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Philip Kotler: Modern Marketing

Philip Kotler is often viewed as the ‘father of modern marketing’. His contribution to the field is enormous. I’d characterise his principal innovation as bringing the analytical approach of a mathematical economist to what was a woolly and vague social science.

Philip Kotler
Philip Kotler

Short Biography

Philip Kotler was born in Chicago in 1931 and received his MA in Economics from the University of Chicago in 1953, studying with three Nobel Laureates. He then took a PhD in economics at MIT, before realising that economics was the wrong subject for him. He held post-doctoral positions at Harvard (in maths) and the University of Chicago (in behavioural science) before accepting an academic post at the Kellogg Graduate School of Management at Northwestern University. There, he chose to teach marketing and by 1962 was Professor of International Marketing.

In 1967, he became the Johnson & Son Professor of International Marketing, a post he still holds today. Also in that year, he published a major work on marketing. Frustrated with the lack of intellectual rigour and analysis of all marketing textbooks then available, Kotler brought his mathematical training to bear on the evidence base of the marketing curriculum.

In Marketing Management, he created a best-selling textbook, that is by far the dominant choice of business schools throughout the world. Now in its 15th edition, Kotler typically revises it thoroughly every three years. He argues that yesterday’s solutions are today’s problems – marketing changes too fast for an edition to remain any longer. It’s good for sales, I guess, but in the case of marketing, I suspect it is more than justified.

Since then, Kotler has authored well over 50 books, and has garnered more academic and business awards and honours than you can shake a stick at. He even appears on a postage stamp (Indonesian, 2006, 1,000 Rupiah – around US$0.07 – for the philatelists).

Spat between Kotler and Levitt

In the 1980s, Kotler had a public spat with his contemporary marketing guru, Theodore Levitt. As we discuss in our article about Levitt, Levitt believed that corporations should standardise their products globally, and build global brand messages and marketing campaigns. Kotler, on the other hand, recognised the value of this but argued that corporations must not ignore cultural and other local differences. He advocates a mixture of global and local marketing that has become known as ‘glocal’. McDonald’s is an example; it produces local dishes in addition to core offerings, and even suppresses those products where they conflict with local values (such as beef products in Hindu countries).

Four Big Ideas that Philip Kotler gave us

The measure of a new idea is how deeply and how widely it becomes ingrained. Four of Kotler’s ideas now seem self-evidently true to a wide swathe of managers, within and outside of marketing functions. This was not always the case, and Kotler was instrumental in developing each, and putting them before generations of graduate business school students.

Marketing is a Core Business Function

There was a time when marketing was seen as a peripheral activity. Or maybe it was an adjunct to the sales function. If it were the latter, then clearly, it could only be an activity for commercial organisations. But it’s not, and therefore all manner of non-commercial organisations, like governmental tiers, voluntary and charitable bodies, and public services, need to engage in marketing. Without marketing, we now recognise, we cannot put our ideas and offerings in front of the people we created them for. Without marketing, there is no point!

Focus on Your Customer’s Needs

Create the products and services your customers need and want. Marketing is less about lining up sales for what you make, and more about figuring out what your customers will buy, and then letting them know about it, when you have something that matches.

Marketing as a Process of Exchange and Communication

Marketing is about building an overlap of values between your brand, and your clients. It is a social process that starts with a dialogue, where marketers create the conditions to hear from their potential buyers. It seems to me that this perspective has its roots in the time Kotler spent as a post-doc in behavioural science. It does for marketing what Daniel Kahneman did for economics: it places the quirky irrationality of humans at the centre of a discipline which was, before then, considered in theoretical and abstract terms.

Five Product Levels

Kotler introduced in, Marketing Management, the idea that there are five levels at which an organisation can offer its products or services.

