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Cambridge Marketing Handbook: Stakeholder Marketing
STAKEHOLDER MARKETING
A HANDBOOK FOR
PROFESSIONAL MARKETERS
TERRY NICKLIN
CAMBRIDGE MARKETING PRESS
I
Cambridge Marketing Handbook:
Stakeholder Marketing
Terry Nicklin
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Cambridge Marketing Handbook: Stakeholder Marketing
Publisher’s note
Every possible effort has been made to ensure that the information contained in this
book is accurate at the time of going to press, and the publishers and authors cannot
accept responsibility for any errors or omissions, however caused. No responsibility for loss
or damage occasioned to any person acting, or refraining from action, as a result of
the material in this publication can be accepted by the editor, the publisher or any of
the authors.
First published in Great Britain and the United States in 2013 by Cambridge Marketing Press.
This revised edition published by Cambridge Marketing Press, 2015
©
Cambridge Marketing Press, 2015.
Cambridge Marketing Press
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Apart from any fair dealing for the purposes of research or private study, or criticism or
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The right of Cambridge Marketing College to be identified as the author of this work
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ISBN
Paperback: 978-1-910958-33-9
eBook-eReader: 978-1-910958-34-6
eBook-PDF: 978-1-910958-35-3
British Library Cataloguing-in-Publication Data.
A catalogue record for this book is available from the British Library.
Design and layout by Cambridge Marketing Press.
Printed and bound by CPI/Antony Rowe, Chippenham, Wiltshire.
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Dedication
Dedicated to Charles Nixon, without whose vision and drive these
Handbooks would not have come into being.
About the author
Terry Nicklin BSc DipM MBA FCIM FCMC
Chartered Marketer
Terry Nicklin has over thirty years’ experience of
marketing in product and service-based organisations.
He has worked at Marketing Director level in global
markets for companies in technology and professional
services, and has consulted for public and private sector clients including
BT, Bosch, GE and Unilever.
His company, KeynotePR, provides marketing support to organisations in
technology and business services sectors. Clients have included: Imperial
Innovations, University of Cambridge and TT Electronics. He was awarded
a Chartered Institute of Public Relations Gold Award in 2012.
Terry has worked with Cambridge Marketing Colleges (CMC) for over ten
years. He is Course Director for Digital Marketing. He was the author of
Stakeholder Marketing – part of Pearson Education’s Marketing in a Box.
Terry is Chairman of the Chartered Institute of Marketing (CIM)
Cambridgeshire Branch, and a Member of the CIM East Regional
Committee. He is a Fellow of the CIM and of CMC.
He holds the CIM Diploma in Marketing and has an MBA from Warwick
University.
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Cambridge Marketing Handbook: Stakeholder Marketing
Contents
Word Cloud
VI
PrefaceVII
Part 1: Public Opinion and Politics Introduction 3
Chapter 1: Beyond the Customer
1.1 Politics and social trends 8
1.2 Power of corporations
12
1.3 Balance of power
13
1.4 Customer trends
14
1.5 Ethics
16
1.6 The environmental issue
17
Chapter 2: Stakeholders and their Impact on the Organisation
2.1 Stakeholder interests
24
2.2 Power and interest 25
2.3 Stakeholder interactions 27
2.4 The power of digital communication 30
2.5 Crisis communications 32
Chapter 3: Corporate Reputation 3.1 Elements of corporate reputation 38
3.2 Corporate branding 39
3.3 Societal marketing 41
3.4 Corporate social responsibility 43
3.5 Corporate communications 45
3.6 Political marketing 55
V
57
Chapter 4: Closing Remarks Appendices
Appendix 1: Domino’s pizza
Appendix 2: Tobacco debate 59
63
Part 2: Partners Introduction 69
Chapter 5: Partners 5.1 Partnership types
71
Chapter 6: Internal Partnerships 6.1 Overview 73
6.2 Internal marketing 74
6.3 Part-time marketers 77
6.4 Achieving internal partnerships 78
6.5 Empowerment 79
Chapter 7: Vertical Partnerships 7.1 Supplier partnerships or partnership sourcing
86
7.2 Innovation networks 91
7.3 Outsourcing 91
7.4 Limitations of supplier partnering 93
7.5 Strategic business units 94
Chapter 8: Horizontal Partnerships 8.1 Personal networks 95
8.2 Collaborative partnerships 96
Epilogue
101
References102
Index106
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Cambridge Marketing Handbook: Stakeholder Marketing
Word clouds produced through Wordle (www.wordle.net)
TM
VII
Preface
Marketers have long held the view that the customer should be at
the centre of all they think about, all they do. Yet the developments
of the last few years have shown that other forces are at play that
can be at least as powerful and long lasting as customer satisfaction
alone. A broader group of stakeholders exists, whose needs and
interests must be understood and satisfied in the quest for a strong,
positive corporate reputation and business success.
Consider how you feel about any organisation in the financial
services sector today, and it is likely that your general impression will
be clouded by the actions of the banks in the early 21st Century, and
the subsequent economic fallout that has affected most economies.
This is true whether you have been personally affected or not. Simply
by listening to the broadcast media, reading newspapers etc. we
develop our opinions as part of a ‘groundswell’ of thought, which
changes over time but is likely to subsist for several years. Often
this public opinion is vague and simplistic (all bankers are bad;
the NHS is under-funded), but without doubt affects the way
individual organisations need to react to, and communicate with,
their stakeholders.
Most recently, the impact of the internet and the dramatic rise in the
use of social media have accelerated and amplified the power of
individuals to comment on – and ultimately to influence – the activities
of organisations of all types.
To account for the increased demands put on organisations by the
complete range of stakeholders, we need to recognise:
• internal stakeholders (employees, temporary staff, interns,
directors, etc.)
• external stakeholders (finance providers, media, regulators,
government, etc.)
• connected stakeholders (suppliers, customers, partners, etc.)
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We also need to extend the framework of marketing and its scope, so
that in addition to the familiar seven Ps of the ‘extended marketing mix’
(Product, Price, Promotion, Place, Physical evidence, Process and People),
we can usefully identify three more Ps: Political Power, Public Opinion and
Partners. This text examines the changing world of multiple stakeholders,
their developing concerns and how they behave in response, and how
organisations should relate to them.
It also examines the organisation itself and the factors that influence
the development of its corporate image among its various stakeholder
audiences.
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Cambridge Marketing Handbook: Stakeholder Marketing
PART 1
Public Opinion
and Politics
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Cambridge Marketing Handbook: Stakeholder Marketing
Introduction
Until fairly recently, marketers focused on identifying customer needs and
wants, and satisfying them with products and services. Marketing, put
glibly, was about ‘selling products that won’t come back, to customers
who will’. Later we recognised the need to delight them.
If you had a product to sell, let’s say a radio, you supplied it to as many
retailers as you could, and they sold it at a higher price – often all at the
same price: the ‘recommended retail price’. Customers duly trotted
along to buy it. Their choice of goods was limited to the range stocked
by the shops they could get to, and the products they could afford. If you
wanted to promote your radios, you had signs made to go in the shops,
i.e. ‘point of sale’ advertising, and perhaps some general press advertising
or even broadcast media advertising if your budget/market justified it.
Essentially, the impact of your campaigns would be a function of the size
of the campaign spend and the success of this ‘interruption marketing’.
Contrast this with a company today: Samsung for example, marketing its
latest DVD player. Potential customers may still go along to the shops –
both specialist (e.g. hi-fi retailers) and general (e.g. department stores or
even supermarkets), where they will expect product demonstrations from
knowledgeable and personable sales staff, and maybe ‘master classes’
from more technically trained staff. However, they will almost certainly also
consult other media to get a more rounded view of the product.
They may watch ‘The Gadget Show’ on Channel 5 for an independent
review. They will almost certainly go online, both to Samsung’s own
website in their own country – where they will expect a full list of technical
features, bang up to date, and in their own language - and to other
websites such as ‘evaluator intermediaries’. They will visit retail websites
such as Amazon where they may well find keen pricing impossible for high
street retailers to match.
They will read reviews from people who have previously bought the
product. They will be shown similar, alternative products to tempt them on
comparison sites such as Kelkoo.
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Beyond the Customer
Once they have made their decision, customers will expect to use their
preferred payment method (credit card, store card, PayPal, etc.), and to
enjoy full after sales support. They will even be able to return the goods
within a few days if they change their mind and they bought online, under
the Distance Selling Regulations!
As well as customers, Samsung will need to consider the views of its retail
channels so that they are motivated to offer the products enthusiastically.
This will include its international network, as products may be bought
online from many countries. The company will need to be mindful of
press commentators or special interest groups who may be interested
in its policy on using bio-degradable materials or reducing unnecessary
packaging. Samsung has shareholders who will be interested in what
management is doing to maximise share price and dividends, while
employees and possibly trade unions will be interested in working
practices and employment terms. Even governments will take an interest
in Samsung as a potential provider of employment to its citizens, especially
in development support areas. If the company is seen as too successful,
regulators may step in to demand a reduction in the power of the
organisation; Microsoft and BT have experienced this in recent years.
Perhaps life in earlier times was not quite so simple as suggested above,
but there is no doubt that companies in most countries are today required
to reach ever-higher standards of performance, in ever more complex
environments. In particular, there is a far wider range of individuals
and businesses who have some interest in what the company is doing:
suppliers, sales channel members, employees, regulators, legislators,
analysts, media commentators, the general public and so on. Collectively
we refer to these as stakeholders. How organisations should recognise and
respond to this changing landscape, and how they can influence such
diverse groups favourably is the principal focus of this Handbook.
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Chapter 1: Beyond the Customer
We are familiar with the idea that marketing is ‘about’ the 4Ps. For
some, they define the scope of marketing and provide a template for
mapping out and planning marketing activities in our organisations.
Much marketing activity is about managing product (or service),
setting price, establishing channels of distribution and managing
communication around our brand. This much is not in question. In
the 1980s, marketing thinkers augmented the basic 4Ps of marketing:
Product, Place (distribution channels), Price and Promotion to add:
People, Physical Evidence and Process – giving us the ‘7Ps’.These
elements have special resonance in services marketing.
However, it should be clear from the Introduction above that today
our horizons need to be set much more broadly than the traditional
‘marketing mix’ would allow. For what we might call ‘stakeholder
marketing’, even the 7Ps are not broad enough and it is worth adding
three more:
• Political power
• Public opinion
•Partners
These additional factors give us the scope to describe many more of
the forces affecting organisations today.
We could of course go further and add many more Ps – Positioning,
Performance, Promise, Personalisation, Progression, Perception,
Prediction, Physical asset, Payments and so on! These are just some
of the additions one can find in the literature. Clearly none of these
models is ‘right’, and we are free to select concepts that mean
something relevant in our particular sector.
So why have we chosen Political power, Public opinion and Partners
to form our 10Ps? These three topics allow us effectively to capture
many of the issues that organisations face, and which are not directly a
matter of gaining and satisfying customers.
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Beyond the Customer
They are issues partly or wholly beyond the customer, yet they may
affect the success of the organisation just as potently. They recognise
the importance of those other entities in and around the organisation
whom we shall conveniently collectively describe as ‘stakeholders’. PR
practitioners used to call them ‘publics’.
To take two examples of how these factors may have impact:
Public opinion: In 2002, health campaigners watched closely as a
lawsuit was filed on behalf of several obese teenagers who claimed
that the fast-food company McDonald’s was responsible for making
them fat. They claimed that adequate information was not given on
the health risks associated with fast food. In May 2012, after a great
deal of discussion during the intervening years, McDonald’s’ investors
soundly rejected a shareholder proposal that would have required
the world’s biggest fast-food chain to assess its impact on childhood
obesity. Clearly this issue remains very much ‘alive’, and public opinion
on this issue continues to develop.
Partners: In a manufacturing company, attention to detail and
concern for quality must be at the heart of the manufacturing process,
supported by suppliers equally concerned to provide consistent quality
and on-time delivery. Raw materials or components become part of
the finished product and so determine its function, manufacturability
and cost. Thus strategic suppliers are better treated as partners if the
most value is to be gained from them. We deal with Partners in more
detail in Part 2 of this Handbook.
It is becoming increasingly clear that organisations have a need to
consider sometimes diverse stakeholder interests in their operations
and especially in their communications. You may be thinking that this
will take the focus away from the all-important customer – who should
remain at the centre of attention. During the 1990s, a school of thought
emerged, (actually several related ones), that to satisfy customers
properly and to be successful, organisations needed to broaden
the relationships they had with suppliers, employees, investors, sales
channels, etc., and to harness these in support of the products and
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Cambridge Marketing Handbook: Stakeholder Marketing
services they deliver to customers. To be competitive, all parts of the
complex web of interactions have to be working effectively.
Organisations
At this point, it is worth noting that although the reference to
‘companies’ is often used as a convenience, the concepts described
here are equally applicable to government departments, leisure resorts,
business parks, individual owner/operators, even whole countries! As
such, we are continuing to develop the application of marketing on a
broader front than did earlier theories, many of which were developed
for the consumer marketing of late 20th Century America. These
theories may or may not have validity today in our more complex,
internet-enabled environment.
Figure 1.1. The 10Ps of stakeholder marketing
You may be thinking that this is looking similar to a PESTER analysis (Political,
Economic, Social, Technological, Environmental and Regulatory analysis),
but the difference is important. A PESTER analysis seeks to identify the
external factors impacting on an organisation, most of which are by
definition, out of its direct control.
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Beyond the Customer
The 10Ps on the other hand represent a framework within which to plan
activities, budgets and responsibilities, i.e. to exert as much control as
possible over the full range of marketing activity.
1.1 Politics and Social Trends
“Politics? What’s that got to do with marketing?” I hear you say. Well,
we are not concerned here principally with the mechanics of party
politics (voting, elections, party manifestos, etc.), but with the issues
that drive politics and are driven by them. “But that’s potentially every
issue”, you may respond. You would be right, but from time to time,
certain issues come to the fore and command particular attention from
legislators, the media, organisations and individuals.
An obvious example would be the issue of the environment.
Developing, producing and consuming products and services leaves its
mark on the planet through use of resources or energy. Understanding
this impact and how it can be reduced, or at least managed, has
become a very important consideration for many societies in the last
couple of decades.
Social trends may affect many aspects of the marketing mix, including:
Product - car manufacturers need to be concerned about recycling
of materials used; Price - utility companies have their pricing monitored
by regulators; Promotion - pharmaceutical companies are governed
by the ABPI Code of Practice and so on. Marketers are part of society
and as such have to adapt to an ever-changing set of standards that
define acceptable behaviour. This informal frame of reference is not
the same as the legal framework with which companies are required to
comply. In many cases, the voluntary code of conduct exceeds, or at
least pre-empts, the requirements of the law. We return to the subject
of ethics below.
Changes in public opinion arise in part from demographic and other
macro changes in our society. At times, these changes can be
significant and far-reaching.
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Governments monitor and report on collected data, and this information
can be used by marketers to develop a better understanding of
underlying social trends that underpin behaviour.
Social trends reported by the Office for National Statistics (ONS) are
presented under the following broad categories (ONS, 2010/11):
• Labour Market
•Education
•Population
• Social Protection
•Transport
• Crime and Justice
• Households and Families
•Lifestyles
•Environment
• Income and Wealth
•Expenditure
• Health and Housing
Examples of social trends from the latest report at the time of writing (2015)
include:
Technology and business
• UK adults have taken more quickly to online purchasing than those
of any other EU country. In 2009, 66% of us bought or ordered goods
and services over the internet.
