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Title: A Strategy Document on The New Marketing Paradigm Holistic Marketing ? Lateral Marketing ? High-tech Marketing by PHILIP KOTLER Documentation Sponsored by Canon


1
A Strategy Documenton The New Marketing
ParadigmHolistic Marketing ? Lateral Marketing ?
High-tech MarketingbyPHILIP KOTLERDocumentatio
n Sponsored byCanon
2
logo unit
3
Kotler On MarketingHow 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

4
Two Challenges Facing Indian Companies
  • Will Indian companies be able to defend their
    market against the growing invasion of foreign
    global brands?
  • Can Indian companies develop strong global
    brands?

5
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!

6
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 cant 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.

7
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
    Indias future success will require investing in
    marketing and branding.

8
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).

9
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.

10
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.
  • Haiers brand name products are sold in Wal-Mart,
    Best Buy, Sears, Lowes, Home Depot and Target.
  • Haier is promoted as a global brand, not a
    Chinese one. (Many people think it is German).
  • Puts lower price models in price-only stores and
    higher price models in top stores.

11
Five Cs 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

12
A Quiz Who Said This?
  • The purpose of a company is to create a
    customerThe only profit center is the
    customer.
  • A business has twoand only twobasic 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.

13
My Message
  • Marketings performance has been disappointing.
  • You must replace your Old Marketing with New
    Marketing that is
  • holistic,
  • technology-enabled,
  • and strategic.

14
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 doesnt focus on its real assets.
  • Brands, customers, service quality, stakeholder
    relationships, intellectual capital, corporate
    reputation

15
NeededHolistic 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 companys channels and supply chain.
  • the companys communications.
  • the companys stakeholders interests.
  • Holistic marketing will require strong software
    support.

16
HOLISTIC RELATIONSHIP MARKETING FRAMEWORK
1) Who is involved?
CORPORATION
COLLABORATORS
CUSTOMERS
MARKET SPACE
2) How can we define relevant market space?
3) What are the potential opportunities emerging
from the market space?
POTENTIAL OPPORTUNITIES
4) What business capabilities and infrastructure
required?
BUSINESS INVESTMENT
CUSTOMER FOCUS
CORE COMPETENCIES
COLLABORATIVE NETWORK
17
4 COMPETITIVE PLATFORMS
Customer Focus
Core Competencies
Collaborative Network
COGNITIVE SPACE
COMPETENCY SPACE
RESOURCE SPACE
Business Architecture
Market Offerings
BUSINESS PARTNERS
CUSTOMER VALUE
BUSINESS DOMAIN
Creating Value
Marketing Activities
Operational System
Delivering Value
CRM
ERP
SCM
18
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.

19
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 skus
  • Improving supply chain responsiveness

20
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.

21
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 doesnt work because competitors
    will match.
  • Pricing raising doesnt work since there isnt
    enough differentiation to support it.
  • Cost cutting has eliminated much of the fat but
    is now risking cutting the muscles.

22
Strategies for Firms in Different Market Positions
Jagdish Sheth, Singapore Marketer, 2002
23
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 (PG, Toyota).
  • Niching (Progressive Insurance, Tetra)

24
Dual Strategies
  • Planning for today
  • Defining the business.
  • Shaping the business to meet needs of todays
    customers
  • Improving alignment between functional activities
    and business definition
  • Organization mirrors current business activities
  • Optimizing current operations to achieve
    excellence.
  • Planning for tomorrow
  • Redefining the business
  • Reshaping the business to compete for future
    customers and markets
  • Making bold moves away from the existing ways of
    doing business
  • Reorganizing for future business challenges
  • Managing change to create future operations and
    processes

25
In many markets, the growing number of
competitors in mature markets leads companies to
target niches of low profitability.
Y O G U R T S M A R K E T
Number of competitors
Market Size
Time
Average profitability of all competitors or
players
26
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
  • Nestles 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.

27
The case of Cereal Bars
Lateral Marketing Process
28
The case of Barbie
Lateral Marketing Process
Baby dolls market
New category
Teenager
To feel as...

