Sound marketing strategy allows for profitable growth

 

Sunday, July 16, 2006
St. Louis Post-Dispatch Business E5
"Sound marketing strategy allows for profitable growth"


Marketing is the neglected function for profitable growth.Achieving profitable internal growth is the toughest challenge facing many CEOs today. Based on the flood of books, magazine articles and executive education courses, everyone seems to have identified "innovation" as the solution to this challenge. My last two columns (and several planned columns) address the many dimensions of innovation.

Innovation is indeed important. But about 80 percent of new products fail because they fail to meet customer needs. Successful innovation requires guidance from strong marketing, whose role is to identify and define those needs. Unfortunately, due to management neglect over the last 30 years, marketing is the weak link. It often lacks the clout to assure that the product is designed to meet customer needs.

Since the rise of Wal-Mart in the 1970s, management has focused more on sales and less on marketing. Few smaller companies have even a single marketing person, but they all recognize the crucial importance of sales. Marketing departments of large companies in the 1970s ensured that all departments focused on customers. Today, marketing often focuses narrowly on branding and short-term sales.

This column addresses how your company can combine marketing with innovation to drive profitable growth. Marketing has three distinct roles in this partnership with innovation:

 

  • Market research to identify and completely understand target customers.
  • Internal coordination to ensure that everything about the product is designed to meet the needs of target customers.
  • Marketing communications to create awareness, understanding and positive attitudes.

Even before you begin to design and develop a new product, you need good market research. That will allow you to segment the market, target customers and position your product to meet the needs of your target segment.     Segmentation divides the total market into customer clusters that are homogeneous in their wants.     Targeting identifies the specific customer segment that is your sweet spot. Your target segment should reflect your company's strengths and offer opportunities for growing sales and margins.     Positioning involves using the "4 Ps" of marketing (product, price, promotion/advertising and place/distribution) to meet the tangible and intangible needs of your target segment. Doing positioning well requires in-depth understanding of both what your customers need and how they will respond to each of the 4 Ps.


Even the smallest industrial company can afford a customer satisfaction survey to obtain in-depth understanding of its customers. The heart of the survey is a list of 10 or 20 items that might be important to your customers. In the survey, customers rate each item on both "importance to them" and "your performance." Using the Internet and services like www.SurveyMonkey.com dramatically reduces the cost.

Simple statistical analysis usually produces valuable results. The average "importance" scores for these 10 to 20 items suggest the crucially important customer needs your company should focus on. Large gaps between importance and performance suggest opportunities for greatly improving customer satisfaction.

With good marketing information in hand, the marketing function should coordinate all departments and functions so they focus effectively on providing superior value to target customers. The coordination begins with new product development. It informs manufacturing and distribution. It drives branding and promotion, and paves the way for sales. It even improves customer service after the sale to cement customer loyalty.

A classic illustration of the importance of market knowledge and internal coordination -- or the lack of them -- is the history of Apple Computer Inc.'s Newton personal digital assistant. In fact, the original goal of the Newton project was not to develop a small handheld device but to reinvent the personal computer. It was only toward the end of the product-development cycle that the concept of a PDA was envisioned and the term coined. In the end, a lack of internal focus on customer needs and the continual addition of new features to the detriment of simplicity, reliability and cost doomed the Newton.

Shortly before the Newton was taken off the market in 1998, Palm Inc. introduced the Palm Pilot -- which was smaller and thinner, cheaper and more reliable. The Palm Pilot's positioning was superior. The Newton was named after a great scientist, which intimidates everyone but scientists and engineers. Palm Pilot suggests something that is easy to hold and guides you to what you need.

Market leadership in a segment goes to the company that provides superior value and communicates it effectively. Marketing communications -- advertising, publicity and promotion -- creates awareness, product understanding and some preference based on your unique positioning.

This is especially important for the sales function. Good marketing communications makes it a lot easier for the salesperson to get the appointment with the crucial executive or purchasing agent. In the end, especially in business-to-business sales, the salesperson is crucial in fine-tuning all aspects of the product to meet the customer's exact needs. Marketing opens the door, but sales closes the order.

Marketing has limitations. Good marketing cannot overcome a bad competitive strategy. You will fail if you target a customer segment that is already being met with excellence. That's why Anheuser-Busch's Eagle Snacks failed. Eagle was a wonderful product. But it was a direct attack on Frito-Lay, which had a dominant position.

This column's key message is that good marketing allows a company to achieve profitable growth if its strategy is sound. But keep the Eagle lesson in mind: Never try to beat Tiger Woods in golf.



Bill Finnie, a business consultant and adjunct professor at Washington University, writes about the do's and don'ts for success.

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The St. Louis Post-Dispatch and William C. Finnie share the copyright on this column. Individuals and their organizations may use these columns for their internal use. Publication for use outside of your organization, however, requires written permission from the St. Louis Post-Dispatch or William C. Finnie.