So, have you ever been exposed to viral marketing? View this viral marketing from Mentos and you'll have been infected as a consumer of viral marketing. It's very creative and very cool. The real question is . . . does it make you want to go out and purchase a Mentos or a Diet Coke? So although it may be creative and explosive, does it work to increase sales? Time will tell.
Showing posts with label marketing. Show all posts
Showing posts with label marketing. Show all posts
Monday, July 13, 2009
Viral Marketing - Love it or Lose it?
Viral marketing describes any strategy that encourages potential consumers to forward a marketing message to friends and family (or anyone for that matter), creating the potential for astronomical growth in the message's exposure and impact. Similar to viruses, these strategies use rapid multiplication to spread the message to thousands, and even millions.
So, have you ever been exposed to viral marketing? View this viral marketing from Mentos and you'll have been infected as a consumer of viral marketing. It's very creative and very cool. The real question is . . . does it make you want to go out and purchase a Mentos or a Diet Coke? So although it may be creative and explosive, does it work to increase sales? Time will tell.
So, have you ever been exposed to viral marketing? View this viral marketing from Mentos and you'll have been infected as a consumer of viral marketing. It's very creative and very cool. The real question is . . . does it make you want to go out and purchase a Mentos or a Diet Coke? So although it may be creative and explosive, does it work to increase sales? Time will tell.
Sunday, July 12, 2009
Understanding the Concept of Brand Equity
My palms were clammy and my throat was dry. “Just Do It” I kept telling myself. Come on, “It’s so easy a caveman can do it” I tried to convince myself. As I stood at the jewelry counter, it hit me, “Diamonds are forever.” I looked at the stone like I knew what I was doing and questioned the clarity. Don’t worry, “You’re in good hands” the sales clerk reassured me. To my surprise, my girlfriend was in the mall and saw me at the counter. She ran over, looked at the ring and asked, “It’s the real thing.” I was too stunned to utter a word as she grabbed the ring and said, “I’m loving it.” Seems like an opening monologue for an annual commercial program on cable television. OK, maybe not. But it does demonstrate the concept of brand equity as your mind reacts to the slogans associated to these popular company brands. (Nike, Geico, DeBeers, AllState, Coca-Cola, and McDonalds respectfully).
Developing a strong, successful brand image may be the best marketing investment a company can make. A company’s brand image is the total of all intangible and intangible characteristics such as history, values, ideas, beliefs, prejudices, interests and features that make it unique. The company’s brand image visually represents the internal and external characteristics of a company. “A brand is thus a product or service whose dimensions differentiate it in some way from other products or services designed to satisfy the same need. These differences may be functional, rational, or tangible – related to product performance of the brand. They may also be more symbolic, emotional, or intangible – related to what the brand represents.” (Kotler and Keller. 2009. pg. 239)
Ultimately, the brand is only as strong as it is in the mind of the consumer. In order for a brand to hold value, the consumer must believe that distinctive differences exist among other brands within a product category. This value can be a direct result of establishing brand equity. “Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands for the firm.” (Kotler and Keller. 2009. pg. 239) Brand equity depends on related associations made by the consumer and is considered a very valuable intangible asset. Three recognized perspectives of brand equity are; financially based, brand extensions and consumer based.
Brand equity measured in financial terms can “determine the price premium that a brand commands over a generic product.” (NetMBA. Nd. para. 4) Measured in terms of brand extensions, a successful brand can be used to introduce new products. Consumer based brand equity can increase the consumers feelings toward the brand. “The premise of customer-based brand equity models is that the power of a brand lies in what customers have seen, read, heard, learned, thought, and felt about the brand over time.” (Kotler and Keller. 2009. pg. 240)
Customer based brand equity involves three unique attributes. First, brand equity is developed based upon unique customer responses to the brand. In addition, the unique responses are a direct result based upon the consumer’s knowledge regarding the brand. And finally, brand knowledge is a very important aspect of brand equity. “Brand knowledge consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand.” (Kotler and Keller. 2009. pg. 241)
Different reactions and feelings to the brand are a result of the consumers familiarity and knowledge of the brand. And “the differential response by consumers that makes up brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing of a brand.” (Kotler and Keller. 2009. pg. 241) Strong brands lead to strong revenues. As a result, companies leverage strong brand equity for strong profit results. “Understanding consumer brand knowledge – all the different things that become linked to the brand in the minds of consumers – is thus of paramount importance because it is the foundation of brand equity.” (Kotler and Keller. 2009. pg. 242)
Building brand equity is developed with three main forces. First, brand elements have a very important influence on brand equity. Brand elements are used to identify and differentiate the brand. They include elements such as the brand name, logo, slogan and character. “A brand element that provides a positive contribution to brand equity, for example, conveys certain valued associations or responses.” (Kotler and Keller. 2009. pg. 246)
Selecting brand elements involves 2 themes: branding building and brand preservation. Within these two themes, marketers consider 6 criteria when selecting elements. The first three characteristics, regarding the brand as memorable, meaningful and likeable, are associated with building a strong brand. The last three characteristics, regarding the brand as transferable, adaptable and protectible, are associated with preserving and leveraging brand equity through elements. It focuses on how a brand is positioning to adapt opportunities and threats, for long term success.
The second force in building brand equity involves the relationship and combined effort to associate the product and service, along with all marketing efforts, activities and programs. All of the messages, images, perceptions and promotions of the brand must stay consistent when presented to the consumer. The consumer must be able to associate the marketing effort with the brand. This aspect is also very important when you consider internal branding as well. Internal and external branding must coincide so that employees of the company deliver on the promise and properly represent the brand.
An example of this consistency in brand delivery is when a consumer can recognize a brand within seconds of seeing the commercial, even without viewing the logo or hearing the brand name. Target does a great job in using consistent imagery, music and themes to develop commercials. In some of their commercials, the logo and brand name are not presented for ten seconds or more. However, due to the consistency of the branding elements, consumers are able to identify the brand of Target within seconds.
The third force in building brand equity involves, “other associations indirectly transferred to the brand by linking it to some other entity (a person, place, or thing.)” (Kotler and Keller. 2009. pg. 246) Associating a professional athlete or famous star with a brand has been used by many companies for years. Michael Jordan with Nike Shoes, Tiger Woods with American Express, Catherine Zeta-Jone for T-Mobil, and Charlton Heston with the National Rifle Association are just a few. Associations can help establish credibility, popularity and other positive characteristics associated with the brand, reflective of the associated party. An example of association by a place might be coffee to Seattle to Starbucks.
