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 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:
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.