review on hbr course pack
Using your HBR coursepack, review the following articles in the coursepack:
The Female Economy
Customer Value Propositions in Business Markets
Getting Brand Communities Right
Following your review, share a 750-words minimum (it is fine to go over)synopsis of the strategic marketing concepts discussed. This posting should not be a series of articles reviews. Instead, it should be a synthesis of the readings continuing with the overarching theme, “Strategic Marketing,” in mind.
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Strategic M
arketin
g
On
Strategic
Marketing
If you read nothing else on marketing that delivers
competitive advantage, read these 10 articles. Weve
combed through hundreds of articles in the Harvard
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Leading experts such as Theodore Levitt and Clayton
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need to:
Figure out what business youre really in
Create products that perform the jobs people need
to get done
Get a birds-eye view of your brands strengths and
weaknesses
Tap a market thats larger than China and India
combined
Deliver superior value to your B2B customers
End the war between sales and marketing
On
Strategic
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If you read nothing else on marketing that delivers
competitive advantage, read these definitive articles
from Harvard Business Review.
Stop pushing productsand start
cultivating relationships with the right
customers.
FEATURING
Marketing Myopia
By Theodore Levitt
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HBrs 10 Must reads on teams
ISBN: 978-1-4221-8988-7
9 7 8 1 4 2 2 1 8 9 8 8 7
9 0 0 0 0
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HBRS 10
MUST
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On
Strategic
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from Aug 2020 to Feb 2021.
HBRs 10 Must Reads series is the definitive collection of ideas
and best practices for aspiring and experienced leaders alike.
These books offer essential reading selected from the pages of
Harvard Business Review on topics critical to the success of
every manager.
Titles include:
HBRs 10 Must Reads on Change Management
HBRs 10 Must Reads on Collaboration
HBRs 10 Must Reads on Communication
HBRs 10 Must Reads on Innovation
HBRs 10 Must Reads on Leadership
HBRs 10 Must Reads on Making Smart Decisions
HBRs 10 Must Reads on Managing People
HBRs 10 Must Reads on Managing Yourself
HBRs 10 Must Reads on Strategic Marketing
HBRs 10 Must Reads on Strategy
HBRs 10 Must Reads on Teams
HBRs 10 Must Reads: The Essentials
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HBRS 10
MUST
READS
On
Strategic
Marketing
HARVARD BUSINESS REVIEW PRESS
Boston, Massachusetts
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Copyright 2013 Harvard Business School Publishing Corporation
All rights reserved
No part of this publication may be reproduced, stored in or introduced into a
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mechanical, photocopying, recording, or otherwise), without the prior
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School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.
The web addresses referenced in this book were live and correct at the time of
the books publication but may be subject to change.
Library of Congress Cataloging-in-Publication Data
HBRs 10 must reads on strategic marketing.
p. cm. (HBRs 10 must read series)
Includes index.
ISBN 978-1-4221-8988-7
1. MarketingManagement. 2. Strategic planning. I. Harvard business re-
view. II. Title: HBRs ten must reads on strategic marketing. III. Title: Harvard
business reviews 10 must reads on strategic marketing.
HF5415.13.H368 2013
658.8’02dc23 2012037855
ISBN: 9781422189887
eISBN: 9781422191521
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mailto:[emailprotected]
www.hbr.org
Rethinking Marketing 1
by Roland T. Rust, Christine Moorman, and Gaurav Bhalla
Branding in the Digital Age 15
by David C. Edelman
Marketing Myopia 29
by Theodore Levitt
Marketing Malpractice 57
by Clayton M. Christensen, Scott Cook, and Taddy Hall
The Brand Report Card 77
by Kevin Lane Keller
The Female Economy 97
by Michael J. Silverstein and Kate Sayre
Customer Value Propositions in Business Markets 113
by James C. Anderson, James A. Narus, and Wouter van Rossum
Getting Brand Communities Right 133
by Susan Fournier and Lara Lee
The One Number You Need to Grow 151
by Frederick F. Reichheld
Ending the War Between Sales and Marketing 171
by Philip Kotler, Neil Rackham, and Suj Krishnaswamy
About the Contributors 195
Index 197
v
Contents
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from Aug 2020 to Feb 2021.