Creating or adjusting a positive brand image which results in strong brand equity is a basic but necessary goal of every company. “Most business people understand the power of a well-recognized and respected brand name. It can strengthen consumer preference for your product, raise customer loyalty, insulate you from competitive forces and cut your promotional costs.” (Carey. 2007. para. 4) It builds the foundation on which companies build their futures. “Marketers build brand equity by creating the right brand knowledge structures with the right consumers.” (Kotler and Keller. 2009. pg. 245) Strong brands are based on strong products, with a clear message, differentiated from the competition, with a believable and consistent message, that is relevant to the targeted audience. With these characteristics in place, companies will experience strong brand equity.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Internet Center for Management and Business Administration, Inc. N.d. Brand Equity. Retrieved June 21, 2009 from NetMBA Business Knowledge Center. Website: http://www.netmba.com/marketing/brand/equity/
Carey, W.P. May 9, 2007. Brand Equity. It’s Worth More Than Companies Realize. Retrieved June 21, 2009 from Marketing and Services Leadership. Website: http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1413
Developing a strong, successful brand image may be the best marketing investment a company can make. A company’s brand image is the total of all intangible and intangible characteristics such as history, values, ideas, beliefs, prejudices, interests and features that make it unique. The company’s brand image visually represents the internal and external characteristics of a company. “A brand is thus a product or service whose dimensions differentiate it in some way from other products or services designed to satisfy the same need. These differences may be functional, rational, or tangible – related to product performance of the brand. They may also be more symbolic, emotional, or intangible – related to what the brand represents.” (Kotler and Keller. 2009. pg. 239)
Ultimately, the brand is only as strong as it is in the mind of the consumer. In order for a brand to hold value, the consumer must believe that distinctive differences exist among other brands within a product category. This value can be a direct result of establishing brand equity. “Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands for the firm.” (Kotler and Keller. 2009. pg. 239) Brand equity depends on related associations made by the consumer and is considered a very valuable intangible asset. Three recognized perspectives of brand equity are; financially based, brand extensions and consumer based.
Brand equity measured in financial terms can “determine the price premium that a brand commands over a generic product.” (NetMBA. Nd. para. 4) Measured in terms of brand extensions, a successful brand can be used to introduce new products. Consumer based brand equity can increase the consumers feelings toward the brand. “The premise of customer-based brand equity models is that the power of a brand lies in what customers have seen, read, heard, learned, thought, and felt about the brand over time.” (Kotler and Keller. 2009. pg. 240)
Customer based brand equity involves three unique attributes. First, brand equity is developed based upon unique customer responses to the brand. In addition, the unique responses are a direct result based upon the consumer’s knowledge regarding the brand. And finally, brand knowledge is a very important aspect of brand equity. “Brand knowledge consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand.” (Kotler and Keller. 2009. pg. 241)
Different reactions and feelings to the brand are a result of the consumers familiarity and knowledge of the brand. And “the differential response by consumers that makes up brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing of a brand.” (Kotler and Keller. 2009. pg. 241) Strong brands lead to strong revenues. As a result, companies leverage strong brand equity for strong profit results. “Understanding consumer brand knowledge – all the different things that become linked to the brand in the minds of consumers – is thus of paramount importance because it is the foundation of brand equity.” (Kotler and Keller. 2009. pg. 242)
Building brand equity is developed with three main forces. First, brand elements have a very important influence on brand equity. Brand elements are used to identify and differentiate the brand. They include elements such as the brand name, logo, slogan and character. “A brand element that provides a positive contribution to brand equity, for example, conveys certain valued associations or responses.” (Kotler and Keller. 2009. pg. 246)
Selecting brand elements involves 2 themes: branding building and brand preservation. Within these two themes, marketers consider 6 criteria when selecting elements. The first three characteristics, regarding the brand as memorable, meaningful and likeable, are associated with building a strong brand. The last three characteristics, regarding the brand as transferable, adaptable and protectible, are associated with preserving and leveraging brand equity through elements. It focuses on how a brand is positioning to adapt opportunities and threats, for long term success.
The second force in building brand equity involves the relationship and combined effort to associate the product and service, along with all marketing efforts, activities and programs. All of the messages, images, perceptions and promotions of the brand must stay consistent when presented to the consumer. The consumer must be able to associate the marketing effort with the brand. This aspect is also very important when you consider internal branding as well. Internal and external branding must coincide so that employees of the company deliver on the promise and properly represent the brand.
An example of this consistency in brand delivery is when a consumer can recognize a brand within seconds of seeing the commercial, even without viewing the logo or hearing the brand name. Target does a great job in using consistent imagery, music and themes to develop commercials. In some of their commercials, the logo and brand name are not presented for ten seconds or more. However, due to the consistency of the branding elements, consumers are able to identify the brand of Target within seconds.
The third force in building brand equity involves, “other associations indirectly transferred to the brand by linking it to some other entity (a person, place, or thing.)” (Kotler and Keller. 2009. pg. 246) Associating a professional athlete or famous star with a brand has been used by many companies for years. Michael Jordan with Nike Shoes, Tiger Woods with American Express, Catherine Zeta-Jone for T-Mobil, and Charlton Heston with the National Rifle Association are just a few. Associations can help establish credibility, popularity and other positive characteristics associated with the brand, reflective of the associated party. An example of association by a place might be coffee to Seattle to Starbucks.
Creating or adjusting a positive brand image which results in strong brand equity is a basic but necessary goal of every company. “Most business people understand the power of a well-recognized and respected brand name. It can strengthen consumer preference for your product, raise customer loyalty, insulate you from competitive forces and cut your promotional costs.” (Carey. 2007. para. 4) It builds the foundation on which companies build their futures. “Marketers build brand equity by creating the right brand knowledge structures with the right consumers.” (Kotler and Keller. 2009. pg. 245) Strong brands are based on strong products, with a clear message, differentiated from the competition, with a believable and consistent message, that is relevant to the targeted audience. With these characteristics in place, companies will experience strong brand equity.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Internet Center for Management and Business Administration, Inc. N.d. Brand Equity. Retrieved June 21, 2009 from NetMBA Business Knowledge Center. Website: http://www.netmba.com/marketing/brand/equity/
Carey, W.P. May 9, 2007. Brand Equity. It’s Worth More Than Companies Realize. Retrieved June 21, 2009 from Marketing and Services Leadership. Website: http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1413
P&G - The Art of Masterful Marketing and Consumer Packaging
Proctor & Gamble has been recognized globally as a marketing powerhouse. They have successfully developed and nurtured numerous branding initiatives that have lead to sustained market leadership. “Proctor & Gamble (P&G) is one of the most skillful marketers of consumer packaged goods. (P&G) is a global leader in the majority of 22 different product categories in which they compete; and has total world wide sales of more than $76 billion a year.” (Kotler and Keller. 2009. pg. 239)
P&G utilizes and implements several capabilities and philosophies that help them thrive in the market. Among these are five key drivers that include customer knowledge, product innovation, quality strategy, an aggressive sales force, and manufacturing efficiency and cost cutting.
It is very difficult to succeed in business if you are trying to sell a product or service to a specific audience if you don’t know what your audience wants, likes and needs. Customer knowledge is very important in delivering products to the market in fulfillment of a need. “P&G studies its customers – both end consumers and trade partners – through continuous marketing research and intelligence gathering. (P&G) generates more than 3 million consumer contacts via its email and phone center. It also puts more emphasis on getting its marketers and researchers out into the field, where they can interact with consumers and retailers in their natural environment.” (Kotler and Keller. 2009. pg. 239) Such front line exposure to the consumer helps management understand their desires. Valuable information can be gathered and implemented to better meet the demands of the consumer.
