Why Age-Based Marketing Doesn't Work: Does Less with More
Wolfe, David B., Aging Today
"The Seniors are coming! The Seniors are coming!" So began my book Serving the Ageless Market, published in 1990. Back then, it seemed only a matter of time-a short amount of time-before corporate America would awaken to the demographics-driven transformation of the marketplace just getting underway. "Who wouldn't take notice of this phenomenon?" thought many of us tracking the event. We just needed to get a few facts and figures out there for everyone to see.
But corporate America was preoccupied with other things during the 19905, especially with the dot-corn universe and the information technology from which it was wringing out costs and making histone productivity gains. However, one sector of business did not participate in these productivity gains. Marketing, which revolves around information, ironically became less productive during the 19905. For example, television advertising lost much of its punch. That Starbucks, New Balance and other brands became superbrands without TV advertising suggests that the tube is no longer the high-powered marketing tool it once was.
Marketing's flagging effectiveness has strained relationships between marketing -agencies and their clients. While agencies blame external conditions- from media clutter to new wrinkles in customer behavior-for falling productivity, clients blame their agencies because good marketers are supposed to know what to do when conditions change the requirements for marketing success. Recent research shows that 90% or more of sales promotions for packaged goods result in lowered profits. A 1995 study by Information Resources Inc. found that 70% to 80% of new-product introductions fail, with each failure resulting in a net loss of up to $25 million. Also, direct marketing response rates were falling even before anthrax made headlines after the attacks of Sept. 11, 2001.
Despite this broad picture of decaying efficacy, marketing is consuming a bigger portion of corporate budgets than ever. In an analysis of 20 industries, half had selling, general and administrative (SG&A) costs of more than 40% of every sales dollar, and none were spending below 30%. Between 1978 and 1996, SG&A expenses for S&P 500 companies grew from 19% of sales to 24%. Spending on advertising rose from around 3% of revenues to about 4.5% in the same period-a 50% increase. Thus, in an age when every other business function has had to do more with less, marketing has managed to achieve an unenviable track record of doing less with more.
Desperate for a magic bullet to cure mounting marketing woes, companies invested billions in customer relationship management (CRM) systems to automate customer analytic and transaction processes. CRM became big business overnight on the strength of such promises. The global marketing research firm IDC estimated that the total worldwide CRM services generated by business totaled $40 billion in 1999, and will pass $100 billion sometime in 2004. In spite of this flood of spending, however, the Gartner Group regularly reports that more than half of all CRM initiatives fail to achieve their objectives. Wells Fargo, for one, pulled the plug on its CRM program in 2002, after spending $38 million trying to make it work.
Companies are learning the hard way that deploying expensive software "solutions" does nothing to address the fundamental philosophical, methodological and organizational flaws that bedevil their marketing functions. Merely automating a business function that is deeply dysfunctional to begin with only makes matters worse. Companies need to understand that what will work in today's more life-seasoned markets are often not the same as the things that were right to do when the consumer universe was dominated by people 18 to 34 years old.
Poor marketing angers and alienates customers. If my walk-around market research-which I conduct on trains, in airports and in other public places-means anything, huge numbers of adults-perhaps even a majority-feel marginalized by most advertising. …