philip_kotler

A Strategy Document

on

The New Marketing Paradigm

Holistic Marketing ● Lateral Marketing ● High-tech Marketing

by

PHILIP KOTLER



Documentation Sponsored by



Canon

logo unit

Kotler On Marketing

How To Create, Win, and Dominate Markets





 Philip Kotler, Ph.D

 Kellogg School of

Management

 Northwestern

University



 Indiatimes Mindscape

 Mumbai and Delhi

 October 11, 12, 2004



Printed on CANON

Two Challenges Facing

Indian Companies

1. Will Indian companies be able to defend their

market against the growing invasion of foreign

global brands?



2. Can Indian companies develop strong global

brands?









Printed on CANON

Can Indian Companies

Defend the Domestic Market?



 Foreign competitors will not only go after the

high end market in India. They will target the

middle and eventually the low end.



 The main defense for India will be developing

stronger skills in innovation, differentiation,

branding, and service. In a word,

MARKETING!





Printed on CANON

But India Needs

Stronger Marketing

 Confusing marketing with advertising.

 Advertising is hard sell.

 Sometimes ads appear before the product is in distribution.

 Some companies over-spend on advertising and go broke.

 Little use of marketing research; can‘t trust.

 Therefore little segmentation of market and poor targeting.

 Over focus on winning through low price; neglecting

differentiation.

 Retailers carry the same goods and their service is poor.





Printed on CANON

Marketing is More Important

than Production!

 The Indian manufacturer of a Hugo Boss shirt gets only $12, or

10% of the final price of $120 that is paid by a customer of Saks

Fifth Avenue.

 The retailer gets 60% ($72) and the Brand company gets

30%, or $36.

 Would you rather be the manufacturer, Brand owner, or

retailer?



 The Indian manufacturer has no defense if the Brand Owner

wants to switch to another manufacturer to whom he will pay

$8 and keep $2 or pass it to the retailer to get more retail

support.



 Yet India pays more attention to the product engineer than the

marketing ―engineer.‖ But India‘s future success will require

investing in marketing and branding.





Printed on CANON

The Strategic Trajectory

for India

 Low cost, average quality domestic products.

 Low cost, good quality domestic products.

 Indian high-end products made for other companies.

 Indian branded products (regional).

 Indian branded products (global).

 Indian dominant brands (global).







Printed on CANON

Ranbaxy Pharmaceuticals (India)

 Originally sold bulk substances to unsophisticated

markets but gross margins were too low to cover

export costs.

 New CEO, Parvinder Singh, challenged Ranbaxy to

become a truly global company. He said: ―Ranbaxy

cannot change India. What it can do is to create a

pocket of excellence. Ranbaxy must be an island

within India.‖

 The company moved into higher-margin businesses

like selling branded generics in large volume

markets like China and Russia.

 Ranbaxy then entered the U.S. and Western Europe.

In just five years, more than half of its US$ 250

million revenues now come from outside of India.



Printed on CANON

The Case of Haier

Haier developed through three stages.

1. Fix quality

(Zhang Ruimin smashed 76 refrigerators).

2. Diversify

(Microwaves, toasters, air conditioners,

dishwasher, vacuum cleaners, etc.)

3. Globalize

(Asia Region, U.S., Europe)



 Haier entered with a U.S. partner and is

challenging Whirlpool and GE.

 Haier‘s brand name products are sold in Wal-Mart,

Best Buy, Sears, Lowe‘s, Home Depot and Target.

 Haier is promoted as a global brand, not a Chinese

one. (Many people think it is German).

 Puts lower price models in price-only stores and

Printed top stores.

higher price models in on CANON

Five C‘s Favoring India

 Capital: India has and can attract capital.



 Cost: Another 50 years of low cost production



 Capability: Large number of trained workers,

engineers, scientists, and business people



 Consumers: Immense domestic market



 Calm and stability: in a world of turmoil and

uncertainty







Printed on CANON

A Quiz: Who Said This?



 ―The purpose of a company is ‗to create a customer…The only

profit center is the customer.‘‖



 ―A business has two—and only two—basic functions:

marketing and innovation. Marketing and innovation produce

results: all the rest are costs.‖



 ―The aim of marketing is to make selling unnecessary.‖



 ―While great devices are invented in the Laboratory, great

products are invented in the Marketing department.‖



 ―Marketing is too important to be left to the marketing

department.‖



Printed on CANON

My Message



 Marketing‘s performance has been

disappointing.



 You must replace your Old Marketing with

New Marketing that is:

 holistic,



 technology-enabled,



 and strategic.









Printed on CANON

Facing the Increasing Pressure for

Marketing Accountability

 Marketing has become a one P discipline = selling.

 Marketing involves a great deal of waste.

 $2 million for 30 seconds on the Superbowl.

 Direct mail campaigns with a 1% response rate.

 Cold sales calls which play the numbers.

