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© 2007-2009 IMD International. Not to be used or reproduced without permission. Strategic Marketing in Action What tough markets demand from Marketers.

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Presentation on theme: "© 2007-2009 IMD International. Not to be used or reproduced without permission. Strategic Marketing in Action What tough markets demand from Marketers."— Presentation transcript:

1 © IMD International. Not to be used or reproduced without permission. Strategic Marketing in Action What tough markets demand from Marketers Professor Kamran Kashani Zurich, March

2 Professor Kamran Kashani GfM Marketing 2 What does business worry about today? Not marketing…..but markets! Globalizing markets:Shifting buying power Hyper-competitive markets:Smart new players Commoditized markets:Disappearing differentiation Buyers’ markets:Choice, negotiating power, less loyal Tough markets:Hard to make money!

3 Professor Kamran Kashani GfM Marketing 3 Challenges The challenges of surviving and prospering in today’s markets are many  Reinvent the Customer Value Proposition  Identify and exploit hidden growth opportunities  Avoid the ‘commoditization hell’  Innovate beyond the core product or service– the business model  Create customer value, extract value…and make money!

4 Professor Kamran Kashani GfM Marketing 4 How prepared is traditional marketing in dealing with today’s challenges?  Reinvent the Customer Value Proposition  Identify and exploit hidden growth opportunities  Avoid the ‘commoditization hell’  Innovate beyond the core product or service– the business model  Create customer value, extract value…and make money! How adequate are the old marketing skills and the new tools: the 4-P’s, marketing research, advertising, promotions, PR, CRM, loyalty programs, key account selling…? Challenges

5 Professor Kamran Kashani GfM Marketing 5 What Marketing could be: Two illustrations Case studies in winning in tough markets

6 Professor Kamran Kashani GfM Marketing 6 SALES NET INCOME ($million) How would you assess this business performance?

7 Professor Kamran Kashani GfM Marketing 7  Dow Corning:Global leader in silicone products (40% market share)  Silicone applications:Aerospace :Automobiles :Electronics :Construction :Healthcare :Personal care :Textiles  customers in 80+ countries Dow Corning : Background

8 Professor Kamran Kashani GfM Marketing 8  R+D:6% of sales :innovation leader in silicones :new applications  Innovative products:premium prices  Value added services:customized applications :co-development of new products  Corporate vision: “We will advance the chemistry and related sciences… to contribute to our customers’ success and differentiate Dow Corning from our competitors.” Dow Corning’s 60-year old strategy: Product Leadership

9 Professor Kamran Kashani GfM Marketing 9 Mass marketCommodities Buyers Specialties Buyers Demand Value Demand Value Market Polarization Dow Corning: Customer shifts challenge market leadership

10 Professor Kamran Kashani GfM Marketing 10 Mass marketCommodities Buyers Specialties Buyers Demand Value Demand Value Market Polarization DC ! Dow Corning: Customer shifts challenge market leadership DC

11 Professor Kamran Kashani GfM Marketing 11 Confronting market change: The denial phase Scott Fuson : Chief Marketing Officer “We had the same business model for 60 years. We were trying to get premium prices for our products because we felt we had premium service and we were a premium company. We said to our customers: “Hold on, you can’t compare our silicones to these cheap imitators. They don’t offer comparable new product development assistance, quality assurance, commitment to safety and reliable deliveries.”

