Solving Marketing’s Inventory Crisis

By Paul F. Nunes and Joshua Bellin

Just-in-time manufacturing was adopted shortly after World War II to save companies from drowning in excess inventory as they attempted to capture the benefits of scale while serving too few customers. Marketing organisations can get their own surplus production problems under control today by embracing an analogous approach: just-in-time marketing.

No business is so profitable it can’t be destroyed by bad inventory management. Which is why today’s shorter product lifecycles and rapid technological obsolescence call for even better demand forecasting tools and flexible manufacturing approaches.

But companies also create a great deal of intangible, virtual inventory that puts their overall profitability at risk – that is, when they produce excess marketing.

Just like physical inventory that risks spoiling or becoming obsolete while stacked in a warehouse, excess marketing inventory – product information and vague brand preferences that sit in customers’ minds – yields few long-term returns. Accenture’s Global Consumer Pulse Research has found that consumers are less influenced by branding campaigns than ever before, for example. (See Figure 1, “Recognising Marketing’s Inventory Problem.”)

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In theory, marketers now have cutting-edge digital tools at their disposal to help them better manage waste and excess spending. And yet most companies still overproduce marketing that underperforms. There are two chief reasons for this ongoing problem.

First, marketers continue to prioritise broadcast methods like television, radio and print that push messages towards broad swaths of consumers. Consider, for example, that in 2014 the growth in television ad spending still exceeded the growth in spending on digital video ads (those that appear on computers, mobile phones and tablets). The chief marketing officer of a US auto insurer likens the trend to an “arms race in advertising spend.” However, most broadcast ads will fall on deaf ears (or unseeing eyes) – wasted inventory from the standpoint of the marketing connection being created at a cost, but going undesired and unused.

Second, most companies still treat digital marketing as a slightly better version of a broadcast medium. This can be seen in the shockingly low click-through rates for online advertising: according to research by Google’s DoubleClick, consumers click on only 0.1 percent of all online ads. Marketers are not yet meeting the promise of targeted, personalised, interactive advertising.

How can marketing departments solve their inventory crisis? Clearly, it’s unreasonable to expect companies to jettison every mass marketing technique and instead invest only in tailored and targeted interactions with current or potential customers.

But marketing leaders can get control of their excessive production by applying the thinking behind the approach used by manufacturers in the wake of the Second World War.

The Just-in-Time Marketing Factory

In the post-World War II ramp-up of mass manufacturing, many companies relied on designing products for broad appeal, long-term planning, and overproducing – all in the service of achieving economies of scale. The result was a constant stream of excess inventory. This led to increased waste, reduced flexibility in responding to shifting demand, and a high level of product defects as companies hesitated to slow production.

Starting with Toyota in post-war Japan, many manufacturing organisations boosted quality and reduced waste by adopting a just-in-time (JIT) approach: produce only what the customer demands, at the right time, to the specifications and quality that the customer requires.

Manufacturers became JIT organisations through three related methods, each of which holds a lesson for how marketers can stem the tide of marketing inventory: kanban, kaizen, and total quality management (TQM). These methods enable companies to create only what the market actually requires, with little waste and fewer defects.

Kanban refers to a set of procedures used on JIT factory floors that ensure production at every stage is calibrated to demand at the next stage, all “pulled” from customer demand.

Kaizen refers to an organisational mindset where everyone – from executives down to assembly-line workers, are continuously improving processes and practices to eliminate waste and enhance quality; improvements are studied and adopted based on small-scale innovations.

Total quality management refers to a firm-wide commitment to stopping defects early in the process, ensuring that no manufacturing defects make it through to the next stage of production – let alone to the end customer where they are increasingly costly to fix.

To solve their own inventory problem, effective marketers are now adopting the mantra of JIT manufacturers: produce only the marketing that’s required, at the time that it’s needed, with the exact message or offer that will convert a sale. Our research and recent experiences with clients suggest that those three JIT principles are beginning to underpin successful marketing organisations, and will continue to do so in the coming years – especially as companies increasingly shift toward a digital focus in their marketing. (See Figure 2, “Principles of Just-in-Time Marketing.”)