Consider this analogy if you will. After a long, tough day at work, you decide to treat yourself to a nice relaxing dinner at one of your favorite restaurants. You sit down and the waiter brings you a glass of water. After about 10-15 minutes, he returns with your dinner, piping hot and ready to consume. You’d be a little puzzled wouldn’t you? Unless you were a frequent patron who had a standing order, you would expect the waiter to take your order first. If he simply decided what to serve you for dinner, what are the chances you would be satisfied? With dozens of different types of food, chances are he would not deliver what you had in mind. The only way for him to know what will satisfy you is to take your order. A successful waiter seeks customer knowledge because he asks questions and listens to the customer. Knowing your customer is one of the most important, if not the most important, aspects to providing satisfactory products and services. P&G recognizes this important issue and takes the necessary steps to know the customer.
Product innovations are also very important in gaining and maintaining market leadership. “P&G is an active product innovator, devoting $1.8 billion (3.5% of sales) to research and development, an impressively high amount for a packaged-goods company. It employs more science PhDs than Harvard, Berkeley, and MIT combined and applies for roughly 3,000 patents each year.” (Kotler and Keller. 2009. pg. 239) Such innovation helps provide products that are developed with cutting edge technology. As sciences and technologies advance, products and services must follow.
With innovative advancements, products continue to evolve and the market continues to expand. In a speech in 2000, Federal Reserve Chairman Alan Greenspan summed it up when he stated, “We appear to be in the midst of a period of rapid innovation that is bringing with it substantial and lasting benefits to our economy.” (Mandel. 2009. p. 36) New benefits typically means increased demand. It helps retain loyal customers and attract new ones. At the time of his speech, it seemed like we were experiencing a boom in innovation that was helping markets to thrive. “But (today) there’s growing evidence that the innovation shortfall of the past decade is not only real but may also have contributed to today’s financial crisis. . . With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world.” (Mandel. 2009. p. 35-36)
This recognizable trend demonstrates the importance of innovative capabilities and R&D philosophies within a company. Innovation can dramatically differentiate products within the same category, providing the competitive advantage needed to emerge as a market leader. “Part of (P&G’s) innovative process is developing brands that offer new consumer benefits.” (Kotler and Keller. 2009. pg. 239) This innovation has helped them stay on top of the industry. Lack of innovation may have affected other companies, but P&G’s commitment to innovation has helped it maintain its leadership position.
Another vital key to a company’s success is the quality of their products or services. “P&G designs products of above average quality and continuously improves them. When P&G says ‘new and improved,’ it means it.” (Kotler and Keller. 2009. pg. 239) In today’s hyper competitive markets, quality products can provide a competitive advantage through differentiation among numerous offerings. An increase number of consumers are considering quality over cost, focusing on the value of a product that will last. It has been unfairly perceived that among low income families, that cheaper is considered a better way to go. Research is uncovering that in today’s markets, low-income families are also considering quality as an important aspect to the decision making process of a purchase.
Another capability and philosophy that sustains P&G as a market leader is an aggressive sales force. “P&G’s sales force has been named one of the top 25 sales forces by Sales & Marketing Management magazine. A key to its success is the close ties its sales force forms with retailers, notably Wal-Mart.” (Kotler and Keller. 2009. pg. 239) As a critical part of the marketing effort, the sales force must ensure that P&G’s products are visible, accessible and prominent among the various offerings within the retail stores. By proactively leveraging positive working relationships with retailers, P&G can streamline the operational and promotional efficiencies, from production to distribution. The sales force can work closely with the retailer to gather useful information which can help improve the product. Improved product quality in turn helps the retailer by increased demands and ultimate sales, as well as helping the profits of P&G. In addition, improved products increase the likelihood of satisfied consumers.
Positive working relationships can also help in negotiations and by establishing a partnership mentality between the 2 companies. In the case of Wal-Mart, a strong working relationship established by an aggressive sales force might provide P&G with a competitive advantage over the competition. The “partnership power” of the relationship can help P&G avoid certain elements required of other companies seeking to do business with Wal-Mart. “A recent JPMorgan Chase report says Wal-Mart wants manufacturers to spend more on promotions and ads that appear on the retailer’s in-store TV network. ‘Failure to participate could have meaningful consequences,’ the report concluded.” (Boyle. 2009. p. 52-53) A strong historical relationship developed by an aggressive sales force may encompass more bargaining power and a reflection of partner as opposed to manufacturer. This can be a very valuable asset for power promoting a company’s brands.
As stated earlier, quality is definitely a valuable aspect of P&G’s products. However, cost considerations are also very important in many consumer minds. Many consumers are willing to pay a premium for superior product quality. However, each product premium has a limit based on perceived value. The goal of a good marketer is to help develop cost efficient operations that can help set proper pricing levels for a product. “P&G’s reputation as a great marketing company is matched by its excellence as a manufacturing company. P&G spends large sums developing and improving production operations to keep its costs among the lowest in the industry, allowing it to reduce the premium prices at which some of the goods sell.” (Kotler and Keller. 2009. pg. 239) Providing top quality products at lower prices develops competitive advantages that will sustain market leadership.
P&G has proven that they have what it takes to sustain market leadership. As P&G states on its website, “Invest in technology. Create superior products. Make each product a brand behind a distinctive strategy. And when you get it right, invest in it over time to establish a brand equity.” (P&G. Nd. para. 7) They have accomplished this through capabilities and philosophies that have been engrossed throughout the company. Among the five key drivers that P&G uses include customer knowledge, product innovation, quality strategy, aggressive sales force, and manufacturing efficiency and cost cutting. Their success can not be attributed to one simple task, but on the successful combination and relational interdependency of many different aspects. As a result, this combined effort has developed a market leader that has been recognized globally, as a benchmark for success.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Mandel, M. (2009, June 15). Innovation Interrupted. Business Week. The McGraw-Hill Companies.
Boyle, M. (2009, June 15). Management & Leadership. Wal-Mart’s Magic Moment. Business Week. The McGraw-Hill Companies.
P&G Global Operations. Nd. Retrieved June 20, 2009 from Proctor & Gamble. Website: http://www.pg.com/jobs/jobs_us/usinfo/building_brand_gl.shtm l
P&G utilizes and implements several capabilities and philosophies that help them thrive in the market. Among these are five key drivers that include customer knowledge, product innovation, quality strategy, an aggressive sales force, and manufacturing efficiency and cost cutting.
It is very difficult to succeed in business if you are trying to sell a product or service to a specific audience if you don’t know what your audience wants, likes and needs. Customer knowledge is very important in delivering products to the market in fulfillment of a need. “P&G studies its customers – both end consumers and trade partners – through continuous marketing research and intelligence gathering. (P&G) generates more than 3 million consumer contacts via its email and phone center. It also puts more emphasis on getting its marketers and researchers out into the field, where they can interact with consumers and retailers in their natural environment.” (Kotler and Keller. 2009. pg. 239) Such front line exposure to the consumer helps management understand their desires. Valuable information can be gathered and implemented to better meet the demands of the consumer.
