Download Making Marketing Work in the New Century

A Strategy Document
on
The New Marketing Paradigm
Holistic Marketing ● Lateral Marketing ● High-tech Marketing
by
PHILIP KOTLER
Documentation Sponsored by
Canon
logo unit
Kotler On Marketing
How To Create, Win, and Dominate Markets
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Philip Kotler, Ph.D
Kellogg School of
Management
Northwestern
University
Indiatimes Mindscape
Mumbai and Delhi
October 11, 12, 2004
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Two Challenges Facing
Indian Companies
1.
Will Indian companies be able to defend their
market against the growing invasion of foreign
global brands?
2.
Can Indian companies develop strong global
brands?
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Can Indian Companies
Defend the Domestic Market?
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Foreign competitors will not only go after the
high end market in India. They will target the
middle and eventually the low end.
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The main defense for India will be developing
stronger skills in innovation, differentiation,
branding, and service. In a word,
MARKETING!
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But India Needs
Stronger Marketing
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Confusing marketing with advertising.
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Advertising is hard sell.
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Sometimes ads appear before the product is in distribution.
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Some companies over-spend on advertising and go broke.
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Little use of marketing research; can’t trust.
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Therefore little segmentation of market and poor targeting.
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Over focus on winning through low price; neglecting
differentiation.
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Retailers carry the same goods and their service is poor.
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Marketing is More Important
than Production!
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The Indian manufacturer of a Hugo Boss shirt gets only $12, or
10% of the final price of $120 that is paid by a customer of Saks
Fifth Avenue.
 The retailer gets 60% ($72) and the Brand company gets
30%, or $36.
 Would you rather be the manufacturer, Brand owner, or
retailer?
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The Indian manufacturer has no defense if the Brand Owner
wants to switch to another manufacturer to whom he will pay
$8 and keep $2 or pass it to the retailer to get more retail
support.
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Yet India pays more attention to the product engineer than the
marketing “engineer.” But India’s future success will require
investing in marketing and branding.
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The Strategic Trajectory
for India
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Low cost, average quality domestic products.
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Low cost, good quality domestic products.
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Indian high-end products made for other companies.
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Indian branded products (regional).
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Indian branded products (global).
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Indian dominant brands (global).
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Ranbaxy Pharmaceuticals (India)
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Originally sold bulk substances to unsophisticated
markets but gross margins were too low to cover
export costs.
New CEO, Parvinder Singh, challenged Ranbaxy to
become a truly global company. He said: “Ranbaxy
cannot change India. What it can do is to create a
pocket of excellence. Ranbaxy must be an island
within India.”
The company moved into higher-margin businesses
like selling branded generics in large volume
markets like China and Russia.
Ranbaxy then entered the U.S. and Western Europe.
In just five years, more than half of its US$ 250
million revenues now come from outside of India.
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The Case of Haier
Haier developed through three stages.
1. Fix quality
(Zhang Ruimin smashed 76 refrigerators).
2. Diversify
(Microwaves, toasters, air conditioners,
dishwasher, vacuum cleaners, etc.)
3. Globalize
(Asia Region, U.S., Europe)
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Haier entered with a U.S. partner and is
challenging Whirlpool and GE.
Haier’s brand name products are sold in Wal-Mart,
Best Buy, Sears, Lowe’s, Home Depot and Target.
Haier is promoted as a global brand, not a Chinese
one. (Many people think it is German).
Puts lower price models in price-only stores and
higher price models
in on
top
stores.
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Five C’s Favoring India
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Capital: India has and can attract capital.
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Cost: Another 50 years of low cost production
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Capability: Large number of trained workers,
engineers, scientists, and business people
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Consumers: Immense domestic market
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Calm and stability: in a world of turmoil and
uncertainty
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A Quiz: Who Said This?

