the new rules of engagement cmos rethink their...
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© Copyright Forbes 2010 1
The New Rules of EngagementCMOs Rethink Their Marketing Mix
In assOCIaTIOn wITh:
© Copyright Forbes 2010 2
KEy FiNdiNgsTo gain a deeper understanding of how marketers are defining and acting on customer engagement, Forbes Insights,
in association with experience marketing agency George P. Johnson, surveyed more than 300 marketing leaders of
large companies.
Key findings of the study include:
• As traditional “interrupt and repeat” advertising models are fading as brand-defining tools in favor of customer
“conversations” and advocacy, engagement is becoming the way marketers are creating brand experiences
worth discussing.
• CMOs are building their customer-facing programs with engagement in mind, and making it a KPI in their dialog
with top corporate management.
• Coming up with a definition of customer engagement appropriate to their organization and brand—and the
accompanying metrics to measure it—is a core responsibility of the CMO.
• In assessing engagement, experiential and digital opt-in methods are frequently rated as the methods that
engage with customers most deeply. Yet CMOs aren’t necessarily aligning their marketing budgets to these priorities.
• Companies may be getting in their own way when it comes to drafting their engagement strategies. Among
the top inhibitors: lack of a well defined approach to engagement, and poorly articulated benefits for loyal customers.
• Despite an understanding of the importance of engagement, more than a quarter of companies don’t have a
specific engagement strategy in place. More than a third believe their companies are doing only a fair or poor
job engaging their audiences.
• For most marketing executives, effective engagement translates into greater sales, higher margins, and repeat
purchase behavior. Still, given the value they place on engagement, a high number are not measuring its impact.
• Employees are an important element of the engagement formula; inspiring employees and equipping them
to over-deliver to customers is crucial to success.
• Marketing channels that emphasize engagement are increasingly favored by executive marketing decision makers.
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As customers’ attitudes and expectations change towards the companies they do business with, the concept of engagement is becoming more crucial to marketing success. At the same time, marketers are trying to justify their efforts across an ever-broadening spectrum of media and increasing number of customer touchpoints, while customers are raising their expectations of what they want.
Even so, “engagement” remains an amorphous concept for many marketers. While academics continue to dis-cuss the topic and debates rage over a proper definition, at its essence, engagement is a way to get customers to con-nect more deeply with a brand. For this study, engagement is defined as the interactions, experiences, and context that create and nurture enduring, profitable customer relationships.
Why is this important? Customers are gaining greater control over how brand values are communicated. Traditional
“interrupt and repeat” advertising models—such as broadcast
FIGURE 1: The role of engagement
At your company, how important is the issue of engagement? Is engagement part of your ongoing conversation with the CEO, board of directors and other corporate leadership?
• Yes
• No
• Very important
• Somewhat important
• Not important
ads—continue to fade as brand-defining tools. Instead, con-sumers, empowered by the Internet and social media, are speaking their minds more freely about what they buy and use. They are driving the brand conversation and marketers need to understand they must “join” the conversation instead of shouting over it.
To gain a deeper understanding of how marketers are defining and acting on customer engagement, Forbes Insights, in association with experience marketing agency George P. Johnson, surveyed more than 300 marketing leaders at companies with annual revenues of more than $500 million. The respondents clearly have been putting a laser-like focus on engagement—not just of their custom-ers, but also within their own organizations. But they are often at odds over how to do it correctly and how to mea-sure its impact.
Many pRoposals FoR GEttInG EnGaGEdThere’s little doubt that marketing executives are now building their customer-facing programs with engagement in mind. In fact, nearly all survey respondents (97%) said their companies viewed the issue of engagement as very
67%
86%
14%
30%
3%
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(67%) or somewhat (30%) important. In addition, 86% said engagement is part of the ongoing conversation between marketing and top corporate leadership. (Fig. 1)
Still, marketers don’t have a consistent approach to what they expect from engagement. They know that engagement is intrinsically linked to customer loyalty and retention. They want repeat sales. They want stronger word of mouth. And they want customers who are less price-sensitive.
When asked what results they thought were integral to their definitions of engagement, more than seven out of ten marketers (72%) chose repeat purchase behavior. (Fig. 2) That was followed closely by customers becoming brand advocates (69%). In addition, nearly half of the respondents (48%) cited a customer’s willingness to pay a premium as sign of successful engagement. Fewer saw the economic implica-tions of engagement, with 38% noting customer resistance to competitive products and services, and 28% indicating that engagement could reduce marketing and sales costs.
