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8 December 2012

Achieving Profitable Growth in Today’s Conditions

Tag(s): Marketing, People

Professor Patrick Barwise, the Emeritus Professor of Management and Marketing at the London Business School and I have been colleagues on the Editorial Board of the Journal of Brand Management for over twenty years. (I resigned last year over a disagreement about its editorial policy but that’s another story.) But until this week we had never met. He came to Goldsmiths’ Hall to give the Worshipful Company of Marketors’ Annual City Lecture on the theme of achieving profitable growth in today’s conditions. Patrick is also Chairman of Which?, the UK’s leading consumer organisation, and a visiting fellow at the Reuter’s Institute for the Study of Journalism, Oxford University.

Patrick wrote a best-selling book “Simply Better”[i]with Seán Meehan (IMD Lausanne) which is the only book not written by Americans to have won the American Marketing Association’s Berry-AMA Book Prize. That book promoted the idea that seeking differentiation in marketing is not the point. The point is to do your job better. The Japanese knew this years ago calling it kaizen, or continuous improvement. The problem is that as the Japanese economy went into the doldrums this concept fell out of favour and gurus returned to the idea of the Unique Selling Proposition (USP). Rosser Reeves advocated this back in the 1940s but he was talking about advertising in which he was a pioneer. In communication you do need to stand out from the crowd. If your advertising is not noticed it is not working. But that does not necessarily apply to the rest of your operation.

Patrick and Seán have followed this up with “Beyond the Familiar” [ii]which no doubt will also be a best seller if his talk is anything to go by. Patrick quoted a 2007 study by the Wharton School which analysed the performance of 6,000 large companies drawn from all parts of the world. Only 24% of these had grown their profits over any consecutive 5-year period during the years 1990-2004. Just 5% had grown profits over any consecutive ten-year period and a mere 1%, i.e. only 60 companies had grown profits throughout all fifteen years.

Patrick believes as I do that it was really the great Peter Drucker who invented Marketing back in 1954 when he said “Marketing is not a specialized business: it is the whole enterprise seen from the Customer’s point of view”[iii].However, while Drucker said it he didn’t offer proof and it needed others following him to provide the proof. So if we have known this for most of my lifetime why is it so difficult to do? Patrick offers a few answers. Firstly it seems to go against human nature, especially for some. The process of recruitment is critical here. People are selected for their technical skills but not often for their ability to get on with other people. These softer skills are partly inbuilt in our DNA or taught to us early in life. They are much more difficult to acquire in adulthood, and so lawyers, for example, may be good at law but not at dealing with their customers. Next it is not always easy to know what customers actually want. Despite mountains of research companies often don’t ask the right questions or more usually don’t listen to the answers. Patrick again refers to the obsession with USPs or gimmicks at the expense of simply doing things better. He observes that customer insights achieve precisely zero unless they reach the decision makers and are acted on. Then there has been relentless pressure on costs often at the expense of building good relations with customers

So much of marketing is common sense but then common sense is not common. We all know we should eat well, eat less and take more exercise but still the vast majority don’t follow this good advice.  Patrick describes the circular link between the customer promise, the customer’s trust, continuous improvement and then innovation beyond the familiar. In turn all of this needs to be linked through an open organisation. It’s important to ask how relevant is your customer promise. USPs and branding need to be firmly rooted in the requirements of the target segment and also firmly rooted in the basic requirements of the category. No amount of clever advertising can work if the product itself is not fit for purpose. So, to repeat it is not about being unique but being better.

To illustrate this Patrick told the story of B&Q, the DIY retailer who appeared to have pulled off a triumph when Ellen MacArthur captured the nation’s hearts by breaking the record for circumnavigating the world solo in her yacht branded B&Q. But then a certain John Roberts wrote to the company congratulating them on their achievement in helping Miss MacArthur sail 27,354 miles in just 72 days. He then enquired when the kitchen he had ordered 96 days ago would arrive from their warehouse just thirteen miles down the road.

