Marketing masters talk about organic growth

THE MARKETING MASTERS

Philip Kotler, David Aaker, Jean-Claude Larreche,  Regis McKenna, Don Peppers and Martha Rogers, John Quelch, Al Ries, Don Schultz, Patricia Seybold, Jack Trout, Lester Wunderman

Achieving organic and sustainable growth is vital in today's business environment where the balance of power has shifted irrevocably to buyers. But it is also frustratingly elusive, particularly for those senior executives who know a lot about cost-cutting and deal-making, and see marketing as an expensive afterthought.

They could do worse than listen to some of the world's most influential marketing thinkers, captured in our new book, Conversations with Marketing Masters. While the book is a wide-ranging look at these marketing gurus, encompassing both their professional journeys and their current views of marketing, it is their advice on what companies need to do to achieve long-lasting market success that should be heeded by any company struggling with the challenge of growth.

KEEP INNOVATING AND LEARNING

'Winners in the organic growth stakes are those companies that innovate, launch and learn,' says Philip Kotler, the SC Johnson & Son Distinguished Professor of Marketing at Northwestern's Kellogg School of Management, and recognised as the founding father of modern marketing. Indeed, he has been on a lifelong mission to dispel the notion that marketing contributes very little to long-running company success.

Companies that succeed are invariably in tune with market evolution, he continues: 'Starbucks didn't just stay a coffee retailer. It is retailing music in its stores. It is selling its products in supermarkets. It is found in dozens of companies.

'Apple's Steve Jobs didn't just launch an iPod to carry music. He visualised ahead of his competition that it would evolve to carry thousands of photos, and later videos. He is ready to cannibalise the earlier iPod versions before they have fully saturated the market in the interests of leading the competitors, rather than allowing them to lead in product evolution.'

By contrast, he argues, losing companies fail to monitor new technologies, new lifestyles, new competitors: 'Carmakers such as General Motors and Ford have had so much time to watch the Japanese, to learn from them and yet were slow at doing so.'

For example, they answered the success of Japanese small cars in the 1970s by countering with small but inferior cars. They were also late in learning how to put more quality in a car, and late in offering hybrid and new fuel-efficient engines. Failing companies, he observes, operate bureaucratically and arrogantly: 'Instead of looking out of their windows, they look at their own image in a mirror.'

BE RELEVANT

Branding expert David Aaker reckons that relevance is one of the most important, but also most difficult challenges. Aaker, author of seminal books on brands and branding, is vice-chairman of Prophet Brand Strategy and Professor Emeritus of Marketing Strategy at the Haas School of Business.

'Understanding relevance is the key to strategy in dynamic markets – and, today, all firms operate in dynamic markets. Emerging product categories and sub-categories change the competitive landscape. Some firms are driving those changes and have an opportunity to become eaders in a new market or sub-market, shaping what customers are buying.

'Those that are successful are companies such as Toyota, Cirque du Soleil, Apple and the US financial services group Vanguard, which have enjoyed exceptional long-lasting market and financial success by constantly finding new sources of relevance in their markets.'

The danger for companies is that they can easily lose their relevance as competitors outflank them: 'It is possible to make the greatest sports utility vehicle (SUV) in the world with the most loyal customers and an envied image. However, if a significant number of your customers now want a hybrid, it simply does not matter how good your SUV is perceived to be. You are less relevant than before and will see your sales eroding.'

THE POWER OF FOCUS

Al Ries, pioneer of the seminal marketing idea of positioning, takes a slightly different tack. What currently preoccupies him is the need for a company to focus. By narrowing the focus, he argues, companies have a much better chance of finding an open position in customers' minds.

'For example, Emery Air Freight was the leading air cargo carrier in the US. So Federal Express narrowed its focus to “overnight” and thus became market leader. Pepsi-Cola wanted to compete with market leader Coca-Cola. It narrowed its focus to “younger” people (the Pepsi Generation) and today it's a strong number two brand.'

But people persist in assuming that the broader the line, the greater the sales. He disagrees: 'It's logical, but it doesn't work that way, because it's not a sales, but a brand problem.

The broader the line, the more segments you try to appeal to, the weaker the brand. What's a Chevrolet? It's a large, small, cheap, expensive car or truck and a very weak brand.'

When you do have an established position, like Volvo and safety, he argues, nobody can take it away. 'However, what drives business today is expansion. Companies want to grow, but in the process they risk becoming unfocused, getting into more products and services,' he says.

This is not to say all expansion is bad. Nevertheless, it means that companies lose sight of a product or brand's core values and line extensions can proliferate without check, for example.

VALUE YOUR CUSTOMERS

For Martha Rogers and Don Peppers of the Peppers & Rogers Group, the answer is obvious: customers bring growth. Having made their names with the original concept of one-to-one marketing, or treating different customers differently, for the last year or so they have been developing the idea of 'return on customer' (ROC).

As Rogers explains,

'We were getting more and more requests from clients to do something very fundamental, which is to provide a business case justification for expenditure around the idea of customer relationships.

'We had this epiphany that there was something scarcer than the money that the chief financial officer was holding in his or her little purse strings. And that was the number of customers, the actual customers, which that company was ever going to get. It didn't make sense to us that companies would take so much care to budget the money they were investing, when what they were really limited by was the customers they had available to them. Shouldn't they think about maximising the value those customers could create?'