 High rate of new product failure.



 Marketing costs are high and rising.

 Marketing lacks accountability.

 Marketing does not create major new ideas.

 Marketing is too involved in short-term thinking.

 Marketing doesn‘t focus on its real assets.

 Brands, customers, service quality, stakeholder

relationships, intellectual capital, corporate reputation

Printed on CANON

Needed:

Holistic Marketing

 Marketing must become strategic and drive business strategy.



 A company needs to take a more holistic view of:

 the target customers‘ activities, lifestyle, and social space.



 the company‘s channels and supply chain.



 the company‘s communications.



 the company‘s stakeholders‘ interests.







 Holistic marketing will require strong software support.









Printed on CANON

HOLISTIC RELATIONSHIP MARKETING FRAMEWORK



1) Who is involved?



CUSTOMERS CORPORATION COLLABORATORS







MARKET

SPACE 2) How can we define relevant market space?







3) What are the potential opportunities emerging

POTENTIAL from the market space?

OPPORTUNITIES









4) What business capabilities and infrastructure

BUSINESS

INVESTMENT required?



CUSTOMER CORE COLLABORATIVE

FOCUS COMPETENCIES NETWORK

Printed on CANON

4 COMPETITIVE PLATFORMS

Customer Core Collaborative

Focus Competencies Network







COGNITIVE COMPETENCY RESOURCE

Exploring SPACE SPACE SPACE

Value



Market Business



Offerings Architecture



Creating

CUSTOMER BUSINESS BUSINESS

Value VALUE DOMAIN PARTNERS







Marketing Operational

Activities

System

Delivering

Value

CRM ERP SCM





Printed on CANON

Responding to Low Margins and the

Economic Slowdown

 Commoditization and rapid imitation leading to shorter product

life cycles.

 Competition of cheaper brands from China and elsewhere.

 Rising selling and promotion costs and decreasing sales

effectiveness.

 Shrinking margins.

 Proliferation of sales and media channels.

 Power shifting to giant retailers who are demanding lower

prices.

 Recession: lower incomes and purchasing power.

 Mergers, large company bankruptcies.





Printed on CANON

Improving Marketing

Efficiency and Effectiveness

 Improving marketing efficiency

 buying inputs more efficiently

 hunting down excessive communication and sales travel

expenses

 closing unproductive sales offices

 cutting back on unproven promotion programs and tactics

 putting advertising agencies on a pay-for-performance basis

 Improving marketing effectiveness

 replacing higher cost channels with lower cost channels

 shifting advertising money into better uses

 reducing the number of brands or sku‘s

 Improving supply chain responsiveness





Printed on CANON

Responding to the

Economic Slowdown

 Reevaluate your current resource allocations.

 Geographical mix

 Market segment mix

 Customer mix

 Product mix

 Channel mix

 Promotion mix





 Decide whether to attack to gain market share rather than

retrench.



 Be sure to maintain the value proposition promised by your

brand.



 Try to add value instead of cutting the price.





Printed on CANON

Marketing Strategies Are Showing

Diminishing Returns



 Product differentiation is harder to

achieve.

 Acquisitions and mergers have as

many failures as successes.

 Internationalization is offering less

opportunities because either the good

markets are overcrowded or the poor

markets have no money.

 New products unfortunately fail more

times than they succeed.

 Price cutting doesn‘t work because

competitors will match.

 Pricing raising doesn‘t work since

there isn‘t enough differentiation to

support it.

 Cost cutting has eliminated much of

the fat but is now risking cutting the

muscles.





Printed on CANON

Strategies for Firms in Different Market Positions









Jagdish Sheth, Singapore Marketer, 2002

Printed on CANON

Five Winning Strategies

 Cost reduction: (IKEA, Southwest Airlines,

Wal-Mart, Enterprise Rent-a-Car).

 Improved customer experience (Starbucks,

Harley Davidson)

 Innovative business model (Barnes & Noble,

Charles Schwab, FedEx, Sony).

 Improved product quality (P&G, Toyota).

 Niching: (Progressive Insurance, Tetra)



Printed on CANON

Dual Strategies

 Planning for today  Planning for tomorrow

 Defining the business.  Redefining the business

 Shaping the business to  Reshaping the business

meet needs of today‘s to compete for future

customers customers and markets

 Improving alignment  Making bold moves away

between functional from the existing ways of

activities and business doing business

definition

 Organization mirrors

 Reorganizing for future

current business

business challenges

activities

 Managing change to

 Optimizing current

create future operations

operations to achieve

and processes

excellence.



Printed on CANON

In many markets, the growing number of

competitors in mature markets leads

companies to target niches of low

profitability.

