The Bursting Media Bubble: Is this the death of Public Relations?

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I wrote in my last post about an emerging trend we’re seeing at SocialRep: prospects are telling us they’re adjusting their marketing budgets by shifting money from Public Relations to Social Media Marketing. This is a touchy subject to discuss in public; the tension between PR and Social Media professionals has been percolating for a long time. Many of the same PR pros who dismissed the significance of social media now claim to be the natural heirs to corporate social media communications, while many social media pundits see PR as entirely antithetical to authentic market dialog. Unfortunately, client-side marketers are now getting caught in the cross-fire, not sure who to trust or what programs to explore.

Having been a PR executive before leaving the industry in 2005 to launch a social media venture, I see both sides of the argument. The PR industry bears enormous responsibility for the kind of mercenary marketing and message manipulation that consumers have embraced social media to defeat. Those PR practitioners who see social media as just another new vehicle to cynically drive market influence—even while embracing a veneer of authenticity—should be continually and publicly exposed. But PR practitioners who built their agencies on the belief that effective communications and advocacy are built on a foundation of meaningful relationships and market knowledge have a lot of expertise and value to offer. The trouble is, even for good PR agencies, their DNA is fundamentally mismatched to the reality of Social Media, and even the purest intentions can’t overcome that fact if the challenge isn’t understood.

The argument about why PR is so mismatched for social media is not a discussion about the ethics of PR or its practices, which I touched on in my last post, but a discussion about the nature of media and how it’s changed. To tell that story, I’ll poach a few slides from one of my SocialRep presentations.

The most important thing to understand about social media is that it isn’t new. The technology that enables it in our wired world is certainly new, but the dynamics of social media are as old as trade itself. If you look at the history of business over thousands of years, word-of-mouth has always been the dominant form of commercial influence. It’s Darwinian. If you’re about to spend your hard-earned money on a product and you don’t want to get cheated, who will you trust to tell you the true value of the product you want to buy: the person selling it, or someone else who’s already bought one? You gain a huge survival advantage as a consumer any time you can find a third party without a vested interest to validate the value of things you want to buy.

But as populations grew, as manufacturing and transportation capabilities exploded, businesses began to reach far beyond the host communities where they were known by their neighbors, and reputations were abstracted into brands. New technologies for communicating to ever larger audiences enabled businesses to tell their brand stories in print, in packaging, on radio and eventually television. But the mode of communication was overwhelmingly asymmetrical. Since the technology for communication was enormously expensive, control was highly centralized in the hands of a few power brokers—the owners of printing presses, publishing houses, radio stations and television networks. These technologies had the power to flood a market with highly choreographed messages, while word-of-mouth only traveled point-to-point within localized community networks of families and friends. This gave rise to what I call the Media Bubble—a temporary imbalance in the flow of communication arising from the early expense of emerging technology, placing control in the hands of those who could afford it.

The Media Bubble arose because the expense of early mass communications technology ensured it was controlled by the few that could afford it.

This media bubble has been our reality for generations. All of the institutions that govern our lives, particularly business institutions, have evolved to make optimal use of this bubble—to leverage the asymmetrical control of a message that can be directed to flood a market. Think about it. Advertising is not organized as a function for connecting with customers. Advertising is organized to maintain relationships with media owners to purchase space within the stream of media that has the subscribing audience we want to reach. Public relations is not organized as a function for connecting with customers either. Public relations is organized to maintain relationships with the reporters and analysts who develop the content that goes into the stream of media that has the subscribing audience we want to reach. In both cases, our business functions are not about connecting with customers directly, but about connecting with the power brokers that control the stream of media that reaches the customers. It’s efficient, as long as that paradigm holds.

But now the media bubble is bursting. And it’s not a mystery why.

Within the media bubble, the media message is a one-way broadcast of information that floods a market of media subscribers. Corporate functions like PR and Advertising evolved to insert their message into the stream of media, or to influence its content.