“The purpose of a company is ‘to create a customer…The only
profit center is the customer.’”
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“A business has two—and only two—basic functions:
marketing and innovation. Marketing and innovation produce
results: all the rest are costs.”
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“The aim of marketing is to make selling unnecessary.”
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“While great devices are invented in the Laboratory, great
products are invented in the Marketing department.”
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“Marketing is too important to be left to the marketing
department.”
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My Message
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Marketing’s performance has been
disappointing.
You must replace your Old Marketing with
New Marketing that is:
 holistic,
 technology-enabled,
 and strategic.
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Facing the Increasing Pressure for
Marketing Accountability
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Marketing has become a one P discipline = selling.
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Marketing involves a great deal of waste.
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$2 million for 30 seconds on the Superbowl.
 Direct mail campaigns with a 1% response rate.
 Cold sales calls which play the numbers.
 High rate of new product failure.
Marketing costs are high and rising.
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Marketing lacks accountability.
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Marketing does not create major new ideas.
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Marketing is too involved in short-term thinking.
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Marketing doesn’t focus on its real assets.
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Brands, customers, service quality, stakeholder
relationships, intellectual capital, corporate reputation
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Needed:
Holistic Marketing
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Marketing must become strategic and drive business strategy.
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A company needs to take a more holistic view of:
 the target customers’ activities, lifestyle, and social space.
 the company’s channels and supply chain.
 the company’s communications.
 the company’s stakeholders’ interests.
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Holistic marketing will require strong software support.
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HOLISTIC RELATIONSHIP MARKETING FRAMEWORK
1) Who is involved?
CUSTOMERS
MARKET
SPACE
POTENTIAL
OPPORTUNITIES
BUSINESS
INVESTMENT
CORPORATION
COLLABORATORS
2) How can we define relevant market space?
3) What are the potential opportunities emerging
from the market space?
4) What business capabilities and infrastructure
required?
CUSTOMER
CORE
FOCUS
COMPETENCIES
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COLLABORATIVE
NETWORK
4 COMPETITIVE PLATFORMS
Customer
Focus
Exploring
Value
Creating
Value
COGNITIVE
SPACE
Core
Competencies
COMPETENCY
SPACE
RESOURCE
SPACE
Market
Business
Offerings
Architecture
CUSTOMER
VALUE
BUSINESS
PARTNERS
BUSINESS
DOMAIN
Marketing
Activities
Operational
System
Delivering
Value
CRM
Collaborative
Network
ERP
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SCM
Responding to Low Margins and the
Economic Slowdown
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Commoditization and rapid imitation leading to shorter product
life cycles.
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Competition of cheaper brands from China and elsewhere.
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Rising selling and promotion costs and decreasing sales
effectiveness.
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Shrinking margins.
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Proliferation of sales and media channels.
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Power shifting to giant retailers who are demanding lower
prices.
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Recession: lower incomes and purchasing power.
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Mergers, large company bankruptcies.
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Improving Marketing
Efficiency and Effectiveness
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Improving marketing efficiency
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buying inputs more efficiently
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hunting down excessive communication and sales travel
expenses
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closing unproductive sales offices
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cutting back on unproven promotion programs and tactics
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putting advertising agencies on a pay-for-performance basis
Improving marketing effectiveness
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replacing higher cost channels with lower cost channels
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shifting advertising money into better uses
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reducing the number of brands or sku’s
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Improving supply chain responsiveness
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Responding to the
Economic Slowdown
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Reevaluate your current resource allocations.
 Geographical mix
 Market segment mix
 Customer mix
 Product mix
 Channel mix
 Promotion mix
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Decide whether to attack to gain market share rather than
retrench.
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Be sure to maintain the value proposition promised by your
brand.
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Try to add value instead of cutting the price.
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Marketing Strategies Are Showing
Diminishing Returns
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Product differentiation is harder to
achieve.
Acquisitions and mergers have as
many failures as successes.
Internationalization is offering less
opportunities because either the good
markets are overcrowded or the poor
markets have no money.
New products unfortunately fail more
times than they succeed.
Price cutting doesn’t work because
competitors will match.
Pricing raising doesn’t work since
there isn’t enough differentiation to
support it.
Cost cutting has eliminated much of
the fat but is now risking cutting the
muscles.
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Strategies for Firms in Different Market Positions
Jagdish Sheth, Singapore Marketer, 2002
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Five Winning Strategies
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Cost reduction: (IKEA, Southwest Airlines,
Wal-Mart, Enterprise Rent-a-Car).
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Improved customer experience (Starbucks,
Harley Davidson)
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Innovative business model (Barnes & Noble,
Charles Schwab, FedEx, Sony).
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Improved product quality (P&G, Toyota).
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Niching: (Progressive Insurance, Tetra)
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Dual Strategies
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Planning for today
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Defining the business.
Shaping the business to
meet needs of today’s
customers
Improving alignment
between functional
activities and business
definition
Organization mirrors
current business
activities
Optimizing current
operations to achieve
excellence.
Planning for tomorrow
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Redefining the business
Reshaping the business
to compete for future
customers and markets
Making bold moves away
from the existing ways of
doing business
Reorganizing for future
business challenges
Managing change to
create future operations
and processes
In many markets, the growing number of
competitors in mature markets leads
companies to target niches of low
profitability.
YOGURTS MARKET
Number of
competitor
s
Market
Size
Time
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Average
profitability
of all
competitors
or players
Some Vertical Marketing Methods
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Modulation
 The juice manufacturer varies the sugar content, fruit
concentrate, with or without vitamins…
Sizing
 Potato chips are offered in sizes 35 grams, 50 grams, 75grams,
125 grams, 200 grams, multi-packs…
Packaging
 Nestle’s Red Box chocolates comes in different containers:
cheap paper box for the grocery trade, premium metal box for
the gift trade…
Design
 BMW designs cars with different styling and features...
Complements
 Biscuits with sugar spread on it, with cinnamon, with
chocolate, with white chocolate, with black chocolate, filled
biscuits…
Efforts reduction
 Charles Schwab offers different channels for transacting such
as retail stores, telephone, internet….
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The case of Cereal Bars
New category
Cereals for breakfast market
into
STREETS
Cereal varieties
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=
The case of Barbie
Teenager
Baby dolls market
To
feel
as...
Doll varieties
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New category
=
Other Examples of Lateral Marketing
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Kinder Surprise = candy + toy.
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Seven Eleven = food + depot.
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Actimel = yogurt + bacteria protection.
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Gas station stores = gas station + food.
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Cyber cafes = cafeteria + Internet.
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“Be the godfather of a kid” = Donation + adoption.
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Huggies Pull-ups = diapers + 3 year olds.
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Walkman = audio + portable
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Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A New
Approach to Finding Product, Market and Marketing Mix Ideas (Wiley, 2004)
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Check Where You Stand
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Marketing does the marketing -> everyone does the
marketing.
Organizing by product units -> organizing by customer
segments.
Making everything -> outsourcing more goods and
services.
Using many suppliers -> working with fewer suppliers.
Emphasizing tangible assets -> emphasizing intangible
assets.
Building brands through advertising -> building brands
through integrated communications.
Attracting customers to stores -> making products
available on-line.
Selling to everyone -> selling to target markets.
Focusing on profitable transactions -> focusing on
customer lifetime value.
Focusing on market share -> focusing on customer share.
Being local -> being “glocal.
Focusing on the financial scorecard -> focusing on the
marketing scorecard.
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Focusing on shareholders
on stakeholders
Building Brand Equity
MARKETING IS THE ART OF BRAND BUILDING
*
IF YOU ARE NOT A BRAND,
YOU ARE A COMMODITY.
*
THEN PRICE IS EVERYTHING
AND THE LOW-COST PRODUCER
IS THE ONLY WINNER!
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1. How Important is Branding?
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The NUMMI plant in California produces two
nearly identical models called the Toyota
Corolla and the Chevrolet Prizm.
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Toyota sold 230,000 Corollas compared to
sales of 52,000 Prizms.
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And Toyota’s net price is $650 higher!
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A Strong Brand Improves
Demand and Supply
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On the demand side:
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higher price
increased sales volume
lower churn
more brand stretching
On the supply side:
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greater trade acceptance, more favorable supplier terms,
lower rejection
lower staff acquisition and retention costs
lower cost of capital
better scale economics through higher volume
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Names are Important in Branding

