I’m sure Multi-Level Marketing has been around since ancient days. Send out street urchins to sell stuff and take a big chunk of their income. Get them to recruit other homeless kids and let them have a share of what their protegé earns.
But Multi-Level Marketing (or MLM) is big business now, with one estimate* putting it at around the US$200 billion per annum mark, worldwide.
So, we have to ask:
What is Multi-Level Marketing?
How does it work?
Is it a good way to earn a living (here’s a spoiler: no)?
The explosion in online business and the effectiveness of Software as a Service have created a new boom: Marketing Automation. This allows marketers to address prospective customers almost personally. But to do so in a way that scales with your business.
It sounds almost too good to be true. So, what is marketing automation, and how does it work?
If you are in the business of selling, who are you selling to? Do you know the characteristics of your customers? To target your marketing well, you need an archetype, which marketers call the ‘Buyer Persona’ or sometimes the customer or marketing persona. And sometimes they use ‘Avatar’.
Each of these terms means the same thing. If you do the work, up front, of characterising the people you want to sell to, you can better target your marketing.
Marketing is about making potential customers aware of your products or services. And the Marketing Mix is how you balance your investments across different ways to achieve this.
As recently as 100 years ago, marketing was hardly practised and didn’t have a name. Yet now, with so much choice of things to buy, businesses need to get our attention and grab our interest. They need to find ways to create a market for goods that our great grand-parents couldn’t have conceived of, let alone needed. So what are the different strategies they can use to do this? That’s the Marketing Mix.
Permission Marketing is still a teenager. Born in 1999, it is not just vibrantly fit and energetic. It already seems mature and part of the community. This is so much so, that we see it everyday, and think nothing of the revolutionary change it has created.
Of course, it’s the term ‘Permission Marketing’ that’s a teenager. It was coined in 1999 by entrepreneur and marketer, Seth Godin. The idea, like so many, had been around for a long time.
It was just waiting for someone to give it a name, describe it, and see it as a powerful trend for the future. This is what Godin did in his breakthrough book, titled… yup: ‘Permission Marketing’ (US|UK).
Philip Kotler is often viewed as the ‘father of modern marketing’. His contribution to the field is enormous. I’d characterise his principal innovation as bringing the analytical approach of a mathematical economist to what was a woolly and vague social science.
Philip Kotler was born in Chicago in 1931 and received his MA in Economics from the University of Chicago in 1953, studying with three Nobel Laureates. He then took a PhD in economics at MIT, before realising that economics was the wrong subject for him. He held post-doctoral positions at Harvard (in maths) and the University of Chicago (in behavioural science) before accepting an academic post at the Kellogg Graduate School of Management at Northwestern University. There, he chose to teach marketing and by 1962 was Professor of International Marketing.
In 1967, he became the Johnson & Son Professor of International Marketing, a post he still holds today. Also in that year, he published a major work on marketing. Frustrated with the lack of intellectual rigour and analysis of all marketing textbooks then available, Kotler brought his mathematical training to bear on the evidence base of the marketing curriculum.
In Marketing Management, he created a best-selling textbook, that is by far the dominant choice of business schools throughout the world. Now in its 15th edition, Kotler typically revises it thoroughly every three years. He argues that yesterday’s solutions are today’s problems – marketing changes too fast for an edition to remain any longer. It’s good for sales, I guess, but in the case of marketing, I suspect it is more than justified.
Since then, Kotler has authored well over 50 books, and has garnered more academic and business awards and honours than you can shake a stick at. He even appears on a postage stamp (Indonesian, 2006, 1,000 Rupiah – around US$0.07 – for the philatelists).
Spat between Kotler and Levitt
In the 1980s, Kotler had a public spat with his contemporary marketing guru, Theodore Levitt. As we discuss in our article about Levitt, Levitt believed that corporations should standardise their products globally, and build global brand messages and marketing campaigns. Kotler, on the other hand, recognised the value of this but argued that corporations must not ignore cultural and other local differences. He advocates a mixture of global and local marketing that has become known as ‘glocal’. McDonald’s is an example; it produces local dishes in addition to core offerings, and even suppresses those products where they conflict with local values (such as beef products in Hindu countries).
Four Big Ideas that Philip Kotler gave us
The measure of a new idea is how deeply and how widely it becomes ingrained. Four of Kotler’s ideas now seem self-evidently true to a wide swathe of managers, within and outside of marketing functions. This was not always the case, and Kotler was instrumental in developing each, and putting them before generations of graduate business school students.
Marketing is a Core Business Function
There was a time when marketing was seen as a peripheral activity. Or maybe it was an adjunct to the sales function. If it were the latter, then clearly, it could only be an activity for commercial organisations. But it’s not, and therefore all manner of non-commercial organisations, like governmental tiers, voluntary and charitable bodies, and public services, need to engage in marketing. Without marketing, we now recognise, we cannot put our ideas and offerings in front of the people we created them for. Without marketing, there is no point!
Focus on Your Customer’s Needs
Create the products and services your customers need and want. Marketing is less about lining up sales for what you make, and more about figuring out what your customers will buy, and then letting them know about it, when you have something that matches.