As we all know from experience, as technology evolves it tends to get cheaper. Companies find ways to innovate production in order to compete for customers on price. Companies also strive to grow markets for their products to expand volume and profits. In that way, industry has inevitably worked to make the expensive communications technologies available to a wider audience at ever decreasing prices—telephones in every home, then televisions, then computers, and internet access, and mobile phones. In what some may find a poetic irony, the very institutions that enjoyed the power of controlling media couldn’t help themselves but to follow the profit motive and sell the components of power to an ever larger market of consumers. The Internet was the tipping point, when consumers and a new wave of businesses that served them assembled the pieces of a massive platform that enabled the rebirth of word-of-mouth communications on a scale that could directly challenge the primacy of corporate-controlled media.

As mass communications technology has evolved, industry developed cheaper components that could be sold profitably to the masses, which eventually made possible the massive social communications platform that allows word-of-mouth media to challenge the primacy of corporate-controlled media.

This is the world we are seeing emerge. It’s not that social media is new, even though the technology that enables it is indeed new. It’s that a media bubble that arose from the expense of communications technology is finally being challenged by an equal and opposite force of democratized communication. Social media represents a return to a broader balance of media control, a world in which consumers challenge the neatly packaged messages of marketers by validating the professed value of products with other consumers before they buy. In this environment, consumers create content that challenges the supremacy of mainstream media—in the early stages by simply writing their own reviews of products on blogs or forums, but then organizing to create their own media properties to gain subscribers based on content more tightly tuned to special interests. As these new media properties emerge, they compete for audience and revenue, undermining the business models and revenue streams of established media companies, and the media market begins to fragment.

Of course, we’re already watching this play out. The effect is what I think of as a fundamental shift from what we used to think of as market segments, often defined by the media through which members of the segment self-reference, to networked customer communities, defined by their interests through which media emerges.

In a world of social media, corporate and media interests are no longer able to asymmetrically control the media and messages. Instead, media is more fragmented and specialized, forcing corporate interests to find a way to play a meaningful role within the customer communities they serve in order to be successful.

So what does this all have to do with PR? Remember how I said the problem for PR is that their DNA is fundamentally mismatched to social media? PR is organized for the old paradigm—to influence the power brokers that control media. Their fundamental DNA is about influencing the influencers, about cultivating relationships with power brokers, not about developing dialog with consumers. Even as many PR companies try to embrace social media, they still see it through the prism of influencing the influencers rather than connecting with consumers. The challenge is not that this is inherently wrong—if as a business you can influence the influencers, that’s an efficient way to advocate on your own behalf. The challenge is that consumers, even while socially wired to follow influencers, are drawn to social media precisely because of its power to defuse the influence of influencers—to continually look behind the veil of influence and expose any inconvenient truths. Influencers will still emerge, but counterveiling truths will also emerge, and rapidly, which means businesses that only focus on trying to develop and influence the influencers will miss the more sustainable advantage of connecting authentically with consumers and playing a valued role in customer communities.

What PR is missing in its DNA is a fundamental drive to connect with customers. To listen, to learn, to play a meaningful role within a customer community. And that’s the litmus test for client-side marketers looking for someone to help them understand social media. The question isn’t how is this partner going to help me drive my message into the market to attract customers, but how is this partner going to help me develop meaningful relationships, and a meaningful role, within the customer communities that define my market. That’s not impossible for a PR company to do, but for most that I see pushing themselves forward as social media experts today, it’s still a big stretch because they don’t see the fundamental shift in the media paradigm.

At this point, I’ll say quite clearly that I think there is tremendous value PR and corporate communications can offer to the emerging practice of social media marketing. But delivering that value will require a substantial shift in philosophy that defines most PR firms. I’ll save that for my next post.

Marketing Trends: Public Relations Budgets going Social?