Consider this analogy if you will. After a long, tough day at work, you decide to treat yourself to a nice relaxing dinner at one of your favorite restaurants. You sit down and the waiter brings you a glass of water. After about 10-15 minutes, he returns with your dinner, piping hot and ready to consume. You’d be a little puzzled wouldn’t you? Unless you were a frequent patron who had a standing order, you would expect the waiter to take your order first. If he simply decided what to serve you for dinner, what are the chances you would be satisfied? With dozens of different types of food, chances are he would not deliver what you had in mind. The only way for him to know what will satisfy you is to take your order. A successful waiter seeks customer knowledge because he asks questions and listens to the customer. Knowing your customer is one of the most important, if not the most important, aspects to providing satisfactory products and services. P&G recognizes this important issue and takes the necessary steps to know the customer.
Product innovations are also very important in gaining and maintaining market leadership. “P&G is an active product innovator, devoting $1.8 billion (3.5% of sales) to research and development, an impressively high amount for a packaged-goods company. It employs more science PhDs than Harvard, Berkeley, and MIT combined and applies for roughly 3,000 patents each year.” (Kotler and Keller. 2009. pg. 239) Such innovation helps provide products that are developed with cutting edge technology. As sciences and technologies advance, products and services must follow.
With innovative advancements, products continue to evolve and the market continues to expand. In a speech in 2000, Federal Reserve Chairman Alan Greenspan summed it up when he stated, “We appear to be in the midst of a period of rapid innovation that is bringing with it substantial and lasting benefits to our economy.” (Mandel. 2009. p. 36) New benefits typically means increased demand. It helps retain loyal customers and attract new ones. At the time of his speech, it seemed like we were experiencing a boom in innovation that was helping markets to thrive. “But (today) there’s growing evidence that the innovation shortfall of the past decade is not only real but may also have contributed to today’s financial crisis. . . With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world.” (Mandel. 2009. p. 35-36)
This recognizable trend demonstrates the importance of innovative capabilities and R&D philosophies within a company. Innovation can dramatically differentiate products within the same category, providing the competitive advantage needed to emerge as a market leader. “Part of (P&G’s) innovative process is developing brands that offer new consumer benefits.” (Kotler and Keller. 2009. pg. 239) This innovation has helped them stay on top of the industry. Lack of innovation may have affected other companies, but P&G’s commitment to innovation has helped it maintain its leadership position.
Another vital key to a company’s success is the quality of their products or services. “P&G designs products of above average quality and continuously improves them. When P&G says ‘new and improved,’ it means it.” (Kotler and Keller. 2009. pg. 239) In today’s hyper competitive markets, quality products can provide a competitive advantage through differentiation among numerous offerings. An increase number of consumers are considering quality over cost, focusing on the value of a product that will last. It has been unfairly perceived that among low income families, that cheaper is considered a better way to go. Research is uncovering that in today’s markets, low-income families are also considering quality as an important aspect to the decision making process of a purchase.
Another capability and philosophy that sustains P&G as a market leader is an aggressive sales force. “P&G’s sales force has been named one of the top 25 sales forces by Sales & Marketing Management magazine. A key to its success is the close ties its sales force forms with retailers, notably Wal-Mart.” (Kotler and Keller. 2009. pg. 239) As a critical part of the marketing effort, the sales force must ensure that P&G’s products are visible, accessible and prominent among the various offerings within the retail stores. By proactively leveraging positive working relationships with retailers, P&G can streamline the operational and promotional efficiencies, from production to distribution. The sales force can work closely with the retailer to gather useful information which can help improve the product. Improved product quality in turn helps the retailer by increased demands and ultimate sales, as well as helping the profits of P&G. In addition, improved products increase the likelihood of satisfied consumers.
Positive working relationships can also help in negotiations and by establishing a partnership mentality between the 2 companies. In the case of Wal-Mart, a strong working relationship established by an aggressive sales force might provide P&G with a competitive advantage over the competition. The “partnership power” of the relationship can help P&G avoid certain elements required of other companies seeking to do business with Wal-Mart. “A recent JPMorgan Chase report says Wal-Mart wants manufacturers to spend more on promotions and ads that appear on the retailer’s in-store TV network. ‘Failure to participate could have meaningful consequences,’ the report concluded.” (Boyle. 2009. p. 52-53) A strong historical relationship developed by an aggressive sales force may encompass more bargaining power and a reflection of partner as opposed to manufacturer. This can be a very valuable asset for power promoting a company’s brands.
As stated earlier, quality is definitely a valuable aspect of P&G’s products. However, cost considerations are also very important in many consumer minds. Many consumers are willing to pay a premium for superior product quality. However, each product premium has a limit based on perceived value. The goal of a good marketer is to help develop cost efficient operations that can help set proper pricing levels for a product. “P&G’s reputation as a great marketing company is matched by its excellence as a manufacturing company. P&G spends large sums developing and improving production operations to keep its costs among the lowest in the industry, allowing it to reduce the premium prices at which some of the goods sell.” (Kotler and Keller. 2009. pg. 239) Providing top quality products at lower prices develops competitive advantages that will sustain market leadership.
P&G has proven that they have what it takes to sustain market leadership. As P&G states on its website, “Invest in technology. Create superior products. Make each product a brand behind a distinctive strategy. And when you get it right, invest in it over time to establish a brand equity.” (P&G. Nd. para. 7) They have accomplished this through capabilities and philosophies that have been engrossed throughout the company. Among the five key drivers that P&G uses include customer knowledge, product innovation, quality strategy, aggressive sales force, and manufacturing efficiency and cost cutting. Their success can not be attributed to one simple task, but on the successful combination and relational interdependency of many different aspects. As a result, this combined effort has developed a market leader that has been recognized globally, as a benchmark for success.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Mandel, M. (2009, June 15). Innovation Interrupted. Business Week. The McGraw-Hill Companies.
Boyle, M. (2009, June 15). Management & Leadership. Wal-Mart’s Magic Moment. Business Week. The McGraw-Hill Companies.
P&G Global Operations. Nd. Retrieved June 20, 2009 from Proctor & Gamble. Website: http://www.pg.com/jobs/jobs_us/usinfo/building_brand_gl.shtm l
Saturday, July 11, 2009
How Much is too Much for a Niche Market?
I came across this news article in CNN and was amazed at how far we are taking the niche markets in our country. Without having the financial data and research obviously used to support such a decision made by Pet Airlines, I can't imagine this would be a sustainable and profitable market. However, it does cater to an extreme market, going to extents some parents don't even do for their real children (see nervous parents in bold).
What are your thoughts on servicing extreme niche markets like this one?
Here are parts of the CNN article I found worth referencing. For the complete article, visit CNN as referenced below.
More airlines embracing furry travelers
Blame America's pet obsession, but in recent years, more members of the airline industry are embracing dogs and cats on board. Midwest Airlines may be an extreme example, letting select dogs sit in the same seats as humans, but other airlines are relaxing their pet policies by letting smaller cats and dogs come into the cabin area. About a year ago, Midwest began allowing certain "celebrity" dogs that appear in canine competitions, shows or advertisements to sit in seats. "They are just passengers with four legs instead of two," said Susan Kerwin, who oversees the pet program at Midwest Airlines.
