MARKETING

IN THE 21ST CENTURY

AND BEYOND
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 MARKETING
IN THE 21ST CENTURY
AND BEYOND

Timeless Strategies for Success,

Condensed Edition

Bruce D. Keillor, Editor

Copyright 2013 by ABC-CLIO, LLC
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, except for the inclusion of brief quotations in a
review, without prior permission in writing from the publisher.
Library of Congress Cataloging-in-Publication Data
Marketing in the 21st century and beyond : timeless strategies for success / [edited by]
Bruce D. Keillor. — Condensed ed.
p. cm.
Rev. ed. of: Marketing in the 21st century. c2007.
Includes bibliographical references and index.
ISBN 978–1–4408–2852–2 (hbk. : alk. paper) — ISBN 978–1–4408–2853–9 (ebook)
1. Marketing. I. Keillor, Bruce David. II. Marketing in the 21st century.
HF5415.M2194 2013
658.8—dc23 2012029549

ISBN: 978–1–4408–2852–2
EISBN: 978–1–4408–2853–9
17 16 15 14 13 1 2 3 4 5
This book is also available on the World Wide Web as an eBook.
Visit www.abc-clio.com for details.
Praeger
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This book is printed on acid-free paper
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 Dedicated to
Tobias Conor Jasper III
Scholar Extraordinaire
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 CONTENTS

Introduction by Bruce D. Keillor ix

Part I. Company and Customer Relationship Marketing 1

1 What Does “Relationship Marketing” Really Mean? 3
Linda M. Orr
2 Building a Successful Sales Force in the 21st Century 17
Daniel J. Leslie
3 Learning from Your Customers: Building Market Feedback
into Strategy and Innovation 33
Jason DiLauro and Linda M. Orr
4 Negotiating Company and Customer Relationships 45
Jon M. Hawes

Part II. Integrated Marketing: The Product-Customer Connection 59

5 Path-Forward Thinking: Core Competencies and the Value
Proposition 61
Ken Dickey
6 Futuring: Anticipating the Emerging Voice of the Customer 70
Stephen M. Millett
7 How to Clean Up with a Start-Up: Tricks and Tips
from Entrepreneurs 86
Robert Black
viii Contents

8 How to Use Social Media: Fostering Connections in a Virtual

Marketplace 101
Gretchen M. Keillor

Part III. Marketing Channels: The New Realities 117

9 Anywhere, Anytime, Anyway: The Multichannel Marketing
Juggernaut 119
Dale M. Lewison
10 Business-to-Business Integrated Marketing 141
Nadji Tehrani
11 Nostradamus Knows Direct Interactive Marketing: Direct
Marketers as 21st-Century Trend Messengers 158
William J. Hauser

Part IV. Global Marketing: New Challenges and Opportunities 181

12 The New Global Marketing Realities 183
Gary A. Knight
13 Culture and International Marketing 203
Vern Terpstra
14 Global Value-Added Strategies 226
John Caslione
15 Global Customer Service 243
Calin Veghes
Index 253
About the Editor and Contributors 263
 INTRODUCTION

A few years ago we published the highly successful four-volume set Marketing in
the 21st Century. Drawing on insights from both the academic and practitioner
worlds, the set covered important issues related to global marketing, interactive
and multichannel marketing, company and customer relations, and integrated
marketing communications. Our goal was to provide a comprehensive reference
resource for business decision makers and anyone who was a student of market-
ing. The market, and the marketing environment, has undergone significant
changes since the publication of the original set but, as the saying goes, “the more
things change, the more they stay the same.” This new volume, Marketing in the
21st Century and Beyond: Timeless Strategies for Success, has taken, and updated,
the key chapters from that original set—and also included some emerging topics
such as social media marketing—to create a single source for marketing success
as we move into the second decade of the 21st century.
Like the four-volume set, this edition is organized into four parts. The first—
Company and Customer Relationship Marketing—begins by addressing the
timeless question: “What does ‘relationship marketing’ really mean?” Exploring
the different facets of how companies can effectively establish an ongoing relation-
ship with its best customers, this chapter sets the stage for the entire book. In this
first part we also delve into company-customer interaction in the form of sales
force strategy, market feedback and innovation, and finally the fundamental chal-
lenges related to negotiating from the perspective of both the customer and the
firm itself.
In the second part—Integrated Marketing: The Product-Customer Connection—
this theme of relationship marketing is expanded. Using cutting-edge thinking
x Introduction

from experts working in the field, we begin with the notion of identifying the
firm’s core competency and matching that competency with the value proposi-
tion targeted at the customer. This then segues into the topic of anticipating
how the customer’s view of that value proposition might change—and how
businesses can proactively anticipate those changes. There is also a chapter on
how newly emerging companies, and entrepreneurial individuals, can be suc-
cessful in a dynamic marketplace. The part concludes with a straightforward,
practical guide for using social media to create an effective long-term relation-
ship with your target markets.
However, understanding the importance of relationship marketing, and estab-
lishing a connection between your firm, its products, and the customers in the
marketplace is not enough. In the third part—Marketing Channels: The New
Realities—the issue of creating and maintaining the channel to the customer is
addressed. Built around an interactive, multichannel perspective, the three chap-
ters address the various aspects of multichannel marketing, the unique challenges
presented by business-to-business marketing, and also the ever-changing area of
direct marketing.
The book concludes with the recognition that no matter the size of a company,
the 21st-century marketplace is global in nature. In this part, titled Global
Marketing: New Challenges and Opportunities, we start off by developing an
understanding of what these new global-marketing realities really mean. There is
a comprehensive discussion of one of the most difficult areas of international
and global marketing—dealing with culture and cultural differences. Building
on this we also consider how to create and maintain value-added strategies across
different markets. The part then concludes—coming full circle from the first
chapter dealing with relationship marketing—by looking closely at customer ser-
vice in the global market.
Each of the chapters in this volume represents strategies that will help business
succeed in the ever-changing 21st-century market environment. They also pro-
vide thought-provoking perspectives for students of marketing designed to help
create a foundation for further study and research. It is my sincere belief that this
book represents one of the best, most comprehensive sources of cutting-edge mar-
keting thought. I trust you will find these chapters valuable in navigating your
way through the realities of the 21st-century marketplace.
Bruce D. Keillor
 Part I

COMPANY AND CUSTOMER

RELATIONSHIP MARKETING
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 CHAPTER 1

WHAT DOES “RELATIONSHIP

MARKETING” REALLY MEAN?
Linda M. Orr

INTRODUCTION
We know that it costs, on average, anywhere from 6 to 10 times more to get a new
customer than to keep an old customer. Yet most Fortune 500 companies lose
50 percent of their customers in five years. Furthermore, the average company
communicates only four times per year with current customers and six times per
year with prospects. That translates into the fact that customer loyalty is worth
more than 10 times a single purchase. Some statistics even show that a 5 percent
increase in customer retention can increase profits 25 to 125 percent! Selling in
the 21st century is light-years different from what it was in the 20th century.
Let’s face it, in the 21st century selling is not about manipulation and it is not
about each individual sale. Competition is too fierce, markets are saturated, and
customers are too smart.
Great sales pitches, well-crafted marketing strategies, and creative advertising
can be very persuasive, and they can even get people to buy your product. But
to keep customers in the long run, you must treat them right and build a relation-
ship with them. Even if you have a very expensive product that people buy only
once in their lifetime, you will be rewarded through positive word of mouth if
you treat your customers the right way. You have to make every moment not just
about that individual sale, but about the long term.
To bring in new customers and to keep old ones, you have to realize that the
externalizing of failures and internalizing of successes holds true for the customers
as well. Remember the old adage: “Nobody likes to be sold, but everyone likes
to buy.” That means that if a customer has a problem or feels manipulated,
4 Marketing in the 21st Century and Beyond

it becomes your fault. If a customer makes a great choice or hunts down the per-
fect “bargain,” they will give themselves the credit. Where does that leave you? It
means you have to leave your ego at the door and realize it is not really all that
simple. You have got to focus on keeping customers happy, and the only way to
do that is by building and maintaining a relationship. You have to get past the
1950s pushy marketing in which the answer is to “persuade” new customers.
You have to realize that you must go beyond the basic psychological processes
and work to maintain a relationship. When relationships are formed, single fail-
ures and even successes can be overlooked. Customers really want convenience
too, and they know just as well as you should that it is expensive to find new prov-
iders. In today’s service-oriented economy, relationship building and excellent
service are more than competitive weapons. They are survival skills.

WHAT IS RELATIONSHIP MARKETING?

Relationship marketing is a total strategy that involves all the marketing mix
variables to create and keep loyal customers. Remember back to Marketing 101
and keep in mind the four Ps, which are the “elements” of a marketing strategy
that a firm has at its disposal to utilize to reach the target customer. Product,
place, price, and promotion: these are all key factors, even today in the 21st cen-
tury—and it is all about strategy. You have got to have a clear strategy first
and make this well defined in your mission statement. Without a clear, well-
defined strategic direction that is translated to everyone (all stakeholders) and
filtered down throughout every part of the organization, you have nothing.
Within your strategy you must figure out what your unique selling and value
proposition is. What do you have to offer the consumer? How are you different?
How will you stand out in the marketplace? Why is the consumer buying your
product? To determine this, you will need to go back and revisit every element
of the marketing mix and decide which direction to take, keeping in mind that
whatever path you choose, you must be consistent and have all your elements
integrated together to send one clear, dependable message. The importance of this
consistency of strategy cannot be understated.
Think back to your strategy or marketing mix variables and your value propo-
sition. A critical component of your value proposition must include how you plan
to satisfy your customers, which will then create beneficial and long-lasting rela-
tionships. These relationships must become the heart of any business’s strategy
that is operating in the 21st century. We spend too much time and effort formu-
lating our strategies and learning about our customers to not follow through and
assess satisfaction and then work to maintain relationships. In the 21st century,
strategies have to be a two-way street and have to include the long term. A
focus on onetime transactions cannot succeed anymore. Remember, relationship
 What Does “Relationship Marketing” Really Mean? 5

marketing is a total strategy focused on creating and maintaining long-term,

mutually beneficial relationships.

THE ORIGINS OF RELATIONSHIP MARKETING

Much of what we know about relationship marketing came from earlier
research in sociology, psychology, and anthropology about dating, relationships,
and marriage. After all, we are working to create bonds that will last forever; the
only difference is that we want to create these bonds with multiple consumers.
Relationship selling is like a marriage. To make it work, you must work at it. It
is not easy, and at times the costs to you will outweigh the profits that you are
receiving in turn. Much like in marriage, awareness, credibility, trust, and chem-
istry govern the relationship. The importance of each must be emphasized contin-
uously. You must be prepared to deliver on every promise. If you do not deliver,
you must be prepared for a fight or struggle. If you have enough negativity, be
prepared for divorce.
The stages of the formation of a business relationship follow that of the dating/
marital relationship. It is important to think about how much time and effort
must go into each stage, which, just like in dating relationships, will determine
the value of the relationship and the potential for that relationship to continue.
Initially, young single people must search for mates. In selling, this stage is called
prospecting. Prospecting is hard work and nobody likes it. You have to get shot
down numerous times to hear just one yes. People do not want to give out their
phone number. You have no trust, no awareness, and no credibility at this stage.
It is really hard work.
Then you get a phone number, and in social relationships, you begin the pro-
cess of dating. In selling, you begin to establish rapport. No matter which situa-
tion you are referring to, the same thing is happening: you are searching for
some mutual attraction and chemistry. Does this person have something to offer
that I want? Then, as the sales process continues, astute salespeople will probe
for needs. In social relationships, this is when the courtship begins. In a selling sit-
uation, salespeople who have listened to needs can then appropriately respond to
those needs. They can present a product or service that most likely fulfills all the
customer’s needs and provides a satisfying solution. In social situations, this is
when a couple begins to fall in love, if and only if appropriate needs are met.
Next, if all has gone well, is either the closing of the sale or wedding bells. As we
know from both sales knowledge and relationship knowledge, this step in no way
ensures commitment. Buying a product (or entering a marriage) requires some
degree of a leap of faith. Just as you never truly know a person until you actually
live with that person and begin to build a life with him or her, you do not know if
you will be satisfied with a product until you actually use it. Will the quality hold up?
6 Marketing in the 21st Century and Beyond

If not, will the company be there to fix it? Will they honor all warranties? This
part of the process, the after the sale/commitment, is when trust is truly built. So
many marketers (and daters for that matter) assume that trust has been created
because the sale was made, when in actuality the most critical component of the
relationship—trust—does not form until the after-the-fact use of the product and
the follow-up. Customer satisfaction can come from a onetime successful sale.
Customer loyalty, which is the Holy Grail to all marketers, can come only from
repeated transactions and the formation of a relationship.
So, are your customers satisfied or loyal? A satisfied customer is a buyer who has
a good purchasing experience with a particular supplier, but plans to buy from
whichever vendor offers the best opportunity in the future. Meanwhile, a loyal
customer is a buyer who has selected a particular supplier over time and intends
to buy from that same supplier in the future. Customer loyalty is the ultimate
goal of relationship marketing. It takes a solid, consistent, well-thought strat-
egy directed at satisfying customer needs to achieve this over a long period
of time.

HOW RELATIONSHIP SELLING IS DIFFERENT

Traditional 20th-century transaction selling was synonymous with terms like
the “hard sell,” “my way or the highway selling,” or “manipulative selling.”
Many mind-sets existed about selling in the 20th century. Selling was thought
to be a contest. Selling was persuasive. Customers must be talked into buying cer-
tain products; they must be sold. Great salespeople are great manipulators. Buyers
and sellers alike might be lying. There was even a key acronym in older selling
textbooks, as late as the late 1990s: ABC. ABC stood for “Always be closing,”
because, of course, the close is everything. Who cares about the future? You got
your sale, right?
The 20th-century sales process many times included a canned presentation,
which was very much one-sided. In this presentation, the salesperson did all
the talking and barely let the customer get a word in. If they cannot talk, they
cannot say no, right? The salesperson was focused on persuading and overcom-
ing objections. It always goes back to convincing the customer that they are
wrong and you are right. Salespeople were seen as an annoyance at a minimum
and even something to fear at the maximum level. They could not be trusted.
Salespeople out on the road were considered very lonely people, and they prob-
ably were.
Contrast all of this to relationship selling. Even the terminology is different.
We use terms like “collaborative selling,” “partnering,” “nonmanipulative sell-
ing,” “consultative selling,” “problem-solving selling,” and the “soft sell.”
Relationship selling in the 21st century has a completely different mind-set.
 What Does “Relationship Marketing” Really Mean? 7

Selling is thought of as a service in which salespeople help customers find solu-

tions to problems. Customers love to buy because they have needs and want to
find solutions to satisfy those needs. In relationship selling, buyers want to trust
the salesperson. They know that this trust will be mutually beneficial because
there will be reduced search costs on both sides of the equation. In relationship
selling, customer service comes first. Great sellers truly care. And most impor-
tantly, it is not a onetime event; it works—again and again and again.
The 21st-century relationship selling process is completely different from the
20th-century process. The sales process is a two-sided, flexible interaction. In fact,
many great salespeople realize that it is better to let the customers do most of the
talking. The salesperson takes on the role of a person probing for needs by asking
questions. It is talking with the customer and not talking to the customer.
Salespeople in the 21st century seek to be helpers who can resolve concerns.
They are not feared. They are thought of as partners and sometimes even friends.
These are the keys to relationship selling in the 21st century. It is a very different
process, strategy, and mind-set.

RELATIONSHIP MARKETING AND CUSTOMER SERVICE ¼

SATISFACTION AND LOYALTY
As the research shows, building relationships is almost always more successful
and profitable than creating onetime transactions. Over the long run, nothing is
more cost-effective than establishing a base of satisfied customers. In some indus-
tries, over 80 percent of all future sales come from the existing customer base.
This is done through the provision of exceptional service, especially after the sale
has been made. Customers make initial purchases because of the promise of great
service. Repeat sales are made because of provision of great service. Firms that can
achieve a very lofty goal and be rated high by customers in their provision of cus-
tomer service grow twice as fast as companies rated poorly and charge an average
of 9 percent more than those companies. Imagine that—treat customers well,
let the word get out there, and you can charge more. That increase in profits is
in addition to the added revenues and decreased expenditures created by having
loyal customers.
Thus even though we have discussed service, satisfaction, and loyalty, it is
equally important to understand customer dissatisfaction. Unfortunately, only
1 customer in 27 will volunteer his or her feelings to the seller when dissatisfied;
others just buy elsewhere next time. Therefore it is critical to provide proper ser-
vice and follow-up to continually gauge and track customer experiences. When
customers are dissatisfied, managers often wonder whether or not they should pla-
cate those complaining customers. There is an often asked question: what can a
firm afford to spend to convert a complaining customer into a satisfied customer?
8 Marketing in the 21st Century and Beyond

Remember the figure just mentioned: most sales (perhaps 80%) come from prior
customers. In the business-to-business sector, the average cost of securing an
order from a new prospect is $1,673. Meanwhile, the average cost of securing an
order from an existing industrial account is only $717. That is a difference of
$956. Additionally, existing firms are more likely than new firms to place large
orders and orders with higher margins. Thus relationship marketing equals satis-
faction, loyalty, and increased profits.

THE UTMOST IMPORTANCE OF TRUST

The first research into relationship marketing evolved from the marriage litera-
ture. Thus courtship and dating are always good examples to use when describing
the characteristics of relationships and why they are so important. We enter into
relationships, personal or business, to minimize effort and risk. Just as it becomes
tiresome and burdensome to continually find new people to date, it is extremely
expensive for new businesses to constantly gain new customers. Plus, as a con-
sumer enters into a relationship with a business, the business gains because they
better understand the customer’s needs and they know how to better serve that
customer. Likewise, the customer gains because they do not have to continually
seek alternative suppliers. Just think about when you move to a new city. It is
stressful just to figure out which local grocery stores you like best and where you
will find the right doctor. Thus, hopefully, the act of forming a relationship
creates a win-win situation. This is of course until one or both parties of the rela-
tionship begin to feel that the relationship is no longer fulfilling their needs and
they could then probably be better served elsewhere.
On that note, would you have an interpersonal relationship with someone you
do not trust? Why or why not? Usually the answer depends on what you have to
gain and what you have to lose. What are the risks and what are the rewards? Of
course, as with all relationships in life and in business, there are risks and rewards.
Maybe you have a relationship with someone you do not like but he or she is fam-
ily. Maintaining civil harmony within your family becomes a greater reward than
the risk of whatever it is about the family member that annoys you. In business,
the greatest risk is financial, but there are also many other types of risk, such
as time and ego risks. But from the customer’s perspective, with greater and
greater saturation of markets, why would you ever do business with someone
you did not trust? And more importantly, once trust is broken, would you ever
continue to conduct business with that person or company? What if you just
heard from a trusted friend or colleague that an establishment or salesperson is
untrustworthy? The answers to these questions are fairly obvious to most of us.
Unless that business has something that we really want or need, that we cannot
get anywhere else, the lesson is very simple—no trust, no sale.
 What Does “Relationship Marketing” Really Mean? 9

REPUTATION IS EVERYTHING: GUARD IT WITH YOUR LIFE

Reputation is all about consistency. Honest people should work for honest
companies and vice versa (honest companies should hire honest people). Trust
can be viewed from the perspective of the salesperson and how salespeople can
be perceived to be more honest. However, in the 21st century it is just as impor-
tant to trust the company as it is to trust the salesperson. Once again, would you
do business with someone you do not trust? NO! Thus the basic elements of pub-
lic relations, reputation management, and corporate identity are critical in the
21st century.
This means it is crucial for businesses to manage and guard their reputations
and to be seen as trustworthy. In the 21st century, if you do not have a good,
healthy corporate image, your firm is at a serious competitive disadvantage. At
the end of the day, unless you have a trustworthy sales force and a solid corporate
image, you have got nothing.

KNOWING AND UNDERSTANDING THE COMPETITOR

In light of the extreme importance of strategy, it would be utterly foolish to
examine any strategy, even a sales strategy, without giving careful consideration
to the competition. Nobody operates in a vacuum. We are constantly dealing
with competition from every angle. And even with the most trustworthy sales
force and the best corporate image, competition can come in and disrupt the
equation and cause the best planned strategies to fail. This raises an important
and often forgotten point. When you are a salesperson, who is your competition?
Is it the competing businesses? Is it their products and/or services? As an individ-
ual out in the field, it is much more basic than that. Your primary competition at
this level is the other salespeople. The business environment of the 21st century is
one of hypercompetition (extreme competition), created from fragmented and
saturated markets, more knowledgeable consumers, greater technology, and more
globalization, just to name a few. So, when you are out in the trenches, what dis-
tinguishes you from the competition? What sets you apart? Well, the easiest
answer is you!
It is up to each and every individual salesperson to build an ongoing, solid, last-
ing relationship with each customer. When that loyalty is built, then you have a
differential advantage. It is also up to each salesperson to learn and understand
how the other salespeople in the industry behave and build relationships. No mat-
ter how great the technology and innovation of the 21st century is, we are all still
just people selling products and services to other people. And given the increased
changes, this concept becomes even more important than ever. We are right back
to the basic principle of relationship marketing, which is once again why it is so
10 Marketing in the 21st Century and Beyond

incredibly important to focus our “selling” and “sales management” activities on

relationships.

KEYS TO SUCCESS FROM THE INSIDE OUT: BUILDING A

SUCCESSFUL SALES FORCE IN THE 21st CENTURY
According to the president of a shoe company, two shoe salespeople were sent
to a poverty-stricken country. The first wrote the president and said, “Returning
home immediately. No one wears shoes here.” The second, more optimistic sales-
person approached the situation in a very different way. She described the situa-
tion to management as “unlimited possibilities. Millions of people here are still
without shoes.”
This story illustrates that one of the most important jobs sales managers per-
form is the personnel function. The work of sales managers in personnel activities
starts with finding and hiring individuals for sales slots in the organization—
people who are both interested in sales jobs and qualified to fill them. An organiza-
tion cannot survive without a good, competent, energetic, and creative sales force.
As a business owner, the utmost important thing is to always have a clear strategy.
This must come first. Thus just as in all other areas of managing a 21st-century sales
force, your guiding principles and choices of action must be rooted in a carefully
planned and deeply rooted strategic mission and vision statement. From this state-
ment, more specific, tangible objectives can be established. These goals and proce-
dures not only must have strategy as their guiding principles, but must also emerge
from a set of ethical standards. Does this line of thought seem repetitive at this
point? Good! A well-developed strategic direction that is founded on a solid ethical
foundation is the single most important step.
Once these tasks are accomplished, then sales managers can begin the tasks of
hiring, training, motivating, and keeping employees who take special care of the
customer. Profitability stems from customer satisfaction, and customer satisfac-
tion and loyalty are deeply rooted in employee satisfaction and loyalty. Just as
many businesses have learned this lesson the hard way, so did T.G.I. Friday’s.
After years of very dismal store results, T.G.I. Friday’s started focusing on internal
operations such as the cleanliness of the store and the happiness and the attitude
of the servers. When they did this, sales doubled in six months.1
Few businesses want to look inward to find fault for problems. It is always eas-
ier to blame something external. We have almost an instinctual response left over
from the 20th century to try to dig out of sales slumps by increasing advertising
spending. Pumping thousands of dollars into promotion is not going to solve
problems that form the very backbone of relationship marketing. Who do cus-
tomers actually have a relationship with? It is the business, but more specifically,
they remember the waitress who actually waited on them or in the case of sales,
 What Does “Relationship Marketing” Really Mean? 11

the salesperson who took care of them. These issues are not human resources
problems and they cannot be left to HR departments to solve. Instead, they must
become central to any marketing and sales campaign and must be integrated into
the total efforts. Finding and keeping the best sales talent is a key competitive
weapon of the 21st century.

SALES EFFECTIVENESS, MONEY, AND THE BOTTOM LINE

What is the end result of all this fluffy relationship stuff? Hopefully, it is
money, of course! A reoccurring theme of the 21st century is hypercompetition.
Competition is more than just potential competition for your customers; it also
includes competition for your employees. Relationship marketing is just as much
about the relationships with your employees as it is about the relationships with
your customers. Customer satisfaction and loyalty come from employee satisfac-
tion and loyalty. So how do you get satisfied, loyal employees? Studies have shown
that more than 80 percent of all behavior is determined by the reward system. As a
consequence, 80 percent of behavior is within your control as a manager. You
must pay employees correctly and you must use a proper balance of the other
types of motivational tools.
Then, it is just as critical that you enact the proper mix of measurement tools,
for both the sales force and the organization. You cannot know what to fix if you
do not know what is broken. As this chapter describes, many performance indica-
tors must be collected. Simply looking at financial indicators is not sufficient.
After all, money is a lagging indicator, meaning that once you are looking at an
income statement, the mistake (or accomplishment) has already happened in
the past. Customers must be enticed to buy first, must be satisfied, must have
time to tell their friends and/or coworkers, and must have time to possibly rebuy
or look elsewhere before the outcomes of their behaviors will show up on an
income statement. Thus it is critical to take a multifaceted approach to evaluating
effectiveness.

LEARNING FROM YOUR CUSTOMERS TO INCREASE

INNOVATION
Once we have taken care of some basic strategic decisions, built a great com-
pany from the inside out through the development of a great sales force, and paid
very careful attention to the competition, we have to remember the most impor-
tant component of the relationship. Who are we trying to build a relationship
with? It is the customer of course! Customer relationship management (CRM)
has become a very popular term of this century. The term CRM is frequently used
to refer to software packages that have become commonplace in the 21st century
12 Marketing in the 21st Century and Beyond

for managing and handling consumer data. However, CRM goes beyond software
applications. The term encompasses a total strategic approach to managing cus-
tomer relationships. Specifically, CRM is the processes that identify customers,
create knowledge about those customers, build customer relationships, and shape
customers’ perceptions of a firm and its products and/or services. One of the most
important parts of the CRM process is the knowledge-building component.
What do your customers want and how do you modify your product based on
that? How do you get them to talk to you so that you can find out what
they want? How do you interpret what they say? Understanding innovation and
adaptability, and more importantly how to be innovative, is a necessity in an
age of such turbulence.

KEY ACCOUNT MANAGEMENT IN THE 21st CENTURY

CRM of the 21st century also involves a very strategic handling and managing
of accounts. Since partnerships are hopefully long term, you need and will have
tons of data about customers. These data need to be stored and utilized to make
key decisions. Then, salespeople need to use this information to determine which
accounts to serve and what levels of service to provide each account. Some
accounts just want a phone call every now and then. Others need personal visits
every week. Key account management in the 21st century requires careful consid-
eration of these questions. Key account management is simply about learning
who the most profitable customers are. The 80/20 rule, that 80 percent of your
sales come from 20 percent of your customers, holds true. Thus sales managers
and salespeople need to make key decisions to determine who those 20 percent
are. But it goes much further than that. What do you do with the other 80 per-
cent? They need careful consideration and classification as well. What if you could
take some of that 80 percent and “move them up” or get them to purchase more?
There is also the issue of the key account management equation. How do you
organize your sales force around these accounts as well as all other accounts?
Territory management of the 21st century has become harder than ever before.
On one hand, as a sales manager you want to utilize whatever system is most effi-
cient and effective and allows the customers to have the best possible service avail-
able. On the other hand, you want to be fair to your salespeople. Sometimes sales
representatives perform poorly not because of their own skills and abilities, but
instead because they are simply in a bad territory. It can and does happen fre-
quently. If your compensation and motivation systems are based on this, you have
problems. Therefore just as relationship marketing has caused us to take a more
careful and strategic approach to account management, sales managers must
also take a more careful and strategic approach to sales force and territory
management.
 What Does “Relationship Marketing” Really Mean? 13

Sales managers want to get the most bang for their buck no matter how they
make decisions. They want value. Value refers to the perception that the rewards
exceed the costs associated with continuing the business relationship—on all sides
of the equation. For the seller, investments in building the business relationship
may be considerable, but a highly committed buyer may be the seller’s most
important asset. The seller can leverage skills and resources, build strong competi-
tive positions, and enjoy the benefits of a long-term relationship without contin-
uing to experience customer search costs. Buyers also enjoy the benefit of long-
term business relationships. They can avoid costs associated with extensive prod-
uct search procedures, receive favored treatment from suppliers, and often achieve
a reduction in total costs, even if the price is the same as (or even higher) than that
charged by others.
The value and efficiency, which both the buyer and the seller want, make the
tedious process of customer relationship management, key account management,
and territory management worth it in the long run. However, these are processes
that require a great deal of skill and effort. The sales manager and salespeople of
the 21st century must understand these principles.

GETTING RID OF THOSE THAT ARE NOT PROFITABLE

In the 21st century, many companies are operating on even tighter margins and
managers are forced to be more accountable. Thus, just as the tried-and-true
approaches of the past are still necessary, 21st-century sales managers must learn
when to get rid of customers just like they must know when to get rid of certain
employees. Keep in mind the definition of relationship marketing, which was
mentioned earlier in this chapter. Relationship marketing is a total strategy
focused on creating and maintaining long-term, mutually beneficial relationships.
As we just saw in the key account management discussion above, through our
efforts we will find that some accounts are not as profitable as others.
A recent analysis of customers of a major bank in Australia revealed that 12 per-
cent of its customers contributed to the majority of the profits, 60 percent were at
a break-even level, and the remaining 28 percent cost the bank money. Other
studies from the largest banks in the United States found that only 6 percent of
the customers were the most profitable. On average, they produced $1,600 in rev-
enue and cost $350 to serve. Compared to this, 14 percent of customers contrib-
uted to loss and produced only $230 in revenue while costing $700 to serve. The
percentage of profitable customers varied from a mere 7 percent of the customers
for a software company to 16 percent for a media company.
We all know it is true to some degree, but the actual statistics presented can be
somewhat daunting. These numbers may make sales managers want to consider
whether or not they have been segmenting their accounts correctly. Key account
14 Marketing in the 21st Century and Beyond

management also needs to incorporate other variables into the equation, which
adds the costs associated with serving each customer. If you are making a lot from
a customer but calling on them every day and refunding their purchasing con-
stantly, they still may not be profitable. Now the tricky part: what do you do with
unprofitable customers? Depending upon the situation there may be a number of
strategies and alternatives to take care of these accounts. In the 21st century, man-
agers must consider these crucial elements along with their customer relationship
management and key account management decisions. Margins are simply too
tight in this century.

UTILIZING INTEGRATED MARKETING COMMUNICATIONS

IN SMALL BUSINESSES
Because the 21st century is all about customer relationship management, it is
also necessary to discuss some of the special types of businesses and customers
and their respective needs. Small businesses have always existed. In fact, the ori-
gins of all businesses were in small businesses. However, the 21st century has
brought with it changes that have transformed and will continue to transform
the role small businesses play in our economy. In some ways, it is easier than ever
to thrive and succeed with a small business. In others, it is harder and harder to
succeed when faced with competition from major corporations and their mega-
brands. So, what are the alternatives for selling in small businesses in the
21st century?
As with so many other things that we have seen, it all comes back to strategy.
Many feel that the 21st century will see a continued dominance of “pull” strate-
gies instead of “push” strategies—meaning, instead of companies pushing the
product to the consumer with mass advertising and a heavy sales force presence,
consumers will pull the product through the channel. They will do so because
they are so educated these days. With blogs and all other forms of technology
and word of mouth, customers can find out information about products and
services as soon as, if not before, they hit the market. Thus strategies for the
21st century have and will continue to change.
Luckily, the 21st century has brought amazing advancements in technology,
which can help the small-business owner succeed. These are all basically “tools”
that sales managers can add to their “tool box” and utilize to communicate with
the customer. The author of chapter 10 discusses direct marketing, database mar-
keting, e-mail marketing, using websites, and utilizing search engine technology.
For the small-business owner with a considerably smaller sales force, many mem-
bers of which are performing multiple functions, these technological tools make
the small-business owner an equal competitor in this century. It all comes back
to strategy, because even with the use of these tools, they all must be integrated
 What Does “Relationship Marketing” Really Mean? 15

back into the company’s strategy to send one consistent and unified message to
the customer about the company’s products and services. If the messages say the
same thing, it really does not matter what the “channel” or “medium” is. As long
as the customer receives correct, timely, and relevant information, the technologi-
cal breakthroughs of this century help the small-business owner succeed right
alongside large companies.

UNDERSTANDING DIVERSE ORGANIZATIONAL BUYERS

Once again, with customer relationship management and key account manage-
ment being two crucial elements of a relationship marketing strategy, it is vitally
important to understand a firm’s largest accounts. Usually, just due to sheer pur-
chasing power, the largest accounts are the industrial and other business-to-
business accounts. These customers have many distinct differences from ultimate
consumers in the marketplace. Many of these differences are the same as they have
always been throughout the 20th century. However, some of these aspects are so
important that they deserve repeating. On the other hand, just like everything
else, the dramatic changes of the 21st century have brought dramatic changes in
organizational selling characteristics and processes.
Some of the biggest changes that have occurred in the 21st century, with regard
to business-to-business purchasing, deal with the purchasing and buying center
functions of the organization. Many of these changes were brought about by the
same forces that are requiring changes in all organizations—increased account-
ability and lower operating margins. There is not as much room for trial and error
in this century. Salespeople calling on business-to-business and industrial
accounts need to recognize these changes and deal with them effectively.
Although the changes mentioned in this chapter are unique to business-to-
business and industrial selling, the solutions are the same. To succeed in this cen-
tury we need to have a greater emphasis on relationship marketing.

THE ETHICS OF MANAGING CUSTOMER INFORMATION

Finally, all of our customer relationship management efforts have brought with
them one tremendous opportunity and challenge: What do we do with all this
information? What are the ethical issues involved? What about consumer
privacy—does it matter? First and foremost, salespeople have to reach the cus-
tomer. All the information that exists has, quite frankly, produced “information
overload.” Therefore from a sales perspective, it has become harder and harder
to reach customers. So, the first question managers must answer is how to reach
customers through the clutter of information. Then, if you do reach the customers,
you then have a whole new set of issues around managing their information.
16 Marketing in the 21st Century and Beyond

Moreover, it can be a benefit to your company if you manage this information

correctly. Just as companies that mishandle consumer data can end up in a public
relations nightmare, companies that learn to properly use and respect consumer
information gain an added advantage of enhancing their reputation.

CONCLUSION
The only way to survive in the 21st century is by building relationships.
Relationship marketing seems like a term caught between a cliché and common
sense. However, no matter how clichéd and like common sense it may seem, it
is a complex set of processes that must be utilized to cope with the rapid changes
of this century. By accepting the strategies and tactics of relationship marketing,
companies can forge stronger bonds with their customers to build relationships
and create better success and hopefully, ultimately, greater profitability.

NOTE
1. Michael LeBoeuf, How to Win Customers and Keep Them for Life (New York:
Berkley, 2000).
 CHAPTER 2

BUILDING A SUCCESSFUL SALES FORCE

IN THE 21ST CENTURY

Daniel J. Leslie

INTRODUCTION
Greater attention to recruiting, hiring, training, developing, evaluating, and moti-
vating great salespeople can increase a company’s profitability. However, creating
a successful sales force in the 21st century is becoming more difficult in light of
the many challenges that are present today. More competition, more sophisti-
cated customers armed with more information, issues regarding technology, com-
munication issues, meetings, and many other distractions are but a few of the
challenges. In this chapter, I will talk about what I believe to be the core building
blocks of building a successful sales force and building a successful organization
no matter what your endeavor, and I will help guide you to answer the following
questions:
• What is your purpose for being in business?
• What are the values that guide your decision-making progress?
• How do you develop these values?
• What vision have you created to share with your people to get them excited?
• How are you using your vision to attract good people and what selection process do
you have in place?
• What are you doing to develop your people and to help them achieve their personal
goals as well as your company’s goals?
• What program do you have in place to begin to develop leadership within your
organization and to develop your second-line management?
18 Marketing in the 21st Century and Beyond

This chapter is meant to provide awareness of the things that will help you to
make a good sales force even better. Or if you are starting from scratch, this chap-
ter can provide a road map and an outline for success from a 30,000-foot point of
view. The details and the work involved will be up to you to explore further.
Obviously, all of the aspects of building a successful sales force cannot be covered
in one chapter. For example, many important human resource management
issues are not included. Most notably, the legal aspects of human resources are
not discussed. Just as everything else is rapidly changing in the 21st century, so
are the laws and the legal ramifications for breaking those laws. As a sales manager
or business owner, you must either have a legal department to advise you on such
matters or pursue additional training in business law. As you read this chapter,
one of the most important things you can do is to create an action plan. Think
of the outline for this chapter as your action plan for the next 12 months.
Get out your calendar and plug in when you and your leadership team will
tackle these issues. At the end of 12 months, you will be amazed at how far you
have come!

IDENTIFYING VALUES
In order for a sales organization to be successful, they must firmly believe in a
core set of values. Values are those things that are constant, that never change.
They provide us direction in times of uncertainty. They are the foundation of
any great organization. These values guide us when things are difficult and
decisions are not clear. The values of your organization will help you to manage
and select good people. They will help you create successful policies and
procedures.
In order to determine an organization’s values, I recommend taking time away
from the office and out of the field. Bring your leadership team together and have
a discussion about values. Determine as a group the values that really dictate the
direction of the organization. What are the things that are important to the indi-
viduals and ultimately to the organization? Agree on three to four values to intro-
duce to your business and your personal lives. Here are the values of our sales
organization at Northwestern Mutual Financial Network: professionalism, integ-
rity, and excellence. They are the values that guide our organization and they will
continue to guide me as a person. What are your values? How will you lead your
organization into the future?
• Professionalism: doing the very best for your client and recommending to your client
what you would want recommended if you were in your client’s situation.
Professionalism means attaining the highest level of competency in your field.
• Integrity: My simple definition of integrity is doing what you say you will do and fol-
lowing through.
 Building a Successful Sales Force in the 21st Century 19

• Excellence: Excellence simply means if it is worth doing, it is worth doing the very
best that you possibly can and directing all of your energy and resources to accom-
plish the goal or the task.
Recently, in an effort to merge two of our existing offices, we began to have dis-
cussions about our shared values. Our leadership teams met to discuss what values
we have in common and what they really mean to us. Out of the discussion came
some definitions of values.
One person said values are “those things that guide you when others aren’t
looking.” Someone else said values are “those things that help keep you account-
able to what you know are right.” Another person said values are “your beliefs put
into action.” Others said that values really equate to leadership.
I like to think of values as a compass that will guide any person or any organi-
zation through difficult times when a decision is not always clear. Would you go
sailing out on the ocean without a compass or other forms of instrumentation?
Of course not. Why? The potential consequence would be too great. What about
your business? What are the consequences for not having clearly defined values
and sticking to them?
Think about your current sales force in your business. What happens when a
salesperson does not do what he or she says he or she will do? What are the con-
sequences? What happens if all of your salespeople accomplish a goal except for
one person? And what if that salesperson is someone whom you have a great rela-
tionship with and someone with whom you have forged a friendship outside of
business? What do you do? Does that salesperson come along for the reward just
because he or she is a nice person or because he or she has been with the company
for a long time? Do your values permit that? If they do, what will that do to the
rest of the group the next time you have a goal? Once you have established your
core values, there must be consequences. You are doing no one any favors by
allowing them to fail. A great manager of people has to make tough decisions like
this because if you do not, you are actually holding your people back. I believe
that holding people accountable will eventually do one of two things. Either it will
help your salespeople to be the best at their profession. Or, it will help to coach
them get out of the business so that they can find out what they are good at doing.
Everyone has something that they will excel in naturally and some do not natu-
rally excel in sales. I have heard it said that only 20 percent of the entire popula-
tion has the capacity for sales. What kind of impact will it have on your culture
to have people on your sales staff who will do anything to make a sale, even if it
is unethical? What about borderline unethical? This is where values come in.
What are your values? Below are some others that our leadership team came up
with that day.
Integrity Intensity
Growth Honesty
20 Marketing in the 21st Century and Beyond

Family Consistency
Fun Passion
Self-understanding Desire
Loyalty Courage
Tenacity Abundance
Follow-through Accepting change
Your values will directly impact your culture. Do you have a culture of mentor-
ing? Do you have a culture in which your veteran salespeople help your newer
salespeople, or is it a culture of hoarding ideas and not sharing? Do you have a cul-
ture of people showing up to training sessions, on time and eager to learn and to
grow? Do you have a culture of being professional and doing what is right for the
customer? If you do, defining your values will protect that culture. If not and you
desire to improve your culture, defining your values will be the first start to turn-
ing your culture around.
Now that you have your values clearly defined, communicate and promote
them to your organization as regularly as possible. Promote your firm’s values
by including them in your bulletins; display them in your training rooms.
When appropriate, you should also have discussions about how recent actions
or decisions were consistent or inconsistent with the organizations values.
Having your values clearly defined will help you manage your salespeople to reach
a higher standard. Being consistent with your message and actions will help you
create a culture of success.

DEFINING YOUR MISSION

Once you determine your values, it is important to create a mission statement.
Many times I hear people downplay the importance of the mission statement.
A mission statement answers why we exist and what our purpose is. It defines
what your organization or your business brings to the marketplace and your cli-
ents. It should communicate what value your business brings to your clients and
how you accomplish your mission. These are the three main points to a good mis-
sion statement. It should be relatively short and simple and should provide a clear
road map for making decisions in good times and bad. My personal mission state-
ment as a financial advisor is as follows:

My mission as a financial advisor with the Northwestern Mutual Financial network

is to help quality individuals, families, and businesses maximize their true financial
potential and gain confidence through the realization of their goals, objectives, and
dreams. To achieve this, I will assist them in overcoming procrastination by simplify-
ing the ever-changing and complex world of business and personal finance.
I am committed to recommending solutions to my clients that I would want
 Building a Successful Sales Force in the 21st Century 21

recommended to me. My goal is to establish strong, long-lasting relationships of

trust that are mutually beneficial. I ultimately believe the greatest gift you can pro-
vide to your family is to plan ahead and be prepared.

This is my professional mission statement. This is what guides me on a daily

basis. It reminds me of why I am in business. What is your personal mission state-
ment? Why do you exist as a professional? As a salesperson, what value do you
bring? What sets you apart from other professionals in your industry? Why are
you in business? I firmly believe that it is also important to touch upon this point:
I believe that anyone in a for-profit business needs to be in business first and fore-
most to make money. As I talk to classes at our local universities, I find that a lot
of young people are sometimes confused by this. If you are profitable, you will be
able to achieve your mission. You cannot accomplish your mission as a sales
organization if you are not profitable and if you are not able to be financially sol-
vent. Some may disagree with that, but I feel those people put the cart before the
horse. As a business, you must be profitable, and by being profitable you will
accomplish the mission of your organization or business.

DEVELOPING A COMPELLING VISION

Once a company’s values are determined and the mission statement has been
laid out, the next step is the creation of a vision statement. If a mission statement
expresses an idea of where your company is and what it stands for, a vision state-
ment provides clarity for the future. Without a vision statement, how does a com-
pany know where it is headed, and in turn, how do your people know what they
are striving to achieve? Good leaders are always providing a vision. A vision state-
ment is a written, detailed account of where that business will be in 5 or 10 years.
In our organization, we work on a 5-year time frame. We believe that you have
real control only over what happens in the next five years. The important thing
about a vision statement is that it provides inspiration and motivation to the peo-
ple who are involved. Another important thing to remember is that your vision
statement may or may not come true. Circumstances in the future might dictate
that the vision that is clearly laid out today, 2, or 3 years from now might be dif-
ferent based on circumstances outside of your company’s control. Your vision
statement still provides a target.
Many companies consistently provide good service to their clients and have
strong sales, but over time fail to grow and fail to keep up with the competition.
This is sometimes true because they do not have a clear vision of the future. To be a
great manager, you need to help your salespeople have a clear vision for their future.
As I suggested when you are deciding upon your organization’s values, the best
way to complete a vision statement for your sales organization and each individual
salesperson is to have a retreat outside of the office. Take time out from working
22 Marketing in the 21st Century and Beyond

in the business and spend time working on your business. Many people are afraid
to do this. However, you cannot create a vision statement for your business with
the phones ringing in the office and with everyone’s mind worried about the day-
to-day activities of the business. At the retreat, help them and yourself to visualize
five years into the future. If this vision statement revolves around your organiza-
tion, what does it look like? Where are you located? How many salespeople do
you have? How profitable is the business? How are you creating value in new
ways? You can be as detailed as you want. Actually, the more detailed you are with
your vision of the future, the more likely you will accomplish it. Similarly, when
helping your salespeople with their personal vision statement, and I highly suggest
that you do, ask similar questions. You may even want to include their spouse if
one exists. Some questions I ask are: Where are you living? Who are your neigh-
bors? Where are you vacationing? What cars do you drive? What is your annual
income and how much of that have you saved to this point? Do you do any com-
munity work? Again, the more detailed the better.
Once you have a clear vision statement, it must be clearly communicated to the
rest of your sales organization and you can now use this as a rallying point. People
will want to see the vision come true. Update the progress of the vision statement
at your quarterly meetings. Follow up on the vision statement with a five-year
action plan. The five-year action plan contains the details of what the vision state-
ment is and how it will be accomplished. It should be a year-by-year account of
the progress that needs to be made for the vision to become true. It should include
not only what needs to be done but also how and by whom. Deadlines should be
in place as targets to accomplish each task. Remember that over a five-year period
there may be circumstances outside of your control that may move your deadlines
or that could change the objectives completely. You may even make a conscious
decision not to follow through on certain tasks because over time it may be appar-
ent they are not needed or may not be as important as you originally thought
when creating the vision. In summary, the vision and action plan provides a writ-
ten, measurable, and attainable goal for your business and for individual sales-
people to strive for. You cannot begin the steps of recruiting, hiring, or training
until you have gone through all of the previous steps. Remember, strategy should
always be your guiding framework.

SELECTING THE RIGHT PEOPLE

Now that we have a core set of values and we know why we are in business
through our mission statement and where we are going with our vision statement,
we have the basis to select the right people. It is important to recruit people who
will fit your sales organization based on the above. In order to attract, recruit, and
select the right people, it is imperative to have a clear selection process.
 Building a Successful Sales Force in the 21st Century 23

A process for selecting people should include three clear components: subjec-
tive evaluation, values fit, and objective analysis. The first part of the process, sub-
jective evaluation, is the relationship part of the selection process. Do you
genuinely like this candidate? This could be one of the most important parts of
the process. If the answer is no or you find yourself not excited about the person,
that should tell you something. Successful managers spend a lot of time with their
salespeople. It is critical to know that you will be able to build a good relationship
with them.
The second part of the selection process should be a “values fit.” The discussion
of values should be an important part of the selection process. Make sure to have a
discussion about the values of your organization with your candidate and make
sure that he or she understands the definition behind them. Specifically, ask them
to share examples of times during their lives when they feel they have exhibited
the values being discussed. Having an in-depth conversation regarding values will
do two things. First, it will give you a truer picture of the character of the candi-
date, which will help you to make a better decision regarding an offer of employ-
ment. Second, you will have formed a foundation for the basis of your coaching
process in the event that you do offer employment. We will discuss this more
when we talk about development.
The third step is to develop an objective-analysis component to the selection
process. What kind of objective selection tools do you use to determine the
strengths and weaknesses of each candidate? An important point here is that no
salesperson, whatever his or her qualifications, is universally acceptable across
the very wide range of all selling jobs. Thus the sales manager must decide what
characteristics a given sales position requires. Selling people-mover systems to air-
ports may call for engineers attired in three-piece suits. Selling manure spreaders
to Iowa farmers probably requires another form of dress. The job requirements
for an order taker may be quite different from those for an order getter. These
requirements must be carefully thought out and matched with job candidates,
not only for the sake of the sales organization but also for the well-being of the
individuals hired.
Clearly, the task is to get the right person for the right job. Because selling sit-
uations vary tremendously, the analysis of a sales position should include a list of
traits that an applicant should have. Some traits and accomplishments commonly
considered in recruiting sales personnel are educational background, intelligence,
self-confidence, problem-solving ability, speaking ability, appearance, achieve-
ment orientation, friendliness, empathy, and involvement in school or commu-
nity organizations. Having many positive qualities does not guarantee that an
applicant will be a successful sales representative, but they may be indicators of
valuable attributes that are otherwise difficult to determine. For example, a
friendly and helpful personality may be considered a meaningful trait, and mem-
bership in clubs and service organizations may suggest that a person has that trait.
24 Marketing in the 21st Century and Beyond

If the applicant’s resume indicates that he or she is a loner, a recruiter may con-
sider that possibility worthy of further investigation.
There are also many computer-based analytical tools to help companies select
the right people for the right positions. One example of these is the Harrison
Assessment. The candidate is asked to answer numerous questions to help identify
personality traits as well as the candidate’s strengths and weakness pertaining to a
specific employment opportunity. An important benefit of these tools is the abil-
ity to identify potential challenges that the candidate might have. By knowing
these challenges ahead of time, you can decide if you will be able to train this per-
son to overcome those challenges. On the other hand, by using these tools and
identifying the challenges, you will again have a better idea if this candidate fits
the job description. This will not only save the company a lot of time and money
by not hiring the wrong person, but you also save the candidate from coming into
a culture where he or she probably will not fit due to personality or lack of skills to
do the job.
Related to this point is the matter of testing. Certainly, no personality test or
other test proves that a person will or will not be a good salesperson, and this fact
concerns job applicants who feel that they have been denied a position on the
basis of a pencil-and-paper quiz. Sales managers are willing to admit that no test
is right in every case. However, many sales organizations continue to use tests as
one form of input in the selection process because the test results have shown
some validity over a long period of time. Thus, although tests are not right all
the time, they may serve to improve the odds of making a correct choice.
Finally, you must determine where your best candidates come from. Where are
you maximizing your recruiting efforts? Career changers? Clubs or professional
associations? Career fairs? The Internet? College campuses? How about within
your own organization? The best selection tool you have could be the people in
your office right now. Do you have a culture in which your people refer other
good people to your company on a consistent basis? Communicate to your
existing employees the type of people you are looking for to join the group.
Have your director of recruitment meet with the salespeople on a regular basis
to help people brainstorm. You may even want to put in place some incentives
for referring a qualified person who ultimately gets hired. The other sources of
recruitment are good, but nothing beats a referral.
Creating a successful internship program is also a great way to identify and
select the right people. An internship gives you an early opportunity to identify
good people with career potential. You can then mold them into successful sales-
people. The second reason to have an internship is to make an impact on young
people and encourage them to become a fan and an advocate of your organization
for the rest of their life. I have heard some people say that they went to college to
avoid being a salesperson. I find that ridiculous because almost every job involves
some form of sales. I make it a point to speak to students at nearby universities to
 Building a Successful Sales Force in the 21st Century 25

share with them the terrific opportunities in sales. What many young people want
is exactly what a career in sales can give them. You can communicate that to them
through giving back to the community and speaking to classes and helping young
people see the positive impact they can have on their lives and the lives of others.
Another benefit to students participating in an internship is the opportunity to
explore a career in sales while they are still in school and in a safe environment.
Whether they stay with your company or not, this experience will give them a
huge head start, and if they do pursue a career in sales, your organization will most
likely be the choice they make.
An internship is also a great way to develop your people early on. It allows
young people through trial and error to learn the business prior to them making
a large financial or personal commitment. They are able to learn without much
risk and we all know that we learn best from our failures. Done correctly, interns
will never forget the experience they had while working with your company, and
whether they make a career with you or not, they will always be an ally.

TRAINING AND DEVELOPMENT

Now that you have chosen the right people, it is important to have a system in
place to develop your sales force, both from the beginning and in an ongoing way.
This is important for different reasons. First, people with a lot of potential want to
work in a predictable environment. They want to know that there are consistent
ways for them to grow with a support system in place to help them accomplish
their goals. People who strive to be successful want to work in an environment
where they are challenged. This will help you with your retention. In addition
to this, as a manager you want to be assured that there are proven, time-tested
ways for your salespeople to advance. Remember, to the extent that you are able
to meet the needs of your clients (your salespeople) your needs will be met.
I believe there are three main pillars of development. The first pillar is your for-
mal training curriculum. This is the pertinent information for a new person join-
ing your organization. What information is critical for a new person in your
business to know immediately to help him or her have a profitable fast start? I rec-
ommend that you break this training up throughout a two- to three-week period.
For example, during the first week you might decide to have your new recruits in
a classroom setting for the first three days and then out in the field with a mentor
for the next two. You may want to continue a schedule like this for the next two
weeks. In addition to initial training, what kind of follow-up training is there?
Provide at least one or two opportunities a week for your salespeople to learn
and to grow in terms of their product development, their people skills, and per-
sonally. In our office, we do this on both a group and an individual basis. We will
discuss this more in the Coaching section.
26 Marketing in the 21st Century and Beyond

While companies vary in terms of length, location, and even method of the ini-
tial formal training, it is imperative that this is done correctly and thoroughly. You
may find that formal classroom instruction that is onsite works better than watch-
ing videos and running through computer simulations at a national convention of
all the trainees in Hawaii. What is important is that the formal initial training pro-
gram covers six basic areas of training. In an effort to rush the sales force out “into
the field,” some companies forget to cover some of these important topic areas.
These six areas are listed below:
• Sales techniques: While it is true that some people just cannot sell, I will put it another
way. People must be born with certain personality characteristics that make them
better salespeople; other things must be learned!
• Product/service knowledge: To sell a product you must understand the product. This
includes everything about a product or service: its features, advantages, and benefits,
how it is made, how it will be delivered, its accompanying warranties, its price, and
everything else about it.
• Customer knowledge: Consumers of the 21st century are smarter, have better technical
skills, and are more diverse. It is critical to understand everything about customers
including why they buy what they buy and how they buy it. For new salespeople, it
is useful to have cross-cultural training since the world of today is so global and
cultures can be so different.
• Supplier knowledge: Since 21st-century relationships are so important, it is just as
important to understand the complete value chain. If you are selling a service, and
two or three other companies will be a part of this service at some point along the
way, you must understand what role these intermediaries and third-party firms play
in the total product package.
• Competitor knowledge: Understanding the competition is critical!
• Individual time and territory management: Many great salespeople fail because they are
so poor at managing their time and territories. You want your salespeople to work
smarter not harder.
Training goes beyond the initial training. Also, do not forget about your vet-
eran salespeople. It is sometimes easy to assume that your veterans are okay, and
they probably are most of the time. But your veterans need ways to grow and to
continue learning as well. Invest in them by bringing in outside speakers or giving
them incentives to join study groups or attend industry functions. Make sure they
know they are not forgotten. A great way to continue to give your veterans an
opportunity to grow is to put them in a teaching or training situation. This is con-
sistent with the mantra of “see, do, teach.” Sometimes the best way to improve
and refine your skills is to teach. You might be surprised by how flattered some
people will be by asking them to participate in teaching and training of others.
The second pillar of development is what that person will learn in the field. As
I mentioned earlier, encourage people to go out into the field early on in the
 Building a Successful Sales Force in the 21st Century 27

training process and to push the limits of what they are comfortable doing.
Salespeople will learn the most in the field, interacting with clients and watching
their mentors. You can put salespeople in training for six months and they will
not learn as much as they will one week in the field. Encourage your salespeople
to go out and implement the things they learn in training and to partner with a
veteran to maximize their learning. If this is not already a part of your culture, find
a veteran salesperson who is inspired by helping others and pair him or her up
with a new salesperson. If done right, you will see the production of the new sales
representative go up as well as the veteran’s production. Once others see the
results, they will want to pitch in and help out as well. Again, is giving back a
value within your organization? Is it part of your culture?
The third pillar of professional development is what a salesperson does in his or
her spare time. Are they using their spare time effectively? Encourage your sales-
people to utilize their spare time. Direct them to the learning resources you might
have on your intranet or direct them to sales tapes and CDs or product informa-
tion so that they can learn and fill in the gaps on their own. Some companies pay
the membership fees for their sales force to join local organizations. This creates
not only a culture of continued learning but also opportunities for networking.
In summary, your salespeople should always be striving for continuing education.
If this is available to them in your industry, then that should be a priority. Is this a
value? Is personal growth and excellence a value of your organization? If not, it
should be or your development initiatives will not reach their full potential.
I find that these three pillars create a stable foundation for the development of a
salesperson, creating almost a vortex of learning that builds up steam and momen-
tum. Taking away one of the pillars will hold a salesperson back from achieving
his or her potential. Managers should be able to expect that their salespeople will
go the extra mile to learn, to develop themselves, to improve their product knowl-
edge, and to further enhance their people skills. Do this and you will have sales-
people who are growing as people as well as making sales for your organization.

