“Marketing as Strategy”- Proffessor Nirmalya kumar

Talk on HBR Management Gurus

Introduction• Born: 8th march, 1960

• Education:

• B.Com: Calcutta university (rank 1 in class of 5251 students)

• M.Com: Shivaji University• MBA: University of Illinois at Chicago (Scored

perfect 5.0 grade)• PhD: in Marketing: Kellogg Graduate School of

Management (winning the Marketing Science Institute's Alden G. Clayton Award for his PhD dissertation)

• Career:

• Recently joined Tata Sons as a member-group executive council

• Professor of marketing and co-director of Aditya Birla India center at LBS

• Served as a faculty of Harvard, IMD, Kellogg & Northwestern University

• Books authored

• Authored 7 books on marketing and business related topics

Books authored

Nirmalya Kumar (2004). Marketing as Strategy: Understanding the CEO’s Agenda for Driving Growth and Innovation. Harvard Business School Press.

Nirmalya Kumar (2005). Global Marketing. BusinessWorld.

Nirmalya Kumar; Jan-Benedict Steenkamp (2007). Private Label Strategy: How to Meet the Store Brand Challenge. Harvard Business School Press.

Nirmalya Kumar; James C. Anderson and James A. Narus (2007). Value Merchants: Demonstrating and Documenting Superior Value in Business Markets. Harvard Business School Press.

Nirmalya Kumar (2009). India's Global Powerhouses: How They Are Taking on the World. Harvard Business School Press.

Nirmalya Kumar and Phanish Puranam (2012). India Inside: The emerging innovation challenge to the West. Harvard Business Review Press.

Nirmalya Kumar and Jan-Benedict Steenkamp (2013). Brand Breakout: How emerging market brands will go global. Palgrave.

Global Marketin

g

How Marketers can get a seat at the CEO’s table?

What should Marketers do? Marketers to tackle issues that

Merit the CEO’s attention Transforming promotion based

marketing to strategic, cross-functional and bottom line oriented

Focus on Three Vs Valued Customer Value Proposition Value Network

In 100 FTSE Index firms in the UK, 13 CEOs had Marketing while 26 had Finance background

The CEO’s Marketing Manifesto

SEVEN TRANSFORMATION INITIATIVES

1. From Market segments to strategic segments

2. From selling products to Providing Solutions

3. From Declining to Growing Distribution Channels

4. From Brand bulldozers to Global Distribution Partners

5. From Brand Acquisitions to Brand Rationalization

6. From Market-Driven to Market-Driving

7. From SBU Marketing to Corporate Marketing

CEOs• Sponsor Marketing

initiatives• Be the customer

champion• Be the quality

controller

Marketers• Be more strategic• Be more cross-

functional• Be more bottom-

line oriented

1. From Market Segments to Strategic Segments

Traditional ways of Market segmentation:

4Ps (Product, Price, Place, Promotion)

Common Market segmentations variables

Demographics

Socioeconomic factors

Psychographic factors

Size of customer

Industry

Geography

Strategic segments: Divided by 3 Vs

Valued Customer – Who to serve?

Value proposition – what to offer? What attributes that our industry

takes for granted should be eliminated?

Which attributes should be reduced below industry standards?

Which attributes should be increased to above industry standards?

Which new attributes should be created that the industry has never offered?

Value Network – How to deliver?

Flag Carriers

easyJet

Valued Customers

Everyone, especially business class

People who pay from own pocket

Value Proposition

Flexible, Full Service, High Prices

One-way fares, No frills, Low pricesValue

Network

Purchasing

Integrated Outsourced

Operations

Multiple types of planes, Short & long haul routes, Worldwide network

Single type of plane, Short haul routes, Select destinations

Marketing Segmented customers, varied meal services, frequent flyer program

Treat all customers same, “Focused”

Distribution

All/agents Internet/direct sales

easyJet: “fly to Scotland for the price of a pair of jeans”

One way fare: 29₤

2. From selling product to providing solutions

Product Focus

Solution Focus

Valued Customers

Almost all customers

Segment focus

Value Proposition

“Better” products with service

End to end solutions that reduce customer costs and risk or increases revenuesValue Network

R&D New tech focus, stand alone products, proprietary products

Customer problem focus, Modular products, standards basedOperations In-house

manufacturing, less complex supply chain

Best partners, high co-ordination

Service Cost center, bundled free

Profit center, unbundled

Marketing Cost+product price, Product sales, sales person takes order, volume based commission, geographical coverage

Value based pricing, multi year contracts, consultants, industry experts, service based commissions

Distribution Product sold through many channels

Become a value added reseller

Solution-Selling Matrix

Loyalty Program Selling

Solution Selling

Stand-Alone Product Selling

Systems Selling

Level of customization and Customer knowledge

Width of products / Services

High: Relationship

focus

Low: Transaction focus

Individual product focus

Systems product focus

3.From Declining to Growing Distribution channels

Gramophone Company Of India – 1995 to 2000

17% catalogue

exploitation

Brick & mortar – 15%

returns

Product cost:13%

Marketing, sales &

distribution cost: 23%

Manufacturer margin:

20%

Retailer margin: 30%

1. Gramophone company 1999

2.Custom CDs (retail Kiosks

3. Streaming services sold through retailers

4. Company website sales of prerecorded music

5.Custom CDs (Online sales)

6.

