Recently, I read an article by Al Ries, legendary marketing strategist. The article was reflecting on overemphasis on marketing metrics and ROI in this age of sophisticated data models used to analyze consumer behaviour. He goes on to say that business world suffers from "metrics madness" and so is marketing buried in ROI analysis. Now I found that intriguing...I spent a year in B-school learning to measure marketing ROI as it was the only way marketing would stay relevant.
Moreover, my engineering background has led to me believe that "if you cant measure something, you cant manage it". And so, as you'd guess, I found Al Ries' comments puzzling to say the least but the guy made his point.
Today, marketing is trying to create its value to business by measuring its impact (ROI, KPI customer metrics). However, marketing is more of an art than science. You dont need marketing ROI to prove that Apple's marketing efforts are more effective than Microsoft's. Question is can marketing metrics improve or optimize marketing spend - i think it can. But mathematical modeling is an overkill for marketing and is not going to help businesses. You just cant run a company by numbers alone - or you will run the company to ground. What is needed are marketers who are creative and strategic in their approach.
And if this whole buzz around marketing metrics and data crunching is to create relevance for Marketing in the business, then the whole premise is flawed.
In words of Al Ries: Advertising (read marketing) is more like insurance than it is like an investment. What's your "return on investment" of a five-year term life insurance policy if you don't die? Zero.
We dont buy insurance policy to make money but to protect our family in case we die. Similarly, marketing is an insurance to secure market share and even if ROI is negative, in few circumstances, it is worth every penny if you are defending your market leadership - consequences of losing which is not comprehended in your ROI analysis but could cost the business in the long term.
The overall practice of marketing is not mathematically based, although subsets of the discipline may be: direct marketing, research, media selection. Mathematics is logical. Marketing is not. That's why marketing is so difficult to learn.
Wednesday, May 6, 2009
Saturday, March 21, 2009
Death of Need-Based Marketing
Peter Drucker got it right: "The customer rarely buy what the business thinks it sells him".
Challenge is that "buyer needs" change far more often than marketers would acknowledge. These needs change and evolve continually - as a function of situations and surroundings (environment).
"Need-based marketing" does not explain why a guy takes out his girlfriend to a movie theater on one night but next evening, they order pizzas at home and watch movies on DVDs ordered from Netflix or picked from the nearby video store.
Another example: Say,you are rushing to get to work for that early morning meeting and you miss your breakfast. You then decide to grab a bite at a local coffee shop that's on your way to the office. However, a busy drive-thru at the coffee shop means that you could miss your meeting; so not taking a chance you decide to head straight to work. You are still hungry and a dairy shop near the office might be your best bet. This dairy shop has a quick drive-thru and they have recently started serving thick"fruity milkshakes" that are quite filling actually. And so you have just found your next best "alternative" to breakfast bun at the coffee shop. The new fruity flavored milkshake is healthier and filling at the same time. Add to this a faster drive-thru and customer service at the dairy shop, you have just "hired" milkshake over breakfast bun.
Customers don't buy products, they "hire" products to get a job done. Marketing guru, Ted Levitt, taught us 30 years ago that customers "don't want a quarter-inch drill. They want a quarter-hole!"
This concept was recently re-introduced by Clayton and others in Harvard Business Review. As illustrated in case of dairy shop example, you hire "milkshake" to feed your morning hunger in a healthier and filling manner. Not only that, choice of milkshake over breakfast bun at the coffee shop is reinforced by smaller line-up and faster drive-thru at the dairy shop. In fact, you don't need breakfast bun or milkshake, in fact what you need most is to feed yourself quickly to get you going till lunch. Milkshake and "Breakfast bun +coffee" are two alternatives to meet the same need. You choose the one that offers you the most value.
Products are just like "job candidates" hired by consumers to get a specific job done. The best candidate wins the job - product which can help consumer get a job done most efficiently and effectively will surely win.
We think of FedEx as the fastest parcel/courier service. When we think of BMW, we are reminded of high performance cars. Think of online auctions and eBay comes to mind. Best products position themselves as "purpose brands" (read this post). These products and brands are associated with a clear purpose and pop into customers' minds when they need to do the jobs that these products were optimized to do.
Marketers should think of this concept before rolling out new surveys, focus groups and forum discussions. It should be central to any customer-driven strategy. The key is to ask right questions. Ask the right questions and you'd unlock key information on the buying behavior of your customers.
