The authors provide the frameworks, analysis tools and route-maps to understand and action creating a marketdriven

Transcription

1 : How to build and lead a market-driven organisation Malcolm McDonald, Martin Christopher, Simon Knox & Adrian Payne FT/Prentice Hall, 2001 ISBN: , 206 pages Theme of the Book Marketing is too important and all-pervasive to be left to the Marketing Department; in order to create a truly market-driven company, everyone from the CEO to the customer services advisor must be focused on meeting customer needs. CEOs and their boards are responsible for the pancompany market-driven strategy, involving the three main stakeholder groups of customers, employees and shareholders in order to deliver improved profitability to the company. The authors provide the frameworks, analysis tools and route-maps to understand and action creating a marketdriven organisation. These are supported customer focus while it continues to How can any organisation achieve organise itself around what it makes, with short case studies and interviews with rather than around its customers or its markets? CEOs from major organisations to demonstrate the principles in action and for each process they offer a checklist to assess company performance and aid planning.

2 The following model of the value-creating process is the structure of the book. Marketing Sales Mfg. IT Finance HR Logistics R&D etc The market understanding process The value-driven CEO The relationship management process The innovation process The supply chain management process The knowledge management process Maximising market potential Positioning and branding the organisation Creating customer value Creating shareholder value Knowledge Interchange Book Summaries Page 2

3 Key Learning Points Organisations and organisational processes should be designed around delivering customer value. The difficult part of strategic marketing planning is in understanding and segmenting customers and creating the value proposition. Creating the right culture for innovation, cross-functional collaboration and customer orientation can lead to sustainable competitive advantage. End-to-end customer service is through the supply chain, this can create customer value. Knowledge sharing promotes innovation. Companies need to manage for the links between leadership, employee satisfaction, employee retention, customer satisfaction, customer retention, sales and profitability. The job of the value-driven CEO is to rethink business strategy, processes, organisation and culture in order to win customer preference by providing superior customer value. The role is quite distinct from that of marketing, whose job is to understand and track markets, segment customers and consumers in order to understand their changing needs and wants, and to develop plans for the brand and for communicating the business strategy. Knowledge Interchange Book Summaries Page 3

4 The Market Understanding Process Running a financially-driven organisation is an unsustainable strategy; growth and superior profits are possible when the organisation is focused on the markets and how to serve them profitably. Unless the company is creating value for customers there can be no business. Marketing planning is essential in this as it analyses future opportunities to meet customer needs and takes a long-term approach on how the company will serve well-defined market segments to deliver the desired benefits. Marketing planning is a managerial process that delivers a long-term strategic marketing plan, which prioritises marketing objectives and strategies and their financial consequences, and a short-term tactical marketing plan, detailing the activities which will achieve the first year s objectives. Market definition and segmentation are crucial in driving company policy as the pace of change accelerates and boundaries a market should be defined as all the different products or blur. Correct market definition is essential for services which customers regard as being capable of satisfying a measuring market share and market growth, particular need. identifying target customers and competitors and for developing marketing strategy to deliver differential advantage. Markets can be segmented into groups of customers who have the same broad requirements. To be viable each segment should be distinct, economically viable, accessible and the criteria must be relevant to the purchase situation. Each segment requires a separate marketing plan, which enables the organisation to target its marketing effort on the most promising opportunities. Knowledge Interchange Book Summaries Page 4

5 The Relationship Management Process Organisations must understand that their relationship-building activities directed at customers are necessary but not sufficient on their own. The organisation also needs to identify the other relevant market domains and the groups or segments within them and develop strategies for all of them. This involves many different parts of the organisation and as a result is uncoordinated, which results in shareholder and customer value not maximised. The purpose of relationship marketing strategy is to influence the market in your favour: Emphasise customer relationship (longer-term) Maximise lifetime value of customers Develop relationships with six key markets internal; customers; suppliers; referral sources; influencers; recruitment Develop cross-functional marketing focused on customer needs Integrate quality, customer service and marketing For most organisations the most important markets are those of customers, employees (internal) and shareholders (influencers) and they are linked. The relationship with each market can be assessed using the following process: 1. identify key segments in each of the markets 2. identify the expectations and requirements of each segment 3. review current and proposed level of emphasis in each market 4. develop a relationship strategy for each market and segment with a clear value proposition Knowledge Interchange Book Summaries Page 5