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I haven’t been up for air in weeks. Somehow, despite the economic downturn, despite the nuclear winter in venture capital markets for early stage startups, SocialRep is humming. I’ve been buried in social media tracking scans for customers and prospects, and new inquiries are coming in over the transom. I’m also excited about an invitation to present at Thunderbird’s Winterim in New York in January, where I’ll be talking about our emerging framework for integrated social media marketing and technology. So how can I account for the uptick in energy despite the gloomy market? I’m starting to see my theory about natural selection play out.

Over the past couple of months, SocialRep has been tracking a massive swath of online dialog about marketing. Not surprisingly, the trends in dialog are overwhelmingly focused on the impact of the economic downturn, with various flavors of speculation, panic and punditry. Some examples:

A few weeks ago, various reports on budget planning for 2009 highlighted a marked migration in marketing spend from traditional to digital media. The nearly universal read on this move is that online marketing is more measureable than offline, but there was surprisingly little citical analysis of the challenges with online metrics, and how those challenges are being addressed.
As the economic crisis deepened, the panic did too. Sequoia Capital stoked the flames with a presentation they posted online telling their entrepreneurs to “get real or go home”. The presentation went massively viral, spreading the talking points for belt tightening and death pool speculation for various startup sectors, but few specifics on the tactics companies should pursue to refine their market approach.
As if in response to the panic–and mindful of the bloodbath marketing usually suffers in a downturn–marketing pundits took up the mantra that, whatever you do, DON’T STOP SPENDING. Some (myself included) cited the anecdotes that companies like P&G, Kellogg and Chevy increased ad spending during the Great Depression and pulled ahead of competitors. But most simply pronounced the incantation forcefully, that smart companies don’t cut marketing, but didn’t offer specifics on how companies should adjust their programs. Jonathan Baskin called this trend perfectly.

Notice a pattern here? Lots of punditry and trend analysis, but very few specific recommendations for how companies should adjust their marketing programs to deal with the economic crisis. There were a couple of exceptions, most notably a lot of dialog about the dangers of discounting and how price cuts undermine brand equity. But in terms of substantive recommendations for adjusting marketing strategy and operations, not so much. So I was interested to see a tangible sign of how some companies are adjusting based on the sudden increase of inquiries at SocialRep.

We’re still in the early stages at SocialRep. After beating the streets for Series A funding over the summer, we read the tea leaves and readjusted to focus our energy on customers and product. In this market, we’re going to live or die by our success in serving customers, not VCs. But bootstrapping a technology company can be tenuous. You need customers, but if you’re too opportunistic and grab at anything you can drag over the doorstep, you’ll quickly fragment your product and team by trying to be all things to all prospects. So you have to be deliberate in choosing customers, which means being a little more slow and quiet than would otherwise seem prudent. When you find a good market vein, you mine it, and pay close attention to the way your prospects frame the problem they want you to solve.

What surprised me was the sudden influx over the past few weeks in the number of companies that found us, and how they framed their interest in our social media offering. The common refrain was that, in the face of an emerging recession, these companies were aggressively reviewing every dollar of their marketing spend. One area in particular was not standing up to scrutiny: Public Relations. These companies complained about spending 5-figure monthly PR budgets on activities that produced activity without results. The mandate these companies had been given was to take the PR budget that was not performing and invest it in something innovative, like social media marketing.

Now I know this will provoke some howls, so let me make a preemptive disclaimer. I believe in PR. Or, I should say, I believe in good PR. And having spent 15 years on every side of PR, I can define the difference between good and bad PR. Years ago, when I was the editor of a magazine, my inbox overflowed every day with pitches and press releases that had absolutely no relation to what my magazine covered. Today as a blogger, I still get totally irrelevant PR-spam, more artfully framed as “blogger relations”. This is the lazily “scientific” ethic of bad PR: blast a fire hose of pitches and press releases at everyone that looks like they might be a journalist or blogger, and hope someone picks up your story. In the place of actual stories that influence the market, this approach produces monthly “activity reports” and media mentions in off-the-beaten-path blogs or news feeds.