Ask the "right" questions: The "right" question to ask in a survey is NOT what your customers want? Most of the times, they wouldn't know it either (historically, customersurveys are not very useful for ahead-of-the-curve technology products like walkman, iPODs and even PCs) and if customers know what they want, they would tell you and likely share a long list of feature enhancements for your product. But what they will never tell you is if they would also pay for the same. Unsuccessful product launches are testimony to this fact; after investing heavily in marketing research and surveys, companies launch products loaded with new features and technologies (that their customers asked for in those surveys) but dismal sales prove otherwise; customers do not value new functionality enough - at least not as much as to pay for it! These functionalities end up getting labelled as "bells and whistles".
Therefore, marketers should focus less on product-centric questions and more on customer-centric questions. By asking the right questions, marketers can unlock a wealth of information about customer buying behaviors.
- What your customers use your product for?
- What job are they trying to do?
- How do they use your product to get those jobs done?
- Is there a better way in which your product could help them perform customers perform their job better?
- What do they use as alternatives if they are not using your product?
I am not prophesying death of "Need-based marketing". It is a useful concept and has been put into good practice producing successful results over the decades. It tells us to focus on customer needs in order to win their business - that is and will remain an undeniable truth for years to come.
But as consumer choices increase and their needs change at any given moment, need based marketing in its current form proves static rather than dynamic to reflect that change. Need-based marketing will cease to exist in its current form - as a snapshot in time of customer needs - assumption that buyer needs remain static over long periods of time. Need based marketing will face a certain death if it fails to capture varying customer needs and competing alternatives.
RECOMMENDED READING: For further reading, refer to following books.
Friday, March 20, 2009
Customers "hire" products to get a job done.
Customers dont buy products, they "hire" products to get a job done.
A "Job" is the fundamental problem that customer needs to resolve in a given situation- a concept that was introduced by Clayton Christensen.
Think about this for a while. It is an important concept to understand because many marketers think of "need-based marketing" when positioning products. According to this school of thought, a product must meet customers' needs. Problem is that needs are not static. Customers' buying behavior change far more often - function of situation and environment.
When a product does a job well, it creates a potential for marketers to create "purpose brands". A purpose brand links customers' realization that they need to do a job with a product designed to do it. Think of powerful brands - FedEx, Starbucks, BlackBerry and Google. Each of these brands is associated with a clear purpose and pop into customers' minds when they need to do the jobs that these products were optimized to do.
Without specific purpose for their products, marketing executives must attempt brand building through expensive advertising. But given the high fixed cost of building new brands through advertising, it deters many companies to build new brands at all, so the acquire and consolidate brands instead.
Positioning products to do specific jobs help companies target their advertising more effectively. To give you an example, a chain of scuba diving shops marketed its diving classes and gear by segmenting customers by "demography"-primarily people who subscribed to scuba diving magazines - and zip codes to market locally. However, they still failed to succeed. But when they asked their customers in what situations they "hired" scuba gear, they found that most of them were engaged couples and planning wedding trips in tropical destinations. No surpises then, the company started purchasing mailing list from Brides instead of Dive magazine.
RECOMMENDED READING: For further reading, I recommend following books on this subject available at Amazon Store. Simply click and buy!
A "Job" is the fundamental problem that customer needs to resolve in a given situation- a concept that was introduced by Clayton Christensen.
Think about this for a while. It is an important concept to understand because many marketers think of "need-based marketing" when positioning products. According to this school of thought, a product must meet customers' needs. Problem is that needs are not static. Customers' buying behavior change far more often - function of situation and environment.
When a product does a job well, it creates a potential for marketers to create "purpose brands". A purpose brand links customers' realization that they need to do a job with a product designed to do it. Think of powerful brands - FedEx, Starbucks, BlackBerry and Google. Each of these brands is associated with a clear purpose and pop into customers' minds when they need to do the jobs that these products were optimized to do.
Without specific purpose for their products, marketing executives must attempt brand building through expensive advertising. But given the high fixed cost of building new brands through advertising, it deters many companies to build new brands at all, so the acquire and consolidate brands instead.
