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■■ Ten Deadly Marketing Sins

In this issue: Signs and Solutions


■ Identify... by Philip Kotler
and overcome the 10 most
glaring marketing deficien-
cies that keep companies A summary of the original text.
from succeeding in the
marketplace.
arketing is in bad shape.
■ Attain...
high marketing productivity
M Not marketing theory,
but marketing practice.
marketing mix, a misdirected
STP, or poor market research.
and profitability by segment- Every new product or service But today, too many market-
ing your market, choosing needs to be supported by a ing departments don’t handle
the best segments, and marketing plan that brings this whole process. It’s han-
developing a strong position in a good return that covers
in each segment. dled by a mix of marketers,
the investment of time and strategists, finance types, and
■ Understand...
money. But then why do 75 operations people. Somehow,
your customers’ needs, per- percent of new products, a new product or service
ceptions, preferences, and services, and businesses fail? emerges, and marketing is
behavior, and motivate your left to its true mission as
stakeholders to obsess about conceived by others in the
serving and satisfying the Marketing is supposed to company, namely selling and
customers. drive business strategy. The promoting.
marketers’ job is to research
■ Develop... new opportunities for the Most of marketing is reduced
systems for identifying and company and carefully apply to a one-P function —
stimulating opportunities, segmentation, targeting and Promotion — not a four-P job.
ranking them, and choosing positioning — or STP — to If the company ends up mak-
the best ones. point a new business in the ing a product that doesn’t
right direction. sell well, most of market-
■ Manage... ing’s task is to clear up the
a marketing planning sys- Then marketers are sup- mess through hard selling
tem that leads to insightful posed to flesh out the 4Ps — and advertising.
long-term and short-term
Product, Price, Place and
plans, and exercise stronger
Promotion — making sure Every indication suggests
control over your product
that they are consistent with that marketing will become
and service mix.
each other and with the STP even more challenging in the
■■ strategy. future than it is today.
Consider the following seven
Then marketers are sup- challenges:
posed to implement the plan
Volume 13, No. 5 (2 sections). Section 1, May 2004. and monitor the results. 1. National brands are find-
© 2004 Audio-Tech Business Book Summaries 13-9. When the results deviate ing it harder to get an
No part of this publication may be used or reproduced
in any manner whatsoever without written permission. from the plan, marketers adequate premium to
have to decide if the culprit cover their brand-build-
To order additional copies of this summary, reference
Catalog #5041.
is weak information, a bad ing cost. Why? Wal-Mart
Kotler set out to identify the
and its imitators are 5. Differentiation isn’t work-
most glaring marketing defi-
insisting on much lower ing. Professor Theodore
prices from suppliers if Levitt said years ago that
ciencies that handicap com-
these suppliers want you could differentiate
panies from succeeding in
Wal-Mart’s business. anything, including salt the marketplace. He found
And mega-retailers are and cement. But the what he calls the 10 Deadly
increasingly putting out problem is two-fold. Many Sins of Marketing:
their own store brands differentiations don’t
that are reaching a level matter to customers — 1. Your company is not suf-
of quality equal to the they are spurious or not ficiently market-focused
national brands. Store compelling. Worse, com- and customer-driven.
brands don’t have to pay petitors are quick to copy
for research, advertising, any effective differentia- 2. Your company doesn’t
and selling. tion, leading innovators fully understand its
to enjoy even shorter life- target customers.
2. Companies have been cycles, barely recovering
embracing Customer their investments. 3. Your company needs to
Relationship Management better define its competi-
as the latest cure for 6. Consumers are more tors and monitor them.
their ills. This means informed and sophisticat-
collecting private infor- ed in their buying habits. 4. Your company has not
mation about individuals A customer who wants to properly managed its
to make a better guess buy a digital camera goes relationships with stake-
at what they can be on www.mysimon.com holders.
tempted to buy. But and finds over 25 on-line
there is growing opposi- merchants stating their
tion to the collection of prices for this camera.
5. Your company is not
personal information. People are being trained
good at finding new
Furthermore, people are into price consciousness. opportunities.
increasingly upset with Buying on-line is all about
junk mail, spam e-mail, price, not reliability or 6. Your company’s market-
and telemarketing phone service differences. ing plans and planning
calls. Companies better process are deficient.
move to permission or 7. Companies continue to
"opt-in" marketing as cut their marketing 7. Your company’s product
soon as they can. expenses during reces- and service policies need
sions, the one prop on tightening.
3. No matter how cheaply a which their sales depend.
company can produce its But because companies 8. Your company’s brand-
products domestically, it don’t get hard data on building and communica-
can’t be the cheapest as what their marketing tions skills are weak.
long as China has a say. expenditures are doing,
China can produce every- can you blame them? 9. Your company is not
thing cheaper and is well-organized to carry
starting to make it as The point is that marketers on effective and efficient
good. China will have will face increasing chal- marketing.
the power to repeat the lenges in trying to preserve
Japanese game: better company margins and hit 10. Your company has not
quality at lower prices. company profit targets. To
made maximum use of
make matters worse, many
4. Mass marketing costs are companies are inefficiently
technology.
rising even though mass organized from a marketing
marketing effectiveness standpoint. Adding company Let’s discuss each of these
is falling. As fewer people marketing inefficiency and sins in detail, including both
pay attention to TV com- ineffectiveness to all these the signs that it is a problem
mercials — either ignor- challenges is a recipe for in your company, and the
ing or zapping them — TV disaster. best solutions for fixing it.
networks are raising their
prices. This will force ■■
marketers to find a more ■
effective media.

