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Don Schultz Describes New Integration

Don Schultz Describes New Integration Brad Berens

Editors note: Don Schultz will be a keynote speaker at December's iMedia Summit.

Brad Berens: I have the pleasure today of talking with the hardest working Emeritus Professor in academics, possibly across any discipline -- Don E. Schultz -- of the Medill School, Northwestern. And, today we are talking about the state of the nation for integrated marketing-- what it means, whether or not we have made any progress in the last year or two, and where we -- where Don, in particular -- thinks things might be going. 

Our conversation today will cover:

Page 1: Two issues impacting marketing today
Page 2: Customer-centricity vs. a customer focus
Page 3: Alignment rather than integration
Page 4: What alignment looks like
Page 5: How to embrace alignment

So, let me ask you a first question on a topic that we chatted about earlier, Don. One distinction that is important to you is the distinction between push and pull. What does that mean?

Don Schultz: Well, the real issue that marketing, all marketing, struggles with today is that by and large all marketing organizations were designed to push things out. We made things; we pushed them out into the marketplace. We wanted to communicate with people; we pushed out advertising. We wanted to incent them in some way; we pushed out sales promotion. So, marketing essentially, has been a linear process, starting with the marketer pushing it out into the marketplace. 

So, the problem marketers have today is they have absolutely no way to deal with the pull of marketplace. They simply cannot get their head around the fact that people now have access to unlimited amounts of information. They have access to unlimited numbers of products. They can time shift. They can do almost anything; and, it destroys the linear model that the marketers have built up over the last hundred years.

And so, it is the struggle between this push and pull. Now, if you go back and look at, and think about, the dotcom move, or bust, whichever you want to call it, back in the late '90s, the whole idea was that the pull marketplace was going to totally destroy the push. It was going to wipe out bricks and mortar; it was going to take care of everything-- everybody would be sitting at home, locked into their computer screen, never coming out and consuming brands willy-nilly.

The problem is that when the dotcom boom came to a halt, in essence, the marketing organizations said, "Well, that is it. They are never going to get anywhere. They are never going to be able to accomplish anything, and therefore, we do not have to worry about that anymore."

Berens: Right. So, there was a rejection of the platform and the media, rather than the somewhat dubious executions on the earlier technology.

Schultz: Well, again, I think what traditional marketing organizations said was, "Well, we told you it would not work. It never did. It never has. Nobody ever made any money online," and all that sort of thing. And, as a result, just put their blinders on and said, "Okay, let's just proceed with what we can do." And, that is really what is happening.

Berens: Do you think that attitudes are changing now?

Schultz: I do not think attitudes are changing; I think the behaviors are changing. The behaviors of the consumer are changing the beliefs of the marketing organizations-- not that they want to believe it, but they have to believe it. This is the real struggle that you find.

Another problem is that, back when the internet first became commercial, and we started looking at and having access to electronic communications and electronic systems, marketing organizations essentially said, "We will put the online people, and the electronic people, over in the corner," and then ignored them. Then, they decided to put them in another room; and then, they decided to put them in another building; and then they decided to put them in a whole different city, because they did not want them to contaminate the traditional marketers.

Berens: Right. If they could put them on the moon that would probably be the best possible solution for a lot of traditional folks. 

Schultz: Exactly. Space was essentially what they were looking for. But, what really happened is, when they did that, they separated the systems inside the marketing organization. And now, they are beginning to realize that they need to bring them back together, and they do not have any way to do it. They cannot simply think their way through, and they do not have the organizational structures to bring them back together. 

The big struggle most of them have is, "How do I start? I recognize now that I have to have traditional media. I recognize I need to have electronic media. How do I bring that together inside my organization, because I have spent the last fifteen years trying to keep them separated and trying to keep them apart." So, that creates another bucket of problems. So, it is the push/pull, and the growth of the consumer power. It is the organizational structures that are in place that companies have great difficulty dealing with.

Next: Customer centricity vs. a customer focus

Berens: Do you think that alignment is something that people might embrace more readily? 

Schultz: I think alignment is so much easier inside an organization, where you can start to say, "How do I create?" And, a big problem is the vertical systems we have in place-- everything is vertical. The problem in a vertical system is the customer is never mentioned.

Berens: Well, the customer is merely the target…

Schultz: Well, we have a marketing department. The marketing department reports up to the CEO. The financial department reports up to the CEO. The operations department reports up to the CEO. Where are customers in any of this? And the answer is: nowhere.

Berens: Except now, they are all online, and they are all talking.