Positioning products to do specific jobs help companies target their advertising more effectively. To give you an example, a chain of scuba diving shops marketed its diving classes and gear by segmenting customers by "demography"-primarily people who subscribed to scuba diving magazines - and zip codes to market locally. However, they still failed to succeed. But when they asked their customers in what situations they "hired" scuba gear, they found that most of them were engaged couples and planning wedding trips in tropical destinations. No surpises then, the company started purchasing mailing list from Brides instead of Dive magazine.
RECOMMENDED READING: For further reading, I recommend following books on this subject available at Amazon Store. Simply click and buy!
Monday, February 16, 2009
ZAG- 17 steps process branding workshop (NYL)
Check out this SlideShare Presentation:
Saturday, February 7, 2009
Done your Marketing Audit yet?
Marketing is a strategic weapon! Are you taking full advantage of all your internal assets in a highly leveraged way that will grow and build your company profitably?
The Marketing Audit will help your company to:
- Position your products and services for optimum sales.
- Evaluate the competitive environment.
- Identify problems with your marketing efforts.
- Evaluate your pricing strategy.
- Implement cost-effective marketing strategies and tactics.
- Assess your marketing plan
- Many more strategies.
1. How you get more customers (lead generation, channel strategy)
2. How you get more dollars per customer (customer profitability)
3. How you get more transactions per customer (scale benefits)
4. How you perform against competitive threats (competition analysis)
5. How well your website and online marketing is performing (channel strategy, product strategy)
6. How good your visual branding is (branding and communication)
7. How well your sales people and sales systems work (sales management)
8. How you define your target market, customers and competition (blue ocean strategies)
9. How you have structured your pricing strategy
10. How well is your marketing mix positioned for recessionary times (product, price, channel and promotion strategies)
Make an investment in both yourself and your business by purchasing this checklist, and then conduct the audit! Your customers will be glad you did. And, when the results show on your bottom line, you will be glad you did also.
Take the Next Step! Where your business has been, or is today, is no longer important. What matters MOST is what comes NEXT! Take the next step on the road to growth and profitability. Contact me at arvind@expertguidance.ca and get a free quote for Marketing Audit Checklist and Consulting.
Sunday, January 11, 2009
Sunday, January 4, 2009
Blue Ocean Strategy - Part 1
I just finished reading a book on strategy: "Blue Ocean Strategy" written by W.Chan Kim and Renee Mauborgne. It is one of the best books written on strategy out there and that is why I wanted to share this with you in this post.
It redefines strategy as we know it today: competition-based and customer-driven strategies are referred to as "red ocean strategies" in this book. Authors provide examples of how companies continue to compete head-on in overcrowded industries - that results in nothing but bloody "red ocean" rivals fighting over a shrinking profit pool.
Definition: Strategy
The word "Strategy" derives from the Greek word stratēgos, which derives from two words: stratos (army) and ago (ancient Greek for leading). Stratēgos referred to a 'military commander' during the age of Athenian Democracy. This definition leads us to believe that strategy is about making such choices that beat the competition; that's a classic red-ocean strategy.
Blue Ocean Strategy
Blue Ocean Strategy is just the opposite. Instead of beating the competition, this new strategy focuses on making the competition irrelevant by changing the market-space. It starts with re-orienting the company's strategic focus from "competitors" to "alternatives" and from "customers" to "non-customers". Conventional Red Ocean Strategy is based on value-cost trade-off which explains why companies pursue either "differentiation" or "low cost" strategy. As it is conventionally believed that companies can either create greater value to customer at a higher cost or create reasonable value at a lower cost.
Blue Ocean Strategy leads us to break the value-cost trade off .Basic tenet of this strategy is that "differentiation" AND "low cost" should be pursued simultaneously by companies in order to create "blue oceans".
Key Principles of Blue Ocean Strategy
Blue Ocean Strategy is different than red ocean strategy in several ways. As I just mentioned, the focus of blue ocean is to
1) create "uncontested market space" unlike competing in existing market space (red ocean).
2) focus on non-customers to create and capture new customer demand
3) make the competition irrelevant
4) break the value-cost trade off
5) align firm's activities in pursuit of both differentiation and low cost
To read more about Blue Strategy analytical tools and frameworks, stay tuned for my next post-
Blue Ocean Strategy-Part 2. Also don't forget to check out previous posts from December last year: Purpose Brands, Learning to Love Recession, What's your profit? and Pocket-Price Waterfall.
