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GRAHAM HOOLEY • NIGEL F. PIERCY • BRIGETTE NICOULAUD. 1. Market-led strategic management. Introduction. Strategy ➡ Guides the organization in its relationship with its environment ➡ Affects the internal structure and processes of the organization
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GRAHAM HOOLEY • NIGEL F. PIERCY • BRIGETTE NICOULAUD 1 Market-led strategic management
Introduction • Strategy ➡ Guides the organization in its relationship with its environment ➡ Affects the internal structure and processes of the organization ➡ Centrally affects the organization’s performance. • Marketing, via its policies and programs relating to the seven elements of the marketing mix, can provide the means to facilitate the attainment of a strategy.
Important Questions 1 Where are we now? 2 Where do we want to be? 3 How might we get there? 4 Which way is best? 5 How can we ensure arrival?
Marketing • Marketing, centering on identifying and satisfying customer requirements at profit • In Greyser’s term, marketing “migrated” from being functional discipline to how business should be run • More than paying lip service to marketing
Example -Pan-company marketing was pioneered by British Airways Customer champions • In 1982 the pressure to prepare for privatization was intense. A fundamental shift in the way BA did business was needed. • Lord Marshall – then Sir Colin – took charge of transforming BA into a totally customer focused organization.
Insight • Lord Marshall and his top team instituted investigative techniques, mainly in-depth interviews with staff, to uncover what they thought about customers. An insight was generated: speed and efficiency, although important, were of secondary importance to the customer. They wanted to see warm, personal and caring staff. Innovation and improvement • All existing business processes and operations were disregarded. Only the customers and their needs were used as the basis for redesigning the company.
Customer culture • Front-line staff were now rated as the company's main assets. The ‘Putting People First’ program involved them in redefining the tasks which win customers, based on teamwork. This became the driver of business strategy. • Engineers and pilots insisted that they too be involved in the program. Customer First Teams were created to suggest solutions to customer problems. • Media advertising communicated ‘The World's Favorite Airline’ to staff as well as to customers. Motivation and incentives were prioritized and company-wide performance-related pay was instituted. Awards for Excellence were conferred by Lord Marshall on 1–1.5% of staff annually.
Measurement • Everything pointed to the need for better metrics and standards. A Market Place Performance Department, reporting to the CEO, was set up. Mystery flyers were created [Mystery shoppers/flyers are researchers who are hired by organizations to pretend to be customers and secretly evaluate the quality of the customer service]. • A continuous upward trend in customer satisfaction ratings was now registered right through into the late 1990s. Continuous improvements in market share, passenger traffic and staff productivity were achieved.
Profitability • The direct result of adopting pan-company marketing was a 30% increase in productivity and an increase in market share of 2.4% in a highly competitive market and the posting of improved profits when, for example, from 1990–1994 the airline industry world-wide lost US$15 billion.
The Three ‘Rs’ of Growth Strategies Doyle distinguishes between the following
Radical strategies • Companies achieve spectacular growth in sales and profits without building customer value through superior products • Acquisition based • Marketing department based (High level of advertising, proliferating product lines) • Public relations based (media hype to attract customers)
Rational strategies • High short term performance through products cheaper than traditional competitors • Major innovations in technology, marketing methods or distribution channels
Robust strategies • Companies achieve steady performance over long period by creating superior customer value and building long-term customer relationships. • Superior customer value, long-term investments in relations with suppliers, distributors and offer long-term advantage. Examples include Toyota, Johnson & Johnson
Marketing…………….. CCDVTP C = Creating C = Communicating, D = Delivering V = Value T = Target Audience P = Profit. Webster proposes marketing as a set of processes
Value-defining processes • Processes that enable the organization to understand its environment in which it operates better (understand resources and capabilities) • Such as market research, buying behavior, product use and so on
Value developing processes • Processes that create value throughout the value chain • Procurement strategy, new product and service development, design of distribution channels, vendor selection, strategic partnership with service providers etc., pricing strategy development, and ultimately the development of the value proposition for customers
Value-delivery processes • Processes that enable the delivery of value to customers • Service delivery, customer relationship management, management of distribution and logistics, communication processes (such as advertising and sales promotion) and customer support services etc.
Evolving Definitions of Marketing The marketing concept and market orientation
Definition of marketing Definition from Ferrell and Lucas (1987): • Marketing is the process of planning and executing the conception, pricing, planning and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.