HBRS10
MUST
READS
On
Strategic
Marketing
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from Aug 2020 to Feb 2021.
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from Aug 2020 to Feb 2021.
I
1
Rethinking
Marketing
by Roland T. Rust, Christine Moorman,
and Gaurav Bhalla
IMAGINE A BRAND MANAGER sitting in his office developing a market-
ing strategy for his companys new sports drink. He identifies which
broad market segments to target, sets prices and promotions, and
plans mass media communications. The brands performance will
be measured by aggregate sales and profitability, and his pay and fu-
ture prospects will hinge on those numbers.
Whats wrong with this picture? This firmlike too manyis still
managed as if it were stuck in the 1960s, an era of mass markets, mass
media, and impersonal transactions. Yet never before have compa-
nies had such powerful technologies for interacting directly with cus-
tomers, collecting and mining information about them, and tailoring
their offerings accordingly. And never before have customers ex-
pected to interact so deeply with companies, and each other, to
shape the products and services they use. To be sure, most compa-
nies use customer relationship management and other technologies
to get a handle on customers, but no amount of technology can really
improve the situation as long as companies are set up to market prod-
ucts rather than cultivate customers. To compete in this aggressively
interactive environment, companies must shift their focus from
driving transactions to maximizing customer lifetime value. That
means making products and brands subservient to long-term
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from Aug 2020 to Feb 2021.
RUST, MOORMAN, AND BHALLA
2
customer relationships. And that means changing strategy and struc-
ture across the organizationand reinventing the marketing depart-
ment altogether.
Cultivating Customers
Not long ago, companies looking to get a message out to a large pop-
ulation had only one real option: blanket a huge swath of customers
simultaneously, mostly using one-way mass communication. Infor-
mation about customers consisted primarily of aggregate sales sta-
tistics augmented by marketing research data. There was little, if
any, direct communication between individual customers and the
firm. Today, companies have a host of options at their disposal, mak-
ing such mass marketing far too crude.
The exhibit Building relationships shows where many compa-
nies are headed, and all must inevitably go if they hope to remain
competitive. The key distinction between a traditional and a
customer-cultivating company is that one is organized to push prod-
ucts and brands whereas the other is designed to serve customers
and customer segments. In the latter, communication is two-way
and individualized, or at least tightly targeted at thinly sliced seg-
ments. This strategy may be more challenging for firms whose distri-
bution channels own or control customer informationas is the
case for many packaged-goods companies. But more and more firms
now have access to the rich data they need to make a customer-
cultivating strategy work.
B2B companies, for instance, use key account managers and
global account directors to focus on meeting customers evolving
needs, rather than selling specific products. IBM organizes accord-
ing to customer needs, such as energy efficiency or server consolida-
tion, and coordinates its marketing efforts across products for a
particular customer. IBMs Insurance Process Acceleration Frame-
work is one example of this service-oriented architecture. Customer
and industry specialists in IBMs insurance practice work with lead
customers to build fast and flexible processes in areas like claims,
new business processing, and underwriting. Instead of focusing on
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from Aug 2020 to Feb 2021.
RETHINKING MARKETING
3
Idea in Brief
Companies have never before had
such powerful technologies for
understanding and interacting
with customers. Yet too many
firms operate as if theyre stuck in
the 1960s, an era of mass market-
ing, mass media, and impersonal
transactions.
To compete in an aggressively
interactive environment, companies
must shift their focus from driving
transactions to maximizing
customer lifetime value. That
means products and brands must
be made subservient to customer
relationships. And that means
transforming the marketing
departmenttraditionally focused
on current salesinto a customer
department by: replacing the
CMO with a chief customer officer,
cultivating customers rather than
pushing products, adopting new
performance metrics, and
bringing under the marketing
umbrella all customer-focused
departments, including R&D and
customer service.
Customer
Product-Manager Driven
Many companies still depend on
product managers and one-way
mass marketing to push a product
to many customers.
Product
Building relationships
Customer-Manager Driven
Whats needed is customer managers
who engage individual customers or
narrow segments in two-way communi-
cations, building long-term relationships
by promoting whichever of the companys
products the customer would value
most at any given time.
