In the mid 1990’s, Tom Patty, President and World Wide Account Director for Chiat/Day, the hottest advertising agency of its time, authored a superlative treatise on the urgent changes necessary for marketing to be viable in times of dramatic change.
He even addressed the topic to the travel industry when he presented the keynote address at the 1995 Travel and Tourism Research Association meeting in Bal Harbour, Florida. His target? Marketing’s venerable Five P’s:
If you were thinking there were only Four P’s (excluding packaging) you are really out of touch. The Four P’s were introduced as the key elements of the marketing mix in 1960 – times have changed… your business school really should have invested in new textbooks.
If you happen to be a bit more cutting-edge, you may even subscribe to the concept of adding a Sixth P – People – to the mix. (This has been an integral component for social computing strategists.)
Fifteen years ago however, Patty proposed that a completely new approach to marketing was required to shift from a product orientation to a brand orientation.
He highlighted four key factors necessitating the need for marketing revolution –
- Globalization of Competition
- Real-time Technology
- The Demand for Agile Management
- Changing Economic Structures
Those issues sound a lot more like 2010 than 1995.
So, with the 2010 PhoCusWright Conference‘s theme “Chaos Calls, Navigating the New,” there is no better time to revisit Patty’s wholly original and still relevant case that the New Five P’s should be:
After successive acquisitions, site updates and the passage of time, the original Chiat/Day website and Patty’s inspirational document has seemed to have eluded Google’s extensive index.
As a public service, the document has been recreated in its entirety from an old printed copy from my files. Hopefully the document will provide marketers with a renewed vision of the future – not just from a 1995 perspective, but one that may be even more applicable in 2010.
Mastering the New Five P’s of Marketing
by Tom Patty
President, World Wide Nissan Account Director
How Not to be a Casualty of the Revolution
“It was the best of times. It was the worst of times.”
That’s how Charles Dickens began his novel entitled A Tale of Two Cities and it’s a perfect description of our current state of affairs.
These are “the best of times” because, as we advance into the twenty-first century we will encounter many, many exciting opportunities in all areas, from new forms of distribution systems to new kinds of communication systems — like interactive television.
These are “the worst of times” because rapid change is always unsettling.
Clearly we are in the midst of a revolution. Former Secretary of State Lawrence Eagleburger compared this period of change to that following the French and Russian Revolutions. The interesting point about this particular revolution is that we are really in the midst of several revolutions at once.
- The first revolution is globalization. This revolution is not something that is just happening in Detroit or California or even the United States. This revolution is widespread — from Tokyo to New York. From Beijing to Paris. What globalization means is that we are competing with everyone, everywhere in the world.
- The second major revolution is in the area of technology. This is not an abstraction; it is something that touches all of us. Computers and electronics have altered everything about our lives: The word processor has replaced the typewriter; the ATM machine has replaced the bank teller; electronic mail and voice mail have given us the ability to communicate with anyone, anywhere, 24 hours a day. It used to be that only doctors were on call 24 hours a day; now everyone is.
- A third revolution is happening in the area of management. Today’s management buzz words are reengineering, downsizing and eliminating hierarchy. In today’s management revolution, small, flexible organizations have the advantage, while large, cumbersome bureaucracies are finding it more and more difficult to retain a leadership position.
- Finally, we are undergoing a revolution in our basic economic structure. The essence of this change is a shift from hardware to software. This is a shift from factories and capital-intensive assets to knowledge-workers whose primary assets are ideas — not bricks and mortar. One way to put this in perspective is to realize that in the hardware business of computers it took Apple Computer ten years to grow from zero to a billion dollars in revenue. In the software business of ideas, movies and licensing, it took Jurassic Park less than one year to reach a billion dollars in worldwide revenue.
Revolution — Chaos, ChangeYogi Berra summed it up best when he said, “The future ain’t what it used to be.” Of course, the exciting part of this enormous change is that revolutions produce victors as well as victims.
Victims vs. Victors of the Revolution Victims Victors IBM Akers Microsoft Gates GM Stempel Chrysler Iacocca
Sears Brennan Walmart The
While Akers was removed from IBM because of a spiraling decline in growth and profits, Bill Gates at Microsoft was amassing double digit increases in revenues and profit. While Stempel watched the market share of GM erode from 35.6 to 34.2 percent in three years, Iaccoca and Eaton increased Chrysler’s market share from 12.3 to 14.5 percent. While Sears was struggling, Walmart was flourishing.
So what’s the difference between the victors and the victims? In order to be a victor, one has to master the New 5 P’s of Marketing.
