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Transcript of © Kenneth B. Wong (Sept. 2008) Marketing Myths, Mistakes and Mystique BY: Ken Wong Queens...
© Kenneth B. Wong (Sept. 2008)
Marketing Myths, Mistakes and Mystique
BY: Ken Wong
Queen’s University
© Kenneth B. Wong (Sept. 2008)
The Great Marketing Myth
Marketing Is All About Volume
Everything we do is measured against the goal of building top line revenue
© Kenneth B. Wong (Sept. 2008)
The REALITY
3
SURVIVAL
IN A WORLD FILLED WITH
MARGIN-SUCKING
MAGGOTS
© Kenneth B. Wong (Sept. 2008)
The REAL Objective of Marketing
Price
Cost
Minus
AssetsManaged
NetIncome
DividedBy
UnitMargins
Times
UnitVolumes
Return OnInvestment
MarketShare
MarketSize
Times
4
© Kenneth B. Wong (Sept. 2008)
Four Fundamental Marketing Questions
• How marketing can IMPROVE price realization?
• How marketing can REDUCE costs?
• How marketing can BUILD profitable volume?
• Should marketing be more focused on its price-, cost- or volume-effects?
© Kenneth B. Wong (Sept. 2008)6
A Comparison of Profit Levers
Volume
Variable Cost
Price
3.3%
7.8%
11.1%
A 1% change in...
Creates a change in operating profit of ...
KW-210
(Average economics of 2,463 businesses in Compustat)
Fixed Cost 2.3%
© Kenneth B. Wong (Sept. 2008)
The Profit Dilemma
1. Nothing impacts on the bottom line more than your ability to maintain your price and your margins
2. Customers are ALWAYS asking for lower prices
3. Marketing’s pursuit of volume tends to destroy margins1. SPEND to generate awareness
2. CUT PRICE
3. OFFER TRADE PROMOTIONS
7
© Kenneth B. Wong (Sept. 2008)
Keys to Changing the Game
• Don’t Confuse “Better Value” with “Lower Price”
8
© Kenneth B. Wong (Sept. 2008)
Value is a RATIO of Quality to Price
Four ways to give better value
1. Retain Quality – Reduce Price
2. Reduce Quality a LITTLE – Reduce Price a LOT
9
© Kenneth B. Wong (Sept. 2008)
The Standard Cost-Quality Relationship
OUTPUT
INPUT
10
© Kenneth B. Wong (Sept. 2008)
Value is a RATIO of Quality to Price
Four ways to give better value
1. Retain Quality – Reduce Price
2. Reduce Quality a LITTLE – Reduce Price a LOT
3. Improve Quality – Retain Price
4. Improve Quality a LOT – Increase Price a LITTLE
11
© Kenneth B. Wong (Sept. 2008)
Why We Prefer Quality-Driven Value
Longer Strategic Window
Greater Economic Efficiency
12
© Kenneth B. Wong (Sept. 2008)
Defining “Cost-In-Use”
Interest expenses Opportunity costs Storage/handling Installation Quality control
(of your product on installation)
Tax and insurance Shrinkage Obsolescence
Training User’s labour
costs (especially if re-engineered)
Longevity Replacement/
repair costs Disposal
costs Regulatory
Cost-In-Use
KW-284
Price
=Acquisition
Costs + PossessionCosts + Usage
Costs
Paperwork Shipping time Expediting orders Cost of errors
in ordering Pre-purchase
activities Purchase
evaluation
© Kenneth B. Wong (Sept. 2008)
Keys to Changing the Game
• Don’t Confuse “Better Value” with “Lower Price”
• Focus on Marketing’s 5th P – Productivity• Find ways to increase quality without raising price• Find ways to reduce cost without destroying quality
14
© Kenneth B. Wong (Sept. 2008)
PRODUCTIVITY KEY 1:
Better Understanding of the “Economics of Branding”
15
© Kenneth B. Wong (Sept. 2008)
Pick A ONE DIGIT Number from this list…
135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808
© Kenneth B. Wong (Sept. 2008)
© Kenneth B. Wong (Sept. 2008)
Pick a Number…
135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808
© Kenneth B. Wong (Sept. 2008)
© Kenneth B. Wong (Sept. 2008)
This is the POWER of a great CREATIVE
135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808
© Kenneth B. Wong (Sept. 2008)
© Kenneth B. Wong (Sept. 2008)
Now…one last time?
135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324508132466668953124808
© Kenneth B. Wong (Sept. 2008)
© Kenneth B. Wong (Sept. 2008)
This is GREAT CREATIVE that is “ON STRATEGY”
135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324508132466668953124808
© Kenneth B. Wong (Sept. 2008)
OR Maybe this is….
2498050137254138498931421592814215928 8324257350813242438095312480883245081 1353429128398084666412342985819025140 7784190251409036582894842539048425390 0370885953304569111048931348023429858 2304529904520366666249135820953124808 0430750137254168498631421592835128392 8977132450813246666895312480808595397 1351222888398084123412342985853904842 4508110251409035582894842539012839809 1592834123405013725494842539049484253
© Kenneth B. Wong (Sept. 2008)
OR Maybe this is….
