By now it practically goes without saying that the marketing environment is undergoing tremendous change and that proliferation—of media, segments, and distribution channels—is the reason.¹

Marketers are responding. During 2006, for example, the 50 biggest US advertisers boosted their overall ad spending, and many experimented aggressively with newer tools, such as Web-based video, paid-search advertising, viral marketing, and social networking. In the aggregate, those same companies also reduced their spending on “measured” media, such as television, newspapers, radio, and Internet display ads.² Less visibly, senior marketing executives are rethinking the capabilities and operating approaches needed to confront proliferation successfully. Their degree of success will be critically important to CEOs and for companies as a whole.

We recently sat down with senior marketers from four companies—Carlsberg, Nokia, Wal-Mart Stores, and Yahoo!—that are facing different aspects of the proliferation challenge. Carlsberg, like many packaged-goods companies, is experiencing rapid market polarization as the low and high ends of its beer market grow more rapidly than the middle. Nokia is experimenting creatively with nontraditional media and turning out more new products than ever in response to fragmenting customer needs. Wal-Mart is segmenting its customers more finely than it has in the past and creating a more diverse set of store formats to meet the needs of those segments. And Yahoo! not only has a Web site that’s an important port of call for advertisers shifting their spending online but also must try to reach and serve its 500 million users by confronting the media complexity it helped to create.

The conversation that follows is a compilation of interviews with Cammie Dunaway (Yahoo!), John Fleming (Wal-Mart), Alex Myers (Carlsberg), and Keith Pardy (Nokia).³ What emerges is a picture of complexity that’s here to stay and of an environment where the only constant is rapid change. (For more on the future of marketing proliferation, see “The evolving role of the CMO”.)

The Quarterly: What skills and traits do you think are particularly important for marketers today?

Alex Myers: The marketing function is developing along two extremes: the advertising guru, on the one hand, and what one might term the fact-based businessman, on the other. The trick is to find the right balance. The journey, which so far has been from advertising guru to communications guru, is entering a new phase that requires us to be businessmen and explain things clearly to management. It’s no longer enough to say, “Trust my campaign” or “It looks great.” You have to explain things internally in a much more relevant way. The marketing function is becoming much more accountable, with CEOs and CFOs saying, “Okay, since you’re spending all this money, we want to know if it’s effective or not. Is our business growing or is it just the budget?” The challenge is not to lose the passion and religion of brands or consumers but to do it in a fact-based way.

Cammie Dunaway: Intellectual curiosity is critical because the world of marketing is changing so rapidly. I remember four or five years ago, when I was at Frito-Lay, I was at a conference with a group of people from leading companies who were at the cutting edge of interactive advertising. A speaker asked how many people were using search engine marketing, and I think maybe 15 percent of the people in the room raised their hands. Today if you’re a marketer and you don’t understand search engine marketing, you’re not doing your job—yet it didn’t really exist five years ago!

So it’s less about finding people who have deep functional excellence within various aspects of the marketing discipline and more about finding people who are on a lifelong journey to learn and stay up on the new tools and techniques that can really help to build their brand.

To some extent intellectual curiosity is a personality trait that you can’t teach. But you can stimulate it. For example, each month I have a different outside speaker come in and present to my marketing team. This injects ideas from other industries and helps us see what other people are doing. We’ve hosted Michael Francis, Target’s senior vice president of marketing; the folks from Current TV, Al Gore’s youth cable network; and various futurists. We’re creating a stimulating environment where people feel that part of their job as a marketer is to stay up on what’s new. Marketers need the confidence to ask questions. It’s OK to acknowledge that this world is changing pretty rapidly and that you as a CMO may not have all the answers.

John Fleming: I look for diversity of thought. On the marketing strategy and customer insights side of the organization, we look for people with a lot of packaged-goods experience. That’s classic marketing with a lot of great discipline. In marketing communications, we look for more creative profiles: people with advertising agency experience, people from retail—even manufacturing. We have around $350 billion in sales, a couple of big channels, 130,000 SKUs⁴ per store—and we’re building 300 stores per year. To focus effectively on discrete segments in basically every business known to retail, we need a wide variety of skills in different marketing fields.

The Quarterly: Business acumen, intellectual curiosity, diversity of thought—sounds like a tall order. What’s going on in today’s marketing environment to raise the bar for marketers?

Cammie Dunaway: The consumer has more choices of media, more access to information, and more control than at any time in history. This changes the marketing job dramatically. Previously, you could understand a consumer archetype and push information about your brand out to that archetype through, say, three 30-second commercials that would reach 80 percent of adults aged 18 to 49. Now you must really understand each consumer as an individual. Yahoo! has 500 million consumers, and I have to understand what each of those 500 million individuals needs from the Yahoo! brand, as well as how and when to best reach them.

