Marketing Decisions Still Made With More Guts Than Brains
This article shares findings from a survey of marketing executives and their decision-making approaches - intuitive judgment versus data and research-based.
We are always intrigued by the decision-making habits of marketing executives. What kind of process, for instance, led to Wal-Mart's decision to move upscale when its positioning for years had been "Always Low Prices?" Or what were the inputs as marketers at VW concluded they should switch the advertising strategy for the brand for the FOURTH time in 18-months? OK, we're going a bit negative here, so how about the flip side to these, in our minds, more questionable marketing moves. What kind of process led grocery store chains like Kroeger and A&P to decide, instead of trying to copy Wal-Mart's price-centric strategy, to differentiate themselves with a better shopping experience, product selection, and convenience? How did Constellation Wines, the largest wine business in the world, arrive at the decision to grow their market share and move more product by providing their B2B customers—liquor stores, restaurants, and bars—with richly detailed profiles of different wine consumer segments, including how to market to them to maximize sales? Is there something—a particular style, an approach, a mentality, a tool, a person—that seemed to make the difference between moving the firm closer to, rather than further away from, its sales and profit growth goals?
Over the years, we've come across studies that report on the decision-making habits and capacities of businesses in general. Bain & Company, for instance, in a survey of 350 global organizations found that nary 15% of companies practice effective decision making. But we wanted to know about marketing executives specifically, so posed a series of questions about decision-making habits to 256 of them. We asked about two basic decision-making approaches: using personal experience, intuition, and judgment vs. data and research to make a decision. The results were, in three words, kind of confusing.
A clear majority agreed that they have "confidence making marketing decisions based on my own sense of what customers will respond to" (66%) and 62% said they "tend to make decisions quickly based on my judgment and experience. Half say they "agree with Malcolm Gladwell in his book Blink when he argues that senior marketing managers should rely more on intuition and judgment in making major decisions and avoid becoming mired in data." At the same time, 81% of marketers also said they approach decision-making "deliberately, examining available data before making a decision." Sixty-seven percent agreed that "although large scale quantitative studies take a lot of time and money, they really improve decision-making." More than half nodded their heads, yes, absolutely, "we need to conduct more quantitative research studies" than is currently the case at their company (58%).
A surprising (to us) 39% concurred, "for every major marketing decision that needs to be made, there are tens, sometimes thousands of alternatives. Hard data—not intuition—is required to identify the ones forecast to be the most profitable." While a minority (27%) reported that "rigorous analysis of unimpeachable data is what leads to marketing success," a minority (41%) also say they "rely more heavily on intuition and judgment than research and science."
Our interpretation of this kind of mixed-message results? Marketers seem to be on to the fact that they need to adapt to the demands of CEOs and CFOs for proof of performance. Traditionally, marketers have resisted conforming to the analytic, fact-based approach to decision-making that is standard practice in virtually every other critical strategic business function—from finance to information technology to operations. Their resistance is understandable—there is a creative element to marketing and the concern that numbers and data might overwhelm the creative process is certainly valid. Perhaps marketers are a bit uncertain how to integrate research into the decision-making process—it's not always crystal clear how to make information actionable for a business. Or perhaps old habits just die hard—the prevailing mentality still seems to be "there is risk and intuition and gut involved in this [marketing] business. You can't fight it. Everybody wants to test everything—but the thing is you're talking about creativity and what will move someone. You've gotta have guts," as David Lubars, the new chairman and chief creative officer of BBDO North America, summed up on National Public Radio.
While we hear more about companies doing some level of research as part of a strategy development process—a good thing—it's still routinely celebrated when a marketer proudly announces he or she went with their gut, research be damned, and happily met with success. It's not described as reckless, unnecessarily risky, just plain bad, or dumb luck that it was successful—it's no gut, no glory. We certainly don't hear of too many marketers who run a background check on their hunches on a regular basis or see much evidence that marketers are putting their money where their mouth is when it comes to actually spending on all the research they say they want and need to do.
Take sponsorships and event marketing as an example. According to the IEG Sponsorship report, North American companies plan to spend $14.9 billion on sponsorships in 2007, an increase of more than 10% from the year prior and outpacing growth in spending on traditional media. With all this spending, you'd think companies would have in-depth knowledge of the effect of sponsorships on sales and brand equity. Yet according a different IEG study—the Performance Research Sponsorship Decision-Makers Survey—"sponsor spending on research to determine the impact of partnerships lagged behind the lip service typically paid to wanting to measure ROI." In fact, only one-quarter of marketers spend more than one percent of their rights fees on research. A startling 81% did not have a dedicated budget for either evaluating opportunities or measuring results. In other words, they can't say for certain that it worked any better than the :30 second TV commercials or print ads that it likely replaced.
Taking a more fact-based approach has to be more than words if marketers have a chance of meeting CEO expectations for performance and accountability.