2 AUDIO-TECH
1. YOUR COMPANY IS NOT analyzed the attractiveness — industries such as bank-
SUFFICIENTLY MARKET- of each segment? Has it esti- ing, insurance, hotels,
FOCUSED AND CUSTOMER- mated the rates of return on telecommunications, and
DRIVEN its investment in the different transportation. By focusing
segments? Has it prioritized on these industries, IBM was
Let’s look at the first sin — the segments and reallocated able to design more compelling
your company is not suffi- its resources to the more offerings than unfocused
ciently market-focused and profitable segments? competitors could present.
customer-driven. Here we
single out the two sides of The more important segments Also, if customer segments
the most handicapping defi- should have managers who are are different, then you
ciency in most companies. empowered to ask for budgets should develop specialized
Either your firm has not that they believe will produce sales forces. IBM learned
gained insight into your the company’s target rate of long ago that sending the
market opportunities, or it is return — and they should be same IBM salesperson to sell
not well-organized to serve rewarded accordingly. a computer to a bank and to
and deliver what your target sell a computer to a hotel
customers want or expect. Now let’s talk about solutions. chain didn’t result in much
Most companies can do a business. The salesperson
The signs that your mar- better job of segmenting knew too little about the
keters have not sufficiently the market. Too many are needs of either banks or
analyzed your market stopping at the demographic hotels. IBM found that it is
include: or descriptive level. A given much better to hire ex-bankers
demographic group — say and ex-hoteliers to sell to
• Poor identification of 30- to 50-year-old men — these industries. They have
market segments. usually contains quite differ- deep experience and a net-
ent individuals, with varying work of relationships in these
• Weak or no prioritization needs and preferences. industries, all of which puts
of market segments. them in a better position to
Ford found this out when it sell effectively.
• A lack of market segment launched the new Mustang
managers. to appeal to young sports- Another problem is insuffi-
minded drivers, only to find cient customer orientation.
When you ask, "Who are you that many young people were This occurs when most
trying to sell to?" the answer not interested and many employees think that it’s the
"everyone" is unacceptable. older people rushed to buy job of marketing and sales to
The owner of a retail store the car. serve the customers; when
might say, "We sell clothing there is no training program
to women between ages 20 In general, try to segment to create a customer culture;
and 50," but that doesn’t mean the members of a market by and when there are no incen-
the store’s target market is different needs, or by the tives to treat the customer
clearly focused. That’s a benefits they seek. Then try especially well.
pretty large group whose needs to find demographic descrip-
are quite varied. Younger tors that might correlate The solution to this is to
women are more likely to with these needs and bene- develop a clear hierarchy
dress for the social scene, fits to make the search for of company values, with
while the 35 and older group these prospects easier. the customer at the top. And
is probably more interested make it easy for customers
in clothes for work and home. Then, prioritize the seg- to reach the company by
ments. Suppose your com- phone, fax or e-mail — and
Many companies do identify pany has identified more than respond to them quickly.
different segments of the one segment. For example,
market and make offers to IBM sells mainframe com- ■■
each segment. An aluminum puters to companies in many
manufacturer may sell alu- industries. IBM recognized 2. YOUR COMPANY DOESN’T
minum on different terms to that some segments were FULLY UNDERSTAND ITS
manufacturers of airplanes, more important than others. TARGET CUSTOMERS
cars, and kitchen appliances. It identified 12 industries
But has the company really where it could focus its effort The second deadly sin is that

