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Accenture

As the skill levels that constitute marketing mastery continue to shift, today’s best practicecan become tomorrow’s price of entry.

A major Accenture study reveals that a significant investment in marketing is crucial to achieving high performance. But the skill levels that constitute mastery continue to shift, and today’s best practice can become tomorrow’s price of entry. No company can afford to be complacent.

It’s not just a cup of coffee you’re looking for when you walk into a Starbucks. What draws customers of the Seattle-based company back to its cafés again and again is the consistent delivery of a specific, specially branded experience.

And that experience matters. Companies that enjoy strong customer loyalty also have higher margins and revenue growth – and thus higher shareholder value. In fact, according to Accenture research, customer loyalty accounts for 38 percent of margin, 40 percent of revenue growth and 38 percent of shareholder value.

Previous Accenture research demonstrated that a company’s ability to win customer loyalty is the defining characteristic of high performance in marketing. We refer to the quality that distinguishes Starbucks Corporation and a handful of other companies as “capital-M” marketers (see “The Best and the Rest,” Outlook, October 2004). That research also identified five core marketing capabilities characteristic of high performers:

• Developing and delivering the branded customer experience;
• Creating and shaping demand;
• Harnessing talent and technology;
• Translating foresight and insight into marketing productivity; and
• Driving marketing to meet performance objectives.

Subsequent research into the link between marketing capabilities and business performance has further revealed that those five capabilities account for at least 50 percent of a typical company’s ability to win customer loyalty, a number that can reach 60 percent for B-to-B-to-C companies.

To be sure, factors that have nothing to do with marketing also play an important role in sustaining customer loyalty. Market maturity and customer buying habits, as well as regulation, product patents and industry structure (monopolies, for example), all contribute to the nearly 50 percent of a typical company’s ability to win and sustain customer loyalty not accounted for by our five core capabilities. Yet the number and range of these extraneous factors make the impact of our five core capabilities – and the 120 supporting skills that underlie them – all the more remarkable.

Some marketing capabilities are clearly more important to business performance than others, even among our five core capabilities. Of this group, the two most closely associated with customer-facing delivery – “developing and delivering the branded customer experience” and “creating and shaping demand” – are the most crucial.

Integrated Execution

However, the top performers in our survey (and to some extent their closest competitors) also scored especially well on the three of these capabilities that have less direct impact on customers. So while mastering certain marketing capabilities is critical to a company’s success, high-performance businesses clearly recognize the importance of excellent, integrated execution of all five capabilities.

Interestingly, the two customer-facing capabilities are as important to B-to-B companies as they are to B-to-C companies, a result we find particularly striking, since industries that use the B-to-B model have traditionally been relative laggards at marketing. Equally interesting, we found that mastery of these two capabilities is by no means exclusive to companies from fully industrialized nations; indeed, some of the highest scores came from companies in emerging economies.

We found that these companies, notably in Asia, are frequently just as good as their Western counterparts at developing and delivering the branded experience and creating and shaping demand – and that they are successfully leveraging these capabilities to penetrate markets in industrialized nations. Taken together, we see marketing capabilities as an emerging weapon of choice for all companies – across industries, business models and geographic boundaries.

No company, regardless of business model or geography, can become a capital-M marketer – that is, achieve the kind of marketing mastery that contributes to high performance – without taking a businesswide approach to marketing and without integrating the marketing function into everything the company does. The high performers we have observed have achieved excellence across the full range of marketing capabilities and skills.

However, we have also observed that mastery of specific skills – or executing these skills at a proficiency level even above excellence – plays an important role in setting some companies apart. We discovered, for example, that “executing a pervasive innovation agenda” is the element or skill set within the “creating and shaping demand” capability that has the most impact on business performance. It is also the same skill set that so clearly differentiates the Japanese carmaker Toyota Motor Corporation.

Targeting Generation Y

Keen to target younger car buyers – a notoriously fickle and demanding demographic, as well as a stubbornly antiestablishment one – Toyota launched an entirely new brand, the Scion, and targeted its marketing to Generation Y. Scion has been a huge success. Its unique-to-America designs are especially popular, as are a huge range of aftermarket accessories, which enable buyers to tailor cars to their personalities.