• Websites were the second most popular source of reading for boys
aged 9-14. For girls it was e-mail.
• The value of fraudulent credit and debit card usage reached almost
£610 million in 2008, an increase of 14% on the previous year, and
350% up on 1998.
Environment
• Only 4% of people (in the UK) and across the EU-27 considered the
environment to be one of the two most important issues facing their
country in 2010. 35% thought it was the third most important issue
after the economy and unemployment.
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Beyond the Customer
•In both the UK and across the EU-27 minimising waste and recycling
was regarded as the action that would have the highest impact
on solving environmental problems, with 34% of people in the UK
and 30% of people across the rest of the EU-27 selecting this option
in 2009.
Older people
• In 1983, 70% of people in Great Britain agreed or agreed strongly
that older people should be encouraged to retire earlier to reduce
unemployment. By 2009 this had fallen to 15%.
Political engagement
• Trust in political parties in the UK fell from 18% in autumn 2008 to 9%
in autumn 2009. However, interest in politics in the UK increased
in the years leading up to the 2010 General Election, with 12.6%
of people saying they were ‘very interested’ in politics in 2008
compared with 10.9% in 2006.
Health
• In autumn 2009, 70% of citizens across the EU and 86% of citizens in
the UK, rated the quality of healthcare in their country as ‘good’ or
‘very good’.
• In England in 2008, 24.5% of adults aged 16 and over had a body
mass index classed as obese (c.f. 15.7% in 1994).
Earnings growth
•Between 2008 and 2009, earnings growth was largest for part-time
employees and smallest for male full-time employees.
• Between 1998 and 2009, earnings grew on average at a faster rate
than inflation.
Population
•Between 1950 and 2010, Europe’s share of world population halved
from 21.6% to 10.6%. In 2010 Asia accounted for 60.3% of world
population.
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Cambridge Marketing Handbook: Stakeholder Marketing
• The number of people aged 85 or over reached 1.3 million by mid2008, accounting for 2% of the population compared with 1% in
1971.
Some of these insights represent huge structural shifts in society, and
clearly could impact significantly on attitudes to organisations as well as
commercial behaviour.
The extent to which any of this impacts on marketing plans depends, of
course, on our market sector and whether we serve consumers directly,
and if so which specific demographic groups.
Figure 1.2. Examples of interactions between government, consumers
and companies
Companies and organisations of all types interact with consumers and
with government in a multitude of ways, only a very few of which are
shown in Figure 1.2 above. Government can incentivise corporations to
modify their behaviour, while companies and consumers could be said to
be continually influencing each other through normal commerce. As this
Handbook seeks to show, the multiplicity of issues and influences, acting
on organisations in particular, are making marketers’ lives ever more
complex, yet ever more important.
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Beyond the Customer
1.2 Power of Corporations
In capitalist economies, corporations are responsible for many aspects
of daily life. This responsibility is clearly of huge importance when one
considers the scale of the entities involved:
Some corporations are larger than entire states:
• Walmart is ‘bigger’ than Norway
oo Norway’s GDP: $414.46 billion
oo Walmart’s Revenue: $421.89 billion
Walmart would rank as the world’s 25th biggest country
• Exxon Mobil is ‘bigger’ than Thailand
oo Thailand’s GDP: $318.85 billion
oo Exxon Mobil’s Revenue: $354.67 billion
Exxon Mobil would rank as the world’s 30th biggest country
You can find more examples at: http://www.businessinsider.com/
Nor is this just a trick of comparing income figures.
On an asset valuation basis, the same pattern is found.
According to James Mackintosh writing in the Financial Times
(Mackintosh, 2012):
“Apple became the world’s most valuable ever company two weeks ago.
It is worth $624bn, more than all the listed companies in Portugal, Ireland,
Greece and Spain together. The employer of 63,300 people – each
valued at $10m – is more valuable than all the shares available to investors
in the MSCI China index, the international benchmark.”
We could also compare numbers of people:
From The Independent:
“Facebook hits one billion users” (Williams, 2012)
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Cambridge Marketing Handbook: Stakeholder Marketing
Based on the one billion figure, if Facebook were a country it would now
be the third largest in the world, behind China’s 1.34 billion people and
India which has a population of 1.2 billion.
For more evidence of the enormous power of the (few) companies behind
(many) consumer brands, try searching Google Images for ‘illusion of choice’.
1.3 Balance of Power
Faced with such extreme power in the hands of the major brand owners,
it should not be surprising that balancing forces have emerged aimed at
achieving greater fairness and especially protecting the vulnerable.
One example is the UK Government-backed Consumer Focus
organisation, whose vision statement is: ‘More power to the people’. This
enables consumers, particularly those considered more vulnerable, to
have a voice in relation to the goods and services they receive.
From its website: “Despite major advances in UK consumers’ rights over
the past couple of decades, there is still a huge amount to do, and many
improvements need to take place. All too often, consumers still receive
inadequate service or aren’t given value for money. Worse, the most
vulnerable are also sometimes the ones who are treated worst or pay
most.
“We work both with and on behalf of consumers to address these
problems and make a difference to people’s lives. When every
organisation, business and market has a consumer focus, our work will be
done.” See www.consumerfocus.org.uk for more information.
In April 2013, the Citizens Advice service took on responsibility from
Consumer Focus for representing consumers’ interests in unregulated
sectors.
A new, technical Regulated Industries Unit (RIU) will replace Consumer
Focus working with the energy and postal services sectors and their
regulators, until this too transfers to the Citizens Advice service in 2014.
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Beyond the Customer
1.4 Customer Trends
The 1999 Bain report ‘The Future of Customer Service’ (Bain & Co,
1999) made it clear that customer service demands had increased
dramatically towards the end of the 20th Century. This trend has not
been reversed. Customers clearly show the following traits:
•They demand more access time (e.g. Sunday trading,
24-hour call centres)
• They are less willing to wait
• They complain more, and are more aggressive in their telephone
manner
• They want more information (e.g. multi-lingual listing of ingredients
on foods)
• They have less patience with broken promises
If things do not go their way, consumers are now more likely to make
their dissatisfaction known:
•
•
•
•
•
•
•
Demanding to see ‘the manager’
Expecting compensation (e.g. credit notes)
Contacting traditional media to gain their support
Using social media to share their experiences
Writing to a) their MP, b) Ombudsmen, c) anyone who will listen
Citizens’ Charters (e.g. rail users)
Using an internet site for advice or assistance:
www.howtocomplain.com or www.which.net
If still not satisfied, they may threaten or take legal action, i.e. they are
becoming more litigious:
• Medical negligence claims
• Mass torts (e.g. tobacco class actions)
• ‘No win, no fee’ lawyers
You may have noticed that some of the things in this list are marketers’
attempts to win customers by responding to, or anticipating trends in,
customer behaviour. So, you may be wondering whether
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‘politico-legal’ issues drive marketers to adopt certain policies, or
whether it is customers whose changing concerns drive the development
of associated marketing strategies. In reality, it is probably a bit of
both. Customers, legislators, commentators and marketers all develop
heightened senses for what concerns the other groups, and each in turn
leads – and is led by – the development of events. Each becomes attuned
to the changing zeitgeist.
The Independent ran an article one Easter in which it compared
leading brands of Easter eggs. Were they reviewing the eggs for
taste, appearance, novelty? No, the issues highlighted were: ‘How
much of the product weight is packaging?’, and ‘Is the packaging
recycled?’. The article was part of a ‘Campaign Against Waste’ and
had an overall critical stance, highlighting that fact that of the ten
eggs sampled, between 26% and 45% of the weight was made up
of packaging, and only one egg brand had any recycled content
in the packaging.
Other viewpoints were represented from The Women’s Institute,
Recycle Now, Friends of the Earth as well as several MPs. The British
Retail Consortium was allowed a balancing comment.
(Hickman, 2007)
Brand owners today need to be acutely aware both of the powerful
role of industry commentators in shaping customer opinion, and of the
increasingly wide range of issues against which they may be judged.
Gaining and maintaining public trust has become the biggest
corporate challenge, according to a survey reported in PR Week (PR
Week, 2012).
60% of the communications directors surveyed identified this as
a concern, ahead of ‘ensuring a consistent brand message’ and
‘integrating communications activities across the business’.
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Beyond the Customer
1.5 Ethics
One important dimension of the increasingly demanding consumer is the
ethical dimension:
• Reacting against GM crop trials
• Not wearing real fur
• Rejecting goods which may have been produced by child labour in
the Third World
• Demanding higher standards in animal welfare (e.g. free range
chickens, ‘dolphin-friendly tuna’)
• Supporting ‘Fair Trade’ brands
• Advertising to children
• Ethical investment funds (FTSE4Good index)
• Campaigns against ‘rip off Britain’, CD prices etc.
It is important to note that corporations cannot fall back on a ‘legal
defence’ in determining its strategy, i.e. ‘as long as we don’t break the
law, we’ll be ok’. Many of the issues above demand standards beyond
those required by law in most countries. In practice, the law tends to lag
behind the increasingly ethical standards of consumers.
This difference between ethical and legal requirements is illustrated in
Figure 1.3 below
Figure 1.3 Comparison of legal and ethical issues
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Cambridge Marketing Handbook: Stakeholder Marketing
These arguments in developed countries become quite subtle and
sophisticated. For example, companies such as Tesco and Primark are
finding that some consumers react against ultra-low prices for clothes, on
the grounds that they must have been produced under exploitative third
world conditions.
1.6 The Environmental Issue
Since Rachel Carson’s book Silent Spring shocked the world by describing
the damage she believed man was doing to the planet (Carson, 1966), and
in the light of growing evidence of global warming, businesses have steadily
increased their attention to the impact their products and processes have on
the environment. In particular, groups such as Friends of the Earth have had a
major impact on business practices in four areas:
•
•
•
•
Shortages of raw materials
Increasing costs of energy
Increasing levels of pollution
Increasing need for government involvement in resource management
So powerful has the environmental or ‘green’ movement become, that it
could be said that it is no longer just a special movement, but an established
element of consciousness which pervades our thinking.
On the other hand, sceptics would point to the way in which marketers have
sought to capitalise cynically on such concerns. How many food products
do you see proudly boasting of being ‘natural’ as if naturalness were always
a wonderful thing. (Deadly Nightshade is natural, while paracetamol is
synthetic; which would you rather take?). Similarly the ‘organic’ label is
spread around liberally in the food sector without much in the way of a
definition hitherto (organic as opposed to metallic or ceramic perhaps!).
According to Mintel in 2009, the most popular way to market food or
drink during 2008 was to brand it as ‘natural’. In the UK 36% of new
products were branded as natural, and 23% globally. (Mintel, 2009).
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Beyond the Customer
General concern about the environmental impact of packaging
has led retailers to introduce more environmentally-friendly materials
for carrier bags such as bio-degradable plastics, and ‘lifetime’ bags
designed for re-use. Meanwhile, politicians have sought to drive new
consumer behaviour through economic means. From October 2011,
retailers in Wales have had to impose a charge of 5p on all single-use
carrier bags. A similar scheme went live in Northern Ireland in 2013,
in Scotland in 2014 and at the time of writing (Sept 2015) a similar
legislation is about to be passed in England “The 5p charge should be
enough to influence consumer behaviour and reduce the number of
bags given out…” says the Government communication website
BT plans to develop wind farms aimed at generating up to 25% of its
existing UK electricity requirements by 2016. The wind farm scheme
represents the UK’s biggest corporate wind power project outside
of the energy sector. The project is part of the company’s strategy
to reduce carbon emissions. BT is one of Britain’s biggest consumers
of electricity, with an annual requirement of around 0.7 % of the
UK’s entire consumption. BT’s wind farms could generate a total of
250MW of electricity – enough to meet the power needs of 122,000
homes, or a city the size of Coventry. This would prevent the release
of 500,000 tonnes of CO2 each year compared with coal generation
– equivalent to a quarter of a million return air trips to New York. The
then Secretary of State for Business, Enterprise and Regulatory Reform
said: “Tackling climate change while ensuring we have enough
energy for the future is one of the biggest challenges of our time”.
Jonathon Porritt, Co-Founder and Programme Director of Forum for
the Future, added: “[This is] precisely the kind of decisive, ambitious
intervention that more and more companies are going to have to
come forward with.” (Sherriff, 2007).
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Starbucks: From Hero to Zero (profits)?
With a firm place on Interbrand’s Best Global Brands 2012 list, and a
brand valuation up 11% to over $4 billion, Starbucks seemed to be
getting it right. Interbrand’s CEO Jez Frampton remarked that (along
with a few other top brands) they demonstrate an understanding
of “the role they play in peoples’ lives and respond accordingly
— building on successes and making up for mistakes. They are
constantly nurturing their brands to keep pace in a rapidly changing
world; they know that every market is different, every interaction
counts, and every individual matters. Quite an achievement in such
turbulent times.” (Interbrand, 2012)
However, by October of 2012, a storm was brewing along with the
coffee. Margaret Hodge, Chair of the House of Commons Public
Accounts Committee (PAC), told Parliament that the company,
along with Apple, eBay, Facebook and Google had, in total, avoided
paying nearly £900m of tax.
Others were motivated to do further investigation, and it was
reported widely that Starbucks had paid only £8.6m in tax since it
opened its first store in the UK 14 years earlier. Over that period, the
company was said to have made £3 billion in sales yet had used
(legal) accounting methods to ensure it made a reported loss in
Britain every year. Customers began to go elsewhere for their coffee
fix as the story moved to the front pages of media titles.
Starbucks’ Twitter campaign backfired as consumers used the
‘#spreadthecheer’ hash tag to complain about the coffee giant’s
fiscal behaviour.
On 3rd December, the PAC released its report criticising multinational
companies for avoiding paying UK tax, despite huge sales in the
UK. The Parliamentary Committee singled out as examples Amazon,
Google and Starbucks... continued on next page...
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Beyond the Customer
continued from previous page... In its report, the PAC said: “Starbucks
told us that it has made a loss for 14 of the 15 years it has been
operating in the UK. We found it difficult to believe that a commercial
company with a 31% market share by turnover, with a responsibility to
its shareholders and investors to make a decent return, was trading
with apparent losses for nearly every year of its operation in the UK.
This was inconsistent with claims the company was making in briefings
to its shareholders that the UK business was successful and it was
making 15% profits in the UK.” (PAC, 2012).
The report said: “We were not convinced that their actions, in using
the letter of tax laws both nationally and internationally to immorally
minimise their tax obligations, are defensible. They all accepted
that the perceived ethical behaviour of corporations could affect
consumer behaviour.”
5th December: Chancellor George Osborne announced in his
Autumn Statement that more money was going to HM Revenue &
Customs to tackle tax avoidance and evasion. This served to keep
the issue in the public mind a little longer.
On 6th December, The Guardian reported that Starbucks UK
Managing Director, Kris Engskov, had agreed to the payment of
corporation tax of around £10 million over the next two years –
directly in response to consumer anger.
Two days later, activists staged a series of sit-ins, asserting that that
firm’s decision to pay the tax missed the point. Some suggested that
by ‘over-paying’ the tax for two years, the company would be able
to avoid later tax due. Starbucks attempted to assure us that it would
not do that. The company was not without its supporters however.
On 16 December, London Mayor, Boris Johnson, urged people
not to “sneer” at the coffee chain over its decision to pay the tax.
continued on next page...
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continued from previous page... Mr Johnson said the tax issue was
“a very difficult one”, adding: “I cannot exactly blame the finance
directors of these companies for doing their job.”