BUSINESS BOOK SUMMARIES 3


your firm doesn’t fully under- hearing this from several • Third, men don’t ask
stand its target customers. focus groups, Mercedes questions. They would
The signs include: decided not to introduce the rather leave a store than
car in the U.S. ask where something is.
• Your last study of cus- Also, they move faster
tomers is out of date. Surveys can be used if they than women through
are designed correctly and if stores, and it’s hard to
• Your customers are not all the interviewees answer get them to look at any-
buying your product at the questions. When there thing they didn’t intend
the expected rate. are a lot of non-cooperating to buy.
respondents, the hope is that
• Competitors’ products they do not differ significantly Mystery shopping involves
are selling better. from the cooperators. hiring people to act as shop-
pers in your own company
• There is a high level of Depth interviews — which and your competitors’ loca-
customer returns and are one-on-one encounters tions. Companies often find
complaints. based on Freudian, Jungian, insights into their own fail-
or other psychological ures to satisfy customers
To solve this problem, you approaches — attempt to through this technique.
need to do more sophisticat- bypass the individual’s ratio-
ed customer research. The nal faculties. But like focus But beyond collecting raw
current buzzword is customer groups, it is difficult to know data, consumer needs can be
insight — and the company how representative the probed more deeply through
that gains deeper insight into findings are relative to the projective techniques such as
customers’ needs, perceptions, general population. word association, sentence
preferences, and behavior will completion, and thematic
gain the competitive edge. In-home research is a behav- apperception tests. Some
ioral-oriented technique used researchers use a laddering
What research does your to observe people’s behavior technique in which they follow
company do? Sometimes the in a real situation. Families the consumer’s explanation
best research consists of con- agree to carry on their normal with another probing question.
tinuously dialoguing with activities while researchers
your target consumers, armed with video cameras For example, a consumer
singly and in groups. While record their interactions. may say that he bought a
valuable, this sort of "street Mercedes because it is better
talk" is not sufficient. More In-store research studies how engineered.
formal approaches are need- shoppers react in stores.
ed. These might include Paco Underhill revealed "Why is this important to
focus groups, surveys, depth some of his findings on in- you?"
interviewing, in-home store research in his book,
research, in-store research, Why We Buy: The Science of "Because the car will ride
and mystery shopping. Shopping. more smoothly."

One can learn a great deal by • First, he observed that "Why is that important to
inviting eight to 12 individuals there is a transition zone you?"
to participate in a focus upon entering a store.
group led by a skilled moder- Shoppers may move too "Because I like to be comfort-
ator on a focused topic. For quickly to observe or able."
example, Mercedes was con- respond to signs, or mer-
sidering introducing to the chandise immediately "Why is that important to
U.S. its Smart Car — a small upon entering, but they you?"
but stylish car that is a hit in do begin to slow down.
Europe. But participants in "Because I feel important
focus groups were skeptical, • Second, merchandise and deserve the best."
saying that the car looked must be available to the
unsafe, was too expensive, touch. Shoppers confirm Thus we move from a simple
and might be considered only their interest in an item explanation to a much deeper
if they needed a third car for by handling it. set of meanings motivating
short shopping trips. After the customer.

4 AUDIO-TECH
Using a technique called per- psychographics in the hopes First, establish a person or
ceptual mapping, researchers of gaining a fine understand- office responsible for col-
can show how consumers ing of each customer. Of lecting and disseminating
perceive different brands in these strands of information, all the competitive intelli-
relation to a set of attributes. past purchases serve as the gence. Find someone who
Suppose consumers are most useful information, would function as a librarian
asked to rate car brands on indicating the customer’s and is gifted at tracking
two dimensions, status and revealed preferences. news about competitors on
reliability. the Internet and developing
Such customer data is stored competitor profiles. Tell
The research might show in a data warehouse. A sam- employees who face competi-
that the average consumer ple of this data is put into a tors to check in with this per-
would position Jaguar as data mart and analyzed by son to be briefed on how the
high in status, but medium skilled data miners. The data competitor thinks.
in reliability. By viewing all miners are often able to spot
the cars in the perceptual new segments that can rep- Another solution is to hire
mapping space, one can dis- resent a new opportunity for people away from your
cover which cars are the clos- the company. Or they can major competitors. This
est competitors to a specific spot trends in products, fea- should not be done to steal
brand. tures, or services that might secrets that belong to the
alert them to new offerings. other companies (which is
Companies can also use a They can also test the effec- unlawful) but to get to know
number of techniques to tiveness of predictive analytics how the competitor thinks
assess consumer preferences. in reaching the best prospects. and acts.
Among the simpler approach-
es are consumer ratings and ■■ You should also monitor
rankings. A more sophisti- every new technology that
cated approach is conjoint 3. YOUR COMPANY NEEDS might hurt your business,
analysis, where consumers TO BETTER DEFINE ITS because there is no greater
rank their choices among a COMPETITORS AND MONITOR threat to many companies
hypothetical set of fully THEM than a new or better techno-
described concepts. logical advance. View these
The third deadly sin occurs threatening technologies as
Their choices can be ana- when you need to better investment options. Adopt
lyzed to reveal the relative define and monitor your the maxim: "Every company
importance they place on competition. Danger signs should cannibalize itself
each attribute, which guides include: before someone else does."
the company to know which
concept would be the most • Focusing on the wrong There’s a story about the
successful. competitor. manager of General Electric’s
vacuum tube division, who
Consumer data can also be • Lacking a way to gather came into his boss’s office
analyzed by regression, dis- and distribute competitive boasting of having increased
criminant, and cluster analy- intelligence. the business by 20 percent.
sis methods to predict how His boss fired him. "You
likely consumers are to For instance, while increased the vacuum tube
respond to different stimuli, McDonald’s would correctly business because our com-
such as prices, features, and name Burger King and petitors went out of business.
so on. Predictive analytics Wendy’s as its main competi- That was easy. What you
are used by direct mailers to tors, it would be helpful for should have done is gotten us
select the prospects who have them to also include Taco into the transistor business.
the highest probability of Bell and Subway — and You kept us in the past when
responding positively to an include supermarkets that you should have prepared us
offer. have added prepared foods. for the future."