Donald Trump’s family name is Drumpf.
But he can’t call it Drumpf Towers.
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Alan Alda’s name was Alphonso
D’Abruzzo.
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Chinese gooseberry was renamed
kiwifruit.
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Paradise Island in the Bahamas used to be
Hog Island.
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A Brand Must be More
Than a Name
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A brand must trigger words or associations (features and
benefits).
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A brand should depict a process (McDonald’s, Amazon).
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A great brand triggers emotions (Harley-Davidson).
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A great brand represents a promise of value (Sony).
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The ultimate brand builders are your employees and
operations, i.e., your performance, not your marketing
communications.
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Your Company’s Brand
1.
What word does your brand own?
2.
Write down other words triggered by your brand name?
A. Circle the favorable words; square the unfavorable words.
B. Underline the words that are favorable but not widely known.
C. Double underline the words that are unique to your company.
3.
Are any of the following a source for strengthening your brand’s
personality?
A. Founders
B. Spokespersons
C. Characters
D. Objects
E. Stories and mythologies
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2. How Do You Develop
a Brand Concept?
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“The brand must be an essence, an ideal, an
emotion. ” It must be supported by beautiful logos,
clever tag lines, creative turns, edgy names, rave
launch parties, big ticket giveaway promotions, and
publicity buzz-making. (Advertising agency view)
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“The brand should have a target group in mind and
be positioned to solve one of their problems better
than competitive offerings.” Furthermore the brand’s
reputation is ultimately based on product quality,
customer satisfaction, employee communications,
social responsibility, etc. (Kevin Clancy, CEO of
Copernicus)
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Branding Components
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Name
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Short, suggestive, memorable, unique, pronounceable
Slogan
Logo and typeface
Colors
Music
Themelines (Got Milk!)
Stationery and business cards
Offices
Trucks
Dress code
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Brand Slogans
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BA, “The World’s Favorite Airline”
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American Express, “The Natural Choice”
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AT&T, “The Right Choice”
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Budweiser, “King of Beers”
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Ford, “Quality is #1 Job”
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Holiday Inn, “No Surprises”
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Lloyds Bank, “The Bank that Likes to Say Yes”
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Philips,
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“From Sand to Chips”
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“Philips Invents for You”
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“Let’s Make Things Better”
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There is No Such Thing as a Commodity:
Differentiate by Segments
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Mobil conducted a study of 2,000 gasoline buyers and
identified five segments:
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Road Warriors (always driving)
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True Blues (brand or dealer loyal)
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Generation F3 (liked convenience store aspect)
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Homebodies (fills up at nearest station)
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Price Shoppers (20% of all the buyers)
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Mobil rolled out Friendly Serve: cleaner property,
bathrooms, better lighting, well-stocked stores, and
friendlier personnel.
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Mobil charged $.02 more and sales increased by 20-25
percent.
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3. How Do You Promote a Brand?

