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16 July 2016

Customer-oriented culture vs. the right marketing strategy?

Tag(s): Worshipful Company of Marketors, Marketing
In a momentous week when Liveryman the Rt Hon Theresa May MP became the country’s second female Prime Minister, it was quite fortuitous that the Marketors had arranged to hold its second debate of the year at Portcullis House, part of the Parliamentary Estate. Mrs May became a Freeman in 1999 soon after becoming an MP in 1997, and addressed the Company at Sally Muggeridge’s Installation Dinner in 2013. Our other Liveryman MP, the Rt Hon Cheryl Gillan MP again kindly agreed to preside over proceedings. But she had also been very busy recently. As Vice-Chair of the 1922 Committee she organised the Conservative Parliamentary Party elections for the leadership and during last week could be seen on television next to the Chairman Graham Brady while he announced the results of each round.

For our second debate we had decided to debate the motion that “This house believes that having a strong customer-oriented culture is more important than having the right marketing strategy.” Cheryl’s style is to take a vote before the debate to gauge the mood and then see with the final vote if any movement has taken place because of the arguments put. The majority were for the motion at this stage.

Liveryman Anthony Thomson proposed the motion. Anthony is a serial entrepreneur who co-founded Metro Bank and is now starting Atom Bank, the first bank to offer its services only on mobile platforms. He told us that the plan for Atom Bank had been 413 pages long with more than 800 pages of appendices. But just as no plan survives the first contact with the enemy as Prussian Field Marshall von Moltke said, so no business strategy survives the first contact with the customer. In the case of Atom the plan was immediately changed.

Strategy is like a road map. It is useful but it does not tell you how to climb a mountain or ford a river (sounds of the Sounds of Music?) Plans are delivered by people. Indeed, the plan might be worth 1% while the execution was worth 99%. Anthony would prefer to choose great people to execute a mediocre strategy rather than choose mediocre people to execute a great strategy.

Liveryman Professor Malcolm McDonald opposed the motion. Malcolm is a distinguished academic and consultant who has written 45 books including the bestselling Marketing Plans: How to prepare them: how to use them. He told us that a customer-oriented culture can lead to destruction of shareholder value. Often companies that claim to want to delight their customers do the wrong thing which is silly. Everything a company does should add value to a properly integrated marketing plan.

ICI was a beautiful company but it didn’t understand market segmentation. ICI has long gone while its major competitors such as DuPont are still there. According to the Harvard Business Review 90% of new products fail because of poor marketing.

There are just four ways to improve shareholder value
  1. Invest in projects that deliver returns greater than the cost of capital
  2. Improve returns
  3. Reduce projects that deliver less than the cost of capital
  4. Reduce the cost of capital.
These actions can create customers and markets while customer orientation can’t.

To achieve long term commercial success you must first define markets by customer needs, not by products. You then develop needs based segmentation, and then understand the needs in each segment. Then you develop financially cohesive plans, the positioning and the branding in that order. You decide which are your key markets in order of priority. Marketing strategy answers all these questions, not customer orientation. And employee motivation is highest in companies with strong brands.

Amanda Mackenzie OBE seconded the motion. Until recently Amanda was CMO of Aviva. She is currently working on secondment as executive advisor at Project Everyone.  Started by Love Actually director and Comic Relief co-founder Richard Curtis, the purpose of Project Everyone is to contribute to the effort to achieve the United Nations’ 2030 sustainable development goals on poverty and climate change. Mackenzie has been brought in to make the entire planet – that’s seven billion people – aware of the goals. In October she will take up a new role as CEO of Business in the Community.

When Aviva was going through the change of name from Norwich Union they looked for great examples of involvement with the customer. When Southwest Airline faced financial difficulties its highly motivated staff volunteered to take a pay cut. Today products are not really differentiators, culture provides the difference. The US retailer Nordstrom tells its staff to use their best judgement in all situations. There is no additional rule. Customer service drives loyalty and build Net Promoter scores.

Dr Stan Maklan seconded the opposition to the motion. Stan is a Canadian who worked for Unilever in Canada, the UK and Sweden where he was Marketing Director of its Toiletries business. He then worked as a management consultant and established Computer Sciences Corporation UK’s Customer Relationship Management practice. He is now a Reader at Cranfield’s Centre for Strategic Marketing and Sales and has published books on corporate brand development and customer relationship management.

Stan told us that a great culture cannot survive without an effective plan. The right marketing strategy takes primacy. A credible plan involves making choices and that has resource implications for the board. Without a plan showing how these resources will be provided it’s just a wish list.

Not all firms need to be customer centric. Ryanair had achieved great success without caring very much about the customer’s point of view. He was sceptical about the efforts of top management in manipulating culture and thought such efforts rarely succeeded. But strategy is in the gift of the top team. Sometimes culture orientation can be a cop out if you had not got the right data to decide your strategy.

Cheryl then opened it up to the floor. Liveryman David Haigh, CEO of Brand Finance said that some of the most successful businesses depended on their leaders. He gave the example of Steve Jobs who transformed the Smart Phone category by telling us we all wanted one.

James Grant, a young guest at the beginning of his career, told us of a few false starts where he’d left jobs because he did not feel valued. Staff are customers too.

Liveryman Glyn Cartwright works with SMEs where the biggest differentiator in performance is relationship management.  At that level strategy is common sense.

Liveryman Raoul Pinnell after a long career in marketing with major corporates from Nestle to NatWest to Shell might have been for the motion. But his more recent non-executive experience in the NHS gave him a different perspective. NHS staff are highly motivated to care for their ‘customers’, the patients, but there is no strategy, no plan, no proper measurement of individual performance.

Past Master Venetia Howes also opposed the motion. Organisations without properly integrated strategies can lead to disaster. In some situations that might kill shareholder value, in others it might kill people. The right decisions are based on culture. A board needs purpose, values, strategy, capabilities, its business model, all aligned. And so the culture is important but not more important.

Liveryman Mike Ricketts thought that while SMEs work closely with customers larger corporations found it increasingly difficult to keep up with change. They hang on to their products in declining sectors and can’t make the changes in direction needed to survive. Hence they needed effective plans to plot the right course.

Junior Warden Phil Andrew runs an enterprise where his 2500 staff jump out of bed every day because they want to make a social difference. They have a cause, not a job. The values and the culture are what they do when nobody’s looking.

Liveryman Keith Rowland said that both are important but the motion requires you to say that one is more important so he would oppose it.

I said that while the motion was nuanced I have written a lot of plans and read hundred. All of them share one characteristic. They’re all wrong in the sense that they seek to see the future and have a bunch of numbers that are usually just speculative. What I look for is what people say they will do to achieve these numbers. The numbers are not really important it’s what people do that counts.

Malcolm then returned to sum up for the opposition. He thought that plans shouldn't be 413 pages long. Ten pages should be enough to describe your strategy. As for orientation that implied bias and an organisation with bias would see distortion in its behaviour and its results. He decried businesses that talked about customer delight – indeed in the US the buzzword now was excitement – as these ideas just lead to doing what you can’t afford to do.

Anthony then summed up for the motion. Profit is a byproduct of doing well for a customer. He had proved in the businesses he had created that his ideas work in practice. He apologised to the academics if he couldn't make it work in theory.  A good strong customer-oriented culture attracts and retains staff. People don’t really rally round a business plan. Strategies can be copied, but culture can’t. Strategy does not provide differentiation.

Cheryl then summed up in a masterly way before taking the final vote. Quite a few had changed their view and the motion was narrowly defeated. The Noes have it. The Noes have it.

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