Part 1: A Modern Approach to Solving Traditional Marketing Problems
Every so often an environmental change entirely transforms the way an industry operates. Just like the time when the printing press forced book publishers to put down their quills, marketers are currently being forced to put down old tools that they have grown comfortable with and replace them with new tools that are more effective at solving marketing challenges in the current age.
This post will explore three forces that are disrupting the way traditional marketing problems are solved: cloud computing, generative AI, and the increased demand for user privacy. I will also introduce the concept of Modern Marketing and the principles modern marketers embrace to navigate this change. To get started, let’s explore a similar disruption that occurred 40 years ago.
The Finance Revolution of the 1980s
The movie Wall Street was released in 1987, but I didn’t watch it until I was in business school around 20 years later. At the time, I was taking classes on corporate finance and investment portfolios, and I was immersed in techniques used to quickly assess a business's value and financial health. As I watched the movie, it occurred to me that virtually everything I was learning in school was only recently made possible by the invention of the personal computer.
The Personal Computer Disrupts the Finance Industry
The movie was released just ten years after personal computers hit the market, but it is loaded with references to the way computers have transformed investment banking. At the same time it also paints a picture of old men who are quickly becoming irrelevant because they cling to old ideas and fail to adapt to technology.
Admittedly, the film's story is more about insider trading than embracing technology. Still, it’s filled with imagery that reinforces the notion that the winners in investment banking are young, fast-moving, and tech-savvy. At the same time, the losers are old and overly reliant on outdated modes of winning. For example, in the opening scene, a babbling old man tells a group of young brokers to take a look at a drug manufacturer, and when the young brokers resist because they think the payoff is too far away, the old man’s reply is:
“But they’ve got a good new drug. Stick to the fundamentals. That’s how IBM and Hilton were built. Good things, sometimes, take time.”
When Charlie Sheen’s character visits the famous investment speculator Gordon Gekko (played by Michael Douglas), you can see five personal computers on Gekko’s desk!
A Matter of Scale and Speed
The movie is fiction, but the creators were illustrating something that was happening in the finance industry that was very real. The personal computer allowed investors and speculators to make decisions quickly. It became table stakes for anyone in the industry to be proficient in using this technology only ten years after it was first introduced! Those leaders of the previous generation who had built their success with the tools of the past were the victims of an environmental change that forced them to adapt or lose relevance.
Marketing has been through similar environmental changes, and the most significant in recent memory was the widespread adoption of the Internet and the introduction of digital marketing in the late 1990s. Today, however, three new forces at work are causing a similarly dramatic shift in how marketing problems are solved.
Today’s Environmental Forces At Work
As I write this in the early 2020s, marketers are under environmental pressures similar to those that investment brokers must have felt 40 years ago. The three forces creating this pressure are:
Technology change from cloud computing - Although the cloud was once solidly within the IT domain, it is quickly becoming common for marketing teams to spend a significant portion of their time creating and manipulating cloud environments.
Technology change from generative AI - Those marketing teams responsible for generating images, videos and text are required to adopt new and unfamiliar capabilities provided by generative AI.
Social and regulatory change - Rising demands for user privacy have led browsers and lawmakers to remove old capabilities that have been the norm for nearly 20 years.
New Capabilities Introduced by Cloud Computing & AI
Cloud computing allows marketers to collect, store, analyze, and make decisions on very large volumes of data (often programmatically) and at a very low cost. Amazon Web Services introduced cloud computing in 2006, but it took a decade or so before products for managing data at scale with low barriers to entry were made available. This new capability can now be applied to solve marketing problems in various ways, and there is enormous evidence that marketers who invest in the cloud can improve business outcomes across just about all sectors.
More recently, 2022 was the year that the world was introduced to generative AI, thanks primarily to the amazing API’s released by Open AI. These included DALL-E 2 (which can create realistic images and art from a description in natural language), and Chat GPT (which can follow complex instructions in natural language and solve difficult problems with accuracy and impressive creativity). Although researchers unanimously agree that generative AI is in its infancy, it is clear that this technology will transform a wide range of tasks that are currently handled by the creative professionals that often sit in marketing teams: drafting articles, press releases, images and ad copy.
