Page 1

CAMBRIDGE MARKETING

FEATURES

How to Build and Sustain a Brand FOCUS

CMR takes an In-depth Look at Customer Value REPORTS

Embracing the 7Ps, Naturally VIEWS

Marketing in Uncertain Times

Innovate Your Way to a Brand That Stands the Test of Time

ISSUE 1 SUMMER 2011

BRAND SUCCESS


Ode

[to the Marketer]

We are the music makers, And we are the dreamers of dreams, Wandering by lone sea-breakers, And sitting by desolate streams;— World-losers and world-forsakers, On whom the pale moon gleams: Yet we are the movers and shakers Of the world for ever, it seems. With wonderful deathless ditties We build up the world’s great cities, And out of a fabulous story We fashion an empire’s glory: One man with a dream, at pleasure, Shall go forth and conquer a crown; And three with a new song’s measure Can trample a kingdom down. [...]

Arthur O’Shaughnessy, 1844 -1881


CONTENTS

CONTENTS 5

A welcome TO the first edition

36 What is Value?

From Charles W. Nixon, Chairman of

In an exclusive extract from their forthcoming book,

Cambridge Marketing College.

Harry Macdivitt and Mike Wilkinson get to the heart of value.

FEATURES

6 How to Build a Brand like Pixar makes Movies 12 AGency Profile: Mobas An interview with Robin Bryant, Managing Director, and James Wheatcroft, Director of Brand Strategy.

44 Building The Better Tech Mousetrap Do your B2B customers buy your product or service because you have the best technology, the better mousetrap? REPORTS

46 EMbracing the 7ps, Naturally A destination team’s journey into customer-focused marketing.

16 CASE STUDY: Mobas, Meet with mercure As part of their work for the Accor hotel chains, Mobas were tasked with the development of a new proposition.

48 CASH IS KING, BUT NOT FOR MUCH LONGER There is a change on the horizon that promises to affect all of our lives. Once key barriers are overcome, we will see the removal of

18 The New 4 Cs of Small Business Marketing Connections, Conversations, Credibility and Creativity.

cash from society. It is a change that will happen much quicker than you would ever imagine, and marketers need to be ready. VIEWS

20 LONG LIVE THE BRAND An article about something very simple which has profound implications: the longevity of brands.

51 Shareholder value versus short-termism The role of marketing.

24 Understanding and Appreciating Green marketing How to avoid being the wrong shade of green.

52 ­Marketing strategy in times of uncertainty There were times in the last 50 years when we thought we knew

FOCUS ON CUSTOMER VALUE

the name of the game, how to play it and which way was up. Now we have all been dumped into what we are comforted to

31 Death by a thousand cuts 32 Has the internet reached tipping point? How marketers must react to the crowded online market.

know is a ‘recession,’ so we wait patiently for the uncertainty to pass and for the old levers to start working again.

54 ENDNOTES The Bestselling Marketing Books on Amazon.co.uk; Digital Dashboards; Website Inspiration.

3


Publishing Editor: Chris Burgess Chairman: Charles W. Nixon Contributors: Laura Barton-Taylor, Nigel Bradley, Mike Farmer, Paul Fifield, Peter Fisk, James Lord, Harry Macdivitt, Malcolm MacDonald, Don Moyer, Melissa Nixon, Neil Wilkins, Mike Wilkinson, Tony Wilson, Paul Woodhouse, Laurie Young.

Most Cambridge Marketing Review articles are accompanied by a word cloud from wordle.net. You can use our clouds to assess swiftly the themes of the article: the larger the word, the more times it appears in the text.

Contact: Cambridge Marketing Press 1 Cygnus Business Park Middle Watch Swavesey Cambs CB24 4AA Tel: +44(0) 1954 234944 Fax: +44(0) 1954 234950 Email: chrisb@marketingcollege.com Issue 1 Summer 2011 Front cover illustration: Robert Sprot Cambridge Marketing Review is published quarterly by Cambridge Marketing Press Printed by Kingfisher Press, Bury St. Edmunds, Suffolk: www.kingfisher-press.co.uk The views expressed in contributions to Cambridge Marketing Review are not necessarily those held by the publishers. ©2011 Cambridge Marketing College under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 license (CC BY-NC-ND 3.0): http://creativecommons.org/licenses/by-nc-nd/3.0/ You may photocopy this magazine for collaborative study purposes. Individual images under licenses listed below: Creative Commons Photo Attributions: (Page 20) A derivative of coconut by Jhayne, 2006: http://www.flickr.com/photos/foxtongue/212004478/in/photostream/ Available under a Creative Commons Attribution 2.0 License: http://creativecommons.org/licenses/by/2.0/ (Page 20) A derivative of 1021014 by Biblioteca de la Facultad de Derecho y Ciencias del Trabajo Universidad de Sevilla, 2010: http://www.flickr.com/photos/fdctsevilla/4384617980/in/photostream/ Available under a Creative Commons Attribution 2.0 License: http://creativecommons.org/licenses/by/2.0/

‘Marketing’ in many languages, drawn from Wikipedia references.

If you would like to comment, please contact the Editor, Chris Burgess: Tel: +44(0) 1954 234944 Email: chrisb@marketingcollege.com

(Page 22) Flames by Steve Ryan, 2008: http://www.flickr.com/photos/juniorvelo/2941512003/ Available under a Creative Commons Attribution-ShareAlike 2.0 License: http://creativecommons.org/licenses/by-sa/2.0 (Page 23) Treat em Rough by Tumbleweed:-), 2009: http://www.flickr.com/photos/us_army_rolling_along/3669354071/ Available under a Creative Commons Attribution 2.0 License: http://creativecommons.org/licenses/by/2.0 (Page 53) A derivative of 8977 - St Petersburg - Hermitage - Nero by Andrew Bossi, 2008: http://www.flickr.com/photos/thisisbossi/3054711145/ Available under a Creative Commons Attribution-ShareAlike 2.0 License: http://creativecommons.org/licenses/by-sa/2.0/ (Page 53) A derivative of Kongratieff Wave by Wikimedia Commons: http://commons.wikimedia.org/wiki/File:Kondratieff_Wave.svg Available under a Creative Commons Attibution-ShareAlike 3.0 License: http://creativecommons.org/licenses/by-sa/3.0/

4

Conventions: • We are marketers not marketeers; we are not cavaliers. • We practice marketing not advertising or PR. • When we refer to products, we mean products and services. Otherwise we refer to offerings.


WELCOME

A welcome TO the first edition From Charles W. Nixon, Chairman of Cambridge Marketing College

T

here is so much to say in starting a new journal that it is difficult to know where to begin. Marketing, as a sector, does not command the respect it deserves. This is illustrated by the limited numbers of marketers on the boards of major companies and the widespread lack Charles W. Nixon of understanding of the crucial importance of marketing. We believe that the absence of a high quality marketing journal is both a cause and a symptom of this. Marketing can be described as a sector, an industry, a discipline, a practice and a vocation. It is sometimes a science but more often an art. The imprecise nature of the subject is one of its advantages, but it is also one of its main problems; the general public’s understanding of what it is that we do is shaky at best. “Marketers are not good at marketing themselves” is a phrase often heard – and it is true, though probably also true of all professions and the practice of their own discipline. Our ability to argue our case when challenged internally by our peers or externally by the media has compounded the belief that marketing is all “puffery and cost” and is not to be taken seriously. Is it that marketing is always the hardest cost to justify and the easiest to cut because it is so little understood?

A Marketer’s Apology Along the lines of Hardy’s ‘A Mathematician’s Apology’, we need to be clear about the importance of marketing to the economy and society. The fact that that statement may raise some concerns in the back of your mind is testimony to the struggle we still face to get marketing accepted. One can almost hear the scornful tone of John Humphrys on the Today programme as he reacts to the argument that we need marketing in order to maintain a successful economy. Yet for many companies, marketing is a unique quantum phenomenon: it is both inside and outside (of the organisation) simultaneously. It is the internal representative of the customer and the market, and the external voice of the company. This paradox needs to be clear and understood by all. As components are assembled into products, supply chains become the weapon of competitive advantage. So ideas from around the world need to be assembled to form the next innovation. Sources of ideas, instances of experiments and examples of actions need to be fed to the marketer to come up with the next generation of products and services. This journal will provide those stimuli: • We will address the lack of general understanding within the profession and without; • We will examine the role of marketing and its relationship to other disciplines; • We will look at marketing practices from around the world to discuss new ideas and new products; • We will consider the classic and the new, measuring success and the importance of time and timing to establishing successful products; • We will consider what success is(!) • We will consider the philosophy of marketing, why it is needed and how practitioners should develop; • We will look at the ethics of the marketer and what responsibilities Marketers should rightly bear. Though these are just some of the issues facing marketing today, Cambridge Marketing Review aims to define the place of marketing in the economic process of society. Overall, CMR aims to provide the basis for the future acceptance of marketing as a business fundamental and a respected career option by exploring, expounding and explaining marketing as fully as possible. We hope it will.

5


How to Build a Brand like Pixar makes Movies Marketers are the champions of customers and the guardians of incredibly valuable assets: brands

P

ixar is an amazing business. Built on imagination and creativity, it harnesses the potential of digital technologies to create the most engaging characters and films. In 1979 Star Wars creator George Lucas and computer scientist Ed Catmull established the foundations of what was Peter Fisk initially a digitally-enabled special effects and advertising business. Seven years later Steve Jobs acquired the studio, renamed it Pixar, and gave birth to some of the most successful animated films ever - like Toy Story, Finding Nemo and The Incredibles. Today it is one of the world’s most creative businesses. Brands need bigger ambitions Similarly, today’s most successful brands have moved on from special effects and advertising - much more than just a name and logo - to be an enduring narrative, embracing the digital and human world, and capturing the creative and emotional essence of a business. Marketers are no longer support functions for sales, or brief writers for creative agencies. They are the creative talent, making sense of the world around them, turning insights into ideas into innovations. They are the driving force of business, the champion of customers, and the guardians of incredibly valuable assets called brands. From Apple to Zappos, Abercrombie and Fitch to Better Place, Paul Smith to Shanghai Tang, Air Asia to Virgin Galactic… The most successful brands have bigger ambitions. The best brands don’t limit themselves to what they do, they are not just labels of ownership, distinguishing one commoditised product or service from another. They define themselves on customers’ terms, on their aspirations and needs – on benefits rather than features, if you like. They recognise the wider impact they can have on customers and society, rather than just communicating relevance and difference at the point of sale. They define what they enable, rather than what they are. In fact they are more than communication tools. They give business purpose, shared with customers. They give people confidence, bring people together, and enable them to achieve more. They make life better. World changing, game changing Why is it not enough for a brand to be a passive name with a distinctive logo, a trademark that rarely changes, and a fixed package or communication device? We need to look at how the world, markets, and attitudes have changed.

6


FEATURE - PIXAR

The bouncing desk lamp in pixar’s logo is luxo jr., the eponymous star of their first short film, produced in 1986.

people, and then deliver it on their terms - when, where and how they want. Collaborating with customers, supply, distribution and affinity brands (in the form of crowdsourcing, co-creation and partnerships) has become the norm, creating more flexibility and helping to build more relevant and engaging solutions. Markets have fragmented with more specialism, yet remain large when considered globally. Being special to a niche market is far better than being average to everyone (and special to nobody). New markets emerge as categories collide, and new possibilities emerge. Gone are the rigid market boundaries, the notion of your home market being the closest to you, and that of customers and competitors as absolutes. Gone is the assumption that the future is an extrapolation of your past. Are you focused on the big opportunities? And if not, why not? Over the next 5 years, female consumers will grow faster than China and India. Within 20 years, the E7 (Brazil, Russia, India and China – plus Indonesia, Mexico, Turkey) will be bigger than the G7, renting will replace buying, education and healthcare will be transformed, sustainability will be compulsory, and water will be the new gold. Our marketing metrics have to change too. Market share, for example, becomes largely irrelevant. Profit is no longer a consequence of volume. Share price is about potential more than performance. Value networks, enabled by the likes of Alibaba and Li & Fung, replace the need for owned production and the headache of inflexible production costs. 3D printing enables real customisation of cars and clothing, design and manufacturing for cents and within hours. Forget core competencies, you can do anything you want.

Source: Creative Genius by Peter Fisk

As Pablo Picasso said, “times of turbulence are the most exciting times, because everything changes”. Customer priorities, competitive positions, commercial structures: all are shaken up. Markets are no longer absolute, bordered and predictable. And therefore we need different models of brands, and different ways of managing them. You might call it a “VUCA world” – volatile, uncertain, complex and ambiguous – but at the same time vibrant, unreal, crazy and astounding … a time to keep your head down and to avoid risk and change, or a time to look at the amazing opportunities all around us. We all now compete in global, always-on markets, whether we intend to or not. Sectors converge and new whitespaces emerge. Customers have incredibly high demands and expectations, but little trust or loyalty. Disruption is normal, uncertainty is expected. Virtuality is the reality, combining speed, interactivity and reach. At the same time, business is more emotional and empathetic, more human than ever. Whilst many of us struggle to shake-off the hangover of economic crisis, others realise that it was just the crying pains of a changing world. Seismic shifts in power and influence have changed the rules of our game. The shift from west to east is not just about money, but about knowledge and culture too. The hot fashions are in Buenos Aires, the best green tech is in Shanghai, the top web designers are in Mumbai, and most venture capital is in Shenzhen. Technology has empowered customers like never before: they are more informed, have more choice, and are more promiscuous. Brands need to redefine themselves in terms of what they do for

World changing: new markets, new opportunities, new priorities.

7


Welcome to the ideas world The possibilities are limited only by your imagination. Ideas become the currency of success. New markets, like smartphones, are waiting to be defined. Nobody wanted to play on a Nintendo Wii until Shigeru Miyamoto designed it. Nobody needed an iPad until Jony Ive delivered it. Ideas need to be bigger and better than ever The best ideas capture the attention of customers with infinite choice, where want outplays need, and viral ideas spread freely between people - rather than being pushed at audiences through interruptive campaigns using expensive, passive media. Beating the competition is not to do with the size of your business or your marketing budget, it is about out-thinking them better understanding the zeitgeist, developing the most compelling propositions, seeing the future more clearly, and bringing together the right partners and networks to secure it. Brands are about ideas, marketers are the creative talent Pixar, therefore, is a fabulous metaphor for brand-building and marketing in this new world. Like the best movies, brands are about ideas more than effects, stories more than icons, They are enabled by software more than hardware, touching people more deeply and memorably.

8

Source: Creative Genius by Peter Fisk

Dream machine: the step-by-step guide to movie-making, the Pixar way.

Building a creative business Emeryville lies just across the bay from San Francisco, and this is where the story of Pixar, Woody, Buzz, Nemo and Mickey Mouse too, unfolds ‌ Steve Jobs is much more than a tech geek. He is a man of extreme vision, creativity and commerce, with the ability to get the best out of people. In the late 80s, having temporarily let go of his Apple passion (that’s a different story!), he set about transforming his new business, Pixar, moving it from making and selling hardware, to designing and distributing software. So he brought in John Lasseter, who had a background in offbeat mini-animations, to drive his transformation. The two men shared a vision, not just of how they could make great movies, but of how they could transform an industry, bringing together the best technologies and a human touch (perhaps prefiguring the iPod a decade later). Christmas 1995 saw the much anticipated release of Toy Story. It received tremendous critical acclaim, generating $362 million in worldwide box office receipts and earning Lasseter an Academy Award. On its success, Lasseter built a creative team of highly skilled animators, a story department and an art department. But he didn’t just want great technicians, he wanted people with insight and imagination. He sought animators with superior acting ability, people who could sense how characters and audiences would feel, deeply and emotionally.


FEATURE - PIXAR

Finding nemo is Pixar’s highest grossing movie to date, earning $867 million dollars at the box office, worldwide.

The new Pixar University quickly became the training school for animators from around the world, and Pixar developed complete creative teams in-house, whilst the non-creative tasks were outsourced. More blockbuster animations quickly followed ... A Bug’s Life, Toy Story 2, Monsters, Inc., Finding Nemo, and The Incredibles. The six films combined grossed more than $3.5 billion at box offices worldwide, the most successful animated films of all time. With each success, Pixar learnt more and invested in its process, brands and audiences. It revolutionised the technology of filmmaking, it transformed the expectations of audiences, and it gave children (and adults) across the world a new genre of heroes. Mickey meets Monsters Inc. In 2006, Pixar became a wholly-owned subsidiary of The Walt Disney Company in a $7.4 billion deal that saw Jobs, the majority shareholder of Pixar with 50.1%, take a seat on Disney’s board of directors. With 7% of all stock, he was the largest individual Disney shareholder. A new brand name, Disney·Pixar, was created, and as Chief Creative Officer, Lasseter reports directly to Disney CEO Bob Iger. He became responsible not just for Pixar, but the entire creative activity of the group. The Pixar blockbusters continued, as did the related theme parks and merchandising - a result of carefully building the movie and character brands: personalities that kids loved, and defined their lives by. Cars and Ratatouille, WALL-E and most recently Up all took Academy Awards. The stories reflected a changing world; more global, more technological, more mixed up. The characters resonated with the shifting aspirations of people, imaginative and emotional, not just functional and rational, an eclectic mix of cultures and colours, backgrounds and futures. The stories could be watched and watched again, a virtue amidst disposable media. Pixar Studios has evolved into a workspace that defines and inspires the creative process. Jobs was never a great movie maker, but he knew how to bring together 1200 creative people and their collective talents. Jobs designed big open spaces, atriums with fabulous cafes and a wood-fired pizza oven. He encouraged designers to construct (and decorate) their own wooden sheds rather than sterile work stations, and provided scooters to help people get around faster. He recognised that the organisation needed to “loosen up”, to be more fluid and human, in order to drive collaboration and creativity. The University is much more than a training school for new entrants. Instead it can be seen as a constant source of eclectic learning and provocation – from astrophysics and space travel, to conservation in the Amazon. At Pixar University, knowledge drives insights, ideas and inspiration. This inevitably creates more rounded, more thoughtful people - and maybe the next big blockbuster.

Pixar Studios are like a fusion of Hollywood and Silicon Valley, just like Pixar is a fusion of technology and entertainment, art and commerce. The Pixar creative process is not unique, but it does beautifully recognise and combine the need for inspiration and perspiration, executed by a loyal and obsessive team. The starting point is an idea. Ideas come in all forms, inspired by all types of insights, but usually impulsive and unstructured. A short paper or, better, a visual poster, captures the proposal for a new movie which is then explored by the whole team. Whilst this is a high-tech studio, it is still full of hand-drawings and plasticine models. The parallels for brands and marketing are everywhere in Pixar: the pivotal role of the CCO and the creative team within the business, the primacy of audience, the bringing together of talents, the nurturing of ideas, the building of personality, the pursuit of compelling narratives, the dreams and emotions, always delivering on time and to budget. And a relentless stream of success. Maybe brands need to own more of their own creativity, rather than being subservient to their agencies. Maybe they need to immerse themselves deeper in the world they are trying to simulate and stimulate, to challenge each other, to unlock and mesh their talents, in a more sustained and evolving way. Indeed the marketing departments of Apple and Zappos are more like creative studios, the hub of business thinking, delivering strategies and innovations as well as brands and communication. Lasseter describes the process as “telling a great story, but not too predictably,” maybe in the same way that a marketing programme needs to evolve rather than be a series of quicklydiscarded campaigns. He talks of “taking people to another world” which equates to the ability to reframe brands in contexts that have more relevance for audiences, and more scope commercially. He talks about “characters that people develop a deep bond with” which is at the heart of building an emotional connection, doing more for people and creating a brand they love. What can we learn from Pixar? Pixar is a digital content business, and in many ways that’s what brands are today. Beyond the products and services that they support, brands are about ideas, stories, relationships and communities, and the capturing and sharing of these. Increasingly, all this is happening digitally. Of course, it is the whole story of Pixar which is a lesson for brands today, not just the way in which Pixar themselves use their brands. Few brands, few marketing leaders, can have achieved the success of Lasseter and his team, either in terms of global awards or commercial results. It is more important to apply the lessons of Pixar’s creative process to the challenge of brand building. This is where many marketers are falling behind, and where many business leaders fail to recognise its importance and impact.

