MBA snippets: Marketing Management

In a moment of stupidity during late 2003 I signed up to do a part-time MBA. I've just completed the exam for Marketing Management, my first subject. Below are the tidbits, comments, theories and anecdotes I found particularly interesting or thought provoking. Many of these are distilled from Marketing Management by Philip Kotler, a valuable text that I'm sure will be referred to often.

Customer satisfaction

• The challenge, according to Jeffrey Gitomer, is not to produce satisfied customers; several competitors can do this. The challenge is to produce delighted and loyal customers.
• 96% of dissatisfied customers don’t complain, they just stop buying.
• Of the customers who register a complaint, between 54 and 70% will do business again with the organisation if their complaint is resolved. The figure goes up to a staggering 95% if the customer feels that the complaint was resolved quickly. Customers who have complained to an organisation and had their complaints satisfactorily resolved tell an average of five people about the good treatment they received.
• According to Jeff Bezos, if you make a customer unhappy he will tell five friends; if you disappoint a customer on the Internet, he is capable of telling 5,000 or 50,000 people.
• What is a customer?
  • A customer is the most important person ever in this office … in person or by mail.
  • A customer is not dependent on us … we are dependent on him.
  • A customer is not an interruption of our work … he is the purpose of it. We are not doing a favour by serving him … he is doing us a favour by giving us the opportunity to do so.
  • A customer is not someone to argue or match wits with. Nobody ever won an argument with a customer.
  • A customer is a person who brings us his wants. It is our job to handle the profitably to him and to ourselves.
• Herzberg’s theory distinguishes dissatisfiers (factors that cause dissatisfaction) and satisfiers (factors that cause satisfaction). The absensce of dissatisfiers is not enough, satisfiers must be actively present to motivate a purchase.
• Product layers:
  1. Core benefit: the basic benefit that meets a customer need or want.
  2. Basic product: realisation of the core benefit.
  3. Expected product: normal customer expectation.
  4. Augmented product: exceeds customer expectations and includes all facets like delivery.
  5. Potential product: all potential product augmentations.
• Tony O'Reilly, former CEO of H.J.Heinz, proposed this test of brand loyalty: “My acid test ... is whether a housewife, intending to buy Heinz tomato ketchup in a store, finding it to be out of stock, will walk out of the store to buy it elsewhere.”

Strategy

• Peter Drucker’s classic questions:
  • What is our business?
  • Who is the customer?
  • What is of value to the customer?
  • What will our business be?
  • What should our business be?
• Most companies believe they can win by performing the same activities more effectively than their competitors, but competitors can quickly copy the operationally effective company using benchmarking and other tools, thus diminishing the advantage of operational effectiveness. Porter defines strategy as “the creation of a unique and valuable position involving a different set of activities.” A company can claim that it has a strategy when it “performs different activities from rivals or performs similar activities in different ways”. Porter’s generic strategies:
  • Overall cost leadership: The business works hard to achieve the lowest production and distribution costs so that it can price lower than its competitors and win a large market share.
  • Differentiation: The business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market.
  • Focus: The business focuses on one or more narrow market segments.
• Value disciplines states that within its industry, a firm can aspire to be (Treacy/Wiersema):
  1. The product leader;
  2. The operationally excellent firm; or
  3. The customer intimate firm.
  Four rules for success:
  1. Become best at one of the three value disciplines.
  2. Achieve an adequate performance level in the other two disciplines.
  3. Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor.
  4. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations.
• Tomina Edmark, inventor of the plastic hairstyling piece called Topsy-Tail, grew her company's sales to $80 million in 1993 with only two employees. Instead of hiring 50 or more employees, Edmark and her two employees set up a network of 20 vendors who chandled everything from product manufacturing to serving the retail accounts. Yet Edmark has been careful to follow the first rule of effective outsourcing: She keeps control of new product development and marketing strategy, the core competencies that make up the heart of her company.
• As Jim Kelly, CEO of UPS, which has a number of global alliances puts it “The old adage 'If you can't beat 'em, join 'em'“ is being replaced by “Join 'em and you can't be beat'“.

Marketing

• SWOT:
  • Strengths (internal)
  • Weaknesses (internal)
  • Opportunities (external): An area of buyer need or potential interest in which a company can perform profitably.
  • Threats (external): a challenge posed by an unfavourable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit.
• Positioning statement: To (target group and need) our (Brand) is (concept) that (point of difference).
• Taco Bell estimates its customer lifetime value at up to $11,000.
• At Volvo, engineers think safety in every design decision (matching their desired market position). When they decided to add a GPS to the dashboard of a recent model, they wanted to be sure that the screen would be easy to read and close to the driver's viewing point so it would not act as a distraction; and when some customers asked volvo to make a convertible car, the company decided against it because “convertible cars aren't safe“.
• Maslow’s hierarchy of needs (people try to move up from 1 to 6):
  1. Physiological needs: food, water, shelter.
  2. Safety needs: security, protection.
  3. Social need: sense of belonging, love.
  4. Esteem needs: self-esteem, recognition, status.
  5. Self-actualisation needs: self-development, realisation.

Miscillaneous

• Viagra works for 80% of people, but for 25% of those it's a placebo.

Note: Originally posted to my Synop blog on March 16, 2004.