Silicon Cloud - Your Marketing Strategy

Your Marketing strategy!

Your Key Take Away

• Many CEOs are ques/oning the value of their marke/ng departments.

• Few companies have chief marke/ng officers who are ranked as high as CFOs.

• Marke/ng departments historically have focused narrowly on tac/cs rather than strategy.

• “Market driving” companies transform their industries with completely new products or distribu/on systems.

• None of Wal-‐Mart’s original top 10 compe/tors are s/ll in business.

• Tradi/onal marke/ng is the process of dis/nguishing your product from the compe//on’s in the customer’s mind.

• “Product agnos/c” marketers some/mes recommend compe/tors’ products to solve customers’ problems, but being neutral about products is hard for marketers.

• Some new distribu/on channels complement old ones, while others, such as music downloads on the Internet, replace them.

• Brand prolifera/on confuses customers. Today’s trend is to consolidate.

• Salespeople can’t just sell. They must become consultants and industry experts.

We hope this guide helps you. If you have any feedback please email [email protected]

Seven Steps To Transforming Marketing

Many CEOs are beginning to have second thoughts about the value of their marke/ng departments. Although they believe marke/ng is important, they doubt its ability to produce measurable results or to help their companies aTain strategic goals. Marke/ng has declined in pres/ge during the past 20 years as markets have fragmented, global compe//on has increased, and customer expecta/ons have risen. Marketers must put aside their /red “4Ps” – price, promo/on, posi/on and placement– and reinvigorate their thinking. They cannot just sell products and reach out to new distribu/on partners. They must discover new business opportuni/es, develop their brands, improve customer service, and increase efficiency.


Transform yourself from a marke/ng tac/cian to a strategist by making these seven moves:

1. “From market segments to strategic segments” – Instead of thinking in terms of groups of customers whom you can reach with targeted messages, think in terms of groups for whom you can create value with both marke/ng and non-‐marke/ng ac/vi/es.

2. “From selling products to providing solu/ons” – Customers have so many choices available that differen/a/ng your product from others is nearly impossible. Even when you develop a unique product, your compe/tors can easily copy or even enhance it. Instead, aTract customers by demonstra/ng how your product can fulfill their par/cular needs.

3. “From declining to growing distribu/on channels” – Instead of locking yourself into the distribu/on methods you have always used, open your mind to new ones. 4. “From branded bulldozers to global distribu/on partners” – In the past, retailers were small, and brands could require retailers to accept their terms. However, the balance of power has shi^ed. Brands must learn to cooperate with enormous retailers.


5. “From brand acquisi/ons to brand ra/onaliza/on” – Instead of crea/ng and acquiring new brands, differen/ate the strongest ones and get rid of the others. 6. “From market-‐driven to market-‐driving” – Innova/on does not necessarily mean developing new products. Successful innovators create new concepts that “change an industry’s rules and boundaries.” 7. “From strategic business unit (SBU) marke/ng to corporate marke/ng” – Marketers have tended to think in the short term. Instead, align marke/ng efforts with the “goals and overall strategy of the firm.” Peter Drucker noted back in 1954 that customers are the basis of business. Even profits are secondary: If you don’t have any customers, you can forget about profits. In “customer capitalism,” businesses make money when they solidify long-‐term customer rela/onships. Thus, the most important responsibility of the marke/ng department is to maintain the company’s focus on customers.

The 4Ps versus the 3Vs

Marke/ng is the process of dis/nguishing your product from the compe//on’s offering in the minds of your customers. The tac/cal arsenal of tradi/onal marketers consists of three elements: 1. Segmenta/on – Dividing customers into groups. 2. Targe/ng – Deciding to which segments you will sell your product. 3. Posi/oning – Crea/ng a message that draws a response from your target segment.


The message should emphasize customer benefits, not product features. To become strategic thinkers, marketers have to iden/fy strategic segments – a somewhat different process from iden/fying tradi/onal marke/ng segments. In strategic segmenta/on, marketers must think not of the 4Ps but of the “3Vs”: 1. “Valued customer” – Whom do you wish to serve? For example, most airlines, although they do some outreach to all travelers, really wish to capture the business-‐traveler market. Since these travelers are not spending their own money, they are willing to pay for more services. In contrast, discount airlines, such as easyJet, pursue leisure travelers and entrepreneurs, who are paying for their /ckets themselves and are seeking bargains. 2. “Value proposi/on” – What do your valued customers want? Value proposi/ons are not simply marke/ng statements; they affect purchasing, opera/ons and distribu/on. For example, all easyJet customers want is cheap, safe, reliable transporta/on. EasyJet reimburses passengers if a flight is more than four hours late. Otherwise, it comes up short in almost every tradi/onal measure of airline service: Customers do not receive assigned seats, free meals, or refundable /ckets 3. “Value network” – What’s the best way to deliver the product? Since easyJet customers will sacrifice convenience for cost, the company does not use travel agents or issue paper /ckets. It sells e-‐/ckets on the Internet.


To become more innova/ve, ask three ques/ons about your value proposi/on: 1. Do some customers need a new alterna/ve or are some simply not receiving services? – Progressive Insurance targeted high-‐risk individuals whom other companies refused to cover. 2. Can you offer more benefits or cheaper prices than anyone else? – The Zara clothing company copies designer dresses, and gets them to market faster and more cheaply than the designers themselves. 3. Can you radically redefine the value network? – Dell began selling its computers over the Internet when its compe/tors were selling in stores.

