Six Sigma, invented at Motorola in the late 1980s, is a methodology for managing an entire company or business unit for the production and delivery of defect-free products and services. The logic goes: the higher the number of defects, the higher the number of complaints, the higher the cost, which drags down profits and jeopardizes customer loyalty. Not at all good for business. Achieving six sigma (sigma is the statistical term for standard deviation) means you've delivered a defect-free product or service 99.9997 percent of the time—a near perfect record. Correction costs go down and customer satisfaction goes up. All great for business.

In our experience, companies tend to adopt Six Sigma with a cult-like, religious zeal. There's Six Sigma Master Black Belts and Black Belts leading the charge, while Green Belts and Champions tear through business practices looking for problems and devising solutions. Everyone is single-mindedly intent on process improvement and passionate about breaking down the barriers inhibiting perfection. At many companies, communication between divisions and functional units, management and employees, dramatically improves. There's a keen focus on customer satisfaction, as well as on gathering and using facts to make decisions, instead of relying on gut feel, anecdotes, and assumptions. Again, all great for business.

Yet one functional area consistently escapes the fervor of the Black Belts, Green Belts, and Champions: Marketing. It's almost as if Marketing is sacrosanct; completely off limits to process improvement. Or maybe, swept up in Six Sigma's production concentration, Marketing is just forgotten as operations and actual products/services take center stage. Even though the "products" Marketing produces—campaigns, new products/services, and programs—more often than not achieve sub-par performance and decisions are routinely guided by gut thinking and management intuition (absolutely anathema to Six-Sigmatic thinking), instead of hard data, a condition that begs for improvement is left untouched. In short, while Operations and Manufacturing are going-gangbusters with Six Sigma producing defect-free products and services 99.9997 percent of the time, Marketing is routinely generating one flailing campaign and new product disaster after another. Mediocrity has been institutionalized in the marketing function.

What's the point of producing defect-free products and services if there aren't any customers who want to buy them? One of the short-comings of Six Sigma is that the existence of customers is assumed—they are already buying and ready to buy, you just have to do a better job of satisfying them. These days companies can ill-afford to assume anything about their customers; not their needs, not their behavior, and certainly not their loyalties. Many companies have saved a lot of money by using Six Sigma, but that's just a drop in the bucket in financial performance improvement compared to what would happen if Six Sigma proponents broadened their view of the application of the system and unleashed it on Marketing.

There's been an upswing in the market for luxury goods, from handbags to cars to appliances. Gucci, for instance, one of the brands hardest hit by the global recession, has seen sales grow significantly in recent months—more than 10 percent year-over-year in September alone! BMW hit a new record for the month in September when U.S. sales increased 2.3% from the year before. Maytag's home appliances segment, which includes high-end major appliances such as the Neptune front-loading washing machine, saw third quarter sales of rise to $1.155 billion, almost 5% higher than the year before.

Not only have established luxury goods been on the rebound, but "New Luxury" brands, as defined by co-authors of the new book, Trading Up: The New American Luxury, Michael J. Silverstein and Neil Fiske, have also achieved big gains. Silverstein and Fiske define New Luxury brands as those with high-quality, higher-priced products and services targeted to middle-market consumers and include JetBlue Airways, Coach, Starbucks, and William-Sonoma. We'd add a few others to this list including Deluxe Designer Checks, Godiva Chocolates, Kate Spade, and Prada Shoes. According to Boston Consulting Group (BCG) study, New Luxury brands saw on average sales gains of 18% in the first half of 2003, well-above their respective industry averages.

While the upswing in the market for luxury and premium goods is good news for business in general—a sure indication that the long-anticipated economic recovery is finally on its way—there's even better news below the surface for marketers. As the BCG study, Trading Up, and other research demonstrate, it isn't just the upper echelons of the U.S. socioeconomic strata buying premium products and services; everyone, for all intents and purposes, is willing to pay a premium price in at least one category.

It's not just a fluke that a consumer is willing to shell out $4 for a Starbucks Café Mocha rather than $1 for a regular cup of coffer; $35,000 for a BMW rather than $16,000 for a Toyota. There's a reason behind it, what marketing academics refer to as buyer involvement. Buyers who are particularly "involved" in a category—meaning they have a strong interest in the category and, therefore, attach particular importance to purchase decisions—will pay more, sometimes significantly more (anywhere from 20% to 200% for New Luxury brands according to BCG)—for features, customer service, added convenience, perceived higher quality, store design, and even the brand name.

