Category: Market

When companies want to establish a “Brand”, it conjures up the advertising-driven practice of brute-force, repetitive, mind-drilling messages.  However, a brand is not limited to an image that a company wants to project, but in the mind of the customer, it is a subjective view of the combination of all direct and indirect interactions that a customer has with the company. Also, while a company may assign branding to a marketing department, a brand is actually established by a broader range of interactions with customers. ·         A brand is subjective because a customer may be influenced not only by company-driven activity like advertising, brochures, websites and salespeople, but also by recommendations, casual observation of the product, experience with the product and a host of other conscious and subconscious factors. In fact, some of the interactions with the company might have profound influence and some will be ignored.  A customer’s impression of a brand therefore is much less controllable and could be much closer to a minor/insignificant influence as a result of company promotion.   ·         Not only is the marketing-driven approach to branding a weak strategy for establishing a brand, but a company actually needs to examine all of its potential direct and indirect influences and determine if they are consistent with the brand.  In his compelling book Brand Harmony, Steve Yastrow describes how companies can successfully create a singular reinforcing image of themselves, that is, the entire organization needs to think of itself as “being the brand”, in order to create comprehensive, company-wide, reinforcing image that customers will understand and believe.  This means that a company should state what its brand is, and then against that standard, consider if a company activity is consistent or inconsistent with the desired projected image. While this does not guarantee that a desired image will be generated in the mind of customers, it increases the chances.   Brand is very difficult to establish and it is very perishable.  Think about how a company’s image might have cost significant dollars to establish, only to be branded negatively by a single rude interaction with a company employee.  Or for example, McDonald’s advertising could all be wasted on one customer if the rest rooms were not clean. Take away idea: A brand is subjective for each potential and existing customer. Companies need to craft a comprehensive, multi-faceted approach to influence individuals across a wide range of interactions.  At the very least, every controllable market interaction and operational touch with customers should be considered as an opportunity to reinforce the brand.  Though not foolproof, it is an approach that makes a lot more business sense than asking a marketing department to establish a brand, independent of everything else a company does.

 

I cannot tell you how many times I’ve been asked one question and received off-target responses. The question: Can you tell me about your market?

 

The question and the answers lie in a lack of understanding of what a market is. On a high level, a market is the sum total of interactions of sellers and buyers. Markets and market structures shift in terms of overall share, product share, product positioning and other aspects based on the interaction of what sellers do (i.e., promote products, position products, price products) and how customers react (i.e., choose one alternative over another, or choose neither or a substitute).

 

The reason that this question is answered unsatisfactorily, so often, is multi-fold:

1. Middle-market companies tend to define their markets in terms of their offerings and not the overall market. Substitute products are most certainly part of the market landscape, yet they are rarely considered. A well-known example is a company that produced oats. It defined the market as the “oats market,” not as the transportation fuel (for horses) market. Had the company fully understood that it was in the transportation fuel market, it might have taken a different tack and either developed other products (oil) to satisfy its market or relented on the market as it shrank.
2. Assuming that a company has a starting point from which to understand a market, which is not really a good assumption at all, it would need to have the ability to detect whatever it can in the market. Then, based on what it learns, and on what it knows that it doesn’t know, it develops a sense of how the market has changed and is likely to change. Middle-market companies rarely invest in updating their intelligence; even if they do, they might not have the skill to interpret what combinations of market factors’ movements are relevant in forecasting how a market structure might change. Ignoring market shifts is usually the default position.

 

A sophisticated, comprehensive approach to understanding markets can be approached through reading Michael Porter’s classic book, Competitive Strategy. However, it might not be practical for most busy executives to read it. A much simpler version of the same notion rolled off the tongue of Michael Corleone in The Godfather II: “Keep your friends close and your enemies closer.”

 

Many potential clients approach me too late, long after detectable market changes were either unnoticed or ignored. They react much later, after the changes have had substantive negative effects on the bottom line. Many times, it is too late, and companies simply “run out of runway” to turn things around. If you sense that market changes need to be monitored more closely, and then need the changes to be interpreted to support forecasting, give me a call: 410.598.0719.