ACCOUNTABILITY: CREATING A CULTURE OF SUCCESS

Once your values, mission statement, and vision statement are complete, and
you have recruited and developed people consistent with those values, you now
have the building blocks of creating your culture of success. We now need to take
action. I believe the culture of success has three primary areas that need to be
developed thoroughly to have a successful sales force. They need to be clearly
defined and communicated expectations of professionalism, activity, and produc-
tion. They must be consistent in every situation and there must be a strong sys-
tem of accountability to those expectations. What is your culture? Is it based on
your values? Over the past decade or so, it seems that many organizations’ cultures
28 Marketing in the 21st Century and Beyond

have begun to be eroded or dictated by the casual dress that many companies now
promote. What is your culture? Is it okay for salespeople to come in wearing polo
shirts and wrinkled khakis? Or does it make sense to create a successful environ-
ment with people that are dressed and look the part? It has been said that you
dress to pay respect to yourself and to the people you meet that day. Is that going
on in your office? What impression are your salespeople giving your prospects and
clients? Are they paying respect? This, of course, is just a small example of a cul-
ture. Again, I am not suggesting that everybody in every sales situation wear a suit
and tie or that it would even be appropriate, but it might be more appropriate
than you might think. It all comes down to this issue that you must consider:
what culture have you created regarding sales activity in your office? Remember,
everything else will filter down from the overarching strategy, culture, and values.
Habits are the key to success, and creating a culture of success means creating
an environment that promotes good habits. What does a good environment look
like and what are the specific activities that should be in place on a daily, weekly,
and monthly basis to develop successful salespeople? First, remember that success-
ful people make habits out of doing things that unsuccessful people do not like to
do. Successful people also have a strong desire to succeed. Having a system of
accountability in place will build on the strengths of your people and will help
them succeed.
It is important to meet with new sales professionals every day. This should be
done by a mentor, a coach, or someone designated to hold your salespeople
accountable every day. If not, the new sales professional will quickly fall into
bad habits and ultimately fail. Remember, it is all about setting goals and objec-
tives (which we covered in the beginning), and salespeople must be held account-
able to their individual goals just like corporations should be held accountable to
their corporate goals.
In order to instill the habits of a successful salesperson, there must be daily
accountability in the first 90 to 180 days. These meetings should be brief and
ideally held first thing in the morning. Hold the meetings between 7:30 and
8:00 a.m. every day. During that time, record the activity of the salesperson from
the previous day and then compare that to the expectations set by him or her and
the organization. In addition to that, discuss the present day and make sure that
the salesperson is properly prepared. Allow for no more than 15 to 20 minutes
per person. Remember, these morning meetings should be moderated by some-
one who has a leadership role, but not someone in senior management. It is
important that the moderator hold the salespeople accountable. This is not an
easy job. It is important for the moderator to ask the tough questions and help
keep the salespeople on track. Eventually, if the salespeople are successful and stay
with the organization, they will realize that having the moderator do his or her job
is one of the many reasons they are so successful. Pair these brief morning meet-
ings with a weekly one-on-one meeting with the sales manager or mentor.
 Building a Successful Sales Force in the 21st Century 29

Between these two meetings you will create a high-touch atmosphere and head off
any problems or bad habits. You must have accountability to help in developing
the habits that will make the new salesperson successful.
Once new salespeople have succeeded in their first 90 to 180 days, do not think
that they will fly all on their own. Move the accountability to a weekly basis or at a
minimum, for your very senior salespeople, monthly. Remember, if you are
selecting highly motivated, driven people, they want to be held accountable.
Even the most motivated people can get distracted by all the noise and issues on
a daily basis. Having the opportunity for the sales manager to look at the weekly
activity from an objective point of view should often identify what is holding
them back.

COACHING
This, then, leads us to having a good coaching process. You have the right peo-
ple based on your values and mission statements. They have gone through initial
training and they have had a successful 180 days in the business. Now what? This
is when the one-on-one meetings become even more important. Depending on
the success of the salesperson, we may end the daily morning meetings and begin
one weekly individual meeting and one group meeting. Having group meetings
provides an environment of accountability. Individual meetings allow the new
or veteran salesperson to discuss more personal issues. If you eliminate the one-
on-one session, you are putting yourself and your people at a disadvantage.
During these individual meetings you may discover the real reason that the sales-
person is struggling. It could be problems with a marriage or issues with his or her
children. You just do not know prior to this, and group meetings will not bring
these to attention.
One of the biggest challenges that companies of the 21st century face is having
a span of control that is simply too large. This is partly due to the rampant down-
sizing and lay-offs of the 20th century. But whatever the cause, the result has been
that some managers are now managing double-digit if not even triple-digit num-
bers of salespeople. Most scholars feel that the appropriate span of control is any-
where between 6 and 18 depending on the type of work and type of employee. It
is a lot easier to manage veteran salespeople than it is to manage new salespeople.
Whatever the case, the coaching step is critical to the success of each salesperson
and then ultimately to the whole company. A first-level supervisor must be able
to spend adequate one-on-one time with all subordinate employees.
The most difficult and most important part of coaching is holding people
accountable. As we discussed earlier, we are not doing any favors when we help
people fail. In your own business, do you currently have a process in place of con-
sequences to implement when people do not do what is expected? Now is when
30 Marketing in the 21st Century and Beyond

we refer back to your organization’s values. By having clearly defined values, your
second-line management will be able to coach to those values. For example, let’s
pretend that a salesperson is not doing what he or she says he or she will do,
and that is in direct conflict with your definition of integrity, which is one of your
values. So, instead of your manager spending time on the actual activity that was
not done, he or she could have a conversation about integrity and how the sales-
person’s actions do not reflect your expectations. The employees should also
know that they are not living up to the values of your organization. Find out
how they feel about that. Of course, the salesperson is not going to feel good
about letting down his or her manager or mentor, let alone being in conflict with
the values that helped bring that person to you in the first place. This kind of a
discussion is much more productive if you go back to the values and to coaching
versus using strong-arm tactics.
As I mentioned before, this is not an easy job for the second-line management.
These managers will build great relationships with the sales force and will most
likely be friends. It is a difficult job to hold your friends accountable. It is impos-
sible to do without being able to fall back on the values. Your second-line man-
agement will be much less stressed, and your salespeople will understand that
their performance is measured not just through the eyes of their manager or
through potential forms of punishment, but that they actually are not living up
to the values that they agreed on when they joined the organization.
Ultimately, if a salesperson does not come through and does not follow through
on the clearly defined expectations, then it is the values that are not in alignment.
It is not a personal situation; it is just a values discussion. That way, if that hap-
pens, the person will leave knowing that, for whatever reason, he or she did not
live up to the values and it was not personal. This creates the culture of not letting
people who should not be around hang around any longer and erode your culture.
How many times have you seen a situation where people lingered in an organiza-
tion and eroded the culture because nobody had the guts to let them go because
they have a personal relationship? Define your values, communicate them, and
then coach to them. That is how to treat your salespeople like clients.
Helping people work through what they really want and dispelling any fear of
failure will help your salespeople push and strive to do bigger and better things.
One of the things I think we do so well in our organization is to get our younger
and newer salespeople exposed to what the possibilities are. We will have picnics
and get-togethers at some of the veteran financial representatives’ homes to see
the level of success they have. Some of our salespeople have homes down on a lake
for the summer, and they will have our young interns or our new salespeople
down for a weekend just to see what it is like and what the possibilities are. I find
that so many people who want to be successful sometimes actually have a fear of
success, and if you fear success, how can you create a culture of success? Give
them the ammunition they need to learn about themselves and to learn about
 Building a Successful Sales Force in the 21st Century 31

the possibilities, and your salespeople will go above and beyond and accomplish
not only your company’s goals but their own as well.
Invite your salespeople to sit down and have dinner with you and your spouse,
and get their spouse involved. The more the spouses are involved in the career of
your people, the more in harmony their family will be and ultimately the more
productive your salesperson will be. By treating your salespeople like a customer
or a client, you will create a culture of success. It will help you deliver on the
promise of your mission and achieve your vision for the future. Not only will this
help the company, but it will help you attract and retain your good people, know-
ing that there is room for them to grow in the future.

DEVELOPING YOUR NEXT LINE OF MANAGEMENT

As I work to continue to build a successful sales force, I am reminded of these
words: great managers surround themselves with great people. By doing this,
whatever task is at hand will be done efficiently and done well. Bad managers sur-
round themselves with less effective people. The reason they do this is to make
sure that they always look good in comparison. They are threatened if someone
is more intelligent or a better people person. It is critical when building a success-
ful sales force to keep this in mind. We must surround ourselves with people who
do not always think alike but have the same core organizational values.
One of the biggest challenges that many companies face is developing leader-
ship for the future. Attracting good people to your organization and helping your
people create a vision for themselves means giving them an opportunity to
become leaders. What kind of leadership development program do you have in
your company? Are you identifying people early on and teaching them about lead-
ership? Are you giving them leadership responsibilities and having them learn
from those responsibilities and thereby positioning them for future? Do not make
the mistake of not developing your second-line management. If you make that
mistake, the success you have today will soon come to a screeching halt, your peo-
ple will be looking for direction, and they will go elsewhere to find it if they do
not find it there.
Invest in leadership development. You can buy leadership books and schedule
weekly or monthly meetings to discuss them. Hire outside consultants who you
get references from that promote leadership. Spend time going to other successful
sales organizations inside or outside your industry to get perspective and to share
ideas. Build a special relationship with your leadership team by going on retreats
away from the office. Invite your up-and-coming leaders to your main leadership
team’s meetings. Pair them up so your senior leaders can mentor your emerging
leaders. Whatever you do, investing in leadership is a tax deductible investment
in your company’s future success.
32 Marketing in the 21st Century and Beyond

CONCLUSION
Building a successful sales force in the 21st century is an incredibly challenging
and rewarding endeavor. It is my hope that this chapter will better enable you to
build a successful sales force for your organization. By following through on the
outline of this chapter, and implementing this as part of your action plan for
the year, it will force you to spend time working on your business and on your
sales force. Take time out of working in your business and work on it. The basics
of sales have not changed over the past 50 years, but the backdrop has changed
dramatically. Salespeople are more sophisticated, as are our customers and clients.
Dealing with the large amount of information can become distracting, and the
amount of time spent in meetings and communicating and follow-through can
be daunting.
Remember to run your business based on your values, use these values to select
the right people, and then manage and coach them to their fullest potential.
A plan for developing and coaching and a strategy for developing second-line
management will allow your company and your sales organization to thrive, not
only today but into the competitive and ever-challenging future. Your sales force
is your best client, so treat them as such. Yes, it takes time and a lot of patience,
but most of all, it takes great leadership.
All of these things will allow your salespeople, and your organization, to be
highly rewarded beyond your wildest dreams. These rewards will not only be
financial, but you also will have built incredible relationships. Best of all you will
have made a lasting impact on the people you work with and on your community.
 CHAPTER 3

LEARNING FROM YOUR CUSTOMERS:

BUILDING MARKET FEEDBACK INTO
STRATEGY AND INNOVATION
Jason DiLauro and Linda M. Orr

INTRODUCTION
If we make products or offer services that do not fulfill our customers’ needs, sales
will suffer. In most companies, research and development (R&D) and product
development are separate departments. This separation was brought about by
the creation of functional silos, which were created in many organizations in order
to operate more efficiently. By the very definition of the name, R&D usually has
their own research function, which possibly forms focus groups, or looks at last
year’s sales and products, or looks at what the competition has done. This set of
processes, many of which were created in an attempt to be customer driven, or
emerged out of “customer relationship management” (CRM) strategies, have
unfortunately resulted in being anything but customer driven. However, we
know that in the competitive landscape of the 21st century, businesses that do
not employ CRM strategies will probably not be as successful as those that do.
Given CRM’s great potential, some have been disappointed with the results to
date. There are many reasons for the fact that the implementation of CRM strat-
egies has not resulted in a greater focus on customers and their needs. The very
people who understand the customers the most, who deal with them every day,
who understand their needs, and who make daily attempts to find products and
services to fulfill these needs, are frequently the last ones consulted in the product
development processes. Salespeople, who are serving on the front lines, are excel-
lent sources of knowledge for improving and upgrading product and service
34 Marketing in the 21st Century and Beyond

offerings. Involving the sales force in the product development process indirectly
brings the customers directly into the process through the sales force’s daily asso-
ciations with their customers. Companies that truly can bring their customers
into the product development process will benefit from greater customer satisfac-
tion and loyalty. Thus, even though sales forces of the 21st century are finding
greater responsibilities, across broader functions of the organization, one of those
added responsibilities must be a strategic involvement in the CRM and product
development processes. Figure 3.1 demonstrates the customer relationship and
product development processes.1
CRM is a set of business processes, which are strategically embedded within a
company, that create the value propositions and linkages between the firm and
all of its external stakeholders. As shown in Figure 3.1, companies must first gain

Figure 3.1
CRM Processes
 Learning from Your Customers 35

customer knowledge and insights. One of the easiest and most accurate ways to
do this is through a company’s sales force. After a firm gathers knowledge, they
must then relate that information into ways to upgrade and adapt new products
and services, if that is what the market wants. Additionally, it is important to note
that new products and services may need consistent adapting to appeal to the
needs of all stakeholders, including suppliers. Thus 21st-century salespeople must
be gatherers and distributors of customer information and they must be entrepre-
neurial in order to understand how to best utilize this information in terms of
providing solutions to customer needs. Saying that 21st-century sales forces need
to be entrepreneurial, or creative, or innovative means more than just utilizing
information to provide customer solutions. Salespeople must be innovative across
many parts of their jobs, from more innovative prospecting methods to even find-
ing out more creative ways to gather information from customers.
Customers today are busier and more distracted. Many times, customers do not
even know exactly what they need, and good salespeople can help find the right
products and services for customers to fit these needs. This chapter will first dis-
cuss the process of gathering feedback from the marketplace from the perspective
of the “ideal client.” Some of the topics covered are how to identify your ideal cli-
ent, how to then understand why they are an ideal client, and then learn how to
replicate your ideal client. We will do this by analyzing our existing clients by cat-
egorizing them, asking them questions based on the service we provide and how
we can improve this service, making changes based on analysis to improve our
relationships, and changing and becoming adaptive in terms of product and ser-
vice offerings. Finally, we will examine working with our clients to help grow
our business, more effectively and efficiently. But first, we need to understand
why adaptability is so vitally important in the 21st century.

ADAPTABILITY AND INNOVATIVENESS

Salespeople do more great things for a company than merely listening to and
understanding the growing and changing needs of the customers. Contrary to
the typical way in which businesses are set up to have functional silos, salespeople
can make the best innovators of a business. Not only do they listen to the cus-
tomer, but studies show that salespeople share personality variables that enable
them to be more innovative and creative than some other employees.2 These
common characteristics are that salespeople tend to be achievement oriented, per-
sistent, persuasive, assertive, more likely to take initiative, versatile, perceptive,
energetic, self-confident, independent, more likely to have an internal locus of
control, more likely to have a tendency toward risk taking, creative, resourceful,
likely to be an opportunity seeker, comfortable with ambiguity, hardworking,
and well organized. These types of personality variables enable salespeople to
36 Marketing in the 21st Century and Beyond

think of the most innovative creative solutions to business problems. In the 21st
century, innovativeness is imperative.
Several significant changes that have occurred recently in the business arena
have caused a true realization of the statement “Change is the only thing that
remains the same.” Some have termed the 21st century as “the next industrial rev-
olution.” Some of the changes are: (1) the pace of economic change is accelerating,
(2) there is explosion of innovation and new knowledge generation, (3) competitive
pressures are intensifying, (4) manufacturing can now take place almost anywhere,
(5) new organizational structures are emerging, (6) international trade is being liber-
alized through trade agreements, and (7) company actions are becoming increas-
ingly visible.
In light of this environmental turbulence and competitive intensity, many feel
that the only way to succeed today is through learning and adaptation. The simple
process of listening to and learning from the customers can be a sustainable com-
petitive advantage that cannot be easily imitated or eroded away by competitors.
The ability to learn faster than competitors may be the only real source of sustain-
able competitive advantage in the 21st century. Organizations that are adept at
learning are more adaptable to change and better equipped to undertake the pro-
cesses of strategic renewal. Strategies can no longer be designed without allowing
for and capturing what is emergent in contemporary situations as they unfold.
Innovations, whether they are small changes to products or services or radical
innovations of new products or services, better enable businesses to fulfill custom-
ers’ needs. Studies have shown that returns on innovation can account for as
much as 50 percent or more of corporate revenue.3 Continuous innovation is a
necessary condition for a focus on total customer satisfaction. Innovation creates
new processes, both administrative and technical, that can create and produce
products and services in more efficient ways.
The need and impetus to be innovative has emerged from more than just a
desire to create new products that will sell better, therefore increasing profitability.
Even in the most low-tech situations, it would be essentially impossible to find an
industry that is not engaged in continuous or periodic innovation and reorienta-
tion due to the dynamic nature of most markets. Further, intensifying competi-
tion and environmental uncertainty has made innovation increasingly important
as a means of survival. Innovativeness shows a strong, positive link with perfor-
mance because innovations serve to accommodate the uncertainties (i.e., market
and technological turbulence) a firm faces in its environment. Innovations set
companies apart from their competitors in turbulent environments. The differen-
tiation that can arise from innovations provides firms with competitive
advantages.
Unfortunately, in this era of hypercompetitive and mature markets, most mar-
keting programs fall short in terms of innovation and creativity, which results in
markets overflowing with very similar “me-too” products and even downright
 Learning from Your Customers 37

failures. For example, 80 to 94 percent of all new grocery products are outright fail-
ures.4 No one seems to understand all the elements of innovative idea generation.
One of the nation’s largest health care and beauty aids manufacturer found that
almost 95 percent of all its innovations were minor package changes, line extensions,
and other incremental improvements. These simple improvements were mostly me-
too products that had relatively little effect on the company’s bottom line.5
Thus, in light of the importance of innovation in the competitive marketplace,
it is vital that business owners gain an understanding of how to increase innova-
tive thinking that can lead to a competitive advantage. A solid competitive advan-
tage is one that cannot be easily eroded away by competitors. As companies like
the ones used in the previous examples have found out, the innovation of each
individual new product or product improvement by itself is not the most impor-
tant component of the successful business model. Single new products or new
product improvements, whether they are tangible products or improvements in
services, may easily be copied by the competition.
The key to developing innovative programs does not lie in each single innova-
tion, but instead lies in a company’s ability to be innovative on a consistent and
continual basis. Firms that have a customer-focused vision realize that their suc-
cess lies in the processes or capabilities, not specific resources. Once a firm
becomes adept at the capabilities or processes that are utilized to create each inno-
vation, they can then use those processes to create other forms of innovative prod-
ucts or services. Thus the firm’s competitive position is not dependent on each
single innovation, which may succeed or fail. The firm instead builds and
attempts to become proficient at the capabilities of the firm, which can then cre-
ate and consistently renew the firm’s strategies and products and therefore create
constant innovation.
Thus the firm’s competitive advantage becomes the processes or capabilities
that create innovation, not the innovations themselves. So, what are these pro-
cesses? What can we do as a company to find out our customers’ needs? How
can we fully utilize the full potential of our sales force? As mentioned, adaptability
is crucial for a sustainable competitive advantage and success in this century.
Salespeople by nature have personality characteristics that make them more likely
to be the great innovators of the firm. The following sections will explain how
salespeople can, very specifically, first identify the “ideal client” to provide feed-
back, and then the steps a salesperson must take to get this feedback and ulti-
mately interpret it to help provide better products and services.

THE IDEAL CLIENT

In the early stages of your sales career, you are usually forced to grasp onto any
piece of business you can get. No matter how small or large the client is, you open
the account without a single thought about the long-term consequences. What
38 Marketing in the 21st Century and Beyond

tends to happen is that the first accounts you open receive all of your attention, all
your best effort, time, and service. What happens over time is you develop a larger
group of clientele with larger average client sizes. When the larger clients start to
eat most of your time and the smaller ones no longer receive the service they once
did, you start to lose them. This is not necessarily a bad thing, but it is not the
ideal situation. You would ideally bring on a partner to continue to give good ser-
vice to the lower tier of clients or create a team structure so they are provided the
attention they deserve. The point is, your ideal client will grow and emerge and
change as your business changes, so it is vital that we realize this and learn how
to develop a business plan that accommodates this change. The ideal client for
any business is a nice person who needs you, appreciates you, is willing to pay
for your service, and can make decisions. This is the same for all businesses. Of
course we want to deal with only nice people, but we want the customer to need
us. If they need us and we provide the product or service they need with reason-
able service, then they will appreciate us. If they appreciate us and feel that we
provide a good value, then they are willing to pay for our service or product. To
be able to provide excellent service, the person or business has to be able to make
decisions in a timely manner. Add to these traits one more very important quality
and you have the perfect client: a person who is willing to refer you to other
potential clients. If we can replicate this person or business over and over again,
this creates opportunities to grow at a more rapid pace than ever found before.

INTERVIEW YOUR CLIENTS

So how do you ask your clients to help you? What are the different ways of
gathering this information? The conservative way is to send out a survey. The
most efficient way is to conduct an interview over the phone. The most effective
way is to sit down with them and conduct a face-to-face interview. This is not
to be taken lightly. When an important client is taking time out of their busy
schedule to help you, you owe them the courtesy of sitting down with them, giv-
ing them the respect of going to a place they are comfortable, and showing them
the appreciation you have for giving you this opportunity. There are many rea-
sons this is so very important; to name a few: First, the client needs to understand
how important this feedback is to you. If you send a survey, it is very easy for a
client to discard it, and quite honestly, they view it as a nuisance. If you conduct
the interview over the phone, while it saves you time the same amount of sincerity
will not come through over the phone as it would in a face-to-face meeting.
Second, the face-to-face interview gives you the opportunity to express your grati-
tude for them being with you.
How do we set up this meeting? By using your segmentation look at all of your
“A” clients. Which of them think you are wonderful? Which clients have sent you
referrals in the past? Which clients have told you how much they appreciate you,
 Learning from Your Customers 39

and the service you provide? These are the ones we talk to first. Starting with the
people who really like you will make this difficult process a little easier. We can
work on tougher challenges later. Now that you have identified a few of your
favorite clients, it is time to make phone calls. When you call your client, tell
them you need a favor: “I would like to have your opinion on the service we are
currently providing you. As a matter of fact, we are in the process of making our
service model more efficient, and we would like to have input from our best cli-
ents.” Let them know they are one of the best; after all, a little flattery never hurts.
Then say, “Would you be willing to share some thoughts with me?”
By doing this, you will get many different responses, but the most typical will
be “ABSOLUTELY!” When you make this call to your lesser clients, who do
not get as much of your attention, you will receive a different response, which will
typically be a pause, with a “why me?” type of comment. There are many ways to
look at this. You can shut down, get nervous, and not push the issue, or you can
look at this as an opportunity to find out what you have been doing wrong. Spend
time with the client to learn what you can do better, and then reestablish the rela-
tionship and make it stronger. The reason your best clients will react favorably is
because they have a bond with you on a higher level. They trust you, they under-
stand you, and they appreciate what you offer them, and more importantly, they
know that you appreciate them. Simply put, people stay where they are appreciated;
they go where they are invited. The reason lower-tier clients will not act favorably
to this type of questioning is because they do not have this comfort level with
you. They do not necessarily feel appreciated; they definitely do not feel important.
This is where we discover the opportunity. The client wants to feel important. Just
like us as individuals, clients want attention. Give it to them and let them know we
hear what they are saying, verbally and nonverbally.

WHAT DO WE ASK?
The answer to this question depends on which response you get to the initial
call. The positive response leads to a very direct line of questioning. The negative
response offers a challenge in that you need to initially find out what is making
the client uncomfortable.
Let’s first look at the positive response. When together remind the client why
you asked them to meet you. They are here so you can ask questions about the
service you have provided them in the past. Not only that, but what changes
would they recommend to make it even better? Ask them what they feel differen-
tiates you from your competitors. What you are really asking is why they are
doing business with you, but doing so in a way that tells you your competitive
advantages. When they offer their suggestions, and opinions, ask them what they
mean. Why is it important to them? What we really want to find is: where do they
see value in the relationship? You will hear answers that will surprise you. You will
40 Marketing in the 21st Century and Beyond

hear answers that upset you. Either way, we are learning what your clients like and
what they dislike about your offering.
Of course answers will differ dramatically depending on your industry, but
some of the most common positive responses in financial services are: you return
phone calls in a timely fashion, your office staff is very supportive, you are consis-
tent in delivery, you help my organization run more efficiently, your prices are
better than others, and the consistency of your service allows us to focus on other
things that are more important. While all of these are nice responses, which ones
carry the most power and meaning? Returning all of the phone calls and a nice
office staff should be a given in today’s business, but surprisingly this is not the
case. Answers like “You help us run more efficiently,” or “Your consistency allows
us to focus on more important things,” are much more meaningful. The reason
they are so important is that the client is telling you where they see value in your
relationship; they are telling you where you help them the most. They are telling
you loud and clear the strongest characteristics of your service model and what it
is that makes them stay with you.
A small caveat about comment on price is warranted. Price is a double-edged
sword. It is positive from the aspect that you have earned their business. But it
is a negative from the aspect that they will be gone the next time someone offers
them a better price. Be careful. Instead of stopping on these comments, push a lit-
tle deeper. Just like in a sales situation, when a prospect starts making price objec-
tions there is usually a much deeper hidden objection that you must find. Also,
keep in mind that from a competitive standpoint, 21st-century strategic business
models that have a sustainable competitive advantage are much more likely to be
successful if there is a differential advantage. Just having a lower price is not nec-
essarily something that will enable a competitor to keep clients in the long run. If
you are truly seeking to learn from your clients, going beyond price and money
will almost always enable you to reap richer information.
When the client tells you that you have freed up time for them to concentrate
on other things, ask them to give you an example. This is important. It is just like
the metaphor that a picture is worth a thousand words. Stories and examples pro-
vide clients the ability to elaborate. When they start elaborating, you have a better
chance of uncovering deeper needs and concerns. Also, by digging deeper into the
details of each example, the client is reinforcing in their own mind how important
you are to their business. When they answer a few questions like this, they are
ready for you to press forward. This is when you ask if there are other businesses
or people that share the same need for a service like the one you provide. Off the
top of their head, they may not be able to think of anyone or any organization
immediately. Give them a moment, and interject by asking, “Do you feel it would
be a good idea for me to offer my services to others in your field?” They know the
answer is yes, but are they willing to share you with anyone else? You have to ask.
If clients are not completely satisfied with your offerings, they will not refer you to
 Learning from Your Customers 41

someone else. Most clients will say yes and will tell you that it is a good idea that
you pursue more opportunities in that field, as long as it is not at their expense.
After they have told you about their own field, ask them if there are any related
areas that would benefit from your service as well. You will be surprised that many
clients at this point put on their thinking cap and start to become your marketing
department. They will come up with suggestions you have never thought of. They
will come up with specific names for you to call and maybe even make the calls for
you to make the introduction.

WHAT HAVE WE LEARNED FROM THIS EXAMPLE?

We have definitely discovered that our clients are willing to help us. They want
us to learn. We have learned that our clients have a good understanding of what
they need from us. We have found where they see value in our relationship with
them. We have found that the client appreciates what we do for them. And
finally, we have found that if given the opportunity, our client may send us refer-
rals based on the service we have provided to them in the past. The key is you
have to EARN the right to get the referrals. Remember that 21st-century selling
is all about the relationship. Referrals are not to be expected; they are to be earned.
Clients will give you the opportunity to meet their peers if they feel you will not
embarrass them and if they feel you can truly help others. When you develop
the relationship at this level you know you have a client for life. This is the ideal
situation.

LET US NOW TAKE A LOOK AT A NEGATIVE RESPONSE

TO OUR INITIAL QUESTION
Keep this in mind. It will be rare that a good client will turn down the oppor-
tunity to give you feedback. If a client tells you that they would rather not have
this conversation with you, you must do a quick self-analysis to see if this is the
type of client who has always been withdrawn, which is all right. Or is this a client
who is unhappy, one who feels unappreciated or mishandled? If it is a client who
just truly is not a person who will typically share their opinion, thank the client
and move on. If you feel that there is a possibility the client is not happy, this is
your opportunity to take a step back and ask the client, “If there is one thing
about our relationship you could change, what would it be?” This gives them
the opportunity to speak their mind and give you some feedback that will allow
you to repair the relationship. There is a good chance the client will tell you there
is nothing wrong. But you have to have the courage to push and find out if there
is the slightest issue. If there is, and you do not uncover it, eventually another
organization will come along with something better, whether it is price, service,
reporting, etc., and you will lose the client. You must discover what the issue is.
42 Marketing in the 21st Century and Beyond

Many times, by going through this process the client will appreciate your effort
and will rediscover why they chose to work with you in the first place. This type
of communication will repair the relationship, and maybe even give you the
chance to do more business than what you did in the past with this client.
On the other hand, you may also learn that the client just does not fit your pro-
file anymore, and that it may just be best to part ways. This is a tough pill to swal-
low, but what you will find, in time, is that the sales industry is difficult enough
on normal days. If you add to your typical day angry clients, unappreciative cli-
ents, clients who are not willing to make decisions, clients who are unwilling to
pay, or clients who do not see the value you provide, you will soon be miserable
in your position. The point is, work with nice people. People you want to work
with. People who are willing to pay for your service, appreciate your time, and
are willing to make decisions. We all have had to open accounts and do business
with people we do not necessarily like, but if you can minimize this type of per-
son, your days will be better, with much less stress.
What have we learned from the negative response? We have learned that nega-
tive responses can sometimes create an opportunity. An opportunity to ask the
questions about what has happened in the past, and what we can do to fix it, or
make it better. We have learned that an unhappy client can be brought back to
positive status with proper handling. In fact, sometimes the most loyal customers
can be those that had a problem that you corrected. These opportunities can cre-
ate very strong, long-lasting relationships. We have learned that some clients will
just not give feedback. They may just want to keep their opinions to themselves.
From them you must learn by their behavior and their reaction to the way you
work with them. This may be a big challenge, but it is a skill you must develop
to be successful in sales and marketing.

WHAT DO WE DO WITH THIS FEEDBACK?

The reasons for segmenting clients, asking difficult questions, and challenging
them to give us detailed answers are to learn more about what will make our busi-
ness successful and what makes our business vulnerable, and most importantly, to
help us take better care of our clients. By interviewing each level of client, we gain
a better knowledge of our service model on all levels. If we were to look only at
our top-tier clients, we may get false sense of reality. Our top clients will typically
love us because they are getting all of our attention. Our lower-level clients will
typically share their displeasure with us, because their experience is not quite as
positive. With the positive comments, what we want to do is obvious. Continue
to do it! With the negative comments, correct them! This is not a quick fix. We
cannot just flip the switch and be done with what we have done for entire time
it has taken to build a business. We will have to take baby steps. Find the most
common complaint and start from there. Once we have solved this issue, we
 Learning from Your Customers 43

move on to the next most common complaint, and so on. By doing this we will
gradually improve the quality of service we are providing to each and every client.

THE FOLLOW-UP
The best way to find out if it is working is to go back to the interview section of
the process. Go back to the same people we interviewed in the past. First, ask
them if they have recognized any of the specific changes we implemented. Then
ask if they like these changes. Since they were the ones who suggested the changes,
typically the answer will be a resounding yes. If it is not, we have to go back to the
interview part and ask what needs to be adjusted. For the most part you will hear
many positives. The few negatives you do receive will be from people who just
want something to complain about. Most of our clients will be so happy we lis-
tened to and executed their suggestions, they will feel closer to us and will appre-
ciate the fact that we care enough to listen. This will prove to be invaluable as the
relationship continues to grow—no matter the level of client. They will respect us
for listening and making the effort to follow through.

HOW DO WE IMPROVE OUR BUSINESS BY IMPROVING

OUR BEHAVIORS?
Remember that old motto of the 20th century? “It’s all about location, loca-
tion, location.” There should be a new motto for the 21st century: “listen, listen,
and listen!” Our clients will tell us what we need to do. Listen to their needs, listen
to their suggestions, listen to complaints, listen to their compliments, and we will
find what it is that they really want. The sales and marketing representative who
understands the “gift of gab” is nice to have for social events, but the true art of
sales starts with a better understanding of silence. The ability to ask open-ended
questions that give the client the opportunity to share their thoughts is what will
help us understand their true needs. If we ask the right questions, and our line
of questioning is leading, we help the client discover that they need us. They real-
ize that we are asking all of the appropriate questions, helping them understand
that we have the product or service that solves their issues. This allows us to be
an advisor, or a valued salesperson, instead of a vendor. Vendors may get business
a few times, but they will never be able to hold a candle to a consultative advisor,
who is appreciated by the client. Our ability to listen to clients, and interpret
clearly what exactly is needed or wanted, gives us the ability to analyze the situa-
tion and respond in a more appropriate manner. This behavior creates a better
atmosphere for our clients.
Our ultimate goal should be to make our customers feel important and to treat
them like no one else will. If our clients feel appreciated, they will stay with us and
continue to introduce us to more people who can benefit as well. By taking the
44 Marketing in the 21st Century and Beyond

measures discussed in this chapter, you will be able to create a business structure
that will allow you to be efficient, effective, and successful. We can do this only
by learning directly from our clients. And then, it is that learning that can help
us provide better, more innovative solutions to the needs of our customers. The
21st century is one of rapid change, and we must learn to listen to the customer,
find out their needs, and incorporate these changes into our business. The inde-
pendent, creative, risk-taking salesperson is best suited for this job. Successful
21st-century companies will realize what a gem they have in their sales force and
utilize this gem to learn from the customer in order to constantly improve their
business, business model, and its products and services.

NOTES
1. The Sales Educators, Strategic Sales Leadership: Breakthrough Thinking for
Breakthrough Results (Mason, OH: Thompson Higher Education, 2006).
2. Ibid.
3. Jin K. Han, Namwoon Kim, and Rajendra K. Srivastava, “Market Orientation and
Organization Performance: Is Innovation the Missing Link?,” Journal of Marketing 62,
no. 4 (1998): 30–44.
4. Robert M. McMath, “Kellogg’s Cereal Mates,” Failure Magazine July (2000),
http://failuremag.com/arch_mcmath_kelloggs.html (accessed September 21, 2006).
5. George S. Day, “Feeding the Growth Strategy,” Marketing Management 12, no. 6
(November/December 2003): 15–21.
 CHAPTER 4

NEGOTIATING COMPANY AND

CUSTOMER RELATIONSHIPS
Jon M. Hawes

INTRODUCTION
As relationships become more and more complex during the 21st century, the use
of negotiations within company and customer relationships has become even
more prevalent. What is negotiation? “Negotiation is a decision-making process
by which two or more parties agree how to allocate scarce resources.”1 Inherent
in this definition are a number of important factors. First, two or more parties
are involved. The company, of course, can be one party and the customer can
be the second party. In some cases, there may be more parties involved. For exam-
ple, governmental agencies impact the dealings between sellers and buyers of elec-
tricity. The media may also impact buyer-seller relationships in some settings. As
a case in point, Walmart currently receives so much scrutiny from the media that
any negotiation in which the firm is involved will certainly be influenced by the
potential public relations impact of any deal that might be reached.
Another important factor in the definition of negotiation is the allocation of
scarce resources. Within a buying-selling situation, the allocation of scarce re-
sources can simply be the products to be sold and the money needed to secure
them. Obviously, the seller would like to get more money for fewer goods while
the buyer would like to get more goods for less money. Often, however, more is
involved. The utility or satisfaction to be obtained by participants of the exchange
represents a broader and perhaps more meaningful conceptualization of this
notion of scarce resources. Often, emotional considerations represent a significant
consideration when determining the total satisfaction obtained by each party to
an exchange.
46 Marketing in the 21st Century and Beyond

Central to the notion of negotiation is the expectation of give-and-take. Rather

than accepting an initial offer from the other side, we negotiate whenever we ask
for an adaptation of what the other party initially offers to us. Negotiation
involves offers, counteroffers, adjustments, and revisions. We expect to make con-
cessions, but we also expect the other side to do the same. As nice as it would be,
give-and-take does not mean take and take and take and take. The norm of reci-
procity creates an expectation of some degree of parity in terms of the pattern
and number of concessions across the parties.
Consequently, anytime that buyer and seller do not accept the initial offer of
the other side and instead propose a modification of the terms to that agreement,
negotiation has occurred. The decision-making procedure that occurs among the
affected parties to achieve this is negotiation. This process can be tough on rela-
tionships, or the parties can work together for the common good. Hopefully,
the latter approach is used.
What are the alternatives to negotiation? What could we do when confronted
with a situation rather than negotiate a solution with the opponent? The first
alternative that can be easily identified is to simply capitulate or give in to the
other side. While we would not get what we want, we would avoid the effort
needed to negotiate with the opponent. Rather than capitulate, we could instead
just break off contact with the other side and hope we never see them again. We
might also take the dispute to a third party for potential resolution. Better
Business Bureaus often get involved with commercial disputes. Some contracts
also call for other forms of mediation or third-party resolution of disputes.
Obviously, legal action in a court is a form of third-party resolution. Yet another
option is just to hope that the other side will give in and change their practices in a
way that suits our needs. Do not hold your breath for this to occur! Finally, physi-
cally fighting with the other side is an alternative to negotiation. This does not re-
present a reasonable alternative within commerce, but this what nations do when
they go to war rather than negotiate a peaceful resolution to their differences.
With such a broad definition of negotiations, it is clear that many people
engage in negotiations on a frequent and regular basis. In fact, we can argue that
everyone does it, almost daily. Interestingly, while negotiating is so abundant
within company and customer relationships, most of the participants have not
received any training on the subject. Usually, people just “wing it” with their best
seat-of-the-pants judgment on how to handle a negotiation. Unfortunately, the
result is often poor tangible outcomes along with damaged relationships, even
when both parties’ intentions have been honorable.
The good news here is that there is clearly much room for improvement here.
While many firms have made considerable improvements in efficiency for a vari-
ety of other organizational functions, there is great potential for increased effec-
tiveness both in terms of the tangible outcomes as well as in terms of improved
 Negotiating Company and Customer Relationships 47

relationships with others relative to the negotiation processes. With the stakes so
high and with the historical level of training so low, even modest investments in
better understanding the process of negotiation are likely to pay very high divi-
dends. Considerable movement along the learning curve is likely and welcome
for all concerned.

FUNDAMENTAL APPROACHES TO NEGOTIATION

There are two fundamental approaches to negotiation between a company and
its customers. The first type of negotiation is distributive negotiation, sometimes
called “bargaining” in the negotiation literature. In the popular press, this may
also be called the “win-lose” approach. In this highly competitive situation, one
or both parties view the allocation of scarce resources as a zero-sum gain where
my loss is your gain (or my gain is your loss). In other words, I can get more only
if you get less. The entire focus is upon claiming for your side all of the value that
is possible while still convincing the other side to agree to the deal. Historically,
this has been how many people approached negotiations. While it is sometimes
the appropriate frame of reference, this style can be hard on relationships.
The second and perhaps more enlightened approach is known as integrative
negotiation, or as a “win-win” agreement. Here, both sides recognize that the scarce
resources can be expanded through cooperation or perhaps by creative thinking.
This can result in a larger pool of resources that then will need to be claimed by each
side. The fundamental difference between a distributive and an integrative agree-
ment is whether or not the pool of resources or the “pie” gets enlarged. If it does,
the agreement is said to be integrative.

DISTRIBUTIVE BARGAINING
Even in the 21st century, there are some times when distributive bargaining is
the appropriate approach. This can be the case when there is no potential for rela-
tionship development, when the other side is focused only on price, or when time
pressures prevent the development of trust or the sharing of interests. But when a
negotiation participant seeks only to claim value by gaining through the other’s
loss as is the case in distributive bargaining, all sorts of aggressive tactics can be
expected. Under this competitive context, the focus is on getting all you can get
out of this deal without much consideration of the impact on any future interac-
tions because there may not be any more deals. This is a very Adam Smith type of
view in which short-term profit maximization is the name of the game.
Transaction-oriented rather than relationship-oriented selling would appear to
be consistent with distributive bargaining.
48 Marketing in the 21st Century and Beyond

Setting Distributive Goals

Preparation for a distributive negotiation should involve setting a target point, a
reservation point, and an asking price (seller) or an initial offer (buyer). The target
point is the best-case scenario on how the deal will end. For the seller, this would
involve the most optimistic (high) price and quantity of goods that they could
expect to sell. For the buyer, this would involve getting the best (lowest) price
in the quantity needed.
Research has shown that ambitious targets are directly related to better out-
comes. Negotiators who have high expectations often come closer to fulfilling
them. Especially within the distributive context, target points should represent
aggressive goals. They should be set high but not so high that they are viewed as
unrealistic and therefore not worthy of discussion by the other side. Targets
should be ambitious but discussable.
While the target point is the ideal outcome hoped for, the reservation point is
the worst deal that you would still accept. The reservation point provides guid-
ance on the most that you would be willing to “give” and still do business with
the other side rather than select your best alternative to a negotiated agreement
(BATNA) with this party. BATNA is a very important concept within distribu-
tive negotiation. It suggests that there is more than one opponent with whom
you could work. It implies competition within that market and multiple attractive
sources. The most attractive of those available sources provides your best alterna-
tive to the negotiated agreement under consideration. Obviously, it would make
no sense to accept an offer from the current opponent that is worse than what
one of its competitors has already offered to you. In many cases, however, under
the heat of battle in a highly competitive distributive situation, this unfortunately
is sometimes done. The development of a reservation point prior to the interac-
tion is an attempt to avoid this type of a mistake during the bargaining session.
Thinking ahead is better than thinking behind and in hindsight wishing that
you had made a different choice.
The third important element to effectively planning for a distributive negotia-
tion is to determine what your first offer should be. Since the process of give-
and-take is a central element in the negotiation process, the first offer is very much
influenced by subsequent concessions, and this will be covered in the next section.

Making Concessions
The seller’s asking price and the buyer’s first offer impact the settlement price.
In many cases, these initial values become anchors that influence subsequent dis-
cussions about price. When the two parties ultimately agree to “split the differ-
ence,” a very common method for finalizing the settlement, the first offers are
directly related to the final outcome. In order to provide some room for give-
 Negotiating Company and Customer Relationships 49

and-take, the seller’s first offer should be higher than the target point. This ena-
bles the seller to make concessions (decreases in price) yet still achieve the target
price. For the buyer, the converse is true. The initial offer should be low enough
to enable concessions (increases in price) but still achieve the buyer’s target price.
Beyond the first offer, it is also important to more broadly consider the role of
concessions within a negotiation. Remember that once the parties consider the
interaction to be a negotiation, there is an expectation of give-and-take. This
implies a belief as well about the pattern of concessions that are likely to occur.
Without concessions on the part of either side, the negotiation is likely dead-
locked. There is no positive movement and an agreement is not likely.
An extreme case of this has become known as “boulewarism,” named after
Lemuel Bouleware who was the chief labor relations negotiator for General
Electric many years ago. He became famous for his “take it or leave it” approach
to union contracts. Mr. Bouleware’s strategy was to offer the union leaders what
he called GE’s first, best, and only offer without an opportunity for give-and-take.
Imagine the level of distress the union leaders would face if they informed their
dues-paying membership that they had accepted the company’s first offer. Union
members would likely question the need for a union! Instead, the union leaders
effectively argued that Bouleware’s strategy was unacceptable and filed an unfair-
labor charge against GE. This charge was upheld under the Wagner Act, forcing
GE to bargain in good faith, meaning that it must engage in give-and-take.
Consequently, there is a very strong social norm for give-and-take during a
negotiation. But beyond the avoidance of a take-it-or-leave-it offer, what else is
involved in the process of give and take? Three very important elements of give-
and-take are the magnitude, the pattern, and the timing of concessions. First of
all, let’s consider the magnitude of concession. This can be expressed as a dollar
or a percentage amount and it should be viewed by the other side as reasonable.
This usually means that the magnitude of each side’s concessions relative to the
opponent is reasonably similar. The second aspect of concessions involves the pat-
tern. Generally the recommendation here is for each subsequent concession to be
of lesser value, signaling to the other side that there is little to be gained by hold-
ing out for yet one more concession and that the negotiator has no more to give.
Finally, the amount of time it takes to respond to the other side’s most recent
offer also sends a signal. The longer it takes to make the counteroffer, the less
likely the opponent will try to hold out for yet one more concession.
As a practical example of this, I recently received a neighborhood newsletter
from a realtor that included recent home sales along with various information
relating to those transactions. One interesting statistic was the percentage of trans-
action value to asking price. Within this neighborhood, the recent statistic was
92 percent. In other words, homes sold on average for 92 percent of what the ask-
ing price had been. What a valuable statistic for a potential buyer trying to deter-
mine her first offer on a property within this neighborhood! Knowing that
50 Marketing in the 21st Century and Beyond

8 percent was the average amount that recent sellers had been willing to discount
home prices suggests that an aggressive but discussable first offer might be perhaps
15 percent under listing price. If this amount is not accepted (and in all likelihood
it would not be), the seller would likely make a counteroffer since the first offer
had been “discussable.” The potential buyer can then react to that new discounted
price. If the seller offers a reduction off list price of, for example, 3 percent, the
potential buyer’s next offer should be commensurate with the sacrifice that the
seller offered from the listing price. In this case, the buyer should up her offer to
about 3 percent more than her first offer. This would take the current bid to
about 12 percent under the original list. If this is not accepted by the seller,
another counteroffer is likely. If that comes in at about 2 percent under what they
had proposed as the first counteroffer, the seller knows that he is getting close to
what the “average” home has been netting and may accept the offer. There could
be, however, another round of concessions. Assume that the buyer counters this
most recent offer by increasing her last offer by 1 percent. What would you expect
to happen? My guess is that if the house had been on the market for more than
the average number of days to sell (another statistic reported in the newsletter),
the seller would accept the most recent offer and a deal would be made.
What can be learned from this real estate example? First, the amount of each
concession was reasonably similar in magnitude, demonstrating to the other side
that there was reciprocation for their sacrifices. Furthermore, the pattern of con-
cessions signaled that the negotiation was nearing an end. The amount of each
concession narrowed over time, logically indicating to the other side that as these
values approached zero, there simply was no more room for bargaining. Taking
longer to make each concession can also signal that the making of concessions is
almost over.

Dealing with Dirty Tricks

While the distributive negotiation approach is sometimes appropriate, when
this win-lose approach to negotiation is used relationships can suffer and some
too-agreeable parties can be taken advantage of by tough opponents. If the other
side uses a dirty trick, the best defense is early recognition of the tactic to enable
an appropriate response. In the next section, we will describe some of the most
frequently used aggressive tactics in an attempt to help you identify these early.
Before we cover that, let’s discuss your options. The best way to deal with the
use of these dirty tricks is to minimize the chance for usage by creating a personal
relationship with the opponent early in the interaction. An opponent is less likely
to attempt the use of an aggressive tactic of questionable ethics on a person with
whom she has a positive, personal relationship. Consequently, co-opting the tactic
by befriending the other side before it is used is a good place to start.
 Negotiating Company and Customer Relationships 51

If that does not work and you suspect that your opponent is using a dirty trick,
most experts recommend that your first response should be to ignore it. There is a
chance that you are mistaken in your identification of the tactic. In addition, it is
possible that the tactic will not be repeated. As long as you do not give up pie
because of the tactic, a strategy of simply ignoring it and continuing to bargain
in good faith as you attempt to reach your negotiation goals makes sense.
What if the opponent then uses another highly aggressive tactic or a dirty trick?
At this point, it makes sense to call them on it or to discuss their use of the tactics
and suggest a return to more professional ways of interacting. Maybe the oppo-
nent can be persuaded in this manner to stop using these unpleasant approaches
to negotiation.
But what if the opponent persists? The next suggestion is one of the following
depending upon your BATNA. If your BATNA is highly attractive, you should
simply walk away from an opponent using the dirty tricks. You can do better
and suffer less stress from dealing with one of the competitors. If the opponent
is this unprofessional during the negotiation, imagine the difficulty that you
may face in obtaining compliance to the terms of the agreement after the sale.
Do not waste your time dealing with this unpleasantness.
On the other hand, what if your BATNA is lousy? In that case, you might (or
might not depending upon the circumstances) want to respond in kind to the
dirty trick. If the opponent is yelling at you, yell back at him. If this opponent
plays chicken (see next section) with you, you have the option of playing chicken
with him. Sometimes, an opponent may just be trying to see how far you can be
pushed. Once you fight back, it is possible that he will stop the aggressive use of
dirty tricks for fear of your reciprocation. Be careful, however, because this
response can put you in the same category as the nasty opponent. Do you really
need this deal with this particular opponent enough to risk this type of behavior?
Furthermore, what are the odds of full compliance to the terms of the agreement
by the opponent after the transaction has been made? This might just be a deal
you are better off not making.

Frequently Used Dirty Tricks

So what kinds of dirty tricks do some of these opponents use? Remember, the
objective of this list is not to encourage you to use the tactics. Instead, the goal
is to enable the reader to recognize these techniques early in an interaction so
you will not fall prey to the opponent. By no means is this list complete. There
are hundreds of gambits for aggressively persuading others to accept your offers.2
And there are a hundred variations on how each tactic can be used. Be careful!
When there are multiple people on an opposing negotiating team, the good cop/
bad cop is often used. This dirty trick is very simple and straightforward, yet
52 Marketing in the 21st Century and Beyond

highly effective. One person takes a highly aggressive, unyielding approach to the
negotiations. This is the bad cop. He becomes unpleasant and highly annoying
during the interaction. Another member on the team takes a much softer
approach during the interaction. This good cop smiles occasionally and is reason-
ably pleasant during the negotiation. Due to the psychological impact of the so-
called contrast effect, she seems REALLY nice in comparison to the bad cop.
At some point during the interaction the bad cop excuses himself, perhaps to
retrieve something from his car or to use the restroom. When he is gone, the good
cop sympathizes with you about the difficulty of dealing with the bad cop. She
then offers to work out a deal while he is gone, saving you from the unpleasant-
ness of dealing with him. While the deal she offers you would normally not be
viewed all that favorably, it sounds great in comparison to the alternative of deal-
ing with the bad cop upon his return. Their hope is that you will readily agree to
the good cop’s terms prior to the return of the bad cop.
Another frequently used dirty trick is the highball/lowball tactic.3 This takes on
two basic forms. The first application of the highball/lowball also has its power
based on the contrast effect. With apologies to my friends in the used-car busi-
ness, please consider the following example of a highball/lowball application.
You are shopping for a used car; let’s say a 2001 Chevy Cavalier. You have a
fairly good knowledge of the market after having visited several other dealerships.
You arrive at the next dealership, notice a nice-looking green 2001 Chevy
Cavalier (the color you prefer) on the lot, and begin inspecting it. Soon a sales-
person approaches you and asks what you think of the car. In response, you ask
what the price is. He promptly responds that the price is $,9600. You realize that
this is way too much money for the car and exclaim, “You have got to be kidding
me!” The salesperson says, “Well, let me go inside and check my numbers. Would
you please wait here while I check?” When he returns in a few minutes, he offers
you what appears to be a sincere apology and says that the price is only $6,900
and that he could not be sorrier for transposing the numbers.
What is your reaction to this? Most of us would feel vindicated for our good
understanding of the market. Due to the contrast effect, we also feel that we have
just received a discount of $2,700. For many shoppers, this car really begins to
look attractive at this point. And, we feel a strong obligation to continue in the
“negotiation” because we have already extracted such a major “concession” from
the salesperson. In this situation, many buyers do not bargain hard for significant
additional concessions and the negotiation very likely concludes with a purchase
of the car at nearly $6,900. Had the salesperson started by saying that the car is
$6,900, most buyers would work much harder at attaining major concessions
from that value.
The other application of this basic tactic really could be better described as the
lowball/highball trick. There are a thousand variations of this scam, but it works
something like this. A customer buys a new car and get what she believes to be
 Negotiating Company and Customer Relationships 53

an exceptionally good price. She finances it at the dealership and drives it home
that day. She pays $1,000 down and is told (in writing) that her payments will
be $237 per month for 48 months. Of course, she parks it in the driveway and
all of her neighbors, family, and friends come over to see it. What a beautiful car!
Early on the third day, she gets a call from the salesperson, who tells her that
there was an error in the financing and that they have to come to her house to
pick up the car. She fears the embarrassment of people finding out that she no
longer has the new car and is afraid that they will think the car was repossessed
or at least that her credit was not approved. Due to this social risk as well as the
concept of cognitive commitment, many people in this situation will respond to
the return request by saying something like “Isn’t there any other way to resolve
this? I really like the car.” Often, the salesperson will reply “The number of pay-
ments was incorrectly listed—you would need to make 60 payments of $237,
not 48” or “The numbers were transposed on the paperwork and your payments
would need to be $273 per month.” Often, the customer agrees to the new terms
without bargaining or even making a counteroffer.

Chicken
“The game of chicken (also referred to as playing chicken) is a ‘game’ in which
two players engage in an activity that will result in serious harm unless one of
them backs down.”4 Remember the movie Rebel without a Cause? In that movie,
two characters drive cars at top speed toward a cliff. To the idiots involved in the
madness, the one who swerves first loses and is identified within that peer group
as the “chicken.”
The same type of game also happens during a negotiation. “If you don’t drop
your price by 10 percent, we will pull you from the approved vendor list!” “If
you don’t deliver to us in three days, we will bad-mouth you to the point where
you will never sell another product in this city!” These and similar outrageous
threats are made by customers all too frequently in commerce. Failure to comply
with such a serious threat from the opponent carries considerable risk. The best
defense to this type of extreme demand is to have really attractive alternatives to
this deal with other clients.

The Nibble
Speaking of chicken, how about the nibble? This is a much less intense form of
dirty trick. The nibble is done almost at the point of deal completion, usually by
the buyer but the seller could also get involved. This tactic is executed just prior to
signing on the dotted line by making one more request for a small concession.
When done by the customer, the request could be for a cash discount, a “baker’s
54 Marketing in the 21st Century and Beyond

dozen,” a free gift with the purchase, or a free tank of gas when buying a car. If the
seller is the initiator, the request could be for a small unexpected prepayment prior
to delivery, for a special rush-order fee, for an “order-processing fee,” or some
other form of deal sweetener to improve the seller’s margin on the deal.
The reason the nibble is so often used is because it so often works, even though
it can be hard on relationships. At this point in the process, the opponent usually
feels like the negotiation is over and may conceptually breathe a sigh of relief. In
addition, many of us are reluctant to risk losing the deal by refusing to make such
a small concession now given how far we have come in the process. The best
defense against the nibble is a comment like “I am sorry, but we just can’t do
that.” If that does not work, consider making a counter “nibble” of slightly higher
magnitude. Fortunately, not all distributive negotiations involve dirty tricks. In
fact, some interactions lead to an integrative outcome and a discussion of this
follows.

INTEGRATIVE NEGOTIATIONS
The fundamental difference between a distributive and integrative negotiation
is whether the pool of exchanged resources (the “pie”) gets expanded. Pie expan-
sion is a thing of beauty. When both sides get all that they want instead of only
part (maybe only half in a classic compromise), there is just cause for celebration.
Participants in such a negotiation are often quite satisfied with the deal, and the
relationship between the parties often flourishes as a result.
The classic example of an integrative negotiation involves two sisters. There
is only one orange in the house. Both girls simultaneously decide that they
want the orange. Both run to the kitchen to claim the last remaining orange.
Consider how this dilemma would be resolved in a distributive negotiation.
Under the classic compromise situation, one girl would cut the orange in half
and the other would get to select her half of the orange while the other gets the
remaining half. To be sure, each girl would get about half of what she wanted.
Now, consider an integrative resolution. Here, each sister would discuss the situa-
tion. Interests would be shared. Questions about why the orange was wanted
would be asked. Time would be taken to consider a variety of potential resolu-
tions to the issue.
In this classic example of sisters each wanting the last remaining orange in the
house, it becomes apparent that an integrative solution is possible in which both
girls can get all that is wanted. When asked why she wants the orange, the first
sister says that she wants to eat the pulp. No big surprise here. But when the sec-
ond sister is asked why she wants the orange, she responds that she needs the peel
as an ingredient for a recipe she is preparing. So, the first sister takes all of the pulp
as she wanted and the second takes all of the peel as she wanted. By asking
 Negotiating Company and Customer Relationships 55

questions, sharing information, taking some time to think, and creatively resolving
the problem, each girl has all of her interests fulfilled.
With such an ideal outcome, why are not all negotiations resolved integratively?
Unfortunately, it is not always possible. But it is possible far more often that most
negotiators believe to be the case. As a matter of fact, most negotiations have the
potential for at least some pie expansion even though participants believe that that
most negotiations are a zero-sum game.
It should also be mentioned that integrative outcomes are harder to achieve.
Integrative negotiation takes longer, involves creative thinking, and requires a
higher level of trust among the participants so that they become willing to share
interests rather than just positions. Interests are the fundamental, underlying,
and often hidden needs that a party is trying to achieve from a deal. Positions
are what a party says it wants and are exemplified by the terms of sale that are
quoted to the other side.
Even with a solid recognition of the benefits of integrative negotiation, that
outcome is often hard to achieve. An important factor here is the fact that conflict
tends to prevail over cooperation in many negotiating settings. Furthermore,
often parties come to a negotiation with a past history that makes trust building
and information sharing difficult to achieve. Consider, for example, the next
negotiation between the National Hockey League Players Association and owners
of those teams. Given the history of lockouts and strikes in the past, there is not
much love in the room when these parties get together.
So how can negotiators experience the benefits of an integrative outcome? How
can each side get more pie than would be obtained under a distributive outcome?
The next section describes five methods for expanding the pie.