Good PR is different. It’s about relationships and market expertise. PR companies in this category take the time to hire and train smart people who get to know a market, the competitive landscape, the products, and of course, the analysts, reporters and bloggers. They don’t spam their contacts with press releases; they build relationships based on sharing knowledge and insight. Reporters and bloggers answer their calls because they know their time won’t be wasted, and they may get an important tip. This kind of PR produces relevant stories that influence markets.

The problem is, the ratio of good to bad PR is not good. And even among the better PR companies, an understanding of how to manage the dramatic shift from traditional to social media is still largely predicated on the notion of cultivating asymmetrical influence more than reciprocal dialog. Moreover, few traditional PR companies have the culture to passionately embrace the tech-driven social media paradigm. So in the face of a market downturn, when belts are tightening, we’re seeing companies looking at the money poured into PR, and deciding that now is the time to try something new.

What does “something new” look like? That’s the topic of my next post. In the meantime, here’s a hint: social media marketing is just like PR, in the sense that there’s “good” and “bad” SMM. And the distinction is based largely on the same dynamic–activity vs. results, influence vs. relationships.

Is the Financial Crisis a Preview of the Climate Crisis?

Get Real or Go Home

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Sequoia Capital dumped a bucket of cold water over their portfolio companies, with this presentation on the economy and the road ahead for venture-backed start-ups. The message: cut costs, focus on quality, drive sales, lower your expectations for investment and valuation. Oh, and you better have a product people need.

Sequoia Capital on startups and the economic downturn

View SlideShare presentation or Upload your own. (tags: depression recession)

A Vision of the Future?

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Great creative take on the road ahead by Screaming Frog.

The Natural Selection of a Market Recession

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A couple of weeks ago I wrote about the financial crisis and its likely implications for the business of marketing. Beyond the direct comments on my blog, I got a lot of bemused and even dismissive comments by email. At the time, the Web2.0 conference was in full swing in New York, and most of the chatter was around exciting new technologies, not so much about the stock market. What a difference a couple of weeks makes. We’ve had some collossal bank failures–WaMu and Wachovia–a major battle over a $700B Wall Street bailout, and the single largest one-day drop of the stock market, more than 9%. That’s just the surface stuff–not getting into interbank lending rates, Fed liquidity, foreign capital flight, etc. This week I’ve heard direct news of the ripples hitting my own industry with discrete layoffs starting in the advertising and digital media space.

All of this, of course, is only symptomatic. The really troubling news hits much closer to home. As many of you know, I’m running SocialRep, a startup in the social media monitoring space, and I depend on sales, credit and investor funding to keep the business accelerating down the runway. In the past 2 weeks, one of my major prospects, a company in the financial sector, went belly up rather suddenly–eating up weeks of energy, investment and travel to close a deal. Many of my other prospects are visibly slowing their spending–holding back on any outlay of cash until they can see where things are headed. The limit on one of my credit accounts was cut back, leaving me a lot less breathing room. On the VC front, the impact is also evident–even though VCs have funds, they’re slowing down and being more careful in their investments, waiting to see who has what it takes to survive a downturn. Yesterday, as if to emphasize that this is rapidly spreading to mainstreet, McDonald’s announced that financing from Bank of America for franchisees to improve their restaurants had been capped by BofA in the wake of market events.

These are all serious signs of a market slowdown that goes way beyond Wall Street–right to my own front door. When banks stop lending and credit dries up, it’s like running out of gas. But despite the growing stream of dire press accounts of what’s happening in the market, I still don’t see any sign that the vast majority of people realize how serious this crisis has become. But relatively speaking, it’s still early in the cycle.

I didn’t write this post to spread doom and gloom, although I am convinced that we’re in for a proverbial Correction of epic proportions. The point is, this is all part of the cycle. It’s the nature of systems–part of the very process of organizational advancement and evolution–and many of the most important transformations of social and economic systems can only happen through disruption. The larger the disruption, the greater the capacity for fundamental change. Everywhere you look where we try to control and minimize the natural cycle of systemic disruption, we wind up only delaying–and often increasing the magnitude–of the eventual, inevitable disruption.