9


12 Pixar insights to inspire marketers 1. Imagineering: ideas are the starting point, driven by insight and experience, and more often through imagination. Create an “imagine if” scenario which is gradually scoped out and brought to life from the future back. 2. Creative fusions: this is not an ingredient, but the essence of the whole business. The creative process defines the organisation, its operational and commercial models, enabled by the fusion of creative talents. 3. Deep immersion: thinking like the character, and like the audience, is the skill of the animator – recruiting people who are great actors, who can put themselves inside the heads of others to see, feel, think and act like they would. 4. Storytelling: the core narrative that brings together characters and experiences in a way that adds context as well as the plot. This immerses the audience and captures their imagination, and makes it memorable and talked about. 5. Humanity: whilst technology is essential to a Pixar movie in terms of production and distribution, it is not what matters most. These are human stories, where the characters tap deep into the emotions and psyche of its audiences. 6. Moving you: a Pixar movie is fun and entertaining, gripping and memorable, but more than anything it moves you. It inspires you, it makes you think, it challenges your prejudices or it makes you cry. 7. Viral infections: these stories are truly contagious, becoming the ‘must see’ for generations of children. More than just advocacy, Pixar’s latest film and the desire to watch it always spreads like wildfire. 8. Branded content: the business is a phenomenal example of a large and complex brand architecture that really works, with each brand clear and distinctive - Pixar is a brand, Toy Story is a brand, and Buzz Lightyear is a brand. 9. Personality: at each level, the brands are more about a sense of character, attitude and behaviours, rather than names and logos. Indeed, as long as the essence of the brand is strong, the visualisations can flex and change. 10. Content spinning: beyond the movie, licensing each level of brands across many different products adds to the rich, ongoing experience. From theme parks to computer games, books to clothing, all are part of the business model. 11. Never ending: Pixar is a relentless stream of creative success, replicating the model with ever more innovative stories, stories which themselves have no end – living, evolving. 12. Inspired leaders: a creative business is by definition chaotic and unstructured, but that’s why leadership matters more. Here is an inspiring purpose, a shared direction, confidence and clarity, led by an energising leader.

10

Brand building in the 21st century In my new book Creative Genius, I explore the best and emerging practices for creativity, design and innovation. From Lego to Whirlpool, Donna Karan to Dave Stewart, I learnt from large and small companies, ad agencies and fashion houses, architects and rock stars. Pixar is certainly one of the best. Over 50 chapters I explore the many dimensions of creative excellence, which can be directly applied to the challenge of building and managing brands. First let’s be clear about what creates a great brand today. Brands have come a long way. Look far back to the Babylonians of 3000BC, the Chinese potters of 1500BC, the cattle herders of feudal times, and even the first watermarks of papermakers, and you will find “branding” in action. Fast forward to modern times. In 1886, John Pemberton innovated brand iconography with Coca-Cola, followed by P&G’s mastery of branding as a discipline, a leader through much of the 20th century. In recent decades, guided by the likes of Levitt, Kotler, Aaker and Bedbury, brands have been defined in terms of ownership and identity.

Brand innovation starts by thinking from the ‘future back’ The 21st century brand The characteristics of successful brands have changed. The digital and global, transparent and collaborative world demands branding that does more for people. Brands are more than companies, products and services. Brands are more than names, logos and communications. Brands reach beyond transactions and markets. In a world where image and reputation can be built and destroyed in an instant, brands need to be stronger, richer, and in the hands of the beholder. This is why the movie-making analogy is useful, and why today’s best brands are: • Aspirational – Brands capture the dreams and desires of their audience, what they seek to achieve, rather than simply labelling a business, product or service. They establish a richer, more relevant context, based around their application and potential. They are about them (the people) not us (the business). • Ideas - beyond names and logos, products or services, brands have a strong and distinctive idea. They capture a shared purpose, supported by values which come alive through attitudes and behaviours. These ideas can cross markets and categories, supporting innovation and growth, even with different identities.


FEATURE - PIXAR

Source: Creative Genius by Peter Fisk

You should be Searching for ideas and insights, challenging the rules, changing the game … Like Branson and Jobs, carry a notebook with you wherever you go.

Bold – Brands are more ambitious, they challenge the norm, they stand out from others and go where others fear or have never imagined. They are iconic, or at least use icons to demonstrate their purpose. They are talked about, questioned, explored and loved because they are different. Enabling – Brands do more for people, giving them the functional means and emotional confidence to do what they never thought possible. Awareness and purchase are just the beginnings of a deeper brand experience. Advocacy, repurchase and ongoing collaboration are steps to a brand to live your life by. Connecting – Brands build communities because people ultimately enjoy being with people who share a similar passion, purpose or experience. Customers don’t want relationships with companies or products, but they do value brands that facilitate their ability to connect and do more with others.

Brand innovation in three steps So what is the essence of brand building today? Brand innovation starts by thinking from the “future back”… Finding the real issue, recognising the paradoxes, imagining possibilities, exploring potential scenarios, and deep diving for interesting customer insights. New ideas emerge in the margins more than the mainstream, maybe trickling up from emerging markets; improvisation is a great source of ideas. Look at M-Pesa in Africa, where a new currency emerged as a result of people’s access to mobile phones and the ability to send SMS messages. Look at Aravind Eyecare in India, where the lack of qualified hospitals and doctors led to an innovative low-cost online solution to curing blindness. Fusion is the key to designing a brand concept: the fusion of function and form, the fusion of business and customer, the fusion of different ideas… Connecting the unconnected, learning from other segments, sectors and geographies. More than anything, fusion comes through collaboration – working with customers, partners, academics, technologists, other brands, and some weird and unusual people too. Samsung call it the “tae kuk,” finding a new balance between yin and yang, connecting opposites to achieve more, adding emotion to functionality. From business models to brand architectures, products to customer experiences, everything can be designed better. El Bulli, the world’s best restaurant, builds its reputation on crazy, unusual fusions of ingredients. Christian Audigier built the Ed Hardy brand sensation by fusing tattoo designs with latest fabrics, styles and licensing models. Brands must ultimately deliver results – transform attitudes and reputations, build engagement and drive sales… Short and longterm, creating extraordinary value for customers and shareholders. Impact is about launching new ideas into markets, but also about making them work over time.

Future lab: innovating brands from the “future back.”

Nike Plus transformed the sportswear brand’s performance through enablement and community. Adding technology to shoes that monitor and map your runs, then share them with others, they created the world’s biggest mass-participation race ever. Skoda is the unlikely hero of Volkswagen, using its deeply loyal following in Eastern Europe to become the portfolio’s most profitable brand. And then there is Stefani Germatto. Better known as Lady Gaga, she has been the cultural sensation of recent years, having launched herself to the world in the same week that Lehman Brothers went crashing to the ground. With boldness and attitude she has polarised society, harnessing social networks and digital media to become the most downloaded, tweeted and talked about rockstar in history. To infinity, and beyond Brands are the most valuable assets in business today, and marketers the most valuable talent. Success in a VUCA world depends on how you think, how you seize the potential of technology and opportunities of new markets, and how bold and ambitious you are. A great brand can come from anywhere: big company or small, emerging nation or developed, young marketers or experienced leaders, limitless budgets or almost none. It’s not about what you are, but how you think. Or to leave the last words to Buzz Lightyear: “to infinity, and beyond!” Peter Fisk is a bestselling author, an inspirational speaker, and an experienced marketer who has worked with British Airways, Coca Cola and Microsoft. He is founder and CEO of the GeniusWorks, dedicated to helping businesses think different things. His latest book Creative Genius: the essential innovation handbook for business leaders, game changers and border crossers has just been published. Find out more at www.theGeniusWorks.com or by emailing peterfisk@peterfisk.com

11


Agency Profile: MOBAS An interview with Robin Bryant, Managing Director, and James Wheatcroft, Director of Brand Strategy.

S

ituated in the leafy Cambridge suburbs sits the offices of Mobas, a full service marketing agency. The organisation itself, however, is not mirrored by its quaint surroundings. In fact, anybody that tries to label Mobas in any way will be sorely wrong. This agency and its people are an impressive proposition and its success is built on a passionate belief in what it stands for, what it does and how it does it.

Paul Woodhouse

Early days Mobas was born on January 29, 2003, the vision of three men, two of whom are still directors today. Speaking to Robin Bryant, Founder and Managing Director, and James Wheatcroft, Director of Brand Strategy, there is a clear focus on the ethos behind the company: it’s all about brand. As with all agencies, things were not automatically easy. As the fledgling advertising agency strived to build a client portfolio, the drive and passion of the directors helped to grow a small but impressive client base. Money was coming in, but some risks had to be taken, as Robin recalls with a wry smile: “Certainly for the first three years of the life of Mobas there was a vested interest to make sure it worked. I can remember at one very precious point in my life having a few thousand pounds on a credit card for print.” These risks were taken, the directors firmly confident in their ideas and creative instincts. They personally funded the project, but this paid off - today Mobas owes no money to any financial organisation, providing them with a solid cash base as a result.

Mobas’ clients are from a range of industries

12

Moving forward Things really started to happen during years four and five of the Mobas story. Peter Chaloner replaced one of the original board members, becoming the Client Services Director. At the same time some large additions to the client base saw Mobas start to grow more rapidly. Robin admits that despite the strengths that Mobas had at the time, the acquisition of a blue chip account gave Mobas the credentials to approach other large accounts with confidence. The first example of this type of client relationship that helped to establish Mobas’ reputation came with the acquisition of its Novotel account. It was at this point that James joined the company, where he successfully monitored and developed the account into its present form. As a result of his work, Mobas now handle the accounts of Sofitel, MGallery, Pullman, Novotel, Mercure, Ibis, Etap Hotel, and allSeasons, as well as B2B Accor, which includes HR, Sales and Development.


PROFILE - MOBAS

The name ‘MOBAS’ was created by taking the initials of the agency’s founders and adding two vowels.This leaves a NAME that is pronounced the same way in any language.

Robin Bryant, Managing Director

I love the big blue chips, i love the brands, I love the start-up businesses that you can grow

Robin firmly believes that the company’s ability to nurture a client, build the relationship and become an extension of the client’s organisation is key to Mobas’ success as a marketing agency: “The nature of our business is that to ensure the growth and ongoing success of a business you need to get long established accounts.” However, although he appreciates that this helped to acquire other large accounts, he is quick to acknowledge that the smaller, regional clients were the foundation on which Mobas was built.

However, it was with the growth of the Novotel account that Mobas has been able to develop a portfolio that spans finance, food, technology, healthcare, property and the public sector, among others. Having worked for many London agencies before founding Mobas, Robin believes that large companies can look outside the capital for creative, innovative partners. He believes that even though Mobas is smaller than most pan-European agencies, the right attitude and work ethic means that Mobas offers a unique and stronger alternative. Robin uses the constant availability of all staff, from top to bottom, as an example of this. If a client called him late to ask him to be in London at 9:00am the following day, he would be there. This is something he doubts would happen at a larger agency. “The big difference between a small and medium sized agency and the large boys is that personal contact with senior people. We can make a decision and make a call and can speak confidently about what we do as an agency for their brands.” During year five, as Mobas reached this peak, the recession hit. A lot of marketers had a tough time; some are still coming to terms with the effects it has had. Both agencies and client-side organisations had to cut their cloth accordingly, but did this have an effect on Mobas’ growth? In fact, the company continued to grow during this period. It moved from its offices in Shepreth to its current home in Stapleford, just on the outskirts of Cambridge. It took on seven new members of staff, now employing a total of twenty six people. Robin attributes Mobas’ recession-beating success to its staff’s solid commitment to

Passion for clients Mobas has a passion for working with clients of all different sizes with different budgets. There is satisfaction in working with large accounts but also in helping smaller ones too. “We do also love working with start-up businesses and we will continue to do so as long as I am still sat here. We feel it is really important,” Robin enthuses, “I love the big blue chips and I love the brands and I love the top level advertising that James looks after because that’s where his passions lie and capabilities are. I love the start-up businesses that you can grow.” The best example of Mobas growing a start-up is that of Ranier Technology, a company that Mobas has worked with since its inception. “We worked with them to help them achieve a brand, a website and all the marketing material they needed to go out there and achieve funding,” says Rob. “When they got funding they then paid us. If they didn’t get funding they didn’t have to pay us!” Over seven years, Mobas has helped grow Ranier to a multi-million pound company that trades globally.

we support ACCor’s ongoing maRketing workload as one of their team. We’ve actually got a desk at their office now!

James Wheatcroft, Director of Brand Strategy

13


the Mobas brand, ability to work within constrained budgets, and solid commitment to their clients. Mobas actually grew its accounts, including Accor, as James explains: “We’ve seen our client’s head count frozen and yet their responsibilities grew. Working closely as a partner agency, we support their ongoing marketing workload as one of their team. We’ve actually got a desk there now!” During this period, Mobas found it had to adapt to meet its clients’ needs. It decided to invest in the addition of people with a spread of skillsets including digital specialists, public relations experts, brand strategists, copywriters, creative designers and video producers. Robin and the senior members of the Mobas team recognise the need to utilise every member of its team and to build knowledge, expertise and disciplines. “We are a brand, design, digital and PR organisation that specialises in marketing communications. We are a fully integrated agency.”

Without our staff, it’s all meaningless THE People But what does it take to work for an innovative and boundary pushing agency like Mobas? Robin lays it out like this: “With regards to recruiting for design, I don’t really care about degrees, I don’t really care about qualifications. What I care about is that an individual can design. With regards to Account Management, that is a completely different bag and completely different skillset. Being able to communicate really well, being able to deliver concepts and presentations really well, to be able to put strategic presentations together is really key. Having qualifications here is important because it shows an ability to do that. Above all you want to be able to build relationships.” Professional qualifications are also important to Robin: “Something that we’re really driving home on now is marketing courses like the CIM courses. That marketing background is really important to certain areas of the business.” The reward is working in an open, vibrant and incentivised culture where everybody’s input is valued, as Robin continues to explain: “Everybody is allowed to be creative, everybody is allowed an opinion. I honestly go into meetings and say ‘look guys, digital is a whole new world to me.’ That’s why we employ specialists.” He also admits that working with demanding clients can sometimes be tough, but emphasises that Mobas is committed to rewarding its staff for their efforts: “Through the recession, we’ve continued to give pay rises, we’ve continued to give bonuses, we’ve continued to do summer parties, we’ve continued to go on Christmas parties because we respect our staff. Without them it’s all completely meaningless because their talent is what makes Mobas happen. It isn’t me and it isn’t Steve [Smith, Founder and Finance Director] and it isn’t Pete [Chaloner], it is the people that make up Mobas.”

14

Mobas employs specialists with a range of skillsets

Relationships Building a strong ongoing relationship with clients has been the key behind Mobas’ achievements. This is through the intimate knowledge of each and every single account and the market in which they operate. Robin explains that Mobas are so integrated within the organisations with which they work that clients have asked them to write strategic plans for them. “They want us to do it because they trust us ... they know that we understand their markets so incredibly well.” This trust is built on very thorough research and going far beyond the call of duty. For example, Mobas went beyond expectations for Novotel, as Robin recalls: “We did a grand tour, unpaid, of all of the Novotel hotels across the UK, which was thirty. Now, we didn’t charge for that because our philosophy is: how can we possibly market your brand, and therefore ultimately your product [otherwise?]. If we don’t know your product we don’t know your brand.” This took a whole month but it proved very valuable as Mobas experienced the product, and met with all of Novotel’s general managers. This philosophy drives other parts of the business. Where some agencies charge for mileage and the cost of a phone call, Mobas do not. “We always say to clients that if you want us to sit down for a half day brainstorm we won’t charge you for that because the outcome is where we charge,” Rob says. “The charge is for the product, we charge for what we produce. If James sits there and produces a brand strategy document that is the outcome of a half day brainstorm, then that’s what we charge for and that’s really important.” Robin explains that the decisions the directors took in the company’s infancy have helped Mobas to maintain the strong cash base which allows this high level of service to be possible. “I could say to James, ‘right you go out for a month on the road and see all the hotels and I’ll get somebody in to cover you.’ That’s going to cost me £4000 but the return on that is that the client goes ‘wow these guys are so committed to us that we trust them and we’re going to spend with them and we’re going to rely on what they say because they’ve taken the time and the financial impact to go and understand my brand,’ and that’s really crucial.” Mobas attribute


PROFILE - MOBAS

Accor is The World’s leading hotel operator and market leader in Europe, operating in 90 countries with nearly 145,000 employees.

winning numerous client briefs, including a rebranding pitch for The Cambridge Building Society, to this willingness to go the extra mile to understand the customer experience. This approach of actually experiencing the brand rather than just taking a client’s word helps Mobas to challenge misconceptions, Robin and James say. They want to experience the brand they are working with to the extent where they know more about it than the client does. This is not to belittle the client, but to help them understand that sometimes there are gaps between what management perceives the customer experience to be and what is actually happening. As James explains: “The client side marketing managers, they haven’t got time to be doing that and they’re too close to it.” Mobas’ drive to communicate its unalloyed experience of a brand back to its management forges strong relationships between the agency and its clients. This has helped Mobas to win new business but, as importantly, it has helped to retain business as well. The company promotes their work with brands through their concept of ‘The Big Picture.’ This is, as James explains, “Mobas’ unique strategy for working with brands. It is the process we have developed to help clients see their brand as consumers or customers do.” This dedication to looking at “The Big Picture” epitomises the way that Mobas goes about its business as a creative agency with truly integrated capabilities. So that clients can gain similar insight into Mobas in return, it has started to design and print its own magazine, On Brand, a 38-page glossy publication. Robin explains why this has been put together: “We like to keep our clients informed about what we’re doing and where we’re going and what our strategy is. We plan their strategies and where they’re going and look after their brands, but I think it’s important that they understand where we’re going on our journey so they can make a choice about whether they want to be a part of that and help us to achieve that or not.” Looking to the Future This takes us to the current marketing landscape: what is on the minds of Mobas’ clients right now? With the changes in advertising since Mobas started, and the growth in digital media and social media, has Mobas seen a change in attitudes? “There’s absolutely no shadow of a doubt that the digital world is growing and growing rapidly,” Robin reflects. “It was only two years ago that we had an office only half this size with four developers in. They’ve now got their own department and that number has doubled. Although fully integrated, we’re proud to have blue chip clients that use us only for our digital services. That doesn’t mean that the rest of the business has shrunk or stayed still: it has continued to grow as well. “People will always need offline but where we’re shaping our business to suit that growth in demand is that we’re now brand, design, digital.”

The big picture ‘The Big Picture’ is Mobas’ unique way of looking at and working with brands. It helps brands to grow, flourish and stay relevant through day-to-day communication. Mobas understands the fundamental elements that shape and impact brands, whether they’re creating a new brand for a product, identifying a strategy to extend a brand portfolio or re-branding a whole organisation. ‘The Big Picture’ has been developed as a result of merging left-brain creative types with right-brain strategists to create a team of over 25 highly experienced strategists, designers and planners working on the emotive and tangible aspects of brands. “The challenge with digital is that it changes so fast,” James adds. “I don’t think that clients often have a strategy for how digital fits in. They think there’s a new channel so they’ll now jump on that. For example, with social media, while it has its uses and merits, I don’t think that everybody should have a Facebook page for instance. In some industries it is pointless and forced but there’s a tendency to go ‘I need to do that and I need to do that,’ when in actual fact it becomes a more diluted message across more channels. When you have a more integrated strategy that also includes offline, that’s when it really works.” Robin believes that some of the decline in offline media and advertising has been something of a red herring brought about by the recession and reduced budgets: “If you look at the figures now, in terms of offline advertising spend it is increasing again, so I think people just redirected their budgets to online because they thought it was more cost-effective. Therefore, they could cover and track the return on investment and justify the spend to their seniors. I think now that we are all coming out of the recession and things are picking up again, I think we would all find that the spend will increase again in both online and offline - they work best when used in tandem.” If this is indeed the case, then Robin and James can have little to worry about. Having weathered the storm of this recession, even growing through it, Mobas is a terrific example of a group of people with ambitious ideas and a refreshing approach to client care and relationship-building. The combination of this approach and the passion of every member of its staff has rewarded Mobas with undoubted success. “We proved exactly what we looked to prove,” says Robin, “we proved that you don’t have to be a big London agency to look after a big account.” This was, after all, one of the reasons that Robin started Mobas, and he is defiant that his company will continue to prove this point. Paul Woodhouse is a Marketing Executive for Vetspeed Ltd. With a career spanning many sectors on both agency and client side, Paul has a passion for writing, and freelances for Cambridge Marketing College and other organisations.

