wits sld 2016

Part 2

“The purpose of a business is to

create. and then keep its customers”

What happened

since “Marketing Myopia”

was written in

1960?

“…In every case the reason growth is

threatened, slowed or stopped is not

because the market is saturated…

It is because there has been a

failure of management”

"If only minds were as easy to change as machines. I'll wager that it's easier to invent a

new generation of microchips than to get a generation of people to alter the routes they

drive to work everyday" - Ricardo Semler, Maverick

“The best swordsman in the world doesn’t need to fear the second

best swordsman in the world; no, the person for him to be afraid of is some ignorant antagonist who

has never had a sword in his hand before; he doesn’t do the thing he ought to do, and so the expert isn’t prepared for him; he does the thing he ought not to do and often it catches the expert out

and ends him on the spot” Mark Twain

“In category after category, companies have gotten so locked into a particular cadence of competition that they appear to have lost sight of their mandate--which is to

create meaningful grooves of separation from one another. Consequently, the harder they compete, the less differentiated they become ... Products are no

longer competing against each other; they are collapsing into each other in the minds of anyone who

consumes them”Prof Youngme Moon, Professor, HBS

(Teaches most popular course - on Consumer Marketing)

McKinsey followed over 1,000 US companies over an 18-year period, including during the last two

recessions, and found that companies that came out in the top-quartile after the previous recessions were

over significantly increased their spending on innovation, marketing and sales during the recession

- in innovation’s case, by 22% more than less successful companies. The payoff from this and

related investments was a 25% higher market-to-book ratio in the post-recession period

As market space gets more crowded, prospects for profit and growth are reduced…

•Supply exceeds demand, and markets decrease

•Prices drop more and more as products become commoditised, and there is nothing more left to compete on

•Globalisation compounds the situation

•Ability to differentiate brands becomes harder

•Niches (and “monopolies”) disappear

•Red oceans become increasingly more bloody

Examples• Telephony (voice services)• Fitness• Some retailers – e.g. books• Air travel, tourism and hotel accommodation• Managed services• Insurance and investments• Who is going to you?

Blue Oceans…

•Represent companies, industries and/or offerings that don’t yet exist in an untapped market space

•Where new “rules of the game” are waiting to be set as existing industry boundaries are expanded

•Where competitors become irrelevant because customers get a massive leap in value

•And where the impact on profit is immense

62% 38%Revenue Impact

39% 61%Profit Impact

86% 14%Business Launches

Value Innovation

Imitators & Incremental Value Improvements

The Sources of Profitable Growth

Originally 158 Companies

In Blue Oceans…

•Challenge all industry assumptions, rather than accept status quo

•Create a huge leap in value for all customers and embrace their common problems or desires

•Look at total solutions even if that transcends normal industry boundaries

•Abandon benchmarking against rivals: Make them irrelevant

In Blue Oceans…

•Don’t force customers to compromise between low cost or differentiated

•Create and capture new demand by offering both low cost and differentiated

•Think free from existing assets and capabilities: Ask “What if we could start from scratch?”

•The tools: Value Innovation

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market place

Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand, & new customers

Make the value-cost trade-off Break the value-cost trade-off

Firm’s activities aligned with choice: differentiation or cost

Use current assets & capabilities

Activities aligned with choice: differentiation and cost

Ask “What if we could start from scratch?”

The Three Tiers of Non-Customers

• The “soon to be non-customers” who are at the edge of your market, and are just waiting to jump ship

• The “refusing non-customers” who consciously choose against your market

• The “unexplored non-customers” who are in markets distant from yours

Reach Beyond Existing Demand

Value Innovation vs. Technological Innovation

Very successful new company with 14000+ stores

YES Est. emotional bond to

coffee (“European”) NO

Leading European fashion company

Globally recognized brand

YES Transformed functional

product into fashion accessory

• NOSwatch

Negative reception Environmental backlash Sale of company

NO Consumers suspicious of

artificial tampering

YES Genetically modified

vegetable, fruit production

Multi-billion dollar failure Bankruptcy

NO Too expensive No buildings, cars

YES First satellite-based mobile

phone serviceIridium

ResultValue InnovationTechnological InnovationCompany

Commodities and “Goods”

Differentiated Products

Delivery & Services

Experiences

Value

Add

ed ? Profit

“Don’t get me wrong: I have nothing against customers. Some of my best friends are customers…. My problem is with the problem of – and I shudder to write the term –

“customer centricity.” Everyone in business today seems to take it as a God-given truth that companies were put on

this earth for one reason alone: to pander to customers… The truth is, customers don’t know what they want. They

never have. They never will. The wretches don’t even know what they don’t want, as the success of countless rejected-by-focus-groups products, such as the Chrysler Minivan to

the Sony Walkman readily attests.”

Stephen Brown, HBR, October 2001

of South Africa

The meek shall inherit the earth,

but they will never increase market

share!