12 Professor Kamran Kashani GfM Marketing 12 Realization: The past success blinded the management from seeing the future. Chief Marketing Officer: “We were performing at sub-standard levels. All of us felt that our jobs were at stake. People knew that if [things] didn’t change, then Dow Corning as it existed was not going to continue… the mood was pretty grim.” “We reached a tipping point… We fundamentally changed the company strategy as there was nowhere else to turn to.” Confronting market change : The “Tipping Point” (2001)

13 Professor Kamran Kashani GfM Marketing 13 Top management embanks on a major strategic change process  Appoints task force: Marketing and other functions  “Provocateurs” to stir & challenge  Mandate: Come up with “Big & Hairy” ideas Self-Audit : Review of 5 years “Voice of Customer” data Confronting market change: A fresh start

14 Professor Kamran Kashani GfM Marketing 14 Discovering new customer segments with different needs Customer needs based segmentation Solutions customers : innovative solutions : proven solutions : cost-effective solution Price-seekers : large volume, commodity buyers : have experience in-house services : don’t need services Chief Marketing Officer: “There was a whole sector [of customers] across many diverse industries that we were overserving and not getting the growth from… They viewed our products as commodities when making purchase decisions, and didn’t want to pay for all the additional services that we bundle with our product sales.”

15 Professor Kamran Kashani GfM Marketing 15 Task Force proposals:A web-based business model to lower “cost-to-serve” – never tried before! :Offer price seekers a “no frills” value proposition :“No frills” – product only (no services) at low market prices :Take out all low/no value adding activities :Develop a new brand – Xiameter : Rejuvenate DC’s core business through even more innovation and paid-for new services New strategy: A game changer in the chemicals industry

16 Professor Kamran Kashani GfM Marketing 16 Task Force proposals:A web-based business model to lower “cost-to-serve” – never tried before! :Offer price seekers a “no frills” value proposition :“No frills” – product only (no services) at low market prices :Take out all low/no value adding activities :Develop a new brand – Xiameter : Rejuvenate DC’s core business through even more innovation and paid-for new services Playing a different game to win: A “disruptive innovation” Dual Brand Strategy New strategy: A game changer in the chemicals industry

17 Professor Kamran Kashani GfM Marketing 17 New strategy motto: “Meet customer needs, exactly”  Materials delivered in all sizes and quantities  Extensive services and solutions  Innovative, proven & cost-effective solutions  Technology and R&D  Personalized customer service  Flexible ship dates  7,500 products  Web-enabled business model  Large volume orders only  No technical service  Lead times: average 7-20 days  Standard silicones  Market-driven prices  Dedicated Traders  350 products (initially)

18 Professor Kamran Kashani GfM Marketing 18 Xiameter’s “Dare to Compare” brand campaign

19 Professor Kamran Kashani GfM Marketing 19 SALES NET INCOME ($million) Poor performance…

20 Professor Kamran Kashani GfM Marketing 20 SALES NET INCOME ($million) Xiameter: A success story… A contributor to Dow Corning’s turnaround

21 Professor Kamran Kashani GfM Marketing 21 Xiameter: A success story re-told by the media and customers CMO Magazine:Xiameter responsible for Dow Corning’s “metamorphosis” Marketing News:Xiameter has had a noticeable effect on morale among company’s many “whiz-bang scientists” Harvard Business Review:Xiameter is a clear winner; it paid back original investment in just 3 months Customer surveys :The system is convenient, the deliveries are on time and we are happy with the prices and product quality. We don’t need any service support and don’t want to waste time talking to sales reps that most other suppliers have. We have become more competitive, increased our sales by more than 30%, saved time and have better control over our cash flow. Quotes

22 Professor Kamran Kashani GfM Marketing 1974 Patent acquired Sales 1980 Restaurants Test Market 1982 Office Test Market 1986 New company established 1988 Marketing takes the lead 1990 First club 1995 Break-even The Nespresso story: The marketing impact 2010 Average growth 30% + CHF 2.8 billion

23 Professor Kamran Kashani GfM Marketing 1974 Patent acquired Sales 1980 Restaurants Test Market 1982 Office Test Market 1986 New company established 1988 Marketing takes the lead 1990 First club 1995 Break-even The Nespresso story: The marketing impact 2010 Revised Strategy →Re-position: Households →Create Nespresso Club →24-hour service →New channel: direct pals →48-hour home delivery →Machine partnerships →In-stone demos →No ads Average growth 30% + CHF 2.8 billion Revised Strategy →Re-position: Households →Exclusive Nespresso Club →24-hour service →New channel: direct sales →48-hour home delivery →Machine partnerships →In-store demos →No ads

24 Professor Kamran Kashani GfM Marketing 24 What do Xiameter and Nespresso success stories have in common?  Big radical strategic decisions were based on customer insights...  …brought into focus primarily by marketers  Key moves were not bound by marketing research –Xiameter business idea never tested with consumers –Early consumer tests of Nespresso concept were disappointing!  Marketers were comfortable with the risk factor in innovation…  …and were in the lead, had their voices heard!