 

Those of us who got education and training in marketing more than 10 years ago are likely having a “Rip Van Winkle” experience as we try to grasp how marketing has changed in that period due to the impact of the internet and then more recently social media apps. Though the same ROMI (Return on Marketing Investment) is the key metric for marketing managers, it is much harder to actually understand and measure.

 

ROMI is the measure to which marketing dollars contribute to profits. In the old world (30+ years ago), it was hard to associate a marketing cause with the actual effect.  A question could be asked: “How much of sales was a direct impact of a single marketing effort, a billboard or an advertisement, for example”.  Even using a lot of assumptions to relate the cause with the effect, there were questions in the direct nature of the relationship between the cause and effect – but at least we knew that no one else could adequately relate marketing to results.

 

Internet purchases, that were preceded by a number of clicks, brought some never-before-available relationship between purchasing and the marketing chain that led up to it (the breadcrumbs). It is understanding the trail of breadcrumbs and developing real insight that can help marketing managers better understand and manage their ROMI. And for a while, it was adequate.

 

There is however a new complication in all of this – a huge complication. Metrics-driven marketing, powered by analytics, affords companies the opportunity to engage customers in entirely and personalized ways. However, companies need to a approach multi-channel marketing very differently than they have with traditional marketing. Marketers have unprecedented access to an enormous amount of customer data including search patterns, engagement patterns, demographics, social connections and campaign responses. The complication is that to access customers’ pocketbooks, they need to understand direct and an indirect interrelation between these data points to determine what is it that leads to a purchase. Only then can marketers effectively allocate their marketing budgets, and direct all related efforts to the right combination of activities that will drive ROMI.

 

And now, just as we are getting comfortable engaging customers with websites and SEO efforts, (Search Engine Optimization), the website-centric paradigm is being replaced by an application-centric engagement: Social and mobile apps are taking center stage. Leverage it or ignore it at your own peril.

 

Concepts for this article were derived from the article “Metrics-Driven Marketing Meets the Multichannel Challenge”. Cornell Enterprise, Fall 2012.

 

 

Much of business media celebrates innovators for developing the next new thing.  However, imitators, not innovators, usually generate the greatest value from the innovation. A broad study determined that imitators capture a whopping 98% of the total value of an innovation.

We have been socialized to consider imitation as undignified and objectionable, yet in the marketplace of value, imitators generally dominate. McDonald’s imitated a system pioneered by White Castle which invented the entire low-cost, efficient, fast food category; Visa, MasterCard and American Express all borrowed the Diners Club innovation of aligning customers and merchants with plastic cards; Walmart copied many of its ideas from predecessor companies like Korvettes. However, these were not direct mimics, but improvements over a predecessor’s idea to create a winning formula that creates more value.

Huge value creation might happen from simply copying an idea, but odds are that a modification to make it better or cheaper, (and better), can disrupt the innovator by investing in an offering that is based on the market reaction to the original idea. Take-away thought: Imitate to share the market with the innovator – but imitate and improve to be dominant.

Ideas for this article were taken from Harvard Business Review April 2010, “Imitation is More Valuable Than Innovation.

 

 

 

Middle-market businesses need simple ways to consider strategic market options. A simple and effective, compact tool is the Ansoff matrix, a simple, 2×2 matrix that guides planners in developing options.

Basically, it provides four options that are dependent on two variables: developing new products and entering new markets. Both involve expense and, therefore, risk. They also pose risks to the company brand. Here is a simple way to think of the four options:

Market Penetration

How do you grow if you sell the same product to the same customers? Consider adjusting the marketing-mix elements: more effective promotion, product improvement and lower pricing. It is the least risky option, but likely to reap limited rewards.

 

Product Development

If a company is entrenched in a market with respected products and services, it might be possible to sell that same set of customers other products. This leverages companies’ current market good will and credibility. The risk is going so far afield that customers would not relate the new product with the brand.