Ten Broad PrinciplesPrinciple # 1: Your customers aren’t listening to youPrinciple # 2: Everybody else is shouting at your customers too Principle # 3: The rest of your company thinks that you are crazyPrinciple # 4: You can’t execute your programme without the rest of your companyPrinciple # 5: If you don’t succeed, you are dead meat (but so is the rest of the company)

Ten Broad PrinciplesPrinciple # 6: The more you give, the more you getPrinciple # 7: Being good is not enough – you have to be betterPrinciple # 8: Marketing should be the most creative and innovative part of your business, (but it probably isn’t)Principle # 9: Marketing should be the most logical part of your business, (but probably isn’t)Principle # 10: Everything is marketing

Customers• Companies are more complex

• Competition is fierce

Challenges Facing Marketers Today - 1

Customers• Companies are more complex• Competition is fierce• Fragile customer loyalty• Want to be involved in pricing, (don’t want to pay for what they don’t

want)• Time, urgency, effort and complexity: Old pace is outpaced and in

overdrive


STILL

>Yeah…. Whatever

Alienated, alone, frustrated, not valued…

And surrounded by morons!

Short of money

Demand for more information about what you do, how you operate, how you determine prices, & how much you’re paid

But also demand that you get to know them better, who they are, how they operate, and what’s important to them

Time Poor

Bored: We have a surplus of…

Similar companies, employing similar people, with similar education backgrounds, working in similar jobs, coming up with similar ideas, producing similar things, with similar prices and similar quality

We also have a surplus of similar brands, with similar brand attributes, similar marketing messages, making similar brand claims

The result? Nostalgia for something – anything - that’s different

…with endless choices

We are living in the age of the never-

satisfied customer (Tom Peters)

Customers• Companies are more complex• Competition is fierce• Fragile customer loyalty• Want to be involved in pricing, (don’t want to pay for what they don’t

want)• Time, urgency, effort and complexity: Old pace is outpaced and in

overdrive• Shift from transactional sales to relationships and partnerships• Market segmentation – as it was• Want to be involved in product quality and service design• Market research limitations


Customers• The failure of marketing communications and promotions

• Word of mouth trumps advertising – always


Selling by Persuasion

Marketer CustomersAdvertising and Promotions

Interruption Marketing1. Put on your best suit, shoes, tie, accessories and

after-shave, and go to a demographically correct singles’ bar

2. March up to every woman and propose marriage

3. If turned down, repeat the process to everyone in the bar

4. If you come away empty-handed, blame the suit, shoes, tie and after-shave

“Spray and Pray”

Mass Advertising…

•Usually displays no real evidence that it is working because very few notice it in the clutter

• Is one-way and doesn’t allow for participation

• Is not easily tested or measured

• Is unpredictable and expensive

•And is often used to generate fear amongst competitors or improve the morale of employees

• Is not trusted/has poor credibility

http://www.google.co.za/webhp?hl=en

Selling by Bombardment


Direct Mail

Email

SEO Marketing

Agent Sales Tools

Self Defence by Customers


Direct Mail

Email

SEO Marketing

Agent Sales Tools

Self Defence by Customers


Direct Mail

Email

SEO Marketing

Agent Sales Tools

Live search Web search

Social networks Word of mouth

Perhaps the Biggest Challenge of All?

The declining power of traditional advertising &

promotion, and of traditional media

But what replaces it?

Advertising is expensive!

“Half the money I spend on advertising is wasted;

the trouble is, I don't know which half.”

(John Wanamaker)But that was then…

Now closer to 10%

Fact: There are too many brands and companies - and too few customers

Fact: Cost of advertising has almost doubled – with less “views”

Fact: There are so many more media that it’s impossible to reach your target audience with just one partner

Fact: Your message will not stick out above all the clutterFact: Your customers and prospects don’t believe the messages anyway:

• Only 18% (14%) of people believe adverts are true (AdWeek, Dec 2009.) Even less 10-year olds

• Word of mouth trumps advertising – always, always, always! (Even Social Media)

• An entertaining viral video can be watched by millions

Customers• The failure of marketing communications and promotions• Word of mouth trumps advertising – always• Therefore, they want communication that is relevant, anticipated,

timely, personalised and customised. (RAP)• Demand for better customer service, more “experiences,” and for

better recovery from problems• Poor internal processes to manage customers


Nestle Example: How Not to Manage Your Reputation

•Greenpeace campaign to stop Nestle buying unsustainable palm oil for KitKat

•Used Nestle’s Facebook page to take discussion directly to the company

•Nestle PR machine went into action to spin it into a positive PR counter attack

•However, the Nestle moderator – an employee - also tried to take control of the discussion by defending the company from “unfair” attacks

“We set the rules, it was ever thus… It’s like stopping people at a dinner party talking about a particular subject because you don’t like it. If he’d stopped typing, the activists would get bored, it could have been over in a day or so. Now it’s a

social media case study”“I’m pretty sure you can’t stop the feed, Nestle, but

kudos for trying. And hey, good job on committing to change in five years… I think we can meet them half way and stop buying their products for the next five years, and then commit to re-evaluating them again

as a company in 2015. Sound like a good plan?”

