A New Framework for the Marketing Mix – ‘The Customer Mix or 6W’s’
Many of you will have studied marketing at University. You will have learnt all about the marketing mix. My question is whether or not the Marketing Mix is still meaningful in this day and age?
Developed in 1960, the original Marketing Mix framework for creating a marketing strategy – as conceived by American academic E. Jerome McCarthy - included four aspects (the 4 Ps):
The above four aspects were subsequently complemented by three more aspects to make the 7 Ps: (McCarthy, 1960)
- Physical Evidence
This framework continues to be espoused and used to this day. But is it fit for purpose in the Internet age, when the balance of power has fundamentally shifted from suppliers (retailers and product manufacturers) in favour of consumers? And, in particular, is it fit for purpose for a multichannel retailer or any other consumer facing brand? I don’t think so, the main reason being that it’s not customer-focused. The People aspect of the 7 Ps refers to staff, not customers. While it may have been a useful framework in its day, the marketing mix has never spoken to the fact that the customer is king. Without customers, we have nothing. So why is it that we continue to focus so much on the top of the funnel and on acquiring new customers, when retaining them is so much more cost-effective?
It's a war out there, how far are you prepared to go to fight for customers?
Winning and retaining customers should be like going to war. It is a battlefield out there, requiring careful strategy and deliverance with a lot at stake. There are many other businesses who will gladly poach your customers. Customers should consume your every waking moment, at least when you’re at work. If they don’t, then you’re simply not working hard enough for them.
Amazon has a role in their team known as ‘the customer experience bar raiser.’ There is a bar raiser in every project and their role is to push the team and the approach to consider whether or not the project they’re working on will deliver all it can for customers or whether ‘the bar could be raised’ even further.
The Marketing Mix framework was originally created in a time long before everyone had access to the inter net. Car dealers, travel companies, restaurants and retailers were not serving customers who have extreme choice, extreme price and product features transparency, and an almost limitless number of different customer journeys they can follow. Today all of these consumer sectors have a much harder time acquiring their customers, and an even harder time trying to retain them. As many businesses declare themselves to be customer-focused, surely there should be a framework that really puts the customer at the heart of what’s being delivered and give them a chance of winning the battle for the customer?
INTRODUCING THE CUSTOMER MIX
How different would the framework be if we really put ourselves in customers’ shoes, rather than simply thinking about what we want to deliver to potential customers and how we deliver it? So, instead of the 7 Ps, I’ve created a Customer Mix framework with 6 Ws that aims to do just that. The following explains why it’s the right framework for consumer brands today.
The Marketing Mix doesn’t properly consider customers’ motivations, preferences and loyalties (or lack of). It doesn’t consider that different groups and segments of customers might want very different things from the same business. The Customer Mix addresses this.
The Marketing Mix considers each purchase as a standalone transaction, rather than one of a potential group of transactions over time. For example, the Process element of the Marketing Mix refers to the customer experience delivered primarily before and during a single transaction. Due to the costs incurred in acquiring and serving customers, and the increasing levels of competition from the disruptors, modern multichannel businesses need customers who they can build relationships with, and so must focus on customer lifetime value.
If you don’t focus on the customers lifetime value, how can you possibly know how much you should invest in recruiting a customer in the first place if you don’t have some idea of their potential worth to you? Again, customer segmentation will enable you to recruit more profitable customers with better lifetime value potential. I talk more about this in chapter 17 of my book, when I discuss CRM and customer insight. The Customer Mix looks past the next transaction and thinks about what’s required not just to sell an item, but to keep the customer’s loyalty for future purchases.
So, what does each of the Ws within the Customer Mix really stand for and, more importantly what do they mean for a multichannel consumer-facing business?
There’s no P in the Marketing Mix that is focused on customers. In the Customer Mix we directly consider Who the different target customers are. Few retailers are niche enough to have a single customer type with one set of needs and desires. The majority of multichannel businesses have created a variety of ways to shop primarily because they do not serve a homogenous customer base. You need to analyse your customer data to understand who your best customers are and create key customer segments. In customer-centric organisations, these customer segments are developed into customer personas. Staff across the business can consider how their decisions on everything from products, to prices to service will likely impact on these target groups. As Professor McDonald pointed out earlier, there is no such thing as ‘the customer.’ There are lots of customer segments. Without trying to be all things to all people, the key is to understand how best to serve your core customer segments.
