Barbie, Patagonia, Starbucks: Why Modern Marketing is Mostly about Creating Value for Customers and Society
In today's business landscape, companies must prioritize creating value for their customers to stay competitive and relevant. Marketing strategies have long evolved beyond merely selling products to understanding and meeting consumer needs. Brands like Barbie, Patagonia, and Starbucks have successfully embodied this customer-centric approach, resulting in significant market success. To gain new insights into crafting effective marketing strategies, we spoke with Anne-Sophie Chaxel, Associate Professor of Marketing at HEC Paris and scientific director of the Marketing Strategy program. She sheds light on how businesses can align their offerings with consumer preferences, fostering long-lasting customer relationships and driving sustained growth.
How would you define marketing strategy, and why is it a crucial component of a business plan?
In 1954, Peter Drucker revolutionized business thinking by asserting that marketing is not just a functional activity but a philosophy driven by the consumer's perspective. This idea was solidified in the 1960s by Theodore Levitt, who emphasized that businesses should focus on understanding and delivering consumer value rather than merely selling products. Today, the American Marketing Association defines marketing as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." This contemporary definition underscores the multifaceted nature of marketing and its role in creating holistic value, including societal value.
Marketing's ultimate goal is to be customer-centric in a manner that is also profitable for the business. It's not about imposing products on customers but about letting customer insights shape what you offer and to whom, ensuring mutual benefit and profitability. This modern approach transforms marketing from a mere business function to a dynamic process where customer preferences and behaviors directly influence the company's offerings, leading to sustained success. Well-executed marketing should permeate all departments within a company, breaking down silos and fostering a unified, customer-centric mindset.
In your experience, what are the most common misconceptions about marketing strategy?
A common misconception is equating marketing solely with advertising. While advertising is a component, it is not the only or even the most essential part of marketing. For instance, Tesla doesn't rely on traditional advertising. Instead, its marketing strategy focuses on addressing emerging societal needs and trends, which benefits both the company and society. Tesla's success is built on its ability to innovate and create products that resonate deeply with consumers, demonstrating that effective marketing is about much more than just advertising. It’s about understanding and fulfilling customer needs, building strong brand loyalty, and creating value-driven experiences. This holistic approach is what truly sets successful companies apart.
The HEC Paris Executive Education program emphasizes a customer-centric approach. Can you explain why understanding customer needs is the foundation of a successful marketing strategy?
Understanding customer needs ensures that a company’s products or services provide real value to consumers, thereby driving both corporate and societal value. A customer-centric approach prioritizes this understanding, leading to tailored solutions that resonate with the target audience. In contrast, a product-centric approach often results in a mismatch between what the company offers and what consumers want. Customer-centric organizations start by gathering detailed consumer data to understand their needs and preferences, then develop products or services that address these needs, ensuring a higher likelihood of success in the market. This approach leverages data and consumer insights to make informed business decisions, which is crucial in today’s data-rich environment.
Can you provide some concrete examples of companies that have successfully identified and leveraged the value of their offerings? What processes did they use to ensure this value resonated with their target market?
Mattel's repositioning of the Barbie brand is a prime example. Faced with declining sales, Mattel embarked on a multi-year strategy that included producing movies and other media content presenting Barbie as a multi-dimensional character embodying empowerment, diversity, and contemporary issues. A pinnacle of this effort was the production of the "Barbie" movie, directed by Greta Gerwig. The film generated significant buzz and served as a cornerstone for cross-promotion, leading to increased sales of related merchandise. Mattel also introduced diverse Barbie dolls featuring various body types, skin tones, and professions, aligning the brand with contemporary values of inclusivity and representation. These changes demonstrated a deep understanding of their target audience’s evolving preferences, successfully revitalizing the Barbie brand and transforming it into a global cultural icon.
How crucial is it for a business to thoroughly understand its target market?
Understanding its target market is crucial for a business because it allows the company to create value for its consumers and leverage value from them effectively. From a compatibility perspective, knowing your target market enables a business to tailor its products or services to meet specific needs and preferences, increasing customer satisfaction and loyalty. For example, Starbucks meticulously studies its target market, including busy professionals and students willing to pay a premium for high-quality coffee and a comfortable environment. By understanding these preferences, Starbucks creates a personalized customer experience through its store ambiance, product offerings, and customer service.
On the attractiveness side, understanding the target market allows a company to focus its marketing efforts on the most profitable customer segments. This targeted approach leads to more effective marketing strategies, higher engagement rates, and better conversion rates. Starbucks leverages its understanding of its target market by strategically positioning its stores in high-traffic areas and emphasizing the brand's quality and lifestyle appeal, directly targeting their demographic's willingness to pay a higher price for a superior product. This focus helps Starbucks maximize revenue from each customer, driving significant business growth.
