Ignore the Human Element of Marketing at Your Own Peril

New Year's resolution: Stop living in the past. Just jettison some old habits, such as trying to manipulate prospects. Stop viewing purchasers as conquests. They are members of a community, prepared to adore (or the opposite) not just your stuff but the inner you. Your essence is transmitted continually via your relationships with consumers, employees, suppliers, shareholders, neighbors and the Earth itself. Welcome to the Relationship Era. Say goodbye to positioning, preemption and unique selling position. This is about turning everything you understood about marketing upside down so that you can land right side up. This is about tapping into the Human Element. Begin with a simple experiment. Type "I love Apple " into your Google search bar. You will get 3.27 million hits. If you type "I love Starbucks," 2.7 million hits. Zappos: 1.19 million. "I love Citibank" gets you 21,100. AT&T Wireless: 7,890. Exxon: 4,730. Dow Chemical: 3. Out of 7 billion human beings, three! Just to put that into context, type "I love Satan" and you get 293,000 hits. Now consider that in the past 12 months, Citibank, AT&T Wireless, Exxon Mobil and Dow have spent $2 billion on advertising. How's that working out for them? The methodology here may not be especially rigorous, but the results dramatize two immutable facts of contemporary marketing life: 1. Millions of people will, of their own volition, announce to the world their affection for a brand. Not for a person, an artwork or a dessert but for a product or service. Congratulations. People care deeply about you. 2. Whether you like it or not, your brand is inextricably entwined in such relationships. If you were to type in "I hate Exxon," you'd get 2.16 million hits--not counting the "I hate Exxon Mobil" Facebook page. Though people are listening less to your messages, it doesn't stop them from thinking and talking about you. And each of those expressions of like, dislike, ardor or disgust has an exponent that reflects the outward ripples of social interaction. In short, as you have realized but most likely not come to grips with, you are being evaluated 24 /7 in countless conversations that have zero to do with your ad slogan. On the contrary, they are about your brand's essential self--which behooves you to think very hard about your essential self. This has ceased to be an option. History has made that decision for you. End of the Consumer Era Mass advertising sustained marketers and media for more than 300 years. The last stage of that epoch -- from roughly 1965 to about five minutes ago -- was the Consumer Era. It was characterized by a shift from advertising and marketing focused on the product (Brylcreem: "A little dab'll do ya!" Lucky Strike cigarettes: "It's toasted!") to getting into the heads and hearts of consumers (MasterCard "Priceless." Nike : "Just do it."). It was a four-step process. 1) Ascertain through research what the public desired. 2) Offer it. 3) Create advertising designed to seduce, impress, entertain, frighten or flatter the target audience. 4) Place that advertising in media favored by the target . Why not? Where's the flaw in selling people what they wish to have by reaching them with messages they relate to in the places they like to be? Thinking of others ... isn't that what Mommy and Daddy told us to do? Yet, for three fundamental reasons, those universal marketing practices must be discarded. For starters -- briefly, because this is no longer controversial -- there is the ongoing chaos scenario: the inexorable collapse of mass media and mass marketing, and the hyper-fragmentation of their online successors. Meanwhile, DVR fast-forwarding, spam filters and opt-outs have essentially reduced audience measurement to a faith-based initiative. It's a paradox: a revolution that in one critical aspect moves us backward. While digital tools have taken the power of the heavily capitalized Few and distributed it to the Many, they have also nearly obliterated anybody's capacity to reach the Many in one fell swoop. The Industrial Revolution was revolutionary because it created efficiency through scale. The Digital Revolution, by contrast, has decimated scale. So, yes, upheaval is violently altering the landscape. The second reason is ecology. Think of the marketing environment like the planetary environment. In the Consumer Era, business won customers by burning fuel. That fuel was advertising. Drill, drill, drill. Burn, burn, burn. Sell, sell, sell. Colossal reach made advertising and promotion seem efficient, yet their effects were maddeningly transitory, a vast expense yielding little equity. Buy advertising and sales went up. Stop advertising and sales went down. Marketing's effects, in ecological terms, were unsustainable. Now, amid the collapse of Mass, the fuel itself is too expensive to produce. The future requires a sustainable alternative. Resource management and the disintegration of Mass argue against the status quo. There is a third -- nearly blasphemous reason -- that the sun is setting on the Consumer Era. We'll get to that shortly. First, let's meditate