Alex Myers: We see proliferation on all fronts, with the proliferation of consumer and customer⁵ segments in the first instance and the proliferation of media channels as a secondary effect. Historically, brewers have been very big in the middle of the market, and if you go all the way back it was about having one brand in one town. A single-geography strategy, if you like. Now there’s a polarization between the top and the bottom, and the risk is in getting stuck in the middle. I see big potential at the top, where variation and delivering experiences for consumers will bring higher margins. It’s almost as if beer is in the entertainment or chocolate business, providing new tastes and flavors at high prices. At the bottom end it is a completely different story. Here it’s about focusing on fewer, bigger products and brands and making sure you can deliver them in a very cost-effective way. To serve the market you have to do both.

Keith Pardy: People are different, so why should we expect them all to want the same product? We recently completed a global segmentation study, with 77,000 consumers from all over the world, to really understand their needs, attitudes, beliefs, and lifestyles. It showed us that there are 12 different groups of consumers, all with very different needs. For some, fashion and stylish looks are the key factors in the mobile device they decide to buy; for others, it’s about leading-edge technology and features. Or a device that helps you do your job on the move might be the must-have thing.

The Quarterly: When it comes to targeting narrow segments of customers, it’s often said that nothing beats the Internet. How do you see marketing online evolving?

Keith Pardy: The Internet is playing a much more important role than anyone ever imagined. Brands are going to be made and destroyed on the Internet, and there’s a whole set of new marketing rules for it. One cardinal rule is trust and respect. I saw a great metaphor the other day: a picture of a sheep with the fangs of a saber-toothed tiger. That’s a great depiction of marketing on the Internet. If you start playing games with people, they’ll find out and eat you alive. Consumers on the Internet are open to interesting ideas and they want to cocreate content with you, but make no mistake: they are in charge.

Marketers have to get used to people shaping our brand meaning via Internet marketing. As an industry, we’re still pushing content, and we haven’t figured out how to unleash all the creative potential that lies in people talking about our products in exciting new ways. I don’t think banner ads are a total waste of money, but they’re not very effective. Context-relevant communication makes a lot of sense. We’re investing a lot in trying to understand how brands can interact with sites like YouTube and MySpace, plus blogs.

The Quarterly: Cammie, what’s your take on the power of user-generated media online?

Cammie Dunaway: When we rolled out our new Yahoo! home page, we launched it with a promotion where we gave everybody who came to the front page of Yahoo! and set Yahoo! as their home page a coupon for a free iced coffee. Later that afternoon, somebody sent me a video that some kids in their 20s had done of themselves seeing this offer on the front page of Yahoo! and being skeptical about whether it could actually be valid, printing out the coupon, complimenting us on the fact that it was so easy, then getting in their car, driving to the store, and redeeming the coupon. Fortunately, it was a great experience for them. But it could have been a really poor one. And that video they made of their experience could have been out on the Web having much more impact than any of the marketing messages that I was controlling.

The Quarterly: What does the Internet mean for Wal-Mart, John?

John Fleming: When I was responsible for Walmart.com, I saw it as a commerce vehicle, but it’s actually more valuable to Wal-Mart as a marketing channel. We have about 20 million customers who shop at Walmart.com, and 94 percent of those customers also shop at Wal-Mart once a month. These are Wal-Mart shoppers who are looking beyond the store for things that the online channel can provide—whether it’s information, additional services, or assortments. We carry over 1.2 million SKUs online, as opposed to an average of 130,000 SKUs in stores. And online, we can also see the things consumers are looking for that we don’t carry. So whereas we used to see Walmart.com as just another channel, now we see it as a complement to the stores and to the Wal-Mart brand.

The Quarterly: It seems all of you say that understanding your customers is more important than ever. What are you doing to improve that understanding?

Keith Pardy: We’re trying to understand the unconscious mind and the real reasons people buy things. That’s where the gold dust is. Of course, the products have to be well engineered, and you’ve got to give people rational reasons to buy something. But there are very few consumers out there who buy only based on a rational, linear decision process. Emotional reasons—largely connected to the subconscious—play a critical role. This is especially true for items or objects that are consumed in the public domain. In these situations people don’t buy just for rational reasons.

For example, we know that what differentiated human beings and some other primates from our evolutionary ancestors was the ability to move our thumbs, grab things, and manipulate our environment. As a species we evolved, and our brain developed in size, through what we learned with our hands. That’s why, when you design these products, the way they feel in your hand, and how your hand and your thumbs and fingers actually operate these devices, is so important. All that happens on a subconscious level. But watch what happens when you give somebody a new device. The first thing they do is put it in their hands, pop it up and down a little bit, and roll it around.