15


CASE STUDY: MOBAS, Meet with mercure As part of their work for the Accor hotel chains, Mobas were tasked with the development of a new proposition.

A

The Mobas Approach Brand research Understanding what’s going on in the client’s industry and how their brand fits. What are the trends? What is the competitive environment? What insights can be drawn? What are their customers’ purchase and experiential journeys and where does the client touch the brand? What do customers think and what makes them tick? Brand strategy Working with the client to define clear and relevant propositions for their corporate or product brand, and creating a vision for the future of the brand. Mobas walks them through the process, ensuring the agency gains buy-in from the client’s internal stakeholders through workshops and insight sessions. The result is a strategy to create new customer perceptions about the brand. Brand design Creating identities and communication platforms for brands, with full understanding of channels, languages and visual messaging. This means creating new brand identities, and evolving existing brands and platforms for collateral and communications – everything from brochures to e-comms to web banners to packaging and in-store POS. Mobas becomes the brand’s guardian. Brand PR Monitoring and creating the voice of the brand – most importantly, Mobas is the window to discovering what customers are saying about the client. BrandLive! This is how Mobas describes the ongoing experience of working with brands. Mobas is a brand ambassador, but is also a ‘chameleon’ that become part of marketing and operational teams to develop and lead brands long-term. A dedicated account team inspire and challenge the brand, ensuring its future long-term.

16

s a major ongoing part of the Accor hotels account, Mobas works strategically and creatively on the Mercure brand. Mercure is a fast growing brand in the UK with over 30 three & four star hotels, and has over 700 hotels worldwide. Mobas worked with Mercure to develop their new meeting proposition ‘Meet with Mercure.’ Until then, Mercure did not have the branded product that many corporate bookers look for when booking business travel, meetings and conferences. The challenge was to create a proposition and concept that while appealing to customers would also be fitting to all internal stakeholders, with the end-goal of expanding the product across their growing network. As with all brands, consistency needed to be a key driving factor. Mobas worked closely with the Mercure UK Marketing team, their team from Operations, and directly with hotels to ensure that the concept was right, and hit the mark. Mobas started by researching the industry and competitive set to see what was happening and what trends were emerging. As business travel and meetings were hit very badly during the downturn, finding the right gap in the market was essential. Mobas then worked with the internal teams to understand the important factors involved when booking or attending a meeting at an external venue. What are the pains, and what differentiates one brand from another? Mobas created a selection of meeting propositions defined by key ‘consumer drivers’ that would resonate with the intended target market. Mobas was a key driver in pushing the project forward and used its range of services to develop a 360 brand. Focus groups were held to test the concepts and creative, which was then refined down into the final concept/proposition. As part of their fully integrated service, Mobas then developed the roll-out of the creative across all channels and platforms, creating marketing material and local tools for hotels to adapt and adopt. These included: • The core proposition • Development of brand pillars and promise • Brand design • Brand video • A creative online platform • Sales tool and templates • Standing operations and procedures to ensure rollout consistency The launch has been a huge success and the 360 degree approach taken by Mobas has ensured that the proposition is relevant, compelling, and consistent, and was delivered on time across all stakeholders.


ADVERTSEMENT

The next stage in your career starts here As a reader of Cambridge Marketing Review, you should be a Chartered Marketer. You have the necessary qualification(s) and are a practicing marketer, so you should be at the top of your profession: you should be Chartered. With the growing competition in the jobs market, Chartered status is the ultimate way to stand out. As with other professions such as Accountancy, Chartered status is becoming the accolade to achieve. The achievement of Chartered status has seemed daunting to many because of its complexity and time-consuming paperwork. The solution is now at hand: a simple one-stop service of administration and content to satisfy all your needs, all for the cost of a standard course. The Cambridge Chartered Programme handles all the paperwork and liaises with the CIM to obtain your acceptance as a full member, then enrols you onto the necessary programmes to satisfy your CPD requirements.* Your activities are registered and logged each year, keeping you up to date and concentrating on what you need to, not on the paperwork. Overview of Available Programme Elements This 35 hours can be made up of a variety of activities. The Cambridge Chartered Programme covers most of these, thereby offering you a selection of activities to undertake to satisfy your interests and CPD requirements. Example One Day Master Classes Strategy Masterclass event Web Analytics course Marketing Revisited Example One Day Knowledge Accelerators Advanced Time Management Media training Customer Relationship Marketing Getting the Most from Marketing Agencies Social Media for Marketers Developing a Corporate Image Project Management for Marketers Market Research primer SEO Practitioner Webinars on a variety of topics, typically for one hour at lunchtimes Example Qualifications Diploma in Digital Marketing Diploma in Mobile Marketing Events Cambridge Annual Marketing Lecture Dinner with guest speaker Cambridge Digital Marketing Conference

Practise personal skills keep up to date with marketing developments

access reference information

become more efficient and effective

engage with other marketers develop specialist skills

Contact us for full information. Email: cpd@marketingcollege.com Tel: 01954 234940

*Two years Continuing Professional Development is required initially to achieve Chartered Status. Thereafter you are currently required to continue with 35 hours of CPD activity to maintain the status. This figure is likely to increase.

17


The New 4 Cs of Small Business Marketing Connections, Conversations, Credibility and Creativity.

we need another model, one which is more sympathetic to the needs of the small business owner.

F

ew theories have endured as well as Jerome McCarthy’s 4 Ps (Product, Price, Place and Promotion) which were first suggested in 1960. There have been many imitators since, e.g. the 7 Ps (McCarthy’s four plus People, Process and Physical evidence), Mike Farmer the 4 Cs (Consumer, Cost, Convenience and Communication), and Ogilvy and Mather’s 4 Es (replacing McCarthy’s Ps with Experience, Exchange, Everyplace, and Evangelism, respectively. Fetherstonhaugh, 2009). Each has its merits for the ‘text book’ brand with a finely tuned pricing strategy, manageable distribution channels and a promotional budget, but how useful are these models for the small business-to-business enterprise? How does the entrepreneur who is trying to build up a recruitment or web design business, or an architecture practice, apply these principles in any practical way? In my experience, not very easily. Usually the person or people behind a small business are the product, the price is determined by what their expertise can command and promotion often revolves around today’s favourite business pastime - networking. In other words, most of the marketing mix revolves around the individuals in the company: they are the brand. So we need another model, one which is more sympathetic to the needs of the small business owner. This article outlines my new 4 Cs of marketing with the small business entrepreneur at its heart: a practical strategy for today’s changing business landscape.

Connections These are all the people who in some way have entered into a person’s business world. LinkedIn connections, contacts on an email database, business cards harvested from long-forgotten events or a list of people who might be telephoned periodically. Unless someone runs one of those enviable businesses that thrives on referrals, connections are likely to be the source of most new business. The reality however is that connections, left on their own, don’t usually do very much. In fact they might not do anything of any consequence without the next - and possibly most important - stage in our model. Conversations I have been to numerous seminars where speakers have told me about all the new business they are getting through social media and implying I should be getting my share too, but no one has really told me exactly how they have done it in a way I can apply

18


FEATURE - NEW 4Cs

According to the Federation of Small businesses,There are 4.8 million small businesses in the UK. Small and medium-sized firms employ more than 59.8% of the private sector workforce.

Using the New 4 Cs One-to-one conversations aided by a credible ‘story’ presented in a creative way turn connections into clients. Most conversations will lead nowhere and many connections will always be just connections. At the other end of the process some clients may start to drift away. Conversations here can ‘intercept’ them before that happens and help retain them as active clients.

ADD CREATIVITY • Say things differently • Use strong imagery • Less is more • Think benefits, not features • Why are you different?

Adding to the pool of connections is essential to fuel the marketing process: • Contacts from events • Linkedin connections • Twitter followers • Telephone marketing • Email marketing

Connections

to my business. Were they holding something back or had they too not quite defined that part of the digital alchemy which turned connections into commercial gold? It wasn’t until I got my first couple of clients through social media that I discovered what was missing – conversations. Creating opportunities for direct conversations is the only way to maximise the potential of your connections. Whether this is meeting at a networking event, tweeting someone directly, sending a direct message through Linkedin, or a good old fashioned phone call. Unless you can find a reason to make direct contact, to have these one-to-one conversations and to start building relationships, your prospects will never make that all-important leap from connection to client. Credibility When you are having these conversations do people really believe what you are saying? Will they be convinced that you can do what you say you are going to do? Not just what you say directly, but what everything else says about you: your business card, online content, LinkedIn profile, and printed literature (yes, the printed word still has a role to play). Quite simply the easiest way to be credible is to be honest. If you find you are being honest and credible but not getting the response you need (which did happen to my business about 18 months ago) it may be time to think seriously about changing what you are doing rather than simply changing what you are saying. More than ever, businesses today should regularly consider if what they are doing is still relevant. Will there still be a market for what they are providing in three or five years time? If not, it is time to think about doing something else.

BE CREDIBLE • Do what you say you are going to do • Be consistent • Don’t oversell

One-to-one Conversations

Clients

Creativity Present what you are doing in a way that will grab people’s attention and will help them remember you. Perhaps even, in some situations, take the view that what you have to say about your business just may not be that interesting. So say something else. If people remember that then there is a chance they will remember you. Building business relationships does not happen overnight, so you don’t need to try and close the sale at the first opportunity. In Summary: To apply this model to your own or your client’s business: Work continuously build to build your Connections; create opportunities to engage in one-to-one Conversations with them; make sure what you say is Credible and make your conversations memorable by being Creative. Get that right and you can add another C to the model as connections start to become Customers, Clients or Collaborators.

For the last 20 years, Mike has been running a design and marketing company, developing and implementing marketing communications campaigns for clients throughout the UK. Mike is also a Director of a small charity working in East Africa and has worked as a business mentor under the North West Development Agency’s business mentoring scheme. Mike tutors the CAM digital marketing course for Cambridge Marketing College.

REFERENCE: Fetherstonhaugh, B. (2009). The 4 Ps are out, the 4 Es are in. Ogilvy [online]. Available at:

http://www.ogilvy.com/On-OurMinds/Articles/the_4E_-are_ in.aspx [Accessed May 2011].

19


LONG LIVE THE BRAND An article about something very simple which has profound implications: the longevity of brands. few years ago I was returning from a marketing conference in America. I had heard speaker after speaker fill their presentations with an unchallenged consensus: that markets were changing very fast, that they were becoming more global, and Laurie Young that customers were becoming more demanding. As a result, competition was increasing and it was difficult to create enduring value. “The product you launch on a Monday is a commodity by Wednesday”. By the time I was at the airport, I was tired, thirsty and hungry; so I wandered into a bar. As I looked at the beers, I noticed the age

Stella Artois 1366

Weihenstephan

1040 Battle of Hastings 1066

of Kronenbourg (1664) and Budweiser (launched, the barman told me, in 1886). I knew that Coca-Cola was quite old and resolved to look it up when I got home (it was also launched in 1886, just beaten by Dr Pepper 1885). Later, I wandered into duty free and was, again, struck by the age of a number of brands we still use today. American Whiskys like Southern Comfort (1874) and Jack Daniels (1866) sat alongside perfumes like Channel No5 (1925) and watches like Breitling (1884). I spent the remaining time before my flight collecting the names of brands which I thought had been around a long time so that I could look them up when back at home. I have kept going since and, a decade later, have a long and erratically compiled list. It comprises the category, country of origin and start date of brands which are still sold today. I am not an historian or an academic but there seem to be several obvious implications of this simple list. A few surprises I am not in the drinks industry so I was surprised that Bailey’s Irish cream is so new (1974). I had assumed that it was a heritage brand. I was not so surprised by the age of some Champagnes and spirits (Verve Clicquot, 1805; Glenfiddich, 1887; Jack Daniels, 1866) but I was taken aback by Jim Beam (1795), Remy Martin (1724), Martel (1715) and Bushmills (1608).

20

I was astonished, though, at the age of some of the beers that are around us today. It is enough that a relatively new country like the USA has beer brands hundreds of years old (Schlitz, 1849, for instance) but Europe can boast not only of Kronenberg and Carlsberg but also Greene King (1799), Guinness (1759), Lowenbrau (1383), Stella Artois (1366) and, astoundingly, Weihenstephan (1040). I have studied marketing to master’s level and been on many courses in my time. Not one used a case study of brands created around the time of the Norman Conquest. I knew that several banking brands were quite old (HSBC, 1865; Santander, 1857) but Barclay’s raised an eyebrow (1690). I knew that tea (Twining’s, 1706) and coffee (Douwe Egberts, 1753) were introduced to Europe in the seventeenth and eighteenth centuries but I was surprised by the age of some Chinese tea brands

Beretta 1526 New World 1492

(Pi Lo Chun has been brewed for twelve hundred years) and other drinks (Schweppes, 1783; Cinzano, 1757; and San Pellegrino locally available since 1200) or foods (Warburton’s, 1876) that are around us today. Despite all this, though, I still find the technology brands the most surprising. I learnt that IBM is celebrating its centenary this year. It was interesting to find that Philips (1891), GE (1876), Ericsson (1876), Toshiba (1875) and Cable & Wireless (1869) have been moving with technical changes for so long. But my kids were amused by the age of Nintendo (1889) and I was stunned that Otis elevators originated at the time of the Wild West (1861).

Ibm is celebrating its centenary this year The more I collected the ages of familiar brands (or brands familiar to their target segments in foreign markets) the more the story of longevity began to emerge. It made the idea that it’s difficult to create enduring value seem ridiculous.

Photos: Jhayne, Flickr (left); Universidad de Sevilla, Flickr (right)

A


FEATURE - BRANDS

Photo: Steve Ryan, Flickr

TSINGTAO Brewery was founded in qingdao in 1903 by The Anglo-German Brewery Co. Ltd. The first beer was served a year later.

Brands are amazingly enduring and resilient I now have a list of over four hundred brands that were created before 1900 and some that are around a thousand years old. Many of these entities have been doing what brands do (creating wealth by appealing, in a unique way, to a succession of human beings) for at least a century. They have commanded the allegiance of a group of buyers, differentiated themselves from their competitors and solicited prices above the commodity floor in their category. Admittedly, some of these offers may not have had brand characteristics throughout their long life. Some (like Axminster, 1755; Meissen, 1705; or Majolica, 1405) were originally a description of a regional heritage or generic, cultural skill. It is true too, particularly in luxury goods, that many were run by artisans with a craft heritage and a commitment to quality but perilous financial track records. Nevertheless, the evidence in this simple list suggests that brand creation is a powerful way to create substantial, sustainable, long-term business.

The Observer 1791

Kronenbourg 1664 Great Fire of London 1666

It is stunning, for instance, to find brands in modern China created several hundred years ago which have survived neglect and massive historical traumas. Tsingtao beer, for instance, is a highly successful and familiar international beer brand which is sold in 62 countries and makes up about 50% of all Chinese beer exports. Created in Qingdao in 1903, it has survived: famine, flood, the Warlord Era, the Second World War, the civil war, communism, the cultural revolution and the deaths of approximately seventy million people in its home nation. In turbulent times, marketers surely have a responsibility to their shareholders to convince their colleagues to invest in this remarkable approach. the concept of branding The idea of branding is itself very old. An early marketing textbook (Butler, 1917) uses the term so freely that it was obviously in common usage. Victorian advertising consultant Henry Sampson talks freely of brands in his extensive history of advertising (1875). Both writers use the word “brand” in ways that we would today. In fact, business leaders of the period, like American Henry Heinz (who in 1861 launched the successful brand franchise which straddles the world today), had clearly heard of consumer brands and understood their power. Before that, business leaders

used branding techniques to meet their customers’ needs even though they were unable to articulate the concept in modern ways. Many had a passion to produce high quality, reliable product for their customers. In parts of China it is still possible to see the brand of the brick builders who worked on the monuments of emperors a thousand years ago. Their products were expected to of the highest quality: so reliable that the artisans’ grandchildren were expected to replace them if they failed. Further back, in 701, article twelve of Japan’s Ganshi code was consumer protection legislation requiring manufacturers to brand their goods (like swords and clothes) as a quality safeguard. When asked how he wrenched himself from abject poverty to the eighteenth century’s equivalent of billionairedom, Josiah Wedgwood called his systematic use of branding and marketing “the science of money getting”. These brand creators might not have had the concepts and terminology available to us today but there

Liberté, égalité, fraternité

Cadbury 1824

French Revolution 1789-1799

is no doubt that they used deliberate, systematic, brand building techniques to create enormous wealth. It is remarkable how many of these brands are connected to the vision and determination of one business leader or their relatives. Later in their life they may have been bought and nurtured by brand managers with professional training. Yet names like Wedgwood, Heinz, Mars, Cadbury, Guinness and Singer have earned vast sums because their founders had a vision for a product or service which they doggedly built over time. Wedgwood would roam his premises smashing poor quality products with his walking stick and proclaiming them “not fit for JW.” Heinz campaigned for quality in food production and Marshall Field was obsessed with giving excellent customer service to Chicago shoppers thirty years before Al Capone. Their passion for serving their customers well and their intuitive investment in sustained, high quality marketing made them, like many brand icons, a fortune.

Ancient chinese brands have survived neglect and Historical traumas 21


Well-rounded marketing techniques It would be easy to dismiss these enduring wealth creators as the byproduct of long lost, heroic entrepreneurs, if they hadn’t been created by bog standard marketing. Brands like Pears, Wedgwood, Sunlight (Lever), Heinz, Selfridges, and Coca-Cola were built using marketing campaigns that look very modern. Histories and biographies (some of which are now rare books or archived correspondence) written a hundred years or so ago are full of campaigns that we would recognise today. In 1771, for instance, one thousand German aristocrats received an unsolicited sample plate with a direct mail letter from Wedgwood. It would be fascinating to know whether the language seemed strange to them, how it was packaged and whether Josiah’s designs appealed to the Germanic taste of their families. It is also maddeningly difficult to understand how it was delivered and how the orders were fulfilled in a time before Post Offices, railways or good roads.

Nokia 1865

Proctor&Gamble

1837 Oliver Twist 1838

We do know, though, that the huge risk of £20 per package (£20,000 in today’s prices; nearly £2million for the campaign as a whole) elicited a fast response which quickly paid that back. And, within two years, all but three of those that had purchased had paid in full. A factor in this success was Wedgwood’s after-care package. It included a “satisfaction or money back” guarantee, free shipping and the willingness to replace any broken item without question. For at least a thousand years, the elite have created markets through their thirst for luxury. Chinese silk, Eastern spices, Venetian glass, Swiss watches, Meissen Porcelain, Staffordshire pottery and French couture, created, each in their turn, rich niches. Once established, the best marketers used them to develop brands and pioneer bigger markets through the aspirations of the less wealthy. Josiah Wedgwood said: “…great people have had these vases in their palaces long enough for them to be seen and admired …the middling people would buy quantities of them at a reduced price.” (Cited in Koehn, 2001). The product life cycle: utter nonsense This irritatingly well known concept is taught in nearly every marketing course and appears in nearly every text book published after the 1960s. Young marketers are taught that the sales of

22

individual products follow a pattern over a period of time which normally follows the line of a simple s-curve. They are born, grow, mature and die. Yet, although the idea has a strong hold on management thinking and executives can often be heard to talk about their product as, for instance, “mature” or a “cash cow”, it remains unproven, controversial and completely muddle-headed. In 1983, for instance, Professor Michael Baker published research that showed around 80% of all new product launches in each year failed. For those many thousand products and their marketers, then, life was anything but a smooth S-curve. It is seldom taught that, after nearly ten years of unsubstantiated assertion, several credible pieces of work in the early 1970s debunked the Product Life Cycle. An HBR article by two JWT planners (Dhalla and Yuspeh,1976) rehearsed the arguments well. They pointed out that most advocates of the proposition had little empirical data and that there were well-crafted research projects that had failed to find a correlation between numerous sales histories and an S-curve. Their

Nintendo 1889 Hucklebury Finn 1884

article contains several data driven models which show no S-curve at all in individual products or services. This cherished notion is also challenged by the fact that there are hundreds of brands sold today that are decades or centuries old, with sales volumes that are still rising. The PLC concept is also challenged by the early history of the twentieth century’s most successful marketing phenomenon: Coca-Cola. As Mark Pendergrast (1993) explains, the rationale for the drink had been to find something simply pleasurable during an alcohol prohibition phase in Atlanta. But by the 1920s (nearly forty years after its invention) that had changed, and consumption fell for the first time. There were many reasons to think that this decline in sales was because the product was “mature”. The government was beginning to respond to constant negative publicity about the affects of the drink by investigating its contents (because there were constant allegations that it contained cocaine). Costly legal actions were being considered, which would add to problems over ownership of the patent. There were cheap competitors and imitators. In addition, global events (the First World War, for example) were affecting the optimism of the nation. ‘Classic Marketing training’ (had it existed then) would prompt marketers of the time to consider whether this decades-old product


FEATURE - BRANDS

Photo: Tumbleweed:-), Flickr

The COCA-Cola COmpany registered the US trademark ‘COke’ in 1944.

was starting its decline phase and should be replaced. (When the leaders of the firm attempted that at the end of the twentieth century with ‘New Coke’, of course, one of the most remarkable examples of consumer antagonism followed). Yet, an explosion of sales in the 1940s demonstrates how daft it would have been to follow classic marketing training with this wonderful brand. Just thirty years later the company was selling billions of gallons of syrup and the so-called PLC blip vanished in the rounding. The company’s leaders had a passion for their drink and invested in some of the most aggressive and focussed marketing possible. They used segmentation, research, extensive advertising, PR and thought leadership in the half century before the so-called “marketing concept” phase of thinking. In the early part of the twentieth century Coca-Cola was America’s most advertised product. Its fanatical leaders are probably fortunate that modern marketing training about the PLC and portfolio theory did not exist then to distract them.