Marketing as a Process of Exchange and Communication
Marketing is about building an overlap of values between your brand, and your clients. It is a social process that starts with a dialogue, where marketers create the conditions to hear from their potential buyers. It seems to me that this perspective has its roots in the time Kotler spent as a post-doc in behavioural science. It does for marketing what Daniel Kahneman did for economics: it places the quirky irrationality of humans at the centre of a discipline which was, before then, considered in theoretical and abstract terms.
Five Product Levels
Kotler introduced in, Marketing Management, the idea that there are five levels at which an organisation can offer its products or services.
The core benefit that the customers need
The generic product or service that the organisation has created
The product or service that the customers expect
A product or service that has additional benefits packaged in
A product or service that meets the full potential to satisfy its customers
Conclusion on Philip Kotler
Studying marketing without reading Kotler would be like studying English literature without reading Shakespeare. His ideas are foundational. But his rigorous discipline of constantly updating his principal textbook also means that his ideas will always be of the moment.
Some Videos of Philip Kotler, speaking about his idea
Theodore Levitt’s principal contribution to management was in lifting marketing up from a functional place in business to a strategic role. So it is perhaps surprising that he is often remembered as the man who coined the term ‘globalisation’. Mis-remembered*, it turns out. The greater irony is that he simply brought the word to prominence. But that shows the impact of his writing; in particular a series of classic articles for the Harvard Business Review, which he edited from 1985 to 1990.
Theodore ‘Ted’ Levitt was born in Germany, in 1925. His parents moved the family to America in 1935, and Levitt served in the War. He earned his Bachelor’s degree at Antioch College and went on to do a Ph.D. in economics at Ohio State University.
After time as a consultant, and then teaching at the University of North Dakota, Levitt joined the Harvard business school in 1959. There, he quickly started teaching marketing, despite having no formal education in the topic. But in the following year, 1960, he published a landmark article in the Harvard Business Review (HBR), which he descried as a manifesto.
In Marketing Myopia, Levitt argued that corporations should not think of themselves as producers of goods or services. Instead, they are ‘buyers of customers’ who create goods and services to tempt customers into a commercial relationship. Companies are organisms that create and maintain customers. Indeed, in his 1983 book, The Marketing Imagination, he summed up his primary thesis as In 1983, by defining corporate purpose as:
to create and keep a customer
Put that way, it is easy to follow Levitt’s argument that marketing needs to pervade a company’s strategy and provide a counterbalance to excessive focus on production and operations. He gave the often cited example of railways. In thinking about their purpose, they should stop considering themselves as providers of a railway and its services, and start to think of themselves as organisations whose role is to move people from where they are to where they want to be.
It is worth noting that Levitt was influenced (as are so many twentieth century management thinkers) by Peter Drucker. Drucker argued that, from a customer’s point of view, marketing isn’t a function: it is the business. Let’s just look at Apple!
To underscore his idea, Levitt introduced the idea of a marketing matrix, that charts a company’s inward orientation against its outward orientation to its customer, with the top right cell representing the ideal.
His 1976 HBR article, The Industrialization of Service, argued that we need to apply the same rigour of repeatability, monitoring and quality control to customer services, as we do to production. He also introduced the now commonplace concept of ‘Relationship Marketing’ – the activity designed to keep customers and extend your relationship with them. This has, of course, spawned the whole discipline (and software market) of CRM: Customer Relationship Management.
The Globalization of Markets
For my third of Levitt’s big ideas, I have to come back to globalisation, which he addressed in his 1983 HBR article, The Globalization of Markets. Here, he argues that the two ‘vectors’ of technology and globalisation would shape the world. Now, in 2016, it is hard to argue with that conclusion. Indeed, he thought that it would be technological advances that would drive marketplace changes towards global uniformity. To survive and outcompete rivals, corporations would need to harness the efficiencies of standardisation. These would outweigh the desirability for customers of local customization in a competitive sense. Ladies and gentlemen, I give you Starbucks, Toyota, Amazon, and Samsung.
This position got Levitt into a debate that we describe in our article about the other towering figure in twentieth century marketing, Philip Kotler.
* Even the New York times got this wrong. Their obituary for Levitt was titled ‘Theodore Levitt, 81, Who Coined the Term ‘Globalization’, Is Dead’, but in a subsequent erratum, they noted, ‘and while he published a respected paper in 1983 popularizing the term, he did not coin the word. (It was in use at least as early as 1944 in other senses and was used by others in discussing economics at least as early as 1981.)‘
Why is it that some of the most successful companies spend surprisingly small percentages of their revenue budgets on marketing? The answer, if you think about it, is obvious: as total revenue income goes up, if you are a successful business, you get more bang for your marketing buck. They may be spending a lot, but the proportion is lower.
So, how do you get your business to this enviable position? The answer, says INSEAD Professor, Jean-Claude Larréché, is momentum. Some products do not need to be aggressively marketed to deliver superior sales performance: instead, their fit with customers’ needs and desires is so great, that they gain a momentum of their own.