As most of you know, the traditional 5 P’s of Marketing include the elements of Product, Price, Packaging, Place and Promotion. Armed with a strategy in each of these areas, a person can put together a marketing plan.
In the packaged goods category, the general belief is that the fifth “P”, Promotion (which includes positioning, advertising, sales promotion and public relations), accounts for about 90 percent of the marketing equation. In the automotive category, on the other hand, the Promotion component is seen to be much less important. In fact, according to Ben Bidwell, former president of Chrysler Corporation, in automotive marketing, “Advertising accounts for only 10 percent of the marketing equation…and that’s only if it’s bad.”
In the automotive category, the picture of the 5 P’s of Marketing is very different from the one we saw in the packaged goods model. Here, Product and Price are the two key marketing elements, with the promotion component only a small percentage.
Now that we have reintroduced you to the traditional 5 P’s of marketing, we need to translate some of these 5 P’s into the automotive vernacular.
- Product is obviously the vehicle.
- Place means everything about the distribution system — the number of dealers, the geographic location of the dealers, the strength of the dealers, etc.
- Pricing includes MSRP as well as repricing activities such as rebates, incentives or leasing subsidies.
- The Packaging P takes a bit more explanation. Sometimes automotive companies drop this P altogether and limit themselves to the 4 P’s of Marketing. However, my contention is that the Packaging element for automobiles will become increasingly important. This is the software, not the hardware component of the business. Packaging includes the in-store environment, the total ownership experience and other elements such as warrantees and after-sales service. Both Saturn and Infiniti have enhanced their marketing activities by focusing on these Packaging Elements.
Why New Age Requires New 5 P’s Old New Stability Chaos Fast Growth
Less Competitive More Competitive
In the past, these Traditional 5 P’s of Marketing served marketers well, but today’s environment requires a new set of 5 P’s of Marketing. The old 5 P’s were based upon a world dominated by stability, a fast growing economy and much less competitive environment. We need a new set of 5 P’s to help us succeed in a world where chaos has replaced stability, where the fast-growing economy has slowed and a global competitive environment demands even greater improvements in effectiveness and efficiency. The New 5 P’s of Marketing include words that are more abstract and conceptual than the tangible hardware of the traditional 5 P’s. The new 5 P’s include Paradox, Perspective, Paradigm, Persuasion and Passion.
The first P is Paradox. In the automotive world, just as in the world at large, we are surrounded by paradox. In fact, I started this paper with a paradox — “It was the best of times; it was the worst of times.” Good managers and leaders must master paradox. We must master short-term objectives without diminishing long-term results. We must have a global perspective, and focus on the details.
One of the most interesting paradoxes in the automotive world is the fact that though advertising represents only 5 percent of the marketing equation, so much time, energy and effort are spent in changing advertising agencies. Why did 18 automotive companies put their advertising account into review during the past 24 months? Clearly this is a paradox.
The European automotive companies were especially active. Virtually every European automotive account changed agencies in the past 24 months. The real paradox, of course, is that the more things change, the more things stay the same. Volvo’s old ad agency — Scali, McCabe, Sloves — is now Mercedes’ new agency.
European Agency Reviews/Changes Nameplate Length of
Alfa Romeo 5 Years Ross Roy Conquest USA BMW 18 Years Ammirati & Puris Mullen Jaguar 6 Years Geer DuBois Oglivy & Mather Mercedes Benz 10 Years McCaffrey & McCall Scali, McCabe, Sloves Porsche 6 Years Fallon McElligot Goodby, Berlin & Silverstein Saab 2 Years Lord Einstein Angotti, Thomas, Hedge Audi 2 Years DDB Needham McKinney & Silver Volkswagen 34 Years DDB Needham Berlin Wright Cameron Volvo 23 Years Scali McCabe Messner Vetere Berger
By comparison, the Asian Automotive companies looked pretty stable with only three agency changes, and one of these — Infiniti — could be considered a consolidation — putting the two Nissan accounts at the same agency.
Asian Agency Reviews/Changes Nameplate Length of
Isuzu 11 Years Della Femina, Travisano Goodby, Berlin & Silverstein Infiniti 3 Years Hill Holiday TBWA Chiat/Day Subaru 2 Years Wieden & Kennedy Temerlin McLain
Among the domestic manufacturers, Jeep consolidated its account at Bozell, and Oldsmobile — after a three month review — decided to stay with its agency of 60 years, Leo Burnett.
