Marketing 4.0 is a book published in 2017, which is very complete and popularizes the marketing concepts of the past five to ten years from a more theoretical perspective. I'm not a marketing or business professional, and what I've read in this book is just the bare bones of it, so I'm just going to briefly organize the contents of the book here. In this article, I will first summarize the theoretical framework of the book.
First of all, let's talk about the background of Marketing 4.0 and my understanding after reading this book. In recent years, due to the popularization of the Internet, the ability of customers to connect with each other has become very strong from a marketing perspective, and there is a higher reliance on community and self-searched information. Therefore, compared to the previous generation of marketing, nowadays, it is even more important to emphasize the side of the customer as a media of communication instead of treating the customer as a passive target. While this trend started a decade ago with Marketing 3.0, it has become even stronger today as marketing has become more technologically and environmentally dependent due to advances in technology. The authors define Marketing 4.0 as a form of marketing that combines business and customer interaction in both the online and physical worlds.
The main change in marketing theory is probably from the traditional marketing mix to the study of digital marketing mix. The traditional marketing mix is defined by the 4P (Product, Price, Place, Promotion) framework, in which market research determines the product, and the company decides on pricing, advertising, and promotional activities. In digital marketing, the focus is on the 4C (Co-creation, currency, communal activation, conversation) marketing mix.
- Co-creation: Involving customers through co-creation in the early stages of concept development to increase the chances of successful product development. (This side of the coin coincides with the MVP of entrepreneurship).
- Currency Floating Pricing: Companies have the flexibility to determine prices based on market demand and production capacity, the best example of which is the airline industry. As a result of technological advances, differential pricing by means of big data is now being introduced in other industries as well.
- Communal activation: This is actually the concept of platform. Place in the original 4Ps refers to the marketing channel, that is, to decide where to sell the product. The sharing economy, which has become popular in the past few years, does not apply to the concept of channel. For example, Airbnb and Uber's services are provided by customers to other customers, and this kind of brand is a platform-type product, and the brand product itself only plays the role of communal activation.
- Conversation: The importance of the 4P's of one-way promotions is increasingly being taken away by having customers have conversations with other customers. Conversations on the Internet become reviews and often have more impact on customers than promotions.
As we can see from the above combinations, the definition of marketing itself has also changed in nature due to the new business model created by the rise of the Internet industry. In traditional marketing, the 4Ps focus on how to initiate customer interaction. In digital marketing, the 4Cs focus on how to generate results. The concept of Marketing 4.0 is to merge the two, with the goal of winning customer advocacy.
Why is there such a change? Since the popularity of the internet, customers have become more wary of traditional marketing and trust recommendations from friends, family, and communities. These sources of information are known as the F-factor, a long-standing concept that refers to friends, family, Facebook fans, Twitter followers, etc. Looking at the English language, you can see that it's more of a European or American trend, and in Asia there are a lot of different social media popular in different countries, but the concepts are similar. The difference with traditional marketing is that not only the breadth of the connection is important like TV commercials, but also the depth and strength of the community connection is even more important. Communities need to be cultivated over a long period of time. As the importance of community grows, marketing needs to create conversations within the customer community to strengthen the community connection. In this environment, companies have no control over the outcome of the conversation, so the focus has shifted from traditional advertising to providing information to cultivating advocates who are truly willing to speak up for the brand in order to create a positive impact.
Since communities are usually formed naturally, even if a company has made a brand positioning at will, it is ineffective if the community does not recognize it. In this case, the most simple and representative tool to measure the effectiveness of marketing is the Net promoter score (NPS). It is based on the proportion of positive promoters minus negative word-of-mouth to the total number of customers. The formula is as follows.
Net Promoter Score = Promoters / Total Customers - Detractors / Total Customers
We can see that the best influence comes from the large number of advocates who are converted from customers. The task of converting advocates requires recognizing the path of the customer experience and choosing the right touchpoints to intervene.
At this point, it is finally time to talk about the main theoretical framework of the book Marketing 4.0. For the customer experience path, the book proposes a 5A framework.
- A1 Awareness Stage: Customers passively receive messages from past experiences, marketing and others, and have a basic awareness of the brand based on these messages. This is also known as the "I know" stage.
- A2 Appeal Stage: Customers will expand the brands they recognize into their memories, and only a few of them will impress and attract customers. This is the "I like" stage.