  1. The core benefit that the customers need
  2. The generic product or service that the organisation has created
  3. The product or service that the customers expect
  4. A product or service that has additional benefits packaged in
  5. A product or service that meets the full potential to satisfy its customers

Conclusion on Philip Kotler

Studying marketing without reading Kotler would be like studying English literature without reading Shakespeare. His ideas are foundational. But his rigorous discipline of constantly updating his principal textbook also means that his ideas will always be of the moment.

Some Videos of Philip Kotler, speaking about his idea

Philip Kotler: Marketing Strategy

Kotler’s Mantra: CCDVTP

 

Philip Kotler on the top trends in marketing

 

Want more on marketing?

You might like the Marketing Pocketbook

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Theodore Levitt: Marketing Myopia

Theodore Levitt’s principal contribution to management was in lifting marketing up from a functional place in business to a strategic role. So it is perhaps surprising that he is often remembered as the man who coined the term ‘globalisation’. Mis-remembered*, it turns out. The greater irony is that he simply brought the word to prominence. But that shows the impact of his writing; in particular a series of classic articles for the Harvard Business Review, which he edited from 1985 to 1990.

Theodore Levitt, 1925-2006
Theodore Levitt, 1925-2006

Short Biography

Theodore ‘Ted’ Levitt was born in Germany, in 1925. His parents moved the family to America in 1935, and Levitt served in the War. He earned his Bachelor’s degree at Antioch College and went on to do a Ph.D. in economics at Ohio State University.

After time as a consultant, and then teaching at the University of North Dakota, Levitt joined the Harvard business school in 1959. There, he quickly started teaching marketing, despite having no formal education in the topic. But in the following year, 1960, he published a landmark article in the Harvard Business Review (HBR), which he descried as a manifesto.

Marketing Myopia

In Marketing Myopia, Levitt argued that corporations should not think of themselves as producers of goods or services. Instead, they are ‘buyers of customers’ who create goods and services to tempt customers into a commercial relationship. Companies are organisms that create and maintain customers. Indeed, in his 1983 book, The Marketing Imagination, he summed up his primary thesis as In 1983, by defining corporate purpose as:

to create and keep a customer

Put that way, it is easy to follow Levitt’s argument that marketing needs to pervade a company’s strategy and provide a counterbalance to excessive focus on production and operations. He gave the often cited example of railways. In thinking about their purpose, they should stop considering themselves as providers of a railway and its services, and start to think of themselves as organisations whose role is to move people from where they are to where they want to be.

It is worth noting that Levitt was influenced (as are so many twentieth century management thinkers) by Peter Drucker. Drucker argued that, from a customer’s point of view, marketing isn’t a function: it is the business. Let’s just look at Apple!

Marketing Matrix

Theodore Levitt: Marketing Matrix
Theodore Levitt: Marketing Matrix

To underscore his idea, Levitt introduced the idea of a marketing matrix, that charts a company’s inward orientation against its outward orientation to its customer, with the top right cell representing the ideal.

His 1976 HBR article, The Industrialization of Service, argued that we need to apply the same rigour of repeatability, monitoring and quality control to customer services, as we do to production. He also introduced the now commonplace concept of ‘Relationship Marketing’ – the activity designed to keep customers and extend your relationship with them. This has, of course, spawned the whole discipline (and software market) of CRM: Customer Relationship Management.

The Globalization of Markets

For my third of Levitt’s big ideas, I have to come back to globalisation, which he addressed in his 1983 HBR article, The Globalization of Markets. Here, he argues that the two ‘vectors’ of technology and globalisation would shape the world. Now, in 2016, it is hard to argue with that conclusion. Indeed, he thought that it would be technological advances that would drive marketplace changes towards global uniformity. To survive and outcompete rivals, corporations would need to harness the efficiencies of standardisation. These would outweigh the desirability for customers of local customization in a competitive sense. Ladies and gentlemen, I give you Starbucks, Toyota, Amazon, and Samsung.

This position got Levitt into a debate that we describe in our article about the other towering figure in twentieth century marketing, Philip Kotler.

Theodore Levitt talking about Global Markets

You may also enjoy the Marketing Pocketbook and the CRM Pocketbook (CRM: Customer Relationship Management).