Why is brand building crucial in today's market, and how has its importance evolved compared to a few decades ago?
Brand building is crucial in today's market because it differentiates a business from its competitors and fosters emotional connections and trust with consumers. Unlike a few decades ago, modern branding requires a level of transparency and authenticity that aligns with the concept of "glass box" branding. This means that all actions of a brand are visible to the public, and every aspect of the business, from operations to corporate values, is scrutinized by consumers.
In the past, branding was primarily about controlling the external image of a company through advertising and public relations. Companies operated as "black boxes," where only selected information was shared with the public. However, with the rise of social media and increased consumer demand for ethical practices, brands have had to shift to a "glass box" model. This model necessitates transparency about internal processes, culture, and values, as consumers now expect to see the real, unfiltered workings of a company.
For example, Patagonia exemplifies "glass box" branding by integrating its commitment to environmental sustainability into every aspect of its business. Their "Don't Buy This Jacket" campaign urged consumers to consider the environmental impact of their purchases, aligning perfectly with Patagonia's mission.
This level of transparency and authenticity not only differentiates Patagonia from other brands but also builds a loyal customer base that supports the company’s values and mission. This evolution from traditional branding to "glass box" branding reflects the increasing importance of aligning business practices with the values and expectations of modern consumers, making brand building a vital aspect of a successful business strategy.
Some voices tend to think that sales and marketing don't like each other. Do you think this is still the case in today's business environment?
Historically, sales and marketing teams have often been perceived as being at odds due to differing objectives and metrics. However, in today's business environment, the alignment of these two functions is increasingly recognized as essential for achieving business success. Building relationship equity is crucial, referring to the additional value a company gains from long-lasting customer relationships. Sales teams play a pivotal role in building and maintaining this equity. They are the direct interface with customers, gathering valuable information and delivering strategic messages that align with the company’s marketing goals. This makes the salesforce critical for capturing and analyzing data that can inform marketing strategies and ensure the company's offerings meet customer needs.
When it comes to pricing, many businesses rely on the principle that for every 1% increase in price, profits grow by around 11%. What do you think about this principle?
This principle highlights the significant impact that small changes in pricing can have on profitability. However, its effectiveness depends on several factors, including the price elasticity of demand for the product, the competitive landscape, and the perceived value of the product. While a 1% price increase can indeed lead to substantial profit growth, it’s crucial for businesses to understand their customers' sensitivity to price changes and ensure that the increase aligns with the value delivered. Effective pricing strategies should be based on detailed market research and customer insights to optimize both revenue and customer satisfaction.
If you had to choose just one misconception that many marketers have regarding their social media strategy, what would that be and why?
A common misconception is starting with tactics rather than goals. Marketers often ask, "Can you help me set up a social media campaign?" without first defining what they want to achieve. This is akin to Alice in Wonderland asking the Cheshire Cat which way to go without knowing her destination. Before deciding what to say on social media, marketers need to define their objectives. Viral content might get likes, but without strategic goals, these engagements are meaningless. Marketers should focus on understanding their unique value, setting clear objectives, and then determining the most effective ways to communicate that value through social media. This ensures that social media efforts support broader business goals.
In today's fast-paced business landscape, where technological advancements and customer expectations are ever-evolving, what do you think is the most pressing marketing challenge that businesses should prepare for in the next five years?
The most pressing challenge is the evolving role of the Chief Marketing Officer and the need for seamless integration of big data and customer insights. CMOs must lead cross-functional initiatives, integrating marketing with broader business strategies, managing complexity across channels and segments, and leveraging data for strategic decisions. This involves integrating what customers are doing with why they are doing it to create personalized, impactful marketing strategies.
CMOs must foster a culture of continuous learning and adaptability, encourage cross-functional collaboration, and invest in advanced analytics tools. They need to communicate the value of marketing initiatives to the broader business, ensuring marketing is seen as a driver of growth and aligning all departments towards a unified, customer-centric vision.
Anne-Sophie Chaxel is an Associate Professor of Marketing at HEC Paris, where she leads the Marketing Specialisation in the MBA Program and the Core Marketing Course of the Executive MBA Program. She also oversees the Marketing Offer Portfolio in Executive Education. With a PhD in Judgment and Decision-Making from Cornell University’s Behavioral Economics and Decision Research Center, under the supervision of Jay Russo, Anne-Sophie’s research delves into cognitive biases and how personal beliefs distort information processing.
Before joining HEC Paris, she taught at Cornell University, McGill University, and Virginia Tech University, bringing a wealth of experience and insight to her current roles. At HEC, she mentors PhD students Yvan Norotte and Hao Zhang, fostering the next generation of marketing scholars. Anne-Sophie’s commitment to understanding consumer behavior and decision-making continues to influence her teaching and research, making her a distinguished leader in the field of marketing.