The challenge for marketers looking to capitalize on this phenomenon, of course, is to identify the "high involvement" buyers and design product and service offerings that appeal to them. The category dominating sales of luxury and New Luxury brands proves not only that it's possible to find and keep high involvement buyers, but also how well it pays to do so.

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Recent Forbes and New York Times articles detail the latest example of marketing buffoonery: using neuroscience research. Well-known companies including DaimlerChrysler, GM, Ford of Europe, it seems, have been deluded into thinking that studying the brain waves of a small group of respondents will somehow yield important insights on which to base mission-critical, multi-million—perhaps billion—dollar decisions about marketing programs such as ad campaigns and new products and services.

Some neuroscience researchers use electrode-studded caps to feed brain activity back to an electroencephalograph, which tracks cognitive functions in different areas of the brain—the region that controls memory, for example—as respondents are shown different visual and aural stimuli. Others use MRI machines to monitor how the brain reacts.

Some of the stunning findings so far from neuroscience applications to marketing research: memory, as it turns out, plays an important role in product choice. As recounted in the Forbes article, "in a recent shopping study conducted by Open University in Milton Keynes, UK, and the London Business School, scientists found that when shoppers are asked to make a choice among common and closely related items in a grocery-store-like setting, the areas of the brain involved in memory light up like a nighttime sky filled with fireworks." No, really? Another stunning discovery: emotions play a part in brand choice, as does the influence of others. No kidding!

And yet another: brand image is as important to the cola category as product taste. Whoa! Using MRI scans, researchers noticed that one area of the brain lit up consistently when test subjects tasted Pepsi, but not when they tasted Coke. In these blind taste test, all the subjects indicated they preferred Pepsi. Yet when the researchers told subjects which of the sample tastes were Coke, a whole other area of the brain lit up and almost all of the subjects said they preferred Coke. So, the researchers concluded, taste isn't everything and brand has an influence on cola preference. A stunning discovery that Pepsi and Coke knew about two decades before the MRI was even invented.

Granted neuroscience certainly has important applications in the design of new products—creating better navigational and warning devices for cars by understanding how a driver's brain interacts with a car, for example. And seeing how the brain processes marketing information is certainly interesting. Yet as a marketing research tool, neuroscience has the same drawbacks as focus groups. You can't project the data gathered from the brains of 12 individuals onto a larger population—it's not representative by any means. Moreover, while this kind of research can tell you what area of the brain has been stimulated, it can't tell you what exactly was stimulating, nor can it tell you why something wasn't (so you could fix it). It offers no prescriptive information. Add to all these shortcomings that it's extremely expensive because of the technology required to monitor brain response.

In the end, we expect neuroscience to go the way of "motivation research" promulgated by the Austrian-born psychoanalyst Ernest Dichter in the 1950s and pupil dilation and galvanic skin response research in the 1960s: a fleeting fad in the annals of marketing research history.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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"The vast majority of companies never become great, precisely because the vast majority become quite good—and that is their main problem." Jim Collins, Good to Great

Controlling for luck, CEO leadership, and industry circumstances, Jim Collins and a team of researchers examined 11 companies from different industries that produced cumulative stock returns at or below the general market for 15 years and then one day saw cumulative returns at least three times the market for the next 15 years to pinpoint exactly what characteristics propelled them to greatness versus a set of comparable companies that continued to languish.

We found this book absolutely fascinating, particularly the finding that one person—what the author Jim Collins calls a "level 5 leader"—can significantly influence company performance despite the conventional wisdom that one person cannot make a difference. Backed by unimpeachable research, Good to Great is a must read for every CEO and CMO looking to transform their company.

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The average ROI of TV advertising campaigns is 1-4%. New products fail 9 times out of 10. Brand equity is declining. On December 2, at 12:00-1:00 PM EST, Microsoft Office Live Meeting will host Kevin Clancy, chairman and CEO of Copernicus, in a one-hour talk on five steps marketers can take to reverse these negative trends and dramatically improve brand equity and bottom-line performance.

Registrants will have the chance to ask Dr. Clancy questions and to opt-in to receive a complimentary copy of the Copernicus report, The Commoditization of Brands and Its Implications for Marketers. The first 25 five registrants who opt-in will also receive an autographed copy of Clancy's and his colleague Peter Krieg's book, Counterintuitive Marketing, recently named one of the top five books in marketing by the American Marketing Association.

To register for the web seminar, click here.

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