Schultz: Now, if you think about marketing, the way we have always taught it, we have taught the four Ps: product, price, place and promotion, the assumption being that if you get those right, customers will magically appear. That is not necessarily true. So, part of the problem here is: How do you start thinking about customers, or how do you start thinking about people, because people are what created all of these things? And, what we are seeing is the people are saying, "What the marketing people are doing does not fit my needs, so I will create my own social networks. I will create my own activities; I will create my own blogs; I will create my own websites; I will create my own everything, because I cannot get satisfaction, or I cannot get the kind of service, or the kind of things I want from the marketing organization the way it exists today.

Berens: It is not really disheartening, but is just occasionally overwhelming… the fact that, it is so much harder on everybody now. We have had this extraordinary growth and explosion of different kinds of media. We have a lot more competitors for a lot more different kinds of products, with some obvious exceptions-- there has been a great deal of consolidation in automotive, and in certain movie studios. But, there are now more options for more things; and, more media within which you can learn about more things; and, more people trying to insert ads into those media than there were at any other time in the history of the species. And, to my mind, that simply means that what we have got is a situation in which more and more people are going to be sharing the pie; but, the pie is not growing as quickly as the media are growing. 

And so, it is always a bit overwhelming to think about all of the different kinds of communication that are happening. And, it seems like, at the moment where the marketing departments are -- as you are describing them -- becoming more and more challenged, and less and less relevant to the communication and the conversation that is happening out in the world. That is the moment where the pressure and stress on them is increasing, and their accountability for how the product is being perceived is only going up. So, it seems to be quite a paradox.

Schultz: I think that is absolutely true. Let me give you an example-- Ford is probably a poster child for the issues of big marketing organizations. Ford is getting better at what they have historically done, and marketing and communication is not going to solve their problem. They are going to have to do things differently.

Berens: On the product side, you mean?

Schultz: No, I am talking about the marketing, just the marketing activities. Granted, they have big product problems. But, one can argue, "Well, marketing somehow failed Ford, because marketing was unable to help the Ford engineers and designers understand what kind of products people wanted." There is a failure of marketing. Ford, being able to throw more money at the marketplace, and having bigger discounts, does not solve their problem. So, getting and doing better, doing the same things better than they are doing now, is not going to solve their problem. They are going to have to do things differently-- and, that is the big challenge. Organizations do not want to do things differently. What organizations want to do is that they want to do the things they are doing now... only better. Part of that comes from the management systems that we put in place. Six Sigma essentially said, "How do we get better at doing what we do?" Not, "How do we do things differently?"

Berens: The Alcoholics Anonymous definition of insanity is doing the same thing over and over again, and expecting a different result…

Schultz: Exactly, and that is part of the issue. Now, marketing as an organizational function has said, "What we need to do is spend more money. We will put more pressure, we will send out more ads, we will send out more commercials." Yet on the front cover of AdAge this week: audiences are down by 50 percent on television, but the spending is up by 40 percent…

Berens: It is mind-boggling.

Schultz: Yeah, it is a perfect example of what you said. It is the idea of, "Well, it is not working, so let's throw more money at it." It is not a case of doing the same thing better, it is a case of doing things differently. And, the push/pull is a whole different approach to thinking about how the marketplace operates; and, people simply cannot get their head around it.

Berens: To wrap things up: Sticking with your Ford example, for a moment, is there a concrete suggestion that we could make on getting them from push to pull, or even some hybrid? 

Schultz: The first thing they need to do is find out what kind of automobiles people want. And clearly, they want Toyotas, and they do not want Fords. So, the first place you start is, "What the hell is Toyota doing better than Ford is doing?" And, part of it has to do with product. Part of it probably has to do with their distribution system. Part of it probably has to do with their pricing policies. Part of it has to do with their customer service. All of those kinds of things. You have to start with customers, because the customers are the only people who have any money. And, the problem is, a lot of marketing is focused on the channels. Ford focuses most of their activities against their dealers. And, the dealers have a different desire than the Ford Motor Company does, so that is where you get out of alignment. Those are the kinds of issues big organizations have to address. Those are mind-boggling things for senior managers, whose primary goal in many cases is to serve out their three or four years, cash in their options, and get out of there. You need pullers; you do not need maintainers.

Berens: You deftly answered my question with an extraordinary, concrete suggestion for Ford, but, that is a concrete suggestion that would require nothing less than the entire reinvention of the Ford culture, which…

Schultz: Absolutely true-- and culture is what drives most of these systems; and, culture is what drives most of these organizations. If you think about the organizations that have really good customer service, who are really customer-centric…

Berens: Who might those be?