“How do I justify spending millions on
creating an image. That’s millions my
customers have to spend when they buy
from us.” Tom Parker, CEO of Clark’s
shoes.
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Brands are built by performance, not
advertising.
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Don’t Overuse Advertising
to Build a Brand

People don’t pay that much attention to ads anymore
(wallpaper).

Some exceptional TV ads grab attention but do not
provide motivation.

Advertising doesn’t have much credibility or
believability.

The existence of so much advertising makes
advertising less effective. Yet the cost of advertising
keeps rising.
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Tools for Building Brands
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Advertising (e.g.,Absolut Vodka)
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Sponsorships (e.g., Kodak and Olympics)
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Clubs (e.g. Nestle’s Casa Buitoni Club)
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Company visits (e.g., Cadbury’s theme park, Hallmark’s Museum)
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Trade shows
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Traveling exhibits
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Worldwide web casts of presentations, roundtables, entertainment
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Distribution outlets (e.g., Haagen-Dazs)
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Public facilities (e.g., Nestle Nestops)
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Social causes (e.g., American Express)
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High value for the money (e.g. buzz created by Ikea, etc.)
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User community building (e.g., Harley-Davidson)
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Founder’s personality (e.g., Colonel Saunders)
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Celebrity spokespersons
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4. What Makes a Strong Brand?
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Strong brand = Product Benefits x Distinct
Identity x Emotional Values

Peter Doyle, Marketing Management & Strategy, 1997
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THE Y&R MODEL OF BRAND STRENGTH
A successful brand has brand vitality and brand stature.
Brand vitality consists of:
1. Differentiation, the brand is distinct
2. Relevance, the brand is meaningful and personally
appropriate.
Brand stature consists of:
1. Esteem, the brand is seen to have quality and momentum.
2. Familiarity, the brand is known and understood by many people.
Some conclusions:
1. A brand that has high familiarity but low likeability is a troubled brand.
2. A brand that has high likeability but low familiarity has high advertising
potential.
3. A brand with high vitality but low stature has excellent potential.
4. When a brand’s differentiation and relevance start slipping, esteem will slip
next, and then familiarity will decline.
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Characteristics of Strong Brands
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Provides superior delivery of desired benefits.
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Maintain innovation and relevance for the brand.
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(Apple, Virgin)
Communicate with a consistent voice.
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(Gillette, Charles Schwab)
Establish credibility and create appropriate brand
personality and imagery.
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(Starbucks, FedEx, Amazon)
(Coca-Cola, Accenture)
Strategically design and implement a brand
hierarchy and portfolio.
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(BMW, The Gap)
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Strong Brands Supply Use Value
as Well as Purchase Value
Nestle:
 Sells baby food
 Provides free dietitian phone line
 Nestops along the highway
Home Depot:
 Sells home improvement products, such as paint, electrical
supplies, plumbing
 Offers free kitchen remodeling design service
 Offers free workshops on how to paint, fix faucets, etc.
Volvo
 Teaches safe driving,
 Supports lower insurance rates for safe drivers
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When Do You Stretch
a Brand Name?
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Mercedes is putting its name on large, medium and
small cars.
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Gap decided to invent Old Navy in going down and
buying Banana Republic in going up.
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How Do You Revitalize a Brand?
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A dowager brand pioneered the market but now is declining. It will
be hard to reverse the decline and give it new life but the decline
can be slowed down.
Two general approaches:
 Marketing mix modification
 Improve the product, distribution, price, or promotion
 Market modification
 Find new segments, new usage benefits or occasions,
more frequent usage, etc.
Find out to whom the dowager brand is losing share:
 Old peer brands
 New peer brands
 Retail store brands
 Generic brands
 Elite brands
Find out to whom the dowager brand is losing sales.
Interview people who defected to each competitive class and their
dissenting rationales.
Determine a counterlogic for each group and direct them to the
groups that can most easily be won back.
Source: Dennis W. Rook and Sidney J. Levy, “Defending the Dowager:
Communication Strategies for Declining Main Brands.”
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How Do You Rationalize
Your Product Line?
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Unilever found that the largest 50 brands accounted for 63% of
its revenues.
Unilever decided to emphasize 400 core brands and dispose,
delete or consolidate 1,200 of its marginal brands.
Unilever selected its 400 core brands based on brand scale,
brand power (#1or 2), and brand growth potential.
40 brands were designated as core global brands (e.g., Dove,
Knorr, Lipton), and 360 as regional core brands.
The core brands would get disproportionate investments in
advertising and promotion, innovation, marketing competence
and management time. The core brands would be extended.
Weak brands had small market shares; poor profitability;
negative cash flow; weak channel support; disproportionate
consumption of management time.
The weak brands would be milked, sold, delisted, or their
attribute would be migrated to another brand.
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What Are the Most Frequent Causes
of Brand Failure?
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Failure to live up to the brand promise.
Failure to adequately support the brand.
Failure to adequately control the brand.
Failure to properly balance consistency and
change with the brand.
Failure to do brand equity measurement and
management.
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Building Customer Equity