Faced with similar criticism, Google took a completely different
stance. The Sunday Times on 16th December reported Eric Schmidt,
Google Chairman, as saying: “It’s called capitalism. We are proudly
capitalistic. I’m not confused about this.”
So what can we learn from this unfortunate development? Well, it is a
good example of how:
• Companies cannot disingenuously feed different messages to
different stakeholder groups e.g. investors and customers, without risk
of getting caught
• News, especially bad news, travels faster than ever before, through
traditional and new forms of media, especially social media
• Appropriately fast action needs to be taken if crises of
communication are to be avoided or at least managed
• Organisations need to be alert to the increasing interest that
stakeholders will have in all aspects of its operations, even those not
directly connected with its supply of products and services
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Chapter 2: Stakeholders and their Impact on
the Organisation
Having seen some of the issues that can arise from the widening external
scope that organisations and their marketing staff need to consider, let’s
take a more detailed look at who exactly comprises the wider stakeholder
universe.
A working definition of stakeholders is given by: Individuals, groups or
organisations who can influence, or are influenced by, the activities
of an organisation.
Internal
Connected
External
Owners
Customers
Industry regulators
Directors
Suppliers
Local communities
Senior management
Finance providers
e.g. VCs
Trade Associations
Specialist employees
Bankers
Interest groups
General workforce
Government
Contractors
Trade companies
Students on placement
General public
Shareholders
(Competitors)
Table 2.1 Internal, connected and external stakeholders
You may be wondering about the inclusion of competitors in the list
above; are they truly stakeholders? Well, many texts say that they are not,
in the sense that we do not run our businesses with their needs in mind.
However, they certainly can have a considerable impact on our strategies
and on our pricing, product development, promotional activities and so
on.
For this reason, and since we need to consider their activities, goals and
likely reaction to all we do, they deserve to be included in our wider group
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Stakeholders and their Impact on the Organisation
of stakeholders. Check again the definition of stakeholders given above if
you are still not convinced.
Stakeholder theory was originally described in 1984 by R. Edward Freeman
to help in addressing the ethics involved in running a business (Freeman,
1984).
2.1 Stakeholder Interests
It follows from the very wide variety of people and groups we call
stakeholders that these individuals or groups will have a wide range of
different interests (or perceive that they have). Each will tend to look after
their own interests. Individuals may belong to more than one stakeholder
grouping of course. In extreme circumstances, stakeholders may even
have mutually exclusive expectations.
Stakeholder groups also align according to their shared interests, and
this will be a dynamic situation. Where groups align in different ways
according to specific events, the use of an ‘attitude matrix’ is useful
to indicate how each identified group is likely to react to a number of
possible strategic developments (Johnson & Scholes, 1993). See Table 2.2.
For example, the decision to outsource manufacturing to an overseas
country might be welcomed by Sales and Marketing and business
owners if it results in a lower cost of supply, but might well be opposed by
Production as it implies fewer jobs will be required at home.
Strategy
Marketing
management
Shop floor
Suppliers
Close plant and make
product overseas



Acquire competitor



Invest in new production
technology



Table 2.2 Simplified attitude matrix
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2.2 Power and Interest
Power
Not all stakeholder groups have equal ability to influence events. For
instance, one would not expect contractors to have as much influence as
directors. This ability to influence is called power, and needs to be taken
into account when considering alternative strategies.
Power can be hierarchical, so that senior managers exert their influence
over more junior people by virtue of their position.
Power can also be due to influence rather than being formally bestowed.
Examples of other specific sources of influencing power include:
•Charisma
• Specialist skills
• Knowledge or experience
• Relationships with others inside or outside the organisation
Interestingly, this compares closely with the five sources of personal power
identified by French & Raven in 1959: Reward power (ability to reward),
Coercive power (ability to punish), Legitimate power (authority), Expert
power (skill and knowledge) and Referent power (others identify with an
individual).
Interest
In addition to their power, we need to consider the level of interest of
each of the stakeholder groups.
Important stakeholders with little day to day interest in our organisation
(journalists perhaps) will receive proactive efforts from our PR team to
gain their attention. On the other hand, temporary employees might
have relatively low power and low interest and will receive a lower level
of attention. Major strategic customers may be very powerful (they can
take their business away), but the nature of the product supplied (how
important it is to their operations) will determine their level of interest in us.
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Stakeholders and their Impact on the Organisation
Stakeholder mapping
We need to understand what level of attention to pay to each type of
stakeholder, for example in our marketing communications, or in our level
of telephone support.
To gain a better perspective on the nature and influence of the many
and various stakeholder groups, a useful tool is stakeholder mapping.
Stakeholders can be categorised on a classic 2-by-2 box diagram
according to their level of interest in the organisation and their power to
influence it (Mendelow, 1991). The four quadrants suggest a requirement
for different levels of support.
Figure 2.1 Stakeholders need custom treatment
Stakeholder support
A major research and licensing organisation with a stock market
listing had a large number of inbound contacts. These ranged from
science students wanting to know more about the technology for
project work, to large institutional shareholders seeking updates on
development milestones. The former were politely directed to the
company’s website where fuller technical detail was available, while
the latter were invited to participate in webcasts where the CEO
would provide the desired updates and answer questions.
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2.3 Stakeholder Interactions
Another useful dimension to understanding stakeholders is to consider
the extent to which stakeholder groups are supportive of the aims and
activities of the organisation. They could for example be characterised
into the following groups (Egan, 1994):
• Partners who actively support your agenda
• Allies who will provide support and encouragement if motivated
• Passive supporters or ‘fellow travellers’, committed to the agenda
but not to you
• ‘Fence sitters’ whose allegiance is not clear
• ‘Loose cannons’ who have a different agenda and whose actions
are unpredictable
• Opponents who oppose your agenda and possibly you
• ‘Bedfellows’ who support the agenda but may not trust you
• ‘Voiceless’ who have no power but may be used by the opposition
An appropriate communications response to each of these groups might
be as follows:
Partners
Little interaction but keep informed
Allies
Light touch, but seek to keep motivated
Passive supporters
Build relationship
Fence sitters
Assess value of developing relationship first
Loose cannons
Caution in information provided
Opponents
Structured approach e.g. formalised meetings
Bedfellows
Keep informed of benefits of agenda
Voiceless
Light touch communications, be alert to coalitions
Table 2.3. Possible communication responses
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Stakeholders and their Impact on the Organisation
Bus companies have come in for criticism for not running frequent
services between rural village locations. This is regarded by many as
an essential social provision, and without it, elderly or needy groups
may not be able to access services such as shops or post offices.
The companies would argue that it is not their job to provide these
services since, as private companies, their primary responsibility is to
their shareholders, owners and employees, and running buses with
few passengers makes no economic sense. (BT has had similar issues
with rural phone boxes.)
Special interest groups
Stakeholders united by a common interest may form into groups, informal
or formal, the better to exert their influence.
An especially important type of stakeholder group which has become
more vociferous in recent years is the ‘special interest group’. They usually
have a well-defined agenda and use their collective strength to gain
publicity, and as a source of power to influence decision makers.
Two principal types of special interest groups can be identified:
Pressure groups
Also referred to as causal groups, citizen action groups, advocacy groups
or lobby groups, these have a single issue on which their members feel
strongly. Their aim is to change opinions and attitudes. Examples are:
Friends of the Earth and the League Against Cruel Sports. Some need no
introduction – such as the RSPCA, while others may be less familiar: Surfers
Against Sewage.
Once again, the marketer may be faced with attempting to satisfy – or at
least placate – conflicting interests. A tobacco company will be keen to
monitor the activities of Action on Smoking and Health (ASH), who oppose
smoking, yet will also be interested in FOREST, the Freedom Organisation
for the Right to Enjoy Smoking Tobacco.
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Sectional groups
These represent the interests of their members. Notable examples include:
The Chartered Institute of Marketing, the Trades Union Congress and the
Society of Motor Manufacturers and Traders.
Marketers need to be aware of the potential for conflict (or occasionally
co-operation) with the variety of such groups which exist in their industry.
High profile battles between large corporates and (seemingly) small
‘rights’ groups can often result in public sympathy for the ‘underdog’, and
in extreme cases, significant damage to the reputation or sales of the
company concerned.
Perhaps the most famous example of the power of pressure groups
came in 1995, when Shell proposed the disposal of its disused Brent
Spar oil storage facility by sinking it in the North Sea. Greenpeace
ran a high profile media campaign in opposition to this plan. Many
people supported the cause and despite the campaign turning
violent in some instances, the public supported Greenpeace;
many people refusing to buy Shell products for a while. Ironically,
the Greenpeace argument was based in part on an inaccurate
assessment of the quantity of oil involved, and Shell had expert
support for its assertion that the alternative plan, of disposing of the
facility by towing it ashore, would actually cause greater levels of
environmental harm.
What is the role of marketing in managing societal issues/interest groups?
It is a tricky decision whether to get involved in the arguments of pressure
groups. On the one hand, you do not want to commit valuable resources
to reacting to every negative comment and, given the possible volume
of such comments, that is probably an impossible task anyway. Equally,
it may be better to remain ‘above the fray’, confident that reasonable
people will see your side of the issue – or at least both sides. Perhaps
the critical dialogue that is taking place is a necessary safety valve and
actually quite useful in alerting you to issues which you might wish to
address in company initiatives and communications.
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Stakeholders and their Impact on the Organisation
On the other hand, if untrue, derogatory, even defamatory allegations
are being made, you may need to take appropriate legal action to stop
these. On balance, most commentators would advocate maintaining
a dialogue of some sort with pressure groups. Shell has created the ‘Tell
Shell’ facility on its website to enable a dialogue. The company moderates
the content.
What should be clear is that rather than looking for quick, reactive
solutions to controversial issues, marketers need to take a step back and
assess how society and the market/customer environment is changing,
and how the company should respond strategically. What changes should
be considered for example in:
•
•
•
•
Products supplied e.g. for their environmental impact
Claims made for product efficacy
Regional variations in price or availability
Channel management e.g. in developing countries
2.4 The Power of Digital Communication
The internet and its associated digital tools of mobile phones and
e-mail have of course given individuals unprecedented ability to
communicate on a global scale. There is a commonly repeated
marketing aphorism that customers who have a good experience
tell, on average, three people about it, while those who have a bad
experience will tell, on average, 22.
Nowadays, they are more likely to write a blog, send a Tweet or
contribute to an online forum and potentially tell millions of people!
There was a website called www.ihateikea.co.uk which suggests a
well thought out and continuing campaign of antagonism towards
the Sweden-based furniture retailer. The IKEA logo and corporate
styling were not used directly, thereby probably avoiding legal action
on the basis of trade mark or copyright infringement. Although the
site is no longer active, a Google search on ‘I hate IKEA’ will provide
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ample evidence of the emotion still evident among its fans and
detractors. Facebook now has ‘the I hate IKEA group’ (sic). And social
media analytics service ‘Amplicate’, which collates opinions from
social media, has an active ‘Hate, Ikea’ stream of comments (http://
amplicate.com).
For a similar active site (at the time of writing) see what became of
the ‘NT Hell’ website at www.nthellworld.co.uk – “for information, help
and advice that Virgin Media’s technical support or customer services
forgot to give you …”.
See the following for more examples of online assistance and advice on
making your views felt:
•www.weeklygripe.co.uk
•www.complainer.co.uk
•www.faircomment.com
•www.webgripesites.com
Given the unregulated nature of the internet, and the fact that the
posters of content can remain anonymous, the elimination of all
such activity is clearly impossible. This is increasingly a concern as
less responsible individuals take the opportunity to air their views, or
make reckless allegations against organisations or individuals. In 2012,
following a report by BBC’s Newsnight programme claiming a senior
politician was a paedophile, many social media commentators passed
on a rumour concerning Lord McAlpine. He proceeded to pursue many
of those involved through the courts, successfully extracting apologies
and financial penalties.
In some cases, social media comment has been shown to be beyond
the practical reach of the law. An example is the 2011 case of Ryan
Giggs, who was named as the footballer having an illicit affair with a TV
‘celebrity’, despite a High Court injunction forbidding his identity being
revealed. In this case, over 75,000 Twitter users had named the player,
prompting one MP to use parliamentary privilege to name the player in
the Commons during a question on privacy orders.
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Stakeholders and their Impact on the Organisation
McDonald’s food chain has been the focus for criticism both over
the nutritional value of its products (you may remember the TV
documentary ‘Supersize Me’), and also due to its very success. In
France especially, the number of outlets and the impact on traditional
eating habits has been the excuse for at least one arson attack.
A pressure group website: www.mcspotlight.org proudly states:
“McDonald’s spends over $2 billion a year broadcasting their glossy
image to the world. This is a small space for alternatives to be heard.”
2.5 Crisis Communications
Many examples have been given above of organisations being on the
wrong end of bad publicity; sometimes through their own fault, sometimes
not. Despite the best of planning, unexpected events do arise, and
marketers in particular are well advised to be prepared with a crisis
communications plan. A ‘perfect’ response is not necessary, but a timely
one is essential, before issues become out of control; and speculation fans
the flames.
Figure 2.2 on the following page illustrates how an issue might develop
over time, with pressure on the organisation growing at first steadily, then
rapidly as the crisis unfolds. Management has the opportunity early on to
identify and address issues, but this becomes difficult as the intensity of the
crisis rises.
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Figure 2.2 The ‘issue lifecycle’ model (Hainsworth, 1990)
The issue lifecycle model (Hainsworth, 1990) “Reprinted from Public Relations Review,
16 (1), Hainsworth, Brad E, Issues Management: an Overview (1990), with permission
from Elsevier
Often, the CEO – or at least a senior manager – will be designated as
the spokesperson for the organisation and the contact point for media
enquiries. These people may have had media training and will be able to
speak on behalf of the whole organisation, while other employees may
not have been briefed on the ‘company line’.
Saying “No comment” in response to a reporter’s questions is more likely to
arouse suspicion and antagonise public opinion further. A better response
would be to admit that there are some things not yet known about the
situation and to set out what the company is doing to resolve matters.
The company website may be used to carry the latest news from the
company viewpoint.
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Stakeholders and their Impact on the Organisation
In short, the principles of communicating effectively in a crisis are:
• honesty and openness
• identification with the audience
•timeliness
• proactive, not reactive
The key is to be seen to be driving events, not being dragged along by
them, and to ensure that your side of the story is available to those who
take a fair minded approach. This includes all stakeholders: employees,
investors and customers, as well as media commentators.
In 2009, when US Airways flight 1549 had to make a forced
touchdown on New York City’s Hudson River, the traditional
broadcast and press media scrambled to get footage and to confirm
the facts for some hours.
Yet some passengers were already standing on the plane’s wing
broadcasting their plight to the world on their cell phones!
See Appendix 1 for a case study on how Domino’s Pizza managed a crisis.
Four broad strategies for dealing with societal marketing issues are as
follows:
1. Reaction strategy
Here, the situation is allowed to continue unresolved until discovered,
for example by enforcement agencies or consumer groups. When the
problem becomes known, managers will often deny responsibility while, in
the background, trying to resolve the issue.
2. Defence strategy
This uses defensive tactics to avoid obligations which the company might
otherwise have. Lobbying government or legal manoeuvring would be
suitable defensive measures.
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3. Accommodation strategy
This involves taking responsibility for the firm’s actions, accommodating
the views of the stakeholders. This might result from the activities of special
interest groups, or impending government legislation.