Domestic Agency Reviews/Changes Nameplate Length of
Jeep Eagle 6 Years CME Bozell Oldsmobile 60 Years Leo Burnett Leo Burnett
The real paradox is that frequently, even after all the changes are made, the same people end up working on the business. This has been especially true for Jeep, where essentially the same people have worked on this piece of business despite three different names on their business cards.
But, what does this tell us about how to master paradox?
The most interesting thing about paradox is that paradox always contains within it an opportunity. In order to master paradox, you first have to find or identify this opportunity and then exploit the paradox. Clearly, the opportunity created by all the agency reviews and changes was an opportunity for smaller agencies to get a car account. But let’s look at another automotive paradox and see how we can master it.
The paradox is: All cars are the same; all cars are different.
The opportunity within this paradox is to exploit the differences between cars in order to create a unique identity for your product. In fact, one definition of a brand is that you can’t get it anywhere else. Whether it is a Rolex watch or a Polo shirt or an Infiniti Q45, part of the brand is this uniqueness, this special quality that sets it apart. One way to create this unique identity is to be the first of something. According to Trout & Ries, “The basic issue in marketing is creating a category you can be first in.”
Let’s look at some examples of marketers who have used paradox to help them create a category they could be first in.
- Miller used the paradox of Lite Beer to help them create an identity by focusing on the dual benefits of the lite beer paradox — “Tastes Great, Less Filling.”
- Everyone knows what a sports car is, but Nissan used paradox to create a new category of sports cars in which it could be the first — Four Door Sports Car.
- Similarly, Nissan used paradox again by introducing the Altima as the first “Affordable Luxury Car.” A paradox. A new category. A first.
- For years, advertising has told us that trucks are tough and rugged and durable, while cars are comfortable, luxurious and safe. Now, the new Dodge Ram exploits the paradox of combining many of these car features with the rugged look and performance of a Mack Truck.
These are just a few examples of how marketers have used paradox to help them create a unique identity for their product or brand.
The second P is Perspective — the ability to see things in their proper relationship to each other. In today’s business environment, it is essential to have the proper perspective. Allan Kay — one of the founders of Apple Computer — said that “perspective is worth 80 IQ points.”
For many years, automotive executives have had problems with perspective. They believed that their perspective — the manufacturer’s perspective — was a valid perspective. For years, automotive executives in Detroit refused to treat the imports seriously because it didn’t fit into their perspective. But today we know that the manufacturer’s perspective is not the proper perspective. Today we realize that we must look at every issue — whether it’s a product issue, a pricing issue or a distribution issue — from a consumer perspective. The only valid perspective is the consumer’s perspective.
To master this consumer perspective, each of us needs constantly to ask ourselves, “What business am I in?” This sounds like such a simple question, but it isn’t. Are we in the automobile business, or are we in the business of satisfying people’s personal transportation needs? The way we answer this question will determine our perspective. If we believe we are in the car business, we will tend to focus on the hardware, whereas if we believe we are in the business of providing solutions to personal transportation needs, we will tend to focus more on the software issues. We will try to spend our time devising solutions to consumer transportation problems.
Similarly, as it relates to advertising, are we in the advertising business or are we in the persuasion business? I strongly believe we are in the business of helping clients persuade consumers to think or to do something. A good way to get a handle on the question of what business we are in is to ask ourselves, “What fundamental consumer need does my product or service satisfy?” And then ask ourselves, “How does my product satisfy these needs differently and better than my competitors?” In today’s environment, in order to be a victor instead of a victim, everyone must spend a lot of time and energy answering these questions — not once a year, when we do a marketing plan, but everyday. This is the only way we can maintain a proper perspective.
The third P is Paradigm. By now everyone knows that a paradigm is a pattern, a model or way of doing things. But knowing what a paradigm is, is not enough. The most critical thing to understand about a paradigm is that in a paradigm shift, everything goes back to zero. What does that mean? It means that whatever made you successful in the old paradigm may not even be necessary in the new paradigm. For example, if you are the best blacksmith in the world, these skills don’t help you when the paradigm shifts from horse-drawn carriage to the automobile. In order to master the third P, Paradigm, you must be able to identify the paradigm shifts that are going on around you and position yourself accordingly.
The automotive paradigm has been dominated by hardware. Success had gone to those who mastered the hardware part of the business. Now, certainly, it is likely that hardware will continue to be the significant factor in automotive marketing. But it seems that a new paradigm is emerging that places greater emphasis on the software components of the business. Clearly the GM credit card is about software, not hardware. I would argue that the increase in percentage of vehicles leased versus purchased also represents a shift to a more software-oriented paradigm — with the emphasis on “satisfying my personal transportation needs” rather than on owning an asset.