on the new currency of commerce: trust. According to the 2006 Edelman Trust Barometer, "quality products and services" was the top response in identifying the standard of trust. By 2010, mere "quality" had dropped to No. 3. "Transparent and honest practices" was No. 1 (with 83% of respondents citing it). Core values, that stuff of essential self. Scan the signage at the Occupy Wall Street encampments. Goldman Sachs takes a drubbing. Apple , very much in the 1%, gets a pass. Of course, how people represent themselves in surveys and at rallies doesn't necessarily reflect how they really behave. In political polling, for instance, nobody ever declares himself a racist. Surveys of media diets reflect zero use of porn. So how to demonstrate that the public's stated preference for honesty and transparency squares with their actual choices in the marketplace? The answer is the Brand Sustainability Map. Researchers at Imc2 commissioned survey data on trust and plotted it against market share for leading consumer marketers. The results are striking: Charting customer "trust" as the Y axis and transactions as the X axis creates four quadrants. The lower-left quadrant, "Limited," is the province of losers: struggling brands with flat or declining sales and little respect from consumers. American Airlines lurks in the lowest left-hand position. To its right is the "Reluctant" quadrant, brands that command little respect and generate little emotion, but whose price or competitive advantage trumps a customer's misgivings. In the upper-left, "Emotional" is the home of companies that maintain respect in spite of quality issues, limited distribution, high price or other competitive disadvantages. Finally, there is the Valhalla of the upper-right-hand quadrant, "Sustainable." This is where you find the likes of Apple , Costco, Southwest Airlines and, in the upper-most-right-hand corner, Amazon. In the Relationship Era, the big winners will be in Sustainable, whose habitues typically spend little on advertising -- because they don't need it. By contrast, indifference is expensive and hostility unaffordable. Notice that three retailers in Sustainable -- Amazon, Costco and Target -- spend an average 0.52% of sales on measured media. Sears, in the Limited space, spends 1.62% of sales and loses market share doing it. The power of brand identification verges on the perverse. A 2011 study in the "Journal of Consumer Psychology" by Shirley Y.Y.�Cheng, Tiffany Barnett White and Lan Nguyen Chaplin concluded that consumers tend to take criticism of their most-admired brands personally, and circle their emotional wagons around the brand under attack. Toyota and Snickers enjoy the same reflexive defensiveness from their devotees as the president of the United States, the Dallas Cowboys and the state of Israel enjoy from theirs. Clearly, those whom we trust and adore, we trust and adore a lot. It's human nature. Luckily, while the digital revolution was undermining Mass it was also supercharging human nature. Social media have taken the stolid, dependable old tortoise -- word-of -mouth -- and transformed it into countless hares, multiplying like, well, hares. And they're zipping around not just the beauty parlor and the saloon but Facebook, Twitter and Yelp at the speed of "send." Network effect To David Rogers, executive director of Columbia Business School 's Center on Global Brand Leadership, that network effect has changed the shape and the physics of the traditional purchasing funnel. "Awareness, opinion, consideration, preference and purchase" have been supplemented by "loyalty" and "advocacy," Rogers says. The new imperative, according to Rogers, is "How do you, as a marketer, get the subset of the loyal customer who doesn't just buy your product again but ... writes those positive reviews? They share your links and retweet you on Twitter and post a photo of themselves with your product on Facebook and "like' you on Facebook and generate all these network conversations, which go back to the top of the funnel and influence other customers in your network at their own stage of awareness, consideration, preference or action." Those echoes influence consumer behavior at every stage and create a sort of perpetual-motion marketing machine. "I draw it as a funnel with an arrow that goes from the bottom and feeds back to the top," Rogers says. "That's the efficiency of it, if it works right." Oh, it works right. All you have to be is beloved, or at least respected, for how you conduct yourself as well as what you sell. That truth was documented by Rajendra S. Sisodia, David B. Wolfe and Jagdish N. Sheth in their 2007 book "Firms of Endearment," a study of what they call "stakeholder-relationship management." They selected 30 companies that they deemed driven by purpose rather than by slavish devotion to quarterly earnings. Less paradoxically than it would appear, in the authors' view, these businesses built value for shareholders by not obsessing about them. The companies included Honda, Trader Joe's, The Container Store, Southwest Airlines, Wegman's Food Markets, Commerce Bank, Best Buy, BMW, CarMax and