A new model could help managers figure out which marketing efforts work best, and therefore decide which strategies to invest in. Y Diana German Businesses rely on solid marketing strategies to boost sales-?yet the tools used to evaluate these strategies often provide misleading results, leaving managers with the inability to accurately measure how they can get the best bang for their marketing buck. “Companies really need to pay attention to the effectiveness of their marketing Instruments” Thomas J.
Guttenberg, an associate professor In the Marketing unit at Harvard Business School, has developed a new analytical tool that more accurately measures the effectiveness of various marketing efforts. He created the model with Gang Lie, an assistant professor of marketing at Purdue University, and Caching Guppy, the Henrietta Johnson Louis Professor of Management and professor of marketing at Cornell University. Guttenberg believes that the model could help brand managers determine which marketing strategies work best to invest in. “Companies really need to pay attention to the effectiveness of their marketing Instruments,” Guttenberg says. They need to look at whether they’re creating new customers or whether they’re Just drawing customers away from competitors. It’s a fundamental question in the field, and this model helps measure that. ” The ideal mix When planning marketing campaigns, brand managers have a wide portfolio of weapons to draw on, Including In-store merchandising, advertising, coupons and sweepstakes, trade promotions, prices, and deployment of a direct sales force. The key is crafting the right mix between them-?the ideal brew needed to achieve sales and market share goals.
The trick is that each marketing effort affects consumer behavior in different ways, and also prompts deferent types of responses from competitors. Some satellites result In expanding demand across an entire category of products. Take for example the “Got Milk” advertising campaign, which is intended to increase demand for a category of products, milk. In contrast, an advertisement that points out how one brand is better than a competitor’s brand has the goal of encouraging consumers to switch products wealth a particular category.
If a business seeks to grow demand for a category of products, the effort may not elicit much of a reaction from its competitors; after all, if the entire category grows the rising tide lifts all boats. But a competitor’s reaction is typically quite different when a company attempts to move In on Its market share, perhaps by offering price discounts. Since his strategy Is viewed as more threatening, the competitor can be expected to retaliate with prejudice-?often by firing off a campaign to win back many more about that,” Guttenberg says. “But nobody benefits when both companies are retaliating.
One effort Just offsets the other. ” Measuring the different effects of these marketing strategies can help brand managers make the right decisions about which strategies to use in their marketing mix. Guttenberg, Lie, and Guppy argue that the tools that have been used in the past to analyze the effectiveness of different marketing activities-?called discrete choice models-?can skew the results and guided brand managers. Traditional discrete choice models-?logic, nested logic, and profit, for example-?are flawed because they make it appear as if all marketing activities produce the same results, the researchers contend.
In reality, differences between various marketing instruments are often significant. The cause of these flawed results comes from what is called the Invariant Proportion of Substitution (UP’S) property, which implies that the proportion of demand generated by taking business away from a competitor is the same, no matter which marketing activity is used. These models get run all the time in academics,” Guttenberg says. “There has been some talk at conferences where there seems to be an understanding that these models are too restrictive. Widening the view So the professors created a new discrete choice model called Flexible Substitution Logic (FSML), described in their working paper The Flexible Substitution Logic: Uncovering Category Expansion and Share Impacts of Marketing Instruments. The model relaxes the PIPS property and allows a wider variety of results to be analyzed when studying the effects of different marketing instruments. By doing so, “the FSML allows a wider variety of individual-level choice behavior to be recovered from the data,” according to the researchers.
The team tested the new model by looking at the marketing of prescription drugs, namely, stating, used to lower cholesterol levels in people at risk for cardiovascular disease. Using data from 2002 to 2004, they studied the three primary ways these drugs were marketed by Pfizer, Mere, Bristol-Myers Squibb, and Assistances: “detailing,” in which drug firm representatives personally visit physicians to sell the drug; at professional meetings and events (M&E) pondered by the pharmaceutical firms; and by using direct-to-consumer advertising (DACCA).
First, they employed the complex mathematical formulas of traditional models to study different marketing strategies used by the drug companies. They found that the PIPS property created counterintuitive estimates of demand gains attributable to these marketing investments. Although logically the researchers expected detailing to generate greater demand for the products than either direct-to- consumer advertising or meetings and events, the traditional models would not allow them to discover this because of the ‘AS.
When they applied their FSML model, however, the results provided much greater detail about the potential effects of different marketing investments. For example, the model predicted that sales gains from DACCA and M would come primarily through category expansion (87. 4 percent and 70. 2 percent, respectively), whereas gains from detailing would come at the expense of competing drugs (84 percent). By contrast, the random coefficient logic model predicted that gains from DACCA, M, and detailing would come largely from competing drugs. The FSML model is very useful if you want to predict consumer emend,” Guttenberg says. “This model gives you a better way to do that. ” Figuring With results that provide a better analysis of how different marketing instruments work, brand managers can now decide how to best invest their marketing dollars. For example, if a brand manager is concerned about retaliation from competitors, the best decision may be to limit investment in detailing and instead put more emphasis on direct-to-consumer advertising or on sponsoring meetings and events, both of which are more likely to expand the category.