Think of forest fires. We spent decades trying to control and minimize forest fires–Smoky the Bear!–only to discover that we were inadvertently causing a massive buildup of dead underbrush and fuel, making the eventual, inevitable forest fire far more powerful and destructive than the smaller fires that used to happen more frequently.

We’ve done something similar in our economy. We’ve leveraged our assets through credit to unnaturally extend and sustain a supposedly endless cycle of prosperity. We used equity and credit to go beyond our paychecks to buy lots and lots of stuff, and the economy grew unnaturally–like some genetically engineered 1000-pound pumpkin. But we leveraged ourselves out over thin air–housing prices. And when we finally reached the headwinds that pushed prices down, the whole thing began to unwind. If you don’t have any more equity and credit to buy lots of stuff, the economy slows down. But it’s worse than that, because now you have to divert your paycheck from buying even the important stuff to pay down the credit bill, so the economy stalls even more. That we’re seriously floating major legislation to try and prop up the underlying housing prices and credit is not surprising, but it’s not comforting. The bill is necessary to prevent markets from seizing up entirely, but many of the provisions are laughable. It’s as if we’re saying, uh oh, bigger fires? Let’s clone an army of Smoky the Bears, and stop fires once and for all. The whole premise is simply not credible. The decline, the disruption, however painful it may be, however we may be able to attenuate some of its worst effects, is a natural part of the system. Not only can we not avoid it. We literally can’t grow without it.

Once you understand that reality, get past the denial, you have a clearer view to what it takes to survive and even thrive in transformational chaos. Speaking dispassionately, the role of disruption is to challenge the system and eliminate weaknesses–to burn out the deadwood and disease. Once that happens–assuming the system wasn’t so diseased that it collapses entirely–there’s an opportunity for reorganization and redevelopment, an advancement to a higher order of organization.

From an American perspective, we have seen this cycle play out in marketing for well over a century. Some of the cycles of disruption and reorder have been dramatic, some more subtle. We’ve seen marketing evolve through cycles that defined marketing by distribution, merchandizing, personal selling, mass markets, mass media, branding, database marketing, internet marketing and most recently social media, just to name some of the most obvious transformations. Some of those cycles were driven most by innovation–radio, TV, computers, networks–others were driven most by disruption–two world wars, the Great Depression, regional wars and countless smaller recessions.

I watched this cycle play out directly during the Dotcom boom and bust when I was president of an agency in San Francisco, and I’m anticipating that we’ll watch it all play out again, but this time on a larger scale, with greater disruption, and with greater impact on the reorganization of marketing as we rebuild. The cycle is predictable, but it’s not orchestrated. It happens through a process of natural selection, driven primarily by short term business objectives. So here’s my 2-cent prediction on the mechanics of this correction. I’ll leave the higher level analysis for a future post.

The first obvious indicators of the cycle accelerating will be layoffs. But companies are already starting to feel the liquidity squeeze, and their first response will be to hold off on any new expenses. This will ripple out and return as a drop in orders and an increase in selling cycles, making the liquidity crunch tighter. After cutting programs, the more aggressive companies will start layoffs. Layoffs ultimately will disproportionately affect marketing, as companies focus more intensely on short-term sales efforts. At this point, we’ll see a large number of senior marketing executives and managers retired–they’re expensive and their contribution is more strategic than the short-term, closing-deals imperative. Marketing will be redefined functionally as sales support and lead generation, and marketing directors will take over the day-to-day reins. Most companies will retreat into this relentlessly sales-driven mode until the bleeding stops and markets stabilize.