eBay. Lo and behold, over a period of 10 years, the Firms of Endearment wildly outperformed the rest of the corporate universe and continue to do so. We updated the FOE data to reflect the 15 years between 1996 and 2011. In that span, during which the benchmark S&P average was 157%, FOE companies grew an average 1,646%. During the past three economically disastrous years, the S&P rose 3.3% on an annualized basis. The FOE index was up 21.06%. Core values can't be faked Impressive, no? These kinds of numbers prompted some CEOs to look deep into their souls for a corporate raison d'etre and many others to summon their PR people to the C-suite to rewrite the mission statement -- the latter approach being a fool's errand, of course. All social efforts must flow from an authentic sense of purpose, not bogus boilerplate. Core values cannot be faked, at least not indefinitely. Scott Adams, creator of Dilbert, once devised a Mission Statement Generator, which could be loaded with familiar buzzwords to automatically formulate high-toned bullshit. ("Our challenge is to assertively network economically sound methods of empowerment so that we may continually negotiate performance-based infrastructures.") Pretty funny. But if you want a real laugh, check out the actual "values statement" for Philip Morris. Item No. 1, as God is our witness: "Integrity, trust and respect." Here's another, literally etched in stone in the lobby of a corporate headquarters: "Integrity. Communication. Respect. Excellence." The corporation? Enron. The message would have been longer, but the stonemason ran out of room to chisel "Rapacious Jackals." And Dow? The company so loathed worldwide that it cannot muster even four expressions of online love? You know what its slogan is ? "The Human Element." It has a lovely ring, and Dow has articulated ambitious plans. But for the chemical company that bought the chemical company that gave us Bhopal, the sloganeering is at best cognitively dissonant. Dow's reputation is such that its sponsorship of the 2012 Summer Olympics in London is roiling the games' organization. Hyping dubious humanity credentials is like lying to your psychoanalyst, a pointless exercise. Yet so many marketers dangle one foot in the 21st century while putting all their weight on the other foot, planted firmly on Rosser Reeves' grave. They squander the unprecedented potential of the online feedback loop by conducting themselves as aloofly in social media as they always have in paid media. Here is how one struggling fast-food chain has chosen to honor the individuals who honor the brand by following it on Twitter : KFC Colonel Everythin's better with #bacon! Try a #KFC Cheesy Bacon Bowl for just $3.99 + tax. (Limited time at participating U.S. KFCs) "You are our fan," KFC seems to be saying. "You are our friend! So we'll interrupt you as we always have with a sales pitch!" It's like being invited to your friends' house for dinner only to realize over dessert that they've suckered you into an Amway solicitation. Ugh. Cross that couple off the Christmas-card list. Trust is an asset, not a commodity. It cannot be purchased. It must be earned. And it can dissolve before your eyes. But brands keep trying to purchase respect points by , for instance, linking themselves to unassailable causes, such as treating sick kids, in association with a finite promotion or as part of a long-term "cause-marketing" strategy. This behavior is cynical and often sordid, exploiting other people's tragedy to buy borrowed interest. Not so different from licensing "Iron Man" for a co-promotion. Others pay lip service to corporate social responsibility to inoculate themselves against charges of venality, environmental rape, off-shoring or other offenses. This is generally little more than PR window dressing. Genuine purpose What companies have available to them at all times, without having to come up with faux philanthropies, is corporate purpose. If you can identify why your company exists and what values it embraces, and if you live by those values across all aspects of your enterprise--from hiring to choosing suppliers to acting on civic responsibility--then you have the foundation for values-based relationships that command loyalty and trust. Do not confuse genuine purpose with other notions of differentiation, such as positioning or USP, rooted in manipulation or contrivance. They are "What can we say about our brand that sets us apart?" Marketing from purpose is no less differentiating but it's accomplished via a brand's demonstrated character. It can be banal or lofty "to make the most delicious ice cream," but you have to explain to all comers why you're in business. Here's how outdoors outfitter Patagonia defines its reason for being: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. This has been the Patagonia way for 40 years, since founder Yvon Chouinard set up shop to outfit lovers of the outdoors without contributing to the destruction of the outdoors. The company donates 1% of its gross sales to environmental causes, recruits other businesses to follow suit, and engineers every aspect of its operation toward