Academic journal article The McKinsey Quarterly

Marketing's Mid-Life Crisis

Academic journal article The McKinsey Quarterly

Marketing's Mid-Life Crisis

Article excerpt

New challenges -- and a new competitive environment -- mean that the marketing function must reinvent itself

WHATEVER THE REALITY behind marketing's vaunted contribution to corporate success, the large budgets it has enjoyed for decades are finally beginning to attract attention -- even criticism. So much so, in fact, that doubts are surfacing about the very basis of contemporary marketing: the value of ever more costly brand advertising, which often dwells on seemingly irrelevant points of difference; of promotions, which are often just a fancy name for price cutting; and of large marketing departments, which, far from being an asset, are often a millstone around an organization's neck.

These uneasy suspicions grow even more troubling in the face of the environment in which consumer goods companies are operating today. Private label, large and increasingly sophisticated retailers, and the current recession all exert pressure on their margins. Consumer loyalty to their products dwindles. Line extensions stand in for innovation, while genuinely new products -- and the new markets they might create -- prove hard to find. Technology, instead of enhancing product or service distinctiveness, erodes it. Value shifts away from manufacturers and toward the point of sale.

Conscious of these painful trends, many chief executives are beginning to wonder whether the higher salaries, better perks, and loftier status typically enjoyed by marketing managers -- especially in consumer goods companies -- are justified. In the last two decades, marketing departments have generated few new ideas. True, they have helped to execute the necessary structural changes arising from developments in globalization, information and communication

technology, strategic planning, and organizational design. But when we look for new marketing frameworks, or for the fresh approaches that will help build the long-term relationships that manufacturers most need today, the examples are few.

In the ascendant

From the 1950s through most of the 1970s, the marketing function drove the rise to power of consumer goods companies. Everybody else -- distributors, retailers, other functions, even consumers -- was swept along as manufacturer's brand fought manufacturer's brand for dominance.

During this period, marketing drew its power from two principal sources: innovation and a company's relationship with its customers and consumers. The years from 1950 to 1975 witnessed a tremendous surge in prosperity, accompanied by the mass penetration of refrigerators, washing machines, freezers, and many other household products that most developed societies now regard as virtual necessities. Such products also drove secondary demand for consumer goods.

In parallel, the spread of television and the introduction of commercial channels allowed manufacturers to develop a new kind of relationship with consumers. At relatively low cost, television could communicate intangible benefits and cultivate trust. Not only were new products created, but brands were built -- brands that have demonstrated remarkable staying power. Nearly half of the top 50 brands in the United Kingdom in 1991 originated in this period.

A function without a cause

With a history as strong as this, why does marketing lack direction today? One answer is that the environment has changed so dramatically that marketers are simply not picking up the right signals any more. Past experience is no longer a reliable guide to what today's concerns should be. Marketing has been struggling to respond to several environmental forces that have been at work since the mid-1970s. Of these, none has been more powerful than the rise of retailers.

Retailers' growing clout

In the United Kingdom, supermarket chains first developed in the post-war consumer boom, gradually pushing out the independent and cooperative grocery stores that had long been associated with the country's economic fabric. …

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