Commentary

Change In Customer Behavior Is A Lasting Legacy Of Economic Downturn

The global economic downturn that began in 2007 and gathered momentum through 2008 into 2009 made life difficult for chief marketing officers. In the face of sliding sales and flat or shrinking revenues, CMOs cut budgets, cut staffs and generally made do with less -- much less, in some cases.

In a recent survey of 400 senior marketing executives, Accenture found that nearly eight in 10 participants said that "growing profitably" was most important to their current marketing strategy, with about six in 10 participants expecting to grow market share and revenues in the coming year. This time around, however, CMOs and other marketers are finding that the landscape has changed. The downturn did more than shrink revenues and marketing budgets; it changed fundamental aspects of consumer behavior.

In particular, customers' overall purchasing behavior, and what customers want from providers of goods and services changed significantly. More specifically:

1) They expect more value for their money (72%);

2) They have higher expectations for product quality (71%);

3) They have increased price sensitivity (69%);

4) They have higher expectations for customer service (68%); and

5) They have greater expectations that marketers will be more respectful of their time (66%).

Communicating with customers, who expect to spend less and get more; who want their customer interactions to be both efficient and convenient; and who are harder than ever to reach and keep, is shaping up as CMOs' primary concern. It also is dramatically reshaping marketing strategies and priorities. In fact, marketing executives believe such customer shifts will affect the overall marketing organization, with 62% of them saying they believe the marketing function will change fundamentally in the next five years.

Marketers acknowledge that they need to focus more on understanding customer needs and expectations. Most believe that success in this area will depend upon mastering capabilities related to customer analytics -- understanding how customers' needs have changed -- and capabilities related to innovation, specifically for creating new offers designed to meet those needs.

Unfortunately, marketers give themselves fairly low marks in these areas. Only 23% of the marketers thought their organization excelled in customer analytics, innovation, customer engagement and marketing operations at the same time, and a third of the respondents (33%) said they did not perform well in any of those areas.

As one survey respondent said, "Marketing will have to become more focused on the individual customer, and with more personal information available, the individual can be targeted more effectively." While the pressure to make marketing operations more efficient will continue, the emphasis on growth-generating activities will increase. The most important such activity, in our opinion, is developing a more accurate understanding of the "sweet spots" that will increase customer loyalty, profitability and growth. Indeed, 65% of surveyed executives indicated that mastering customer analytics is important to their business strategy, but fewer said they had the mature capabilities that would enable them to extract and translate customer and market data into value-added strategic insight.

Intertwined with such insight is the ability to identify and focus on high-potential customer segments. Given the growing diversity and fragmentation of the customer base, companies need advanced analytics capabilities to take customer segmentation to the next level, whether for current or for potential customers. By using analytics to perform predictive modeling and identify key segments, companies can gain a deep understanding of what customers really want and value.

Analytics can also help predict shifts in customer behavior and values, giving companies the opportunity to change their offers and value propositions accordingly. Additionally - and very important in the current environment -- analytics can increase the efficiency of the marketing organization by helping direct resources to activities that are directly tied to what customers value.

Insight Leading to Innovation

While understanding changes in customer behavior and values is essential to effective marketing, companies also need a better path toward innovation, which is vital both to retaining customers and to growing the customer base. Nearly two-thirds of our survey respondents indicated that mastering innovation is very important to their company's business strategy, but a much lower percentage said that they have the capabilities in place to help them innovate with unique value propositions.

Innovation is a business process and companies should manage it the way they do other business functions, with discipline and rigor. Companies need to establish the structure, processes, people, accountability and systems that enable them to profitably translate customer insight into the products, services and experiences that inspire loyalty.

Properly structured innovation should lead to a variety of results: a new product that meets customer needs better than anything else on the market; an existing product at a new price point that opens up a whole new customer segment; or a bundle of products and services that creates the perception of added value. Increasingly, innovation can be applied to sales channels, making it easier and faster for customers to get what they want.

Senior marketing officers have their work cut out for them, especially given the tight marketing budgets that will remain in place for the foreseeable future at most organizations. Generating profitable growth under such circumstances calls for a combination of operational efficiency, analytical insight and disciplined innovation. Companies with these elements in place will be well-positioned to accelerate growth and achieve high performance.

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