Marketing Is Everything

HER JANUARY-FEBRUARY 1991 trade Is Everyaffair by Regis McKenna he nineties will operate to the node. And that is great freshlys for the marter. Technology is trans variateing extract, and choice is transforming the grocery inventoryplace. As a result, we are witnessing the emergence of a unfermented trade paradigm not a do to a greater extent than trade that simply turns up the volume on the gross sales spiels of the past completely if a experience- and experience-based groceryplace place that repreast southeastnts tbe once-and-for- tot entirelyy death of the salesman. Marketings teddy is driven by tbe enormous power and ubiquitous spread of tecbnology.So permeant is engine room straightaway finish off tbat it is virtually meaning s well-off to read distinctions amongst applied science and nontecbnology teleph adept circuites and industries tbere arc only tecbnology companies. Tecbnology has moved into increases, the hold up forplace, and t he commercial messageizeplace with astonishing speed and thorougbness. s up to nowty years after tbey were invented, fractional borsepower motors are in some IS to 20 bo customb senile intersection points in tbe average American dental plate today. In less(prenominal) than 20 years, the micro operateor has achieved a similar penetration. TWenty years ago, there Regis McKenna is chairman of Regis McKenna Inc. a Palo Alto-headquartered trade consulting firm that advises some of Americas leading high-tech companies. He is in addition a general sectionalizationner of Kleiner Perkins Caufield &) Byers, a engine room venture-capital comp whatsoever. He is the author of Whos Afraid of Big Blue? (Addison-Wesley, 1989) and The Regis Touch (Addison-Wesley, 1985. DRAWING BY TIMOTHY BLECK T 65 MARKETING IS EVERYTHING were few than 50,000 reck superstarrs in social function,- today more than . 50,000 computers are purchased both day. The defining characteristic of this rude(a) -fangled expert push is programmahility.In a computer chip, programmability mode the readiness to warp a command, so that whizz chip can perform a manikin of prescribed functions and produce a variety of prescribed out throw ins. On the milling machinery floor, programmability transforms the proceedsion exploit, enabling whizz machine to produce a liberal variety of models and products. More broadly, programmability is the virgin bodily capability to produce more and more varieties and choices for nodes still to widen each individual node the expectation to protrude and implement the program that will yield the precise product, process, or variety that is right for him or her.The technological promise of programmahility has exploded into the macrocosm of al roughly unlimited choice. precede the world of drugstores and supermarkets. match to Gormans New merchandise News, which tracks naked as a jaybird product introductions in these twain eonsumer-product s arenas, amongst 1985 and 1989 the chassis of tender products grew by an astonishing 60% to an all-time annual high of 12,055. As venerable a snitch as course illustrates this multiplication of brand variety. In 1946, Procter & Gamble introduced the laundry detergent, the first ever. For 38 years, one version of billow administerd the entire market.Then, in the mid-1980s, Procter & Gamble began to gravel out a succession of sore Tides Unscented Tide and Liquid Tide in 1984, Tide with Bleach in 1988, and the concentrated Ultra Tide in 1990. To some marketers, the creation of almost unlimited node choice represents a threat particularly when choice is accompanied by new competitors. TVenty years ago, IBM had only 20 competitors,- today it stages more than 5,000, when you count any fellowship that is in the computer business. Twenty years ago, there were fewer than 90 semiconductor companies today there are almost one-third hundred in the United States alone.And n ot only are the competitors new, bringing with t sew new products and new strategies, precisely the customers in homogeneous manner are new 90% of the community who apply a computer in 1990 were not using one in 1980. These new customers dont know ahout the old rules, the old understandings, or the old counselings of doing business and they dont care. What they do care about is a smart set that is willing to adapt its products or portions to fit their strategies. This represents the evolution of market to the market-driven party. Several decades ago, there were sales-driven companies.These organizations accented their energies on changing customers minds to fit the product praeticing the any garble as long as its black inculcate of trade. As teehnology go againsted and competition increased, some companies shifted their set out and became eustomer driven. These companies expressed a new willingness to change their product to fit customers requests practicing the tell us what coloring cloth you deficiency school of trade. In the 1990s, successful companies are becoming market driven, adapting their products to fit their customers strategies.These companies will practice lets figure out to make outher whether and how color matters to your larger intent merchandising. It is selling that is oriented toward creating or else than controlling a market it is 66 HARVARD art revaluation January-February 1991 based on exploitational education, incicmcntul im call d inducement, and ongoing process earlier than on simple market- dole out tactics, raw sales, and one-time events. nearly definitive, it draws on the base of knowledge and experience that exists in the organization. T ese two fundamentals, knowledge-based and experiencebased selling, will increasingly define the capabilities of a successful selling organization. They will supplant the old start to marketing and new product development. The old approach getting an idea, conduc ting traditional market research, developing a product, riseing the market, and finally going to market is slow, unresponsive, and turf-ridden. More all over, arrestn the fast-changing marketplace, there is less and less reason to believe that this traditional approach can forestall up with satisfying customer esteemes and demands or with the rigors of competition.Consider the mueh-publieized 1988 lawsuit that Beecham, the international consumer products group, filed against announce giant Saatchi Saatchi. The suit, which sought more than $24 zillion in damages, argued that Yankelovich Clancy Shulman, at that time Saatchis U. S. market-research subsidiary, had vastly overstated the projected market share of a new detergent that Beecham launched. Yankelovich forecast that Beechams product, Delicare, a cold-water detergent, would win amongst 45. 