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 MBAs with a Mission by Brook Raflo Thinking inside the Box by Nicholas Shreiber, Guest Columnist - - - - - - - - - - - - - -  Online Feedback Form Tell us what you think about Goizueta Magazine |
Marketing Strategy Unplugged (cont.) Page 2 "What most marketing studies do is look at the literature, come up with some hypotheses, and then go to a public and test them. That's all," Bharadwaj observes. "It's too expensive and, more importantly, time consuming to keep testing and retesting on the scale we did." Even after the mail survey data were collected, analyzed, and plugged in to the model, Menon and Bharadwaj still had questions about some of the results. So they went back to their focus group managers for an explanation. For instance, one of their assumptions was that good marketing strategy would be preceded by an environmental analysis-known as a "SWOT" test, for Strengths, Weaknesses, Opportunities, and Traps. Logically, SWOT should improve analysis and aid strategy making, but in practice the pair found it a negative influence. They went back to the managers for an explanation. Environmental turbulence "They told us something very interesting," Bharadwaj remembers. "When the market environment is stable, this kind of analysis steals time and resources that are needed elsewhere. But when the market environment is changing fast, doing this kind of analysis is imperative. So we went back to the model and created a factor called 'environmental turbulence' and found that it explained the difference in performance." "Another important finding of our research," Menon says, "is that a lot of firms do SWOT analysis, which is not surprising given its emphasis in most MBA training. However, research clearly shows that firms need to do SWOT analyses on multiple strategies to assure that they are focused on the best possible strategies. "In other words," he continues, "firms may analyze a strategy but it may not be the best. More important, SWOT should be viewed as a necessary but not a sufficient condition for good planning." Yet, Menon adds, lots of firms equate planning and SWOT to the detriment of their market performance and organizational learning. At the end of the two years of research and testing, Bharadwaj and Menon had identified seven primary factors that positively influence the making of a successful marketing strategy. Both researchers contend that the most serious mistakes that firms, and senior managers, commit are in the implementation of marketing strategies. Their research points out that successful strategies have very specific traits. First, a cross-functional point of view is reflected in the design and implementation of successful strategies. This research provides clear empirical support for the value and need for cross-functional structures within firms. Yet most firms have no clue of how to do it well, Bharadwaj and Menon contend. Second, successful marketing strategy making requires organizational buy-in. Bharadwaj points out that many of the recent departures of CEOs at large corporations can be traced to two of the other findings of the research. For strategies to succeed, managers must not only provide the appropriate level of resources-not too much or too little-but they must work hard at garnering the most important corporate resource: employee commitment to the strategy. In fact, Menon suggests, even average strategies can produce positive results when there is corporate buy-in. Going beyond theory, their holistic model of strategy making gives marketing managers a framework for improving the strategic process. Put your effort on these parts of process, they are saying to managers, and you will create better marketing strategy. A key contribution of the study, say the authors, is that it offers a practical framework for the manager on how to enhance the quality of the strategy process. It gives managers an a priori basis for focusing efforts on specific components of the whole process and enables post hoc analysis or prior strategies. Just as important for the long run, though, their paper laid down a conceptual foundation for further research into market strategy design. Menon and Bharadwaj are already conducting more research on what factors drive marketing creativity. Some of the earliest beneficiaries of these new insights are Goizueta students. The process of strategy making is an oft-discussed topic in both general marketing and marketing elective classes. Bharadwaj says he often uses his students as a kind of reality check. "I think most students start out with the position that most faculty research doesn't make sense, but they have been very positive about our research. My feeling is that if I can't explain it to my students I shouldn't be doing it, so if I throw out an idea and find people aren't reacting to it at all, I figure it is a dead end and I drop it." Rajendra Srivastava, professor of marketing, agrees that interest in marketing strategy will remain high for the foreseeable future. With the vast amounts of money spent on marketing by start-up companies in the last five years-sometimes as much as 60 percent to 70 percent of all capital raised-there is immediate need for business to know if the money has been well spent. "Senior executives," Srivastava says, "are starting to ask, 'Where is the beef?' They are trying to find the linkages between financial performance and marketing strategy. If we start looking at customers as an asset-rather than land or equipment or buildings-then you must invest in that asset. If you don't invest in your customers or the distribution channel that reaches those customers, then you can be left on the sideline. That's why this is so important right now. "Here is a very concrete example. E-Trade, an online brokerage, is planning to spend $400 million on marketing in the next few years. E-Trade has made money but, because of this marketing expense, is probably going to lose money in the near future. So people might think, 'Where is the logic in that?' "But think about every E-Trade customer with a $50,000 IRA account," he continues. "E-Trade might make $1,000 a year if they lend that $50,000 out wisely. Keep that customer, and it becomes $1,000 every year. At a 10 percent cost of money, that's $10,000 a year. Now, if E-Trade has its own credit cards or mortgage lending or other financial products, maybe they can turn that $10,000-a-year customer into a $30,000-a-year customer. What are a million $30,000-a-year customers worth? $30 billion. "People who don't understand the value of customers, fail to understand what E-Trade is doing," Srivastava says. |
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