The third edition of the Marketing Strategy Forum (MSF), organized by DAEMON QUEST, welcomed the most innovative Marketing ideas. Here we present the summary, in Ten Steps, of the “Recipes for Success for a New Customer Marketing”, from some of the best experts inside and outside of Spain, who were present at the MSF.
Last March 7th and 8th, in Madrid and Barcelona respectively, more than 1,000 Presidents, General Directors, Marketing Directors, and Sales Directors once again made the Marketing Strategy Forum (MSF), organized by DAEMON QUEST and HSM, the leading conference on innovation and Marketing in Spain. With national and foreign experts on hand, the forum inspired extraordinary ideas and tendencies aimed at transforming the old product marketing into a New Customer Marketing. We wanted to analyze and summarize them in ten steps aimed at reaching one common goal: designing winning Market Strategies.
Why does Marketing not occupy its rightful place in companies, and why is it the most sacrificed area when a company suffers financial strain? The answer is not as simple as saying “financiers are bad and marketing people are too soft”. A big part of the respect companies have for financiers is due to the fact that they take shelter in the irrefutable rigor of data, and they adhere to it. Shouldn’t we Marketing professionals give our decision process the same rigor and prestige?
Two mistakes to rectify: if Marketing aspires to be considered strategic, it must replicate the best parts of Finance and discipline itself, as web as becoming accustomed to basing its work on rigorous data, and not only on pretty “draw and color” schemes. It’s fine to be creative, but we must also be critical and decisive. The second error is that the product is no longer the star. In fact, it never has been. The true star is the customer. Making Marketing “climb the ladder” to a company’s top levels means “strategizing” it, and in order to do that, there is nothing like the combination of good positioning, good segmentation, and good targeting.
Companies should ask themselves “what do I do well” and clearly differentiate themselves by a select group of elements. The term “added value” is outdated. Everyone claims to offer it. The link with the customer must be based more on the opportunity to offer different “experiences” that the customer always associates with a company. Richard Branson, founder of Virgin, is the greatest exponent of this tendency. He doesn’t only sell airline tickets, compact discs, or trips to the moon. He offers “Virgin experiences” to his customers.
In Spain, companies like Aviva Vida y Pensiones have proven that things can be done differently, and you can still succeed in a complex market. The third insurance group in Spain, it is differentiated by its solid leadership position, a sales model that opts for permanence in the channel, and by the differentiating element of specialization: the company operates exclusively in the Life segment. In order to be “different”, Aviva Vida y Pensiones has undertaken an admirable organizational turn entirely geared towards the customer, and it has set the goal for itself of a quadruple value option: customer value, distributor value, employee value, and stockholder value [iv].
This term, coined by the London Business School Professor, Nirmalya Kumar, revolves around two axes: a Marketing that takes initiative and doesn’t limit itself to launching “what the factories produce”, and a Marketing that is focused entirely on the customer. Both axes are based on analytical Marketing, which is based on customer knowledge, which substitutes the focus on the product with the following model in stages: segmenting, targeting, positioning, product/service design, promoting it, putting it on the market, and fixing the price. “Customer Driven Marketing” Strategies must replace the “4 P’s” by means of three key processes, derived from Analytical Marketing: product development (design + strategy + research), sales (prices + production + distribution), and customer support (analysis + service + promotion). Companies such as Wal-Mart are paradigmatic in “Customer Driven Marketing” Strategies: combining customer knowledge and customer research with analytical techniques, the most powerful distribution company in the world has been able to find out everything about its consumers and maintain a dialogue with them, which is not only officially, but also directly geared towards increasing sales volume.
“The ROI Empire” must be made complete with approaches based on profitability, but focused on the customer. Don Peppers defines ROC as a measuring stick that allows us to calculate the level at which a customer begins to generate value for a company, but also as a business philosophy, aimed at obtaining the long-term confidence of real and potential customers. While ROI answers the question “How much money do I obtain from the capital I have?”, ROC answers the question “How much money do I obtain from the customers I have?”[v]. There is an absolutely key concept underlying both questions: the customer’s value throughout their entire potential relationship with the company, or “Lifetime Value” (LTV).
