5 marketing concepts that need to be reexamined

ILLUSTRATIONBY RUTH MACAPAGAL

There are fundamental concepts in marketing that remain relevant despite technology and changing consumer behaviors. This is important since what we know strongly influences what we do. Marketers (and entrepreneurs) need not wait for the consequences of a wrong action to influence new knowledge.

Here is a list of five concepts marketers should look into to check if they have the right understanding of the business of marketing.

1. Needs and wants of the customers have to be identified

First, most customers don’t even know what they actually need or want. They may know what they dislike but when it comes to new product design, it is still the domain of a company’s technical group, usually influenced by the company’s visionaries.

For example, would the idea of an electronic blood pressure monitor come from hypertensive patients? Unlikely. The most they can do during the dominance of the manual blood pressure monitor era is to cite the pain points of needing to visit doctors, and having to wait just to get a blood pressure reading. Patients have no technical expertise to create an innovative solution that is totally different from the existing practice.

The exception is lead user innovation, a rarely studied type of innovation where the users create solutions to their own problems. The World Wide Web of Tim Berners-Lee is an example. It was originally conceived in 1989 and created in 1990 to meet the demand for automated information sharing among scientists in universities and institutes around the world. Another example is in banking, where 55 percent of today’s computerized commercial banking services were first developed and implemented by nonbank firms for their own use (source: “Users as Service Innovators,” 2010). It is possible that both needs and solutions already exist elsewhere.

Secondly, since many needs are latent (or problems customers don’t even realize they have), these needs can be extracted from different non-user groups. Instead of the usual market-driven strategy, what is needed is market-driving strategy which focuses on the underserved and unserved markets. For instance, participants are expected to have done their oral hygiene ritual before attending our live conferences or seminars inside hotel venues—at least that is what they tell us when asked. But they seldom bring their oral hygiene kit for use after lunch; instead, they might opt just to take the mints or Mentos conveniently provided by hotel venues to freshen breath. The market penetration of toothpaste is 100 percent before arrival at the venue and only less than 15 percent after lunch in this context.

Some latent needs are aspirational, actually a desire, such as low-income workers wishing to regularly travel, but there is no product or service for them. This cannot be understood or discovered by using traditional marketing lenses, but by using a business model lens. A case in point is Gawad Kalinga, which was able to give hundreds of thousands of homeless people new homes with the business model of making housing projects part of corporate social responsibility of companies, with recipients themselves helping in the construction to bring down costs. In fact, traditional marketing principles will tag the homeless as a nonmarket since they have no purchasing power. This is a common marketing bias that shows ignorance of possible business model designs that can overcome the preconception.

Third, consumers do not buy based on logic alone as emotions play a big part. That part is harder to capture accurately during research.

2. Gain growth and market shares

Growth and market shares are objectives in every company’s plan. Achieving these two key mandates can be problematic if not analyzed well.

First, growth in revenues can be attained either without new customer acquisition, or too much from new customer acquisition without reasonable repeat purchase level or retention. These imperatives of acquisition and retention must be explicitly stated to prevent gaining growth targets that can affect the numbers in subsequent years.

Second, attaining growth and market shares may not be at a profitable level or done at an artificial level such as via inventory loading, pantry loading, excessive discounting or additional branch opening, which means increasing numbers but having the same customer base, etc.

Third, a shorter term market shares orientation needs to be balanced with longer term emphasis on increase in market penetration. Otherwise, the marketing department would end up being no more than a sales promotions department trying to win short-term market shares. This is dangerous as some gains can even be reversed and affect the business for the worse in the medium and long term.

3. Market segmentation is key

Marketing’s core strategy begins with a defined market segment before proceeding with other marketing activities. Here are reasons why this concept is problematic.

For one, each market segmentation and subsegmentation leads to making the market size smaller, and this may affect a firm in terms of lack of scale and inefficiencies. For example, most mobile phone companies flooded the market with different models catering to different preferences of the consumers. Apple did the opposite when they launched their single model iPhone in 2007. They then released updated new phone models yearly, and have sold over 2 billion iPhone units to date.

