Why Bad Things Happen to Good Marketers Ken Wong Queen’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 Assets Managed Assets Managed Net Income Net Income Divided By Unit Margins Unit Margins Times Unit Volumes Unit Volumes Return On Investment Return On Investment Market Share Market Share Market Size Market Size 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) 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 Cost2.3% 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 Cost2.3% 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 Cost2.3% 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 Cost2.3% 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? WeakStrong % WAYTOOSTRONG WAYTOOWEAK

The “Multibrand Solution” WeakStrong % 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

Lower Costs Higher Prices and 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 REDUCE What factors should be reduced WELL BELOW the industry standard? ELIMINATE What factors have always been offered but NO LONGER add value? CREATE What factors have NEVER been offered in this industry? RAISE What factors should be raised WELL ABOVE the industry standard? NEW VALUE CURVE 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 CUSTOMERS Interactive Marketing External Marketing Internal Marketing

BAD PREMISES lead to the WRONG PRIORITIES which creates A DISCONNECT BETWEEN MARKETING AND THOSE WHO MUST 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

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