Tom Asacker: Unknown on insight

The Business of Belief: Why We Believe What We Believe in Business and Life

Top posts

Unknown on insight

"Insight is in the mind of the beholder." Okay, I just made that up. But it's true.

I'm on my way to Orlando to present at the Association of National Advertisers Masters of Marketing Annual Conference. In order to better empathize with my audience, I picked up a recently released book that is referenced frequently by ANA members and staff: What Sticks - Why Most Advertising Fails and How To Guarantee Yours Succeeds.

It's an okay read. I didn't experience any metaphorical light bulbs illuminating over my head, except when I read this, from the foreword by Steven Levitt of Freakonomics fame:

   Two kinds of problems exist in business: messy ones and neat ones. Inventory forecasting is an example of a neat problem. You can go in and count the inventory in the morning, then count it again in the evening and calculate the depletion and replenishment needs, model inventory and data, and become more efficient. It might not be easy to develop the tools for optimal control of inventory, but at least the problem is well defined and everything is easy to measure.
   Then there are the kinds of problems I like: The messy ones where it is hard even to know what the right questions are to ask. And once you ask the right questions, figuring out how to answer it isn't easy either. These are the kinds of problems that people tend to fall back on conventional wisdom to answer, but these are also precisely where conventional wisdom is most likely to be wrong.
   Marketing falls into the messy category. It is messy because there are lots of variables such as competitive spending, unobserved fluctuations in demand, and a complex array of intersecting media.

Sounds reasonable, right? But it's not. And it's not, because the author is comparing an outdated paradigm called "inventory control" to another outdated paradigm called "advertising." Let me try to explain.

Once upon a time, companies used to employ various statistical methodologies to attempt to predict and, thus, plan for inventory needs. Since many variables exist which effect those requirements, like inventory lead times, fluctuations in customer demand, shrinkage, and other "messy" ones, companies eventually changed the way they looked at inventory; a paradigm shift (actually, the Japanese changed the paradigm by necessity, and everyone else followed their lead. But that's another blog post for another day).

So here's what stuck: Instead of trying to predict and control inventory by pushing it onto the shelves, companies got as close as they possibly could to the customers' real-time needs and let them pull it into the manufacturing plants and shopping baskets. This "Just-in-Time" strategy resulted in many benefits; huge reductions in inventory which freed up capital for more prudent investments, reduced obsolescence costs, improved quality, speed to market, etc. Just ask Michael Dell.

So even though the inventory forecasting problem appeared to be a neat mathematical one, a radical shift in thinking substantially eliminated it. The same kind of paradigmatic shift is required in the field of marketing (it's starting to happen in the online world). Instead of pushing advertising at people, and developing ever more sophisticated methods for modeling and measuring its effects, we need to get closer to our customers and help them pull us towards them and their needs.

Levitt has it wrong: people don't simply fall back on conventional wisdom to answer hard problems. They fall back on conventional wisdom to answer every problem. That's why it's called "conventional wisdom." Don't look for breakthrough insights in outdated processes like "inventory control" and "advertising." Instead, study those businesses that actually broke with conventional wisdom and discovered new ways to get closer and closer to the customer. And for the record, I am not saying "don't advertise." Not advertising is like winking at a beautiful girl in a dark room. YOU know what you're doing, but she hasn't a clue.

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c684b53ef00d834b9af3453ef

Listed below are links to weblogs that reference Unknown on insight:

Comments

Tom

A good point well made. But customer-pull is difficult.

Dell is a good example of limited complexity products built-to-order. Tesco is a good example of standard products stocked-to-order. And Toyota's lean aftersales parts business in Japan is considered by most to be the best example of customer-pull today.

However, most companies still can't get customer-pull right. Not in logistics, not in marketing and certainly not in innovation. The Toyotas, Tescos and Dells are still the exception.

Perhaps there is some hope in recent developments in customer co-creation: to drive innovation, marketing, sales & service. Perhaps the new Dells, Tescos and Toyotas of the world will be joined by companies like P&G, Mini & Mastercard, who are all experimenting with customer co-creation.

Graham Hill

Posted by: Graham Hill | October 06, 2006 at 09:33 AM

Mr. Asacker
You got it right! It's about getting close to customers to define their needs and wants. Do you know why the Toyotas are doing so well at defining their customers’ needs? Remember, it's all connected and I would take a chance and say look at Toyotas CSR (Corporate Social Responsibility) program. Through this program, Toyota and I'll even say ABN AMRO is right out there in their market. They talk to their customers and in turn, they receive information while "doing good in the 'hood". Instead of sitting on information they take it right back to the plant or institution to create and sell products people actually want and/or need.
Secondly, take Dell for instance,
The art of Direct Marketing isn't lost on this PC giant. Custom designed PCs - now there's a concept. And I can design it in the privacy of my own home while keeping an eye on my budget too! whoa "Dude, I'm getting a Dell" If anyone doesn't know how to get close to their customers in this day and age, they are clearly living in a cave - and even Geico has employed internet technology so cave men can get a good insurance rate.

All jokes aside, we have gone back to the future, where a company representatives have to be able to stand behind their products - and give us what we want not what they produce.

Posted by: Mel | October 09, 2006 at 04:13 PM

Putting consumers and advertisers on an equal footing is the whole premise of MyMindshare (http://mymindshare.com) , a consumer advertisig cooperative.

Instead of pushing and pulling in one direction or another, the advertisement itself (an the attendent mindshare) is the subject of a transaction, negotiated and entered into voluntarily and beneficially by both parties.

Posted by: Jim Bursch | October 10, 2006 at 08:59 AM