4. Proactive strategy
Here, the company takes action before it is compelled or embarrassed
into doing so. It implies a ‘thought through’ approach which recognises
the wider social responsibilities of organisations. In the marketing
communications toolkit, it is public relations (PR) which is the most useful in
this context. A proactive PR campaign has the most chance of influencing
public opinion. Regester and Larkin provide an excellent critique on how
to manage a crisis (Regester and Larkin, 2001).
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Chapter 3: Corporate Reputation
The concerns shown by changing public opinion manifest themselves by
and large at the corporate level.
Today, organisations in the public eye can expect to be challenged on
a much wider range of issues. The public, and its self-appointed moral
representative the media, increasingly look behind the external face
carefully created by organisations and their promotional agencies to see
what lies within. What are the values of this company? Are they behaving
fairly? Are they giving customers, suppliers and employees an appropriate
deal? Is there sound governance to ensure that any future unscrupulous
behaviour is detected and remedied?
Several points should be recognised at this point:
• All organisations have a reputation, whether they choose to manage
it or not
• Corporate reputation exists in the mind of the stakeholder; it is not
something that can be contrived internally in organisations, though
influence is possible
• Among the multiplicity of stakeholders, different opinions of an
organisation will exist simultaneously
• Reputations are formed as a result of experiences over long periods;
any attempt to shift reputation consequently requires a consistent
long term planning approach
• Regrettably though, a good reputation can be damaged
very quickly
Reputation then is formed from the multiple experiences of stakeholders
over time as they process the external corporate image. In turn, image is
formed from the way the organisation sees itself – its corporate identity,
and this results from the essential personality of the organisation.
A further factor that affects the way organisations are perceived is
the existence of ‘filters’ that colour perception according to broad
characteristics (see Figure 3.1 below). These filters may include the country
of origin, the industry sector image and the prevailing media attitude. To
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Corporate Reputation
see the truth of this, just consider how German engineering is preferred to
many alternatives in the car market, or how Italian food is widely admired.
At the sector level, consider the general regard in which politicians are
held, or the reputational fate that has befallen the financial services
industry of late.
Organisations have to operate against the background of one or more
such filters, seeking to overcome or capitalise on any pre-conceptions.
Audi has successfully used the notion of build quality implicit in
German engineering through its slogan of around 30 years: “Vorsprung
Durch Technik”.
Figure 3.1 Possible reputation filters
3.1 Elements of Corporate Reputation
We can break down the concept of reputation into four elements: credibility,
trustworthiness, reliability and responsibility (van Riel & Fombrun, 2007).
• Investors may be looking for credibility in a company, reducing their
risk through backing those with strong management and good
market standing
• Employees will look for an organisation they can trust, to support their
employment rights, provide an ongoing livelihood etc.
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• Customers may look for a reliable provider of goods and services,
consistently delivered
• The community as a whole may be looking for a responsible
business, taking into account impacts on people and the
environment
As an example, consider Nokia, the Finnish mobile phone manufacturer.
Credibility is established through its high quality, branded product
range. Trustworthiness has been developed through attention
to customer service; reliability through maintenance of quality;
responsibility through strong product development and innovation
policy.
3.2 Corporate Branding
The increased appetite of stakeholders for knowledge of the essential
nature of organisations – and a readiness to judge them – has fuelled
more rapid development of a concept first seen in the early 1990s:
corporate branding.
Definition: Corporate branding is the visual, verbal and behavioural
expression of an organisation’s unique business model (Knox &
Bickerton, 2003).
Note that this definition is not confined to visual aspects of
communication and devices such as logos. Behaviour is at least as
important. A product brand is effectively a promise from the brand
owner that its customers can expect a certain mix of values, based
on quality, design, price, performance, cachet, availability, after-sales
service, innovation and so on. So it is with corporate branding: a broader
group of stakeholders is concerned with a range of issues as these apply
to the whole organisation.
Typically they might be based around ethical issues such as the impact
on society, political affiliations, governance and so on.
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Corporate Reputation
Responsibility for corporate branding lies at the top of the organisation, or
at least with advisors directly responsible to the Chief Executive.
Other dimensions of corporate and product branding are compared in
the table below.
Stuart Rose, at the time Chairman and CEO of Marks and Spencer,
appearing on BBC Breakfast TV in early 2010 faced a range of
questions, not one of which was about the products or services his
company offers or its operational performance. Instead he was
asked about: justifying his personal remuneration package, M&S
policy on fair dealing with suppliers, recyclable carrier bags and
so on. Commentators had often challenged him on the wisdom of
combining the roles of Chairman and CEO and achieving effective
governance
Responsibility for corporate branding lies at the top of the organisation, or
at least with advisors directly responsible to the Chief Executive.
Other dimensions of corporate and product branding are compared in
the table below.
Dimension
Corporate brands
Product brands
Time to form brand
Medium/long
Short
Source
Corporate identity
Marketing strategy
Brand custodian
CEO
Brand manager
Implementation
All personnel
Brand manager
Stakeholders
Everyone
Customers and channels
Communication platform
Corporate communication
Marketing communication
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3.3 Societal Marketing
So important has the concern for ethical behaviour become in corporate
management, that a whole new management discipline has emerged in
what we may call ‘societal marketing’.
We define societal marketing as being concerned with achieving a
balance between three considerations:
• Company profits and returns to shareholders
• Satisfying customers’ wants and needs
• Public interest
Organisations have found that paying attention to these additional ‘softer’
issues can actually boost profits through gaining customer goodwill and
good publicity.
A linked concept, the ‘triple bottom line’, is made up of social, economic
and environmental factors, sometimes abbreviated to ‘people, profits and
planet’ (Elkington,1994).
Figure 3.2 Triple bottom line concept
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Corporate Reputation
In Figure 3.2:
• Social factors could include: support for small, local suppliers; familyfriendly employment policies; community initiatives
• Economic factors include: financial returns; reduced raw material
usage; impact on others’ profitability
• Environmental factors include: reducing carbon footprint; reducing
energy wastage; recycling and reducing pollution
McKinsey’s Ian David believes that the ultimate purpose of business should
be described as “The efficient provision of goods and services that society
wants”, and that “Profits should not be seen as an end in themselves,
but rather as a signal from society that their company is succeeding in
its mission of providing something people want – and doing it in a way
that uses resources efficiently relative to other possible uses.” (Gambetti &
Quigley, 2013).
Barratt Developments plc is a builder of homes and commercial
property. In their Annual Report and Accounts document 2012
they state: “We continue to focus on our sustainability philosophies:
People, Partners, Planet and Customers, and our commitment to
Health and Safety”. They go on to report against each of these
factors in a table giving Key Performance Indicators:
Customers
Recommendations to friends
Health & safety Injury incidence rate per 100,000 workers
Partners
Social completions (houses built)
People
CSCS carded workforce (evidence of training)
PlanetProportion if construction waste segregated on site
for recycling
Similar data are given each year, broadly covering corporate social
responsibility measures, as well as the traditional and mandatory
operational and financial ones.
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3.4 Corporate Social Responsibility
The term ‘corporate social responsibility’ (CSR) has been in use since the
1960s, but in the last couple of decades has grown in importance along
with increasing concerns about organisational ethics discussed above.
It even has its own International Standard providing guidelines for social
responsibility (SR), named ISO 26000
Definition: Corporate social responsibility means organisations taking
responsibility for the impact of their operations on society and on their
stakeholders: employees, customers, communities, etc.
Something of an industry has built up around CSR. The term is applied to
widely different issues. The Confederation of British Industry (CBI) succinctly
states: “CSR is the acknowledgement by companies that they should be
accountable not only for their financial performance, but for the impact
of their activities on society and/or the environment.”
Discussions surrounding the concept are still at an evolutionary stage,
although the principles of CSR have long been part of business strategy.
The CBI again: “Business is already accountable for its activities over the
diverse strands that now come under the ‘CSR’ umbrella – such as human
resources and environmental issues, sustainable development, waste
management, health and safety practices, through a wide range of
existing guidelines at national, EU and global levels. But it is important to
distinguish between these base-line standards and CSR activity which is
voluntary, business-driven and often goes well beyond what is required by
legislation.” Find out more at: www.cbi.org.uk
Many authors have suggested a hierarchy of responsibilities in increasing
levels of altruism:
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Basic level




Highest level
Economic
Be profitable
Legal
Obey the law
Play by the rules of society
Ethical
Obligation to do what is right
Avoid harm
Philanthropic
Contribute resources to the community
Be a good corporate citizen
Improve quality of life
Table 3.2 Hierarchy of corporate social responsibility
Shell and GSK are among the many public companies that have
devoted pages of their Annual Report & Accounts to corporate
social responsibility issues. However, even the most unpromising
corporation can address CSR issues. Boliden Kokkola Oy is a large
Finnish zinc smelter that takes corporate social responsibility very
seriously. It has created what it calls the “New Boliden Way” as
a foundation for a uniform corporate culture. The company’s
mission is: “To produce zinc for the needs of the modern world,
responsibly and safely.” The company is “committed to being a
responsible member of society” and declares that it is convinced
that “an ethically sound company has the best potential for
coping with the challenges of the future”. In its Corporate
Responsibility Report, Boliden includes sections on: Responsible
product policy, Economic responsibility, Social responsibility
and Environmental responsibility. Sub-sections include: “Every
accident is avoidable” and “Personnel wellbeing as a profit
factor”. By including data such as the levels of zinc in their plant’s
surrounding areas, they are encouraging debate and ultimately
trust among the local community.
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Figure 3.3 Boliden’s view of corporate responsibility
3.5 Corporate Communications
While corporate behaviour is a powerful determinant of the impression
that stakeholders develop over time, so is the organisation’s
communication activity and the symbolism used. These comprise
familiar elements such as logos, slogans, colours, language, building
design, etc. that organisations use as they attempt to shape their
reputations favourably.
Given the disparate nature of the stakeholder audience, it is not
surprising that a variety of corporate communication tools need to
be deployed to reach them. Specialist terms such as ‘employee
relations’, ‘public affairs’ and ‘investor relations’ are used to label the
activities and to distinguish them from normal (commercial) marketing
communications. Indeed, responsibility for these areas is often not with
the marketing department, but is run from the Chairman’s office, or
from HR.
Ultimately, the goal of corporate communication is to create and
maintain a favourable reputation for the organisation in the minds of
its key stakeholders.
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Bob Worcester of MORI has said that we should think about
communicating:
• ‘Here’s who we are’
• ‘Here’s what we can do for you’
• ‘Here’s what we think’
Worcester believes that the first two are essential pre-requisites to
achievement of the third, as trust needs to be built up ahead of credibility
(Worcester, 1983).
Interestingly, many organisations seem to adopt a determinedly neutral
stance in their communications, as if to avoid offending anyone. They talk
of offering ‘total solutions’ and claim ‘a quality approach’, rather than
identifying the specific and characteristic factors that set them apart from
their competitors.
Bernstein neatly summarises the tendency for blandness and homogeneity
seen even between business sectors in Bernstein’s Law (Bernstein, 1984):
“Product advertising takes minor differences and maximises them;
whereas corporate advertising takes major differences and minimises
them.”
The principal tools used for corporate communications are the ones
that reach large numbers of people efficiently, and which have the best
chance of shaping public opinion: advertising (through its high profile) and
PR (through its credibility).
Corporate advertising
Corporate advertising has been said to be about “selling the corporate
personality”, to “enhance or change the corporate image of an
organisation” and “talking about the corporation to promote its identity”
(Ogilvy, 1995).
It can be distinguished from product advertising by not being focused on
sales of a particular product or service. That is not to say that products
cannot be used in corporate advertising, they are just not the main focus
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Garbett identifies ten jobs which corporate advertising can carry out
(Garbett, 1981):
•
•
•
•
•
•
•
•
•
•
Build awareness of a corporation’s identity
Improve understanding of a company’s area of business
Overcome poor attitudes towards a company
Explain corporate philosophy and policies
Illustrate achievement
Enhance a company’s image as an investment
Advocate social change useful to a corporation
Secure support of useful legislation
Provide a unified view of a corporation to its employees
Aid in recruitment
Corporations commonly try to sum up their vision and values in one
phrase or sentence – a company slogan. These range from the vacuous:
“Committed to innovation, quality and service”, to the specific: Avis –
“We’re number two, so we try harder”. The latter was hugely successful
over several decades, being eventually truncated to “We try harder”.
The author attended an awards ceremony at which a brief description
of each of the contenders was read out; he lost count of how many
included the epithet “World leaders in digital solutions”!
Devising an effective company slogan can be tremendously difficult.
Poor examples greatly outnumber good ones. Here are a few quoted in
Bernstein’s ‘Company Image and Reality’. Make up your own mind which
camp they fall into! (Bernstein, op cit)
•
•
•
•
•
‘Simply Years Ahead’ – Philips
‘Becoming a part of everyone’s life’ – Colgate
‘A powerful part of your life’ – Westinghouse
‘We have Connections’ – Cable & Wireless
‘There’s no stopping us’ – Computer Technology Ltd.
Sometimes, slogans are not intended to represent a lasting statement of
‘who we are’. The following examples are more accurately described as
campaign slogans, and can be expected to be shorter-lived.
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Motorola adopted a constantly switching set of slogans:
•
•
•
•
•
•
‘What you never thought possible’ (1996-2000)
‘Intelligence Everywhere’ (2000-2004)
‘Seamless Mobility’ (2004)
‘Mobile Me’ (2005)
‘Hello Moto’ (2006-2008)
‘We Generation’ (2008)
By contrast, Nokia stuck to one consistent slogan over many years:
• ‘Connecting People’ (1992-2000+)
Public relations
Public relations has always recognised the existence of multiple
stakeholders, including those beyond the customer. The Chartered
Institute of Public Relations has defined PR as “the planned and sustained
effort to establish and maintain goodwill and mutual understanding
between an organisation and its publics”. For ‘publics’ read stakeholders.
The scope of PR must therefore be very broad:
•
•
•
•
•
•
•
•
Community and social affairs
Investor or ‘capital’ markets
Business and industry – small, medium and large
Government – national, local, international
Regulatory markets
Educational institutions, universities, colleges
Charities and not-for-profit
International affairs
Common activities are as follows:
•
•
•
•
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Trade and general press relations – news, articles, speeches
Issues tracking
Local or central government lobbying
Facility visits
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• Corporate materials such as video for offline or online use, company
statements, podcasts, in-house magazines
•Sponsorship
• Stunts designed primarily to gain attention
• Special events e.g. celebrity store openings
• Community involvement
• Shareholder communication and meetings e.g. results
announcements
• Analyst briefings
• Regulatory news releases (RNS)
Internal communications techniques include:
•
•
•
•
•
In-house magazines and newsletters
Management communications
Recruitment exhibitions
Company-wide briefings
Formal employee feedback networks
Communication with multiple stakeholders
Imagine you are the person in the unenviable position of being
responsible for writing a press release to announce that a third of
the workforce of your large manufacturing company is to be made
redundant due to market pressures. You would need to consider as
many important stakeholder groups as possible, three of which would
be: customers, employees and shareholders (let’s assume it’s a public
company). What messages should you be thinking of including in the
press release if you had each of these stakeholders in mind?
For customers, you would want to stress continuity – that you are still
in business and able to supply their needs. They will be interested in
reliability of supply and risk. What you probably do not want to stress is
that the action has significantly... continued on next page...
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Corporate Reputation
continued from previous page... reduced costs or made you more
competitive (unless you want to give away the cost savings in the
form of price reductions!).