Certainly the marketing bundle for Saturn reflects a new automotive paradigm. Instead of believing that product and price are 75 percent of the marketing equation, Saturn believes that the major components in their marketing bundle are software issues like the experience of buying and owning a Saturn. They place much less emphasis on the product and much greater emphasis on the experiential components.
There are also different advertising paradigms. In the hardware paradigm, the advertising has a simple task: “Show the car” and communicate the product features and benefits. We call this the Model Advertising Paradigm.
A very different paradigm is called the Brand Advertising Paradigm. Again, Saturn is a very good example of this. In this paradigm, the task is to communicate who and what you are.
Another set of automotive paradigms is the difference between the way consumers approach the luxury segment versus the way they approach all other segments. It could be argued that the consumer paradigm for virtually all luxury products works this way. Whether it is a Rolex watch or an Armani suit or a Mercedes Benz, the consumer asks, “How much Mercedes can I afford?”
The way to master Paradigm is first to identify the paradigm shift and second to make sure you are positioned to take advantage of the opportunities presented by this new paradigm.
Now we have come to the fourth P, Persuasion. Persuasion is the ability to “induce someone to do or to think something.” The science of persuasion — like the science of medicine — assumes an understanding of the means by which you can induce someone to think or do something. In the same way, the science of medicine assumes an understanding of how the human body works and what can be done to induce health or eliminate illness.
Arguably, anyone in a marketing or sales job is in the persuasion business. But advertising agencies are most certainly in the persuasion business. In partnership with our clients, the role of an advertising agency is to help the client persuade potential consumers in the target audience either to think or to do something. In order to be a master of persuasion, a person needs to understand the three essential components in any attempt to persuade. They are:
- The credibility of the speaker
- The content of the message
- The involvement of the audience
Let’s take a look at each one of these elements in turn.
- The first and most important element in an attempt of persuasion is the credibility of the speaker.Bert Decker, a famous speech coach, has an interesting book entitled You Have To Be Believed To Be Heard. His basic thesis is that before you can begin to be persuasive, you have to be credible — you have to be trusted. This is one of the biggest problems we face in the advertising business. Advertising has a credibility problem. According to the last Yankelovich Monitor, only 8 percent of the people say they believe advertising. This is down from 10 percent just four years ago. In fact, the only source of information that has less credibility and trust, according to Yankelovich, is a car salesperson, with only 4 percent — down from 15 percent four years ago.
Look what happened to Audi. After the 60 Minutes program on unintended acceleration, Audi’s credibility vanished overnight — and so did their market share. Hyundai is another example. Their credibility was damaged by poor word of mouth about quality problems. As a result, their sales fell 100,000 units in one year.
Credibility and trust are emotional, not rational things. You can’t make someone trust you. You have to earn it over time. Some manufacturers want instant trust and credibility. It just doesn’t work that way. One of the more interesting aspects about credibility as it relates to advertising is the fact that the more credible the speaker is, the less information you need to supply in order to persuade someone. Look at Honda advertising as an example. The Honda brand has a lot of credibility. Consequently, the advertising tends to be very simple and sparse. For a brand with less credibility, you need to provide more content, more information in order to be persuasive.
- The second element in persuasion is the content of the message. The content includes the positioning of the product.The content of the message needs to address the issue of what consumer need or desire does this product satisfy and how does it do this differently and better than its competition. Remember, consumers do not buy products; they buy solutions to their problems. They buy holes, not drill bits; they buy hope, not perfume; and, in the case of the railroads, people wanted an efficient, safe, fast means of transportation, not a railroad.
- The third and final element in any attempt to persuade is that you must understand the motivations of your customers so that you can create an emotional connection with them.
In order to be an effective persuasion partner, the agency must not only understand the mechanics — the means of persuasion — but must also know how to select the right tool from the persuasion tool bag. For example, if a brand has a credibility problem, the most effective persuasion tool might be public relations because people tend to believe and trust what they read in the newspaper or see on TV news broadcasts. On the other hand, one must remember that while public relations has greater credibility than advertising, it is very difficult to control the content of the message in public relations, whereas in advertising, you get complete control of the content.
Who is doing persuasive communication in the automotive arena? Certainly the Dodge Ram commercials excelled in having incredible content of the message.
