The New Calculus Of Marketing How Marketing Leaders Must Re- Engineer For The Internet Of Customers

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1 A Forrester Consulting Thought Leadership Paper Commissioned By Salesforce ExactTarget Marketing Cloud April 2014 The New Calculus Of Marketing How Marketing Leaders Must Re- Engineer For The Internet Of Customers

2 Table Of Contents Executive Summary... 3 Marketers Old Habits Die Hard... 4 Marketers Feel Unprepared... 5 The New Calculus Of Marketing Needs New Skills... 8 Key Recommendations Appendix A: Methodology Appendix B: Demographics/Data Appendix C: Endnotes ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to [1-M5RJ1H]

3 3 Executive Summary In the age of the customer, only customer-obsessed enterprises can survive the disruption caused by empowered customers. Marketing leaders, who are on the frontlines of this disruption, will need to pull dollars away from traditional areas of investment, such as brand advertising, and invest in creating real-time data intelligence and contextual customer experiences. 1 This type of transformation requires marketing leaders to rethink their roles, responsibilities, and priorities as they prepare to steer their organizations toward customer obsession. In December 2013, Salesforce ExactTarget Marketing Cloud commissioned Forrester Consulting to evaluate the changing role of marketing leaders, their level of preparedness to embrace the consumer-driven transformation, and the new capabilities required in the marketing organization. Then to further explore this trend, Forrester tested the hypothesis that marketing leaders must become transformative and strategic business leaders and build critical capabilities in data, analytics, and marketing technology to use as levers to win, serve, and retain consumers. Marketing leaders feel unprepared to cope with consumer-driven, technology-led disruption of their roles. In conducting in-depth surveys with 118 marketing leaders, Forrester found that the majority of the marketing leaders surveyed do not feel prepared to meet the ever-growing demands on consumers. They struggle with people- and skills-related challenges and instead focus on traditional marketing capabilities such as brand building. Those marketers that do feel adequately prepared are already driving strategic transformation within their organization and are building deeper relationships with their consumers. KEY FINDINGS Forrester s study yielded four key findings: channels to choose from than ever before. In the coming years, their choices will become even more numerous, thanks to increasing device proliferation, the Internet of Things, and the digitization of offline channels. Forrester predicts that in 2014, big data will finally be put to good use as marketers stop waiting for insights to reveal themselves and start finding actionable paths through the information. Marketers will develop smarter, more relevant programs across their mix by incorporating data-driven insights into their planning and then using the new robust data they get out of those programs to inform their future plans. But there is work to be done as marketing executives equip themselves to face these new challenges. Digital, data, and analytics expertise has replaced traditional skills in brand development and campaign planning. Marketing leaders in our study told us that their responsibilities in the areas of defining digital strategy, driving strategic transformation in the organization, and data and analytics capabilities are the three areas that have changed most dramatically in the last two years. Their responsibilities to execute traditional mass marketing campaigns for brand-building purposes have taken a back seat. Marketing leaders are slowly arming themselves to take on the new world of marketing. Marketing leaders who improve their team s agility and develop the right capabilities for the future will enjoy more executive confidence and move on to greater corporate leadership opportunities. Our study indicates that these executives are thinking about the right building blocks to prepare for the transformation: improve data and analytics capabilities, invest in marketing technology chops, and adopt a performance-driven culture. Customer orientation is essential for differentiation. Over the years, we ve seen how marketers have transformed from being product-focused to customerfocused. In our survey, we found that this focus translates to maintaining a fine balance between customer acquisition and retention and using data and analytics to determine how to tip the balance. The growing complexity of the marketing role places a huge burden on marketing leaders. Seventy-two percent of respondents stated that they expect marketing to become much more complex or somewhat or more complex in the next two years. Marketers have more