Guttenberg notes that future research s needed to find alternative models that overcome the ‘AS, and he hopes that the FSML model will be applied in other studies that examine the effectiveness of marketing instruments. “It would be interesting to apply the FSML model in a lot of other situations to see which ones expand the pie and which ones threaten other actions,” he says. About the author Diana German is a writer based in Mansfield, Massachusetts.
Critical Dimensions of Marketing Expressing the Various Dimensions of Marketing in Terms of Every Day Life Marketing is very diverse and can have many components, ingredients and elements. It is clear to the serious student that marketing does not have a constant definition. It is a concept that evolves with the situation and the environment. To different people it means different things. To some it will be a philosophy of business. To others it will be a management function or a management process.
Another group sees marketing as a social process or a social science. According to the American Marketing Association the definition of marketing can be summarized as follows: “Marketing is the process and execution of the conception, pricing, promotion, and striation of ideas, goods and services to create exchanges that satisfy individual and organizational goals” Since around 1970 this definition has been in general use in countless text books and training manuals. It reflects different important concepts of marketing.
This definition includes the double dimension of strategic and operational marketing, the up’s of marketing, the different application of marketing that includes ideas, concepts physical goods as well as service and also reflects the marketing objective of mutual satisfaction between the customer and the marketer. Extension of the Marketing Functions In order to effectively integrate marketing functions three interdependent primary marketing functions have been identified as follows: Marketing Research or services that will create value for both the customers and the companies.
One need to clearly distinguish between market research that is specifically focused on the markets, while marketing research is paying exclusive attention to the processes involved in marketing. One would engage in marketing research to identify and solve marketing problems that may be encountered. Marketing research includes conducting marketing studies in the form of surveys or coco group discussions for example.
These methods can be either qualitative or quantitative in nature, depending on the situation and the specific need. When conducting marketing research it is often the case that more than one research method and style is used to ensure a balanced view of the research results. The purpose of this types of marketing research is often to establish the positioning of the competitors and to scientifically develop plans to control the effectiveness of the marketing effort.
Strategic Marketing The main aim of the strategic marketing function is to focus the often limited sources of an organization on the most suitable prospective marketing segments with the aim of increasing sales and reaching a position where a sustainable competitive advantage can be maintained. The starting point is normally to choose a suitable target market for the product or range of products of the company. The strategic marketing function also includes defining the product concept or services as this will directly influence the strategic position of the company in the marketplace.
In order to do this the marketing team needs to define the desired positioning of the company or the brand positioning of he specific products or services. The pricing strategy will be informed by the strategic position of the company and can be different in different marketing segments. The strategic function is responsible for choosing suitable distribution channels and determining the relationship with distributors in respect of the product or service. The key components of the communication strategy will flow from the marketing strategy and should be utilized by the operational marketing team as a basis for marketing communications.
The relationship strategy should be determined as part of the marketing strategy to ensure that the strategic positioning is maintained during operational marketing Operational Marketing Every element of the operational marketing initiatives is based on formal strategic marketing plan. The operational marketing function normally includes the building of the promotion and operational communications campaign. It also includes close interaction with the sales team.
Distribution and merchandising normally forms an integral part of the operational marketing function when the product line consists of fast moving consumer goods. Other types of functions include some direct marketing activities and a strong focus n customer service. Conclusion: In real life, marketing often revolves around the implementation and execution of a number of practical, logical and sensible actions that will address the defined marketing factors. One should remember that life is not a set of textbook perfect situations and marketing information can change in a very short time span.
Normally real companies have limited resources that are further complicated by the uncertainties of market segments that are not perfectly homogeneous and timescales that is normally tough to deal with. Under these real life situations the classical marketing techniques are often only implemented in an irregular and partial manner. The marketer who can make the necessary adjustments “on the fly” will be viewed as the marketing wizard, while the slow mover will be lost in the annals of marketing case studies when students are taught how not to react to market needs.
Carl Marx Tragedy at Toyota: How Not to Lead in Crisis “Toyota can only regain its footing by transforming itself from top to bottom to deliver the highest quality automobiles,” says HOBS professor Bill George of the beleaguered automobile company that in recent months has recalled 8 million vehicles. He offers even recommendations for restoring consumer confidence in the safety and quality behind the storied brand. Key concepts include: Toyota Motor Corporation’s problem is first and foremost a leadership crisis. It needs a credible leader with a strong, cohesive plan.
