Tuesday, July 5, 2011

Don’t Leave Value on the Table (if You Are a Good Marketer)


Last year I finally understood what Marketing was all about. I mean I knew the concepts, the models, the approaches, but I was missing something of vital importance, one thing that will hold everything together. Going through the materials of this course, I could not help but notice that every class we are talking about value in one way or another. That is when it struck me: Marketing is about VALUE! The rest is arbitrary and complementary.

With the evolution of the nature of this science along the selling/marketing concept continuum[1], the understanding of the notion of value has evolved as well. We are no longer living in the age of “a car being any color as long as it is black”: the customers are most often dictating the requirements of how they see value and how they want to get it. This brings us to our first abbreviation, which is…

CCDVTP – Create, Communicate and Deliver Value to a Target Market at a Profit.
The first four letters of the CCDVTP abbreviation talk about Creating, Communicating and Delivering Value to the customer. Put differently, the entire science of Marketing is about value extraction and transfer in a most effective and efficient manner. 

It is essential to grasp the fundamental principles of value creation: the value created for the customer must be real, it must be superior to the competitors and it must be produced at a profit for the company[2]. Let us walk through the three major steps of value management:

·         Creation
A very simplified definition of value would be the gap between the real cost of inputs for the producer and the perception of outputs by the consumer. The very raison d’etre for any business is value extraction. This lies in the foundation of customer-value marketing and is critical for establishing the long-term sustainable business strategy, “By creating value for consumers, the company can capture value from consumers in return”[3].
Practice proves that crating value may not be enough in the long run, capturing and sustaining it are the critical keys for success. The case of the Callaway Golf Company illustrated that even great strategies get outdated rather quickly and the ability to transform and adapt gains a company the competitive advantage. If you are not “searching for cheese”[4] all the time, you may find yourself in a situation when what used to be a value-creating strategy is actually already value-destroying. Sometimes you need to change your business model (Biopure) or risk cannibalization of your own sales (Brita) to keep producing the value, but this is the sine qua non of business survival.

·         Communicating
In the Aqualisa case we saw that creating value is not enough: even great products need to be spoon-fed to the customers until they recognize the advantages they can enjoy using those products or services. “Crossing the chasm” might be the single most difficult task for a marketer. I come from an HR background, and I have seen many instances when brilliant process innovations failed and thorough, well-defined policies did not work because the implementers had fallen into the trap of assuming that (1) everything is self-explanatory and (2) the innovations are so advantageous for the staff that the employees will take time to get acquainted with the new information and immediately get interested in the novelty offerings. 

I am extremely interested in the concept of internal or functional marketing, when services or products are offered within an organization, primarily for own employees. The ACCORD model is very useful in situations, when interests of multiple stakeholders need to be taken into consideration and various approaches to innovation analyzed. Still, even with meticulous preparation, it might be difficult to get through to the end users with a brilliant product or service because of the plumber issue we discussed in class. In organizations it is often the line managers, who might have conflicting priorities or self-interest, and therefore it is imperative that communicating efforts are reaching the target audience, which they are designed for.

·         Delivering
Delivering the value to one target segment in one country is quite different from doing the same across the globe and for multiple customer bases. Product/concept transferability is an evasive animal that can ruin your entire launch campaign if you do not do your homework well. Understanding the customer will help not only deliver but also maximize the value for the customer and build loyalty. What do the customers prefer: standardization or adaptation, digital or analogue, global or local? Answering these questions is solidifying the marketing plan with bits of due diligence critical for successful placement.

Colgate was facing the issue of value delivery when they were launching the MaxFresh brand, and their campaign was not successful in China primarily because of poor understanding of the customers and how they would respond to the new products and the marketing stimuli that formed part of the promotional activities. I am not downplaying the importance of adaptation: this is often a winning strategy, but planning and preparation is key before any decision is taken with regards to how the value will be transferred to the consumer.

OK, suppose we have a great product or at least an idea of how to make millions of our aficionados happy. The question is how to turn insights into Customer Value Proposition. We have to consider two aspects of it: 