4 4 Marketers Old Habits Die Hard Digital marketing technologies are a seemingly endless source of innovation for marketers. In recent years, marketers have gained access to real-time engagement, predictive analytics and behaviorally triggered automation. Yet many marketers continue to approach marketing much as their mid-20th century forbearers did with acquisition marketing: targeting large-scale, demographically defined audience segments, defined by publishers and evaluated by the reach and frequency of impressions. Today, however, digital technology enables brands to build relationships directly with individual customers. This practice enables brands to target and respond to individual customers or prospects anonymous or known with personalized content and offers. We found that marketers in our study faced similar challenges: Long-term relationships matter, yet marketers focus heavily on acquisition. Although marketers prioritize retaining existing customer relationships, they cling to acquisition as the top marketing goal (see Figure 1). As a result, marketers continue to focus on investing and building capabilities around mass media acquisition channels and engage customers through onedimensional campaigns. Marketers continue to build brand relationships, while their customers build digital relationships. Consumers are rapidly shifting to mobile devices and digital platforms, leading to a profound shift in the ways that marketers must relate to customers. 2 This means that consumers are building their capacity for digitally based relationships with companies and brands. 3 Despite this, marketers invest in building primarily brand-based relationships by focusing their marketing efforts on increasing brand awareness and defining their corporate brand. FIGURE 1 Marketers Prioritize Acquisition Over Retention What are the top three marketing goals of your organization? Priority one Priority two Priority three Acquire new customers Retain existing customers Increase brand awareness Improve marketing ROI Launch new products and brands Increase customer satisfaction and advocacy Improve customer experience Increase digital marketing tactics Innovate with marketing tactics Increase revenue Increase profitability Base: 118 marketing leaders 15% 31% 13% 9% 12% 12% 13% 12% 10% 12% 10% 9% 5% 1 3% 7% 6% 2% 3% 1% 0% 1 0% 1% 0% 0% 25% 17% 12% Source: A commissioned study conducted by Forrester Consulting on behalf of Salesforce ExactTarget Marketing Cloud, December 2013 Marketers recognize the need to focus on leading strategic change. Marketers recognize that by purely focusing on excelling in brand- and campaign-centric activities, they are understating their potential as business leaders. The marketers in our study believe that one of their core responsibilities today is to drive strategic transformation within their business (see Figure 2). This puts marketing leaders in a position to drive overall business growth as opposed to ensuring efficiency and effectiveness of marketing processes. 4

5 5 FIGURE 2 Marketers Aspire To Become Strategic Change Agents What your top responsibilities today as the senior marketing leader within your organization? Priority one Priority two Priority three Priority four Priority five Building customer relationships Driving strategic transformation within the organization Defining your corporate brand Creating marketing big ideas Shifting away from traditional mass marketing methods Foster connections between marketing and other parts of the business Fostering innovation Defining your digital strategy 12% 10% 10% 7% 6% 6% 17% 10% 12% 7% 5% 9% 6% 6% 6% 3% 2% 3% 3% 1% 3% 3% 0% 2% 11% 3% 2% 3% 1% 9% 6% 3% 7% 11% Establishing clear marketing processes 5% 7% 6% 6% Developing customer intelligence strategies 3% Building data and analytics capabilities 6% 3% 5% Managing marketing technology purchases Hiring staff with digital marketing experience Acquiring new data sources 15% 7% 1 1 3% Marketers Feel Unprepared The technology-led and digitally enabled change in consumer behavior is making marketing executives optimistic about the opportunities ahead. Marketing leaders are increasingly finding themselves working in data-driven and customer-empowered environments. They must be proficient in digital tools, data, and analytics and have the ability to orchestrate crosschannel customer experiences. This type of capability is not built overnight. Our study revealed two personas of marketers, conventional marketers and mindful marketers, with respect to their level of preparedness for the change that marketing is currently undergoing (see Figure 3). While conventional marketers are brand-focused, mindful marketers focus on building customer relationships and raising their role as strategic thinkers in the organization. People- and culture-related challenges get in the way of marketing s transition. Both types of marketers are challenged by people- and culture-related challenges. Thirty-six percent of respondents stated that managing resource constraints, managing an innovative culture, and hiring the right talent are the main challenges they face as a marketing leader (see Figure 4). Sourcing leads for sales Educating critical stakeholders about new marketing technology or approaches Marketing the right idea at the right time to the right consumer Managing agency vendor or partners 1% 0% 0% 0% 0% 1% 3% 3% 3% 0% 0% 0% 0% 1% 0% 5% 6% 10% FIGURE 3 Two Marketer Personas Define Readiness To Embrace Transformation Brand awareness 0% 0% 0% 0% 1% Base: 118 marketing leaders Source: A commissioned study conducted by Forrester Consulting on behalf of Salesforce ExactTarget Marketing Cloud, December 2013 Base: 118 marketing leaders Source: A commissioned study conducted by Forrester Consulting on behalf of Salesforce ExactTarget Marketing Cloud, December 2013