Apply Kanban to Achieve Targeted Pull

Using Kanban methods, leading marketers are creating pull, primarily with consumers who are already inclined to purchase in the product or service category. By doing so, they’re able to significantly cut down on wasted time and effort.

Take, for example, Delta Airlines’ approach to selling group travel. Delta could have launched a broad marketing campaign extolling the ease and value of group bookings on Delta. Instead, the airline provided select prospective group travelers with a tool which spread virally through social media – a popular Facebook application called “Away We Go” that the company launched in 2011.

The app addressed a pain point for group travelers: planning and booking trips – like “spring break” or family reunions – when destinations are up for discussion and the exact group of travelers hasn’t yet been pinned down. The planning tool helped by adding structure to group decision making, allowing users to invite friends, keep track of who’s coming, organise and share everyone’s trip details, create a calendar of activities, and post comments on specific topics. And, while on the trip, users could share updates and photos with their broader network.

Delta’s application, which was accessible to every Facebook user, not only eased the pain of group travel planning – it also directly led to new flight bookings on Delta without an outsized marketing campaign.

Other companies are also discovering the benefits of a kanban approach. Cosmetics retailer Sephora maintains boards of pictures on Pinterest that show its staff’s favourite beauty products. These “It Lists” attract consumers who, whether searching out or following these lists on the social media site, are looking to be inspired by pictures and discover new products.

Targeting this service at highly engaged consumers has been extremely effective. In fact, according to the company, Sephora’s Pinterest followers spend 15 times more money on Sephora.com than the company’s Facebook followers. The company’s head of digital, Julie Bornstein, explained in an interview that “the reality is that when you’re in the Pinterest mindset, you’re actually interested in acquiring items.”

Cultivate a Mindset of “Kaizen” For Continuous Marketing Improvement

Consider how car rental giant Hertz continuously improves its loyalty programm by refining its customer insights. These insights, put to use in all channels – whether an interaction occurs through call centre agents, counter terminals, handheld devices or the Hertz website – persuade customers to take up personalised offers at higher rates.

The company has improved its analytics system to the point where the accuracy of these offers continues to improve. Deals are suggested not only based on the profitability of the promotion, but also on a customer’s record of taking certain kinds of promotions over others. A customer who would be qualified for a “buy one, get one free” deal may still receive a different – perhaps even less profitable – offer if, in the past, she had turned down similar entreaties. The company understands that a promotion can only be as profitable as a customer’s willingness to take it – and an unwilling customer represents a wasted opportunity. That’s why offers are continually calibrated to a customer’s behaviour, in a way that all customer-facing channels can instantly use.

The benefits for customers are clear: in 2014, Hertz was chosen as the car rental favourite in a large survey on website TripAdvisor. It is also Zagat’s top pick for Customer Loyalty Programm two years running, and has received the Flyertalk award, bestowed by one of the top frequent-flyer discussion forums.

Hertz is not alone in its dedication to continuously refining marketing practices. Take flash sale e-commerce site Gilt. The company nets approximately 25 percent of its total sales from email clicks, which means that it is extremely interested in continually improving how emails are targeted to its members. The company sends out more than 2,500 automatically generated versions of its daily sale emails; more traditional retailers typically send about 50 versions of an email. Gilt has found that tailoring emails based on a user’s input – for example, their interaction history and the user profiles they create – drives 30 to 50 times more revenue “lift” than emails that don’t account for user feedback. And, targeting promotions based on a customer’s shopping behaviours drives up to 20 times revenue lift as compared to generic emails.

Assure Total Quality Management of Customer Interactions

Any flawed customer interaction anywhere in the company is tantamount to a customer experience defect. Top marketers increasingly recognise that achieving total quality in every customer interaction is one of the most effective marketing techniques in the digital age.

Las Vegas-based Zappos.com, an online shoe and clothing shop, puts this idea into practice. Exceptional customer service is, in effect, the company’s primary marketing function. It drives repeat purchases and word-of-mouth acclaim. Zappos maintains a well-recognised commitment to achieving what it calls “wow customer experiences.” For example, unlike most businesses the company measures customer outcomes rather than call throughput at its call centres.