Pie Expansion Tactics

There are at least five tactics that can be used to expand the pie and create an
integrative solution within a negotiation.5 These can best be explained by way
of the following example. Consider the negotiation between a happily married
husband and wife concerning their next vacation. Here are the facts. They want
to go together. Each works outside the home and gets two weeks of vacation time.
If requested soon enough, each can pick almost any two weeks in the year. The
husband says that he would like to go to the mountains and the wife says that
she would like to go to the ocean. The classic distributive solution would be to
spend perhaps one week at the ocean, then travel to the mountains for the second
week. While they would be together, each party gets only one week at the first-
choice location. Another popular distributive choice would a form of turn taking.
The wife could get her ocean vacation this year but plan on a trip to the moun-
tains next year. Integratively negotiated outcomes are better.
56 Marketing in the 21st Century and Beyond

The first type of an integratively negotiated outcome is very straightforward,

but often overlooked: expand the pie. Each party could ask the respective boss
for more vacation time. Occasionally, the supervisor will approve this request. If
not asked for, there is no likelihood of the boss voluntarily offering the extra time.
Why not ask?
Another way to create an integrative outcome in which there is more pie to
share across the participants is through the use of nonspecific compensation. In this
tactic, one side gets her way and the other side is “paid back” for compliance in an
unrelated way. In the current example, the couple could go to the ocean for their
vacation, but the husband could receive nonspecific compensation. For example,
suppose that the husband had been asking for his wife’s permission to allow him
to start a part-time career in NASCAR but that she had so far refused to give it.
She might get her preference on the ocean vacation, but then relent and grant per-
mission for the husband’s NASCAR ambitions. A key issue here is that the pay-
back be unrelated to the vacation. The pie would be expanded because the wife
gets all she wants (100%) relative to the ocean vacation and the husband gets
something that until now was unattainable, creating additional satisfaction or util-
ity for him as well.
Another related tactic is called cost cutting. In this situation, one side gets its
way. The cost for the other side’s compliance with this outcome is also consid-
ered, however, and reductions are sought, enabling a more positive outcome than
would otherwise have been the case. In our vacation example, let’s assume once
more that the wife gets her way. The couple plans an ocean vacation. But the wife,
in the spirit of true cooperation, asks the husband what it is about ocean vacations
that he does not like. If what he does not like includes noise and crowds, the wife
could select a relatively quiet and sparsely populated spot for their ocean vacation,
which would cut the husband’s cost for complying with the decision. She gets her
first wish fulfilled, but his utility is improved by the removal of what he disliked
about vacationing near the ocean.
A fourth method for securing an integrative negotiation is through the use of
logrolling. This tactic requires that at least two issues be under consideration in
the negotiation. Let’s reframe the current vacation example as a two-issue prob-
lem. We already have the issue of location: mountains or ocean. A second issue
might involve hotel quality: high or low.
We already know about each party’s preferences about location. How about
hotel quality? Perhaps the wife has a preference for high-quality hotels while the
husband prefers a low-quality hotel due to the cheaper price. In addition, perhaps
each party also has a different valuation relative to the importance for the two
issues of location and hotel quality. Maybe the wife is more concerned about hotel
quality than location and the husband is more concerned about location than
hotel quality. This is an ideal setting for logrolling. If each party gets to its first
 Negotiating Company and Customer Relationships 57

choice on the most important issue, the vacation will take place at a high-quality
hotel (wife) in the mountains (husband). Since the decision is based on what is
most important to each party, each gets more than half of what was wanted, ena-
bling pie expansion.
Finally, we come to the most difficult opportunity to achieve an integrative
outcome. This method is called bridging and involves conceptualizing the prob-
lem in a radical new way. Suppose that instead of selecting one of the stated posi-
tions (mountains or ocean) that is already on the table, the husband and wife
search for a solution that fulfills their more fundamental interests. The husband
can ask the wife, “Why do you like vacations at the ocean?” or similar questions.
The wife should also ask the husband, “What is it that attracts you to vacationing
at a mountain location?” By exploring their reasons behind their originally stated
positions, they may be able to find a solution to the problem that they both like.
For example, let’s suppose that the wife likes the ocean for vacations because
when she goes there she enjoys sunbathing and swimming in the pool. Perhaps
the husband likes the mountains because when he is there he finds many oppor-
tunities for hunting and fishing due to the remoteness of the site. If they give this
some further thought and freely share with each other what they fundamentally
enjoy about the vacation experience, the couple may determine, for example, that
a two-week vacation together in a hotel near a highly remote Canadian lake in
July enables both to get all of what they want. This is an optimal solution that
was possible only because both sides worked together to explore creative solutions
that were not initially considered.

CONCLUSION
Negotiation is hard work, but the payback can be very attractive. Now more
than ever, the opportunity to work with others to explore modification and
improvement of offerings enables greater productivity, higher customer satisfac-
tion, and often more profitable deals for both parties involved. When buyers
and sellers negotiate issues of concern rather than simply seeking out alternative
partners, working relationships often improve and long-term strategic alliances
become more likely.
Here is some good advice on negotiations. Prepare well, set ambitious but dis-
cussable goals, seek and develop more attractive BATNAs (best alternatives to
negotiated agreements), be honest, and treat opponents with respect. When the
time is right share your interests, not just your positions, with the other side.
Furthermore, learn from your previous negotiation encounters. Identify where
you have done well and in what areas you should work for improvement. If you
do these things, you will be well positioned for negotiation success.
58 Marketing in the 21st Century and Beyond

NOTES
1. Leigh Thompson, The Mind and Heart of the Negotiator (Upper Saddle River, NJ:
Prentice Hall, 1998), 2.
2. For many examples of gambits, see Roger Dawson, Secrets of Power Negotiating
(New York: Career Press, 2000).
3. “The #1 Sales Scam,” Reader’s Digest 164, no. 982 (February 2004): 138–41.
4. “Game of Chicken,” Answers.com, http:www.answers.com/topic/game-of-chicken
(accessed August 22, 2006).
5. Roy J. Lewicki, David M. Saunders, and Bruce Barry, Negotiation, 5th ed. (Boston:
McGraw-Hill Irwin, 2006), 84–86.
 Part II

INTEGRATED MARKETING: THE

PRODUCT-CUSTOMER CONNECTION
This page intentionally left blank
 CHAPTER 5

PATH-FORWARD THINKING: CORE

COMPETENCIES AND THE VALUE
PROPOSITION
Ken Dickey

INTRODUCTION
With all that has been written about the subject of core competence, why is it that
the present-day strategic planning process has proven so frustratingly difficult and
yielded continued poor operating results for so many companies? One wonders if
the process of strategic thought, which must take place before action, can provide
serious benefits. If so, can companies learn to utilize this powerful tool?
It seems that the concept of core competence is too abstract and theoretical for
real-world consideration and use. Apparently, this is a topic for the classroom that
corporations never apply to their strategic thought process. If this concept of
strategic thought anchored by the core competency process is to deliver on the
promise of the future, why do so many companies continue to struggle to
implement it?
As a practical matter, many business leaders view the core competence subject
in isolation, as though conversational mastery of this topic will prove to be the
“secret ingredient” missing from their recipe for success. Often discussed as the
latest and greatest one-minute business solution, “core competence” is interwoven
with those classic phrases “back to basics” or “returning to our roots”; it is never
really understood and therefore is superficially applied.
In reality, most strategic plans contain little genuine forward thought and are
no more than an exercise in spreadsheet arithmetic. Companies take the year’s
numbers, add x percent, build a series of action steps that are good enough to
62 Marketing in the 21st Century and Beyond

get through the presentation meeting, and next year blame poor results on the
economy, competition, weather, etc. The strategic planning process in use by
companies who take the time to generate a long-term plan is similar. An abun-
dance of numbers, data, charts, graphs, comparisons, analysis, plans, and action
steps are all built through a backward-looking perspective; not a single eye looks
to the horizon or what might lie beyond.
A quest for understanding is embedded in the core competence process. The
real power of this understanding is in the intellectual work and thought process,
which involves dynamic discussions, tough introspective questions, and brutal
intellectual honesty. The product of these efforts is a clear direction for the future
of the enterprise, which will continue to produce increasingly superior results.
“Superior results” means growth rates two to five times the industry norm, and
financial results (measured by return on capital employed) of the same magnitude
when compared to competition. The delight of customers who place serious value
on their strategic relationship with the firm is the true testimony of the firm’s
success.
Addressing the real barriers requires intellectual honesty—something that not
everyone finds easy. The intellectually honest discussion process that will soon
be addressed is not for the timid, casual, or unwilling, as it will expose difficult,
perhaps painful, and unpopular topics requiring attention. A commitment to pro-
ducing superior results demands intellectual honest and open discussion on all
subjects. Remember that if superior results were easy, everyone would do it.
Readers may find it amazing that so many companies continue to struggle year
after year simply because they fail to address the most basic issues. Hopefully, the
case examples given will be beneficial in making the connection from theory to
practice.

CASE EXAMPLE 1: CONFLICTING FUNDAMENTALS

The owner of an enterprise makes all the politically correct statements about
growth, long-term career opportunities, future plans, etc., but in fact is unwilling
to fund growth projects. The owner’s level of satisfaction for risk and complexity
of the enterprise has been achieved, and additional capital investment or risk is
not necessary for him to further benefit. The owner’s desire to preserve the status
quo remains unspoken, but the intellectual honesty required for the core compe-
tence process will quickly uncover this watershed issue. The enterprise cannot
deliver on the promise of growth if its basic fundamentals are in conflict. The con-
flict between the personal life of the business owner and the needs, expectations,
and aspirations of employees, customers, and vendors is ever present. There is
no easy answer or quick fix, and the frustration of those team members trying to
execute a long-term growth strategy will continue to grate against the true agenda
of the owner until the problem is solved. Albert Einstein once said that the
 Path-Forward Thinking: Core Competencies and the Value Proposition 63

definition of insanity is doing the same thing over and over and expecting the
same results; unfortunately, some companies do this.
For any plan to deliver on the promise of the future, the importance of every
stakeholder must be acknowledged. The reality of expectations (business and per-
sonal) requires that a company consider the aspirations, desires, and needs of all
stakeholders, not just the owners. The stakeholders’ responses to future plans
must also be considered; it is important to remember that all stakeholders have
an opinion, positive or negative, about the future of the firm. Stakeholders are
raised to the forefront of corporate attention depending on the issue, hence the
need to recognize their importance.
Understanding and using core competence does not require investment, but the
success and growth of customers will dictate future investment pace as the firm
gains a greater share of an expanding market-based opportunity. Investment deci-
sions should be centered on serving the needs of customers.
Building a great business, not just an average business, is a matter of conscious
choices. The size of the company is no guarantee for success. In the example of
the business owner who was satisfied with merely the status quo, the choice had
been made, though probably never discussed, to accept the concept that “okay
is good enough.” Usually these owner-focused companies slowly settle and fade
over time. Bright new employees are not attracted, vendors share their new ideas
with companies on the move, customers look elsewhere for value innovation,
and lending institutions view the lack of growth as a sign of management weak-
ness and stagnation.
The greater the need for superior performance, the more critical the task of
comprehensive strategic thought becomes. An understanding of core competence
is at the heart of this process.
The strategic thought process utilizing core competence as a driver is difficult,
painful, and awkward. It requires one to think on multiple levels (vertical, hori-
zontal, and concentric), deal with an unknown number of variables (including
business and personal), and recognize the simultaneous occurrence of those varia-
bles. In this example, the business owner has made a personal choice, factoring in
comfort level, risk tolerance, family status, etc. This basic unspoken decision will
drive the future of the enterprise, for better or worse. This example used a small
business as a case model; however, larger firms are subject to their own series of
barriers and blinders. Size or product diversity is no guarantee for success.
The process to harness the power of core competence is not a stand-alone, one-
time event; the discussions usually span months and are conducted best by a neu-
tral moderator. Furthermore, the process includes the key people running the
business. These busy people are stressed already with the events of the day.
Most managers are short-term tacticians; they look for immediate resolution of
“today” issues. Unfortunately, many of their tactics prove toxic to the long-term
success. Many times the flood of everyday activity and their training or instincts
64 Marketing in the 21st Century and Beyond

prevent them from seeing the world from a position of opportunity driven by
understanding, a position that comes from the core competence process.
Some team members may have difficulty grasping or accepting the concept of
core competency, while others may fear change and take on obstructionist roles.
In many companies that I have had the opportunity to assist, we have found that
time to understand and digest this new lens to the world is a great ally in gaining
an opportunistic perspective.
An open discussion process often reveals strong differing opinions about what
the company actually does and what it needs to do. As employees have an oppor-
tunity to speak openly about their feelings regarding what they believe is really
happening in the company, these latent feelings and issues will surface. The exam-
ple’s small-business owner might be surprised at his employees’ reactions to his
speech about growth. Their reactions would show him the reality of the conse-
quences that flow from his unspoken agenda. His agenda may have greater influ-
ence on the business than any other single issue.
Keeping all stakeholders in mind, a company must decide what it wants to do
and does not want to do, how it wants to do it, what needs to happen and when,
and how it will deal with the variables.

CASE EXAMPLE 2: BOEING AIRPLANE COMPANY

Not long ago, Boeing referred to their firm as being in the “transportation busi-
ness.” This comprehensive, all-inclusive corporate direction led to multiple paths.
Transportation includes everything from planes, boats, cars, bikes, elevators,
trains, and walking, and some of these ideas may have been good for Boeing. In
reality, however, the heart of Boeing was airplanes. So after years of less than sat-
isfactory operating results, Boeing was forced into serious reconsideration, and
attention was again focused on the core competence of Boeing: airplane design
and manufacturing. As an affirmation of their newfound focus, Boeing even
began calling themselves The Boeing Airplane Company. Today, Boeing is the
world leader in commercial aircraft and the envy of global competitors.
Imagine the vigorous discussion at Boeing during this period of self-examination,
particularly between the corporate managers defending the transportation theme
and the operating people opposing it. In the end, they achieved success by hearing
the voice and needs of the customer, initiating the core competence process, and
forging the value proposition.
In an article in BusinessWeek, Stanley Holmes writes, “Another success driver
[is] Boeing’s newfound discipline on the factory floor. It has come a long way
from the troubles it faced in 1997, when production problems shut down two
assembly lines and cost the company $2.5 billion.”1 Boeing’s core competence
 Path-Forward Thinking: Core Competencies and the Value Proposition 65

and discipline to the design and manufacturing of commercial and military air-
craft is at the heart of its success.
Core competence is a way of thinking about the total enterprise and how the
people within it view the world served by their customers. Cultivating and devel-
oping a thought process centered on core competency does not require outspend-
ing competitors on research and development. The core competency process has
nothing to do with vertical integration. Outsourcing is a tool, while a thorough
understanding of the company is the true value.
Consider the issue of the stakeholders in a business and which of the stakehold-
ers has the most significant stake. These stakeholders are united in their desire for
a successful business, each for their own reasons.
The listing of stakeholders includes but is not limited to employees, customers,
vendors, the financial community, shareholders, union leaders, joint development
partners, distributors, representatives, dealers, integrators, users, original equip-
ment manufacturers, etc. All of the stakeholders are important, but only one
can reside at the top of this list: customers.
To emphasize this point, a company could ask each member of the strategic
planning team to create his or her own list of the stakeholders in order of priority.
This list will provide insight into how the employees see the company and whom
the company should serve. Without customers, the remaining names on the list of
stakeholders simply disappear. Serving customers better must be the first priority
of all strategic thought process.
Sufficient time must be allowed for this early step since it will create the unity
of purpose upon which the enterprise will rest. Team members will come to this
strategic thought process with a narrow focus and must be given time to internal-
ize the most fundamental reason why their enterprise is in business. Once cus-
tomers favor them with orders, then all the stakeholders can share in the
celebration. A simple review of how the enterprise responds to a business down-
turn validates this point; in a downturn, the company will launch a new market-
ing and sales theme focused on customers, which is quickly abandoned once the
bookings crisis appears over. The company then moves on to the next hot topic,
unaware that its path is circular.
Core competence discussion requires decisions concerning what the company
is about and what it is not. Having had the opportunity to participate in this core
competence process with many firms, I have found that many companies stall at this
very first step. They simply cannot agree on what the business is about and what it is
not. Management has allowed the direction of the business to be self-defined—that
is, defined by the desires of individual self-serving units—to the point of paralysis.
Nothing more can be accomplished until senior management clarifies this basic
question, ironically a question that they have caused in the first place.
66 Marketing in the 21st Century and Beyond

CASE EXAMPLE 3: SWISS WATCHES

One of the more widely discussed case studies used by universities is the exam-
ple of the mechanical-watch business located in Switzerland. For years watches
produced in Switzerland were the world hallmarks of fine watches. This precision
mechanical manufacturing business, however, failed to notice the threat coming
from the emerging market of electronic components in Japan. The Japanese
competitors planned to compete through a complete change of technology.
Electronic-component watches were cheaper, feature rich, more reliable, and easily
mass-produced. In a period of a few years, more than 90 percent of the Swiss
mechanical-watch business was gone, replaced by the new electronic watches
from Japan. Thousands of employees who produced these fine parts were out of
work, and the economy of Switzerland that depended on these craftsmen suffered.
In the aftermath of this market crash, the core competence process revealed to
the Swiss leaders that their real competence was their ability to produce small pre-
cision mechanical parts. Watches just happened to be one of the uses for these
precision parts, so any product that had a requirement for this level of precision
could be considered to recover business losses.
While the list of potential consumer and industrial products was lengthy, one
of the most promising possibilities was the upscale SLR camera product line.
With the realization that Swiss precision parts competence could be applied to
many products in multiple industries with customers worldwide, the Swiss turned
their failure into success.
Although the Swiss were absolutely certain they were in the mechanical-watch
business, when viewed through the lens of the core competence process they
saw their business as a series of capabilities that extended far beyond watches.
The power of core competence is not visible unless a company looks for it in a
deliberate manner, which is why it took such a long time for the Swiss to view
themselves as having a series of competencies rather than just as producers of
mechanical watches. The Swiss found that a useful core competence must be dif-
ficult for others to imitate, and it must make a significant contribution to the end
product or service.
In consideration of the case of the Swiss watch industry, it is important to
remember that the use of the core competency thought process is no guarantee
or protection from competitors. Nothing the Swiss could have done would have
prevented the Japanese from entering the watch business with new technology
and creating a major market shift from mechanical to electronic watches. The
metrics were in favor of the electronic components; it was the Swiss watchmakers’
narrow perspective that caused the true damage.
It is important to realize that new and powerful competitors will enter the mar-
ket from distant arenas using technology as their gateway. The Swiss business
leaders did not realize this, and so they failed to see the threat from the Japanese
 Path-Forward Thinking: Core Competencies and the Value Proposition 67

electronics industry. A comprehensive understanding of their core competencies

would have facilitated a far quicker response to the threat; it would have allowed
them to expand into other products and markets that utilized their ability to pro-
duce fine mechanical components and parts.

CASE EXAMPLE 4: HONDA CORPORATION

If the Swiss watch industry is a negative example, Honda Corporation provides
a positive example of core competency thought process. In my class studies, I ask
the students to define Honda’s core competency. Their responses are typically
quality, value, choice, manufacturing, culture, engineering, or price. The correct
answer surprises many.
At the heart of Honda’s success resides a competence fired by passion to be the
world’s best designers and manufacturers of gasoline engines. Therefore any prod-
uct or application that uses a gasoline engine as its prime fuel is fair game for the
Honda product teams.
Just as the Swiss did not see the Japanese electronic threat coming from that
distant arena, the U.S. lawn care industry did not see Honda coming into their
industry. Until that point, Honda produced only cars and motorcycles, and these
upscale transportation products were a long way from the business of consumer
lawn care products. The Honda lawn care product, however, entered the market
with a 30+ percent price premium and captured a significant share of market.
When consumers are willing to pay a price premium for a product with demon-
strated superior value and features, a competitive action based on lower price is
not an effective response. The premium price serves as the point of validation
for superior content.
The Honda business leaders clearly understand the power of core competency
and have remained extremely loyal to the principles that differentiate competen-
cies, technologies, and products.
Today, this portfolio of competencies allows Honda to participate in multiple
products where the common link is a desire for a high-quality gasoline engine.
The list continues to grow and currently includes standby power generators,
lawnmowers, outboard marine engines, snowmobiles, automobiles, motorcycles,
power sprayers, and their new venture aircraft engines. If a product utilizes a gas-
oline engine, consider it fair game for the Honda product teams. While competi-
tors have tried to imitate the Honda business model, none have done it better.
Honda’s success shows that core competence will provide access to a wide vari-
ety of markets. The Swiss watch industry was late to understand the value of their
competency, while the leaders of Honda were early adapters and enjoyed a profit-
able growth curve for more than 50 years.
Honda’s success also proves that it is important to differentiate competence,
technologies, and products. Technology alone is not a core competence, but the
68 Marketing in the 21st Century and Beyond

organizational capacity to integrate human expertise across various levels of the

organization is. Individual technology streams are not the issue, but the ability
to harmonize the hard and soft issues across an enterprise is at the center of mak-
ing competency an effective tool. In the case of Honda, they take the experience
and knowledge gained from the racetrack and deliver that knowledge to various
product design teams worldwide.
The knowledge gained from technology investments must have the capacity to
move through the organization. It does little good to spend resources on technol-
ogy development and then not have a competency to move that knowledge
through the organization to people who can convert this knowledge into benefit
for customers.
A company collectively learns and improves by developing a culture centered
on learning, working together, and moving knowledge to those who need to
know. Those responsible for stewardship of technology absolutely must have a
shared understanding of customer needs and technical possibilities.

CASE EXAMPLE 5: LAWN TRACTORS

Recently, a local lawn implement dealer sent a very angry letter of resignation
to the factory headquarters when his flagship supplier signed a national arrange-
ment to source lawn and garden tractors to a national big box store organization.
Until this time all lawn and garden tractor sales had gone through the exclusive
dealer organizations, which enjoyed protected territories. The dealer could not
understand how the loyal dealers could be expected to compete for new equip-
ment sales against such a large-volume organization.
What the dealer did not realize was that his core competency was not new
equipment sales, but it was supplying parts and service for the lawn care tractors.
New product sales, as well as the employees, facility capability, revenue, and cus-
tomer perception, were all based upon aftermarket parts and service. The compe-
tency to provide technical service and support to customers was a capability that
few could imitate or duplicate. Thus his supplier’s shift to a big box store that
does not provide parts or service could only help his business.

CASE EXAMPLE 6: A FOOD PRODUCTS COMPANY

Lately, a large producer of processed foods decided to make a significant acquis-
ition of a firm that used many of the same raw ingredients. The difference in the
two firms was that one company used the national grocer’s wholesale distributor’s
organization while the other company used the association of frozen food distrib-
utors. It seemed straightforward enough, as both frozen foods and dry goods foods
used many of the same raw ingredients.
 Path-Forward Thinking: Core Competencies and the Value Proposition 69

Unfortunately, because the original food products company had no compe-

tence in the frozen food industry and proved their ineptitude with their actions,
the penalty administered by the frozen food distribution organization was a loss
of revenue of more than 75 percent in the first 12 months. The frozen food
acquisition was sold in less than 18 months and the food products company took
a write-down on the acquisition of more than $80 million. It was an expensive les-
son for such a basic principle.
Acquisitions made in the name of vertical integration, sourcing, raw materials,
etc., are often the very worst performers because they are viewed from an incre-
mental operations perspective and not from a core competency perspective. No
one takes the time to examine the two companies in terms of a series of competen-
cies. This example of the food products company is not extreme, but it is a real
example in which the core competencies of the companies were not known or
understood until well after the fact.
These six case studies illustrate the power of the core competency process to
deliver on the promise of the future. Competency, or a portfolio of capabilities,
is essential to a path-forward strategic thought process.

NOTE
1. Stanley Holmes. “Boeing Straightens Up and Flies Right,” BusinessWeek, May 8,
2006, 69.
 CHAPTER 6

FUTURING: ANTICIPATING THE

EMERGING VOICE OF THE CUSTOMER
Stephen M. Millett

THE CHALLENGE
The cardinal rule of marketing has been, “Listen to the customer.” The theory is
that to be responsive to customer demand, marketers need to pay attention to
what customers say they want. But what if they cannot express what they want?
Sometimes, waiting for customers to state their needs results in being too slow
and not sufficiently competitive to respond to customer demand. In still other
cases customers may not be able to envision or articulate what they want. For
example, Henry Ford allegedly asserted that “if I’d only listened to customers,
I’d have developed faster horses.”1
Traditional market research methods have proven to be very effective, even pre-
dictive, of identifying short-term and well-articulated customer wishes. Focus
groups, interviews, and surveys have been invaluable when customers can see
and react to the proposed new product or service. They can react to the tangible.
The shorter the time frame, the more predictive the voice of the customer is. Yet
these same market research tools typically fail when more abstract concepts and
longer time periods are presented to customers. Customers generally find them-
selves unable to articulate what they will want in the extended future or whether
or not they would buy at a specific price point until they can see and feel a prod-
uct prototype.
What is an enterprise to do when the length of time it will take to bring a prod-
uct or service to market is three years or more into the future? How can we know
that a new product will sell when it reaches the market? How do we know what
customers are willing to spend?
 Futuring: Anticipating the Emerging Voice of the Customer 71

These questions pose a particularly troubling challenge to companies that pride

themselves on innovation, original research and development (R&D), and being
the first to market with new products and services. They must accurately antici-
pate customer demand in the future as well as respond to present customer
demands without the information to make accurate assessments.
Futuring is emerging as a new tool for identifying likely consumer preferences
and demands in the extended future when customers themselves cannot say what
they will want. It employs a number of methods to explore likely states of cus-
tomer behavior and needs yet unknown to customers themselves.
The purpose of this chapter is to explore the substance, methods, and applica-
tions of futuring as a potentially vital approach to marketing in the 21st century.

THE SUBSTANCE OF FUTURING

Futuring is the systematic study of long-term consumer trends and patterns of
behavior in place of short-term consumer-articulated research. While straight
trend extrapolations can be misleading, an understanding of how consumers have
behaved in the past provides foresight into how they are likely to behave in the
future.
One very important and often studied consumer trend is the composition of
the consumer population, or demographics. An understanding of age, gender,
ethnic origin, and other population characteristics has long been a part of market
segmentation research. Futuring, however, extends the time horizon of market
segmentation research to anticipate how people are likely to behave, under certain
circumstances, in the future. A few examples illustrating the point follow.
In 1991, Strauss and Howe published a book in which they asserted that there
had always been four basic types of generational cohorts in American history and
that the generations followed predictable patterns of behavior.2 By studying gen-
erational types, one could anticipate the predilections and preferences of genera-
tions. This principle could also be applied to consumer behavior. In an
independent study, Yankelovich Partners built a database and provided an analy-
sis of three generations in the 20th century: matures, boomers, and Gen X.3 They
claim to have established patterns of behavior that could be used to explain and
anticipate how each generation would likely behave while passing through the
stages of life. This analysis provided insights into new product and service devel-
opment as well as marketing strategies. While generational trend analysis
remained controversial into the 21st century, the concept of age as a demographic
indicator of future consumer behavior is now widely accepted and practiced.
Generational analysis by itself, however, is not as robust as when it is combined
with other demographic trends. One is life stage analysis, which was popularized
by the best-selling book authored by Gail Sheehy in the 1970s.4 Her adherents
72 Marketing in the 21st Century and Beyond

placed a heavy emphasis on life stage rather than generation cohort as the primary
driver of consumer behavior. The emerging theory is that all generations have
their own peculiar attitudes and preferences based on shared cultural and histori-
cal experiences, especially those of their youth. But all individuals and generations
pass through stages of life, such as adolescence, marriage and early family raising,
careers, midlife, retirement, and old age. Generational analysis tells us that all age
groups do not act exactly the same way as they move through different life stages,
but that life stages set up the aspirations, achievements, and frustrations that are
common to everyone.
By way of illustrations, matures, or the World War II generation, typically
accepted authority, worked very hard, and retired with occasional but rarely regu-
lar postcareer employment. They tended to have single marriages and careers.
With fresh memories of the Great Depression, matures tended to spend within
their financial means and saved money for their future. The baby boomers, who
were born between 1946 and 1964, however, developed great skepticism about
authority from their experiences of the Vietnam War, Watergate, and corporate
layoffs. Their generation experienced higher divorce rates than in the past and
many boomers have had multiple marriages, families, and careers. Boomers have
consistently been heavy spenders and light savers. How they will behave in retire-
ment is now a major question. The expectation is that they will continue working,
at least part-time, well into their 80s, with many boomers starting their own busi-
nesses relative late in life.
While insightful, generation cohort behavior is not sufficient by itself to antici-
pate future behavior. One also has to understand life stage. At certain life stages,
people face similar challenges, such as gaining an education, marrying and raising
a family, pursuing a career, entering middle age, retirement, etc. Originally, it was
believed that one only needed to understand life stage to predict consumer behav-
ior. This is not true, because different generations have different styles based on
their common life and historical experiences and respond differently to the chal-
lenges of various life stages. As mentioned above, the World War II generation,
due to their military experiences, approached family life and their career-
building challenges in the 1950s very differently than the baby boomer generation
did in the 1980s. Accordingly, the boomers’ style of retirement may prove to be
very different.
By understanding generational and life stage behaviors, one can anticipate at
least in general terms how certain consumers are likely to act and what they are
likely to buy in the future even when the customers may not be able to articulate
their wants and needs. Yet futuring must take into account additional demo-
graphic and economic trends.
While generation and age are important demographic indicators of the future,
so is ethnic identity, especially in an era of heavy immigration into the United
States. Of primary importance are Hispanics who are entering the United States
 Futuring: Anticipating the Emerging Voice of the Customer 73

from Mexico, Central America, South America, and the Caribbean, both legally
and illegally. Counted as a distinct group, irrespective of country of origin,
Hispanics are now the single largest minority group in the United States. While
their presence is well known in the border states of Texas, New Mexico,
Arizona, and California, they also represent a significant social group in such other
states as Nevada, Florida, and New York.5
Is Hispanic consumer behavior in the United States the same as that of other
Americans? Are the types of homes and neighborhoods in which they live reflec-
tive of their ethnic tastes, their economic strata, or some other factors? What evi-
dence exists that indicates that given sufficient income, Hispanic consumers have
a hunger for many of the same lifestyles and consumer products favored by
American consumers? Oddly, we still do not fully know the answers to these
and similar questions. It is assumed that Hispanic baby boomers, whether born
in the United States or not, but living and working in the United States, behave
generally the same as American-born baby boomers. However, we do not have
the studies to confirm this.
Observations also tell us that while Hispanics may patronize Hispanic busi-
nesses, they will also shop extensively in the mainstream American marketplace.
Therefore most consumer products and large retail chains will offer information
in both English and Spanish.
Asians, who are a rapidly growing minority with approximately more than
4 percent of the total U.S. population, are another significant minority in the
United States. Their lifestyles and spending patterns are noticeably different from
both those who are American-born and Hispanics. They tend to have a very
strong sense of Asian and family identity and will adhere to Asian ways to the
greatest possible extent. They will shop largely within their own community for
products ranging from groceries to financial services. This may be due to language
problems, but it may also be due to cultural preferences and an associated trust of
similar Asians with a corresponding distrust of native-born Americans. The his-
torical pattern, however, is that second- and third-generation Asians born in the
United States acculturate as quickly as any other ethnic group in American
history.
Gender is another important demographic factor. The United States has
slightly more females than males, and in many consumer niches, women are more
likely to be the consumers as well as the primary decision makers. For example, it
has been well known for years that women buy more men’s clothes than men do.
Yet so many men’s clothing stores appeal to masculine rather than feminine tastes.
Women are also the primary buyers of health care services. Yet, again, so many
doctors, clinics, and hospitals are male rather than female in language, behavior,
and culture. In still other cases, women have an increasingly major influence on
the purchases of large-ticket purchases, such as homes (primary and resort), cars,
and travel.
74 Marketing in the 21st Century and Beyond

Futuring considers all of these demographic trends and sorts them out as to
what outcomes are most likely to occur by what designated date in the future.
Demographics, as contextual as they are, do not tell the whole story of con-
sumer behavior. One has to consider economics and technology as well.
Economic forecasting, however, is notoriously difficult to do and mostly inaccu-
rate. That is not for a lack of data or sophisticated modeling and simulation; it
is due primarily to the dynamics of so many variables interacting with each other
that make prediction difficult. For example, the events of September 11, which
greatly impacted the American economy, were not predictable.
At the macroscopic level, with only a few years as exceptions, the U.S. economy
has shown consistent positive annual growth since World War II. The average
annual growth of the largest economy in the world is not likely to sustain more
than 5 percent growth in the GDP. The United States is not likely to have the
kind of hyper growth rates of China and India. More importantly, however, is
the real GDP or the growth rate normalized into constant dollars. More impor-
tant still are average household income and disposable income. These economics
touch the lives of everyday consumers. While the data are readily available for
household income, household wealth is very difficult to estimate.
The trend has been that average American household incomes have remained
remarkably stable for nearly 10 years and that household wealth, which is difficult
to measure, may actually be declining. Many of the apparent gains in income
must be discounted by inflation (especially in the staples of housing, energy,
and food). At the beginning of the 21st century, household wealth was increas-
ing due to the rapid inflation of real estate prices. Unfortunately, the collapse
of the real estate market resulted in a decline in household wealth. Equally
troubling is the decline in pension wealth as a long-term household resource.
Many corporations have eliminated or reduced their pension plans. On the other
hand, while household finances have changed in the last 20 years, technologies
have continuously improved the general quality of life with many products and
services declining in prices due to technological advancements.
Health care insurance is also critically important. While many Americans are
employed, they may be underemployed (meaning that their levels of responsibil-
ities and their incomes may not be parallel with their education and past work
experience) and have little or no health care insurance. It is estimated that nearly
50 million Americans have no health insurance at all at a time in history when a
visit to the emergency room could cost $5,000 or more.
When thinking about the future of consumer behavior, one has to consider
beyond income the matter of net household wealth. This takes into account debt
versus wealth. With rising consumer debt, declining real estate prices, rising
energy costs, and rising interest rates, net assets may begin falling rather than ris-
ing several years into the future. Such a trend would have potentially devastating
impacts on the baby boomer generation as it enters its retirement years.
 Futuring: Anticipating the Emerging Voice of the Customer 75

Futuring must also consider emerging technologies. Everyone has seen the
enormous impacts on lifestyles, employment, productivity, and consuming
caused by the personal computer and the Internet within just the last 20 years.
What will be the next Internet? Computers will likely range in size and band-
width, like TVs and telephones. Beyond the information technologies, there are
the potentially important new energy technologies and biotechnologies.
Breakthroughs in both could be as revolutionary in the marketplace as the per-
sonal computer was in the early 1980s and the Internet was in the late 1990s.

THE METHODS
All futuring methods generally fall into three categories: trend analysis, expert
judgment, and alternative futures, or multioptions analysis.6 A brief overview of
each follows.

Trends
Some of the leading indicators of future consumer behavior have already been
identified above. These are trends or patterns of behavior over time (as opposed
to discrete events, which are very difficult, if not impossible, to predict).
Trend extrapolation continues to be the most frequently used method to make
forecasts. All forecasters use trend data, because data exist only for the past and the
present. No one has data from the future. Trend analysis can be very reliable in
some cases, but it can only anticipate continuity. It cannot predict discontinuities.
I was asked once how many data points were required to draw a trend line.
I thought the questioner was kidding me, so I said that I like at least two, but pre-
fer three. He looked at me with a straight face and said that was odd because at his
company they typically used only one. Obviously, predicting a trend for the
future based on only one data point is risky business.
A common assumption is that additional data lead to better predictions. This
may not be true. Indeed it may be the opposite, as past data may emphasize cer-
tain events or recent past events more than they should. Trends within an indus-
try may be used to develop projections for shifts in purchase behaviors, due to
changes in culture, tastes, fashion, or technology. Trend data are often collected
and disseminated by associations or trade groups. For example, recent trend data
published by the International Association of Culinary Professionals are shown in
Figure 6.1, which shows several key trends, such as a trend toward lifestyle sim-
plicity, that will likely impact consumer eating habits and purchases in the
future.7
The theoretical problem with trend data, however, is not merely the amount of
them or even their accuracy. The problem is the variability of the phenomena for
76 Marketing in the 21st Century and Beyond

Figure 6.1
Key Consumer Food Trends

The focus is on healthy living

• People continue to cook, but want to take advantage of quick preparation time
and convenience while taking advantage of healthy, fresh ingredients
• Focus on holistic health, including the mind, body, and waistline

Lifestyles are more casual

• Focus on simplicity and sharing
• More interest in local and regionally grown foods
• Slow cookers, aka crock pots, are experiencing a comeback

Ethnic Foods
• Italian and Mexican foods are no longer considered ethnic, but mainstream
• New ethnic trends are Thai, South American, and Mediterranean

Kids want food to be fun

• Enjoy a surprise element
Source: McLain, Cathy, Forum Offers Food Marketers Trends Snapshot, “The Hungry Mind,” Quarterly
Joint Publication of the Marketing Communicators Section of the International Association of Culinary
Professionals and the Food and Beverage Section of the Public Relations Society of America (IACP and
PRSA), Second Quarter 2004, p. 4.

which we gather data. In cases where the data are extensive and accurate and the
phenomena are very stable, then trend analysis can be very accurate. Trend pro-
jections do work on many occasions, especially in the short term and for things
known to vary little over time.
One very interesting trend is the shift in work in the United States over the past
century. In 1900, over 40 percent of American working men were engaged in
farming, fishing, and mining. By 2000, the proportion had dropped to about
4 percent. In the same 100 years, the proportion of professionals and retail male
employees rose from 21 percent to 58 percent. Workers in production facilities,
like mills and factories, and transportation rose from 38 percent in 1900 to a peak
of about 50 percent by 1950, and then declined back to 38 percent by the end of
the century.8
These trends reflect the economic shift from agriculture to manufacturing to
retail and the “knowledge economy.” However, even over long periods of time,
 Futuring: Anticipating the Emerging Voice of the Customer 77

will these trend lines be linear projections in the future? It is hard to image that
agriculture will drop further, although a decline to 1 to 2 percent of the working
population is certainly possible. Will manufacturing jobs in the future drop like
agricultural jobs have? Considering trends in technology, especially information
and communications technologies (ICTs), it seems likely that the proportion of
manufacturing jobs may fall to 20 percent.
Trend analysis, however, breaks down when the data are not sufficient, data are
inconsistent in accuracy, or the phenomena display a potential for great variability
(or instability). The more complexity that exists in the phenomena (such as a large
number of variables that are highly interactive with each other) and the longer the
time horizon, the more there will be variability, risk, and uncertainty. For exam-
ple, trend analysis is not very helpful in predicting fashion trends such as skirt
length, tie widths, or baby names.
Trend analysis is another form of pattern recognition. In the many worlds of
pattern recognition, there are fundamentally three categories of pattern recogni-
tion problems:
Type I: Background Pattern Recognition. The first type occurs when the background pat-
tern is the principal focus of interest. It establishes what is the norm and the baseline
of continuity. When the background is well understood, one looks for deviations
(“signal”) from the background to detect changes. One theory is that patterns of
human living exist for long periods of time; the routines of everyday life endure
despite periodic (and thankfully rare) great events of history.9 In this context, the
patterns have great stability, even though there may be relatively small deviations
from time to time—and occasionally (but rarely) major disruptive events. One is
impressed more with the continuities than the momentary exceptions. In this situa-
tion, trend analysis would generally be predictive.
Type II: Signal Pattern Recognition. The second type occurs when an event or a thing,
called the signal, is the focus of interest rather than the background. One watches
for the presence of the signal with little or no regard to the background (which
may be only clutter confounding the detection of the signal). This perspective is
the opposite of Type I; one is interested in the great events or discontinuities rather
than the background, long-term patterns. Discontinuities do happen for all sorts of
reasons, some of which are beyond the powers of humankind to control. Type II pat-
tern recognition cannot be predicted from Type I analysis, although Type I trends
are necessary to provide the context for understand the significance of Type II pat-
tern recognition.
Type III: Emerging Pattern Recognition. In the third type, neither the background nor
the pattern is known, so one collects data and searches for the pattern in them.
Here is where both historians and futurists imagine all kinds of possibilities. The
most favored Type III trend analysis is linear projections, even when complicated
repression analysis has to be used to even find a line. It is possible that lines do exist,
so a Type III analysis may lead to something that would fall into Type I. Another
78 Marketing in the 21st Century and Beyond

very popular pattern is cycles, whereby the analyst sees a consistent pattern of up and
down curves.10 A variation of cycles, called S-curves, have been developed to forecast
the development of new technologies.11 Cycles are very popular in all kinds of fore-
casting, but the periodicity of them and the exact replication of the curves over and
over again is rarely achieved. The theory has great attraction, but the applications
can be very messy.
In a true inductive style, one would need a great deal of data to be sure that the
pattern would be repeatable over long periods of time. The pattern might be very
irregular and have no similarity to either a line or a cycle. If the pattern did
emerge, then Type III analysis would be a very effective way of discovering new
Type I patterns.
Expert judgment is a form of intuitive forecasting. It is the only way, in most
cases, to anticipate the discontinuities that cannot be predicted by trend analysis.
In the ancient world, the experts with extraordinary predictive powers were called
prophets, oracles, and soothsayers. Ultimately, in this historical context most of the
predictions of such people came from their gods. Today, the experts are called ana-
lysts, professors, and consultants. Their inspirations come largely from their study
of history, existing data, stringent logic, and the mental “black box” called intuition.
All expert judgments suffer from two major liabilities. One is the fact that no
expert, contrary to what he or she may proclaim, can possibly know everything.
The other is that all experts have their own biases. Therefore the best expert
judgment methods involve many experts to fill in the gaps and smooth out the
biases.
Expert judgment methods include interviews, questionnaires, surveys (both
actual and virtual over the Internet), and group dynamics (such as brainstorming,
variations on idea generation, and the Nominal Group Technique).12
Expert focus groups and expert judgment methods in general are used in ways
very similar to the methods of short-term market research where the “experts” are
the consumers themselves. The techniques for extracting judgments are about the
same. The difference is largely in the pool of experts and the time frame of
the questions. Whereas customers cannot articulate what they will likely do in
the future, the experts who know about customers can make predictions based
on their studies and their intuition. They may know more about the behavior pat-
terns of customers than the customers know about themselves.
It should be noted in passing that all forms of modeling, even the most complex
and quantitative, begin with expert judgment. Someone has to ask the focus ques-
tion and select the variables that will be included and excluded from the model.
Too often when futuring, there is no direct acknowledgment of this. In many
cases the expert judgment, typically called assumption, is invisible in the construc-
tion of econometric and financial models. For example, assume we are interested
in developing a model for predicting the number of students who would be
 Futuring: Anticipating the Emerging Voice of the Customer 79

available to attend state universities sometime in the future. We may include data
on the number of high school students within the state, the present rate of college
attendance, and the expected increase in tuition. Should this model also include stu-
dents from outside the state; and what about students from other nations? What if
we assume that the in-state tuition rate is extended to out-of-state students? Will
this impact our results? What if the bias of the authors is that only legal residents
should be able to attend the state university? Would this impact the result?
Alternative futures provide multiple possible futures. In trend analysis, there is
an underlying assumption that there will be a single, most likely if not predeter-
mined, future because of the momentum of the phenomena behind the trend data.
There is a future and it is knowable. In expert judgment, there may be either singu-
lar or multiple predictions for the future. In alternative futures, the assumption is
that there are multiple possible, even likely, futures and each requires examination.
The most popular form of alternative futures today is scenario writing, although this
category of methods also includes paths, trees, matrix analysis, and real options
analysis.
The contemporary use of scenarios may be traced back to the RAND
Corporation and the planning scenarios done for the U.S. Air Force in the 1950s.
These scenarios were hypothetical, not predictive, sequences of cause-and-effect
actions leading to a logically consistent end state. The RAND scenario method
was adapted, with the help of Herman Kahn, by both GE and Shell in the early
1970s with a significantly different twist. In the applications of GE and Shell, sce-
narios became alternative end states with logically consistent components (trends,
issues, factors, etc.) but without a presumed sequence of events. The Shell variation
became highly publicized and the model for most scenario projects today.13
Depending upon their purposes and techniques, scenarios can be generated
both intuitively, as a variation on expert judgment in a group setting with a poten-
tial for multiple (typically two to four) outcomes, and analytically using both
expert judgment and trends analysis combined with probabilities, cross-impact
analysis, and computer-based modeling and simulation.
Scenarios can be used a variety of ways just as they can be created in different
ways. One use is contingency planning just as used by Kahn for the Air Force.
The point of thinking about multiple endings (alternative futures) was to encour-
age the consideration of plans beyond the main one. For every Plan A there must
be Plan B, C, D, etc., to cover possible alternative outcomes once a sequence of
actions is put into motion. The military has been rigorous about contingency
planning (at least at the tactical level), but businesses have not proven to be as
flexible in their thinking and their actions as the military.
Another use of scenarios is the learning process itself. The scenarios are neither
plans nor predictions, but rather a method for simulations of various complexity.
Scenarios in the business context are similar to war games in the military sense.
80 Marketing in the 21st Century and Beyond

They are hypothetical rehearsals of alternative, hypothetical futures. The benefits

of the scenarios are derived from the insights gained in the process rather than the
scenarios themselves. A secondary value is the team building that also comes from
the process involving the social dynamics of the same people who will be respon-
sible for the implementation of strategies that emerge from the scenario exercise.
A third application of scenarios is forecasting, but in a different way than in
statistical, financial, and economic forecasting. Scenarios, at least analytical rather
than intuitive scenarios, can be generated by modeling and simulation with or
without a computer software program. As practiced by Battelle for over 20 years
using the Interactive Futures Simulation (IFS) software program, scenarios begin
with a topical question of importance to a client. The answers to the topical ques-
tion will be used to make a decision in the near future about investments or strat-
egies that will likely lead to desired outcomes in the long-term future. Expert
judgment is used to identify the most important descriptors (trends, issues, fac-
tors, or variables) relative to the topical question. Trend analysis is performed
for each descriptor. Then each descriptor is assigned alternative outcomes with a
priori probabilities of occurrence by a target date.
While the software program provides the structure for cross-impact analysis of
all the descriptors and their alternative outcomes with each other, the software pro-
gram, using the judgments entered, also calculates adjusted probabilities of descrip-
tor outcomes and arranges them in alternative sets (scenarios). The scenarios with
the highest adjusted probabilities of occurrence are the scenarios that are most likely
to occur given current information about trends. Desired scenarios may be included
in the sets, although they may have low probabilities of occurrence. The desired sce-
narios provide foresights into what would need to occur, or what investments and
strategies would have to be put in place in order to achieved desired outcomes
(which provides more rigor and direction than just wishful thinking).14

CASE HISTORIES OF FUTURING

Two case histories will be offered to illustrate how futuring can be used to
anticipate future consumer demand and to identify the emerging but yet unarti-
culated voices of customers. These come from the experience of Battelle, a large
independent technology development, management, and commercialization firm
headquartered in Columbus, Ohio.

The Case of the Intuitive Champion

The quotation by Henry Ford in the beginning of this chapter reflects the
futuring of a new product champion, or one who sees the future with opportuni-
ties that few others do. It is the futuring of successful inventors and entrepreneurs.
The first case history presented here tells the story of the origins of the Xerox
 Futuring: Anticipating the Emerging Voice of the Customer 81

machine when the intuitive futuring of the champion proved to be successful

despite the flawed predictions of traditional market research.
In 1944 a patent lawyer from Battelle in Columbus, Ohio, met another patent
lawyer in New York who was also an amateur inventor, named Chester Carlson.
Carlson had a patent of his own invention for a dry, electrostatic copying
machine. It was a revolutionary concept, but Carlson did not have the resources
or the scope of complex technical knowledge to make it work beyond a benchtop
model. So he joined forces with Battelle, which undertook at its own expense the
development of an operational and commercially viable dry copying machine.
Battelle’s effort took 14 years! Along the way, a classics professor across the street
at The Ohio State University suggested the brand name Xerox. The Xerox com-
pany was founded in Rochester, New York, to manufacture and distribute the
machine. After many disappointments, the first commercially successful Xerox
machine was offered on the market in 1960. It proved to be a huge success and
emerged as one of the great technological innovations of its era.15
During the development of the Xerox process, Battelle and its partners com-
missioned a market research study. The study interviewed many potential cus-
tomers and concluded that there was no market pull for a dry process copier.
But Carlson, acting like a true new product champion, thought otherwise. He
had his own view of the future. As a patent attorney, he knew from experience
that there was no good process for him to make multiple copies of legal docu-
ments already in his possession. He personally knew trends in the law,
government, and business. He knew that there would be a potential demand for
offices to have their own copying capabilities. The people at Battelle and the
Xerox Corporation agreed with him.
Why was the market study wrong in light of the later huge success of Xerox
during the 1960s? The apparent reason was that the market study asked the
wrong set of customers, who in turn could not verbalize their reactions to a totally
unfamiliar product concept.
The market researchers went to secretaries, printers, and other people who gen-
erated copies. These people said they already had the tools that they needed and
they did not see a role for a dry copier (which they apparently had a very difficult
time visualizing in the framework of their normal work routines). When the
Xerox machine was introduced and when people saw it and worked it, they came
to see benefits not visualized or articulated before. It turned out that the customer
base they had used was people who received, not generated, material. The original
market research study had asked the wrong questions of the wrong potential cus-
tomers and failed to anticipate several trends toward the explosion in business,
legal, and academic paperwork.
Another point is that the Xerox Corporation was very clever to introduce a new
business model for commercializing a new product. It was not only that the Xerox
machine was a “better mousetrap” or that the Xerox Corporation was a better
82 Marketing in the 21st Century and Beyond

“mousetrap company,” but that the business model for the new product was also a
“better mousetrap value proposition.” A major lesson here is that typically a new
technology, especially a very novel one, requires a new business model.
The lesson of this case history is that, as asserted earlier, traditional market
research methods fail when they ask prospective customers what they would buy
in the future, especially when the product concept is not clearly developed under-
stood or presented. Perhaps the market research went to the wrong target market
(which frequently occurs); or it went to the right target market but asked the
wrong questions (which also commonly happens). The point remains that the tra-
ditional market research came up with the wrong answer, which was ignored by
the new product champion, who proved to be correct.
An important lesson is to understand that the customer of tomorrow may not
be the customer of today. Who would have predicted 20 years ago that teenagers
would be making the primary purchase decision for household telephones, for
example? In this case, the expert judgment of Chester Carlson and his Battelle
allies carried the day over the market research. Admittedly, they took huge techni-
cal and financial risks, but they were successful in implementing their vision of the
future.

The Case of the Predictive Scenarios

The second case history also comes from Battelle and it is one in which this
author was involved intimately. A consumer product company with a well-
known corporate and brand name and with a common household product came
to Battelle for futuring. The concept was to use futuring as a frame of reference
for developing new products leveraged from existing capabilities. We used the
IFS scenario method and supporting software program. The topic question con-
cerned the future of American households and expectations for household clean-
ing. We conducted two expert focus groups (expert judgment), one with
Battelle experts and one with corporate experts, from which we derived a number
of demographic, social, economic, and technological descriptors. The core team,
consisting of both Battelle and client project principals, performed trend analysis
on the descriptors and projected the most likely alternative outcomes for each
descriptor. The alternative outcomes (comprehensive, mutually exclusive, and
numbering two to four for each descriptor) were assigned a priori probabilities
of occurrence in the future based on trend analysis and expert judgment with peer
review. Cross-impact analysis was performed with the IFS software program.
A large number of scenarios were generated by the software program. Most of
them could easily be combined into five principal scenarios. With the scenarios
giving us views to the future, we held yet another expert focus group at Battelle
to derive product concepts from the scenarios. A materials engineer concluded
that if people wanted cleaner homes, meaning more hygienic and free from
 Futuring: Anticipating the Emerging Voice of the Customer 83

illness-causing bacteria and viruses, but wanted to spend less time cleaning, then
there was a potential market for a disposal wipe that would be impregnated with
an antimicrobial substance. The product would be highly effective, easy to use,
easy to throw away, and affordable.
The scenarios had stimulated a process of creating new product concepts. The
client took the scenarios and their implications back to their R&D center, where
they supplemented the scenarios with their own research and idea generation pro-
cesses. The result was that within two years the corporation introduced a home-
cleaning disposable wipe that became very popular as soon as consumers saw
and tried the wipes.
When the scenarios were generated, we used a 10-year planning horizon. We
asked the question in a way that gave a long-range perspective, but we never said
that we had to wait 10 years to launch a new product. The client company intro-
duced its wipe about three years after we began the scenario project. It made a
likely future happen faster by being proactive rather than reactive to already
existing and known consumer needs. Therefore the company seized all the com-
petitive advantages of being first to market with an innovative product that cap-
tured people’s imagination and store shelf space.
Futuring, particularly scenario analysis, proved to be the engine of innovation
in new product development. It identified a potential consumer need in the
future that had not been previously articulated in any meaningful way by tradi-
tional market research.

THE APPLICATIONS OF FUTURING

Looking into the future, four obvious applications of futuring come to mind, as
follows:
R&D Investments and Portfolio Management. R&D organizations have the dilemma of
developing technologies for future products with little or no direction on what con-
sumers of the future will want. Some R&D organizations will conduct their own
consumer but rarely market research. In too many companies, they get too little
practical guidance from marketing. (In most companies there is a tension between
marketing, which says to R&D, “Why can’t you make what I can sell?,” and
R&D, which says to marketing, “Why can’t you sell what I can make?”) While the
typical horizon of marketing organizations and traditional market research may be
up to 1 year, the time horizon of R&D can be as far as 10 years into the future.
Therefore R&D is turning to futuring as their long-term perspective on what tech-
nologies they should invest in and pursue.
Product Development. Both case histories above concerned futuring as the engine of
innovation in new product development. In the past, new product development
occurred primarily within R&D, but more recently new product development may
be a separate function. Sometimes it falls under marketing rather than R&D. Some
84 Marketing in the 21st Century and Beyond

organizations will even have an innovation group and process separate from R&D
and marketing. Whatever the structure, the question remains—what is the inspira-
tion of innovation? Thinking about the future of customers, markets, and competi-
tors provides an excellent avenue to stimulate innovation toward practical and
successful new products and services.
Strategic Marketing. Marketing organizations need to do long-term thinking just as
R&D groups must. Strategic marketing for the future addresses the issues of chang-
ing customers, shifting value propositions, and evolving market positioning of prod-
ucts and services. Skillful long-term marketing facilitates and reduces the costs of
short-term selling.
Thought Leadership. Thought leadership occurs when a company takes ideas to its cus-
tomers and shapes their very thinking. The object of thought leadership is mind
share, which in the future of virtual networks will be like the shelf space of the future.
It is the telling of a compelling story about the future to customers who are looking
for answers they themselves do not have. Particularly in business-to-business rela-
tionships, buyers often look to their suppliers and partners to come up with new
ideas for the future.

CONCLUSION
The purpose of this chapter was to explore the substance, methods, and appli-
cations of futuring as an emerging method for both companies and organizations
to estimate the emerging, unarticulated voices of customers when customers
themselves cannot say what they will want or buy in the future. “Customers”
may be literally consumers or they may be stakeholders and constituents. It is
important to remember that customers cannot always articulate what they will
want in the future. Futuring is a way to anticipate the unarticulated voice of
the customer based on various trends, including patterns of customer behavior.
These patterns turn out to be better predictors of the future than what customers
may say. In addition, futuring not only identifies potential new opportunities
with existing customers; it may likely foresee new customers and growth
opportunities.

NOTES
1. Thomas Goldbrunner, Richard Hauser, Georg List, and Steven Veldhoen, The
Four Dimensions of Intelligent Innovation: Winning the Race for Profitable Growth, Booz
Allen Hamilton, 2005, http://www.boozallen.com, 4.
2. William Strauss and Neil Howe, Generations: The History of America’s Future, 1584
to 2069 (New York: Morrow, 1991).
3. J. Walker Smith and Ann Clurman, Rocking the Ages: The Yankelovich Report on
Generational Marketing (New York: Harper Business, 1997).
 Futuring: Anticipating the Emerging Voice of the Customer 85

4. Gail Sheehy, Passages: Predictable Crises of Adult Life (New York: Dutton, 1976).
5. U.S. Census Bureau, Statistical Abstract of the United States: 2004–2005, 124th ed.
(Washington, DC: U.S. Government Printing Office, 2004), 24.
6. Stephen M. Millett and Edward J. Honton, A Manager’s Guide to Technology
Forecasting and Strategy Analysis Methods (Columbus, OH: Battelle Press, 1991).
7. Cathy McLain, Forum Offers Food Marketers Trends Snapshot, “The Hungry
Mind,” Quarterly Joint Publication of the Marketing Communicators Section of the
International Association of Culinary Professionals and the Food and Beverage Section
of the Public Relations Society of America (IACP and PRSA), 2nd quarter 2004, 4.
8. Theodore Caplow, Louis Hicks, and Ben J. Wattenberg, The First Measured
Century: An Illustrated Guide to Trends in America, 1900–2000 (Washington, DC: AEI
Press, 2001), 24–49.
9. Fernand Braudel, Civilization and Capitalism, 15th–18th Century, vol. 1, The
Structures of Everyday Life: The Limits of the Possible, trans. and rev. Sian Reynolds
(Berkeley: University of California Press, 1979/1992).
10. Strauss and Howe, Generations; Arthur M. Schlesinger Jr., The Cycles of American
History (Boston: Mariner Books, 1999).
11. J. C. Fisher and R. H. Pry, “A Simple Substitution Model of Technology
Change,” Technology Forecasting and Social Change 3 (1971): 75–88.
12. Millett and Honton, A Manager’s Guide, 43–61, 90.
13. Stephen M. Millett, “The Future of Scenarios: Challenges and Opportunities,”
Strategy & Leadership 31, no. 2 (2003): 16–24. Also see Liam Fahey and Robert M.
Randall, eds., Learning from the Future: Competitive Foresight Scenarios (New York:
Wiley, 1998).
14. See http://www.dr-futuring.com for more information about the Battelle
approach to scenario generation. Also see William R. Huss and Edward J. Honton,
“Scenario Planning—What Style Should You Use?,” Long Range Planning 20, no. 4
(1987): 21–29; Stephen M. Millett, “Futuring and Visioning: Complementary
Approaches to Strategic Decision Making,”Strategy & Leadership 34, no. 3 (2006): 43–50.
15. Much of this case history is based on Battelle lore passed down by word of mouth.
For Battelle’s version of the Xerox story, see Clyde E. Williams, Bridging the Gap: My
Contributions to the Growth of Industrial Research (Cincinnati, OH: Best Impression
Corp., 1976), 95–104; George A. Boehm and Alex Groner, Science in the Service of
Mankind: The Battelle Story (Columbus, OH: Battelle Press, 1981), 35–48.
 CHAPTER 7

HOW TO CLEAN UP WITH A START-UP:

TRICKS AND TIPS FROM ENTREPRENEURS
Robert Black

INTRODUCTION
You have come up with a smashing new labor-saving product for the home. You
want homemakers everywhere to run out and buy it; what do you do? Clean
Shower was introduced one bottle at a time. Samples were given to northern
Florida employees of Winn Dixie supermarkets and their family members to try
in their own homes. Company officials were lobbied until finally the store’s buyer
relented and agreed to allow the product on the shelves of the Jacksonville divi-
sion. The inventor-entrepreneur-manufacturer-salesman then visited most of the
120 stores personally to ensure the product was available as agreed.
Then the creativity began. Beauty parlors near the Winn Dixie locations were
targeted. Those beauty parlors were likely to contain local women who were careful
about their appearance and their home’s appearance. In the beauty parlor, they also
had time to talk while waiting or even while sitting in the chair. The product was
explained, some features were demonstrated, and then they received a free sample to
try at home. “If you like it, buy it at Winn Dixie. If they’re out, be sure to ask for more.”
The captive audiences were captivated. Clean Shower took off. The rest, as they
say, is history.