Doll varieties
Vertical Marketing Process
29
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)

30
Check Where You Stand
  • Marketing does the marketing -gt everyone does the
    marketing.
  • Organizing by product units -gt organizing by
    customer segments.
  • Making everything -gt outsourcing more goods and
    services.
  • Using many suppliers -gt working with fewer
    suppliers.
  • Emphasizing tangible assets -gt emphasizing
    intangible assets.
  • Building brands through advertising -gt building
    brands through integrated communications. 
  • Attracting customers to stores -gt making products
    available on-line.
  • Selling to everyone -gt selling to target
    markets.
  • Focusing on profitable transactions -gt focusing
    on customer lifetime value. 
  • Focusing on market share -gt focusing on customer
    share.
  • Being local -gt being glocal.
  • Focusing on the financial scorecard -gt focusing
    on the marketing scorecard. 
  • Focusing on shareholders -gt focusing on
    stakeholders 

31
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!

32
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 Toyotas net price is 650 higher!

33
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

34
Names are Important in Branding
  • Donald Trumps family name is Drumpf. But he
    cant call it Drumpf Towers.
  • Alan Aldas name was Alphonso DAbruzzo.
  • Chinese gooseberry was renamed kiwifruit.
  • Paradise Island in the Bahamas used to be Hog
    Island.

35
A Brand Must be More Than a Name
  • A brand must trigger words or associations
    (features and benefits).
  • A brand should depict a process (McDonalds,
    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.

36
Your Companys Brand
  • 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 brands personality?
  • A. Founders
  • B. Spokespersons
  • C. Characters
  • D. Objects
  • E. Stories and mythologies

37
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 brands reputation is ultimately based on
    product quality, customer satisfaction, employee
    communications, social responsibility, etc.
    (Kevin Clancy, CEO of Copernicus)

38
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

39
Brand Slogans
  • BA, The Worlds Favorite Airline
  • American Express, The Natural Choice
  • ATT, 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
  • Lets Make Things Better

40
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.

41
3. How Do You Promote a Brand?
  • How do I justify spending millions on creating
    an image. Thats millions my customers have to
    spend when they buy from us. Tom Parker, CEO
    of Clarks shoes.
  • Brands are built by performance, not advertising.

42
Dont Overuse Advertising to Build a Brand
  • People dont pay that much attention to ads
    anymore (wallpaper).
  • Some exceptional TV ads grab attention but do not
    provide motivation.
  • Advertising doesnt have much credibility or
    believability.
  • The existence of so much advertising makes
    advertising less effective. Yet the cost of
    advertising keeps rising.

43
Tools for Building Brands
  • Advertising (e.g.,Absolut Vodka)
  • Sponsorships (e.g., Kodak and Olympics)
  • Clubs (e.g. Nestles Casa Buitoni Club)
  • Company visits (e.g., Cadburys theme park,
    Hallmarks 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)
  • Founders personality (e.g., Colonel Saunders)
  • Celebrity spokespersons

44
4. What Makes a Strong Brand?
  • Strong brand Product Benefits x Distinct
    Identity x Emotional Values
  • Peter Doyle, Marketing Management Strategy,
    1997

45
THE YR 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 brands differentiation and relevance
    start slipping, esteem will slip next, and then
    familiarity will decline.

46
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)

47
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

48
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.

49
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.

50
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.

51
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.

52
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?

53
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

54
Achieving Deep Customer Focus
  • Create strategic excitement.
  • Enlist points of light.
  • Articulate the new market space focused on
    customer outcomes.
  • Identify the value opportunities through using
    the customer activity cycle.
  • Build a compelling case (not through a plan but a
    story).
  • Size the prize.
  • Modeling the concept with a few chosen customers.
  • Get people working together.
  • Get critical mass.
  • Gather momentum.

55
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.

56
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).

57
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.

58
Treat Different Customers Differently
  • Most profitable customers
  • Most unprofitable customers
  • Most growable customers
  • Most vulnerable customers

59
NeededTechnology-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.

60
A 5 Step Model for Database Marketing
  • Gather useful data on customers.
  • Classify customers by their needs and by their
    value to the firm.
  • Prepare business rules that select the best
    prospects.
  • Customize marketing treatments for each prospect
    in terms of product offers, service mix, media,
    and channel.
  • Set up accountability procedures.

61
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.

62
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.