Secondly, the same customers can belong to not just one but multiple market segments.

Thirdly, some products like Safeguard or rubbing alcohol are used by everybody with different demographic profiles, from young to senior citizens, united only in their benefit commonalities.

Fourth, it is not necessarily in choosing the specific market segment that companies can win, but in creating innovative moves that change the rules in the industry. Finding commonalities instead of differences can in fact expand instead of shrink market size.

For instance, Cebu Pacific Air launched a mono class low-cost carrier attracting people who prefer to pay only what they will use during the flight, like meals or a second luggage—uniting the price conscious individual travelers, corporate travelers with budget cuts, the practical travelers, the light travelers and the like.

4. Positioning. Positioning!

Positioning is what you want your brand to be thought of by the consumers.

Here, three things need to be emphasized.

First, it is a good concept but works to the advantage of brands with tons of money to communicate. After all, positioning cannot be executed without communication.

Second, it can be countered with disinformation as we have seen during elections or in social media, bringing up ethical issues in positioning and repositioning.

Third, strategic innovation can make a good positioning obsolete. Kodak wanted to be remembered as a “memories” company which was effective in its stronger emotional component but social and technological changes have made films and film developing kiosks obsolete as people store most of their photos on their phones or their laptops.

5. Marketing is about uniqueness

There are three issues about this myth.

First, uniqueness has traditionally been part of the marketing mix equation but most brands try to be unique in the same way. For example, they may launch a change in color, font, packaging or the advertising to make it seem different, but these are essentially what competition is doing as well, and there is no real marketing innovation.

The argument is sound that being unique in brand distinctiveness can last longer than in product differentiation. But there is another way to differentiate in a more sustainable way, and that is through business model differentiation that is easily overlooked but when done, is harder to match by industry leaders.

Case in point is Amazon. After attaining the network effect, it became the successful pioneer. They have challenged assumptions about how their industry operates and created new boundaries. Look at Apple when they introduced the iPod and iTunes. Even Spotify saw a blind spot in the iPod business in that consumers did not have to buy or “own” a song collection when they want to listen to music, learning from the radio business.

Secondly, there is a prerequisite to uniqueness, and that is relevance. Marketers cannot push for differentiation without it being relevant to their target market; otherwise, they become uniquely irrelevant. For example, marketers launch sales promotions for the sake of having a marketing activity, only to encounter problems with stock availability of the product being promoted. The problem of trying to be unique is your brand or company has to be believable in claiming that uniqueness.

Thirdly, true uniqueness is the ability to solve the trade-off between value and affordability from the perspective of the customers, as value proposition is the combination of product and price. The air conditioning unit of my BMW would not get cool during traffic, and the customer service guy of my repair shop tried to keep me posted regularly of its status. While updates are appreciated, they also quoted close to P100,000 to try to fix the problem, and if they can’t, some P200,000 will have to be added, hopefully to solve it once and for all. I wasn’t making downpayment for a new car, I just wanted to fix the air conditioning of my car that was averaging just some 10 kilometers a day usage.

Designing relevance, uniqueness and believability in your value proposition can avoid buyers’ remorse, as well as encourage a higher customer lifetime value.

And so it is good for marketers to always be reminded of five truths

1. Keep learning as new things, new ideas, new concepts arise. Sometimes, we also need to unlearn in order to relearn. Questions are the starting point to change and progress.

2. Understand the limitation of what is usually being practiced and do not assume everything is gospel truth. You may end up spending unnecessary money practicing unsound principles.

3. The marketing plan must incorporate category growth strategy mastering the concept of market-driving strategy in order to be a complete plan.

4. Beyond marketing, marketers must learn the entire business model concept with 11 interconnected building blocks, and marketing is already 50 percent of a business model.

5. Value chain and innovation must be incorporated into regular conversations about business, and must clearly be articulated in the building blocks of the business model. —contributed INQ

Josiah Go is the chair and chief innovation strategist of Mansmith and Fielders Inc. Visit www.mansmith.net for live seminar schedule of over 70 courses in marketing, sales and innovation, including market driving strategy and business model innovation.