Samsonite 1910

Birdseye 1930 First World War 1914-1918

Terms like “cash cow” are far too easily and sloppily applied and have, sometimes without analysis, prompted firms to neglect or denude brands of capital investment. To teach young marketers (who are likely to be in any job for a far shorter time than any of the products, services or corporate brands they will handle) that it is routine to take money from long-term successful entities to invest in creating risky innovations is daft and naive. I am now convinced that the very first question any marketer should ask is: “can I find any way to turn this into a brand?” not “at what phase is my product in its life cycle?” commoditisation is not inevitable Time and again I hear marketing people talk about their offer as a commodity. In utilities or many technology companies, for instance, it is often an unwritten assumption that they cannot do much to their core offer to enhance its perceived value. Why is the telephone service of BT so similar to many of its competitors? Why is the maintenance service of IBM so much like that of Fujitsu or HP? Why is the modern current-account banking of HSBC, Barclays and others almost identical? Why can’t sophisticated, repeat buyers find any difference between the audits of the big four accountancy firms or the legal advice of the law firms they use?

Modern brands like Virgin have shown that it is possible to create wealth through the visionary pursuit of a unique offer. They have created a perception that it is possible to provide an airline, train or broadband service that is truly different. But that is also the lesson of these long lived brands. I’m not a beer connoisseur (and I am sure there is a difference between many of the products), but it is just beer. Why then should Lowenbrau (1383) be able to hold its own against, say, Grolsch (1615) after four hundred years? It’s just a drink. The message of the great, durable brands is that none of us should accept the idea that commoditisation or price cutting is inevitable. In the face of harsh competition from China or India, many business leaders in the West are assuming that there is no way they can hold their own and command a customer franchise; that you cannot build value in a changing commoditised, international market. Wedgwood, Cadbury, Lever, Colt, Heinz, Pears and Singer must be spinning in their graves.

One small step for man...

Apple 1976

Moon Landing 1969

After thirty years as a marketer, trying to persuade executives not to treat marketing as an after-thought and to invest in brand equity, it is satisfying to find that one of the most enduring, differentiating and profitable business techniques in human history is ours. Laurie Young is a businessman who likes to write. Throughout his career, he has held senior positions at BT, Unisys and PricewaterhouseCoopers. He also founded, built and sold a company. Laurie holds the CIM’s diploma and an MBA. You can see his full list of brands in his latest book The Marketer’s Handbook (obtainable through the CIM or Amazon).

REFERENCES: Baker, M J. (1983). Market development: a comprehensive survey. Harmondsworth: Penguin. Butler, R.S. (1917). Marketing methods: modern business. New York: Alexander Hamilton Institute. Dhalla, N. K. and Yuspeh, S. (1976). Forget the product life cycle concept! Harvard Business Review, Jan/Feb.

Koehn, N. F. (2001). Brand new: how entrepreneurs earned consumers’ trust from Wedgwood to Dell. Boston, Mass.: Harvard Business School Press. Pendergrast, M. (1993). For God, country and coca-cola. Macmillan. Sampson, H. (1875). A history of advertising: from the earliest times. London: Chatto and Windus.

23


Understanding and Appreciating Green marketing How to avoid being the wrong shade of green.

T

he industrial revolution began in Britain and had a major impact throughout the world. This marked the point at which energy from human labour was replaced by machinery. The benefits were massive: textiles were produced in vast quantities, and transportation allowed Nigel Bradley easy import of goods. Whilst we must be proud of this advance in the development of human enterprise, it was the start of serious damage to our environment. This machinery used steam, produced by water heated by the fossil fuel coal. Any previous damage to the planet made by man had been promptly repaired by nature. Industry heralded the arrival of poor air, which combined with fog to produce smog. The effect was apparent in town planning; we positioned industry so that the wind would take poor air away from the population. In many countries we still see that the western sides of cities have higher property values, are more desirable and are associated with upper class residents. The east ends are less sought after, less salubrious and associated with the working class. Industrialisation led to unprecedented levels of waste from production, but also at the point of consumption. It is now understood that our planet is made up of a complex set of inter-related systems, and a balance in nature allows these systems to co-exist. The human race has affected these systems. Some say that we are now in the process of destroying the planet as a result of the damage caused by poor resource management and a lack of consideration of proper waste disposal. In this article, I look at the environment in which corporate management must operate. There have been dramatic examples where planet earth and its inhabitants have struggled to co-exist. I identify the advances made by the industrial and agricultural revolutions but also show their negative effects. The human race has reacted in different ways over the years and I trace the emergence of the green movement. The interplay between nature and human activity is described in the context of the evolution of marketing philosophy and the two waves of Green Marketing that have gradually changed decision-making by both consumers and suppliers. How Green Marketing has evolved Production and Sales Orientation In the 1880s the industrial revolution began the massive output of products which could be sold in great quantities, thereby giving us the Production Orientation for the marketing process.

24


FEATURE - GREEN

Friends of the Earth is a network of more than 75 national organisations worldwide, with around 2 million supporters across five continents.

This coincided with the beginning of damage to the environment, at first local to production plants, but gradually becoming widespread. From the place of production, natural air currents spread smoke and grime whilst waste was transported away to be deposited in various locations. By the 1920s the Sales Orientation for marketing was well established and ready customers were found for excess production. In stark contrast to these advances of society, Vladimir Vernadsky, in 1926, wrote that life forms, including human life forms, are basic to the well-being of the earth (Vernadsky 1998). This stood against prevailing thought and the ideas were not taken seriously outside Russia. However, these were early soundings about global warming.

our natural resources must be considered

Image:Valio/Shutterstock.com

The Marketing Orientation In the 1950s, marketers were advancing the concept of Consumer Marketing, recognisable as the start of the science of marketing as we know it. In the next decade, Consumer Marketing flourished and there was an interest in applying the techniques to non-domestic markets (these have also been variously called Industrial Markets and Business to Business Markets). The marketing industry started to apply what it had learnt from consumers to these new markets. Additionally, the green revolution was taking place in agriculture. It became possible to increase crop production by the use of pesticides, fungicides and fertilisers, and animal husbandry benefited from the use of new techniques and animal health products. Despite this atmosphere of progress, in 1962 a groundbreaking book questioned the use of chemicals in agriculture. Rachel

Silient Spring (Carson, 1962) denounced the use of chemical fertiliser

Carson called her book Silent Spring because wildlife had become quiet during springtime. Although the book was almost banned before being published, remarkably it led to the banning of DDT in the United States in 1972. A further notable event in this climate of conservation was David Brower’s 1969 formation of Friends of the Earth. Also during the 1960s, mass production of consumer goods was increasing. Newer production techniques allowed more exciting products to be developed. Developments in packaging technologies lent the appearance of products a more imaginative point of sale impact. This represented a further revolution around the world. After two decades of change, the 1970s are remembered by many people for oil shortages, recession, and inflation. It is against this background that various strands of marketing emerged. We saw the arrival of Non-Profit and Social Marketing. Kotler (1971) defined Demarketing. Corporate Social Responsibility (CSR) emerged. In 1973 Dr Schumacher, a former advisor to the British National Coal Board, published his book Small is Beautiful, stressing that decentralised business activities should be encouraged, as such decentralism opposes globalization. He felt that the workplace should be dignified and meaningful and that the world’s natural resources must be considered. These notions have been echoed in many initiatives that grew from his ideas. Amongst many such voices, one pioneer of Green Marketing must be seen as George Fisk (1973, 1974), who identified both the consumer and supplier of products as responsible for effects on the environment. Green Marketing Wave 1 In the 1980s we saw the emergence of Services Marketing and also the first wave of Green Marketing. CSR Reports started with the ice cream seller Ben & Jerry’s, where the financial report was supplemented by a greater view on the environmental impact of the corporation. In 1987, a document prepared by the World Commission on Environment and Development defined sustainable development as meeting ‘the needs of the present without compromising the ability of future generations to meet their own needs.’ This became known as the Brundtland Report, and was another step towards widespread thinking on sustainability in everyday activity. In 1989 a man-made disaster came in the form of the Exxon Valdez oil spill. Over 10 million gallons of crude oil were lost into the sea and this killed fish, birds and other forms of life. It was one of the most damaging environmental disasters created by man. This and other misdeeds by corporations led to greater policing of conduct, and more importantly, to a sense of responsibility from the organizations themselves. In the 1990s, environmental issues continued to be top of mind as the Shell corporation decided to abandon an oil storage and tanker loading buoy (called Brent Spar) in the Atlantic Ocean. This decision was made in 1991 and continued to be featured in

25


the media to the extent that many Shell customers switched to other suppliers. Shell also faced controversy in Nigeria as the Ogoni people protested against them, arguing that local people did not benefit from their operations and environmental damages were being caused. Some protesters were executed and Shell’s reputation suffered. Furthermore, a decade of research culminated in Theo Colborn’s 1997 book Our Stolen Future: How We Are Threatening Our Fertility, Intelligence and Survival. This showed that exposure to man-made chemicals in the atmosphere is damaging to organisms. Her work, like that of Carson years earlier, heightened awareness and actually led to new laws around the world. Earlier in the 1990s, two marketing authors assembled their knowledge and views into two key books, both of which were called Green Marketing. They were Ken Peattie (1992) in the United Kingdom and Jacquelyn Ottman (1993) in the United States of America. In this atmosphere the phrase ‘Triple Bottomline’ (TBL) was coined by John Elkington in 1994 in his article “Towards the sustainable corporation.” The Triple Bottom-line is easily remembered as People, Planet and Profits. It was effectively a tangible step towards social, environmental and monetary accountability on the balance sheet. Green Marketing Wave 2 In the years after 2000 we saw the definite arrival of Electronic Marketing, making full use of the World Wide Web which was

Table 1: Notable Events for Green Marketing. Based on Christopher, Payne and Ballantyre (2002)

26

conceived in 1990. E-Marketing and other related techniques gave the ability to offer customised communications and tailormade products to individuals on a massive scale. This ‘marketing to individuals’ promised the elimination of waste at all parts of the offering, whether by avoiding junk mail or providing products that match needs precisely. This came hand in hand with a second wave of Green Marketing, where some of the lessons learnt in wave 1, two decades earlier, were put into practice. By now Corporate Social Responsibility and the Triple Bottom Line were widespread. Away from marketing, such publications as the 2005 United Nations Report, Al Gore’s 2006 book An Inconvenient Truth, and the 2006 UK Stern Report brought scientific-environmental arguments to the wider public in an easy to understand way. Each assessed the implications of moving to a lowcarbon global economy and the potential of different approaches. This new wave of Green Marketing differed from the first wave in many respects. Ken Peattie, currently an expert in this field, along with Andrew Crane (2005) looked back over the previous years and argued that Green Marketing did not become a reality because five types of ‘misconceived green marketing’ stood in the way as obstacles. These were described as Green Spinning, Green Selling, Green Harvesting, Enviropreneur Marketing and Compliance Marketing. It is curious to note that Green Marketing wave 1 followed an economic recession, whereas Green Marketing wave 2 came before the global recession we have come to know as the Credit Crunch.

Years

Focus of Marketing

Environment

1880s

Industrial Revolution, Production Orientation

Pollution begins

1920s

Selling Orientation

Vladimir Vernadsky, 1926

1950s

Consumer Marketing

1960s

Industrial Marketing

Green Revolution in Agriculture Rachel Carson publishes Silent Spring, 1962 David Brower forms Friends of the Earth, 1969

1970s

Non-Profit and Social Marketing Kotler defines Demarketing Corporate Social Responsibility emerges

Oil shortages, recession, inflation Dr Schumacher publishes Small is Beautiful, 1973

1980s

Services Marketing Green Marketing wave 1 emerges CSR Reports start with Ben & Jerry’s

The Brundtland Report,1987 Exxon Valdez oil spill, 1989

1990s

Customer Relationship Marketing Triple Bottom-line accounting term coined, 1994

Shell’s Brent Spar and Nigerian controversies. Theo Colborn publishes Our Stolen Future,1997

2000s

Electronic marketing Marketing to Individuals Green Marketing wave 2 CSR & TBL widespread

United Nations Report, 2005 Release of Al Gore’s An Inconvenient Truth, 2006 Stern Report, 2006


FEATURE - GREEN

look to the blog: who says csr doesn’t pay? (2010) http://tutors.marketingcollege.com/who_says_csr_doesnt_pay

This difference may be significant: it may suggest that Green Marketing is here to stay. The Green Marketing concept dictates, amongst other things, less use, recycling and avoiding waste - just some of the ways society reacts at times of recession. In Green Marketing wave 2 we find ourselves with excess waste in developed countries - there is a real problem that has resulted from using the earth’s resources. Rubbish is piling up and we are running out of landfill. Forests are disappearing and so oxygen production is in doubt. Quality of life is under threat from toxic waste and increases in greenhouse gas levels are leading to global warming. Let us distinguish Green Marketing wave 2 from wave 1 by suggesting that the problems are the same, but that wave 1 was largely confined to suppliers. In wave 2 there is a greater public awareness. There have been various attempts to create green typologies of consumers to help in market segmentation (Schlegelmilch et al, 1996; Straughan and Roberts 1999; Walley and Parsons 2000; Molina and Serrano 2002). One useful longitudinal study is the Green Gauge Report. In the USA in the early 1990s, Roper Starch Worldwide identified five segments of consumers, a classification which has continued in surveys since then. This classification appears in the Green Gauge Report, a syndicated study of consumer environmental attitudes and behaviour in the US today. Most of these were based on 2,000 faceto-face interviews selected in line with the most recent US census. This classification is shown in Table 2 and highlights the differences in the USA general public between wave 1 and 2. Note that the survey did not exist in the 1980s, so 1995 is shown as an indicator for wave 1 and the year 2007 is used as a marker and for wave 2. Despite a slight increase in Grousers, we see an increase in True Blue Greens and a reduction in Apathetics. Energy and Waste It is also useful to focus on the production of energy and the production of waste. Energy and waste are two indicators of the inefficiency of industrial processes; regardless of profitability: the greater the energy and waste, the more ecologically inefficient the industry sector or individual corporation. Energy production has largely focused on fossil fuels, used to create electricity, to heat buildings and to power transportation. Coal, oil, and gas are taken from the earth, where, effectively, they store carbon dioxide. These are sometimes known as non-renewable because supplies are limited and cannot be replenished at the same rate by which they are used. The processes involved in transforming them into power release carbon into the atmosphere and this contributes to global warming, which is damaging the planet. By using the term waste we are referring to any unwanted materials, variously described as trash, rubbish or garbage. These may take the form of liquids, solids, gases or even energy such

Name

Description

1995

2007

True Blue Greens

Major green purchasers and recyclers

11%

30%

Greenback Greens

Will buy or give green, won’t make lifestyle changes

7%

10%

Sprouts

Care but would only spend a little more to buy green

31%

26%

Grousers

See the environment as a problem, but somebody else’s

14%

15%

Apathetics

Essentially don’t care/ won’t care

35%

18%

Table 2: GFK Roper Consulting Green Segments. (From the Green Gauge Report)

as heat. Simply speaking we can identify two types of waste. Production waste and consumption waste. Production waste is created by the manufacturer and may take the form of heat energy that is lost, dirty water, excess product, product not fit for the market or excess packaging. All of these must go somewhere. At the final consumption point there is a new type of waste: the packaging, unconsumed product, excess energy used in preparation, and ultimately human excreta. There are many direct consequences of inefficient use of energy and waste generation. Air pollution leads to asthma, and greenhouse gases from production and waste are causing unstable weather conditions. This is not helped by deforestation, as the oxygen production lost would have compensated for or offset carbon dioxide. Intensive-farming and poor land-management mean that the fertility of the land deteriorates, resulting in lower yields and a shortage of food. To counteract this, more fertiliser is produced and used, meaning more energy and pollution. Another problem that is emerging is a reduction in biodiversity. Some living organisms are becoming extinct. This is a problem because strengths and weaknesses in any organism allow complementary co-existence. If life-forms cannot survive in changed environments, there will be a shortage of food. This concerns seeds as much as other, more developed, life forms. A final example of human action that has a negative consequence directly concerns marketing. If we over-promote to certain market segments, or if we do not provide adequate information, we can cause over-consumption. An often cited example is obesity; this has become a major issue in recent years in the USA and the UK. There is mounting evidence linking obesity to higher risk for numerous cancers.

27


The Meaning of Green marketing The term ‘green’ appears to have been first used in the 1970s and can be traced to the German political party known as The Greens (Die Grünen). Subsequently, other green political parties started to gain support in the 1980s in other parts of Europe. The uniting principles of the green parties include concern for the environment, sustainable lifestyles and social justice. These are themes that push through into Green Business and Green Marketing. From the 1970s to today, some corporations have made big errors and tried to foster better relations by being transparent. Other firms have pre-empted any questioning of their conduct by publishing a code of conduct, a statement of ethics or a statement of Corporate Social Responsibility. In the background was recession and pollution. Besides Multinational Corporations leading the way (or misbehaving), there have also been: NGOs, social activists and academics, and government initiatives. Additionally there has been greater public awareness of business effects. Then of course corporations have needed to be seen to be ‘keeping up with the competition’. Since 1976, the Chartered Institute of Marketing has described marketing as ‘the management process responsible for identifying, anticipating and satisfying customer requirements profitably.’ Ken Peattie adapted this definition in his 1992 book to arrive at a

definition for Green Marketing. He called it ‘the management process responsible for identifying, anticipating and satisfying the requirements of customers and society, in a profitable and sustainable way’. By including the word society, this definition incorporates an element of satisfying the human environment, but it does not fully cover the environment of other organisms such as plant and animal species. Peattie’s definition does incorporate the word sustainable which implies continuity. In other words, the raw materials and resources of marketing must be available and the biproducts should be absorbed or re-used with no detrimental effect. In 1995 Polonsky offered another variant, with a main focus on the environment:‘Green or Environmental Marketing consists of all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment.’ This definition leads us to other similar terms: Sustainable Marketing, Environmental Marketing, Ecological Marketing, Eco-Marketing, Ethical Marketing, Cause-related Marketing, and Responsible Marketing. These terms appear in Table 3. They are not exactly the same but they do overlap; Green Marketing should embrace them all. An understanding of these concepts helps to move closer to an understanding of what we mean by Green Marketing.

Table 3: Terms similar to Green Marketing

28

Term

Definition

De-Marketing

A strategy whereby consumer requirements are identified and anticipated but then techniques are used to decrease demand.

Sustainable Marketing

A concept that suggests that the raw materials and resources of marketing must be available and the bi-products should be easily absorbed or re-used with no detrimental effect.

Environmental Marketing

A way of doing business that has minimal effect on the surroundings, namely water, air and land. This embraces pollution and waste disposal.

Ecological Marketing

Activities and techniques used to avoid or to solve environmental problems.