DEVELOPING PRODUCTS
Delivering new benefits or substantially improved benefits to the consumer
is a must with a start-up company. To break through the noise and clutter, the
offering must be outstanding in its own right. Me-too products will not work to
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 87

kick-start a company. It is important to have a proprietary position. This can be as

complex as securing patents or copyrights, registering trade names, or developing
secret formulas or processes. It can be as simple as staking out a location on a busy
street corner.
The most important proprietary position is the one in the mind of your cus-
tomer. You and you alone occupy that place, nurture it, and defend it. Volvo
established itself with a classic positioning on safety. Similarly, Rolls Royce laid
claim to ultimate luxury. Clorox defended itself as “bleach” at the risk of becom-
ing generic and being forced to share its position. As entrepreneurs, the first vital
task is to set a goal for the positioning you want to establish for your new product.
The rest of the introduction revolves around winning this spot and finding ways
to defend it against intrusions from others.
How do you know you can achieve this unique positioning? There are many
sources of statistics describing product launches, successes, and failures. It is
claimed that only one out of five new products succeeds and that half of
new products in the planning cycle are expected to generate less than $10 million
in annual sales.1 ACNielsen’s consumer goods research operation, BASES,
reported that in the year 2000, 30,000 new consumer brands were met with a
93 percent failure rate in the United States. The cost of these failures was put
at a conservative $20 billion estimate.2 Other sources cite somewhat different
numbers, but the conclusion is inescapable: launching a successful product is very
difficult.
One necessary but not sufficient requirement for success is that the innovation
fulfills a need in the market. Ambi-Pure is a toilet-cleaning product sold by Sarah
Lee. In its first year, sales grew astronomically. This said less about the product
than about the market. Many new toilet-cleaning products enjoy excellent initial
sales, then drop off. Customers continue to have a need for a better product in
this market and are willing to try newcomers. None has been established as the
dominant toilet cleaner.
In a classic product introduction, Crisco, the leading—almost sole—shorten-
ing available to homemakers was challenged by Spry. The introduction came with
the marketing muscle of Lever Brothers. Although the challenge seemed insur-
mountable, the introduction succeeded. This was due in part to the fact that the
market for shortening expanded as the fierce competition between Lever and
Procter and Gamble reminded consumers of their needs in this category.3
The needs do not have to be significant or radical. Addressing small but linger-
ing needs can lead to success as well. Take, for example, the fragrance of products
that are not designed to provide or enhance fragrance. This characteristic is easily
overlooked but can greatly influence purchase, use, reuse, and other desirable
responses. Observing behavior at the retail shelf, shoppers will select those prod-
ucts that stand out, read some of the label, and then smell the product. Even some
products in sealed metal cans are subjected to the smell test. Why? Consumers
88 Marketing in the 21st Century and Beyond

may be searching for indication of good products or merely trying to avoid bad
(spoiled) ones. Once the product is in the consumer’s hands, she is looking for
confirmation that she has made the right decision or to discover a reason to put
the product down and select another.
This rejection may not be the fault of the product at all, but due to some aspect
of the package, merchandising, and the like. Staying with our olfactory example, a
sealed and precooked canned ham may be rejected by a customer if the label’s
smell is reminiscent of a dead animal. (Some glues used to seal labels to containers
still are made from rendered animal flesh.) Inside the can the product is perfect,
but the marketing has been stymied by a label defect. This creates a secondary
need for label printing that does not harm the ability to sell the labeled product,
and might perhaps enhance the experience. A fragrance of cloves or other spice
associated with ham will reinforce the decision to buy. One might ask, “Who
cares what the label smells like?” The answer is: the consumer cares. The fragrance
should be consistent with or even enhance expectations of product performance.
A hammer’s handle should smell like wood rather than like the fish oil preserva-
tive that has been used to treat the wood.
Delivering the right fragrance at the right time to communicate the right mes-
sage may well be serving unmet needs. More attention is being paid now to the
concept of headspace in products. Headspace is the volume of gas in the container
or in the product that allows gasses to accumulate. The so-called new-car smell is
the most recognizable and most often noted headspace example. Similarly, purses,
makeup, chocolates, and other products have very familiar headspace aromas.
Often the headspace is not representative of the product but rather is a by-
product of production, packaging, or shipping. It takes time for the fragrance to
develop, and it may be marred by outside events. Even “good” fragrance experien-
ces may mask harmful chemicals (automobile headspace includes chemicals from
colorings and adhesives).
A start-up would do well by attending to the fragrances of the business. Seeing
that the aromas present an appealing mix with the product may move the customer
to purchase. A purse that smells richly of leather is more apt to be purchased than
one lacking this cue. Some leather preservatives, for example, contain formalde-
hyde, which would not offer customers as pleasant an experience. Research in psy-
chology is only now beginning to document the strong relative influence of smell
on memory and attitude. Entrepreneurs should keep this in mind in designing
products and packaging or even in selecting conducive retail outlets.

RESEARCHING THE NEEDS

How do we discover the needs? Traditional marketing research methods such
as focus groups, surveys, and in-depth interviews are obvious answers. The fra-
grance example above shows the power of programmed observation. Watching
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 89

the consumption process from the first signs of need recognition through and past
disposition may give insight into the choices, use patterns, and satisfaction with
products.
One useful observation tactic takes disposition directly into account. Garbology,
as the name suggests, is the study of garbage. There are many applications of this
approach, including the archaeological examination of ancient or modern trash
dumps. In a consumer setting, examining the garbage can tell us what has been con-
sumed or not consumed and in what condition. USAIR’s president had the airline’s
trash analyzed to better understand the customer preferences and satisfaction with
meal selection and preparation. He knew intuitively that too much waste suggested
poor choices by the dietary staff and used that to change menus and preparation
methods. This was before garbology had taken hold as a respected scientific
endeavor.4
Items do not have to end up in the trash to tell a story. Products left on the
shelf or, worse, purchased and never opened or used also indicate problems
detected by consumers. Apple’s iPod may have run its product life cycle already
or at least the growth stages. The market has slowed and people are using the tech-
nology less or not at all. As the mainstream entered the market, the innovators
and early adopters (the earliest groups to adopt an innovation) appear to be
turned off now that the product has become mainstream and boring. The effort
required to locate, save, and program music is no longer rewarded with unique-
ness and coolness. An effort to revitalize the market with video downloads of
movies may not be sufficient to rejuvenate the brand. It depends on how many
holiday-gifted iPods are returned or unopened because the market has moved
on to the next technology.5
Frank Perdue, of Perdue chicken fame, saw that consumers could not find cues
to quality in uncooked poultry so he created a market by creating new cues.
Rejecting convenience for taste, Perdue emphasized that his birds were fresh,
not frozen. Still requiring a cue by which consumers could judge the quality of
uncooked poultry, he settled on the use of marigold leaves in the feed. Among
the useful side effects of this nutrition decision was the fact that marigold leaves
contained a substance that would change the skin color of the chickens to various
shades of gold. This, then, becomes the immediate discriminatory variable in
chicken selection. Watching customers in the store now, they can be seen to select
chicken based on richness of color—as a surrogate for richness of taste or even
nutritional quality.6
Others observe customers as well. The Perdue chickens do enjoy a better diet
and better conditions, so the color marketing is not considered deceptive or dan-
gerous. Marketers who create false attributes or overstate the usefulness of features
may be in for trouble. Government interpretation of what is fair and appropriate
can vary. In its early days, Coca-Cola suffered from intervention by the courts and
the U.S. government. The product never contained cocaine, but adding caffeine
90 Marketing in the 21st Century and Beyond

prompted oversight and examination of consumers to see if they were being

harmed by this substance. Eventually, the product was given the green light and
no further attempts were made in the United States to intervene.7
A more recent beverage creation and introduction, Snapple, did not receive this
kind of government scrutiny. The producers introduced natural bottled drinks
using at the time unorthodox communication methods. The product was targeted
to specific niches of customers identified by observing who was dissatisfied with
what was available in the market.
Clean Shower was also designed for niche markets. The product and the
approach were modified as feedback was gained by interviews and observation
of the early trial markets. This research was tricky though. Many early triers were
friends and family who may not have given the most realistic feedback versus
offering “support from the family.”
The Clean Shower customers being targeted were women more than 25 years
old with a household income above $40,000 and below $200,000. Working
women were a high priority. With many consumer goods, younger women are
the more logical target. Observation of usage and discussion with customers con-
vinced Clean Shower that they needed a different group. Women under 25 were
not focused on cleaning techniques. Older women usually select their brand loy-
alties and are often not targeted, but this category was new and loyalties had not
yet formed. So the age range was skewed upward. The narrow band of income
may look odd, but there are reasons for this too. Below $40,000 the cost of
the product seemed high and perhaps prohibitive. Those in the $200,000þ
income groups often had maids to handle the cleaning duties and were unaware
of the benefits offered by the product. Although men requested clean showers,
they were seldom the ones doing the work so they were seldom targets for the
company. Finally, it was found through observation that potential customers
spent considerable time in the car commuting. This opened the door to some of
the novel advertising techniques discussed below.

START-UPS AND NEW PRODUCT INTRODUCTIONS

A start-up has different characteristics than a more mature company. By defini-
tion, a start-up enters the world as naked as a baby—no products, no money, and
no customers. The trick is to find a way to generate positive cash flow with initial
successes. Once that has been accomplished, it is necessary to analyze what went
right to develop a model that can then be replicated.
McDonald’s started from just one location. Ray Kroc was selling milkshake
mixers when he stumbled on a customer who wanted enough to make 48 milk-
shakes simultaneously. The smell of success was unmistakable, so Kroc went per-
sonally to investigate the techniques and processes being used. After a relatively
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 91

short time, Kroc bought out the McDonald brothers and created a franchise sys-
tem that ensured adequate cash flows and controls over quality and service.
McDonald’s continues today in part by continuing to innovate. A successful
product line and operating plan from the 1960s cannot survive in the 21st cen-
tury, but a successful philosophy and value system can. McDonald’s has main-
tained close contact with their customers and made changes along the way. Not
everything works. Doing things that look dumb in retrospect are inevitable. The
important thing is to do inexpensive dumb things (and learn from them). When
something does work, understand how it works and replicate it.

NEW PRODUCT MANAGEMENT

One of the great success stories of product development happened almost by
accident but has been replicated many times over. Coca-Cola began as a syrup
for headaches and indigestion and was only incidentally mixed with carbonated
water to become a beverage. The plans for bottling and distribution certainly were
no accident, however.
Also not an accident was the selection of the name of the product. Coca-Cola
was selected to be descriptive of the product and to be attractive in advertise-
ments. The look of the name and the type style have been duplicated worldwide.
Competitors and copycats still abound, much as other products with similar
names were offered in the early 1900s: Candy Cola, Hoca-Nola, Kel Kola, and
Kaw-Kala.8
Product naming itself is part science, part art, mixed with a bit of luck and a
dash of magic. The name of the product and the name of the company should
say what you do and why consumers should buy. The following are examples of
product names that give a mental image and will attract the target customer:
• Tony’s Deep-Dish Pizza
• Biker Pub and Grub
• Family Friendly Video
• Dermal Science Anti Aging Face Cream
• Nickermans Menswear
• Best Way Trucking
These names do part of the selling. Everyone has their own preconceived men-
tal images associated with words and phrases. The start-up needs to take advan-
tage of these images and use their name to send a message. Even if the founder’s
name is Edward Smith, a pizza shop needs an Italian name. People who ride
motorcycles are shunned in some places and may think of themselves as part of
a clique. A name like Biker Pub and Grub would attract bikers and probably repel
92 Marketing in the 21st Century and Beyond

many in search of a family-friendly or quiet dining establishment. The name itself

helps to define the focus of the business and identify the niche market targeted.
Nickermans Menswear is the actual name of a tailor shop in Bangkok,
Thailand. The owner is an East Indian. When asked where the name originated,
the owner said that he thought a Jewish name would be more likely to attract
European and American customers who had had good experiences with Jewish
tailors in Europe and the United States. A nearby tailor shop that is also owned
by an East Indian is called Raja’s. We leave it to the reader to decide which shop
is more likely to attract walk-in business from European and American men.
The concept works in the business-to-business sector as well. When placing
purchase orders, purchasers sometimes specify the shipping company desired.
Usually, the purchase order form has a place in which to indicate the transporta-
tion company. It was usual practice to select “best way” on the form when it
was left to the supplier’s discretion to pick the shipping company. By naming a
trucking company Best Way, the founders took advantage of this custom.
Stories abound that similar strategies were used in the days when telephone
directory assistance was the primary method for long-distance shopping.
Operators asked for the number for a local florist would find themselves giving
the number for A Local Florist. Clever and innovative naming can reduce some
of the need for media advertising.
A name is also a promise. It gives the consumer expectations. What is delivered
must be congruent with what is expected. Miss Evelyn’s Tea Shoppe needs china,
crystal, and white lace tablecloths. Biker Pub and Grub needs Formica tabletops
and Harley-Davidson décor. Potential customers would do an about-face at the
front door of Miss Evelyn’s if they saw Harley-Davidson décor in the seating area.
A name can also be limiting. Wile E. Coyote (the Roadrunner’s foe in so many
cartoons) had found that the Acme Company could supply him with many differ-
ent products. Conversely, he is unlikely to try Beautyrest for explosives. Once a
company name becomes associated with a product or line of products, it can cre-
ate a negative attribution for incongruous products. Beautyrest has become linked
with mattresses. Beautyrest ice cream will not work. Similarly, Sealtest mattresses
might be a bad choice.
Some companies are, however, able to use brand names for their products that
unlink the corporate name from the brand or product line. Sara Lee is a company
that markets shoe polish along with their apple pies. The shoe polish is sold under
the Kiwi brand, and the pies are sold proudly sporting the corporate name.
Names that are hard to pronounce or are spelled incorrectly to be clever can
cause dissonance and may create consumer avoidance. Consumers do not want
to be made to feel inadequate at not being able to pronounce or spell a name,
and it makes it more difficult to establish a place in customers’ memories. Some
examples of difficult names might include Kwick Schop, Abdjinger, and
La Pountinifique. As firms go global they increasingly seek to identify names that
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 93

will be memorable, pronounceable, nonoffensive, and perhaps not restrictive in

whatever language they are doing business. The lists of candidate names tend to
run short as more firms seek names they can use.
McDonald’s may be viewed as a nondescriptive name. The brothers who ran
the original hamburger stand that grabbed Ray Kroc’s attention were named
McDonald and the name seemed adequate for their needs. Perhaps some of the
expansion came about because the franchises opened with signs that read
McDonalds 10-cent Hamburgers in a time when 25-cent hamburgers might have
been considered the norm. Apparently the neutral name did not hurt the fran-
chise system. Some businesses with good names have failed; others with names
that do not convey value succeed. A good name choice does not guarantee success,
but it may be considered to be of particular advantage for a start-up.
Start-up companies require innovative approaches to marketing. Large, mature
companies like Procter and Gamble will spend years and millions of dollars devel-
oping a new product and researching the market. They will then launch a product
with a media budget of $20 million plus while simultaneously sending out
representatives to retail stores to ensure shelf space. The stores feel the market’s
pull pressure from consumers coming in to ask for the product in response to
the advertisement. As a contrast, Clean Shower was launched with a $70,000
budget that included manufacturing, marketing, and overhead. Marketing was
personal, the inventor selling one-on-one to prospects in informal surroundings.
Store employees pulled the product into the stores, and consumers drew reorders.
Naturally, the different types of organizations have different expectations of the
results they will achieve with these programs. In either case, results should be
measured against objectives. One formula for setting objectives is the SMART
model, which sets the dimensions of effective goals. Objectives need to be
Specific, Measurable, Attainable, Relevant, and Time bound. This enables even
the least organized entrepreneurs to establish a test of success or failure versus
the standard that was set prior to launch.9
Traditional advertising is becoming less and less effective. The public is satu-
rated with advertisements and turns them off mentally. New technology enables
television viewers to skip the commercials or fast-forward through them. In an
effort to grab attention, producers of advertising add comedy, sex, and special
effects. Often these are the only parts of the commercial that are remembered.
In the case of some of the most talked about and memorable Super Bowl or
World Cup commercials, viewers often fail to accurately recall the brand adver-
tised. One of the reasons is that the attention is on the comedy, sex, and special
effects rather than on the product.
Another reason for the limited effectiveness of Super Bowl advertising is that
one exposure has little impact on purchase. The objective is to create sufficient
motivation within the consumer to drive purchase. Big companies use this in
scheduling media. The classic metric used to choose and measure media
94 Marketing in the 21st Century and Beyond

campaigns is the reach (number of prospects seeing the ad) versus frequency (aver-
age number of times the ad is seen during a purchase cycle) trade-off. One expo-
sure of an ad to 100,000 people will not drive as many purchases as will 10
exposures of that same ad to 10,000 audience members. In an introductory ad
campaign, you have to reach beyond a minimal level of exposures and ensure that
the target audience views the ad at least enough times to increase the probability
of purchase. It is also possible to have too many advertisements. The trick is to
select a frequency high enough to have the desired effect but not so high that
the final exposures are wasted.
There are many ways to determine how much frequency is enough. Some large
companies use the “rule of nine” as a guideline for new product introductions. If
you are in their target audience, you can expect to hear the message more than
nine times. The audience is selected based on the media they see and hear and
how often the media overlap (the same people hear the same message in multiple
places). The rule of nine is based on an average product, an average media presen-
tation, and an average susceptible consumer. Therefore this is a rule that a start-up
must break. For a start-up, the product must be better at delivering benefits, the
media must be better at motivating the consumer to purchase, and the message
must reach the most susceptible audience.
One way to excel at reach is through creative use of media. Radio is an oldie but
a goodie. Consumers turn off advertisements on radio. They do this by pushing
the next button on the car radio or simply by mentally turning them off.
Ratings produced by independent companies measure the number of radios
tuned to a particular station. Listening is another story. To be effective, the poten-
tial consumer must be tuned to the station and listening actively. This author
changes the station at the first shout of a car advertisement.
To overcome this radio problem, only personality-driven programs are effec-
tive. Talk radio is good because the audience is tuning in to listen actively.
Personality music can be good if the patter between songs keeps the audience lis-
tening actively. As soon as the consumer realizes the program has shifted to an
advertisement, it is turned off physically or mentally. Early Clean Shower radio
commercials were simply the radio personalities relating their true experiences
with the product. The personality was given the product, allowed to use it, and
asked to tell his or her story about the experience. These had sufficient impact
such that in many cases one exposure was sufficient to obtain purchase by suscep-
tible consumers.
These outside-the-box campaigns are hard to manage. An advertising agency
on a 15 percent commission could not do this and remain profitable. One of
the most economical radio purchases at Clean Shower was a Scandinavian music
program in the Pacific Northwest. The audience actively listened to the host
and when he said, “Buy Clean Shower,” the Scandinavians purchased Clean
Shower.
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 95

Another good example of successful radio is Snapple. Traveling salespeople use

convenience stores to get snacks, use the comfort facilities, and get something to
drink. Snapple was introduced with a wide mouth so that it was possible to drink
out of the bottle while driving and reclose it between stops. Canned carbonated
beverages were not reclosable and had small openings. Recognizing that music lis-
tening loses its appeal after hours in the car, Snapple ran commercials on Rush
Limbaugh’s program. Salespeople in his audience listened, asked for Snapple,
and looked for a variety of Snapple products. This Limbaugh audience, sales-
people in cars, sought out the wide-mouth container with the reclosable top in
the noncarbonated product niche and made Snapple a success.
When a radio campaign is done properly, the results can be spectacular. On the
other hand, giving radio personalities the freedom to tell their own story can lead
them to make promises that the start-up company cannot fulfill. Undoing the
problems can consume large amounts of time and money that are not readily
available to start-ups.

WORD OF MOUTH
Radio personalities speaking on behalf of a product are spokespersons. Your
neighbor telling you about a great new product is engaging in word-of-mouth
communication. Word of mouth can be particularly helpful to the start-up. The
product must be revolutionary and not an incremental improvement. Word of
mouth is best with a product in a niche market. For example, an improvement
in racing sail development would spread quickly through the sailboat racing com-
munity. If it is shiny, functional, and fits on a Harley Davidson, word of mouth
will work in that community.
In the youth market, Homestar Runner is an entrepreneur with a series of
comic figures. The company sells T-shirts, hats, posters, CDs, and other branded
items through their website. The consumers are 9-, 10-, and 11-year-old children.
The only marketing is the website itself and word of mouth among children. The
target audience returns frequently to the website, and events on the site become a
topic of conversation within that age group. The markup on the products is sub-
stantial, and the media budget is zero.
Giving Clean Shower away in beauty parlors in Winn-Dixie shopping centers
was completely outside of any conventional marketing approach, yet generated
considerable discussion about the labor-saving product. The idea started by think-
ing about people who would care about appearances, shower regularly, have suffi-
cient disposable income, and a wish for more free time. The company found this
group in beauty parlors, and they told their friends and family. It was successful,
but beauty parlors no longer allow access to their customers, so this word-of-
mouth experiment cannot be repeated.
96 Marketing in the 21st Century and Beyond

Steve Marks and Harvey Nelsen founded Main Street Gourmet, a producer of
muffins and muffin and cookie batter. Harvey wanted a broader distribution and
to get the muffins into McDonald’s restaurants. He arranged to play in a charity
golf outing with the owner of a major franchise group and then got him to agree
to a one-month trial of his muffins. To get business started, Harvey encouraged
all of his friends to purchase the muffins—even handing out money for them to
do so. This got people to try the muffins, share them with their friends, and talk
about the experience. People liked the muffins, and as a result, he was able to gen-
erate sales that impressed the franchise owners enough that they expanded the
product line.
Barry Easterling is another creator/entrepreneur. He designed a better surgical
table that was attractive to surgeons. Prototypes were produced, and physician
friends were recruited to try the product and get it placed in hospitals. Once
placed and tried, the surgeons discussed the improvement among themselves
and pulled more tables through distribution channels through their word of
mouth.
Jerry Wilson wrote the book on Word-of-Mouth Marketing, literally.10 He
describes a word-of-mouth marketing blitz as a way to orchestrate discussions in
launching a product or start-up company. The essential element is to keep it simple
and systematic, streamline everything, and orient everything to action. Wilson
describes the steps to creating communication through word-of-mouth networks
by creating teams to work through planned tactics to achieve specific quantified
objectives. The book itself was marketed successfully through these channels.
Word of mouth works both ways. One bad customer experience can be spread
to large groups that will not patronize a product. Clean Shower found that nega-
tive word of mouth could be reversed. Customers who did not use the product
correctly reported problems to friends and neighbors. When these customers
called to accuse the company of fraud and threaten to complain to the Better
Business Bureau, opportunities arose. The person who initially answered the
phone was able to identify the problems and reinstruct in the use of the product.
This turned the complainers into loyal customers, and they began to spread the
word on how well it worked. The telephone specialist began training the customer
service staff that was added to the company, and she later became the vice
president of operations.

OTHER PROMOTION
The word-of-mouth and sampling strategy of Clean Shower as a start-up some-
what mirrors that used by Lever Brothers to introduce Spry shortening. To intro-
duce the product, one-pound sample cans, recipe books, and coupons were sent
to one-third of U.S. households. This was supplemented with a mobile cooking
school, model kitchen, and eventually a cooking program on the radio. With over
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 97

4 million mid-1930s dollars spent on the campaign, the product became very
popular and put a significant dent in Crisco’s market. Of course, Spry is gone
now and Crisco remains.11
True start-ups have it a little more difficult. A rule of thumb in the grocery
business is that 60 percent of buying decisions are made at the shelf. An easy-to-
read label that describes the benefits will go a long way. A recent example is
Cleanest Dishwasher. The package has the product name in bold type and adds,
“Cleans the machine that cleans the dishes.” The need fulfillment is clear—who
could resist the special value two-pack?
Color is important as well. If it is a consumer product, it should stand out on
the shelf. If all of the competitors are dark blue, your label should be red and white.
It is hard to go wrong with light and bright. Different and appealing are an absolute
must. In the case of Cleanest Dishwasher, the aisle where it is likely to be located
(dish and laundry detergents) has product labels that are dark with greens and blues.
As a contrast, the product’s package is white with a bright yellow label.
Labels and signs tend to collect text. The name, the logo, multiple messages,
consumer suggestions, company name, admonitions, address, telephone number,
and the like are all included. Remember—less is more. The rule of thumb is that a
highway billboard should contain no more than seven words, two of which
should be “This Exit.” The front label on a start-up product is a billboard. It
has to work as quickly as the highway sign. Cleanest Dishwasher has 14 items
including the logo. Even this is pushing the envelope. The back label can contain
the details. This too should be concise enough to be read quickly. Details like the
company name and address can be in smaller print. The best billboard this author
has seen is a McDonald’s M followed by “Playland Next Exit.” One letter and three
words delivered a complete message. Consumers who do not like McDonald’s are
not going to patronize in any case. Consumers who like McDonald’s and have chil-
dren are very likely to stop. Children in the car may even lobby their parents to stop
(to put it mildly!).
Beyond the label, the rest of the package has to appeal to the customer as well.
A start-up needs to have a good “feel” to it to make the long trek from the shelf to
the cart. Fine wines are now being introduced with screw caps in place of the tra-
ditional, but awkward and messy, corks—much to the delight of this author.
Purchasing the product in its package should be pleasant. In the late 1960s and
early 1970s, Hanes created a hosiery product that was meant to break into a
new distribution channel. The product itself, pantyhose, was improved so that
there was better fit with fewer individual sizes. The channel selected was super-
market distribution. The unique packaging, a large plastic egg, contributed to
the visibility and memorability of the brand. It was easy for retailers to manage
(and Hanes did much of the work). The package also felt good.12
Making products easy for the retailer is one way to break in. Start-up compa-
nies are tempted to try to push their product through the supply chain. Pushing
98 Marketing in the 21st Century and Beyond

is marketing to agents and distributors who are given an incentive to push the
products through to retail outlets. These in turn are given an incentive to push
the product to the customer. In each case, the next layer has other interests and
usually has more pressing present business. This has been described as pushing a
chain, and is about as effective as pushing an anchor chain. The alternative is
the pull strategy described earlier in which, for example, Clean Shower prospects
were encouraged to ask Winn-Dixie retailers to stock the product. The best alter-
native is to design a product and package that are good for the retailer then get the
consumers to pull it into the store.
Hanes not only made the package attractive, they took the handling duties
away from the retailer. The rack and product were delivered directly to each store,
so the retailers’ storage and delivery costs were zero. Afterward, restocking and
other maintenance were performed by Hanes’s “route girls.” These women, in
distinctive uniforms, oversaw the displays and gathered intelligence daily in the
field. A start-up may offer to do this sort of consignment placement on much
smaller scales to get a product established.
Establishing a product sometimes comes down to timing. If the three most
important things in real estate are location, location, location, the three most
important in business start-ups are timing, timing, timing. The Spry shortening
product mentioned previously was developed and ready five years before it was
introduced. The launch of the product was held up while the economy recovered
enough that a new item might have been better received. Start-ups seldom have
the luxury of waiting that long, but some entrepreneurs may choose not to make
the shift until the timing is right.

CASE HISTORY
How did Clean Shower come to market anyway?
Fair is fair, so in return for help in the manufacturing company the author
was helping around the house. One chore was cleaning the shower. After one
cleaning, it was time for a trip to the store in search of a better product. Finding
nothing, the author returned to the workbench and developed Clean Shower.
After trying it and discovering how well the product worked, friends, neigh-
bors, and employees were encouraged to test it as well. One use cycle later the
people who were trying it came back and demanded more: “I can’t go back to
cleaning the shower—you have to make me some more.” So we applied for a pat-
ent, and developed a label, bottle, sprayer, boxes, and a manufacturer to put it all
together. The first 4,000 units were produced and stored before getting place-
ment in a local convenience store.
A local marketing company had a public relations person who was able to get
the story on the local news. The news show drove customers into the convenience
 How to Clean Up with a Start-Up: Tricks and Tips from Entrepreneurs 99

stores. Samples were then given to employees at the local stores in the Winn-Dixie
supermarket chain. This created more local buzz. As mentioned above, it was at
this point that sampling occurred in the beauty parlors that were often in the same
plazas as the Winn-Dixie stores.
Within four weeks, Clean Shower became the number one seller on the house-
hold cleaner aisle. Additional television appearances and newspaper articles caused
additional growth. With the initial success, investors were interested and funding
became available. Then a Boston media buyer suggested talk radio as an advertis-
ing vehicle. The initial radio was a morning talk show featuring a liberal and a
conservative. The commercials were simply the two personalities discussing their
experiences with the product.
In less than four weeks, Clean Shower became the number one selling shower
cleaner in the Boston area. The system of having a radio personality use the prod-
uct and describing their life-changing experience was then replicated throughout
the country. As the product rolled out and became available in new areas, new
media vehicles were phased in. Clean Shower grew 20.6 percent per month for
34 months with a peak of over $10 million per month. (Author’s note: This brief
history does not include the stumbles, hiccoughs, and just plain dumb things that
also happened along the way. Those come with the territory too!)

CONCLUSION
A start-up is a difficult, frustrating, time-intensive, labor-intensive, and fun enter-
prise. It also requires marketing techniques different from those used by established
firms. Some of the ones that have been mentioned include the following:
• Me-too products do not launch start-up companies.
• Create a name that is easy to understand, pronounce, and spell, and that describes the
company.
• Color should add to the message and not reduce legibility.
• Fragrance, sound, and feel of the package count.
• Word of mouth and public relations are low cost and high impact.
• You have to know your consumer and what makes your target market susceptible to
your offering.

NOTES
1. Judann Pollack, “New Products, Same Old Mistakes,” Advertising Age 67, no. 41
(October 7, 1996).
2. Mark Dominiak, “Avoid New Product Release Pitfalls,” Television Week 24, no. 6
(February 7, 2005).
100 Marketing in the 21st Century and Beyond

3. Robert F. Hartley, Marketing Successes, 2nd ed. (New York: Wiley, 1990).
4. Jerry R. Wilson, Word-of-Mouth Marketing (New York: Wiley 1994).
5. David Smith, “Why the iPod Is Losing Its Cool,” The Observer, September 10, 2006.
6. Hartley, Marketing Successes.
7. Ibid.
8. Ibid.
9. Wilson, Word-of-Mouth Marketing.
10. Ibid.
11. Hartley, Marketing Successes.
12. Ibid.
 CHAPTER 8

HOW TO USE SOCIAL MEDIA:

FOSTERING CONNECTIONS IN A VIRTUAL
MARKETPLACE
Gretchen M. Keillor

WHAT IS SOCIAL MEDIA, AND WHY SHOULD I USE IT?

People want to be connected. We are social beings. We want others to know us,
and we want to know others. You can see it everywhere: in the way a man intro-
duces his wife at a party, in the handshake and hug when two friends greet, in the
delight of a customer greeted by name.
For most of humanity’s history, these connections have occurred in physical,
tangible spaces. They have occurred in villages and towns: women chatting in
the marketplace, men gathering in the pub for a football game, children playing
together in neighborhood parks. Traditionally, our community interactions exist
in a physical space.
But in the last few years this has all changed. Now we have a virtual arena in
which to commune. We have developed technology that enables us to connect
from miles apart, in more intimate ways than ever before. Grandparents in
Ohio can video chat with their grandchildren in Colorado, someone can snap a
photo and instantly show it to a friend across the ocean, and we no longer have
to wait for the postal service to deliver important news.
Put very simply, that is what social media is about: connecting people. Whether
it is a shared laugh over a silly video or asking for a recipe just because someone
took a photo of the meal they made, it is about interacting together. Not only
does social media enable people to connect to each other (grandparents to
102 Marketing in the 21st Century and Beyond

grandchildren), but it also enables people to connect to the places they go and,
most importantly for us, the businesses they buy from.
Social media for business, executed well, capitalizes on this essential facet: the
connection between you and your customers. There are virtual venues in exis-
tence that enable you to reach your customers on a very personal level, and if
you are smart, you will use them in the way they were designed to be used—
namely, to foster relationships.
This is where many businesses go wrong. They see Facebook as merely a place
to display their new ad campaign, YouTube as a place for their latest commercial,
or Twitter as an opportunity to blast their special offers. Some of these more tradi-
tional activities are great to include in your social media strategy, but if that is all
you do, you will come off as impersonal and far from genuine, and that is not
what your customers want.
For your business, think of social media like a virtual marketplace. People mill
around, inspecting the wares on each stand. They scold their children, chat with
friends, and carefully pack their bags with purchases. You sell things, of course,
and your customers buy, but it is much more than that. That woman with the
red hat wants you to know her name and her favorite drink. You want to have a
conversation with the man who plays piano, even if your business has nothing
to do with pianos, just because you play piano and you know he does too. Or
maybe the little girl over there wants to show you her new shoes. Of course these
exact conversations will not necessarily happen via social media with your busi-
ness, but that is not the point. It is the mentality of making connections, not sim-
ply selling, that is important.
There are two main advantages to using social media. First, if you execute prop-
erly with this connective mind-set, you will end up with a base of very loyal, con-
nected, returning customers for your business. Ideally, these loyal customers will
also recommend your business and advocate for you in their own community
circles. Second, social media is incredibly cost-effective; many of the channels that
we will discuss are completely free to at least get started with, and even when you
reach the point of paying for promotions, it is still much less expensive than tradi-
tional advertising and promotion.
More strongly connected and loyal customers for just a fraction of your market-
ing budget? Let’s go!

KNOW YOUR BUSINESS LANDSCAPE: YOUR CUSTOMERS,

YOUR COMMUNITY, AND YOURSELF
Before we can even talk about the types of social media or how to use them,
you need to be very familiar with the three players involved: your customers, your
community, and yourself. Because social media is all about making connections,
knowing who you are and who you will be making connections with (or who
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 103

you want to be making connections with) is paramount. You should already be

intimate with these players from your business plan or overall marketing strat-
egy, so it is just a matter of applying that knowledge to the venue of social
media.
Social media is not an end in itself. It is just a venue that enables you to interact
with your customers and your community, and it is up to you to choose how you
will do so. Knowing your business landscape will help you to do this; it will shape
a defining structure for your use of social media. It will empower you to choose
which social media channels to use (i.e., YouTube or Twitter?), how often to
use them (three times a day or three times a week?), and what kinds of content,
tone, and imagery to use too.
First, know your customers, both your current customers and the kinds of cus-
tomers that you want to have. Basic demographics are useful here. How old are
they? Are they male or female? How much money do they make? What is their
education level? Where do they live? What do they care about? Think about your
ideal customer.
For example, I worked with a fine-dining restaurant to tackle this question. The
restaurant was known for its locally sourced, elaborate culinary creations, as well
as for its award-winning wine and beer selection. They also featured local artists,
with new paintings on the walls each month and a new band in the bar area. As
a result, their customers were mostly upper-middle-class, well-educated creatives
who wanted to enjoy a hand-crafted cocktail or five-course meal while at the same
time supporting their local community.
The next step is to think about your customers and social media. How do they
use social media? How often? Which channels? If you do not have the time or re-
sources to extensively research this (i.e., focus groups and data tables), then simply
ask around. Find that one customer of yours who fulfills most of the items on
your “ideal customer” checklist, and ask them if they have a Twitter account or
if they know what Instagram is. And do not forget to consider, too: what do your
customers want to hear from you? Information about exclusive deals, upcoming
events, general information on a topic, or something else altogether?
Returning to our example of the restaurant, we discovered that a surprising
number of their customers used Twitter on a daily basis, and so part of our social
media strategy was to go where they already were—on Twitter, daily. In terms of
content, many of them were interested in experiencing and educating themselves
about craft microbrews, so we kept them updated whenever a new beer of note
went on tap, and we also linked to interesting articles that related to craft beer.
Their customers were also interested in supporting local artists, as I mentioned
above, and so we posted about upcoming bands and artist openings as well. By
knowing its customers, this restaurant was able to speak directly to what they
cared about on a personal level, and as a result received much more interaction,
both online and in-store.
104 Marketing in the 21st Century and Beyond

The second aspect of knowing your social media players is to know your com-
munity. Because social media is about making personal connections, it is espe-
cially important to remember that your business does not exist in a vacuum.
There are two main advantages to knowing your community and interacting
with it. First, if your customers see you supporting other businesses that they also
like, they will feel even better about supporting you because you “get it,” because
you understand what they are about. Second, your customers want to know that
you are not entirely self-centered. We will talk more about this later, but in this
age, a company that is only self-interested will not get far. If your customers see
you supporting something besides yourself, they will feel even better about sup-
porting you.
So you have neighbors, friends with mutual interests, an overall community
that you are a part of, and your customers want to see that you know that.
What does your community look like? And what kind of culture do you want
to contribute to, connect with, or be associated with?
Think about, say, a deli in a college town. Their community is the stand at the
farmers market where they buy produce each week, the tattoo shop next door
whose employees order to-go every night, the students who work for them, and
the music shop around the corner who shares a parking lot with them. These
are all opportunities for the deli to branch out and make connections. Perhaps
the farmers market stand would like to feature a few of the deli sandwiches made
with their produce next weekend, or the music shop would want to host an out-
door concert that the deli caters.
These are huge opportunities to share customers and participate in mutual pro-
motion. Look for potential mutual partners—not competition, but businesses
that you can come alongside of and work together with for mutual benefit. It
helps to think about where else your ideal customers go. Are they college students
who visit delis and music shops and tattoo parlors? Or, in the case of the restau-
rant I mentioned before, are they educated middle-aged creatives who enjoy art
galleries and high-fashion retail stores as well as craft beer?
Once you have an idea of your community and opportunities for mutual part-
ners, remember that social media enables these connections to deepen. Social
media is more personal and connective than any other form of marketing, so
when you interact with a mutual partner through social media, you engage their
customers as well as your own in a very personal way, and that is great. Go ahead
and “like” the music shop on Facebook, follow that tattoo shop on Twitter, tag
the farmers market stand in a photo of a sandwich. And then go further: retweet
a photo of a beautiful tattoo from the tattoo shop, share the music shop’s event
to your own Facebook fans, publicly thank the farmers market stand for growing
such great produce. These businesses will notice, and they will return the favor by
promoting you as well, which means that you will be exposed to all of their fans
and followers too. It is not a bad trade-off. It creates goodwill among your
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 105

neighbors, it gives you major brownie points with customers for “getting it” and
not being selfish about your business, and of course it broadens your exposure.
The final brick in the foundation is knowing yourself. You are speaking to your
customers’ wants and interacting with your community, but knowledge of your
company’s identity will guide how you express yourself in these interactions, in
terms of tone, imagery, and content.
If you have not already defined this in your business plan or marketing strategy,
one of my favorite ways to nail this down is to choose a celebrity that best fits how
you want to be perceived. In the case of the fine-dining restaurant I mentioned,
they wanted to be perceived as classy, confident, and sharp, but with a playful side
to keep their customers feeling at ease. So we chose George Clooney. This helped
to inform the tone of the copy we used on their new website, the sleek design for
their menus, and even how servers interacted with tables. In the same way, define
a personality (or celebrity) that you want to emulate and make sure to adhere to
that personality each time you use social media.
Now that you have the foundation of knowledge of your customers, your com-
munity, and yourself, we can look more directly at social media itself.

DEFINE YOUR GOALS FOR SOCIAL MEDIA, AND MAKE

THEM MEASURABLE
Social media is a big field. It is anomalous and ever-changing. There is an app
for just about everything, and there are constantly new services and websites tak-
ing off that enable people to connect to each other in new ways. It can feel a bit
like going down the rabbit hole when you begin; there is always something more
that you could be doing to increase your online presence. That is why it is impor-
tant to have clearly defined goals for what you want to accomplish with social
media—goals laid out both in abstract idea-based format and in tangible, measur-
able numbers.
There are two basic ways to grow your business: breadth and depth. If you are
most interested in simply gaining more customers, your goal is breadth. If you are
most interested in deepening the relationships you have with current customers to
ensure that they keep coming back, your goal is depth. Ideally, of course, your
business will pursue both of these goals simultaneously. Because of the sheer vast-
ness of social media options, though, choosing just one direction in which to
work will help focus your efforts.
In terms of social media, increasing your business’s breadth will basically be
gaining more fans (more followers on Twitter, more “likes” on Facebook, more
subscribers to your Tumblr, etc.). Luckily, this is a fairly easy goal to measure,
because generally the numbers are right there in front of you, and all you have
to do is choose a goal (i.e., we’re going to increase the number of our Facebook
likes from 500 to 750 by August 1st). The challenging part about increasing your
106 Marketing in the 21st Century and Beyond

business breadth, obviously, is to actually reach more people. There are a couple
of ways to accomplish this.
First, make sure to advertise the fact that you are involved in social media. This
might seem obvious, but it is often overlooked. Add a Facebook icon to your busi-
ness cards, stick a “Follow us on Twitter!” sign in your front window, and encour-
age customers to check in at your store with Foursquare.
Second, ingratiate yourself into the existing online community. Like we dis-
cussed in the previous section, it is important to acknowledge and interact with
your neighbors online. After you set up your Twitter account, for example, spend
a good couple of hours finding people or businesses to follow based on your
existing community, as well as the type of culture that you want to be affiliated
with. Do this with all of your social media accounts, too, not just Twitter.
When a nonprofit I worked with delved into social media, we did exactly that.
Since the nonprofit was focused on providing education and work opportunities
to women around the globe, on our Twitter account we followed international
nonprofits like UNICEF and Kiva, as well as women-focused organizations like
Women for Women International and Vital Voices. But we also followed Equal
Exchange Fair Trade company, because we believed in fair work opportunities
for everyone. And we followed ArtPrize, because we believed in supporting local
creativity. And so on. Not only did we follow these organizations on Twitter,
but we interacted with them, too. We retweeted interesting posts of theirs, asked
them questions, and encouraged them when they announced good news. They
responded by following us back or retweeting interesting posts of ours, and as a
result, we gained more followers.
My final suggestion to increase your social media breadth is to create exclusive
content—that is, content that is accessible only to your fans and followers. While
this is not exactly possible to do with every social media channel, do it where you
can. Some businesses offer special discounts to customers who check in at their
business on Foursquare, for example. Or some music bands, upon releasing a
new song on Facebook, will make it accessible only to fans who have “liked” their
page. Exclusive content gives customers a tangible reason to follow you, aside
from just being supportive of your business.
Increasing the depth of your customer base, when it comes to social media,
means coaxing your current followers and fans to interact with you. By stepping
up the level of your interaction, your goal here is to create long-lasting relation-
ships and loyal, repeating customers, aka “regulars.”
This is more difficult to measure effectively, though most social media channels
have built-in analytics that can help you to grasp how much interaction you are
receiving. If not, you can make use of third-party programs to help track this.
(Hootsuite is a particularly effective social media management system, for more
reasons than just their tracking capabilities.) If you do not use an integrated
third-party system, since each built-in analytics system is slightly different, you
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 107

may have to define different goals for each social media platform. For example, you
might measure Twitter interaction by the number of retweets you have, Facebook
interaction by the number of people “talking about” you, and YouTube interaction
by the number of comments on your videos in any given time period. It just
depends how you most want your customers to interact with you.
While measuring can be tricky, executing for depth luckily comes a bit easier
(i.e., feels less like pulling teeth) than trying to broaden your customer base. It
basically comes down to engaging your audience by posting relevant content that
they get excited about (remember “know your customers”?), by asking questions,
by coming off as engaged and approachable yourself (remember “know your com-
munity”?), and more. We will discuss more specific ideas for content in the last
section of this chapter.
Now that you have an idea of your goals for social media, let’s look at the vari-
ous channels you can use to accomplish those.

CHOOSE YOUR CHANNELS AND INTEGRATE THEM

The early days of simple social media profiles have evolved into a very complex
and diversified field. There is now a separate platform for almost every feature of
the original “profile”—Flickr for photos, YouTube for videos, Twitter for status
updates, Spotify for music, for example—and there are several platforms that
combine all of these things together for a holistic approach.
In this section, we will discuss the various types of social media and the front-
runners in each category, with the aim of helping you to choose which channels
will be most effective for you to use. Do not be overwhelmed; you do not have
to be everywhere and everything in this field. You just have to be relevant to your
customer base.

Social Networking
The most well-known category of social media is the communicative one: social
networking. These are the holistic platforms, who incorporate a lot of different
features to enable people to connect on as many levels as possible. This is
Facebook, Google+, MySpace, and LinkedIn. All of these platforms offer busi-
nesses the option of creating a corporate page, solely for your business, which
you should do on at least one of these sites.
Facebook is the dominant social networking platform out there, and that is
where you should start. It rivals search engines when it comes to discovering infor-
mation about a business; more and more often, it is the first place people look,
even before a corporate website. Facebook also offers a ton of features for your
business to make the most of its presence there, from analytics tracking to targeted
108 Marketing in the 21st Century and Beyond

advertisements, and they also have an exceptionally good help center that guides
you through the process of creating a page and how to use it. Major props, highly
recommended, you need to be on Facebook.
The other three—Googleþ, LinkedIn, and MySpace—are up to you.
Googleþ was heralded as Facebook’s new rival, but that was almost a year ago
and it is still not rivaling. What is left, though, is a lot of people who were into
that kind of thing in the first place (namely, techies). If your company has a par-
ticular customer base of techies, it might be worth pursuing.
LinkedIn is Facebook’s more professional and corporate older brother. It is put
together quite well, but distinctly lacking personality. It is generally used for
resume building and career networking, not so much personal interaction, and
because of this, LinkedIn users are generally older and career oriented, and use
the platform less often.
And MySpace is the opposite, perhaps Facebook’s younger wild sister who
sleeps around. To be honest, it is disconcertingly poorly designed in terms of user
experience. Once you think you have got the hang of it, there is a broken link or a
bug and you have to start all over again. That being said, MySpace has carved out
a niche in the music department; it is a hotspot for bands and artists, which caters
directly to their younger, creative users. Again, if this is your customer base, it
might be worth pulling your hair out over broken links.

Blogs and Microblogs

Blogs essentially started out as a place for you to post your angst-filled journal
online for people to comment on (which was unexpectedly appealing to a lot of
people). While some blogs are still used that way, the field has developed into
much more. Good blogs today will center on a specific topic, like how to raise
your kids vegetarian or design your home cheaply. Think of them like the online
version of a weekly newspaper column. If you are seeking to be a real source of
information for your customers, for them to look to you for answers about a par-
ticular field, then perhaps a blog is for you.
WordPress.com is my favorite blogging option. It is highly customizable, easy
to use, and even offers a website creation platform (at WordPress.org), if you are
seeking to set up a basic website cheaply. Blogger and LiveJournal are also well-
established blog platforms.
Microblogs are similar, but instead of full-length articles, they snip information
into bite-sized pieces. On a microblog, you will post much more often (two to
three times a day, or sometimes hourly) in much smaller pieces (140 characters
or less) about a wider range of topics. Microblogs are tricky to get right, as they
are probably the most honest, genuine, and unstructured representation of your
business. They are literally up-to-the-minute updates, as opposed to highly
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 109

strategic campaigns (though that is not to say that you cannot be strategic with
microblogs).
Twitter is the most widely used microblog. It is a platform entirely devoted to
the idea of status updates. While it is incredibly simplified, there is often confu-
sion at first as to how it “works.” Here are a couple of tips:
• Twitter is truly a two-way street. If you are interested in receiving someone else’s sta-
tus updates, you can follow them. And if they are interested in receiving your status
updates, they will follow you back. But if they have never heard of you and do not
care, they will not follow you back and you will only receive their updates; they will
not receive yours.
• You can speak to someone directly, but only by creating a new status yourself and
tagging that person in it. For example, Joe says, “Wish the Browns had won last
night—great game!” To reply to that, you’d say “@Joe the Browns suck, it was a ter-
rible game, lying is wrong.” Key point: everyone will see your reply to Joe, not just
Joe, because first and foremost it is a public status update.
• You can contribute to a discussion on a particular topic, but only by creating a new
status yourself and tagging it with a hashtag. For example, you see all these status
updates about #worldpeace, and you want to be a part of that conversation, so you
say something like “We totally support #worldpeace!” Since you tagged it with a
hashtag, your status will be added to the #worldpeace discussion. To see the whole
discussion, you can search Twitter for #worldpeace, and it will show you all the
updates that have been tagged with that hashtag. Pretty neat! This feature enables
global communication about a single subject, and also helps you to see which topics
are trending worldwide.
Twitter is a highly involved form of social media that requires constant moni-
toring and interaction. It is also very limiting, as you can literally use only 140
characters per post. If you are smart, though, you will use Twitter as a way to drive
traffic to your other social media outlets that are built for a deeper level of interac-
tion (i.e., post a link on Twitter every time you add a new blog post at your full-
length blog, or post a link to your freshly created Facebook event). And better yet,
you will track the click-throughs on those links to see exactly how much traffic
you are directing. But more on that later.
Tumblr is another form of microblog that is slightly less “micro” than Twitter.
It falls somewhere between the 140 characters of Twitter and the full-length
articles of traditional blogs. Most importantly, it allows for photographs and video
implants. In this way, many artists use Tumblr as a feed for their most recent art-
work or sources of inspiration. Tumblr’s tagline is even “follow the world’s cre-
ators.” If your business is creative, but you do not want to invest the time into
crafting a full-length blog and you have more to say than Twitter allows,
Tumblr might be a good place for you to showcase your most recent works and
inspiration.
110 Marketing in the 21st Century and Beyond

Multimedia
There are also social media channels entirely devoted to multimedia. These
channels capitalize on the fact that people have interests, hobbies, and preferences
that they want to share with other people. Sometimes they are a little more diffi-
cult to access from a business point of view (as in, they do not always have preset
profiles, like a Facebook page, that you can just plug your business’s information
into), but it is possible to do.
If your business relates directly to photography, the photo community of Flickr
might be worth tapping into. You can create a photostream of your most recent
photos, follow other photographers, and mark photos as favorites. Or if your busi-
ness has a clientele of stay-at-home moms really into DIY projects, Pinterest could
be just the ticket to reach them; you can create a business profile to promote your
products. Spotify is the newest trend in music sharing—it is even integrated with
Facebook—if your business is interested in tapping into a music-based
community.
YouTube is one multimedia channel that is highly adaptable for businesses.
People love rich media; they love to see photos and videos. Even if your business
is not a film company, there are still many opportunities for creating simple vid-
eos. For example, an artist could show the before-and-after process involved in
the artwork, a nonprofit could interview people it helps, and more. The downside
is that this could potentially be a lot of investment, so make sure that your
goals feed directly into creating videos. (For example, if you are a coffee shop that
wants to be known for its espresso expertise, you post how-to videos on creating
latte art.)

Location Based
An interesting trend that has taken off with the advent of mobile technology is
location-based social media. These apps allow the user to “check in” wherever they
are, using GPS technology, and then share that information with their friends.
Foursquare has pretty much cornered the market on this one. Foursquare has
made “checking in” to places into a game. They provide perks for checking in,
essentially making your trip to the gas station seem much more exciting than
it actually is. The perks they provide are mostly within the app itself (for exam-
ple, you receive points and badges for checking into places, you can leave “tips”
for other visitors, and if you check into a place more than anyone else, you
become the mayor of that particular place). But businesses have capitalized on
this, and you can too, by offering tangible perks to your customers via
Foursquare. For example, some restaurants offer discounts to diners who check
in, or provide a monthly gift package to the “mayor” of their location. If your
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 111

business has an actual location that customers visit, Foursquare might be worth
checking into (pun!).
Facebook “Places” offers the same basic features of Foursquare, but it is less
about being a fun little game and more about social interaction. It is designed to
keep users updated on their friends’ activity: when they are nearby, where they
have been recently, etc. This might be a good way to introduce yourself (and your
customers) to location-based services, as it is already linked to your Facebook page
instead of being a completely separate app.

Other Categories
And there is so much more. There are games and entertainment platforms that
are social that your business could tap into, depending on your customer base.
There are administrative and collaborative platforms for your business to increase
efficiency and productivity through online sharing (Google Docs, Dropbox,
Creately). There are sites based on reviews and opinions alone, such as Yelp,
eHow, and WikiAnswers, that might hold customer insights for you. There are
crowdfunding sites (Kickstarter and IndieGoGo) if you are looking for a solution
to jump-starting a project. And more, and more, and more—all of it social, all of
it personal, people reaching people.

Integration
You are probably thinking now that this sounds like a lot of work. There are so
many channels to take advantage of, and they all require separate profiles with
separate interactions; just to establish a presence on all these channels would be
overwhelming, much less maintaining that presence, etc.
Luckily, someone thought of that before you did. There are several services out
there that focus entirely on integrating and managing your social media, precisely
so that you do not waste time posting and reposting the same things.
Two of my personal favorites are Hootsuite and Tweetdeck. They both enable
you to manage multiple accounts across several different platforms (Facebook
pages, Twitter, Foursquare, LinkedIn, WordPress, to name a few), and also
provide great perks like scheduling posts and customizing your feeds and men-
tions. Hootsuite offers a premium option that provides great analytics and
tracking for your links, too, including insights into your followers. I started
with Tweetdeck and now prefer Hootsuite, but depending on your needs and
work style, you can choose whichever works best for you. They are both free
to get started.
Now that you have chosen channels, let’s talk about how to use them.
112 Marketing in the 21st Century and Beyond

MAP OUT YOUR TIMING STRUCTURE

Timing your posts properly can be a difficult aspect of social media. Because no
one is on social media 24/7, you will want to time your posts at the appropriate
time of day to receive the most possible views. You will also want to make sure
that you find a balance of how often to post. Everyone knows that avid
Facebook user who posts every five minutes, and you do not want to be that,
but you also do not want to be inactive either.
The time of day that you post really depends on your customer base (i.e.,
young people will probably interact with Facebook later into the evening than
an older crowd), so you might have to do some investigating into when your cus-
tomers are most active with social media. Your timing strategy will also vary a bit
depending on which social media channel you are using, too (i.e., Twitter users
behave slightly differently than Facebook users). Nevertheless, here are two basic
guidelines that will serve as a general strategy:
1. Peak usage days of the week are midweek and Saturdays.
2. The “magic” times of day that will receive the most views and interaction are gener-
ally around lunchtime (11 a.m. or noon EST) and after work (5 or 6 p.m. EST).
Discovering how often to post depends almost entirely on which social media
channel you are using instead of your customer base.
There are three categories:
1. Weekly
2. Multiple times a week
3. Daily (or more)
Generally, the longer the content, the less often you will want to use it. So a
full-length blog or YouTube channel with videos would be best suited to the
weekly category. The articles and videos you post involve a lot of time for you
to develop, and also a significant amount of time for your users to consume them,
so do not stress yourself out—or expect too much from your customers—by post-
ing lengthy items too often.
A step up from weekly is the three to five times a week category. Facebook is
the key channel here; it is well suited for medium-sized chunks of information,
without the user commitment of an entire blog or video.
And finally, Twitter is the most involved channel of all; that requires daily (or
even hourly) updates to keep your users interested. As we discussed in the pre-
vious section, these posts are bite-size—retweets of a post that you liked, or a
quick photo of your new piece of furniture for the office—which makes them
more manageable for you to produce and for your users to consume.
One tactic that I have found particularly helpful is to actually create a social
media calendar based on the strategies outlined above. Color-code the calendar
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 113

based on which channels you will be using, and then create a certain number of
events for that channel per day, week, or month. Keep a list of notes for poten-
tial content, and then use it to fill in the events. The calendar planning will help
you to stick to your strategy, and keeping a content database will also help you
to stay consistent with posting in the slow times when there just is not much
going on.
I have done this for a band that I manage (everyone needs to have some fun!).
I knew we wanted to post on Facebook three times a week (at least), on Twitter
daily, and on YouTube once a week. So I created a Google calendar with these
color-coded categories, and then actually created events for the posts for six
months out. As the band developed, I have kept track of content ideas—a photo
we took at practice, a video from our latest show, a funny comment our drummer
made, an album that was inspirational to the band, etc.—and filled them into the
calendar: band practice photo on Monday to Facebook, funny comment to
Twitter on Wednesday, video launch to YouTube (and subsequently Facebook
and Twitter) on Friday, inspirational album share to Facebook the next
Monday, and so on. The integration platforms (Hootsuite and Tweetdeck) that
I mentioned earlier make this even easier for you through their postscheduling
feature. You can sit down for two hours and plan your entire social media week,
and they will execute it for you. It is great.

