• by Karlene Lukovitz , February 18, 2011

After years of evolutionary change, digital media have now brought marketing communications to a "break point" requiring a new model. Companies that recognize this and implement fundamental structural changes to address the new realities of marketing management will thrive in the years ahead, and those that don't will fall by the wayside.

Those are the key messages of Boston Consulting Group's John Rose, who shared his thoughts about the firm's latest report, "The CMO's Imperative: Tackling the New Digital Realities," with Marketing Daily. That report is based on a 2010 BCG study on the future of marketing and advertising that encompassed a quantitative survey of marketing executives, one-on-one interviews and benchmarking research.

"Quite a few executives continue to believe that social media and the explosion of mobile technology amount to more evolutionary steps for marketing communications -- or that once the economy rebounds, it will basically be a matter of employing the consumer communications strategies that worked in the mid-2000's and adding some investments and skill sets in these emerging channels," says Rose, a senior partner in BCG's New York office and an author of the report. "This was basically the case with developments like search and online advertising -- which is not to say that those were easy. They weren't. But while important, they did not represent 'succeed or fail' scenarios from an overall marketing standpoint.

"The new scenario is indeed a succeed/fail one," says Rose. "We strongly disagree with the view that companies will be able to succeed going forward by just adding some new stuff onto the old structure or model. We think it's clear that the new consumer communications mandate -- to engage in real-time, curated conversations -- represents discontinuity, or a true break from the past. While the phrase 'new paradigm' has become clichéd, in this case, that's precisely what is required. It's been a long time since marketing communications has been a significant contributor to enterprise value, but we believe that companies who get this need for a paradigm shift and change accordingly will show significantly higher enterprise values in the years ahead."

While marketers are still in need of more effective and standardized metrics and tools for managing media mix integration, the real challenge now is "how to build essentially new organizations with very different skill sets and ways of integrating communications above and below the line," maintains Rose. "We're talking fundamental structural changes, both in terms of internal resources and in how corporate marketing organizations work with agencies and third-party services providers - who must also change fundamentally in order to remain relevant."

The new watchwords for marketers are transparency, authenticity and engagement -- emphases that require radically different structures and capabilities than those needed for the dominant traditional model of centrally created, custom-crafted messages broadcast or pushed to consumers, points out Rose. And as the report notes, while traditional media -- particularly television -- will continue to dominate media spending budgets for years to come, the shift to spending less on media buys and more on labor-intensive tasks like managing digital content will continue.

While building new internal capabilities structures is mandatory, the exact nature of those must be carefully thought out, the report stresses. Given the increasingly powerful effects of social media communications on brand image, engagement and loyalty, the risk levels associated with poor execution are high -- and "too often, companies entrust these tasks to 20-year-old interns or third-party PR firms or digital agencies that lack sufficient context," note the authors.

At the same time, it's difficult and costly for companies to attract and retain staff who are both technically competent and can manage the complexities and nuances of social media brand communications. To make sound decisions regarding which activities should be in-house and which outsourced, CMOs need to consider the sensitivity/risk level of each activity, the availability of genuinely qualified third parties, and the difficulties/costs of building internal capabilities, the report advises.

Where do agencies fit in? Just 31% of marketing executives surveyed by BCG said that they consider their agencies helpful in making the right trade-offs between digital and traditional media. "The third-party services world hasn't figured out how to be fully helpful yet," sums up Rose.

While large agencies will continue to play critical roles in brand image and traditional media strategy, they risk becoming increasingly marginalized unless they change their financial models and become service providers capable of "having the ear of the CEO and being true, strategic brand stewards," says Rose. This, he adds, will require breaking down divisional/separate agency silos and motivating them on a financial level to work together for the client's greater good to a much greater degree than exists today.

Focused, digital agencies have their own limitations, including lack of scale and global coverage, lack of a broader perspective that incorporates traditional media, and inability to coordinate strategies across the full range of media, notes the report. BCG expects companies to continue to move toward a model that integrates use of traditional "holding company" agencies, digital agencies and PR agencies, and says that success will lie in ensuring that these providers collaborate by employing practices such as all-provider briefings and financial incentives for effective cooperation.

At the same time, the report recommends "embracing new-style advertising agencies that support their [client] relationships with integrated campaigns involving all vendors" and are starting to fill "the gap left by a fragmented array of digital and traditional agencies."

On a bigger-picture level, the report (downloadable on BCG's Web site) advises that companies develop digital marketing strategies "as closely as possible to the business unit." Other key strategic recommendations: Articulate an integrated marketing strategy; use an integrated model that assesses return on marketing investment across the full range of marketing vehicles; design customized metrics for digital; and set minimums for digital investment and incentives for experimentation among marketing executives.