Schultz: Nordstrom -- it is in their culture -- being nice to people, to try to help them, to try to take care of them, to the extent that, "If we do not have it, gee maybe, you know, we can send you down the street, because we think so and so has got it." You have got a culture at Starbucks, which essentially is the culture of serving people-- pleasant atmospheres, high-priced products… and people love it. It is the culture of the organization, which is focused on customer service. Look at the airlines. Southwest has a culture of serving people and making them feel comfortable and happy and enjoyable.

Berens: They have that culture even while they do less for customers than other airlines. There is no reserve seating. There is no food…

Schultz: But, the people are pleasant, the people are happy. The people seem to like to work there. Go get on any of the major airlines today, and all you will find is a flight crew in their late 40s and 50s who are just serving their time in, hoping to God they can get out of there.

We have to keep those in perspective. And, the problem is that service organizations, in many cases, have fallen into the same trap that the big consumer products companies have-- they have read all of the marketing books, and they are trying to emulate the big marketing organizations, and that is what has created problems with the service organizations. 

You know, the companies that are growing in the banking business are those like Wachovia. And Wachovia is growing because you get a really good experience. People like to go there. They like the people that are in the banks.

What we are talking about is a radically different culture when you start talking about customer service and customer orientation. Putting customers at the center of the organization really is a very difficult task. But, that is where we have to get to. If that is failing, then you have to start talking about alignment, and that is: how do you align the organization so at least the things that you are talking about, and the things that you are doing, have some relationship to what customers want, and not simply something that is efficient for you.

Brad Berens is executive editor, iMedia Communications. Read full bio.

Berens: When we talk about integrated marketing here, at iMedia, a lot of the time we are talking about the more aesthetic kind of integration, where you want to market the same product in multiple channels. It is a little different than just making sure that the tagline is the same: in your email, on your website, in your radio spot, on your billboard. The big thing that has been interesting to me is the idea that you do not ever know who is going to be exposed to what. 

And so, a lot of TV spots right now (and, we just had a piece in iMedia Connection last week about integrating online and television), a lot of TV spots are having pervasive URLs throughout the entire spot, or you know, "for more, visit blankety-blank dotcom." On the one hand that is a way of giving people a place to go to get more information that the marketers either do control or at least have a voice in. On the other hand, if you are leaving some important part of the message to the other channel; if you are saying that in order to get the full story you have to go to the website after the commercial, then you are just giving people an opportunity to drop off before they get the whole message. So, it seems a formidable challenge to figure out how to market through different channels, when you never have a real sense of sequence. Do you know who is doing it right? In your experience, who is doing a good job of all this?

Schultz: Well, they are so limited, and I am not really sure that there are very many companies that are doing it right. I keep coming back to the idea that, what iPod has done, which is created a new category. And, it is not as much the iPod product itself, it is all the ancillary things that go with it. What organizations have to think about, because Apple -- yes, Apple sells iPods -- but, Apple is not participating in all those ancillary products that go along with iPods.

Berens: You mean podcasts? Or, do you mean other devices into which you stick your iPod?

Schultz: Yeah, podcasts, other devices, all those sorts of things. One of the things that happens is we are so accustomed to marketing and thinking about individual products, we do not think very much about the surrounding activities, and the surrounding elements that go with it. One of the things that marketing tends to do is to be specific to products. It tends to product promote rather than thinking about, "How can I use a product to build this whole support system that goes along with it?"

Berens: Well, one good example that I saw recently -- I was on vacation in Portland, Oregon, and went into NIKETOWN, because I wanted to buy some new running shoes. I had not been in a NIKETOWN for a while, and so I was somewhat surprised to see an entire line of iPod products. They have clothing for running where your iPod can slip into the sleeve. They have a neat little gizmo where you can put it into the bottom of your shoe, and it will talk to your iPod and measure your stride, and measure your running performance. And, this is….

Schultz: And, does Apple make it?

Berens: Apple and Sony seem to make these things together. There are ways in which the brands are leveraging each other, so that the iPod lifestyle and the outdoor Nike running lifestyle (which, I think people already see as overlapping), well now the products are using each other to promote each other. That is a kind of integration, but, that is not what I would usually think about as integration. I would ordinarily think of integration as what Apple is doing, and what Nike is doing individually. So… is that integration?