source reduction and environmental sustainability. Patagonia has progressive workplace policies, including in-house day care, paternity leave and paid sabbaticals for environmental volunteerism. It also enforces identical factory conditions, whether they're in California or Vietnam. Years ahead of regulators in committing to reducing toxic discharge in its supply chain to zero by 2015, the company also made a costly decision in 1996 to use only organic cotton. CEO Casey Sheehan recalls the corporate thinking at the time: "For a period of years, our margins will suffer, our prices will be high. But we will also tell the world that ... if we don't do this and the world continues down the path of using conventional cotton, we are going to use up all the water and turn these agricultural areas into pesticide-ridden areas." In the early 1960s, Volkswagen changed advertising with its wry, counterintuitive appeals to inconspicuous consumption. Fifty years later, in its 2011 Black Friday advertising, Patagonia further mined that paradox and suggested that consumers not purchase even Patagonia goods. "Don't Buy This Jacket," was the headline above copy detailing the environmental toll of a single piece of Patagonia outerwear. None of this eco-righteousness has ravaged the bottom line. On the contrary. "The last three and a half years have been the best years in Patagonia history," Sheehan says. "And that 's from revenue growth, operating income--all the traditional measurements. Our profit ... back in the day [was] 2% to 3% annually. Now we're up in the 9% range. That's right on par with public-company metrics." Its growth transpired amid the worst economy since the Dust Bowl. Patagonia's employee turnover is 5% a year; its share of rejected goods is 1%. It's not at all about "sitting around the campfire singing "Kumbaya,' " Sheehan says. "It's just that everything you say and do ... has the potential to affect everyone around you. The people you work with, the people you contract with. It's simple as that a happy CEO or leader means happy workers, which means happy products, happy customers." That is why the Human Element cannot be isolated to the CMO's office but must be internalized by all management and must inform every corporate relationship -- from contract workers to securities analysts. In a recent Harvard Business Review article, visiting professor Modesto Maidique reimagined leadership by posing a seminal question to his top-level audience: "Whom do you serve? Yourself? Your group? Society? Wall Street ?" We subsequently asked him what he was getting at. After all, isn't keeping the stock price up a CEO's primary fiduciary responsibility? "People assess corporate success based on stockholder returns," says Maidique, director of the Center for Leadership at Florida International University. "You look at the [biggest] return, and that 's the best CEO." But in a hyperconnected world, bosses must be stewards of the ecosystem. Information is everywhere, and "the approach they take to their ecosystem is going to be widely reported around the world." Whereas author and executive Pete Blackshaw has famously asserted that "customer service is the new media department," if Maidique is right, everything you do is the new media department. Perhaps you're thinking, "Duh. People in glass houses shouldn't lounge around in their underwear." Or maybe, "Sure, some whole-grained, tree-hugging Mother Earthlings like Patagonia manage to build a business out of twigs and bark, but aren't they profiting from a pre-existing global movement and have a customer base predisposed to buying in?" Krispy Kreme So let's consider a different sort of enterprise, one that not only sells some of the most nutritionally incorrect products on Earth, but has spent most of this millennium as a Wall Street laughingstock. We refer of course to Krispy Kreme Doughnuts. The stock plummeted from $44 a share in 2003 to $1.15 in 2009 (when overexpansion, accounting irregularities and investors' loss of irrational exuberance ended what had been three-plus years of Krispy Kremania). It has since climbed back into the $6 to $9 range, on the strength of steadily growing revenue and profit, same-store sales and enthusiasts' devotion. "You look at our fans and no matter what happens, they love us," says CMO Dwayne Chambers. "People like to eat doughnuts when they're really happy, and people like to eat doughnuts when they're maybe worried or ... a little melancholy. We have one of those products that really fits a lot of different needs and a lot of different emotions." Just like a glazed or jelly-filled friend. Krispy Kreme's resurgence began with the 2009 hiring of CEO Jim Morgan, who presided over management introspection about purpose. What came out of the process wasn't particularly sophisticated but, if anything, resembled old-time religion: "Touching and enhancing people's lives through the joy that is Krispy Kreme." The executives distilled the watchword from 75 years in the guilty-pleasure industry. They decreed only that the joy ethic inform every interaction at every level of the business, which is a bit like ordering