According to Rajendra Sisodia, a professor of marketing at Bentley University who obtained his Ph.D. in Marketing and Business Policy from Columbia University, the effectiveness of traditional marketing in the form of advertising, promotion, and personal selling is dying.
Sisodia took part in a 10-year study that reviewed marketing productivity entitled “In Search of Marketing Excellence.” A few of the findings include:
- On average, corporations allocate 50% of their expenditures to marketing-related activites each year; this number has been steadily rising for 50-60 years
- A trillon dollars is spent on marketing in the U.S. each year, which equates to approximately $13,000 per U.S. family each year
- Marketing productivity has declined over time. The inputs (advertising, promotion, and personal selling) aren’t having as much of an effect on the outputs (customer satisfaction, loyalty, and trust)
From an article entitled “Conscious Capitalism: A Better Way to Win” in the Spring 2011 issue of California Management Review, Sisodia discusses the concept of conscious capitalism and how certain successful companies like Google, Starbucks, Whole Foods and Trader Joe’s are spending considerably less than the industry average on marketing, but still managing to attract large profits:
Conscious businesses typically have to spend very little on marketing. This is because they have legions of satisfied and delighted customers who are loyal and passionate advocates for the company. We have found that many conscious businesses spend as little as 10 to 25% of the industry average spending on marketing. This represents an enormous cost saving, at a time when marketing costs have been growing rapidly for most companies. For example, retailer Jordan’s Furniture spends a quarter of the industry average on marketing (as a percentage of revenues) but achieves sales per square foot that are six times higher. Such companies receive the benefit of the best kind of marketing there is—free marketing—not only from their customers, but also from their employees, their suppliers, their communities, and the media.
Does this article not suggest that companies who spend more time doing the right thing, i.e. looking after their employees, customers, and communities is the new form of marketing? What do you think?
In the below video, Dr. Sisodia gives an intriguing example of a Whole Foods store manager in New Jersey who made the decision to “give away” $4,000 worth of free groceries after the cash registers went down one Christmas Eve. He makes the point that the manager’s investment of $4,000 in his customers led to many more returns than if he had spent $4,000 on an ad. The story was subsequently picked up in the news and shared exponentially. Grateful customers who were short on time that Christmas Eve, even later returned to the store to pay for their “free” groceries and when the manager declined, they chose to donate to local charities instead.
In summary, the main point Sisodia sets out to make is that profit, like happiness, cannot be pursued. The more you pursue it the less likely you are to find it. Profits are a byproduct of doing the right thing as a business and conscious businesses embrace a holistic marketing approach. While there will always be the need for advertising, promotion, and personal selling, now may be the time to start thinking about how those tactics can be applied to larger, more lucrative framework.