The pet travel frenzy has spurred the creation of an airline catering exclusively to pets. This month, Pet Airways, the nation's first pet-only airline, will begin flying in five major cities, including New York and Los Angeles, California. It's an alternative to shipping larger pets in the cargo area of a plane, where there have been pet injuries and even deaths.
On each Pet Airways flight, services include potty breaks and experienced animal handlers checking up on the animals every 15 minutes. Nervous parents can track their pets online.
The cost of flying your furry friend ranges from $75 to nearly $300 each leg. It's a hefty price tag, but profit-bleeding airlines are happy to offer the option.
ARTICLE REFERENCE:
http://www.cnn.com/2009/TRAVEL/07/10/pets.fly.airlines/index.html.
What are your thoughts on servicing extreme niche markets like this one?
Here are parts of the CNN article I found worth referencing. For the complete article, visit CNN as referenced below.
More airlines embracing furry travelers
Blame America's pet obsession, but in recent years, more members of the airline industry are embracing dogs and cats on board. Midwest Airlines may be an extreme example, letting select dogs sit in the same seats as humans, but other airlines are relaxing their pet policies by letting smaller cats and dogs come into the cabin area. About a year ago, Midwest began allowing certain "celebrity" dogs that appear in canine competitions, shows or advertisements to sit in seats. "They are just passengers with four legs instead of two," said Susan Kerwin, who oversees the pet program at Midwest Airlines.
The pet travel frenzy has spurred the creation of an airline catering exclusively to pets. This month, Pet Airways, the nation's first pet-only airline, will begin flying in five major cities, including New York and Los Angeles, California. It's an alternative to shipping larger pets in the cargo area of a plane, where there have been pet injuries and even deaths.
On each Pet Airways flight, services include potty breaks and experienced animal handlers checking up on the animals every 15 minutes. Nervous parents can track their pets online.
The cost of flying your furry friend ranges from $75 to nearly $300 each leg. It's a hefty price tag, but profit-bleeding airlines are happy to offer the option.
ARTICLE REFERENCE:
http://www.cnn.com/2009/TRAVEL/07/10/pets.fly.airlines/index.html.
Thursday, July 9, 2009
The value of the TOWS Matrix in strategy formulation and generating strategic alternatives?
TOWS and SWOT are both acronyms for the words threats, opportunities, weaknesses and strengths. SWOT uses strengths and weaknesses to combat threats and capitalize on opportunities. TOWS matches external opportunities and threats with a company’s internal strengths and weaknesses. Aren’t they the same? “At a practical level, the only difference between TOWS and SWOT is that TOWS emphasizes the external environment whilst SWOT emphasizes the internal environment.” (Mind Tools. 2007. para. 4.)
The TOWS Matrix produces four potential strategy alternatives based on the pairing of threats, opportunities, weaknesses and strengths. The result is:
SO Strategies (strengths and opportunities) focuses on the external factor of opportunities and the internal factor of strength. This strategy uses strengths to capitalize on opportunities. WO Strategies (weaknesses and opportunities) focuses on the external factor of opportunities and the internal factor of weaknesses. This strategy takes advantage of opportunities by overcoming weaknesses. ST Strategies (strengths and threats) focuses on the external factor of threats and the internal factor of strengths. This strategy utilizes strengths to avoid threats. WT Strategies (weaknesses and threats) focuses on the external factor of threats and the internal factor of weaknesses. This strategy attempts to limit weaknesses while staying clear of threats.
I do agree with utilizing the TOWS Matrix for strategic alternatives. Whereas SWOT provides information helpful in determining the strengths, weaknesses, opportunities and threats of a company’s, the TOWS matrix expands on this area by matching internal and external factors for generating additional strategic alternatives. It helps you gain a better understanding of the strategic choices that you face and the options you could pursue.
“This (TOWS Matrix) is a good way to use brainstorming to create alternative strategies that might not otherwise be considered.” (Hunger and Wheelen. 2008. Pg 144.)
The TOWS Matrix does more than just list the threats, opportunities, weaknesses and strengths a company faces. Instead of simply providing lists, it creates strategic alternatives in an action based formats. It pairs internal and external factors in an effort to provide the best alternative for a company in light of its current condition. It helps management evaluate not only the 4 factors facing the company, but how they match up and can be used together in an effort to generate various strategic alternatives. Without the TOWS Matrix, and the correlation of both internal and external factors, various alternatives may not be recognized as possible solutions.
However, management must realize that, “. . . using a TOWS Matrix is only one of many ways to generate alternative strategies.” (Hunger and Wheelen. 2008. Pg 145.)
Mind Tools - Essential Skills for an Excellent Career. Using the TOWS Matrix. Retrieved March 2, 2007, from Mind Tools. Website: http://www.mindtools.com/pages/article/newSTR_89.htm
Hunger, David J. & Wheelen, Thomas L. (2008). Concepts in Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall
The TOWS Matrix produces four potential strategy alternatives based on the pairing of threats, opportunities, weaknesses and strengths. The result is:
SO Strategies (strengths and opportunities) focuses on the external factor of opportunities and the internal factor of strength. This strategy uses strengths to capitalize on opportunities. WO Strategies (weaknesses and opportunities) focuses on the external factor of opportunities and the internal factor of weaknesses. This strategy takes advantage of opportunities by overcoming weaknesses. ST Strategies (strengths and threats) focuses on the external factor of threats and the internal factor of strengths. This strategy utilizes strengths to avoid threats. WT Strategies (weaknesses and threats) focuses on the external factor of threats and the internal factor of weaknesses. This strategy attempts to limit weaknesses while staying clear of threats.
I do agree with utilizing the TOWS Matrix for strategic alternatives. Whereas SWOT provides information helpful in determining the strengths, weaknesses, opportunities and threats of a company’s, the TOWS matrix expands on this area by matching internal and external factors for generating additional strategic alternatives. It helps you gain a better understanding of the strategic choices that you face and the options you could pursue.
“This (TOWS Matrix) is a good way to use brainstorming to create alternative strategies that might not otherwise be considered.” (Hunger and Wheelen. 2008. Pg 144.)
The TOWS Matrix does more than just list the threats, opportunities, weaknesses and strengths a company faces. Instead of simply providing lists, it creates strategic alternatives in an action based formats. It pairs internal and external factors in an effort to provide the best alternative for a company in light of its current condition. It helps management evaluate not only the 4 factors facing the company, but how they match up and can be used together in an effort to generate various strategic alternatives. Without the TOWS Matrix, and the correlation of both internal and external factors, various alternatives may not be recognized as possible solutions.
However, management must realize that, “. . . using a TOWS Matrix is only one of many ways to generate alternative strategies.” (Hunger and Wheelen. 2008. Pg 145.)
Mind Tools - Essential Skills for an Excellent Career. Using the TOWS Matrix. Retrieved March 2, 2007, from Mind Tools. Website: http://www.mindtools.com/pages/article/newSTR_89.htm
Hunger, David J. & Wheelen, Thomas L. (2008). Concepts in Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall
Wednesday, July 8, 2009
Why is astute strategic planning a must in today’s competitive business world?
