Today’s principal drivers of marketing success, according to Nirmalya Kumar, are speed and reach. Speed, as exemplified in instantaneous global electronic communication, but also in the continuous innovation of new and improved products if a company is to achieve sustainable marketplace success. Reach in global presence, but also in C-suite presence; reach via an influential chief marketing officer, but also in a CEO who recognises a role for marketing that is as critical for sustainable corporate success as are finance, operations and information technology.
But in today’s corporate world, we find the profession of marketing in crisis, according to Kumar, a marketing expert of global renown whose London Business School titles included Professor of Marketing, Director of Centre for Marketing, Faculty Director for Executive Education and Co-Director for the Aditya Birla India Centre.
Kumar contends that marketing is ‘caught in the whirlpool of corporate obscurity’. It is drowning in responsibilities for ‘tactical implementation issues’ with little or no strategic influence. It is associated with the slow growth stemming from worldwide recession, such that ‘people in marketing start losing power’. Boardroom meetings include the CEO, the CFO, the COO, perhaps the CIO, but ‘very few companies have the CMO… the voice of marketing in the boardroom’.
Kumar argues that for marketing to be top-of-mind for the CEO, “It must become strategic, cross-functional and bottom-line oriented.” The importance of that statement can be highlighted by amplifying the three key terms:
- Bottom-line oriented means the CMO can cite the returns the company is getting for its marketing expenditures
- Cross-functional means the marketing department alone can’t reach marketing objectives but must gain awareness and support company-wide – Strategic means extending marketing beyond a focus on the so-called four Ps (price, product, placement and promotion). These are tactical concerns — important in the tactical realm, but not the stuff of transformational organisation-wide initiatives that, in Kumar’s words, ‘deliver oncorporate objectives, including quantitative measurements such as revenue growth and increased profitability’
Becoming more strategic also involves focussing beyond survival, considering the long-term impacts that marketing can deliver as well as those in the short term — no mean task in overcoming the short-term emphasis by today’s investors, analysts and media.
Kumar notes that marketing is more prone to short-term fixation than other corporate offices because its key metrics are more subject to quantifiable short-term measures. The short term involves expenditures that generate sales. “There, I can show you the impact right away,” he says. Not so, however, with expenditures on customer service, brand equity and other spending for which ‘we don’t have financial indicators’ and yet need to establish benefits in ‘brand awareness, distribution availability, looking at how much esteem the brand is held in’.
Launch and learn
Kumar’s career has been steeped in marketing, so much so that he describes himself as ‘passionate about marketing and willing to espouse controversial positions’. (The other passion he publicly avows is the arts — in particular the paintings of Jamini Roy, the father of Indian modern art, and the poetry and other writings of Rabindranath Tagore, the first Asian to win a Nobel Prize.)
After earning undergraduate and master degrees in his native India, Kumar completed his MBA at the University of Illinois in Chicago and his PhD in marketing at the Kellogg School of Management at Northwestern University. He has taught at Northwestern, Harvard Business School and IMD (Switzerland); written dozens of peer-reviewed journal articles, case studies and six books; consulted to more than 50 of the Fortune 500 companies; served on boards of directors of several Indian companies; and is regularly interviewed by media outlets worldwide. Beyond being a provocative teacher and writer, he has successfully positioned himself as someone who is both highly cited by other academics as well as having helped transform corporations.
Among the controversial positions Kumar espouses is his insistence that marketing in today’s world requires a company to be ‘market driving’ rather than market driven and that — in order to be market driving — companies must not only listen to customers to perceive their needs, but also tell customers what the company says they need. “When you’re market-driven, one can test and then launch,” he explains. “When you’re market-driving, one has to adopt the launch-and-learn strategy.”
Radical innovators employ a combination of market-driven and market-driving strategies, Kumar says, allocating five to 20 per cent of their research budgets to their radical ideas. It’s a risky and potentially expensive strategy: “Instead of learning through research, you learn in the marketplace,” says Kumar. “You learn by doing.”
And as a result, companies escape the incremental innovation that’s a product of customer feedback-based product development and rise to the radical innovation characteristic of companies such as Apple, Facebook and Starbucks. Customers don’t ask for blockbuster products from these radical innovators, because customers can’t envision what doesn’t exist. “A few may have imagined the need — perhaps, but not the manifestation of the need.”
Kumar asserts that continuous innovation is today’s only source of sustainable growth. A company can grow in only two ways: raise prices or increase volume. Not many companies can do the former, he asserts. Achieving the latter means entering new markets — although there is a limit to that as well — so‘the only way for true growth is to develop new products and services through innovation’. Make that continuous innovation, because ‘even the most innovative companies are not about launching… and sitting back’, Kumar observes. “So innovation is the game in which you have to play continuously.” And that means you’re willing to risk innovation that will sometimes attack your own products.
Cannibals in the family
Adding new distribution channels, Kumar explains, can increase company-wide volume or lead to cannibalisation. If it’s the latter, the company does it anyway, because ‘if the old channels are dying, you can’t be stuck with them’. There’s no way for the company to avoid being attacked; the only choice is whether to be attacked from outside or within.
Given this reality, Kumar advises, “Keep all the cannibals in the family…. Everyone needs to think, ‘I will do what is best… even if it means killing the mother ship.’ The company needs to do whatever is necessary to win in the marketplace.”