Cammie Dunaway: We do a lot of ethnographic work, where we get out and observe consumers in their environment—at home, at work. What we’re looking for are pain points: what are they struggling with? Sometimes that’s the most fertile area for real, breakthrough innovation. We also conduct a lot of what we call digital salons, where we prototype a product. We’ll reach out to the consumers who, we feel, are most likely to respond. For example, when we redid the front page of Yahoo! we reached out to our heaviest users. We engaged them in a dialogue about prototypes of a new front page. What did they like? What did they not like? We did this all online through these digital salons. It was tremendously important both for getting us insights and for creating some evangelists when we made changes to the product.

The other thing I’ve started doing a lot more than I did in my packaged-goods days is using behavioral data—really mining the wealth of transactional data we have about how people are spending their time online and trying to create a marriage of that data with attitudinal data obtained from ethnographic studies or consumer interviews.⁶

The Quarterly: A deep understanding of customers’ needs, of course, is a foundation for building strong brands. How are you managing your brands in today’s increasingly complex environment?

Alex Myers: We’re shifting from being a single-brand-driven business to becoming portfolio managers.⁷ And that’s a big transition. I would go so far as to say that the strength of a portfolio in the beer business is now much more important than the strength of individual brands. Five to ten years ago that wasn’t the case: the brand was everything.

So typically in each region we have a local power brand which could be, say, Carlsberg in the United Kingdom, Tuborg in Denmark, or Baltika Breweries in Russia. It might be an international name, but in that region it is performing the role of a local power brand. It is like the middle of the sandwich—the meat. Above that segment in each market we will drive our international brands, or in places where an international brand is the power brand we also will emphasize the other international brands. Then you probably have some regional and local brands that could be for the value segment.

John Fleming: We’re on a journey. The first step is just about discipline and consistency in how we manage the brand. Even today, when the engine that drives the machine is the 200,000-square-foot Supercenter, we don’t have consistency. A couple of years ago, everybody—at every store and in the home office—thought that they managed the brand one customer at a time. Because buyers had the ability to get any kind of packaging they wanted with any kind of signage from suppliers, our stores looked like a city with no zoning. Furthermore, the signs in the stores were different from the circulars, which didn’t necessarily look like the television advertising. So we moved a lot of the brand decision making toward a more centralized function and developed guidelines and processes to ensure consistency.

At the same time, we are spending a lot of time doing research around the brand so we can better articulate where we want to take it. The brand has always stood for low prices, broad assortments, and trust. Over time, we need to evolve it to being a broader value proposition that takes into account products and experiences that are relevant to the segment we’re targeting in any given location.

The Quarterly: What other complexity challenges is today’s marketing environment creating for you?

Keith Pardy: One issue is that when you’re introducing around 50 products a year, and the average life cycle of a product is from 12 to 24 months, you’ve got a tremendous number of ramp-ups and ramp-downs. Dealing with that schedule is tricky. We’ve invested heavily in our logistics and supply chain processes so that we have complete, real-time visibility into the product life cycle, and our product-management teams stay with their programs until the products are ready to ramp down. A second issue is that when you have many products, prioritizing communications becomes very important. Our experience is that consumers hate confusion, and maintaining relationships is much more important than flashy, big-burst marketing.

Alex Myers: In Carlsberg, decision making has always been fairly decentralized, especially the closer you get to the customer and consumer. So a particular challenge has been how to do group projects, set group standards, and develop best practices. We started by going around to the heads of nine European markets and putting together a menu of marketing and sales best practices. We asked these people to assess themselves on the way they segmented their customers, their approach to pricing, everything to do with the marketing and the sales function. In consumer segmentation, for example, everyone had a different model—some were looking at needs, others at age—but within three months the nine had agreed on a common approach to consumer segmentation.

Cammie Dunaway: In a wireless home, consumption of media grows by about three hours a week because people are consuming multiple forms of media at the same time. People who are watching television are also instant messaging with a friend or looking up stories on their laptops about what they’re watching. Or after they read a newspaper story, they’re going online to understand various points of view about the story and maybe to see alternative photographs from a citizen journalist.

This “hypertasking” makes the need for integrated marketing communications much more significant because the consumer is going to see your message from many different angles. When we’re launching a new product I put my advertising and public-relations agencies, plus my internal folks who do promotions work, in a room with a brief and say, “I want you guys all working together because all of these touch points need to connect. I don’t want a PR idea that’s over here and an advertising idea that’s over here and my customer contact strategy off doing something different.”

This is the challenge—and the opportunity—that the proliferation of media provides: the ability to really get to the right consumer at the right time with the right message in ways that you couldn’t in the past.