Companies are also increas- But once you’ve identified You should also prepare
ingly gathering information your competitors, how do you offerings similar to those
about a customer’s past pur- monitor their resources, of your competitors.
chases, demographics, and strategies, and practices? Consider the Austrian crystal

BUSINESS BOOK SUMMARIES 5


firm Swarovski. One of its To solve this problem, begin Also, you may need to man-
divisions makes fine lead by moving from zero-sum age supplier relations bet-
crystals for chandeliers. thinking to positive sum ter. Seek the best suppliers
Their crystals are the finest thinking. and reward them at a level
and the most expensive. that will bring forth their
However, a European com- In earlier times, a busi- best efforts. The old game —
petitor emerged who charged nessperson thought that the using three suppliers in a
20 percent less than size of his pie was fixed. His category, giving 60 percent to
Swarovski and then an conclusion: He could gain the lead supplier, 30 percent
Egyptian competitor emerged the most by paying his part- to a second supplier, and 10
who charged 50 percent less. ners — including employees, percent to a third supplier —
suppliers, and distributors — is giving way to choosing one
What should Swarovski do? the least. This is zero-sum excellent supplier. The auto
The easy way out is to lower thinking. Today there is industry has moved in this
its price, but that would cut growing evidence that your direction. The company and
into profits. A better answer economic results will vary its supplier partners co-invest
is to use strong pull branding with the manner in which in each other and act as a
to get hotels and homes that you treat your partners. winning team in designing
buy chandeliers to insist on and making cars. This level
Swarovski crystal. A still Fred Reichheld, in his book of partnership can increase
better answer is to show Loyalty Rules!, describes the company’s quality, pro-
chandelier makers or hotels many successful companies ductivity, and innovation,
how they can save money or that reward their employees, while reducing costs.
time using Swarovski crystal suppliers, and distributors
because it doesn’t have to be generously. This creates a Finally, you may need to
cleaned as often or it can be larger pie, including the manage distributors and
mounted quickly with a spe- share that goes to your com- dealers better. The key is
cial Swarovski patented pany. Your company will to get them to place a high
process. Maybe the best attract better and more moti- value on their relationship
answer is for Swarovski to vated employees, suppliers, with you and to put out
buy the European and the and distributors and they special effort on your behalf.
Egyptian competitors, or to will manage as a team to Much depends on the terms
start lower-end businesses so outperform the competition. of engagement you set with
that the crystal buyer can buy them. Caterpillar believes
"good, better, or best" crys- Another solution is to man- that dealers with whom they
tals depending on his budget. age your employees better. forge close ties can serve as
Employees work best when sources of market informa-
■■ they are well-chosen, well- tion and intelligence, as
trained, well-motivated, and proxies for customers, and as
4. YOUR COMPANY HAS well-respected. This doesn’t problem solvers. Its dealers
NOT PROPERLY MANAGED happen when a firm just hires play a vital role in almost
ITS RELATIONSHIPS WITH people, gives them little or no every aspect of the business,
ITS STAKEHOLDERS training, gives them little lat- including product design and
itude in decision making, and delivery, service, and field
The fourth deadly sin is that frequently criticizes their work. support. Dealers can be
your company has not man- Such workers can easily much more than a channel to
aged its relationships with become in-company saboteurs. customers.
stakeholders well. Signs of
trouble are: Employees should not be ■■
hired until senior manage-
• Your employees are not ment has clearly defined the 5. YOUR COMPANY IS NOT
happy. company’s values, vision, GOOD AT FINDING NEW
mission, positioning, and tar- OPPORTUNITIES
• You have not attracted get customers. Then the
the best suppliers or company can search for the The fifth deadly sin is that
distributors. right people, train them your company is not good at
appropriately, empower finding new opportunities.
• Your investors are them, and know they will The danger signs are:
unhappy. "live the company’s brand."