Employees, both those who are having to leave, and especially
the all-important ones who remain, will expect to see sentiments of
regret. The news will hit many people and their families hard, and
some sympathy for them is in order. Management may want to
explain that all other avenues had been explored before deciding
to take this action. The release could refer to measures that
management is taking to mitigate the impact on those affected
(if true), such as outplacement, re-training, and searching for
alternative opportunities within the organisation. (The last is a legal
requirement in the UK anyway, so you may as well make a virtue out
of a necessity.) What management should not do of course is to refer
to safeguarding the remaining jobs, as conditions may yet worsen
and further redundancies may prove unavoidable. Trades Unions
may be involved, and one would hope that employees and their
representatives will have already received the news by appropriate
personal means, not be reading about it for the first time in a press
release; though this has happened, as has firing people by text
message!
Shareholders are again a rather different proposition. They may see
the downsizing action as broadly favourable if it results in lower costs
and a more efficient operation – a case of management taking the
opportunity for early decisive action perhaps. They will be looking out
for the company to hold on to as much of its current business as it can,
and to plan its new future, taking advantage of its lowered cost base.
Faced with such conflicting issues, one cannot simply issue several
statements with different facts. Employees and customers will read
the content of the website, and all stakeholders will read the media
comment that is based on management briefings.
continued on next page...
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continued from previous page... If this were not a difficult enough
task, consider the situation of a company operating in a politically
sensitive sector, say located in a region where unemployment is
already very high, or the last British manufacturer of some product
class. What if it were a high profile brand such as British Aerospace or
Rolls Royce, where the signal this news may send internationally will
be important? What if the company is a supplier to government e.g.
for defence equipment, and the government could arguably have
done more to safeguard the jobs? These are immensely complex
issues, and an understanding of its complex stakeholder network is
essential to any large organisation today.
Digital communication
Digital technologies have given ordinary people hugely increased power
to communicate with each other through websites, blogs and especially
through social media. Everyone now has the opportunity to share their
experiences (good and bad), air their views and opinions, and vent
their frustrations online. Unlike earlier available channels, writing to the
newspapers perhaps, these voiced opinions can remain accessible for
a long time, possibly permanently. Anyone searching for BP on a search
engine in 20 years’ time will uncover all shades of opinion on what
happened at Deepwater Horizon in 2010.
It follows then that organisations have to monitor mentions of their
brands online, and review the new marcoms toolkit for up to date ways
of engaging with stakeholders. Social media in particular are relevant
since they provide the opportunity for two-way or multi-way dialogue,
rather than being just another broadcast channel for the organisation’s
messages.
Remember though that social media were not developed as a
promotional channel for marketers. Social media emerged spontaneously
in society, a result of the possibilities afforded by new technologies.
Marketers are struggling with the challenge of how to use social media for
their own purposes.
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Participants actively look for an alternative to the propaganda (as they
see it) put out by corporations, politicians and so on; an alternative that
represents the authentic face of the organisation. Any evidence that
there is a lack of authenticity will be unwelcome to say the least.
WalMart found itself unpopular when its ‘WalMarting Across America’
campaign – involving a blog written by two people travelling and
writing about the company’s beneficial impact on the visited
communities – was discovered to have been written by a writer in the
pay of WalMart. The fact that the reported stories may have been
true was not the point. The subterfuge was simply not acceptable.
Some examples of web-based tools used to communicate and engage
with external audiences are as follows:
Websites
•
•
•
•
•
•
Interactive content (e.g. product configurators)
Forms (to gather feedback or data systematically)
RSS (to provide up to date information)
Podcasts, files for download
Streaming video
Blogs (opinion pieces and online diaries)
• Mash-ups (combinations of data e.g. on maps)
Social media
•Micro-blogging
• Social bookmarking
• Social networking
Advertising
•Banners
• Affiliate
•Viral
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E-mail/Mobile
•SMS/MMS
• Applications (‘apps’)
Many of these tools are an improvement on traditional media in their use
as communications tools, offering:
•
•
•
•
much lower cost (although sometimes a high time burden)
faster implementation and updates
two-way communication
built-in metrics for evaluation
However, there is a question over whether organisations should be seeking
to manage their organisation’s social media activity in a controlled and
co-ordinated fashion. Is it even possible? Whose job is it? In the PR Week
survey mentioned in Chapter 1, only 28% of communications directors
said their communications teams managed their company’s social media
presence.
Internal marketing
Employees are an important audience for corporate communication for
at least two reasons:
1. They are a stakeholder group in their own right, whose efforts are
vital to the success of the organisation; and
2. Employees are part of the effort to interact with external
stakeholders through service and innovation.
Internal marketing attempts to smooth the working relationship between
functional areas of the firm, and in so doing, seeks to establish the firm
as an integrated whole, rather than an aggregation of disparate and
possibly opposing units.
Legislation has affected the way groups of employees are treated within
organisations. Maternity/paternity leave and flexible working hours are two
examples. Organisations are increasingly realising that these provisions can
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increase their attractiveness as employers, allow them to attract and keep
the best people, and maximise the motivation of their staff.
As a key stakeholder group, employees require their own communications
channels.
The organisation needs to have a system of internal communication which
keeps employees at all levels informed about the past, current and future
activities of the organisation.
Typical media for internal communications are:
Print
Visual
Electronic
•
Memos
•
Slide presentations
•
Corporate intranet
•
Newsletters
•
•
Voice mail
•
Internal newspapers
•
E-mail
•
Staff magazines
Video conferencing
(especially for
geographically dispersed
groups)
•
Telephone
•
Text
•
TV and radio (for larger
companies)
Communication should of course be two-way. Employees need a forum
to discuss their views, and management needs to be kept updated on
issues that concern employees. Whole-company meetings and suggestion
schemes are common ways of giving employees a voice.
Sainsbury’s has used online blogs from selected employees as a
way to attract recruits. Formatted as ‘A Day in the Life’ diaries, reallife employees describe their jobs and what makes working at the
company so interesting Former Sainsbury’s Chief Executive, Justin
King ran the highly successful ‘Tell Justin’ scheme on www.sainsburys.
co.uk, where he recorded a video message for potential recruits,
allowing, employees and would-be employees to share their thoughts
at the highest level. Sainsbury’s also declares that it prides itself on
“our Corporate Social Responsibility, with initiatives including a food
donation programme, promotion of Fairtrade™ produce and our
Active Kids scheme”.
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Companies complying with Sarbanes-Oxley regulations in the USA
have set up systems to allow employees anonymously to report
perceived wrongdoing to independent bodies.
3.6 Political Marketing
Having said at the start that we are not principally concerned here with
the political process of electing particular governments or influencing
voters, we should acknowledge that there is a branch of marketing that
does just that. Political marketing is a well-developed discipline that seeks
to influence particular groups of public sector stakeholders in order to
persuade them to particular causes.
One definition of political marketing is given by Hughes & Dann:
“A set of activities, processes or political institutions used by political
organisations, candidates and individuals to create, communicate, deliver
and exchange promises of value with voter-consumers, political party
stakeholders and society at large.” (Hughes & Dann, 2009).
Stakeholders for political marketing would include:
•
•
•
•
•
•
•
•
•
Government/civil servants
Party donors
Party members
Aspiring political candidates
Special interest groups
Traditional media journalists
‘New media’ participants, including social media, bloggers
General public/voters
Political opposition
Each of these stakeholders can be characterised according to their interest
and power using the Mendelow matrix (see figure 2.3) in Chapter 2.
Organisations, and occasionally individuals, and their representatives such
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as PR agencies, seek to influence governments directly through lobbying.
They will also use a variety of communication tools to present facts,
examples and viewpoints to those in positions of authority and will seek to
raise the profile of their particular issues.
Microsoft and BT have both found it necessary to argue their cases
strongly in the face of governments who believed their high profits and
dominant market position meant that real competition could not exist in
the market.
The increased mobility across borders of people, money, goods and
services brings about dramatic changes in market conditions. These may
or may not favour an individual company at any point in time. Examples
would include the influx of workers from Poland, Czech Republic, etc.
following these countries’ accession to the EU in 2004, and the subsequent
impact on, for example, the agricultural and hospitality sectors.
The European single market also means that European Union (EU) citizens
have the right to live and work in any other EU country. Doctors, dentists,
pharmacists and architects are among the groups whose national
qualifications are recognised automatically (from January 2013).
Such issues tend to have strong political overtones, with interested parties
using political marketing techniques to seek to persuade others to their
viewpoint.
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Chapter 4: Closing Remarks
Marketers must realise they are living through continuously changing
times. What was fine yesterday is not today, even less tomorrow. When the
Humble oil company proudly declared in its advertising that “Every day
we supply enough energy to melt 7 million tons of glacier!”, they could not
have foreseen the public sensitivity to global warming that would emerge
decades later.
Not only do we have to be alert to changing views in our own country
but also internationally. Business practices that today are regarded as
standard may become unacceptable in the future. Payments to officials
for ‘administrative favours’ may be regarded as perks or Schmiergeld
(‘smoothing money’) right now, but could well be disallowed at some later
date.
We cannot know the future precisely, but perhaps we can develop
sensitivity to the kinds of issues that may emerge in societies and how this
may affect our products, our companies and our marketing. One wonders
how our attitudes may change to:
•
•
•
•
•
Tobacco smoking
Pyramid selling schemes
Donations to political parties
Unpaid internships
Foie gras (banned in the House of Lords December 2012, having
already been banned in the Commons)
• Halal and Kosher meats
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Appendices
Appendix 1: Domino’s Pizza Manages a Viral Video
Nightmare
Domino’s Pizza is the one of the world’s leading pizza chains, and the
company has built a reputation as a trusted doorstep delivery business
that supports the communities in which it resides.
The company has also built a fairly ‘well-oiled machine’ when it comes
to dealing with various crisis situations that threaten to spoil that trust.
However, none of that prepared the company for what took place on
the evening of April 12, 2009 (Easter Sunday), when two bored adult
employees produced a video that showed one of them tainting supposed
customer food orders with bodily fluids. They then posted the video to
YouTube.
Domino’s learned of the video after it had been posted to YouTube
and several other sites, including The Consumerist, which was courteous
enough to inform Domino’s within an hour of its posting.
It was a nightmare for Domino’s and a reality shock for many corporations
that now see just how quickly and easily the digital world can help turn
respectable businesses into unsuspecting victims.
These are the actions Domino’s took to regain control over the situation
and preserve its reputation. Over the following few days, Domino’s took
the following steps:
1. Identifying and taking action against the culprits
The company started by capturing digital images of the two employees’
faces from the video and distributed a message to all US locations seeking
help in identifying them by name. On confirming their identities and
pinpointing the location, it then contacted the storeowner and requested
that they be fired.
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Having no way of knowing at the time whether the video was a hoax,
the company contacted the Health Department and local police to file
charges against the two culprits.
2. Getting the video removed
Simultaneously, the company’s social media team immediately contacted
YouTube to ask that the video be removed since it was in violation of
several of the site’s guidelines. YouTube responded that it would pull the
video only at the copyright owner’s request; it considered the woman who
had filmed her co-workers to be the rightful owner.
After identifying her from the digital stills, and minutes before she turned
herself in three days after the filming, a company representative met
the copyright owner and her lawyer on the steps of the local police
department with a letter that authorised YouTube to remove the video.
Under her lawyer’s recommendation, she signed the letter.
3. Responding to public queries
Domino’s decided it best not to go public with a press release or news
conference right away. It knew that by making a public statement,
anyone hearing of the issue for the first time would become intent on
seeing the original video, thereby encouraging it to spread.
Instead, it responded to those who approached the company about
the story. It also communicated with those forums that had either posted
the video or hosted conversations about the issue. In each case, it drove
home that this was something done to the company, not something the
company itself had done inappropriately.
Ultimately, it became clear that the buzz was starting to spread through
chatter on Twitter, so the company responded with a posted statement
on its website and by entering the conversation on Twitter and directing
users to that post on its site.
Soon afterwards, video views on YouTube grew to half a million.
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4. Fighting fire with fire
Three days after the original incident, Domino’s posted its own video to
YouTube. The video, which used no script and was simply filmed using the
Communication Department’s flip camera, featured company President,
Patrick Doyle, addressing the issue, calmly and sincerely venting his anger
and reiterating how sacred the company holds its customers’ trust.
In posting the video response, Domino’s used the word “disgusting” in the
video title – just as had been done with the original video – so that the
new video would come up first when users searched for the original.
The company then posted links to its video on Twitter and on its Facebook
page wall.
Results
Within three hours of posting the company’s video response to YouTube,
views of the original video surged to over one million. On that day only,
search queries for the keyword ‘Domino’s’ surpassed those for ‘Paris
Hilton’!
The company-posted video also quickly propelled the story into
mainstream US news, then global media, starting with the BBC and
working its way onto Chinese National Television, then Australia and Peru –
markets where Domino’s does not even have stores. A company analysis
reckoned 60 million media impressions were made.
Nevertheless, although the company’s video response triggered
widespread awareness, it also served to change the story in the
company’s favour.
“On Monday, for the 100,000 people who first saw the [employee] video,
the story was ‘look at these disgusting people at Domino’s.’ Then it
became ‘What is Domino’s doing about it?’ When we posted our video,
the story morphed into ‘How can companies protect themselves in a
YouTube world?,’ with Domino’s cited as a company who is handling this
crisis”, the company said.
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Since then, the company has been contacted on multiple occasions by
other organisations seeking advice on how to prepare themselves for
similar crises.
Some key learning points:
• Domino’s already had a social media team in place to respond as
needed, and well-trained staff throughout the company able quickly
to take up the tasks at hand. It was also advantageous that senior
management had consented to trust its people to do what was right
and not hold things up with boardroom-style meetings.
• Domino’s had already established customer loyalty that worked to
offset consumer doubts even before the issue had been resolved.
• By initially responding only within the forums where the story was
already unleashed, Domino’s was able to keep the issue somewhat
manageable, until it had a better understanding of what had
happened, and could begin taking steps to rectify the situation.
Even after the news hit mainstream, when Domino’s had its story straight,
and was able to showcase itself as a company taking action, it turned
down every request from the talk-show circuit to appear on television – a
conscious refusal to have its president and brand featured alongside the
original video.
The company did respond to every incoming query. And it responded
openly and truthfully, off the cuff, with criticism against the perpetrators
and contending that it had been victimised – and always understanding
that whatever was said would ultimately find its way into the public arena.
Case adapted from a piece by Kimberly Smith on MarketingProfs.com
(Smith, 2009).
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Appendix 2: Tobacco Debate
The tobacco smoking industry provides a good example of how important
public issues are dealt with in our democracy. While the law sets out the
basic permissible behaviours, the rights of individuals to hold differing
opinions is respected and organisations are formed to represent them.
Lobbying of government is professional and sometimes very well-funded.
Tobacco products have given pleasure to millions of people for decades.
The industry has created many jobs and the products have been heavily
taxed by governments. In 2010, the cumulative revenue of tobacco
taxation was over $17 billion in the USA alone! At the same time, many
people have died from smoking-related diseases and many more have
had their lives impaired. Treating diseases caused by smoking, costs the UK
National Health Service approximately £2.7 billion a year.
For most of that time, advertising has been heavy, especially advertising
associated with sport (Formula 1 for example) and outdoor activity
(Marlboro Man). Not to mention the now infamous Camel advertisements
showing a smoking clinician next to the slogan: “More Doctors Smoke
CAMELS than any other cigarette!”. In the year to August 2002, tobacco
companies spent £25 million advertising in the UK, excluding sponsorship
and indirect advertising, (AC Nielsen, 2003).