Schultz: When you talk about integration, what you are talking about is holistic-- and there is only one element. So, in that case, one of them has to disappear, either Apple has to disappear, or iPod has to disappear; and, that would be integration. Then, you have integrated the two, and maybe you have created another name. But, in essence, you are only talking about one single element with integration. When you talk about alignment-- that is what you are talking about. How do Nike and Apple align together to operate it in the marketplace? So, it is not subsuming, and it is not overcoming, and it is not somebody disappearing-- that is the big difference. So integration got a really bad name, because nobody really wants to be integrated.

Berens: Because they think that integration means the erasure of one component…

Schultz: Exactly-- I do not want to be integrated into anything. I want to keep my own persona, and I want to keep my own element, I want to keep my own activities; I want to keep my own projects…

Berens: My own budget….

Schultz: But, I do not mind being aligned. I can align myself inside the organization. It goes back to the real issue, and that is that marketing (unfortunately, in too many places) is a department for a functional activity. And, in truth, marketing is what an organization does, not what a group of people do, because you cannot go to market with products and services unless you get the organization aligned behind them, because you need operations, you need marketing, you need finance, you need HR, you need people, you need all of those things to be successful. The question is, how do you align the organization to do that? And, how do you align with customers, not how do you subsume one into another?

Berens: It also sounds so much more achievable. Integration, to my mind, is a lot like engagement-- it is one of those terms that is very hard to define. And, the fact that we have been batting this around for you know, 25 minutes or so, kind of supports that… that you go to any two different marketers or advertisers, and you talk about integration, you probably are going to get two different definitions. They may be only slightly different.…

Schultz: You will get one from each of them, and then one on which they do not agree either. It is a big problem.

Next: How to embrace alignment

Schultz: Another problem that organizations have is that if you look at a marketing organization, it is all facing outward. The problem today is the consumer, the customer, the person who is using the electronic media, is using the pull system, and never goes to the marketing group. They go around the marketing group. They go to websites, they go to MySpace, they go to online groups, they go to blogs. They go to all those things, most of which the marketing organization has nothing to do with. 

Their problem is the experiences that customers have are in most cases not determined by the marketing organization. Customer service does not report to marketing-- it is not part of the marketing group organization. Supply systems are not related to the marketing organization. Employees do not report to the marketing organization. So, as a result, all the brand contacts and all the experience you have with a company is not under the direction, or even under the control of, the marketing group.

Berens: Well, direction and control are one thing, and I understand that many corporations are not marketing focused; but, I think that, in some ways, thinking about direction and control, it might be unrealistically ambitious. Something more possibly achievable would be simply for the marketing group in a big brand to know what was going on.

Schultz: Well, that would be helpful. But, remember, they do not have any way to communicate internally, because all of their communication is all designed to go outbound. It is all designed to talk to the retailer, to talk to the consumer-- never to tell the people inside what is going on.

Berens: Fair enough. So, forward facing is something you mentioned a moment ago, I think.

Schultz: What all of that says is, if you are talking about integrated marketing communication, when marketing was dominant in the marketplace (back in the late '80s and early '90s, when we first started all of this stuff), marketing controlled all of those systems; marketing controlled all of the communication that was pouring out. Well integrated marketing communication, at that point, simply meant, how do I get all of these things to look alike? How do I get the same sound, the same color, the same logo -- all of those things -- on all the outbound stuff? That is what I am concerned about. To that end, integration is difficult, and really what we ought to be talking about is alignment, because you cannot integrate the organization. You can only align it, because of the silos, and the organizational structures that are in place.

So, really, when we talk about, "How do you start to think about integration and alignment?" what we start to think about is: How do I put in horizontal systems inside the organization that will bring all those functional silos together, so that they are all focused on trying to serve and provide what the customers want and the customers need?

Berens: Can you tease out this difference between integration and alignment a little bit more, because I am groping towards an understanding of it, but I think you probably have a way of explaining it that I would get more quickly?

Schultz: Integration was, "How do we get one site, one sound, one color, one logo-- all of the stuff that we are sending out." That was integration. That was all in the control, really, of the marketing group, of the marketing organization. So, the marketing organization wrote and controlled the advertising, the promotion, most of the other things, and the way the organization brought its face to the marketplace. 

When we gave the consumer technology, it allowed them to bypass the marketing organizations. In fact, they do not need to listen to marketing communication anymore. In essence, what I am working on now is a concept called: placeholders. Placeholders, essentially, are things that organizations establish in the mind of the consumer, and in the marketplace, so that when someone says, "I need to do that," they think of me, and they at least go in and they Google me.

Berens: How is a placeholder different than a brand?