4% and 52. 3% of the U. S. arket if Beecham backed it with $18 million of advertizing. According to Beeeham, however, Delicares hig hest market share was 25% the product generally achieved a market share of between 15% and 20%. The lawsuit was settled out of court, with no clean up winner or loser. Regardless of the outcome, however, the issue it illustrates is widespread and fundamental forecasts, by their very nature, must be unreliable, particularly with engineering science, competitors, customers, and markets all shifting footing so often, so rapidly, and so radi bidy.The alternative to this old approach is know ledge-based and experience-based marketing. Knowledge-based marketing requires a phoner to master a scale of knowledge of the technology in which it competes of its competition of its customers of new sources of technology that can alter its rivalrous environs and of its bear organization, capabilities, plans, and way of doing business.Armed with this mastery, companies can put knowledge-based marketing to work in three essential ways integrate tbe customer into tbe devise process to guarant ee a product tbat is tailored not only to the customers demand and desires but in any case to the customers strategies generating nicbe thinking to role tbe play alongs knowledge of cbannels and markets to identify segments of tbe market tbe company can own and developing the bag of suppliers, vendors, partners, and users wbose traverseinghips will help bring and support tbe companys reputation and technological edge.The otber balf of this new marketing paradigm is experiencebased marketing, wbicb empbasizes interactivity, connectivity, and creativity. With tbis approacb, companies spend time with tbeir customers, constantly monitor tbeir competitors, and develop a bunkback-analysis system tbat turns this information about the market and the competition into important new product intelligence. At the selfsame(prenominal) time, tbese companies botb evaluate their own )anuary February 1991 HARVARD line redirect examination 67 MARKETING IS EVERYTHING echnology to assess its currency and cooperate with separatewise companies to create mutually advantageous systems and solutions. These close encounters with customers, competitors, and internal and external technologies give companies the firsthand experience they need to invest in market development and to take intelligent, calculated risks. In a time of exploding choice and uncertain change, marketing the new marketing is the answer. With so very much choice for customers, companies face the end of loyalty.To combat that threat, they can add sales and marketing quite a little, throwing dear(predicate) resources at the market as a way to retain customers. just the true(a) solution, of course, is not more marketing but smash marketing. And that meat marketing that buzz offs a way to integrate the customer into the company, to create and sustain a descent between the company and the customer. The marketer must he the integrator, both internally synthesizing technological capability wi th market needs and externally bringing the customer into the company as a participant in the development and adaptation of well be controlds and function.It is a fundamental shift in the purpose and purpose of marketing from manipulation of the customer to genuine customer occasion from telling and selling to communicating and sharing knowledge from last-in-line function to bodily-credibility champion. playacting the integrator requires the marketer to command credibility. In a marketplace characterized by rapid change and latently paralyzing choice, credibility survives the companys sustaining look upon.The character of its perplexity, the strength of its financials, the reference of its innovations, the congeniality of its customer references, the capabilities of its alliances these are the measures of a companys credibility. They are measures that, in turn, today affect its capacity to attract grapheme people, generate new ideas, and form quality relationships. T he relationships are the key, the hasis of customer choice and company adaptation. After all, what is a successful brand hovel a special relationship?And who hetter than a companys marketing people to create, sustain, and interpret the relationship between the company, its suppliers, and its customers? That is why, as the demands on the company chip in shifted from controlling woos to competing on products to serving customers, the core group of gravity in the company has shifted from finance to engineering-and now to marketing. In the 1990s, marketing will do more than sell. It will define the way a company does business. The old notion of marketing -was epitomized hy Marketing Is Everythins, and Every intimacy T A/T / + IS IViarKCting he ritual phone call from the CEO to the corporate headhunter saying, Find me a good marketing per- marketing operation What the QQ wanted, of course, was soul who could take on a discrete set of casebook functions that were generally assoc iated with run-of-the-mill marketing. That person would immediately go to Madison street to hire an advertisement agency, change the ad camping groundaign, redesign the company logo, restore the brochures, train the sales force, retain a high-powered public relations firm, and alter or some differentwise reposition the companys image.HARVARD BUSINESS REVTEW lanuary-February 1991 68 in arrears the CEOs call for a good marketing person were a number of assumptions and attitudes about marketing that it is a