Eco-Marketing

A term formed from the words ‘ecological’ and ‘marketing’ to suggest that consumer requirements are identified, anticipated and satisfied in full consideration of the implications to organisms and their environment.

Ethical Marketing

A way of doing business that first of all considers the moral stance and how it affects everything and everyone.

Cause-related Marketing

The use of marketing tools to link businesses with charities (or causes) to have a mutually beneficial outcome.

Responsible Marketing

A way of doing business that concerns the wellbeing of other citizens and is seen to be correct.


FEATURE - GREEN

look to the blog: Puma replaces shoeboxes with bags (2010) http://tutors.marketingcollege.com/puma_ditches_shoe_boxes

Green Marketing involves more than the marketing department. Other departments must be green in order for promotional claims to be accurately green. Naturally, Green Marketing managers respect legislation, but they go further: they anticipate future legislation and go beyond what is likely to be expected from them. They are not forced to change their practice because they have already taken several steps ahead. Beyond the reality of having green products, Green Marketing activities also concern perception: this means satisfying consumers’ needs for products they consider to be environmentally friendly.

This new definition goes beyond the customer and touches on all stakeholders A CIM agenda paper in 2008 called ‘Tomorrow’s World,’ suggested a new definition for marketing in general. It is “allembracing” and it is noteworthy that the word “sustainable” crept into the somewhat lengthy description. The CIM proposed to redefine marketing as: ‘The strategic function that creates value by stimulating, facilitating and fulfilling customer demand.’ Furthermore ‘It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits.’ Additionally, ‘By opening customer-centrically, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioural change and a sustainable business future.’ This new definition goes beyond the customer and touches on all stakeholders, which include employees, shareholders, distributors, members of society and so on. The simple way to remember Green Marketing is to think of it as total consumption. Consumption is complete: the product is produced efficiently, it is delivered efficiently, all of it is sold and all of it is used. There is no waste at any point and the consumer buys just the right amount and does not need to reject anything. If a product does not satisfy each of these criteria then it is a lesser shade of green. The marketer who does not follow green principles will produce too much and will sell too much, and the buyer does not consume fully. There is an excess in product, packaging and everything that goes into the marketing effort. Marketing communications are poorly targeted and waste services are needed to cope with unused produce and excess packaging. These principles are outlined in Figure 1.

• • • • • • • • • • •

THE PRINCIPLES OF GREEN MARKETING Consumer needs are satisfied with products that are environmentally friendly Production and delivery are efficient from the viewpoint of energy used Production and delivery create minimal waste Consumption is near complete, there is minimal waste The consumer buys the right amount The consumer does not need to reject anything Products will not be forced into a market place where demand is already satisfied Producers are responsible for the disposal of products and their waste, after consumption Unnecessary transportation will be avoided The marketing activities do no harm to humans or other life forms Green marketers avoid concentration of activities (whether production or consumption) in one place, as biodiversity is affected by such concentrations [Figure 1]

Of course product categories are important; they may be durable or non-durable. If a product is non-durable it can be consumed fully, but durable products are also capable of being used fully without waste. This may entail their repeat use or some transformation into something quite different. We therefore arrive at our own definition of Green Marketing, which is as follows: Satisfying customer and other stakeholder needs with products that are environmentally friendly. It involves efficient production and delivery followed by complete consumption; there is minimal waste at any point in the process.’ Note that this definition talks in terms of customers rather than consumers, thereby embracing both mass market and niche customers. It therefore looks at business to business and domestic buyers and users. It also goes beyond customers by including all other stakeholders of an organisation, which therefore places a wider responsibility on the organisation. The definition then describes the production and consumption process as being complete, with minimal waste. Green Marketing now has a complete definition. It is imperative then, for the sake of us all, that marketers adopt this approach fully. Nigel Bradley is a Senior Lecturer in Marketing at the University of Westminster, with a Masters degree in Product Management and Marketing, At RSL (now IPSOS) he headed the International Division, then was responsible for the National Readership Survey and the British Business Survey. Nigel is a Fellow of the Market Research Society, a Chartered Marketer, and a Fellow of the Chartered Institute of Marketing. Since 2000 he has developed qualifications and examined for the MRS and CIM. In 2010 OUP published the second edition of Nigel’s University Textbook: Marketing Research – Tools and Techniques.

29


REFERENCES: Belz, F-M. & Peattie, K. (2009) Sustainability marketing: a global perspective. Chichester, West Sussex: Wiley, Brundtland Report (1987). The World Commission on Environment and Development, Available from http:// www.are.admin.ch/are/en/ nachhaltig/international_uno/ unterseite02330/ Carson, R. (1962). Silent spring. Boston: Houghton Mifflin Carson, R. (1969). Silent Spring. London: Hamish Hamilton Ltd., Colborn, T., Dumanoski, D., Meyers, J. P. (1997). Our stolen future: how we are threatening our fertility, intelligence and survival. New York: Plume/Penguin Elkington, J. (1994). Towards the sustainable corporation: winwin-win business strategies for sustainable development. California Management Review, (36)2, pp.90100. Fisk, G (1973). Criteria for a theory of responsible consumption, Journal of Marketing, 37, April, pp.24-31 Fisk, G (1974). Marketing and the ecological crisis. New York: Harper & Row Fuller, D. A (1999). Sustainable marketing: managerial-ecological issues. Thousand Oaks: CA Sage GFK Roper Consulting (1991-2010). Green gauge report. Available at: http://www.gfkamerica.com/ practice_areas/roper_consulting/ gfk_roper_green_gauge_us/index. en.html [Accessed 8 February 2011]. Graham, F. (1970). Since silent spring. London: Hamish Hamilton Ltd. Henion, K. E. & Kinnear T. C. eds (1976). Ecological marketing. Austin, TX: American Marketing Association. Kotler, P. and Levy S. J. (1971). ‘Demarketing, yes demarketing’, Harvard Business Review, Nov-Dec 74-80. Langeland, L. (1999). On communicating the complexity of a

30

green message. Part 2: the vigilant market. Greener Management International, 25, Spring, pp.81-91. Makower, J. (2005). America’s Green Zeitgeist. Available at: http://makower.typepad.com/ joel_makower/2005/11/gauging_ america.html [Accessed 8 February 2011]. Molina, M. A. V. & Serrano, L. M. (2002). Propuestas para una segmentación estratégica del mercado ecológico. Cuadernos de Gestion, 2(1), pp.11-30. Ottman, J.A. (1992). Green marketing: challenges & opportunities for the new marketing age. Lincolnwood, Chicago: NTC Business Books. Peattie, K (1992). Green marketing. London: M&E Handbooks, Pitman Publishing. Peattie, K. & Crane, A. (2005). Green marketing: legend, myth, farce or prophesy? Qualitative Market Research: An International Journal. Dec 8(4), pp.357 – 370. Polonsky, M. Jay. (1995). A stakeholder theory approach to designing environmental marketing strategy. Journal of Business & Industrial Marketing. Aug 10(3), pp.29-46. Schlegelmilch, B.B., Bohlen, G. M., & Diamantopoulos, A. (1996). The link between green purchasing decisions and measures of environmental consciousness. European Marketing Journal, 30(5) 35-55. Straughan, R. D., & Roberts, J. A. (1999). Environmental segmentation alternatives: a look at green consumer behavior in the new millennium. Journal of Consumer Marketing., Dec 16 (6), pp.558-575. Vernadsky V. (1998). The Biosphere. Translated from Russian by D.B. Langmuir. New York: Copernicus. Walley, K., Custance, P. & Parsons, S. (2000). UK consumer attitudes concerning environmental issues impacting the agrifood industry. Business Strategy and the Environment, 9(6), pp.355-366.

iDEAS

Space for your thoughts


CUSTOMER VALUE

Death by a thousand cuts Drawing ©2011 Don Moyer. Used with permission. Originally appeared in Harvard Business Review.

BY Don Moyer

CO

FF

EE

$1

P

eople go to war for many reasons. Protecting freedom, family, or country is generally considered a noble one. Undercutting a competitor is not. The top line is a potent weapon - but one that must be wielded with finesse, not machismo.

As a strategy, price cutting can be difficult to sustain; against more efficient competitors, it’s impossible. In his first-rate book Competitive Solutions: The Strategist’s Toolkit, R. Preston McAfee points out that price wars between equals produce injuries on both sides and victory on neither. So launch hostilities only when you’re sure you have an overwhelming advantage and can drive the other guy from the market.

Of course, if a competitor attacks, you’ll have to put up your dukes. But in peacetime, it is wiser to invest in areas such as R&D, customer service, and marketing, which justify raising prices, not lowering them. After all, cheap - unlike rich and thin - is something you can be to excess.

Don Moyer has collected his series of cartoons as a book, entitled 64 Drawings. It is available from Blurb at www.blurb.com/bookstore/detail/949041

31


Has the internet reached tipping point? How marketers must react to the crowded online market.

Price has been the weapon of choice but has led to a precipitous decline in profits

T

he arrival of the internet at the end of the 20th century fundamentally transformed the way that organisations operated; pure online companies were created whilst the bricks and mortar gradually saw the incremental benefit of having a website. Now the internet is once Laura Bartonagain going to change how organisations Taylor do business. This will impact the strategy of online retailers. The growth of online shopping has reached a crucial point; in the last 36 months there were 10,005 (37%) new entrants to the UK market (Experian, Hitwise, 2010). However the growth in the number of customers is slowing, at 11% during 2008-2010. The implication is that more e-tailers are competing for the same traffic. Online shopping maturing Online shopping is starting to mature; we are past the early adopter phase. 12% growth is predicted 2009-2014 in the UK compared to 27% seen in 2004 – 2009 (Perrett, 2010). It is far from saturation point but there are fewer new customers coming into the market due to its maturity. By 2014 there will be 32.5m UK shoppers, which is only 4 million more than today (Rigby, 2010). As McEleny (2010) comments, “the web has become part of our lives and by 2015 we will see a parity between online and offline sales”. The UK is the most mature e-commerce market in Europe (Stables, 2010). In 2010 60% of adults in the UK accessed the internet every day (Office of National Statistics). Whilst the current economic conditions can be seen to have contributed to the slowdown in online shopping in certain demographic groups, over half the UK population (31 million adults) shop online and the 35-44 year olds are the highest spending group according to Verdict Research (Shannon, 2010). And it is this group that is likely to cut back on spending as a result of forthcoming government cuts (Rigby, 2010). Increased competitive rivalry The slowing of growth in the numbers shopping combined with the rise of new entrants is increasing the competitive rivalry between e-tailers. Consumers now have a wider choice of e-tailer. This increases their power, as established e-tailers need customer volume to offer the keenest prices, and new entrants fight for market share (Porter). Existing e-tailers have responded to increased competition by offering discounts and lowering prices. Customers have learnt to search for the best price. It can be said that e-tailers are using low price tactics to ‘buy’ site traffic and market share. This is economically devastating to many sectors, especially those like the

32


CUSTOMER VALUE

look to the blog: three executives discuss the logistics of internet shopping (2010) http://tutors.marketingcollege.com/a_place_for_everything

Number of online shoppers (millions)

46 32

44

31

42 40

30

38 36

29

34

28

32

27

30 01/01/2008

01/01/2009

Number of Shopping & Classifieds

consumer electronics or home entertainment sector. For example, 2010 saw a decrease in the average selling price (ASP) of DVDs to £8.88, down from £9.35 in 2008 (OCC Data, Nov 2010). Price has been the weapon of choice to increase appeal and attract more custom. This has led to a precipitous decline in profits. To maintain sales revenue, e-tailers have to sell higher product volumes year on year to counteract declining ASP. In order to do this they have to attract more customers, maintain prices, improve customer retention and increase the lifetime value of customers. Changing consumer behaviour trends Promiscuous customers The above is hard to achieve when the pattern of price cutting has taught customers to anticipate lower prices. The pricing tactics have educated customers to shop around for the best price; they have a predisposition to lower prices and now expect them. Price comparison sites make it easier for customers to compare prices. The internet reduces the time it takes to undertake comparison shopping and allows immediate access to a wide range of sellers. As online shopping has matured, online shoppers have become more intelligent and sophisticated in how they shop. Information now plays a central role in online shopping. Search versus Purchase The gap between online searches and shopping is closing (IMRG, 2010). Shoppers are searching more before purchasing, indicating that for many shoppers online, brand loyalty is a declining factor when making a purchase. The UK search market was worth £436million in 2010; up 16% from 2009 (IAB). This indicates the importance of search as a method for delivering return on investment, as it successfully drives traffic and increases sales. It also indicates that more customers are using search to find exactly what they are looking for instead of remaining brand loyal.

Growth of e-tailers in shopping & classifieds (thousands)

GROWTH OF ONLINE SHOPPING VERSUS GROWTH OF E-TAILERS 2008-2010 (Sources: Experian, Hitwise; IMRG)

01/01/2010 Number of Shoppers (UK)

The biggest growth has come from social networks, from which 8% of all traffic to e-tailers now comes. Nearly one in five social network visitors say they search their social networking sites for information before making a purchase, up from 17% a year ago (Experian, 2010). This is only set to increase with new initiatives such as the online store on Facebook by e-tailer ASOS. Users will be able to buy products directly from the social network as opposed to the online store. The Internet Advertising Bureau reported that 1 in 5 online shoppers would follow a brand on a social media site if they were rewarded with an incentive. Strategic response The growth of people shopping online has slowed, but the amount being spent has not. With forecasted growth of 56% to £35 billion over the next four years (Rigby, 2010), e-tailers must choose the correct strategy to benefit from the forecasted value growth. Differentiation focus Considering Porter’s (1980) original Generic Strategies, e-tailers need to focus and differentiate in order to respond to competition in the crowded online market. Buyer behaviour is changing; e-tailers cannot just rely on price and their brand as customers are no longer brand loyal. They must do more to ensure the total shopping experience is the best in class to help counteract changing consumer behaviour. In short, doing nothing but having lower prices is not an option. With low barriers to entry, new e-tailers will continue to arrive and offer more choice for customers. E-tailer growth and survival therefore depends on loyal customers. Shared-value creation Profit maximisation should not be the main goal of a differentiation strategy. Porter advocates that what is good for society is good for business; creating societal benefit is a powerful way to create

33


economic value (Porter & Kramer 2011). The concept of shared value is to create profit through contributing to social benefit, and is an innovative way of differentiating from competitors. The challenge for e-tailers is to figure out where their products naturally touch social points, and how to improve each situation.

Early adopters now shop on web-connected TVs. marketers should look to perfect their customer experience How can E-tailers Respond? Better customer service E-tailers need to differentiate by offering customers a choice and providing market-leading customer service. They must supply valuable product information, ensure good stock availability and have strong customer service policies. Better customer service can be delivered through the website with personalisation and userfriendly navigation, and by imitating elements of social networking sites. This takes advantage of the increasing trend towards social media combined with e-commerce. The website design quality is very important. This includes the appearance, information provided, and effective navigation. A high quality website demonstrates “the vendor’s capability and its sincere interest in its customers” (Tao et al, 2009) and can influence a customer’s first impression towards a retailer. Choice Giving consumers a choice in how they communicate with brands helps build a close retailer-consumer relationship. Marketers need to offer this choice through integrated digital marketing tactics. Nearly 2/3rds of UK consumers say they are unlikely to buy from a company if they cannot interact with it through their preferred method of communication, according to Blueview Group (Anon., 2009). Personalised online content E-tailers need to tailor site content and service to meet the needs and wants of the highest spending age groups to maximise revenue opportunities. Verdict Research predict that the 15-24 and 55+ age groups have the most growth potential. Recognising the different needs of groups and servicing them accordingly will help grow a loyal following and differentiate from competition. Peer reviews Reviews increase the time spent on the site, add to the “stickiness” and create a sense of community among shoppers (Mudambi, 2010). Providing an easy way for customers to get information about products from reliable reviews could be a source of differentiation.

34

Technological advantages New technologies need to be explored and opportunities seized on new platforms at the early-adoption phase. For example, mobilecommerce and geo-location services such as Foursquare show that the relationship between consumer and brand is everywhere, not just online or in the store. Evolution of marketing professionals Marketers in the online retail sector will need to develop new skills in order to successfully implement a differentiated, focused strategy. The focus should be on the consumer, making the shopping experience and journey better and differentiated from the competition. This is essential for the strategy to work as it will encourage customer loyalty. This helps to compete against rivals, and dissuade new entrants to market. Technological skills Marketers need to be aware of advancements in current technology to ensure web user interfaces are delivering the best navigation experience possible. As we saw earlier, search is at the centre of online shopping behaviour. Marketers must understand how search engines work in order to optimise web pages, making their brand stand out in relevant search results. It is vital, to differentiate from competition, that new features and innovative tactics are used so the brand is seen as cutting-edge and credible. Being early adopters of new ways of doing things is necessary if a brand wants to keep up with consumers. Listening to customers Developing the skills required to listen to what customers want will be crucial to a strategy that focuses on the customer. Without understanding what customers want from an e-tailer, the customers’ expectations will not be met. This includes service level expectations, website usability and channels of communication. Retailers need insight into online discussions to know what they are getting right and what needs improving. Listening to customers will help retail brands engage directly with the customer and help build loyalty. Digital marketing A deep understanding of the opportunities that digital marketing offers in the future is a necessity for any marketer. Marketers need to keep up with the fast pace at which new market channels are being introduced. For example, shopping through TVs with an internet connection is at the early adopter phase. Retailers should maximise this new channel early to perfect the customer experience ready for when customers have a close affiliation with the channel. Representative marketing departments There are different groups of online shoppers: the younger demographic and the 55+ group. Marketing departments must include people of a similar age range to help represent the mind set and views of each demographic.


CUSTOMER VALUE

Image:Diamond_Images/Shutterstock.com

Could this be the future of one-click internet shopping?

Shared-value creation development Leaders and Managers will need to develop new skills and knowledge to fully explore the idea of shared value creation. Porter and Kramer (2011) suggest that a deeper appreciation of societal needs, and an understanding of the basis of organisations’ productivity, is required.

iDEAS

Space for your thoughts

Conclusion The online retail space is changing. The key to growth and survival for retailers is to integrate channels. Consumers want a choice in how to interact with brands. They desire brands that are accessible when they want, where they want and how they want. In an increasingly competitive industry with declining brand loyalties, only brands that offer consumers what they want will win loyalty and repeat business. Graduating in Marketing Management and Law, Laura has worked in the public sector, scientific publishing and most recently FMCG. She is now Digital Marketing Manager for the Royal Society of Chemistry, and completed the postgraduate diploma in marketing this year. REFERENCES: Experian. www.hitwise.com IMRG. www.imrg.org. McEleny, C (2010) Is the UK ready for social commerce? New Media Age [e-journal], pp.01-02, Available through: Business Source Corporate, EBSCOhost, [Accessed 22 January 2011]. Mudambi, S, & Schuff, D (2010) What makes a helpful online review? A study of customer reviews on Amazon.com. MIS Quarterly [e-journal], 34, 1, pp.185200, Available through: Business Source Corporate, EBSCOhost [Accessed 22 January 2011]. Murray-West, R. (2011) Voucher codes the answer to VAT increase. The Telegraph [online]. Available at: http://www.telegraph. co.uk/finance/personalfinance/ consumertips/8245200/Vouchercodes-the-answer-to-VATincrease.html [Accessed 23 January 2011]. OCC. www.optionsclearing.com. Perrett, M. (2010) ‘Growth in online shopping set to level off’. The Grocer. Porter, M. E. (1980). Competitive strategy. New York: The Free Press. Porter, M.E & Kramer, M.R. (2011) The Big Idea: Creating Shared Value Harvard Business Review [online]. Available at: http://hbr. org/2011/01/the-big-idea-creatingshared-value/ar/1 [Accessed 22 January 2011].

Rigby, C. (2010) Ecommerce set for slowdown, says Verdict. Internet Retailing [online]. Available at: http://www.internetretailing. net/2010/09/ecommerce-set-forslowdown-says-verdict/ [Accessed 22 January 2011]. Rigby, C. (2010) Social commerce set to be key in 2011. Internet Retailing [online]. Available at: http://www.internetretailing. net/2010/11/social-commerce-setto-be-key-in-2011/ [Accessed 22 January 2011]. Shannon, S. (2010) U.K Online shopping will slow significantly, Verdict says. Bloomberg [online]. Available at: http://www. bloomberg.com/news/2010-0923/online-shopping-will-slowsignificantly-on-spending-cutsverdict-says.html [Accessed 23 January 2011]. Stables, R. (2010) International expansion in an online world. European CEO [online]. Available at http://www.europeanceo. com/business-and-management/ international-expansion-in-anonline-world [Accessed 23 January 2011]. Tao, Z, Yaobin, L, & Bin, W. (2009) The relative importance of website design quality and service quality in determining consumers’ online repurchase behavior, Information Systems Management, 26, 4, pp.327-337, Available through: Business Source Corporate, EBSCOhost [Accessed 22 January 2011].