25 Professor Kamran Kashani GfM Marketing 25 To fulfill its strategic role marketing has to break out of its “support” silo… Strategy Process Fin CEO NBD R&D HR OP IT “support” MKTG Strategic Decisions:What markets? :Which customers? :How to serve? :How to differentiate? :How to make money? Strategy Process

26 Professor Kamran Kashani GfM Marketing 26 … and bring the customer’s voice and insights into the strategy process Strategy Process Fin CEO NBD R&D HR OP IT MKTG Strategic Decisions:What markets? :Which customers? :How to serve? :How to differentiate? :How to make money? Strategy Process

27 Professor Kamran Kashani GfM Marketing 27 When marketing’s voice is absent from Big decisions… …customers’ interests take back seat to other priorities “Whenever you ask a CEO about the importance of customers, you hear the requisite platitudes. But in fact customers have often lost out in the relentless push to maximize shareholder value…Bain & Company found while 80% of CEO’s think they are doing an excellent job of serving customers…only 8% of customers agree.” Fortune Magazine, 2006

28 Professor Kamran Kashani GfM Marketing 28 0% S&P Total 38.7% American Customer Satisfaction Index Stock Portfolio 144.5% Relative Price Change over Time Source: Harvard Business Review, March 2007 Growing evidence: shareholder value is highly correlated with customer satisfaction

29 Professor Kamran Kashani GfM Marketing 29 Growing evidence: “…shareholders do better when firms put the customer first.”

30 Professor Kamran Kashani GfM Marketing 30 “…If more companies made customers the top priority, the quality of corporate decision making would improve because thinking about the customers forces you to focus on improving your operations and the products and services you provide, rather than on spinning lines to shareholders.” Roger Martin, Harvard Business Review January-February 2010 Growing evidence: “…shareholders do better when firms put the customer first.”

31 Professor Kamran Kashani GfM Marketing 31  Strategic point of view: –Spotting long term trends, identifying future scenarios –identifying market gaps and opportunities  Value mapping: –Looking beyond the first level customers –Seeing how “value” is created and captured upstream/downstream  Thinking and acting beyond the “researchable” –feel comfortable with uncertainty in innovation –learn to experiment and take measured risks –trust one’s well-developed and educated intuition Skills set Breaking out of the “support” silo: Are marketers ready for the demands of strategy in today’s tough markets?

32 Professor Kamran Kashani GfM Marketing 32  Converting customer insights into compelling business plans: –developing an integrative view of business and other functions –defining strategic priorities & initiatives –making a credible case: showing bottom line impact!  Driving implementation: –getting buy-in for market inspired change –learning to by-pass resisters or use them to advantage –mobilizing and energizing the troops! Are marketers ready for the demands of strategy in tough markets? Skills set

33 Professor Kamran Kashani GfM Marketing 33 Scan the market Formulate the Winning Strategy Articulate Customer Value Proposition Build the Brand Assess Competition Lead Implementation Drill for Insights Follow-up: Satisfy and Retain customers ImplementationPlanning IMD’s Strategic Marketing in Action program: inspired by skills set marketers need in today’s tough markets

34 Professor Kamran Kashani GfM Marketing 34 To conclude: Let’s remember why our profession exists… “The purpose of business is to create and keep a customer.” Peter Drucker

35 Professor Kamran Kashani GfM Marketing 35 Danke!


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