At this point, the natural selection shifts from who and what gets cut to who and what gets selected for new growth. Companies still have to compete, and they’ll look for ways to gain a market advantage. The focus early on will be all on demand generation. Marketing directors who have grown up with technologies will explore emerging tools that improve lead generation and campaign performance. Vendors and startups who weren’t overly leveraged before the drop will aggressively innovate new technologies to feed the hunger for cheap and efficient lead generation. But all of this will happen against the backdrop of a new, accepted foundation of social media technology. All of the Web 2.0 hype will have long since burned away, and the useful stuff–the components that help companies connect more effectively with customers to provide the products they want and need without all the bloat of inneficient product development and promotion.

This, ulitmately, is the evolution imperative that will be at the heart of recovery. An evolved paradigm of media–no longer a fight between broadcast and social–but an integration at the foundational level based on what allows successful businesses to advance. It won’t happen by design. It won’t happen by chance. It’s the natural direction of the system, and the massive disruption caused by the financial meltdown is only the catalyst.

I’ll write more in the coming days about why I’m so convinced social media is going to be woven into the fabric of the new marketing infrastructure. Suffice to say that it’s not “true belief” on my part. I’ve written and spoken about this in the past, that the media paradigm we’ve known all our lives and accepted as the norm is in fact a bubble that is bursting. The historical status quo has always been word-of-mouth. Technology simply evolved in a way that disrupted the status quo and put control in the hands of a few, primarily because of the expense of technology-based communication. But technology is now commodity. Communication has returned to a higher level of democratization. And now we’re seeing the media bubble burst, right at the same time we’re seeing a more acute economic bubble burst along with it.

Marketing in the Face of a Wall Street Crash

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Serendipity is an odd thing. It’s as if the future is written all around us on little post-it notes, but we never read them until an event unfolds and we suddenly realize that, just maybe, we might have seen it coming.

A few years ago my best friend’s dad gave me an amazing collection of thousands of books. I’m a writer, my wife’s a librarian, we were like kids in a candy store. It’s taken years to process the books, and we still have 20 boxes in my garage. So a couple of months ago I was down in the garage sorting a stack of books and one book stood out. Because of its cover. Because of its author. Because of its simple title: The Great Crash. 1929.

John Kenneth Galbraith, the influential popular economist, wrote the book in 1954 as “an economic history of the lead-up to the Wall Street crash of 1929”. Given all the concern over the past year about the mortgage crisis, it seemed like a timely topic, so I put it on a short stack to read. I finally got down to reading the book on a trip back east and literally just finished reading it last Friday. That was the day the “extraordinary weekend” started before the 504-point crash on Monday. It’s an understatement to say that I felt like I had just read the history of what is about to unfold before us.

Without overstating the parallels between 1929 and 2008–the mechanisms behind the collapse are undoubtedly different–the pattern is hauntingly familiar, right down to the constant stream of assurances from vaunted economists and elected politicians that “we’ve now seen the worst of it”, “a turn around is just around the corner” and, my personal favorite, “the fundamentals of our economy are still strong”. This is what Galbraith called the collective belief in the power of incantation. I’ll let others argue about the economic comparisons of 1929 to 2008, but the human factor–the wholesale denial of destruction even while it’s underway–is breathtakingly familiar.

I hate to be the alarm clock if you’ve been oversleeping, but it’s time to wake up and get it together. We’re in for a rough ride, and it’s not going to be pretty–especially for marketers. I’ve spent the past year pouring all of my resources into a marketing technology startup. It’s a scary time to look up and realize you’re standing on a small rock in the middle of a raging sea and a gathering storm. But it’s even worse to keep your head down and spout incantations about how it’s all going to turn around real soon now. So here’s my blog-condensed playbook of what lies ahead.

It’s going to get a lot worse before it even starts to get better. We’re only seeing the beginning throes of chaos in our financial system. We’ll see liquidation panic play out over days and probably weeks. The government will make various attempts to stop the bleeding, but eventually they’ll be left to do nothing but call impressive meetings of Very Important People who deliver more incantations. The impact on available cash and credit will force companies to cut spending deeply. Jobs will be lost on a large scale, and just like past recessions, marketers will be heavily over-represented in the RIFs. At many companies, marketing executives and managers will be released and become freelance consultants, marketing associates and directors will take over and run marketing operations primarily as sales support. Lead generation will of course lead everything.