Several skills within the five core capabilities seem to be especially strong predictors of success or failure at winning customer loyalty and thus achieving high performance. High scores on both “managing talent” and “focusing on highpotential segments” – components of “developing and delivering the branded customer experience” – greatly increase the likelihood of top business performance. By contrast, low scores on these particular skills, as well as a low score on “using leading-edge research into future needs” – a component of “translating foresight and insight into marketing productivity” – diminish the likelihood of achieving high performance.

As we probed deeper into the specific contributions of the skills that are components of the five capabilities, a clear message emerged: Execution is everything. Among the skills required for “developing and delivering the branded customer experience,” those needed for delivery are paramount. The critical issue in delivery, moreover, is consistency, which accounts for almost half of the total impact that the branded experience has on winning customer loyalty.

Most Critical Factor

People are often the most critical factor in execution. Even for the three noncustomer-facing capabilities, the skills that matter most are those that have to do with people. For example, “harnessing talent and technology” is the capability that, if improved, is most likely to help a company outperform its competitors, according to our respondents. And managing, training and retaining talent is the skill within the “harnessing talent and technology” capability that has the most impact on the branded experience.

Indeed, the marketing skills that matter most across all the capabilities are largely concerned with people management – ensuring that all functions deliver the same branded experience, training all front-line people completely and effectively and reinforcing the brand promise across campaigns.

Starbucks, for example, has an intensive training program that educates employees about the company’s strict product specifications – such as the precise instructions for preparing an espresso – which are key components of its brand promise. Starbucks is also one of the few companies in any industry to extend its attractive pay and benefits package to part-time workers, thus attracting the best people from what is normally a transient workforce.

Our research shows that training and retaining the best talent accounts for most of the “harnessing talent and technology” capability’s impact on customer loyalty. And a company that scores very high on managing talent has a significantly increased likelihood of being a top business performer.

Among the key skills that underpin this capability are “applying rigorous recruiting criteria” and “encouraging risk-taking among staff.” Pret A Manger, a European gourmet sandwich shop that has revolutionized mealtimes for U.K. office workers, not only invests significantly in recruiting, training and compensating talent, the company also empowers its employees to take action to maintain positive impressions of the Pret experience – by offering a free cup of coffee to a customer who has had to wait too long for an order, for instance.

So can any company become a high-performance marketer? Some industries are plainly much better suited to marketing than others. Not surprisingly, those closest to the consumer, like retail and consumer products, display superior marketing mastery. Take Samsung, a large electronics company in Korea, which has excelled at “translating foresight and insight into marketing productivity.”

Confronted with the challenge of allocating marketing resources across more than 400 category and country combinations, Samsung launched an 18-month project to gather detailed and integrated information about all these combinations, right down to country-level brand data. It then made sure that these data were easily accessible to all company marketers and used sophisticated analytical software to predict the impact of different resource allocations. The upshot: one of the most successful attempts to extract meaningful insights from customer data ever undertaken.

Some companies currently enjoy a solid lead as masters of marketing, but nearly all our respondents see clear challenges to achieving their ideal state of mastery. Surprisingly, it is not organizational barriers that daunt them, or an excessive focus on costs or technology, nor is it a lack of leadership, accountability, vision or innovation (though underperforming companies are more likely to cite these reasons for failing). The two obstacles most frequently cited are a lack of funding or investment, and a lack of resources and talent.

Investing in Performance

That executives feel this way is unfortunate, because our research has found that investment is critical to the successful creation of marketing mastery and its impact on business performance. According to our research, the companies that invested the most in marketing capability, as a percentage of their overall investment in the business, achieved the greatest level of mastery and the best performance.

How companies divide up the total investment among the five core marketing capabilities is not really important, however. Rather, it is the level of mastery achieved in each of the capabilities and skills that we were able to link to a company’s success, regardless of the portion of spending allocated to it. So when companies invest in marketing, they must ensure their investment translates into real capability improvement.

So can the best maintain their lead? Or will the rest catch up?

Maintaining a leadership position through sustained marketing mastery is by no means a sure thing. The skill levels that constitute mastery continue to shift, and today’s best practice becomes tomorrow’s price of entry. No company can afford to be complacent, because marketing mastery does matter, which means the time to invest in marketing mastery is now.

This article originally appeared in the May 2006 issue of Outlook, an Accenture publication. Copyright 2006 Accenture. All rights reserved. Reprinted by permission.