Zappos has built a trusted reputation that it could not have achieved through traditional marketing campaigns alone. In fact, the company’s cultural commitment to total quality in customer interactions means that the retailer needs to spend relatively little on traditional broadcast marketing methods.

Similarly, web application company Basecamp considers its dedication to perfect customer interactions as the essence of its marketing. For years, the company had no formal marketing department at all. Co-founder and president Jason Fried explained his philosophy in an article in Inc. magazine: “Customer service is marketing. So is product quality. The phrasing of that error message, what you call that button, how you greet your customers – it’s all marketing.”

Putting JIT Marketing into Practice

Many marketing departments are not organised effectively to put these JIT principles into practice.

That’s because they’re often structured around the core activities of the old marketing model – advertising, promotions, and marketing research, to name three. It’s difficult for such organisations to overcome the notion that each function has separate objectives; for example, that advertising should achieve reach; that promotion should convert sales; and that research should underpin the design of long-term marketing campaigns. This traditional approach becomes even more muddled when digital efforts – with social media, for example – are offloaded to specialists in their own silo.

In a JIT marketing organisation, by contrast, these activities are inseparable. Through our analysis of Accenture’s work with clients that are building interactive marketing organisations, we’ve seen that leading-edge companies are breaking old habits. They are reorganising their marketing either around distinct product and service categories – or, often better, around distinct customer segments whose interests and behaviours span categories. Then, to reduce costs and improve effectiveness, three pools of talent are supporting each of these marketing groups. In fact, some are finding these specialised skills so critical that they are organising these talent segments into more formal divisions.

The first talent segment is comprised of creatives and programmmers, tasked with designing messages and experiences that create targeted pull – in other words, applying kanban to marketing. Take Nike’s Digital Sport division, a dedicated team of engineers, programmmers and marketers whose mission is to increasingly shift Nike’s advertising into the digital realm, where it can attract customers to the brand through ongoing customer interactions – sometimes over social media, and sometimes through a new line of digital sports devices that log their user’s performance data.

As CEO Mark Parker told Fortune Magazine, “Connecting used to be, ‘Here’s some product, and here’s some advertising. We hope you like it.’ Connecting today is a dialogue.” As a result of Digital Sport’s trailblazing efforts, Nike managed to reduce their “push” advertising in print and media by 40 percent over three years, even while the total advertising budget increased.

A second useful new talent segment is made up of data scientists who design platforms for real-time analytics and improved promotional targeting, making marketing kaizen a reality. Woolworths, the largest supermarket chain in Australia, grew such a team by acquiring a 50 percent stake in data analytics firm Quantium. The director of the company’s multichannel strategy, who was also responsible for logistics, IT, and customer engagement, headed the expanded group.

That placed the analytics group not only at the centre of marketing, but at the centre of all the company’s customer relationship efforts. As one analyst told Australian publication BRW, the resulting improvement to promotions that the group could now achieve “means better profits, more long-term relationships with customers and less wasted marketing.”

The last segment we observe is made up of quality assurance specialists who ensure the consistency of customer interactions in the marketing, sales and service functions – in other words, the total quality of the customer experience. A team at a leading financial services giant, for example, uses technology provided by innovative startup Sprinklr to achieve high-quality interactions with customers over social media.

Surveys show that, for many companies, interacting over social media tends to be ad-hoc if not outright undisciplined. The Sprinklr platform, by contrast, allows the company to rigorously follow posts about their offerings in real time. It enables them to move conversations that begin on Facebook or Twitter into secure sales or support channels that retain the context and the continuity of the discussion. The result: improved customer loyalty, cost savings from call deflections, and revenue from new sales.

Not all marketing departments are ready to take this organisational plunge. Indeed, not every marketing department needs to – just yet. But those that have dramatically reduced their creation of marketing inventory are finding themselves more nimble than their competitors, and better able to change their marketing approach quickly. That gives them the opportunity to focus on their individual customers: how their preferences are changing, which channels they prefer, and how best to engage them.

Doing that at scale isn’t easy, even with the best digital tools on the market. But, as manufacturers can tell you, it’s been done before.

About the Authors

Paul F. Nunes is global managing director of the Accenture Institute for High Performance.

Joshua Bellin is a research fellow with the Institute. Both are based in Boston.

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