 

Market Development

This is simply selling the same product to a different market. Brand might not be relevant at all, and the risk, therefore, is higher for companies penetrating a less-understood market.

 

Diversification

The risk here is typically greatest: You don’t know that much about your product or the market. The rewards here are potentially substantial, but the failure rate is the highest. It is not uncommon for post-mortem analysis of failures to ask, “What were they thinking?”

 

My take-away thought for you is this: Obviously, there is a risk/reward equation to consider. My experience is that success is not only a function of a company’s ability to understand and mitigate risk, but also of a company’s being grounded in the potential upside of a business, which, all too often, is overly optimistic.

 

The basis for this article comes from www.simonbrand.com.

 

Market Penetration How do you grow if you sell the same product to the same customers? Consider adjusting the marketing-mix elements: more effective promotion, product improvement and lower pricing. It is the least risky option, but likely to reap limited rewards.	Product Development If a company is entrenched in a market with respected products and services, it might be possible to sell that same set of customers other products. This leverages companies’ current market good will and credibility. The risk is going so far afield that customers would not relate the new product with the brand.
Product Development If a company is entrenched in a market with respected products and services, it might be possible to sell that same set of customers other products. This leverages companies’ current market good will and credibility. The risk is going so far afield that customers would not relate the new product with the brand.	Market Development This is simply selling the same product to a different market. Brand might not be relevant at all, and the risk, therefore, is higher for companies penetrating a less-understood market.

 

Established Brands Beware! Opportunities for Growing Companies!

Conventional wisdom holds that you need to build a trusted brand to get people to spend their money, and that establishing a brand is notoriously expensive. Branding generally includes increasing awareness and name recognition through heavy advertising.

That was then. It can be argued that a fundamental shift is occurring in the way consumers evaluate and purchase products and services.

Customers can now more clearly consider a product’s absolute value, as opposed to its relative values. Relative evaluations are comparisons with another product that is prominent or is placed in front of shoppers on a store shelf or catalog page. But absolute evaluations go beyond those constraints by using the most relevant information available about each product and feature – and absolute evaluations usually produce better answers.

Absolute valuations are now possible because technology provides much more powerful tools to gather information and process it to assess the quality of products and services. A recent example of this is Angie’s list, where consumers in a cohort share their experiences and evaluations of residential service providers. A somewhat old example is the way aggregation tools were applied to airline tickets. Prior to the 1990’s, a customer had to call an airline or, early in the Internet age, go to a single airline’s website to inquire about a flight. This search was limited to looking for airlines that the customer was familiar with. Conducting comparisons was very challenging. Aggregation sites like Kayak vastly improved the process because customers could determine the absolute value of an airline’s flight schedule and price by comparing alternatives side-by-side. Other aggregation tools, advanced search engines, reviews from other users, social media and access to experts enable consumers to make better decisions without having to rely on relative evaluations.

Absolute value in this context does not mean the best option; rather, it means the “good enough” solution that can vary depending on the individual consumer’s subjective preferences. The point is that customers can more easily determine the absolute value of something – and get closer to knowing what their experience will be with an individual product.

In the past, consumers used their own experience with a brand as a key quality proxy. They might reason the following: “In the past, I used Brand X. It was pretty good.” Their reference point was used to conclude that selecting Brand X has limited risk. But currently, when technology enables quality to be more quickly and objectively assessed, customers will be less hesitant to try something new. This enables newer brands to lower the barriers to entry and gain a foothold, at the expense of established brands with lower absolute value.

What helps support this conclusion are these two findings: 30 percent of U.S. consumers start researching products on Amazon and study reviews, with the average online shopper consulting more than 10 information sources prior to making a purchase. Brands, especially those that convey prestige, status and emotions, will continue to be of value. But, in realms where objective, specification-based quality is important – and can be assessed and communicated — relying on a brand may not be as reliable a market signal as it once was.

(Based on “Is Tech Eroding Consumer Loyalty,” Strategy+Business. Summer 2014)