YOGURTS MARKET Number of

competitor

s





Market

Size









Time



Average

profitability

of all

competitors

Printed on CANON or players

Some Vertical Marketing Methods

 Modulation

 The juice manufacturer varies the sugar content, fruit

concentrate, with or without vitamins…

 Sizing

 Potato chips are offered in sizes 35 grams, 50 grams, 75grams,

125 grams, 200 grams, multi-packs…

 Packaging

 Nestle‘s Red Box chocolates comes in different containers:

cheap paper box for the grocery trade, premium metal box for

the gift trade…

 Design

 BMW designs cars with different styling and features...

 Complements

 Biscuits with sugar spread on it, with cinnamon, with

chocolate, with white chocolate, with black chocolate, filled

biscuits…

 Efforts reduction

 Charles Schwab offers different channels for transacting such

as retail stores, telephone, internet….





Printed on CANON

The case of Cereal Bars







Cereals for breakfast market New category









into STREETS =

Cereal varieties









Printed on CANON

The case of Barbie



Baby dolls market Teenager New category







To

feel =

as...





Doll varieties









Printed on CANON

Other Examples of Lateral Marketing

 Kinder Surprise = candy + toy.

 Seven Eleven = food + depot.

 Actimel = yogurt + bacteria protection.

 Gas station stores = gas station + food.

 Cyber cafes = cafeteria + Internet.

 ―Be the godfather of a kid‖ = Donation + adoption.

 Huggies Pull-ups = diapers + 3 year olds.

 Walkman = audio + portable



 Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A New

Approach to Finding Product, Market and Marketing Mix Ideas (Wiley, 2004)









Printed on CANON

Check Where You Stand

 Marketing does the marketing -> everyone does the

marketing.

 Organizing by product units -> organizing by customer

segments.

 Making everything -> outsourcing more goods and

services.

 Using many suppliers -> working with fewer suppliers.

 Emphasizing tangible assets -> emphasizing intangible

assets.

 Building brands through advertising -> building brands

through integrated communications.

 Attracting customers to stores -> making products

available on-line.

 Selling to everyone -> selling to target markets.

 Focusing on profitable transactions -> focusing on

customer lifetime value.

 Focusing on market share -> focusing on customer share.

 Being local -> being ―glocal.

 Focusing on the financial scorecard -> focusing on the

marketing scorecard.

 Printed on CANON

Focusing on shareholders -> focusing on stakeholders

Building Brand Equity

MARKETING IS THE ART OF BRAND BUILDING



*

IF YOU ARE NOT A BRAND,

YOU ARE A COMMODITY.



*

THEN PRICE IS EVERYTHING

AND THE LOW-COST PRODUCER

IS THE ONLY WINNER!









Printed on CANON

1. How Important is Branding?



 The NUMMI plant in California produces two

nearly identical models called the Toyota

Corolla and the Chevrolet Prizm.



 Toyota sold 230,000 Corollas compared to

sales of 52,000 Prizms.



 And Toyota‘s net price is $650 higher!





Printed on CANON

A Strong Brand Improves

Demand and Supply

 On the demand side:

 higher price

 increased sales volume

 lower churn

 more brand stretching





 On the supply side:

 greater trade acceptance, more favorable supplier terms,

lower rejection

 lower staff acquisition and retention costs

 lower cost of capital

 better scale economics through higher volume



Printed on CANON

Names are Important in Branding

 Donald Trump‘s family name is Drumpf.

But he can‘t call it Drumpf Towers.



 Alan Alda‘s name was Alphonso

D‘Abruzzo.



 Chinese gooseberry was renamed

kiwifruit.



 Paradise Island in the Bahamas used to be

Hog Island.

Printed on CANON

A Brand Must be More

Than a Name

 A brand must trigger words or associations (features and

benefits).



 A brand should depict a process (McDonald‘s, Amazon).



 A great brand triggers emotions (Harley-Davidson).



 A great brand represents a promise of value (Sony).



 The ultimate brand builders are your employees and

operations, i.e., your performance, not your marketing

communications.





Printed on CANON

Your Company‘s Brand

1. What word does your brand own?



2. Write down other words triggered by your brand name?



A. Circle the favorable words; square the unfavorable words.

B. Underline the words that are favorable but not widely known.

C. Double underline the words that are unique to your company.



3. Are any of the following a source for strengthening your brand‘s

personality?



A. Founders

B. Spokespersons

C. Characters

D. Objects

E. Stories and mythologies





Printed on CANON

2. How Do You Develop

a Brand Concept?

 ―The brand must be an essence, an ideal, an

emotion. ‖ It must be supported by beautiful logos,

clever tag lines, creative turns, edgy names, rave

launch parties, big ticket giveaway promotions, and

publicity buzz-making. (Advertising agency view)



 ―The brand should have a target group in mind and

be positioned to solve one of their problems better

than competitive offerings.‖ Furthermore the brand‘s

reputation is ultimately based on product quality,

customer satisfaction, employee communications,

social responsibility, etc. (Kevin Clancy, CEO of

Copernicus)





Printed on CANON

Branding Components



 Name

 Short, suggestive, memorable, unique, pronounceable

 Slogan

 Logo and typeface

 Colors

 Music

 Themelines (Got Milk!)