Competitors Ford and GM are working to regain the market share they have lost to Toyota. Rather than blame floor mats and panicky drivers, as Toyota did when complaints first arose, it should have acknowledged that its vaunted quality the company and restore consumers’ trust. By William George Toast’s ever-widening problems are a tragic case study in how not to lead in crisis. Under the media spotlight, Toyota CEO Kaki Toyota, grandson of the founder, went into hiding and sent American CEO Jim Lent to make apologies. (Editor’s note: Toyota has agreed to appear before a Congressional inquiry this week. Meanwhile, he let serious product quality issues spiral out of control by understating safety risks and product problems. This left the media, politicians, and consumers to dictate the conversation, while Toyota fumbled the responses. Disingenuous quasi-apologies and disjointed plans for resolution have been Toast’s substitute for crisis response. As accounts pour in about declining quality, the company parades out relatively unknown mid-level managers to quell the firestorm. It wont work. “You live by the sword; you die by the sword. Toast’s weapon of choice has always been quality, a competitive advantage that prompted many Americans to stop buying GM and Ford brands. Toyota can only regain its footing by transforming itself from top to bottom to deliver the highest quality automobiles. When terrorists laced Ethylene capsules with cyanide in the mid-asses, Johnson & Johnson CEO Jim Burke understood his company credo challenged him to put the needs of customers first. Although was not responsible for these problems, Burke nevertheless recalled every Ethylene product from the market. This is not a crisis of faulty brakes and accelerators, but a leadership crisis.
During Chrysler asses crisis, CEO Lee Iacocca took charge, restoring consumer trust and prosperity. When General Motors emerged from bankruptcy last summer, Chairman Deed Whittaker became the trustworthy, determined face of the company’s comeback. Toyota needs a credible leader with a strong, cohesive plan. Mr.. Toyota is anything but. His uninspired words of optimism from Davis only unnerved customers and U. S. Regulators. Meanwhile, Ford and GM are working hard to regain the market share they lost at Toast’s expense. How can Kaki Toyota get Toyota back on track?
I offer recommendations based on my recent book, 7 Lessons for Leading in Crisis. 1: Face reality, starting with yourself. Faced with multiple reports of accidents from sticking accelerators, Toyota blamed the problems on stuck floor mats and panicky drivers. Instead, Toyota should acknowledge that its vaunted quality system failed. CEO Toyota should take personal responsibility by saying that he pushed too hard for growth and neglected quality. By admitting his errors, he gives every Toyota employee permission to acknowledge mistakes and to get on with correcting them, instead of denying reality. : Don’t be Atlas; get the world off your shoulders. Toyota cannot expect to solve problems of this magnitude himself. Instead, he needs a crisis team reporting directly to him, working 2417 to get problems fixed-?permanently. He also needs outside counsel, as he appears to be listening only to insiders who are defensive about criticism. He should add the world’s top quality experts to his fix-it team and listen carefully to their advice. 3: Dig pep for the root cause. When Toast’s problems first surfaced, the company blamed a symptom-?loose floor mats-?and exonerated the accelerators.
Instead, management should have required its best engineers to get to the root cause of this problem and every other quality problem being reported. This is basic engineering away. In fact, they are likely to get worse before getting better. Just as the seeds were sown over the past ten years by placing growth ahead of customer concerns and quality, digging deep into problems will likely uncover more quality concerns that will take years to resolve. Toyota must invest heavily in corrective actions while its sales shrink and profits implode, requiring major cash resources until its reputation can be restored. : Never waste a good crisis. For all the pain Toyota is experiencing, this crisis provides a unique opportunity to make fundamental changes required to restore Toyota quality. The crisis is melting away the denial and resistance that existed in recent years. Employees are ready for new direction, and they are willing to make radical changes to renew the company. With Today’s leadership, Toyota automobiles can be restored to the world’s highest quality. : You’re in the spotlight: follow True North. In a crisis, people insist on hearing from the leader.
Kaki Toyota can’t send out public relations specialists or his American executives to explain what happened. Having lost sight of his company’s True North-?its values and principles-? Toyota must come out of hiding, take personal responsibility, and subject himself to intense questioning by regulators and the media. Then he should make a personal commitment to every Toyota customer to repair the damage, including buying back defective cars. 7: Go on offense; focus on winning now. Coming out of this crisis, the raked will never look the same.
GM and Ford are rapidly regaining market share, while the confidence of Toast’s loyal customers is badly shaken. Toyota cannot wait until all its quality problems are resolved. It must play defense and offense simultaneously. To win, Toyota has to offer advanced features and superior quality, better value for consumers, greater safety, and improved fuel efficiency. This is a challenging menu, and this crisis is the true test of Kaki Today’s leadership. Is Toyota up to these challenges? I believe this is a great company that will resurrect its reputation and restore its leadership.