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Marketing in three dimensions

By Patrick Callinan, David Edelman and Fabian Hieronimus

In the latest McKinsey Global Marketing Survey, executives are optimistic about beating competitors though underlying issues around capabilities raise important questions.

Marketing leaders are optimists—and with good reason. The executives whose companies demonstrate marketing excellence and possess good functional capabilities also report strong overall growth in the past and expect it in the future.

In our latest McKinsey survey on marketing and sales, we asked about the three key stages of marketing: discovering and gathering insights, designing insight-based products and offers, and delivering those products and offers to market. On the whole, executives are positive about their companies’ prospects. Nearly half anticipate that their overall profits will grow faster than competitors’ over the next five years. But to really beat the competition, the results show that companies must invest the right amount in their capabilities across all three of these marketing areas. Among companies that do so, 61 percent believe their growth will outpace competitors’ in the coming years.

Yet this optimism belies a more unsettled picture today. At least two-thirds believe they fall short across an array of critical marketing and sales practices—for example, gathering and analyzing data, tracking interactions with customers, managing marketing talent, and integrating marketing in cross-functional processes. One reason for this may be the lack of integration across discovery, design, and delivery processes, which the results indicate has a clear impact on performance. At companies where executives say their marketing and sales processes across these three areas are well or very well integrated, 50 percent have outperformed the competition over the past five years, compared with 31 percent at companies with poorly or very poorly integrated processes.

Mind the insights gap

Across the three areas of marketing that we explored, executives are most likely to report underspending on the first: gathering customer information and insights. Roughly seven of ten respondents say their companies do not spend enough on the discovery of new insights; on average, companies spend just 19 percent of their overall marketing budgets in this area (Exhibit 1).

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According to the results, few companies are focusing on strategy or talent in this area. Less than half of executives say their companies have a formal plan for gathering strategic insights. Just one-fifth say their organizations have the right skills and people to gather and use insights effectively—the same share who believe they have a comprehensive recruiting and talent-management strategy for their sales and marketing employees. Companies pay a price for this. Of the executives who say they don’t have the right people and skills, 35 percent admit they have underperformed against competitors in the past five years. Just 10 percent of respondents who report having the right people and skills at their companies say the same.

This lack of investment and strategy may explain why respondents say their companies struggle with specific insight-gathering practices. Just one-third say their companies’ segmentation really incorporates an understanding of customer needs and where their companies will make money in the future; of respondents whose companies invest the right amount, more than half say the same. And for all of big data’s promise, seven out of ten respondents do not believe their organizations have effective advanced-analytics capabilities.

A big disconnect

Investing in insights and analytics capabilities is a waste, though, if the resulting insights do not lead to successful products and services. Unfortunately, the results suggest that across the three areas, many companies’ marketing capabilities are disjointed—as are the organizational structures around these activities.

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According to respondents, interaction between people working in sales and marketing roles is most likely to be ad hoc. Less than one-quarter say these employees interact formally and continuously on cross-functional teams (Exhibit 2). There is a mismatch at the strategic level, too: 27 percent say their companies’ marketing plans do not align with corporate initiatives and overall strategic plans.

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The disconnects between different areas of marketing work are particularly stark when it comes to developing useful tools and turning insights into products and offerings that generate sales. Less than one-third of respondents believe their marketing and sales teams do very well at effectively using customer insights in R&D and product-development work. Almost half of executives say their companies’ customer databases do not help in decision making, while only 18 percent say they have a customer-segmentation tool that works well for their salespeople. A similarly small share of respondents say the tools and processes their companies use to capture insights contribute directly to sales effectiveness.

For other areas of marketing, respondents report a lack of clarity—in their account management responsibilities and go-to-market models, for example (Exhibit 3). There’s even confusion at the brand level. Nearly two-thirds of respondents admit that their companies lack a full understanding of their brands’ strengths and weaknesses, perhaps because just 36 percent say their business leaders are highly engaged in developing messaging and positioning.

Integration and investments pay off

Even beyond the tactical level, respondents report a fundamental lack of integration across key marketing and sales practices—and that the level of integration links closely to overall performance. In the past five years, 38 percent of all executives say their companies’ profits have grown faster than competitors’. At companies with well-integrated processes for discovery, design, and delivery, fully half of executives say the same, compared with 31 percent at companies with poor integration.

According to respondents, the level of investment also matters. Those who believe their organizations are investing the right amount in their marketing capabilities—especially in discovery—are more likely than others to say they have beaten the market (Exhibit 4).

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Only 14 percent of all executives, though, say their companies invest the right amount in all three areas of marketing and sales (Exhibit 5). The companies whose spending is already on target have an edge: 61 percent of respondents at these companies expect they will beat the market in the future, compared with just 44 percent of executives at companies that misspend on all three areas.

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Looking ahead

  • Know where you’re spending. As companies plan to increase their financial and people investments in marketing and sales, it’s important that they first understand the bigger picture. How are they spending (and how do they want to spend) on discovery, design, and delivery? Are their investments in any one area supported by investments in the other two, so that an effective process is in place to get ideas—and then products and offers— to market? To optimize growth, companies need to mind the connections between these three areas and balance their investments accordingly.
  • Find the weak links. The results indicate that, for many companies, points of breakdown exist between the discovery, design, and delivery activities in their marketing functions—and that important groups are left out of key processes. Companies should get very tactical by highlighting exactly where handoffs occur (or don’t) and by understanding the cost of that breakdown. That information is essential for connecting teams across the three key areas and prioritizing which connections to work on first. One way to start is a targeted “crash” project around a specific effort, such as a single customer journey (installing cable service, for example) or the launch of a new product.
  • Make data digestible. Given the reported lack of analytical capabilities, companies clearly need support and improvement. They should enlist their analysts to strip out the technical complexities and isolate the valuable data that can inform product development or identify customer-experience issues. If the data are presented in a user-friendly form, such as a dashboard, the front line can more easily incorporate that data into the insight-gathering process and identify the most-needed answers.
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