Market Strategy Fundamentals
DRAFT DRAFT DRAFT
I. Marketing Strategy
VI. Value Selling
The power of an auction
22 Immutable Laws
The marketing audit
Swim with the Sharks customer and competitor profiles
Social marketing networks
Jay Abraham, Sticking Points
Levinson´s Guerrilla Marketing
Kotler´s Marketing textbook
What is the difference between marketing and sales? Marketing is everything you do to make the phone ring (or receive an E-Mail). Sales is what you do when you pick up the phone (answer the E-Mail).
"But I don´t know anything about marketing. I just love my customers, that's all." protested the elegant, grey-haired gentleman. He was making a presentation at the Stanford New Enterprise Forum of Stanford Business School. Decades ago he had founded a company in Silicon Valley, which was now a Goliath in its industry. The room full of razor-sharp Stanford MBA students had been bombarding him with sophisticated questions about marketing. They were a) bound and determined to show how smart they were and b) actually wanted to learn something.
Market share is, of course, not only a function of the experience curve. It also reflects the transition from the six P's of the marketing mix to the six C's.
Product Customer wants & needs
Price Cost to satisfy the needs
Place Convenience to buy
Packaging Channel management
Promotion Communication and branding
Post-sales service Customer Relationship Maintenance (CRM)
The original four P's were Product, Promotion, Price and Place. They stem from a 1957 article by the Harvard professor Neil H. Borden. They were first popularized by E. Jerome McCarthy in Basic Marketing, A Managerial Approach, Irwin, 1960. Neil Bolson´s original article was slightly revised by his Harvard colleague, Benso P. Shapiro, and published by Harvard Business School in its case study series as "Concept of the Marketing Mix" in 1981.
The four C´s of Customer needs and wants, Cost to the Customer, Convenience and Communication were suggested by Robert Lauterborn in "New Marketing Litany: four P´s passé; C-words take over," Advertising Age, 1 Oct. 1990, p. 26. Upon reading the article I modified the P and C lists for my own teaching as presented above. Both the four P´s and four C´s feature in various editions of the classic text Principles of Marketing by Philip Kotler, to whom the four P's are sometimes wrongly attributed.
The first list is the Makay Envelope Corporation 66-Question Customer Profile. The second is the Mackay Envelope Corporation 12 P´s Competitive Profile.
Harvey Mackay bought a failing envelope company when he was just 26 years old and built it into a leader of its industry in the U.S., producing over 10 million envelopes a day, with exceptional profit margins. Envelopes are a pretty boring commercial product -- not much sex appeal in an envelope. Their sales do not provide much scope for negotiating win/win either. They are bought by purchasing agents strictly on a price-performance basis. As one envelope performs about as well as another, the negotiation comes down to hard-nosed chiseling over pennies with the professional buyers. Thereforer there is no point in collecting the kind of information on them that one does for purchasers of consumer products.
The above is all pretty obvious to anyone who has any experience at all in B2B marketing, wouldn't you agree? Makay does not. In fact, he considers the paragraph above arrant nonsense. Based on his experience with that most boring of products, the lowly envelope, he states with conviction:
"It is critical to know your customer." (i.e. the purchasing agent)
"People, not specs, will always be the key in determining who gets the sale."
The Mackay envelope salesmen did better than anyone else in the industry. What was the secret of the their success? The company had salesmen fill out, over time, a 66 question profile on every purchasing agent encountered.
The items began with the date of birth, continued with the buyer's education -- and that of his children -- and concluded with information about his anticipated funeral. O.K., that last is an exaggeration, but not by much. Amassing a ton of data about individuals is acceptable in the U.S. business culture. The reason it frequently is ignored is not because of cultural constraints, but simply because of the persistence required to obtain it, datum by datum. Doing it at all is viewed more skeptically in Germany, because of attitude -- and laws -- towards collecting a person´s private information. In some other cultures it would also be looked at askance.
With due consideration to cultural constraints, before considering the system in detail, the first question is whether the effort it requires is worthwhile. To cite only two of the many examples Makay gives:
"Family." Questions 13-19. I luckily overheard a buyer's secretary on the phone arranging to have her twelve-year old daughter driven to a gymnastics event. Obviously, I asked about the daughter. Suddenly there I was, watching the Mighty Mite compete in the parallel bars event. A month later, having brought myself up to speed in gymnastics, I mentioned it to the buyer -- and got my first order the same day.
"Business background." Question 22. "Any status symbols in the office?" is a good question to key on. I called on a Fortune 500 company in New York -- having learned that the most important reading a salesperson can do is to read the wall of his prospect's office while waiting for him to get off the phone -- and noticed a picture of the company president awarding the buyer a certificate for writing a position paper on unemployment. A week later I sent him a book on unemployment. The orders have never stopped coming.
The author introduced this system in 1990 to BFS GmbH in Munich, Germany. Of course it had to be modified in respect of the strict laws about data confidentiality in Germany (Datenschutz). At the same time this system (among others) was introduced, the market for the company's services exploded because of the falling of the Berlin Wall in November 1989. The company took off, growing at 40% per annum, which eventually led to its sale to the conglomerate Krupp AG in 1994. Granted, much of that enviable growth was due to the fortuitous increase of the market. However that increase was obvious to the competitors as well. The ability to seize that opportunity reflected in large part the fact that from the very outset the company paid far more attention to the buyers as individuals than the competitors did.