With no industry-wide definition of engagement in place, it’s little surprise that marketing executives are approach-ing the issue from different angles. For more than one-third (35%), engagement is primarily about creating authen-tic brand experiences, while a quarter (24%) have given up observation in favor of interaction. (Fig. 3) Another quarter (23%) are involving customers in the product development cycle or designing tools to empower brand advocates.
No matter the approach, it’s clear that engagement isn’t just an outward-facing challenge. For 61% of marketing executives, employee engagement is also a priority. (Fig. 4) And that’s just the beginning. Like many of the execu-tives surveyed, Joanne Smith, director of customer loyalty for DuPont, sees many important targets. “Engagement across a host of audience groups is critical to success,” she said. “We engage customers and employees, but also policy makers, NGOs, community members, the scientific com-munity, to name a few.”
GEttInG In thEIR own wayWhile the need to engage customers is a given, market-ers remain unclear about how to accomplish this. They want to add value to their brands, deepen their customer relationships, and protect their profit margins. But they are running into roadblocks—some of which they may be erecting themselves—that keep them from reaching these objectives.
FIGURE 2: Which of the following results are integral to your definition of successful customer engagement?
FIGURE 3: How can the CMO/marketing function best encourage customer engagement?
0% 50% 100%
0% 50% 100%
Repeat purchase behavior
By taking a leadership role to ensure authentic, consistent brand experiences
Customers become brand advocates who market on your behalf
By creating campaigns based on customer interaction, not observation
Customer willingness to pay a premium
By creating systems that involve customers in the product development cycle
Customer resistance to competitive products and services
By designing tools and assets that brand advocates can use to evangelize
Customer support for the brand reduces marketing and sales costs
By increasing employee education and training to create rich brand experiences
Customers volunteer time and talent to improve brand’s products and services
By designing “big idea” marketing campaigns to express brand values
72%
35%
11%
24%
10%
12%
9%
48%
28%
69%
38%
14%
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For example, more than a quarter of the companies surveyed indicated they have no specific strategy related to customer engagement. (Fig. 5) Without a plan in place, these marketers will be challenged to understand their objectives and gauge their results. Perhaps that’s why more than a third of marketers rated their companies’ current engagement efforts as just fair or poor. (Fig. 6)
What do marketers expect from engagement? It ulti-mately depends on who the company’s primary customer is.
FIGURE 4: Among which audiences do you hope to optimize engagement? FIGURE 5: Does your company have a specific strategy toward customer engagement?
FIGURE 6: Overall, how successful is your brand organization at engaging your audiences?
0% 50% 100%
Customers
Employees
Partners
Distribution/retail network
Media
Shareholders
Analysts
Though best known for its namesake cable channel, MTV Networks—a
division of Viacom, Inc.—is comprised of several dozen cable networks world-
wide, including MTV, VH1, Spike, Comedy Central, Logo and Country Music
Television. The audiences for these channels are diverse and subject to turnover
as they outgrow individual properties.
How do MTV’s marketing executives engage such moving-target consumers?
For Tina Exarhos, executive vice president of marketing and multiplat-
form creative for MTV, the challenge is “to constantly reinvent ourselves for the
current MTV generation.” Right now, that happens to be millennials, broadly
defined as viewers born between 1982 and 1995. It’s a very tech-savvy gen-
eration, so MTV prioritizes online and mobile engagement efforts. “We’re not
scared to experiment,” said Exarhos. “We’ve committed ourselves to testing
any and everything in the digital space, as it relates to customer engagement.”
But blogs, fan pages and iPhone apps are not enough. “We want to be
in the spaces and places where our viewers hang out—whether that’s on
Facebook, or at summer festivals,” noted Exarhos. “While it might not be a
direct pathway to ratings, we believe that staying top-of-mind with consum-
ers is critical.”
Real-world engagement is also crucial for Niels Schuurmans, executive
vice president of brand marketing and creative at Spike TV, the network’s
male-oriented channel, even when the returns can’t be measured. In 2009,
Spike sponsored live Supercross motorcycle races—though a rival network
was broadcasting the events. Said Schuurmans, “I want the Spike brand to be
everywhere guys are… Those are our guys.”
MtV: holIstIc EnGaGEMEnt to a REal woRld aUdIEncE
• Yes
• No
• Don’t know
• Excellent
• Good
• Fair
• Poor
95%
39%
22%
61%
35%
19%
18%
27%
4%
69%
10%
56%
30%
4%
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0% 50% 100%
FIGURE 8: What are the leading inhibitors your company faces in terms of customer engagement?
Economic factors
Benefits for loyal customers not clearly articulated
Negative customer service experiences
Fragmented media/information sources
Inventory control
Competition
No well defined approach to engagement
Frequent changes in market needs/wants/behaviors
Lack of great ideas from marketing agencies and internal teams
Poor purchase experience
FIGURE 7: What are your company’s top business objectives related to customer engagement?
