Ten Deadly Marketing Sins: Signs and Solutions
Ten Deadly Marketing Sins: Signs and Solutions
Ten Deadly Marketing Sins: Signs and Solutions
2 AUDIO-TECH
1. YOUR COMPANY IS NOT analyzed the attractiveness — industries such as bank-
SUFFICIENTLY MARKET- of each segment? Has it esti- ing, insurance, hotels,
FOCUSED AND CUSTOMER- mated the rates of return on telecommunications, and
DRIVEN its investment in the different transportation. By focusing
segments? Has it prioritized on these industries, IBM was
Let’s look at the first sin — the segments and reallocated able to design more compelling
your company is not suffi- its resources to the more offerings than unfocused
ciently market-focused and profitable segments? competitors could present.
customer-driven. Here we
single out the two sides of The more important segments Also, if customer segments
the most handicapping defi- should have managers who are are different, then you
ciency in most companies. empowered to ask for budgets should develop specialized
Either your firm has not that they believe will produce sales forces. IBM learned
gained insight into your the company’s target rate of long ago that sending the
market opportunities, or it is return — and they should be same IBM salesperson to sell
not well-organized to serve rewarded accordingly. a computer to a bank and to
and deliver what your target sell a computer to a hotel
customers want or expect. Now let’s talk about solutions. chain didn’t result in much
Most companies can do a business. The salesperson
The signs that your mar- better job of segmenting knew too little about the
keters have not sufficiently the market. Too many are needs of either banks or
analyzed your market stopping at the demographic hotels. IBM found that it is
include: or descriptive level. A given much better to hire ex-bankers
demographic group — say and ex-hoteliers to sell to
• Poor identification of 30- to 50-year-old men — these industries. They have
market segments. usually contains quite differ- deep experience and a net-
ent individuals, with varying work of relationships in these
• Weak or no prioritization needs and preferences. industries, all of which puts
of market segments. them in a better position to
Ford found this out when it sell effectively.
• A lack of market segment launched the new Mustang
managers. to appeal to young sports- Another problem is insuffi-
minded drivers, only to find cient customer orientation.
When you ask, "Who are you that many young people were This occurs when most
trying to sell to?" the answer not interested and many employees think that it’s the
"everyone" is unacceptable. older people rushed to buy job of marketing and sales to
The owner of a retail store the car. serve the customers; when
might say, "We sell clothing there is no training program
to women between ages 20 In general, try to segment to create a customer culture;
and 50," but that doesn’t mean the members of a market by and when there are no incen-
the store’s target market is different needs, or by the tives to treat the customer
clearly focused. That’s a benefits they seek. Then try especially well.
pretty large group whose needs to find demographic descrip-
are quite varied. Younger tors that might correlate The solution to this is to
women are more likely to with these needs and bene- develop a clear hierarchy
dress for the social scene, fits to make the search for of company values, with
while the 35 and older group these prospects easier. the customer at the top. And
is probably more interested make it easy for customers
in clothes for work and home. Then, prioritize the seg- to reach the company by
ments. Suppose your com- phone, fax or e-mail — and
Many companies do identify pany has identified more than respond to them quickly.
different segments of the one segment. For example,
market and make offers to IBM sells mainframe com- ■■
each segment. An aluminum puters to companies in many
manufacturer may sell alu- industries. IBM recognized 2. YOUR COMPANY DOESN’T
minum on different terms to that some segments were FULLY UNDERSTAND ITS
manufacturers of airplanes, more important than others. TARGET CUSTOMERS
cars, and kitchen appliances. It identified 12 industries
But has the company really where it could focus its effort The second deadly sin is that
One can learn a great deal by • First, he observed that "Why is that important to
inviting eight to 12 individuals there is a transition zone you?"
to participate in a focus upon entering a store.
group led by a skilled moder- Shoppers may move too "Because I like to be comfort-
ator on a focused topic. For quickly to observe or able."
example, Mercedes was con- respond to signs, or mer-
sidering introducing to the chandise immediately "Why is that important to
U.S. its Smart Car — a small upon entering, but they you?"
but stylish car that is a hit in do begin to slow down.
Europe. But participants in "Because I feel important
focus groups were skeptical, • Second, merchandise and deserve the best."
saying that the car looked must be available to the
unsafe, was too expensive, touch. Shoppers confirm Thus we move from a simple
and might be considered only their interest in an item explanation to a much deeper
if they needed a third car for by handling it. set of meanings motivating
short shopping trips. After the customer.
