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Marketing Enters The C-suite

Five big issues facing global companies

Published: Dec 21, 2011 06:18:13 AM IST
Updated: Dec 9, 2011 12:15:03 PM IST

What sort of business worries keep senior global executives awake at night?

Right now, of course, the health of the global economy and unpredictable exchange rates are top of the list. But in my conversations with business leaders around the world, I’m also hearing that more and more marketing-related issues are taking up senior management time.

Brands, customer insights and social media are not just matters for marketing departments. They are vital business issues that are increasingly being discussed in the C-suite too.

I would highlight five issues in particular.

1. Customer focus
Although not a new issue, this is still high on everyone’s agenda. And it will stay there because—as we all know—implementing a customer-centric culture is not simple. It’s easy to say ‘I love my customers,’ but it’s trickier to make it happen. Having a smart marketing strategy is not enough to gain a sustainable competitive advantage in the market. What is likely to make the difference is well-executed implementation — something companies still struggle with.

A second aspect of customer focus is to provide the “right” product or service to the market. Nobody wrote an e-mail one day to Steve Jobs saying they needed an iPhone or iPad. Similarly, very few business leaders ask themselves ‘What are my customer headaches?’ But this is such a good starting point. If you can provide a product or service that solves a customer headache, you can be sure to be on the right track.

Thirdly, in many cases companies still continue to be organized by products and not by customers. Big firms such as Nestlé are trying to change that, but much more needs to be done in this area. At the end of the day, customer-centricity is about creating the right corporate environment to ensure that everyone in the company has the incentive—not just money — to add value to the customer.

2. Polarization of segments in developed markets
Since the start of the economic crisis, consumer behaviour in developed markets has become more polarized. High-end and low-end categories are growing in volume, and everything in the middle is increasingly being squeezed. In other words, Western and Japanese companies are telling us that the consumer wants the best or the cheapest.

Look at the prices of espresso machines, for example. A few years ago they ranged from €100 to €800. Now they go from €50 to €1,350 and volumes are up at the low end and the upper end. It’s a similar story with cars, beers, ice creams or women’s underwear. Victoria’s Secret is booming, cheap imports from India and China are flooding the markets, and all the brands in the middle are getting squeezed. The value proposition of mid-range products is less and less attractive, due to the fact that their quality is not a differentiator any more. Consumers are happy with “good enough” quality products at attractive prices.

3. Branding and innovation
In a world where every Chinese factory is already ISO-certified, your ultimate differentiator is your brand. Brands are built with many components, but a key element of brand strategy is innovation. Indeed, innovation is the bloodstream of a great brand. If you don’t innovate, you run the risk of being quickly perceived as “dusty” and the competition will leapfrog you.

Branding is also the key to building customer loyalty. While in the 1990s, measuring customer satisfaction was on every CMO’s agenda, many have come to realize that customer satisfaction alone is not enough anymore. This is the reason more and more companies (and IMD too) have embraced the concept of the NPS (Net Promoter Score).

You might like driving your Toyota very much, but the ultimate question is whether you would recommend Toyota to a colleague or friend. This willingness to recommend is the strongest indicator of your own intention to buy Toyota again, and it’s the best way of measuring consumer loyalty to a brand.

Since competing on price is a difficult strategy to sustain, the other challenge is to build your brand with as many emotions as possible. Without emotions, all you have is a product. The more emotion you put into a product, the more iconic the brand will become.

4. Challenges from new global players
The world’s centre of economic gravity is shifting from developed markets to emerging ones, and in the next 5-10 years, we will see many more global brands coming from fast-growing economies. Look at China, with AIGO (potentially the next Samsung?), Geely (the new Toyota?) and Lining (the next Adidas or Nike?). Or look at Latin America, with fast-rising brands such as La Martina in Argentina (the next Ralph Lauren?), Havaianas in Brazil (the next Crocs?) and Kidzania in Mexico (the next Disney?).

Emerging-market brands need to provide something that western brands do not offer, which is very challenging; but it is happening as demonstrated by the examples above. Emerging brands are starting to challenge their more developed rivals, not only in the value segment but also in the premium space, and with a very focused value proposition. They are especially competitive in areas such as technology and fashion, where tastes change quickly and people are always looking for new products and lifestyles.

5. Social media and the digital consumer
Many companies are struggling to understand and exploit social media. Even big and famous FMCG firms struggle to really understand what is going on. This is partly because many CMOs are often 50-plus, while the majority of social media users are teenagers. Moreover, you can’t really learn about social media by reading books, because things have already changed by the time the research is conducted and the book comes out.

What should your company do? I would suggest three things. First, get yourself involved in social media and understand the people who use them, because they are your customers and clients of tomorrow. Second, get young people to lead your efforts in social media marketing, and trust them, even if it may be a bit difficult at the beginning. Third, don’t forget that many senior consumers also use Facebook and Skype to stay in touch with their children and grandchildren.

A related challenge is how to reach digital consumers most effectively as mobile applications become more sophisticated and widespread. We are seeing more Augmented Reality (AR), where consumers can see an advertiser’s video by downloading a mobile app and using it to scan a code on a traditional print ad. IMD is one of the global AR pioneers, and we’re working on a number of innovative developments in this area.

These are exciting and challenging times, and companies that can get to grips with these five issues will certainly earn themselves a big advantage in the marketplace.

Dominique Turpin is the Nestlé Professor and President of IMD. He co-directs IMD’s Orchestrating Winning Performance program (www.owp.ch). This article draws on comments made by Dr Turpin to CMOs from around the world who gathered at IMD in September for the 2nd annual CMO Roundtable. The next CMO Roundtable will be held at IMD on September 13-14, 2012.

[This article has been reproduced with permission from IMD, a leading business school based in Switzerland. http://www.imd.org]

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