Old Capabilities Removed by Privacy Laws
New legislation in Europe and certain areas of the United States have led all major browsers to commit to eliminating third-party cookies (scheduled for 2024). But beyond cookies, marketers are also required to rethink access controls, create data retention policies, set clear expectations with customers, and know the lawful basis that they use to justify capturing customer data.
The result is that marketers are losing the tools for grouping customers into audiences and measuring their interaction history through multitouch attribution. It also means that marketers must understand the law well enough to stay compliant through new policies and data management practices.
These forces have been gaining momentum over time, and marketers across the globe are feeling an intense pressure to address them. To understand how these forces impact marketers, it’s useful to review what is included in the marketing domain and the traditional problems that marketers are tasked with solving.
The Problems that Marketers Solve
Since the 1960’s, every business school in America has taught the 4 P’s of marketing as a way of defining the business problems that marketers are expected to solve (I’m aware that many people think there should be more P’s, but I still think this is a helpful model). These were originally introduced by E. Jerome McCarthy’s 1960 book “Basic Marketing: A Managerial Approach”:
| THE 4 P'S OF MARKETING | |
|---|---|
| Product | Product or service development |
| Place | The process of making a product or service available (AKA distribution) |
| Price | The process for setting prices |
| Promotion | Any communication that informs your audience about your product or service |
Businesses are free to organize any way they choose, and sometimes the product development and data management responsibilities are separated from the marketing team.
I am including these in the term “marketing” because these teams are often taking the lead in solving problems that fall into the traditional Marketing domain. The American Marketing Association also released a definition of marketing in 2017 that is fairly consistent with the 4 P’s:
“Marketing is 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.”
These definitions of marketing are still relevant in the modern era because the problems marketers solve have not changed, and will not likely change in the future. The environmental forces described in the previous section are quickly changing the capabilities available to marketers, but the boundaries of the marketing swimlane have not expanded or contracted. At DiveTeam we say that these forces are giving marketers a pair of flippers while taking away the goggles.
Research suggests that marketers have been through about 5 similar transitions in the past 150 years.
The 150-Year Evolution of Marketing
If you review the scholarly research around how marketing has evolved over time, you will surely run across Robert Keith’s 1960 article in the Journal of Marketing titled “The Marketing Revolution”. In this short article, Keith discusses his experience as an employee of the Pillsbury Company for 25 years at the time.
Keith, writing in 1960, identified three eras of marketing that have been wide cited by other researchers:
| THE PRODUCTION ERA | THE SALES ERA | THE PRODUCT ERA |
|---|---|---|
| 1870 - 1930 | 1930 - 1950 | 1950 - 1960 Keith actually called this the "marketing era" |
| Focused largely on physical production. | Focused on market research and understanding what the customer wants. | Focused on product, and careful selection of which new products should be brought to market. |
[source: Keith Robert J. (1960), “The Marketing Revolution,” Journal of Marketing, 24 (January), 35–8. https://journals.sagepub.com/doi/pdf/10.1177/002224296002400306]
| NOTE |
|---|
| Keith also identified a 4th era of marketing that he believed was just beginning at Pillsbury in 1960 called “marketing control”, but it is less widely cited and not relevant for our purposes here. |
In the ~65 years that have passed since Keith’s article was published, marketing technology has been under constant pressure from developments in technology. In fact, only a few years after Keith’s article was published Gordon Moore made an observation in April 19, 1965 that the number of transistors on a computer chip will double every 18 months (this later became known as Moore's Law). Moore’s law turned out to be surprisingly accurate for the next 60 years, and the constant advancement of technology became the defining characteristic of marketing in that time.