Strategic planning is vital to an organizations mission to announce where it’s going (short term and long term), how it will get there and how it can monitor success or failure. A solid strategic plan focuses a company’s energy, provides direction towards goals, and helps adjust to a changing environment.
In today’s business environment, “flying by the seat of your pants” is extremely risky and inefficient. Strategic planning helps an organization define its purpose, goals, objectives and resources – all used by the team to work together. Although it does not guarantee success, it provides focus and unity in vision, a definite competitive advantage over a competitor who lacks a strategic plan. A powerful strategic plan is the foundation for a company’s success. Projections are rarely the same as the plan forecasts. Meaningful strategic plans provide management with the reasons for variances and thus the wisdom for future planning.
With the rapid globalization of our markets, a strong strategic plan is more important than ever before. A strong strategic plan may provide opportunities in uncertain environments created by globalization.
“ . . . environmental uncertainty is an opportunity because it creates a new playing field in which creativity and innovation can play a major part in strategic decisions.” (Concepts in Strategic Management and Business Policy, Wheelen & Hunger, 2008, p. 73)
As more businesses enter this global stage, establishing a strategic plan that encompasses key factors associated with both local and global aspects of business, is vital to its success. Conducting international risk assessments is vitally important prior to entering a nation’s economic system. Proper business planning will also help in evaluating the economic, technological, political-legal, and socio-cultural variables of a county, as well as analyzing the industry and task environment associated with various countries.
Think globally but act locally. This is more likely obtainable with a successful business plan.
In today’s business environment, “flying by the seat of your pants” is extremely risky and inefficient. Strategic planning helps an organization define its purpose, goals, objectives and resources – all used by the team to work together. Although it does not guarantee success, it provides focus and unity in vision, a definite competitive advantage over a competitor who lacks a strategic plan. A powerful strategic plan is the foundation for a company’s success. Projections are rarely the same as the plan forecasts. Meaningful strategic plans provide management with the reasons for variances and thus the wisdom for future planning.
With the rapid globalization of our markets, a strong strategic plan is more important than ever before. A strong strategic plan may provide opportunities in uncertain environments created by globalization.
“ . . . environmental uncertainty is an opportunity because it creates a new playing field in which creativity and innovation can play a major part in strategic decisions.” (Concepts in Strategic Management and Business Policy, Wheelen & Hunger, 2008, p. 73)
As more businesses enter this global stage, establishing a strategic plan that encompasses key factors associated with both local and global aspects of business, is vital to its success. Conducting international risk assessments is vitally important prior to entering a nation’s economic system. Proper business planning will also help in evaluating the economic, technological, political-legal, and socio-cultural variables of a county, as well as analyzing the industry and task environment associated with various countries.
Think globally but act locally. This is more likely obtainable with a successful business plan.
Tuesday, July 7, 2009
Don't Let Your Customers Get Away
There used to be a saying in business that cash is king. However, a more modern version would be accurately stated that customers are king. As a result, many companies are recognizing the importance of customer retention and implementing systems and policies to minimize customer defection.
In order to grow, a company must increase sales through gaining new and profitable customers. Such attempts to obtain new customers can be very expensive. “Acquiring new customers can cost five times more than satisfying and retaining customers.” (Kotler and Keller. 2009. pg. 138) Often times, this responsibility falls upon the marketing / sales team, and can dominate their efforts and mindset. Setting aggressive sales goals and maximizing such importance can create a narrow minded approach to profits. “Unfortunately, much marketing theory and practice centers on the art of attracting new customers, rather than on retaining and cultivating existing ones. The emphasis traditionally has been on making sales rather than on building relationships; on preselling and selling rather than on caring for the customer afterward. More companies now recognize the importance of satisfying and retaining customers.” (Kotler and Keller. 2009. pg. 137)
In today’s hyper competitive markets, companies are taking critical steps to reduce defection rates of customers. First, the company needs to determine and measure its current retention rate, or the rate of which customers remain as loyal customers. A good example of retention is the renewal of a club membership at a wholesale store such as Sam’s or BJ’s.
However, companies must be careful in defining the retention rate. For example, measuring the number of returning college students in their senior year may not be a good indication or accurate measurement of retention. By the senior year, it is unlikely that a student will transfer schools and risk loosing hard earned credits. Such a measurement may result in a skewed higher retention rate. A more accurate and reflective retention measurement would be to capture the number of returning sophomores, who have less to risk in transferring schools at an earlier stage in the educational process.
Accurately measuring retention rates will help evaluate customer satisfaction. If a company experiences high retention rates, then it appears that they are performing well and have satisfied customers. As a result, they can increase their focus on acquiring new customers for growth. However, if the retention rate is low and the defection rate is high, the company should place their main focus on satisfying customers. The main focus should be reverted to implementing changes to fix the problem in an effort to satisfy customers through strong customer relations management.
Once you determine that your retention rate has decreased, the company must act to avoid further customer defections. A company must, “distinguish the cause of customer attrition and identify those that can be managed better.” (Kotler and Keller. 2009. pg. 137) A company must determine what they are doing wrong to cause customers to defect. They must also determine how to make improvements to avoid further defection and to retain customers on the verge of defection. It is important to realize that defection isn’t always the result of poor service or inadequate quality. The competition may have developed a new product or service that your company currently does not offer. If you do not fill this need, the opportunity to defect will increase as the need and/or desire for this product or service grows in the mind of the customer.
Whatever the case for defection, a company must act quickly and determine what factors need to be changed, added, eliminated or adjusted to provide the best possible customer experience. “Listening to customers is crucial to customer relationship management.” (Kotler and Keller. 2009. pg. 138) Find out what they want and delivery.
Another important thing that companies must realize is that customer defection is not always a bad situation. There is a cost associated with servicing customers. Depending on the amount of money spent within a company, some customers can actually cost the company money to make a sale. Companies view customers in relations to profitable stature based on purchasing history and the level of attention required to service. Marketers understand that there are profitable customers and unprofitable customers. This can be determined by the customers lifetime value (CLV). “In marketing, customer lifetime value (CLV), a new concept of ‘customer life cycle management’ is the present value of the future cash flows attributed to the customer relationship. Use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.” (Customer. Nd. para. 1)
Understanding the customer lifetime value can better explain why losing some customers is not the end of the world. The key factor related to defection is to, “compare the lost profit equal to the customer’s lifetime value from a lost customer to the costs to reduce the defection rate. As long as the cost to discourage defection is lower than the lost profit, the company should spend the money to try to retain the customer.” (Kotler and Keller. 2009. pg. 137) In the case where the cost to discourage defection is higher than the lost profit, the company should accept and allow the loss of the customer.
A company should do everything possible to keep profitable customers. This goal should be expressed as the key to sales since the cost of finding new customers is far more expensive than retaining current ones. Progressive companies will adjust sales commissions to include compensation for both new sales as well as customer retention rates achieved through strong customer relations management by the sales person. If a company experiences high retention rates, they can adjust their focus on acquiring new customers in an effort to increase profits and growth. In addition, companies should not overlook the possibility of new profit growth potential within the current customers. It’s typically easier to cross sell additional products and services to a current customer than to generate a new sale customer.