* Even the New York times got this wrong. Their obituary for Levitt was titled ‘Theodore Levitt, 81, Who Coined the Term ‘Globalization’, Is Dead’, but in a subsequent erratum, they noted, ‘and while he published a respected paper in 1983 popularizing the term, he did not coin the word. (It was in use at least as early as 1944 in other senses and was used by others in discussing economics at least as early as 1981.)

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Jean-Claude Larréché: Marketing Momentum

Why is it that some of the most successful companies spend surprisingly small percentages of their revenue budgets on marketing? The answer, if you think about it, is obvious: as total revenue income goes up, if you are a successful business, you get more bang for your marketing buck. They may be spending a lot, but the proportion is lower.

So, how do you get your business to this enviable position? The answer, says INSEAD Professor, Jean-Claude Larréché, is momentum. Some products do not need to be aggressively marketed to deliver superior sales performance: instead, their fit with customers’ needs and desires is so great, that they gain a momentum of their own.

Jean-Claude Larreche
Jean-Claude Larreche

Short Biography

Jean-Claude Larréché was born in 1947 and studied electronic engineering at INSA in Lyon, where he was awarded a bachelor’s degree in 1968. He followed this with an MSc in Computer Science at the University of London (1969), and an INSEAD MBA, in 1970. He then went on to research marketing modelling at the Graduate School of Business at Stanford University, where he was awarded a PhD in 1974.

Larréché’s research led him to develop a now widely used marketing simulation, MarkStrat, and his growing expertise in the modelling of how marketing works led to a non-executive appointment to the board of Reckitt & Coleman (now Reckitt Benckiser), that he held from 1983 to 2001.

In 1982, he returned to INSEAD as Professor of Marketing, becoming The Alfred H. Heineken Chaired Professor of Marketing in 1993. He continues to hold this role. Whilst collaborating in a number of books, Larréché’s most significant publication is his 2008 book, The Momentum Effect.

The Momentum Effect

Larréché differentiates between ‘upstream marketing’ and ‘downstream marketing’. Upstream marketing is designed to start the process of product or service awareness among appropriate prospects, and allow the business to refine their product or service offering, to meet potential buyers’ needs. You do this with customer insight and content marketing tactics. Downstream marketing is the communication and promotion that puts your products and services to the market, to generate purchasing intent.

The key, Larréché asserts, is to divert funds from downstream to upstream marketing, to ensure that you have a product or service that is so attractive to customers, that it creates its own momentum. The obvious example he cites is Apple’s marketing of the iPhone and iPad ranges.

Larréché’s book sets out his 8 component ‘Momentum Strategy’, which he summarises in a diagram like this one:

Twin Engines of Momentum - Larreche
Twin Engines of Momentum – Larreche

Here, Larréché separates out the design and execution (or build-sell-support) components of product development, giving equal weight to the two sides. He also shows these two components as interacting cycles. The cyclical metaphor is an important aspect to note: Larréché argues strongly for our continuing refinement of our offering, to continue to drive momentum.

Here is Larréché talking about his ideas in an InSEAD video

Larréché has transcended his earlier career focus on marketing. With The Momentum Effect, he is really talking about business strategy, and placing his ideas about successful marketing at the heart. You can get a real sense of this in this interview, where he answers some excellent challenging questions, including about how companies lose momentum.

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Seth Godin: Permission Marketing

The internet has changed the old pre-1990 world of marketing and advertising. It has thrown up new rules, new tools and new gurus. One of the very first to spot that this would happen, and then to study strategy and tactics, was Seth Godin. A serial entrepreneur and opinion former, Seth Godin is far better known among entrepreneurs, small business owners and freelancers than among the marketing managers of larger corporations. but he has worked hard to keep his analysis fresh and relevant, and there is much that any manager can learn from him.