35


What is Value? In an exclusive edited extract from their forthcoming book, Harry Macdivitt and Mike Wilkinson get to the heart of value.

T

he word ‘value’ is used so often that it is in danger of losing whatever meaning it had. In short, the concept of value has itself become devalued! Value is the core driving force underlying every business decision. Therefore it is important that we know what it is, how it is defined Harry macdivitt and used in order to yield real insights into our daily work. Here are just some of the answers we hear when we ask managers to define the term: • Value is getting more than I paid for (or expected) • Value is the perception that I need your solution more than someone else’s Mike wilkinson • Value is perceiving I’ve had a good deal • Value is getting a feel-good factor from a transaction • Value is making my life a bit easier • Value is a mystery! Alan Watson, a London taxi cab driver and greengrocer, had this to say about value: “My family has owned and operated a fresh fruit and vegetable stall in London for more than 90 years. We have come through two wars, a great depression and a deep recession. We are about to go into another recession. We survived all of these, and we will survive the next one too. How? By listening carefully to what people want, doing our best to give them it - and even a little bit more. People are more interested in value than price, and that’s just what I give them. I have customers who have been coming back to me for more than 40 years!” Alan’s message is simple, durable and actionable. “Understand exactly what people want - and give them it!” The message is simple but we need to interpret it in the context of the complex, technology-driven and intensely competitive corporate world of the 21st century.

Commodity or not a Commodity? Most of us would probably agree that when it comes to commodities, water is a fairly basic one. When we turn on the tap we expect water to come out. Here in the UK that water is potable and, according to Thames Water, very inexpensive, at around 0.002p per litre at the time of writing. On that basis why would anyone want to pay any more for what is, after all, just H2O? Clearly a lot of people do. The UK bottled water market is worth close to £1.5 billion per annum – a high price for something that is

36


CUSTOMER VALUE

“What is a cynic? A man who knows the price of everything and the value of nothing.” - Oscar Wilde

so inexpensive from the tap. Somehow the bottled water companies have succeeded in differentiating their offering against tap water and their other competitors - very effectively. In doing so they have created benefits in the minds of consumers, perceived or real, to which consumers clearly attach some value. This perceived value is both tangible and intangible. Consumers justify their purchases generally on the basis of logical arguments – it’s convenient, it has fewer chemicals in it, it’s purer, it’s healthier. How much of this is actually factual and how much is the result of marketing efforts is open to debate. However, value is derived from convenience (you can’t take a tap with you!), perceived health and taste benefits (despite Thames Water’s tap water coming first in a blind taste test some years ago), and image (if the people on the next table in the restaurant are drinking volcanic water from New Zealand, your jug of tap water is going to look a bit sad!) Claridge’s Hotel in London now has a water menu to sit alongside its wine menu. And the price of a bottle? Anything from a few pence a litre to £50 and more, for water! Simple H2O with a little extra – brand image, cachet, a bottle designed by Jean Paul Gautier. So what is water really worth? Is it 0.002p a litre, or is it £50 or more? Or even… How much would you pay for a litre of water in the desert? If a basic commodity such as water can be differentiated so broadly and effectively, imagine what you could do with your own products and services.

THe price of a bottle of water? Anything from a few pence to £50. Some interpretations of Value Let’s drill down a little into this thing called ‘value,’ and try to pull out a few important truths that will help us on the way to creating a robust definition. Value as a perception and an expectation When we compare one offer with another, we select that offer which captures most completely whatever we are looking for. Our belief in its ability to actually deliver what we expect is based on perceptions alone, if no other objective source of information is available at the time of purchase. In this scenario, the buyer is conditioned by the messages received prior to, or at the same time as, the purchase. Objective reality does not ‘kick in’ until rather later when the purchaser has had time to reflect on the transaction and to observe performance in use. Value as a quid pro quo We expect a fair transaction in which the worth to us of the item purchased is at least equal to (and certainly not less than) the sum of the sacrifices we make in procuring it – time to search for and

choose from among options, cost of money to purchase, the price itself, and any associated psychological risk factors. The sacrifice is not of a monetary nature alone; it also reflects our time and effort in seeking out the goods in question and is logically the best use of the limited resources at our disposal. In short, this is a rational buyer’s expectation. Value as an enhancement of our situation A consumer or a business manager will invest his money in ways which will improve his life in some meaningful manner. While he might be willing to accept a quid pro quo offer, he is delighted if he actually receives more than he expected, especially if what he does receive genuinely enhances his situation.

A focus on value is a focus on customer needs Why does Value Matter Today? Clear advantages accrue to businesses that apply a value-based approach to their thinking. A focus on value is really a focus on understanding the actual needs of customers and finding a unique and differentiated way of meeting those needs effectively and efficiently. A value-based approach demands single-minded commitment to innovation and creativity – and a sustained search for uniqueness. Managers of value-orientated businesses are constantly on the lookout for new ways of meeting, perhaps even anticipating, their customers’ needs and doing so in a manner which permits them to exploit their uniqueness. A frequent challenge salespeople hear is that their products are “just commodities.” While this may be true in some cases, it is usually put forward by a shrewd buyer as a ploy to extract some undertaking from the salesperson, usually in the form of a discount or some other deal ‘sweetener.’ If we have genuinely incorporated into our product development processes and our service delivery activities a real focus on customer value, this should enable us to respond in a manner which repudiates any assertion of commoditisation. In short, a value-based approach to business provides an excellent counter to the challenge of commoditisation. Differentiation is not just about doing something different. It is about doing something different in a manner that really matters to your customer. By clearly focusing on customers’ needs and pain points, we can uncover novel ways of serving. A value-based approach generates lasting customer relationships which are more difficult to dislodge than relationships based solely on price. In that sense, product and service life cycles can reasonably be expected to be significantly longer than those which are not based on understanding and delivering real customer value.

37


REVENUE GAINS

VALUE TO THE CUSTOMER

EMOTIONAL CONTRIBUTION

The Value Triad©

The “Value Triad©” Value means different things to different people. Even for the same person, different contexts may create different value perspectives. For instance, the executive travelling on business may opt to fly British Airways because of her perception of superior service, access to business lounges, and perhaps even prestige. However if she travels at her own expense, costs become a more compelling factor causing her to choose a budget carrier instead. The purchasing context, and who is paying, has a profound impact on the decision. Value can mean perception, an exchange or even an economic enhancement. A simple definition is inadequate to capture this completely. We developed the Value Triad© concept as a practical tool to capture as much as we can of the richness and variety of meaning encountered in value. We define the three elements of the Value Triad© as: • Revenue Gains (RG) • Cost Reductions (CR) • Emotional Contribution (EC) Revenue Gain and Cost Reduction both focus on the functional, tangible, objective elements of value whilst Emotional Contribution focuses on the more subjective elements. Revenue Gains (RG) These are the improvements in revenue that accrue to the customer as the result of the purchase and use of your products and services. Outcomes such as superior yield from manufacturing processes or service delivery initiatives, greater revenue streams through their ability to create and sell a better and more competitive service, or through their ability to charge a premium price for products and services in turn, or to increase market share. They all generate revenue gains.

38

COST REDUCTION

Cost Reduction (CR) This is our ability to help a customer to reduce his costs through the use of our products and services. This is not merely about reducing the price of purchased goods and services. Cost reductions for your customer can also be achieved by reducing direct labour hours, having longer periods between servicing, employing less expensive personnel, training staff in new skills, reducing short and long term capital expenditure, and so on. Cost reductions must be achieved without compromising subsequent value delivery to your customer’s customer.

a richness of meaning Emotional Contribution (EC) This arises from many sources and is in general linked closely to the “feel good factor” – e.g. reduction of “hassle”, peace of mind, increased confidence, greater safety, pleasing to the eye, personal gain, trust, self-esteem, absence of risk, etc. There are lots of these, but to appreciate them fully we need to put ourselves in our customers’ shoes and see the world from their perspectives. While there may be alignment around the more tangible economic factors, executives often have quite different opinions about what affects them, personally, from an emotional perspective. This makes it very difficult to create a universally acceptable, objectively verifiable quantitative estimate of emotional impact. Emotional considerations have a profound but hidden impact on the overall attractiveness, or even acceptability, of a proposal. What may be an overwhelmingly attractive economic offer can be overturned by an adverse emotional viewpoint of a key decision-maker.


CUSTOMER VALUE

A Key component of value-Based Pricing, the Value triad© was first introduced in The Challenge of Value by Macdivitt and wilkinson, 2010.

Value Drivers A Value Driver is any factor, which, if a business acts on it, leads to an enhancement of competitive advantage. B2B drivers are mostly economic in nature. In B2C, these are likely to be largely intangible. That is not to say that it is impossible to find intangible or even emotional drivers in a B2B transaction. After all, business is an interpersonal affair. Likewise, while many consumer purchase decisions may be emotional, perhaps even impulsive in nature, many are driven by economic considerations, and increasingly so during times of recession or financial stringency. Economic value drivers are factors which ultimately result in increased revenue or decreased costs. These factors tend to increase profitability or reduce/eliminate economic losses. These factors can be measured or calculated with relative ease. Emotional value drivers are factors which ultimately lead to some improvement in the customer’s emotional satisfaction, or the avoidance of a reduction of his emotional satisfaction. These “intangible” factors are much more difficult to measure or calculate. Nevertheless we must try to assess the “worth” of an EC element to a customer in a given context, and its relative importance in the buying decision. If there is little difference between competitors on RG and CR elements, the EC factors become very important drivers of the final decision, and perhaps even a tie-breaker! Some factors contribute to both. For instance, a company manager whose purchase decision leads to his company achieving or increasing profitability will also experience some feelings of satisfaction and improved self-esteem. Below we identify the extent to which different Value Triad© elements have an impact on a “typical” B2B transaction and “typical” B2C transaction:

Usually B2B decisions are based largely on economic factors. Managers tend to emphasise CR more than the RG consequences of a decision. It is relatively rare in B2B work that EC elements are explicitly considered. There are powerful EC impacts from what appears at first sight to be an economically driven choice. The offer is unlikely to be accepted unless it can be demonstrated objectively to have economic worth. But we must also search diligently for any EC impacts while constructing a value proposition.

‘Intangible’ emotional factors are more difficult to measure but can be powerful EC is dominant in many B2C transactions. CR is also common in B2C e.g. in relatively mundane transactions such as weekly supermarket shopping. Economic factors play a significant role, and complement the EC created by packaging, branding and advertising. When money is scarce, cost awareness increases dramatically among some segments of the community and may dwarf EC factors. RG factors are relatively uncommon but do exist e.g. in investments individuals make in their education, self-improvement courses and services to facilitate job-finding. During recession we might expect CR elements to become more dominant in the consumer purchase decision. The ideas we discuss here have a significant impact on our thinking about managing channels to market, and how we might craft differential value propositions to different “players” in the channels.

100%

% of VT Elements Applying

EC

CR

Change when money is scarce

RG

0% B2B

B2C Extent of the impact of Value Triad© Elements on “typical” B2B and B2C Transactions

39


Differentiation “Differentiation” describes any aspect of our total customer offer which is different from the competition and, crucially, which is valued by the customer. It is a lot more than a mere difference in specification. Our product or service may well be different from that of the competition; however, unless this difference delivers real value that the customer can identify with, understand, acknowledge and be willing to invest in, then it is merely a point of difference - nothing more. If we can manipulate some aspect of price or performance in a way that mobilises our unique capabilities, in a way that no competitor can possibly emulate, and as a result create an elegant – perhaps even unique - solution to a customer’s problem, then we have a winning proposition! This is infinitely easier to say than to do. Never underestimate your competitors’ abilities to surprise you. And never, ever, make the assumption that your differentiation will make the competition irrelevant. This is both foolish and dangerous. The question you need to ask is “what can we do, in relation to our total customer offer, to encourage the customer to choose us, and remain with us?” This distils down to “what are the critical differences between us and the competition and how do they influence the relative value the customer perceives?” Note that this absolutely must be from the customer’s perspective – not ours. Our views are irrelevant – we are not the buyer! Our success in meeting customers’ requirements is based, at least in part, on listening to (and fully understanding) the customer’s context, value adding processes and ‘pain and pleasure points’ and how we can mobilise this information in the creation of a product or service which offers real differential advantage from his perspective. If delivering value is about enhancing our customer’s competitive advantage and if competitive advantage is about our customer’s ability to leverage his differential value in turn, then delivering a differentiated value is about our ability to enhance our customer’s differentiated value better than anyone else. A minor specification change is not a differentiation unless we can demonstrate credibly how it adds real value. A change that, for instance, makes a product easier for us to produce or a service easier to deliver, is not a differentiation from the customer’s perspective. However, if this change can make the customer’s life easier, or his business more profitable, it may be a differentiation. It only becomes one once we can demonstrate convincingly that it will enhance our customer’s business in economic or emotional dimensions, or both. We must resist the temptation to make changes in specification merely because we have the technology or know-how to do so. Technology can be incredibly seductive, particularly if we have a large technology portfolio. Philips, for example, has a wonderful track record of technology development and an impressive stream of new product introductions over many years. Marketplace success often eluded the company because their products had not been built

40

around real customer insight. Many were visionary and before their time but withdrawn before the market caught up. Consumer insight was what was needed and it took a change of Chief Executive for a consumer focus to be introduced throughout the whole organisation – a dramatic shift in emphasis away from technology push. Beware of falling into the trap of believing that your products are commodities. This is a fast highway to a self-fulfilling prophecy. If we start to believe that our product is a commodity, our thinking will change subtly and so will the way we approach the business. We will ignore, or discount, the value of any differentiation we do possess. We will not promote it and we will thus leave the customer with a clear impression that we are just one of the crowd. The way to counter this is to challenge any assertion that the product is “just like everyone else’s”. Demand justification of this assertion and be ready to present strongly rebutting arguments.

what advantages will this change make in the customer’s overall product or service experience? IF the answer is ‘none,’ DOn’t do it!

Of course, your product may be heading towards commodity land. If so, this is time for a thorough root and branch assessment of the product and its relevance in the market, a search for potential differentiators (existing or new!) and a strategy to re-position the product in the mind of your market. In one well documented case, Rhone Poulenc was able to find a new use for silicon dioxide (sand) as a component of car tyres to reduce rolling resistance and improve fuel consumption (Hill, McGrath and Dayal 1998). Never stop looking for customer and product insights that can lead to new routes to differentiation (MacMillan and McGrath, 1997). In any work you are doing in differentiation, you must think in Value Triad© terms – and ask the famous ‘So What?’ question. “So… What advantages will this change make in the customer’s overall product or service experience?” If the answer is “none,” or “negligible” – DON’T DO IT! All you are doing is increasing your cost and reducing your margin.


CUSTOMER VALUE

DIfferent products and industries call for a different combination of routes to differentiation.

Routes to differentiation The complex, technology-packed products in today’s markets come with a host of potential differentiators. Here are a few ideas to think about: Consistency Have you ever had the experience of taking your car for a service at your local garage? The first time you go, the job is done perfectly. The car is clean, performs well and the bill is reasonable. You are delighted and resolve to use this garage in the future. Next time, however, the car is returned in a disgusting state. Half the work is not done, the mechanic couldn’t care less, and the bill is outrageous. The service delivery here is inconsistent. There is clearly little or no quality control in operation and so the standard of service we receive is a lottery, depending on the professionalism of the individual mechanic. We can differentiate our service by ensuring that our customers receive consistently great service - not just once but every time. Dependable, reliable service breeds dependable, reliable customers. Convenience A European chemical company carved out a large slice of the market for its specialised materials used in many B2B applications. This market is dominated by huge companies such as Hexion, Bayer and DuPont and is in large measure commoditised. The standard approach was for suppliers to ship their product monthly, in hundreds of tons, and for the material to be stored in huge tanks on site until required. This process locks up millions of euros and thousands of square metres of prime space. The supplier’s logistics guaranteed just-in-time delivery – a feature that at that time could not be emulated by its competitors. The effect was that customers were able to reduce the size of the storage facilities required and unlock both working capital and space for expansion. By enhancing the convenience to our customer of using our product or service, we may be able to lock them in – especially if our competitors cannot copy our methods. Customisation Delivery of a customized service demands deep understanding of our customers’ value adding processes or production operations. Deep understanding can only come from a proper discovery process, and demands in-depth examination of the client’s business. McKinnon & Clarke, a company operating in the energy efficiency consultancy market, routinely undertakes detailed site assessments of their clients’ energy consumption. As a result of the deep understanding that results, they offer highly customised recommendations for energy cost reduction. The service provider and the client share in the cost reductions achieved through implementation of the recommendations. The client pays nothing up front for the service which is undertaken at the service provider’s risk. Customer loyalty is assured through major cost reductions – often hundreds of thousands of pounds – which the client could never have achieved independently. The service is difficult to copy

because the consultant has years of experience, an encyclopaedic knowledge of energy costs from all suppliers, and a robust analytical process undertaken by highly qualified and skilled consultants. By clearly and thoroughly understanding our customer’s value adding processes, and pinpointing where our company’s unique skills can be applied, we can create a mutual dependency which yields benefits to both client and service provider. Combinations Virgin Mobile, a Mobile Virtual Network Operator, was exploring opportunities in the fiercely competitive US mobile market. This market was at the time dominated by the big players like Sprint,

Four Steps to Building Value Understand your customer Just like when establishing points of differentiation, you can never know too much about your customer. Every scrap of information you collect may have a profound impact on your understanding of their business, context, strategy or aspirations. Respect diversity! Everyone is different. Even in the same segment, each company is different. Value is different for every customer, and even for the same customer under different circumstances. So, to identify value properly, we first have to know and understand – really know and understand – our customers. We must learn everything we can about their RG, CR and EC value drivers. Know your differentiation Make it your business to know - at a deep level – how and why you are different from your competitors in order to identify your competitive advantages and disadvantages. In virtually every buying decision, customers have choices. They will make their decision about what product or service to buy based on the perceived value to them of these competitive differentiators. Quantify the differentiators You need to be able to quantify the RG, CR and EC differentiators in the customer’s own financial terms or other metrics. This is probably one of the most difficult aspects of selling and marketing on value. It can present a real obstacle to its effective implementation. It is important that this is done correctly, and from the customer’s perspective - not from your own! Communicate your differentiated value This task is crucial and enormously demanding, especially on sales people who may need to re-learn their trade! The differentiated message needs to be presented both compellingly and sensitively to persuade the customer that they need the value you offer – and that you are the right people to deliver it.

41


Verizon and AT&T. There seemed no way in. The company set about searching for a poorly served sector and discovered it in the youth market. At the time, the typical offer for young mobile phone users was exactly the same as for adults. No other supplier had differentiated the offer to their young customers, the standard offer being monthly contracts, tied handsets, peak and off-peak call rates (which, confusingly, changed frequently) and premium priced services like internet connection. Virgin, long experienced in serving the youth market in its music businesses, understood the needs of young people much better than the competitors, none of whom had made any meaningful inroads into this market. Furthermore, their excellent contacts in the entertainment sector afforded an opportunity to provide unique, specialist content which could not be copied by competitors. The operator constructed a specifically targeted youth offer. They eliminated the monthly contract (a real bone of contention), provided an easy to use and easy to understand billing structure in which customers only paid for what they used, thus eliminating monthly billing and statements which parents might see, and incorporated a host of “cool” features like music, wallpapers, ring tones and even concierge services. The operator was the first to succeed in this market. We can differentiate our offer by truly understanding the real needs and motivations of our customers – and responding to them. Characteristics The characteristics of your product or service may be sufficient to differentiate it. Factors such as size, speed, colour, components, bundles or “add-ons” all may confer distinctiveness – and make it hard for competitors to emulate. Sony, for instance has a long history of creating clever consumer products through miniaturization of electronic circuits and introduced such disruptive innovations as portable televisions and the Walkman. Bundling of discrete product elements into a solution is today a popular method of creating differentiation. It can only work if the bundled elements genuinely add real “Triad Value” and are difficult or impossible for competitors to emulate e.g. Microsoft’s Office packages and Fresenius Medical Care’s Online Purification Cascade. The key issue for success is to be able to create a solution that genuinely meets customers’ needs in a way that cannot readily be copied by others. This means listening carefully to what the market is saying, and designing your product so that it can be assembled differently for different requirements, tested to demonstrate that the assemblies work in any given customer’s context, and the components carefully sourced, selected or developed uniquely for your solution. Merely throwing together “bits and pieces” from off the shelf and calling this a “solution” is not only unlikely to work but will incur real wrath and deep cynicism from buyers! When a real solution emerges they will migrate en masse to the new supplier.

