Hot Takes on the Future of Marketing with David Reibstein
We sat down with Professor David Reibstein to talk about marketing – current trends, metrics you should be tracking, the impact of COVID, and how marketing will evolve in the future.
David Reibstein is a Professor of Marketing at The Wharton School of Business at the University of Pennsylvania. Dave’s research focuses on branding, marketing metrics, product line decisions and competitive marketing strategies, among other subjects. Dave consults extensively with international companies, including Google, Intel, Verizon, Shell Oil, Novartis, and others. He received his PhD, focused on the application of quantitative methods and econometric techniques to marketing problems and research, from Purdue University. Dave also holds a BSc in Business Administration and a BA in Statistics and Political Science, both from the University of Kansas.
Olivia: How do you feel marketing management and metric tracking is evolving and will change in the next five years?
Dave: There's no question that marketing management has gone through a major change, and lately, it’s been much more data driven. It’s moving everything to the digital era and towards online search and shopping. That’s happening on both the consumer and the B2B sides.
We used to look at quarterly data, which turned to bi-weekly data, which turned to weekly data, and now we’re at a stage where we’re watching everything happening in real time.
We also have much improved forecasting. Imagine a car’s dashboard – which is where we came up with the term of marketing dashboard. Today’s dashboards are intelligent, and not only look at what’s happened but allows you to forecast what might happen. Our car tells us that if we keep going the way we’re going, we’ll arrive at X time, and we’ve got Y miles left before we run out of gas. There’s forecasting going on, and it’s the same thing that’s happening with marketing tracking.
As for the next five years, I think we’re going to see more embedding of AI, which is going to be doing a lot of the modelling and forecasting and maybe even recommending what it is we should be spending on and when, and I think that’s part of what we can anticipate seeing change.
Olivia: What are some risks you see in AI becoming our future?
Dave: See, I think we need some balance between having judgement and letting the data forecast, since the data are only based on what’s happened historically. We need to anticipate other things that may not have appeared in that historical data - in the same sense of having cars that drive themselves, but still needing somebody at the steering wheel. If something does happen, we can take control, and I think there’s going to be some merging between human interaction and AI.
Olivia: What are some important marketing metrics that many people don’t normally think of tracking?
Dave: My favourite metric that isn't tracked and is really important, is Share of Wallet or Share of Requirements. Part of the reason people don't track it is because it's hard to. I can look at a customer and say to myself: “this is a great customer.” But maybe I’m just getting a minor portion of their purchases that’s coming to me, and I’m thinking of them as this “great customer.” And they’re thinking of me as a secondary supplier.
What that measure tells us is that if our Share of Wallet is high, and if we want to grow, we can’t squeeze any more out of our existing customers. We need to acquire new customers. If our Share of Wallet is low, then don’t spend as much time seeking new customers, and spend time trying to penetrate the existing customer base. And so strategically, it’s very important, and very, very few companies capture that data.
To learn more about Dave's insight, check out his book, Marketing Metrics, The Manager's Guide to Measuring Marketing Performance.
“My favorite metric ... is Share of Wallet or Share of Requirements."
Olivia: What do you think the biggest barrier as to why people aren’t collecting that information [Share of Wallet] is? Because it’s hard to access?
Dave: I think the biggest barrier is that it [share of wallet metric] wasn’t collected in the past - and what we do is replicate what it is that our predecessors have already been collecting. Secondarily, we know what people are purchasing from us; it is harder for us to capture what they are purchasing from others. But there’s ways that we can get there and that’s part of what we should be doing.
Olivia: What is the most common mistake companies make when acquiring new products or branches?
Dave: I’ll give you two quick examples. I was working with Shell Oil, and we had finished segmenting the market, recognizing there’s different types of customers that buy gasoline. There was a subset that we should be focused on. Then Shell Oil acquired Texaco. Now, the norm in the industry is that you take down their signs and you put up your signs, and keep it within the brand, so now we just have a bigger brand. There was the opportunity of “I’m going to take the Texaco brand and use it to go after other segments." The issue is that companies have trouble figuring out what they’re going to be doing with the brand they acquire.