6 6 FIGURE 4 People- And Culture-Related Challenges Hinder Transition What are the top three challenges that you face as a marketing leader today? Managing resource constraints 22% Establishing an innovative corporate culture 9% Hiring the right talent 5% Personalizing customer experiences across touchpoints 16% Understanding the wants and needs of empowered consumers Staying on top of digital innovations Responding to changing consumer behavior especially with social media and mobile adoption Dealing with marketing channel proliferation 1% Responding to competive pressures 1 Quantifying the value of marketing 7% Devising a globalization strategy Understandinghow big data can be used for better market insights Managing marketing technologies 3% 3% 3% Base: 118 marketing leaders 0% 5% 10% 15% 20% 25% Source: A commissioned study conducted by Forrester Consulting on behalf of Salesforce ExactTarget Marketing Cloud, December 2013 Conventional marketers focus responsibilities on brand stewardship instead of building customer relationships. These marketers consider building the corporate brand as one of their main responsibilities. This reflects how marketers are still focusing on old-school approaches and not equipping themselves with new skills in analytics, marketing technology, and digital customer experience (see Figure 5). Consumer-driven challenges confound marketers journey toward transformation. Coupled with internal and organization-related challenges, consumer-driven trends further complicate how marketing leaders make the leap toward leading strategic transformation within their organization.

7 Building customer relationships Driving strategic transformation within the organization Fostering innovation Foster connections between marketing and other parts of the business Defining your digital strategy Creating marketing big ideas Shifting away from traditional mass marketing methods Defining your corporate brand Devloping customer intelligence strategies Establishing clear marketing processes Building data and analytics capabilities Managing marketing technology purchases Hiring staff with digital marketing experience Acquiring new data sources Others 7 The New Calculus Of Marketing Needs New Skills This is not time for business as usual. In the age of the customer, only enterprises that are customer-obsessed will survive. 5 Marketing leaders are at a critical place in the organization to lead this change toward customer obsession. Today, many of these executives feel unprepared to embrace consumer-driven disruption, but tomorrow, they will be well positioned to become strategic business leaders if they invest in core skills that are essential in the new calculus of marketing. The new calculus of marketing forces marketers to adapt and break habits from the past. Marketers are enforcers of the firm s digital strategy. No longer is marketing responsible for purely designing campaigns or supporting promotional activities. The marketers in our study told us that their responsibilities around defining a digital strategy have changed most dramatically in the last two years. They are now less focused on designing traditional mass media campaigns and more focused on driving strategic transformation in their organizations, using digital as the anchor capability. Focuses on data and analytics and marketing technology for better personalization and targeting are driving marketers to rethink skills. A central part of becoming a customer-obsessed enterprise is to use realtime customer intelligence to deliver relevant experiences consistently through every interaction. This requires the careful orchestration of data and analytics along with a marketing technology infrastructure to deliver on the promise of personalization. Strategic smarts, digital chops, and data and analytics form the trifecta of skills needed for marketing s new calculus. The three capabilities that both marketing executives and their teams must reengineer or even acquire are strategic thinking, digital-first thinking, and customer insights. We found in our study that marketing leaders expect their teams to continue pushing creative thinking through the organization while expecting them to build business acumen, digital marketing skills, and data analysis skills for their team. Each one of these capabilities will inch marketers closer to feeling more prepared to cope with the new calculus of marketing. FIGURE 5 Mindful Marketers Focus On Customer Relationships, While Conventional Marketers Focus On Brand Building What are your top responsibilities today as the senior marketing leader within your organization today? Mindful Marketers Conventional Vulnerable Marketers marketers 2 12% 16% 10% 13% 9% 9% 5% 1% 12% 1 7% 7% 7% 7% 5% 2% 2% 5% 5% 2% 0% 0% 0% Base: 118 marketing leaders Source: A commissioned study conducted by Forrester Consulting on behalf of Salesforce ExactTarget Marketing Cloud, December 2013