RECOMMENDED READING: Blue Ocean Strategy (Kim & Mauborgne)
It redefines strategy as we know it today: competition-based and customer-driven strategies are referred to as "red ocean strategies" in this book. Authors provide examples of how companies continue to compete head-on in overcrowded industries - that results in nothing but bloody "red ocean" rivals fighting over a shrinking profit pool.
Definition: Strategy
The word "Strategy" derives from the Greek word stratēgos, which derives from two words: stratos (army) and ago (ancient Greek for leading). Stratēgos referred to a 'military commander' during the age of Athenian Democracy. This definition leads us to believe that strategy is about making such choices that beat the competition; that's a classic red-ocean strategy.
Blue Ocean Strategy
Blue Ocean Strategy is just the opposite. Instead of beating the competition, this new strategy focuses on making the competition irrelevant by changing the market-space. It starts with re-orienting the company's strategic focus from "competitors" to "alternatives" and from "customers" to "non-customers". Conventional Red Ocean Strategy is based on value-cost trade-off which explains why companies pursue either "differentiation" or "low cost" strategy. As it is conventionally believed that companies can either create greater value to customer at a higher cost or create reasonable value at a lower cost.
Blue Ocean Strategy leads us to break the value-cost trade off .Basic tenet of this strategy is that "differentiation" AND "low cost" should be pursued simultaneously by companies in order to create "blue oceans".
Key Principles of Blue Ocean Strategy
Blue Ocean Strategy is different than red ocean strategy in several ways. As I just mentioned, the focus of blue ocean is to
1) create "uncontested market space" unlike competing in existing market space (red ocean).
2) focus on non-customers to create and capture new customer demand
3) make the competition irrelevant
4) break the value-cost trade off
5) align firm's activities in pursuit of both differentiation and low cost
To read more about Blue Strategy analytical tools and frameworks, stay tuned for my next post-
Blue Ocean Strategy-Part 2. Also don't forget to check out previous posts from December last year: Purpose Brands, Learning to Love Recession, What's your profit? and Pocket-Price Waterfall.
RECOMMENDED READING: Blue Ocean Strategy (Kim & Mauborgne)
"Value Innovation"
[Excerpts from Blue Ocean Strategy, Chapter 1]
"Value Innovation" is the cornerstone of Blue Ocean Strategy (read more on Blue Ocean Strategy). Value innovation places equal emphasis on "value" and "innovation". Innovation without value tends to be technology-driven, market pioneering or even futuristic - shooting beyond what buyers are willing to accept and pay for. At the same time, value without innovation tends to focus on value creation on an incremental scale - something that creates value but it fails to make you stand out in the marketplace.
Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers.
Cost savings are made by eliminating and reducing the factors that industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. (read more on this in The Four Actions Framework). Value Innovation breaks the value-cost trade-off and enable companies to pursue differentiation and low cost, simultaneously.
Value innovation enable companies in the simultaneous pursuit of differentiation and low cost. By focusing on alternatives instead of just competition and by targeting non-customers (beyond existing customers), companies will create new marketplace and make the competition irrelevant.
RECOMMENDED READING: Blue Ocean Strategy by Kim and Mauborgne. To get the best deals on shipping, Canadian readers purchase this book from Amazon.ca; International and US residents should use Amazon.com
"Value Innovation" is the cornerstone of Blue Ocean Strategy (read more on Blue Ocean Strategy). Value innovation places equal emphasis on "value" and "innovation". Innovation without value tends to be technology-driven, market pioneering or even futuristic - shooting beyond what buyers are willing to accept and pay for. At the same time, value without innovation tends to focus on value creation on an incremental scale - something that creates value but it fails to make you stand out in the marketplace.
Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers.
Cost savings are made by eliminating and reducing the factors that industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. (read more on this in The Four Actions Framework). Value Innovation breaks the value-cost trade-off and enable companies to pursue differentiation and low cost, simultaneously.
Value innovation enable companies in the simultaneous pursuit of differentiation and low cost. By focusing on alternatives instead of just competition and by targeting non-customers (beyond existing customers), companies will create new marketplace and make the competition irrelevant.