I would propose that we divide the years following Keith’s article in 1960 into three more Eras, distinguished by the dates that critical technological advancements shifted the capabilities available to marketers:
| THE DISTRIBUTION ERA | THE DIGITAL ERA | THE MODERN ERA |
|---|---|---|
| 1960 - 2000 | 2000 - 2020 | 2020 - present |
| Focused on distribution, and inserting your brand into the places where your customers already exist (store shelves, lifestyle magazines, billboards, primetime TV, etc.) | Began with the launch of Google Ads in October 2000 Focused on digital experiences and using browser storage to accumulate vast amounts of user data. |
Began when Safari announced that they will block third-party cookies by default in March 2020 Focused on extracting value from cloud computing (specifically automation, machine learning and generative AI) while defining the standards for managing customer data. |
The Distribution Era (1960 - 2000)
During the Distribution Era, a relatively small number of shared communal spaces attracted large percentages of the population. Large chain retailers like Walmart, Best Buy and department stores boasted of consistently high volumes of foot traffic, and society gathered around a small number of prime time TV shows and summer blockbusters.
Marketers who sought to influence customers during this time had a distribution challenge, because they only had a relatively small number of options for grabbing the attention of the public, and these highly competitive communal spaces could be cost prohibitive. The closest approximation to targeted advertising available during the Distribution Era was magazines, who promoted the demographics of their readers to sell advertising space.
The Digital Era (2000 - 2020)
The Digital Era officially began with the launch of Google Ads in October 2000. Digital storefronts such as Netflix and Amazon rapidly consumed their non-digital competitors, and thousands of consulting firms began offering “Digital Transformation” services to help businesses adopt digital technology.
Marketers at this time recognized that these digital storefronts and marketplaces were able to collect vast amounts of user data (through the use of cookies and other forms of browser storage). The race began to consolidate as much user data as possible into Analytics tools and Data Management Platforms for two purposes:
Reduce wasted ad spend by reaching the right person at the right time with the right message
Calculate the advertiser’s return on investment by measuring an advertisement’s ability to influence customers with multi-touch attribution
As a result, marketing budgets in the Digital Era shifted away from the expensive traditional channels that reached groups of people, and toward the new digital channels where messages could be presented to individuals: search, display and social media. Those marketplaces for buying and selling digital ads became some of the world’s most profitable companies in only about 10 years, with Google and Meta clearly in the lead.
The Modern Era (2020+)
I am calling the current time period the "Modern Era”. In 20 years or so a new Era is likely to begin, and we’ll come up with a different name at that time. The shift away from the Digital Era and into the Modern Era began with two global events that occurred in March 2020:
The COVID-19 pandemic ended “Digital Transformation” by forcing the final remaining businesses who had not effectively adopted digital technology into bankruptcy.
Safari announced that third-party cookies will be blocked by default (the technology that makes it possible target ads to an individual user as they cross multiple websites and collect a log of their digital behavior).
Safari’s announcement caused the Data Management Platforms and multi-touch attribution models that marketers had depended on to measure performance and distribute budgets during the Digital era to become useless overnight, and initiated the hyper-focus on incrementality testing and first-party customer data management that have become the defining characteristics of the Modern era.
The introduction of generative AI two years later would further distinguish the Modern Era from its predecessors by forcing those marketing teams reluctant to embrace cloud computing capabilities to start adding data engineers to their teams.
A Modern Approach to Marketing
Marketers in the Modern Era solve traditional marketing problems by applying incrementality techniques and cloud computing resources in ways that respect user privacy.
Those leaders of the Digital Era who built their success with the tools of the past are now the victims of an environmental change that is forcing them to adapt or lose relevance. There are four principles that marketers who want to adapt to the Modern Era must embrace:
| 4 PRINCIPLES OF MODERN MARKETING | |
|---|---|
| Outcome-Based Measurement Strategy | to abandon the single source of truth in favor of clear goals set by business domain owners. |
| Iterative Decision Making | to progress the business through validated learning without reliance on the personal data of individual customers. |
| Authentic Privacy Strategy | to establish a legal and ethical foundation for managing customer data. |
| Data-as-a-Product | to apply product management principles to create trusted data products that are managed by teams with domain expertise. |
In my next post of this series, I will expand on each of the four principles and share specific examples of how marketers can apply them to solve problems.