distinct function in the company, key from and usually subordinate to the core functions that its job is to identify groups of potential customers and find ways to convince them to buy the companys product or service and that at the heart of it is image making creating and projecting a false aesthesis of the company and its offerings to lure the customer into the companys grasp.If those assumptions ever were warranted in the past, however, all three are totally unsupportab le and obsolete today. Marketing today is not a function it is a way of doing business. Marketing is not a new ad campaign or this months promotion. Marketing has to be all- distributive, part of everyones job description, from the receptionists to the board of directors. Its job is neither to fool the customer nor to falsify the companys image. It is to integrate the customer into the design of the product and to design a ystematic process for interaction that will create substance in the relationship. To understand the un equivalentness between the old and tbe new marketing, compare how two bigb-tech medical instrument companies recently bandied similar customer telepbone calls requesting tbe repair and replacement of their equipment. Tbe first eompany call it Gluco delivered tbe replacement instrument to tbe customer witbin 24 hours of tbe request, no questions asked. Tbe corner in wbich it arrived contained instructions for sending back tbe broken instrument, a mailing labe l, and even tape to reseal tbe box.Tbe pbone call and tbe excbange of instruments were handled conveniently, professionally, and witb maximum consideration for and minimum spread to tbe customer. The moment company call it Pumpco bandied tbings quite differently. Tbe person wbo took the customers telepbone call good-for-naught never been asked about repairing a piece of equipment sbe tbougbtlessly sent tbe customer into tbe limbo of bold. Finally, sbe came back on the line to say tbat tbe customer would harbour to pay for tbe equipment repair and tbat a temporary replacement would toll an additional $ 15.Several age later, tbe customer get under ones skind tbe replacement witb no instructions, no information, no directions. Several weeks after the customer returned tbe broken equipment, it reappeared, repaired but witb no instructions concerning tbe temporary replacement. Finally, tbe customer got a demand letter from Pumpco, indicating tbat someone at Pumpco unhealthful m ade the mistake of not sending tbe equipment C. O. D. To Pumpco, marketing means selling tbings and collecting notes to Gluco, marketing means grammatical construction relationsbips witb its custotners.The way tbe two eompanies bandied two simple eustomer requests refleets tbe questions tbat customers increasingly ask in interactions witb all kinds of businesses, from airlines to software makers Wbicb company is competent, responsive, and well organized? Wbicb company do I trust to get it rigbt- Wbicb company would I ratber do business witb? Successful companies accreditedize tbat marketing is equivalent quality strengthened-in to tbe organization. equivalent quality, marketing is an intangible tbat tbe customer must experience to apprize.And homogeneous quality wbicb in tbe United States bas developed from early ideas standardized HARVARD BUSINESS redirect examination )anuary-February 1991 69 MARKETING IS EVERYTHING planned obsolescence and inspecting quality in to more determined concepts like the systemization of quality in every aspect of tbe organization marketing bas been evolutionary. Marketing bas shifted from tricking tbe customer to blaming the customer to satisfying the customer and now to integrating tbe customer systematically.As its next move, marketing must permanently shed its reputation for hucksterism and image making and create an award for marketing much like tbe Malcolm Baldrige interior(a) Quality Award. In fact, companies tbat continue to see marketing as a bag of tricks will lose out in sbort magnitude to companies tbat stress substance and real performance. Marketings ultimate assignment is to serve customers real needs and to communicate tbe substance of tbe company not to introduce tbe kinds of cosmetics tbat used to typify tbe auto industrys annual model cbanges.And because marketing in tbe 1990s is an expression of tbe companys cbaracter, it necessarily is a responsibility tbat belongs to the whole company. The Go al ofMarketing Is to hold the Market, Not fust U. S. companies typically make two kinds of mistakes. Some get caught up in the excitement and drive of making things, particularly new creto denounce the ations. Others bewilder absorbed in the competiPwduct selling things, particularly to increase their market share in a given product line. Both approaches could prove fatal to a business.Tbe problem witb tbe first is tbat it leads to an internal focus. Companies can become so fixated on pursuing tbeir R&D agendas that they immobilize about tbe customer, tbe market, tbe competition. They end up winning recognition as R&D introduces but lack the more important capability sustaining their performance and, sometimes, maintaining their independence. Genentech, for example, clearly emerged as the R&D pioneer in biotechnology, only to be acquired by Rocbe. Tbe problem with the second approach is that it leads to a market-sbare mentality, which inevitably translates into unde rshooting the market.A market-share mentality leads a company to think of its customers as share points and to use gimmicks, spiffs, and promotions to eke out a percentage-point gain. It pusbes a company to guess for incremental, sometimes even minuscule, growtb out of existing products or to spend high to launch a new product in a market where competitors enjoy a fat, dominant position. It turns marketing into an expensive fight over crumbs rather than a smart effort to own the whole pie. Tbe real goal of marketing is to own the market not just to make or sell products. Smart marketing means defining what wbole pie is yours.It means thinking of your company, your technology, your product in a fresh way, a way that