Kumar also finds that radical innovators get beyond exclusively incremental innovation through what he calls ‘the three Vs’: valued customer, value proposition and value network. Such concepts, he notes, are far more relevant than product, price, place and promotion.
The four Ps, he contends, are an essential part of marketing, but they’re inadequate for gaining competitive advantage. Any advantage a company achieves through any of the four Ps is readily open to being matched by competitors. But ‘by focussing on the three Vs, a company can sustain differentiation’:
- Having valued customers involves segmenting customers as finely as possible to precisely respond to their perceived value
- Offering a value proposition happens when your company creates the means by which customers perceive its products and services as differentiated from what any competitor offers
- Establishing a value network requires extensive thinking about how a company delivers its value proposition to target customers. “It’s a cross-functional orientation often referred to as the value chain,” Kumar notes
“The problem with the four Ps,” Kumar believes, “is that they focus towards a more tactical direction in marketing.” The three Vs rise to a strategic level and, as such, are considerably more complex and challenging. “Because the question becomes where to cut the value network in order to serve the different segments,” Kumar says. For each segment, a company theoretically can set up dedicated functions: R&D, marketing, operations, purchasing, distribution, service and so forth. But that loses economies of scale. So the challenge is in segmenting to the exact extent that customers perceive your differentiation from competitors, but enough commonality is maintained among the firm’s value networks to capture economies of scale.
Kumar emphasises the importance of knowing customers as a prerequisite to addressing the three Vs. Many retailers in his native India, for example, are successfully going toe to toe on encroachment by global brands ‘because they understand the Indian consumer better…. You either have to be distinct or you will become extinct’.
There’s likely no more propitious time for marketing to focus on the three Vs than in an economic downturn. “In the boom times, a lot of bad practices creep into the companies,” Kumar says. Recession forces companies to assess the value of every product and service against all expenditures (of time as well as money) involved in generating sales. US auto companies are a particularly relevant illustration: all were pared to the bone as part of required restructuring yet yielded increased sales and profitability sooner than most experts had thought possible. “You need to prune parts of the product line in which you don’t have competitive advantage,”Kumar asserts. “That’s what you are seeing across the board right now.”
The American auto industry — in particular, its past failures — also demonstrates Kumar’s assertion that ‘no competitor can kill another competitor’. All such killings result only from customers abandoning a product in favour of someone else’s product that provides greater value. “It is the consumers who choose which companies to go to.”
This concept of ultimate power in the hands of customers is particularly germane for marketing departments that focus almost obsessively on competitors rather than customers. “With gale-force winds of competition lashing every industry,” Kumar has written, “companies must invest a lot of money, people and time to fight archrivals. They find it tough, challenging and yet strangely reassuring to take on familiar opponents, whose ambitions, strategies, weaknesses and even strengths resemble their own…. Thus, Coca- Cola duels Pepsi, Avis combats Hertz, Procter & Gamble takes on Unilever … Tweedledum fights Tweedledee.”
And eventually, Kumar continues, such companies may be felled by ‘disruptive, low-cost competitors … that have business models and technologies different from those of the market leaders’. Customers abandon the established firms for ‘products and services at prices dramatically lower than the prices established businesses charge, often by harnessing the forces of deregulation, globalisation and technological innovation’.
Upstarts that were among the early giant killers include Costco, Dell, Southwest Airlines and Walmart. Kumar, with a sense of excitement and urgency, notes, “Now, on both sides of the Atlantic, a second wave is rolling in: Germany’s Aldi supermarkets, India’s Ara-vind Eye Hospitals, Britain’s Direct Line Insurance, (the online stock brokerage) E*Trade, Ireland’s Ryanair, Israel’s Teva Pharmaceuticals and the United States’ Vanguard Group. These and other low-cost combatants are changing the nature of competition as executives knew it in the 20th century.”
And it is this changing nature of competition that may propel marketing to its greatest prominence yet within companies striving for sustainable success. If so, it may be propelled by what Kumar calls for — a more strategic orientation by marketing. He is certain that every company must be able to connect marketing to the strategy of the CEO. “Nothing gets sold by the marketing department alone,” he states. “To sell anything, each department — such as finance, R&D or operations — has to coordinate and work in tandem.”
Kumar’s thinking has been brought to life, and extended, in his most recent work on India. For example, in India’s Global Powerhouses, he provides case studies drawn from the enormous emerging market that is India, showing how companies such as the Tata Group are helping to change the ‘brand’ of an entire nation. In a highly favourable review of the book by Martin Veitch in CIO (23 July, 2009), he remarks, “The concepts, the constructs, and the mindset that have prevailed over the past century in companies and countries need to transform as a new future with India and China as dominant powers comes into play.”
Today, he is an evangelist for the position that multinational companies have been caught with the wrong footprint of assets, revenues, and attention during this recession. They are overrepresented in the mature developed world and underrepresented in the fast growth emerging markets. His current research focuses on how firms must reorganize and reorient themselves to meet the changed realities of the 21st Century.
In November, 2011, Kumar’s newest book, Inside India, will introduce the concept of ‘invisible innovation’ to demonstrate how India is slowly emerging as an innovation powerhouse for multinational companies. Here, too, Kumar deftly explains exactly how transformation can (and must) happen for professions, companies and countries to grow.