4 AUDIO-TECH
Using a technique called per- psychographics in the hopes First, establish a person or
ceptual mapping, researchers of gaining a fine understand- office responsible for col-
can show how consumers ing of each customer. Of lecting and disseminating
perceive different brands in these strands of information, all the competitive intelli-
relation to a set of attributes. past purchases serve as the gence. Find someone who
Suppose consumers are most useful information, would function as a librarian
asked to rate car brands on indicating the customer’s and is gifted at tracking
two dimensions, status and revealed preferences. news about competitors on
reliability. the Internet and developing
Such customer data is stored competitor profiles. Tell
The research might show in a data warehouse. A sam- employees who face competi-
that the average consumer ple of this data is put into a tors to check in with this per-
would position Jaguar as data mart and analyzed by son to be briefed on how the
high in status, but medium skilled data miners. The data competitor thinks.
in reliability. By viewing all miners are often able to spot
the cars in the perceptual new segments that can rep- Another solution is to hire
mapping space, one can dis- resent a new opportunity for people away from your
cover which cars are the clos- the company. Or they can major competitors. This
est competitors to a specific spot trends in products, fea- should not be done to steal
brand. tures, or services that might secrets that belong to the
alert them to new offerings. other companies (which is
Companies can also use a They can also test the effec- unlawful) but to get to know
number of techniques to tiveness of predictive analytics how the competitor thinks
assess consumer preferences. in reaching the best prospects. and acts.
Among the simpler approach-
es are consumer ratings and ■■ You should also monitor
rankings. A more sophisti- every new technology that
cated approach is conjoint 3. YOUR COMPANY NEEDS might hurt your business,
analysis, where consumers TO BETTER DEFINE ITS because there is no greater
rank their choices among a COMPETITORS AND MONITOR threat to many companies
hypothetical set of fully THEM than a new or better techno-
described concepts. logical advance. View these
The third deadly sin occurs threatening technologies as
Their choices can be ana- when you need to better investment options. Adopt
lyzed to reveal the relative define and monitor your the maxim: "Every company
importance they place on competition. Danger signs should cannibalize itself
each attribute, which guides include: before someone else does."
the company to know which
concept would be the most • Focusing on the wrong There’s a story about the
successful. competitor. manager of General Electric’s
vacuum tube division, who
Consumer data can also be • Lacking a way to gather came into his boss’s office
analyzed by regression, dis- and distribute competitive boasting of having increased
criminant, and cluster analy- intelligence. the business by 20 percent.
sis methods to predict how His boss fired him. "You
likely consumers are to For instance, while increased the vacuum tube
respond to different stimuli, McDonald’s would correctly business because our com-
such as prices, features, and name Burger King and petitors went out of business.
so on. Predictive analytics Wendy’s as its main competi- That was easy. What you
are used by direct mailers to tors, it would be helpful for should have done is gotten us
select the prospects who have them to also include Taco into the transistor business.
the highest probability of Bell and Subway — and You kept us in the past when
responding positively to an include supermarkets that you should have prepared us
offer. have added prepared foods. for the future."
Companies are also increas- But once you’ve identified You should also prepare
ingly gathering information your competitors, how do you offerings similar to those
about a customer’s past pur- monitor their resources, of your competitors.
chases, demographics, and strategies, and practices? Consider the Austrian crystal
6 AUDIO-TECH
• Your company hasn’t the Valley with new ideas, inventing a hotel that rents
identified any exciting especially for starting dot- berths, not rooms, at a low
new opportunities in coms. Venture-capital firms price.
recent years. abounded to lend money to
people with superior ideas, Companies can also use
• The new ideas it has and the Valley attracted group or individual creativity
launched have failed. many talented people who techniques to stimulate new
could write software and ideas. These include brain-
The solutions are to set up a implement ideas. storming and several other
system for stimulating the techniques.
flow of new ideas from The implication is that com-
your partners and to find a panies need to duplicate Most companies search for
way to use creativity sys- Silicon Valley internally. The new ideas by starting with
tems for generating new company should place a high their current product and
ideas. value on new ideas and facil- varying it in some way. For
itate their collection and example, a cereal company
Some companies believe that evaluation. The better ideas will add raisins or nuts or
there are no new opportuni- should draw on an internal change the package size.
