Counterintuitive Marketing

University Degree Business and Administrative studies

Essay

Running head: Counterintuitive Marketing

Essay on

John Brown

Abstract

Counterintuitive Marketing is chocked full of explanations and solutions for American businesses of the late 1990s experiencing lackluster performance. The authors, Kevin Clancy and Peter Krieg, trace the high rate of business failures back to bad marketing strategy and furthermore, poor implementation. They expose marketing as being flawed by strategic decision-making based largely on management’s intuition. This is followed by a thorough discuss on developing marketing plans built on logic and hard data.

Essay based on

Counterintuitive Marketing

Summary

Marketing is the engine that drives business growth. It is charged with finding and keeping customers for the business, and only through effective marketing does the core business grow. Many American companies have failed to recognize this and are suffering from lost market share and declining profits. As a result, acquisitions, mergers and downsizing have become commonplace to mask the real problems. Furthermore, the strategic planning of these events has not been integrated with marketing, even though most strategic planning issues are fundamentally marketing decisions. The future success of business is dependent on positioning the marketing function at its heart. This is the only way businesses will thrive.

Peter Drucker is quoted as writing, “Because its purpose is to find and keep customers, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are ‘costs.’” Marketing is the only way to grow a business, and growing the business will ultimately reward the stockholder. Contrary to popular belief, the purpose of a business is not to reward stockholders.

A firm must produce and deliver goods and services that people value at prices that are appealing relative to the products and services other businesses offer. American companies are failing to deliver on this. Through data collected by professional market research firms in the late 1990s, the average brand or product was losing about a third of a share point per year. Furthermore, most new products fail. The average new product and service success rate is only 10 percent. Contributing to this failure is the lackluster performance of the marketing function. Consumer recall of advertising averages under 10 percent, and the return on investment of advertising is from 1 to 4 percent. Other indicators such as brand equity are also in decline. Most marketing programs are failing to build loyalty, consideration, preference, or long-term volume. Mediocre decision-making based heavily on intuition and experience is all too often the cause of these failures.

Through the authors’ experiences they point out that most marketing decisions are rushed, rely on little research, and focus on short-term results. Interestingly, these decision-making patterns are significantly more characteristic of male senior marketing executives than of female senior marketing executives. Therefore, the authors referred to this observation as testosterone-driven decision making. The following points are characteristic of testosterone marketing that can have devastating results on a business:

Password

Confirm Password

I agree to the terms of service and privacy policy

Decisions are made quickly because there is no time to do it right.
Top management demands short-term results.
Competitors guide decisions.
Real consumer needs and problems are unknown or ignored.
Too few alternatives for each decision are evaluated.
The profitability of marketing alternatives and actions is unknown.
Marketing managers are often promoted prematurely.

Overcoming these obstacles is possible. When the marketing decision-making process relies on rigorous analysis and solid research instead of executive intuition and creative judgment, astonishing results can be achieved.

An obstacle facing every business is the composition of reliable analysis and usable research. ...

This is a preview of the whole essay

Decisions are made quickly because there is no time to do it right.
Top management demands short-term results.
Competitors guide decisions.
Real consumer needs and problems are unknown or ignored.
Too few alternatives for each decision are evaluated.
The profitability of marketing alternatives and actions is unknown.
Marketing managers are often promoted prematurely.

An obstacle facing every business is the composition of reliable analysis and usable research. CEOs and marketing executives have found all too often that research studies are not even marginally helpful. Top companies are noted as saying that research has been most disappointing in predicting new product success and in measuring advertising’s true effectiveness. As has been noted, good research takes time and money, and if management is impatient and unwilling to properly fund the studies, they will continue to be disappointed. Businesses must come to a realization that good research done well can help market their products and services effectively while bad research can, and often does, lead them in the wrong direction.