- A3 Inquiry Stage: Customers begin to actively seek information, such as asking friends for advice, searching for reviews on their own, or visiting a physical store. The community experience becomes very important at this stage. The key at this stage is to get the customer "convinced".
- A4 Action Stage: After being convinced in the previous stage, the customer takes action, usually a purchase. However, this stage may end with a purchase, or it may include post-purchase actions, such as complaining or needing customer service assistance. All actions result in an experience that determines whether to move on to the next stage.
- A5 Advocacy Stage: Through the experience, customers may develop loyalty to the brand, which is reflected in retention rates, repeat purchases, and ultimately, advocacy actions.
Customers may not move straight through the five stages and may skip some or fall back to earlier stages. But regardless, the ultimate goal of Marketing 4.0 is to create advocates, and there are three main sources of influence that can be utilized to improve marketing capabilities at each stage.
- Self-influence: The customer's past self experience.
- Influence of others: Generally comes from word-of-mouth from friends and family, or from social media platforms trusted by customers.
- Extrinsic Influence: The purposeful communication of a brand through advertising and other marketing activities.
For different industries or products, or even customer segments, the importance of different influences may be weighted differently, so marketing should make judgments based on marketing productivity data and focus on important marketing activities. There are many types of marketing productivity data, for example, those related to the most important purchases and ownership of the 5A framework are.
- Purchase Action Ratio: This is a measure of how well brand awareness is converted into purchase actions. The formula is
Purchase Action Ratio = Number of Purchase Actions / Number of Unprompted Brand Names - Brand Ownership Ratio: This is a measure of the effectiveness of converting brand awareness into ownership. The formula is
Brand Ownership Ratio = Number of Active Advocates / Number of People Who Can Say Brand Without Being Prompted
This is where "the number of people who can name the brand without being prompted" is a measure of brand awareness. The Purchase Action Rate is the conversion rate corresponding to the Action stage, while the Brand Ownership Rate corresponds to the Advocacy stage.
By the same reasoning, we can define the conversion rates at other stages. By observing the conversion rates at each stage, marketing insights can be gained. By looking at these numerical insights, marketing decisions can be focused on the main areas that need to be strengthened. For example.
- A low conversion rate from the awareness stage to the aspiration stage indicates that the brand positioning or marketing approach is inadequate and therefore unattractive, and the focus should be on brand positioning and marketing communications.
- A low conversion rate from request to inquiry indicates that the customer doesn't feel the need for further research, which may be an opportunity to raise more curiosity by starting more conversations. Focusing on social and content marketing can be an effective way to create curiosity.
- If the conversion rate from inquiry to action is low, one of the traditional 4Ps may be at fault, for example, pricing is too high, or there is a need to strengthen channel management, or there is a need to strengthen the management of the sales team.
- A low conversion rate from the action stage to the advocacy stage means that the brand affinity and stickiness cannot be effectively improved. This may be because the product is not good enough, but it may be possible to increase loyalty programs such as point collection campaigns, or to enhance customer care to improve adhesion.
Practical application is, of course, easier said than done. In the real world, customer experience paths are very complex and large, and are often quite different from region to region and industry to industry. Using an architecture that visualizes key conversion rates can help in the analysis of different industries and regions. If we go back to the NPS we mentioned earlier, we know that the best state is when the awareness stage is as high as the advocacy stage, i.e., everyone who knows the brand becomes an advocate, so the perfect visual image will be a bow-tie shape. By comparing the results of the five stages of brand visualization to the bow-tie shape, you can find the right way to market your brand. In the next post, I will organize the four industry types and marketing applications presented in the book and analyze them based on this approach.
By the way, although there is not much in the book, I think it is worth emphasizing that we can see that in order to enter the advocacy stage, all marketing methods are futile if there is a lack of good products. The most effective way to gain customer trust and advocacy is to return to truth and transparency, maintain a clear and sustainable brand positioning, and provide differentiated products to support the brand positioning.
That's all for now.
Article Series
- Marketing 4.0 (Part 1: Theoretical Framework)
- Marketing 4.0 (Part 2: Industry Types and Marketing Applications Based on the 5A Framework)
- After Reading "Marketing 4.0" (Part 3: Marketing Tactics in the Digital Age)
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