Seth Godin

Short Biography

Seth Godin was born, grew up and continues to live and work in New York State. Born in 1960, he read computer science and philosophy at Tufts University and then did an MBA in marketing at Stanford Graduate School of Business. He then went to work at educational software business, Spinnaker Software, as a brand manager.

He started his first business, in book packaging, after leaving Spinnaker in 1986, but real success came in 1995, when he and business partner Mark Hurst started a marketing company called Yoyodyne. Godin is an avid reader and Yoyodyne was possibly named after a fictional defence contractor in Thomas Pynchon’s novels.

Yoyodyne used the concept of ‘Permission Marketing’. This is a term Godin claims to have coined with his book of the same name, published in 1999. The idea behind this is that we, the targets of marketing, give our permission for the marketer to send us their messages. In the case of Yoyodyne, it gained permission on behalf of its clients, by offering their prospects games and contests. With a blue-chip customer base, Godin sold the business in 1998 to Yahoo!, becoming Yahoo!’s VP for Direct Marketing. He only stayed for two years, which suggests that this was a tie-in period, before setting out on his own again.

Multiple ventures have followed: ChangeThis (an idea dissemination platform – sold in 2005), Squidoo (a web microsite platform sold in 2014), The Domino Project (a book publishing venture that published one book per month in 2011 – four have been reprinted by Portfolio/Penguin in 2015).

In amongst this, Godin has been a prolific author and a successful speaker. He largely promotes his own events based on a massive following for his daily blog posts. This gives him a massive permission marketing base for his books, events, courses and any other venture he is drawn to.

Seven Big Ideas

We can track Godin’s ideas through his books (currently over 20, I think). Let’s take a look at a few that will appeal to a range of managers and professionals.

Permission Marketing (1999) and All Marketers are Liars (2004)

Don’t force your message on your audience – create a demand from your audience to hear your message. And then, when they come to you, don’t tell them about your product, tell them stories.

Purple Cow (2002)

The key is differentiation. Without it you won’t stand out and marketing will fail. You need to abandon product, place, price, and promotion in favour of p for phenomenal or, as Godin puts it: p for Purple Cow.

The Dip (2007)

Doing things really well is hard. You make a lot of progress at the start of your learning journey and then slow down. This is the Dip. If you take on too much, you won’t have the time or attention to escape the dip on anything. True success means quitting on most things so you can succeed on a few.

Tribes: We need you to lead us (2008)

Market by leading. Find like-minded people who believe in what you are doing and lead them. Create products or services that they want, and they will crave what you offer. The ultimate in permission marketing. See an earlier Pocketblog about Godin’s Tribes concept.

Linchpin: Are You Indispensable? (2010)

Market yourself by becoming essential to your organisation or your tribe. Do this with creativity and by doing the most valuable work that you can. This is a manifesto for personal success, rather than the success of your product.

We are all Weird (2011)

Everyone is different and the internet allows us to make for and market to the long tail – small communities who would have been too small to build a career or product on before the internet allowed us to address the world.

The Icarus Deception (2012)

Playing it safe is not a safe strategy. Success means taking risks and being exceptional. Be creative and do the best work you possibly can.

Seth Godin at TED

Seth Godin has spoken twice at TED, in 2003 and in 2009.

[ted id=28]

[ted id=538]

 

 

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Guy Kawasaki: Corporate Evangelist

It is a common cry that the internet has changed everything and almost equally common to hear that it has transformed marketing. One person leading the charge to dedefine marketing in the technology age is Guy Kawasaki; formerly, and perhaps most famously, Chief Evangelist for Apple.

Guy Kawasaki

Short Biography

Guy Kawasaki was born in 1954, in Honolulu. He says of his school that ‘it is not as well known as its rival, because no presidents of the US went there’. However, it did allow him to study psychology at Stanford University, from where he went on to UCLA, after a week at UC Davis; starting Law School, but finding it wasn’t for him. After gaining his MBA at UCLA, his first job was in the jewellery trade, which taught him how to sell.