6 AUDIO-TECH
• Your company hasn’t the Valley with new ideas, inventing a hotel that rents
identified any exciting especially for starting dot- berths, not rooms, at a low
new opportunities in coms. Venture-capital firms price.
recent years. abounded to lend money to
people with superior ideas, Companies can also use
• The new ideas it has and the Valley attracted group or individual creativity
launched have failed. many talented people who techniques to stimulate new
could write software and ideas. These include brain-
The solutions are to set up a implement ideas. storming and several other
system for stimulating the techniques.
flow of new ideas from The implication is that com-
your partners and to find a panies need to duplicate Most companies search for
way to use creativity sys- Silicon Valley internally. The new ideas by starting with
tems for generating new company should place a high their current product and
ideas. value on new ideas and facil- varying it in some way. For
itate their collection and example, a cereal company
Some companies believe that evaluation. The better ideas will add raisins or nuts or
there are no new opportuni- should draw on an internal change the package size.
ties. They say their industry pool of money to facilitate This results in line extensions
is mature, or that they are research and development. or brand extensions added to
selling a commodity. But it’s The best ideas should then the cereal aisle in the super-
only that their beliefs are be assigned to the right tal- market. Their competitors
getting in the way of their ent to develop and launch do the same. The cereal
imagination. For example, them. aisle gets longer, but not
Starbucks didn’t see the more profitable. Each prod-
coffee market as mature. To manage the idea flow, the uct variant draws a smaller
company should appoint a number of customers who
No company has to go with- high-level executive to be the defect from the larger-selling
out new ideas. First of all, Idea Captain. He should brands.
the company’s employees form an Idea Committee with
probably have many ideas for representatives from each Kotler calls this vertical mar-
improvement. All they lack major department. Everyone keting. Its three techniques
is a place to send these ideas in the company should be are:
and the motivation to send encouraged to send ideas to
them. the committee. Everyone 1. Modulation, as when a
submitting an idea will be juice manufacturer
Second, the company’s sup- told of its fate. The strongest varies the sugar content.
pliers, distributors, advertis- ideas that are eventually
ing agency, and other partners implemented successfully 2. Sizing, such as when
probably could suggest many should carry rewards to the potato chips are offered
new ideas. people who suggested them, in several sizes.
either with money, vacations,
Third, there are systematic or other tangible rewards. 3. Packaging, as when the
ways to help employees For example, Kodak pays same chocolates come in
generate new ideas. $10,000 each year to its different containers.
employees who have con-
In an excellent article called tributed top money-making The main problem with verti-
"Bringing Silicon Valley or money-saving ideas. cal marketing is that this
Inside," Gary Hamel presents leads to a hyper-fragmented
one recipe for generating suc- Many of the best ideas will market where few products
cessful new ideas. Silicon come from observing major have the volume to make a
Valley, he said, scored its suc- shifts in the market environ- lot of money.
cesses because it was the site ment. These shifts may be
of three markets: an idea political, economic, social, Companies need to make use
market, a capital market, and technological, or environmen- of an alternative idea-gener-
a talent market. tal. For example, one compa- ating process that Kotler
ny responded to an economic calls lateral marketing.
Many creative and entrepre- trend — the high price of Lateral marketing is to think
neurial people poured into hotel rooms in Tokyo — by of your product in relation to