Since the link between smoking and damage to health was proven,
the industry has been under pressure from almost all sides and in most
countries. In the EU, advertising of tobacco is no longer allowed, and plain
packaging is proposed as mandatory – as it has been in Australia since
late 2012. However, in the USA in 2010, the tobacco industry spent $16.6
million on lobbyists to represent the industry to Congress.
FOREST – the Freedom Organisation for the Right to Enjoy Smoking
Tobacco – is a political and media lobby group, generally recognised
by government and other national and local authorities as the ‘voice
of the smoker’. They present their views to government bodies, either
in writing or in person, including to the Health and Safety Commission,
House of Commons Health Select Committee, Greater London
Authority Investigative Committee on Smoking in Public Places, Scottish
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Parliament Community Care Committee and so on. They are also active
internationally, making submissions to the European Commission (EC) and
representing consumers at meetings convened by the EC in Brussels.
In December 2010, they organised an online petition in response to an EC
public consultation to revisions to the Tobacco Products Directive. Find out
more at: www.forestonline.org
ASH – Action on Smoking and Health was established in 1971 by the Royal
College of Physicians as a campaigning public health charity that works
to eliminate the harm caused by tobacco. They do not attack smokers nor
condemn smoking. While they aim to be innovative and agenda setting
in their work, their policies are claimed always to be evidence based and
follow a dual approach:
• Information and networking: To develop opinion and awareness
about the ‘tobacco epidemic’
• Advocacy and campaigning: To press for policy measures that will
reduce the burden of addiction, disease and premature death
attributable to tobacco
ASH provides the secretariat for the All Party Parliamentary Group on
Smoking and Health. Find out more at: www.ash.org.uk
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PART 2
Partners
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Introduction
It seems obvious to state that organisations do not work in isolation. They
are affected by external forces – as anyone who has conducted a PESTER
analysis well knows – but as well as the truly external factors, outside our
control, there are individuals, companies and organisations with which we
can develop favourable relationships, and which help to position us for
success.
Financial advisers working closely with particular banks to obtain
recommendations, and companies taking part in government-sponsored
trade missions to foreign markets are redefining the boundaries of their
organisations, and effectively expanding the scope of their influence through
the cultivation of a ‘partnership’ approach.
Partnerships are really just another manifestation of relationships, a concept
most marketers have become familiar with through customer relationship
management. However, partnerships in a broader sense go far beyond
customer relationships. Perhaps the simplest taxonomy for the types of
relationships we need to consider is given by Doyle, (Doyle, 1995):
•
•
•
•
Customer partnerships
Supplier partnerships
Internal partnerships (e.g. employees, functional departments)
External partnerships (e.g. competitors, collaboration partners)
Gummesson goes further in an attempt to document much of the complexity
in relationship mapping and offers us the 30Rs (Gummesson, 1999).
These are grouped further into:
Classic market relationships – these include the simple ‘customer-supplier’
relationship, the ‘customer-supplier-competitor’ model and the distribution
network, all of which are probably familiar from other marketing texts.
Special market relationships – these represent certain specific aspects of the
classic relationships, such as the ‘service encounter’, and the ‘customer as
member of a loyalty programme’.
69
Mega relationships – mega relationships concern the economy or society
in general, and in a marketing context will include lobbying, mass media
and market alliances.
Nano relationships – these are to be found within organisations, so include
quality management, the ‘internal customer’, internal profit centres etc.
These concepts are developed in the following chapters.
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Chapter 5: Partners
5.1 Partnership Types
Clearly, both Doyle’s and Gummesson’s approaches refer to far more
than just customer relationships; they take in other organisations,
individuals and even whole economies. Customer relationships are
covered extensively elsewhere and tend to dominate marketers’ daily
lives, but in this Handbook, we are not concerned directly with customer
relationships. Instead we consider the myriad of other relationship types
that affect our personal and organisational effectiveness.
Rather than work through the 30Rs, we can usefully use Egan’s simpler
categorisation of the other partnership types as follows:
Internal partnerships
Research suggests that the quality of relationships a company has
with its customers is largely determined by how they are made to feel
by employees at the ‘front line’ (the marketing-customer interface). A
few years ago, The Chartered Institute of Marketing (CIM) created a
whole study module at Advanced Certificate level with that very title:
‘The Marketing Customer Interface’, in recognition of its importance.
It follows that we must take care to nurture these front line employees
and also those supporting them internally, if we are to achieve optimum
performance as an organisation.
Supplier or ‘vertical’ partnerships
While marketers spend most of their time looking ‘forwards’ down the
supply chain to their customers, it should become clear that looking
‘back’ up the supply chain is also a key component of putting together an
offer which is attractive to customers. Suppliers are a key source of value,
and contribute much in terms of innovation and improving efficiency. We
shall look at the desirability and costs of developing supplier partnerships.
Since suppliers are at different points in the supply chain, we call these
vertical partnerships.
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Partners
External or ‘horizontal’ partnerships
In contrast to supplier partnerships, collaboration can also take place
between individuals or organisations at similar points in the distribution
chain, perhaps through personal friendships and networking at one
extreme, and co-operations between governments and agencies at the
other. These tend to be relationships outside the organisation and are
regarded as ‘horizontal’ with respect to the supply chain.
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Chapter 6: Internal Partnerships
6.1 Overview
Anyone who has spent time working inside a large organisation will
already be familiar with the concept of the ‘internal customer’. Most
people in organisations rely on the support of other people to do their jobs
effectively. For example, you may depend on an efficient IT department
to keep your computer system working properly, and you may expect
the finance department to provide you with accurate and timely data
on sales revenue, volume, profit, etc. In turn, you, as a marketer, will no
doubt be tasked with providing an estimate of future product sales to
enable capacity and human resources planning. Sales colleagues will
expect some notice of future product launches and support in the form of
literature, a good website and so on.
Achieving good organisation performance externally requires the internal
organisation to be functioning in the same, high quality way with open
communication and trust. In service companies, where the offering is
delivered through human interaction of some kind, this connection should
be clearly evident.
If restaurant staff are poorly trained or motivated, then the ‘customer
experience’ they deliver will be poor and the customer will not return. In
fact, it is worse than this: the disgruntled customer may pass on news of
their bad experience to friends, colleagues and even to thousands of
strangers through review websites and other social media.
In short, employees must be motivated, well trained and incentivised
to perform well and in line with organisational values if the customer
experience is to be as management would wish.
In product businesses, customer contact is often indirect e.g. through
distributors or call centres, and so the link between employee
performance and external performance is less obvious. It is not unusual to
find large organisations with four or five layers between the customer and
functional specialists. Partly for this reason, it was the growth of services
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marketing as a concept during the 1980s that led to the concept of
‘internal marketing’ being taken more seriously.
Buttle observed that an organisation’s final output, be it goods or
services, is almost always the result of a series of operations and processes
performed by employees (Buttle, 1996).
6.2 Internal Marketing
Internal marketing has been described as: “Any form of marketing within
the organisation which focuses attention on the internal activities that
need to be changed in order that marketing plans can be implemented.”
(Christopher et al, 1991).
By understanding the needs of employees, it is argued, organisations can
ensure these are met, and in turn the employees can meet the external
customers’ needs more effectively. How well this works depends on
amongst other things: the culture of the organisation, the health of the
organisation, the nature of the service or product provided and the level
of interest of the customers themselves.
Egan found that internal marketing as a concept has had a chequered
career (Egan, 2011). Initially more to do with persuading staff to take
management’s view of a situation, it has since been associated with a
wide variety of concepts, some of which overlap. You may well recognise
some of this selection of examples from your own corporate career:
• The concept of the ‘internal customer’ who should be treated as if
they were an external paying customer
• The use of techniques such as briefings, brand guidelines, product
launches etc. to ‘sell’ the message of an organisation to its internal
audiences
• The concept of ‘Total Quality Management’ (TQM), which is based
on the premise that the quality of products and processes is the
responsibility of everyone involved with the creation or consumption
of the products or services offered by an organisation
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This requires the involvement of management, workforce, suppliers and
customers, to meet or exceed customer expectations
• Activities that improve awareness of customer issues among
employees, such as briefings and customer visits
• Development of a marketing orientation for an organisation
(everyone’s a customer), even where this may have seemed odd
e.g. in the provision of public services such as the NHS and the
railways
• Recruitment of customer-conscious employees: recruit for attitude,
train for skill
It is probably fair to say that to most people, it is the communication
aspects of internal marketing which spring most readily to mind.
However, achieving the best from internal partners goes much further
than that. Doyle states that internal marketing focuses on the three core
value-adding activities of (Doyle, op cit):
• innovation (finding new approaches in products and services to
improve efficacy, add features, reduce costs etc.)
• effective processes
• customer support and building networks which ‘design in’ quality
In accordance with this insight, companies increasingly appreciate
that marketing is not wholly delegated to that function within the
business, but is part of the task of everyone in the organisation. A firm’s
competitiveness depends on the effectiveness with which it organises
its three core value-generating processes – innovation, operations
and customer service and support. To work effectively each of these
processes needs a cross-disciplinary approach. None is the task of a
single department, but depends upon the commitment of everyone in
the firm.
Gummesson refers to internal relationships as ‘nano relationships’, which
he regards as being ‘below’ the market relationships, and he gives
the following examples (the numbers refer to his classification)
(Gummesson, op cit):
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Internal Partnerships
• R24: Market mechanisms are brought inside the company – by
introducing profit centres in an organisation, a market inside the
company is created and internal as well as external relationships of a
new kind emerge.
• R25: Internal customer relationship – the dependency between the
different tiers and departments in a company is seen as a process
consisting of relationships between internal customers and internal
suppliers.
• R26: Quality providing a relationship between operations
management and marketing – the modern quality concept has built
a bridge between design, manufacturing and other technologybased activities and marketing. It considers the company’s internal
relationships as well as its relationship to the customers.
• R27: Internal marketing: relationships with the ‘employee market’
– internal marketing can be seen as part of a total relationship
marketing approach as it gives indirect and necessary support to the
relationships with external customers.
• R28: The two-dimensional matrix relationship – organisational
matrices are frequent in large corporations and above all they are
found in the relationships between product management and sales.
• R29: The relationship to external providers of marketing services –
external providers reinforce the marketing function by supplying
a series of services, such as those offered by advertising agencies
and market research companies, but also in the area of sales and
distribution.
• R30: The owner and financier relationship – owners and other
financiers partly determine the conditions under which a marketing
function can operate. The relationship to them influences the
marketing strategy.
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Figure 6.1. Relationships seen as networks and interactions
6.3 Part-time Marketers
The concept of the ‘part-time marketer’ is relevant here. Internal partners
are comprised not only of the folk who have ‘marketing’ and ‘sales’ (or
their equivalents) on their business cards. It is argued that marketing is the
responsibility of all employees.
Gummesson described how these non-marketing specialists – despite not
being formally recognised as marketers – are crucial to the company’s
marketing effort. Christopher et al, further subdivided employees into four
types as the figure below shows:
Involvement with marketing mix
INVOLVED
HIGH
Frequency of
contact with
customers
LOW
NOT DIRECTLY
INVOLVED
CONTRACTORS
e.g. Sales,
customer
service
MODIFIERS
e.g.
Receptionists,
accounts staff
INFLUENCERS
e.g. R&D,
market
research
ISOLATEDS
e.g. HR,
IT
Figure 6.2 Communications role of various employee groups
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Internal Partnerships
Contractors are heavily involved with conventional marketing activities and
include sales personnel and customer service staff. They should naturally be
well trained and tuned to satisfying customers on a daily basis.
Modifiers have frequent customer contact but not involvement in
conventional marketing activity. Examples of modifiers would include
receptionists, delivery personnel and so on. They should be trained in
customer relationship skills.
Influencers are part of the ‘marketing machine’ but with less personal
customer contact than Contractors. As such, they should be encouraged to
be customer oriented. Influencers include market researchers and R&D staff.
Isolateds are not directly involved with customers or marketing, but their
performance may impact on success. For example, IT or HR staff may have a
strong long-term influence on the efficiency and effectiveness of marketing
activity (Christopher et al, op cit).
6.4 Achieving Internal Partnerships
Achieving the maximum organisational benefit from the efforts of employees
requires excellence in the following:
Recruitment of individuals with the appropriate personality, skills and
aptitude – this may require techniques such as behavioural interviewing using
simulation exercises and tests to confirm an individual’s attitude or level of
competence in customer-facing activity.
Performance management and review – appropriate levels of supervision
(see Empowerment below) are provided, along with clear deliverable
objectives.
Training and development – often involving ‘on the job’ experience and selfdirected learning opportunities.
Reward mechanisms – which may or may not be financial in nature, to
reinforce and encourage desired behaviour patterns. Non-financial rewards
may include awards or similar recognition among an individual’s peer group.
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6.5 Empowerment
Empowerment has been fashionable for so long, it has almost become
a cliché. At its heart is the notion that people interfacing directly with
customers know best what is required to achieve customer satisfaction,
and to achieve that, they need to have the flexibility and authority to take
action without the need to refer matters upward for approval.
At its best, empowerment brings about the following benefits (Bowen
et al, 1992):
• Quicker online response to customers’ needs during service delivery
• Quicker online response to dissatisfied customers during service
recovery
• Employees feeling better about their jobs and themselves
• Employees interacting with customers with more warmth and
enthusiasm
• Empowered employees being a great source of service ideas
• Great ‘word of mouth’ advertising and customer retention
Empowered employees could be trusted to give their best and promote
their organisations effectively, and could truly be called partners in the
deepest sense.
On the other hand, empowerment is not without its drawbacks. First, it
comes at a price, as the selection and training processes will require
more investment in time, and staff levels may need to be increased.
Second, some employees will not take to being empowered, preferring
to be managed rather than taking decisions themselves (“I’m not paid to
think”). Organisations under intense pressure to improve efficiency may
find empowerment not to be an available option, and empowerment
may be much more difficult to achieve outside of the service sector.
Chris Daffy in Once a Customer, Always a Customer (Daffy, 2000),
identified the need for ‘corporate integration’ (an adapted version is
shown in Figure 6.3) to illustrate the key phases in delivering excellent
customer service, including the drivers and outcomes from the ‘internal
people things’.
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Internal Partnerships
Phase
Approach
Through
Outcomes
Phase 1
Leading from the top
Company vision
& values
Direction
Phase 2
Harnessing Internal
Resources
Recruitment
& Training
Empowerment
Teamwork
Phase 3
Encouraging
appropriate
behaviour
Feedback
Partnership
Rewards
Systems
Loyalty
Referrals
Phase 4
Business
performance
Commercial
success
Profit
Growth
Value
Reputation
Figure 6.3. Organisation approach to delivering excellent
customer service
In phase one, we need a clear vision of what we are trying to achieve
(‘begin with the end in mind’ to quote Stephen Covey). This responsibility
lies firmly at the top of the organisation and CEOs must be seen
wholeheartedly to embrace the relationship marketing culture if it is to
succeed. The result will be clear direction for all.
In phase two, we can collect the ‘internal people things’ as Daffy
called them. Good customer care must start internally if it is to have any
chance of working externally. HR policies in particular must be geared
towards creating the well-trained, empowered workforce we have been
considering above.
In phase three, we group the ‘external customer things’. We need good
mechanisms for capturing customer feedback and reward systems which
encourage customer focused behaviour.
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Terry Leahy, ex-CEO of Tesco once said: “When we stopped obsessing
about Sainsbury’s and started obsessing about the customer, that’s when
we beat Sainsbury’s.”
