Market Insight for Strategic Decision Making: Part 1
Welcome to the marketers experience podcast series by MXs the marketing experience studio MXs transforms marketing education by creating innovative and sustained shifts in thought behavior and performance, leading to powerful results. Your host Knoll Capon is the RC cuff professor of international marketing at Columbia business school and our thought leader in residence, Nolan, his guests invite you to listen in as they present new approaches to marketing and market strategies that help you succeed. [inaudible] and now here's our renowned global expert. Noah Capon.
What I believe is that to be a successful business, you've got to get your marketing right in particular, you've got to get the fundamentals, right? And there are three fundamentals. There are what I term six marketing imperatives for marketing principles and marketing as a philosophy fundamentally, there's one asset that you need, no matter what business you're in, no matter what country or in no matter what technology you deal with. And that is you have to attract, retain and grow customers, all things being equal. If you do a good job of attracting, retaining and growing customers, you will make profits today. Promise profits tomorrow, the organization will survive and grow and shareholder value and increase, and your shareholders will get very happy. So the question becomes, and what does the firm have to do to attract, retrain and grow customers? The furnace deliver value to those customers.
So here we have a fairly robust, but fairly straightforward model. If the firm produces value for its customers, all things being equal, it will attract, retain and grow those customers. The firm will make profits today, promise profits tomorrow, survive and grow as an organization and make increase shareholder value. So that seems to make a whole lot of sense. And that's the core of marketing as a philosophy attracting, retaining and growing customers is not just a job for marketing. Although marketing plays a leadership role at some level, this task is the responsibility of everyone in the firm after all is the firm fails in this task? No one. And I mean, no one gets a paycheck, but if the firm does a better job of delivering customer value than its competitors, good things will happen. Profits survive in gross in the organization and enhance shareholder value. But if on the other hand, competitors do a better job and competitors do a better job consistently. All definitely the forum will declare bankruptcy, undergraduate business, and the business environment. The history is littered with the corpses of companies who have delivered less value to customers than their competitors and has gone out of business
Six imperatives of things that marketing must do and must do well in order to do a better job of delivering customer value than its competitors. Hence making profit, surviving, and growing and enhancing shareholder value. So let's start off with imperative. One
One says the firm must determine and recommend which markets to address. Now, this imperative differs somewhat from the remaining imperatives where marketing makes decisions in this imperative. Marketing is advisory to top management. Marketing has a very important advisory role in the decision of what opportunities to address, but also in advising what businesses and markets from which the firms should withdraw. What are the roles for marketing here where there really two sorts of roles? The first role is an opportunity identification. Role marketing is the only function in the organization that really has the job of looking outside the organization and figuring out what the opportunities are. So one of marketing's roles is to go out there, identify opportunities, and then bring those back into the organization and make recommendations as to which ones the firm should go. After some, the firm will say yes to others.
A fair may say no to, but it's marketing's job to keep these opportunities flowing. The other part of the job is to advise on proposed corporate actions. In fact, new directions for the firm, not only come from marketing, he come from many different parts of the organization or also from people outside the organization, consultants, investment bankers, and so forth. And they come along with acquisition ideas with divestiture ideas and so forth decisions, which will change the direction of the organization. Often finance plays a major role here. The marketing must insist on the seat of the table. Whenever the corporation is, is making some decisions that are going to change its portfolio to change its direction, to acquire an organization, to divest part of the current organization, marketing's voice should be heard. We really need to understand what the marketing implications of those decisions are.
The second imperative is identify and target market segments. So we've identified. We figured out which markets to enter into. And the fact of the matter is set. Man, be at the very early stages. Markets can be thought of as a number of segments where the customers in those markets, all looking for the same sort of thing with the same sets of values, benefits have the same needs to satisfy, but in the various segments, members plays different levels of importance on those benefits and values. The market that I want to talk about is the car rental market, that this is a market that's been in maturity for a long number of years. So this one is not a growth market. Like some technology markets. This is a very well developed mature market. And for many years, people believed there were essentially two segments, the business segment and the leisure segment, the way enterprise grew and became successful was by targeting a new segment.
What I like to call the car in the garage segment, people who had problems with their cars on a day by day basis, breakdowns and accidents, Andrew Price was successful because of its understanding of market segments. Notice that the automobiles are the same, more or less the cars and all from Hertz and Avis or budget are all the same, the same as the cars for enterprise. So there's nothing to do with the physical product that was used. It was different. It was enterprises understanding of market segments, imperative, three set, strategic direction and positioning. First of all, so we have to set performance objectives. We have to figure out what we're going to achieve or want to achieve. And there are two different areas here. There's what I call the strategic objective in general, in this segment, are you trying to grow or you're trying to make profit, or you're trying to generate cash to put somewhere else, but then how much?
And by when which is the operational part secondary, there's a notion of a positioning statement. Positioning statement in a segment says, who are customer targets? Who are we going up against? Competitive targets? What's the value proposition? What are we offering them? What value are we offering those target customers? And what's the reason to believe? Why should people in this segment believe that we can actually deliver on the value proposition? This is an example from, from Cenex, the Mexican Modi national that's in the, in the cement business, let's suppose that there is a potential customer building a, uh, a shopping center or an apartment complex or something like that. They need cement who are the customer targets. While there may be two, I'm going to pick on two. One is the site manager, the person who's responsible for getting the building up. And the second is the investor, the project investor who put in the money, who's financing, the building.