Jean-Claude Larréché was born in 1947 and studied electronic engineering at INSA in Lyon, where he was awarded a bachelor’s degree in 1968. He followed this with an MSc in Computer Science at the University of London (1969), and an INSEAD MBA, in 1970. He then went on to research marketing modelling at the Graduate School of Business at Stanford University, where he was awarded a PhD in 1974.
Larréché’s research led him to develop a now widely used marketing simulation, MarkStrat, and his growing expertise in the modelling of how marketing works led to a non-executive appointment to the board of Reckitt & Coleman (now Reckitt Benckiser), that he held from 1983 to 2001.
In 1982, he returned to INSEAD as Professor of Marketing, becoming The Alfred H. Heineken Chaired Professor of Marketing in 1993. He continues to hold this role. Whilst collaborating in a number of books, Larréché’s most significant publication is his 2008 book, The Momentum Effect.
The Momentum Effect
Larréché differentiates between ‘upstream marketing’ and ‘downstream marketing’. Upstream marketing is designed to start the process of product or service awareness among appropriate prospects, and allow the business to refine their product or service offering, to meet potential buyers’ needs. You do this with customer insight and content marketing tactics. Downstream marketing is the communication and promotion that puts your products and services to the market, to generate purchasing intent.
The key, Larréché asserts, is to divert funds from downstream to upstream marketing, to ensure that you have a product or service that is so attractive to customers, that it creates its own momentum. The obvious example he cites is Apple’s marketing of the iPhone and iPad ranges.
Larréché’s book sets out his 8 component ‘Momentum Strategy’, which he summarises in a diagram like this one:
Here, Larréché separates out the design and execution (or build-sell-support) components of product development, giving equal weight to the two sides. He also shows these two components as interacting cycles. The cyclical metaphor is an important aspect to note: Larréché argues strongly for our continuing refinement of our offering, to continue to drive momentum.
Here is Larréché talking about his ideas in an InSEAD video
Larréché has transcended his earlier career focus on marketing. With The Momentum Effect, he is really talking about business strategy, and placing his ideas about successful marketing at the heart. You can get a real sense of this in this interview, where he answers some excellent challenging questions, including about how companies lose momentum.
The internet has changed the old pre-1990 world of marketing and advertising. It has thrown up new rules, new tools and new gurus. One of the very first to spot that this would happen, and then to study strategy and tactics, was Seth Godin. A serial entrepreneur and opinion former, Seth Godin is far better known among entrepreneurs, small business owners and freelancers than among the marketing managers of larger corporations. but he has worked hard to keep his analysis fresh and relevant, and there is much that any manager can learn from him.
Seth Godin was born, grew up and continues to live and work in New York State. Born in 1960, he read computer science and philosophy at Tufts University and then did an MBA in marketing at Stanford Graduate School of Business. He then went to work at educational software business, Spinnaker Software, as a brand manager.
He started his first business, in book packaging, after leaving Spinnaker in 1986, but real success came in 1995, when he and business partner Mark Hurst started a marketing company called Yoyodyne. Godin is an avid reader and Yoyodyne was possibly named after a fictional defence contractor in Thomas Pynchon’s novels.
Yoyodyne used the concept of ‘Permission Marketing’. This is a term Godin claims to have coined with his book of the same name, published in 1999. The idea behind this is that we, the targets of marketing, give our permission for the marketer to send us their messages. In the case of Yoyodyne, it gained permission on behalf of its clients, by offering their prospects games and contests. With a blue-chip customer base, Godin sold the business in 1998 to Yahoo!, becoming Yahoo!’s VP for Direct Marketing. He only stayed for two years, which suggests that this was a tie-in period, before setting out on his own again.
Multiple ventures have followed: ChangeThis (an idea dissemination platform – sold in 2005), Squidoo (a web microsite platform sold in 2014), The Domino Project (a book publishing venture that published one book per month in 2011 – four have been reprinted by Portfolio/Penguin in 2015).
In amongst this, Godin has been a prolific author and a successful speaker. He largely promotes his own events based on a massive following for his daily blog posts. This gives him a massive permission marketing base for his books, events, courses and any other venture he is drawn to.
Seven Big Ideas
We can track Godin’s ideas through his books (currently over 20, I think). Let’s take a look at a few that will appeal to a range of managers and professionals.
The key is differentiation. Without it you won’t stand out and marketing will fail. You need to abandon product, place, price, and promotion in favour of p for phenomenal or, as Godin puts it: p for Purple Cow.
Doing things really well is hard. You make a lot of progress at the start of your learning journey and then slow down. This is the Dip. If you take on too much, you won’t have the time or attention to escape the dip on anything. True success means quitting on most things so you can succeed on a few.
Market by leading. Find like-minded people who believe in what you are doing and lead them. Create products or services that they want, and they will crave what you offer. The ultimate in permission marketing. See an earlier Pocketblog about Godin’s Tribes concept.
Market yourself by becoming essential to your organisation or your tribe. Do this with creativity and by doing the most valuable work that you can. This is a manifesto for personal success, rather than the success of your product.
Everyone is different and the internet allows us to make for and market to the long tail – small communities who would have been too small to build a career or product on before the internet allowed us to address the world.