6 The Innovation Process Innovation is about exploiting change as an opportunity (Drucker, 1998) and providing new solutions that offer value to customers. There are broadly four aspects that The invention and new product sustain the innovative organisation: culture and climate, assets and development process is high risk and to capabilities management, organisational manage that risk organisations use the structure and controls, and new product and process development. multistage review procedure to kill off poorly conceived ideas and ensure the commercial validity of new products before capital investment. The model below shows the six types of new product innovation and the risk factors. Branding also has to be considered in managing risk. + New product line New-to-the-world Frequency of market occurrence New to company Product improvement Line extension + Cost reduction Repositioning - - New to customers + Risk zone To create customer value the company has to be close to its customers. This requires innovative thinking at all levels in the organisation and demands a shift to multifunctional teams, process measures and a broader definition of innovation to create an agile organisation with efficient processes and aligned Knowledge Interchange Book Summaries Page 6

7 employees committed to the vision. Organisations generate sustainable growth through continuous innovation responding to the causes of change. This requires a long-term customer-focused strategy so that the four aspects can be managed to create customer value. The Supply Chain Management Process Logistics and the wider supply chain are a major potential source of competitive advantage and shareholder Strong brands and innovative technologies are no longer enough; value. Logistics cuts across important though they are, even the strongest brands and ground-breaking conventional organisational and products need to be supported by a functional boundaries with alliances and supply chain. other supply relationships involved. The key to survival today is agility and this demands a flexible organisation structure, closely connected to the marketplace, with a network of supply chain partners working well together. With increased commoditisation, availability is critical, as customers make buying decisions at the point of purchase. Responsive organisations can differentiate themselves by responding to customer-specific service needs in ever shorter time frames. When organisations operate independently of suppliers and customers, costs and inefficiencies build up, they need to operate as an extended enterprise in a seamless end-to-end supply chain. the supply chain should effectively Networked organisations demand become a demand chain everything that is moved, handled or produced transparency of information on supply should ideally be in response to a known and demand, enabling suppliers to customer requirement. respond to true demand rather than forecast demand and for time compression to increase the agility of the supply chain. Knowledge Interchange Book Summaries Page 7

8 The Knowledge Management Process Creating a knowledge management culture is a radical shift in operations and thinking, and trust is a prerequisite for The way organisations manage their knowledge has become a key source change as knowledge is volunteered not of competitive advantage. conscripted. Organisations need to create a learning environment, where collaboration is encouraged and supported by technology and systems designed to facilitate the flow of knowledge. Knowledge is an asset to share, though it should be recognised that there is explicit knowledge, which can be documented and easily reused, and tacit knowledge, which is difficult to identify and articulate. When you share tacit knowledge it creates something new and innovative. The value of knowledge comes from using it; this intellectual capital can make a significant difference to the market capitalisation of a firm. Dave Ulrich (1998) identified that: Intellectual capital = competence x commitment The firm needs both in order to make sense of the knowledge and share it to add customer value. There are two knowledge management strategies codification and personalisation and the organisation s methods of interaction with customers and employees will determine which is the most suitable. A knowledge culture spreads ownership of knowledge assets to increase knowledge input and output, which are mutually reinforcing. There are limits to how much knowledge a person needs and risk of overkill; knowledge should be treated as valuable. Knowledge Interchange Book Summaries Page 8

9 The systems for sharing knowledge should reflect how people work in the organisation. The model below shows three key steps of exploiting the power of knowledge: Create a knowledge culture Enablement rather than direction Establish knowledge exchange processes Partnership with workers in a process structure Encourage and reward knowledge sharing Individual and organisational benefits Knowledge management is about selectivity focusing on the core competencies and husbandry Productivity in the knowledge-oriented firm will be cultivating the expertise and defined in terms of innovation, quality and relevance, or the generation of value through experience. Marketing maximising intellectual capital. knowledge falls into four main types: customer; competitor; process and technology. It is about being ideas-driven and market-informed. Maximising Market Potential Once markets have been defined and the segments identified, the company must prioritise its marketing The growing concentration of power into the hands of fewer and fewer powerful global objectives and strategies. Tools customers makes key account management increasingly critical to corporate success. such as the 2-D priority matrix support setting objectives and the Ansoff matrix supports identifying growth strategies. Depending on the economic relationship with the buyer, the firm chooses the appropriate level of involvement for the Key Account relationship and Knowledge Interchange Book Summaries Page 9