COME UP WITH CONTENT

You are all prepped and ready to go. You know your business’s landscape; you
have defined goals, chosen channels to use, and mapped them onto a calendar.
We are into the meat and potatoes now: what do you actually say?
Developing content will be different for everyone reading this, as every business
landscape is different. There are a few ground rules, though, that might help guide
your thinking in that area.
First, vary the type of posts that you use. You should post about new product
launches, upcoming events, and interesting developments in your business’s
industry, not simply your daily special discount. Based on your goals for social
media and what your customers are interested in, define three to five categories
that you want to post about, and then work them into your social media calendar.
Going back to the example of the band, the three categories I chose were com-
munity, inspiration, and band news. Not only did we want to promote our music,
we wanted to be a source of inspiration for our users, as well as be well connected
to the community we lived in. So Mondays were our “community” day, Fridays
our “inspire” day, and Wednesday our “news” day, for Facebook at least. Some
businesses even advertise these categories (i.e., “Today is self-improvement
Sunday! Check out this article on eating healthier.”), which is not a bad thing.
It creates consistency and a certain amount of expectation from your customers.
114 Marketing in the 21st Century and Beyond

The second rule dovetails into this: do not talk about yourself all the time. It is
annoying. It is annoying to come across that trait in a person, as we all know, and
because social media is such a personal medium, it is annoying to come across that
trait on a business’s Facebook page. You can get away with that in advertising
(sort of), but remember that social media is not advertising, and it needs to be
treated differently. Social media is a very personal and direct interaction with your
customers, about cultivating relationships. And that is a give-and-take. So do not
be self-involved.
This rule can be executed in a number of ways. You can promote community
events, promote a neighboring business that you love, link to an informational
article that is related to your industry—or even not related, maybe you just
thought it was interesting and it promotes the type of culture that you want to
be affiliated with. And do not forget that you can simply thank your customers
every once in a while, too. Here again it might help to think of your business as
a person, or as that celebrity that you chose earlier. What kinds of topics, aside
from yourself, is your business interested in?
The third rule is similar: engage your audience. (Remember your goal of creat-
ing customer depth?) Sometimes people need a little encouragement to interact,
especially in a realm as public as social media. Do not wait for them to offer their
opinion; ask it of them. Instead of simply saying, “We’re booking shows for the
summer; get excited!,” you can say “We’re booking shows for the summer; what’s
YOUR favorite venue in the area?” You can also publicly ask for customer photos
(“post your favorite photo you took in our coffee shop!”), share customer posts
(“thanks to Sandy for sharing this, such a great article”), and encourage check-
ins at your events. And always, always, always have the last word. Respond and
reply to every interaction a customer offers. They want to know they are talking
to someone, and that they are being heard.
The fourth rule is simple: use rich media as often as possible. Rich media is visual
and interactive; it is photographs, videos, and click-through links. In my own expe-
rience, these types of posts receive about three times the interaction as simple text
posts. We are visual beings by nature. Think how much more fun it is to look
through a picture book than to read a textbook, or how much more moving it is
to see a photograph than read a description. You should take advantage of that incli-
nation in your social media, particularly because so many channels make it so easy to
do. I cannot stress this enough: post as many photos, videos, and links as possible.

OKAY GO!
You should be well on your way to establishing (or improving) your social
media presence. Knowing your business landscape is just the foundation.
Developing measurable goals for social media is key, and then carefully choosing
 How to Use Social Media: Fostering Connections in a Virtual Marketplace 115

your channels will make your time spent most effective. And finally, actually
using social media well, in terms of timing and content, is not difficult given the
basic guidelines we have laid out.
Just remember that virtual marketplace we talked about, where you develop
relationships with your customers instead of just selling to them. You want them
to know your name, of course, but they want you to know their names, too.
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 Part III

MARKETING CHANNELS: THE NEW

REALITIES
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 CHAPTER 9

ANYWHERE, ANYTIME, ANYWAY: THE

MULTICHANNEL MARKETING
JUGGERNAUT
Dale M. Lewison

INTRODUCTION
Future success in the highly competitive and diverse marketplace will require a
carefully conceived process that is capable of formulating a unique business con-
cept that is adept at gaining access to newly defined markets through uniquely
designed pathways. This chapter will focus on a model of a multichannel market-
ing process that will assist in the conceptualization and implementation of a con-
temporary business model that is well suited to the multidimensional behavior of
the 21st-century consumer.
In the new knowledge/experience/service economy of the 21st century, the
most relevant unit of business competition is not your company or your product
line; rather it is your concept of how to conduct business in a fashion that is
uniquely advantageous to your firm and its stakeholders. Now and in the future,
intangible assets (e.g., consumer perceptions of your distinctive way of doing
business) will be as or more important to your success than tangible assets. The
plasticity of multichannel direct-marketing practices allows you to create a con-
cept of business that can be dramatically differentiated from the ordinary and
overused “go-to-market” strategies of the past. The destruction of the mass mar-
ket and its reconstruction into market segments, niches, micromarkets, and
markets of one individual demands that future business models tell an interesting
and compelling story of how your multichannel networks are capable of
120 Marketing in the 21st Century and Beyond

delivering a more customized shopping experience that is best suited to the indi-
vidual needs and preferences of your targeted consumer segments.
Our multichannel marketing model is based on a five-phase marketing process
that will guide you from unearthing potentially new and promising customer
needs (analytical marketing), to mining and converting raw data into useful infor-
mation (database marketing), to formulating new and successful ways of filling
customer needs (strategic marketing), to building and operating a collection of
pipelines capable of extracting sales (multichannel marketing), and finally, to
managing and adapting the relationships required to directly serve chosen market
prospects (relationship marketing). We begin where one should always begin,
with an exploration of the marketplace and its happenings.

PHASE 1: ANALYTICAL MARKETING

The first phase of the multichannel marketing process deals with gathering,
analyzing, and interpreting the marketplace intelligence needed to make informed
decisions concerning the internal and external aspects of your marketing effort.
Successful marketing operations necessitate a complete understanding of: (1) exist-
ing and potential customers, (2) external and internal environments, and (3) levels,
types, and degrees of competition. We will introduce these issues here and explore
them in more depth in latter chapters.

Customer Analysis
You need to know what customers think and how they act. Customer analysis
is a hodgepodge of tools and techniques used in diagnosing past buying behavior
and forecasting future buyer activities. Multichannel marketers must continu-
ously gather relevant information about what, where, when, why, and how cus-
tomers buy and behave. You will need to know how prospects and customers
act and react to various situations involving the procurement of products and
the adoption of ideas. The buying behavior of individual consumers and organiza-
tional buyers tends to be significantly different. How so? Let’s find out.

Consumer Buyer Behavior

Consumers have become strategic shoppers with the knowledge and experience
to go beyond simple searches for the cheapest or best-known products. Today,
consumer buying activities have become mutlidimensional behaviors involving
numerous marketing channels and a complex set of integrated and interacting
forces. Consumer buying decisions, and the resulting patronage behavior, involve
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 121

a problem-solving process in which consumers are swayed by a wide variety of

internal and external influences.
The consumer buyer behavior process is a sequential series of actions that pro-
gresses from problem recognition, information search, alternative evaluation,
response selection, to some form of a behavioral reaction and a purchase decision.
This process is directed and influenced by a set of psychological, personal, social,
and situational forces that have both a direct and indirect impact on the buying
behavior of consumer groups and individual buyers.

Organizational Buying Behavior

Organizational buying behavior is the focus of business-to-business marketing.
The types of products organizations buy and the methods used in procuring those
products are significantly different from the consumer buying process. The orga-
nizational market is composed of several different markets. For example, there are
industrial markets (buyers who make purchases in order to produce other goods
and services), reseller markets (retailers and wholesalers who secure products in
order to resell them), government markets (local, state, and federal agencies that
need products in order to provide those services they are mandated to perform),
and institutional markets (public and private, profit and nonprofit entities that
use goods and services to achieve their mission).
Organizational buying tends to be more rational, systematic, complex, profes-
sional, and direct. Organizations tend to use some form of multirole buying cen-
ters wherein need initiators, decision influencers, gatekeepers, decision makers,
purchasing agents, and product users interact in a variety of ways to arrive at a
purchase decision.
While the complexity of the organizational buying process is difficult to gener-
alize, it tends to be a five-stage series of activities that is similar to the individual
buyer buying process. The five steps of organizational buying typically consist
of: (1) need recognition and specification, (2) vendor identification and consider-
ation, (3) proposal solicitation and evaluation, (4) vender selection and order
placement, and (5) product inspection and performance evaluation.

Environmental Analysis
The second component of analytical marketing is assessing the external and
internal environments that create the key possibilities of the competitive playing
field and determining the core competencies of each market player. External envi-
ronment analytics requires a decision based on the opportunities and threats dis-
covered in this assessment of the marketplace. In other words, what are the key
possibilities or prospects offered by the market? The flip side of an external
122 Marketing in the 21st Century and Beyond

environmental analysis is an internal exploration of the firm’s core competencies.

What is the firm capable of doing? How do the firm’s strengths and weaknesses
impact its capabilities? Can the firm develop sustainable competitive advantages
that will support the organization well into the future?

External Environmental Possibilities

Awareness, understanding, and appreciation of external marketplace environ-
ments are crucial steps in your successful detection of the key market possibilities
facing your organization now and in the future. In this role, you become the eyes
and ears of the organization’s effort to monitor and interpret the patterns and
trends that characterize the competitive external marketplace. Given the largely
uncontrollable nature of this complex environment, you need to identify and
react to these dynamics on a timely basis. As a marketer you have the best chance
to detect pattern occurrences and emerging trends that define future market direc-
tions (possibilities) for a product or industry. Patterns and trends are systematic,
repetitive, and detectable arrangements of marketplace phenomena that express
a meaningful mosaic of occurrences that form consequential correlations, associa-
tions, or linkages between those occurrences and successful marketing outcomes.
The external marketplace environment encompasses all of the realities of the
surroundings, conditions, circumstances, and forces that influence and modify
the behavior of your organization. Typically, an external marketplace scan
includes monitoring and assessing all relevant political and legal issues, social and
cultural influences, technological and informational advances, economic and com-
petitive forces, population and demographic trends, as well as physical and
geographical surroundings. Your analysis of the marketplace begins with the
information-gathering process we term “possibilities scan.” Using the information
from the scan, analysis should continue with: (1) the identification of the major
influential forces that drive a particular pattern or trend, (2) the delineation of
the opportunities and threats emerging out of an identified pattern, and (3) a dis-
covery of the competitive advantages resulting from the opportunities and threats
assessment.

Internal Environment Capabilities

Does your organization have what it takes to do what it wants to do, to go
where it wants to go, and to be what it wants to be? You need to have a clear idea
of you organization’s potential—what it is and what it is not. In this internal
analysis you need to understand your organization’s capabilities in terms of its
people, processes, systems, structure, and culture. “Know thyself” are the watch-
words for conducting a scan of the multichannel marketer’s special abilities. The
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 123

purpose of this inward-looking assessment is to gain an expansive view of the

firm’s core competencies and capacities for adapting to and taking advantage of
selected key possibilities that make up the market.
What are your capabilities? A capability is any ability that you or your company
possesses to perform a task or activity in an integrative fashion by deploying
tangible and intangible resources in an efficient and effective fashion. In the
knowledge/service/experience economy of today and tomorrow, intangible capital
created by humans can often be the most important capabilities your firm pos-
sesses. In the economies of the future, your firm’s intellectual capital in terms of
knowledge and know-how will create the core competencies needed to progress
in the murky environs of tomorrow’s marketplace. When conducting a capabil-
ities scan, you need to identify and assess strengths and weaknesses of your organi-
zation that impact your firm’s ability to survive and thrive in future markets. All
organizations need the capability to resist negative forces in the environment
and endure hardships. These embedded capabilities will allow you to overcome
environmental threats and take advantage of environmental opportunities.
Weaknesses prevent the firm from withstanding attack and reaping benefits of
new marketplace opportunities.
How do you develop the core competencies package needed to deal with the
uncertainties of the marketplace of the future? What can your firm do to establish
recourse in responding to environmental situations? What courses of action will
your firm have to rise to the occasion? The answers to these questions lie with
the strategic value of the firm’s resources to create capabilities, core competencies,
and ultimately, the sustainable competitive advantages needed to outmaneuver
marketplace rivals. In the misty realm of tangible and intangible assets, it may
behoove you to understand and appreciate this “resource-based view” of business
and marketing strategy. A full assessment of the wide spectrum of resources is
beyond the scope of this chapter. In general, strategic assets include all potential
sources of future economic benefit that have a capacity to contribute to a com-
pany’s overall value. Assets have a distinct life cycle—a beginning and an end to
economic value. Asset categories include physical assets (land, buildings, equip-
ment, and inventory), financial assets (cash, receivables, debt, investments, and
equity), customer assets (customers, marketing channels and affiliates), stake-
holder assets (employees, suppliers, and partners), and organizational assets (lead-
ership, strategy, structure, culture, brands, knowledge, systems, and processes).

Competitor Analysis
The preceding customer and environmental assessments can provide you with
enough intelligence to determine the overall potential of a marketplace; however,
they cannot provide you with one critical bit of information—what share of that
124 Marketing in the 21st Century and Beyond

total market you can reasonably expect to capture. Competitor analysis is con-
cerned with profiling the competitive rivalry taking place in any market.
Changing competitive actions and responses between rivals for a competitive mar-
ket position is an everyday occurrence in the dynamic global marketplace. You
will have to build and defend your competitive advantages and market positions
on a continuous basis. What do you need to consider when conducting a com-
petitor analysis? Competition can be characterized in terms of different levels,
forms, and degrees. Let’s examine these competitive nuances.

Level of Competition
One way to look at competition is to examine the directness and specificity of
the competition you face. As Figure 9.1 portrays, competition can be head-to-
head direct competition between two competitors for a specific product item. At
the other end of the continuum, the competition is fairly general and indirect;
nonetheless, it can be quite significant and disruptive. Competition can fall along
a continuum from item to category to substitute to generic competition. The nar-
rowest perspective on competition is item competition—the rivalry among firms
selling the equal or similar products to the same target market at comparable price
points. Item competition is specific because it involves direct competition among
product items in terms of brands, styles, sizes, models, and features. Category
competition consists of rivalry among marketers of closely related lines of prod-
ucts with similar features. For example, toys, books, apparel, home electronics,
office supplies, home and garden, and arts and crafts are all product categories
where heated competition is common. Substitute competition is less specific
and more general—where two different products (e.g., a movie or a football
game) try to satisfy the same basic need (entertainment). Finally, generic compe-
tition can best be described as the general competition that exists among

Figure 9.1
Continuum of Competition
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 125

marketers of different goods and services for the limited income and patronage of
the consuming public. If the consumer buys a new mobile phone, she or he may
not have the money to go out to dinner and a movie,

Forms of Competition
The nature and structure of the relationship among various members of the
marketing channel of distribution can greatly impact the form of competition that
any particular firm might encounter. Within-channel and between-channel com-
petition, as well as competition between two or more vertical marketing systems is
common. Intratype competition is the rivalry between two marketers from differ-
ent channels who occupy the same level with their respective channels of distribu-
tion. Walmart and Kmart engage in intratype competition. When competing
parties from different channels use unlike business formats to serve the same tar-
get markets with comparable product offerings, the competitive form is referred
to as intertype competition. The competition between Sear’s and Baby Gap in
infant apparel lines illustrates this intertype rivalry. There are times when you will
have to compete with a member of your own channel of distribution. Vertical
competition is the rivalry among members of the same channel—an apparel
retailer who stocks and sells Levi jeans competes with factory outlet stores and
direct-marketing channels operated by Levi Strauss. Systems competition is the
rivalry among entire marketing channel systems; it is the competition that exists
between two vertical marketing systems (an integrated production, wholesale,
and retail operation). Home Depot and Lowe’s are highly vertically integrated
operations that compete as controlled and coordinated distribution and fulfill-
ment systems.

Degrees of Competition
Competitive relationships range from hostile conflict to illegal collusion. The
intensity of competition can be described along a continuum of competitor rela-
tions that reflect no competition to destructive competition. Figure 9.2 illustrates
this continuum. Collusion is an illegal direct (person-to-person) or indirect (sig-
naling) conspiracy to engage in cooperative behavior with the intent to injure a
third party. Cooperation involves the consideration of a mutually beneficial rela-
tionship in which competing parties work together for a common goal.
Indifference characterizes the coexistence strategy of competition—organizations
seek to serve different core market niches and compete indirectly in peripheral
market segments. By avoiding direct competition, coexisting competitors can pur-
sue a live-and-let-live existence. Competition is an aggressive and confrontational
degree of competition that will require that you meet or exceed customer
126 Marketing in the 21st Century and Beyond

Figure 9.2
Competitive Intensity

expectations by developing a better marketing program that offers the customer

greater value. The hottest degree of competition is conflict—a serious confronta-
tion between competitors that leads to harsh reactions and retaliatory measures.
It should be your goal to develop a competitor audit using the above factors to
understand the current actions of competitors and predict probable future
actions. A successful competitor audit form is able to serve as a diagnostic tool
in identifying the strengths and weaknesses of competitive enterprises.

PHASE 2: DATABASE MARKETING

Database Analysis
Now that you have gathered and categorized information regarding your cus-
tomers, competitors, and the environments and conditions under which you must
operate, you need to change your static information into actionable intelligence.
Extracting information from a database is more than just creating a new pile of
facts and figures. Creating actionable intelligence requires that you first analyze
and interpret the information, then use this newly minted intelligence to develop
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 127

the marketing strategies and craft the creative appeals needed to take advantage of
those intelligence opportunities that have been identified in the analysis process.
Database analysis is all about transforming data into useful intelligence that allows
you to develop successful operational marketing programs.
A database is a compilation of data that you can access and organize using com-
puters to make queries, sort data, and extract information through the identifica-
tion of patterns and trends. Database marketing focuses on discovering relevant
trends and patterns in customer and competitive behavior as well as identifying
the opportunities and threats that are inherent in the marketplace environment.
The most common form of databases are those related to the following customer
traits and activities: (1) purchase history in terms of what, how, and when of the
customer’s buying behavior, (2) the type and level of response to previous offers,
(3) customer satisfaction levels with previous experiences, (4) demographic char-
acteristics, (5) contact information, and (6) psychographic (interests, lifestyles,
and activities) profiles.
Database marketing is a highly regarded marketing tool that will allow you to
closely monitor your customers and permit you to categorize them in terms of
their lifetime value to your organization. It allows you to identify the most profit-
able customers as well as those who are not worth the expense and effort of retain-
ing them. Good database analysis is an essential tool to identifying market
segments, selecting target markets, executing tailored marketing efforts, and
developing cross-selling opportunities. Databases are very useful in providing a
strong analytical foundation for your marketing plans and establishing the quan-
titative measures and successful implementation of those plans.
J.Jill, the Quincy, Massachusetts-based cataloger, started its push in 1999 to
become a multichannel marketer by moving beyond its mail-order roots and
launching a website and opening brick-and-mortar outlets. Over the years each
channel developed its own database with little or no effort at integrating these
sources of information. By keeping its information in separate silos, it was impos-
sible to coordinate the marketing efforts of each channel. When J.Jill fully com-
bined its databases in 2004, thereby going from a multiple-channel enterprise to
a multichannel network, the firm saw a substantial 20 percent increase in sales.1

Market Analysis
The important tasks of identifying and analyzing markets are essential prerequi-
sites for developing a viable marketing program and a successful multichannel
approach to the marketplace. Poorly defined and profiled markets leads to poorly
designed and executed marketing programs. Let’s look at how we might define a
market and effectively analyze it.
128 Marketing in the 21st Century and Beyond

Figure 9.3
Defining Your Market

Defining Your Market

What is a market? We need to start with a common concept of what a market
is. Our usage of the term “market” is very specific. As illustrated in Figure 9.3, a
market has traditionally been a group of individuals or organizations (consumer
population) who have needs and desires they want satisfied (consuming purpose)
and who have willingness, ability, and authority to support a particular marketing
effort by a given marketer. With advancing technologies and the availability of
sophisticated direct-marketing capabilities, markets no longer have to be plural;
a market can now be an individual or an organization.

Analyzing Your Market

The goals of market analysis are rather simple—to simplify and organize the
rather complex marketplace by first identifying individual consumers or clusters
of customers who have similar needs and exhibit similar buying behavior patterns.
By grouping customers into more meaningful submarkets, you can select and tar-
get those individual customers or groups of customers that best match your mar-
keting programs and operating competencies. As we shall find out later in this
chapter, having a greater understanding of the marketplace will allow you to gain
a competitive advantage by uniquely differentiating and positioning your market-
ing effort with regard to the specific needs and desires of a more homogeneous
market. The rationale behind this market delineation and assessment process is
to assist you in focusing your efforts on some of the most promising target
markets.
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 129

The essential steps in analyzing a market include market segmentation (divid-

ing the heterogeneous mass market into more homogeneous submarkets), market
targeting (selecting one or more market segments to be targeted and developed),
and market positioning (creating in the minds of target buyers a distinctive posi-
tion or image for your firm and its products and marketing programs). Market
segmentation can be accomplished using one or more of the following
approaches:
• Geographic segmentation—delineating and describing market segments in terms of
their physical location and aerial expanse
• Demographic segmentation—identifying and characterizing market segments based
on the personal traits (e.g., age, gender, race, education, income, etc.) of the custom-
ers that make up the market
• Geodemographic segmentation—linking demographic characteristics with geo-
graphic locations in an attempt to isolate more defined market segments
• Psychographic segmentation—defining and profiling market segments using social
class, lifestyle, and personality traits
• Behavioral segmentation—outlining and describing market segments that reflect
usage characteristics (user status, usage rate, usage occasion, and usage regularity).
• Benefit segmentation—identifying and profiling market segments on the basis of the
primary benefit or benefits sought when buying and using a good or service
Databases and modeling tools from such vendors as Acxiom, Claritas, and
Equifax have gone beyond providing basic geodemographic information for mar-
ket identification and analysis. These sources and others offer detailed psycho-
graphic profiles that provide insight into what makes customers tick. Lillian
Vernon, the Rye, New York-based cataloger of gifts, home goods, and children’s
products, outsource the information-gathering and assessment responsibility.
They add lifestyle, attitudinal, and behavioral information to their own customer
transaction data from past and current customers to gain a sophisticated look at
new and existing market opportunities. In the brave new world of multichannel
marketing, vendor programs such as Mapinfo’s PSYTE U.S. Advantage can iden-
tify customers and prospects who prefer buying online, ordering via phone, or
shopping in a store. These tools and others are vital approaches not only in market
segmentation and selection but also in developing contact strategy.2
Having gone to all of the work of collecting and analyzing market data and
using it to discover and comprehend the mysteries of selected market segments,
you now need to employ some guidelines that will assist you in selecting one or
more segments that suit your particular situation. Consider these questions:
• How accessible is your chosen market segment? Is your market reachable using the
firm’s current communication and distribution channels? What marketing program
changes will be required to access each consumer segment?
130 Marketing in the 21st Century and Beyond

• Is your chosen market segment large enough to be profitable? What is the current and
future sales potential? Are the financial rewards sufficient to warrant the development
of a special marketing effort?
• How compatible are the needs and expectations of the chosen segments to your busi-
ness mission and marketing objectives? Are the operational and marketing require-
ments for serving the selected market segments consistent with the resources and
capabilities of your firm?
• Will the market segment respond favorably to your special offers that have been
designed to meet their individual needs? Are you capable of developing a marketing pro-
gram that is unique enough to capture the loyalty of these selected target customers?
• What relative advantages do you have in serving this market segment relative to the
strengths of competitors? Do you have sufficient competencies to defend and grow
your competitive position?
The final step in conducting a market analysis involves positioning all of your
marketing efforts in the minds of your customers in a fashion that clearly distin-
guishes it from those of its competitors. Market positioning is one of the market-
ing strategies that we will explore in the next section.

PHASE 3: STRATEGIC MARKETING

Marketing Strategies
The purpose behind a well-conceived database marketing effort is its generation
of intangible value that is created by being “in the know.” This intangible asset
(information) is a major source of wealth in the knowledge/experience/service
economy of today. Marketing strategy is the force that drives this value creation pro-
cess. A well-articulated marketing strategy is a vital integrative tool for connecting the
realities of the marketplace with the practicalities of a strong marketing effort. Good
strategy can provide direction and focus to each marketing program, give meaning to
the marketing effort by creating a unique identity, reduce ambiguity and inconsis-
tency in decision making and action taking, align and integrate vertical and horizon-
tal marketing operations, create value for all of the firm’s stakeholders, and assist the
firm in gaining a sustainable competitive advantage by finding the right strategic fit
between the internal organizational capabilities of the firm and the marketplace pos-
sibilities of the external environment. There are several categories of marketing strat-
egy; let’s talk about the more well-known categories—reference and growth.

Reference Strategies
A reference strategy is one in which you make direct and indirect comparisons
between your market offering and those of your competitors. Customers tend to
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 131

think in relative terms when organizing their thoughts and assessing their choices.
Consumers make assessments in terms of a good or service being better, faster,
cheaper, or cooler than someone else’s good or service. When developing a market
offering for specific target markets, it is important not only to be different but also
to establish a unique mind-set about the firm and its offerings. Differentiation is
the marketing strategy of developing a set of unique and meaningful differences
that will distinguish the firm’s marketing programs from themselves and from
the offering of competitors. You need to continuously ask yourself, what are my
“points of difference” and are they important to my target consumer groups?
The consumer buying process starts with buyer awareness and interests; having
a differentiated offering is one of the best ways to build recognition and appreci-
ation for it. Differentiation distinguishes your market offering from the sea of
alternatives that make up the marketplace. Goods are differentiated by functional
and aesthetic features and psychological benefits. Service differentiation is
achieved by offering more service extras in a more consumer-friendly manner
(the way customers are treated, assisted, and served). Better value, greater conven-
ience, and lower prices are three additional approaches used to create a difference.
Positioning carries the competitive referencing strategy to the next level. By
employing the positioning marketing strategy, you are attempting to establish a
distinctive and consequential consumer mind-set with respect to your firm and
its offering. While being different is important, positioning goes beyond this basic
concept. Positioning is all about being more appropriate, more consistent, more
personal, more relevant, and more desirable when compared to what has been
tendered by competitors. Depending on the situation, positioning strategies can
be either creative or adaptive. Creative positioning seeks to fashion a new and dis-
tinctive perception of the firm and its marketing programs in order to improve the
likelihood that chosen market segments will judge the offering to be superior to
competitive deals. Adaptive positioning focuses on altering how consumers think
about the firm’s current offerings. The goal of a repositioning strategy is to change
consumer mind-sets in such a fashion that the firm’s modified offering is viewed
in a more favorable light than its past position and the new positions of its
competitors.

Growth Strategies
Finding new and exploiting existing market opportunities is the core growth
goal to be achieved through the implementation of market penetration, marketing
development, and product development strategies. Long-term survival requires
that you be able to redirect your efforts in response to environmental changes,
and to increase your organization’s resources by identifying and pursuing profit-
able growth opportunities. Essentially, growth strategies address the question of
132 Marketing in the 21st Century and Beyond

“what should our business be?” Growth opportunities and the means available for
harvesting new market prospects include intensive, integrated, and diversified
marketing strategies.
Opportunities found within the organization’s current portfolio of businesses
are referred to as intensive growth opportunities—occasions when current products
and current markets have potential for generating incremental sales volumes. Your
firm may be able to realize considerable growth potential by more aggressively
marketing current products to existing markets (market penetration), by introduc-
ing current products to new markets (market development) and by developing new
products for existing markets (product development).
Integrated growth opportunities are those that occur within the organization’s
current industry. Integration involves those occasions in which an organization
establishes a strong position or a leadership role within a given industry by gaining
greater control over its marketing channels of distribution or competitive business
enterprises. By vertically integrating one or more levels of a distribution channel,
marketers expect that resulting efficiencies will help them to increase sales reve-
nues. A vertically integrated marketing channel is one in which a single channel
member at one level controls and manages all or most of the functions performed
by all channel members in all levels of the distribution system. Gaining control of
competitors who operate at the same level (e.g., retail level) within the same chan-
nel is the marketing strategy known as horizontal integration.
If you elect to add attractive businesses whose business nature and format are
dissimilar to current business concepts, you are pursuing diversified growth
opportunities. Diversified growth is achieved by entering new markets with new
products. The important question to answer in chasing this type of growth chance
is “how new and different” should proposed products and markets be from our
current business operations? You can elect to add new businesses and markets that
are similar to and have numerous synergies with existing businesses and markets
or you can venture into entirely new business concepts and hitherto unexplored
markets. The further you get from you core businesses and markets, the more dif-
ficult it gets to develop the necessary expertise for successfully running the
business.

Marketing Offers
To interact with consumers, there must be some basis for that interaction; that
basis is your market offer. As a multichannel marketer you must recognize that
you cannot be all things to all customers. Successful marketing in the future will
require a unique set of value propositions to a select group of customers. To
implement an effective differentiating and positioning strategy, create a persuasive
offer that speaks to the consumer’s inner mind-set. Customer are more cynical,
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 133

doubtful, and dubious about offers that do not grab them with something that
they value; they want you to clearly communicate to them how the attributes
and benefits of your offer represent a good “return on their investment” of time,
money, and effort when buying, using, and/or possessing your product.
An offer is the total attributes and benefits package that you present to the cus-
tomer as an exchange proposal. It is the deal, contract, arrangement, proposal, or
proposition that you develop in hopes of soliciting a favorable response. In tradi-
tional marketing vernacular, it represents three of the four Ps of marketing; it is a
unique combination of products, prices, and promotions. From the consumer’s
perspective, the offer communicates what the customer gets and what they have
to do in order to get it. A good offer provides the prospective customer with a
good rationale for accepting it.
So, what constitutes a good offer? One that gets the right response. You can
ensure a better offer response rate if you follow some simple guidelines. First,
clearly articulate and communicate the importance of those attributes and bene-
fits deemed essential by prospective buyers. Second, make sure that you have
one or more “points of difference” that will attract attention and promote reac-
tion. Third, your offer’s affordability needs to match your customer segment’s
ability to buy. Fourth, be sure one or more of the attributes or benefits contained
within the order is viewed as being superior to those offered by competitors. The
fifth guideline suggests that you work hard to ensure that your offer is hard to
duplicate—your offer should contain aspects that make it difficult for competitors
to duplicate. Making your offer compelling is the sixth guideline to successful
offers. Does your offer contain sufficient benefits and attributes to motivate the
customer to respond now? If customers can see, feel, taste, hear, or smell an offer,
they are better able to judge its merits. More tangible offers are usually more effec-
tive than offers based on fewer sensory cues. Finally, there is no purpose in creat-
ing an offer that will not generate a fair return on the effort. Profitability is the
concluding guideline to more successful offers.

Marketing Channels
In recent years, as markets have fragmented and competition intensified, the
role of the marketing channel has become an increasingly important and vital
element in the success of any marketing program. The concept of a marketing
channel is thought of in broader terms today than in the past. The old view of
marketing channels focuses on developing a physical distribution network that
is capable of moving goods from producers to consumers in the most cost-
efficient manner possible. Marketing channels were viewed as physical logistical
challenges associated with moving products. As shown in Figure 9.4, the more
current view of marketing channels is that they are a collection of inbound and
134 Marketing in the 21st Century and Beyond

Figure 9.4
Multichannel Marketing Model

outbound channel alternatives that serve as connecting pathways between supply

side elements of the organization’s operational environment and the demand side
dynamics that characterize the marketplace environment. Designing the architec-
tural structure of your marketing channel involves identifying and selecting your
“go-to-market” strategies and tactics. Channels are the vehicles that promote
two-way (outbound marketing and inbound response) exchanges between the
marketer and selected consumer groups.
There is no doubt that marketers are doing the right thing in offering their cus-
tomers more ways to buy their products and services. One estimate is that cus-
tomers of multichannel marketers spend considerably more (upwards to 30%)
than those who pursue a single-channel source approach. Proliferation of avenues
for reaching and serving customers have created new and promising opportunities
for market growth; increased use of mobile phones, growth of wireless networks,
and 4G video calling all provide for new contact strategies. Imagine the impact
on personal financial services business if the customer could have a face-to-face
conversation with the bank official using 4G video technologies. Some studies
suggest that clients would be more inclined to engage in complicated transactions
if they could use this form of personal channel.3
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 135

Marketing channels are viewed as operating systems because their architecture

structures and designs satisfy system requirements of sequential linkages, nonran-
dom organizations, and goal orientation. Marketing channel links are comprised
of a wide variety of participating partners organized to perform certain marketing,
distributive, and operating functions at certain times and places. The marketing
channel is typically viewed as two subsystems—the industrial (organizational)
channel level and the consumer (final) channel. Industrial channels originate with
the raw-resource producer, proceed through various jobbers, semiprocessors, and
industrial distributors, and terminate with the final manufacturer. Consumer
channels are the communication and exchange pathways between the final manu-
facturer and the final consumer; wholesalers and retailers bridge the gap between
consumer channel origins and destinations.
Successful “go-to-market” strategies of the future will require marketing chan-
nels designed as “borderless marketing systems” that incorporate the best collec-
tion of channel alternates that are capable of delivering a comprehensive
marketing effort. The unbound nature of future channel structures is a logical
outcome of the borderless consumer who uses different marketing channels to
meet her or his needs at different stages of the buying process. A shopper may dis-
cover a new product by browsing through a magazine at a Barnes & Noble book-
store, search for additional information about the product on the Internet, and
place an order through an inbound teleservices channel. Being less mindful of
channel boundaries, consumers are migrating from one channel to another in
search of an acceptable combination that is best suited to his or her particular
needs at any given point in time. Channel choices range from the traditional mar-
keting channel designed as a single pathway between marketer and responder, to a
multiple-channel structure where several channel alternatives are available as inde-
pendent and separate avenues to the market, and finally to hybrid multichannel
marketing networks where an appropriate collection of channels are vertically
and horizontally integrated to provide customers with their preferred choice of a
channel alternative for supplying a particular task.

PHASE 4: MULTICHANNEL MARKETING

In traditional marketing channel architectures, channel members (jobbers, dis-
tributors, manufacturers, wholesalers, and retailers) operated in a self-serving fash-
ion by jockeying for power and control of channel operations and market access.
The limitation on vertical integration (between various levels of the channel) and
the total absence of horizontal integration (between different types of channels)
hindered most efforts at establishing a cooperative and coordinated channel effort.
As suggested above, the dawn of a new era of multichannel marketing will require
136 Marketing in the 21st Century and Beyond

most businesses to pursue a strategy in which they use several different channel
alternatives that are both vertically and horizontality integrated. What are those
channel alternatives? Your choices include personal, electronic, broadcast, print,
and teleservices channels. Let’s briefly examine each of these channel alternatives.
Do you prefer “face-to-face” communications and interactions? Personal chan-
nels feature one-on-one explanations and demonstrations of the attributes and
benefits of an offer. Brick-and-mortar retailers and direct personal selling are the
two most common forms of face-to-face personal channels. Electronic channels
utilize the Internet for communicating and interacting globally. By using text,
pictures, sound, and video, electronic channel marketers use the World Wide
Web and e-mail to contact prospects and customers. Radio and television constitute
the primary forms of broadcast channels. Because broadcast channels have tradition-
ally been limited to outbound communication with little or no inbound interaction
capabilities, they are poorly configured for direct customer response. However, as
part of a multichannel strategy, broadcast channels play a vital role in a multidimen-
sional marketing network. Print channels rely on words and visuals (pictures, tables,
and graphics) to extend and accept offers. Direct-mail packages, magazines, and
newspapers are the principal print medium for generating customer interest and
response. The final channel alternative is teleservices channels. The telephone is a
convenient and effective two-way communication tool; as such, you can use it to
contact and interact with prospects and customers (outbound telemarketing) or have
customers contact and interact with you (inbound telemarketing).

PHASE 5: RELATIONSHIP MARKETING

What kind of relationship do you have with your channel stakeholders (cus-
tomers, stockholders, employees, communities, business partners, competitors,
and managers)? Relationship marketing is the channel philosophy that all channel
activities be directed at establishing, nurturing, and building successful relationships
with customers and additional stakeholders with a vested interest in the channel’s
success. While relationship marketing has historically been viewed as the partner-
ship between the firm and its customers, multichannel marketers must take a
broader view, including the creation of win-win relational exchanges between the
firm and all of its strategic partners (stakeholders). In this final phase of the multi-
channel marketing process, we will look at the issues inherent in managing channel
operations and adapting those operations to new environmental conditions.

Channel Management
In the normal course of marketing channel operations, a large number of differ-
ent types of interactions among different channel levels and between different
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 137

channels types are necessary if the entire marketing effort is to be completed in an

efficient and effective manner. Buying, selling, stocking, informing, financing,
transporting, transferring, and promoting are the more common interactions that
need to be managed.
A channel manager will be charged with the responsibility of managing the
entire set of channel flows (activities and movements among channel members).
Channel movements and activities are two-way (inbound and outbound) interac-
tions. The more complex nature of multichannel structures greatly complicates
channel architecture. All channel partners with a multichannel structure must
deal with both inbound and outbound channel flows within and between chan-
nels. Communication flows must deal with both the inbound and outbound
movement of information (informative facts and figures) and promotions (persua-
sive appeals and creatives) from one channel level to another within the same ver-
tical marketing channel as well as horizontally between various channel partners at
different channel levels within different channel networks. The difficulties of
managing all of these vertical and horizontal lines of communication are more
than compensated for by the enhanced marketing capabilities and expanded mar-
ket opportunities. Equally complex are the vertical and horizontal interaction
flows of negotiations (offer propositions and responses), transactions (order place-
ment and fulfillment), and relations service features and actions. Each of these will
be discussed more fully in chapters to come.
Marketing channels can be characterized by a number of different structural
designs. Channel structure describes the arrangement or positioning of channel
partners within the marketing channel network. Channel structure is a function
of channel length, width, direction, and multiplicity.
The length of the channel is the vertical dimension of its distribution network.
Long channels are indirect structures that have several independent intermediaries
(e.g., wholesalers and retailers) between the channel origin (e.g., producer) and
the destination (e.g., consumer). Short channels are direct pathways to the
marketplace containing few if any middlemen. Shorter channels tend to be more
vertically integrated than their longer counterparts. The operational efficiency and
the marketing effectiveness of shorter channels offer competitive advantages that
are superior to long, indirect structures.
Decisions regarding channel width are based on the intensity of market cover-
age the channel architect deems necessary to gain the needed exposure and degree
of availability of your marketing program. Channel designers can plan market
coverage densities that range from intensive distribution (readily available in as
many outlets as possible), to selective distribution (available in limited number
of outlets), to a very restrictive and exclusive distributive network (one outlet
per market area).
Channel multiplicity relates to the practice of developing several channel alter-
natives in an effort to reach the same or different market segments. As discussed
138 Marketing in the 21st Century and Beyond

earlier in the section on multichannel marketing, delivering your marketing effort

to diverse market segments will require hybrid channel networks made up of
multiple channel alternatives that provide those functions best suited to their
operating dynamics.
The multichannel marketing network is an interactive system of participating
members; as such, it is subject to the behavioral processes inherent in all social sys-
tems. Each channel partner’s actions impact the whole system. The entire system
benefits when individual actions are directed at cooperative and integrative behav-
ior. Channel disruption and disharmony occur when individual behavior conflicts
with the norms of the multichannel network. Channels must be managed and
controlled. Let’s quickly review the types and causes of channel conflict, the
means and methods of control, and the kinds of channel cooperation needed to
build a highly integrated multichannel marketing network.
Channel conflict occurs when a participating member of a multichannel system
believes that the actions of another channel member are interfering with the
attainment of its goals (e.g., reduction in cost of goods sold or better market expo-
sure for new product introduction). A state of frustration and distrust on the part
of one channel partners occurs when other participants restrict their role perfor-
mance. Adversarial relationships occur as either vertical or horizontal confronta-
tions. Vertical conflict occurs between channel members from different levels of
the same channel—for example, a retailer who disagrees with the manufacturer
over the amount of promotional support he can receive if the order size is
increased. Serious disagreement between channel participants who occupy a cer-
tain level in one channel and channel members of a different multichannel net-
work at the same or different level describes horizontal conflict. An example
would be a firm who uses both a direct-mail catalog and telemarketing via a tele-
services channel to sell a product.
Why do channel partners disagree? The causes of channel conflict are many.
Poor communications, different expectations, incompatible goals, limitations on
resources, changing market conditions, cloudy delineation of reasonability, modi-
fication of channel structures and relationships, and lack of coordination of activ-
ities are a few of the more common causes of channel conflict. Channel conflict
must be resolved and converted to channel cooperation. It may be your role to
assume the position of channel captain by providing the leadership needed to
build harmony and ensure collaboration.
How might you ensure cooperation between various components of your
multichannel network? Channel integration focuses on creating a unified market-
ing system under one leadership and one set of goals. The integration of the
multichannel marketing network can be accomplished through vertical integra-
tion (seeking control and coordination of intermediaries at different levels of the
same channel) or horizontal integration (managing channel operations of channel
members who operate using different business formats [channel alternatives] at
 Anywhere, Anytime, Anyway: The Multichannel Marketing Juggernaut 139

the same or different channel level). As we shall see in later chapters, the core pur-
pose of this unifying process is to end the segregation of intermediary operations
and their functional tasks.

Channel Adaptation
Your need to know where you have been in order to know where you need to
go. Channel assessment involves the creation of a systematic approach to perfor-
mance analysis and a better understanding of the contribution made by each com-
ponent of a multichannel network. Your systematic approach should include a
sequence of activities, from mining to organizing, analyzing, interpreting, and
presenting information, that reveal the trends and patterns that distinguish suc-
cessful marketing efforts from those not achieving expectations.
Channel assessment leads to behavioral modification. You must understand
and appreciate that adaptability and innovation are critical success factors for
any multichannel network architecture. Adapting to new and changing environ-
mental dynamics can be accomplished through adaptive and generative innova-
tion. The modification of existing channel structures and operations, in an
effort to fine-tune channel network operations, defines the adaptive approach to
behavioral modification among channel partners. Generative changes are modifi-
cations in channel structures and operations that represent new and unique
approaches to multichannel activities. It involves doing entirely new things in
response to marketplace conditions.
Mobile marketing is an adaptation facing many new-age marketers. Mobile
phones are as common as credit cards, more so with the highly prized teen and
young adult market. Mobile phone marketing allows the marketer to interact
directly with the consumer and elicit an immediate response. The interactivity
and ubiquitous access of this emerging channel invites serious attention.
Because the mobile phone belongs to only one person, it is one of the most per-
sonal one-on-one marketing channels. It can effectively be used to support mar-
keting programs delivered through other channels. Finally, one of mobile
marketing’s greatest assets is that the deliverable of the offer and the correspond-
ing responses to the offer can be easily measured and quantified.4

PHASE OUT: SOME CONCLUSIONS

The preceding discussions have carefully articulated a process by which you can
develop a successful approach to multichannel marketing—from the systematic
gathering of market intelligence (analytic marketing), to the processing of data
into useful information (database marketing), to its utilization in developing
effective marketing strategies and market offers (strategic marketing) that are
140 Marketing in the 21st Century and Beyond

delivered and responded to via several different marketing channels (multichannel

marketing) in order to build and nurture mutually beneficial relationships with
your customers and channel stakeholders. Concluding the multichannel market-
ing process is the need to adapt channel operations through continuous and
dynamic improvement efforts.

NOTES
1. Ray Schultz, “Three’s Company,” Direct 16, no. 9 (July 1, 2004).
2. Ann Meyer, “Homing In,” Catalog Age 21, no. 5 (May 1, 2004).
3. “Digital Demands Multimedia Tack,” Precision Marketing, October 7, 2005, 12.
4. Robert Fuchs, “Mobile Marketing Has Its Advantages,” Marketing News,
October 1, 2006, 21.
 CHAPTER 10

BUSINESS-TO-BUSINESS INTEGRATED
MARKETING
Nadji Tehrani

DON’T PUT ALL YOUR EGGS IN ONE BASKET:

USE INTEGRATED MARKETING!
Every so often, marketing reinvents itself. A French philosopher once said, “The
more things change, the more they stay the same.” However, when it comes to
marketing, that is only 50 percent true. The method of marketing changes but
the marketing principles stay the same. Because of this ever-changing nature of
marketing, there will always be a great challenge in figuring out what the formula
for success today versus yesterday is.
Putting all of the above together, it becomes clear that marketing is often like
shooting at a moving target; that is why it is the most challenging and most com-
plex part of any corporation. Ironically very few, if any, companies pay enough
attention to this vital art and science.
As I travel around the country visiting companies, I continuously find that a
certain number of blunders continue in many companies. Here are a few
examples:
1. Some companies hire a complete marketing staff, but they give them no budget to
market anything! I hope this makes sense to somebody!
2. Other companies want to get by with public relations (PR) only. In other words, they
give only lip service to marketing by trying to get something for nothing. Obviously,
that kind of marketing will never succeed, and the companies that believe in that phi-
losophy will flounder until they lose their competitive advantage.
3. Other companies commit even greater sins by spending millions of dollars developing
a product or group of products, and then they say there is no money left for
142 Marketing in the 21st Century and Beyond

marketing! To me, this is completely backward! Many companies successfully do it

the other way around. They do not have much of a product, but they market the hell
out of it, and as unlikely as it may seem, those are the companies that come up with
the biggest market share!
Not long ago, I visited a company that offers one of the best, if not the best,
speech product in the industry. We met with the CEO and asked about his com-
pany and his marketing plans. The answer was something like this: “We have
invested 35 years in building this product line and we have no money to market
it.” I will never understand this kind of logic. This company will also flounder
until someone else comes along with an inferior product and markets the hell
out of it and eats his lunch. It seems like many companies simply choose to ignore
marketing. These companies fail to realize that companies exist for two and only
two reasons, namely, marketing and innovation. Without these, no company
would get anywhere.

WHAT IS INTEGRATED MARKETING?

When newspapers were invented, they gradually became an important tool for
marketers. When radio was invented, some uninformed marketers said, “Well,
that’s the end of newspapers.” That was nearly 60-plus years ago. When TV was
invented, the same people said, “That’s the end of newspapers and radio”—and
so on! Today, we know that those misguided comments were nothing more than
hogwash. Yes, newspapers, radio, TV, and the Web are still around and they are
all serving an important function in marketing. To the extent that people have
different tastes, some prefer print, some prefer the Web, some prefer the mail,
etc.; conventional wisdom dictates that if you want to reach your total market,
you have ONE AND ONLY ONE SOLUTION and that is integrated marketing,
encompassing ALL of the above components. As Reed Business Information states:
“Understand that one advertising medium can’t do it all. An integrated approach of
print and online initiatives will allow you to better accomplish your goals and objec-
tives. To reach their goals, marketers need to piece together their own custom
Integrated Marketing Solution.”
Today’s business-to-business (B-to-B) marketer has a plethora of tools to use in
his or her toolbox. Among these are: newspaper, radio, TV, Internet, direct mail,
target marketing, database marketing, PR, custom portals, telemarketing, print
advertising, trade show marketing, relationship marketing, e-mail marketing,
and search engine marketing. What is important to remember here is that you
must identify the right combination of these tools and decide how to use them
in your campaign. In some cases a number of these tools will be used simultane-
ously, while in others the tools will be sequenced so that one directly enhances
the other. For the B-to-B marketer, the science is understanding how these tools
 Business-to-Business Integrated Marketing 143

work independently and together, and the art is being able to extract the best from
the tools to have a successful campaign.
The business universe gets more competitive and more demanding every
minute. Both the pace of business as well as the number of participants are continu-
ously increasing. What does that mean for marketers? It means that they are battling
for attention against an ever-shrinking time frame in an ever-more crowded arena.
B-to-B advertising eliminates many of the obstacles. In a high-attention venue,
with an involved and deeply interested audience, advertisers have the time, the
attention, and most of all, the interest of audience members. That is why it makes
good business sense to extend the advertising impact by taking advantage of the
multiplicity of media platforms B-to-B vehicles offer. A combination of print
advertising, website presence, trade show appearances, and conference sponsor-
ships means an advertiser’s impact on the audience is magnified geometrically.

THE MISSING LINK IN MARKETING: DIFFERENTIATION

AND POSITIONING
Your customers must have a reason to buy from you and that reason comes
from positioning and differentiation. In order to better understand the purpose
of positioning and differentiation, which, in my opinion, are the most crucial
parts of marketing strategy, let’s refer to the American Heritage Dictionary for
the definition of differentiation and positioning. Although they do not have a
direct definition for differentiation and positioning in marketing, if you look at
the definitions for differentiate and position, one will arrive at the same conclu-
sion, as follows. American Heritage defines “differentiate” as: (1) to constitute
the distinction between or (2) to perceive or show difference in or between; and
discriminate.
It describes “position” as:
• The right or appropriate place
• The way in which something or someone is placed
• The act or process of positioning
• To place in proper position; last but not least, an advantageous place or location
Looking at the above definitions, one can clearly conclude that to effectively
market, any product or service must be differentiated from its competition,
thereby giving the potential buyer a reason to purchase the product or service in
question. As for positioning, the definition clearly points out that it is crucial for
any product to be positioned in an appropriate place or, preferably, advantageous
location.
Over the years, I have learned that if you do not position yourself advanta-
geously, your competition will position you and your product in the most
144 Marketing in the 21st Century and Beyond

disadvantageous way. Having said that, one must clearly explain that positioning
is not a part-time job by any stretch of the imagination. Positioning and differen-
tiation, like marketing itself, are not part-time jobs. In fact, to do it right, they are
more than full-time jobs. That means you must market every day, you must posi-
tion every day, and you must differentiate every day—365 days a year, 24 hours a
day, 7 days a week. In short, marketing, positioning, and differentiation are 24/7
jobs, period, end of story.

POSITIONING AND DIFFERENTIATING ARE VITAL TO THE

SUCCESS OF ANY MARKETING CAMPAIGN
With so much global competition, customers need a reason to buy from you,
and that reason comes from your positioning and differentiation, which explains
to your customer or potential customer what sets you apart or what sets your
product or service apart. Without that, no one has any reason to buy your product
or service as opposed to your competitors’.
In an ultra-fast-moving and rapidly changing environment, one can practically
assume that market conditions also change month to month, maybe even day to
day, as opposed to 25 years ago when things changed more slowly. Consequently,
one must always remain 100 percent focused on the marketplace as well as on the
validity of positioning vis-à-vis the current conditions of the marketplace. It would
be a disaster if one were to lose sight of adjusting one’s positioning to reflect the
changing marketplace requirements. The next important item is that when compa-
nies fail to change their positioning, they lose market share and lose considerable
revenue. In fact, such companies may not even survive when markets change
so rapidly.
In today’s extremely complex, information-jammed world, we are exposed to
thousands of advertisements and promotions of various kinds, and in short, we
are inundated with an information explosion. It has been said that in the last
30 years, more information has been produced than in the previous 5,000 years.
The emergence of the Internet has added ultrasonic speed to the growth of infor-
mation available. Therefore to make your products and services stand out in the
marketplace, you must do a superb job of positioning, differentiation, marketing,
and advertising.
The first law of positioning states that it is better to be first than to be better.
Who was the first man who flew over the Atlantic? Obviously, it was Charles
Lindbergh. Who was the second person to fly over the Atlantic? Answer: nobody
knows and nobody cares. What was the name of the horse that won the Triple
Crown in 1973 and broke practically all racetrack speed records? The answer:
Secretariat. What was the name of the horse that came in the number 2 position
right behind Secretariat in all three races? The answer, no one remembers and no
one cares about number 2. Only horse-racing fans would remember that the
 Business-to-Business Integrated Marketing 145

name of the second-place horse was Sham. The bottom line: the first law is true,
and if you really want to be a market leader, you must position yourself as such
every minute, every hour, every day, every month, 365 days a year and 24/7.

ONLINE MARKETING COMES OF AGE

Everyone knows that the latest evolution in marketing focuses on online mar-
keting. Every time a new marketing concept comes along, people say, “This is
the answer to all marketing needs. We are going to cancel everything else and
jump on the online bandwagon!” Years ago, when we launched Telemarketing
magazine in a pioneering act to lay the foundation for what is now the
multibillion-dollar contact center/CRM and call center industry, most people said
the same thing about telemarketing. I heard people dropping direct mail or print
advertising in favor of telemarketing. This was not the right thing to do because
no one buys anything from a company they have never heard of. When the market-
ers came to their senses in the early 1980s, they learned that in order to get the best
results from telemarketing, they must combine it with direct mail, trade show mar-
keting, and personal visits (for high-value products) in order to get maximum results.
In other words, we learned back then that the only way to market effectively is
through integrated marketing. Stated differently, the more things change, the more
they stay the same. Today, integrated marketing is also the only way to go. One can-
not cancel all other marketing plans in favor of online marketing only. There is no
disputing the fact that a well-designed print ad will stand out in a publication just
as a well-designed online ad will be noticed on a website. And standing out in a
crowd ensures that your brand is recognized and your marketing message conveyed.
More and more companies today are leaning toward online marketing. Many
are making the mistake of stopping everything else and putting all of their market-
ing eggs in the online basket. This is, in my opinion, completely unwise because
other forms of marketing such as print, trade shows, exhibition, etc., create the
perception of stability, dedication, longevity, awareness, and commitment of the
company, not to mention brand recognition and marketing through education,
which are vital in the marketing process. As stated above, no one buys anything
significant from a company they have never heard of. Here are some guidelines
for online marketing and beyond:
1. When thinking of doing online marketing, do not forget other forms of marketing.
2. Check the reputation of the company behind the website on which you would like to
do your online marketing.
3. More importantly, check the Alexa (http://www.alexa.com) ranking of the website on
which you plan to advertise. This step is by far the most important part of selecting a
suitable online marketing vehicle that has proper Web traffic. Alexa.com is a division
of Amazon.com, and specializes in auditing Web traffic of ALL websites regardless of
146 Marketing in the 21st Century and Beyond

the type of website. When looking at Alexa.com rankings, it is vital to remember that
the lower the ranking number, the greater the website traffic in terms of bringing the
necessary eyeballs to that website. In other words, you do not want to choose websites
that have higher ranking numbers than 4,000 on Alexa.com. As an example, the
Alexa ranking of TMCnet.com is approximately 3,000, plus or minus. As such,
TMCnet.com is ranked by Alexa.com as being in the top 3,000 websites in the
world! Websites with much higher numbers simply do not have the traffic, and it
could lead to a waste of your marketing dollars.
4. Compare the Alexa ranking charts directly with competing websites by superimpos-
ing all of the competing websites along with your preferred website on which you
would like to advertise. This will give you an idea of the suitability of your chosen
website. Once again, these charts are vitally important to help you judiciously select
and eliminate the sites with extremely poor traffic.
5. Check the quality of the content. Quality editorial matter brings quality readers, and
quality readers become quality sales leads for your products and services.
6. Investigate the WebTrends rankings of your chosen site versus competition.
7. Check the relevant term ranking on the leading search engine sites before you select
your final website for your marketing purposes. For example, TMCnet.com ranks
as number one in over 40 relevant terms on Google. We are not aware of any other
site in the telecom industry that even comes close. If your chosen site cannot match
this type of prominence, it simply does not deserve your advertisement.
8. ALWAYS remember that on Alexa.com, the lower the number, the better the traffic.
9. Look at your chosen site’s value proposition. How does it compare your value propo-
sition with competing sites?
10. Investigate the “renewal rate” of other online advertisers on your chosen website. If
the renewal rate is less than 90 percent, do not waste your money advertising on that
website. As a point of reference, the marketing channel renewal rate on TMCnet.com
is 99 percent.
11. Does your chosen website offer guaranteed lead generation? If not, forget it.
12. Remember that only outstanding content delivers quality sales leads. Therefore place
maximum emphasis on the integrity and longevity and reputation of your chosen website.

THE MOST EFFECTIVE WAY TO GENERATE LEADS

Integrated marketing and/or multimedia programs are effective ways to market
and generate sales leads. In today’s world, customers tend to react to advertising
and marketing materials in different ways. In other words, some prefer voice
(radio or telephone), others television, others magazine, others print advertising,
others channel marketing, and others Internet advertising of several forms. To
conduct full-court marketing or a winning marketing program, you must consider
integrated marketing as the vital point of your marketing program. Indeed, nearly
10 years ago, the tagline of Customer Inter@ction Solutions was “The Magazine of
 Business-to-Business Integrated Marketing 147

Integrated Marketing.” That was a decade ago when we came to the realization
that someday we must all consider integrated marketing because “one size fits
all” does not work in marketing.
There has been an evolution in the nature of incoming leads. Having gone
through direct mail via coupons, postcards, regular mail, and bingo cards, the
nature of incoming leads upgraded to telephone plus mail then to 80 percent
via toll-free 800 numbers in the ’80s and ’90s. No matter where you advertise,
nowadays over 90 percent of the leads are coming via your website and the rest
via toll-free inbound 800 numbers or regular phone.
Even if you conduct integrated marketing and generate the most qualified sales
leads, placed in the hands of an unproven salesperson, no sales will result. In other
words, if you do not keep in mind all of the above guidelines, such as appropriate
integrated marketing, etc., you still may hit a point where your marketing cam-
paign is not producing desired results. In that case, we suggest you keep in mind
all of the above guidelines and develop a checklist to determine where there is a
shortfall and misconnection in your marketing campaign and fix it.
If you follow the anatomy of a healthy organization, you will find that without
exception, no company can exist without new business, and simply stated, no com-
pany can remain in business without sales. It follows, therefore, that to generate
sales one must have sales leads because “all sales begin with sales leads.” As vital as
lead generation is, it is mind-boggling that so many companies ignore this phenom-
enally important part of business and simply give it casual attention, if any at all.
Leads can be generated from any or all of the following:
1. Trade shows
2. Print advertising
3. Telemarketing
4. Channel marketing
5. Web advertising
6. Direct mail
7. Integrated marketing (which is regarded as the most powerful method)
8. Effective response-driven campaigns (which begin with response-driven advertising)
9. Effective positioning (no marketing campaign could be functional without it)
10. Differentiation (again, no marketing campaign could be functional without it)
11. PR

THE ROLE OF CRM

Next comes the job of CRM (customer relationship management), the objec-
tive of which is to keep the customer satisfied by developing a strong relationship
with the customer. In short, the job of advertising is to generate sales leads, and
148 Marketing in the 21st Century and Beyond

the job of salespeople is to close the sales and turn the leads into customers. The
job of CRM is to keep the customers.
One of the original purposes of CRM has been to develop a technique that will
help companies improve customer retention, customer satisfaction, and cus-
tomer loyalty. However, if you truly analyze your relationship with your ven-
dors, or many companies’ relationships with their vendors, you will find that
in most cases, customers are taken for granted and therein lies the root of the
problem. I learned a long time ago that if you do not nurture your relationship
with your customer on a weekly or monthly basis, it is only a matter of time
before you will lose that customer. And yet, many companies totally ignore
their major customers, and that is a violation of all the commandments of
good CRM!
For example, how many of you have heard from your car manufacturers after
you have purchased a car? Did anyone call to see if you were satisfied? Do they call
you every month or every six months or every year? Most importantly, did anyone
call you a month or two prior to when your lease terminated to try to sell you a
new car? In my experience, the answer to all of the above is a resounding no!
I chose car manufacturers as an example because a car is a very expensive item
and it can range anywhere from $20,000 to $60,000 or more per customer. To
me, that is a significant purchase, and manufacturers must communicate regularly
with customers, not only to find out if they are satisfied but also to encourage
them to buy their next car from that particular company. At the moment, none
of the above is taking place and that is why practically all of the car manufacturers
are losing customers left and right to their competitors!
When a vendor fails to contact its customers frequently, no relationship is built.
As a result, the customer has no reason to be loyal to that vendor. If you ignore
your customers and do not show appreciation and care, the customers have no
reason to remain loyal to you. I realize that most companies are unintentionally
committing the above mistakes, but in this day and age when the customers have
many choices, it is the violation of all the commandments of business, not to
mention CRM, to ignore customers and not try to show appreciation and care
in order to keep that customer loyal!
On the other hand, to go to the next level in building customer loyalty and
conducting true CRM, you need to find out what it takes to help your customers
acquire new customers and keep them. If you can achieve this, then you will have
a customer for life. But then again, how many companies are doing this? I would
guess less than 1 percent, and therefore there is no customer loyalty and retention,
and billions of dollars of losses in business are the result every year because of the
above problems.
If you are really and truly committed to positioning your company for maxi-
mum market share and profitability, here are a few suggested steps for you to take:
 Business-to-Business Integrated Marketing 149

1. The Role of CRM: You must genuinely try to keep most, if not all, of your existing
customers through implementation of a truly functional and sensible CRM and
e-CRM program.
2. The Case for Marketing Frequency: Position and differentiate your company 24/7/
365 in an advantageous way and remember that aggressive marketing, advertising,
and promotion are NOT part-time jobs. A true leader does not claim leadership for
one week, disappear for six weeks, place a couple of ads, and then disappear again
for six months. Those types of leaders will not be leaders for long. In fact, they will
become followers and in some cases go out of business.
3. On Positioning and Differentiation: Through your clever positioning and differentia-
tion tactics, be very specific communicating to the marketplace what sets your prod-
uct or service apart from your competition. This is vitally important because it gives
your customers and your prospects a reason to buy from you rather than from your
competition.
4. Remember, if you do not position yourself 24/7/365, your competition will position
you in the most disadvantageous way.
5. Market Aggressively: Maintain the most powerful, aggressive marketing campaign
that includes a clever marketing strategy, truly effective advertising, and targeted ver-
tical trade show participation. Remember that there is no shortcut to marketing
domination, the greatest market share, and success.
In my opinion, the above guidelines are a few of the most vital points you need
to keep in mind. Focus on them 100 percent and implement them around the
clock, 365 days a year if you are to gain the lion’s share of the market and leapfrog
your competition. And remember that this economy is truly on your side to help
you gain your dream market share, so make the most of it.