 Stationery and business cards

 Offices

 Trucks

 Dress code





Printed on CANON

Brand Slogans

 BA, ―The World‘s Favorite Airline‖

 American Express, ―The Natural Choice‖

 AT&T, ―The Right Choice‖

 Budweiser, ―King of Beers‖

 Ford, ―Quality is #1 Job‖

 Holiday Inn, ―No Surprises‖

 Lloyds Bank, ―The Bank that Likes to Say Yes‖

 Philips,

 ―From Sand to Chips‖

 ―Philips Invents for You‖

 ―Let‘s Make Things Better‖







Printed on CANON

There is No Such Thing as a Commodity:

Differentiate by Segments

 Mobil conducted a study of 2,000 gasoline buyers and

identified five segments:

 Road Warriors (always driving)

 True Blues (brand or dealer loyal)

 Generation F3 (liked convenience store aspect)

 Homebodies (fills up at nearest station)

 Price Shoppers (20% of all the buyers)

 Mobil rolled out Friendly Serve: cleaner property,

bathrooms, better lighting, well-stocked stores, and

friendlier personnel.

 Mobil charged $.02 more and sales increased by 20-25

percent.





Printed on CANON

3. How Do You Promote a Brand?



 ―How do I justify spending millions on

creating an image. That‘s millions my

customers have to spend when they buy

from us.‖ Tom Parker, CEO of Clark‘s

shoes.



 Brands are built by performance, not

advertising.







Printed on CANON

Don‘t Overuse Advertising

to Build a Brand

 People don‘t pay that much attention to ads anymore

(wallpaper).



 Some exceptional TV ads grab attention but do not

provide motivation.



 Advertising doesn‘t have much credibility or

believability.



 The existence of so much advertising makes

advertising less effective. Yet the cost of advertising

keeps rising.



Printed on CANON

Tools for Building Brands

 Advertising (e.g.,Absolut Vodka)

 Sponsorships (e.g., Kodak and Olympics)

 Clubs (e.g. Nestle‘s Casa Buitoni Club)

 Company visits (e.g., Cadbury‘s theme park, Hallmark‘s Museum)

 Trade shows

 Traveling exhibits

 Worldwide web casts of presentations, roundtables, entertainment

 Distribution outlets (e.g., Haagen-Dazs)

 Public facilities (e.g., Nestle Nestops)

 Social causes (e.g., American Express)

 High value for the money (e.g. buzz created by Ikea, etc.)

 User community building (e.g., Harley-Davidson)

 Founder‘s personality (e.g., Colonel Saunders)

 Celebrity spokespersons









Printed on CANON

4. What Makes a Strong Brand?



 Strong brand = Product Benefits x Distinct

Identity x Emotional Values









 Peter Doyle, Marketing Management & Strategy, 1997









Printed on CANON

THE Y&R MODEL OF BRAND STRENGTH



A successful brand has brand vitality and brand stature.





Brand vitality consists of:

1. Differentiation, the brand is distinct

2. Relevance, the brand is meaningful and personally

appropriate.

Brand stature consists of:

1. Esteem, the brand is seen to have quality and momentum.

2. Familiarity, the brand is known and understood by many people.





Some conclusions:

1. A brand that has high familiarity but low likeability is a troubled brand.

2. A brand that has high likeability but low familiarity has high advertising

potential.

3. A brand with high vitality but low stature has excellent potential.

4. When a brand‘s differentiation and relevance start slipping, esteem will slip

next, and then familiarity will decline.





Printed on CANON

Characteristics of Strong Brands

 Provides superior delivery of desired benefits.

 (Starbucks, FedEx, Amazon)

 Maintain innovation and relevance for the brand.

 (Gillette, Charles Schwab)

 Establish credibility and create appropriate brand

personality and imagery.

 (Apple, Virgin)

 Communicate with a consistent voice.

 (Coca-Cola, Accenture)

 Strategically design and implement a brand

hierarchy and portfolio.

 (BMW, The Gap)



Printed on CANON

Strong Brands Supply Use Value

as Well as Purchase Value

Nestle:

 Sells baby food

 Provides free dietitian phone line

 Nestops along the highway





Home Depot:

 Sells home improvement products, such as paint, electrical

supplies, plumbing

 Offers free kitchen remodeling design service

 Offers free workshops on how to paint, fix faucets, etc.





Volvo

 Teaches safe driving,

 Supports lower insurance rates for safe drivers









Printed on CANON

When Do You Stretch

a Brand Name?



 Mercedes is putting its name on large, medium and

small cars.



 Gap decided to invent Old Navy in going down and

buying Banana Republic in going up.









Printed on CANON

How Do You Revitalize a Brand?

