People buy things, not companies. Correct market definition is crucial for a company’s share measurement, its growth measurement, the specification of target customers, the recognition of relevant competitors and the formulation of a marketing strategy. These were the thought provoking words of Professor Malcolm McDonald, author of more than 40 best selling marketing books delivering his keynote at the Chartered Institute of Marketing (CIM) Sri Lanka Region’s 11th CIM Annual Conference 2011 early this week.
Over 40 years of research into the link between long run financial success and excellent marketing strategies, according to Prof. McDonald shows that a company needs to target needs based segments, make a specific offer to each segment, leverage their strengths and minimise their weaknesses, while anticipating the future. “Amongst the weak strategies, targeting product categories, making similar offers to all segments, having little understanding of their strengths and weaknesses and planning using historical data come on top,” he added.
He cautioned the industry not to neglect the topline. “Nobody bothers with the topline. Many are concerned with the bottom-line. They concentrate on increasing the bottom-line and that is looking at short term. Trying to bring firms into being lean and fit is a sickness called ‘Anorexia Industrialoza,” he said, which had the audience in splits.
He guaranteed that proper market segmentation will result at the very least, a minimum of 10% increase in profitability. “You put value propositions together to meet the customers’ needs, delivering value and measuring it – what is lacking in most companies is the strategic bit – they lurch from period to period from year to year until they go belly up,” he said. He stressed the need for an effective long term strategy. “Then you will survive. If you are doing the wrong thing, you’ll die. Good robust strategy for me is everything and that is what I work towards with world class companies that go on year after year, whatever happens in the global economy.”
Competitiveness is serious business
Prof. McDonald said a deep understanding of the market place, correct needs-based segmentation and prioritisation, segment-specific propositions, powerful differentiation, positioning and branding coupled with integrated strategic marketing strategies will help marketing managers to steer firms through the bad times.
“The purpose of strategic marketing and its principal focus is the identification and creation of sustainable competitive advantage,” he noted.
He added that social media and e-marketing do not make a difference, because a company’s customers still remain the same. “Your reputation is the only thing you’ve got. The brand at least in theory represents 20% but I think the brand name represents everything a company does. Nowadays organisations need to work out what their market is going to be like in the future quantitatively to survive. Everything’s changing,” he stressed, pointing out that a typical profit and loss account is ‘garbage’.
"The last thing you should be doing is trying to measure the return on interest on a marketing campaign. Proper segmentation and proper targets – that’s what is going to work in the long run,” he added.
He said that accountants do not measure intangible assets, but the discrepancy between market and book values shows that investors do. “Measuring marketing performance isn’t like measuring factory output – a fact that many non-marketing executives don’t fully gasp. In the controlled environment of a manufacturing plant, it’s simple to account for what goes in one end and what comes out the other and then determine productivity. But the output of marketing can be measured only long after it has left the ‘plant’,” he explained.
Stressing the conditions determining a strong marketing strategy, Prof. McDonald said that the marketing strategy defines real target segments, segment-specific value propositions, allocates resources differentially by segmenting and aligning to the market via Strengths, Weaknesses, Threats and Opportunities analysis.
He urged the marketers to identify their key market segments and based on their current experience and planning horizon to make a projection of future net free cash in-flows from each segment. “Identify the key factors that are likely to either increase or decrease these future cash flows.