42

We have reviewed only a handful of possible ways to differentiate our product or service. There are many, many more. However we decide to differentiate, we will need to follow these steps: 1. Learn as much as possible about the customer, his company, and his market. There is lots of information in the public domain and it need not take a lot of time or effort to collect it. It is simply not possible to know too much! 2. Consider what our research says about our customer’s context. Where are the sources of pain and difficulty he is suffering that non-one else seems to be addressing? 3. Find ways of using our own unique capabilities, contacts, technologies or other resources, and weave them into a solution that is difficult for competitors to copy – and easy for the customer to buy! 4. Build a powerful value proposition and learn how to deliver it persuasively and compellingly. Communicating and Demonstrating Value However cleverly we believe we have created a differentiated product, service or solution, the final arbiter is, of course, the customer. Communicating our differentiated solution in a clear, compelling and persuasive manner is vital. What buyers and users want to know are the following: 1. Does it work the way the salesman tells us? 2. Can it be used/implemented in our organisation? 3. Does it deliver the results we want and need? 4. What evidence can we be given? 5. How can my risk (psychological and financial) be reduced or eliminated? The first two questions are part of the salesperson’s “discovery process” – i.e. before coming up with a recommended solution, the supplier needs to satisfy himself that the solution is appropriate for the specific customer. If you cannot meet their need, be honest and say so! Questions 3, 4 and 5, by contrast, are crucial if the customer is to be persuaded. A central part of the sales process is the ability to identify and, where possible quantify, the real benefits to the organisation as a whole and individually to members of the “buying centre”. Thinking about measurable performance and economic factors is good, but it is not enough. We need also to think through how the purchase will impact individuals. This part is often overlooked, yet it is so important. It is about understanding and managing psychological risk on the one hand, and presenting an attractive aspirational vision on the other. The Value Triad© can help us here. It may be possible to estimate, or even to pinpoint, the exact operational or economic impact (RG or CR) of a purchased product or service on the customer’s processes. In complex B2B situations this requires technical analysis. Much of this work should be done by staff in


CUSTOMER VALUE

In Crossing the chasm, Geoffrey A. Moore explores the ‘chasm’ between the early adopters of products and the early majority.

the supplier’s ‘back office’ by appropriate specialists. Often these details cannot readily be estimated sufficiently accurately by the supplier’s people. In this case the salesperson’s role is to collect as much operational information as possible. This is part of the “discovery” process. Some companies e.g. Xerox, Alstom Power, Akzo Nobel, Ricoh and Michelin to offer a few examples, have developed value analysis tools which have, built into their architecture, all of the variants in customer needs that are likely to appear in routine day to day selling activity. These models are designed to be easy and straightforward for sales people to apply during customer meetings and can be very powerful in enabling sales staff to engage the customer, collect critical customer data and instantly demonstrate economic impacts of different product and service configurations. The best information of all comes from the customer. In more complex cases (or in the case of very new technology), external experts may be needed to make the necessary assessments to encourage adopters to “Cross the Chasm” (Moore, 1999). Professionally sourced data or reports carry much more weight than those created by our own people. As far as the customer is concerned, “we would say that anyway, wouldn’t we!” However this assessment is carried out, it needs to be done with care, rigour and a deep understanding of both the customer’s value adding processes and how our product or service fits into this. It is not a task that can casually be left to the sales person. Failure to justify fully the value adding elements of the product or service proposition may lead to rejection of the total proposition. Quantifying the Value Triad© elements as they apply in a given customer situation is crucial if you are to build a value-based business.

iDEAS

Space for your thoughts

Harry Macdivitt is a specialist in Value-Based Pricing. Initially trained as a chemist, Harry spent a number of years in research before embarking on a career in business, and now delivers consultancy events for global companies. Mike Wilkinson works with organisations to maximise the effectiveness of their sales efforts. He has developed Play2Win© to aid the management of major sales opportunities, and Home Run!© to structure the approach to the consultative sale. Harry and Mike are co-directors of Axia Value Solutions, and co-authors of The Challenge of Value. Value Based Pricing will be published in October 2011 by McGraw Hill.

References: Hill, S. McGrath, J. and Dayal, S., 1998. How to Brand Sand. Strategy-Business Editors, 11, Second Quarter. MacMillan, I. and McGrath, R., 1997. Discovering New Points of Differentiation. Harvard Business Review, July – Aug.

Moore, G, 1999. Crossing the Chasm, Marketing and Selling High-Tech Products to Mainstream Customers. Revised ed. New York: HarperCollins Publishers.

43


Building The Better Tech Mousetrap Do your B2B customers buy your product or service because you have the best technology, the better mousetrap?

A

n uncomfortable (and often a rather surprising) truth for developers of technology products is that the world will not beat a pathway to your door. In fact nobody in their right mind is ever going to spend money voluntarily on your product or service. This is the default position.

TONY WILSON

Look to the customer Your challenge is to learn about the business problems and opportunities that your customers face, in practice. A colleague once showed me a good test for how much you have understood: could you talk about these two areas for 20 minutes (no, not 2 minutes), with a particular customer? If you can’t do this, how can you tell what to put into your product or service to make it irresistible to your customers? How will you know what they need?

44

Illustration by amandabarrett.co.uk

Business benefits People won’t spend money with you, that is, except under one condition: that they expect their business to be better off as a result of having your product or service. Pretty obvious, when you stop to think about it, but this raises another set of questions. For a customer’s business, ‘being better off’ is not necessarily the same as ‘having your great technology,’ in their minds at least. We have to ask by what criteria the customer judges if their business is better or worse off. In principle, your customers will only care about one thing in this regard: how can they serve their own customers better? Anything that enables them to do this will be attractive to them. So the question for you is “how will your offering enable your customers to serve their customers better?” Of course, not all your customers will be so enlightened as to see things this way, but nevertheless you need to be able to answer the question even if your customers cannot. In practice, there’s another thing that your customers ought to care about: how they can outperform their own competition. Anything that enables them to do this will also be attractive to them. So the (second) question for you is “how will your offering enable your customers to be more competitive?” If you can’t answer these two questions for yourself, how can you begin to understand how to make your offering more attractive (i.e. beneficial) to the customer? You’d be surprised how often the solution is not “write more code”!


There are plenty of examples of companies that have failed to gain this understanding (or failed to act upon it). Conversely, there are many that have had major success, against the odds, by understanding how their customers’ businesses work. My favourite “failure” in this category was in 1998, when a wellknown breakfast cereal company experimented with a different size of box for its products. The new box was a few centimetres taller than its predecessor, and was simply too tall to fit into standard kitchen cupboards. It was rapidly withdrawn. My favourite successes come from my own experience: I once worked for a semiconductor equipment company, designing and delivering photolithography systems. This was absolutely leadingedge stuff, and we were a young company competing against two major established players. One day we noticed that we were routinely able to install and commission our newest product at the customer’s site several weeks faster than our competitors typically took to get theirs working. This time-saving, for a leading-edge semiconductor manufacturer, was worth a great deal of money, even in relation to the ($5m!) price of the machine. For the next few years, we won sales not because we had the best technology, but because we got customers up to speed faster. We also had a business in second-hand equipment, where we found that our boxes priced at $750k were regularly outselling those our competition priced at $350k per unit (which arguably performed better). The reason, we discovered, was that our equipment could physically fit straight into the space vacated by previous generation equipment. As our competitors’ machines were a size larger, customers would have needed to rebuild their expensive clean-room; the $400k price difference was overcome. In both cases, we won business by understanding the real world in which our customers operated. Admittedly, in both these cases, our product fitted by good fortune with what the customer wanted, but we were able to capitalise on this by pursuing the bits of the market where these factors were important. What can we add? The message, then, is to understand how your customers really work (we shall leave a discussion on market segmentation for another time). Then you can ask what you can do to increase the benefit to the customer. How can you make the product more “complete”? The next trick is not to limit yourself to asking “what can we do to increase the benefit?”, but to ask “what more would the customer need?” In other words, ask the question from the customer’s point of view. Very often, these “extras” take the form of intangibles. Intangibles Example 1: A company was in the business of lab equipment for the biotech industry, and was about to launch a new product. It realised that it had two sorts of customers – the research lab, where costs were critical, and the production line, where it was vital to keep the

!

Photolithography Box

CUSTOMER VALUE

Competing photolithograpy systems lost out because they were too large to fit into the available space.

Clean Room

Entrance

equipment running. So it introduced different warranty packages for the two sorts of user. The production line user was offered a package whereby engineers would arrive within 24hours, spare parts would be held locally, and everything would be done to maximise uptime. The research labs were given the option of a basic warranty rolled into the price of the equipment (so as not to call on their minimal support budgets), with no premiums for fast support. The company was therefore able to launch two new products, even though the hardware was identical for each.

Ask the question from the customer’s p.O.V. Partners Example 2: when you buy a used car from a garage, there’s a question of how to handle the insurance. I did this a while ago, and my new (used) car was due for delivery at midday on a Monday. It was easy enough to switch insurance to the new car at that time, you may think. However, the dealer was delivering from 100 miles away and there was some uncertainty about the delivery day. The dealer solved the problem by adding in one week’s insurance with the vehicle. That way I didn’t have to think about timing, and it was fine if I wanted to keep my old car for a few days in order to sell it privately. Such a model is now more or less standard, I believe. This is an interesting example, because car dealers are not insurance companies. In this case, the dealer partnered with an insurance company to offer a package which made a difference to the customer that neither of them could have offered alone. The message is the same for your business: identify what would make your customers’ lives easier, and if you can’t provide this by yourself, then find a partner to do it with. That way, you’re offering a better deal, and keeping your competition at bay. This policy can work particularly well for smaller companies, who can thereby be seen to punch above their weight. The world will not beat a path to your door to see your better mousetrap, if “better” just means “new technology”. But if you take the trouble to understand in detail how your customers operate, you will be able to identify things to add to your mousetrap to make it work better. Sometimes you may need to partner with others to do this. But if you can do it, your mousetrap really will be better because it will be complete, from the customer’s point of view. And you may even get paid for it! Tony Wilson has a Physics PhD (Cantab), and over 25 years’ experience working in Strategic Marketing, Product Management and High-value Selling for high technology companies. He now runs his own coaching and consultancy business, helping technology-based companies to make proper Marketing and Selling Strategies. Tony is Lead Tutor for Marketing Planning, Director of the B2B Professional Diploma and Professional Certificate programmes, and Director of the Marketing for High Technology programme at CMC.

45


EMbracing the 7ps, Naturally A destination team’s journey into customer-focused marketing.

Areas of Outstanding Natural Beauty have a remit to help, inspire, protect, encourage and benefit

46

S

ome organisations have a complexity of stakeholders that we can only imagine, let alone understand. The Quantock Hills AONB Service, one of 50 teams across Great Britain tasked with protecting areas of outstanding natural beauty, is one such organisation. Neil Wilkins AONBs have a remit to inspire people to protect the natural environment around them, to encourage people to enjoy it, and to maximise its benefits to the local economy. This fine balance is echoed by diverse and complex interrelationships between the various stakeholders. Such stakeholders include tourists, landowners, local residents, local businesses, walkers, horse riders, mountain bikers, day-trippers and the all-important sources of funding like the County Council and Natural England. The traditional approach to marketing to these varied groups, each with its own perception of the role and value that the AONB team provides, is to assume a ‘one size fits all’ stance. Then one must hope that the compromise of messages and communication methods goes at least part way to satisfying their needs. Such an approach is reflected in the Management Plan, a seven year strategic statement of intent and top line tactical activity which helps to tick the boxes for grant funding but has little if no relevance to the majority of stakeholder groups. In attempting to support the development of rural economic growth, the AONB team satisfy constant enquiries from local people at the same time as providing a Ranger Service for areas that would otherwise be left to their own devices (and indeed nature itself). In doing so, they have identified that there must be a way of streamlining their communications activity to help prioritise and focus to ensure optimum return on investment. The first step in a simple but often ignored process was to segment their audiences to gain a deep understanding of the intricacies of each - and of course their needs and perception of the value of the AONB Service. The process identified seven key stakeholder groups, defined not by the traditional method of dry sociology-economic data but rather by real names like Margaret, Ben and James. These names, whilst simple to the extreme, have become a common language within the team, filtering the communication methods and messages, and the tone, style and timing of their delivery. What applies to local resident Margaret is very different to what is relevant for visiting mountain biker Ben, and herein lies the key to unlocking the 7Ps of marketing: an appropriate mix of marketing for each individual type of customer. The team identified very quickly that some segments were hard to reach, less influenced by communication and ultimately


REPORT - AONB

A panorama of the view from Cothelstone Hill in the Quantocks.

Photos: Neil Wilkins, 2011

To maintain momentum in what might otherwise have been merely a ‘nice to do’ exercise, careful plotting of the Customer Journeys (one for each segment) has ensured the continued relevance of each and every published communication. Customer Journeys in the rural world need to inherently link back from digital and printed materials to the real world, so touch points have been developed providing clear links for interested segments. A good example is the addition of Quick Response (QR) Codes to signs on the Quantock Hills, the first AONB to feature them. Visitors and tourists can easily scan these codes with their smartphones to link through to an informative interpretation of where they are and what activity they are doing, thereby enhancing the experience and reinforcing the values of Care and Enjoy. The Quantock Hills: an area of outstanding natural beauty

less important to achieving the objectives set in the Management Plan. This natural prioritisation has allowed the team to quickly focus on the most important marketing messages, to develop a communication time plan that is relevant for the end customers, and importantly to filter out irrelevant marketing tools. They see that mountain biker Ben may respond well to social media whereas Margaret may prefer a more traditional printed newsletter to keep in touch with developments relevant to her. At the hub of the communication plan, an important evolution came in the form of a reignited website. Far from the dry ‘internalproject focus’ of the old website, a vibrant new dual focus site has clear signposting to ‘Care’ (designed for landowner James) and ‘Enjoy’ (to inspire and engage with tourists and visitors like Ben). Of course, deep inside the site and accessible through specific landing pages, the fine details of projects targeted towards the Council and Funding Bodies are still held. There is something for everyone but content is prioritised, targeted and focused.

A vibrant new dual focus: ‘CARe’ and ‘enjoy’ With everyone in the team understanding the strategy and the customer priorities it wasn’t a large step to allocate suitable roles and ownership for communication. No longer is the role of marketing left to the Marketing Officer; everyone plays their part. Importantly, the Rangers, who spend almost all of their time out of the office and in the field, have embraced blogging. Exciting and informative real life stories, written for James and Margaret, have made the Rangers celebrities in the local community, raising the stature, credibility and relevance of the AONB Team. In the 7Ps a balance is necessary between product, price, place, promotion and more, and for the team, the Rangers are now entrenched as a core benefit of the product.

Rural Customer journeys need to link from the digital to the real world The timing, location and relevance of all marketing and communication is now integrated across the team and, importantly, through all channels appropriate to each of the prioritised customer segments. Proving Return on Investment can now be done with ease at every step in each of the plotted Customer Journeys, ultimately ticking the most important boxes in the Management Plan targets. Together as a team, the Quantock Hills AONB Service can now continue to market and communicate their special destination in the knowledge that they are sustainably protecting it for future generations, as well as facilitating the benefits to be had from it today. By embracing the fundamentals of the 7Ps and moving away from an ‘internal focus’ the team have created one of the most customer-centric services of its kind in the country.

Visitors can use their smartphones to scan QR codes on signs in the Quantock Hills to accesss information about their location (www.quantockhills.com).

Neil learnt his marketing with the likes of Orange, NatWest and Ordnance Survey and now helps individuals and businesses to communicate more effectively. He mentors marketers on professional CIM qualifications and tutors on the CIM’s Digital Marketing Diploma. Neil is Cambridge Marketing College’s Digital Media Director.

47


Cash is king, but not for much longer There is a change on the horizon that promises to affect all of our lives. Once key barriers are overcome, we will see the removal of cash from society. It is a change that will happen much quicker than you would ever imagine, and marketers need to be ready.

T

he high cost of cash is a price that Retail Banks can no longer allow to burden their profit and loss statement. In the UK 2.9 billion cash withdrawals were made from ATMs in 2008 to the value of £195 billion (Datamonitor 2009, p18). Sourcing this vast amount of cash presents a James lord huge cost to the sector which, given pressures to maximise returns for shareholders, has to be removed. With this in mind it is no surprise that contactless payment technology is slowly picking up speed. By just holding their plastic against a terminal, customers are now able to pay for low value goods at any merchant that is equipped with the technology. To date, around 11,000 UK retail outlets offer this service (Keyfacts 2009, p9). Across the globe, pilot projects are continuing to roll out these payment mechanisms at a furious pace. In 2007, Barclays became the first UK provider to issue contactless payment technology on its credit cards via its Barclaycard subsidiary (Brignall, 2009) and since early 2009 it has issued contactless debit cards. Other major retail banks such as Lloyds have followed suit by issuing Halifax and Bank of Scotland branded contactless cards (Keyfacts 2009, p9). Roll out of cashless payment technology So what is going to happen? Let us fast forward just a few years: cashless payments are continuing to grow, slowly at first, with just a few major players within the sector following Barclays’ lead in providing the service for low value transactions. Inevitably, resistance to the new mechanism remains strong and cash is still king, but our technologically literate generation begin to take notice. From these roots grow an even more convenient contactless payment method using near field communication technology to allow the customer to make payments using their mobile phone. Ten years on and collaboration between retail banking competitors, intermediaries and legislative bodies has seen cashless payments rolled out across millions of merchants around the western and emerging world; cash is dying a slow death as this more convenient payment method has emerged and rapidly become standardised. Vast opportunities for retail banks have now really begun to develop. Sector barriers have broken across the globe; huge national banking organisations previously unknown to the UK have entered the market. As a result strategic alliances and takeovers have gathered pace as they strive to gain market share.

48


EMERGING THEME

look to the blog: MArketing futurology and emerging themes (2010)

Image:Photosani/Shutterstock.com

http://tutors.marketingcollege.com/marketing_futorology_-_emerging_themes

Biometric payment technologies As we get nearer to 2030, cashless payment technology will take a new direction: biometrics. No longer will the consumer need to carry anything with them to pay for their goods, they will simply use a scan of their iris and/or thumb print to confirm their payment. Like its predecessors, take up will be slow, but once customers are assured of the security of their financial details it will soon become the primary payment mechanism. Does this sound a little far-fetched? This technology currently exists. In 1998 Nationwide Building Society conducted a successful trial using biometric technology. It was only the expense of the required capital investment that stopped it from being rolled out across the nation (Sangani, 2005).

Iris recognition technology has been successfully trialed by Nationwide Building Society. Only the expense of the required capital investment stopped it from being rolled out across the nation.

a little far-fetched? Visibility like never before With knowledge comes power and it is customer knowledge that will cause a fundamental change to the sector. The Banking sector will relish the wealth of new opportunities that this advancement has generated. Competitive rivalry, which has been intense ever since the rollout of contactless payment technology, will continue to be ruthless as each player in the sector competes to become the provider of the ‘gateway’ current account for all customers that it deems profitable. Without cash transactions, which are invisible to the sector, the current account will now be the tool that makes all purchases visible like never before. Banks will begin to truly understand their customers by analysing every single one of their purchases. They will be able to clearly identify each customer’s stage in life and their role within the family structure, and use this to predict their values, needs, wants and aspirations on an unprecedented scale. This information will be used to identify key segments precisely within their customer base where customers share the same behaviour. If this information is used correctly, it will help to deliver successful cross-sale and retention strategies as a result of detailed customer propensity insights. This will allow banks to provide offerings that are both relevant and, more importantly, indispensable to each customer within their identified segment. It will also provide key learnings for successful acquisition strategies, using their customer base as a complex prediction tool for targeting prospects. This will have a massive impact on competitive strategy within the sector. Each player will invest huge amounts of resources in time, personnel and capital to win the fight for the consumer. They will spend vast amounts to significantly develop the customer management systems and analytical tools that are in use today to ensure they are able to store and manipulate the extensive amounts of new data that will be available to them. They will train personnel that have expertise and knowledge of these systems to be able to provide insights to the key decision makers within the organisation.