Kawasaki’s next job took him into the milieu in which he has remained: the technology industry. It was when his employer was taken over, and he was asked to move to Atlanta, that he made the move instead to Apple, in 1983. There he took the role of ‘Software evangelist’ – his job was to convince developers to create products for a new computer that, at the time, had a tiny user-base, no backwards compatibility, and minimal sales. He stayed in this role for four years.

His next role was leading a software business, creating products for a new computer… He says deprecatingly of himself that he believed his own hype, but for a while, the database software that Acius created was among the best for the Apple system. A spell of journalism followed (in the Mac arena) and then he collaborated to set up another software company. But in 1995, Kawasaki returned to Apple as their ‘Chief Evangelist’ charged with developing and protecting the brand.

Leaving Apple again in 1997, he co-founded a technology venture capital business and gradually built up a wide portfolio of advisory positions with tech businesses. Indeed, he continued to found businesses too – most notably Alltop, and increasingly became a much in-demand speaker and author. He is currently Chief Evangelist at graphics and design software service company, Canva.

Kawasaki’s Ideas

The first thing to say is that Kawasaki’s ideas are not original, and I doubt he would claim it for them. His skill is creating a coherent narrative around ‘marketing by enchantment’ – using the ideas of soft influence to engage an audience and build a loyal customer base for a product or service. He himself likens the content of his book, Enchantment: The Art of Changing Hearts, Minds and Actions, to Dale Carnegie’s earlier book, How to Win Friends and Influence People. He also describes himself as the author of thirteen books, or of one book, written thirteen times. Be aware of this when shopping, as it does contain a grain of truth!

For me, Enchantment is the book that contains his central thesis. He describes ‘enchantment’ as ‘to charm, delight, enrapture’, and as ‘the process of delighting people with a product, service, organization, or idea.’

So how can you create enchantment?

Kawasaki identifies three primary requirements for enchantment:

1. Greatness

Greatness is about quality – you cannot truly enchant with a sub-standard product. If you want to enchant, you need to start with the passion to create a great product that people will crave, because it goes well beyond good: in Steve Job’s words; ‘crazy good’. Canva, with which he is currently associated, has been described as ‘the easiest to use design program in the world’. Whether or not you believe this is true, the fact that people with knowledge say this is a sign of its greatness (and it is pretty good – and free to use!). It is also an example of another of Kawasaki’s points: that a grand vision is not important, drawing the supposition that Richard Branson almost certainly had no concept of ‘Virgin Group’ when he started Virgin Records – he simply set out to create a great record label. For many years, Canva has been targeted at individuals; only recently has it started to create an enterprise level offering.

2. Likeability

You need to make your product or service likeable, by being humble, generous, decent and doing what you say you’ll do. Answer your phones quickly, and do the right thing for people. Kawasaki is mistrustful of charisma and instead urges real engagement with customers and prospective customers. Show them courtesy and respect, and do nice things for them and they will surely come to like you and your brand.

3. Trust

Long-term, likeability will turn into trust. When you continually delight with both the quality of your product or service and treat people exceptionally well, they will come to trust you. Once you have that, as long as you do not squander it, you have created real and valuable capital for your brand.

I think you can see that none of this is revolutionary.

So why is it important? It is important because it works, yet is not that widely acted upon. The burden of Kawasaki’s advice is honoured more often in the breach than the observance, as the vast majority of corporations continue to invest highly in traditional forms of marketing and advertising, which fail to respectfully engage with their markets. Why? I think because it is easier. I think that you can readily hire an agency for the one, but need exceptional individuals and exceptional commitment to ‘do enchantment’ well.

Presenting to Enchant
A short diversion

I was very much taken, while researching this blog, with Kawasaki’s simple advice for presenters, so here it is…

The 10-20-30 Rule:

  • 10 Slides
  • 20 minutes
  • 30 point font

Use lots of graphics and images

Where you can, demonstrate rather than explain

Kawasaki Speaking

Guy Kawasaki is a much in demand speaker. Here he is at TEDx talking about ‘The Art of Innovation’. This is one of my favourite TED talks with plenty of aha moments.