Combined with Who, Why informs us on our target customer segments and their motivations. It prompts retailers, banks, car dealers, restaurants and all consumer facing businesses to consider not just why a customer wants a particular product or service, but why the channels used during the customer journey may be important to the purchase decision, as well as the fulfilment timeframe. An understanding of Why helps businesses to become more relevant to their customers. It can inform marketing, merchandising and product or service design decisions. For example, if a customer segment is time-poor and cash-rich, thinking about motivation might lead to the creation of premium services to engage them better, rather than a change to the product range being required.
In my book “100 practical ways to improve customer experience”, I provide an example of this in chapter 1 with “You Try, We Wait,” Net-A-Porter’s personal shopping assistants will deliver orders to their extremely important customers (EIP-extremely important people) at their home on the same day as they place their request. They will then wait until the customer has tried on the pieces they ordered, and take back anything that the customer doesn’t want to keep.
This replaces Product in the marketing mix and focuses on what we believe our target customer segments will be most interested in purchasing. But it goes beyond product too, as What the customers want can include value, convenience or personalisation of the offer. It can also include services, and in the marketing mix, ‘Product’ doesn’t really lend itself to these additional requirements. Sometimes products and services cannot be separated. One example is the many online subscription-based ecommerce sites that have sprung up. The consumer isn’t just buying into the products provided, but the concept that they receive something in the post on a regular basis. As I mentioned previously, retailers and other consumer-facing verticals need to think like service providers and what they can do to become more useful to their customers.
Replacing Place in the Marketing Mix, Where considers locations for fulfilment, and also locations for every other aspect of the customer journey including research and purchase. In a complex multichannel customer journey we can no longer assume that a product is purchased in a store or at a desktop computer, and fulfilled by either home delivery or taken from the store at the point of purchase.
What’s offered at a variety of locations may be important to a customer’s overall decision to purchase, and remain a customer too. A good example of this is in China. Unencumbered by legacy technology, processes and store footprints, Alibaba has opened grocery outlets under the ‘Hema’ brand. They have installed a ship from store proposition with a fully automated system that takes the customer’s order from the shop floor to the back of house where it will be packed and dispatched for delivery to the customers home at a time of their choosing.
Another example is when an online grocery shopper can buy the same brands for a similar price from a number of supermarkets. In this case, having an app that allows the customer to add to their shopping list while they are commuting to work might be important, as might the grocer’s ability to offer click and collect at their supermarket.
Considering Where leads consumer-facing businesses to question every aspect of their multichannel strategy. For instance, do their apps, mobile site and any other infrastructure support customers wanting to shop on the move, or complete transactions within the store, restaurant, bank on their own device? And for online-only businesses without a brick and mortar environment, do they need to consider physical collection points for customers who don’t find delivery options convenient?
According to Salesforce, in 2017 stores remain the preferred channel globally. Even among technology-savvy Gen Z shoppers, 58% prefer the physical store shopping experience. But digital is where most end up starting their hunt: by nearly a 2:1 margin, 60% of respondents are likely to start their hunt on digital, versus just 37% in the physical store. Retailers are finding success when combining digital and instore to work together seamlessly. The research found that in-store activity generates almost half of all online activity. They interviewed people to see how instore events and engagement matters and found that 26% visited in store events and 58% were more like to purchase from that retailer in the future (Salesforce, 2017).
There are also an increasing number of good examples of brands that started as online pureplay ecommerce businesses who have opened up brick and mortar stores. One such example is the fashion brand Missguided. A highly successful internet business, they opened up stores in the two main Westfield malls in London. This enabled them to bring their brand to life in a physical environment, but also to provide the multichannel experience that many of their younger consumers demand. They have since gone into the wholesale channel and sell their brand through Nordstrom in the US.
Combined with Where, When gives us a real sense of how important convenience is to the customer experience. But When is also important in its own right. Timeliness can be key to customer demand – in particular products such as flowers, food or gifts may only be demanded if they can be fulfilled within a very specific timeframe. As consumers in developed economies become more time-pressured, timeliness will only ever become a more important aspect of the Customer Mix. Again, questions about When can consider multiple points in the customer journey. Various clients of mine allow their loyalty cardholders early access to sales events, online and in store. Many retailers report differing success with their marketing emails depending on the time of day they are sent out. Flash offers and price changes can be enabled in moments on the web, which makes time a much more powerful aspect of a consumer facing businesses tactics. Optimising your marketing and trading calendars to maximise sales opportunities is crucial.