 A dowager brand pioneered the market but now is declining. It will

be hard to reverse the decline and give it new life but the decline

can be slowed down.

 Two general approaches:

 Marketing mix modification

 Improve the product, distribution, price, or promotion

 Market modification

 Find new segments, new usage benefits or occasions,

more frequent usage, etc.

 Find out to whom the dowager brand is losing share:

 Old peer brands

 New peer brands

 Retail store brands

 Generic brands

 Elite brands

 Find out to whom the dowager brand is losing sales.

 Interview people who defected to each competitive class and their

dissenting rationales.

 Determine a counterlogic for each group and direct them to the

groups that can most easily be won back.

 Source: Dennis W. Rook and Sidney J. Levy, ―Defending the Dowager:

Communication Strategies for Declining Main Brands.‖

Printed on CANON

How Do You Rationalize

Your Product Line?

 Unilever found that the largest 50 brands accounted for 63% of

its revenues.

 Unilever decided to emphasize 400 core brands and dispose,

delete or consolidate 1,200 of its marginal brands.

 Unilever selected its 400 core brands based on brand scale,

brand power (#1or 2), and brand growth potential.

 40 brands were designated as core global brands (e.g., Dove,

Knorr, Lipton), and 360 as regional core brands.

 The core brands would get disproportionate investments in

advertising and promotion, innovation, marketing competence

and management time. The core brands would be extended.

 Weak brands had small market shares; poor profitability;

negative cash flow; weak channel support; disproportionate

consumption of management time.

 The weak brands would be milked, sold, delisted, or their

attribute would be migrated to another brand.





Printed on CANON

What Are the Most Frequent Causes

of Brand Failure?



 Failure to live up to the brand promise.

 Failure to adequately support the brand.

 Failure to adequately control the brand.

 Failure to properly balance consistency and

change with the brand.

 Failure to do brand equity measurement and

management.







Printed on CANON

Building Customer Equity

 How customer-centered is your company? How

do you measure this?

 Does your company need to be more customer-

centered? To all customers or only the more

important customers?

 How can you go about becoming more customer-

centered?

 How much would this cost you in new technology

and training?

 How much would you gain as a result of

becoming more customer-centered?



Printed on CANON

Achieving Outcomes in Market Space

 Achieving a deep customer focus is not done simply by building a

customer database or customizing your product offerings.



 A company must define its marketspace not in terms of products but

in terms of customer outcomes.

 Baxter Healthcare supplies ―home-recovery enhancement,‖ not just

nursing care or wheelchairs.

 IHI, a health insurance company, operates in the ―lifetime health and

personal safety‖ marketspace.



 A company then examines the customer activity cycle and the value

gaps.



 The company then invests in filling the major value gaps.



 The company ends up being favored and grows through doing more

things better for their customers.





 Source: Sandra Vandermerwe, ―Achieving Deep Customer Focus,‖ MIT Sloan Management

Review, Spring 2004, pp. 26-34



Printed on CANON

Achieving Deep Customer Focus

1. Create strategic excitement.



2. Enlist ―points of light.‖



3. Articulate the new market space focused on customer outcomes.



4. Identify the value opportunities through using the customer activity cycle.



5. Build a compelling case (not through a plan but a story).



6. Size the prize.



7. Modeling the concept with a few chosen customers.



8. Get people working together.



9. Get critical mass.



10. Gather momentum.



 Source: Sandra Vandermerwe, ―Achieving Deep Customer Focus,‖ MIT

Sloan Management Review, Spring 2004, pp. 26-34.

Printed on CANON

Building Customer Equity

 Reduce the rate of defection.

 Increase the longevity of the relationship.

 Enhance the growth potential of each

customer through cross-selling and up-

selling.

 Make low-profit customers more profitable

or terminate them.

 Focus disproportionate effort on high

value customers.





Printed on CANON

Components of Customer Equity

 Customer equity is driven by:

 Value equity

 Brand equity

 Relationship equity.





 Companies must decide which driver(s) underlie

each equity.









 Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon,

Driving Customer Equity (New York Free Press 2000).







Printed on CANON

Transaction Marketing vs.

Customer Relationship Marketing

 Customer Relationship Marketing (CRM) represents a

paradigm shift from Transaction Marketing (TM).



 TM companies focus on products and making a sale. CRM

companies focus on building a long-term relationship that

produces satisfaction for the customer and profitability for

the company.



 TM companies promote everywhere in search of customers.

CRM companies promote to a defined customer group and

aim to make the right offer at the right time using the right

channel to the right customer.



 All companies must practice a mix of TM and RM. TM will be

stronger in companies facing a large number of customers;

RM will be stronger in companies facing a small number of

customers.



Printed on CANON

Treat Different Customers Differently





 Most profitable customers





 Most unprofitable customers





 Most growable customers





 Most vulnerable customers









Printed on CANON

Needed:

Technology-Enabled Marketing

 Technology-enabled marketing (TEM)

combines information technology, analytical

capacities, marketing data, and marketing

knowledge, made available to one or more

marketing decision makers to improve the

quality of marketing management.