Incidentally, Krupp AG promptly eliminated this system after acquiring the company. A consultant might write: "The revenue generating activities of primary importance suffered a precipitous metathesis."* The author would say that the sales did not just decline, they fell off the cliff. The company was sold back to the entrepreneur who had founded it. He rapidly built up sales again, turned around and shortly afterwards resold it a second time, "double dipping!"
*"precipitous metathesis" means a sudden, abrupt reversal.
The data from the 66-question customer profile are the first of two key drivers for strategy formation. This data "from the field" is delivered to upper management, a bottom-up process. (Strategy formation tends to have a "top-down" orientation because determining it is, after all, the province of the CEO and the senior management team.) Harvey Mackay had the advantage that, having developed the system himself, he believed in it and religiously practiced what he preached (bolding added):
"For the first ten years we used this process, I would take home the files on our top ten accounts every Sunday night and drill the information into my head until I knew it by rote. Although I don´t do that any more, once a year our marketing group and our top operating people sit down and review the material with a special emphasis on the final page. This analysis of our common customer issues is the launching pad for our planning."
The first step to bottom-up strategy formation is to profile the customers. The Makay list to do so has the following categories:
Personal : Questions 1- 6
Education: 7 - 12
Family 13 - 19
Business Background 20 - 33
Special Interests 34 - 39
Lifestyle 40 - 57
The Customer and You 58 - 66
Market Driven Strategy
We feel that market considerations are the crux to strategy formation. " A company can exist without many things. But it can not exist without customers!" Therefore this chapter is the longest Toolkit chapter. It is divided into three sections:
A - Marketing Considerations
1. A Marketing Audit, a ten point checklist
2. The Customer & Competitor Qoogols
3. PIMS redux, The Profit Impact of Market Share
4. Branding, a source and three examples Permission to use cartoon checklist, get.
B - Advertising Considerations
1. Cost containment
2. DRTV Infomercials and Home Shopping Channels (QVC) -- the Celebrity Impact
3. The Internet and the relevance of a classic advertising model - a call for improvement
C- Selling Considerations
2. Other sales techniques
3. The Law of Number Two
A. Marketing Considerations
1) The Marketing Audit, a ten point coaching checklist
- impact of the economy (recession, recovery)
- government controls and regulations on
-- competitive practices
2. Industry characteristics
- structure and (shifting) boundaries
- role of globalization
- impact of technology and innovation (paradigm shifts)
- role of key suppliers
- role of offshoring and outsourcing
3. Customers, B2C and B2B
- motivation of the end user
- buying processes
- customer relationship management (CRM)
-- on-line/Internet relationship (E-Zine)
-- role of social media
- cost of customer acquisition versus retention
- the lifetime value of a customer taking into account product life cycles
4. Product/Service characteristics
- design and packaging
- R & D: customers as innovation drivers
-- optimization (just in time)
-- physical handling, warehousing, transportation
5. Market Research
- primary versus secondary research (fn. to explain the difference)
- the sales force
- beta customers
- quantitative approaches
- split testing
- regression analysis
- conjoint analysis
- The Mackay Envelope Corporation 66-Question Customer Profile
(See below, Part B.)
(fn. Primary research is dealing with events and people directly. Secondary research is library research, Internet surfing, information obtained at "second hand".)
- based on price, features & benefits, service, quality, solution
- market position (relative market share)
- direct versus indirect competition
- likely competitive responses
- on-line presence
- their value chains
- cost versus margin based
- elasticity and cross-elasticities (fn. and show the calculus)
- reflects experience curve effects
- buying market share
- premium pricing
8. Branding and positioning
- local and national
- international and global
- Internet presence
- social media (cf. Chapter IV, which follows, for an example)
- wholesale versus retail
- direct mail
- Internet (e-bay for companies and yahoo shops)
- DRTV (QVC)
- channel management
10. Advertising and Public Relations
- agency and media selection
-- generating buzz (fn.) (word of mouth)
-- going viral
-- celebrity advertising
- budget (how determined)
- effectiveness, how measured
-- cost per lead
-- cost per close
11. The sales force
- recruitment and training
- commission and salary structure
- distribution of excellent and sub-par performers (fn. Pareto´s rule)
- solution selling techniques, such as SPIN (cf. Appendix Q Solution Selling)
- sales competitions (cf. the Tim Galway IBM example)
12. The marketing strategy according to:
- senior management - to what extent is strategy determined through a bottom up versus a top down process?
- mid-level managers – to what extent are they empowered (fn) to make changes?
- the sales force – how are such changes communicated to them to ensure their understanding of and commitment (fn) to them?
The above checklist is reproduced in the Toolkit Appendices in a "user-friendly" form for photocopying.
2)The Customer and Competitor Qoogols
To avoid undue (fn.) repetition, these long checklists are only presented in the Toolkit Appendix. They can also be, along with the other Coaching Elephant Tools, downloaded from our website.
3)PIMS Redux (fn.)The Profit Impact of Market Share
Some Food for Thought for Coaching a Market Driven Strategy
(fn. redux, brought back, placed after the noun it modifies)
VI. Value Selling