0% 50% 100%
Cut through the marketing clutter to increase sales
Open up new market segments
Penetrate emerging markets
Add incremental revenue via product extensions and additional services
Increase resilience in the face of negative economic pressure
Resist downward price pressure from increasing competition
Reduce marketing and sales spend
(Fig. 7) For business-to-business marketers, adding incre-mental revenue by selling product extensions and additional services topped the list at 68%. But business-to-consumer marketers, generally more sensitive to brand messaging, see engagement as a way to cut through the marketing clutter to increase sales (48%).
Yet even with their objectives in view, marketers are hav-ing trouble spelling out how they should go about fostering deeper engagement with their brands. Asked about what inhibitors their companies face in terms of customer engage-ment, external forces such as economic factors and competition top the list. (Fig. 8) But marketers are also getting in their own way—a surprisingly high percentage cite not having a well-defined approach to engagement, difficulty in articulating benefits for loyal customers or negative customer experiences.
choosInG thE RIGht tactIcsAnother potential roadblock to engagement is finding the right mix of tactics, and supporting those tactics in an integrated manner with adequate budgets. Certainly marketers are under greater pressure than ever to justify their expenses. But a review of the survey results indicates that marketing budgets don’t always align with engage-ment priorities.
Asked to assess their various marketing tactics in terms of how deeply they engage customers, marketers surveyed leaned towards in-person and permission-based methods as opposed to more traditional “interrupt and repeat” tac-tics. Experiential events topped the list with 48% rating it as having high/highest engagement. (Fig. 9) Opt-in email was second.
48% 44%
30%
30%
28%
23%
15%
11%
9%
4%
47%
40%
35%
33%
31%
16%
33%
68%
42%
31%
48%
38%
10%
42%
• B-to-C • B-to-B
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FIGURE 9: How deeply do these tactics engage your customers?
FIGURE 10: Please approximate the percent of your marketing budget attributed to each of the following channels:
0% 50% 100% 0% 50% 100%
Webcasts/podcasts
Social networking sites
Trade shows
Direct email
Live event sponsorship
Experiential events
Opt-in email
Print ads
Direct mail
Mobile apps
Online fan communities
Broadcast ads
Virtual event sponsorship
15 4
17 4
18 4
18 6
19 6
20 5
19 8
22 6
22 7
24 5
22 11
26 10
29 7
31 17
But marketing budgets don’t necessarily align with these methods. Print and broadcast ads are toward the bot-tom of the engagement list, but spending on traditional advertising makes up close to a quarter of marketing bud-gets. (Fig. 10)
What is clear is that for many companies, using an integrated approach that reaches customers across various media may be the most engaging option. For example, live events can be augmented with digital feeds. Print ads can
More than ever, global brands must understand their customers’ purchas-
ing behavior in order to engage them effectively. To that end, Volkswagen
of America has created a comprehensive map of customer touchpoints. “This
map,” said Tim Ellis, vice president of marketing, “provides us with a basis by
which we build our customer engagement strategies.”
For brands with a large family of products, engagement efforts must be
tailored to different customer needs. Brand consistency can therefore be a
challenge. Volkswagen of American turns to its customer map. “Our customer
engagement strategy across the VW brand in the U.S. is very consistent,”
noted Ellis. “Again, because we have developed a customer touchpoint map,
we know better how the brand is interacting with customers across all depart-
ments—and this helps inform how we consistently deliver a seamless customer
experience moving forward.”
Still, a unified approach is not always possible. “We recognize that many
customers want to be interacted with differently, on different topics, and during
different stages of the customer lifecycle. Therefore, we strive to design cus-
tomer engagement strategies for different customer needs groups,” said Ellis.
VolkswaGEn: MappInG thE BRand ExpERIEncE • Advertising
• Direct
• Experiential
• Digital
• Public relations
• POS/in-store
• Social media
• Mobile/SMS/apps
High engagement
Highest engagement
25%
16%
11%
20%15%
7%
4% 2%
• High engagement
• Highest engagement
• High engagement
• Highest engagement
48% 27%
36% 25%
36% 25%
33% 24%
29% 22%
29% 21%
28% 19%
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link to in-person community events. Mobile apps can be customized to deliver information based on users’ specific locations or what they likely are doing.
To build a broadcast audience for the MTV Movie Awards and MTV Video Music Awards, Tina Exarhos, executive vice president of marketing and multiplatform creative for MTV, leveraged the channel’s online proper-ties. “We were successful in getting people who weren’t watching those shows to tune-in because we were taking real-time content and feeding the digital space,” she says.