By measuring retention rates, making necessary adjustments and evaluating the cost of retention efforts to profit, a company can increase its chances for profitable operations.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Customer Lifetime Value. (n.d.). Retrieved June 15, 2009, from Wikipedia: http://en.wikipedia.org/wiki/Customer_lifetime_value
In order to grow, a company must increase sales through gaining new and profitable customers. Such attempts to obtain new customers can be very expensive. “Acquiring new customers can cost five times more than satisfying and retaining customers.” (Kotler and Keller. 2009. pg. 138) Often times, this responsibility falls upon the marketing / sales team, and can dominate their efforts and mindset. Setting aggressive sales goals and maximizing such importance can create a narrow minded approach to profits. “Unfortunately, much marketing theory and practice centers on the art of attracting new customers, rather than on retaining and cultivating existing ones. The emphasis traditionally has been on making sales rather than on building relationships; on preselling and selling rather than on caring for the customer afterward. More companies now recognize the importance of satisfying and retaining customers.” (Kotler and Keller. 2009. pg. 137)
In today’s hyper competitive markets, companies are taking critical steps to reduce defection rates of customers. First, the company needs to determine and measure its current retention rate, or the rate of which customers remain as loyal customers. A good example of retention is the renewal of a club membership at a wholesale store such as Sam’s or BJ’s.
However, companies must be careful in defining the retention rate. For example, measuring the number of returning college students in their senior year may not be a good indication or accurate measurement of retention. By the senior year, it is unlikely that a student will transfer schools and risk loosing hard earned credits. Such a measurement may result in a skewed higher retention rate. A more accurate and reflective retention measurement would be to capture the number of returning sophomores, who have less to risk in transferring schools at an earlier stage in the educational process.
Accurately measuring retention rates will help evaluate customer satisfaction. If a company experiences high retention rates, then it appears that they are performing well and have satisfied customers. As a result, they can increase their focus on acquiring new customers for growth. However, if the retention rate is low and the defection rate is high, the company should place their main focus on satisfying customers. The main focus should be reverted to implementing changes to fix the problem in an effort to satisfy customers through strong customer relations management.
Once you determine that your retention rate has decreased, the company must act to avoid further customer defections. A company must, “distinguish the cause of customer attrition and identify those that can be managed better.” (Kotler and Keller. 2009. pg. 137) A company must determine what they are doing wrong to cause customers to defect. They must also determine how to make improvements to avoid further defection and to retain customers on the verge of defection. It is important to realize that defection isn’t always the result of poor service or inadequate quality. The competition may have developed a new product or service that your company currently does not offer. If you do not fill this need, the opportunity to defect will increase as the need and/or desire for this product or service grows in the mind of the customer.
Whatever the case for defection, a company must act quickly and determine what factors need to be changed, added, eliminated or adjusted to provide the best possible customer experience. “Listening to customers is crucial to customer relationship management.” (Kotler and Keller. 2009. pg. 138) Find out what they want and delivery.
Another important thing that companies must realize is that customer defection is not always a bad situation. There is a cost associated with servicing customers. Depending on the amount of money spent within a company, some customers can actually cost the company money to make a sale. Companies view customers in relations to profitable stature based on purchasing history and the level of attention required to service. Marketers understand that there are profitable customers and unprofitable customers. This can be determined by the customers lifetime value (CLV). “In marketing, customer lifetime value (CLV), a new concept of ‘customer life cycle management’ is the present value of the future cash flows attributed to the customer relationship. Use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.” (Customer. Nd. para. 1)
Understanding the customer lifetime value can better explain why losing some customers is not the end of the world. The key factor related to defection is to, “compare the lost profit equal to the customer’s lifetime value from a lost customer to the costs to reduce the defection rate. As long as the cost to discourage defection is lower than the lost profit, the company should spend the money to try to retain the customer.” (Kotler and Keller. 2009. pg. 137) In the case where the cost to discourage defection is higher than the lost profit, the company should accept and allow the loss of the customer.
A company should do everything possible to keep profitable customers. This goal should be expressed as the key to sales since the cost of finding new customers is far more expensive than retaining current ones. Progressive companies will adjust sales commissions to include compensation for both new sales as well as customer retention rates achieved through strong customer relations management by the sales person. If a company experiences high retention rates, they can adjust their focus on acquiring new customers in an effort to increase profits and growth. In addition, companies should not overlook the possibility of new profit growth potential within the current customers. It’s typically easier to cross sell additional products and services to a current customer than to generate a new sale customer.
By measuring retention rates, making necessary adjustments and evaluating the cost of retention efforts to profit, a company can increase its chances for profitable operations.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Customer Lifetime Value. (n.d.). Retrieved June 15, 2009, from Wikipedia: http://en.wikipedia.org/wiki/Customer_lifetime_value
Move Over Tradition - it's Time for the Modern Customer-Oriented Organization Chart
With the advancements in Technology, companies are being forced to reconsider and adjust traditional ways of doing business. Marketing Information Systems have created efficiencies in marketing, streamlining the process for a concentrated and powerful customer focus.
Companies have the ability to focus directly on more isolated, concentrated and relevant profitable customers. As a result, the flow and responsibilities associated with a traditional organizational chart have evolved into a customer centric focal design, referred to as the modern customer-oriented organizational chart. Although both organizational charts involve the same or similar features, it is the manner and layout of these features that differentiates these 2 styles.
Traditionally, an organizational chart was designed from the top down, according to management. The upper management resided at the top of the pyramid as the critical point of decision making, driving the organizational leadership. In tier 3, middle management worked closely with upper management in addition to the frontline personnel, located in tier 2. The frontline personnel worked directly with the customers, located at the bottom of the pyramid in tier 1. Frontline personnel serviced the customers as well as mediated customer information to middle management.
In a traditional organizational chart, the structure is established in a way that relies on tier hierarchy, where critical consumer information is forced to flow upwards. As the flow of information progresses further up the pyramid, the accuracy and aspects of the information can become diluted. This type of organizational flow can be compared to the childhood game, “telephone.” The goal is to have a number of children share information. Starting from the first person in line, a message is transferred from one child to another until it reaches the last child in line. The desired result is to have the message relayed at the end of the line, exactly as initiated with the first child. Typically, as the message travels along the line of children, it changes in meaning, relevancy and impact.
The traditional organizational chart structure has a similar shortfall in design. The decision makers in top management don’t have an accurate pulse of the customer. Upper management makes decisions that affect the products and services offered by the company. If the message from the consumer becomes distorted as it moves along the chain of command, management’s current and future decisions are unlikely to address consumer concerns. “Managers who believe the customer is the company’s only true “profit center” consider the traditional organizational chart, a pyramid with the president at the top and, management in the middle, and frontline people and customers at the bottom, obsolete.” (Kotler and Keller. 2009. pg. 120)
The traditional organizational chart focuses attention on the decisions and responsibilities of upper management. Customers, located at the bottom of the pyramid, are typically unseen and unintentionally considered irrelevant in the decisions made by management. Although management may intend to use customer related information passed up the pyramid in making decisions, many times the consumer factor is minimized and decisions regarding the company operations overshadow any consumer input. As a result, a large number of decisions are made in the interest of the company, as opposed to the consumer, who ultimately makes the purchase. This can be critical to a company’s success because if the company doesn’t address consumer issues, frustrations, needs, opportunities and desires, they will experience substantial losses in market share as numerous consumers defect to other market opportunities.