BUSINESS BOOK SUMMARIES 7


another product, service, or and threats. This leads to too many services free.
idea. setting the right objectives.
A strategy is formulated that • The company is poor at
For example, gas station plus promises to achieve the cross-selling products
food store equals convenience objectives. Tactics are devel- and services.
store. Audio plus portability oped that flesh out the strat-
equals Walkman. Café plus egy. The tactics have costs To solve this problem, use a
computers equals cyber café. that add up to the budget product tracking and
request. Controls are put in evaluation system to distin-
Lateral marketing has great place to check on whether guish strong products from
potential to create new prod- the plan is delivering the weaker ones and make
uct categories, new markets, objectives or whether changes appropriate decisions.
or new marketing mixes. are needed in mid-course. Despite the explosion of
But in truth, a company product varieties, many of
needs to master both process- Senior management should them lose money.
es, vertical and lateral mar- also establish flexible bud-
keting, to be successful at geting. Ask managers what For example, in 1999,
innovating. they can accomplish with 20 Unilever found that 50 of
percent more money. Each 1,600 brands — or 3 percent
■■ manager would have to — accounted for 63 percent of
describe how he would use their revenue. Unilever
6. YOUR COMPANY’S the extra money and how identified 400 of its strongest
MARKETING PLANNING much he thinks it would brands, calling them core or
PROCESS IS DEFICIENT increase his sales and profits. power brands. These brands,
Ask the same managers such as Dove, Lipton, and
The sixth deadly sin is that what would happen to their Hellmann’s, were able to
your marketing plan is defi- sales if their budgets were support more line, brand,
cient. The danger signs are: reduced by 20 percent. channel, and geographical
extension. The other 1,200
• Your marketing plan for- Using all this information, brands would be reduced in
mat does not include the the company can allocate number — through sale, liq-
right components or money to those who can do uidation, or combination.
logic. the best with their adjusted Ultimately, Unilever would
budgets. The workability of sell fewer brands but make
• The planning software flexible budgeting depends more money. This refocusing
does not allow you to on the credibility of the esti- on power brands is also going
simulate the impact of mates. After repeated use of on at Procter & Gamble,
alternative strategies. this system, it will become Nestle, Heinz, and several
clear which managers can other companies.
• The plan does not consider competently forecast results
contingencies. and which ones are not to be Another solution is to offer
trusted. and price services at dif-
The solution includes estab- ferent levels. Don’t give
lishing a standard plan ■■ away free services that cus-
format. A marketing plan tomers take but don’t value
should string together the 7. YOUR COMPANY’S or even use. This means the
following components: situa- PRODUCT AND SERVICE company is wasting money
tional analysis; strengths, POLICIES NEED TIGHTENING on services that are not val-
weakness, opportunities, and ued. And don’t give away free
threats; major issues; objec- The seventh deadly sin is products that the customer
tives; strategy; tactics; budgets; when your firm’s product and would have been willing to
and controls. service policies need tighten- pay for. Instead, establish
ing. The danger signs are: different customer segments,
Make sure that each stage some of which have to pay
follows from the previous • The firm has too many for the service and others
stage. The situational analy- products, and many are that will get the service for
sis leads to sorting out the losing money. free.
company’s major strengths,
weaknesses, opportunities, • The firm is giving away In addition, it’s important to

8 AUDIO-TECH
improve the processes than other brands. Remember that advertising
for cross-selling and is a cost that the customers
upselling. Some salespeople • Your company allocates pay, and maybe many of
resist mentioning other prod- the same amounts of its them would prefer a lower
ucts of their company. They budget to the same mar- price. Given that the aver-
may be happy making the keting tools every year. age GM car consumes $3,000
sale and don’t want to in advertising cost, how
appear pushy. They may not • You do little evaluation many more cars could GM
make much or any commis- of the ROI impact of your sell if it reduced its price by
sions on other products. promotional programs. $3,000 a car?
They may not think the
other products are of suffi- The solution is to improve On the other hand, some ad
ciently high quality to satisfy your brand-building campaigns are effective and
the customer. strategies and measure boost the company’s sales.
the impact on your brand People wouldn’t have been so
The same problem occurs in equity. Too many marketers excited to pay a higher price
the professions. A CPA may think that the magic bullet is for Absolut Vodka if it wasn’t
not recommend that his advertising. After all, adver- for its brilliant ad campaign,
client use his firm's manage- tising is designed to build but how many campaigns are
ment consulting services. In more awareness, knowledge, brilliant? Most are, at best,
any case, a company with a interest, and — ideally — average. Why? The ad
range of products needs to preference. But a brand is agency would claim that the
supply training and incen- built by many communica- brand manager wants to play
tives to encourage its staff to tions tools, as well as the it safe. The brand manager
promote other products that quality of the product and its would claim that the ad
might interest the customer. packaging, the reliability of agency didn’t come up with a
the shipping, and many other great ad idea.
Upselling has two meanings. factors. Among the commu-
One is inducing a customer nication tools that create Ads work better when they
to buy a more expensive ver- brand impressions are sales- are placed in the media that
sion of a product than the one people, trade shows, and word- reach the target market.
he came to see. The other is of-mouth from customers, Advertise in the magazines
to approach a customer some competitors, and product read by fishermen, hobbyists,
years after a purchase and reviewers. mechanical engineers — and
suggest that it is time to the ads will be read if you’re
replace the old product with A brand evokes a set of cus- advertising products that are
a much better one. Your tomer expectations. Brand interesting to them. The ads
staff needs skills in both equity results from how well usually carry response cards
upselling and cross-selling. customer expectations are for readers to get further
fulfilled. The higher the information or place orders,
■■ satisfaction, the higher the making ROI measurement
brand equity. much easier.
8. YOUR COMPANY’S
BRAND-BUILDING AND To build brand equity, shift There is a growing belief that
COMMUNICATIONS EFFORTS money into marketing public relations deserves more
ARE WEAK instruments of greater of the advertising budget. It
effectiveness. Most compa- is a better audience-building
The eighth deadly sin is nies see spending money on tool for high-tech products, for
when your brand building costly ads as a form of insur- which buyers want indepen-
and communication skills are ance that the company will dent professional opinions
weak. The warning signs be remembered, even when it before they choose a brand.
include: has nothing new to say or no The maker of a high-tech
new way of saying it. The real product should first identify
• Your target market does question companies should ask opinion leaders, such as
not know much about is whether the same amount experts and columnists who
your company. of money would work better review and talk about new
if spent in improving the products. Volvo launched its
• Your brand is not seen as product’s quality of customer XC90 SUV with a PR cam-
distinctive and better service. paign that created a huge