This goes well beyond the idea of marketing as a discrete function, as a department, as Peppers notes: 'Everything in the company is going to revolve around customer value: customers creating value for the business, which is, of course, the core purpose of any business.'

They expect that over time investors will start demanding this sort of information, says Rogers: 'We've been trying to make the case that, if you are an investor, you'd like to know what ROC is. You really want to be able to detail the return on customer measures of different companies to make a decision. But, in addition to that, it will also drive better decisions in companies compared with what we've seen in the recent past, because the recent past has seen an embarrassment of short-term thinking that has really led us to a crisis.'

IGNORANCE IS NO EXCUSE

That means knowing who their customers are, of course. Don Schultz, Professor Emeritus-in-Service of Integrated Marketing Communications at Northwestern University's Medill School and who was instrumental in developing the idea of integrated marketing communications, complains that senior management are too often woefully ignorant of just who their customers are.

'I can walk into any organisation and ask senior management who the firm's top ten customers are and they won't have a clue. They're focused on managing tangible assets, not customers. When I'm meeting with a board or senior management, or even with marketing people, I ask one basic question: “Who are your best customers? Name your ten best customers.” And they can't do it.'

Notable exceptions include companies like Procter & Gamble, points out John Quelch, Senior Associate Dean and Lincoln Filene Professor of Business Administration at Harvard Business School. 'Under chairman and CEO AG Lafley, the company has rediscovered the basics of customer understanding better than anyone else. Fundamentally, that's what good marketing has to be based on.

'But, so often in the race to deliver quarterly results for Wall Street, there's a lot more emphasis on just coming out with new products and seeing what sticks, as opposed to really understanding consumers and identifying latent needs that maybe are not expressed in consumer research, but are the core unmet needs that breakthrough new products should be addressing.'

THE DANGERS OF SHORT-TERMISM

As Jack Trout, pioneer of positioning with Al Ries and now president of strategic marketing consultancy Trout & Partners, points out, 'The problem is growth at all costs. Wall Street, the financial community, wants to see how much you are going to grow, quarter by quarter. If it doesn't see that you are on a growth path, it will savage your stock. You really have to say, “No, I am in the business of selling widgets and I'm going to work on that. I don't care what you guys think, I'm going to approach this thing from what's best from my business point of view, and, if things work out, my stock will be OK.” You cannot get sucked into the Wall Street game'.

ENLIST YOUR CUSTOMERS' HELP

Patricia Seybold, customer experience expert and founder of the Patricia Seybold Group, urges companies to engage closely with their customers: 'They are the ones who are out in front and very passionate about things. Get them really hooked into your organisation, and not just through surveys or user group meetings twice a year. And you can recruit and incentivise them without spending much money. They love to be heard.'

As Don Schultz notes, 'I think the one thing that organisations have to understand is that the success of the company comes from only two sources: its customers and its employees.

I don't think organisations pay enough attention to the fact that those are the only two places where income is generated. And companies can either increase it or decrease it.'

REFLECTIONS ON MARKETERS

Marketing should be Spearheading the Search for Growth. But do the Marketing Experts Think that, in General, Marketers are up to the Job?

Regis McKenna, the Silicon Valley visionary who helped put names such as Apple and Intel on the map, believes that marketing itself is doing very well. His concerns are about those within the profession: 'My own view is it's just not being done well by the marketing people. Marketers spend too much time on advertising and promotion.

'And while they are doing that, the chief information officer is automating their core functions. As they obsess over brand, the chief strategy officer is dispersing their responsibilities throughout the organisation. And as they squabble over whether marketing is an art or a science, they're completely overlooking the fact that marketing has become a technology.'

As Al Ries says, 'Every year the tactics of marketing get better and better, but the strategies have not kept pace. Too often the marketing people have to accept the strategies dictated by their management. If I were a marketing professor, I would give marketing tactics an “A” and marketing strategy a “C minus”.'

Marketing professor Jean-Claude Larreche echoes this view. As holder of the Alfred H Heineken Chair at INSEAD and a specialist in strategic marketing, he finds that too many marketers lack what he calls a 'CEO-like mind': 'I now split the marketers I meet between those who will remain in marketing and those who have CEO potential. It's not that one is better than the other, but it's a choice. Some people will tell me: “I don't want to be a CEO” and that's fair enough. But if they stay in marketing they should have a CEO-like mind.'

What about this New Breed of Super-Marketers called Chief Marketing Officers (CMOs)?

David Aaker, who has done a study of them, sees them as having two main goals: getting control over product and/or geographic silos, and providing market-driven growth to the firm: 'In many cases the firm, which may have relied on downsizing and acquisitions to achieve financial performance, has explicitly targeted the need to grow internally.

'The CMO naturally needs to own this effort if it is to be more than ad hoc initiatives. The challenge is how to introduce CMO-led central marketing to resistant organisations. It can be difficult for a new CMO to achieve credibility and effectiveness in a resistant organisation. One study said that the average life of a CMO is 18 or 20 months, which is a dramatic commentary on the job.'

Jack Trout offers a word of advice to these struggling senior marketers: 'You really have to involve the top management in the strategy of what you are doing. You have to force them into it and they have to understand what you are doing and why – and why you're spending money on it. You have to be willing to put it right out on the table and say: “Ladies and gentlemen, this is what we've got to do as a company”.'

Adapted from Laura Mazur and Louella Miles, Conversations with Marketing Masters, John Wiley & Sons, 2007.

This article featured in Market Leader, Spring 2007.