From Products to Solutions

In the business-‐to-‐business marketplace, many companies began selling services instead of products alone. By becoming “solu/on providers,” they gained leverage, since the prices of services are more difficult to compare than those of products. Becoming a solu/on provider requires transforma/onal leadership, cost cumng, culture change, and a focus on customers. IBM successfully made the transi/on from selling products to selling solu/ons. It discovered that its customers wanted linked hardware and so^ware, and informa/on technology support. So IBM devised ver/cally integrated systems to help customers make beTer use of its technology. Other computer companies, such as Microso^, Cisco, Compaq, Sun and Unisys, followed IBM’s successful path. They adopted such changes as open architecture, unbundled products and value-‐based pricing. Their salespeople became consultants. Some/mes, the best solu/ons require incorpora/ng compe/ng products into the system – yet becoming neutral about products, or “product agnos/c,” is par/cularly challenging for marketers whose training is to be cheerleaders for their company.

Using New Channels

The prolifera/on of new technology and distribu/on channels has fundamentally changed the ways businesses gain customers and compete. Some new channels complement old ones, but others replace them. When listeners began downloading music from the Internet, sales of CDs and casseTes took a nosedive. The advent of giant global retailers, which can demand low prices from suppliers, has accompanied the emergence of new distribu/on channels. Small retailers may be unhappy that they are paying more than larger ones, but the big companies buy enormous quan//es and require less service. In general, manufacturers forging new distribu/on rela/onships should build trust and maintain transparency about price differences.

Brand Management

Increasingly, corpora/ons’ most valuable assets are intangible ones, such as brands. In the 1980s and 1990s, companies created and acquired more and more brands, thinking that if one was good, more were even beTer. The prolifera/on was costly and confusing. Companies couldn’t manage their numerous brands well. Customers couldn’t differen/ate between them. Some brands appealed only to a few customers, and some even competed against one another. Procter & Gamble discovered that out of its 250 brands, the top 10 accounted for half of its sales. Today’s trend is brand consolida/on – which is not easy. You don’t want to eliminate customers along with the brands. And, of course, managers whose livelihoods depend on a brand will defend it vigorously. To reduce your brand porrolio, conduct an audit to get factual informa/on about how your brands are performing. Weak brands: • “Have small market share.” • “Suffer from poor or nega/ve profitability.” • “Consume rather than contribute to cash flow.” • “Lack support from important channel members.” • “Exhaust dispropor/onate amounts of managerial resources.” • “Add liTle strategic value to the firm.” If you have a poorly performing brand, sell it, delist it, merge it into another brand or stop funding its marke/ng.

Drive the Market before It Drives You

Some companies have developed radical innova/ons to move ahead. The Body Shop, CNN, Starbucks and Swatch are “market-‐driving” rather than “market-‐driven” companies.

Their visionary CEOs created unconven/onal business models that eventually made the compe//on obsolete. Wal-‐Mart grew so drama/cally that none of the top 10 compe/tors it faced when it was founded in 1962 is s/ll in business today. Market-‐driving companies create new value proposi/ons by offering unique value networks and new benefits at lower prices. For example, IKEA offers sleek Scandinavian furniture, variety and good value in a pleasant atmosphere. Its value network incorporates interchangeable parts, in-‐house design, high-‐volume manufacturing, computerized logis/cs and appealing displays. Customers pick up and assemble their own merchandise, keeping costs low.


Market-‐driving companies have these common characteris/cs, which set them apart from tradi/onal companies: • They rely on vision rather than market research. • They aTract customers from a variety of market segments. For example, Swatch sells low-‐cost, high-‐fashion watches. • They create new, lower price points for quality and service, and educate their customers about the value of their offerings. • They develop new channels and logis/cs. FedEx uses its own planes in a “hub and spoke” configura/on, while BeneTon knits its products before dyeing them so it can respond more quickly to customer color demands. • They grow through posi/ve customer word-‐of-‐mouth.


Large companies face four cultural problems that make compe/ng with market-‐driving companies difficult: 1. Innova/ve companies challenge tradi/onal assump/ons, while established companies o^en cannot accommodate new ideas. Instead, they tend to dismiss unconven/onal approaches. 2. Established companies are risk-‐averse and do not reward innovators who produce profitable new ideas. Instead, they remember the good ideas that failed. 3. They prefer to grow by small advances rather than drama/c new ones. Incremental steps enable them to hang on to their suppliers, customers and research-‐and development departments, while new ini/a/ves require change. 4. They have a vested interest in preserving their industries. Because IBM had poured so many resources into mainframes, it avoided personal computers. Similarly, GM and Ford entered the market for minivans late because they were already selling sta/on wagons.


Becoming a market driver requires taking risks and rewarding crea/vity. Start by iden/fying internal entrepreneurs, selling new ideas company-‐wide and implemen/ng them with teams. Nissan Design reaches for innova/on and crea/vity by including different personality types, such as engineers and crea/ves, on the same team. IBM and Motorola use compe//on to s/mulate innova/on, since no one knows which new technology consumers will eventually accept.

Thank You

We hope this guide helps you. If you have any feedback please email [email protected] SiliconCloud www.siliconcloud.com

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Silicon Cloud - Your Marketing Strategy