comes by defining what you can lead. Because in marketing, what you lead, you own. Leadership is self-will. When you own the market, you do different things and you do tbings differently, as do your suppliers and your customers. When you own tbe market, you develop y our products to serve tbat market specifically you define tbe standards in that market you bring into your camp third parties who want to develop their own compatible products or offer you new features or add-ons to aug- 70 HARVARD BUSINESS REVIEW January-February 19yi ent your product you get the first look at new ideas that others are testing in that market you attract the most talented people because of your acknowledged lead position. Owning a market can become a self-reinforcing lock. Beeause you own the market, you become the dominant force in the field beeause you dominate the field, you deepen your ownership of the market. Ultimately, you deepen your relationship with your customers as well, as they attribute more and more leaders qualities to a company that exhibits such an integrated performance. To own the market, a eompany starts by thinking of a new way to define a market.Take, for instance, the case of Convex Computer. In 1984, Convex was looking to put a new comput er on the market. Because of tbe existing market segmentation. Convex could ask seen its only choice as competing for market sbare in the predefined markets in supercomputers where Cray henpecked or in minicomputers where Digital led. Determined to define a market it could own. Convex created the mini-supercomputer market by offering a product with a priee/performance ratio between Crays $5 million to $15 million supercomputers and Digitals $300,000 to $750,000 minieomputers.Convexs product, priced between $500,000 and $800,000, offered teehnological performance less than that of a full supercomputer and more than that of a minicomputer. Within this new market. Convex schematic itself as the leader. Intel did the same thing with its microprocessor. The company defined its early products and market more as computers than semiconductors. Intel offered, in essence, a computer on a chip, creating a new division of products that it could own and lead. Sometimes owning a market means b roadening it other times, narrowing it. apple has managed to do both in efforts to create and own a market.Apple first broadened the category of microscopical computers to achieve a leadership position. The market definition started out as hobby computers and had many small players. The next step was the home computer a market that was also crowded and limiting. Tb own a market, Apple identified the face-to-face computer, which expanded the market concept and made Apple the undeniable market leader. In a later move, Apple did the opposite, redefining a market by narrowing its definition. Unquestionably, IBM owned the business market for Apple, a market-share mentality in that arena would have been pointless.Instead, with technology alliances and marketing eorreetly defined, Apple created and owned a whole new market desktop publishing. Once inside the corporate world with desktop publishing, Apple could deepen and broaden its relationships with the business customer. Paradoxic ally, two important outcomes of owning a market are substantial earnings, which can fill again the companys R&D coffers, and a powerful market position, a beachhead from wbich a company can grow additional market share by expanding both its teehnological capabilities and its definition of the market.The greatest praetitioners of this marketing approach are Nipponese companies in industries like autos, commercial electronics, semiconductors, and computers and communications. Their primary goal is ownership of certain target markets. The keiretsv industrial structure leaves them to use all of the markets infrastructure to achieve HARVARD BUSINESS REVIEW January-February 1991 * r MARKETING IS EVERYTHING this relationships in technology, information, politics, and dispersion help tbe company assert its leadership. Tbe Japanese strategy is consistent.Tbese companies begin by using basic research from tbe United States to jump-start new product development. From 1950 to 1978, for example, Japanese companies entered into 32,000 licensing arrangements to acquire foreign technology at an estimated cost of $9 billion. But the United States spent at least 50 times tbat much to do the original R&D. Next, these Japanese companies pusb out a variety of products to engage the market and to learn and and then focus on dominating tbe market to force foreign competitors to back away leaving them to barvest substantial returns.Tbese buge profits are recycled into a new spiral of R&J3, innovation, market creation, and market dominance. Tbat model of competing, which links R&D, technology, innovation, production, and finance integrated through marketings drive to own a market is the approacb tbat all competitors will take to succeed in the 1990s. In a world of pickle manufacturing, the counterpart was mass marketing. In a world of flexible Technolo2V nnufacturing, the counterpart is flexible market7-. 7 ine. The technology comes first, the ability to marJZ V UI VtCi jgj follows.The tecbnology embodies adaptability, programmability, and customizability now comes marketing that delivers on those qualities. straight off tecbnology has created tbe promise of any thing, any way, any time. Customers can have their own version of virtually any product, including one that magical spells to mass identification rather than individuality, if tbey so desire. Think of a product or an industry where customization is not predominant. The telephone? Originally, Bell Telephones goal was to place a simple, all-black pbone in every home. Today there are more than 1,000 permutations and combinations ready(prenominal), ith options running the gamut from different colorize and portahility to answering machines and programmability as well as services. Tbere is the further promise of optic fiber and the convergence of computers and communications into a unified industry with even greater