Printed on CANON

A 5 Step Model for

Database Marketing

1. Gather useful data on customers.

2. Classify customers by their needs and by their

value to the firm.

3. Prepare business rules that select the best

prospects.

4. Customize marketing treatments for each prospect

in terms of product offers, service mix, media, and

channel.

5. Set up accountability procedures.



Printed on CANON

Database Marketing is Expensive!

 Requires a tremendous investment in information gathering

about individual customers and prospects.



 Requires constant updating of information.



 Some critical information may not be available.



 Requires a high investment in hardware and software.



 Requires integrating individual customer information from a

variety of sources.



 Requires people skilled at data mining.



 Requires managing and training employees, dealers, and

suppliers.



Printed on CANON

Does Every Business Need CRM?

 No. The following businesses may not benefit from CRM:

 Businesses where the CLV is low.

 Businesses with high churn.

 Businesses where there is no direct contact between the

seller and ultimate buyer.



 Companies that are in the best position to invest in CRM.

 Companies that collect a lot of data (banks, insurance

companies, credit card companies, telephone

companies).

 Companies that can do a lot of cross-selling and up-

selling (GE, Amazon, etc.).

 Companies whose customers have highly differentiated

needs and are of highly differentiated value to the

company.



Printed on CANON

Marketing Technology Platforms

on the Market Development Curve



Campaign Historical Database

Management Analytics



Database Management &

Database-Driven Marketing

Warehousing

Performance Dashboards



Yield-Based Pricing

Optimum Tools



Marketing Mix Modeling /





Predictive analytics





Marketing Resource Management



Marketing Management Work-Flow Solutions









Introduction Growth Mature Decline

Printed on CANON

Source: Gary Morris, Adapted from Marketing Advocate, Inc.

Precision Marketing

 Precision marketing is achieved through looking at large

quantities of historic data with the help of data mining tools

that search for meaningful patterns, and then creating

mathematical equations that represent the underlying

relationships within the data.



 Predictive analytics are used to identify the right offers and

right messages to beam through different channels to narrow

customer segments, based on the propensity to respond. The

expected profit of a campaign can be estimated.



 Many tactical marketer tasks will be automated and free up

marketers to focus on more strategic decision making.









Printed on CANON

SALES AUTOMATION

 The objective is to empower the salesperson to be

an informed salesperson who virtually has the whole

company‘s knowledge at his or her command and

can provide total sales quality.









Printed on CANON

Marketing Automation

 Areas Ripe for Marketing Automation:

 Selecting names for a direct mail campaign



 Deciding who should receive loans or credit

extensions

 Allocating product lines to shelf space



 Selecting media



 Customizing letters to individual customers



 Targeting coupons and samples



 Pricing airline seats and hotel reservations









Printed on CANON

Marketing Decision Models

and Marketing Mix Response Models



 BRANDAID

 CALLPLAN

 DETAILER

 MEDIAC

 PROMOTER

 ADCAD







 See Kotler, Marketing Modelson CANON

Printed

Marketing Dashboards



 Tools dashboard





 Processes dashboard





 Performance dashboard







Printed on CANON

Marketing Work-Flow Process Tools



 Project management





 Product management





 New product development





 Campaign management

Printed on CANON

Exploit the Internet!

 Research a new product on the Internet (panel research, chat

rooms).

 Create a site to explain how an existing or new product works (ex.,

Tide).

 Create a site that consults on a category (Colgate on dental

problems).

 Create a site that consults on the customer‘s profile (Elizabeth

Arden).

 Sponsor a chat room around your product category.

 Answer email questions instantly (Nestle baby care questions).

 Send free samples of new products (freesample.com).

 Send coupons of new products (coolsavings.com).

 Customize your product (Acumin vitamins).

 Offer to sell very large orders direct.

 Offer valuable information to people who will register on the site.









Printed on CANON

Is New Technology Enough?

 NT + OO = EOO



 New Technology + Old Organization =

Expensive Old Organization









Printed on CANON

Technology-Enabled Marketing: Examples



 Royal Bank of Canada

 Decision to purchase CRM

 Halifax Bank

 Teller suggests financial products

 Capital One

 A credit card for everyone, but with different interest rates, credit

lines, and cash advances.

 Tesco supermarkets

 Tesco has identified 5,000 customer “needs” segments. It sends

out some 300,000 variations of any given offer with redemption

rates of 90%. It has formed clubs such as Baby Club, A World of

Wine Club, My Time Club

 Kraft

 Kraft has the names of 110 million customers and 20 thousand

facts for each household. Kraft launched print magazine, Food &

Family, that is delivered to the homes of 2.1 million Kraft

customers in 32 versions tailored to 32 segments.