In phase four, we remind ourselves that the ultimate goal and the result of
all the above (at least for most commercial organisations) is profitability
and, usually, growth. In a wider stakeholder context, we might include
providing employment, rewarding investors or contributing to society in
various ways. Customer care is only part of the picture.
John Lewis Partnership
John Lewis is the UK’s best known exponent of an employee
partnership approach, and indeed refers to its employees as ‘Partners’.
This from the JLP Corporate website (accessed September 2015):
“All 88,700 permanent staff are Partners who own 44 John Lewis shops
across the UK (31 department stores, 11 John Lewis at home and shops
at St Pancras International and Heathrow Terminal 2), 340 Waitrose
supermarkets (www.waitrose.com), an online and catalogue business,
johnlewis.com(www.johnlewis.com), a production unit and a farm.
The business has annual gross sales of over £10bn. Partners share in the
benefits and profits of a business that puts them first.
When our founder, John Spedan Lewis, set up the Partnership, he was
careful to create a governance system, set out in our Constitution, that
would be both commercial allowing us to move quickly to stay ahead
in a competitive industry, and democratic giving every Partner a voice
in the business they co-own. His combination of commercial acumen
and corporate conscience, so ahead of its time, is what makes us
what we are today.”
Despite operating in a difficult economic climate and intense
competition from other retailers and from the internet, JLP’s results
would seem to confirm that its approach can pay off, to the benefit of
its employees and its customers.
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Fred Reichheld, in 1996, produced the ‘Service Profit Cycle’ concept
(Figure 6.4) that established the linkages between internal strategic
instruments and external service performance, and which operates as a
self-reinforcing ‘circle of virtue’.
• If an organisation has a respectable level of profitability, it can more
easily afford to produce external service quality.
• External service quality generates customer satisfaction (although
the goal should be customer delight he argued).
• If customers are satisfied they will display loyalty, leading to favourable
behaviours such as purchasing more and more often, making
recommendations to friends, forgiving occasional lapses, etc.
• Customer loyalty leads to further profitable growth (as it is cheaper to
keep a customer than to recruit another).
• Profitable growth is likely to be correlated with internal service quality
because retained customers enable service providers to move more
rapidly up the experience curve.
• If internal service quality is high, employee satisfaction will increase.
Employee satisfaction would almost certainly mean that employee
retention improves, again with consequential benefits as far as
service standards are concerned.
Figure 6.4. Reichheld’s service-profit cycle
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Of course this virtuous cycle may operate in reverse where a reduction
in profitability requires an organisation to cut its costs – with consequent
deterioration in external service quality, and so on. This may be thought to
be one reason why organisations including British Rail and the Royal Mail
found it so difficult over the years to live up to customer expectations.
The cultivation of internal partners, harnessing this important source
of innovation and effort, and using it to increase external customer
satisfaction, clearly has a lasting significance. It may not be key to
all organisations and may be difficult or impossible to deliver in some
circumstances, but it deserves its place in the management toolkit
(Reichheld, 1996).
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Chapter 7: Vertical Partnerships
Have you ever wondered how producers of goods can be expert at
so many things? For instance, how can a car manufacturer develop
state of the art electronics for its engine management system, be at
the cutting edge of specialised tyre rubber development, and know all
they need to know about the latest LED lighting systems? The answer of
course is that they cannot; they rely on their suppliers to provide
that expertise.
We noted above that supplier relationships offer a useful form of
partnership. Development of strong relationships with suppliers is arguably
as important as customer relationships. They can be a valuable source of
innovation and may provide services such as stocks or logistics which are
a source of competitive advantage. Increasingly, organisations look for
partners who will provide specialist skills or know-how, and their ability to
put together these partnership networks determines the effectiveness of
the supply chain.
“It is about not trying to invent everything. 90% of what you do, someone
out there can do better”, said John Brophy, General Manager,
Corporate Research, BP Chemicals, speaking about outsourcing
technology.
Doyle has said (Doyle, op cit): “We can summarise the key tasks
of management in today’s organisation as three. The first task of
management is to identify opportunities created by change. The second
task of management is to build the networks or delivery processes which
can realise these opportunities. This means creating the project teams
within the firm and the partnerships with other organisations to deliver the
innovations, efficient products and services, and customer service and
support. The third task of management is to build the brands.”
Just as our approach to customers is re-thought in relationship marketing,
so the way suppliers are perceived and treated can benefit from the
more enlightened view of vertical partnerships. In the ‘new think’,
suppliers are seen as partners not adversaries.
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7.1 Supplier Partnerships or Partnership Sourcing
Historically, people traded with those they knew and trusted. Only
relatively recently, with effective laws and peaceful times, have
anonymised transactions become the norm. We have become
accustomed to business procedures and protocols that define how
suppliers should be treated. These are enshrined in documents such as
order specifications, terms and conditions, contracts etc. that seem to
assume that unless everything is specified tightly, the other party will take
unfair advantage; that each party is attempting to gain the upper hand
and to maximise their profit at others’ expense.
Some would argue that suppliers should be kept at arm’s length. They
would guard against being too ‘cosy’ with suppliers, and would adopt a
strategy that:
•
•
•
•
•
Focuses on getting the best deal (price) in the short term
Plays one supplier off against another
Treats information as power, not to be shared easily
Expects to change suppliers frequently
Uses market pressure and available capacity to drive the best deals
Today however, increasing numbers of organisations are developing
a more collaborative supplier partnership approach in which the
generic objective of the partnership is to improve the efficiency and
effectiveness of what Porter called the ‘value chain’(Porter, 1985).
The dynamic in each market will be different, but the key point is
that fostering co-operative networks with suppliers to the point where
they can be regarded as partners can assuredly lead to long term
commercial advantage. This is a far cry from the traditional ‘arm’s
length’ adversarial arrangement where customers and suppliers
viewed each other with suspicion, and negotiation with suppliers
usually concentrated on price, with each party vying to get the upper
hand. In business to business marketing, it is not now uncommon to find
organisations sharing cost information (‘open book costing’), so that they
might together drive costs
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out of the process, share innovation, and in so doing, develop a closer
relationship for the benefit of both parties.
Replacing win-lose with win-win relationships can be achieved if both
parties are committed to making it work. Maybe marriage is not a
bad analogy. As noted by Brennan (Brennan, 1997): “Partnership can
only flourish in a ‘positive-sum’ game where there are real economic
advantages associated with this approach to doing business.”
Analogies for the complex world of business have also been made
with dancing. Tom Peters expresses it with characteristic colour (Peters,
1992): “Today’s global economic dance is no Strauss waltz. It’s break
dancing accompanied by street rap. The effective firm is much more
like a carnival in Rio than a pyramid along the Nile.”
Partnership sourcing is based on customers and suppliers working
together for mutual benefit. It has been adopted by many of the
world’s leading companies, especially in the manufacturing sectors.
Its supporters claim it can improve responsiveness, reduce costs
and improve competitiveness. Partnership sourcing is the natural
complement to other popular strategies such as Just-in-Time (JIT)
manufacturing and Total Quality Management (TQM).
The principles of partnership sourcing are:
• The parties are making a long-term commitment
• There is a change in emphasis from purchase price to total
acquisition cost
• There is a strong commitment to quality – i.e. fitness for purpose
The main objectives of partnership sourcing are:
• To minimise the costs of doing business together
• To ensure ongoing supplies and quality
• To gain competitive advantage through, for example, innovation
or erecting barriers to entry
• To delight the customer
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Vertical Partnerships
Additional objectives may include:
•
•
•
•
Better management information
Reduced time to market for new products/services
Reduced costs of bringing products to market
Reduced inventory and waste
Activities that add value need not stop at the organisation’s boundaries.
For example, when you order a book from Amazon, the speed of the
delivery is, in part, a product of Amazon’s order processing efficiency, but
is also affected by the efficiency of the courier network used. Since speed
of delivery is a major driver for online purchasing, it is clear that much of
the value is being added here by activity outside the direct control of the
Amazon organisation. Similar examples would include the quality of food
in restaurants (farmer or grower responsible), and user experience with a
mobile phone (signal strength provided by local telco service).
Figure 7.1 below shows how organisations can partner with suppliers,
customers or both, to form an integrated value chain, where each partner
carries out those tasks to which they are best suited. These partnerships
can be in either direction i.e. with customers or suppliers.
Partnership sourcing
ORGANISATION
VALUE CHAIN
Partnership marketing
Customer value chains
Supplier
value chains
Figure 7.1 Concatenation of value chains
For an explanation of the value chain concept, see Porter’s Competitive
Advantage (Porter, op cit).
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There are many practical ways in which organisations can partner with
others in the same value chain to cut costs, remove duplication or other
inefficiencies, foster innovation and so on.
Some practical techniques are:
•
•
•
•
•
•
‘Just in time’ production methods
Joint R & D programmes
‘Open’ purchasing arrangements (see example below)
Technology transfer and licensing
Staff transfer
Integrated e-commerce systems
Open purchase order system
Imagine a company running a factory making vacuum cleaners, and
its supplier of washers. The company could give all its washers business
to one supplier, whose responsibility it would be to check stock levels
at the cleaner factory, and ‘top up’ supplies as required. At the end
of the month, if each cleaner needs 20 washers, and the factory had
produced 5,000 cleaners, it must have used 100,000 washers, and the
supplier would send an invoice for that amount. A large amount of
unnecessary administration has now been cut out. Note that there is no
need for ordering individual batches of washers, chasing and expediting
deliveries, counting and checking washers on arrival, putting them into a
raw materials warehouse (where they may get damaged, lost or stolen),
raising paperwork at both ends for each batch and so on.
Both parties benefit from the trust they have shown by a reduction in
administration costs, and the customer probably receives more attentive
service and higher quality. Contrast this approach with the traditional
model of keeping suppliers ‘hungry’ by splitting purchases among several,
and making them fight for volume through frequent price negotiations.
Many texts can be found which give the context for this example under
the topics of ‘Just in Time’ manufacture or Total Quality Management.
While ‘supplier as adversary’ and ‘supplier as partner’ may be seen
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Vertical Partnerships
as clear opposites, there is in fact a continuum of supplier relationship
strategies that could be adopted, as represented on the following page
(adapted from Hughes et al, 1998):
Spot buying
Bids/tenders
Certified suppliers
Inc
re
Preferred suppliers
as
ing
clo
Partnership approach
se
ne
ss
of
Joint ventures
re
lat
ion
sh
ip
Strategic alliance
Co-ownership
Figure 7.2 Continuum of supplier relationship strategies
Professional procurement texts carry much more on these alternative
approaches.
Tritek Cardboard Packaging used a partnership approach to get closer
to their customers by forming formal partnerships with them. They agreed
reduced pricing targets over five years and these were reviewed every
three months. They used ‘open book’ costings so that customers could
see where costs were incurred, and both parties were able to suggest
innovations and specification changes to reduce costs – i.e. ‘cost out’
as opposed to ‘cost down’. As a specific example of cost elimination,
one customer asked Tritek to arrange for their delivery driver to unload
and forklift deliveries directly into its warehouse, thereby reducing staffing
costs for the customer. The results of partnership sourcing for Tritek were:
greater levels of trust, greater security of business, better planning - with
subsequent benefits in recruitment, training, capital efficiency, etc. – and
improved quality systems.
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7.2 Innovation Networks
Suppliers and customers of an organisation can be powerful drivers of
innovation, either because they have a special knowledge or interest
in finding new answers to problems, or because they have some
other advantage such as a novel technology. Although suppliers are
often expected to provide innovations, networks between suppliers,
customers and other parties can be established. In Total Relationship
Marketing, Evert Gummesson quotes a study in the cable connections
industry in which customers were responsible for 11% of innovations,
while primary suppliers were responsible for 33% and secondary
suppliers developed 56% of innovations (Gummesson, op cit).
7.3 Outsourcing
The decision not to produce components or services in house and to
sub-contract work to external suppliers (the ‘make-buy’ decision) is
referred to as outsourcing, and is not uncommon these days.
Outsourcing occurs when an organisation procures goods and services
externally that it might conventionally be expected to produce using
its own resources. The transition to an outsourcing arrangement may
also involve transfer of the employees and assets involved to the
outsourcing business partner. Many public sector services, including
the running of prisons and hospitals, have been outsourced as a result
of the perceived greater efficiencies and motivation of for-profit
organisations.
In some cases, outsourcing involves overseas partners (‘offshoring’);
call centres being a classic example. In the financial services sector,
consumer reaction to this has been mixed, and in recent years,
financial institutions have been returning their call centre activity to
the UK.
In-house provision may be cheaper since an external supplier’s price
will include an element of profit, but direct comparison with supplier
prices is only one factor.
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Other issues to consider include the following:
• Resource usage – when a company makes products in house, it is
tying up resources such as management, labour, working capital,
space, etc. which could be used for other more profitable purposes,
i.e. there is an opportunity cost.
• Flexibility and scalability – if a company cannot produce all the
output it requires in-house, or its needs change over time, it can use
external suppliers as the need arises. However, negotiating such
a deal with external suppliers might necessitate guaranteeing a
minimum supply quantity over a period of time.
• Control – in-house production should be easier to control in terms of
product quality and availability.
• Compulsion – certain areas of the public sector are required to
consider outsourcing.
• Vulnerability – a company may miss out on the opportunity to build
in-house expertise and could then suffer if its external arrangements
become uncompetitive.
• Contract compliance – Outsourcing arrangements require strict
attention to contracts.
Obvious examples where companies have used outsourcing include
catering and cleaning services, but more complicated ones might include
electronic parts sub-assembly, HR and even marketing. Clearly, this policy
may have some limits: imagine how your accounts department would
react if you announced that you were bringing in external consultants to
provide your financial information, rather than using the internal service!
Microsoft uses suppliers in a highly integrated way to provide tailored
goods and services by combining the specialised capability of smaller
suppliers with the muscle of the software giant. Human resources is an
example of this, where the ‘insourced’ HR supplier maintains a full time
staff located at Microsoft’s UK headquarters to carry out recruitment
and other HR functions. To the outside world, these people are part of
Microsoft and share its values and processes.
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Courier service FedEx came to public attention in the USA when it
was found that organisations in large office buildings were using its
services in preference to internal mailroom operations. They found it
faster, despite the mail travelling far further!
Car company Rover spun out its advertising department to create a
stand-alone advertising agency, with Rover as its largest client.
7.4 Limitations of Supplier Partnering
While there is a strong argument in favour of the partnership sourcing
approach, it has its critics.
Disadvantages of a partnering approach include: the difficulty of leaving
the partnership due to entrenched thinking, sharing of resources, joint
investment and so on. Long-term relationships can become stale, so
fail to provide the ‘dynamic tension’ necessary to maintain continuous
improvement. In extreme cases, partnerships can lead to restricted
choice for customers (perhaps intentionally!), and even to cartels or
other corrupt practice.
Perhaps the ‘right’ answer is that partnership sourcing is not an end in
itself. It is a means of continuously managing business relationships, and
harnessing the power of suppliers in pursuit of greater competitiveness
and quality. Hughes and Dann stress the need for flexibility when
adopting closer partnership approaches, and refer to a number of
preconditions and tests that need to be applied if partnership sourcing is
to succeed (Hughes and Dann, op cit).