- First truck with air bags
- First truck with ABS
- First truck with storage bins behind seat
- First truck to provide bold aggressive look of an 18 wheeler
The Nissan Altima campaign was designed to take consumers through a logical step-by-step process providing reasons why they should consider the Nissan Altima and positioned this vehicle as the affordable luxury sedan. The advertising first focused on the Altima’s unique styling and next on the special features that it shares with cars costing twice as much. And finally, the advertising revealed a starting price of under $13,000. This was an attempt to provide consumers with information and credibility in an emotional context that would be persuasive.
Saturn’s advertising, as we said earlier, operates in a different paradigm. But it is very persuasive. The purpose of this advertising is to create an image for the company: “Saturn — a different kind of car company.” Instead of focusing on the hardware elements — the features and benefits of any particular vehicle — the advertising focuses on the emotional, human benefits of dealing with their company. By doing this, the advertising is able to create a strong emotional connection with the audience.
The fifth and final P of marketing is Passion. Passion is a strange word to find in a paper on Marketing. You may be asking yourself, “What does Passion have to do with Marketing?” It’s understandable why you might ask this question. If you looked to the marketing giants like Proctor and Gamble or any of the packaged goods marketers, you would not see too many examples of Passion.
In the old marketing world, passion was simply not very important. In fact, it was considered to be a negative. We left our passion at home when we went to work. In fact, “work” used to be a place you went rather than something you did — as in the phrase “Daddy’s gone to work.”
But in today’s environment, work has to be more than just a place you go, and passion has to be something you take with you — everywhere you go. You have to have a passion for what you do. In order to succeed, in order to capitalize on the opportunities of the 21st century, you have to believe in what you do. You have to have a passion for it.
I am passionate about my belief that there is only one objective — to develop exciting communication that persuades a consumer to visit a Nissan dealership.
The new paradigm is that we are all soldiers in the same army. That is the passion that I have.
Let’s review the New 5 P’s of Marketing.
The world is changing fast, and if we’re going to take advantage of the opportunities ahead, we need to master the New 5 P’s.
- You have to master Paradox. You have to look for the opportunity and exploit the paradox. Remember the examples we used — the Four Door Sports Car or The Affordable Luxury Sedan — where paradox was used to create a new category for a product, making that product the first.
- You have to have the right Perspective. The manufacturer’s perspective is not the right perspective. We need to look at everything from a consumer perspective, and the best way to do this is to make sure that we know what consumer needs our product satisfies and how we satisfy these needs differently and better than our competition.
- We have to be able to identify the Paradigm we’re working in and be sure that if this paradigm shifts, we are able to position ourselves in the best place to take advantage of this shift. Remember, in a paradigm shift, everything goes back to zero. If there is a paradigm shift from hardware to software, are you positioned to take advantage of this shift?
- Remember that we are all in the Persuasion business and that in order to master persuasion, you must understand the means of persuasion and the three essential components of an attempt to persuade:
- You must have a credible speaker
- You must have relevant content
- You must appeal to the basic emotional drives of the audience
- You have to have a Passion for what you do. We used to have mass marketing because we had mass products and mass media. Instead, we now have unique, individual products designed for specific needs and wants. Today’s consumer has an incredible array of choices in all categories and can get information about any subject with the touch of a finger. We’re moving into a new paradigm in which advertising creates exciting, stimulating dialogues with consumers designed not just to make a sale but to create a relationship. In the new marketing environment, I passionately believe this is the best way to get and keep a customer.
It is hard to say why the majority of global marketers did not heed Patty’s recommendations and adopt his new approach to engaging consumers.
One company however, long time Chiat/Day client Apple, did take Patty’s message to heart. Want proof? Take a look at their television ad campaigns – Here are five examples:
Paradox – MacBook Air: Pinch
“Everything we have learned comes down to this.”
Perspective – Get a Mac: iLife
“Apple pioneered applications to serve our emerging digital lifestyle and then consolidated them into the iLife suite”
Paradigm – iPad: is Electric
“iPad can be just about anything.”
Persuasion – Switch: Yo Yo Ma
“Macs are friendly to people like me.”
Passion – iPhone 4: Meet Her
“With FaceTime, the iPhone 4 is perfect for those conversations youʼll remember for a lifetime.”
I would like to float the hypothesis that Apple’s approach to marketing is a key reason that their market cap and sales per employee exceed both Microsoft and Google.
Apple exploits opportunity from paradox, adopts a consumer perspective, masters new paradigms, leverages emotions to persuade consumers, and has a passion for their product.
Apple gets it. You get Apple. I rest my case.
Thank you Tom Patty for your revolutionary, inspiring and visionary insights.