“Quarter hour ratings growth can be attributed to how we engaged consumers after the shows began.”
The live space remains highly engaging, but reality must be augmented with digital efforts.
wantEd: consIstEnt, UnIVERsal MEtRIcsAs the recession continues to impact business, marketing executives are under greater pressure to deliver concrete returns and develop “fresh ways” to reach consumers. For the vast majority, effective engagement translates into greater sales, higher margins, and repeat purchase behavior.
Still, marketers are often unsure about exactly how to measure the impact of engagement. Fully 36% of respon-dents said their company does not measure customer engagement, a high number given the value marketers
FIGURE 11: Does your company currently measure customer engagement?
• Yes
• No
• Don’t know59%
36%
5%
FIGURE 12: What are the primary metrics you currently use to assess customer engagement?
0% 50% 100%
Customer retention
Customer conversion
Revenue per customer
Campaign opt-ins/downloads
Social media activity
Sales
Marketing and sales cost
Repeat purchases
Customer appetite for new products and services
Length of sales cycle
58%
33%
15%
44%
29%
11%
35%
17%
10%
5%
While most engagement efforts revolve around customer conversion and reten-
tion, 61% of the marketing executives surveyed also strive to engage their own
employees. For Intuit, internal engagement has always been a priority.
“We know there is a very high correlation between happy and engaged
workforce and when they believe they are doing right by customers,” said Harry
Pforzheimer, chief communications officer and marketing leader for Intuit. As
a business metric, Intuit knows that employee engagement translates into a
“delighted customer base.”
“We’ve been laser focused on identifying and solving important problems
for our customers for the last 26 years,” said Pforzheimer. “This mission has
also driven the development of value statements that define the company’s core
ideology… Intuit employees strive to live out these values each day, especially
in interacting with and serving our various customer bases.”
They must be doing something right. The Silicon Valley-based company is
not just a market leader for financial software and services, it’s also regularly
listed among America’s “best companies to work for.”
IntUIt: FIRst, EnGaGE yoUR EMployEEs
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regarding measurement could pay immediate dividends.
choosE lasERs, not caRpEt-BoMBsWhile economic factors and competition inhibit engage-ment efforts for nearly half of all top-level marketing execs, it’s the lack of strategy that bears further examination. The data shows that a clearly defined, highly focused strategy is critical to effective engagement.
The survey asked executives to describe their market-ing strategy as either “wide and shallow,” where they use a wide range of brand experiences to promote their brand but don’t fully engage in any one method, or “narrow and deep,” where they focus marketing on just a few highly specific brand experiences and go deeper with customers.
Those who use the “narrow and deep” strategy were much more focused on overall engagement. They were:
More likely to have an engagement strategy• Less likely to be hampered by not having a well defined • approach to engagement More likely to feel they are doing an excellent or good • job of engaging their audiencesMore likely to measure customer engagement•
In other words, carpet-bombing a branding message isn’t seen as effective in a marketplace with a growing num-ber of customer touchpoints.
But don’t confuse brand experience engagement with channels. Even laser-focused campaigns must be conducted across platforms. According to Beth Lacey of American
Five years ago, American Express realized it needed to leverage its customer
service experience to engage its customers. But how?
“We went back to the heritage of this company,” said Beth Lacey, senior
vice president for customer experience. “Service has been core to the brand for
the 160 years we’ve been in business. How do customers talk about American
Express and talk about the products they have with us? They don’t talk about
the card in their wallet. They talk about the relationship with the company.”
In an era when many customer service departments have been converted
to profit centers, American Express launched Relationship Care, which empha-
sizes conversations over transactions.
“We don’t want our care professionals to aim for the shortest amount of
time spent on the phone with customers,” said Lacey. “As other companies
refer to ‘average handling time,’ our customer care professionals call it ‘cus-
tomer handling time’.”
Isn’t there a risk of alienating customers who are wary of sales tactics?
“This is not selling,” said Lacey. For example, if a customer calls to change
his or her address, the customer service representative might mention a rewards
program at Home Depot—without pushing any new products or services. “We
want to make sure our customers understand how the card they’re carrying can
give them more value.”
According to Lacey, every interaction “is an opportunity to deepen loyalty
and engagement in order to help customers understand how to use their prod-
uct. That loyalty is evidenced by increases in spend, customer retention, and in
our customers recommending American Express to a friend.”
aMERIcan ExpREss: EnGaGE cUstoMERs thRoUGh sERVIcE
place on this strategy. (Fig. 11)So what metrics do they use? Customer retention tops the
list, followed by sales and revenue per customer. (Fig. 12)If marketing executives are universally under pressure
to deliver measurable returns, and they agree that better engagement can bring those returns, why the measurement disconnect?