In contrast, the modern customer-oriented organizational chart inverts the traditional chart, focusing the importance on the consumer. “At the top are customers; next in importance are frontline people who meet, serve, and satisfy customers; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers.” (Kotler and Keller. 2009. pg. 120) Customers are also extending along side the entire length of the pyramid. As such, “managers at every level must be personally involved in knowing, meeting, and serving customers.” (Kotler and Keller. 2009. pg. 120)
This new style of information flow is much more precise. It allows upper management to make decisions that are inline and directly related to consumers as they now can relate to their input. “Some companies have created an ongoing mechanism that keeps senior managers permanently plugged in to frontline customer feedback.” (Kotler and Keller. 2009. pg. 138) This new approach places all focus, at whatever level, on the needs of the consumer. Decisions are now made on optimal operational factors that will ultimately serve the consumer in the most efficient and profitable manner.
The traditional organizational chart and the new modern customer-oriented organizational chart are similar in that they share the relational dependency among the 3 company tiers (top management, middle management and frontline people). In both styles, business units and personnel must work together in assigned roles, reporting structures and job responsibilities. The roles in frontline people and middle management are relatively similar among the 2 styles. However, the biggest difference is that the new modern customer-oriented organizational chart demonstrates the recognized importance of all levels to be available to service and support the consumer.
In the traditional style, frontline people were the only directly connected group to the consumer. In the new modern style, all levels of management as well as employees are focused on being available to directly service the consumer. A perfect example of upper management’s involvement in daily operations and interactions with customers is the CEO of Dominos. “As a continuation of Domino's Big Taste Bailout campaign, Domino's CEO Dave Brandon, made the first of two surprise deliveries in Killeen, Texas to Angela Waldrep, the first lucky winner.” (Trading Markets. 2009. para. 1) In the past, top executives would never have considered being part of the front line service. However, in today’s ultra competitive business environment, an expanding number of top executives recognize the incredible insight that can be gained through such frontline experiences.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Trading Markets. Domino's Pizza CEO Delivers Pizza for a Year Prize to Killeen Resident. 2009. Retrieved June 15, 2009 from Trading Markets. Website: http://www.tradingmarkets.com/.site/news/Stock%20News/2254713/
Companies have the ability to focus directly on more isolated, concentrated and relevant profitable customers. As a result, the flow and responsibilities associated with a traditional organizational chart have evolved into a customer centric focal design, referred to as the modern customer-oriented organizational chart. Although both organizational charts involve the same or similar features, it is the manner and layout of these features that differentiates these 2 styles.
Traditionally, an organizational chart was designed from the top down, according to management. The upper management resided at the top of the pyramid as the critical point of decision making, driving the organizational leadership. In tier 3, middle management worked closely with upper management in addition to the frontline personnel, located in tier 2. The frontline personnel worked directly with the customers, located at the bottom of the pyramid in tier 1. Frontline personnel serviced the customers as well as mediated customer information to middle management.
In a traditional organizational chart, the structure is established in a way that relies on tier hierarchy, where critical consumer information is forced to flow upwards. As the flow of information progresses further up the pyramid, the accuracy and aspects of the information can become diluted. This type of organizational flow can be compared to the childhood game, “telephone.” The goal is to have a number of children share information. Starting from the first person in line, a message is transferred from one child to another until it reaches the last child in line. The desired result is to have the message relayed at the end of the line, exactly as initiated with the first child. Typically, as the message travels along the line of children, it changes in meaning, relevancy and impact.
The traditional organizational chart structure has a similar shortfall in design. The decision makers in top management don’t have an accurate pulse of the customer. Upper management makes decisions that affect the products and services offered by the company. If the message from the consumer becomes distorted as it moves along the chain of command, management’s current and future decisions are unlikely to address consumer concerns. “Managers who believe the customer is the company’s only true “profit center” consider the traditional organizational chart, a pyramid with the president at the top and, management in the middle, and frontline people and customers at the bottom, obsolete.” (Kotler and Keller. 2009. pg. 120)
The traditional organizational chart focuses attention on the decisions and responsibilities of upper management. Customers, located at the bottom of the pyramid, are typically unseen and unintentionally considered irrelevant in the decisions made by management. Although management may intend to use customer related information passed up the pyramid in making decisions, many times the consumer factor is minimized and decisions regarding the company operations overshadow any consumer input. As a result, a large number of decisions are made in the interest of the company, as opposed to the consumer, who ultimately makes the purchase. This can be critical to a company’s success because if the company doesn’t address consumer issues, frustrations, needs, opportunities and desires, they will experience substantial losses in market share as numerous consumers defect to other market opportunities.
In contrast, the modern customer-oriented organizational chart inverts the traditional chart, focusing the importance on the consumer. “At the top are customers; next in importance are frontline people who meet, serve, and satisfy customers; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers.” (Kotler and Keller. 2009. pg. 120) Customers are also extending along side the entire length of the pyramid. As such, “managers at every level must be personally involved in knowing, meeting, and serving customers.” (Kotler and Keller. 2009. pg. 120)This new style of information flow is much more precise. It allows upper management to make decisions that are inline and directly related to consumers as they now can relate to their input. “Some companies have created an ongoing mechanism that keeps senior managers permanently plugged in to frontline customer feedback.” (Kotler and Keller. 2009. pg. 138) This new approach places all focus, at whatever level, on the needs of the consumer. Decisions are now made on optimal operational factors that will ultimately serve the consumer in the most efficient and profitable manner.
The traditional organizational chart and the new modern customer-oriented organizational chart are similar in that they share the relational dependency among the 3 company tiers (top management, middle management and frontline people). In both styles, business units and personnel must work together in assigned roles, reporting structures and job responsibilities. The roles in frontline people and middle management are relatively similar among the 2 styles. However, the biggest difference is that the new modern customer-oriented organizational chart demonstrates the recognized importance of all levels to be available to service and support the consumer.
In the traditional style, frontline people were the only directly connected group to the consumer. In the new modern style, all levels of management as well as employees are focused on being available to directly service the consumer. A perfect example of upper management’s involvement in daily operations and interactions with customers is the CEO of Dominos. “As a continuation of Domino's Big Taste Bailout campaign, Domino's CEO Dave Brandon, made the first of two surprise deliveries in Killeen, Texas to Angela Waldrep, the first lucky winner.” (Trading Markets. 2009. para. 1) In the past, top executives would never have considered being part of the front line service. However, in today’s ultra competitive business environment, an expanding number of top executives recognize the incredible insight that can be gained through such frontline experiences.
References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.
Trading Markets. Domino's Pizza CEO Delivers Pizza for a Year Prize to Killeen Resident. 2009. Retrieved June 15, 2009 from Trading Markets. Website: http://www.tradingmarkets.com/.site/news/Stock%20News/2254713/
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