63
Marketing Technology Platforms on the Market
Development Curve

Historical Database Analytics
Campaign Management
Database Management Warehousing
Database-Driven Marketing Performance Dashboards
Yield-Based Pricing Optimum Tools
Marketing Mix Modeling /
Predictive analytics
Marketing Resource Management
Marketing Management Work-Flow Solutions
Introduction
Growth
Mature
Decline
Source Gary Morris, Adapted from Marketing
Advocate, Inc.

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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.

65
SALES AUTOMATION
  • The objective is to empower the salesperson to be
    an informed salesperson who virtually has the
    whole companys knowledge at his or her command
    and can provide total sales quality.

66
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

67
Marketing Decision Models and Marketing Mix
Response Models
  • BRANDAID
  • CALLPLAN
  • DETAILER
  • MEDIAC
  • PROMOTER
  • ADCAD
  • See Kotler, Marketing Models

68
Marketing Dashboards
  • Tools dashboard
  • Processes dashboard
  • Performance dashboard

69
Marketing Work-Flow Process Tools
  • Project management
  • Product management
  • New product development
  • Campaign management

70
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 customers
    profile (Elizabeth Arden).
  • Sponsor a chat room around your product category.
  • Answer email questions instantly (Nestle baby
    care questions).
  • Send free samples of new products
    (freesample.com).
  • Send coupons of new products (coolsavings.com).
  • Customize your product (Acumin vitamins).
  • Offer to sell very large orders direct.
  • Offer valuable information to people who will
    register on the site.

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Is New Technology Enough?
  • NT OO EOO
  • New Technology Old Organization Expensive Old
    Organization

72
Technology-Enabled Marketing Examples
  • Royal Bank of Canada
  • Decision to purchase CRM
  • Halifax Bank
  • Teller suggests financial products
  • Capital One
  • A credit card for everyone, but with different
    interest rates, credit lines, and cash advances.
  • Tesco supermarkets
  • Tesco has identified 5,000 customer needs
    segments. It sends out some 300,000 variations
    of any given offer with redemption rates of 90.
    It has formed clubs such as Baby Club, A World of
    Wine Club, My Time Club
  • Kraft
  • Kraft has the names of 110 million customers and
    20 thousand facts for each household. Kraft
    launched print magazine, Food Family, that is
    delivered to the homes of 2.1 million Kraft
    customers in 32 versions tailored to 32 segments.

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10 Earmarks of the New Marketing
  • Recognize growing customer empowerment.
  • Develop a focused offering to the target market
  • Design the marketing from the customer-back.
  • Focus on delivering outcomes, not products.
  • Draw in the customer to co-create value.
  • Use newer ways to reach the customer with a
    message.
  • Develop metrics and ROI measurement.
  • Develop high-tech marketing.
  • Focus on building long run assets.
  • View marketing holistically to regain influence
    in the company.

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1. PG Recognizes the New Consumer
  • Consumers want a conversation, to dialogue, to
    participate, to be more in controlWere going
    from one-dimensional, product-myopic marketing to
    three-dimensional marketing that offers better
    solutionsmore delightful experiences and the
    opportunity for on-going relationships.
  • Alan Lafley, CEO, PG

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Do-It-Yourself Marketing
  • Self-Inform Customers can research products and
    issues without relying on experts (e.g., WebMD,
    MedlinePlus.com)
  • Self-evaluate Customers can compare product
    features and prices with a few clicks of a mouse
    (e.g., PriceGrabber.com, DealTime.com)
  • Self-segment Customers can design and configure
    products (e.g., Dell, Reflect.com)
  • Self-price Customers can propose prices to
    sellers (e.g., eBay, PriceLine.com, Free Markets)
  • Self-support Customer can resolve problems by
    searching knowledgeable bases and discussion
    forums (e.g., www.remotecentral.com,
    www.treocentral.com)
  • Self-program Customer can define their own media
    programming (e.g., TiVo, MyYahoo!)
  • Self-organize Customers can join communities of
    interest to discuss products and issues (e.g.,
    Meetup.org., IVillage)
  • Self-advertise Customers can create feedback for
    their peers (e.g., Amazon.com, Planet Feeeback,
    BlogSpot.com)
  • Self-police Customers can monitor reputations of
    manufacturers (e.g., eBay, BizRate.com)
  • Source Mohan Sawhney lecture

