Is Traditional Marketing Dead?

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.

10 comments

  1. I love this story about Whole Foods. It seems the manager may have had extra money floating around in his marketing budget. What a way to spend it? Old marketing tactics are not dead yet, but they are slowly gasping for their last breath. I actually help to produce a local advertising magazine with Punch Advertising and it is getting harder and harder to make money with it. It is a direct mail magazine so who knows what will happen with the post office in the future.

  2. Nicole – Thanks for your comment! I liked the story about Whole Foods as well and was trying to find a copy of the actual news article(s) that ran online but couldn’t. It will be interesting to hear what happens with Punch Advertising … what type of audience is the magazine distributed to? i.e. local households that fit a particular demographic within a certain zip code?

    • The Corporation is Punch Advertising and the magazine is a subsidiary of it, ‘The About Covington to Madison Magazine.’ I do some marketing work for Punch along with writing headlines and copywriting for the magazine. The magazine is distributed to local households but the mailing is only narrowed down by zip codes and maybe by income factors. The advertiser that have gained the most benefit really cater to women, i.e. boutiques, art galleries, salons, etc. and the ones who have been consistently advertising. We try to add a lot of articles and columns to make it interesting. Mostly it is know as ‘That Little Magazine.’ The cost of postage is the wall we are hitting. These direct mail magazines are a lot of work with little return, but we have lots of irons in the fire.

  3. I could’t get the point what the writer wanted to highlight with the ” Traditional Marketing ” notion. Is it just about the promotion activities ? Or is it about the concept of the marketing ?

    • Hello – thanks for your comment! By traditional marketing I am referring to not only the concept of what it means to practice “traditional marketing” (i.e. communication of value through traditional media channels such as television, radio, and print). In other words I’m talking about how the traditional tactics are losing their effectiveness, which in turn translates to thinking about how we view the concept of marketing as a “whole.”

  4. The idea of ‘conscious capitalism’ ties in to what Bill Neal and I talk about in our book ‘Value Creation: The Power of Brand Equity.’ Brand equity encompasses the emotional, emotive attributes associated with a brand – and in your story about the Whole Foods manager who gave food to shoppers when the cash registers went down on Christmas Eve, the manager created lots of Brand Equity, and helped to add value to the Whole Foods brand.
    Values (ideals, beliefs, principles, standards) is a topic that we’re introduced to when we’re very young, both unconsciously (we emulate the values of those around us) and consciously (we’re taught about ‘good’ values in school and religion.) The Whole Foods store manager obviously hit a responsive chord when he treated his customers with respect and comped their food that evening.
    Corporate Social Responsibility is all about doing the same thing, only in a larger sense. It all begins with values.

    • Ron – It’s apparent that I am going to have to read your book! Have you heard of Fred Kofman who wrote “Conscious Business: How to Build Value through Values?” Or Raj Sisodia’s “Firms of Endearment: How World-Class Companies Profit from Passion and Purpose?” Those are two more I would like to read as well … value creation is great topic that has a lot of practical application in today’s business world. Thanks for stopping by!

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