In particular there has to be:
• A commitment to openness on both sides and joint ways of working
• A readiness to discuss future business plans and capital investment
requirements
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• A preparedness to share each other’s long-term strategies and
business goals
• A willingness to understand each other’s business processes,
managerial and operational cultures
• A strong sense of how the parties will mutually exploit cost, quality,
technical or marketing advantage via their collaboration
• An agreed remedy in the event of a non-partnership source of
greater advantage appearing in the supply market
• A review forum capable of assessing how well the partnership has
exploited or distorted the market to the advantages of both sides
• A realistic assessment of the acceptability of the distribution of
benefits from the relationship between the partners
7.5 Strategic Business Units
In an attempt to gain the benefits of specialised production without the
perceived risks of outsourcing to other companies, some organisations
create specialised divisions to provide the focus required – strategic
business units. These divisions may have separate profit measurement
and operate as nearly as possible as independent units within the larger
corporate group. They may be free to purchase and supply to other
companies inside and outside the group, even when the products and
services are available within. By bringing market forces to bear in this way,
it is argued, the units will be motivated to be as competitive as possible,
but also free to adopt whichever policy is best for them at any time.
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Chapter 8: Horizontal Partnerships
As defined above, external or ‘horizontal’ partnerships occur between
parties at similar points in the distribution chain. These are generally
organisations or individuals that form alliances to gain a particular
competitive advantage.
As Gummesson defined relationship marketing (Gummesson, 1999):
“Relationship marketing is marketing seen as relationships, networks and
interactions.” There is a good deal of overlap between the way the terms
networks, partnerships and relationships are used in the literature, and
they are even used interchangeably. But however it is defined, partnering
with customers or with other members of an industry network can be an
important source of knowledge, expertise and power.
We can adopt Egan’s definition of networks and collaborations to
describe these arrangements (Egan, op cit).
8.1 Personal Networks
Definition: Personal networks are systematic or ad hoc relationships
between individuals such as owners/managers who co-operate to
obtain information or to optimise organisational performance.
Networks form as partnerships between individuals from different
organisations, co-operating for the mutual benefit of themselves (career)
or their organisations (competitive advantage). Such interactions are
often informal and spontaneous. In exceptional cases they are legally in
a grey area or even forbidden as anti-competitive; discussion on pricing
matters would be an obvious example of the latter.
Gummesson included personal and social networks within the category
‘Mega relationships’, because they could be said to ‘sit above’ market
relationships.
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In particular he identified:
• R18: Personal and social relationships – which may be dominant in
some cultures, where business is solely conducted between friends
and friends of friends. The ‘old boy network’ can still be seen today in
some professions.
Certain institutions e.g. Harvard University and the University of Tokyo
provide their alumni with powerful influence in their respective economies.
In the latter case, in Japan, the term keiretsu means the long-term
relationships between companies that exist as a result of personal
relationships. Firms are three times more likely to trade with other keiretsu
members than with outsiders.
Nor is it only large organisations that can partner for competitive
advantage: many ‘singleton’ consultants and service providers meet
at breakfast clubs or other sharing meetings, passing on business leads
or recommendations for their fellow networkers. Such partnerships are
particularly valuable for freelancers, who may have little time for marketing
or networking ‘at random’. With other professionals looking out for them,
they can be many times more effective, and also benefit from the
credibility of the ‘third party reference’. Partnering in this way also helps to
overcome the sense of isolation from working alone.
Women in business have formed groups at all levels solely for the purpose
of networking and providing mutual support.
In sectors such as executive recruitment, a strong network of contacts is
a pre-requisite. Recent statistics for LinkedIn suggest that over 200 million
people now belong to this social network, used mainly as a personal
networking tool. This is perhaps 80% of the managers in many Western
countries.
8.2 Collaborative Partnerships
Collaborative partnerships are more formal relationships between organisations,
recognised across the companies. These are more likely to involve
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written agreements and procedures specifying the nature of the collaboration.
Collaborative partnerships can be further divided into industry
collaboration between competitors or other players in the same industry
sector, and external collaborations between partners in different sectors.
Industry collaboration
Co-operation between organisations within an industry can result in what
Sheth & Sisodia called a ‘positive-sum game’, as opposed to the ‘zerosum’ proposition that results from participants attempting to gain market
share at each other’s expense (Sheth and Sisodia, 1999). By working
together to grow the entire industry sector, gains in sales volume can be
achieved, it is argued, at lower cost.
Trade associations are one mechanism through which sector members
can collaborate. Generic advertising can encourage consumers to adopt
a product type, or to consume more.
In Canada, the British Columbia Dairy Association (BCDA) is a notfor-profit organisation that represents the B.C. dairy industry, raising
awareness of the dynamic, economically sustainable nature of the
industry, and delivering innovative nutrition education programmes to
B.C. consumers. For more information go to:
http://bcdairy.ca/milk/campaigns/must-drink-more-milk.
Although industry collaboration is not new, the use of partnership alliances
– between some of the competing firms within the sector – appears to be
on the increase. The motivation is often cost and efficiency improvements
through sharing capacity or technology for example.
The next time you take a scheduled flight, watch the flight
announcements board: you may see your flight number e.g. BA123
alternating with another number from a different airline such as AA456, as
these airlines may be sharing the route and seeking to fill their planes by
independently marketing the seats.
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In the airline industry, the Star Alliance, formed in 1997 between airlines
including Lufthansa and Singapore Airlines, describes itself as ‘the first truly
global airline alliance to offer worldwide reach, recognition and seamless
service to the international traveller’. In the high street, collaborative
marketing campaigns have been run between Disney, Coca-Cola and
McDonald’s for a number of years.
A customer purchased car insurance using an evaluator website
(let’s call it brand ‘A’), to provide instant quotes from a large number
of vendors. Having selected a brand name (let’s call it ‘B’) that
he recognised and trusted, he proceeded to go ahead with the
transaction (‘conversion’ in modern marketing-speak), and awaited
his confirmation. He quickly received an e-mail confirming his
purchase of insurance – from brand ‘C’ – an unfamiliar brand. Later
that week, through the mail, he received his documents advising
him that his insurance was underwritten by brand ‘D’! Not only was
this somewhat confusing, it concerned the customer that he had no
knowledge – and therefore no control – over whom he was dealing
with. This is perhaps an extreme case, but partnerships such as this
are common, especially in consumer markets, where brand owners
and product/ service providers share aspects of the communication/
fulfilment chain, with little in the way of transparency for the end
customer.
External collaboration
External collaboration exists where organisations co-operate to some
extent with others outside their sector, such as with governments,
professional bodies, regulators, technology providers and so on.
Gummesson includes the following types of external relationships
(Gummesson, op cit):
• R19: Mega marketing – where the real ‘customer’ is not always found
in the market place; relationships must be formed with governments,
regulators, financial institutions etc.
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Powerful groups require mega marketing: co-operation, persuasion or
lobbying to make marketing even feasible. Pharmaceutical companies
must carry out trials according to strict criteria, and even after the
efficacy and safety of a new drug is proven, it must still get approval from
the National Institute for Clinical Excellence (NICE) before a product is
approved for use in the British NHS.
• R20: Alliances – change the market mechanisms, by partly curbing
competition
British Airways has in the past been fined by the European Commission
for its close relationships with travel agents under which incentives
were offered to travel agents for promoting the airline’s flights.
The EU said that the practice of ‘fidelity rebates’ which rewarded
agents who sold more tickets with higher commission fees was anticompetitive. The EU said the system “makes travel agents loyal to BA,
discouraging them from selling travel agency services to other airlines.
This has created an illegal barrier to airlines that wish to compete
against BA in the UK markets for air transport”.
In its defence, BA said that its commission arrangements for travel
agents were similar to those run by most major airlines in Europe and
across the world and, in fact, were standard practice throughout the
industry. However, it has now ended the system and instead pays a
flat commission.
• R21: Knowledge relationships – recognising that knowledge is a
critical strategic resource and often the rationale for alliances.
• R22: Mega alliances – change the basic conditions for marketing.
Mega alliances are formed, for instance, between nations as they
seek to gain benefit from their combined economic strength and to
reduced bureaucracy through co-operation. The Common Market, now
evolved into the European Union, is a prime example. Adoption of the
euro currency by most of the European nations has reduced costs and
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exchange risk significantly. Elsewhere in the world one can find the North
America Free Trade Agreement (NAFTA) and the Association of South East
Asian Nations (ASEAN). In fact, it is hard to think of an area which does not
have some sort of economic alliance.
The collaboration between Apple and Nike is an excellent example
of two major brands – not in direct competition – co-operating for
mutual advantage. Both brands are seen as style-driven, modern
and with strong youth appeal. By incorporating sensors in the Nike
footwear which interface with an app on an Apple portable device,
the parties have enabled a new level of functionality for both
products, while erecting considerable (if temporary) barriers to entry
for their competitors.
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Epilogue
To make sense of the complex world of partnerships, we have considered
the three main types: internal, vertical and horizontal. However, marketers
must be mindful of the fact that in addition to simple one-to-one (dyadic)
relationships, markets will contain whole networks of simultaneous
relationships.
Think of a key decision maker in a customer of your organisation. What
networks are they part of? They may belong to their professional body
(e.g. the Chartered Institute of Purchasing and Supply), they may attend
meetings on specific industry topics where they will have discussion
with other specialists. They may have colleagues and friends in other
companies you sell to or buy from; they may play golf with other business
people and read the output of opinion formers in the trade media or
subscribe to certain RSS feeds online. All these interactions and more can
affect their awareness and perception of your product, your service or
your company.
A customer may also be a supplier. An agency working for your
competitor may be a suitable partner for you in time to come.
Organisations today need to recognise how partnerships can add value,
be a source of innovation, raise competitiveness and improve customer
satisfaction.
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References
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Index
4Ps, 5
Empowerment, 78, 79-83
7Ps, 5
Environment, 4, 7, 8, 9, 10, 17-21, 29, 30, 39,
41, 42, 43, 44
10Ps, 5, 7, 8
Advertising, 3, 16, 46, 49, 52, 57, 63, 76, 79,
93, 97
Ethics, 8, 16, 24, 43
Facebook, 12, 13, 19, 61
Amazon, 3, 19, 88
GDP, 12
App, 53, 100
Google, 13, 19, 21, 30
Attitudes, 11, 28, 47, 57
Gummesson, 69, 71, 75, 77, 91, 95, 98
Barriers to entry, 87, 100
Horizontal partnerships, 72, 95-100
Blog, 30, 51, 52, 54, 55
Innovation, 39, 47, 53, 71, 75, 83, 85, 87, 89,
90, 91, 101
Brand, 5, 13, 15, 16, 17, 19, 39-40, 51, 62, 85,
98, 100
Internal marketing, 53, 74-77
Broadcast, 32, 34, 51
Internal partnerships, 71, 73-83
Budget, 3, 8
International, 4, 12, 20, 43, 48, 51, 57, 64, 98
Business plan, 93
Internet, 7, 9, 14, 30, 31, 81
Channel management, 30
Loyalty, 62, 69, 80, 82
Collaborative partnerships, 96-100
Market research, 76, 77, 78
Competition, 56, 81, 99, 100
Marketing mix, 5, 8, 77
Competitive advantage, 85, 87, 95, 96
Marketing orientation, 75
Consumer behaviour, 18, 20
Matrix, 24, 55, 76
Copyright, 30, 60
Motivation,54, 91, 97
Corporate communication, 40, 45-55
Objectives, 78, 87, 88
Corporate image, 37, 46
Outsourcing, 85, 91-93, 94
Corporate reputation, 37-56
Corporate social responsibility, 42, 43-45, 54
Costs, 17, 50, 63, 71, 75, 83, 86, 87, 88, 89, 90,
99
Packaging, 4, 15, 18, 63, 90
Partnerships, 69-101
PESTER, 7, 69
Planning, 5, 32, 37, 73, 90
Crisis, 32, 33, 34, 35, 59, 61
Podcasts, 49, 52
Culture, 44, 74, 80, 94, 96
Political marketing, 10, 55056
Demographic, 8,11
Political power, 5
Distribution, 5, 69, 72, 76, 94, 95
Politics, 8-12
E-commerce, 89
Porter, 86, 88
Egan, 27, 71, 74, 95
Positioning, 5
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Press, 3, 4, 34, 48, 49, 50, 60, 64
Price, 3, 4, 5, 8, 16, 17, 30, 39, 50, 79, 86, 87,
89, 91
Product, 3, 4, 5, 6, 8, 15, 17, 21, 24, 30, 32, 38,
39, 40, 44, 46, 51, 52, 57, 63, 73, 74, 75, 76, 85,
88, 92, 97, 98, 99, 101
Product development, 23, 39
Public opinion, 5, 6, 8, 33, 35, 37, 46
Public relations, 35, 48
Radio, 3, 54
Retail, 3, 4, 15, 18
Sales, 3, 4, 6, 19, 24, 29, 46, 73, 76, 77, 78, 81,
97
Service quality, 82, 83
Services, 3, 7, 8, 9, 13, 21, 28, 31, 38, 39, 40,
42, 56, 73, 74, 75, 76, 85, 88, 91, 92, 93, 94, 99
Services marketing, 5
Social media, 14, 21, 31, 51, 52, 53, 55, 60, 62,
73
Societal marketing, 34, 41-42
Special interest groups, 4, 28, 35, 55
Sponsorship, 49, 63
Stakeholder theory, 24
Strategic business units, 94
Strategy, 16, 18, 24, 34, 40, 43, 76, 86
Television, 31, 40, 54, 61, 62
Twitter, 19, 31, 60, 61
Value, 6, 9, 13, 27, 32, 37, 39, 47, 55, 71, 73,
75, 80, 81, 86, 88, 89, 92, 101
Vertical partnerships, 71, 85-94
Vision, 13, 47, 80
Website, 3, 9, 13, 18, 26, 30, 31, 32, 33, 50, 51,
52, 60, 73, 81, 98
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Cambridge Marketing Handbooks
This Stakeholder Marketing Handbook is one in a series
of Handbooks for marketing practitioners and students,
designed to cover the full spectrum of the Marketing Mix.
The other Handbooks include:
• Digital Marketing
• Distribution for Marketers
• Law for Marketers
• Marketing Communications
• Marketing Philosophy
• Marketing Planning
• Pricing for Marketers
• Product Marketing
• Research for Marketers
• Services Marketing
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Cambridge Marketing Handbook: Stakeholder Marketing
109
This set of guides provides an invaluable
resource for anyone wishing to further their
career in marketing.
Professor Malcolm McDonald MA (Oxon) MSc PhD DLitt DSc
Emeritus Professor, Cranfield University School of Management
Stakeholder Marketing - A Cambridge Marketing Handbook
Marketers have long held the view that the customer should be central to all they
think about, all they do. Yet the developments of the last few years have shown that
other forces are at play that can be at least as powerful and long lasting. A broader
group of stakeholders exists, whose needs and interests must be understood and
satisfied in the quest for a strong corporate reputation and business success.
Most recently the impact of the internet and social media has amplified the
power of individuals to comment on, and ultimately to influence, the activities of
organisations of all types. This Handbook examines the identification of internal,
connected and external stakeholders, their ability to affect the organisation, and
how organisations should relate to them. It also examines the organisation itself
and the factors which influence the development of its corporate image among its
various stakeholder audiences.
About the Author
Terry Nicklin has over thirty years’ experience of marketing in product and servicebased organisations. He has worked at Marketing Director level in global markets
for companies in technology and professional services, and has consulted for
public and private sector clients including BT, Bosch, GE and Unilever. He runs
PR and marketing consultancy Keynote PR to provide high quality marketing
support to B2B clients in technology and business services sectors. At Cambridge
Marketing College, Terry is Course Director for Digital Marketing. He is Chairman of
the Chartered Institute of Marketing (CIM) Cambridgeshire Branch, a Member of the
CIM East Regional Committee and the recipient of a CIPR Gold Award
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