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The Evolution of Marketing
Transactional Marketing Relationship Marketing Collaborative Marketing
Time frame 1950s 1980s Beyond 2000
View of value The company offering in an exchange The customer relationship in the long run Co-created experiences
View of market Place where value is exchanged Market is where various offerings appear Market is a forum where value is co-created through dialogue
Role of customer Passive buyers to be targeted with offerings Portfolio of relationships to be cultivated Prosumers-active participants in value co-creation
Role of firm Define and create value for consumers Attract, develop and retain profitable customers Engage customers in defining and co-creating unique value
Nature of customer interaction Survey customers to elicit needs and solicit feedback Observe customers and learn adaptively Active dialogue with customers and communities
Adapted from Prahalad and Ramaswamy 2004
77
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

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Choose to Serve a Unique Set of Customer Values
  • 1. Identify the value expectations of potential
    customers.
  • 2. Select the values on which to compete.
  • Nike values Winning, roar of the crowd, extreme
    effort, the smell of sweat, physical development
  • New Balance values Self-improvement, inner
    harmony, balanced, the smell of nature, spiritual
    development
  • 3. Analyze the ability of the organization to
    deliver those values.
  • 4. Communicate and sell the value message.
  • 5. Deliver the value promised and continuously
    improve the company's value model.
  • See J. Nicholas Debonnis, et. al, Value-Based
    Marketing for Bottom Line Success 5 Steps to
    Creating Competitive Value (McGraw-Hill, 2004)

79
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 A1100, A2100, A350, A450, Then MV25
  • Source Jagdish Sheth

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4. Focus on Delivering Outcomes, Not Products.
Company Product focus Solutions focus
Akzo Nobel Gallons of paint Painted cars
BP Nutrition-Hendrix Animal feed Animal weight gain
Cummings Diesel engines Uninterruptible power
ICI Explosives Explosives Broken rock
Scania Trucks Guaranteed uptime
WW Grainger MRO items Indirect materials mgt.

Source Kumar
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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
    their market so that they only had a 10 share.

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5. Draw in the Customer to Co-create Value Two
Approaches
  • Offer a wide product line so the customer can
    choose something closer to the customers
    desires.
  • MM allows customers to special order MMs in 21
    colors.
  • Branches Hockey lets players pick from 26
    options length of a stick, blade patterns, etc.
  • Stand ready to customize according to the
    customers wishes.
  • Dell computers are designed by customers
  • Lands End sells tailor-made chinos.
  • PG 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

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Examples of Collaborative Marketing
  • PGs site has a Were 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.

84
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.

85
Newer Ways to Reach Customers
  • Sponsorships
  • Mentions on talk shows
  • Product placement
  • Street-level promotion
  • Festivals
  • Celebrity endorsements
  • Mobile billboards

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Creating Buzz on the Streets
  • Chryslers 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.

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7. Develop Metrics and ROI Measurement
Products Brands Channels Customer Segments Markets
Relative product quality Brand awareness Channel penetration Customer satisfaction Market penetration
Perceived product quality Brand esteem Channel trust Average transaction size Market share
Percentage of sales from new products Brand loyalty Channel efficiency Customer complaints Sales growth
Product profitability Brand profitability Market share in each channel Customer acquisition costs Market profitability
Channel profitability Customer retention rate
Source Kumar Customer profitability
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8. Develop High-Tech Marketing
  • Predictive analytics
  • Sales automation
  • Marketing automation
  • Marketing models
  • Process dashboards
  • Performance dashboards
  • Campaign management
  • Project management
  • New product management

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9. Focus on Building Long-Run Marketing Assets.
  • Brands and brand equity
  • Customers and customer equity
  • Service quality
  • Stakeholder relationships
  • Intellectual knowledge
  • Corporate reputation

90
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 companys channels and supply chain.
  • the companys communications.
  • the companys stakeholders interests.

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Two Models of Management
  • Profit-based management
  • Reduce costs
  • Reduce compensation
  • Replace people with technology
  • Price to extract maximum value
  • Sell more products
  • Acquire lots of customers
  • Loyalty-based management
  • Invest in marketing assets
  • Give superior compensation
  • Leverage people with technology
  • Price to reward customers
  • Deepen customer value
  • Acquire customers selectively

Source Frederick Reichheld, The Loyalty Effect
92
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.

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This time like all times is a good one, if we
but know what to do with it. Ralph Waldo Emerson
THANK YOU!
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