Cenco marketing the future of marketing_ mohan

© 2001 Mohan Sawhney Kellogg School of ManagementNorthwestern University

The Future of Marketingand the Marketing Organization

©2003 Mohan Sawhney

The new marketingSession 1

Rethinking the marketing process

Rethinking marketing activities

Rethinking the marketing organization

Rethinking the role of marketers


Marketing’s mid-life crisis Disintermediation problem: The marketing department has traditionally served as the mediator between customers and the firm. But the Internet allows R&D, operations, sales, logistics, and support organizations to connect directly with customers, marginalizing the role of marketing in the process.

Measurement problem: The marketing function has traditionally been unable to measure the ROI of spending on marketing programs, so marketing budgets tend to be treated as avoidable expenses in difficult economic times.

Alignment problem: Marketing organizations are traditionally designed around marketing mix silos (product, price, promotion, place). These silos create disconnects between audience marketing, channel marketing, product marketing, and licensing/pricing activities.

Automation problem: Marketing has traditionally been a manual and intuitive process. But technologies like customer relationship management (CRM), partner relationship management (PRM), enterprise marketing automation (EMA), product lifecycle management (PLM) and marketing analytics are taking over the operational and analytical role of marketers.

Marketing needs to reinvent itself, with the changing times


Where marketing is going

Marketing today

Profiting from transactions

Delivering value to customers

Firm to firm competition

Reacting to customer needs

Competing for market share

Designing superior products

Intuitive decision making

Episodic, batch processes

Marketing in the Future

Profiting from relationships

Creating value with customers

Ecosystem to ecosystem competition

Anticipating customer needs

Competing for mind share

Designing superior experiences

Fact-based decision making

Continual, adaptive processes


What is marketing, anyway?

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges thatsatisfy individual and organizational goals.

- American Marketing Association

What’s lacking in this definition?


The changing nature of exchanges

From information asymmetry...– Information was scarce – Customers were ill-informed– Exchanges were monologues– Marketing was “command-and-control”

To information democracy – Information is ubiquitous– Customers are well-informed– Exchanges are conversations – Marketing is “connect-and-collaborate”


The rise of reverse marketing!

Reverse segmentation– Customers can self-select into segments, configure offerings to suit their

preferences and needs, and customize products themselves

Reverse advertising – Customers can get objective information on products and brands without

relying on manufacturers or retailers, and can initiate requests for information and advertising from manufacturers

Reverse channels– Customers can work with infomediaries and buying agents to negotiate and

buy products on their behalf

Reverse pricing– Customers can conduct reverse auctions and quote prices they are willing to

pay to manufacturers

Reverse support– Customers can serve themselves through self-service channels, and

communicate with peers and experts for support


Metaphors we market by:Marketing as hunting

Market as jungle Customers as targets Marketers as hunters Segmentation as rifle versus shotgun approach Products as mousetraps Salespeople as baiters-and-switchers Promotions as campaigns Relationships as conquests and acquisitions Customer visits as eyeballs and traffic


Towards a new marketing metaphor:Marketing as gardening

Customer relationships as garden to be tended

Marketer as gardener

Partners as players in the ecosystem

Customer loyalty as roots

Lifetime profits as harvest

Marketing as seed, feed, yield, and weed


The evolving information power balance

Customer information power

Mark

ete

r in

form

ati

on

pow

er

High

Low High

Low

Information faminePersonal marketing

Information DemocracyRelationship marketing

Information AsymmetryMass marketing

Information IntegrationCollaborative marketing

2

1

4

3


Towards a new definition of marketing

Marketing is the adaptive process by which firms collaborate with customers and partners to create and sustain value for all stakeholders.

Key aspects– Process, not function– Ongoing, not one-time– Relationships, not transactions– All stakeholders, not just customers


Customers as collaborators

Collaborative ideation– Hallmark’s Idea Exchange – Eli Lilly’s Innocentive Innovation network

Collaborative design– Ducati’s virtual design team – Texas Instruments TI-92 and high-school teachers

Collaborative configuration – Premier pages from Dell– GE Plastics resin design tools

Collaborative pricing– Partition pricing from HP for servers– Usage-based auto insurance from Progressive Insurance

Collaborative support– Cisco Networking Professionals Connection


Collaborative segmentation - GM’s AutoChoiceAdvisor tool


The functional view of marketing

Segmentation,Targeting,

Positioning

ProductStrategy

PricingStrategy

PromotionStrategy

PlaceStrategy

Opportunityassessment

Implementation, Monitoring, and Control


The adaptive process view of marketing

Sustainvalue

Augmentvalue

Communicatevalue

Capturevalue

Delivervalue

Realizevalue

Definevalue

Sensevalue

CustomerRelationshipRepository

Adapt

• Redefine markets• Sense market trends • Understand customers• Identify opportunities • Segment customers

