Market-driving strategy and innovation

There are many management concepts to choose from. For instance, core competency espouses that the company’s assets or strengths be the unit of analysis while industry analysis advocates that competition be the unit of analysis.

Then there is also market-driven strategy that promotes customers in the center of strategy while market-driving strategy focuses on underserved and unserved markets as unit of analysis for strategy.  A popular concept, Blue Ocean Strategy, is considered a subset of market-driving strategy since it entails two additional requirements,  other than new demand, that of creating differentiation and being low-cost.

One critique about contemporary marketing practitioners is that they are actually market-driven strategists, who may not fully understand the principles, frameworks and concepts of market-driving strategy to grow the brand and the business long-term, hence, their tools are often short-term, brand switching tactics, designed to gain market shares.

If the company’s reward system is aligned with desired strategic thinking, then market penetration, in addition to market shares, would have to be imposed by management as part of its key result areas. Without a market-driving strategy, a marketing plan focusing solely on the served market is incomplete as it risks losing the underserved or unserved markets, many times, even bigger than the current served customers.

In Mansmith and Fielders Inc., market-driving strategy is defined as embracing innovative changes in the logic of industry and business system to grow its profit and industry’s demand from underserved and unserved markets. The goal is not incremental but strategic growth and has three different levels:  level 1 is about a major change in value proposition more than a major change in business system; level 2 is about a major change in business system more than a major change in value proposition; while level 3 is about a major change in value proposition coupled with a major change in business system.

Selecta ice cream by Walls is an example of level 1 market-driving strategy.  Selecta is the dominant brand of ice cream in the Philippines, but it was not so a few years ago, as it was neck-to-neck with Nestle.  Problematic with declining industry demand, the marketers went on to ask mothers what they liked to serve during birthdays and what they actually served.  The result of their insighting led them to launch Selecta’s 3-in-1 ice cream, combining three of the favorite ice cream flavors in a tub at an affordable price. With this huge success that turned around shrinking industry demand, they even extended to four flavors with 3-in-1 plus 1, wanting to own the term “3-in-1.”  Meantime, Nestle was not able to immediately respond with the new value proposition of Selecta, as they did not have the technology to do 3-in-1. Mothers were happy they were able to serve what they really liked to serve, children were happy with each of their favorite flavors, while fathers were happy too with a cost-saving solution, improving not just company’s sales but also industry demand in the process, attracting many lapsed customers to return.

Waters Philippines is an example of level 2 market-driving strategy where there is a major change in the business system more than the value proposition.  (Disclaimer:  Waters Philippines is owned by the author.) It markets Waters Bio Mineral Pot, a premium home water purifier—mineralizer—alkaline maker that is leader in its segment. Waters used to be sold in appliance and other retail stores on cash basis in the late ’80s and early ’90s, however, its growth was constrained with its inability to explain the product features and benefits of the high end products in stores. This led to stores requiring them to go on promotional sale, with the additional problem of the fixed cost of hiring its own promo girls and the automatic termination of these promo girls in five months just when their competency is peaking. Waters then decided to create its own independent direct sales force who were able to go direct to the customers (instead of waiting for them to go to the retail stores) to promote the product, backed with installment plans that nearly matches what consumers typically pay monthly for water delivered by their water refill stations. The installment plans allowed more affordability for the consumers while enhancing the business opportunity for its sales network. Today, Waters Philippines is expanding to Indonesia to tap into a bigger combined market.

Inquirer Libre is an example of level 3 market-driving strategy, which saw a major change in value proposition coupled with a major change in business system.  As the leading broadsheet in the Philippines, Inquirer wanted to broaden its readership base to include younger consumers, so in November 2001, it launched Inquirer Libre.

The Inquirer’s mother brand gave the new tabloid-size newspaper immediate credibility among its train riders.  Libre (meaning “free” in English) is a complimentary morning daily that is heavy in entertainment and with a lot of light, human interest articles designed to be read in 15 minutes.  Instead of selling the newspaper, it gave away Libre for free.

Instead of tapping newspaper dealers, it went straight to consumers by way of self-service pick-up stations, hence, avoiding traditional trade margins and sales returns (after all, it’s a free paper).  Instead of showing half naked women targeting blue-collar workers, it decided to be a wholesome paper targeting the young white-collar workers.  Hence, instead of the usual readers in their 30s to 40s, Libre readers are mostly in their 20s not known to be newspaper buyers.  This is an example of category point-of-entry marketing that will eventually turn some of the current Libre readers to broadsheet readers in the future.

As can be seen from above, the three levels of market-driving strategy help companies think strategically, looking beyond the value proposition to include their value chain—instead of plainly being better, it strives to innovate by being different.

The author is chair of Mansmith and Fielders Inc. He can be contacted at [email protected]. Follow him on Twitter via @josiahgo for free daily marketing tips.