How customer-centered is your company? How
do you measure this?

Does your company need to be more customercentered? To all customers or only the more
important customers?

How can you go about becoming more customercentered?

How much would this cost you in new technology
and training?

How much would you gain as a result of
becoming more customer-centered?
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Achieving Outcomes in Market Space
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Achieving a deep customer focus is not done simply by building a
customer database or customizing your product offerings.

A company must define its marketspace not in terms of products but
in terms of customer outcomes.
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Baxter Healthcare supplies “home-recovery enhancement,” not just
nursing care or wheelchairs.
IHI, a health insurance company, operates in the “lifetime health and
personal safety” marketspace.

A company then examines the customer activity cycle and the value
gaps.
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The company then invests in filling the major value gaps.
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The company ends up being favored and grows through doing more
things better for their customers.
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Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan Management
Review, Spring 2004, pp. 26-34
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Achieving Deep Customer Focus
1.
Create strategic excitement.
2.
Enlist “points of light.”
3.
Articulate the new market space focused on customer outcomes.
4.
Identify the value opportunities through using the customer activity cycle.
5.
Build a compelling case (not through a plan but a story).
6.
Size the prize.
7.
Modeling the concept with a few chosen customers.
8.
Get people working together.
9.
Get critical mass.
10.
Gather momentum.

Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT
Sloan Management Review, Spring 2004, pp. 26-34.
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Building Customer Equity

Reduce the rate of defection.
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Increase the longevity of the relationship.

Enhance the growth potential of each
customer through cross-selling and upselling.

Make low-profit customers more profitable
or terminate them.
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Focus disproportionate effort on high
value customers.
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Components of Customer Equity

Customer equity is driven by:
 Value equity
 Brand equity
 Relationship equity.

Companies must decide which driver(s) underlie
each equity.

Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon,
Driving Customer Equity (New York Free Press 2000).
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Transaction Marketing vs.
Customer Relationship Marketing

Customer Relationship Marketing (CRM) represents a
paradigm shift from Transaction Marketing (TM).

TM companies focus on products and making a sale. CRM
companies focus on building a long-term relationship that
produces satisfaction for the customer and profitability for
the company.

TM companies promote everywhere in search of customers.
CRM companies promote to a defined customer group and
aim to make the right offer at the right time using the right
channel to the right customer.

All companies must practice a mix of TM and RM. TM will be
stronger in companies facing a large number of customers;
RM will be stronger in companies facing a small number of
customers.
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Treat Different Customers Differently

Most profitable customers

Most unprofitable customers

Most growable customers

Most vulnerable customers
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Needed:
Technology-Enabled Marketing

Technology-enabled marketing (TEM)
combines information technology, analytical
capacities, marketing data, and marketing
knowledge, made available to one or more
marketing decision makers to improve the
quality of marketing management.
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A 5 Step Model for
Database Marketing
1.
Gather useful data on customers.
2.
Classify customers by their needs and by their
value to the firm.
3.
Prepare business rules that select the best
prospects.
4.
Customize marketing treatments for each prospect
in terms of product offers, service mix, media, and
channel.
5.
Set up accountability procedures.
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Database Marketing is Expensive!

