When Marketing is Strategy – a Lesson for Solution Providers

marketing-strategy-planA recent article in the Harvard Business Review, entitled “When Strategy is Marketing” (Dawar, December, 2013)  got me thinking seriously how downstream, market-facing activities can impact a company’s planning around designing and delivering successful solution offerings. As a start, it would be helpful to quickly review the main tenets of this interesting paper.

The Shifting Business Landscape: Customers and Markets at the Core

Dawar argues that companies’ upstream activities – such as sourcing, production, and logistics – are being commoditized or outsourced, while downstream activities aimed at shaping consumers’ perceptions and reducing their costs and risks are emerging as the main sources of competitive advantage.  Moreover, the reality is that companies are increasingly finding success less from simply being responsive to customers’ stated preferences but by carefully defining what customers’ are looking for and helping shape their “criteria for purchase.” Think, for example, of the success of Volvo and Nike in defining what performance means in their respective categories. These criteria become the basis on which companies segment markets, target and position their brands, and develop strategic market positions for competitive superiority. The strategic objective for the downstream business, therefore, is to influence how consumers perceive the relative importance of various existing purchase criteria within well-defined problem settings while – wherever possible -- introducing new, favorable criteria.

Technology Innovation: A Variable Threat

innovation-technology-concept-tag-cloud-29270267Dawar also states that most executives believe technology innovations are “the greatest threat to competitive advantage.” But he goes on to explain that “you don’t need to sweat every product launch and every new feature introduction by a competitor – just those that attempt to wrest control of the customers’ criteria of purchase.” Further, innovation is not confined to products or technology. Competitive battles are won by offering innovations that reduce customers’ costs and risks over the entire purchase, consumption, and disposal cycle. He gives the example of Hyundai’s unique risk reduction guarantee during the recent recession of “if you lose your job or income within a year, you can return it (the car) with no penalty to your credit rating.” Hyundai didn’t innovate to sell better cars – it innovated by selling cars better.

When Marketing is Strategy: a Solutions Essential

This discussion should stimulate great interest among solution players. Good marketing has always sought those moments, or touch points, when consumers are open to influence. Undoubtedly it has become more difficult to capture all of the touch points and key buying factors that have resulted from the explosion of product/service choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed customer. Solutions marketers are increasingly aware of the profound changes in the way consumers’ research and buy products – for instance, the shift away from one-way communication (from marketer to consumer) toward a two-way conversation. Yet failure to change the focus of marketing toward integrating all consumer-facing activities across the firm’s dynamic value chain can undermine the core goal of reaching customers at the moments that most influence their purchases and retained custom.

Although these forces of change have made life more complex for the solutions marketer, they have, at the same time, presented new and exciting opportunities for the savvy CMO and his/her team. It is important that we look at this issue through a consistent “solutions” lens.  Solutions Insights, a specialized consulting and research company, have defined a solution as:

“A combination of products, services, and intellectual property focused on a business problem or opportunity that drives measurable business value and can be significantly standardized. The solutions components can be from either the vendor and one or more partners, and the solutions implementer can be the vendor, the partner, the customer itself, or a combination of the three”

Market-Facing Activity: A Key to Competitive Advantage

market facingWhen customers are unsure of the product needs they are trying to satisfy but are clear (or can be made clear) of the problems they face – a typical situation in the solution’s space where market complexity makes decision making difficult -- the marketer’s job turns to the shaping of the “criteria of purchase.” This is based on tailoring the offering to consumption circumstances and reducing customer costs and risks. With care, advantage grows over time with the number of customers served – in other words it is replicable or accumulative. This is facilitated, in large part, by both network effects (e.g., on-line communities; digital opinion leaders) and amassing and deploying “big’ data. Dawar references an excellent example of this process:

  • Orica, was an explosives company mired in a commodity business (quarries that blast rock for use in landscaping and construction) in Australia. By gathering data on hundreds of blasts across a wide range of quarries they were able to guarantee outcomes within specific tolerances, greatly reduce result uncertainty for consumers and successfully raise prices over competition. In other words, they were able to demonstrate measurable value delivered through its combined services and mining IP that was critical to the customers’ core business requirements that competition was unable to match.
  • Similarly, SKF – a Swedish ball bearing company – changed a segment of its low price commodity business by integrating value-added services to its products. Through deep customer research they discovered that many customers were wrongly installing and maintaining ball-bearings, with a consequent adverse impact on product performance. They concluded that they must take more responsibility for how the customer was using their products. By providing a newly created proprietary service, they were able to offer a new solutions offering that aided in both correct product installation and lubrication. They subsequently successfully positioned themselves as “trouble-free operations.”

In both cases, continued success depends on maintaining control of the customers’ criteria of purchase. Market change can be evolutionary, where the boundaries of existing criteria of purchase are pushed to the limit (e.g., more efficacious prescription drugs), or revolutionary, where changes just don’t introduce new criteria but often make the old ones obsolete (e.g., touch screens and the smart phone). Good solutions providers should be at the cutting edge of such change opportunity due to their continuous assessment of the ability of solution investment to guide customer purchase criteria.

Key Takeaways: Shaping Criteria of Purchase

In summary, a “criteria of purchase” approach to the solution process drives some critical considerations. If the relative importance of purchase criteria remains uncertain at the early stages of the decision process – as is often the case with complex problems – the active solution provider must help potential consumers make sense of and connect with the marketplace as they seek information (and reassurance). The thoughtful marketer can select the competitive set in which they position their offering in the mind of the customer as Dow did in the solar energy market when they promised the “power to use less power.’ In today’s decision journey, consumer-driven marketing is increasingly important as customers’ seize control of the process and actively “pull” information helpful to them. Solution providers must use key customers as active partners and co-creators in the establishment of “criteria of purchase.” Post purchase, all marketers should make expanding the base of active loyalists a priority. This requires focusing spending on a new set of touch points – solution modification, delivery enhancement and any other methodology that thwarts competitors attempt to control the clients’ criteria for purchase. To repeat, “Competitive battles are won by offering innovation that reduces customer costs and risks over the entire purchase, consumption and disposal cycle.” In a growing age of transient (rather than sustainable) competitive advantage, the solution marketer that can continuously define the competitive market space through fluid establishment of important purchase criteria, should stay one step ahead of rivals.

Food for thought for the solutions marketing fraternity!

Dover-PD_001-5x-WEBPhil Dover is on the Marketing faculty at Babson College as well as the co-founder of the MEL Institute, a research consultancy aimed at understanding the role of managers, leaders and entrepreneurs in sustaining innovation within the “ambidextrous organization.” (www.mel-institute.com)

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