Product
Customer
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RUST, MOORMAN, AND BHALLA
4
short-term product sales, IBM measures the practices performance
according to long-term customer metrics.
Large B2B firms are often advanced in their customer orientation,
and some B2C companies are making notable progress. Increasingly,
they view their customer relationships as evolving over time, and
they may hand off customers to different parts of the organization
selling different brands as their needs change. For instance, Tesco, a
leading UK retailer, has recently made significant investments in
analytics that have improved customer retention. Tesco uses its
data-collecting loyalty card (the Clubcard) to track which stores cus-
tomers visit, what they buy, and how they pay. This information has
helped Tesco tailor merchandise to local tastes and customize offer-
ings at the individual level across a variety of store formatsfrom
sprawling hypermarts to neighborhood shops. Shoppers who buy di-
apers for the first time at a Tesco store, for example, receive coupons
by mail not only for baby wipes and toys but also for beer, according
to a Wall Street Journal report. Data analysis revealed that new
fathers tend to buy more beer because they cant spend as much
time at the pub.
On the services side, American Express actively monitors cus-
tomers behavior and responds to changes by offering different
products. The firm uses consumer data analysis and algorithms to
determine customers next best product according to their chang-
ing profiles and to manage risk across cardholders. For example, the
first purchase of an upper-class airline ticket on a Gold Card may
trigger an invitation to upgrade to a Platinum Card. Or, because of
changing circumstances a cardholder may want to give an additional
card with a specified spending limit to a child or a contractor. By of-
fering this service, American Express extends existing customers
spending ability to a trusted circle of family members or partners
while introducing the brand to potential new customers.
American Express also leverages its strategic position between
customers and merchants to create long-term value across both
relationships. For instance, the company might use demographic
data, customer purchase patterns, and credit information to observe
that a cardholder has moved into a new home. AmEx capitalizes on
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from Aug 2020 to Feb 2021.
RETHINKING MARKETING
5
that life event by offering special Membership Rewards on pur-
chases from merchants in its network in the home-furnishings retail
category.
One insurance and financial services company we know of also
proved adept at tailoring products to customers life events. Cus-
tomers who lose a spouse, for example, are flagged for special atten-
tion from a team that offers them customized products. When a
checking account or credit-card customer gets married, shes a good
cross-selling prospect for an auto or home insurance policy and a
mortgage. Likewise, the firm targets new empty nesters with home
equity loans or investment products and offers renters insurance to
graduating seniors.
Reinventing Marketing
These shining examples aside, boards and C-suites still mostly pay
lip service to customer relationships while focusing intently on
selling goods and services. Directors and management need to
spearhead the strategy shift from transactions to relationships and
create the culture, structure, and incentives necessary to execute
the strategy.
What does a customer-cultivating organization look like? Al-
though no company has a fully realized customer-focused structure,
we can see the features of one in a variety of companies making the
transition. The most dramatic change will be the marketing depart-
ments reinvention as a customer department. The first order of
business is to replace the traditional CMO with a new type of leader
a chief customer officer.
The CCO
Chief customer officers are increasingly common in companies
worldwidethere are more than 300 today, up from 30 in 2003.
Companies as diverse as Chrysler, Hersheys, Oracle, Samsung,
Sears, United Airlines, Sun Microsystems, and Wachovia now have
CCOs. But too often the CCO is merely trying to make a conventional
organization more customer-centric. In general, its a poorly defined
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from Aug 2020 to Feb 2021.
RUST, MOORMAN, AND BHALLA
6
rolewhich may account for CCOs dubious distinction as having
the shortest tenure of all C-suite executives.
To be effective, the CCO role as we conceive it must be a powerful
operational position, reporting to the CEO. This executive is respon-
sible for designing and executing the firms customer relationship
strategy and overseeing all customer-facing functions.
A successful CCO promotes a customer-centric culture and re-
moves obstacles to the flow of customer information throughout
the organization. This includes getting leaders to regularly engage
with customers. At USAA, top managers spend two or three hours a
week on the call-center phones with customers. This not only
shows employees how serious management is about customer
interaction but helps managers understand customers concerns.