ties. They say their industry pool of money to facilitate This results in line extensions
is mature, or that they are research and development. or brand extensions added to
selling a commodity. But it’s The best ideas should then the cereal aisle in the super-
only that their beliefs are be assigned to the right tal- market. Their competitors
getting in the way of their ent to develop and launch do the same. The cereal
imagination. For example, them. aisle gets longer, but not
Starbucks didn’t see the more profitable. Each prod-
coffee market as mature. To manage the idea flow, the uct variant draws a smaller
company should appoint a number of customers who
No company has to go with- high-level executive to be the defect from the larger-selling
out new ideas. First of all, Idea Captain. He should brands.
the company’s employees form an Idea Committee with
probably have many ideas for representatives from each Kotler calls this vertical mar-
improvement. All they lack major department. Everyone keting. Its three techniques
is a place to send these ideas in the company should be are:
and the motivation to send encouraged to send ideas to
them. the committee. Everyone 1. Modulation, as when a
submitting an idea will be juice manufacturer
Second, the company’s sup- told of its fate. The strongest varies the sugar content.
pliers, distributors, advertis- ideas that are eventually
ing agency, and other partners implemented successfully 2. Sizing, such as when
probably could suggest many should carry rewards to the potato chips are offered
new ideas. people who suggested them, in several sizes.
either with money, vacations,
Third, there are systematic or other tangible rewards. 3. Packaging, as when the
ways to help employees For example, Kodak pays same chocolates come in
generate new ideas. $10,000 each year to its different containers.
employees who have con-
In an excellent article called tributed top money-making The main problem with verti-
"Bringing Silicon Valley or money-saving ideas. cal marketing is that this
Inside," Gary Hamel presents leads to a hyper-fragmented
one recipe for generating suc- Many of the best ideas will market where few products
cessful new ideas. Silicon come from observing major have the volume to make a
Valley, he said, scored its suc- shifts in the market environ- lot of money.
cesses because it was the site ment. These shifts may be
of three markets: an idea political, economic, social, Companies need to make use
market, a capital market, and technological, or environmen- of an alternative idea-gener-
a talent market. tal. For example, one compa- ating process that Kotler
ny responded to an economic calls lateral marketing.
Many creative and entrepre- trend — the high price of Lateral marketing is to think
neurial people poured into hotel rooms in Tokyo — by of your product in relation to
8 AUDIO-TECH
improve the processes than other brands. Remember that advertising
for cross-selling and is a cost that the customers
upselling. Some salespeople • Your company allocates pay, and maybe many of
resist mentioning other prod- the same amounts of its them would prefer a lower
ucts of their company. They budget to the same mar- price. Given that the aver-
may be happy making the keting tools every year. age GM car consumes $3,000
sale and don’t want to in advertising cost, how
appear pushy. They may not • You do little evaluation many more cars could GM
make much or any commis- of the ROI impact of your sell if it reduced its price by
sions on other products. promotional programs. $3,000 a car?
They may not think the
other products are of suffi- The solution is to improve On the other hand, some ad
ciently high quality to satisfy your brand-building campaigns are effective and
the customer. strategies and measure boost the company’s sales.
the impact on your brand People wouldn’t have been so
The same problem occurs in equity. Too many marketers excited to pay a higher price
the professions. A CPA may think that the magic bullet is for Absolut Vodka if it wasn’t
not recommend that his advertising. After all, adver- for its brilliant ad campaign,
client use his firm's manage- tising is designed to build but how many campaigns are
ment consulting services. In more awareness, knowledge, brilliant? Most are, at best,
any case, a company with a interest, and — ideally — average. Why? The ad
range of products needs to preference. But a brand is agency would claim that the
supply training and incen- built by many communica- brand manager wants to play
tives to encourage its staff to tions tools, as well as the it safe. The brand manager
promote other products that quality of the product and its would claim that the ad
might interest the customer. packaging, the reliability of agency didn’t come up with a
the shipping, and many other great ad idea.
Upselling has two meanings. factors. Among the commu-
One is inducing a customer nication tools that create Ads work better when they
to buy a more expensive ver- brand impressions are sales- are placed in the media that
sion of a product than the one people, trade shows, and word- reach the target market.
he came to see. The other is of-mouth from customers, Advertise in the magazines
to approach a customer some competitors, and product read by fishermen, hobbyists,
years after a purchase and reviewers. mechanical engineers — and
suggest that it is time to the ads will be read if you’re
replace the old product with A brand evokes a set of cus- advertising products that are
a much better one. Your tomer expectations. Brand interesting to them. The ads
staff needs skills in both equity results from how well usually carry response cards
upselling and cross-selling. customer expectations are for readers to get further
fulfilled. The higher the information or place orders,
■■ satisfaction, the higher the making ROI measurement
brand equity. much easier.