10 develops a strategy to deliver this. It is useful to assess the key accounts based on future potential for profits combined with the nature of the relationship to inform the Key Account objectives and strategies. The person responsible for the account needs to have the relevant skill-set for the relationship, eg integrated KAM requires general management skills. In evaluating the organisation s marketing effectiveness certain principles apply: Objectivity balance the hard facts with the nature of the judgments Appropriate marketing metrics customer segment; marketing inputs; customer motivation; customer behaviour; bottom line. E-commerce and e-communication must be included in the company s marketing planning and customer value delivery. It allows companies to provide information directly to its markets and creates direct links to customers, while giving consumers control, speed, choice and comparability. The Six I s model structures thinking on how IT can add value to the customer and improve the organisation s marketing effectiveness. Interactivity - beyond addressability to dialogue Individualisation - micromarketing - mass customisation Integration - across customer life - across media / channels SUPERIOR CUSTOMER VALUE Intelligence - informed strategy Independence of location - remote marketing - remote delivery of infoware Industry restructuring Disintermediation & re-intermediation The dimensions of IT-enabled marketing Companies can determine where Internet is suitable by considering the nature of the customer needs and whether these can be delivered online reliably and to good quality. Knowledge Interchange Book Summaries Page 10

11 Positioning and Branding the Organisation Under the pan-company marketing approach the customer is involved in as many of the organisation s processes as Is customer value created and marketed across a broad set of company possible. The CEO is corporate brand capabilities, such as its people, manager and needs to ensure the processes and supply chain networks, or is there an overdependence on branding organisation can deliver customer value its products and services? consistently as well as delivering shareholder value in the brand equity. Customer value is increasingly delivered from processes outside the remit of marketing; all these customer touch points must present a consistent, coherent and clear brand that is aligned with the value customers expect. Value is not just determined by price, but by the whole cost of ownership. Marketing the organisation demands a different approach from the traditional 4P s marketing: The reputation is based on a complex portfolio. Stakeholders have multiple reference points and key elements of the company s reputation are based on its commitments, values, ethics, policies and practices. Customer value is created through the company s systems, people, processes and alliances In positioning the organisation, consider four components: reputation, product / service performance, product and customer portfolio and networks. This allows the alignment of processes with the proposition and people can operate with a clear understanding of the priorities that determine customer value. Knowledge Interchange Book Summaries Page 11

12 Creating Stakeholder Value Customer value and shareholder value are mutually dependent, plus employee value these are the three critical areas of value creation. Customer value: Consider the total offer to the customer. The value proposition framework is useful in assessing the three steps of value delivery in a customer oriented way: 1. choose the value based on understanding customer needs 2. provide the value - clear and differentiated products and service package 3. communicate the value engage with customers Creating the right customer oriented culture for this is a source of sustainable competitive advantage. The company can use relationships to create customer value, whether through offering improved service, a wider The company must also understand range of channels or individualised service. the value to it of its customers. If the firm develops a corporate memory of the customer, so they feel known, they may build an emotional bond with the firm and be more loyal. Customer retention is important to profitability, though the company needs to understand which customers are bringing revenue and profitability and focus its retention activity accordingly. Shareholder value: Overemphasising shareholder value at the expense of other stakeholders can affect the business leaders must consider shareholder organisation s processes value creation in the context of the strategic fundamentals of the business, and particularly resulting in diminishing how it relates to customer value. shareholder returns. Knowledge Interchange Book Summaries Page 12

13 high Shareholder hero Eg some banks Value victor Eg Dell Computer Shareholder value Value destroyer Customer hero low low Eg Fisons Customer value Eg Body Shop high The customer shareholder value matrix Value victor is a sustainable position. Employee value: With increasing customer employee touchpoints in the company, it s important to recruit and select people for the right values and motivations fit. Organisations must develop a The value employees add to business success strong service ethos and ensure is tied closely to the way they are selected, trained, motivated and led. that employees feel cared for, so they feel able to care for customers. Employees need to be empowered to operate in the desired customer-oriented way. Knowledge Interchange Book Summaries Page 13

14 Authors MARTIN CHRISTOPHER: Professor of Marketing and Logistics and Deputy Director of Cranfield School of Management with special responsibility for management development. Chairman of the Cranfield Centre for Logistics and Transportation and head of The Marketing Group. Consultant for major international companies and non-executive director of a number of companies. SIMON KNOX: Professor of Brand Marketing at Cranfield School of Management and consultant to a number of multinational companies. Published widely on branding and customer purchasing styles. Director of the Institute for Advanced Research in Marketing. MALCOLM MCDONALD: Professor of Marketing Strategy and Deputy Director of Cranfield School of Management with special responsibility for e- business. He has extensive industrial experience and has written 30 books and papers. ADRIAN PAYNE: Professor of Services and Relationship Marketing and Director of the Centre for Relationship Marketing at Cranfield School of Management. Held senior positions in industry and works internationally as a consultant and keynote speaker. Published 9 books on customer relationship management, relationship marketing, customer retention and services marketing. Knowledge Interchange Book Summaries Page 14

15 Cranfield School of Management Produced by the Learning Services Team Cranfield School of Management Cranfield University 2008