Likewise, Tesco managers spend one week a year working in stores
and interacting with customers as part of the Tesco Week in Store
(TWIST) program.
As managers shift their focus to customers, and customer
information increasingly drives decisions, organizational structures
that block information flow must be torn down. The reality is that
despite large investments in acquiring customer data, most firms
underutilize what they know. Information is tightly held, often
because of a lack of trust, competition for promotions or resources,
and the silo mentality. The CCO must create incentives that elimi-
nate these counterproductive mind-sets.
Ultimately, the CCO is accountable for increasing the profitability
of the firms customers, as measured by metrics such as customer
lifetime value (CLV) and customer equity as well as by intermediate
indicators, such as word of mouth (or mouse).
Customer managers
In the new customer department, customer and segment managers
identify customers product needs. Brand managers, under the cus-
tomer managers direction, then supply the products that fulfill
those needs. This requires shifting resourcesprincipally people
and budgetsand authority from product managers to customer
managers. (See the sidebar What Makes a Customer Manager?)
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from Aug 2020 to Feb 2021.
RETHINKING MARKETING
7
What Makes a Customer Manager?
IN A SENSE, THE ROLE of customer manager is the ultimate expression of
marketing (find out what the customer wants and fulfill the need) while the
product manager is more aligned with the traditional selling mind-set (have
product, find customer).
Jim Spohrer, the director of Global University Programs at IBM, hires what
UCal Berkeley professor Morten Hansen calls T-shaped people, who have
broad expertise with depth in some areas. Customer managers will be most
effective when theyre T-shaped, combining deep knowledge of particular
customers or segments with broad knowledge of the firm and its products.
These managers must also be sophisticated data interpreters, able to extract
insights from the increasing amount of information about customers atti-
tudes and activities acquired by mining blogs and other customer forums,
monitoring online purchasing behavior, tracking retail sales, and using other
types of analytics. While brand managers may be satisfied with examining the
media usage statistics associated with their product, brand usage behavior,
and brand chat in communities, customer managers will take a broader and
more integrative view of the customer. For instance, when P&G managers
responsible for the Max Factor and Cover Girl brands spent a week living on
the budget of a low-end consumer, they were acting like customer managers.
The experience gave these managers important insights into what P&G, not
just the specific brands, could do to improve the lives of these customers.
Wed expect the most effective customer managers to have broad training in
the social sciencespsychology, anthropology, sociology, and economics
in addition to an understanding of marketing. Theyd approach the cus-
tomer as behavioral scientists rather than as marketing specialists,
observing and collecting information about them, interacting with and
learning from them, and synthesizing and disseminating what they learned.
For business schools to stay relevant in training customer managers, the
curriculum needs to shift its emphasis from marketing products to cultivat-
ing customers.
This structure is common in the B2B world. In its B2B activities,
Procter & Gamble, for instance, has key account managers for major
retailers like Wal-Mart. They are less interested in selling, say,
Swiffers than in maximizing the value of the customer relationship
over the long term. Some B2C companies use this structure as well,
foremost among them retail financial institutions that put managers
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RUST, MOORMAN, AND BHALLA
8
in charge of segmentswealthy customers, college kids, retirees,
and so forthrather than products.
In a customer-cultivating company, a consumer-goods segment
manager might offer customers incentives to switch from less-
profitable Brand A to more-profitable Brand B. This wouldnt hap-
pen in the conventional system, where brand and product managers
call the shots. Brand As manager isnt going to encourage customers
to defecteven if that would benefit the companybecause hes
rewarded for brand performance, not for improving CLV or some
other long-term customer metric. This is no small change: It means
that product managers must stop focusing on maximizing their
products or brands profits and become responsible for helping cus-
tomer and segment managers maximize theirs.
Customer-facing functions
As the nexus of customer-facing activity, the customer department
assumes responsibility for some of the customer-focused functions
that have left the marketing department in recent years and some
that have not traditionally been part of it.