8 8 Key Recommendations The new calculus of marketing means that marketing executives and leaders must transform the way they have been carrying out their responsibilities. It flips the traditional skill set on its head and pivots to skills that haven t always been native to marketers, such as data and analytics and technology management. Mindful marketers who feel prepared for the new calculus of marketing are already re-engineering their skills, while conventional marketers stand a greater risk of being relegated to marketing s back office. The new calculus of marketing requires marketers to re-engineer their skills to: Stop thinking of marketing in terms of campaigns. Campaign-centric thinking has led marketers to develop capabilities and skills that are channel-based. But the ultra-connected consumer will not tolerate uncoordinated, irrelevant messages. Instead, these consumers will look for seamless interactions with brands anchored in their digital platforms and devices. This calls for a different set of skills to execute on this promise that focuses less on campaigns and more on interactions. Become analytics wizards. Marketers have been fairly good at measuring vanity metrics for various channelbased campaigns and programs. These have primarily looked only backward and provided limited insights into future customer behavior. In the new calculus of marketing, marketers must adopt forward-looking analysis and predictive analysis, not just of marketing programs but of customer behavior. Lead technology selection decisions. Marketing needs technology to run. Some marketing leaders have been passive participants in technology buying; they now need to amplify both their understanding of the marketing technology landscape and their approach to technology selection, dependency mapping between technologies, and articulating the vision for technology-enabled marketing execution. Adopt a digital-first mindset. The argument is no longer about offline versus online or mass media versus digital. It is about understanding the triggers of customer behavior, wherever an interaction happens on digital devices, in-store, or in the call center. A digital strategy that aligns marketing, customer experience, ecommerce, and IT means marketers must think of digital as the thread that runs across these various internal groups, as well as the core driver of consumer behavior. The new calculus of marketing will spur a new generation of digitally savvy, analytically inclined, and strategically aligned marketers who will lead their organizations into the age of the customer.

9 9 Appendix A: Methodology In this study, Forrester conducted an online survey of 118 marketing leaders in the US. Survey participants included executives through managers who either influence or make cross-channel marketing decisions. The survey sample included organizations with $100-plus million in revenue with greater than 500 employees. Questions provided to the participants investigated what level of awareness current marketing leaders have on the shifts in consumer behavior and technology, how prepared marketing leaders are to embrace this change, and the capabilities marketing leaders need to lead this transformation. Appendix B: Demographics/Data FIGURE 6 Number Of Respondents By Career Level Career level Number of respondents Executive 7 Vice president/director 50 Manager 61 Total 118 FIGURE 7 Number Of Respondents By Organization Revenue Respondents by organization revenue $100 million to less than $500 million $500 million to less than $1 billion $1 billion to less than $5 billion $5 billion to less than $10 billion Greater than $10 billion in annual revenue

10 10 Appendix C: Endnotes 1 Source: Competitive Strategy In the Age Of The Customer, Forrester Research, Inc., October 10, For example, Forrester recently uncovered an important change in customers experience of and responsiveness to brands, dubbed the mobile mind shift. These shifted customers hold the expectation that any information or service must be available at their moment of need and tailored to their context and prior interaction history. Source: The Mobile Mind Shift Index, Forrester Research, Inc., April 19, Source: Start To Build Your Ultimate Customer Relationship, Forrester Research, Inc., January 22, Source: The Evolved CMO In 2014, Forrester Research, Inc., February 24, Source: Competitive Strategy In The Age Of The Customer, Forrester Research Inc., October 10, 2013.

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