OLD-FASHIONED MARKETING HABITS CONTINUE

During my daily association with various CEOs and marketing executives,
I find that many are committed to direct mail only or trade show only or e-mail
only as the sole marketing vehicle for their companies. They act as if they have
never heard of integrated marketing. Indeed, I have seen many companies that
waste thousands of dollars on one or two media and ignore the rest. Obviously,
these companies will never gain the full benefit of their marketing dollars.
I recently investigated such a company and discovered that in spite of the fact
that thousands of dollars were spent on one or two media, the company did not
commit to integrated marketing, and that company’s name did not appear in
the appropriate categories in any of the major search engines. The bottom line
is that the successful marketers of today are those that use integrated marketing,
and anything less will not do. In previous editorials, I have frequently mentioned
that marketing is not a part-time job and there is no shortcut in marketing. And
150 Marketing in the 21st Century and Beyond

yet, many marketers are ignoring the above facts, and their companies are losing
millions of dollars in new business.
One of the most prevalent problems I have recently found with many market-
ers is that they are ignoring print, trade show, telephone, and channel marketing.
In my opinion, there is no greater disaster that can result from ignoring these vital
components of “integrated marketing.” And yet, the mediocrity continues, and
many companies are completely oblivious to these facts and foundations of
modern marketing.
Advertising blunders also continue. Indeed, many advertisements that I find in
a variety of publications are guilty of the following problems. First, they are not
communicating the benefits of the products or of doing business with that com-
pany. Second, they are not differentiating themselves from the competition.
Third, they have not positioned themselves effectively. Fourth, they are too busy
or they do not say anything. Fifth, they are poorly designed and are using colors
that turn off readers. Sixth, and last but not least, many of them do not even have
a powerful benefit-driven headline. To make matters worse, 70 percent of the
sales leads generated from advertising are not followed up!
If the above is the case, one has to wonder, what is the purpose of advertising if
you do not give the customer a reason to do business with you? And again,
Corporate America seems to be oblivious. The lousy ads appear in many publica-
tions and newspapers without having any effect whatsoever! How do you solve the
problem? The client must do a much better job of informing the ad agency about
the benefits of the product and, most importantly, what differentiates that prod-
uct from the competition.
As stupid and ill-advised as this may sound, believe it or not, a few marketing/
PR people go out of their way to destroy relationships with the most powerful
media companies in their industries! To me, this is like someone developing a
new Bible for Catholics and, as the first order of business, they decide to break
all relationships with the pope! I know this sounds stupid, but it is also sad and
it is happening! Unfortunately, this is also a true story. Who is to blame? Of
course, top management for hiring and keeping such idiots on the payroll!
In any business, every now and then one encounters an entrepreneur who has
no experience in marketing who likes to take on the role of a marketing manager,
or one meets a marketing director who simply speaks at the direction of the entre-
preneur who has no experience in marketing. Unfortunately, often in these cases
if they market and do not sell something for a short period, they cancel all of their
marketing without investigating why they did not sell anything. Such people
should know that only properly prepared marketing messages that speak to the
audience in a benefit-driven manner, and that are properly placed in a magazine
(or other media) that targets their audience, are the ones that will generate sales
leads. In addition, unlike the common belief that all leads will turn into sales, sales
leads, no matter how qualified, are worthless if you place them in the hands of
 Business-to-Business Integrated Marketing 151

unproven salespeople. In other words, a response-driven campaign that is properly

developed, speaks to the audience with something to offer, and is placed in an
appropriate, targeted publication will generate leads and only sales leads, but no
sales by itself. Consequently, sales leads should first be qualified and then must
be placed in the hands of a good salesperson with appropriate closing techniques
to sell the product/service and convert the sales leads into customers.

THE BIGGEST MISTAKES OF ALL

In my judgment, two of the biggest blunders made by businesses are as follows:
1. The greatest mistake made by downsizing is laying off the core people who are the
foundation of your business success. Let it be known that categorically I truly hate
to lay off anyone solely because of economic conditions.
2. Many ill-advised senior managers also authorize drastic cuts in advertising, market-
ing, and trade show participation. As far as I am concerned, these people are making
the greatest possible mistake and thereby inflicting the greatest possible damage to
their corporations. Here is why: In a slow economy such as the one we are now
experiencing, every corporation loses anywhere between 50 and 70 percent of its cur-
rent customers. We also know that all sales begin with a sales lead. Furthermore, the
sole purpose of marketing, advertising, and trade show participation is to generate
qualified sales leads, which, when handled properly by the sales department, will
become new customers. However, when you cut all marketing, advertising, and trade
show budgets, and you lose 50 to 70 percent of your customers, how then can you
replace the lost customers and still remain in business? To me, this is a very simple
principle of business, and yet in every recession, the majority of corporate leaders still
make the mistake of eliminating their marketing, advertising, and trade show budg-
ets. In my judgment, this explains why so many companies go under at such times!
It is like cutting off your nose to spite your face!

WHY SOME COMPANIES FAIL

Based on my years of experience watching businesses develop, grow, and then
decline, I offer the following lessons or examples of the most common failures.

Lesson #1: Ignorance Is the Entrepreneur’s Best Friend

I am a firm believer that ignorance is truly the entrepreneur’s best friend. I once
read a study made by a reliable research organization that stated that 90 percent of
entrepreneurs are between the ages of 30 and 38, because that is a period in life
when people do not know an excessive amount about business, but they do know
some things for real. Consequently, entrepreneurs in that age bracket are more
likely to take a plunge, and once they are in the water, they know that they have
to sink or swim. That element alone leads the entrepreneurs to become successful.
152 Marketing in the 21st Century and Beyond

Lesson #2: Why Do Some Companies with Poor Products Succeed

and Others with Very Good Products Fail?
Believe it or not, this was precisely the case for a pair of companies, one with a
great product and the other with a mediocre product. Ironically, the former (the
company with a great product) nearly went bankrupt, while the company with
the mediocre product maintained better than 80 percent market share! If you
asked me to explain why this was so in one word, I would say “marketing.” If
you allowed me three words, I would say “lack of marketing,” and if I could use
two more words, I would say “lousy marketing.” Believe it or not, this is a true
story, and I admired the company with the highest market share simply because
the CEO of that company was a master marketer, while the CEO of the failing
company considered marketing to be a necessary evil, and he gave it only lip ser-
vice. The ironic thing, in this case, is that the above scenario occurred with not
only many high-technology companies but also several teleservices companies.

Lesson #3: The Case for the Teleservices Companies

Company A and Company B ranked #48 and #49 in the Top 50 Teleservices
Agencies ranking as selected by the editors of Customer Inter@ction Solutions mag-
azine. The CEO of Company A was a master marketer and frequently consulted
with TMC. He followed practically every suggestion that we gave him. He was
also an excellent manager and had very talented and hardworking employees. As
a result, the company rose from #48 to #2 in the Top 50 rankings (over a five-
year period), and thanks to the tremendous business savvy of the CEO of
Company A, the company went public in the mid-1990s at about $15 a share.
Subsequently, the price rose to $80 per share. Later on, there was a two-for-one
split, and the split stocks also rose to $80 per share. The bottom line is that the
CEO and founder of Company A cashed in an estimated $600 million worth of
stock, and through exceptional investing, he has now become a billionaire.
Company B did nothing: no marketing, no promotions, no advertising, and
therefore the company went nowhere. Again, this is a true story.

Lesson #4: Having a Marketing VP with No Budget

Believe it or not, some companies are shortsighted enough to have a marketing
vice president, but no budget. They try to rely completely on word-of-mouth
marketing. Even if these companies have not gone out of business over the last
25 years, they have not made much progress either. To me, it is incomprehensible
for any company to have a director or vice president of marketing, but no budget
for promotion or advertising.
 Business-to-Business Integrated Marketing 153

Lesson #5: Rush to Market

Back in 1990, a leading company in our industry came up with a product that
was supposed to be all things to all people. For political and personal reasons, this
product was marketed long before it was ready. The powerful marketing and pre-
viously existing respect for this company in the industry led many innocent call
center executives to adopt that technology, only to find out that it was completely
nonfunctional and, in fact, that it was nothing more than a major headache. As a
result, the company lost major market share and still has not recovered from that
disaster.

Lesson #6: Suing Your Influential Customers

Another idiotic and totally incomprehensible action that a few CEOs have
taken in the recent past was actually threatening to bring a lawsuit against their
leading customers. The reason? The customer refused to renew its contract with
Company A because of Company A’s obsolete product and unreliable technical
service. The shortsighted CEO of Company A was blinded by his ego and did
not realize that the contact center industry, like many other industries, is an
extremely well-connected group. In other words, when somebody screws up a
great company by offering lousy service, yet does not allow customers to go else-
where by virtue of threatening lawsuits, that CEO has no reason to exist, in my
opinion. Fortunately, one such CEO was let go just before the company went
under. This was not the first time I had witnessed such an illogical and idiotic
action of bringing a lawsuit against a prestigious customer. Back in my chemistry
days, the CEO of a chemical adhesives company where I was employed submitted
a completely defective product to the company’s leading customer. When the cus-
tomer refused to pay, the ill-advised CEO brought a lawsuit against the customer.
That ill-advised action took the chemical company, which had heretofore been
the #1 supplier to the industry, to last place. Eventually, the company was sold
for practically a song to a leading competitor. One wonders how the board of
directors of any responsible company could put up with this kind of stupidity—
instead of providing maximum care for their leading customers, they actually
brought a lawsuit against them. Yes, it sounds utterly stupid, but it has happened
and I have witnessed it.

Lesson #7: The Demise of Horizontal Trade Shows

Once upon a time, the granddaddy of all technology shows, COMDEX, fea-
tured exhibitors who offered soup to nuts in terms of products. Suddenly, there
was a shift in the marketplace from exhibiting at horizontal shows in favor of
154 Marketing in the 21st Century and Beyond

exhibiting at small but highly focused and targeted trade shows. As a result,
COMDEX no longer exists. What made matters worse in COMDEX’s case
were ill-advised managers who treated every exhibitor like dirt and dictated to
those exhibitors that if they wanted a particular space the next year, exhibitors
must increase their booth size by 20 to 50 percent. The rule was, “Take it or
leave it.” Eventually, exhibitors who were not getting much business out of
COMDEX anyway declined to continue exhibiting, and COMDEX is now
history.

Lesson #8: The CEOs Blinded by Ego

As I have indicated in many of my previous editorials, a CEO can be a double-
edged sword. On the positive side, a CEO with the right frame of mind and the
proper attitude can enhance the revenues of his or her company tremendously.
The right CEO will actually build and reinforce relationships with all customers,
or as many of his or her customers as possible, and, in fact, will play the role of
ambassador for the company. Alternatively, many CEOs would prefer to deal
only with other CEOs. In such cases, the wrong CEO (who is rude and has a huge
ego problem) would spell disaster. I know one CEO who inherited a company
with about 80 percent market share. That market share was largely the result of
an outstanding CEO who had run the company previously. The new CEO, a per-
son with horrible interpersonal skills, came in and started to break most, if not all,
of the company’s relationships one by one! As a matter of fact, I became so dis-
gusted with that particular company that I wrote an editorial about how lousy
some companies are in treating both their customers and the leading media in
their industry. One analysis that I used was that the company acted as if the world
owes them everything and they owe nothing in return. Needless to say, that par-
ticular CEO was let go, and the rest of the company was extremely happy for that.

Lesson #9: Build Great Products and Keep Them a Secret!

Another great lesson that we continuously learned from mistakes made by small
to medium-size companies is as follows: the tendency of technology companies
has often been to build a better mousetrap only to find that the mouse died
15 years ago! Believe it or not, as funny as this may seem this is still the case in
80 percent of technology companies. Recall the CEO of a speech technology
company that I told you about earlier in the chapter, who had invested many
years of his life and all his money in developing his product, but insisted that he
had no money for marketing. Can you believe he actually said something so
idiotic? We have stated in these editorials many times that “if you don’t mar-
ket, you don’t exist.” In fact, in previous editorials I updated that comment by
 Business-to-Business Integrated Marketing 155

saying, “If you’re not on the first page of Google and/or Yahoo search results for
your industry, you don’t exist.” Nevertheless, high-tech companies continue to
ignore the rules of marketing and they give only lip service to it. Ironically, the
few companies that do market seem to have one or more of the following
problems:
• The marketing pieces and advertising are not benefits-driven.
• There is no differentiation statement.
• There is no positioning statement.
• There is a wrong message to the wrong audience.
• There is no call to action!
With that many problems, it is no wonder that many who do a lousy job of
marketing do not blame their lack of knowledge about effective marketing; they
say marketing does not work or advertising does not work, whereas in reality their
poor marketing message has all of the above problems, and in most cases, their
messages have no call to action. That should explain the reason for unusually high
rates of failure within the technology companies—they typically spend 95 percent
of their budgets on research and development of new products and next to noth-
ing on marketing. Today, no company prospers without the implementation of
well-strategized integrated marketing.

Lesson #10: Do Not Hang Your Hat on PR Alone

Many times, I have witnessed CEOs and vice presidents of many technology
companies go on media tours with the PR staff. The companies visit both the
leading publications as well as the industry analysts. Oftentimes, they feel that
their visit will lead to press via PR, and thereby they feel that their marketing
job is done. Many CEOs, while visiting the leading media providers, rarely ask
“How do you think I should market my product?” And that is the source of the
problem, because a leading publisher who really understands the industry can
offer practical solutions and suggestions for effective marketing strategies at no
charge. Yet many companies are not receptive to it, and they feel that PR alone
is going to do the job. In my humble opinion, that will never happen, and it is
only wishful thinking.

Lesson #11: M&A Blunders

In the mid-1990s, when the contact center industry was flourishing and grow-
ing at literally 50 to 100 percent a year, Wall Street became extremely interested
in the contact center industry, specifically in teleservices. Investment bankers
started calling me and asking me what I thought about this company or that
156 Marketing in the 21st Century and Beyond

company. It looked as if there was a feeding frenzy or, more specifically, an acquis-
ition frenzy going on. Every week or every month, I would hear of a new acquis-
ition. I was concerned about this activity—not because I did not feel that
consolidation would be good, but because many of the acquirers were financial
buyers, which means they were strictly interested in making a profit and they were
clueless about the many, many details that need to be considered in order to effec-
tively run and manage a call center. I recall talking to such a financial buyer who
used to be a waiter in a restaurant; he then purchased the restaurant and sub-
sequently went into the real estate business and made a ton of money. At that
time, he discovered the rapid growth of call centers. As a result, he borrowed mil-
lions and acquired half a dozen incompatible and subpar companies. Before too
long, as expected he ran into major problems. I recall receiving a call from that
person asking me what he had done wrong. Unfortunately, it was too late. If he
had called me prior to the acquisitions, I would have told him that his particular
combination of incompatible companies would never have become a unified
profit center. As a result, millions of dollars were wasted.

Lesson #12: The Unlikely and Unfortunate Story

A few years ago, a poorly funded company (Company X) claimed to have devel-
oped a new technology that raised the eyebrows of all technology-savvy people.
The company made every claim known to humankind, and they made many,
many promises. While no one was taking them seriously, they decided to manipu-
late an analyst to state that upon evaluation of all products in this category, the
analyst found Company X’s product to rank at #1. Obviously, some monetary
rewards must have changed hands, otherwise such nonsense never would have
been presented. The industry was up in arms. All manufacturers were against this
action, and they spent a considerable amount of time informing the rest of the
industry to beware of Company X’s questionable practices. To make a very long
story short, eventually Company X went out of business.
I have always wondered what is in the minds of the people who continue to
make mistake after mistake and misleading statement after misleading statement,
getting involved in all of the problems that I have outlined above. I once
explained some of these problems to a highly respected CEO of our industry
who, in my judgment, was one of the most, if not the most, knowledgeable
CEOs in our industry. I shared with him some of the errors that were being com-
mitted. I asked him what he thought about the issue. His answer was, “If this
industry wasn’t so good, many of those CEOs would be pumping gas!” The more
I thought about it, the more I realized he was right. Obviously, the purpose of this
editorial is not to embarrass anyone or badmouth any individual or any company;
rather, the main objective of this editorial is to learn from some of the mistakes
 Business-to-Business Integrated Marketing 157

made in the last 25 years. If I can prevent anyone from making any of the above
mistakes, I think I have accomplished what I set out to do!

MARKETING THROUGH EDUCATION: THE ONLY WAY

TO GO
It has been proven that the only way to market high-technology products is
through education. There is simply no other way. One of the best ways to address
this is to come up with unique and innovative editorial/marketing strategies to get
your message across convincingly. The key to successful marketing must include
the following, at a minimum:
1. Think out of the box and think integrated marketing.
2. Be innovative.
3. Remember the top three rules of marketing and advertising, which are benefits,
benefits, and benefits. If your marketing message does not have a powerful, benefit-
driven message, do not expect any results.
4. Positioning. Nothing is more important than all of the above, plus positioning.
5. And . . . differentiation.
6. Last, but not least, please note that without question, an integrated print, online, and
trade show campaign is much more effective than focusing on only one or the other
exclusively.
The combination of positioning and differentiation is what gives your custom-
ers a reason to buy your product as opposed to your competitor’s product.
To be successful, you need to follow the above guidelines to avoid wasteful
spending and costly mistakes and, above all, do not put all of your eggs in the
same basket. Online can be extremely rewarding if you follow the above guide-
lines. That is, integrated marketing should be the foundation of your marketing
program to include online, print, trade shows, etc., to bring appropriate brand
recognition and marketing through education in order to help you maximize your
marketing ROI.
 CHAPTER 11

NOSTRADAMUS KNOWS DIRECT

INTERACTIVE MARKETING: DIRECT
MARKETERS AS 21ST-CENTURY
TREND MESSENGERS
William J. Hauser

INTRODUCTION
During the 16th century, Michel de Nostredame (Nostradamus), a French physi-
cian, gazed into his crystal ball and made predictions that are debated and, in
some cases, anxiously awaited almost four centuries later. Written in the form of
rather obscure four-line poems, or quatrains, Nostradamus and his work remains rel-
evant today. Actually, one might look at the continued popularity of Nostradamus’s
work as an extremely successful direct multichannel marketing campaign.
The predictions written as quatrains have made and still make excellent copy.
Because they are obscure, often written in a combination of languages, the reader
is required to reread and study their contents many times over (stickiness). This
obscurity also makes them adaptable to just about any recent historical time frame
(relevance). Over the epochs the predictions (product) have remained the same; it
is the delivery channels that have changed. Originally marketed by word of mouth
and in limited print, Nostradamus’s quatrains are universally marketed today via
the Internet, books, television, movies, and other channels. Interestingly, unless
some of Dr. Nostradamus’s more dramatic doomsday predictions happen in the
near future, there is no end in sight for this product. Think about it. A marketing
campaign that has lasted for almost 400 years and is still going strong. I think we
all might love being the account executive on this campaign!
 Nostradamus Knows Direct Interactive Marketing 159

As technology continues to breathe new life into marketing, especially direct

interactive marketing, it might prove profitable to conjure up Nostradamus and
his crystal ball to observe where direct interactive multichannel marketing is
headed in the first quarter of the 21st century. However, as with Nostradamus’s
earlier predictions, a caveat is offered here.
Nostradamus’s predictions come true
As history allows them to.
But a crystal ball’s view clouded
Makes predictions in uncertainty shrouded.
The following article will view direct interactive marketers as the trend messen-
gers of the 21st century. It will then borrow Nostradamus’s crystal ball to look
first at 21st-century consumers. Next, it will envision the role of technology and
its future impact on interactive multichannel marketing. From this, we will delve
deeper into the all-seeing orb in an attempt to predict the consumers’ responses to
it and any potential obstacles in the prediction.

The Macroscopic Millennium

A few years ago, you went to bed at night in one millennium and woke up the
next morning in a new one. While this may not sound like it is a big deal, think
about what was occurring. You were born into a century of rapid technological
and social change. The 1900s were full of events that were unimaginable a cen-
tury before. How many people in the 1800s even knew what an atom was, much
less understand what it means to split it or make it a weapon of mass destruction?
Similarly, how many 19th-century thinkers would have ever fantasized that they
could speak into a little mouthpiece and be able to communicate to anyone, any-
where in the world?
Where the 20th century has brought sweeping macroscopic innovations, the
21st century will foster in a trend toward understanding everything to the nth
degree. Technology will continue to advance at even more accelerated speeds than
it did in the past. With these advances our capacity to gather information and
understand the environment around us will continue to grow and expand.
Where we were once satisfied with a broad explanation, we will expect and
demand the most minute of details. As we become inundated in our “intelligence
society,” even the simplest of relationships or transactions will become complex,
characterized by the need to have all the information available, even if it is just
buying a gallon of milk.
In order to obtain this information, new tools will be developed that are
beyond our dreams. Those bulky objects we call personal computers today will
soon be museum pieces. Books, as we know them today, may become obsolete
and exist only as antiques or collector’s items. The communicative capacity of
160 Marketing in the 21st Century and Beyond

the Internet will be viewed by the late 21st-century thinker in the same way that
we currently view the technological advances of two cans and a waxed string.
These sweeping changes will be exciting for the direct marketer to identify and
follow. The marketer will have new-millennium tools available to track trends,
understand messages, and ascertain the impact of these innovations on business
and culture. More importantly, the marketer will thrive in an environment of
rapid social and technological change that he or she can convert into actionable
policies and actions. The direct marketers of the 21st century will also serve as
the trend leaders for many of the new trends. Because of the plethora of informa-
tion available to everyone, the marketers will want to take the time to thoroughly
investigate and understand the short-term and long-term impacts of a myriad of
trends. Because they are the ones with this information, they will become valued
as the trend messengers.

DIRECT MARKETERS AS TREND MESSENGERS

Trend Messengers
Since trends are an integral part of a culture, the direct marketer can use the
trends to define the likes/dislikes, current interests, “hot buttons,” and general
whims of the group. By definition trends are ideas, attitudes, or behaviors that
reflect a current style or pattern of behavior within a group or culture. These
trends reflect social conditions and demonstrate a direction in which these condi-
tions are moving. Trends influence and are influenced by a number of groups in
the culture or society. Finally, trends are time based and dynamically change
within those time parameters.
The information given off by the trends is what is called trend messages. Like
all messages, there is a sender and a receiver. The message must be communicated
from the sender to the receiver in such a way that there is a shared understanding
of the contents. If the receiver does not understand the message or translates it
differently than the intended meaning, confusion arises.
Trends are complex messages and are subject to a wide variety of interpreta-
tions. This is why the direct marketer should not accept a trend message at its face
value. A successful trend analyst will look at each trend from a number of different
perspectives. This process, called triangulation, allows the analyst to understand
the causes or conditions that helped the trend to emerge, the climate in which
the trend exists, how individuals are responding to the trend, and most impor-
tantly, the trajectory or path the trend is expected to take over the next few years
or months.
The intricacy of trend networks and the multiple messages generated from
these networks further complicate the direct marketer’s work. Since different
groups and individuals will interpret trend messages differently, it is imperative
 Nostradamus Knows Direct Interactive Marketing 161

that each meaning be placed in its own social context. Understanding the social
context and the receiver’s motivations/needs is as important as understanding
the trend message itself.
In 21st-century society and business, the individual who can identify trends
and successfully convert the messages into programs and products is an extremely
valuable asset. This person has the ability to define and shape the direction of the
culture, group, and, especially, the business world. These individuals are called
trend messengers. Trend messengers will take the multitude of messages given
off by a trend, develop actionable interpretations of the messages, and then help
others to develop successful responses to them.
Trend messengers play different roles at the different levels of society or busi-
ness. At the national level, news commentators identify and define those macro-
scopic trends affecting the rest of us. Because their audience is so large, their
interpretation of the trend is quickly shared by the group listening to them.
Remember that the messenger’s interpretation is not necessarily value-free or
unbiased. The messenger’s political, social, and religious background will help
to shape his or her interpretation of the messages. Due to the near universal reach
of the media, today’s national trend messenger wields a great deal of power.
Political officeholders and their opponents spend great amounts of time and
money trying to persuade the public that their interpretation of the trend is the
only right way to view it. At the local level, similar trend messengers exist to help
shape the opinions of the individuals who live or work in the area. While these
individuals may not have the reach or power of the national players, they are still
able to exert substantial influence in people’s daily lives.
At the individual business level, trend messengers are essential. Most businesses
work in an environment shaped by a large number of trends. These trends can be
both beneficial or harmful to the business. Anyone can say that they have identi-
fied a trend and this is what it means. However, without understanding the
numerous components of the trend, its networks, and its implications, the
response may be wrong or, at the worst, damaging to the company. Business
trend messengers develop a knack for identifying and interpreting trends. It
becomes almost second nature to place trends in their social context and then
apply their findings to program and product development. This second nature,
however, comes from experience; that is, the expertise to identify, analyze, and
interpret trend messages and translate this process into actionable responses. So,
trend messengers rely on a blending of the art of trend identification and the sci-
ence of trend analysis and interpretation.
Becoming a trend messenger and successfully interpreting trend messages is
exciting and fun, and can be profitable for both the individual and the company.
Trends and their messages are everywhere. The successful trend messengers will
be the ones who can quickly and accurately turn trend messages into profit for
their companies.
162 Marketing in the 21st Century and Beyond

Trend Evolution
Today’s trends are tomorrow’s reality! Tomorrow’s trends provide the material
for today’s science fiction writers. In the early 1900s airplanes and automobiles
were considered fads that would surely pass quickly into oblivion. As each of the
decades of the first half of that century passed, older generations must have mar-
veled at how dramatically things had changed in just the past 10 years. It had
become a way of life in American society. Not only did the automobile evolve
through a number of its own trends (e.g., convertibles, large engines, rumble
seats, tail fins, whitewall tires), it also served as the incubator for a number of
other related trends. Where would fast-food restaurants, gasoline stations, drive-
in movies, 24-hour shopping, ATM banking, weekend trips, and even the sub-
urbs be if the automobile had remained a fad?
Airplanes have followed a similar evolutionary trend trajectory. Orville and
Wilbur Wright’s first excursion must have seemed very strange to those who
observed it or heard about it for the first time. But within a few short years, this
futuristic phenomenon became interwoven into the fabric of our culture. All of
a sudden airplanes were being used for entertainment, travel, and warfare. As
the airplane’s trend messages were heeded, the trend accelerated at lightning
speeds. In less than 30 years after the Wright brothers, planes could cross the
country and, eventually, the oceans. People could travel distances in a day that
used to take a week or more. But this was not enough. By the late 1940s, words
such as “jet” airplanes and “rocket-powered” crafts began to enter our vocabulary.
By the end of the 1990s, even the youngest pilot-in-waiting knows that you can
now fly to Europe in about three hours and to the moon in a couple of days.
Studying the evolution of major trends is like studying the history of a culture.
As the trends evolved to new forms, so has culture’s reaction to them. Today’s
trends, as advanced as we may think they are, are only reflections of our culture
at a given point in time. As time changes so does this reflection. What will our
trend reflections look like 50 or 100 years from now? Will trips to other parts of
the world be in our own family “astromobile”? Will trips to the moon or other
nearby stars become commonplace? If this sounds farfetched, look at the turn of
the 21st century through the same glasses that your ancestors viewed the new
20th century. To the direct marketer in 2099 we may look as simple and unso-
phisticated as the horse and buggy.

Trend Messengers or New-Age Prophets

The role of the trend messenger is still in its embryonic stage, but it will grow
exponentially into the next century. Direct marketers must be prepared to take
the lead in information gathering, trend tracking, and, most importantly, con-
verting trend messages into actionable solutions to business needs. The role of
 Nostradamus Knows Direct Interactive Marketing 163

trend messenger will become essential in those businesses where innovation and
staying in touch with the consumer is important to their success. Understanding
trends and how individuals and groups respond to them will be a skill that will
be in great demand in the future.
Since the beginnings of the human race, individuals have been trying to predict
the future. Whether it was reading tea leaves, tarot cards, or crystal balls, our fore-
fathers conjured up ways to try to figure out was going to happen next in their lives.
Even if they were right a fraction of the time, they gained the reputation as being a
seer of the future. Today, we still attempt to gaze into the future but in a more
scientific way. Computers have replaced tarot cards, and telecommunications has
replaced the crystal ball. But today’s direct-marketing trend messengers are not all
that different from their ancient ancestors. They are expected to give meaning to
events and actions and to use the resources at hand to “show others the way.”
The tools that future generations of direct marketers will have available can
only boggle our minds today. Millions of pieces of information will be collated,
analyzed, and interpreted within a matter of seconds. Decisions will be intelli-
gence based, and their outcomes will be evaluated at different times in different
settings. The status of the future trend messenger will be elevated, and the role
will become a prized asset for trend-centered companies.

THROUGH THE CRYSTAL BALL

The 21st-Century Consumer
The year is 2011. The oldest baby boomer is 66, and the youngest boomer is
48 years old. Less than a century ago, people in this group (if they lived that long)
would have been considered elderly. Now, 10 plus years into the 21st century, the
majority of these individuals live healthy, active lives and few people would con-
sider them “over the hill.” These charter members of the new-millennium club
are still the largest and most powerful consumer group. However, their offspring
have caught up. The children and grandchildren of the baby boomers have
become adults and have emerged as very powerful consumer segments.
These two groups are integrally linked. The mature consumers have taught the
younger consumers how to select the “best value” products and how to be brand
loyal. Since both groups share information and opinions, they greatly influence
each other’s product awareness and purchase decisions. Thus, while these seg-
ments are major forces by themselves, together they form a strong network.
Within this network the diversified consumer groups reside at different points
on both the lifestyle and life cycle continuum. More importantly, they provide
different perspectives and strongly influence each other’s decisions.
The key difference between the mature and young (45 and under) consumers is
their different positions on the life cycle continuum. Mature baby boomers are
164 Marketing in the 21st Century and Beyond

looking for products and services that help them maintain and enhance their life-
styles. Their key focus is convenience. Time is a precious resource, and anything
that can be done to allow them to use this time to their advantage is appreciated
and rewarded. The mature boomers are in the process of reengineering their nests.
They are renovating their current living quarters or moving to smaller ones. At the
same time, they are downsizing their possessions and reorganizing their lives to
meet their current lifestyle needs. Most importantly, this mature consumer group
spends a good deal of its time helping others, especially family members. The
“peace, love, and happiness” philosophy of the 1960s, while somewhat subdued
by the conservatism of age, has been firmly ingrained in their psyche. This feeling,
coupled with the family focus of the late 1990s, has led the group to be very sup-
portive of significant others in the form of financial assistance, gifts, and advice to
family members. Like their parents and grandparents, the mature baby boomers
relish the opportunity to give of themselves (emotionally and financially) to their
children and grandchildren.
As the younger consumer groups (i.e., Generation X and the Echo Boomer
Generation) have grown in size, the pendulum is gradually swinging back toward
youth. Like their parents, these groups have their unique needs and lifestyles.
While they appreciate the values taught them by their parents, they want to be
different. This is reflected in the products and services they want and purchase.
At the same time, these emerging groups are in the process of creating and feath-
ering their own nests. In most cases these are their first homes, and coupled with
the growth of their families is the need to make the nests meet their lifestyles.
Because of their growing families and the resources they need to get started and
maintain their lifestyles, this group relies on their parents and grandparents for
help, support, and advice. It is here that brand support and loyalty are enhanced.
The younger consumers’ familiarity with products and services is reinforced by
the wisdom they receive from their “trusted” elders.
The living environment in 2012 is similar for all the consumer segments. The
pessimism toward government, politics, and business that was planted in the
1960s and germinated throughout the rest of the century remains strong in
2012. Highly active, highly stressed living environments are the norm. The aver-
age age of most houses is over 50 years, and many dwellings are in need of sub-
stantial renovation. More people are living alone due to the growth of baby
boom widows and widowers, the growth of single-parent families in the late
20th century, and a trend toward singles living alone or in alternative arrange-
ments. Not unlike in the late 1990s, consumers in 2012 are fearful of victimiza-
tion. Aging neighborhoods, aging consumers, and the uncertainty of random
crimes keep the new-millennium consumer on guard for his or her well-being
and protection. Environmental awareness and activity are a normal part of the
behavior, having been internalized into the culture by the youth who learned it
in school and practiced it into adulthood.
 Nostradamus Knows Direct Interactive Marketing 165

Consumers Define Value

Each consumer in the 21st century is driven by his or her own definition of
“value.” These definitions are learned from others and based on individual experi-
ence and attitudes as the consumers attempt to deal with the world around them.
Because their social environment constantly changes, their definitions of value are
also subject to change. The notion of value is centered around the psychological feel-
ing of making the “best deal.” Delighted consumers are those who feel satisfied that
they are the winners in the transaction they just completed. While price is impor-
tant, it is but one of a constellation of factors that make up the value equation.
Because of their busy lifestyles, new-millennium consumers value superior sol-
utions to their needs and problems. They have high expectations for product
innovation, quality, and service. While switching costs (especially time and con-
venience) are high for most consumers, they will change to someone who they
perceive is providing them a better solution. However, these consumers will sup-
port brands that continuously meet and surpass their expectations. The brands
that have become a part of the consumer’s family are the ones that will thrive
and enhance consumer loyalty throughout the 21st century.
The new-millennium consumer is actually an extension of the late 20th-
century consumer. They continue to demand more for less. They want more
value and satisfaction for less for less time, effort, and money. They do their
homework and demand to be treated as an intelligent partner looking for the best
solutions. While they remain critical and somewhat pessimistic, they expect com-
panies to create solutions for “just my needs.” Businesses that are able to do this
on an ongoing basis will be richly rewarded.

The Power of Communications

The 21st century is the century of mass communications. Information is spread
almost instantaneously from individual to individual, house to house, community
to community, nation to nation. Information that took weeks and, in many cases,
months to get from one point to another now can be received as quickly as it is
transmitted. An individual can pick up his or her telephone and speak to a friend
or colleague in China and another one in Argentina. Not only can that individual
talk with each one, the system is configured to enable the three of them can carry
on one conversation. Similarly, the Internet is currently at about one-tenth of its full
potential. Its capacity to store and disseminate information will grow exponentially
as the new technologies, markets, and needs continue to demand more of it.
If one thinks about it, the trajectory of the communication trend has acceler-
ated almost exponentially during the past 50 years. Imagine living in the 1940s.
Television was a novelty, telephones were rotary with party lines of many users
hooked into one system, and radios and newspapers were the chief sources for
166 Marketing in the 21st Century and Beyond

information. Events were at least a week old before you saw them on the newsreels
at your local theater. But keep in mind that all of these forms of communication
were light-years ahead of the technology even 50 years earlier.
Now look at the world almost 80 years later. Television is no longer a novelty
and may even be considered a necessity in many parts of the world. Instead of
one or two channels on a very small and fuzzy screen, you now have a choice of
hundreds of channels on a large screen with a deciphonic sound system.
Current events are transmitted “live” into your living room. Telephones have
advanced to the stage where you can make calls, fax information, text message,
take pictures, and link directly into your home computer. Telephones are no
longer constrained to walls or booths; they are portable and cellular and can be
taken anywhere you go.
Now look ahead to the year 2040. If the communication trend continues to
follow its astronomical growth trajectory, one can only imagine what communica-
tion devices and media will be commonplace then. Futurists tell us that by this
time everyone will have his or her own personal identification number. The num-
ber will be uniquely yours, and no matter where you go in the world, people will
be able to communicate with you by just dialing the number. Along with this per-
sonal identifier will be personal communication devices that will go everywhere
you do. These devices will be very small and powerful and may even become a
part of your wristwatch.
This communication trend is important to direct marketers for a number of
reasons. First, it is the medium by which information is spread. Small, isolated
events that in the past would have not moved any farther than 50 miles from
the point of origin now achieve global impact within a matter of minutes.
Second, because of the large audiences that receive the messages, the role of the
direct marketer becomes extremely important. No longer is the messenger’s
sphere of influence small. Instead, the messenger may now be putting his or her
“twist” on a message that is being received by millions of people. In today’s envi-
ronment, the messenger has the power to change the definition, interpretation,
and direction of a trend in a matter of seconds. Third, the speed at which mes-
sages are communicated to the masses accelerates the life cycle of a message.
With instantaneous communications the message has a very short incubation
period. It also becomes subject to different interpretations quicker and therefore
is more likely to be adapted to individual, group, or cultural needs.
All of this makes the marketer’s job more difficult. There is little time to ana-
lyze the message and project its future. Decisions are made based on available
information. However, most of this information will be outdated within a matter
of days or weeks. Also, because of the size and diversity of the audience, the direct
marketer must be prepared to examine the message from a number of individual
and cultural perspectives. This can become a task of major proportions.
 Nostradamus Knows Direct Interactive Marketing 167

Thus the 21st-century telecommunication trend is integrally linked to most

other trends. It affects how these trends are defined, grow, and are supported.
Changes in the telecommunication field not only affect the acceleration of the
trend trajectory, they also influence how the trend will be viewed and followed.
As such, the telecommunication trend is and will continue to be one of the most
powerful macroscopic trends in existence.

The Age of Aging

In 1945 millions of jubilant soldiers returned home to their loved ones and had
babies. From 1946 to 1964, these babies came in record numbers. Little did any-
one know at the time that this group would someday be the largest age cohort in
American history. Not only is it the largest group numerically, it is also the most
educated and the most powerful age cohort, both politically and economically.
This group of “baby boomers” has influenced all aspects of American society
and continues to do so well into the first quarter of the 21st century.
As the age structure of the population has continued to change, so has culture’s
view of it. Advertising, once focused on the young, upwardly mobile individual, is
now oriented toward the middle-aged consumer. While this shift has gradually
evolved, businesses have been slow to understand and respond to the trend. This
response is only now occurring, in earnest, with most companies. Perceptions are
changing from viewing the “mature” consumer as a small niche group that has out-
grown its need for most products to an ever-growing, powerful and affluent group
of consumers who may be looking for new products and services or may be pur-
chasing products as gifts to help and assist others, such as their children or
grandchildren.
The mature market has traditionally been viewed by the business world as a
group of individuals who have accumulated all the material possessions they need
and therefore are a less than viable market. Many businesses have erroneously
labeled this group as “old” and view the mature segment as not being interested
in or physically capable of using their products. Businesses have also assumed that
this group of consumers do not have the financial wherewithal to purchase their
products or services. This could not be further from the truth.
In 1996, the baby boomers began to cross the threshold into the 50 age
bracket. As this group approached this benchmark age, the messages also changed.
The new business mentality is to view the mature consumer of the early 21st cen-
tury as a very important and influential segment. Today’s mature consumers are
looking for products and services that preserve and enhance their active lifestyles.
This group no longer stops being active because “you’re too old to do that”; nor
do they mind “looking their age” because they are interested in looking and feel-
ing their best no matter what the physical age may be. Thus marketing messages
168 Marketing in the 21st Century and Beyond

concerning youthfulness are being redefined from the traditional life cycle defini-
tions to also include lifestyle definitions.
Mature consumers of the 21st century have more disposable income than the
other consumer segments. More importantly, they have high levels of discretion-
ary time. They gather information, study it, and then make informed decisions
before they purchase the product. Probably the area most overlooked with this
group is that of customer loyalty. While most businesses have long realized that
established, satisfied consumers are the foundation of brand loyalty, they have
neglected the loyalty of some of their most faithful and enduring supporters.
Not only are older consumers among the most loyal, they are the key agents of
socialization for other consumers. Social scientists have long demonstrated the
importance of this intergenerational learning process, which can be parent to
child, older adult to younger adult, or vice versa. Direct marketers need to use this
interaction to better understand how consumers learn about products and
become brand loyal. Older consumers are very influential in making younger con-
sumers aware of products and services: either by using the product as the child
grows up or by explaining the advantages of one product over another.
Thus the macroscopic aging trend is affecting business attitudes toward older
consumer groups. Marketers are beginning to realize the vast amount of power
the aging consumer has. Mature consumers have a great deal of purchasing power;
that is, they have the financial ability to buy products that they feel meet their
expectations, needs, and lifestyles. Aging consumers also have immense amounts
of influencing power. They can influence businesses in the short run through
their purchases and investments in the company. More importantly, they also
have the ability to exert long-term influence over the company as they teach other
generations of consumers about the “value” of the products.

But What about Generation X?

With the dawning of the 21st century comes the realization that Generation
Xers have become middle-aged. This group of individuals, also is known as the
baby busters, was born between 1965 and 1986. Currently this cohort accounts
for 17 percent of the total U.S. population and approximately 46 million individ-
uals. While about one-half the size of the baby boomer (1946–64) cohort, one
must still remember that the 46 million individuals, if taken as a group, comprise
a larger population than over three-quarters of the world’s nations. In fact, this
group actually would be the 24th-largest country in the world.
For better or worse, Generation Xers are the by-products of their parents’ gen-
eration. A number of factors influencing their parents in the 1960s and 1970s
helped to shape the way this group thinks and acts. As the first group to live
through the baby boomer trends, the Xers are faced with the dilemma of dealing
 Nostradamus Knows Direct Interactive Marketing 169

with their parents’ youthful idealism turning to mature conservatism (i.e., “do as
I say, not as I did”). In a dialectical sense, the X Generation is the logical synthesis
of the baby boomer philosophical and ideological struggles with the previous
generation (Xers’ grandparents).
Numerous factors happened in the 1960s and 1970s that directly impacted the
Generation X phenomena. First of all, this era led toward an awareness among
women that more options were available to them. This, in turn, led to both legis-
lative and attitudinal changes in equality. Concurrently, men were beginning to
have a general attitudinal shift that enabled them to support these changes. The
overall effect of this was to change perceptions of traditional family roles, thereby
changing the structure of the American family.
Related to the dynamic changes in social and political factors were changes in
the educational institution. The ’60s and ’70s witnessed the highest proportion
of women attending college ever in history. This movement toward educational
advancement had a number of direct effects on baby boomer women. First, the
university setting and the advanced education opened up new avenues and
options for additional opportunities. This is an extremely important factor.
Attending colleges and universities meant obtaining new perspectives on attitudes
and values. At the same time, the educational environment presented a forum
where the time-honored ways of doing things could be debated. It is important
to remember, however, that new learning goes both ways. Men attending college
also had their eyes opened to the disparities in existing norms and traditions and
gained the realization that changes in these traditional behaviors and attitudes
were necessary and forthcoming.
A dramatic outcome of the growth in female educational advancement was the
trend toward delayed childbearing. Not only was childbearing delayed due to the
completion of undergraduate and graduate degrees, it was also delayed as women
entered into the labor force and pursued career opportunities. This delay was one
of the contributing factors for the lower number of births during this time frame.
Three other factors are directly related. One factor was the introduction and mass
usage of the birth control pill. Not only did it reduce unwanted pregnancies, it
gave women new freedom in relationships and competition with men. More
importantly, it allowed them to have better control over the planning of their lives
(i.e., school, career, parenthood). A second factor was the legalization of abortion
in 1972. Like the pill, it presented women with alternatives to childbearing and
helped to affect the smaller size of the succeeding generation. A third trend was
with the liberalized divorce laws of the ’60s and ’70s. These laws allowed women
additional freedoms and opportunities that did not exist under the traditional
patriarchal system of the past. At one point during this time, 40 percent of all
U.S. marriages ended in divorce. This trend was to directly affect the
Generation Xers in that they became the products of broken homes and dissolved
170 Marketing in the 21st Century and Beyond

marriages. As a matter of fact, approximately 50 percent of all Xers spent at least

one year in a single-parent household before reaching the age of 18.
Finally, the above factors probably would not have occurred to the extent they
did if economic trends had not been conducive to all of these changes. The expanded
economies of the ’60s and ’70s provided more jobs and opportunities and enabled
more women to pursue careers. In the 1980s the economy continued to affect
women’s growing entry into the labor force, but for different reasons. The prolonged
recession during this period caused more women to enter the labor force to supple-
ment family incomes. At the same time, the dissolution of many families created
a large group of sole breadwinners. In this case, women’s entry into the labor
force became essential as they increasingly took on the single-parent, head-of-
household role.
It is very important to remember that all of these factors are interrelated. Each
was and is dependent on the others. Together they helped to shape not just the
baby boomer generation but also their offspring. However, the offspring
(Generation Xers), unlike their parents, had little to do with the development of
these factors, but were required to face the consequences of them.
Among the consequences, Generation Xers were really the first latchkey gener-
ation. Growing up in families with working mothers and, in many cases, absent
fathers, members of this generation learned quickly how to take care of themselves
and their siblings. This meant preparing their own meals and finding entertain-
ment around the house. The Xers were weaned on the personal computer and
arcade games. For the most part these skills were self-taught, and members of this
group do not have the computer phobia prevalent among older generations.
Television and VCR growth was a direct result of the need to find entertainment
for latchkey kids while their parents were away from the house. When the parents
were available, the kids’ days were overly busy being chauffeured from one organ-
ized activity to another.
Generation Xers were also the first mall generation. Malls became the “in place”
for meeting friends, eating, attending movies, browsing, and shopping. This was
usually done without being chaperoned by the parents. Thus Xers became very
independent, experienced, and educated shoppers. Since work meant getting
money to purchase things, most Xers worked during their school years. Parents,
out of a combination of wanting to give their kids more than they had and guilt,
created a generation of entrepreneurs, capitalists, and brand-conscious consumers.
As the baby boomer parents moved away from the “five & dime” mentality of the
1950s, they became more brand conscious. While purchasing name brands for
themselves, they also lavished their kids with “designer” products. This brand
awareness was socialized into the Xers and then enhanced by them.
Finally, Xers, more than any other generation, have worked in ethnically and
racially integrated and diverse settings. As a group they are more tolerant of and
comfortable with differences and are more likely to have friends outside their
 Nostradamus Knows Direct Interactive Marketing 171

racial group. Demographically, as a group the Xers are more racially/ethnically

diverse than the overall population.

America: Melting Pot or Stew Pot?

As many of us were growing up it was common for us to hear that the United
States was the great cultural “melting pot.” That is, the best ideas, values, and atti-
tudes from each culture are mixed into one assimilated blend that we call the
United States of America. Recently, sociologists have changed this analogy from
a melting pot to a stew pot. In the stew pot analogy, each culture adds its unique
flavor to the American blend. Like a good stew, however, each cultural ingredient
maintains its own identity. To someone visiting this country in the first decade of
the 21st century we are all considered Americans; but among each other we are
very conscious of our ethnic backgrounds or heritage. Thus it is probably more
accurate to view ethnic diversity in the United States as accommodation (stew
pot) than assimilation (melting pot).
The United States’ history is one of ethnic diversity. Since our beginnings, the
trajectory has swung back and forth between assimilation, distrust, and accommo-
dation. In the early 2000s, the trend appears to be heading in the direction
of accommodation. This is being brought on by changing attitudes and shifting
demographics. Since the 1960s it appears that this culture has witnessed, to vary-
ing degrees, an attitudinal shift in favor of ethnic diversity. While this shift may
not always be evidenced in relations between ethnic groups, it has surfaced in
more subtle ways such as trends in ethnic foods and ethnic color and fashion
motifs.
Demographically, over the last couple of decades the major growth in the pop-
ulation in the United States has been among ethnic populations. Demographic
projections indicate that the white population growth in the first few decades of
the 21st century will continue to remain relatively flat. However, major ethnic
populations such African American, Hispanic, and Asian will grow at a relatively
accelerated pace. Of these three, the Hispanic segment is expected to grow the
fastest.
With the increased growth in population also comes an increased growth in
social and economic power. Ethnic populations will continue to grow politically
and, at the same time, wield more economic power. As this economic power is
converted into purchase behavior, it will be even more imperative for direct mar-
keters to understand the nuances in attitudinal, behavioral, and cultural differ-
ences in each of these ethnic groups. For example, it would be quite erroneous
to view an ethnic group, such as Hispanics, as one group. Mexican culture differs
from Central and South American cultures, which differ from a Puerto Rican cul-
ture, which is different from a Cuban one. Similarly, there is no one Asian or
African American ethnic culture. As the ethnic groups differ from the dominant
172 Marketing in the 21st Century and Beyond

culture on the macroscopic level, so then do they differ from each other on the
microscopic level.
In the 21st century ethnic diversity will continue to grow and manifest itself.
The challenge that marketers face is to decide when to emphasize the cultural stew
or when to emphasize the individual ingredients. Do the various ethnic groups
desire culturally specific products or do they want mainstream products?
Conversely, how much ethnic flavor will spill over to the overall culture? For
example, Spanish-American colors are prevalent in the southwestern part of the
United States. It is possible that this ethnic color palette has become the domi-
nant color preference for most individuals living in the Southwest, regardless of
ethnicity.
In order to successfully compete in the 21st century, marketers will need to
understand each ethnic group’s unique cultural heritage, values, and customs.
To do so, they will have to understand the unique trend messages and interpreta-
tions associated with each culture and ethnicity. At the same time, they will need
to be acutely aware of how the unique ethnic messages apply to the overall society.

We Have Got the Whole World in Our Hands

The 21st century will continue to manifest an ever-changing world. How many
of us had heard of Bosnia or Herzegovina before 1990? What about Afghanistan,
Darfur, and other trouble spots in the first decade of the new millennium? As you
watch television or read your daily newspaper, you are observing changes on a
daily basis that were unimaginable even a decade ago.
For the direct marketer the 1990s evidenced the opening of the global market
arena. More appropriately, however, we should call it the global markets arena.
With the formation of the European Economic Union, the opening of the
Eastern European and former Soviet markets, the strong advances of the Pacific
Rim nations, the North American Free Trade Agreement, and the advancements
in the standards of living in the developing nations of Central and South America,
new and profitable markets are available to those companies that take the time
and effort to understand them.
Even with the advent of major trading blocks, it is important for marketers to
remember that they are really dealing with a multitude of cultures that are very
different from their own culture and, also, from each other. Consumers in
Mexico City may be dramatically different in their lifestyles and consumption
behavior than people living in the United States and even from those consumers
in other parts of Mexico or in neighboring Latin America countries.
Similarly, products and services that meet consumer needs in the United States
may have to be adapted to meet the needs of other cultures. For example, many of
the products used in U.S. households would be considered too large for most
 Nostradamus Knows Direct Interactive Marketing 173

households around the world. Similarly, eating habits, food preparation tech-
niques, and food storage requirements differ significantly from China to Ireland
to Brazil.
Shakespeare once said that “the whole world is a stage.” We are actors on that
stage. Kind of overwhelming, isn’t it? How do you influence events in Japan,
Germany, or Argentina? It may be more accurate, however, to view the world
not as one all-encompassing stage, but as a series of “sets” at different “locations.”
For you, the direct marketer, this may even be more bewildering. You can no
longer evaluate just one role; you must learn to analyze a number of roles and,
also, understand how the same role is played a number of ways on a number of
different stages in order to achieve a great performance.

Our Children’s World

What about the environment in the 21st century? While we have heard much
recently about how nearly everyone considers him or herself an environmentalist,
the trend toward environmental concern and awareness in the early 21st century
is still at an embryonic stage. Individuals are becoming more aware of environ-
mental issues and concerns as they read and hear about them in the media.
However, this awareness has still not been converted to real large-scale action.
Numerous national studies have continued to show that over 70 percent of people
in this country are aware of environmental concerns, but less than 15 to 20 per-
cent actively do something (i.e., recycle, drive less, consume less) to remedy envi-
ronmental problems.
The movement toward environmentalism is an excellent example of trend lag.
Most individuals in the United States support the notion that environmental
problems are serious and must be dealt with. However, when it comes to actually
getting involved with the trend, the number of “doers” decreases immensely.
There are a number of reasons why this discrepancy or lag occurs. First, messages
are confusing. Individuals are confused as to the breadth and scope of environ-
mental problems (i.e., ozone depletion vs. solid waste vs. water pollution vs. air
pollution), confused as to what is being done about the problems, and confused
as to what they personally should be doing. These feelings of confusion are
coupled with a notion that the environment is an abstract “public issue” that does
not affect the individual as a “personal problem” and therefore they need do little
or nothing about resolving it.
Other factors directly influence the environmental trend. First is the need for
convenience. Individuals living in a fast-paced, stress-filled world are looking for
ways to make their life easier. From this need for convenience, a number of prod-
ucts and services have emerged. The use of prepared, fast foods and disposable
paper products does make life a little easier for the active individual who has little
174 Marketing in the 21st Century and Beyond

time to shop, prepare meals, and wash dishes. However, this convenience comes
at an environmental cost. All of these convenience items are made for a onetime
usage and quickly end up in the trash, thereby adding to the solid waste problem.
Another way the drive toward convenience has affected the environmental
trend is in the perception held that environmental behavior is time consuming
and inconvenient. For example, people in this society are accustomed to throwing
trash into a container with very little thought about what they are doing or what
will happen to it. When asked to begin separating this trash into recyclable and
nonrecyclable items, the process becomes inconvenient and a waste of precious
time. It is as if individuals assume that once trash is collected, someone else will
do the environmental chores for them.
Ironically, another positive trend, consumers in search of “value,” has had a
negative effect on the environmental movement. Consumers in search for the best
deal or value are willing to travel from store to store to find it. In doing so, they are
using up diminishing resources and adding pollution to the atmosphere.
Barring unforeseen ecological disasters, current attitudes toward the environ-
mental trend will remain constant throughout the first quarter of this century.
Small changes in consumer attitudes and behavior will gradually occur over time.
However, these changes will be more concrete and enduring than the faddish
behavior of the early 1990s, such as “green marketing.” It is interesting that the
long-term adherence to the trend will come from a nontraditional direction.
Children, as part of their educational process, are being taught about the environ-
ment and how to become good environmental stewards. As they internalize the
attitudes and practice the behaviors, the trend will become institutionalized in
American society. These attitudes and behaviors will become part of normal daily
living and environmental sensitivity and activity will evolve to another level.
Thus our children have become the environmental trend messengers. They
bring home the information they learned in school and share it with members
of their family. At the same time, they take on the role of monitor by influencing
both the family’s attitudes and environmental behavior. Children, as we know,
can exert pressure and influence to do what they want or think is correct

21st-CENTURY ADVANCES IN DIRECT MARKETING

Multichannel Marketing
Next, let’s gaze into Nostradamus’s crystal ball to see what the world of direct
marketing will be like in the 21st century. Multichannel marketing, a “new” idea
at the end of the 20th century, will quickly become the standard-bearer for mar-
keting in the 21st century. Customers no longer accept limited channels for both
marketing and distribution. Instead they expect the direct marketer to “read their
minds.” That is, customers do not want to select between a number of alternative
 Nostradamus Knows Direct Interactive Marketing 175

channels; they will expect the marketer to present them with the channel that best
fits their needs and convenience.
This will be done by creating analytical profiles of the customers based on at
least three integrated factors. The optimal profiling scheme will utilize a balanced
combination of demographic, attitudinal, and behavioral factors. This will be nec-
essary to obtain a well-rounded or triangulated view of the customer. It is essential
to remember that these factors are interconnected. Demographic factors influence
attitudinal factors and both, in turn, affect the customer’s behavior. This is why it
is limiting and, in many cases, misleading to use only one or two of the factors and
not all three.
One of the best ways of looking at this combination of elements is to think of a
three-dimensional chessboard. Make the top layer the customer’s demographics,
the middle layer the customer’s attitudes, and the bottom layer the customer’s
purchase behavior. Not only do the unique elements move across each of the
layers or boards; they also move up and down. Thus an element may indicate that
certain customers with comparable demographic characteristics may share similar
attitudes and acquire similar products. Conversely, even customers with similar
demographic characteristics may have different attitudes and these, in turn, will
drive their behavior in different directions. For example, a 50-year-old may be
interested in retirement planning. This individual may not have much knowledge
of financial planning, not be actively involved in personal financial matters, be
leery of advice, and not be open to taking much risk. The constellation of these
factors would lead us to create a program or campaign specifically oriented to this
cluster. On the other hand, if that same 50-year-old perceives him or herself to be
somewhat knowledgeable of finances, willing to seek and use advice, and willing
to take some risks, another strategy would prove to be more effective.
Because the elements that go into a customer profile are subject to change, the
overall profile must be viewed as a dynamic process. As the customer’s lifestyles
and life cycle changes and as the demographic, attitudinal, and behavioral factors
change, the overall scheme will need to be flexible enough to adapt to it. Static
schemes will lose their robustness after a short period of time. Actually, the best
schemes are boxes within boxes, that is, larger schemes that can be reconfigured
into a number of smaller schemes and/or vice-versa. This enables us to maintain
the structure of the larger foundation profile while being able to cluster and ana-
lyze the smaller pieces of intelligence to better understand and service the custom-
er’s needs. In this way, the profile becomes the easel on which we paint a number
of unique customer pictures.
The multidimensional profiling, coupled with the ever-improving technologi-
cal advances, will empower the direct marketer to create true 1:1 marketing with
their customers. Because they will know what the customer’s needs and prefer-
ences are, the marketer will be able to quickly customize the message and delivery
channels in a way that the customers feel that they are understood and the
176 Marketing in the 21st Century and Beyond

company is looking out for them. Not only will this build a sense of trust, it will
generate additional business from those customers and, most importantly, moti-
vate the delighted customers to refer others to that business.
Of course the obvious concern here is to the amount and scope of customer
information. What will be the tipping point at which the customer begins to feel
that his or her privacy is being invaded and that the information is actually working
against them? By the second decade of the 21st century, information technology
will have alleviated the vast majority of information theft occurring during the first
few years of the century. At the same time, information gatherers and users will treat
the handling of personal information as a sacred bond between the customer and
the company. During the latter part of the first decade of the century, these atti-
tudes and behaviors will change due to strong sanctions (fines) against the offending
companies and even stronger sanctions (fines, imprisonment) against individuals
who do not treat the information as part and parcel of another individual.
With these changes in place, 21st-century customers will be more willing to
share personal information, because they know that it is secure and being col-
lected in their best interest. The 20th-century attitude of “who are you going to
sell my information to” will be replaced by a new attitude of the best way to help
to direct marketer to help me is to provide him or her with useful and accurate
information about myself. As a customer, therefore, I will be receiving a profitable
return on my information investment.