There’s no P for lifetime value or ongoing customer relationships in the Marketing Mix. In the Customer Mix this is crucial. As I mention in my book in chapter 7, very few businesses have a dedicated customer retention role. This correlates with the lack of any customer retention element in the marketing mix. Also, implicit in the What’s Next element of the Customer Mix is the idea that in modern retailing, customer loyalty can rarely be earned with a single transaction. At the point you convert a customer for the first time, the best retailers already have a strategy in place for how they will continue to engage with them to keep them coming back. This requires proactive customer relationship management (CRM), rather than the type of reactive and transaction-driven CRM programmes that are still widespread in the industry.
Customer lifetime value is a crucial measure of a retailer’s success with its customers, and should be an indicator of both future sales and profitability. Improving the value and longevity of customer relationships, involves considering some or all of the other five Ws to allow all consumer-facing businesses to meaningfully engage with their customers.
INSIGHT NOT REPORTING
There is way too much data floating around most customer-facing organisations. Without insight, it’s just numbers. Numbers on their own mean nothing. A KPI means nothing, unless you can explain why it’s trending up or down. What were the factors that impacted it from one week to another? To put the customer first, you must have insight about the customer. In chapter 17 of my book, I discuss how to generate insight and how to build relationships with customers based on your knowledge of them.
Too many businesses have siloed marketing teams. Brand marketing, which often looks after the ‘traditional channels in the business’ and digital marketing, which works across all the new channels, are more often than not, working separately. The person who loses out is the customer. Marketing communications has to be integrated.
I have received communications in the past from retailers whereby I was sent an incentive to buy online ‘for the first time’, when I was already an online customer and had been for many years. I’ve had the same scenario occur when I’ve been encouraged to shop instore.
A CULTURE WHICH SUPPORTS CUSTOMER FIRST
As I’ve discussed at various points throughout the book, if you want to change the culture of the business and its focus on customers, then you need to move towards KPIs and measures that give you a real sense of how customers feel about your business. When you buy a new car, do you, like me, have a great fear that the minute you drive away, if anything goes wrong, it’s going to cost you? This is borne out of the focus on sales as opposed to service that you receive at most car dealerships. This can easily be remedied. But it’s a cultural challenge and requires a root and branch re-set away from a sales culture to a customer service culture. If you serve customers well, they buy and buy again.
It should go without saying. However, we really do need to think mobile first. We need to think about the customers cross channel journey and all the touch points along the way and how mobile can be leveraged to support and enhance their journey. Not only that, but we have to start planning for voice activation first with mobile. Within a very short time, we will no longer be pinching and scrolling on a mobile device. We’ll interact by voice alone. If you ever hope to do business in Asia, then you need to be aware that consumers do everything on their mobile. In China, particularly in large tier 1 and 2 cities, you rarely see people pay with cash. They use We Chat, Alipay and other mobile payment services, often activated through a QR code.
TECHNICAL AND INNOVATION
This is about planning for technology and innovation and not the development of technology for technology’s sake. As I pointed out previously, you shouldn’t have to prove the business case for everything you do, otherwise you’ll never be agile enough to truly innovate. However, the reverse is that you develop technology where there’s simply no use case for it. It must be about enhancing the customers experience with a potential commercial benefit to the business as a result of doing so.
FULFILLMENT AND SUPPLY
Here we talk about having flexibly delivery and returns processes.
There are still some retailers today who charge customers for online delivery and for returns. All that does is create a barrier straight from the off.
PRODUCT AND SERVICE
Product and service decisions should be made around the customer and not around the channel. Some very large retailers still struggle to surface all of their brands and products available in store on the website. So, guess what? Not only do they lose the potential additional demand they could generate, but they also suppress sales instore. Most customers use the web now as their first point of discovery before deciding whether or not to visit the store. If they can’t see the brands online on the retailer’s website that they want to buy they may not visit the store in the first place. An exception to this is in China, where most customers start their journey on marketplaces such as TMall or JD.com, as opposed to on the brands own website.
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This extract from 100 Practical Ways to Improve Customer Experience by Martin Newman and Malcolm McDonald is ©2018 and reproduced with permission from Kogan Page Ltd.