Business

Has marketing lost its way?

Sales Pitch

Herman Alvaranga

Wednesday, January 31, 2018



Imagine that you are the managing director of a mid-size company (by Jamaican standards) whose board of directors wants to maximise shareholder value, and that desired shareholder value is expressed in two financial objectives. The board has issued an edict that gross revenues must be doubled in three years, and net income must be increased by a factor of five.

As CEO your challenge is that the company has been growing at just above the industry rate of seven per cent for the past five years, and now you must double revenues in three years.

What should you do? To whom should you turn? While finance, manufacturing, operations, HR and sales have been doing pretty well, surely they won't have the answer to your immediate challenge. Aaahhh! There's marketing! What can marketing do for our CEO?

THE PURPOSE OF MARKETING

Peter Doyle (2008) states: “The primary purpose of marketing is to contribute to maximising shareholder value, and marketing strategies must be evaluated in terms of how much value they create for investors.” Mea

nwhile, Zyman (1999), as I am quick to point out, puts it more directly by claiming that the sole purpose of marketing is to get more people buy more of your products, more often, for more money.

MARKETING OBJECTIVES

Having established the purpose of modern marketing, let us now turn to its objectives. In order to achieve its purpose there are seven objectives that marketing must address: market share, sales volume, profit, marketing productivity, customer satisfaction, customer value creation, and customer lifetime value. We now have the purpose and objectives of marketing, which leaves us with the process for creating a marketing strategy to achieve those objectives.

THE MARKETING STRATEGY PROCESS

There are three steps in the marketing strategy process: establishing the core strategy, the competitive positioning, and implementation via the marketing mix.

1. The core strategy. The core strategy is both a statement of the company's objectives and the broad strategies that it will use to achieve them. To establish the core strategy requires a detailed analysis of the resources available and the markets in which the organisation will operate. So will the product portfolio. What are today's, tomorrow's, and yesterday's breadwinners? What is the new product development process? Are there any investments in managerial egos which are doomed to failure?

At the core, our CEO has two routes to improving performance: increasing sales and improving productivity.

• Increasing sales can only be achieved by expanding the market or increasing your share of market. Preferably both!

• Improving productivity comes mainly from increasing margins and reducing costs.

2. Competitive positioning. At the next level, market targets (both customers and competitors) are selected and/or identified. At the same time the company's differential advantage, or competitive edge, in serving the customer targets better than the competition is defined. Taken together, the identification of targets and the definition of differential advantage constitute the creation of the competitive positioning of the organisation and its offerings. There are two routes to competitive advantage:

• Cost leadership: This strategy is particularly suitable in commodity markets where there is little or no differentiation between the physical products offered. Where products are highly differentiated, however, the strategy has the major disadvantage in that it does not create a reason for the customer to buy the company's offering. Low costs could be translated into lower price, but this would effectively be a differentiation strategy (using price as the basis on which to differentiate). Since this is not the case with our CEO, cost leadership is not a viable option.

• Differentiation: The major advantage of a differentiation strategy, as opposed to a cost leadership strategy, is that it creates, or emphasises, a reason why the customer should buy from the company rather than from its competitors. While cost leadership creates an essentially financially based advantage for the company, differentiation creates a market-based advantage. Happily our CEO does have a solid base on which to really launch a differentiation strategy.

3. Implementation and control. At the implementation level a marketing organisation capable of putting the strategy into practice must be created. Implementation is also concerned with establishing a mix of products, price, promotion and distribution that can convey both the positioning and the products and services themselves to the target market. Finally, methods of control must be designed to ensure that the strategy implementation is successful. Control concerns both the efficiency with which the strategy is put into operation and the ultimate effectiveness of that strategy.

THE SALES FUNCTION

So far we have not addressed the sales function. Where does it fit into the picture? By marketing theory it falls under the broad heading of promotion, which is more correctly classified as the integrated marketing communications mix (IMC). The IMC itself is broken down into three categories: mass communications, digital communications and personal communications, which is where the critical element of personal selling falls. Happily, in this case our CEO knows that he has a powerful sales manager and a sharp sales force.

MARKETING FAILURE?

Having discussed what should be done, our CEO must face his reality. He knows that he can rely on his sales people. He does have a marketing department; but what has marketing been doing for him over the years? Have they been integrally involved in the above process, or mostly engaged in mass marketing activities of advertising, PR, trade promotions and events and experiences? Put another way, has marketing been contributing to the organisation in the way that it should, or has marketing mostly been a failure?

THE LAST WORD

Too many of our marketers, for whatever reason, fall into the category of what Kotler refers to as 1-P marketers. In essence they are promoters offering some value, but definitely not enough to meet the demands of the modern organisation competing in a hostile environment where product parity is the norm.

What is it like at your company? Is marketing creating the value that it should? Or has marketing lost its way?

Herman Alvaranga, FCIM, MBA, is president of the Caribbean School of Sales & Marketing (CSSM). For more insight on sales and marketing please go to his blog at www.cssm.edu.jm

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