Life in the Information Cyber-Maze

From a technological standpoint, we are only beginning to scratch the surface
of the information technology in the early part of the 21st century. It is not too
hard to imagine a time where you will have immediate, real-time access to every
major global information base just by talking into your wristwatch. Think what
you will be able to do with that power! Decisions will be made on the spot with
accurate and timely information. Whether you are in the process of buying a
new car or a loaf of bread, you will be able to scan current product and price infor-
mation and negotiate your best deal in a matter of minutes. Businesses will be able
to identify new markets and consumer segments and, given the breadth of data
available, will be able to develop a profile of the market, evaluate how other com-
panies have fared in the market, and develop a strategic market plan to success-
fully enter and grow that market. The wealth of information may actually make
it possible for the market analyst to correlate all of the data and come up with
projections that will indicate, with a high degree of accuracy, how successful the
business will be.
While this sounds exciting, it is not without its pitfalls. Having all of this infor-
mation available may actually create a trend away from information usage.
 Nostradamus Knows Direct Interactive Marketing 177

Individuals, overloaded with data, may begin to feel trapped within their own net-
works. The information cybernet will then become the cyber-maze. Once inside
the maze, the individual may spend the majority of his or her time just trying to
navigate or survive the maze. As tidal wave after tidal wave of new information con-
tinuously bombards the net, the individual may find that the overload is too much.
When this happens, the trend trajectory may move away from information-based
behavior to a more primitive instinctual behavior. New groups will surface with a
“know nothing” philosophy of life. As this anti-information sentiment grows, a
new trend will evolve. While the laws of Fahrenheit 451 may be a little too dra-
matic, expect changes to range from “clear-mind” coffee klatches to “no net” pro-
tests to wide-scale information sabotage.

Global Customer Relationship Management

By the end of the first decade of the 21st century, customer relationship
management (CRM) is no longer a new concept, it is a way of life. Whether called
customer lifetime value, 1:1 marketing, permission marketing, or mass customiza-
tion, CRM has one underlying theme: the customer rules. Actually, CRM is
much more than a theme, it is a philosophy or way of thinking that must per-
meate through all levels of the corporate culture and processes. If not followed
thoroughly and comprehensively across all aspects of an organization, it stands a
very good chance for failure and, even worse, can be very unprofitable for a
company.
Realizing that CRM is a strategic vision and not just a set of tools or processes
has required a dramatic philosophical shift from how companies traditionally
thought about and carried out their business. For many in the last part of the
20th century, CRM was thought to simply be the cross-selling of products and
services. However, direct marketers today realize that this is only a small part, or
actually the outcome, of a successful CRM philosophy. That is, in the course of
knowing, understanding, and servicing customers, you must be able to provide
them additional products/services or unique combinations of the two that are
“right” for them and profitable for your company. This profit is immediate in
the sense of incremental products and services sold and, more importantly, is long
term in the additional loyalty and business received from the customer over a sus-
tained period of time.
In a nutshell, CRM can be defined as growing deep and enduring relationships
with your profitable customers. In breaking down this definition into its compo-
nent parts, one quickly sees that CRM needs to be a strategic vision and plan and
not simply a set of processes or programs. At the heart of this definition is the cus-
tomer. A customer-centric philosophy is exactly what it states. The customer is
the center of attention, and everything done is centered around meeting and
178 Marketing in the 21st Century and Beyond

exceeding the customer’s needs and expectations. During the 1990s retailer and
manufacturer CRM programs focused on delighting the customer. By going past
a product/service mentality and offering customers unique solutions that meet
their needs and solve their problems, a company offers more than what is
expected and therefore delights them. A delighted customer is a satisfied cus-
tomer. A satisfied customer is more likely to acquire additional products/services
and therefore become a more profitable customer. The satisfied customer is also
more likely to maintain and grow his or her relationship over an extended period
of time. Most importantly, the satisfied, delighted customer will become a loyal
supporter and advocate, thereby bringing other customers to us.
The key term in the above definition is deep relationships. This means going
past the list of products/services currently owned by the customer and under-
standing his or her aspirations, preferences, lifestyles, and life cycle stages. It also
means understanding their current needs, anticipating their future needs, and
then communicating solutions to them in a nonthreatening, trusted-advisor
manner—that is, offering them the products/services that they will find the most
personally useful via the channels they prefer to use.
By definition, deep customer relationships should be long-term growth rela-
tionships. As customers experience continued delight with your solutions, they
will continue to increase their level of comfort that you are providing them with
the best solutions. The cumulative effect of these positive experiences will further
solidify the relationship and, more importantly, allow it to grow. It is extremely
important to remember here that good relationships are a reciprocal process. As
you provide customers with profitable solutions that meet and exceed their expec-
tations, they become more comfortable with the idea that you are looking out for
their best interests. As this comfort level builds, customers will be more likely to
allow you to provide them the expert advice that they have now come to expect.
The unique blending and cross-selling of products, programs, and services
becomes the logical outcome of this process. As with any type of relationship,
the continuous meeting of expectations and the growth of trust will continue to
deepen and strengthen it. In the end, these delighted customers are (and/or
become) your most profitable customers.
Direct interactive marketing fits all of the above criteria for providing the cus-
tomer with an optimal experience. By its nature, direct marketing is one-to-one
marketing focusing on a unique customer wants and needs. Direct marketers in
the 21st century want to thoroughly understand their customers, anticipate their
needs, exceed their expectations, and, most importantly, gain their trust. Due to
exponential advances in telecommunications, the CRM program of the 21st cen-
tury will be global. By the second decade of this century, direct marketers will
have mastered all of the problems and pitfalls of marketing and fulfillment. This
will be in the form of global partnerships, which by design “market globally, but
fulfill locally.” At the same time, the best direct marketers will have developed
 Nostradamus Knows Direct Interactive Marketing 179

new strategies that will enable them to profitably compete against a global
cacophony of competition. Direct interactive marketers will quickly become the
trend messengers for the 21st-century global CRM trend. Customers will come
to expect a seamless process from beginning to end. Those companies slow to
catch on to this established way of life will not be around by the end of the first
quarter of the century.

NOSTRADAMUS: FULL CIRCLE

The year is 2107. Much has changed in the last 100 years. Advances in health
care have caused the average individual to live to a young 104 years of age.
Ironically, changing trends in the last 100 years have caused men to live longer
than women. Lifestyle (e.g., smoking) and employment (e.g., stress) trends have
actually lowered the life expectancy rates for women. It is now commonplace for
four to five generations of family members to be alive and functioning within
the family unit. Thus the nuclear family of the 20th century has become the
extended family of the late 21st century.
The fuel-burning automobile can only be found in a museum. Environmental
trends that started in the late 1900s and blossomed in the 2020s caused this form
of transportation to be outlawed. The death of the car really passed unnoticed since
most people found it more convenient and cost-efficient to use mass transportation.
Specially designed units made it possible for each family to have their own private
vehicle that links to a worldwide transportation grid, making it possible to go to
grandma’s across town in seconds and to Europe in a matter of a couple hours.
All of this is done without the family leaving the comfort of the vehicle.
All houses are now made out of stone. Researchers have observed a pattern
where new homes moved from towering castles to ground-hugging cave-like
dwellings made from natural materials. Not only are these dwellings easier to
maintain, they provide natural warmth and cooling, making them very fuel and
cost efficient. Instead of adding floors on top of each other, the new avant-garde
houses now add floors below each other.
After years of searching for the ideal convenience foods, scientists finally came
up with water-soluble food strips that are added to your favorite beverage. The
water supply, once a problem area in the past century, is now treated with vitamin
supplements, so that by drinking the water everyone is assured of receiving their
optimum amount of required vitamins and nutriments.

What Would Nostradamus Think?

While digging through the basement of an obscure little bookstore in a tiny lit-
tle alley in Paris, we come across some heretofore unknown manuscripts written
by Nostradamus. As we begin to translate and interpret the quatrains, we quickly
180 Marketing in the 21st Century and Beyond

see that Nostradamus has predicted what direct interactive marketing will be like
at the end of the 21st century. First, he tells us that by the end of the 21st century,
all marketing will be direct and all marketing will be interactive. He also suggests
that the tools direct marketers will have available then are unfathomable by
today’s standards. Technology- and intelligence-based decision making is as
commonplace as putting on one’s shoes. Global fulfillment issues have long been
resolved due to global alliances, and he even hints at products being beamed
around the world.
However, Nostradamus offers a few words of caution to the 21st-century direct
marketer. His crystal ball foresees a period of time in the 21st century where con-
sumers revolt against technology totally intruding into all aspects of their lives.
“Big Brother” notions of the 20th century have become the paranoia of the late
21st century. Only those companies that have truly built a strong bond of loyalty
and trust with their customers will survive. Direct marketers will do well to heed
this cautionary glimpse into the future for, as Nostradamus says:
As the new millennial century wanes
And the machine’s iron fist does life permeate,
Only those in trust bonded
Shall the dawn of the new day see.
 Part IV

GLOBAL MARKETING: NEW

CHALLENGES AND OPPORTUNITIES
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 CHAPTER 12

THE NEW GLOBAL MARKETING

REALITIES
Gary A. Knight

INTRODUCTION
Today, business operates in a fiercely competitive, borderless world in which cus-
tomers access products and services from everywhere, and their expectations
regarding value and quality have grown apace. Increasingly, international market-
ing capabilities honed on global experience are minimal requirements to partici-
pate in the global marketplace. Spectacular growth in technology, a consequent
revolution in the telecommunications industry, and a broad-based spread of
e-commerce have shifted the ways organizations manage themselves. The emer-
gence of an inextricably linked international marketplace for goods, services,
capital, and investment contributes to complexity and competition in a global
market that is growing in magnitude and scope.
Perhaps the most important trend of the last few decades is globalization, which
reflects the growing interconnectedness of national economies and interdepen-
dence of consumers, producers, suppliers, and governments in different countries.
It reflects the production and marketing of products and brands worldwide by
firms located across the globe. Combined with declining trade barriers and the
increasing ease with which international business takes place, the activities of
these firms are leading to gradual integration of the economies of most nations
in the world.
Globalization is a revolution-in-progress, the central story line of the 21st cen-
tury, with major consequences within as well as between nations. Globalization is
a powerful and positive force that stimulates economic growth, creates jobs, raises
incomes, expands both choice and competition, improves product quality, and
184 Marketing in the 21st Century and Beyond

lowers prices. The fact that virtually all the world’s nations willingly participate in
some form of international free trade is evidence that they see it in their own best
interest. Indeed, it is a lack of trade, investment, and freedom that keeps the
world’s poorest economies in poverty and environmental degradation.
Business leaders must confront the key future challenges of international mar-
keting. In this chapter, I review key trends and realities that confront the contem-
porary international marketer. Let’s first review the critical role of information
and communications technologies.

INFORMATION AND COMMUNICATIONS TECHNOLOGIES

While globalization makes going global an imperative, advances in information
and communications technologies (ICTs) provide the means for taking business
operations abroad. ICTs make the cost of international operations affordable for
all types of companies, explaining why so many small and medium enterprises
(SMEs; defined here as firms with less than 500 employees) have entered the
international arena.
Communications technology is critical. It took five months for Spain’s Queen
Isabella to learn about Columbus’s voyage, two weeks for Europe to learn of
President Lincoln’s assassination, and 1.5 seconds for the world to witness the col-
lapse of New York’s World Trade Center. The most profound technological
advances have occurred in the area of communications, especially telecommunica-
tions, satellites, optical fiber, wireless technology, and of course, the Internet.
These developments are revolutionary and similar in their effects to the commer-
cialization of the printing press in Europe in the 15th century. The resultant
widespread dissemination of information and knowledge gave rise to a giant leap
in human activity.1
More than 500 million people worldwide already have access to the Internet. It
has become the information backbone of the global economy, allowing for voice,
data, and real-time video communication, as well as facilitating cross-border busi-
ness transactions. A wide range of goods and services—from auto parts to bank
loans—are marketed online. South Korea, where Internet access is nearly 100 per-
cent, is leading the way. South Korea’s broadband networks for home use are
much faster than European and U.S. systems. Korean schoolchildren use their cell
phones to get homework from their teachers and play games online with gamers
worldwide. Adults use their phones to pay bills, do banking, buy lottery tickets,
and check traffic conditions. South Korea is becoming the dominant global player
in high-tech industries such as mobile communications, digital robotics, and
various software categories.2
Widespread diffusion of the Internet and e-mail makes company internation-
alization extremely cost-effective. The Internet provides cheap and ready access
 The New Global Marketing Realities 185

to information and opens up the global marketplace to companies that would

normally not have the resources to do international business, including countless
SMEs and born-global firms. Such companies often succeed by entering “virtual
alliances” with partners in key markets and locations overseas. The Internet has
fostered an ongoing revolution in the way firms acquire and use information vital
to conducting international market research. Search engines, databases, reference
guides, and countless government and private support systems assist managers
to maximize knowledge and skills for international business success.
The Internet also facilitates international marketing activities, particularly by
smaller firms. By establishing a website, even tiny companies take the first step
in becoming multinational firms. Today, many firms leverage the Internet to
engage in direct marketing, the selling of goods or services directly to end users,
bypassing traditional intermediaries. Some direct marketers engage in catalog
sales, in which catalogs of the firm’s offerings are mailed to potential customers.
For instance, Eddie Bauer does a thriving catalog business with customers in
Asia, Europe, and North America. More and more firms use the Internet to pro-
vide detailed product information and the means for foreigners to purchase offer-
ings. Some are entirely Internet based, with no retail stores at all, such as
Amazon.com. On the other hand, more than one-third of traditional retailers
(e.g., Kohls, Tesco, Walmart, Zellers) now employ some type of Internet-based
marketing.3
The Internet also facilitates consolidation and increased efficiency of the global
supply chain and international distribution channels. It facilitates efficient out-
sourcing, which allows firms to concentrate on their core competencies. With
real-time information sharing, manufacturers and distributors optimize cross-
national communications and consequent international operations. SMEs benefit
through the ability to project the image of being larger firms, cut international
operations costs, and provide products through virtual warehouses. The time
from ordering to receipt can be greatly reduced, allowing smaller firms to compete
internationally.
But while many direct marketers have flourished on the Internet, others have
floundered. Skillful supply chain management based on brick-and-mortar facili-
ties still provides the backbone for global sales. However, the Internet holds great
promise, and its role in direct international marketing will likely increase over
time.

GLOBALIZATION
Globalization is of course a key international marketing reality. Cross-national
merchandise trade has increased dramatically since the 1980s. By the early 2000s,
the total of merchandise exports and imports represented more than 40 percent of
186 Marketing in the 21st Century and Beyond

world GDP. Globalization and technological advances permit more and more
firms to target billions of consumers and industrial buyers worldwide. Highly
international firms source input goods from suppliers worldwide and sell their
products and services in hundreds of foreign markets. Growth in world trade is
presenting much greater choice in products and services to consumers worldwide.
The competitive and value-adding activities of globally active firms are pushing
down prices and contributing to higher living standards worldwide.4
The most salient feature of globalization is growing integration and interdepen-
dence of national economies. Global companies devise extensive multicountry
operations via investments aimed at production and marketing activities. The
aggregate activities of these firms give rise to economic integration.
Globalization also means convergence of buyer lifestyles and needs. Today,
people in Tokyo, New York, and Paris can buy the same household goods, cloth-
ing, automobiles, and consumer electronics. The same pattern is observable in
industrial markets as well, where the raw materials, parts, and components that
professional buyers source from suppliers worldwide are increasingly standard-
ized, that is, similar or uniform in design. As income levels rise, demand prefer-
ences are converging for both industrial and consumer goods and services. More
than 90 percent of movies shown in Canada are made abroad, primarily in the
United States. The movie market in Europe and Japan is dominated by popular
Hollywood films. Media contribute to the homogenization of world consumer
preferences, in part by emphasizing a particular lifestyle dominated by the
United States. Increasingly, this trend is spreading to the developing countries
as well. Converging tastes and global production platforms facilitate the launch
and marketing of highly standardized products to buyers around the world.
Intense global competition is forcing firms to reduce the costs of production
and marketing. Global corporations strive to drive down prices via economies of
scale and by standardizing what they sell. Today, globalization of markets is trans-
forming the world into a global village, where companies undertake international
marketing activities in a giant global marketplace. In their own way, globalization
and technological advances are resulting in the “death of distance.”5 That is, the
geographic and, to some extent, cultural distance, that separates nations is
shrinking.

THE RISE OF TERRORISM

One of the negative manifestations of globalization is the rise of global terror-
ism. Terrorism is the threat or actual use of force or violence to attain a political
goal via fear or intimidation. Large-scale terrorist attacks have proven capable of
stimulating declines in the global economy. Terrorism is similar to natural disas-
ters, wars, political crises, and other “supply chain shocks” that occasionally
threaten international firms. The main threat of terrorism and other shocks results
 The New Global Marketing Realities 187

from indirect effects. These include the decline in buyer demand, unpredictable
global supply chain shifts or interruptions, and government policies and laws
enacted to deal with terrorism. Such outcomes decrease revenues, increase costs,
and generally increase the complexity of international marketing. Among all the
business functions, sales, marketing, and the global supply chain are among the
most affected.6
Perhaps the greatest threat from terrorism is the resultant psychological
response leading to substantial declines in consumption and other shifts in peo-
ple’s behavior. For instance, following the September 11, 2001, attacks, there
emerged a short-term flight from the dollar, and Swiss banks recorded a sharp
increase in inquiries about their special accounts for foreigners. The indirect
effects of terrorism can also trigger shortages of externally sourced critical inputs,
especially for multinational firms—be it due to production or to delivery con-
straints. Attempts to recoup decreasing sales via increased advertising and other
promotional activities lead to unplanned expenses. The cost of protecting against
such events will increase as insurance providers put up premiums to account for
increased risk.
But managers can take proactive steps to deal with indirect effects.
Emphasizing strong brands and superior product quality helps companies deal
more effectively with declines in buyer demand following disasters. Marketing
communications and public relations are potentially important “recovery market-
ing” tools to help maintain demand. Regular scanning and forecasting about
emergent business conditions are critical for firms that rely heavily on foreign-
sourced input goods. Global supply chains benefit from “scenario planning,” in
which specific strategies and tactics are developed around possible terrorism-
related scenarios.
Managers may need to consider the potential role of terrorism when evaluating
foreign countries, both as markets and as potential sites for foreign direct invest-
ment (FDI). The issue of terrorism will be progressively more used as a segmenta-
tion variable in the evaluation and selection of markets. This is bad news for those
countries and regions that experience regular or particularly severe terrorism.
Colombia and India are especially vulnerable, followed by countries in the
Middle East, Latin America, and Asia. Terrorism is most likely to occur in those
regions where it has tended to occur historically, that is, in non-Western or less-
developed countries. These areas will also tend to be most vulnerable to economic
and consumption downturns in the wake of terrorist events.
As firms face increasing regulations, policies, and other imperfections imposed
by national and supranational governments, distribution and logistics are particu-
larly affected. Shipments are delayed and shortages occur. Thus some firms will
tend produce more essential inputs themselves, as opposed to buying them from
suppliers. Or they will acquire needed inputs from a broader range of suppliers,
from sources located in a broader range of locations, or from sources that are more
188 Marketing in the 21st Century and Beyond

familiar in order to reduce their vulnerability. For example, Compaq Computer

has established secondary suppliers for all of its critical input components. The
firm owns assembly operations in various locations worldwide. Management can
quickly shift production from one locale to another in the event of a crisis. Jabil
Circuit, a manufacturer of high-tech electronics, requires suppliers to be able to
boost deliveries by 25 percent with a week’s notice, and by 100 percent with four
weeks’ notice.7
Some firms will increase their inventories of essential inputs, as a cushion
against terrorism’s effects. Inventory stocks are more vulnerable the greater the
firm’s reliance on international supply sources. Careful supply chain management
is critical to ensure a proper balance between customer service and the inventory
costs of growing safety stocks.8

EMERGING MARKETS
One of the most exciting new realities for international marketers is the rise of
emerging markets. These fast-growth, modernizing countries are responsible for
the much of the explosion in world trade and investment over the past two decades.
The Economist (http://www.economist.com) tracks the progress of emerging
markets, including countries such as China, India, South Korea, Thailand,
Argentina, Brazil, Chile, Mexico, South Africa, Turkey, Czech Republic, Hungary,
Poland, and Russia. In the mid-2000s, the top 25 emerging market countries
together sustained average annual GDP growth rates of nearly 7 percent. They
have been growing much faster than those of the advanced economies, which
suggests that several emerging markets will join the group of wealthy nations in the
not-too-distant future. Most importantly, they have engaged in substantial privatiza-
tion, modernization, and industrialization. Significantly, they have growing middle
classes that can afford to participate in the market for a broad variety of goods and
services.
China and India together represent about one-third of the world’s population.
China is the biggest emerging market, and its role in international business is rap-
idly expanding. With a population of 1.3 billion people (one-fifth of the world
total), China is the world’s second-largest economy in purchasing power parity
terms. The Chinese economy continues to grow at the astonishing annual rate
of nearly 10 percent. During the past decade, the number of Global 500 firms
headquartered in China has risen from 3 to 15 and will expand further. Leading
exemplars include Shanghai Automotive (China’s top automaker), Sinopec
(a large oil company), and Shanghai Baosteel (a steel manufacturer).
Emerging markets are increasingly important target markets, that is, buyers of
goods and services. They enjoy strong growth rates and prospects for market
expansion. Accelerating demand growth will soon make the 25 emerging markets
 The New Global Marketing Realities 189

larger and more attractive than the countries of Europe and Japan combined.
Consumer expectations are rising as local governments open markets to
international competition. Infrastructural investments are improving the climate
for business. These trends greatly improve the prospects for global business suc-
cess, especially among multinational corporations that collaborate closely with
local intermediaries. Instead of dismissing emerging markets, international mar-
keters now see them as important target markets. Despite widespread poverty,
most have high-income segments that represent attractive markets. For instance,
China has some 300 million consumers, and India has roughly 200 million con-
sumers with significant purchasing power. Roughly one-quarter of Mexico’s
100 million people enjoy affluence equivalent to many in the United States.
Emerging markets are excellent targets for sales of raw materials, parts, machi-
nery, and other industrial goods used in the manufacture of finished goods.
Most specialize in particular industries that create focused product demand, such
as the textile machinery industry in India. They also house a range of niche
markets.
Finally, governments and state enterprises are major target markets for sales of,
especially, infrastructure-related goods and services. The government and industrial
segments are promising targets for capital equipment, machinery, power transmis-
sion equipment, transportation equipment, high-technology products, and other
goods typically needed by countries in the middle stage of development.
But multinational corporations (MNCs) must be mindful of risks in emerging
markets. Legal frameworks are often inadequate, existing laws are insufficiently
enforced, or judicial systems may be slow, corrupt, or subject to manipulation.
Intellectual property protections for new technologies, brand names, logos, and
manufacturing processes are often inadequate. Piracy and other intellectual prop-
erty violations are commonplace in some emerging markets. Political instability is
an important, potentially inhibiting factor. Protectionism may take the form
of special loans, subsidies, or tax incentives for home-grown firms, and high
market entry barriers for foreign competitors. Infrastructure is often inferior
in emerging markets in areas such as energy systems, transportation, and
communications.
Many emerging markets are characterized by family conglomerates (FCs),
large, highly diversified holding companies that have been around for some time.
FCs are dominant players in emerging economies such as South Korea where they
are known as chaebols, India where they are called business houses, Mexico where
they are termed groupos, Turkey where they are known as holding companies, and
various other Asian and Latin American countries. Many are well-known
international firms—Daewoo, Hyundai, Koc, Reliance, San Miguel, Samsung,
Tata—that seek partnerships with foreign firms because of the opportunity to
gain new technical know-how, strong brands, and intellectual property.
190 Marketing in the 21st Century and Beyond

CHINA AND INDIA AS SOURCING PLATFORMS

Along with the growth of emerging markets, China and India are playing a
growing role in international trade. Offshoring (also known as “global sourcing”)
is a key new reality. It reflects the tendency of firms to establish value-adding
operations in advantageous locations abroad. Offshoring offers economies of
scale, access to specialist knowledge, and the ability to subcontract critical organi-
zational processes. China and India have grown in popularity as offshoring desti-
nations because their cost of labor is substantially lower than in the advanced
world, and because they possess large pools of knowledge workers. For example,
the cost of hiring a software code writer in India is typically one-fifth that of the
United States.9
Information and communications technology mean that the output of design
and research jobs can be transferred around the globe at the touch of a button.
For example, Massachusetts General Hospital has its CT scans and X-rays inter-
preted by radiologists in India. At present about 40 percent of world software is
written in India. Information technology firms, from Intel to Microsoft, are mov-
ing their programming activities to Bangalore, India.
The lower costs of upstream activities that MNCs enjoy by offshoring are
passed on to consumers. This translates into lower prices at JC Penney, Marks
& Spencer, WalMmart, and other firms that outsource extensively from the
developing world. Lower prices across a whole range of retailers and other busi-
nesses provide for much higher standards of living by allowing people to keep
more of their money.10

INTERNATIONAL SERVICES MARKETING

A critical but often overlooked reality is the growing international marketing of
services. Services are deeds, performances, or efforts performed directly by people
working in banks, hotels, airlines, construction companies, repair shops, retailers,
and countless other firms in the services sector. The production of services repre-
sents about 80 percent of U.S. GDP and two-thirds or more of the annual GDP
in nearly all other developed countries. Thus services are extraordinarily impor-
tant in the world economy and global trade. In the United States and several
European countries, travel and tourism are now the number one source of reve-
nue from foreigners. Because services has become the biggest part of the economy
of nearly all countries, global trade in services is growing dramatically. In recent
years services trade has been growing faster than products trade. In total, world
exports of commercial services (i.e., excluding government services) amounted
to nearly $1.6 trillion in 2002, about 20 percent of total world trade.
 The New Global Marketing Realities 191

But most services cannot be exported and are normally offered abroad by estab-
lishing “brick-and-mortar” facilities via FDI.11 Banks often expand internationally
by forming strategic alliances with foreign correspondent banks. They use multi-
bank alliances to provide automatic teller machine access in many locations for their
clients. Partly because services comprise nearly 70 percent of GDP in developed
nations and approximately 50 percent of GDP in most other countries, the interna-
tionalization of services is growing rapidly. Indeed, in recent years internationaliza-
tion of services has been growing faster than that of products.
FDI in services has grown enormously in recently years. Among the reasons for
this trend is the innovative application of product design and engineering,
advanced production processes, marketing and distribution, customization,
outsourcing, and globalization strategies as critical factors to the international
success of manufacturing firms. Finance, telecommunications, insurance, trans-
portation, distribution, and information services are the focal key support activ-
ities that underpin international trade and facilitate international marketing
activities.12
But marketing services abroad is challenging. While the cost of establishing
services operations abroad tends to be less capital-intensive than for products-
producing firms, operating services firms internationally can be costly. This
results in part because services production does not benefit to the same degree as
products production from economies of scale. To serve customers, the service
MNC must establish a full-service operation in each location where it operates,
so it must replicate the existing structure in each affiliate. This presents challenges
for finding qualified personnel to staff each operation, to maintain quality control,
and to standardize services cross-nationally.
Knowledge is important to all firms, but particularly to services providers.
A key issue for these firms internationally, therefore, is protecting critical knowl-
edge that provides the basis for the firm’s competitive advantages. Much knowl-
edge in services firms is relatively tacit and is therefore embedded in the firms’
personnel. Knowledge that is transferred via more traditional means—manuals,
training programs, and various telecommunications vehicles—is harder to pro-
tect. Internationally, services firms that rely heavily on such knowledge, particu-
larly in countries with weak intellectual property laws, are relatively vulnerable.13
A key knowledge-related source of competitive advantage is often relationships
with customers. This knowledge includes knowledge of key individuals and his-
torical knowledge of the relationship as it has evolved over time. Grosse (2000)
suggests that this type of knowledge can be protected if it is retained within multi-
person teams, as opposed to individual employees. In this way, if an employee
leaves, the knowledge still remains with the team. The international marketing
of services implies a strong role for customer relationship management.
192 Marketing in the 21st Century and Beyond

BORN GLOBALS AND INTERNATIONAL SMEs

Another new reality is the rise of the international SMEs. SMEs make up over
95 percent of all companies and create about 50 percent of total value-added
worldwide. They have far fewer financial, human, and tangible resources than
the large multinational corporations that have traditionally plied the waters of
global trade. Historically, international business was beyond the reach of most
SMEs. However, technological advances and globalization have created a business
environment in which young, smaller firms can market their offerings around the
world. As a result, companies that internationalize at or near their founding, born-
global firms, have sprung up rapidly.14
Despite the scarce resources that characterize most SMEs, born-global manag-
ers see the world as their marketplace, from or near the firm’s inception. The
period from domestic establishment to initial foreign market entry is often three
or fewer years. By internationalizing as early and rapidly as they do, they develop
a “borderless” corporate culture. Born globals typically target their products and
services to a dozen or more countries. Smaller size confers much flexibility for suc-
ceeding abroad. Born globals usually internationalize via exporting and leverage
relationships with strong foreign distributors who provide key local advantages
related not only to downstream international business activities but also to gather-
ing market intelligence, forging links with key foreign contacts, deepening rela-
tions within extant markets, and cultivating new buyer segments.15
These young entrepreneurial firms internationalize early for various reasons.
Management may perceive big demand for the firm’s products abroad—“export
pull.” Management may possess a strong international orientation, pushing the
organization into foreign markets—“export push.” Occasionally, the firm special-
izes in a particular product category for which demand in the home market is too
small, pushing management to seek growth abroad. Often, born globals enjoy
relationships with foreign facilitators and customers who pave the way for
international expansion.16
The emergence of born globals has given rise to the field of international entre-
preneurship. Entrepreneurship is the process of creating or seizing opportunities
and pursuing them even in the face of limited company resources. Management
at entrepreneurial firms is typically innovative, proactive, and risk seeking.
When a firm exhibits these characteristics in cross-border business, they are
engaged in international entrepreneurship.17 International entrepreneurship
involves the firm in new and innovative activities in the pursuit of business activ-
ities across national borders. Managers with an entrepreneurial orientation have
an obsession for opportunity. They are comfortable dealing with uncertainty
and have the flexibility to make course changes to company strategies as the need
arises. In international business, the entrepreneurial manager is creative, is innova-
tive, has a strong feel for the firm’s business environment, and is ready to pursue
 The New Global Marketing Realities 193

new opportunities. They are capable of anticipating the future. Such behaviors
can be found in any company, but today they are particularly salient in born glob-
als and other smaller international firms.18
International entrepreneurship is an exciting trend because it implies that any
firm, regardless of size, age, or resource base, can participate actively in global
markets. The traditional view of the large multinational corporation as the domi-
nant player in international business is evolving. Youth and lack of experience, as
well as limited financial resources, are no longer major impediments to the large-
scale internationalization and global success of the firm. Countless SMEs are
internationalizing at or near their founding, and succeeding in international mar-
kets. Younger, smaller firms are playing a substantially greater role in international
marketing than ever before.

COLLABORATIVE APPROACHES
Collaborative ventures have been around for many years, but they continue to
contribute much to firms’ international marketing performance. While collabora-
tion can take place at similar or different levels of the value chain, most ventures
focus on research and development (R&D), production, or marketing.
Collaboration makes possible the achievement of projects that exceed the capabil-
ities of the individual enterprise. Groups of firms sometimes form strategic alli-
ances to accomplish large-scale goals such as development of new technologies,
or the construction of major projects, such as building power plants. They draw
on a range of complementary technologies, accessible only from other firms, to
innovate and develop new products. The advantages of collaboration help explain
why the volume of such partnerships has grown substantially in the last few
decades.19
Firms are more likely to collaborate if, relative to other international entry
modes, collaboration reduces the partners’ transaction costs, that is, the general
costs of doing business. Firms also enter collaborative arrangements for strategic
reasons. That is, they transact internationally by whichever mode helps them
achieve strategic objectives, leading to long-term profit maximization.
Consistent with organizational learning theory, firms may also collaborate in order
to share organizationally embedded knowledge or technology that is not easily
conveyed in written or explicit form.20
Philips and AT&T formed a joint venture to develop central-office switching
devices for the telecommunications industry. Nabisco entered a joint venture
with a Japanese firm, Yamazaki, to market its snack products in Japan. The host
country partner contributes knowledge of the local language and culture, market
navigation know-how, and useful connections to the host country government.
Western firms often seek joint ventures to access markets in Asia. The partnership
194 Marketing in the 21st Century and Beyond

allows the foreign firm to access key market knowledge and gain immediate access
to a distribution system and customers.
Project-based, nonequity alliances are increasingly common in international
business. They involve pooling resources and capabilities among firms in order
to pursue a well-defined project in a finite period. Once the venture bears fruit,
the partners may shift their approaches and compete in more traditional ways.
For example, IBM and NTT formed a strategic partnership for a limited
period. Under the arrangement, IBM provides outsourcing services to NTT,
Japan’s dominant telecommunications carrier, and in turn, NTT provides out-
sourcing services and contacts for computer services sales to customers in
Japan.21 Companies also increasingly form consortia, large-scale partnerships that
involve more than two firms for handling very large projects. For example,
Boeing, Fuji, Kawasaki, and Mitsubishi joined forces to design and manufacture
major components of the Boeing 767 aircraft.
The firm enters a collaborative venture when it ascertains that a necessary link
in its value chain is somehow weak or inadequate. If this is the case, it then
chooses a partner that can replace the function of the weak link. In this way, the
firm can meet its growth and other strategic objectives faster or more effectively.
More specifically, firms enter collaborative arrangements in order to gain access
to new markets or opportunities, reduce the costs and risks of international busi-
ness, gain access to knowledge or other assets, create synergies for innovative activ-
ities, placate government authorities or access protected markets, and prevent or
reduce competition.22
About half of all collaborative ventures fail within their first five years of oper-
ation. The majority fall short of partners’ expectations.23 International ventures
are especially problematic because in addition to involving complex business
issues, they also entail the additional burden of dealing across culture and lan-
guage, as well as differences in political, legal, and economic systems.24
International collaborative ventures sometimes break down due to cultural
differences. The partners may never arrive at a common set of values and organi-
zational routines. The undertaking is especially complex when the parties are from
very distinct cultures. For example, European and North American firms face
considerable challenges in managing joint ventures with partners in China.
Another challenge in international collaborations is the risk of creating a competi-
tor. Collaboration takes place between firms that are current or potential compet-
itors. Accordingly, the partners must walk the line between cooperation and
competition. For example, for several years, Volkswagen and General Motors suc-
ceeded in China by partnering with the Chinese firm Shanghai Automotive
Industry Corp. (SAIC). The Western firms transferred much technology and
know-how to the Chinese partner. Having learned much from Volkswagen and
General Motors, SAIC is now poised to become a major player in the global auto-
mobile industry and competitor to its old partners.25
 The New Global Marketing Realities 195

CONTEMPORARY APPROACHES TO INTERNATIONAL

MARKETING
Market Orientation
In order to respond optimally to differing conditions abroad, contemporary
firms develop a market orientation. Having a market orientation means that the
firm attempts to ascertain the needs and wants of the buyers in a market and then
creates products and services that specifically fit those needs and wants. It is real-
ized by conducting market research to ascertain market characteristics and the
needs of buyers, by disseminating the research findings throughout the firm,
and by responding to the findings by creating products and services that specifi-
cally address buyer needs and wants. Typically, a strong market orientation trans-
lates into substantial adaptation of products and services to suit the needs and
tastes of foreign customers.
For example, when targeting China and other Asian markets, dairy producer
New Zealand Milk adds ginger and papaya flavoring to its milk products, to suit
the tastes of people in Asia.26 When Procter & Gamble (P&G) introduced Oil of
Olay skin moisturizer into Taiwan, it reformulated the product to suit the prefer-
ences of Taiwanese women after market research revealed that they prefer less
moisturizer.27 Hollywood movies must be dubbed or translated into the language
of target markets. Packaged foods in Europe are often labeled in four different
languages.

Customer Relationship Management (CRM)

International firms also increasingly strive to develop strong relations with their
foreign customers via CRM. It involves collecting, storing, and analyzing cus-
tomer data to develop and maintain two-way communication between the firm
and its key customers. By leveraging information technology, international firms
like Credit Suisse and HP identify their most valuable buyers and then tailor
product and service offerings to closely match their needs. In this way, the firm
develops “customer equity.”28 The ultimate goal is to maximize value proposi-
tions to the firm’s most important customers, so that they remain customers
indefinitely. For most firms, keeping good customers is more profitable than find-
ing new customers.

Global Marketing Strategy

When the firm extensively standardizes a product for foreign markets, it is
following a global strategy. It involves creating a relatively standardized marketing
mix, targeted to all countries or, at minimum, major world regions. It is based on
identifying and targeting cross-cultural similarities. The firm applies the same or
196 Marketing in the 21st Century and Beyond

similar approach or content for one or more elements of the marketing mix across
as many markets as possible. Citibank, Nestlé, HP, and Xerox are examples of
MNCs that use global strategy to great success.
The viability of global marketing strategy varies across industries and product
categories. For example, commodities, industrial, and high-technology products
lend themselves to a global approach, while many consumer goods require greater
adaptation. P&G applies a global strategy for its international marketing of dis-
posable diapers, a commodity. But its line of laundry detergents is more adapted
to local markets, because cleaning methods and washing machines vary signifi-
cantly across countries.

Product Innovation
Product innovation is also critically important to the success of international
firms. Many product innovations originate from firsthand knowledge of dealing
with the needs of individual foreign markets. Various new ideas about how to
improve products emerge from dealing in the extreme conditions often found
abroad. Some MNCs have globalized R&D by locating development laboratories
in different countries and then coordinating R&D activities to leverage the tech-
nical resources of the firm’s worldwide operations.
R&D intensity, that is, total R&D expenditures as a percentage of total sales,
has increased in many industries such as chemicals, electronics, pharmaceuticals,
and medical equipment. This has resulted because firms increasingly recognize
that technology is a major source of global competitive advantage. Innovative pro-
cesses are needed to develop global products and stay abreast of growing global
competitive pressures. The growth of information and communications technol-
ogies facilitates low-cost coordination of global R&D activities. More than 12 per-
cent of total R&D spending is performed by firms’ foreign affiliates (http://www
.oecd.org). One disadvantage of performing R&D activities abroad, however, is
the risk of dissipating proprietary knowledge to foreign partners or competitors,
particularly in countries with lax intellectual property laws.
The ability to innovate depends on the availability of knowledge workers and uni-
versity graduates trained in the sciences and high-technology areas. Accordingly,
countries such as Australia, Canada, Finland, France, Germany, India, Japan,
South Korea, the UK, and the United States enjoy particular advantages in innova-
tion and the development of new technologies. Many firms leverage links with uni-
versities. For instance, Rolls-Royce co-opts research with academic technology
centers, such as Loughborough University in the UK, to develop new technologies
for the firm’s jet engines.
Innovation leads to new product development. Before 1980, product develop-
ment and design was a sequential process, usually based in a single country.
 The New Global Marketing Realities 197

Engineers and marketing people agreed on a set of technical specifications, and a

product was developed and sent to the factory for manufacturing. However,
because the product was developed in a single national environment, it required
substantial adaptation for selling abroad.

Global Products
Today, many more firms develop global products, which are adapted for world
markets from scratch. The primary impetus is to capture economies of scale in
R&D, product development, production, and marketing. Growth in R&D paral-
lels the emergence of demanding global customers with increasingly similar needs
and tastes. P&G developed Pringles potato chips as a standardized global product.
Worldwide it is produced and promoted as one product, one process, one pack-
age, and one marketing campaign. The savings for P&G have been enormous.29
Global firms increasingly employ cross-national teams from the firm’s major
subsidiaries and functional areas to design new products. The team approach
requires substantial cross-national coordination. But when skillfully managed, it
results in products that are both cost-effective and relatively customized to indi-
vidual markets. It reduces development time and costs. Companies make their
suppliers partners in the design process to optimize sourcing and production.
Product development is no longer a sequential process; rather, design and devel-
opment occur simultaneously, and all major players are co-opted from the
beginning.30
For developing global products, the team leverages computer-aided design
(CAD), which facilitates three-dimensional design on compatible computer sys-
tems that accommodate contributions by design team members from around
the world. Sophisticated software allows the team to pilot various configurations
of the product at virtually no cost. Rapid prototyping means that new designs
can be quickly tested on global customers and modified based on resulting market
research. Savings result from a single, unified design effort.31 The Boeing 777 was
developed by design teams composed of members from Europe, Japan, and the
United States. The jet was broken down into tail, fuselage, wings, and other
modular sections. Each section was designed and developed by a global team.
In developing global products, leading MNCs focus on the commonalities
among countries rather than the differences.32 The team develops a basic product
or product platform into which variations for individual markets can be incorpo-
rated inexpensively. Development of a basic product platform appropriate for all
markets allows the firm to capture economies of scale for producing most of the
product. For example, personal computers are now designed so that the expensive
hardware is virtually the same everywhere, but the software is changed to accom-
modate local languages. While the basic computers that Dell sells worldwide are
198 Marketing in the 21st Century and Beyond

essentially identical, the letters on its keyboards and the languages used in its soft-
ware are unique to countries or major regions. Roughly speaking, the balance is
about 80/20. That is, about 80 percent of each Dell computer sold worldwide is
identical, and about 20 percent is adapted for each local market as a function of
differing languages.
Many products are designed using modular architecture, a collection of stand-
ardized components and subsystems that can be rapidly assembled in various
configurations to suit the needs of individual markets. For example, global cars
like the Ford Mondeo or the Honda Accord are designed around a standardized
platform to which modular components, parts, and features are added to suit
specific needs and tastes.

Global Branding
The worldwide standardization of positioning, advertising strategies, personal-
ity, look, and feel characterize a global brand. Management seeks to achieve a clear
and consistent identity with its target market regardless of geographic location.
Developing and maintaining a global brand name is the most effective way to
build global recognition and maximize the international marketing program.33
For example, the Eveready Battery Co. consolidated its various national brand
names—such as Ucar, Wonder, and Mazda—into one global name, Energizer,
in order to build a consistent image and global brand name. While most brands
are conceived on a national level and then internationalized, the best approach
is to build a global brand from scratch. Several firms have done this, choosing
brand names and images that can be easily recognized and pronounced world-
wide. An example is Japan’s Sony Corporation.34
Strong global brands have the following attributes:
• Brand development is based on understanding customers via market research; man-
agers understand the brand’s meaning for each target audience.
• The brand delivers the benefits that customers seek. It is based on a targeted and
compelling concept that provides superior value, a solid “value proposition.”
• The brand is both consistent and relevant.
• The firm employs a full range of marketing communications activities to deliver the
desired customer experience and build brand equity.
• Brand equity is continuously monitored.
• The firm commits sufficient financial and other support to maintain the brand over
time.35
The most successful brands are positioned around a strong psychological
proposition. For example, research revealed that consumers in China value products
 The New Global Marketing Realities 199

that give them a sense of “well-being,” “self-indulgence,” and “harmony.”

Volkswagen and Vidal Sassoon attempt to incorporate these values into their brands
when marketing to the Chinese.36

THE MANAGERIAL IMPERATIVE FOR INTERNATIONAL

MARKETERS
The centers of economic activity are shifting profoundly. Today, Asia (exclud-
ing Japan) accounts for 13 percent of world GDP, while Western Europe
accounts for more than 30 percent. Within the next 20 years the two will nearly
converge. In coming years, the United States will continue to dominate much
of international trade, but China and India will become the most important
new international players in the near term. Partly due to the rise of China and
India, the consumer landscape will change and expand substantially. Almost a bil-
lion new consumers will enter the global marketplace by 2015 as economic
growth in emerging markets pushes them beyond the threshold level of $5,000
in annual household income—a point when people begin to spend on discretion-
ary goods. Through 2015, consumer spending power in emerging markets will
increase from $4 trillion to more than $9 trillion—almost the present spending
power of Western Europe. The elderly market segment will balloon, and firms
will need to develop products and services for this key market. In the United
States, the Hispanic population will expand dramatically.37
Technological connectivity is transforming the way people live and interact.
We are still at the early stage of this revolution. Firms are learning how to make
the best use of information technology in designing processes and in developing
and accessing knowledge. New developments in fields such as biotechnology,
laser technology, and nanotechnology are moving well beyond the realm of prod-
ucts and services. More transformational than technology itself is the shift in
behavior that it enables. Increasingly, people work not just globally but also
instantaneously. They are forming communities and relationships in new ways.
More than 2 billion people now use cell phones. They send 9 trillion e-mails a
year and enter a billion Google searches a day. For perhaps the first time in
history, geography is not the primary constraint on the limits of international
marketing and other global activities.38
A purely domestic focus is no longer viable for most firms, particularly product
manufacturers. In order to remain competitive, domestic management must
develop a greater understanding and knowledge of international marketing.
Managers must adopt a global rather than a local focus. The most sophisticated
firms will deliberately seek simultaneous presence in all of the world’s major trad-
ing regions. A global approach is critical to gain and maintain competitive advan-
tage and ensure long-term performance. Companies must locate their value chain
200 Marketing in the 21st Century and Beyond

activities in those countries and in markets where they can derive maximal
competitive advantages.
Having a global presence is not limited to large MNCs. Smaller firms are also
increasingly global, often pursuing global niche strategies by targeting specialized
foreign markets. Trade liberalization implies greater competitive rivalry from
global firms. In order to meet globalization’s growing competitive challenges,
companies are increasing the level of their offshore investment and overseas sourc-
ing. Suppliers are following their internationalizing customers abroad.
Managers must strike some ideal balance between global control of the organi-
zation and decentralized decision making at the level of individual countries. This
implies striking the right balance in standardizing and adapting products, services,
and marketing itself. Managers must leverage technology, especially in informa-
tion and communications, to manage their international marketing activities.
To achieve economies of scale, companies will emphasize standardization of prod-
ucts and marketing and centralization of production activities in fewer locations.
By the same token, global competition pressures firms to be entrepreneurial and
flexible in their pursuit of new or latent opportunities and the resolution of
current problems and future threats.

NOTES
1. “The Net Imperative: A Survey of Business and the Internet,” The Economist,
June 26, 1999, B5–B7.
2. “Broadband Wonderland,” Fortune, September 20, 2004, 191–98.
3. “Clicks, Bricks and Bargains,” The Economist, December 3, 2005, 57–58.
4. Thomas L. Friedman, “It’s a Flat World, After All,” The New York Times
Magazine, April 3, 2005, 33–37.
5. “The Death of Distance: A Survey of Telecommunications,” The Economist,
September 30, 1995.
6. Michael Czinkota, Gary Knight, and Peter Liesch, “Terrorism and International
Business: Conceptual Foundations,” in Terrorism and the International Business
Environment: The Security-Business Nexus, ed. Gabriele Suder, 43–57 (Cheltenham,
England: Edward Elgar, 2004).
7. Yossi Sheffi, The Resilient Enterprise: Overcoming Vulnerability for Competitive
Advantage (Cambridge, MA: MIT Press, 2005).
8. M. Czinkota and G. A. Knight, “Managing the Terrorist Threat,” European
Business Forum 20 (Winter 2005): 42–45.
9. “A World of Work: A Survey of Outsourcing,” The Economist, November 13,
2004, special section.
10. Jagdish Bhagwati, Arvind Panagariya, and T. Srinivasan, “The Muddles over
Outsourcing,” Journal of Economic Perspectives 18, no. 4 (Fall 2004): 93–114.
 The New Global Marketing Realities 201

11. M. K. Erramilli and C. P. Rao. “Service Firms’ International Entry-Mode Choice:

A Modified Transaction-Cost Analysis Approach.” Journal of Marketing 57 (July 1993):
19–38.
12. G. Feketekuty, “Keynote Address: A Framework for Global Trade in Services,” in
Proceedings of the Services 2000, ed. I. T. Administration (Washington, DC: U.S.
Department of Commerce, 1999).
13. Grosse, Robert, “Knowledge Creation and Transfer in Global Service Firms,” in
Globalization of Services, ed. Y. Aharoni and L. Nachum, 217–32 (London: Routledge,
2000).
14. Gary Knight, “Entrepreneurship and Marketing Strategy: The SME under
Globalization,” Journal of International Marketing 8, no. 2 (2000): 12–32.
15. Gary A. Knight and S. Tamer Cavusgil, “Innovation, Organizational Capabilities,
and the Born-Global Firm,” Journal of International Business Studies 35, no. 2 (2004):
124–41.
16. Ibid.
17. Patricia McDougall and Benjamin Oviatt, “International Entrepreneurship: The
Intersection of Two Research Paths,” Academy of Management Journal 43, no. 5 (2000):
902–6.
18. Knight and Cavusgil, “Innovation.”
19. Masaaki Kotabe, Hildy Teegen, Preet Aulakh, Maria Cecilia Coutinho de
Arruda, Roberto Santillan-Salgado, and Walter Greene, “Strategic Alliances in Emerging
Latin American: A View from Brazilian, Chilean, and Mexican Companies,” Journal of
World Business 35, no. 2 (2000): 114–32.
20. Bruce Kogut, “Joint Ventures: Theoretical and Empirical Perspectives,” Strategic
Management Journal 9 (1988): 319–32.
21. Robert Guth, “IBM Announces Deal with Japan’s NTT,” Wall Street Journal,
November 1, 2000, 23.
22. Vern Terpstra and Bernard Simonin, “Strategic Alliances in the Triad,” Journal of
International Marketing 1, no. 1 (1993): 4–25.
23. Yves Doz, “The Evolution of Cooperation in Strategic Alliances: Initial Conditions
or Learning Processes,” Strategic Management Journal 17 (Summer 1996): 55–85.
24. Sing Keow Hoon-Halbauer, “Managing Relationships within Sino-Foreign Joint
Ventures,” Journal of World Business 34, no. 4 (1999): 334–70.
25. Alex Taylor III, “Shanghai Auto Wants to Be the World’s Next Great Car
Company,” Fortune, October 4, 2004, 103–10.
26. Cris Prystay, “Milk Industry’s Pitch in Asia: Try the Ginger or Rose Flavor,” Wall
Street Journal, August 9, 2005, B1.
27. Roger Calantone, S. Tamer Cavusgil, Jeffrey Schmidt, and Geon-Cheol Shin,
“Internationalization and the Dynamics of Product Adaptation: An Empirical
Investigation,” Journal of Product Innovation Management 21 (2004): 185–98.
28. Katherine Lemon, Roland Rust, and Valarie Zeithaml, “What Drives Customer
Equity,” Marketing Management 10, no. 1 (2001): 20–26.
29. Jay Galbraith, Designing the Global Corporation (San Francisco: Jossey-Bass, 2000).
30. Ibid.
202 Marketing in the 21st Century and Beyond

31. Ibid.
32. George Yip, Total Global Strategy II (Upper Saddle River, NJ: Prentice Hall,
2003).
33. David A. Aaker, Managing Brand Equity (New York: The Free Press, 1991).
34. Yip, Total Global Strategy II.
35. James Gregory and Jack Wiechmann, Branding across Borders (Chicago:
McGraw-Hill, 2002).
36. Gilbert Lee and Nic Hall, “Brand Strategy Briefing: The 15 Global Hot
Buttons,” Brand Strategy, June 2004, 58.
37. “The U.S. Hispanic Market: Wearing the American Dream,” Financial Times,
June 5, 2006.
38. Ibid.
 CHAPTER 13

CULTURE AND INTERNATIONAL

MARKETING
Vern Terpstra

INTRODUCTION
What is culture? The simplest definition is that culture is the distinctive way of
life of a group or nation of people. A dictionary puts it in more detail. It is “the
totality of socially transmitted behavior patterns, arts, beliefs, institutions, and
all other products of human work and thought characteristic of a community or
population.” Culture is also learned behavior. It depends on the environment,
not heredity; it is not biologically transmitted.
In other words, culture is a very complex phenomenon and a challenge to firms
who wish to market internationally. How does the firm’s product or service fit in
with the foreign market’s culture? How must it be adapted to fit? Every firm must
make its own adjustment and adaptation to satisfy foreign customers. We shall
look at various dimensions of culture and their significance for international mar-
keting. A very simple illustration of cultural differences was used by Hong Kong
Shanghai Bank in advertising on an international airport poster. They showed
an image of a grasshopper and the following message:
USA – Pest
China – Pet
Northern Thailand – Appetizer
204 Marketing in the 21st Century and Beyond

LANGUAGE
Language is the most obvious difference between cultures. Inextricably linked
with all other aspects of a culture, language reflects the nature and values of that
culture. For example, the English language has a rich vocabulary for commercial
and industrial activities, reflecting the progressive nature of the English and
U.S. societies. Many less industrialized societies have only limited vocabularies
for those activities, but richer vocabularies for matters important to their
culture.
Because language is such an obvious cultural difference, everyone recognizes
that it must be dealt with. It is said that anyone planning a career in international
business should learn a foreign language. Certainly, if a person’s career involves
dealing with a particular country, he or she will find learning the country’s lan-
guage to be very useful. Because it is usually impossible to predict to which coun-
tries a career will lead, it is best to study a language spoken by many people (e.g.,
Mandarin Chinese) or a language that is commonly used as a first or second lan-
guage in many nations (e.g., English, French, or Spanish). Whether or not it is a
primary language of the parties involved, English is frequently used in negotia-
tions, legal documents, and business transactions.
This does not mean, however, that American firms can bask in their knowledge
and use of English. Language still provides a challenge to international marketing.
Frequently, translation will be needed, and translation can be expensive. The
WTO spends over one-fifth of its budget translating its documents. The
European Union spends over $1 billion for translators and interpreters, and that
is just for EU members, not the rest of the world.
It is said that a language defines a cultural group, that nothing distinguishes one
culture from another more than language. What does it mean, though, when the
same language is used in different countries? French, for example, is the mother
tongue not only for the French but also for many Belgians and Swiss. Spanish
plays a similar role in Latin America. The anthropologist, however, stresses the
spoken language as the cultural distinction. The spoken language changes more
quickly than the written language and reflects the culture more directly.
Although England, the United States, and Ireland use the same written English,
they speak somewhat different dialects. These three cultures are separate yet
related, as are the Spanish-speaking cultures of Latin America.
Even where a common language is spoken, different words signifying the same
meaning are occasionally used, as are different pronunciations. In England, peo-
ple say “lorry,” “petrol,” and “biscuits”; in the United Sates, people say “truck,”
“gasoline,” and “cookies.” Incidentally, even within one country—for example,
the United States, where almost everyone speaks “American” English—there are
different cultural groups, or subcultures, among which the spoken language
varies.
 Culture and International Marketing 205

Language as a Problem
Activities such as advertising, branding, packaging, personal selling, and mar-
keting research are highly dependent upon communication. If management is
not speaking the same language as its various audiences, it is not going to enjoy
much success. In each of its foreign markets, a company must communicate with
several audiences: its workers, its managers, its customers, its suppliers, and the
government. Each of these audiences may have a distinctive communication style
within the common language.
Language diversity in world markets could be an insurmountable problem if
managers had to master the languages of all their markets. Fortunately, that is
not the case. To be effective, any person assigned to a foreign operation for a
period of a year or more should learn the local language. However, cultural
bridges are available in many markets. For example, in countries where a firm is
operating through a distributor, the distributor may act as the bridge between
the firm and its local market. In advertising, a firm may be able to rely on a local
advertising agency. Agency personnel, like the distributor, probably speak the
advertising manager’s language—especially if the firm communicates principally
in English.

