Today, organizations use different business models than they used a few decades ago.
The need to respond to customer requirements in a faster, more flexible way renders information technology a key element in the development of modern business models. And as an area based on the implementation of a strategy for introducing, maintaining, and withdrawing products from the market, marketing is part of that revolution.
In this article, I will show you:,
- how the business environment changed in the 21st century,
- what it means for marketing,
- the difference between linear and agile management styles,
- and where to apply them to maximize your marketing ROI.
Business in the 21st century
Here is a table that sums up the main differences between the traditional business approach and the new approaches that emerged in the 21st century.
Source: Kumar V., Managing customers for profit, Pearson Education, 2008r., https://www.amazon.com/Managing-Customers-Profit-Strategies-paperback/dp/0136117406
As you can see, product orientation was replaced by customer orientation.
It’s not the sale itself that defines the strategic continuity of the organization anymore, but rather the customer value in the life-cycle. In the customer life-cycle as defined by Kumar, the customer is acquired, maintained, and – if it turns out that the maintenance of this customer is not profitable – left behind. That’s a situation when the marketing effort targeting a particular customer segment outweighs the margin.
In the modern, client-oriented business model, the most important element is the customer. Without the customer, the company has no chance of surviving on the market. As long as the organization solves customer problems, it will stay on the market – regardless of whether it sells its products or merely mediates.
Since the most important objective of the organization is solving customer problems, agility becomes a critical skill.
By agility, I mean that the organization is able to identify customer needs and respond to them as quickly as possible.
It’s the customer who makes the purchase decision and this decision determines the further strategic development of the organization. In that environment, businesses need to be able to change directions quickly. Fortunately, technological innovation allows organizations to accurately respond to increasingly turbulent business environment.
Thanks to IT, companies can easily monitor customer behaviors, recognize their needs, and analyze the outcome of every single taken action. In the virtual environment, determining the lifetime value of customers is essential in order to maintain a competitive advantage on the market.
In the next part of this article, I’m going to discuss the structure of marketing methodologies according to two approaches: linear and agile.
In the linear approach, marketers develop a strategy as a plan with at least five year’s time horizon that can be translated into tactical and operational activities.
A typical marketing strategy consists of an environmental analysis, marketing goals, and marketing mix.
At this stage, marketers analyze the organization’s environment in terms of closer and further elements. These elements both influence the organization, but in the case of closer environment, the organization can influence it as well (proximity environment).
Some of the critical closer elements of an environmental analysis are: the company’s competitors, customers, and communities of customers. Among the further environmental elements, we can count demographic, economic, natural, political and legal, and socio-cultural factors.
Naturally, not all business models will be able to analyze these environmental elements and some items will need to be considered only in particular cases.
Defining the goal of a marketing strategy allows to better assess the effects of marketing activities. Thanks to a goal, at every stage of strategy implementation marketers can assess whether they are approaching the intended result.
The marketing goal needs to be measurable and timed. If these two criteria are omitted, the marketing goal will not perform its function and allow organizations to monitor their progress.
The marketing mix program, often called 4P, consists of four different elements: place, product, price and promotion.
By creating a marketing mix, marketers define how the product will be:
- PLACE: delivered to the customer (with distribution channels like: sales points, electronic sales, door-to-door sales, machines, or others).
- PRODUCT: In 4P, marketers describe the product in terms of its features, benefits, and the use of benefits by customers.
- PRICE: Classic marketing strategies usually opt for one of these two main price strategies: market plus that involves selling the product more extensively to reduce the price later, or market minus, striving to sell the product cheaper than the competition.
- PROMOTION: How the information about the product will be delivered to the final customer.
Lastly, marketers also choose the promotion formula that will reduce the cost of reaching their customer segments and still be effective.
At the heart of the agile approach lies the belief that many industries are now dealing with environments that change so quickly that they’re not worth analyzing in the first place. The Agile methodology proposes that an entrepreneur should define their business model as quickly as possible using a canvas (https://leanstack.com/LeanCanvas.pdf), and then based on MVP (Minimum Viable Product) launch it on the market to verify is it working or not.
To pass through the agile cycle in marketing, it is demanded to take these three steps (as quickly as possible):
Define business model canvas
In is areas such as:
- Problem (that is being solved for the customer by entrepreneur)
- Solution (provided by the business model to solve the problem)
- UVP (unique value proposition, achieved by finishing the sentence: this is the only solution on the planet that…)
- Unfair Advantage (why the business model solution cannot be copied or stolen)
- Segment (for whom we are going to deliver our UVP – it is also useful for defining personas – the characteristics of typical customer and named them).
- Key matrix (factors with which you will measure business model efficiency)
- Channels (the paths that provide the solution and information to the customer)
- Cost structure
- Revenue streams
Launch an MVP (Minimum Viable Product) on the market and verify whether it’s working or not
An MVP is a product that provides UVP. The reason behind creating an MVP is assessment of how the customer will react to such a market value proposal. Include only one UVP at a time to get better conclusions. The MVP market implementation is usually run in the following stages:
- Defining the hypothesis – mainly based on Key Matrix, e.g. 90 products will be sold in first month for $8 each,
- Conducting experiments – launching the MVP on the market,
- Verification of results.
Verification of results and, if necessary, making a pivot in business model
The most commonly used factor in this stage is measurement of ROI (Return On Investment = benefits divided by cost). Based on such calculation business model is being changed or not.
To sum this up:
The agile approach in marketing is based on publishing product iterations, gathering customer feedback, and improving the product on the basis of this insight.
Linear vs. Agile
Even though it’s often criticized as outdated, the linear approach to marketing is still widely used today. Where the level of investment is high and the industry calls for detailed marketing plan, the linear approach is a good choice.
The linear approach is based on cascading phases of planning and implementation that are separated. The advantage of this approach is the ability to optimize costs associated with predictable organization activities. That is also why it is primarily dedicated to large organizations where the investment expenditure on verifying a new business model is much higher.
The Agile approach to marketing is still poorly understood. Various authors interpret Agile in different ways, but all these definitions have one thing in common: gaining market power, boosting profitability, and ensuring greater agility in the organization’s responsiveness to emerging customer needs with the simultaneous minimization of risk.
Despite its popularity, the Agile approach has still not reached the popular pattern of implementation in large organizations. Still, there is an increasing number of companies that rely on the cycle creation, measurement, and learning for teams and departments. And marketing departments are no exception.
Are you looking for a universal method for getting great marketing results?
Here’s the bad news: it doesn’t exist.
But you can choose from various approaches that will increase the chances of your organization to boost its ROI from marketing activities and exclude high-risk investments in marketing strategies that might turn out to be unsuccessful.
Got any questions about these marketing styles? Leave a comment or drop me a line at firstname.lastname@example.org, I’m always happy to talk about new approaches to making a marketing team work wonders.