Then there was Ashley Gibbins (26) who, having been put on hold for an hour while trying to order a broadband internet connection, stumbled across the facility to change NTL’s recorded message while pressing the “star” key. He left the following message in his Geordie accent:

“Hello, you are through to NTL customer service. We don’t give a **** about you, basically, and we are not going to handle any of your complaints. Just **** off and leave us alone. Get a life.”

NTL admitted that it reflected a serious flaw in their security system. They then complained to the police who prosecuted him under the Communications Act for being grossly offensive. Fortunately the judiciary disagreed.

According to McKinsey research the worst performing US mobile carrier received 5.7 times as many customer complaints per million as the best.

Patrick speaks of the ART of brand building. Every brand is unique but every valuable brand has three things in common with its target market.

Awareness

Relevance

Trust

One of the companies Patrick most admires is Procter & Gamble, my alma mater. He cites the example of Tide launched in 1946 as the first heavy-duty synthetic laundry detergent. This coincided, though not by accident, with the arrival of automatic domestic washing machines. With relentless improvements and range extension and the rigorous use of customer insights to ensure continuing relevance Tide still enjoys 42% market share by value in the US. (By the way Tide as a brand was effectively killed off in Britain by our old friends the Mergers and Monopolies Commission. In 1966 they investigated Lever Brothers and Procter & Gamble who between them controlled 90% of the market for soap powders and detergents. There were few Own Label alternatives in those days. They were suspicious of the practice of selling varieties distinguished by being natural (soap) or synthetic (detergent) and also by different colours, blue and white detergents. But they accepted the evidence for housewives’ appreciation of these distinctions. They were also suspicious of the practice of heavyweight advertising and insisted that each company should offer one soap powder, one blue detergent and one white detergent at a permanently low price without advertising or promotional support. Lever Brothers used Surf for this purpose and Procter & Gamble Tide. After a few years of lack of marketing support Tide was discontinued and the innovations that went into the US version of Tide went into Ariel in the UK, a brand launched in 1968 after the MMC report. Needless to say Ariel is alive and well with a major market share).

Patrick also cites Apple, the most valuable corporation and indeed brand in the world, as another that devotes itself to simply better products. Sir Jonathan Ive, its British head of design, said this year “Our goals are very simple – to design and make better products. If we can’t make something that is better we won’t do it.” Two years ago his then boss, Steve Jobs said “It was this relentless improvement that enabled us to beat our competition and yield the market share it did”.

Patrick believes that everybody lies a bit to their boss. So he poses 5 questions that you should ask about your company.

1.       Can middle managers accurately describe the customer promise?

2.       Can all the top team list three things that erode customer trust?

3.       Is your brand really the best option now and in the future?

4.       Have you acted on any novel idea in the last few years which led to a significant innovation?

5.       Have front line staff asked you any embarrassing questions?

These five questions of course relate back to his circle of five steps:

1.       Customer promise

2.       Customer trust

3.       Continuous improvement

4.       Innovation beyond the familiar.

5.       Open organisation.

Lastly Patrick quoted the great W. Edward Deming who said “In God We Trust – all others must bring data”.  Data should be at the heart of any decision. It was Deming, of course, who taught the Japanese their approach to quality management while his lessons went unheeded in his homeland, the US. Over time Toyota, using Deming’s methods, became the most valuable automotive brand in the world while its chief American competitors were bailed out by their government. After his lecture I joined Patrick and the Master Marketor John Flynn and his wife for dinner. I asked Patrick how he now rated Japanese management. He said that he rated some highly but not all. Toyota, despite their recent recalls, Honda and Canon were all still excellent companies. And that is right. Companies thrive or die despite their governments. The best companies are committed to a relentless search to do everything they do better than they did last year and better than their competitors.

 Copyright David C Pearson 2012 All rights reserved



[i]Simply Better: Winning and Keeping Customers by Delivering What Matters Most: Patrick Barwise, Sean Meehan 2004

[iii]The Practice of Management Peter Drucker 1954




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