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My previous series of articles covered competitive strategy, financial strategy and management theories. This fourth series, on marketing strategy, offers readers coverage of the sort of topics that would be found in an MBA.
Marketing is the third most important discipline covered in an MBA course, yet it is one that may not be well understood by many accountants, particularly those with more limited experience. In due course we will no doubt fill in more of the content of an MBA - for example, international management.
Few accountants do an MBA, put off perhaps by the thought of doing another 1,000 hours or more of study on top of what they needed to do to qualify as an accountant and probably after a first degree as well. Indeed, some people joke that the MBA acronym stands for Masochist of Business Administration.
While it is true that doing an MBA is more easily said than done (at Cass it took me 170 evenings and three weekends - after 150 evenings, you just want it to end), it is also true that it can be a very mind-expanding experience. Also, if you ever want to be an FD, move into general management or become a consultant, then having an MBA as well as being an accountant should give you a real career edge.
Even if you decide that doing the full MBA is not advantageous to you, it's still worth dipping into some of the really key elements of that knowledge. In time, just reading these series of articles can at least give you some familiarity with the key concepts, ideas and tools to add to your existing, more technical skills.
My next series will look first at marketing (three articles) and then at people and organisation (two articles). Finally, there will be another five articles on international and corporate management.
But let's turn to the subject of this series, marketing. In this series we will be looking at the following:
- marketing strategy (article 1)
- marketing, product and channel mix (article 2)
- customer value and competitive positioning (article 2)
- branding strategy (article 3)
- turning marketing strategy into economic value (article 3).
What is marketing strategy?
Marketing strategy is the process of deciding which markets to compete in, which customers to prioritise, and what customer value to target, and to decide how that will be delivered through products, service and the marketing mix in order to beat competitors.
This definition provides for the following:
- determining what businesses to be in - and not to be in
- how to compete across the matrix of those businesses by customer segment
- some idea of being genuinely better than competitors
- a view of the mechanisms for taking the product to market: the marketing mix, things like the product itself, price, promotion and the place where it will be offered and how you will get it there (the 'Ps').
To evolve an effective marketing strategy requires a lot of thought. Indeed, true marketing strategies in the complete sense are something of a rarity: many of the key ingredients are invariably missing.
So why is marketing strategy of interest to the accountant? Because it will not only drive the future value of a company but it will also direct (and possibly misdirect) resources and thus costs.
The latter will happen both directly and indirectly, too - for example through the spend on the marketing mix, including not just advertising, promotion and selling costs, but also in digital support for investments in place - for example in retail sites.
It will also affect the cost of customer service, logistics and staff training, and will sometimes even involve culture and organisational changes, and quality systems.
In the past I have described marketing strategy as the 'competitive software' that makes the organisational engine move smoothly forward, just like the oil in a car's engine. It has a subtle effect - unless it all goes wrong.
As I explained in my five articles last year, mainstream strategy within the business (sometimes known as the competitive strategy) typically consists of a number of elements:
- marketing strategy
- operations strategy
- IT strategy
- financial strategy
- HR/organisational and people strategy.
What is interesting here is that of all of these there is most overlap between competitive strategy and marketing strategy. Indeed, one can be forgiven for thinking that marketing strategy and competitive strategy are the same thing. For instance, a typical marketing strategy book would almost certainly contain the following:
- SWOT analysis
- PEST analysis
- Porter's five competitive forces
- customer value analysis
- competitor analysis
- value chains
- portfolio tools like the General Electric grid, or the BCG grid, mapping relative growth rates and relative market shares
- life cycle analysis
- the Ansoff grid of existing versus new products and markets
- Ansoff's gap analysis.
What has happened is that the marketing industry has latched onto the new techniques that have been invented by strategy over the past 60 years. Well, marketeers can be expected to be successful in marketing the discipline of marketing, can't they?
What value then does marketing strategy bring to the business? To answer that question, let's take a look at an example.
Dyson entered the carpet vacuuming market in the mid-1990s and rapidly overtook Hoover as market leader. Dyson's simple value proposition (ie a distinctive way of adding value to the customers) was to 'say goodbye to the bag'. Hoover, instead of countering Dyson with a bagless technology, acted like a rabbit frozen in the headlights. Dyson also brought design into the marketing mix with a rather art deco design and initially selling its products in a bright yellow livery.
A key plank of Dyson's initial marketing strategy was the part that founder James Dyson played in the media as a David versus Goliath. In 1995 he stole the show in The Money Programme from Hoover, Electrolux and Panasonic, suggesting that they were unable to compete with him due to his patents and because many of them were unable to 'think differently'.
The then marketing director of Hoover went on the record, saying: 'I do wish that (when Dyson offered the bag-less technology to us), we had bought the technology off him. We would have put it on the shelf, we would have left it on the shelf, and it would not have been used.'
From 1994 to around 1999 Dyson's marketing strategy was based around the distinctive quality of being more convenient than a bagged machine as no bags were needed. Dyson was more innovative, had premium pricing (there was a certain 'snob' value to the Dyson) and enjoyed free media coverage driven by the founder's colourful personality.
Dyson did not spend lavishly on advertising but relied on word of mouth and positive media coverage to create its own competitive space. The rewards of this marketing strategy were very high returns at the operating profit level and UK brand leadership.
Between 1999 and 2002 the company began to be challenged by bagless vacuum cleaners from its competitors around the time that it began to export internationally: product life-cycle effects and imitation were starting to set in in what was fast becoming a mature market.
There was a profit wobble around 2002 to 2003 when Dyson decided to move production to Asia Pacific, generating adverse press commentary and some loss of customers. There were clear warning signs then that its marketing strategy lacked lustre.
Dyson fought back, not by fundamentally changing its marketing strategy (eg by shaving its price premium) but by boldy investing heavily in R&D, which allowed it to secure quality and image advantage again. Moreover its US strategy began to pay off and by the 2010s Dyson had a turnover of over £1bn on its international business, and had restored its very high profit levels.
Dyson's example demonstrates that a business's marketing strategy needs to be responsive to competitive change yet also requires consistency of direction combined with renewal. Never assume that however docile your competitors may be that this will always be the case. An effective marketing strategy is key to superior financial performance.
Dr Tony Grundy is an independent consultant and trainer, and lectures at Henley Business School