• Choose target segments • Craft value propositions• Validate/adapt value propositions

• Define offerings• Design offerings• Develop offerings• Adapt offerings

• Expand channels• Reallocate functions • Synchronize channels• Customize channels• Adapt channel mix

• Price to maximize yield• Bundle/unbundle offerings• Design new revenue models• Adapt pricing strategy

• Expand touch points• Manage brand equity• Optimize communications mix• Integrate communications • Monitor customer experience

• Build platforms• Create externalities• Expand ecosystem • Maximize value share

• Improve retention• Increase share of wallet• Increase cross-sell• Increase up-sell• Personalize relationships


TraditionalMarketing

TransitionalMarketing

CollaborativeMarketing

Sensevalue

Define value

Realizevalue

Delivervalue

Capturevalue

SustainValue

Segmentation Customization Customerization

Products Services Experiences

Physical Hybrid IntegratedChannels Channels Channels

Transactional Value-based RelationshipPricing Pricing Pricing

Persuasion, Permission, Contextual,Broadcast dialogue facilitation

Vertical Horizontal IntegratedAlliances Partnerships Value Network

Communicatevalue

Episodic Batch ActiveCRM CRM CRM

Evolution of marketing activities

Augmentvalue

Listen Observe Co-create


Towards the decoupled organization

HumanResources

Purchasing

MarketingFinance &Administration

Research & Development

Product Manufacturing

InformationTechnology

Partnermanagement

Cu

stom

erC

usto

mer

Cu

stom

er

Cu

stom

er org

anizatio

n(seg

men

t 2)

Cu

sto

mer

Cu

sto

mer

Cu

sto

mer

Cu

sto

mer

org

aniz

atio

n(f

ron

t-en

d)

Product organization(back-end)

Shared services(back-end)

Productdevelopment

TechnicalSales

Corporate Core


Citibank’s decoupled organization

CEO

Automotive

Oil & Gas

Retailing

Cash Management

Telecom

Foreign Exchange

Derivatives

Mergers & Acquisitions

Legal HR Controller Risk Mgmt.

Operations IT Marketing Ford GM BMWG

lob

al P

rodu

ct O

rgan

izat

ion

(Bac

k-en

d)

Glo

bal

Cus

tom

er O

rgan

izat

ion

(Fro

nt-e

nd)

Local accountmanagers

Corporate Core

Source: Designing the Global Corporation, Galbraith (2000)


The “P&L cube” – single target, multiple metrics for incentives

N. America S . America EMEA APAC

SBU 1

SBU 2

SBU 3

• Revenue• Profit• Penetration• Share

Market 3

Market 2

Market 1


Implementing the front-back design

Make each dimension profit-measurable Negotiate revenue and profit targets across dimensions Record profits and revenues only once Define power balance across dimensions Base rewards on profits as well as cooperation Create responsibility chart to clarify roles Match coordination level to strategic priority of dimension Dynamically adapt power balance Create linking mechanisms between dimensions

– Direct links between dimensions through “coordinators” (Tetra Pak)– Coordination meetings for planning and budgeting (Xerox)– Rotation of personnel across dimensions (Citicorp)– Market mechanisms - Transfer pricing between CBU, SBU, RBU (Acer)


The new roles for marketers

Integrators – Integrators are the key to the front-end of the marketing organization.

They are responsible for serving each distinct consumer, channel, or partner segment. They will have deep understanding of their segment, will be good at working across boundaries, and leading cross-functional teams.

Specialists– Specialists are the key to the back-end of the marketing organization.

They help the company to build and maintain world-class skills in functional areas of marketing like branding, marketing research, marketing decision support, business intelligence, and product design.

Linking through processes– Integrators and specialists will be linked through processes and teams.


Managing linkages at Kraft Foods

Finance

Operations

Materialsmanager

Plantmanager

Engineering

Quality

ProcessTeam

Leader

Marketinginformation

Finance

Brandmanager

Consumerpromotion

CategorySales

director

R&D

CategoryBusinessDirector

Categoryplanners

RetailSales

manager

Salesinformationspecialist

Spacemanagement

specialis

Supplychain

specialist

CustomerCategorymanagers

CustomerBusinessManager

Process teams(category-specific)

Category teams(category-specific)

Customer teams(key accounts)

Source: Reinventing the Marketing Organization, McKinsey Quarterly


Summary: The future of marketing

The exchange – from asymmetry to democracy

The metaphor – from hunting to gardening

The definition – from controlling to collaborating

The process – from functional silos to connected processes

The organization – from product-centric to customer-centric

The roles – from sales/product to integrators and linkers

Cenco marketing the future of marketing_ mohan

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