Just as marketing must be at the center of the business, brands must be at the center of marketing. Many of today’s brands have no clear strategy. This means they have no vision, no target, no positioning, no powerful advertising, and no preemptive product or pricing. This must be addressed by building a powerful brand that stands out from the crowd and represents real value. Marketing must figure out who the target is and learn everything about them. Then configure the product or service or company, and price it appropriately, so it addresses the target’s needs and wants. In turn, these benefits must then be properly communicated to the target audience. Only at this point will the consumer be willing to pay a premium for and go out of their way to find this product or service.

The marketing strategy must start with a vision to provide purpose and a sense of mission. A vision is a hope, a goal, a dream; it incorporates the values of the company and it implies benefit for customers. The vision must be so big, bold and ambitious that it has a transformation effect on the company. Expressing the means to the vision’s end is a mission statement. This statement conveys what the company should do to achieve the vision. A strong corporate or brand vision and mission is helpful in setting overarching goals for an organization and motivating everyone in the organization. The vision and mission statement mirror aspects of the targeting and positioning strategy for the company or brand because they should be a constant reminder of whom the firm is trying to impact and what it is trying to say about itself to differentiate itself from competitors.

Brand targeting and positioning are the cornerstones of the marketing strategy. All of the other plan elements depend on these. Targeting is about knowing where to concentrate the effort. While positioning is about the reason people would buy one product rather than another. An analytical approach must be taken to determine the optimal target and position. As the text points out, the seemingly obvious targets are not always the most profitable. A counterintuitive approach using segmentation should be employed instead of intuition. This provides an understanding of the market’s structure, both in terms of customer desires and problems and in terms of competitive strengths and weaknesses. The information generated here is then used as a starting point to develop a strong, empirically grounded positioning for the product. For without a strong positioning, a brand turns into a commodity bought strictly on the basis of price.

Correctly targeting and positioning the product or service is essential for effective advertising. This is key because marketers communicate with prospects and customers through this medium. Therefore, the marketer’s challenge is to produce memorable and effective communications and place them where they can have the greatest impact. One of the most straightforward and best ways to accomplish this is to provide the advertising agency with a clear detailed brief that contains at a minimum, the most profitable target, unique positioning strategy, and the desired brand personality. The success of the advertising campaign will be measured in terms of return on investment (ROI) where a 5 to 10 percent return is considered successful.

Companies are continually searching for new products and services loaded with features that appeal to everyone. New ideas come from everywhere. At some point, these ideas turn into concepts that must be tested for marketability. While the traditional methods of concept testing remain the most common way to develop and test new product concepts, concept testing is not the best approach to new product / service development. The goal of traditional concept testing is to find the concept that produces the highest level of consumer appeal and therefore the highest levels of purchase probability. This is not what a company really needs because the most appealing product is not the most profitable product. Consumers want as many value-added features as possible at the lowest price possible. Companies need the most profitable concept. Marketers must determine what needs to be accomplished on every dimension of interest and then what levels of each of these activities are optimal, thus maximizing not the dimension itself but profitability.

Pricing is another marketing decision that requires strategy and research. Intuitively, lowering the price will increase sales; however, additional sales may not make up for lost profits from lower margins and may also damage brand equity. To develop the most profitable product at an optimal price, four issues must be reviewed: the product’s tangible features, its intangible features, buyer price sensitivity, and the return on investment. These are best analyzed through marketing-mix simulations, trade-off / choice modeling, or a combination of both. Marketers must learn exactly what forces do influence buyers and then plan accordingly.

Computer modeling has greatly enhanced the development of marketing plans and test market evaluations. The marketing plan is a document that outlines the strategies a company, product, or brand will use to reach its overall business objectives. It is the key to the transition from strategy to tactics. This plan must take into account marketing inputs and outputs and establish the relationship between them. At the heart of the plan is an empirically based mathematical model that is capable of analyzing all of this data. The conceptual model is converted into a mathematical model. Then through the use of statistical analysis, computers allow marketing experts to merge their knowledge, experience, and insights with scientific methods to build marketing plans that work upon implementation. Going a step further with computer modeling, simulated test markets can be devised to mimic consumer reaction to new advertising for a new or restaged product. The simulated test market reduces risks that include not only lost marketing and sales dollars but also capital. A sophisticated decision support system combines simulated test marketing with mathematical modeling of the marketing mix. These systems provide insight into improving advertising, the concept, the product and packaging, and the marketing plan itself to increase sales and profits.

