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March 14, 2007
Editors-in-Chief of Customer Intimacy

It’s now old news that the “consumer’s in charge movement” got some serious advertising street cred early last month when several user-generated ads ran on Super Bowl XLI. Not only did the user-generated content (UGC) fit right in with the work created by professionals, but according to IAG Research, the Doritos spot "Live the Flavor” was actually “the most-liked ad” of the broadcast. Disclosure: this agency had a spot in the game for client Snapple that was not user-generated. Of course advertisers aren’t alone. Last month, Nickelodeon debuted a 2-hour programming block called ME:TV, featuring contributions from 10-year-olds. Next month, VH1 will air the Jack Black-hosted Acceptable TV, which, according to the AP, fuses TV with the Web. Equally telling is the fact that Getty Images is buying Scottish firm Scoopt, which resells photos and videos shot by amateurs. Of course, that is Hollywood’s and the news industry's problem. It’s the advertising application we’re concerned with. And the fact that the Super Bowl spots did so well has some speculating that the ad agency model is dead. For me, it’s just evidence that agencies are hustling to keep up with clients and some are actually succeeding. If anything, UGC is proof that the relationship between marketers and customers has seismically shifted—a movement 30 years in the making.

To see where I’m coming from, roll back to the 1980s—to feathered hair, the rise of the West Coast offense, and the work of a handful of business thinkers including Harvard Business School’s Michael Porter. Focusing on how organizations achieve competitive advantages, Porter categorized a firm’s activities into what he called the “value chain” and identified three generic business strategies: (1) “cost leadership” (2) “differentiation through product innovation” and (3) “cultivation of a market segment.” Example: Wal-Mart competes on price. Target differentiates with unique products from designers like Cynthia Rowley. Neiman-Marcus caters to the rich, a.k.a. a market segmentation strategy. It also turns out that you can combine strategies. Target is also a recognized price leader. Neiman Marcus also offers unique products like space flights. On the other hand, after dabbling in market segment and differentiation strategies, Wal-Mart seems to have gone back to a cost leadership approach.

Building on Porter’s theories, Michael Treacy and Fred Wiersma boiled it down to three value disciplines: “operational excellence," “product Innovation,” and “customer intimacy." Most marketers would argue it’s the third, “customer intimacy,” that’s key in achieving a competitive advantage. Yes, operating efficiencies should lead to lower prices, but Wal-Mart’s chronic decline in year-on-year sales shows that plenty of customers are looking for more than just a bargain. Likewise how many companies folded because their innovation didn’t get traction with consumers?

Many successful companies can be described as working backwards: designing their products, pricing and distribution around a deep understanding of their customers’ wants and needs. From a marketing perspective, customer intimacy drives the value chain—albeit in reverse. A stroll down any grocery aisle makes this clear. Horizontal segmentation—where marketers create product variations for every palate (Think upwards of 30 varieties of spaghetti sauce.)—is a reminder of how important customer intimacy has become.

Of course technology has only fueled the process. The ability to capture and analyze mountains of data in conjunction with ethnography and other research techniques brings marketers ever closer to their customers. Likewise, the Internet has expanded niche opportunities, opening up new markets. Yet I digress. The question is what does all this have to do with ad agencies and user-generated ads? The answer is: everything.

Marketing communications specialists succeed by integrating themselves into their clients’ value chains. They align themselves with operations. Contribute to product innovation. And most importantly, help cultivate customer intimacy. Fully integrated, the agency crafts communications strategies and creates messaging that binds customers to the value chain. In this regard, agencies have traditionally served as the authors of customer intimacy.

But just as technology has brought marketers ever closer to their customers, the convergence of affordable digital cameras, desktop editing systems, and YouTube has introduced customers into the communications end of the value chain. They not only are empowered to tell companies exactly what they want but also now have the ability to communicate it. Focus groups and quantitative studies are well and good. But the overall goal is complete customer intimacy. Therefore, enter the era of user-generated content. Just as our clients encourage customers to participate in the development of new products and services, now agencies can empower customers to contribute to marketing communications.

Capitalism has come a long way from the days when Henry Ford said customers could get a Model-T “in any color, provided it's black." Today, people choose from a spectrum of car makes and models—in arrays of styles and colors—but they can also customize the interiors to match the shoes they designed online, stipulating the number of cup holders to support their caffeine-enriched, zero-calorie bottled water. Which is only to say, why shouldn’t customers be creating their own commercials as well? Well, they are. Super Bowl XLI is early proof. Now it’s our job to make sure customers have what they need to get exactly what they want. And there’s no need to get territorial. Despite the rumors, we all know that the Doritos spot cost more than $12 to produce. What’s more, it wouldn’t have made it to the broadcast without agency stewardship.

So look at it this way: agencies are the communication specialists in the value chain. The goal is total customer intimacy. So where once we served as authors, we’ve now been promoted to editors-in-chief… in essence, the editors-in-chief of customer intimacy—a role that shouldn’t make a client uncomfortable since at the end of the day, the editor-in-chief still works for the owner, making us just one big happy value chain.

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Gregory Pruitt is president of Pruitt+Partners, a U.S.-based business development consulting practice. Pruitt previously served as VP/Director of Business Development at Cliff Freeman & Partners -- where during his tenure, the agency more than doubled its size and billings. Before that, he held senior business development positions at DeVito/Verdi and Ogilvy/141 Worldwide.

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