For starters, every industry has its own set of priorities. At American Express, for example, engagement is all about referrals. “Our primary measure is what percentage of cus-tomers would recommend American Express to a friend,” said Beth Lacey, senior vice president for customer expe-rience. “We’ve been able to translate increasingly positive answers to that question into increased use of the product.” This data is collected via a short survey that’s sent via email after every service call.
On the other hand, Niels Schuurmans, executive vice president of brand marketing and creative at Spike TV, part of MTV Networks, can sometimes put an actual price tag on his engagement efforts. “Last year, we did some out-door for Star Wars,” he said. “We did a bus shelter outside of Madison Square Garden [that] cost us $8,000, but it got covered in the news. What cost us $8,000 gave us back in $250,000 in media.”
Measurement doesn’t just vary across industries, but within companies. One executive reported being hamstrung by competing metrics in place across different groups. This would suggest that greater interdepartmental communication
© Copyright Forbes 2010 10
Express, an industry leader when it comes to engagement, “You need multiple channels to take care of your custom-ers. There are segments of our customers who don’t want to talk to anyone; they want to do everything in an online environment.” Even then, the online environment is fur-ther segmented still. “The customers we engage with on Twitter,” for example, “want sound-bite answers to their questions, and this is a way to reach them.”
To be competitive tomorrow, today’s marketing exec-utives must pick an engagement strategy that suits their industry—preferably, one with a narrow focus—and imple-ment it aggressively and across multiple channels.
thE FUtURE wIll BE taRGEtEd“Targeted customer engagement in the U.S. is more critical than ever,” said Tim Ellis, vice president of marketing for Volkswagen of America. As the automaker seeks to grow its U.S. sales, “effective and targeted customer engagement will build our business by delivering messages to customers that are more relevant.”
Whether the endgame is increased sales, greater customer retention, increased employee satisfaction, online brand advocacy—or a combination thereof—marketing executives agree that the loyalty that arises from targeted engagement directly correlates to business performance.
The good news is the budgetary purse strings may be loosening up. In 2010, 42% of executives saw modest or significant budget contractions; just 17% expect the same looking forward to 2011. (Fig. 13) In fact, exactly half of the respondents expect modest or significant budget increases. Considering that the economy—not competition, not mar-ket fluctuations—was identified as the most significant factor inhibiting engagement, healthier marketing budgets can only help enhance brand engagement efforts.
But where should marketing executives focus their spend? Integrated marketing based on a deep understand-ing of customers.
“With all of the buzz around social media, mobile market-ing, user generated content, interactive innovative marketing tactics, there is something to be said for the basics,” said Ellis.
FIGURE 13: How will your marketing budget change year-to-year?
50%
0%
• Significant contraction
• Modest contraction
• No change
• Modest increase
• Significant increase
10%
2%
32%
15%
24%
32%
30%
46%
4% 5%
2010 vs. 2009 2011 vs. 2010
© Copyright Forbes 2010 11
The information in this report is based on the results of a survey and one-
on-one interviews conducted by Forbes Insights in April 2010.
Forbes Insights surveyed 314 marketing executives at businesses with
more than $500 million in annual revenues. 46% of respondents held titles
of either C-level executive (e.g., CEO, CMO), executive vice president, or vice
president. The remaining 54% held the title of director of marketing.
Of the companies involved, 40% had annual revenues of $5 billion or
more. 44% said they sell primarily to consumers, and 56% said they sell pri-
marily to other businesses.
chRIstIaan RIzy DIReCTOR
stUaRt FEIl eDITORIal DIReCTOR
BREnna snIdERMan ReseaRCh DIReCTOR
JEFF koyEnwRITeR
MEthodoloGy
“It is important that we continue to balance the ‘old and the new’ so that we can appeal to consumers in all channels and all mediums so that it feels natural for them.”
MoVInG ahEadTaking a holistic, integrated approach can be the key to effective customer engagement. While specific tactics will vary based on marketing and sales priorities, the new engagement model requires more insight into audience needs, habits, and preferences, as well as a concerted effort to engage what could potentially be a brand’s most influen-tial advocates—the company’s employees. Only then can a brand deliver consistent and seamless experiences across the plethora of customer touchpoints.
Companies that factor in engagement when setting mar-keting objectives and determining campaign goals stand to achieve greater success than those that do not. To go deeper with their customers, marketers must understand how they engage with their brands, and use that knowledge to create the most optimal marketing mix.
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