IBM Study: 60 percent of ASEAN chief marketers unprepared for complexity from digital era transformation

Most CMOs admit they are not sufficiently plugged into real-time conversations about their brands; still focusing on understanding markets versus understanding individuals to shape their strategy

CMOs are also struggling to prove the return on marketing investments

Kuala Lumpur, 1 December 2011 – An IBM (NYSE: IBM) study of more than 1,700 chief marketing officers (CMOs) from 64 countries and 19 industries, including 70 CMOs from ASEAN, reveals that the majority of the world’s top marketing executives recognize a critical and permanent shift occurring in the way they engage with their customers, but question whether their marketing organizations are prepared to manage the change.

At the same time, the research shows that the measures used to evaluate marketing are changing. While 59 percent of ASEAN CMOs (Global: 63 percent) think return on marketing investment (ROI) will be the primary measure of the marketing function’s effectiveness by 2015, even among the most successful enterprises, they feel insufficiently prepared to provide hard numbers.

And most of these executives – responsible for the integrated marketing of their organization’s products, services and brand reputations – say they lack significant influence in key areas such as product development, pricing and selection of sales channels.

Digital Revolution is Transforming the Marketplace
Globalization has brought the world to everyone’s backyard. Today, everyone is a broadcaster, publisher and a critic – there is nowhere to hide, and transparency is the new price of entry. What all these translate to is that there are more data from more sources, but less clarity.

Customers are sharing their experiences widely online, giving them more control and influence over brands. This shift in the balance of power from organizations to their customers requires new marketing approaches, tools and skills in order to stay competitive. CMOs are aware of this changing landscape, but are struggling to respond.

“The inflection point created by social media represents a permanent change in the nature of customer relationships,” said Giuseppe Bruni, Lead, Strategy & Transformation, Global Business Services, IBM ASEAN. “Approximately 90 percent of all the real-time information being created today is unstructured data. CMOs who successfully harness this new source of insight will be in a strong position to increase revenues, reinvent their customer relationships and build new brand value.”

Unprepared for Complexity
The IBM study found that while 76 percent of ASEAN CMOs (Global: 79 percent) expect a high to very high level of complexity that their organizations will have to master over the next three to
five years, compared to today, only 40 percent (Global: 48 percent) feels prepared for the expected complexity. This represents a complexity gap of 36 percent (Global: 31 percent).

Collectively, the study findings point to four key challenges that CMOs everywhere are confronting: the explosion of data (ASEAN: 56 percent, Global: 71 percent), social media (ASEAN: 64 percent, Global: 68 percent), channel and device choices (ASEAN: 48 percent, Global: 65 percent) and shifting demographics (ASEAN: 52 percent, Global: 63 percent) will be pervasive, universal game changers for their marketing organizations over the next three to five years.

To grapple with the first of the four challenges – data explosion – ASEAN CMOs are more likely to deploy tools and technologies over the next three to five years, including their use of social media (ASEAN: 93 percent, Global: 82 percent), customer analytics (ASEAN: 89 percent, Global: 81 percent), and customer relationship management (ASEAN: 85 percent, Global: 81 percent) tools.

Despite this urgency to change, CMOs cite cost (ASEAN: 63 percent, Global: 72 percent), a lack of ROI certainty (ASEAN: 61 percent, Global: 61 percent), and tool implementation issues (ASEAN: 36 percent, Global: 47 percent) as roadblocks that are preventing them from already adopting new tools and technologies available.

In order to deal with the broad level underpreparedness, CMOs signal three key domains of improvements – deliver value to empowered customers, foster lasting connections, and capture value and measure results.

Delivering Value to Empowered Customers
One reason why most organizations struggle to get the customer insights they need is that they still focus on understanding markets rather than individuals. Although CMOs identify customer intimacy as a top priority, and recognize the impact of real-time data supplementing traditional methods of channel marketing and gathering market feedback, most say they remain mired in 20th century approaches.

The majority of the CMOs surveyed are still focusing primarily on traditional sources of information such as market research (ASEAN: 84 percent, Global: 82 percent), competitive benchmarking (ASEAN: 83 percent, Global: 80 percent), and sales campaign analysis (ASEAN: 61 percent, Global: 68 percent) to make strategic decisions.

Traditional sources of information are important, of course. However, most of them have one big drawback – they can only show customers in aggregate, offering little insight into what individual customers need or desire.

Relatively few CMOs are exploiting the full power of the digital grapevine. Although nearly three-quarters of CMOs (ASEAN: 70 percent, Global: 74 percent) use customer analytics to mine data, only 29 percent of ASEAN CMOs (Global: 26 percent) are currently tracking blogs, 41 percent (Global: 42 percent) are tracking third-party reviews and 46 percent (Global: 48 percent) are tracking consumer reviews to help shape their marketing strategies. This is largely because the tools, processes and metrics they use are not designed to capture and evaluate the unstructured data produced by social platforms.

Bruni likened marketers who underestimate the impact of social media to those who were slow to view the Internet as a new and powerful platform for commerce. Like the rise of e-business more than a decade ago, the radical embrace of social media by all customer demographic categories represents an opportunity for marketers to drive increased revenue, brand value and to reinvent the nature of the relationship between enterprises and the buyers of their offerings. Marketers who establish a culture receptive to deriving insight from social media will be far better prepared to anticipate future shifts in markets and technology.

Fostering Lasting Connections
Proactive CMOs forge customer relationships that continue after the sale; and they fortify this bond by creating a corporate character that manifests itself in everything their employees do and say.

More so than their global peers (Global: 67 percent), 83 percent of ASEAN CMOs see enhancing customer loyalty and advocacy as the top priority for investing in digital technologies.

Despite this stated priority, most CMOs are, in fact, still focusing on the transaction, and less on the data required to build lasting relationships with the customer. 70 percent of ASEAN CMOs (Global: 61 percent) are using data primarily to segment and sell; not to generate awareness, stimulate interest, and build loyalty and advocacy.

Capturing Value, Measuring Results
Most CMOs have not traditionally been expected to provide hard financial evidence of their ROI. But given the current economic volatility and pressure to be profitable, organizations can no longer afford to write a blank check for their marketing initiatives. CMOs recognize they now need to quantify the value they bring to the business, be it from investing in advertising, new technologies or any other activity.

In fact, 59 percent of ASEAN CMOs (Global: 63 percent) believe ROI on marketing spend will be the most important measure of their success by 2015. While not all of them (ASEAN: 54 percent) feel fully prepared to be held accountable for marketing ROI, ASEAN CMOs (54 percent) appear to fare better than their global peers (44 percent). Other important measures to gauge marketing success are the positivity of customer experience (ASEAN: 56 percent, Global: 58 percent), the ability to convert and attract new customers (ASEAN: 54 percent, Global: 48 percent), and overall sales (ASEAN: 51 percent, Global: 45 percent).

If CMOs are to be held responsible for the marketing returns they deliver, they must also have significant influence over all “Four Ps”: promotion, products, place and price. The study found that this is often not the case.

CMOs say they exert a strong influence over promotional activities such as advertising (ASEAN: 85 percent, Global: 84 percent), external communications (ASEAN: 87 percent, Global: 82 percent) and social media initiatives (ASEAN: 70 percent, Global: 73 percent). But, in general, they play a smaller role in shaping the other three Ps – having less impact on new product development, and even lesser sway over key parts of the pricing process or channel selection.