a fish to swim. Similarly, the idea of cultivating those human relationships ran deep in Krispy Kreme kulture. "The brand was always built on word-of -mouth, which was the social media of decades prior," Chambers says. "It was the man or woman going to the barber or beauty shop and chatting about a product or business. ... But when you look at something like social media and the ability to engage people in conversation ... about what they're interested in, all of a sudden you are at a much deeper level." Well, as long as you know the difference between using social media to send 140-character ads and truly staying connected. Whereas KFC uses Twitter to sell, sell, sell, Krispy Kreme uses it to engage, engage, engage. krispykreme #Trivia: What are the names of our three different #coffee blends on our website? (Hint: Check out ow.ly/7tRWd.) Anyone can play. "If you are sitting in front of your computer and a friend sends you an email, no matter what you're doing, you're going to stop and click on that email," Chambers says. "It's a friend, and you want to know what's going on, because they wouldn't send you an email unless there's a reason. We want to be in that category." A tall order. But a congruency between the expressed and observable values of the brand and those of its constituencies instills a sense of belonging and sets remarkable dynamics in motion. The folks at Krispy Kreme not only find it easier to bounce out of bed at 4 a.m. but also require less and less expensive advertising to sell more and more delicious cardiovascular time bombs. Chambers says that paid media represents less than 5% of his budget. With 3.8 million Facebook followers, he does not need big media budgets to engage. Another outlier, sweet and irresistible? Maybe. But just as you don't need to be saving the world to cultivate brand values, so you don't have to be a deep-fried indulgence. What about, say, a deodorant? The sidebar here offers a case history of a wholly unglamorous personal-care product redefining itself around urging women to be fearless. Conveniently enough, a recent documentary has its way with a competing, distinctly less-evolved antiperspirant. One of the more hilarious moments in our friend Morgan Spurlock's 2010 film, "Pom Wonderful Presents the Greatest Movie Ever Sold," occurs when the Ban brand management team is asked what the brand is about. What follows is a long, embarrassing pause. It was not intended as a trick question, but the silence speaks volumes. Movie theaters fill with growing laughter. After what seems an eternity, a Ban manager offers, "It's about superior technology." All right, that 's an answer. Not a great one, but valid. Spurlock retorts, "Yeah, but that 's not something you really want to put in your armpit," and that line brings down the house. If you polled these audiences on "brand purpose," many people would roll their eyes at what seems like the most ludicrously tortured corporate-speak. Yet the tension and humor of the Ban-Spurlock exchange don't flow from any absurdity in the question "What is your brand about?" Rather, the joke hinges on the public's sense that brand stewards should, at a minimum, know why they are in business. Viewers were laughing not at the notion of brand ethos but that Ban doesn't have one. Which gets us to the third factor in committing to The Human Element. It was always a superior model, because it is the natural order of things. Vast libraries of consumer research illustrate that we respond to what we perceive as authentic--not to the phoniness, sycophancy, contrivance, pandering and panoply of other negatives associated with "marketing." In the words of that Danish marketing guru, Polonius: "To thine own self be true." Counterintuitive as it may seem, a pillar of the Relationship Era is that it is better to look inward than define your business as the accumulation of your public's often fickle, shortsighted tastes. In 1885, what the public wanted was more-comfortable horse-drawn carriages. Try as we might, we cannot recall any significant agitation 20 years ago for a $4 cup of coffee. As Steve Jobs said in explaining why Apple hadn't conducted market research in developing products: "It's not the consumer's job to know what he wants." Somewhat obnoxious, we'll grant you that . But would you like to search the entirety of the web and get a piddling 118 hits? Type in "I love poseurs." Doug Levy is CEO and founding partner of Imc2, a purpose-inspired strategic and creative agency based in Dallas. He and Bob Garfield are collaborating on the forthcoming book 'The Human Element.' Bob Garfield is a 26-year Ad Age contributor and proprietor of a limited consultancy on marketing strategy and execution. He is the author of four books, including 'The Chaos Scenario.' Ad Age Editor Abbey Klaassen will sit down with Editor at Large Bob Garfield for a video interview about The Human Element on Thursday, Jan. 5. What questions do you have for him? Leave your thoughts in the comments or email them to adageeditor@adage.com.

Ignore the Human Element of Marketing at Your Own Peril

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