Another example – Google acquiring YouTube. Should they change the name to GoogleTube, or use YouTube by Google? Or just leave it alone? Fortunately, they just left it separate. But it’s a real struggle trying to think about what to do with the branding, and how to integrate it. I don’t think companies have a good way of trying to analyze that, and they should – it is something that could be studied and analyzed.
Olivia: Do you think some companies don’t use their brand strength to it's potential? Do you think that’s a common phenomenon?
Dave: I think the common phenomena is overusing the brand, where a company wants to put everything under the brand, whereas maybe they should be very, very separate.
Olivia: Do you see NFTs and cryptocurrency technologies, such as blockchain, making a permanent impact in marketing? And will it shift the marketing space permanently, or do you think it’s more of a passing trend?
Dave: This is a hard question, because it depends on what day of the week you’re asking me. I first look at cryptocurrencies and NFTs, and then look at the amount of grey in my beard and I go, “Okay, this is for some other generation, and there’s no way this is going to last.” But I do believe that it’s going to be here. I believe we have this huge surge, it will settle back down, but I do think it’s going to be with us. Just look at gaming - I believe that gaming is going to be in the Olympics, that we’re going to see Olympic sports that are going to have people, you know, competing in Fortnite. That’s very different than NFTs and Cryptocurrency, but in some ways it’s similar.
One of the questions is, do people view cryptocurrencies as an alternative currency? Or do they view it as an investment? I think the crash we just had was probably good – it brought some people back down to Earth. But it [cryptocurrency] will persist, and if we look to 5-10 years from now, we will still see Bitcoin, other cryptocurrencies, and NFTs as collectables.
Olivia: In your opinion, what is one of the biggest challenges that marketers face today?
Dave: It’s a persisting problem that marketers generally don’t have a seat at the table. It’s like we [companies] make the big decisions and then marketing figures out the implementation. Marketing used to be and needs to revert to being involved in the strategy of the company. What business we should be in should be a marketing decision, or at least have significant marketing input. So, the challenge is getting to a stage where marketing is not just looking at tactics but is involved in scanning the horizon and seeing what opportunities are out there.
“Marketing used to be and needs to revert to being involved in the strategy of the company.”
I’ve seen a lot of companies that have a marketing department, and then they have product managers, and the product managers aren’t in marketing. I’m going, “What?!”, because as far as I know, product management is a part of marketing. That is part of marketing’s responsibility. Whoever oversees marketing needs to own that and own the innovations that are going on within the organization. The innovations should be driven by customer insights, not engineering achievements alone.
Olivia: Why do you think historically, marketers aren’t necessarily respected as much as the CFO at the C-Suite level? Why do you think they aren’t as involved as they should be in strategy?
Dave: It’s in part because there’s a language that Wall Street understands, and marketers have not been speaking that language. With the advent of digital, marketers still haven’t been speaking that language. Marketers want to talk about the number of hits, pages, and abandoned shopping carts – while Wall Street wants to know what your cash flow and your return on investment is. We ought to be getting better at that. I think one of the other challenges marketers face is looking for and spending money on things that are easy to measure. Right now, I can put a lot of money on social media, and I can see when I get a click and where I can get some response. With traditional media, I don’t get to see that direct connection, but that doesn’t mean that traditional media isn’t working. I think that’s taken away from some long-term investment.
Olivia: Do you think that’s linked to the necessity for marketers to constantly prove the value of marketing spend and investment into marketing? Therefore, they tend to shift towards things that are easy to track, because marketing value isn’t proven to other C-Suite members unless you have those numbers?
Dave: That’s exactly what I was referring to. I’m going to do those things where I can prove what the result is. It’s hard to prove what the value of your brand is. It’s not hard to prove that I spent X amount on Facebook ads and to look at how many people have clicked. So, you can say you have this direct relationship. But come on – there is some value in that brand. And we’re withdrawing our spending on it because we can’t see the direct connection between our spending and the brand.
Olivia: Do you think there’s a way that marketing and finance can adapt to communicate in a more fluid way?
Dave: I used to run a course called “Linking Marketing Metrics to Financial Consequences.” Half the people were CMOs, and the other half were CFOs. Putting them together and communicating has such great value. There are a couple of companies that have finance people on every brand team, and I think that makes tons of sense.