Requires a tremendous investment in information gathering
about individual customers and prospects.

Requires constant updating of information.

Some critical information may not be available.

Requires a high investment in hardware and software.

Requires integrating individual customer information from a
variety of sources.

Requires people skilled at data mining.

Requires managing and training employees, dealers, and
suppliers.
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Does Every Business Need CRM?

No. The following businesses may not benefit from CRM:
 Businesses where the CLV is low.
 Businesses with high churn.
 Businesses where there is no direct contact between the
seller and ultimate buyer.

Companies that are in the best position to invest in CRM.
 Companies that collect a lot of data (banks, insurance
companies, credit card companies, telephone
companies).
 Companies that can do a lot of cross-selling and upselling (GE, Amazon, etc.).
 Companies whose customers have highly differentiated
needs and are of highly differentiated value to the
company.
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Marketing Technology Platforms
on the Market Development Curve
Campaign
Management
Database-Driven Marketing
Performance Dashboards
Historical Database
Analytics
Database Management &
Warehousing
Yield-Based Pricing
Optimum Tools
Marketing Mix Modeling /
Predictive analytics
Marketing Resource Management
Marketing Management Work-Flow Solutions
Introduction
Growth
Mature
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onInc
CANON
Source: Gary Morris, Adapted from Marketing
Advocate,
.
Decline
Precision Marketing

Precision marketing is achieved through looking at large
quantities of historic data with the help of data mining tools
that search for meaningful patterns, and then creating
mathematical equations that represent the underlying
relationships within the data.

Predictive analytics are used to identify the right offers and
right messages to beam through different channels to narrow
customer segments, based on the propensity to respond. The
expected profit of a campaign can be estimated.

Many tactical marketer tasks will be automated and free up
marketers to focus on more strategic decision making.
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SALES AUTOMATION

The objective is to empower the salesperson to be
an informed salesperson who virtually has the whole
company’s knowledge at his or her command and
can provide total sales quality.
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Marketing Automation

Areas Ripe for Marketing Automation:
 Selecting names for a direct mail campaign
 Deciding who should receive loans or credit
extensions
 Allocating product lines to shelf space
 Selecting media
 Customizing letters to individual customers
 Targeting coupons and samples
 Pricing airline seats and hotel reservations
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Marketing Decision Models
and Marketing Mix Response Models







BRANDAID
CALLPLAN
DETAILER
MEDIAC
PROMOTER
ADCAD
See Kotler, Marketing Models
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Marketing Dashboards

Tools dashboard

Processes dashboard

Performance dashboard
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Marketing Work-Flow Process Tools

Project management

Product management

New product development

Campaign management
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Exploit the Internet!











Research a new product on the Internet (panel research, chat
rooms).
Create a site to explain how an existing or new product works (ex.,
Tide).
Create a site that consults on a category (Colgate on dental
problems).
Create a site that consults on the customer’s profile (Elizabeth
Arden).
Sponsor a chat room around your product category.
Answer email questions instantly (Nestle baby care questions).
Send free samples of new products (freesample.com).
Send coupons of new products (coolsavings.com).
Customize your product (Acumin vitamins).
Offer to sell very large orders direct.
Offer valuable information to people who will register on the site.
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Is New Technology Enough?

NT + OO = EOO

New Technology + Old Organization =
Expensive Old Organization
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Technology-Enabled Marketing: Examples





Royal Bank of Canada
 Decision to purchase CRM
Halifax Bank
 Teller suggests financial products
Capital One
 A credit card for everyone, but with different interest rates, credit
lines, and cash advances.
Tesco supermarkets
 Tesco has identified 5,000 customer “needs” segments. It sends
out some 300,000 variations of any given offer with redemption
rates of 90%. It has formed clubs such as Baby Club, A World of
Wine Club, My Time Club
Kraft
 Kraft has the names of 110 million customers and 20 thousand
facts for each household. Kraft launched print magazine, Food &
Family, that is delivered to the homes of 2.1 million Kraft
customers in 32 versions tailored to 32 segments.
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10 Earmarks of the New
Marketing
1.
Recognize growing customer empowerment.
2.
Develop a focused offering to the target market
3.
Design the marketing from the customer-back.
4.
Focus on delivering outcomes, not products.
5.
Draw in the customer to co-create value.
6.
Use newer ways to reach the customer with a message.
7.
Develop metrics and ROI measurement.
8.
Develop high-tech marketing.
9.
Focus on building long run assets.
10.
View marketing holistically to regain influence in the company.
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1. P&G Recognizes
the New Consumer