Implementation of the marketing plan is just as important as the strategy. Marketplace results are the function of both strategy and implementation. As a result, the authors discuss five essential steps to implementing the plan successfully:

Marketing process design based on the best industry practices.
Development of a transformational strategy.
Scientific marketing planning.
Action plan development.
Action plan implementation.

Importantly, the action plan must integrate the targeting and positioning strategy in everything.

A theme stressed throughout the book is spending additional time and resources on critical marketing decisions. The authors ask executives, “Why don’t you have time to do it right when you can make the time to do it over and over and over again?” Companies must set objectives and make them specific, realistic, and measurable. Marketing performance can and should be measured against these clear objectives. The necessary data and tools exist to dramatically improve the marketing function. Marketers must come to the realization that marketing is more science that art in today’s world. Decisions can and should be based on more than intuition.

Personal Evaluation

In Counterintuitive Marketing the marketing function is herald as the “center of the business solar system.” The authors imply that all other functions are secondary. Accounting, finance, purchasing, engineering, research and development, and operations are said to not really matter if there is not sufficient demand for the products and services to allow the company to make a profit. This view of marketing has thankfully evolved to appreciate the rippling effects from contributions provided by the entire organization. As the late David Packard of Hewlett-Packard observed, “Marketing is far too important to leave to the marketing department.” Companies have realized that every employee has an impact on the customer; therefore, marketing must be viewed as an extension of every representative. This has resulted in emphasis of interdepartmental teamwork to manage key processes within the organization (Kotler, 2006). This more holistic marketing concept has far reaching implications to improve the effectiveness of the entire marketing strategy.

Throughout the book, the importance of devoting the proper time and resources to marketing decisions is stressed. The significance of this becomes evident as better decisions are made when managers have time to consider the alternatives and weigh the options. However, as the authors state, making decisions quickly is intuitive, and companies appear to reward fast decision-makers. Holding a tight budget is also rewarded. Therefore, increased spending on market research is often frowned upon. Based on a 2002 research study published in the March edition of Advertising Age, one of the main challenges reflected in the differences of opinion between the chief executive officers(CEO) and the chief marketing officers(CMO)towards marketing is budgets. According to the study, CEOs need and expect all areas of their organizations to be more efficient while CMOs indicate they anticipate a budget increase. To accommodate the pressure to simultaneously grow revenues while also reducing marketing costs as a percentage of sales, the article offers three recommendations: link spending priorities to profit potential, focus spending on brand drivers, and deepen insights on how customers get product information and make buying decisions. Opposed to the authors of Counterintuitive Marketing, marketers must test and develop programs more quickly as they enhance planning processes and research approaches. Unfortunately, this is the reality in corporate marketing.

Throughout the book Clancy and Krieg talk about the importance of using rigorous analysis of alternative decision options based on hard data using criteria related to profitability. They pound home the idea that marketing decisions can not be made intuitively on a hope and a prayer. Advanced methods of mathematical analysis and simulation tools are available and must be used to increase the probability of successful marketing. The future of marketing will be determined through technological advances. Traditional methods of analyzing and predicting the market have taken a backseat to fact-based mathematical modeling made possible through advanced technology.

References

Clancy, K.J. & Krieg, P.C. (2000). Counterintuitive Marketing: Achieve Great

Results Using Uncommon Sense. New York, NY: The Free Press.

Court, D., French, T., & Singer, G. (2003). “How the CEO Sees Marketing.”

Advertising Age, 28.

Kotler, P. & Keller, K.L. (2006). Marketing Management (12th ed.).

Upper Saddle River, NJ: Pearson Prentice Hall.