We need more customer insight."

Berens: And you have just gotten through explaining to us that they are probably sitting on a treasure trove of that.

Schultz: And I asked, "How do you get customer insight?"

Then they started saying, "Well, you know, we need to do different kinds of research, and so on." We never, ever got back to: what kind of marketing organization is needed for the 21st century? What kind of people do you need? What kinds of skills do you need? And, what kind of requirements do you have to have to staff a marketing group from now, say until 2020? No one has any ideas, because the only thing they do is they keep going back to the things they have now. "Can I make the things that I have now better?" 

And, if you say, "wait a minute. Do you really need to get better at the things you do now, or do you need to do different things?" Then they all get a little bit frightened.

Berens: Because they do not know how to do those things?

Schultz: Or, what the different things are.

Berens: So, what does this marketing organization of the future look like?

Schultz: Well, it is probably radically different than the one we have today. The big difference is, you are going to have to have people who can deal with both push and pull forms of marketing. The problem we have is that almost everyone in marketing today has been trained in a push marketplace. When I say that, I mean even the people who are involved in the online, interactive, high-tech, electronic, all that sort of thing…it is basically still push marketing-- pushing messages out, pushing information out, pushing touch things out, without much recognition that the real challenge today is how do you respond when people touch you?

Most organizations are not very good at responding; they are very good at pushing out, and talking, but not in replying. And, that is part of the difficulty. Now, if you look at what is happening, the problem is customer service, technical support-- all of those things are not in the realm, nor in the area of marketing. Those are all done by some other functional silo.

Berens: Frequently in another country.

Schultz: Or by another department who looks at it as a cost center. And, as a result, what you have is, even if the marketing group is able to get or develop some kind of a response, the responses they generate do not come back to the marketing group. They come back to customer service, sales, tech support, all of those kinds of things. So, the marketing people do not know whether anything is working.

And this is only going to get worse, because the more electronic and new media capabilities I give the consumer, the less relevance and the less view the marketing group has of what the responses are.

Brand experiences today are in the hands of part-time marketers, not marketers.

Berens: And, by part-time marketers, you mean consumers?

Schultz: No. I mean employees, retailers, customer service people… they are not trained as marketing people. They are trained for something else, but they in essence end up doing most of the marketing for the organization.

Berens: Because they are the ones who are on the ground responding to people.

Schultz: Certainly. Think about a marketing department. How much contact do they have with customers, or consumers or users? Answer is practically zero. They are all busy in their offices, and who is talking to the customer?

Berens: That would be customer support.

So, getting back to the horizontal systems that you are talking about -- and again, I am sorry if I am bottom lining this too much -- but one of the challenges is to get budget so that there is somebody who is in the marketing department who is hanging out with customer service; or, somebody in customer service who has, as part of their job, regular communications with the marketing department, so that there is that flow of information.

But, the challenge is how do you get that budget line? How do you get the corporation to say, "It is okay that this person who is reporting up to the head of customer support is spending six hours a month, six hours a week -- whatever it is -- talking with the marketing department, and therefore not actually supporting our endeavors."

Schultz: One of the things you have to think about -- if you go back to where we started -- is that you think about a customer as a flow of income.

How much is the customer worth? Does the customer create $1,000? $10,000? $15,000? $1 million? You start by thinking about customers as flows of income, and you aggregate those customers up: here are the number of customers I am trying to retain; here are the number of customers I am trying to grow; here are the number of customers I am trying to migrate.

If you start thinking about that as income flows, then you have got some kind of calculus that you can say, "I have a hundred million dollar income flow over here from this group of customers. How much am I willing to invest in those customers to maintain them and those income flows? Or, how much am I willing to invest to grow those customers?" And, what you have to do is build a financial calculus so that it is an investment and a return.

Right now, the only thing we have is a marketing department that is a cost center. And, generally, that’s because they can’t measure, financially, the returns they are generating.

A trusted advisor to companies of all sizes and a respected voice within the interactive media industry, Dr. Brad Berens has enjoyed a wide-ranging career that features storytelling as an organizing theme. These days, he divides his time among...

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