Printed on CANON

10 Earmarks of the New

Marketing

1. Recognize growing customer empowerment.

2. Develop a focused offering to the target market

3. Design the marketing from the customer-back.

4. Focus on delivering outcomes, not products.

5. Draw in the customer to co-create value.

6. Use newer ways to reach the customer with a message.

7. Develop metrics and ROI measurement.

8. Develop high-tech marketing.

9. Focus on building long run assets.

10. View marketing holistically to regain influence in the company.







Printed on CANON

1. P&G Recognizes

the New Consumer

 Consumers want a conversation, to dialogue,

to participate, to be more in control…We‘re

going from one-dimensional, product-myopic

marketing to three-dimensional marketing –

that offers better solutions…more delightful

experiences… and the opportunity for on-

going relationships.



Alan Lafley, CEO, P&G









Printed on CANON

Do-It-Yourself Marketing

 Self-Inform: Customers can research products and issues without relying on

experts (e.g., WebMD, MedlinePlus.com)

 Self-evaluate: Customers can compare product features and prices with a few

clicks of a mouse (e.g., PriceGrabber.com, DealTime.com)

 Self-segment: Customers can design and configure products (e.g., Dell,

Reflect.com)

 Self-price: Customers can propose prices to sellers (e.g., eBay, PriceLine.com,

Free Markets)

 Self-support: Customer can resolve problems by searching knowledgeable

bases and discussion forums (e.g., www.remotecentral.com,

www.treocentral.com)

 Self-program: Customer can define their own media programming (e.g., TiVo,

MyYahoo!)

 Self-organize: Customers can join communities of interest to discuss products

and issues (e.g., Meetup.org., IVillage)

 Self-advertise: Customers can create feedback for their peers (e.g.,

Amazon.com, Planet Feeeback, BlogSpot.com)

 Self-police: Customers can monitor reputations of manufacturers (e.g., eBay,

BizRate.com)



 Source: Mohan Sawhney lecture









Printed on CANON

The Evolution of Marketing

Transactional Relationship Collaborative

Marketing Marketing Marketing



Time frame 1950s 1980s Beyond 2000

View of value The company offering The customer Co-created

in an exchange relationship in the experiences

long run



View of market Place where value is Market is where Market is a forum

exchanged various offerings where value is co-

appear created through

dialogue



Role of customer Passive buyers to be Portfolio of Prosumers-active

targeted with relationships to be participants in value

offerings cultivated co-creation





Role of firm Define and create Attract, develop and Engage customers in

value for consumers retain profitable defining and co-

customers creating unique value





Nature of customer Survey customers to Observe customers Active dialogue with

interaction elicit needs and and learn adaptively customers and

solicit feedback communities



Adapted from Prahalad and RamaswamyPrinted on CANON

2004

2. Develop a Focused Offering

to the Target Market

 Value customers: Which customer segment(s) do we

want to serve?



 Value proposition: Can we create a value proposition

that delivers superior value through dramatically

higher benefits or lower costs?



 Value network: Can we run a better network or

radically redefine the value delivery system for the

industry such as Dell and IKEA have done?



3Vs framework of Nirmalya Kumar



Printed on CANON

Choose to Serve a Unique Set of

Customer Values

1. Identify the value expectations of potential

customers.



2. Select the values on which to compete.

 Nike values: Winning, roar of the crowd,

extreme effort, the smell of sweat, physical

development

 New Balance values: Self-improvement, inner

harmony, balanced, the smell of nature, spiritual

development



3. Analyze the ability of the organization to deliver

those values.



Printed on value

4. Communicate and sell the CANON message.

3. Design the Marketing

From the Customer-Back

 Marketing must be run as a set of value finding,

creation, and delivery processes, not 4P functions.

The four Ps are seller oriented.



 The 4As are buyer oriented.

 Awareness (A1)

 Acceptability (A2)

 Affordability (A3)

 Accessibility (A4)





 Market value potential = A1 x A2 x A3 x A4

 If A1=100%, A2=100%, A3=50%, A4=50%, Then

MV=25% Printed on CANON

4. Focus on Delivering Outcomes,

Not Products.

Company Product focus Solutions focus

Akzo Nobel Gallons of paint Painted cars

BP Nutrition- Animal feed Animal weight gain

Hendrix

Cummings Diesel engines Uninterruptible

power

ICI Explosives Explosives Broken rock

Scania Trucks Guaranteed uptime





WW Grainger MRO items Indirect materials

mgt.





Source: Kumar

Printed on CANON

Visualize a Larger Market

 Nike now defines itself in the sports market rather

than the shoe and clothing market.

 The late Roberto Goizueta told his company that

while Coca Cola had a 35 percent share of the

soft drink market, it had only a 3 percent share of

the total beverage market.

 Armstrong World Industries moved from floor

coverings to ceilings to total interior surface

decoration.

 Citicorp realized that it only had a small share of

the total financial market which includes much

more than banking.