Consumers want a conversation, to dialogue,
to participate, to be more in control…We’re
going from one-dimensional, product-myopic
marketing to three-dimensional marketing –
that offers better solutions…more delightful
experiences… and the opportunity for ongoing relationships.
Alan Lafley, CEO, P&G
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Do-It-Yourself Marketing










Self-Inform: Customers can research products and issues without relying on
experts (e.g., WebMD, MedlinePlus.com)
Self-evaluate: Customers can compare product features and prices with a few
clicks of a mouse (e.g., PriceGrabber.com, DealTime.com)
Self-segment: Customers can design and configure products (e.g., Dell,
Reflect.com)
Self-price: Customers can propose prices to sellers (e.g., eBay, PriceLine.com,
Free Markets)
Self-support: Customer can resolve problems by searching knowledgeable
bases and discussion forums (e.g., www.remotecentral.com,
www.treocentral.com)
Self-program: Customer can define their own media programming (e.g., TiVo,
MyYahoo!)
Self-organize: Customers can join communities of interest to discuss products
and issues (e.g., Meetup.org., IVillage)
Self-advertise: Customers can create feedback for their peers (e.g.,
Amazon.com, Planet Feeeback, BlogSpot.com)
Self-police: Customers can monitor reputations of manufacturers (e.g., eBay,
BizRate.com)
Source: Mohan Sawhney lecture
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The Evolution of Marketing
Transactional
Marketing
Relationship
Marketing
Collaborative
Marketing
Time frame
1950s
1980s
Beyond 2000
View of value
The company offering
in an exchange
The customer
relationship in the
long run
Co-created
experiences
View of market
Place where value is
exchanged
Market is where
various offerings
appear
Market is a forum
where value is cocreated through
dialogue
Role of customer
Passive buyers to be
targeted with
offerings
Portfolio of
relationships to be
cultivated
Prosumers-active
participants in value
co-creation
Role of firm
Define and create
value for consumers
Attract, develop and
retain profitable
customers
Engage customers in
defining and cocreating unique value
Nature of customer
interaction
Survey customers to
elicit needs and
solicit feedback
Observe customers
and learn adaptively
Active dialogue with
customers and
communities
on CANON
Adapted from Prahalad and RamaswamyPrinted
2004
2. Develop a Focused Offering
to the Target Market

Value customers: Which customer segment(s) do we
want to serve?

Value proposition: Can we create a value proposition
that delivers superior value through dramatically
higher benefits or lower costs?

Value network: Can we run a better network or
radically redefine the value delivery system for the
industry such as Dell and IKEA have done?
3Vs framework of Nirmalya Kumar
Printed on CANON
Choose to Serve a Unique Set of
Customer Values
1. Identify the value expectations of potential
customers.
2. Select the values on which to compete.

Nike values: Winning, roar of the crowd,
extreme effort, the smell of sweat, physical
development

New Balance values: Self-improvement, inner
harmony, balanced, the smell of nature, spiritual
development
3. Analyze the ability of the organization to deliver
those values.
4. Communicate and sell
the
value message.
Printed
on CANON
3. Design the Marketing
From the Customer-Back

Marketing must be run as a set of value finding,
creation, and delivery processes, not 4P functions.
The four Ps are seller oriented.

The 4As are buyer oriented.
 Awareness (A1)
 Acceptability (A2)
 Affordability (A3)
 Accessibility (A4)

Market value potential = A1 x A2 x A3 x A4
 If A1=100%, A2=100%, A3=50%, A4=50%, Then
MV=25%
Printed on CANON
4. Focus on Delivering Outcomes,
Not Products.
Company
Product focus
Solutions focus
Akzo Nobel
Gallons of paint
Painted cars
BP NutritionHendrix
Animal feed
Animal weight gain
Cummings
Diesel engines
Uninterruptible
power
ICI Explosives
Explosives
Broken rock
Scania
Trucks
Guaranteed uptime
WW Grainger
MRO items
Indirect materials
mgt.
Source: Kumar
Printed on CANON
Visualize a Larger Market