technological choice. How about a venerable product like the bicyc le, which appeared originally as a sketch in Leonardo da Vincis notebooks? According to a recent article in the Washington Post, tbe National Bicycle Industrial Company in Kokubu, Japan builds made-to-order bicycles on an assembly line.The bicycles, fitted to each customers measurements, are delivered within two weeks of the order and the company offers 11,231,862 variations on its models, at prices only 10% higher than ready-made models. thus far newspapers tbat report on this technology-led move to customization are themselves increasingly customized. Faced witb dead(prenominal) circulation, the urban daily newspapers have begun to customize their news, advertizement, and even editorial and sports pages to appeal to local suburban readers. The Los Angeles Times, for example, has seven zoned editions targeting each of tbe citys surrounding communities.What is at work here is the predominant matbematical aspect of todays marketing variety plus service equals customization. For 72 HARVARD BUSINESS REVIEW January-February all of its handying about as a marketing buzzword, customization is a remarkably direct concept it is the capacity to deal with a customer in a unique way. Technology makes it increasingly possible to do that, but interestingly, marketings version of the laws of physics makes it increasingly difficult. According to quantum physics, things act differently at the micro level Light is the uncorrupted example.When candided to certain kinds of tests, light guides like a motion, moving in much the way an ocean joggle moves. But in other tests, light behaves more like a particle, moving as a star ball. So, scientists ask, is it a tramp or a particle? And when is it which? Markets and customers operate like light and brawniness. In fact, like light, the customer is more than one thing at the same time. Sometimes consumers behave as part of a group, fitting neatly into social and psychographic classifications. Other times, the consumer we ar upons loose and is iconoclastic.Customers make and break patterns the senior citizen market is filled with older people who intensely wish to act youthful, and the upscale market must contend with wealthy people who hide their money behind the most utilitarian purchases. Markets are subject to laws similar to those of quantum physics. Different markets have different levels of consumer energy, stages in the markets development where a product surges, is absorbed, dissipates, and dies. A fad, after all, is nothing more than a wave that dissipates and then becomes a particle.Take the much-discussed Yuppie market and its association with certain branded consumer products, like BMWs. After a stage of bigh customer energy and close identification, the wave has broken. Having been saturated and absorbed by the marketplace, the Yuppie association has faded, just as energy does in the physical world. Sensing the change, BMW no longish sells to the Yuppie life sprint but now focuses on t he technological capabilities of its machines. And Yuppies are no longer the wave they once were as a market, they are more like particles as they look for more individualistic and personalised expressions of their consumer energy.Of course, since particles can also behave like waves again, it is likely that smart marketers will tap some new energy source, such as values, to recoalesce the young, affluent market into a wave. And technology gives marketers the tools they need, such as database marketing, to discern waves and particles and even to design programs that combine equal particles to form a powerful wave. The lesson for marketers is much the same as that balmy by Buckminster Fuller for scientists Dont fight forces,- use them. Marketers who follow and use technology, rather than oppose it, will discover that it creates and leads directly to new market forms and opportunities. Take audiocassettes, tapes, and compact discs. For years, record and tape companies jealously gua rded their property. Knowing that home hackers pirated tapes and created their own composite cassettes, the music companies steadfastly resisted the forces of technology until the Personics System established that technology was making a legitimate market for pass, high-quality customized composite cassettes and CDs.Rather than treating the customer as a criminal, Personics saw a market. Today consumers can design personalized music tapes from the Personics System, a rewed-up jukebox with a library of HARVARD BUSINESS REVIEW (anuary R-bmary 1991 73 MARKETING IS EVERYTHING over 5,000 songs. For $1. 10 per song, consumers tell tbe macbine wbat to record. In about ten legal proceeding, tbe system makes a customized tape and prints out a laser-quality label of tbe selections, complete witb tbe customers name and a personalized title for tbe tape. Launcbed in 1988, tbe system bas already spread to more tban 250 stores.Smart marketers bave, once again, allowed tecbnology to create the customizing relationship witb tbe customer. We are witnessing tbe obsoleseence of advertisg-1 tbe old model of marketing, it made sense as oveS fTOm wbole formula you sell mass-produced tn lU Q 3 jygg market tbrougb mass media. Marketings job was to use advertising to deliver a message to tbe consumer in a one-way communication Buy tbis Tbat message no longer works, and advertising is sbowing tbe effects. In 1989, newspaper advertising grew only 4%, compared witb 6% in 1988and9% in 1987.According to a study by Syracuse Universitys Jobn Pbilip Jones, ad spending in tbe major media bas been stalled at 1. 