Changing the shape of the market Inevitably, one organisation will diversify to try and gain a firstto-market advantage. However, it will soon be pegged back by imitators as the cash cow that is the current account relationship will suddenly make way for a new star (Palmer et al. 2007, p45). This organisation (be it Lloyds, HSBC, or an organisation that has recently entered the UK market such as Walmart, Mitsubishi UFJ Financial or ICBC) will use their leverage to forge new alliances with key organisations across other markets, from utility providers and local councils to estate agents, communication providers and further afield. In short the current account relationship will become a much more complete offering. Through their current account, banks will act as an intermediary for their customers’ needs. They will develop a new relationship service (tailored to newly-identified detailed segments) that will provide solutions for all the key problems in their customers’ lives. They will negotiate hugely discounted rates as a result of their stature and power in the supply chain and they will charge the customer a nominal amount for their services, all in the hope of developing loyalty to the brand and increasing other product holdings. In short the customer will be able sort out their energy, communication and local authority payments, and even sell their home, all through their current account. If banks have done their research properly (so that they target the right tailored product to the right market segment) and this new innovative product begins to grow, then smaller players in the market that have been struggling to compete will fall by the wayside. This is because they will have insufficient power to negotiate third party relationships with the same price and quality of service as their competitors. Consequently larger banks will swallow up these providers to gain access to their customer base.

49


Within a short space of time this new relationship service will be provided by all the key players in the market. Rather than competing on price, they will compete on service to aid differentiation by striving to be best-in-class (Hooley et al. 2008, p72). Each competitor will benchmark their offers against those provided by competitors in an attempt to provide a stronger proposition. Successful banks will be those organisations that clearly understand which elements of the service are most important to their customers and are able to develop strategies and systems to ensure that their staff can deliver a superior service (Hooley et al. 2008, p563). This new relationship-based product will mean that there is strategic wear-out (Drummond et al. 2001, p167) of traditional sales channels. Competitors in the market will invest significant resources to react to the changing environment. Without cash, large branch networks will be removed to be replaced by new flagship stores catering for this new relationship service. ATMs will simply disappear. Traditional call centre structures will be vastly updated to incorporate new lines of communication that have opened up as a result of new and emerging technology, whilst internet banking capabilities will face a major overhaul as customers are primarily driven to these channels. Marketing in 2030 Inevitably this new market will pose huge questions surrounding marketing structure and resources within competing organisations. The influence of marketing teams on strategic planning will continue to grow, as they are increasingly recognised as being key to creating competitive advantage. Marketers will be expected to have the skills and knowledge to be able to work with the wealth of knowledge at their finger tips, to interpret it correctly and to analyse its implications to feed into strategic planning. They will be expected to use these key findings to ensure that segments can be identified that are both attractive and profitable to the organisation. They should also develop tailored relationship current account products that are relevant to the audience, with a proposition that will make them desirable. Once key opportunities are identified, successful marketers will need sound financial rhetoric to present their proposals to key decision-makers. They will work ever closer with financial teams to present the potential of acquisition and retention strategies, and to highlight implications of these on shareholder returns. With this new product it will be essential for marketers to develop strong working relationships with third party organisations. They will assist in the negotiation process during product development and once the product is launched. They will work closely to continue to develop key product offerings, to identify future opportunities and to ensure clarity and consistency of all marketing acquisition and retention strategies. The complexity of this new current account relationship will, by its nature, mean that customers will be very reluctant to change their provider, so there will be huge

50

implications of getting the right product proposition to the right segments using the right medium at the right time. To aid this it will be necessary for marketers to constantly provide detailed insight into competitor activity and to predict future actions, challenges and trends within the marketplace. The overhaul of the sales channels will change the marketing media that are used. Marketers will compete for time and attention in a changing environment, so it will be essential that they develop relevant strategies and promotions using a mixture of new media channels. It is inevitable that buyer behaviour will be directly influenced by new technology, so marketers will need to be more adaptive than ever. Like never before, the use of biometrics will allow customers to be targeted as they go about their daily routines. Campaigns will be put in place so that when a customer passes by a certain trigger point in a shop or other location they can be targeted with a specific promotion via a digital screen or other mobile communication medium. These marketers will also have to be very flexible, as they will operate in ‘live’ environments (such as social media), to ensure that they can adapt to new opportunities as and when they arise. In any market, but especially in a growing market such as this, skills in innovation and creativity will be central to the role. What does this mean for marketers? It is clear that massive change is on the horizon, so marketers need to act today to identify the skills and knowledge that will be required for the role in the future. They need to commit to continuous development by devising strategies that will ensure these needs are satisfied. This will then allow them to be best positioned to take advantage of the opportunities that are set to develop.

James works for The Co-operative Financial Services. He spent the last 12 months working as a loans product manager, looking after the customer’s end to end journey and ensuring that Co-op loan products were fit for purpose. He has more recently taken up a Business Delivery role which is focused on developing long term sustainable relationships with Co-op Current Account customers.

REFERENCES: Brignall, M. (2009). Fraud concerns over new Barclays debit cards. Guardian, [online] (Last updated 2 March 2009) Available at: http:// www.guardian.co.uk/money/2009/ mar/02/identityfraud-creditcards [accessed 16 November 2009]. Datamonitor (May 2009). The future of UK retail banking. Drummond, G. et al. (2001). Strategic marketing; planning and control. 2nd ed. Oxford: Butterworth-Heinemann.

Hooley, G. et al (2008). Marketing strategy and competitive positioning. 4th ed. Essex: Prentice Hall. Keyfacts (October 2009). Branch and financial insights. Palmer, R. et al. (2007). Managing marketing: marketing success through management practice. Oxford: Butterworth-Heinemann. Sangani, K. (2005). Fingering the identity thieves. Financial World, August pp45-47.


VIEWS - SV

Shareholder value versus short-termism The role of marketing

T

here are two schools of thought about the topic of shareholder value (SV). One school argues that it leads to short-termism. The other school, to which I belong, argues that short-termism has been endemic in Western economies for decades and that this has little to do with SV. For example, during Professor a 20 year period, up to the year 2000, every Malcolm high performing company in the FTSE top McDonald ten in terms of ROI subsequently either went bankrupt or was acquired. The performance of top companies in the banking and financial services sectors in the first decade of the 21st century indicates that, after over 70 years of marketing, organisations still haven’t learned the lesson that shorttermism will eventually doom them to failure. The reason isn’t hard to fathom. As Collis said in a Harvard Business Review article in 2008, most directors don’t even know what the components of a strategy are, whilst Christensen said, also in HBR, of 30,000 new product failures in 2006, most were caused by poor marketing. But to single out SV as a major cause of this is ingenuous in the extreme, for it is managers who are short-term in their behaviour, not the financial investment community. It also reveals a common misunderstanding about what SV really is and how stock markets around the world work.

and existing dividend payments and to drive the capital growth that they want to see in the future. At the same time they also need a method of assessing the risks associated with these proposed strategies as, obviously, those risks have a direct link to their required rate of return. This is where marketing should play a role. As Figure 1 shows, the perceived risk profile of the investment drives the level of return required by investors in each particular investment. Logically, therefore, a normal, rational, risk-averse investor requires an increase in expected future return from any more risky investment in order to compensate for any potential volatility. No amount of discussions will alter this inarguable fact of life. It was ever thus and certainly long before Rappaport proposed EVA (the antecedent of SV). While investors know exactly what their return will be in advance of making their investment in most government-backed debt investments (i.e. the interest rate payable is stated on the debt offering), this is clearly not the case with most equity risk perceptions and hence required rates of return. Further, if the historical track record of a company’s shares shows significant volatility in share prices and even dividend payments, investors will require much higher returns from the company, as they will extrapolate from this past performance as their best guide to the future performance of the company’s shares. Thus, life is much more challenging for a highly volatile company, caused by shareholders’ natural dislike for risk.

The Central Role of Risk Assessment In Value Creation Let’s first look at the concept of risk. For most companies, the current share price already reflects some expected future growth in profits. Thus, these current investors and, even more particularly, potential future shareholders, are trying to assess whether the proposed business strategies of the company will produce sufficient growth in sales revenues and profits, both to support the current share price

The new opportunity of marketing from SV In the best companies, marketers carry out proper due diligence on declared future marketing strategies, taking into account the associated risks, the time value of money and the cost of capital. New strategies have significantly different impacts on risk which may change their potential for creating shareholder value. Optimal marketing strategies seek to increase returns whilst reducing associated risk levels, and it is these which create SV. Remember, investors are interested in sustainable SV, as it is this which impacts the capital value of shares, not results in a single year manipulated by short termism on the part of managers. Whether we like it or not, SV will persist as the most logical method of measuring corporate performance, for without creating it, all stakeholders will suffer. This provides an unprecedented opportunity for marketers to show their true worth, especially as today intangible assets account for about 70% of all corporate value in the UK.

REQUIRED RATE OF RETURN

Figure 1: Risk-adjusted required rate of return

Level of return required by investors in investment Y

Zero risk rate of return

ste dju k-a Ris

dr

e

urn ret of ate r d i re qu

Specific risk of investment Y

PERCEIVED RISK PROFILE OF INVESTMENT

lin

e

Emeritus Professor Malcolm H.B. McDonald MA(Oxon), MSc, PhD, D.Litt., FCIM, FRSA was, until recently, Professor of Marketing and Deputy Director of Cranfield School of Management. His extensive industrial experience includes a number of years as Marketing Director of Canada Dry. He spends much of his time working globally with the operating boards of the world’s biggest multinational companies.

51


­Marketing strategy in times of uncertainty There were times in the last 50 years when we thought we knew the name of the game, how to play it and which way was up. Now we have all been dumped into what we are comforted to know is a ‘recession,’ so we wait patiently for the uncertainty to pass and for the old levers to start working again.

H

ibernation is not a strategy. I hate to be the bearer of bad news, but those patient organisations are probably reducing their chances of survival with every week they wait. If you believe (as I do) that this is not a recession but a change in the Economic cycle identified by Nikolai Kondratiev (1892-1938), then the ‘good times’ are unlikely to make a return much before 2030. Now, what does that mean for marketing?

Paul Fifield

The last 50 years have been typified by what Kondratiev termed the economic summer and autumn seasons; we are now in the winter period. During summer and autumn periods (roughly 1960-2008 in our case) everything grows and it is really quite difficult not to make money. In such bountiful times, marketing only has to worry about communications to have an impact and can happily abdicate responsibility for product, price and distribution. Now that things have changed, we are obviously left wondering whether marketing departments will be able to rise to the challenge. In fact, research from the London Business School showed that a majority of CEOs recognised that the changing business environment required significant changes in their organisations. They recognised that these changes should be driven by their marketing people; unfortunately they also considered their marketing people unequal to the challenge. We all know what marketing was meant to cover: it was laid out in Levitt’s iconic article of 1960, “Marketing Myopia” and later stylised into the marketing mix of Ps (first 4, then 7, and now 11!). Originally, marketing was intended to be an integrative function, helping everyone else in the organisation to better align their efforts with the needs of the external market – a subject where marketers were expected to be expert. All those Ps to mix and manage, and what happened? The single P of promotion seemed to dominate all the thinking in marketing departments, business schools and institutes alike. Product, pricing and distribution decisions are now controlled by other functions in the organisation, functions with an internal view of the world rather than a market view. We all know the consequences: reasonable long-term returns (or spectacular short-term returns) for as long as the market seemed easily predictable and easily pleased. Things have changed.

52


VIEWS - UNCERTAINTY

Photo: Andrew Bossi, Flickr. Image: Wikimedia Commons

Kondratiev’s Economic Cycle

Time for Marketing to step up to the mark? The easy times are gone and it is now time for REAL marketing to take the lead, if it can. Einstein said “The world that we have made as a result of the level of thinking that we have done so far creates problems that we cannot solve at the same level as they were created.” Most of our problems have been caused by management’s obsession with internal issues, but today’s challenges will only be met by solutions found outside the organisation. If (and it is not easy) you are able to take the first step and abandon yesterday, then you will start to see the nature of the business environment that we face. The key characteristics of today’s environment are: • Change: This is a constant, not a temporary or unusual situation. Like it or not, customers and their lives continue to evolve, as do their needs and wants. Recent research has shown that the current change in customer demand started in the early 2000s, and was not a direct result of the financial collapse. • Unpredictability: This is another constant. Control, predictability and planning are mere illusions that inward looking business functions believe ‘ought’ to be possible. According to Henry Mintzberg, “Setting oneself on a predetermined course in unknown waters is the perfect way to sail straight into an iceberg.” • Tools: Since the vast majority of the management and marketing tools we have learned to use were created in the times of plenty and growth, they are simply irrelevant to today’s circumstances – no matter how well you implement them. • Organisation: The present dominant organisation form remains only slightly modified since the Roman Legions and is probably past its sell-by date – if it cannot deliver the value that the market demands (and most cannot) then it will cease to exist. Much of the ossification of organisations and their structures is due to management which seems intent on clinging to the outdated ‘hierarchical command and control’ reminiscent of its military origins. • Metrics: In (normal) times of change and unpredictability, the question ‘How are we doing?’ tends to be asked more frequently. Unsurprisingly, the answer “This was our profit 18 months ago” fails to delight. The trailing indicators of the past 50 years need to give way to new forms of leading indicators that can inform managers about what investment decisions to take now. Show me the money! Lastly, if marketing really is responsible for creating the cash flow of the organisation, then it is time to start behaving like a serious force in the business. It is time to look outside our self-made communications bunker, see the implications of external change on the rest of the organisation and take some responsibility for helping others to adapt to the new business reality. Darwin said that “It is not the strongest of the species that prospers, nor the most intelligent, but the one most adaptable to

codexvisio.com

Search...

Nero Claudius Caesar Augustus Germanicus

Lives in: ROME From: ANTIUM Born: 15 December 37 Likes: Fiddling, watching things burn Dislikes: Overbearing mothers YOU THINK SOCIAL NETWORKING IS THE ANSWER?

change.” Recent research is suggesting strongly that, by the end of this decade, some of our biggest, strongest and most intelligent organisations are unlikely to exist, at least in their present forms. Why is that? Because adaptability is not taught in business schools; because adaptability is not a ‘model’ offered by consultants; because adaptability is not a single-silo idea, it must be driven across the entire business; because the ‘Business Pioneers’ who dare to promote adaptability are seen as dangerous heretics by the status quo who have too much to lose from such counter-cultural ideas. A recent survey of CEOs by IBM showed that the vast majority of those interviewed: 1. Saw the rapidly changing environment as their biggest issue. 2. Knew that they had to change the organisation to meet the environmental requirements. 3. Did not know how to achieve this – there were no successful examples to follow. Luckily not everybody has been cutting costs, blaming the sales force, restructuring blindly, rushing out as many new products as possible and reducing prices to try and compete with the Chinese. Soon the business pioneers will be getting the support that they need to help focus the rest of their organisations on where all the money comes from: the customer!

Fiddling while Rome burns? For those of you that can’t relate to the message of this article, or are even wondering what any of this has to do with marketing, keep focusing on digital marketing & social networking – the answer might be in there somewhere…

Paul Fifield is the Director of the Paul Fifield Organisation and a Partner at The GreenField Organisation LLP. He is a Visiting Professor at the University of Southampton and the Collège des Ingénieurs, Paris, and a Visiting Lecturer at the University of Bath. Contact Paul at PaulFifield@Fifield.co.uk.

53


Here are the top 5 bestselling sales and marketing books from Amazon.co.uk:

List correct as of June 2011

Website Inspiration Have you ever wondered where to look for inspiration to improve your website? You might start by looking at the 2011 FT Bowen Craggs Index of corporate websites which was published in April. The Index ranks 75 large corporate websites and their associated social media channels by a range of criteria and is the most

54

endnotes DIgital Dashboards A digital dashboard centralises a range of information, helping turn data into intelligence to inform your decision-making. Good decisions help to grow a business, reduce risk in an organisation and ultimately provide a better customer journey and marketing service. An effective dashboard turns useful data into decisionmaking tools. Dashboards should blend and integrate the hard numbers and the softer, subjective measures that give a broader context to their causes. The best dashboards automate the data collection and reporting process, providing real-time feeds of information. This speeds up tactical decision making and fuels longer term strategic thinking. As trends are important, a dashboard that reports over set periods is far more likely to demonstrate fluctuations from which improvements can be made. Soon, dashboards will measure every step along the entire customer journey, truly proving return on investment. detailed mass study of large websites produced. It has three aims: to show organisations where to look for ideas, to identify trends in online communications, and to allow the companies in the Index to see how they are performing against their peers. It is not intended to be a ranking of the best websites in the world; instead, it selects from the FT Global 500 the 25 biggest companies from the US, Europe and the Rest

MarketMeSuite

marketmesuite.com A social media dashboard for small businesses which links Facebook and Twitter activity with email reporting and outcomes. It focuses on the output of information rather than the reporting and integration with other activity. Price: $5.99/mth to $99 one off purchase Pros: Twitter and Facebook publishing, ease of use, joined up interface Cons: Lack of strategic focus, onesize fits all Rating: 6/10

Google Analytics

google.com/analytics The leading analytics service, providing broad ranging insights into website performance and customer journey tracking. Customised reporting and ease of integration makes Google highly accessible for all sizes and types of organisation. Price: Free Pros: Ease of integration into existing websites, automated reporting Cons: Focus only on website objective data Rating: 8/10

iDashboards

idashboards.com

Price: Free 30 day trial, bespoke pricing Pros: Interactive interface, link to traditional sales and marketing methods, strategic integration Cons: Potential cost of website and social media integration Rating: 6/10

LoopFuse

loopfuse.com Marketing automation through a step-by-step process, from tracking website visits to conversion. Integration with salesforce.com and LinkedIn with varied levels of reporting Price: Scalable from Free to $3,000/mth Pros: Link with existing CRM, integrated email publishing, website analytics Cons: Set-up, visual reports Rating: 7/10

MetricPulse

metricpulse.com Data-focused rather than intelligent but allows for some monitoring of competitors in a real time interface. Price: 14 day Free trial then $22/ mth to $198/mth Pros: Simple web-based interface, Google Analytics, Facebook, Twitter integration Cons: Lack of strategic focus, cost Rating: 6/10 Image: baur/Shutterstock.com

1. Hegarty on Advertising: Turning Intelligence into Magic By John Hegarty 2. It’s Not How Good You Are, It’s How Good You Want To Be By Paul Arden 3. Cold Calling for Chickens By Bob Etherington 4. The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly By David Meerman Scott 5. Advanced Selling Strategies: The Proven System of Sales Ideas, Methods and Techniques Used by Top Salespeople Everywhere By Brian Tracy

NEWS REVIEW

Bestselling Marketing Books ON Amazon. co.uk

Visually inspiring dashboards for a range of industries and functions including marketing and sales. iPhone and iPad integration for real time reports on internal data with full export facility

of the World (including Russia). These 75 websites are then subjected to a detailed assessment using a mix of specific and subjective metrics. Each review takes 16 hours and is carefully documented. Bowen Craggs are clear that their assessment is not intended to be a tick box, mechanical exercise – it involves judgement at every stage. Bowen Craggs provide an interactive table of the full

results of the Index, which you can sort by your preferred criteria, such as the score for message or serving customers. There is further information on their methodology which includes a commentary of the strengths and weaknesses of the top websites and a summary of key themes and trends. You can find the full results as well as free access to Bowen Craggs’ Best Practice Library at http://www. bowencraggs.com


Cambridge Marketing Press 1 Cygnus Business Park Middle Watch Swavesey Cambridgeshire CB24 4AA Tel: +44(0) 1954 234944 - Fax: +44(0) 1954 234950

Cambridge Marketing review - Issue 1  

The Cambridge Marketing review is a high-quality, professional journal, covering interesting features and articles by various experts for th...

Cambridge Marketing review - Issue 1  

The Cambridge Marketing review is a high-quality, professional journal, covering interesting features and articles by various experts for th...

Advertisement