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Estée Lauder: Modern Marketing

Christmas is coming and many readers will be considering perfume and beauty products as gifts. One of the biggest players in that market is Estée Lauder – the eponymously named cosmetics business founded by a determined and charismatic entrepreneur: Estée Lauder.

Estee Lauder

Brief Biography

Estée Lauder was born in 1908 and grew up in the Queens suburb of New York, where her father (like mine) ran a hardware store. Her interest in beauty products started when her Hungarian uncle, Dr Schotz, who was a chemist, came to live with her family and created skin creams in the kitchen, and later in a laboratory in a stable out back. He also made paint stripper, embalming fluid, and lice treatment for chickens. We can only hope that there were no serious mix ups in packaging!

Lauder helped Schotz by selling beauty products and so began her career as a consummate salesperson and marketer, selling skin care and makeup in beauty salons, demonstrating her products on women while they were sitting under hair dryers. This cemented her belief that women must try if they are to buy.

The Estée Lauder name borrows from her given name, Josephine Esther Mentzer, which the family shortened to Esty, and her married name, following her marriage to Joseph Lauder in 1930 or, more strictly, I’d guess, following their remarriage in 1942, following separation and reconciliation. In 1946 she and Joseph Lauder  launched the Company, soon winning a concession at their first department store.

Lauder targeted the most prestigious store, Saks, and a year later was able to finally persuade the buyer after giving a talk at the Waldorf Astoria hotel, and then giving away samples at the end. This created a demand that Saks could not ignore, and marked her second key lesson in marketing.

Lauder’s first fragrance was Youth Dew, a bath oil, created in 1953. It was a rapid success, and Lauder continued to demonstrate her olfactory acumen (as a ‘nose’ is how the industry terms it) by overseeing the creation of five more brands of fragrance before she retired in 1995.

Lauder’s Approach to Marketing

Many of Lauder’s marketing strategies and tactics will strike a modern reader as very… modern. They remain very much what is still recommended; because it still works. So, as a primer on marketing, we can do little better than take inventory of seven of her best approaches.

Give away samples

The try before you buy approach is so successful, it is used on a multi-million dollar scale. Just look at how many millions of versions of U2’s latest record were given away by Apple (500 million actually) at the launch of their new iOS8 and iPhone 6. Was this successful? You bet. Most of U2’s earlier albums re-entered the iTunes charts within a week, generating millions of dollars (undisclosed) of sales for both U2 and Apple.

Direct Mailing

Early on, Lauder used Sak’s mailing list to send samples and gifts to their customers, encouraging them to visit the Estée Lauder concession in store. Direct mailing may have fallen out of fashion to a degree, but many marketers still argue that, in the days of so much direct email, a well thought-out direct mail campaign can be successful. Whether you agree or not, the use of direct email is a powerful and omnipresent force in our lives – the same strategy; just new technology.

Clever Naming

When the US Food and Drug Administration came down hard on the scientific claims of Lauder’s rivals’ products, Lauder took an altogether more savvy route. Her advertising refrained from making scientific claims, but her naming implied the attributes she was unable to claim: Re-Nutriv is meaningless as a word, but caries a vast weight of associations.

Clever Pricing

‘You get what you pay for’ my dad used to say. If lots of her customers believed that, then her premium pricing strategy was clever. Without doubt, two things are true: she did insist on top-quality ingredients, but her pricing included a substantial mark-up, creating exclusivity and emphasising the quality through the most important real-estate in the store: the price label.

Gift with a purchase

That idea may well been hers – she certainly exploited it well, long before BOGOF and three-for-two offers made shopping bags twice as heavy.

Hands on Consultative Selling

Going one step beyond her ‘try-before-you-buy’ strategy, Lauder did pioneer in-store beauty consultations as a way of selling. She believed that in order to make a sale, you must touch the customer, and spent a great deal of her time advising customers and teaching Beauty Advisors.