5% of GNP since 1984. Ad agency staffing, researcb, and profitability bave been affected. Three think factors explain tbe decline of advertising. First, advertising overkill bas started to ricocbet back on advertising itself. Tbe proliferation of products has yielded a proliferation of messages U. S. customers are hit witb up to 3,000 marketing messages a day. In an effort to bomb ard the customer with yet one more advertisement, marketers are squeezing as many voices as they can into tbe space allotted to tbem.In 1988, for example, 38% of primetime and 47% of weekday daytime video recording commercials were only 15 seconds in duration in 1984, those figures were 6% and 11 % respeetively. As a result of the shift to 15-second commercials, the number of television commercials bas skyrocketed between 1984 and 1988, prime-time commercials increased by 25%, weekday daytime by 24%. Predictably, bowever, a greater number of voices translates into a smaller impact. Customers simply are unable to remember wbich advertisement pitcbes wbich product, much less wbat qualities or attributes might discriminate one product from anotber.Very simply, its a jumble out tbere. Take tbe staggeringly clever and vituperatively acclaimed series of advertisements for Eveready batteries, featuring a tireless marching rabbit. Tbe ad was so successful tbat a survey conducted by Vide o Storyboard Tests Inc. named it one of tbe top commercials in 1990 for Duracell, Evereadys top competitor. In fact, a full 40% of tbose wbo selected tbe ad as an outstanding commercial attributed it to Duracell. Partly as a consequence of tbis confusion, reports indicate that Duracells market share has grown, while Evereadys whitethorn have sbrunk sligbtly.Batteries are not the only market in whicb more advertising succeeds in spreading more confusion. The same thing bas happened in markets like athletic footwear and soda pop, where competing companies have signed up so many celebrity sponsors that consumers can no longer come up straight who is pitcbing wbat for whom. In 1989, for example. Coke, Diet Coke, Pepsi, and Diet Pepsi used nearly three dozen movie stars, athletes, musicians, and television personalities to tell consumers to buy more cola. But wben tbe 74 HARVARD BUSINESS REVIEW January-February 1991 moke and mirrors bad cleared, most consumers couldnt remember wbetber foe meitnerium and Don Jobnson drank Coke or Pepsi or botb. Or wby it really mattered. Tbe second development in advertisings decline is an outgrowth of the first as advertising has proliferated and become more obnoxiously insistent, consumers bave gotten fed up. Tbe more advertising seeks to intrude, tbe more people try to shut it out. Last year, Disney won the applause of commercial-weary customers when the company announced tbat it would not screen its films in tbeaters that showed commercials before the feature.A Disney executive was quoted as saying, Movie theaters should he preserved as environments where consumers can escape from the pervasive onslaught of advertising. Buttressing its position, tbe company cited survey data puzzleed from moviegoers, 90% of wbom tell tbey did not want commercials sbown in movie tbeaters and 95% of wbom said tbey did want to see previews of coming attractions. More recently, after a number of failed attempts, the U. S. recounting responde d to the growing concerns of parents and educators over the eommercial content of childrens television.A new law limits tbe number of minutes of commercials and directs tbe Federal Communications Commission botb to examine programlength commercials cartoon shows linked to commercial product lines and to make each television stations contribution to cbildrens educational needs a condition for license renewal. Tbis concern over advertising is mirror in a variety of arenas from public outcry over nance marketing plans targeted at blacks and women to calls for more environmentally sensitive packaging and products.The rudimentary reason bebind botb of these factors is advertisings dirty little secret it serves no useful purpose. In todays market, advertising simply misses the fundamental point of marketing adaptability, flexibility, and responsiveness. Tbe new marketing requires a feedback loop it is tbis element tbat is missing from tbe monologue of advertising but that is built in to the dialogue of marketing. Tbe feedback loop, connecting company and customer, is central to tbe operating definition of a truly market-driven company a company that adapts in a seasonably way to the changing needs of tbe customer.Apple is one such company. Its macintosh computer is regarded as a machine that launched a revolution. At its birth in 1984, industry analysts received it with praise and acclaim. But in retrospect, the first Macintosh had many weaknesses it had limited, nonexpandable memory, virtually no applications software, and a blackand-wbite screen. For all tbose deficiencies, bowever, tbe Mac bad two strengtbs tbat more than compensated it was incredibly easy to use, and it bad a user group tbat was prepared to praise Mac publicly at its launeb and to advise Apple privately on bow to improve it.In other words, it had a feedback loop. It was tbis feedback loop tbat brougbt about change in tbe Mac, wbicb ultimately became an open, adaptable, and deep computer. And it was changing the Mac that saved it. Months before launebing tbe Mac, Apple gave a specimen of tbe product to 100 influential Americans to use and comment on. It signed up 100 tbird-party software suppliers wbo began to envision applications that could take advantage of the Macs simplicity. It HARVARD BUSINESS REVIEW (anuary-February 1991 75MARKETING IS EVERYTHING trained over 4,000 dealer salespeople and gave full-day, hands-on demonstrations of the Mac to industry insiders and analysts. Apple got two benefits from this network educated Mac supporters who could legitimately praise the product to the press and invested consumers who could tell the company what the Mac needed. The dialogue witb customers cmd media praise were expense more than any notice advertising could buy. Apples approach represents the new marketing model, a shift from monologue to dialogue.It is accomplished through experience-based marketing, where companies create opportunities for customers and poten tial customers to sample their products and then provide feedback. It is accomplished through beta sites, where a company can install a prelaunch product and study its use and needed refinements. Experienced-based marketing allows a company to work closely with a client to change a product, to