But the internet has made them savvier…

• Know more about what you sell & how it works

• Interact with many suppliers, getting more quotes

• In many different channels and media….

Customer Relationships. On whose terms?

Twin-Sumers

18 million hits

per month!

“For a generation of customers used to doing their buying research by search engine, a company’s brand is not what the company says it is, but

what Google says it is. Word of mouth is now a public conversation, carried on in blog comments and customer reviews, exhaustively collated and

measured.

The ants have megaphones now.”(Chris Anderson, Editor-in-Chief, Wired, from his book

The Long Tail: Why the future of business is selling less of more)

“SHAKESPEARE HOTEL is situated in a charming tree-lined square, north of Hyde Park, with excellent access to all parts of the

capital, and prides itself on offering value for money and a good service within the meaning of budget accommodation. Whether you are visiting London with a group or by yourself, Shakespeare Hotel

will endeavour to make your stay a pleasant one”

I knew I should

have looked it

up first!

“The usual London rip off” Having booked a twin room over the phone I arrived to find that all the twins had gone and only a double was available ! Having

explained that my teenage son moves a lot at night I was UPGRADED LOL to a quad room. It was on the fourth floor (no

elevator) It smelled of urine. The TV had no channels or a remote. the furniture looked as if had been recovered from a skip and the water took 8 mins to get warm. I returned to reception to comment on this and a very apathetic lady told me I could have a

double instead. Well I have slept in bigger cabins on sail boats than the supposed double. Needless to say I had no sleep as i kept falling of the bed and they managed to turn the heating off

all night. I was quoted 85 pounds but it turned out to be plus VAT. I wouldn’t recommend this place to my worst enemy.

http://www.tripadvisor.com/ShowUserReviews-g186338-d193604-r97178147-Shakespeare_Hotel-London_England.html

Crowdsourcing Power•Crowd Mining: Extracting useful information or stats from the

global database. (e.g. Tescos knows that most diets are 18 days long, Discovery Health knows “everything”)

•Crowd Sourcing: Outsourcing tasks to anyone in the world (Idea Bounty and ForaFiver)

•Crowd Funding: Raising funds for anything using the power of individuals all contributing (Zopa and Groupon)

•Crowd Sharing and Idle-Sourcing (Uber and ZipCar, and also Waze and Pigspotter)

•31,4 million references on Google

•103 million YouTube hits in first 9 days… and another 600+ million since then

•8.3 million CDs pre-sold, 21 million in 24 months

• “7th most influential person in the world in 2010” (Time)

• “She’s worth £14m!”

Easier to communicate with millions of others

http://en.wikipedia.org/wiki/File:Susan_Boyle_Nov_2009.jpg

Please review the “Marketing Audit”. (It will be used in

the Action Assignment)

Activity – p24 - 28

Your Turn!

Case Study – p30

What do we market? (“Products”)1. Goods2. Services3. Experiences4. Events5. Persons

6. Places7. Properties8. Organisations9. Information10. Ideas

Five Key Objectives of Any Marketing Strategy…

•Identify and find

•Win (& win back)

•Retain

•Grow

•Reduce cost to serve

Most resources spent here. Why?

But real profits lie here!

Offensive Marketing

Find and Win: (Includes R&D, market research, distribution and location, launch, sales commissions

advertising and promotion)

And It’s Very Expensive!

Thus, once they are inside, we need to Defend! (Retain and Grow)

Many Definitions of Marketing“Marketing is a social and

managerial process by which individuals and groups obtain what

they need and want through creating, offering and exchanging

products of value with others”(Philip Kotler)

Another Better Definition of Marketing:

• It is the continual, creative anticipation and fulfilment of a target

customer’s needs and wants and desires, such that the customer

repeatedly returns to that company or brand throughout their lives, & paying

a price that is profitable for the marketer, and enabling it to succeed

against competition• John Dalla Costa & Alan Middleton, Advertising Works

of South Africa

A market consists of all the potential customers who share a particular need or want, and who

may be willing and able to engage in exchange to satisfy

that need or want

The value that customers get is important here!

“The aim of marketing is to make selling superfluous… Ideally, marketing should result in a customer who is ready to buy. All that is then needed is to

make the product available.”(Peter Drucker)

Therefore, marketing is preoccupied with the needs of the customer in the whole

cluster of things associated with creating, delivering and consuming our products

The “Competitiveness Value Map”

RelativePrice

Low

High

HighRel. Perceived Quality

Why do companies market?

•Decline of sales over time•Growth to slow for survival•New opportunities to grow•Changing customer needs and expectations

•Increased competition•Marketing expenditures out of hand

Why is B-2-B so different?

(See page 40, and indicate which apply to your business)

wits sld 2016

Education