© 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


The Great Marketing Myth

Marketing Is All About Volume

Everything we do is measured against the goal of building top line revenue


The REALITY

3

SURVIVAL

IN A WORLD FILLED WITH

MARGIN-SUCKING

MAGGOTS


The REAL Objective of Marketing

Price

Cost

Minus

AssetsManaged

NetIncome

DividedBy

UnitMargins

Times

UnitVolumes

Return OnInvestment

MarketShare

MarketSize

Times

4


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%


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


Keys to Changing the Game

• Don’t Confuse “Better Value” with “Lower Price”

8


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


The Standard Cost-Quality Relationship

OUTPUT

INPUT

10


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


Why We Prefer Quality-Driven Value

Longer Strategic Window

Greater Economic Efficiency

12


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


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


PRODUCTIVITY KEY 1:

Better Understanding of the “Economics of Branding”

15


Pick A ONE DIGIT Number from this list…

135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808


Pick a Number…

135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808


This is the POWER of a great CREATIVE

135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324580132466668953124808


Now…one last time?

135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324508132466668953124808


This is GREAT CREATIVE that is “ON STRATEGY”

135128398084666412342985819025140903658289484253900859533045691110489313480529904520366666249135820905013725416849863142159288324508132466668953124808


OR Maybe this is….

2498050137254138498931421592814215928 8324257350813242438095312480883245081 1353429128398084666412342985819025140 7784190251409036582894842539048425390 0370885953304569111048931348023429858 2304529904520366666249135820953124808 0430750137254168498631421592835128392 8977132450813246666895312480808595397 1351222888398084123412342985853904842 4508110251409035582894842539012839809 1592834123405013725494842539049484253


OR Maybe this is….

093512228883980841234123429858539048421592834123405013725494425390494842531592834121592834123405013725494842539049484253340501372549484253904948425345081102514090355828948425390128398095928341234050137254948425391592834123405013725494842535893421592834123405013725498931421594842539049484253049484253450811025140903558289484253901283980904945081102514090355828 398095928341135342912839808466641234978245313452985819025140 425390494842668419025140903658289484253904842592782453882390 17093512228880370885951204569111048931348023429782453729825815081102514423045299045203166666249135953124808978245343211334253904943204307501372541684986714215928328392713234598733

893421592834896713245081724666689581248080859539735879204131 093512228883980841234123429858539048421592834123405013725494425390494842531592834121592834123405013725494842539049484253340501372549484253904948425345081102514090355828948425390128398095928341234050137254948425391592834123405013725494842535893421592834123405013725498931421594842539049484253049484253450811025140903558289484253901283980904945081102514090355828450811025140903558289484253901283980904945081102514090355828


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)


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


PRODUCTIVITY KEY 2

Better Understanding the “Economics of Segmentation”

and how segmentation translates into branding

29


LowerCosts

Higher Pricesand Sales

Increase"Value"

Reduce"Waste"

Add "Good"Costs

Reduce "Bad"Costs

Productivity Key 2: Focus & Segmentation

Total Costs

Higher Profits30


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


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?


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


The Bottom Line

You don’t have to be all things to all people

BUT

You better be absolutely perfect for someone

34


PRODUCTIVITY KEY 2

Better Understanding How to Satisfy Customers

35


Step 1: Know What Matters Most

A Trip to Disneyland

36


Step 2: Know How Customers Measure “Quality”

House of Wong

37


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


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


FOCUS ON “EXECUTION”

The EXECUTION of

MARGIN-SUCKINGMAGGOTS


Ken Wong c/o Queen’s School of BusinessKingston OntarioK7L 3N6

tel: 613-533-2367fax: 613-533-2321

email: [email protected]

mailto:[email protected]

© kenneth b. wong (sept. 2008) marketing myths, mistakes and mystique by: ken wong queens...

Documents