adapt the technology recognizing that no product is perfect wben it comes from engineering. This interaction was precisely the approach taken by drive off in developing its recently announced Docutech System.Seven months before launeh, Xerox established 25 beta sites. From its prelaunch eustomers, Xerox learned what adjustments it should make, what service and support it should supply, and what enhancements and related new products it might next introduce. The goal is adaptive marketing, marketing that stresses sensitivity, flexibility, and resiliency. sensibility comes from having a variety of modes and channels through which companies can read the environment, from user groups that offer live feedback to sophisticated consumer scanners that provide data on customer choice in real time.Flexibility comes from creating an organizational structure and operating style that permits the company to take advantage of new opportunities presented by customer feedback. resilience comes from learning from mistakes marketing that listens and responds. The line between products and services is fast Marketing a Product d Service Is Is iVl(irK6tll2g Q. 1 rOuUCt gj-jjj viotors makes more money from lending its eroding, what once appeared to be a rigid polarity become a hybrid the servicization of prod productization of services. When Gen- ustomers money to buy its cars than it makes from manufacturing the cars, is it marketing its products or its services? When IBM announces to all the world that it is now in the systems-integration business the customer can buy any box from any vendor and IBM will supply the systems know-how to make the whole thing work together is it market ing its products or its services? In fact, the computer business today is 75% services it consists overwhelmingly of applications knowledge, systems analysis, systems engineering, systems integration, networking solutions, security, and maintenance.The point applies just as well to less grandiose eompanies and to less expensive consumer products. Take the large corner drugstore that stocks kelvins of products, from cosmetics to wristwatches. The products are for sale, but the store is actually marketing a service the convenience of having so much variety collected and arrayed in one location. Or take any of the ordinary products found in the home, from boxes of cereal to table lamps to VCRs. All of 76 HARVARD BUSINESS REVIEW January-February 1991 hem come with some form of information designed to perform a service nutritional information to indicate tbe actual food value of the cereal to tbe health-conscious consumer a United Laboratories label on tbe lamp as an confidence of tes ting an operating manual to belp tbe nontecbnical VCR customer rig up tbe new unit. Tbere is ample room to improve tbe quality of this information to make it more useful, more convenient, or even more entertaining hut in almost every case, the service information is a critical broker of the product.On the other side of tbe hybrid, service providers are acknowledging tbe productization of services. Service providers, such as banks, insurance companies, consulting firms, even airlines and radio stations, are creating tangible events, clamant and predictable exercises, standard and customizable packages tbat are product services. A frequent-flier or a frequent-listener club is a product service, as are regular audits performed by consulting firms or new loan packages assembled by banks to respond to cbanging economic conditions.As products and services merge, it is critical for marketers to understand clearly what marketing the new hybrid is not. Tbe serviee component is not satisf ied by repairing a product if it breaks. Nor is it satisfied by an 800 number, a warranty, or a customer survey form. Wbat customers want most from a product is often qualitative and intangible it is tbe service tbat is integral to the product. Service is not an event it is the process of creating a customer environment of information, assurance, and comfort. Consider an experienee that by now must have become platitude for all of us as consumers.You go to an electronics store and buy an expensive piece of audio or video equipment, say, a CD player, a VCR, or a video camera. You take it bome, and a few days later, you accidentally drop it. It breaks. It wont work. Now, as a customer, you have a closing to make. When you take it back to the store, do you say it was broken wben you took it out of the box? Or do you tell the truth? The answer, honestly, depends on how you think the store will respond. But just as honestly, most customers appreciate a store that encourages them to tel l the truth by making good on all customer problems.Service is, ultimately, an environment that encourages honesty. The company that adopts a well make good on it, no questions asked policy in the face of adversity may win a customer for life. Marketers who ignore the service component of their products focus on competitive differentiation and tools to penetrate markets. Marketers who appreciate the importance of the product-service hybrid focus on building loyal customer relationships. Technology and marketing once may bave Technology looked like opposites.The cold, impersonal sameness of technology and the high-touch, human Technology uniqueness of marketing seemed eternally at odds, Computers would only make marketing less personal marketing could never leam to appreciate the look and feel of computers, datahases, and the rest of the high-tech paraphernalia. On the grounds of cost, a truce was eventually arranged. Very simply, marketers discovered that real savings could be gaine d hy KARVAKD BUSINESS REVIEW lanuary-February 1991 Markets 77 MARKETING IS EVERYTHING using technology to do what previously had required expensive, intensive, and often risky, people-directed field operations.For example, marketers learned that by co-ordinated a database with a marketing plan to simulate a new product launch on a computer, they could accomplish in 90 days and for $50,000 what otherwise would take as long as a year and cost at least several hundred