Brand Clarity

Lauder believed that every woman had a right to feel beautiful and therefore ensure that her advertising portrayed beauty that was both aspirational and approachable. From 1962, Estée Lauder selected one model to be the “face” of the brand. These have included supermodels and actresses. Whether they are really ‘approachable’ is debatable, but at any one time, the face of the brand become a distinctive image for the company.

To learn more about marketing and sales…


This blog is for my mother, Jeanne Clayton, whose favourite perfume was Estée by Estée Lauder.

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Listening to your Customer

Steve Jobs famously eschewed focus groups and market research in designing new Apple products.  He did not want to supply what customers wanted.  He wanted customers to want what he created.

Whether Apple will be able to sustain that level of creativity is a question only time will answer.  But Jobs’ attitude did not mean that Apple was deaf to its customers – quite the opposite.  Having created the kind of loyalty that just about any other corporation can only dream of, everything Apple does has been tailored to retaining that crazy loyalty.

Marketing departments typically spend their time and resources looking for ever better ways to ensure that potential customers hear their message.  Customer service departments focus on fixing customer problems.  Who in your business is dedicated to listening to the customers you have, to build loyalty?  It’s cheaper and easier than acquiring new customers, and it’s cheaper and easier than fixing relationships with disappointed customers.

The big question is ‘How?’

How can you really listen to the voice of your customer? 

Surveys are great – especially low cost, easy-to-implement online surveys using tools like Zoomerang or Survey Monkey.  These have the benefit that they take little effort from your customer (and why should they make a big effort?) and can be supported by an appropriate incentive like a small reward or a competition entry.

The gold standard for good feedback on what you do (and don’t do) is follow-up calls or meetings from someone separate from the team that serves your customer.  To make it work for both you and your customer, you must welcome absolutely frank assessments and ask good questions to secure details that make appropriate actions easy to target accurately.

But what if your customers won’t talk to you?  You can always employ a ‘professional customer’ – mystery shoppers.  They are great for thorough, detailed and accurate assessment of what you do.  Unlike real customers, however, they cannot give you information about what else they want, from your product or service lines.

Customer focus groups or ‘customer panels’ can do that.  They are a lot of work to plan and organise and expensive too – often requiring specialist consultants, room hire, and inducements to participate.  This is a form of market research and the Marketing Pocketbook offers eight more variants on what we have above.

The forgotten question is Why?

In case ‘why would you listen to your customer?’ seems like a pointless question with an obvious answer: ‘of course you must’ – stop for a moment.

Of course you must, but unless you know why you are going to do it, you rune the risk of asking the wrong questions, choosing the wrong format, and mis-using the answers.  It is all too easy to feel like you are doing something useful by sending people out to listen to your customers, but before you do so, make sure you have a purpose and design the process accordingly.

A Paradigm Shift

Michael Porter identified two sources of competitive advantage:

  1. Industry Cost Leadership
  2. Product Differentiation

Arguably, Apple has neither, with high prices for products that are being successfully emulated by their main rivals.  So how are they succeeding?  I believe by a third source of competitive advantage: brand loyalty.

As a prevailing business strategy, this is new force in big business, but one we can all exploit, by building an organisation that excites and values its customers so much that we win the kind of fanatical following that Apple has.

If you can do that – with or without one of Porter’s two other sources of competitive advantage – you have the basis for a long-term business.

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On Competition – The Far End of the Value Chain

Back in August, we met Michael Porter – a professor at Harvard Business School, and an authority on competitive strategy.  In a blog called ‘On Competition – Five Forces’ I described his best known ‘Five Forces Model’ and also his model of three sources of competitive advantage:

Porter's Three Generic Business Strategies

The Whole Picture?

At a recent seminar, I challenged participants to identify any additional business strategy that can deliver competitive advantage.  After all, in my August blog, I did assert that this model is showing its age.