CRM. Customer relationship management has been increasingly
taken on by companies IT groups because of the technical capability
CRM systems require, according to a Harte-Hanks survey of 300
companies in North America: 42% of companies report that CRM is
managed by the IT group, 31% by sales, and only 9% by marketing. Yet
CRM is, ultimately, a tool for gauging customer needs and behaviors
the new customer departments central role. It makes little sense for
the very data required to execute a customer-cultivation strategy to
be collected and analyzed outside the customer department. Of
course, bringing CRM into the customer department means bringing
IT and analytic skills in as well.
Market research. The emphasis of market research changes in a
customer-centric company. First, the internal users of market re-
search extend beyond the marketing department to all areas of the
organization that touch customersincluding finance (the source of
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from Aug 2020 to Feb 2021.
customer payment options) and distribution (the source of delivery
timing and service). Second, the scope of analysis shifts from an
aggregate view to an individual view of customer activities and
value. Third, market research shifts its attention to acquiring the
customer input that will drive improvements in customer-focused
metrics such as CLV and customer equity.
RETHINKING MARKETING
9
Reimagining the marketing department
The traditional marketing department must be reconfigured as a customer
department that puts building customer relationships ahead of pushing spe-
cific products.
To this end, product managers and customer-focused departments report to
a chief customer officer instead of a CMO, and support the strategies of cus-
tomer or segment managers.
Chief customer
officer
CEO
Customer relationship
management
Research and
development
Market
research
Customer
service
Product managers
Customer segment
managers
A CB
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RUST, MOORMAN, AND BHALLA
10
Research and development. When a product is more about clever
engineering than customer needs, sales can suffer. For example, en-
gineers like to pack lots of features into products, but we know that
customers can suffer from feature fatigue, which hurts future sales.
To make sure that product decisions reflect real-world needs, the
customer must be brought into the design process. Integrating R&D
and marketing is a good way to do that. Few companies have done
this better than Nokia in Asia, where its market share exceeds 60%.
In an industry where manufacturers must introduce scores of new
offerings every year, the groups ability to translate customer input
about features and value into hit product offerings is legendary.
Among its customer-focused innovation tools is Nokia Beta Labs, a
virtual developer community that brings users and developer teams
together to virtually prototype new features and products, inviting
even wacky ideas that may never make it to the marketplace.
(Nokia adopted a different strategy in the United States, using far
less customer input, and has seen its market share slide.)
Examples abound of companies that create new value through the
collaboration of users and producers: Mozillas Firefox in the web
browser category, P&Gs Swiffer in the home cleaning category, and
International Flavors and Fragrances partnership with B2B cus-
tomers like Este Lauder in the perfume market. In a world in which
the old R&D-driven models for new product development are giving
way to creative collaborations like these, R&D must report to the CCO.
Customer service
This function should be handled in-house, under the customer de-
partments wingnot only to ensure that the quality of service is
high but also to help cultivate long-term relationships. Delta Air-
lines, for example, recently pulled out of its call centers overseas be-
cause cultural differences damaged the airlines ability to interact
with North American customers. Delta concluded that the negative
impact on the quality of customer relationships wasnt worth the
cost savings. Now, when customer service gets a call, a representa-
tive immediately identifies the callers segment and routes her to a
customer-service specialist trained to work with that segment.
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For the exclusive use of V. Karri, 2020.
This document is authorized for use only by Venkatesh Karri in BUOL 733, Strategic Marketing-1 taught by Daniel Kanyam, University of the Cumberlands
from Aug 2020 to Feb 2021.
RETHINKING MARKETING
11
The interaction is captured in the customer information system and
used, in turn, by the customer department to divine new customers
needs and create solutions.
If customer service must be outsourced, the function should re-
port in to a high-level internal customer manager, and its IT infra-
structure and customer data must be seamlessly integrated with the
companys customer databases.
A New Focus on Customer Metrics
Once companies make the shift from marketing products to cultivat-
ing customers, they will need new metrics to gauge the strategys
effectiveness. First, companies need to focus less on product prof-
itability and more on customer profitability. Retailers have applied this
concept for some time in their use of loss leadersproducts that may
be unprofitable but strengthen customer relationships.
Second, companies need to pay less attention to current sales and
more to CLV. A company in decline may have good current sales but
poor prospects. The customer lifetime value metric evaluates the
future profits generated from a customer, properly discounted to
reflect the time v
