why bad things happen to good marketers ken wong queen’s school of business
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Why Bad Things Happen to Good Marketers
Ken WongQueen’s School of Business
They manage with “serial killer tendencies”
The Common Characteristic Found in ALL C-Suite Executives
• Is it a good idea to be in top physical shape?
• What should I do to get into top physical shape?
• How many of you ARE in top physical shape?
Which Premises Matter Most?
“Life is what happens while you are busy making plans”
- John Lennon
Why We DON’T Follow Best Practice
Don’t expect others to see marketing as a “best practice”… ….
… until marketing is seen as consistent with their priorities
You “manage” what you “measure”
Marketers tend to measure “volume”
CEOs/CFOs tend to measure “profitability”
How Do We Know Management’s REAL Priorities?
The REAL Objective of Marketing
Price
Cost
Minus
AssetsManaged
NetIncome
DividedBy
UnitMargins
Times
UnitVolumes
Return OnInvestment
MarketShare
MarketSize
Times
An obsession with volume renders marketing
a third-class citizen
The Drivers of Profitability
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%
Does a blind pursuit of volume lead to less marketing?
Questions to Ponder
A) $1.00
B) 0.9999999999999999999999999999999999999999999999
Which number is smaller?
Without Cost Reduction, Price-based Appeals Are Built to Fail
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%
3.36 X
The Magnitude of Cost Reduction Creates Ripple-effects…
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%
1.34X
Improving Quality or Adding Features Is Easier to Say Than Justify
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%2.12 X
That Can Lead to An Overreliance on Automation
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3% 3.40 X
It costs 5 – 8 times more to ACQUIRE a new account than it costs to SERVE AND RETAIN an existing account.
…and the “soft costs” associated with depersonalization
Marketing Becomes A Fixed Cost
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%
1.44 X
Describe this product…
BRANDING to the rescue
What if it carried the logo…
BRANDING BENEFITS
1. VOLUME: prices equal, do you buy brands or unbranded goods?
2. PRICE: would you pay more for what Fisher-Price promises?
3. COST: how much did Fisher-Price spend to attach its qualities to the product?
1. Is branding an expense or an investment?
2. Is MARCOM/Advertising all it takes to become a great brand?
Branding Issues
Marketing makes promises the organization has to keep
Why Great Advertising Is NEVER Enough
Your Profit Vehicle DRIVES Your Marketing Priorities
Marketing Effort
Customer Value
Barriers to Entry
Market Share Strategies
Product Innovation
Product Quality
Marketing Effort
Price Strategies
Margin
Volume
Process Innovation
Functional Efficiencies
Discretionary Spending
Integration/Consortia Effect
Cost Strategies
Net Income
New Applications
New Geographic Markets
More Usage Occasions
More Usage Per Occasion
Market Size Strategies
Your Profit Vehicle DRIVES Your Marketing BUSINESS Priorities
Marketing Effort
Customer Value
Barriers to Entry
Market Share Strategies
Product Innovation
Product Quality
Marketing Effort
Price Strategies
Margin
Volume
Process Innovation
Functional Efficiencies
Discretionary Spending
Integration
Cost Strategies
Net Income
New Applications
New Geographic Markets
More Usage Occasions
More Usage Per Occasion
Market Size Strategies
Is There a Preventative Strategy?
1. Know Your Customer…and what makes them happy
Where Would You Position Your Brand?
Weak Strong
%
WAYTOO
STRONG
WAYTOO
WEAK
The “Multibrand Solution”
Weak Strong
%
A
“ A Balanced Blend…”
Y
“Mellow Tasting Brew…”
X
“ Real Coffee Taste…”
• Who is prepared to pay the most?
• Who costs the least to service?
• Who represents the most volume?
• Can you keep the promises required to win their business?
How DO You Decide?
1. Know Your Customer…and what makes them happy
2. Know What It Costs to Make Them Happy
LowerCosts
Higher Pricesand Sales
Increase"Value"
Reduce"Waste"
Add "Good"Costs
Reduce "Bad"Costs
Not All Costs Are Created Equal
Total Costs
Higher Profits
Why It is Easier to Create "New Value“ for Some Customers
REDUCEWhat factors should be reduced
WELL BELOW the industry standard?
ELIMINATEWhat factors have always
been offered but NO LONGER add value?
CREATEWhat factors have
NEVER been offered in this industry?
RAISEWhat factors should be raised
WELL ABOVE the industry standard?
NEWVALUECURVE
Source: Kim and Mauborgne, "Creating New Market Space," Harvard Business Review, 1999
1. Know Your Customer…and what makes them happy
2. Know What It Costs to Make Them Happy
3. Know Everyone You Need to Make Happy
• The distinctive character of service offerings means you cannot sell what your staff does not understand* Intangible * Inseparable * Variable * Perishable
• The Five-Step "Service Profit Chain"• Profits grow from satisfied customers who receive service
value due to satisfied and loyal employees who had proper training, coaching, and support
Marketing Makes Promises the Organization Must Keep
COMPANY
EMPLOYEES CUSTOMERSInteractive Marketing
ExternalMarketing
InternalMarketing
BAD PREMISES
lead to the
WRONG PRIORITIES
which creates
A DISCONNECT BETWEEN MARKETING AND THOSE WHOMUST KEEP THE PROMISES MARKETING MAKES
Why Do Bad Things Happen to Good Marketers
1. Who Do We Serve?
2. How Do We Serve Them?
3. Who do we need to influence to serve them well?
Three Premises on Which We Must All Agree