Figure 1.1 Model of mutually beneficial exchanges Providers goals Survival Financial Social Spiritual Ecological Etc. Customers goals Solutions Benefits Well-being Altruism Etc. Offers Services, products… customers & providers satisfaction Responses Purchases, support
Marketing concept • Marketing involves the following: • organisational culture: set of values and beliefs for the organisation to serve customers needs • strategy: develop effective responses to changing market environments by defining market segments, and developing and positioning product offerings for targets • tactics: concerned activities of product management, pricing, distribution and communications such as advertising, personal selling, publicity and sales promotion
Market orientation • Definition from Kohli and Jaworski (1990): • Market orientation are activities toward developing an understanding of customers current and future needs.
Components and context of market orientation are proposed: • Customer orientation • Understanding costumers to create superior value • Competitor orientation • Awareness of the short-long term competitor’s capabilities • Interfunctional co-ordination • Using all resources to create value for customers • Organizational culture • Linking employee and managerial behavior to customer satisfaction • Long-term profit focus
Figure 1.2 Components and context of market orientation Market-led organizational culture
Resource based view of marketing • Focus on ‘core competencies’ • Performance is driven by the resource profile of the organization • Possession and deployment of distinctive, hard to imitate or protected resources • Three alternative approaches are apparent
Product push marketing • Activities on existing products and services and look for ways to encourage, or persuade customers to buy. • The key is to make customer want what we are good at. • This is the myopic interpretation of resource based view.
Customer-led marketing • Under this approach organisations chase their customers at all costs. • The retailers react by giving customers more choice, heavy promotions and deals to stimulate purchases, and aggressive sales force targets. • Customers get confused because of the over complex promotions.
Resource based marketing • Companies base their marketing strategies on equal consideration of the requirements of the market and their abilities to serve it. • Resource based marketing seeks a long term fit between the requirements of the markets and the abilities of the organisation to compete in it.
Figure 1.3 Marketing approaches Market needs Customer-led marketing Resource based marketing Product push marketing Organizational capabilities
How market orientation and market resources impact on organizational performance?
Figure 1.4 Organizational stakeholders Focal Organization
Contribution of marketing to stakeholders objectives • Firms that do well in marketplace also do well financially • Adding value of firm for shareholders • Firm adopting market-oriented culture perform better financially than those that do not
Figure 1.5 Marketing and performance outcomes Marketing resources Market performance Market-oriented culture Assets Financial performance Customer satisfaction & loyalty capabilities Sales volume & market share
Marketing fundamentals • Set of basic and pragmatic marketing principles that guide marketing thought and action • Follow logic of value-based processes described by webster • Their applications can revolutionize how organizations respond to, interact with, their customers
Principle 1: Focus on the customer • High degree of customer focus-But not blind focus! • Market-led approach • What business are we in? • What business could we be in? • What business do we want to be in? • What must we do to get into or consolidate in that business?
Principle 2: Only compete in markets where you can establish a competitive advantage • Choosing where to compete and where to commit its resources • How attractive the market appears • Do we have the competencies and skills to compete here?
Principle 3: Customers do not buy products • Customers do not buy products , they buy what the product can do for them – the problem it solves
Principle 4: Marketing is too important to leave to the marketing department (even if there still is one) • Marketing is everyone’s job in the organisation • Doing marketing is marketing department job, becoming and being marketing minded is everybody’s job.
Principle 5: Markets are heterogeneous • Different customers, sub-markets and segments; buy a car for cheap transport from a to b or for comfortable or save travel; different benefits requirements
Principle 6: Markets and customers are constantly changing • Markets are dynamic and products have a limited life; need product and service improvement; customer expectations change • Two main processes of improvement; - Innovation ( a relatively large step is taken at one point in time)and changes in technology - Second step is a continuous process where smaller changes are made but on an insistent basis.
Figure 1.6 Product and process improvement
The role of marketing in leading strategic management • The role of marketing in the organisation can be in a way shown in figure 1.7. (that role is threefold)
Figure 1.7 The role of marketing in the organization Identify and communicate customer wants and needs throughout the organization Determine the competitive positioning to match the needs of the customers with company capabilities Marshal all relevent organisational resources to deliver customer satisfaction
Identification of customer requirements • Identity and communicate customers want and need throughout the organisation • Identify the requirements of customers and communicate them effectively; who the customers are and what will give them satisfaction or create “customer delight” • Customers expectations, wants and need must be understood and communicated
Deciding on the competitive positioning to be adopted • Which target markets or markets the organisation will seek to serve • Two main set of factors; • First, how attractive the alternative potential targets are • Second, how well the company can hope to serve potential target relative to the competition
Implementing the marketing strategy • Marshal all relevant organisational resources to deliver customer satisfaction • Implementing the marketing strategy; no gaps between offer, design, production and delivery;