RECOMMENDED READING: Blue Ocean Strategy by Kim and Mauborgne. To get the best deals on shipping, Canadian readers purchase this book from Amazon.ca; International and US residents should use Amazon.com
Death of "Need-Based Marketing"
Peter Drucker got it right: "The customer rarely buy what the business thinks it sells him".
Challenge is that "buyer needs" change far more often than marketers would acknowledge. These needs change and evolve continually - as a function of situations and surroundings (environment).
"Need-based marketing" does not explain why a guy takes out his girlfriend to a movie theater on one night but next evening, they order pizzas at home and watch movies on DVDs ordered from Netflix or picked from the nearby video store.
Another example: Say,you are rushing to get to work for that early morning meeting and you miss your breakfast. You then decide to grab a bite at a local coffee shop that's on your way to the office. However, a busy drive-thru at the coffee shop means that you could miss your meeting; so not taking a chance you decide to head straight to work. You are still hungry and a dairy shop near the office might be your best bet. This dairy shop has a quick drive-thru and they have recently started serving thick"fruity milkshakes" that are quite filling actually. And so you have just found your next best "alternative" to breakfast bun at the coffee shop. The new fruity flavored milkshake is healthier and filling at the same time. Add to this a faster drive-thru and customer service at the dairy shop, you have just "hired" milkshake over breakfast bun.
Customers don't buy products, they "hire" products to get a job done. Marketing guru, Ted Levitt, taught us 30 years ago that customers "don't want a quarter-inch drill. They want a quarter-hole!"
This concept was recently re-introduced by Clayton and others in Harvard Business Review. As illustrated in case of dairy shop example, you hire "milkshake" to feed your morning hunger in a healthier and filling manner. Not only that, choice of milkshake over breakfast bun at the coffee shop is reinforced by smaller line-up and faster drive-thru at the dairy shop. In fact, you don't need breakfast bun or milkshake, in fact what you need most is to feed yourself quickly to get you going till lunch. Milkshake and "Breakfast bun +coffee" are two alternatives to meet the same need. You choose the one that offers you the most value.
Products are just like "job candidates" hired by consumers to get a specific job done. The best candidate wins the job - product which can help consumer get a job done most efficiently and effectively will surely win.
We think of FedEx as the fastest parcel/courier service. When we think of BMW, we are reminded of high performance cars. Think of online auctions and eBay comes to mind. Best products position themselves as "purpose brands" (read this post). These products and brands are associated with a clear purpose and pop into customers' minds when they need to do the jobs that these products were optimized to do.
Marketers should think of this concept before rolling out new surveys, focus groups and forum discussions. It should be central to any customer-driven strategy. The key is to ask right questions. Ask the right questions and you'd unlock key information on the buying behavior of your customers.
Ask the "right" questions: The "right" question to ask in a survey is NOT what your customers want? Most of the times, they wouldn't know it either (historically, customersurveys are not very useful for ahead-of-the-curve technology products like walkman, iPODs and even PCs) and if customers know what they want, they would tell you and likely share a long list of feature enhancements for your product. But what they will never tell you is if they would also pay for the same. Unsuccessful product launches are testimony to this fact; after investing heavily in marketing research and surveys, companies launch products loaded with new features and technologies (that their customers asked for in those surveys) but dismal sales prove otherwise; customers do not value new functionality enough - at least not as much as to pay for it! These functionalities end up getting labelled as "bells and whistles".
Therefore, marketers should focus less on product-centric questions and more on customer-centric questions. By asking the right questions, marketers can unlock a wealth of information about customer buying behaviors.
- What your customers use your product for?
- What job are they trying to do?
- How do they use your product to get those jobs done?
- Is there a better way in which your product could help them perform customers perform their job better?
- What do they use as alternatives if they are not using your product?
I am not prophesying death of "Need-based marketing". It is a useful concept and has been put into good practice producing successful results over the decades. It tells us to focus on customer needs in order to win their business - that is and will remain an undeniable truth for years to come.
But as consumer choices increase and their needs change at any given moment, need based marketing in its current form proves static rather than dynamic to reflect that change. Need-based marketing will cease to exist in its current form - as a snapshot in time of customer needs - assumption that buyer needs remain static over long periods of time. Need based marketing will face a certain death if it fails to capture varying customer needs and competing alternatives.
RECOMMENDED READING: For further reading, refer to following books.
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