According to Ogilvy UK Vice President Rory Sutherland, viewing marketing as a driver of efficiency rather than a creator of opportunity should be a concern of all marketers.
In fact, the whole concept of capitalism and what business means has been “dangerously distorted,” he argued yesterday (June 8) at the Festival of Marketing: Fast Forward. Sutherland first highlighted the definition of how companies create value – including through marketing and innovation – invented by management thinker Peter Drucker.
“Everything else is a cost. You’ve all heard it said and seen it quoted, but I don’t think anyone can say it with confidence at a board meeting, ”Sutherland argued.
Given how the corporate culture has evolved to view marketing as a cost, marketers should stop seeing capitalism as an “ever increasing vehicle of operation and efficiency” and instead view it as a cost. a discovery mechanism.
“It’s the only correct way to see what a business is doing. It is a process of discovery, of discovering a value that no one knew existed. It’s either about uncovering an unmet need or addressing an existing need through an innovation or idea that was not previously considered, ”Sutherland said.
“When you think about it, there are two ways to add value to the world. You can either figure out what people want and find a really smart way to do it, or you can figure out what you can do and find a really smart way to make people want it. The money you earn is no different regardless of the direction of travel. In reality, most things are a mixture of the two.
The value of creating a customer is disproportionately greater than the value of identifying a customer, but the distinction is completely lost.
The problem today is that marketing is seen as not being part of the value creation process. For Sutherland, this problem was compounded by the fact that consumer brands like Unilever and P&G, which inherently believe in the value of marketing, now account for less than 25% of all ad spend, down from around 68% in the years. 1980.
Today, the advertising slack has been picked up by mobile phone network operators, cell phone manufacturers, broadband providers, insurance comparators and cable TV providers. These companies, he argued, are either dominated by a financial mindset or focused on technology.
“These two particular mindsets are reductionist, they are Newtonian, they are engineering-driven, and they focus above all on maximizing efficiency. My point is that marketing is fundamentally not an efficiency maximization game and shouldn’t be allowed to be, ”Sutherland said.
“I know the rest of the organization is putting piles of technology on you all because they think marketing should be about cutting costs and maximizing efficiency. It is not and it should never be. It’s a game of maximizing opportunities. The goal of marketing is to maximize possible opportunities.
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Framing marketing as a source of maximizing efficiency, a perception Ogilvy’s vice president believes is driven by the mainstream economics, has left marketers trapped in a “progressive world.” there are no significant gains to be made or growth to be achieved. be had.
“We are also weakening, because the fact is that good targeting identifies customers, great creativity really does. The value of creating a customer is grossly greater than the value of identifying a customer, but the distinction is completely lost in most of these metrics that we are using now and that’s crazy, ”he said. -he adds.
Instead, Sutherland fosters a “both and” mentality of short- and long-term thinking shared by Marketing Week columnist Mark Ritson, who views the top and bottom of the funnel as “multiplicative”. He argued that marketers should start with optimizing the bottom of the funnel and get the right conversion, then go up and start building customers.
The lost joy of experimentation
Given the trade-offs between short-term tactics and long-term brand building, Sutherland believes the danger of performance marketing is a tendency to become obsessed with optimizing things that aren’t important, but easy to manage. measure.
“The whole point of marketing is to get people who weren’t thinking of buying your product to pay a heavy price for it. The main role of performance marketing, if we’re cynical, is to get people who would have bought your product anyway to buy it a little earlier at a lower price, ”Sutherland said.
“There is nothing wrong with doing that. Overcoming inertia is a perfectly reasonable function of advertising, and I don’t denigrate it. I don’t denigrate the sales promotion, I don’t denigrate the discounts, but that’s not the whole game.
This obsession with optimization could, he says, kill creativity on a large scale. Sutherland recalled being a Creative Director in 2007 and assuming that the future goal would be to test a wide variety of creative approaches. However, he believes the industry has failed to do so.
The main role of performance marketing, if we’re cynical, is to get people who would have bought your product anyway to buy it a little earlier at a discount.
In fact, the shift to digital marketing, which allows brands to fail quickly and kill ideas quickly, should have led marketing to become “extremely more creatively experimental,” but Sutherland believes that promise has not come true. not materialized.
“I think there’s some sort of weird plot between media agencies and tech companies to turn all advertising into a game of incremental improvement, targeting and optimization. Google, which has no incentive to say that, says ‘No, what makes the biggest difference is creative experimentation’, and yet we hardly do it, ”he said.
“I sincerely believe that behavioral science, combined with creativity, has a magical power to invest marketing in a truly effective discovery process. “
Sutherland explained how Ogilvy’s behavioral science practice worked with restaurant chain Dishoom on the Matka Giveaway, which allows patrons who roll a bronze die and get a six to have their meal for free. While for an economist it’s only a 16% discount, he argued, for a client, it’s the most exciting thing that happens to him all month.
The curse of “reducing uncertainty”
Sutherland also believes that brands that choose to only measure the effectiveness of an activity based on how well it achieves a predefined metric risk undervaluing their work.
“First of all, if there had been a logical answer in advance, someone would have solved it already and most good ideas are only explainable in retrospect – Red Bull, Nespresso, Dyson, Uber , Five Guys. I can take $ 10 billion to $ 15 billion companies and take us back to 2005 and explain why all of these companies are such a stupid idea, ”he added.
“If James Dyson had come to me and said, ‘I think there’s a market for an $ 800 vacuum cleaner,’ I would have said, ‘I’m not really sure, let’s look at the market.’ And if he’d said, ‘Wait, you haven’t heard of my $ 400 hair dryer,’ I would have had him escorted out of the building like a dangerous lunatic.
The beauty of experimentation is that it requires a creative leap, which Sutherland believes functions like finance and purchasing are fundamentally opposed. He argued that finance focuses on both reducing costs and reducing uncertainty, which means that having to ask “the most risk averse people in the organization” for permission to experiment is counterproductive. intuitive.
However, it is difficult to quantify the impact of lost opportunities and compromised resilience that comes with classifying marketing as a game of short-term efficiency and cost reduction, added Sutherland.
“What we have done within companies is that in functions like purchasing and finance we have created a monster because we have created silos within the company that can take responsibility for themselves. merit the reduction in costs, without exposing himself to any blame or liability for loss of opportunity and a dangerous loss of resilience, ”he said.
“That’s what Nassim Taleb would say ‘They have no skin in the game’. They can claim credit for any cost savings they make, but they never have to take responsibility for the consequences of those savings.