Those are the two different customer targets, who is the competitor target? Well, these are other cement manufacturers, people in the city who make and deliver cement. So what's value proposition. Well, two different value propositions, two different customer targets. Uh, the site manager, the value proposition for that site manager is that we can deliver our cement within 30 minutes of getting the phone call versus the regular other cement manufacturers where it takes about three hours. So with Semex, there's less chance of downtime because of lack of cement for the investor or the value proposition is because the building goes up faster. The financial return is greater. And the reason to believe Semex trucks are equipped with a GPS system that makes scheduling and delivery much more efficient. Then there are issues of branding that may function as reasons to believe here. There are three issues. First of all, brand identity, what is it? We want customers to think about our brand, then there's brand image while do customers actually think about our brand. So there's an operational job here of trying to get those two, uh, aligned. And then there's also the issue of brand equity. The value of the brand, which is becoming an increasingly important part of, of marketing and corporate consideration.
Paragraph four is design the market offer. And here, what we're really doing is executing on the value proposition. We've said, we're going to deliver this set of value. The question is, how do we do that? And typically we do that with the, what we call them, the four PS or the marketing mix. And many of you, if you've taken an introductory marketing course, somewhere along the line are probably pretty familiar with this concept of the four piece of marketing mix. And we're talking about design here designed to the product design of promotional communications, which we all the advertising web sort of stuff. Plus interpersonal communication with sales, Mac, salespeople, and so forth distribution, how we get the, uh, product to, or service to the customer and to conform to the four piece framework. We often call this place. And then the price, the price we ask our customers to pay now with respect to the four PS, the critical issue here is that they're consistent and they hang together in a sense of a way,
Five rolling on from that is securing. The support of other functions is one thing from marketing to design, but these other functions, the organization have gotten to deliver. And here, the notion is making sure we can pull all these different functions typically, which have individual objectives, goals, and their own functional strategies. Make sure they don't operate in silos, but rather come together and work together. As one in the goal of delivering value to customers and implementing that marketing mix, I use metaphor is that marketing is the architect. The functional areas are the various trades that put up the building in order to make that happen. They're really two organizational leavers. One is a cultural issue. In other words, that it's believe three in the organization that's serving customers is critical. This really has to come from the top of the organization. If the CEO is a very customer focused individual and shows the organization by his or her words and deeds, the criticality of serving customers, then the chances are we're in the good shape to get different people in the organization to do what they're supposed to do.
The other part is measurement and reward systems. People in organizations do what they're paid to do. And if you have a system that set in place, a compensation system, that rewards behaviors that do not directly lead to value for customers, you'll get the behaviors, but you will not get devalue for customers. For example, it's a very simple example. Production people are typically measured on cost per unit on how inexpensive they can produce products. If that drives them, they may do things to reduce product costs that may not be good for customers. I've come across major companies where production manners jurors in an effort to reduce costs have changed the part of a product they make. They've taken a high quality part and gone to a somewhat lower quality part. Sure. They reduce the cost of production, but then the product failed with the customer and the overall value of that customer to the firm reduced.
And the value of the firm to the customer reduced imperative. Six is monitor and control. There are two parts. So first piece of monitoring and control is, is with respect to performance. Are we achieving what we set out to achieve on whatever performance dimensions are important? The key issue here is steering control. If performance is veering off track, we want to recover as soon as possible. The second piece of the monitoring control is are we doing what we said we would do? We will develop a market plan, a strategy and action programs, which involve certain people doing certain things, whether it's R and D people reduction people, will tech service people, customer service people, the advertising department, whatever these are the actions that we'll implement, implement the strategy. So gesture review in terms of our imperatives imperative, one determine and recommend which markets to address imperative, to identify and target market segments, imperative, three set, strategic direction, and positioning imperative for design the market offer imperative five secure support from other functions and imperative, six monitor and control.
These are the core set of jobs that marketing must do. If your company is not doing all these jobs or if it's not doing all of them, well, you've got a problem. So when you look at your overall marketing effort, these are the six key areas you've got to have in their head and blazing them on your brain. In this episode, we touched on the importance of marketing as a philosophy to guide from decision-making. We'll pick up on this topic in later episodes, but let's conclude this episode with four marketing principles that should guide your marketing. Decision-making principle, one selectivity and concentration. You have to make serious choices and focus your efforts versus the alternative or spreading those resources around principle to customer value. The core job of the firm is to deliver value to chosen customer targets. Principle three differential advantage customer value by itself is not sufficient. The value you offer to your customers must be greater than the value offered by competitors principle for integration. The entire firm's resources must work together. So you do offer greater customer value than your competitors. And so secure differential advantage by adding on these four principles, as you implement the six marketing imperatives, your firm will make profits today, promise province tomorrow, survive and grow as an organization and enhance shareholder value.
Thank you for spending your time with MXs thought leader, Noll, Capon to find out more about MXs we're learning is made fun and easy. Please go to the MX