7. 8. 9.Download/subscription sold directly

Digital distribution

Direct Online sales & Mail delivery

Brick – Mortar Retail

Build for inventory

Build to order

Digital Content

+lower Inventory+Lower Returns+Lower Financial Costs+Lower Out of Stocks-Higher Production Costs

+Lower Production Costs

+Lower Fulfillment Costs

+Lower Fulfillment Costs+Positive Cash Flow+Save Reseller Margin-Channel Conflict-Fulfillment Costs

2002; 99cents / download

4.From Brand Bulldozers to Global Distribution Partners

P&G Wal-Mart

Both tough negotiators

Both Non – cooperative

Through collaboration

Use each others capability

Wal-Mart gets short delivery cycles, value for customers (EDLP), reduction in inventory

P&G produces to demand rather than inventory, data, access to customers

Wait and see customersRelatively passive approach, maintain position “Monitors Development”

Be ready customersBeing alert, opportunity driven, but not all costs “Ready to act”

Win-Win customersProactive approach, High level of investment “Invest to grow”

Win-Lose customersBeing alert, damage control driven approach“Handle with care”

International Presence

Central department – No

positive influence

Central Control –influence/

Enforcement

Att

racti

ven

ess o

f th

e

man

ufa

ctu

rer

Internationalization of Retailer

Monitor Alert Proactive

Rewe, E.Leclerc, Tengelmann

Auchan, Casino, Ahold

Schlecker

Tesco

Metro

Wal-Mart

5.From Brand Acquisitions to Brand Rationalization

P&G: Out of 250, top 10 brands account for 50% sales, more than 50% of profits, 67% growth over 10 years.

Unilever: Bottom 1200 brands accounted for only 8% sales in 1999.

Nestle: more than 8,000brands with tiny sales share.

Result: Insufficient differentiation, In efficiency, lower market power, management complexity

Past Future

Corporate Acquisitions & MergersSearch for top-line growthInternational expansionBrand-Management structuresPower of country managers

Search for synergySearch for profitable top-line growthGlobal strategyCategory-Management structuresCorporate HQ resistanceCompetition Copycat strategies

Worldwide mushrooming media outlets

Need for differentiationEmergence of global Media giants

New Distribution ChannelsDemand for exclusive products and shelf space productivityDesire to avoid channel conflictMultiple consumer segmentsLocal marketing

Consolidating distribution channelsDemand for category managementGrowth of private labelsCross-national segmentationEmergence of global consumers

Growing Brand Portfolios

Shrinking Brand Portfolios

Channel / Consumer

Forces Behind Brand Consolidation

6.From Market driven to Market-Driving

Market Driving Firms:

Trigger industry breakpoints, change the industry fundamentals

Visionary rather than traditional market research driven radical business concept

Rather than learning from existing focus, they teach potential customers to consume the different value proposition

Amazon | DELL | IKEA

Value Innovation

MarketDriving

Continuous improvement

Architectural Innovation

Valu

e P

roposi

tion

Value NetworkExisting plus Unique

Continuousimprovement

DiscontinuousLeap

Ikea

B

A

C

D

Benefits

PriceHigh

High

LowLow

Zone of Existing

competition

Focus: Young people/familiesTremendous assortmentImmediate deliveryShopping atmosphereLow price <> self-service, self assembly, self transportation

In-house design, interchangeable parts, parts inventory, computerized logistics, inexpensive locations

7.From SBU to Corporate Marketing

Address corporate strategy challenges:

Portfolio Choices: what business to be in?

Portfolio relationships: what value should our businesses add to each other?

Parenting skills: what value does the corporate center adds?

Leverage Product Platforms

Wal-Mart china enabled global sourcing center

Exploit Brand Platforms

Electrolux corporate marketing

Extend Channel Platforms

Ford combining dealership of luxury brands (Volvo, Land Rover, Jaguar)

Nurture Customers as Platforms

Amazon adding categories rapidly

Develop Markets as platforms

B&Q China developed store design which was brought to UK for fighting soaring real estate prices

Target Growing Masses in Emerging Markets

slower birth rate & ageing population in North America, Japan and Western Europe (Asia/Africa/Latin America can drive 10-15% Growth)

Searching for Marketing Synergies

Project Shakti

Trains Women in village with less than 2,000 population

Women become rural sellers/distributors of HUL

By selling HUL products in 4-5 neighboring villages, they can earn appx 1000 per month

Executive recruit must spend eight weeks in villages of India

Developed a pool of emerging market experts who understand poor as a business opportunity rather than a problem

“The Business enterprise has two and only two basic functions: Marketing and Innovation. Marketing and Innovation produce results; all the rest are costs”

- Peter Drucker

easyJet: “fly to Scotland for the price of a pair of jeans”

One way fare: 29₤

Valued customers Leisure travel, small businessmen, paying

from their own pocket

Value proposition Attributes eliminated: free meal, travel agents Attributes reduced: No seat selection Attributes increased: lower prices, punctuality,

young plane fleet Attributes introduced: one-way fares, refunds

on delay, ticket-less travel

Value network Avoid fixed costs: no secretaries Exploit fixed costs: easyjet planes in the air -

11hrs > 6.5hrs (industry) Minimize variable cost: airport fee Convert variable cost in to revenue: sell

snacks on plane