That’s the bad news. And make no mistake, it will be ugly. The good news is, chaotic disruption is a huge opportunity for innovation, though it’s not for the faint hearted. In any system, change can only be accomplished by disruption and reorganization. Instead of looking at the disaster ahead as wholesale destruction, look for the patterns of reorganization–and find the companies that have the intelligence and bravery to share your world view. Look for the opportunities to solve problems and help companies grow when others are running scared. Proctor and Gamble, Kellogg and Chevrolet were companies that invested in advertising during the Great Depression while the vast majority of companies cowered in their caves, and during the worst financial meltdown of our history (so far anyway) they managed to grow and build a sizeable lead over competitors leading into the recovery.

Who are the companies that will be investing in growth as the financial system crashes around them? And what will they be investing in? I know where I’m placing my bets. While much of the Web 2.0 hype will be silenced in the coming months, I’m betting people will go online to connect with peers more than ever before. To share their fears, to relate, to vet anything that anyone is telling them about what’s happening, and most of all, to find opportunities. I’m also betting that the decks will be cleared for a new generation of marketing tools and marketing personnel for whom social media and community isn’t a trend, but a given. This is the transition point.

Seriously. It’s time to wake up. There’s a rough road ahead. Buckle your seat belt and grab the wheel.

Brand Equity–Measuring the Gap between CMO and CFO

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Over the past few years, I’ve had the great pleasure of getting to know Jonathan Knowles–one of the smartest marketing thought-leaders around, and an expert on marketing finance. I interviewed Jonathan for a number of columns when I was writing for BusinessWeek Online, I invited him to speak before the CMO Council, and he’s keynoting this year’s Elite Retreat in Hawaii. Among other things, Jonathan turned me on to the theories of Lev Baruch, and the growing role of intangibles in defining the market value of businesses. He’s also written what I think is the most readable and entertaining book on marketing ROI.

Jonathan has just written an important article for the AMA’s Marketing Management magazine that looks at the differences between accounting, finance and marketing views on brand equity. The article, along with a number of other related marketing/finance resources that Jonathan has written, is available on his site on a page that lays out some of the basics marketers should know about brand equity and marketing finance.

One of the critical observations that Jonathan has brought home for me over the years, and which is discussed in his AMA article, is the dramatically different world views that characterize marketing and financial thought. This is a deceptively simple concept with dramatic implications. For example, Jonathan writes:

the (unspoken) assumption of most finance people is that customer decision making is dominated by purely rational criteria.

The equal and opposite assumption of many marketing people is that customer decision making is driven largely by emotional and psychological triggers. These unspoken assumptions dominate the expectations marketing and financial people bring to the table, and yet they are rarely discussed. This is only one example of the gap between CMOs and CFOs–a gap that begins with the very definitions of words we both use to communicate vastly different ideas, such as the meaning of “value”.

I can’t do justice to the depth of Jonathan’s work in a short post–Jonathan’s great gift is that he makes complex ideas accessible and easy to understand. But these are important articles that every marketer should read, especially as the unstable economy drives greater scrutiny into budgets and program performance.

Marketing’s credibility depends on its ability to explain to business people the value of what they do, beyond basic sales response activities. The concept of brand equity is core to the argument about how marketers are creating a long-lived asset for the business in the form of a brand. But to pass the pass the sniff test for finance people, marketers have to show that marketing-created assets actually generate incremental cash for the business. Which means marketers have to go beyond their usual attitudinal metrics to demonstrate impact on actual customer behavior.

Jonathan lays this all out in the Marketing Management article, and suggests four arguments that marketers can use to show that brand equity is adding to the value of the business. Essential reading.

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Is the Financial Crisis a Preview of the Climate Crisis?

Get Real or Go Home

A Vision of the Future?

Brand Equity–Measuring the Gap between CMO and CFO

Content Strategy Webinar Tuesday