BUSINESS BOOK SUMMARIES 9


buzz that resulted in pre- 9. YOUR COMPANY IS NOT evolved when Michael Treacy
sales of 7,500 vehicles and WELL-ORGANIZED TO CARRY and Fred Wiersema wrote
two prestigious awards before ON EFFECTIVE AND The Discipline of Market
any money was spent on ads. EFFICIENT MARKETING Leaders. They distinguished
between three basic position-
Companies who use direct The ninth deadly sin is when ings: product leadership,
marketing enjoy considerable your firm is not well orga- operational excellence, and
advantages. They don’t pay nized to carry on effective customer intimacy.
a commission to intermedi- and efficient marketing. Companies cannot excel in
aries, nor do they lose sight all three ways because it
of who is actually buying The signs of this include: would be costly and because
their products. Dell Computer the three positions contain
became the world’s leading • The head of marketing contradictions. To succeed,
PC manufacturer by selling does not seem very effec- you must lead in one of the
direct. tive. three areas, and be at least
average in the other two.
Initially, the company took • The staff lacks some
orders by phone, but today it marketing skills needed Brand asset management is
gets virtually 90 percent of in the 21st century. closely related to positioning.
the orders on-line. Customers Brand names such as Coca-
specify what features they • There are bad vibes Cola, Sony, and Disney can
want, and Dell immediately between marketing and be extended into new products
orders any components it the other departments. and services, but someone has
needs from suppliers. It to police their use. None of
assembles the new computer The solutions begin with these firms can let a disap-
and ships it in a few days. appointing a stronger pointing product be launched
leader of the marketing under its name. These
Meanwhile, Dell receives department. The chief mar- names are well-positioned,
payment immediately, but keting officer must gain the and deviations from the posi-
doesn’t pay its suppliers for respect of the CEO and tioning center of these
60 days, resulting in money everyone else in the company brands must be avoided.
being made from the float as by making accurate marketing
well as from the price. Dell forecasts, and by demonstrat- Customer relationship
has inspired more companies ing how marketing expendi- management can improve a
to move from "producing for tures are contributing to company’s targeting preci-
stock" to "producing for return on investment. sion. Managers can access
orders." the customer database for
Another way to solve this market planning, merchan-
Finally, it’s critical to problem is by building dising, product development,
require marketers to sup- new skills in the market- sales analysis, cross-selling,
ply estimates of the finan- ing department. These and so on. CRM skills are
cial impact of their spend- skills include positioning, rapidly being added to mar-
ing requests. At Coca-Cola, brand asset management, keting departments to create
management is beginning to customer relationship man- competitive advantages.
insist that these estimates be agement, partner relation-
supplied, before and after the ship management, Internet Similarly, partner relation-
expenditure. They know marketing, public relations, ship management becomes
that marketers are only mak- and profitability analysis. critical as more companies
ing a guess, at best, but perform more of their activi-
Coca-Cola’s real purpose is to Positioning your product ties through partners. The
produce a financial mindset means ensuring that it owns firm needs to periodically
in its marketers. The more a word in its category: Volvo take the temperature of each
that marketers think in owns "safety" and BMW owns major partner and respond to
financial terms, the better "driving performance." A new any sign of dissatisfaction or
the dialogue that will take brand should offer an impor- distancing.
place between the marketing tant new benefit and there-
and financial people. fore create a new category. Internet marketing is well-
established, but there are
■■ Positioning theory further still opportunities that many

