SME Executive Summary on Nirlmaya Kumar on Marketing As Strategy

In Kumar's experience CEOs don’t focus on Marketing and the four Ps - so important in Marketing courses - are of little interest. Focus is on finances and operations and only what provides profit or is cross functional is really monitored. Marketing is left to the Marketing Managers who - in the eyes of the CEO - usually asks for money and says “trust me.”

And academics have done a poor job of positioning the role of marketing and have not tied it to it’s strategic focus. Today's marketers need to focus away from the low level look at the four Ps and move towards a more strategic alignment between marketing and company objectives.

Kumar instead urges that we look at the Three Vs.
Valued Customer - who you sell to or want to sell to
Valued Proposition - what you offer to them
Value Network - the network through which you deliver value

Case Study ZARA (What makes Zara successful)
The case study focuses on Spanish clothing giant and innovator Zara. From the case study video and people's comments as well as insights from Kumar these are the secrets that have focused Zara's marketing to guide it's strategic decissions.

Secret 1: adjust to the price expectations of your market like in France where consumers will pay more for fashion - leveraging price elasticity and customer expectation.

Secret 2: Constant stream of new styles - produces in small quantities with a constantly changing show room. This brings customers back on regular basis and creates urgency. Scarcity breeds traffic and desire.

Secret 3: Prototype fashions fast so that you can produce them quickly and get them to market to meet the fashion trend at it’s very beginning rather than lagging behind the major fashion houses. This requires having production in Spain (rather than China or Bangladesh) to get these out fast. It also means that they use high cost manufacturing machines to cut and then shop out sewing to small shops in the area.
the marketing objective is to be first to market a clear first mover advantage.

Secret 4: Stores are placed in high-traffic/high-fashion locations which are high cost but allows them to save on advertising deciding instead to use large store windows to do their advertising for them. Part of the ideas here being that image is not created by 30ss TV ads alone.

Secret 5: They manage all details internally right down to the construction of stores that are built by in house crews giving them complete control over their brand image and it's ever important execution.

Secret 6: They keep bureaucracy low which allows them to make quick decisions on new ideas - speed of innovation fostered by low decision making time.

Secret 7: The carefully manage customer experience in the store by highlighting the clothes rather than photos and images to maintain the high-fashion image they seek to communicate.


Results:
Zara has higher margins at almost 15% along with inventory turnover at almost 11%. Multiply these to get the margin on investment you get 150% making them twice as profitable at Gap.

Zara has innovated by challenging many assumptions - not advertising, high cost manufacturing, don’t replenish successful items, own production over outsourcing, tons of designers, copy everything rather than creating new and turn over your shelf every two weeks. Most companies would consider this a recipe for failure. But Zara has moved beyond marketing as advertising and instead use it as their strategy directing who they sell to, what they offer and how they deliver it (customer, proposition and network).

Speaking on another topic Kumar referenced his other book on selling value called VALUE MERCHANTS - A book about B2B - selling from one company to another making the prime consumer the procurement manager who is compensated in how much they save the company.

Here price differences is transparent. The choices are made on quantifiable value measured by costs. This skill is called Customer Value Management and is driven by two things:

1. Delivering superior value to target segments and customer firms
2. Capturing equitable returns - from customers for value delivered

To do this you must be able to “Demonstrate and Document” using data to convince clients to buy your product or service and then - after the sale - documenting the delivery of this value so that they buy again.

To understand this we define value as Difference in Value where your products value minus the price is greater than the same value minus price of the next closest alternative. (V1 - P2) > (V2 - P2) (v is value - P is price)

So how do we provide value. It can be technical, economic, service and social benefits a customer firm receives in exchange for the price it pays for a marketing offering. Things like consolidated invoicing that cut down time doing paperwork to dealing with waste for the customer to save them the time and cost can be given a dollar value and used to justified higher cost.

This understanding of business to business selloing takes us beyond what many were tough in their MBAs. Now we are beyond "don’t sell features sell benefits." Today this has evolved to "don’t sell benefits, sell value."


So how to you show value?
1. List all the value elements of your product or service - time saving, overhead reduction, etc.
2. Decide which competitors market offering to customers in each segment and see which your customer would consider the next best alternative.
3. Re-visit the value elements vs competitors adn find those that favor you.
4. Determine the points of contention in initial customer visits to be sure that what you have value in is what will best influence them.
5. Now collect the date on these points of difference so that you can present them.

For example, a copying machine company competing against Xerox. Their point of difference is that their machines have less paper jams. When converting this to dollar values (number of jams per day x minutes to fix jam with Xerox - our same cost / 60 min per hour x operation wages per hour x annual work days) they found that they could show much more value that Xerox and therefore justify a higher initial price.

The point to consider: How do you value what you provide business clients and how are you making this point to them?

(Summary by Dana Montenegro of SeriouslyCreative: dana@seriouslycreative.com)