Could a business outcompete rivals with a higher cost product, that does pretty much the same as its competing products, and has no niche focus?  The answer takes us into a fascinating debating point, by way of another powerful model with which Porter is closely associated.

Competitive Advantage

Porter’s 1985 book ‘Competitive Advantage’ gives you a pretty thorough précis of his earlier ‘Competitive Strategy’ in Chapter 1 – focusing on the three strategies – and then takes off.  Competitive advantage, Porter says, comes from understanding the ‘value chain’.  This is the full set of activities that company undertakes, to create value.  It is illustrated below.

Porter's Value Chain

Competitive advantage is about understanding the Five Forces model and the sources of cost advantage and product differentiation in terms of these nine activities.

The Far End of the Value Chain

The five primary activities form a chain of value-adding processes, supported by the four secondary processes that provide the necessary resources to make the value chain work.  Each can be a source of competitive advantage, most obviously through cost differentiation.

I want to focus on Marketing & Sales, and Service.  My argument is that a company can differentiate its product – to give it competitive advantage, through these two, without focusing on a niche, delivering a substantively different product, and with no cost leadership.

Marketing, Sales and Service are about Myth-making

Hello Kitty is a trademark of SanrioIf you can create a compelling narrative about your product, people will want it, to associate themselves with the myth you have created around your brand.  My daughter loves ‘Hello Kitty’ – I don’t know why.  As far as I can tell, the Hello Kitty brand started life as nothing more than a motif, appearing on a range of products.  Now, not just children, but adults too, want goods just because they have the face of a little white cat (with no mouth) on them.

The products are no better, no different (unless you include the motif) and certainly no different functionally, and definitely no cheaper.  There is little niche focus beyond, as far as I can tell, females.  Hello Kitty thrives in most cultures and at many age groups from 2 to forty, at least.

I think the source of Sanrio’s competitive advantage is nothing more than marketing.

Would I fall for such a ruse?

Of course not.  Unlike some grown ups, I would never have Hello Kitty nor any other character on my iPhone case…

‘Hold on Mike, did you say iPhone?’

iPhone certainly has no cost advantage and it now has many competing products that offer the same functionality.  And as a niche, iPhone users are pretty hard to define: old and young, across social and cultural spectra…

So how does marketing create competitive advantage?

It seems implausible that three sources of competitive advantage could be all there is.  Yet I have come to the conclusion that I haven’t yet found an exception.  Despite arguing that marketing is that exception, let me explain.

What does marketing do that creates such loyal followings for Hello Kitty and iPhone (and, indeed, for both – I saw someone with a Hello Kitty iPhone cover, which was the nudge for writing this blog)?

I think the great marketing that Sanrio and Apple create, builds a loyal following for their products.  Many people will identify themselves as iPhone users – in a way that others would not identify themselves as Wildfire or Galaxy users.  What great companies can do is use marketing and service to create a ‘tribe’ of people who are loyal to their brand – or to a part of their brand.

What this relatively new form of marketing is doing is building a niche focus that is defined by the products and services of the company.

So, Porter was right after all.  Now we need to look at this concept of ‘tribes’.  More next week.

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Marketing is an Ethos

I think Neil Russell-Jones strikes the nail perfectly in his introduction to the Marketing Pocketbook:

‘Marketing is not a department or a group of people.It is an ethos, that is a type of thinking that must flow throughout an organisation and permeate every aspect of its operations.’

What he means is that we should not leave marketing to ‘the marketers’ and we should not consider it a distinct activity from any other aspect of running our business.  Every aspect of every organisation from a multi-million-mega-corp to a sole-trader; and from the biggest Government department to the smallest cog in the Big Society machine needs to reflect the need to get a positive message out.

The game has changed: the rules are the same

SocialMediaThe game of marketing has changed out of all recognition in the last ten years.  The web and social media marketing channels have taken over and present us all with a huge amount to learn about how to use them effectively.  Luckily, for the moment, the rules are the same – in the sense that they are defined by human psychology.

 

Continue reading Marketing is an Ethos

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