Strategy (value proposition) and tactics (creating, communicating and delivering value)
The GSTIC model helps us better understand the difference in value management on strategic (value proposition) and tactical (create, communicate and deliver) levels. In my understanding, it is challenging to create marketing value in the short run, which is sustainable. However, investments in customer value pay back manifold in the long run, if we take into consideration customer lifetime value (customer acquisition + customer retention) and failing to retain a customer has exponential costs, “A churn decrease of 5% equals a 20% increase in shareholder value”[5]. Marketing value management must be a focused and long-term effort. There are signs that this is the direction most cutting-edge companies are moving towards: from the idea of 4 Ps to the new strategies of 3 Vs – valued customer, value proposition and value network[6]. This idea turns the traditions ways of doing business upside down and puts the customer at the top of the hierarchy.
Irrespective, whether we are talking about customers in a traditional sense or, for instance, about internal/functional marketing and, hence, internal customers, they are dictating the rules now. I will make another HR example here. Up until the beginning of the 90s, the world lived by the rules of the employer-dominated markets. Now the situation is completely different: employees (and particularly talented ones) choose where they want to work. As an outcome, practically all big firms now have the so-called Employee Value Proposition and they are concerned about Employer Branding, or how they are viewed by the potential candidates in the market. All of a sudden, there is a need for Marketing specialists in areas, traditionally viewed as non-core and supplementary, but now Talent Acquisition and Retention are strategically important for a company’s competitive position, therefore the Employee Value Proposition must be carefully crafted, benchmarked, packaged, and communicated. 

Translating the strategic intent of the value proposition into tactical elements is growing increasingly difficult. Waging the customer’s interest therefore becomes essential, and efficiency of the traditional AIDAmodel is now being questioned. In the world predicated by the speed innovation few companies have the privilege to wait for their consumers to get ready; hence, the traditional process has to be short-cut. Inbound marketing is one way to get into the hearts and minds of the target audience quicker and assume there a sturdy position, but there are also many conditions that need to be met. Inbound marketing is one of the new frontiers and it has not been fully embraced yet by the marketing community: is there value lost because of that?

Brave New World
Generation Z is attacking… My mom started using the internet… I forgot the last time I bought a newspaper… Is the Marketing science too slow with the response? How does value change over time? Being able to answer this question will enable us to adjust the tools to do our CCDVTP trick. I am not sure that above-the-line marketing is living its last days, but we cannot deny the fact that consumers have become immune to traditional promotional stimuli and fresh approaches are called for. I do not know if neuromarketing, digital, viral or social media marketing will take the reign but Marketing as we know it will change, simply on the premise that value is ever-changing, ergo all companies will be changing together with the customers’ needs and desired in a dire attempt to satisfy those. It is important to understand, however, that completion factor is irrelevant in the process of value creation: it is solely the customer orientation and focusing on the greatest impact areas that assure a strong market position for a company[7].

Personal Value
In Marketing perception is reality. I am a product and I want to be perceived as having a value as high as possible. I am my own brand. I am my own marketer. Every time I am going to an interview now, I am running the marketing concepts in my head: now that I have invested so much in myself and created this combination of elite business school education, professional experience and refreshing personality, how do I communicate this to the potential employers and what are the ways for effective value exchange between us? 

Throughout the three terms I have realized that the 4Ps or 3Vs are all around me. Simply because everything in our life has a value, this value gets created, traded, assessed, exchanged, destroyed, etc. Humans are highly irrational and emotional: it therefore difficult to attach exact value labels to things, people, feelings or experiences. Then how do I assign value to my personal brand?

 The emotional connection between a personal brand and the outside world is a key success factor[8]. By integrating social sciences, such as psychology or sociology, with marketing we can work out a recipe for augmenting the personal value and therefore gain the competitive edge on the personal front, as well as in business.

In the last Marketing class there were two quotes that drew my attention: “Marketing is ALL of you!” and “Marketing is God.” As ostentatious as they are, both are true in a sense that this “artistic science” we had been studying for the past three terms is omnipresent and omnipotent. So far, I had been doing marketing without realizing it. Upon leaving IE, I was fully equipped to 4P myself, 3V my personal and professional efforts, and undoubtedly CCDVTP in everything I do.


[1] Edwin Jacob Nijssen, Ruud T. Frambach, Creating Customer Value Through Strategic Marketing Planning. Kluwer Academic Publishers, Dordrecht, the Netherlands: 2001, p. 10.
[2] J. Nicholas DeBonis, Eric W. Balinski, Phil Allen, Value-Based Marketing for Bottom-Line Success. McGraw-Hill, USA, 2002, p. 21.
[3] Philip Kotler, Gary Armstrong. Principles of marketing (13th ed). Pearson, New Jersey, 2010. P. 626.
[4] This metaphor refers to book by Spencer Johnson “Who Moved My Cheese” (Putnam, 1998), the basic idea of which is that one needs to stay up-to-date, be ready for change, and adapt all the time to be a success.
[5] Prof. Jikyeoung Kang. Marketing Management (slides). Session 21 – Relationship Management. IE Business School, 2010. Slide 25.
[6] Nirmalya Kumar. Marketing as Strategy. getAbstract: HBP Product # 4821ES, 2010.
[7] J. Nicholas DeBonis, Eric W. Balinski, Phil Allen, Value-Based Marketing for Bottom-Line Success. McGraw-Hill, USA, 2002, p. 6.
[8] Tessa Hood. The Five Facets of a Living Brand. Training Journal, August 2010, p. 18.

1 comment:

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