10 AUDIO-TECH
companies have not yet accountability for their job candidates, procure sup-
tapped. These opportunities budgets. plies, and conduct market
include market research, research.
competitive intelligence, con- ■■
cept and product testing, Another solution to the prob-
coupon and sampling distrib- 10. YOUR COMPANY HAS NOT lem of under-using technolo-
ution, product customization, MADE MAXIMUM USE OF gy is to improve your sales
and employee and dealer TECHNOLOGY automation system. The
training. system should enable your
The tenth deadly sin is when sales force to answer ques-
Public relations is becoming your firm has not made max- tions in the customer’s office
more prominent. Tom imum use of technology. The and empower them to make
Harris’s book The Marketer’s signs include: decisions on behalf of the
Guide to Public Relations company.
underscored how many PR • The company has made
campaigns, rather than minimal use of the You should also use more
advertising, deserved the Internet. market automation. A
credit for creating many number of routine marketing
product successes. • The company’s sales decisions can be better han-
Companies need to add PR automation system is dled by software than by
skills in the marketing outdated. company personnel. Airlines
department, and not rely on use yield-based pricing soft-
begging and borrowing them • The company has not ware to help maximize their
on an as-needed basis. introduced any market passenger load factor. The
automation. software determines when
Profitability analysis is the price of a seat should be
another crucial skill. Most • The marketing group lowered before a flight, and
companies do not know their lacks decision-support sends the information to
real profitability by locations, models. travel agents and certain
products, customers, and customers.
channels. For example, at Many companies think they
many companies, the largest are using the Internet Don’t overlook the need to
customers are not the most because they have estab- develop decision support
profitable customers. Large lished a Web site and they models. Firms are experi-
customers often demand the sell on-line. But this repre- menting with marketing mix
lowest prices and consider- sents only 10 percent of the modeling that combines the
able services. Some mid- opportunities afforded by the separate and collective
sized customers are more Internet. effects of a marketing mix on
profitable, measured as a sales and profits. A company
rate of return on the cost of Therefore, solving this prob- can get help in developing
serving them. lem begins with making these and other models from
more use of the Internet. a variety of marketing
The point is that two cus- Among the ways to do this resource-managing vendors,
tomers spending the same is to create an effective and such as Veridiem and
amount may yield different user-friendly Web site. Marketing Management
profits. Robert Kaplan and Survey your customers and Analytics.
Robin Cooper outlined a cor- Web site experts to get their
rect approach to accounting for suggestions for improve- ■■
profitability with their ments. Also, assess the effec-
Activity-Based Costing tiveness of your intranet for t’s clear that the theory of
accounting method. This
requires salespeople to report
communications within the
company, your extranets for
Ipractice
marketing is solid, but the
of marketing leaves
how much time and expense linking with suppliers and much to be desired. In this
each customer consumes, dealers, and your on-line summary, we have explored
much like lawyers bill clients training systems for keeping the 10 deadly sins of market-
for each half-hour of time your employees’ skills up-to- ing as practiced today. We
and expense. All told, mar- date. In addition, you should have described the signs of
keters must add profit mea- take advantage of the power each sin, and proposed the
surement to increase their of the Internet to recruit new solutions that can fix them in

BUSINESS BOOK SUMMARIES 11


your company. 3. Develop a good under- service mix.
standing of your major
Now it’s up to you. Applying competitors, and their 8. Create strong brands by
the solutions will turn the 10 strengths and weaknesses. using the most cost-effec-
sins into the 10 command- tive communication and
ments for attaining high 4. Build partners out of promotion tools.
marketing productivity and your stakeholders, and
profitability. Here are the 10 generously reward them. 9. Build marketing leader-
commandments: ship and a team spirit
5. Develop systems for among your various
1. Segment your market, identifying and stimulat- departments.
chose the best segments, ing opportunities, rank-
and develop a strong ing them, and choosing 10. Constantly add technolo-
position in each segment. the best ones. gy that will give your
business a competitive
2. Map your customers’ 6. Manage a marketing advantage in the market-
needs, perceptions, pref- planning system that place.
erences, and behavior, leads to insightful long-
and motivate your stake- term and short-term
holders to obsess about plans. ■■
serving and satisfying
the customers. 7. Exercise stronger control
over your product and

ABOUT THE AUTHOR

Philip Kotler is the S.C. Johnson Distinguished Professor of


International Marketing at Northwestern University’s Kellogg School of
Management and the author of thirty books, including Marketing
Insights from A to Z and Lateral Marketing.

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Ten Deadly Marketing Sins, summarized by arrangement with John Wiley & Sons, Inc., from Ten
Deadly Marketing Sins: Signs and Solutions by Philip Kotler. Copyright 2004 by Philip Kotler.

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