Olivia: What are some of the main benefits you’d see of having a dedicated finance person per brand?
Dave: I think it gives some understanding to finance of why we’re investing in some of the marketing initiatives that we are, but I think it also provides some education to the marketing people about what finance people are expecting of them. We need to demonstrate marketing’s viability in the organization to finance.
The big challenge is more on the marketing side, in understanding what are the metrics that finance requires.
Olivia: Do you have any controversial marketing strategy opinions you hold today? Ideas that go against the norm in marketing?
Dave: One of them that I have that marketers are resistant to - is that I think “brand” ought to be on financial statements. I would love to change the FASB rules, but I can’t even get marketers to support that! I believe the reason is that marketers don’t want to be held accountable. Proctor and Gamble bought the Gillette company, and they bought the patents and equipment and inventory - but they also bought the brand. When they bought the company, there was a valuation put on the Gillette brand, and that valuation went into the books.
But they don’t have Tide, Head and Shoulders, or Charmin on the books. They don’t include the brands they built. The ones they buy do, and to me that doesn’t make any sense. It would say something to the rest of the organization, if we could look at the balance sheet and say, “Look at the value of these assets we built!”
Olivia: How accurate do you think brand valuations can be?
Dave: My answer to that question is it’s not very accurate. Nor is the valuation of land, buildings, or an inventory. Lots of things show up on our books as assets before they’re discarded. What’s the value of our real estate, which changes daily? We don’t have an accurate daily market price, but it still shows up in our books.
Olivia: Do you have any other controversial marketing opinions?
Dave: The other one I have is that marketers should be held responsible for assessing the return on their marketing investment. In general, marketers say that’s too difficult. I say I don’t want to spend $1 on marketing, unless I know it’s going to return more than $1. Marketers’ feet need to be held to the fire on that.
“Marketers should be held responsible for assessing the return on their marketing investment”.
I asked a former CMO of BMW, who is now a CFO at Deutsche Bank, which job he enjoyed the most, expecting he’d say he enjoyed his CMO position. And he responded with “CFO.” He said that as a CMO, he was responsible for the sales when they went up and when they went down. As a CFO, he just reported on what was delivered. His feet weren’t held to the fire, and he wasn’t responsible for the results.
Olivia: How do you think COVID has changed the future of marketing, if at all?
Dave: No question that it has. I have a whole podcast series where I interviewed more than a dozen CMOs about how COVID has changed how they go to market.
At the time, people cut back on their marketing spending. Those that did not reduce spending benefited the most, but not everybody could afford to keep spending.
There’s no question that COVID has changed customer behavior. We see so many more people buying online - and on the B2B side, so many more companies have learned to do sales calls and product demos online. This is much more efficient for the salesperson who would travel across the country or around the world to have an hour-long meeting. So how we present our products is very different, and the way that people buy is very different.
The other thing that has changed is that companies have learned to become very agile. Hershey’s was going to be running a big promotion for Halloween, and suddenly they had nobody trick-or-treating, so they had to change course. For Uber, everyone was staying home, and they now needed to have Uber Eats deliver food. We needed to be quick and agile about how it is that we run our marketing, with a balance between strategy and agility. Strategy is: I’ve got a course, and I’m going to be pursuing this course, and I don’t want to be shifting. So, we need a strategy that has agility built into it.
Olivia: Is there anything else you’d like to touch on?
Dave: Something I wanted to touch on is that Social Purpose now plays a much, much bigger role for companies. My students are interested in going to work for a company that they believe is good for the world. Companies are having to change who they are and what they do, and sustainability is a part of it. It’s not just greenwashing. It is authentically doing that. It’s another reason why marketing should have more influence at the top of the organization. We need to change who we are as a company and how we operate. I think it’s something that’s very relevant for thinking about marketing today. I think socially beneficial behavior has a much greater impact when you’re not using it for publicity purposes. Running a clean company is better than communicating how clean your company is. You don’t want to hide it, but you don’t want to be beating your chest and saying “look how sustainable I am” - which sort of begs people to look for your latest oil spill.
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