For a long time now, companies have understood the importance of clearly knowing each customer’s value and assigning resources according to that value. But limiting the “value chain” to only one link – the customer’s – is not enough. It is not enough to know “who to attend to according to how much value they contain”, but rather which value proposition we make to that customer we have deemed as valuable. Once we definitely know which differentiated value proposition adapts to their needs, it is equally as imperative that we know how we will communicate it to them. That is to say, what value will we offer in the service, in the way we attend to the customer: through which channels, with what messages, by what means…Only the combination of “Valued customer + Value proposition + Value Network”, coined by Professor Nirmalya Kumar of the London Business School, is capable of guaranteeing the success of Customer Marketing Strategies[vi].
The tendency to manage according to customer value should be based on a correct Segmentation Strategy, as we saw previously. In order to segment intelligently, we not only have to have the best analytical tools, but we must also pay attention to what the market tells us; a constantly changing and moving market, where customer profiles change at dizzying speeds, even as new ones emerge. One of the most striking tendencies of recent times is the birth of what Telefonica has christened “multi-client”[vii]. That is to say, the consumer who demands “key in hand” solutions, and who you cannot expect to understand that a provider consists of different companies, different divisions, and different services. The real challenge is making complex corporate structures seem simple to the customer, and allowing them to communicate with one single entity. This paradox must be resolved intelligently, without losing sight of profitability: large companies geared towards the new “multi-customer” must work like a good restaurant: in the kitchen, you can have all the racket and work you want, but the plate must be served on time, properly and without problems. The challenge is difficult, but it’s worth it: one is always willing to pay more if they are attended to impeccably.
These new customer profiles pose a double challenge to companies: maximum centralization of their offers, but at the same time, diversifying their channels as much as possible in order to optimize sales administration. Mango has decided to enter the U.S. market, but only “on-line” for the moment. Hertz has gone beyond the traditional points of sale in airports and stations to set up operations in shopping centers. In one year, Vueling Airlines grew 400% in passengers and 500% in income (see pg. 12), with more than 90% of their sales carried out on the Internet[viii]. Physicians pay more attention to sales actions via e-mail and SMS than to in-person visits. Doesn’t it make you think?
Profitability should take priority in all sales and Marketing actions, in order to be able to “strategize” it, as we mentioned earlier. While profitability should be the dominant element in Segmentation, Positioning, Targeting, or Channel assignment Strategies, loyalization actions should not count any less. The efficiency and profitability of many loyalty plans is being questioned, but there are examples that prove they can be efficient in economic and marketing terms. The example of the children’s fashion chain Neck&Neck is extremely illustrative: After detecting that 55% of customers who made purchases at their shops did not repeat the purchase, the company decided to develop an ambitious loyalization strategy around a Customer Club that offered buyers sales, discounts, and other tailor-made promotions. That’s how, in September 2002, “Club Neck” was born, with the goals of increasing the frequency of purchase and the average ticket price of each customer, assuring the spending levels of the most loyal customers, and generating greater loyalty to the brand. Today, Neck&Neck, has a base of almost 98,500 customers. That is to say, 51% more than last year. 48% of sales have been made with club customers, and the company’s total turnover has increased an annual 21% [ix].
We cannot apply all of the aforementioned steps hurriedly, expecting immediate results. The relegation of Marketing to the background over too much time, and the exaltation of Finance has translated into a tremendous “short-term” pressure on companies, which are more concerned with the value of their actions than with the value of their customer portfolio. Many companies have opted, as Don Peppers assures us, comparing the customers to the field, for “intensive cultivation strategies” in lieu of “conservative cultivation strategies”. The first ones squeeze the juice out of the customer quickly, but they “burn it”. The second ones care for the customer over time and obtain results not only “in one harvest”, but in all of them. Do we want customers who are “burned” in the short-term, or “fertilized” over the long-term? The answer is as logical as it is obvious.
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[i] Yankelovich Partners
[ii] The Times / A. Marsden. Shareholder Value Creation
[iii] Philip Kotler
[iv] Mª Angeles Garralda. Aviva Vida y Pensiones. MSF 2006
[v] Don Peppers. Shocking Results. New Strategies to Increase Customer Profitability. MSF 2006
[vi] Nirmalya Kumar. From Market Driven to Driving marketing. MSF 2006
[vii] Javier Juanco. Telefonica. MSF 2006
[viii] Carlos Muñoz. Vueling Airlines. MSF 2006
[ix] Javier de Rivera. Neck & Neck. MSF 2006