093512228883980841234123429858539048421592834123405013725494425390494842531592834121592834123405013725494842539049484253340501372549484253904948425345081102514090355828948425390128398095928341234050137254948425391592834123405013725494842535893421592834123405013725498931421594842539049484253049484253450811025140903558289484253901283980904945081102514090355828 398095928341135342912839808466641234978245313452985819025140 425390494842668419025140903658289484253904842592782453882390 17093512228880370885951204569111048931348023429782453729825815081102514423045299045203166666249135953124808978245343211334253904943204307501372541684986714215928328392713234598733
893421592834896713245081724666689581248080859539735879204131 093512228883980841234123429858539048421592834123405013725494425390494842531592834121592834123405013725494842539049484253340501372549484253904948425345081102514090355828948425390128398095928341234050137254948425391592834123405013725494842535893421592834123405013725498931421594842539049484253049484253450811025140903558289484253901283980904945081102514090355828450811025140903558289484253901283980904945081102514090355828
© Kenneth B. Wong (Sept. 2008)27
Productivity Key 1: Branding
What if it carried the logo…
Would you pay more for FP versus a private label?
How much would FP need to spend on EACH product to convince you it had those traits?
© Kenneth B. Wong (2005)
© Kenneth B. Wong (Sept. 2008)
The Real Measure of A Brand
• Volume matters BUT• Great brands enable PREMIUM PRICES• Great brands SPEND LESS
• The Real Measure of a Brand is NOT Awareness but Association
28
© Kenneth B. Wong (Sept. 2008)
PRODUCTIVITY KEY 2
Better Understanding the “Economics of Segmentation”
and how segmentation translates into branding
29
© Kenneth B. Wong (Sept. 2008)
LowerCosts
Higher Pricesand Sales
Increase"Value"
Reduce"Waste"
Add "Good"Costs
Reduce "Bad"Costs
Productivity Key 2: Focus & Segmentation
Total Costs
Higher Profits30
© Kenneth B. Wong (Sept. 2008)
Segmentation 1: “What Do We (Really) Sell”?
31
Viagra Rule People don’t buy products or services – they buy SOLUTIONS to problems
Price ceilings vary with the importance and complexity of the problem you solve
© Kenneth B. Wong (Sept. 2008)
How to improve the retail experience(sample advice)
• Personalize the experience
• Help the customer find their way
• Explain product differences
• Show them you care
• Show them why they "get what they pay for" (i.e. up-sell)
• EDI, E-tailing, etc…
Segmentation 2: Does everyone solve that problem in the same way?
© Kenneth B. Wong (Sept. 2008)
Homogenizing Customers Makes It Easier To Find Ways to Create “New Value”
REDUCEWhat factors should be reduced
WELL BELOW the industry standard?
ELIMINATEWhat factors have always
been offered but NO LONGER add value?
CREATEWhat factors have
NEVER been offered in this industry?
RAISEWhat factors should be raised
WELL ABOVE the industry standard?
NEWVALUECURVE
KW-367Source: Kim and Mauborgne, “Creating New Market Space,” Harvard Business Review, 1999
© Kenneth B. Wong (Sept. 2008)
The Bottom Line
You don’t have to be all things to all people
BUT
You better be absolutely perfect for someone
34
© Kenneth B. Wong (Sept. 2008)
PRODUCTIVITY KEY 2
Better Understanding How to Satisfy Customers
35
© Kenneth B. Wong (Sept. 2008)
Step 1: Know What Matters Most
A Trip to Disneyland
36
© Kenneth B. Wong (Sept. 2008)
Step 2: Know How Customers Measure “Quality”
House of Wong
37
© Kenneth B. Wong (Sept. 2008)38
Step 3: Walk the Talk
The Five Step “Profit Chain”
Profits grow from satisfied customers who receive service value due to satisfied and loyal employees who had proper training, coaching and support
COMPANY
EMPLOYEES CUSTOMERSInteractive Marketing
ExternalMarketing
InternalMarketing
© Kenneth B. Wong (Sept. 2008)
Becoming De-Myth-ified
1. Know What Drives Your Profitability Don’t limit pricing to a tactical tool
2. Don’t Confuse Lower Price with Better Value
3. Don’t Forget Marketing’s “5th P” – PRODUCTIVITY1. Don’t Limit Branding to Awareness – Focus on “Association”
2. Practice “Lean Marketing”
3. Don’t forget the 6th “P” - PEOPLE
39
© Kenneth B. Wong (Sept. 2008)40
FOCUS ON “EXECUTION”
The EXECUTION of
MARGIN-SUCKINGMAGGOTS
© Kenneth B. Wong (Sept. 2008)41
Ken Wong c/o Queen’s School of BusinessKingston OntarioK7L 3N6
tel: 613-533-2367fax: 613-533-2321
email: [email protected]