 Taco Bell went from selling food in stores to

―feeding people everywhere‖ including kiosks,

convenience stores, airports, and high schools.

 Jack Welch asked product managers to redefine

Printed on only

their market so that they CANONhad a 10% share.

5. Draw in the Customer

to Co-create Value: Two

Approaches

1. Offer a wide product line so the customer can choose

something closer to the customer‘s desires.

• M&M allows customers to special order M&Ms in 21 colors.

• Branches Hockey let‘s players pick from 26 options: length

of a stick, blade patterns, etc.



2. Stand ready to customize according to the customer‘s wishes.

• Dell computers are designed by customers

• Lands‘ End sells tailor-made chinos.

• P&G on its reflect.com site lets shoppers design everything

from eye moisturize to liquid foundation makeup.

• Yankee Candle Company will mix colors and scents to

make the candles you want.

• Other examples: golf clubs, breakfast cereals, credit card

companies

Printed on CANON

Examples of Collaborative

Marketing

 P&G‘s site has a We’re Listening section and Share

Your Thoughts section and Advisory Feedback

sessions.



 GM offers an AutoChoiceAdvisory on its website



 Cisco runs Customer Forums to improve its

offerings.



 A motorcycle in Italy is being designed by

customers.





Printed on CANON

6. Use Newer Ways to Reach the

Customer with Relevant Messages

 Make your ads more precise as to who they

reach and more relevant.



 Let consumers indicate if they have an

interest or not. Stop pestering them.



 Deliver valuable content with each ad, such

as useful information or entertainment.



 Reach consumers in newer ways.



Printed on CANON

Newer Ways to Reach

Customers

 Sponsorships



 Mentions on talk shows



 Product placement



 Street-level promotion



 Festivals



 Celebrity endorsements



 Mobile billboards

Printed on CANON

Creating Buzz on the Streets

 Chrysler‘s PT Landcruiser appeared in fashionable areas and

college tailgate parties. 250,000 prospects requested information

before official ad campaign began in April 2000.



 Models drove around Los Angeles on Vespa scooters and chatted

with customers in cafes and bars.



 Ford identified 120 people in six key markets and gave them a

Focus to drive for 6 months and promotional material.



 Vans builds skateboard parks at malls and sponsors Vans Triple

Crown.



 Hasbro enlisted ―cool‖ pre-teens to play the POX game and tell

their friends about it.



 Tourist goes into lounge and her telephone rings and picture of

the caller appears on the phone.







Printed on CANON

7. Develop Metrics and ROI

Measurement

Products Brands Channels Customer Markets

Segments

Relative Brand Channel Customer Market

product awareness penetration satisfaction penetration

quality

Perceived Brand Channel trust Average Market share

product esteem transaction

quality size

Percentage Brand loyalty Channel Customer Sales growth

of sales from efficiency complaints

new products

Product Brand Market share Customer Market

profitability profitability in each acquisition profitability

channel costs

Channel Customer

profitability retention rate

Source: Customer

Kumar Printed on CANONprofitability

8. Develop High-Tech Marketing

 Predictive analytics

 Sales automation

 Marketing automation

 Marketing models

 Process dashboards

 Performance dashboards

 Campaign management

 Project management

 New product management



Printed on CANON

9. Focus on Building

Long-Run Marketing Assets.



 Brands and brand equity

 Customers and customer equity

 Service quality

 Stakeholder relationships

 Intellectual knowledge

 Corporate reputation





Printed on CANON

10. View Marketing Holistically

 Marketing must become strategic and drive

business strategy.



 A company needs to take a more holistic

view of:

 the target customers‘ activities, lifestyle,

and social space.

 the company‘s channels and supply chain.

 the company‘s communications.

 the company‘s stakeholders‘ interests.



Printed on CANON

Two Models of Management

Profit-based management Loyalty-based management

 Reduce costs  Invest in marketing assets

 Reduce compensation  Give superior compensation



 Replace people with  Leverage people with

technology technology

 Price to extract maximum  Price to reward customers

value  Deepen customer value



 Sell more products  Acquire customers selectively



 Acquire lots of customers









Source: Frederick Reichheld, The Loyalty Effect





Printed on CANON

Conclusions

 Marketing is definitely not filling its potential.

 Marketing must become the driver of business strategy.

 Companies need to adopt a more holistic view of the marketing

challenge.

 Companies need lateral marketing thinking to conceive of new

product and service ideas.

 Companies need to choose from five major strategic paths.

 Companies need to move from a product focused to a market

and customer focused organization.

 Companies need to build, measure and manage brand equity

and customer equity.

 Companies need to move to technology-enabled marketing to

achieve precision marketing and develop better measures of

ROI impact.







Printed on CANON

―This time like all times is a good one,

if we but know what to do with it.‖

Ralph Waldo Emerson

THANK YOU!

Printed on CANON