8. YOUR COMPANY’S
BRAND-BUILDING AND To build brand equity, shift There is a growing belief that
COMMUNICATIONS EFFORTS money into marketing public relations deserves more
ARE WEAK instruments of greater of the advertising budget. It
effectiveness. Most compa- is a better audience-building
The eighth deadly sin is nies see spending money on tool for high-tech products, for
when your brand building costly ads as a form of insur- which buyers want indepen-
and communication skills are ance that the company will dent professional opinions
weak. The warning signs be remembered, even when it before they choose a brand.
include: has nothing new to say or no The maker of a high-tech
new way of saying it. The real product should first identify
• Your target market does question companies should ask opinion leaders, such as
not know much about is whether the same amount experts and columnists who
your company. of money would work better review and talk about new
if spent in improving the products. Volvo launched its
• Your brand is not seen as product’s quality of customer XC90 SUV with a PR cam-
distinctive and better service. paign that created a huge
10 AUDIO-TECH
companies have not yet accountability for their job candidates, procure sup-
tapped. These opportunities budgets. plies, and conduct market
include market research, research.
competitive intelligence, con- ■■
cept and product testing, Another solution to the prob-
coupon and sampling distrib- 10. YOUR COMPANY HAS NOT lem of under-using technolo-
ution, product customization, MADE MAXIMUM USE OF gy is to improve your sales
and employee and dealer TECHNOLOGY automation system. The
training. system should enable your
The tenth deadly sin is when sales force to answer ques-
Public relations is becoming your firm has not made max- tions in the customer’s office
more prominent. Tom imum use of technology. The and empower them to make
Harris’s book The Marketer’s signs include: decisions on behalf of the
Guide to Public Relations company.
underscored how many PR • The company has made
campaigns, rather than minimal use of the You should also use more
advertising, deserved the Internet. market automation. A
credit for creating many number of routine marketing
product successes. • The company’s sales decisions can be better han-
Companies need to add PR automation system is dled by software than by
skills in the marketing outdated. company personnel. Airlines
department, and not rely on use yield-based pricing soft-
begging and borrowing them • The company has not ware to help maximize their
on an as-needed basis. introduced any market passenger load factor. The
automation. software determines when
Profitability analysis is the price of a seat should be
another crucial skill. Most • The marketing group lowered before a flight, and
companies do not know their lacks decision-support sends the information to
real profitability by locations, models. travel agents and certain
products, customers, and customers.
channels. For example, at Many companies think they
many companies, the largest are using the Internet Don’t overlook the need to
customers are not the most because they have estab- develop decision support
profitable customers. Large lished a Web site and they models. Firms are experi-
customers often demand the sell on-line. But this repre- menting with marketing mix
lowest prices and consider- sents only 10 percent of the modeling that combines the
able services. Some mid- opportunities afforded by the separate and collective
sized customers are more Internet. effects of a marketing mix on
profitable, measured as a sales and profits. A company
rate of return on the cost of Therefore, solving this prob- can get help in developing
serving them. lem begins with making these and other models from
more use of the Internet. a variety of marketing
The point is that two cus- Among the ways to do this resource-managing vendors,
tomers spending the same is to create an effective and such as Veridiem and
amount may yield different user-friendly Web site. Marketing Management
profits. Robert Kaplan and Survey your customers and Analytics.
Robin Cooper outlined a cor- Web site experts to get their
rect approach to accounting for suggestions for improve- ■■
profitability with their ments. Also, assess the effec-
Activity-Based Costing tiveness of your intranet for t’s clear that the theory of
accounting method. This
requires salespeople to report
communications within the
company, your extranets for
Ipractice
marketing is solid, but the
of marketing leaves
how much time and expense linking with suppliers and much to be desired. In this
each customer consumes, dealers, and your on-line summary, we have explored
much like lawyers bill clients training systems for keeping the 10 deadly sins of market-
for each half-hour of time your employees’ skills up-to- ing as practiced today. We
and expense. All told, mar- date. In addition, you should have described the signs of
keters must add profit mea- take advantage of the power each sin, and proposed the
surement to increase their of the Internet to recruit new solutions that can fix them in
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Ten Deadly Marketing Sins, summarized by arrangement with John Wiley & Sons, Inc., from Ten
Deadly Marketing Sins: Signs and Solutions by Philip Kotler. Copyright 2004 by Philip Kotler.