Nike now defines itself in the sports market rather
than the shoe and clothing market.
The late Roberto Goizueta told his company that
while Coca Cola had a 35 percent share of the
soft drink market, it had only a 3 percent share of
the total beverage market.
Armstrong World Industries moved from floor
coverings to ceilings to total interior surface
decoration.
Citicorp realized that it only had a small share of
the total financial market which includes much
more than banking.
Taco Bell went from selling food in stores to
“feeding people everywhere” including kiosks,
convenience stores, airports, and high schools.
Jack Welch asked product managers to redefine
Printed
on CANON
their market so that
they
only had a 10% share.
5. Draw in the Customer
to Co-create Value: Two
Approaches
1.
2.
Offer a wide product line so the customer can choose
something closer to the customer’s desires.
•
M&M allows customers to special order M&Ms in 21 colors.
•
Branches Hockey let’s players pick from 26 options: length
of a stick, blade patterns, etc.
Stand ready to customize according to the customer’s wishes.
•
Dell computers are designed by customers
•
Lands’ End sells tailor-made chinos.
•
P&G on its reflect.com site lets shoppers design everything
from eye moisturize to liquid foundation makeup.
•
Yankee Candle Company will mix colors and scents to
make the candles you want.
•
Other examples: golf clubs, breakfast cereals, credit card
companies
Printed on CANON
Examples of Collaborative
Marketing

P&G’s site has a We’re Listening section and Share
Your Thoughts section and Advisory Feedback
sessions.

GM offers an AutoChoiceAdvisory on its website

Cisco runs Customer Forums to improve its
offerings.

A motorcycle in Italy is being designed by
customers.
Printed on CANON
6. Use Newer Ways to Reach the
Customer with Relevant Messages

Make your ads more precise as to who they
reach and more relevant.

Let consumers indicate if they have an
interest or not. Stop pestering them.

Deliver valuable content with each ad, such
as useful information or entertainment.

Reach consumers in newer ways.
Printed on CANON
Newer Ways to Reach
Customers

Sponsorships

Mentions on talk shows

Product placement

Street-level promotion

Festivals

Celebrity endorsements

Mobile billboards
Printed on CANON
Creating Buzz on the Streets

Chrysler’s PT Landcruiser appeared in fashionable areas and
college tailgate parties. 250,000 prospects requested information
before official ad campaign began in April 2000.

Models drove around Los Angeles on Vespa scooters and chatted
with customers in cafes and bars.

Ford identified 120 people in six key markets and gave them a
Focus to drive for 6 months and promotional material.

Vans builds skateboard parks at malls and sponsors Vans Triple
Crown.

Hasbro enlisted “cool” pre-teens to play the POX game and tell
their friends about it.

Tourist goes into lounge and her telephone rings and picture of
the caller appears on the phone.
Printed on CANON
7. Develop Metrics and ROI
Measurement
Products
Brands
Channels
Customer
Segments
Markets
Relative
product
quality
Brand
awareness
Channel
penetration
Customer
satisfaction
Market
penetration
Perceived
product
quality
Brand
esteem
Channel trust Average
transaction
size
Market share
Percentage
Brand loyalty
of sales from
new products
Channel
efficiency
Sales growth
Product
profitability
Market share Customer
in each
acquisition
channel
costs
Brand
profitability
Channel
profitability
Source:
Kumar
Customer
complaints
Customer
retention rate
Customer
Printed on CANONprofitability
Market
profitability
8. Develop High-Tech Marketing









Predictive analytics
Sales automation
Marketing automation
Marketing models
Process dashboards
Performance dashboards
Campaign management
Project management
New product management
Printed on CANON
9. Focus on Building
Long-Run Marketing Assets.

Brands and brand equity

Customers and customer equity

Service quality

Stakeholder relationships

Intellectual knowledge

Corporate reputation
Printed on CANON
10. View Marketing Holistically

Marketing must become strategic and drive
business strategy.

A company needs to take a more holistic
view of:
 the target customers’ activities, lifestyle,
and social space.
 the company’s channels and supply chain.
 the company’s communications.
 the company’s stakeholders’ interests.
Printed on CANON
Two Models of Management
Profit-based management
 Reduce costs
 Reduce compensation
 Replace people with
technology
 Price to extract maximum
value
 Sell more products
 Acquire lots of customers
Loyalty-based management
 Invest in marketing assets
 Give superior compensation
 Leverage people with
technology
 Price to reward customers
 Deepen customer value
 Acquire customers selectively
Source: Frederick Reichheld, The Loyalty Effect
Printed on CANON
Conclusions








Marketing is definitely not filling its potential.
Marketing must become the driver of business strategy.
Companies need to adopt a more holistic view of the marketing
challenge.
Companies need lateral marketing thinking to conceive of new
product and service ideas.
Companies need to choose from five major strategic paths.
Companies need to move from a product focused to a market
and customer focused organization.
Companies need to build, measure and manage brand equity
and customer equity.
Companies need to move to technology-enabled marketing to
achieve precision marketing and develop better measures of
ROI impact.
Printed on CANON
“This time like all times is a good one,
if we but know what to do with it.”
Ralph Waldo Emerson
THANK YOU!
Printed on CANON