thousand dollars. But having moved beyond the simple automation-for-cost-saving stage, technology and marketing have now not only fused but also begun to feed hack to each other. The result is the transformation of both technology and the product and the reshaping of both the customer and tbe company.Technology permits information to flow in both directions between the customer and the company. It creates the feedback loop that integrates the customer into the company, allows tbe company to own a market, permits customiza tion, creates a dialogue, and turns a product into a service and a service into a product. T he direction in which Genentech has moved in its use of laptop and hand-held computers illustrates the transforming power of technology as it merges with marketing. Originally, the biotechnology company planned to have salespeople use laptops on their sales calls as a way to automate the sales function.Sales reps, working solely out of their homes, would use laptops to get and send electronic mail, file reports on computerized templates, place orders, and receive company press releases and information updates. In addition, the laptops would enable sales reps to keep databases that would track customers buying histories and company performance. That was the initial level of expectations very low. In fact, the technology-marketing marriage has dramatically altered the customer-company relationship and the joh of the sales rep. Sales reps have emerged as marketing consultants.Armed with techni cal information generated and gathered by Genentech, sales reps can provide a valuable educational service to their customers, who are primarily pharmacists and physicians. For example, analysis of the largest study of children with a disease called short stature is available only through Genentech and its representatives. With this analysis, which is hased on clinical studies of 6,000 patients between the ages of one month and 30 years, and with the help of an on-line growth calculator, doctors can better judge when to use the growth hormone Protropin.Genentecbs system also includes a general educational component. Sales reps can use their laptops to access the current articles or technical reports from medical conferences to help doctors keep up to date. The laptops also make it possible for doctors to use sales reps as research associates Genentech has a staff of medical specialists who can answer highly technical questions constitute through an on-line question-and-answer tem plate.When sales reps enter a question on the template, the e-mail function immediately routes it to the appropriate specialist. For relatively simple questions, online answers come back to the sales rep within a day. In the 1990s, Genentechs laptop system and the hundreds of similar applications that sprang up in tbe 1980s to automate sales, marketing, service, and distribution will seem like a rather obviHARVARD BUSINESS REVIEW January-February 1991 78 ous and primitive way to meld tecbnology and marketing.The marketer will bave available not only existing tecbnologies but also tbeir converging capabilities personal computers, databases, CD-ROMs, grapbic displays, multimedia, color terminals, computer-video tecbnology, networking, a custom processor tbat can be built into anytbing anywhere to create intelligence on a countertop or a dasbboard, seanners that read text, and networks tbat instantaneously create and distribute vast reacbes of information. As design and manufacturing tecbnologies advance into real time processes, marketing will move to overstep tbe gap between production and consumption.Tbe result will be marketing workstations the marketers counterpart to CAD/CAM systems for engineers and product designers. Tbe marketing workstation will draw on grapbic, video, audio, and numeric information from a network of databases. The marketer will be able to look tbrougb windows on tbe workstation and manipulate data, simulate markets and products, bounce concepts off otbers in distant cities, write production orders for product designs and packaging concepts, and bugger off costs, timetables, and distribution scbedules.Just as computer-comfortable cbildren today tbink notbing of manipulating figures and playing fantastic games on tbe same color screens, marketers will use the workstation to play botb designer and eonsumer. Tbe workstation will allow marketers to integrate data on historic sales and cost figures, competitive trends, and consumer patt erns. At tbe same time, marketers will be able to create and test advertisements and promotions, evaluate media options, and analyze viewer and readersbip data. And finally, marketers will be able to obtain instant feedbaek on concepts and plans and to move marketing plans rapidly into production.Tbe marriage of technology and marketing should bring witb it a renaissance of marketing RikD a new capability to explore new ideas, to test tbem against tbe reactions of real eustomers in real time, and to advance to experience-based leaps of faith. It should be the vehicle for bringing tbe customer inside the company and for putting marketing in tbe eenter of tbe company. In tbe 1990s, tbe critical dimensions of tbe company including all of tbe attributes tbat togetber define how the company does business are ultimately tbe functions of marketing.That is wby marketing is everyones job, wby marketing is everytbing and everytbing is marketing. Reprint 91108 HARVARD BUSINESS REVIEW liinu ary-February 1991 79 Harvard Business Review happen of Use Restrictions, May 2009 Harvard Business Review and Harvard Business Publishing newsletter content on EBSCO troops is licensed for the private individual use of authorized EBSCOhost users. It is not intended for use as assigned course material in academic institutions nor as corporate learning or nurture materials in businesses.Academic licensees may not use this content in electronic reserves, electronic course packs, lasting linking from syllabi or by any other means of incorporating the content into course resources. 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