Schultz: Placeholders could be categories, brands have to do with products. So, what I may be talking about is, if I have a particular need that can be solved in any number of ways… for example, I am looking for entertainment. Well, entertainment can be music, it can be theater, it can be dance, it can be socializing, it can be any number of things…

Berens: I see, so category participation is…

Schultz: It is participation… and, it is essentially the social networks we are talking about. But brands are tied to specific products, or specific solutions. What organizations have to do, going forward, is to create themselves as a placeholder in the mind of the consumer. If I am looking for entertainment, "Well, gee, maybe I ought to go look at Sony. Maybe I ought to go look at NBC. Maybe I ought to go look at Rock and Roll bands." Those are the kinds of things we are dealing with, because today the consumer in essence does not really need to hear anything from the marketing organizations. All they need to know is a placeholder, so I can go tap into the internet and download anything I want in two tenths of a second. That is the big change.

Next: What alignment looks like

Schultz: Another thing that has popped up in the last several months is there is this huge emphasis now on, "We want to become customer focused." And so, every organization says, "Our goal is to become customer focused."

Berens: Like they were ignoring their customers for the preceding recorded history…

Schultz: Yeah, the last hundred years we have been ignoring them, so now we are going to become customer focused. Now, the problem is, when they talk about customer focused, what they mean in many cases is, "Well, we are going to be nice to customers now. We will start answering the telephone. We will start responding to their requests." Most will not have to stand in line as long as they used to. 

But, the problem is, that is customer focused from a marketing view. When you talk about it in traditional terms it means: How do I cross-sell you, up-sell you… that sort of thing. What they really are trying to get to, (and they have great difficulty in doing), is becoming customer-centric. Customer-centric says you put the customer in the middle, or at the center of the organization, and then you try to figure out what they need, and what they want, and what they require, and you try to fill those needs. Customer focused essentially says, "Let's try to find ways to focus on the customer more than we have in the past, so we can cross-sell, up-sell, and that sort of thing."

Berens: Or, another way of putting this is, what you are calling customer focused is a way of more efficiently getting the customer to purchase something, and then go away; but, not to have them linger; not to have them engage in a dialogue with the company; not to make it something that is an ongoing relationship; but, just to more effectively process them.

Schultz: Exactly. Now, you have to understand that marketing organizations are designed to talk. They have never been designed to listen. So, when you start talking about dialogue, and interactivity, and you start talking about things like social networks, and that sort of thing, the marketing organizations have no way to deal with that, because they have always been outbound, and linear, and all designed to push communication out, and never really ever looked at, or listened to, customers historically. So, that creates a big problem.

So, one of the issues is there is all this customer focus, which is interpreted as: "How do we improve our customer service? How do we improve our customer wait times? How do we improve the things that we do?" …all in the hope that we can sell them something. There is very little emphasis in customer focus, in terms of trying to satisfy customers, to understand their needs, or create a long-term relationship with them. Customer relationship management essentially is customer focused. The more I know about you, the better opportunity I believe that I have to cross-sell, or up-sell, or add on, or migrate you, or something like that. So, customers in most marketing situations are still considered pawns that the marketing organization is trying to move around.

Berens: How does customer-centricity differ from customer-focused?

Schultz: Well, customer-centricity says that you really are looking at a demand chain, rather than a supply chain. A supply chain is one where we try to figure what is the most efficient way to serve you. A demand chain is: How do we figure out what we want, and then how do we make it? And, those are radically different concepts. 

Look at two very separate examples: Wal-Mart essentially is a supply chain-- it is a logistical system designed to get products through the system, get them into the stores at the lowest possible price, and then hope people come in and pick up them up.

Berens: Right. It is all about the economies of scale.

Schultz: Exactly. And, if you look at an organization like Dell, Dell says, "Tell us what kind of computer you want. We will make it for you, and we will design it to your specifications." That is a demand chain. So, those are two radically different kinds, and radically different business models. The problem is, customer focused is all designed around a supply chain. How can I sell you more of the stuff I have got? A demand chain is all focused around, "Tell me what you want, and let me see if I can figure out if I can provide that; or, if I cannot provide it, maybe I can find another way to fill your needs."

They are two diametrically opposed processes, and what they are doing is they are essentially crashing/clashing in the marketplace today. The supply chain people are beginning to understand that they cannot get much more efficient than they are now; and, cannot squeeze suppliers much more than they have now. And so, the real question is: What do I do? Well, I have got to go sell some more, which forces me into this add on, up-sell, cross-sell, all those kinds of things. So, those are the big issues. 

Next: Alignment rather than integration

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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