SOCIAL ORGANIZATION
The social organization of a group of people helps define their roles and the
expectations they place upon themselves and others in the group. Concepts such
as family vary from group to group, which becomes evident when talking about
these concepts to people from other cultures. The nature of people’s friendships
with others—how quickly the relationships develop, how the friendships are nur-
tured, and how long they last—also reflect on the social organization within the
culture or group. Social organization is formally defined in the government and
the laws that proscribe certain behavior among people. The nature of social
organization and the impact on business is discussed next.

Kinship
Kinship includes the social organization or structure of a group: the way people
relate to other people. This differs somewhat from society to society. The primary
kind of social organization is based on kinship. In the United States, the key unit
is the family, which traditionally included only the father, the mother, and the
unmarried children in the household. Of course, the definition is changing, as is
reflected in each census. The family unit elsewhere is often larger, including more
relatives. A large extended family is common in many less developed nations.
206 Marketing in the 21st Century and Beyond

Those who call themselves brothers in Congo, for example, include cousins
and uncles.
In developing countries, the extended family fulfills several social and economic
roles. The family unit is not prescribed or defined by a specific religious restric-
tion, as does the baradari of Hinduism. The extended family provides mutual
protection, psychological support, and economic insurance or social security for
its members. In a world of tribal warfare and primitive agriculture, this support
was invaluable. The extended family, still significant in many parts of the world,
means that consumption decision making takes place in a larger unit and in differ-
ent ways. Pooled resources, for instance, may allow larger purchases; for this rea-
son, per capita income may be a misleading guide of market potential. The
researcher may find it difficult to determine the relevant consuming unit for some
goods. Is it a household or a family? How many members are there?

Common Territory
In the United States, common territory can be a neighborhood, a suburb, or a
city. In many countries of Asia and Africa, common territory is the tribal group-
ing. In many countries, the tribe is often the largest effective unit because the vari-
ous tribes do not voluntarily recognize the central government. Unfortunately,
nationalism has not generally replaced tribalism. Tribalism and religious or ethnic
divisions often lead to bloody conflict, as in Congo, Ireland, Israel and Palestine,
Pakistan, the Philippines, Rwanda, and Sudan. Even in Europe, the Scots and
the Welsh are not happy about being under British rule. For businesses, in many
countries, groupings based on common territory may be a clue to market
segmentation.

Special Interest Group

A third kind of social grouping, the special interest group or association, may be
religious, occupational, recreational, or political. Special interest groups can also
be useful in identifying different market segments. For example, in the United
States the American Association of Retired Persons (AARP), the Sierra Club,
and the National Rifle Association (NRA) represent market segments for some
firms.

Other Kinds of Social Organization

Some kinds of social organization cut across the categories just discussed. One
is the caste system or class groupings. These may be detailed and rigid, as in the
Hindu caste system; or they may be loose and flexible, as in U.S. social classes.
 Culture and International Marketing 207

The United States has a relatively open society, but there is still concern about
social standing and status symbols. While social class is more (or less) important
and rigid in comparing countries, each country has its own social and ethnic
groupings that are important for its society and the economy. These groupings
usually mean that some groups are discriminated against and others are favored.
Different groups may require different marketing strategies.
Other groupings based on age occur, especially in affluent industrialized
nations. For example, senior citizens usually live as separate economic unit with
their own needs and motivations. Age groupings are a major market segment in
industrialized countries. As noted in the discussion of the extended family, much
less separation between age groups exists in less developed areas. Generally, strong
family integration occurs at all age levels, as well as a preponderant influence of
age and seniority, which is in contrast to the youth motif prevalent in the
United States. Of course, Generation X and baby boomers are important age
groupings in the United States.
A final aspect of social organization concerns the role of women in the
economy. Women seldom enjoy parity with men as participants in the economy;
and their participation is related to the economic development of nations—the
poorer the nation, the fewer women seen in jobs outside the home. The extent
to which women participate in the money economy affects their role as consumers
and consumption influencers. Even developed countries exhibit differences in
attitudes toward female employment.

TECHNOLOGY AND MATERIAL CULTURE

Material culture includes the tools and artifacts—the material or physical
things—in a society, excluding those physical things found in nature unless they
undergo some technological transformation. For example, a tree as such is not
part of a culture, but the Christmas tree is. Technology refers to the techniques
or methods of making and using that which surrounds us. Technology and
material culture are related to the way a society organizes its economic activities.
The term “technology gap” refers to differences in the ability of two societies to
create, design, and use that which exists in nature or to use that which has been
transformed in some way.
When referring to industrialized nations, developing nations, the nuclear age,
or the space age, one is referring to different technologies and material cultures.
One can also speak of societies being in the age of the automobile, the bicycle,
or foot transportation—or in the age of the computer, the abacus, or pencil-
and-paper calculation. The relationships between technology, material culture,
and the other aspects of life are profound but not easily recognized because people
are the products of their own culture. It is primarily as people travel abroad that
they perceive such relationships.
208 Marketing in the 21st Century and Beyond

In discussing this topic, Karl Marx went so far as to say that the economic
organization of a society shapes and determines its political, legal, and social
organization. His view was termed “economic determinism,” his materialist inter-
pretation of history. Few people today would take such a strong position, but they
may recognize many examples of the impact of tools, techniques, and economic
organization on the nature of life in society. For example, people’s behavior as
workers and consumers is greatly influenced by the technology and material
culture.
The way people work and how effectively they work is determined in large part
by their technology and material culture. Henry Ford’s assembly line revolution-
ized U.S. productivity and, ultimately, the standard of living. U.S. farmers’ use of
equipment and technology has made them the world’s most productive agricul-
turalists. Ironically, agriculture is one of the most capital- and technology-
intensive industries in the United States. The farmer does not do the research
and development, however, but land-grant universities, equipment manufac-
turers, and chemical companies do. The computer, as one of the newer artifacts,
affects the way people work, the kind of work they can do, and even where they
work. If you consider the nature of the factory and agricultural methods and the
role of the computer in an African nation, you can see technology and material
culture as a constraint on work and productivity in a culture.
One of the most striking examples of the potential impact of technology is
India. In the 20th century, India was almost a third-world country. In the 21st
century, India is a world leader in computer and information technology and sells
its services to the United States and other first-world countries. Most of the
world’s poorest countries are not able to imitate India’s success, but technology
can help them also.
In 2005, the United Nations launched a “Digital Solidarity Fund” to finance
projects that address “the uneven distribution and use of new information
and communication technologies” and that will “enable excluded people and
countries to enter the new era of the information society.”
One of the simpler new technologies, the mobile phone, is having the greatest
impact on economic development. The world’s poorest are rushing to embrace
mobile phones because of their benefits. They can be used by illiterates and do
not depend on a permanent electricity supply. They are shared and rented out
by the call. Farmers and small businesses can shop around for the best place for
supplies and equipment, as well as the market with the best price for their prod-
ucts, reducing the need for travel.1
How people consume and what people consume are also heavily influenced by
the technology and material culture. For example, the car has helped to create the
conditions that made suburban living possible, with the accompanying lifestyle
and consumption patterns. Television has a wide-ranging impact on consumer
and voter behavior. The microwave oven influences not only the preparation of
 Culture and International Marketing 209

food but also the nature of the food consumed. Considering artifacts such as the
digital camera and the cellular telephone, one can imagine further ramifications
of each new project on the life of the consumer. Knowing the impact of these
products in the U.S. culture, one can conjecture how consumer behavior might
be different in countries with much lighter penetration of such products.

Material Culture as a Constraint

Managers need to develop insight into how material culture in foreign markets
affects their operations abroad. In manufacturing, foreign production by a firm
may represent an attempt to introduce a new material culture into the host
economy. This is usually the case when a firm builds a plant in a less developed
country. The firm generally checks carefully on the necessary economic prerequi-
sites for such a plant: for example, raw-material supply, power, transportation,
and financing. Frequently overlooked, however, are the other cultural precondi-
tions for the plant.
Before making foreign production decisions, a firm must evaluate the material
culture in the host country. One aspect is the economic infrastructure—that is,
transportation, power, and communications. Other questions are these: Do pro-
duction processes need to be adapted to fit the local economy? Will the plant be
more labor-intensive than plants at home? The manager discovers that production
of the same goods may require a different production function in different
countries.
In large diversified markets such as the United States, almost any industrialized
product can find a market. In developing nations, however, firms that make
industrial goods find increasingly limited markets in which they can sell only part,
or perhaps none, of their product line. The better the picture of the material cul-
ture in world markets, the more able a firm is to identify the best prospects. The
prospects in countries where the principal agricultural implement is the machete
differ from those in countries where farmers use tractors.
Firms that manufacture consumer goods are also concerned with the material
culture in foreign markets. Simple considerations such as electrical voltages and
use of the metric system must be taken into account. Product adaptations may
also be necessitated by the material culture of the family unit. Does the family
have a car to transport purchases? Does the family have a stove to prepare foods
or a refrigerator in which to store foods? If electrical power is not available, electri-
cal appliances will not be marketable unless they are battery powered. To those
people who wash clothes by a stream or lake, detergents and packaged soaps are
not useful; the market is for bar soaps only.
Large multinational companies are learning from entrepreneurs in developing
countries that the key to success in markets where income is low is to sell products
that come in small sizes, are relatively cheap, and are easy to use. Unilever
210 Marketing in the 21st Century and Beyond

packages its shampoo in single-use sizes, selling it for a few cents in India. Other
examples include three-inch-square packages of margarine in Nigeria that do
not need refrigeration, and an 8¢ tube of Close-Up with enough toothpaste for
about 20 brushings. Unilever expects that developing markets will account for
50 percent of all sales by 2010, up from 32 percent in 2005. Freeplay Energy in
London designed and sold 3 million hand crank radios. Since many people in devel-
oping countries have no electricity and cannot afford to purchase batteries, these
units are popular for listening to farm and health reports. Phillips Electronics of
the Netherlands has developed its own version, which the firm is now selling in
India for around $20. Indian firms located in Madras and Bangalore are developing
wireless kiosks that allow users to access the Internet for as little as 3¢ an hour,
and computers with voice recognition software, which is aimed at users who
cannot read.
Marketing strategy is influenced by the material culture. For instance, the pro-
motional program is constrained by the kinds of media available. The advertiser
wants to know the availability of television, radio, magazines, and newspapers.
How good is the reproduction process in newspapers and magazines? Are there
advertising and research agencies to support the advertising program? The size
of retail outlets affects the use of point-of-purchase displays. The nature of travel
and the highway system affects the use of outdoor advertising.
Modification in distribution may also be necessary. These changes must be
made based on the alternatives offered by the country’s commercial infrastructure.
What wholesale and retail patterns exist? What warehouse or storage facilities are
available? Is refrigerated storage possible? What is the nature of the transport sys-
tem—road, rail, river, or air? What area does it cover? Firms that use direct chan-
nels in the United States, with large-scale retailers and chain-store operations, may
have to use indirect channels with a multitude of small independent retailers.
These small retailers may be relatively inaccessible if they are widely dispersed
and transportation is inadequate.
If local storage facilities are insufficient, a firm may have to supply its own pack-
aging or provide special packaging to offer extra protection. Whereas highways
and railroads are most important in moving goods in the United States, river
transport is a major means in other countries. And in still other countries, air
is the principal means of transport. Thus, in numerous ways, management is
concerned with the material culture in foreign markets.
Perhaps the subtlest role of international business is that of the agent of cultural
change. When a firm introduces new products into a market, it is, in effect, seek-
ing to change the country’s material culture. The change may be modest, such as a
new food product, or it may be more dramatic, such as a machine that revolution-
izes agriculture or industrial technology in the host country. The product of the
international firm is alien in the sense that it did not originate in the host country.
The firm must consider carefully the legitimacy of its role as an agent of change.
 Culture and International Marketing 211

It must be sure that any changes it introduces are in accordance with the interests
of the host country. When the product is coming from a developed nation and
sold in developing countries without modification, people may resent the firm’s
product as a form of “neo-colonialism,” “Westernization,” or “imperialism.”
Along this line, someone coined the term “cocoa colonization” concerning U.S.
cocoa business abroad.

EDUCATION
In developed nations, education usually means formal training in school. In
this sense, those people without access to schools are not educated; that is, they
have never been to school. However, this formal definition is too restrictive.
Education includes the process of transmitting skills, ideas, and attitudes, as well
as training, in particular disciplines. Even so-called “primitive” peoples have been
educated in this broader sense. For example, regardless of formal schooling, the
Bushmen of South Africa are well educated in relation to the culture in which
they live.
One function of education is to transmit the existing culture and traditions to
the new generation. Education plays an important role in cultural change in the
United States, as it does elsewhere. For example, in the past, developing nations’
educational campaigns were carried out with the specific intent of improving
techniques used in farming and in reducing the population explosion. In
Britain, business schools were originally established to improve the performance
of the economy. Some attribute the rapid economic development of Singapore
to formal apprenticeship programs.

International Differences in Education

When looking at education in foreign markets, the observer is limited primarily
to information about the formal process, that is, education in schools. This is the
only area for which the United Nations Educational, Scientific and Cultural
Organization (UNESCO), the World Bank, and others have been able to gather
data. Traditionally, literacy rates have been used to describe educational achieve-
ment; recently, however, international agencies have been measuring inputs as
well as educational system outputs other than literacy. For example, the World
Bank still includes adult and youth illiteracy rates in its reports. Now it has begun
measuring participation in education, which includes enrollment ratios in pri-
mary, secondary, and tertiary levels of education, and educational efficiency,
which includes completion rates at different levels of education and average num-
ber of years in school. In addition, the World Bank also reports on inputs such as
expenditures per student, teachers’ compensation, number of faculty with
212 Marketing in the 21st Century and Beyond

appropriate qualifications, and pupil-teacher ratios. Perhaps most importantly,

the goals of the World Bank have changed from activities aimed merely at increas-
ing literacy rates to measures designed to ensure that “all children complete a full
course of primary education,” a target it hopes is achieved by 2015.
The education information available on world markets refers primarily to
national enrollments in the various levels of education—primary, secondary,
and college or university. This information can give an international marketer
insight into the sophistication of consumers in different countries. There is also
a strong correlation between educational attainment and economic development.
One could argue that qualitative measures such as math and science scores on
international achievement tests should also be used as indicators of human capital
development and long-term economic prospects. Because U.S. students consis-
tently score lower on these exams than students in other countries, some fear that
the United States may lose its technological edge in the future.
Because only quantitative data are available, there is a danger that the qualita-
tive aspects of education might be overlooked. Furthermore, in addition to the
limitations inherent in international statistics, the problem exists of interpreting
them in terms of business needs. For example, a firm’s needs for technicians, mar-
keting personnel, managers, distributors, and sales forces must be met largely
from the educated population in the local economy. When hiring people, the firm
is concerned not only with the level but also with the nature of the applicants’
education.
Training in law, literature, or political science is probably not the most suitable
education for business needs. Yet in many nations, such studies are emphasized
almost to the exclusion of others more relevant to commercial and economic
growth. Too often, primary education is preparation for secondary, secondary
education is preparation for university, and university education is not designed
to meet the needs of the economy. In many nations, university education is
largely preparation for the traditional prestige occupations. Although a nation
needs lawyers and philosophers, it also needs agricultural experts, engineers,
managers, and technicians. The degree to which the educational system provides
for these needs is a critical determinant of the nation’s ability to develop
economically.

Education and International Marketing

The international marketer must also be something of an educator. The prod-
ucts and techniques a firm brings into a market are generally new to that market.
The firm must educate consumers about the uses and benefits. Although a firm
may not make use of a formal educational system, its success is constrained by
that system because its ability to communicate depends in part on the educational
 Culture and International Marketing 213

level of its market. An international marketer is further concerned about the

educational situation because it is a key determinant of the nature of the con-
sumer market and the kinds of marketing personnel available. Some implications
for businesses include the following:
• When consumers are largely illiterate, existing advertising programs, package labels,
instructions, and warranties need to be adapted to include fewer words and more
graphics and pictures.
• When women are largely excluded from formal education, marketing programs may
differ from those aimed at female segments in developed nations. When a firm is tar-
geting women audiences with less education, messages need to be simple, perhaps
with less text and more graphics.
• Conducting marketing research can be difficult, both in communicating with con-
sumers and in getting qualified researchers. If few people are able to read, written sur-
veys would be an ineffective tool in gathering data. Personal interviews, although
more costly, would tend to increase response rates and accuracy.
• Cooperation from the distribution channels depends partly on the educational attain-
ments of members in the channel. When overall levels of education are low, finding
local qualified marketing employees for certain service or managerial positions may
be difficult and very competitive. Long-term training programs and commitments
to employee education may raise local operating costs.

RELIGION
If you are to gain a full understanding of a culture, you must become familiar
with the internal behavior that gives rise to the external manifestations.
Generally, it is the religion of a culture that provides the best insights into this
behavior. Therefore, although an international company is interested primarily
in knowing how people behave as consumers or workers, management’s task will
be aided by an understanding of why people behave as they do.
Numerous religions exist in the world. This section presents brief overviews of
animism, Hinduism, Buddhism, Islam, Shinto, Confucianism, and Christianity.
These religions were selected based on their importance in terms of numbers of
adherents and their impact on the economic behavior of their followers.
Adherents to these religious beliefs account for over three-fourths of the world’s
population. The animists alone have a reported number of adherents varying from
100 million to 245 million.

Animism or Nonliterate Religion

“Animism” is the term used to describe the religion of indigenous peoples. It is
often defined as spirit worship, as distinguished from the worship of God or gods.
214 Marketing in the 21st Century and Beyond

Animistic beliefs have been found in all parts of the world. With the exception of
revealed religion, some form of animism has preceded all historical religions. In
many less developed parts of the world today, animistic ideas affect cognitive
behavior.
Magic, a key element of animism, is the attempt to achieve results through the
manipulation of the spirit world. It represents an unscientific approach to the
physical world. When cause-and-effect relationships are not known, magic is
given credit for the results. The same attitude prevails toward many modern-day
products and techniques.
For example, during the author’s years in Congo, he had an opportunity to see
reactions to European products and practices that were often based on a magical
interpretation. In one instance, a number of Africans affected the wearing of
glasses, believing the glasses would enhance the intelligence of the wearer. Some
firms that manufacture consumer goods in Africa have not hesitated to imply that
their products have magical qualities. Of course, the same is sometimes true of
firms elsewhere.
Other aspects of animism include ancestor worship, taboos, and fatalism. All of
them tend to promote a traditionalist, status quo, backward-looking society.
Because such societies are more interested in protecting their traditions than in
accepting change, companies face problems when introducing new products,
ideas, or methods. A firm’s success in bringing change depends on how well it
understands and relates to the culture and its animistic foundation.

Hinduism
There are over 900 million Hindus in the world, most of them in India. In a
broad sense, about 80 percent of India’s population is Hindu; but in the sense
of strict adherence to the tenets of Hinduism, the number of followers is smaller.
A common dictum is that Hinduism is not a religion, but a way of life. Its origins
go back approximately 3,500 years. It is an ethnic, noncreedal religion. A Hindu
is born, not made, so a person cannot become a Hindu or convert to Hinduism,
although he or she may become a Buddhist, for example. Modern Hinduism is a
combination of ancient philosophies and customs, animistic beliefs, legends, and
more recently, Western influences, including Christianity. A strength of Hinduism
has been its ability to absorb ideas from outside; Hinduism tends to assimilate rather
than exclude.
Despite this openness, many in India are unhappy about marriages between
Christians or Muslims and Hindus because it is viewed as a threat or dilution of
Hindutva (Hindu-ness) of the culture. Much violence has occurred between the
Hindu and Muslim populations, with one instance of over 500 people killed in
Gujarat in early 2002. Because Hinduism is an ethnic religion, many of its
 Culture and International Marketing 215

doctrines apply only to the Indian situation. However, they are crucial in
understanding India and its people.
Sikhism is a religion also practiced in India that represents a combined form of
Hinduism and Islam, featuring a much-debated aspect, the caste system. While
the Indian government officially abolished it over a half century ago and instituted
quotas and job-preferment policies, there are still examples of separate gurdwarars
(houses of worship) for Sikhs and the Dalit, or Scheduled Caste (formerly called
“untouchables”), some of whom are converting to Buddhism, Christianity, and
Islam to escape the caste system.
Another element and strength of Hinduism is baradari, or the “joint family.”
After marriage, the bride goes to the groom’s home. After several marriages in
the family, there is a large joint family for which the father or grandfather is chief
authority. In turn, the older women have power over the younger. The elders give
advice and consent in family council. The Indian grows up thinking and acting in
terms of the joint family. If a member goes abroad to a university, the joint family
may raise the funds. In turn, that member is expected to remember the family if
he or she is successful. Baradari is aimed at preserving the family.
Nirvana is another important concept, one that Hinduism shares with
Buddhism. This topic is discussed in the following section.

Buddhism
Buddhism springs from Hinduism, originating about 2,600 years ago.
Buddhism has approximately 360 million followers, mostly in South and East
Asia from India to Japan. There are, however, small Buddhist societies in
Europe and America. Buddhism is, to some extent, a reformation of Hinduism.
It did not abolish caste, but declared that Buddhists were released from caste
restrictions. This openness to all classes and both sexes was one reason for
Buddhism’s growth. While accepting the philosophical insights of Hinduism,
Buddhism tried to avoid its dogma and ceremony, stressing tolerance and spiritual
equality.
At the heart of Buddhism are the Four Noble Truths:
1. The Noble Truth of Suffering states that suffering is omnipresent and part of the very
nature of life.
2. The Noble Truth of the Cause of Suffering cites the cause of suffering to be desire,
that is, desire for possessions and selfish enjoyment of any kind.
3. The Noble Truth of the Cessation of Suffering states that suffering ceases when desire
ceases.
4. The Noble Truth of the Eightfold Path that leads to the Cessation of Suffering offers
the means to achieve cessation of desire. This is also known as the Middle Way
because it avoids the two extremes of self-indulgence and self-mortification.
216 Marketing in the 21st Century and Beyond

The eightfold path includes (1) the right views, (2) the right desires, (3) the right
speech, (4) the right conduct, (5) the right occupation, (6) the right effort, (7) the
right awareness, and (8) the right contemplation. This path, though simple to state,
is a demanding ethical system. Nirvana is the reward for those who are able to stay
on the path throughout their lifetime or, more probably, lifetimes.
Nirvana is the ultimate goal of the Hindu and Buddhist. It represents the
extinction of all cravings and the final release from suffering. To the extent that
such an ideal reflects the thinking of the mass of the people, the society’s values
would be considered antithetical to such goals as acquisition, achievement, and
affluence. This is an obvious constraint on business.

Islam
Islam dates from the seventh century AD. It has over 900 million adherents,
mostly in Africa, Asia, and the Middle East. Most of the world of Islam is found
across the northern half of Africa, in the Middle East, and throughout parts of
Asia to the Philippines. Islam is usually associated with Arabs and the Middle
East, but non-Arab Muslims outnumber Arab Muslims by almost three to one.
The nations with the largest Muslim populations are all outside the Middle
East. Indonesia, Pakistan, Bangladesh, and India all have over 100 million
Muslims. Although there are two major groups in Islam (Sunni 85%, and
Shi’ite 15%), they are similar enough on economic issues to permit identification
of the following elements of interest to firms.
Muslim theology, Tawhid, defines all that one should believe; whereas the law,
Shari’a, prescribes everything one should do. The Koran (Qur’an) is accepted as
the ultimate guide. Anything not mentioned in the Koran is likely to be rejected
by the faithful. Introducing new products and techniques can be difficult in such
an environment. An important element of Muslim belief is that everything that
happens, good or evil, proceeds directly from the Divine Will and is already
irrevocably recorded on the Preserved Tablet. This belief tends to restrict attempts
to bring about change in Muslim countries; to attempt change may be a rejection
of what Allah has ordained. The name “Islam” is the infinitive of the Arabic verb
to submit. “Muslim” is the present participle of the same verb; that is, a Muslim is
one submitting to the will of Allah.

The Five Pillars of Islam

The Five Pillars of Islam, or the duties of a Muslim, include (1) the recital of
the creed, (2) prayer, (3) fasting, (4) almsgiving, and (5) the pilgrimage. The creed
is brief: there is no God but Allah, and Mohammed is his Prophet. The Muslim
must pray five times daily at stated hours. During the month of Ramadan,
 Culture and International Marketing 217

Muslims are required to fast from dawn to sunset—no food, no drinking, and no
smoking. Because the Muslim year is lunar, Ramadan sometimes falls in mid-
summer, when the long days and intense heat make abstinence a severe test.
The fast is meant to develop self-control and sympathy for the poor. During
Ramadan, work output falls off markedly, which is attributable as much to the
Muslims’ loss of sleep from the many late-night feasts and celebrations—as to
the rigors of fasting. The average family actually spends more money on the food
consumed at night during Ramadan than on the food consumed by day in the
other months. Other spending rises also. Spending during Ramadan has been said
to equal six months of normal spending, corresponding to the Christmas season
elsewhere. Sales increases of 20 to 40 percent of furniture, cars, jewelry, and other
large or expensive items are common. One firm stated that between 35 and
40 percent of all auto sales take place during Ramadan.
By almsgiving, the Muslim shares with the poor. It is an individual responsibil-
ity, and there are both required alms (zakat) and free-will gifts. The pilgrimage to
Mecca is a well-known aspect of Islam. The thousands who gather in Mecca each
year return home with a greater sense of the international solidarity of Islam.
Spending for the pilgrimage is a special form of consumption directly associated
with religious behavior.
There is a relationship between culture and law. Behavior deemed acceptable or
not acceptable is often reflected in the laws of a nation or group of people. The tie
between religion and law is perhaps most clear in Islam. With respect to business,
Muslims are not allowed to consume pork or alcohol. Furthermore, people are
not allowed to invest in firms whose primary business involves alcohol, defense,
entertainment, gambling, or the manufacture of or processes using pork products.
Under Shari’a law, investors are not allowed to hold any stake in conventional
banks or insurance companies because these institutions are believed to engage in
usurious practices that are illegal. Even the ability to own stock or shares in compa-
nies with large amounts of debt or that make annual interest payments is being
called into question. While there is some tolerance for investing in these companies,
devout Muslims point out that this is a breach of Shari’a rules against usury.

Japan: Shinto, Buddhism, and Confucianism

Japan is a homogeneous culture with a composite religious tradition. The origi-
nal national religion is Shinto, “the way of the gods.” In the seventh century, how-
ever, Japan came under the influence of China and imported an eclectic
Buddhism mingled with Confucianism. In 604, Prince Shotoku issued a moral
code based on the teachings of both Confucius and Gautama Buddha. Its 17
articles still form the basis of Japanese behavior. The adoption of the religions
from China was only after the authorities decided they would not conflict with
Shinto.
218 Marketing in the 21st Century and Beyond

Traditional Shinto contains elements of ancestor and nature worship; state

or modern Shinto added political and patriotic elements. Official estimates of
90 million Japanese Buddhists are somewhat misleading. An old refrain is that
Japanese are born Shinto, get married as Christians, and die as Buddhists.
Figures on followers of Buddhism in Japan vary widely, from 20 to 90 percent
of the Japanese population. (The high figures are based on birth records and on
Buddhism being the “preferred religion” in a response to research questions
posed; the low figures incorporate the response of up to 75 percent of Japanese
who claim to be nonreligious.)
Among the more important aspects of modern Shinto are (1) reverence for the
divine origin of the Japanese people and (2) reverence for the Japanese nation and
the imperial family as head of that nation. The term “modern Shinto” is used
because when the imperial powers were restored in 1868, state Shinto became a
patriotic cult, whereas sectarian Shinto was purely religious. Of course, sectarian
Shinto, through ancestor worships, also affects Japanese attitudes. In many
houses, there is a god-shelf (kamidana) on which the spirits of the family ancestors
are thought to dwell and watch over the affairs of the family. Reverence is paid to
them, and the sense of the ancestors’ spirit is a bulwark of the family’s authority
over the individual.
The impact of modern Shinto on Japanese life is reflected in an aggressive patri-
otism. The mobilization of the Japanese of World War II and their behavior
during the war are examples. One longtime observer said, “Nationalism is the
Japanese religion.” More recently, the economic performance of Japan is due, at
least in part, to the patriotic attitude of those working in the economic enterprise.
The family spirit is carried over to the firm, which has meant greater cooperation
and productivity. Some Eastern religion seeks virtue through passivity. Shinto, by
contrast, stresses the search for progress through creative activity. Japan’s eco-
nomic performance clearly seems to follow the Shinto path. The aggressive
Japanese attitude is reflected in the company song of Kyocera, a Japanese firm.
As the sun rises brilliantly in the sky, revealing the size of the mountains,
The market, oh, this is our goal.
With the highest degree of mission in our heart, we serve our industry,
Meeting the strictest degree of customer requirement.
We are the leader in this industry, and our true path
Is ever so bright and satisfying.

Christianity
Christianity is a major religion worldwide, and little time will be spent describ-
ing its general teachings. The emphasis here is the impact of the different
Christian religious groups (Roman Catholic and Protestant) on economic atti-
tudes and behavior. Two studies have dealt with this subject: Max Weber’s The
 Culture and International Marketing 219

Protestant Ethic and the Spirit of Capitalism and R. H. Tawney’s Religion and the
Rise of Capitalism. The Eastern Orthodox churches are not discussed in this sec-
tion, but their impact on economic attitudes is similar to that of Catholicism.
Roman Catholic Christianity traditionally has emphasized the Church and the
sacraments as the principal elements of religion and the way to God. The Church
and its priests are intermediaries between God and human beings; apart from the
Church, there is no salvation. Another element is the distinction between the mem-
bers of religious orders and the laity, with different standards of conduct applied to
each. An implicit difference exists between the secular and the religious life.
The Protestant Reformation, especially Calvinism, made some critical changes
in emphasis, but retained agreement with Catholicism on most traditional
Christian doctrine. The Protestants, however, stressed that the Church, its sacra-
ments, and its clergy were not essential to salvation: “Salvation is by faith alone.”
The result of this was a downgrading of the role of the Church and a consequent
upgrading of the role of the individual. Salvation became more of an individual
matter.
Another change by the reformers was the elimination of the distinction
between secular and religious life. Luther said that all of life was a Beruf, a
“calling,” and even the performance of tasks considered secular was a religious
obligation. Calvin carried this further by emphasizing the need to glorify God
through ones calling. Whereas works were necessary to salvation in Catholicism,
works were evidence of salvation in Calvinism.
Hard work was enjoined to glorify God, achievement was the evidence of hard
work, and thrift was necessary because the produced wealth was not to be used
selfishly. Accumulation of wealth, capital formation, and the desire for greater
production became Christian duty. The Protestant Reformation thus led to
greater emphasis on individualism and action (hard work), as contrasted with
the more ritualistic and contemplative approach of Catholicism.
Although it is useful to recognize the separate thrust of Roman Catholic and
Protestant Christianity, it is also important to note the various roles Christianity
generally plays in different nations. Some nations reflect varying mixtures of
Catholic and Protestant, and the resulting ethic may become a combination of
both doctrines. Of course, within Christianity (as with Buddhism, Hinduism,
and Islam), wide variations exist in the degree to which adherents follow the
teachings. In all groups, segments range from fundamentalist to conservative
to casual.

Religion and the Economy

In discussing various religions, some economic implications were suggested
that will be elaborated on here. Religion has a major impact on attitudes toward
economic matters. The following section, Attitudes and Values, will discuss the
220 Marketing in the 21st Century and Beyond

different attitudes religion may inspire. Besides attitudes, however, religion may
affect the economy more directly, as in the following examples.
• Religious holidays vary greatly among countries—not only from Christian to Muslim
but also from one Christian country to another. In general, Sundays are a religious
holiday where Christianity is an important religion. In the Muslim world, however,
the entire month of Ramadan is a religious holiday for practical purposes. A firm
must see that local work schedules and other programs take into account local holi-
days, just as American firms plan for a big season at Christmas.
• Consumption patterns may be affected by religious requirements or taboos. Fish on
Friday for Catholics used to be a classic example. Taboos against beef for Hindus or
pork for Muslims and Jews are other examples. The Muslim prohibition against alco-
hol has been a boon to companies such as Coca-Cola. Heineken and other brewers
sell a nonalcoholic beer in Saudi Arabia. On the other hand, dairy products find favor
among Hindus, many of whom are vegetarians.
• The economic role of women varies from culture to culture, and religious beliefs are
an important cause. Women may be restricted in their capacity as consumers, as
workers, or as respondents in a marketing study. These differences may require major
adjustments in the approach of a management conditioned in the U.S. market.
Procter & Gamble’s products are used mainly by women. When the company
wanted to conduct a focus group in Saudi Arabia, however, it could not induce
women to participate. Instead, it used the husbands and brothers of women for the
focus group.
• The caste system restricts participation in the economy. A company may feel the
effects not only in its staffing practices (especially its sales force) but also in its distri-
bution and promotional programs because it must deal with the market segments set
up by the caste system.
• The Hindu joint family has economic effects. Nepotism is characteristic of the family
business. Staffing is based more on considerations of family rank than on any other
criteria. Furthermore, consumer decision making and consumption in the joint fam-
ily may differ from those in the U.S. family, requiring an adapted strategy. Pooled
income in the joint family may lead to different purchase patterns.
• Religious institutions themselves may play a role in economic matters. The church,
or any organized religious group, may block the introduction of new products or
techniques if it sees the innovation as a threat. On the other hand, the same product
or technique can be more effectively introduced if the religious organization sees it as
a benefit. The United States has seen the growing role of religious groups. This is true
in other countries too, as one can see by following the daily news and business press.
• Religious divisions in a country can pose problems for management. A firm may find
that it is dealing with different markets. In Northern Ireland, there is strong Catholic-
Protestant hostility. In India, Muslim-Hindu clashes led to the formation of the sep-
arate nation of Pakistan; but the animosity continues. In the Netherlands, major
Catholic and Protestant groups have their own political parties and newspapers.
Such religious divisions can cause difficulty in staffing an operation or in distributing
 Culture and International Marketing 221

and promoting a product. Religious differences may indicate buyer segments that
require separate strategies.
Clearly, an international firm must be sensitive to religious differences in its
foreign markets and be willing to make adaptations. To cite one example, a firm
that is building a plant abroad might plan the date and method of opening and
dedicating the building to reflect the local religious situation. In particular, a
firm’s advertising, packaging, and selling practices need to consider local religious
sensitivities.

ATTITUDES AND VALUES

People’s attitudes and values help determine what they think is right or appro-
priate, what is important, and what is desirable. The attitudes that relate to busi-
ness will be presented. It is important to consider attitudes and values because, as
Douglas North, the Nobel Prize–winning economist said, “People act on the basis
of ideologies and religious views.” People have attitudes and values about work,
money, time, family, age, men, women, and a host of other topics that have an
impact on business. The list is long; only those topics most important for business
will be highlighted here.

Business Activities
Ever since Aristotle, selling activities have failed to gain high social approval.
The degree of disapproval, however, varies from country to country. In countries
where business is looked upon unfavorably, as a wicked or immoral profession,
business activities are likely to be neglected and underdeveloped. Capable, tal-
ented people are not drawn into business. Often these activities are left to a special
class or to expatriates. One is reminded of the medieval banking role filled by Jews
or the merchant role of the Chinese in Southeast Asia. In any case, depending on
a country’s attitude toward business, an international firm may have problems
with personnel, distribution channels, and other aspects of its marketing program.

Wealth, Material Gain, and Acquisition

The United States has been called the “affluent society,” the “achieving soci-
ety,” and the “acquisitive society.” Those somewhat synonymous expressions
reflect motivating values in society. In the United States, wealth and acquisition
are often considered signs of success and achievement and are given social appro-
val. In a Buddhist or Hindu society, where nirvana or “wantlessness” is an ideal,
people may not be so motivated to produce and consume. Businesses obviously
prefer to operate in an acquisitive society. However, as a result of rising expectations
222 Marketing in the 21st Century and Beyond

around the world, national differences in attitudes toward acquisition seem to be

lessening. For example, Buddhist Thailand is proving to be a profitable market for
many consumer goods firms.
Work may be an end unto itself for some people, and one’s position with a par-
ticular organization may be an important measure of the person’s social status.
For others, family, leisure time, and friends take precedence over money and posi-
tion. German and French workers have gone on strike and even rioted over plans
to extend their workweek beyond 35 hours, to cut paid vacation time, or to raise
the age that one becomes qualified for retirement benefits.

Change
When a company enters a foreign market, it brings change by introducing new
ways of doing things and new products. In general, North Americans accept
change easily. The word “new” has a favorable connotation and facilitates change
when used to describe techniques and products. Many societies are more tradition
oriented, however, revering their ancestors and traditional ways of consuming.
Business as an agent of change has a different task in traditional societies.
Rather than emphasizing what is new and different about a product, the business
might relate the product to traditional values, perhaps noting that it is a better
way of solving a consumer problem. In seeking acceptance of its new product, a
firm might try to get at least a negative clearance—that is, no objection—from
local religious leaders or other opinion leaders. Any product must first meet a
market need. Beyond that, however, to be accepted the product must also fit in
with the overall value system.
The Campbell Soup Company met this kind of obstacle when it introduced its
canned soups into Italy. In conducting research, it received an overwhelmingly
negative response to the question, “Would you marry a user of prepared soups?”
Campbell had to adjust its questionnaire accordingly.

Risk Taking
Consumers take risks when they try a new product. Will the product do what
they expect it to do? Will purchasing or using the product prejudice their standing
or image with their peers? Intermediaries handling the untried product may also
face risks beyond those associated with their regular line. In a conservative society,
there is a greater reluctance to take such risks. Therefore a firm must seek to
reduce the risk perceived by customers or distributors in trying a new product.
In part, this can be accomplished through education; guarantees, consignment
selling, and other techniques can also be used.
 Culture and International Marketing 223

Risk avoidance is a major factor in the low number of online shoppers. While
the number of users is growing exponentially, a recent survey found that
one-third of Internet users did not shop online because they did not want to
risk providing credit card information over the Internet. One-quarter of
those surveyed believed it was safer to purchase at a retail shop. The number
of Internet users who are also online shoppers is highest—between 15 and
25 percent—among developed nations, and lowest—below 5 percent—among
developing nations. Recent research indicates that this differs from one culture
to another, but this may also be a reflection of different use patterns; that is,
some people use the Internet for entertainment or research, while others use it
for shopping.

Consumer Behavior
The attitudes just discussed are relevant to understanding consumer behavior
in the markets of the world. International managers must have such an under-
standing to develop effective programs. Because of the impossibility of gaining
intimate knowledge of a great number of markets, they must rely not only on
company research but also on help from others. Those who can assist managers
in understanding local attitudes and behavior include personnel in the firm’s sub-
sidiary, the distributor, and the advertising agency. Although a firm is interested
in changing attitudes, most often it has to adapt to them. As Confucius said, “It
is easier to move mountains than to change the minds of men.”

AESTHETICS
Aesthetics refers to the prevalent ideas in a culture concerning beauty and good
tastes, as expressed in the arts—music, art, drama, and dance—and the apprecia-
tion of color and form. International differences abound in aesthetics, but they
tend to be regional rather than national. For example, Kabuki theater is exclu-
sively Japanese, but Western theater includes at least all of Western Europe in
addition to the United States and Canada in its audience.
Musical tastes, too, tend to be regional rather than national. In the West, many
countries enjoy the same classical and popular music. In fact, due to modern com-
munications, popular music has become truly international. Nevertheless, obvious
differences exist between Western music and music of the Middle East, Africa, or
India. Likewise, the dance styles of African tribal groups or the Balinese are quite
removed from Western dance styles. The beauty of India’s Taj Mahal is different
from that of Notre Dame in Paris or the Chrysler Building in New York City.
224 Marketing in the 21st Century and Beyond

Design
The aesthetics of a culture probably do not have a major impact on economic
activities. In aesthetics, however, lie some implications for international business.
For example, in the design of its plant, product, or package, a firm should be sen-
sitive to local aesthetic preferences. This may run counter to the desire for
international uniformity, but the firm must be aware of the positive and negative
aspects of its designs. Generally, Asians appreciate complex and decorative styles,
particularly when it comes to gift wrapping, for instance.
A historical example of a lack of cultural sensitivity is illustrated by early
Christian missionaries from Western nations who were often guilty of architec-
tural “imperialism.” The Christian churches built in many non-Western nations
usually reflected Western rather than indigenous architectural ideas. This was
not done with malicious intent, but because the missionaries were culture-
bound in their aesthetics; that is, they had their own ideas about what a church
should look like.
The U.S. government faces a similar problem in designing its embassies. The
U.S. Embassy in India received praise both for its beauty as a building and for
the way it blended with Indian architecture. The U.S. Embassy in London, how-
ever, has received more than its share of criticism, including comments about the
size of the sculpted American eagle on top of the building. Some Britons also took
exception to the architecture of the London Hilton. For a firm, the best policy is
to design and decorate its buildings and commercial vehicles to reflect local aes-
thetic preferences. In its thousands of outlets abroad, McDonald’s has learned to
adapt its facilities to local tastes.

Color
The significance of different colors also varies from culture to culture. In the
United States, for instance, people use colors to identify emotional reactions;
people “see red,” they are “green with envy,” and they “feel blue.” Black signifies
mourning in Western countries, whereas white is often the color of mourning
in Eastern nations. Green is popular in Muslim countries, while red and black
have a negative connotation in several African countries. Red is an appealing
and lucky color in China, blue sometimes suggests evil, and yellow is often asso-
ciated with authority. Certain colors have particular meanings because of
religious, patriotic, or aesthetic reasons. Businesspeople need to know the
significance of colors in a culture when planning their company’s products and
the products’ packaging. For any market, the choice of colors should be related
to the aesthetic sense of the buyer’s culture rather than that of the manager’s cul-
ture. Generally, the colors of the country’s flag are safe colors. Japan has a Study
 Culture and International Marketing 225

Group for Colors in Public Places. It wages war on “color pollution,” and its
mission is “to seek out better uses for color, to raise the issue of colors.”

Music
There are also cultural differences in music. An understanding of these differ-
ences is critical in creating advertising messages that use music. The music of non-
literate cultures is generally functional, or has significance in the people’s daily
lives, whereas the music of literate cultures tends to be separate from people’s
other concerns. For example, a Western student has to learn to “understand” a
Beethoven symphony, but aborigines assimilate musical culture as an integral part
of their existence. Ethnomusicologist William Malm stated that understanding
the symbolism in different kinds of music requires considerable cultural condi-
tioning. Therefore homogeneity in music throughout the world cultures is not
possible. There are exceptions, of course, but one implication for a firm is that
wherever it utilizes music, it should use music of the local culture. Recognizing
the importance of music in popular culture, companies such as Coca-Cola,
PepsiCo, and Nike are frequent sponsors of events such as MTV Video Music
Awards Latin America and WOMAD (Festival of World Music, Arts & Dance).

NOTE
1. “Calling across the Divide,” The Economist, March 12, 2005, 11.
 CHAPTER 14

GLOBAL VALUE-ADDED STRATEGIES

John Caslione

INTRODUCTION
In today’s competitive marketplace, successful companies develop value-added
strategies to build and sustain important customer-supplier relationships, relation-
ships that rise above the traditional confines of both product and price. Both cus-
tomer and supplier share a common vision: to engage in innovative strategies to
enhance their respective long-term profitability in a spirit of mutual self-interest.
Too often, however, suppliers and customers alike have a tendency to become a
bit greedy in their approach to each other, forgetting that the most successful
business relationships are founded upon the concept that both parties find value
in working together from the very beginning.
After years of feeling as though they have been giving away too much value to
customers in the form of value-adding services, many suppliers are now adopting
a misguided and short-term strategy in which they attempt to charge the customer
for every service provided. This classic “cafeteria”-style pricing approach is noth-
ing more than turning virtually everything that the supplier provides to a
customer into a chargeable product or service.
This is not a strategy at all; it is just another desperate attempt by corporate
finance departments to wrest every last dollar from their customers under the jus-
tification that all things of value provided to customers should result in direct and
immediate revenue for the supplier.
A similar situation exists on the customer’s side, but with a different directional
flow. With the economic slowdown, it seems that customers are trying to take the
quick and easy way to meet their company’s challenged profit streams. They pres-
sure their suppliers by extracting price reductions first, and then maybe, if the
customer is sophisticated enough, by thinking about true cost reductions.
 Global Value-Added Strategies 227

Both supplier and customer must temper their eagerness for quick, short-term
gains and look to attack the true enemy for them both: their common operating
expenses. Even with today’s ultra-short-term focus on profits, both are signifi-
cantly better off using their respective core competencies to lower each other’s
operating costs in a spirit of true alliance: a strategic supplier alliance initiated by
the supplier.

LUCENT TECHNOLOGIES AND DIGITAL CHINA

Digital China, a spin-off of Legend Group Ltd. in 2000, was listed on the
Hong Kong Stock Exchange in 2001. The company embraces innovation to
provide first-tier products, solutions, and services for e-commerce infrastructure.
Digital China is currently the largest IT products distributor and systems integrator
in China.
Lucent Technologies, with its headquarters in Murray Hill, New Jersey,
designs and delivers the systems, services, and software that drive next-
generation communications networks. Backed by Bell Labs research and develop-
ment, Lucent uses its strengths in mobility, optical, software, data and voice net-
working technologies, as well as services to create new revenue-generating
opportunities for its customers while enabling them to quickly deploy and better
manage their networks.
Lucent Technologies and Digital China formed the strategic supplier alliance
in 2004. This is a win-win solution. The alliance allows Digital China to become
the exclusive general distributor of Lucent’s network management software to
enterprises in mainland China. Lucent will be able to influence the network of
resellers and agents across the United States to provide a broader range of software
products and related services to Chinese service providers and enterprises. This
will help the Chinese enterprises migrate toward next-generation networking
technologies, while minimizing the overall network operations costs for everyone
involved.
Digital China has already established a channel network consisting of more
than 3,500 integrators, agents, and industrial customers, backed by its strong
capabilities in technical support, after-sale maintenance, and customer training.
Lucent offers network management software with cutting-edge technologies that
best support Digital China’s strategy in growing value-added businesses. By form-
ing this strategic alliance, Digital China manages to deliver more products and
value-added services to Chinese customers.
Suppliers that engage in real value-added strategy have the freedom to charge a
premium for their products and services and refrain from reducing prices. These
suppliers often charge a premium because the value they deliver to customers, in
the form of increased bottom-line profits, routinely far exceeds the price of the
charged premium.
228 Marketing in the 21st Century and Beyond

DEVELOPING A GLOBAL CUSTOMER SERVICE STRATEGY

Enlightened customers engaging in such value-adding relationships are typi-
cally at the forefront of their industries. While these customers often pay a pre-
mium for the products and services their suppliers provide, the overall cost of
doing business together may be among the lowest in their respective industries.
The customers’ selection of suppliers represents the best, most profitable business
decisions that these customers can make for their businesses to build market
share, increase revenues, and enhance profitability for today and also for the long
term.
As both customer and supplier work together, their common vision enables
each to rise above the primal desire to operate using traditional competitive prod-
uct and pricing strategies. Instead, these companies strive to work together in a
customer-supplier relationship dedicated to pursuing long-term high profitability
for both, in a relationship called a strategic supplier alliance.
For example, a supplier of seals used in automatic transmissions knew that its
customers, the major auto manufacturers, were incurring high warranty costs
for failed transmissions under warranty. No transmission component supplier in
the industry, including the auto manufacturers themselves, knew exactly why
the transmissions failed all the time. Some failures were obvious as to the cause,
while other failures were not so obvious. In the ambiguous situations, by default,
the seal manufacturers were routinely blamed for the failure.
Tired of working in such a contentious environment, one highly motivated
U.S.-based seal manufacturer created a customized database to collect data and
information from one of their customer’s three repositories of failed transmissions,
where transmissions were dismantled and tested.
The supplier’s goal was to uncover the reasons why faulty transmissions failed,
and then to provide recommendations to the customer on how to reduce trans-
mission failures and consequently reduce the high warranty costs. Specifically,
the seal supplier used this database for its own organization to develop a special
knowledge to know how and why transmissions failed all the time.
With this valuable knowledge and the ability to provide profit improvement
recommendations to the customer, the seal manufacturer was able to directly
reduce warranty costs by more than $50 million in the first year alone. This seal
supplier provided all of this information at no additional charge to one of its
carefully selected customers, one of the few customers dedicated to pursuing
long-term strategic supplier relationships.
Not surprisingly, this automobile manufacturer promptly gave the seal supplier
an exclusive supply contract on its next three transmission platforms for the next
five years. Despite paying a slight premium for this supplier’s seals, doing business
with this particular supplier represented the best, most profitable business deci-
sion that the auto manufacturer could make in choosing its seal supplier. And,
 Global Value-Added Strategies 229

unlike most of its competitors in a price-driven industry, this auto manufacturer

made its decision based upon lowest total cost and highest overall profitability
rather than lowest product price.

WHAT IS “VALUE-ADDED”?
True value-added strategy goes above and beyond the product level to create a
strategic relationship between the two companies. The product itself does not
change, and in fact, it sometimes becomes almost incidental to the customer-
supplier relationship.
Value-added strategies are based on the supplier’s competencies and other areas
of expertise as an organization. They are designed to provide high value to a
selected customer’s bottom line, versus merely seeking to “add value” to the indi-
vidual products and services it sells. It is a supplier’s organizational value rather
than its product or service value that is at the core of value-added strategies.
From the customer’s perspective, a value-added strategy enhances profitability.
The supplier develops projects and programs that boost the customer’s profits in
one or more of three ways:
1. Enhancing customer’s revenues
2. Reducing customer’s current costs
3. Avoiding customer’s future costs
Whether a supplier achieves one, two, or all three of these objectives, the result
is that it improves the customer’s bottom line. A value-added strategy focuses on
achieving these objectives by utilizing core competencies or other areas of special
expertise in the supplier’s organization to materially benefit the customer’s
profitability.

VALUE-ADDED VERSUS ADDED-VALUE

A value-added strategy should not be confused with an added-value sales
approach to marketing products and services. While many companies use the terms
interchangeably, the difference between the two is significant. It is also essential that
companies understand the difference between the two; otherwise value-added can-
not be used effectively to develop marketing differentiation strategy.
With added-value, a company focuses on the same objective as in a value-added
strategy, namely improving the customer’s bottom line, but it does so by increas-
ing the tangible benefits a customer receives from using the actual products and
services the supplier sells. In other words, the supplier’s product or service is still
the source of the value delivered, such as increased customer revenues or reduced
or avoided customer costs.
230 Marketing in the 21st Century and Beyond

For example, if a supplier’s product has lower installation costs and lower life-
time maintenance costs, these are added-value product benefits, because the
source of the value to the customer emanates from the product itself.
This approach does indeed add value, and it makes sense to position products
and services sold that way. But customers typically do not perceive one company’s
product and service offerings to be highly differentiated from another’s, especially
when they look at the suppliers’ product and service portfolios in their entirety.
Today, there increasingly exists product and service parity in customers’ eyes.
Even if a supplier has great technology or a tremendously valuable product, its
biggest and best competitors probably have similar and comparable products. If
they do not, it will not be very long before they do, wiping out any competitive
advantage that the original supplier had.
Competitive parity of products typically exists between most suppliers’ prod-
ucts and services today. Any customer value that may be derived from products
is largely the same; the playing field is virtually level. This ultimately leads to more
“commoditization” of product and service offerings in the marketplace, which in
turn creates increased supplier frustration. They then dismiss the power of value-
added strategies, largely because they are mistakenly engaging in added-value
sales, which is product-based differentiation in its marketing differentiation strat-
egy and not true value-added strategy.
In today’s highly competitive and technology-driven environment, companies
must begin to understand and finally accept that product-oriented strategies can
no longer provide suppliers with any meaningful or sustainable differentiation
from their competition beyond the short to medium term.
A value-added strategy helps overcome the issue of product parity by taking the
customer-supplier relationship to a higher level. Value-added strategies connect
the two companies at the organizational level, not the product level. Value-
added is organizationally based value, creating a relationship between supplier
and customer through the development of multiple cross-functional department
relationships and through the integration of intercompany systems and processes.
If effectively applied in marketing strategy, the competitive advantages gained
by a supplier are not easily replicated and can become a sustainable competitive
advantage over several years.
In executing value-added strategy, company size does not matter as much as
one might think. In the example of the seal manufacturer, its fiercest competitor,
a global company with six times more in revenue, is unable to pursue a similar
strategy because its management and company culture pursues a product-based
differentiation strategy that strives to differentiate by offering a wide product line
at discounted prices. At the time of this writing, the gap between the two seal sup-
pliers has closed to less than four times in revenue due to the success of the value-
added supplier’s increased share of the market.
 Global Value-Added Strategies 231

Because so few companies understand the value-added approach, let alone have
the kind of company culture needed to implement it, significant opportunities
to differentiate from the competition await suppliers willing to take the more
difficult road by pursuing a value-added approach.

TOTAL VALUE PROPOSITION ¼ VALUE-ADDED þ

ADDED-VALUE
Countless business books have been written about value-added and added-
value, and most of these books offer different and conflicting definitions of the
two. Still more talk about the “total value proposition” and usually fail to tie
together a clear and concise definition that is both tangible and easy to explain.
There should be little mystery or disagreement about what comprises a supplier’s
total value proposition if one provides clear definitions of value-added and added-
value. Both enhance the customer’s revenues, reduce current operating costs, and
avoid future operating costs of the customer. They just approach it from two
different and distinct directions.
Simply, a supplier’s total value proposition is the sum total of the value its
products (added-value) bring to the customer and the value that the supplier’s
organization brings (value-added) to this same customer; in other words, product
value plus organizational value equals a supplier’s total value proposition.

EXAMPLES OF VALUE-ADDED STRATEGIES

United Parcel Service, USA
At United Parcel Service, a core competency is their understanding and appli-
cation of information and communications technology. It is unparalleled in the
industry and could otherwise match up with even the most successful telecommu-
nications supplier. This expertise came in very handy recently with one of UPS’s
largest global accounts.
UPS’s global account manager (GAM), responsible for the global account of a
major European electronics company, had uncovered that this customer was in
the early planning stages of building a new, state-of-the-art manufacturing facility
for one of its divisions. As part of this effort, this division was preparing to con-
tract with a telecommunications consultancy in Europe to write the technical
specifications for a tender (request for proposal). The tender, once developed,
would then be let to one of the major telecommunications providers, e.g., Nortel,
Lucent, etc.
Learning of this opportunity, the UPS GAM for the account offered to provide
UPS’s own telecommunications consultants to write the specifications for the
232 Marketing in the 21st Century and Beyond

tender at no additional charge to the company. After a bit of initial skepticism

with such a generous offer, the customer eventually agreed.
UPS then dedicated four of its telecommunications consultants for a period of
almost three months to complete the task, saving this particular customer division
over $660,000 in avoided telecommunications consultancy costs.
What did UPS gain for all their effort? They more than doubled their account
share within this customer division to more than 80 percent of business in that
division that next year. Pursuing similar value-added strategies, they also went
on to achieve sizeable increases in sales and account share within other divisions
of this same global customer.

British Sugar Ltd., Europe

One of the ultimate commodity products in the world is sugar. Companies
have tried unsuccessfully for decades to differentiate their sugar from that of their
competitors. UK-based British Sugar Ltd. succeeded in differentiating sugar by
not even trying. They ignored their product and focused upon other sources of
value within their organization that they could provide.
British Sugar’s value-added strategy was founded upon two key value-added
contributions.

Leverage Consulting Expertise

The first strategic value-added contribution involved making use of the envi-
ronmental consultancy expertise that they had developed over the years for inter-
nal use. Many of British Sugar’s customers are in the food-processing industry
and, like British Sugar, had an ongoing problem of treating environmental waste
resulting from the processing of sugar as well as in the processing of foods.
As part of its strategy, British Sugar offered its environmental consultancy to a
selected group of six strategically important customers at no additional charge. All
six customers who received the offer accepted. Each was able to significantly
reduce and avoid considerable costs in their businesses almost from the first day.
Some customers no longer needed to pay outside consultants for these services,
and some eventually eliminated the need to maintain an internal environmental
consulting department altogether.

Sell Excess Capacity

The second involved selling excess capacity of electricity to this same select
group of six customers. One of British Sugar’s major cost drivers is electricity
(a “20/80 cost”). Years earlier, when the UK was going through its own
 Global Value-Added Strategies 233

deregulation of the electric utility industry, as the United States is currently doing,
British Sugar had acquired a power generation company for its own exclusive
energy generation and consumption.
Over time, it found that it had more potential power than it could use in its
own operations. Instead of selling it outright for a profit, executive management
decided to offer its excess capacity at cost to this same group of six strategic cus-
tomers, and not one pence (cent) more. The price offered to these customers,
British Sugar’s actual cost, was 70 percent below the lowest wholesale price in
the industry. It was also estimated that this excess capacity of electricity would
be enough to satisfy anywhere from 25 to 35 percent of the six customers’ needs
at their UK-based facilities.
When offered this opportunity to purchase electricity at a much-reduced price,
all six customers were interested, especially after the very positive experience with
British Sugar assuming the responsibility for environmental consultancy within
their companies.
What was in this for British Sugar? Quite a lot. Not only did all six customers
give either all or most of their business to British Sugar, but British Sugar was able
to demand a premium price for the sugar they sold to these customers. Moreover,
it gained a tremendous amount of control over its business within the customers’
businesses.
For example, as a condition under UK law, in order for British Sugar to effec-
tively “sell” electricity at its cost, it must have a British Sugar office inside every
facility that consumes its electricity. This meant that, as part of the agreement
with these customers, there needed to be a British Sugar office inside each of these
customers’ locations that consumed British Sugar’s electricity.
In the world of strategic or global account management, such a cohabitation
arrangement is invaluable for the supplier to increase its business in the customer
account and to maintain control of its business in that account over the long term.
Some people believe that British Sugar should have made a small profit by
charging a slightly higher price for its electricity. Would these same British
Sugar customers still be interested in buying electricity if British Sugar offered it
at 50 percent below the lowest wholesale price versus 70 percent?
Certainly they would, but two potentially dangerous things would likely hap-
pen if they did begin to sell their excess electricity:
First, if British Sugar charged any price above its actual costs, then under UK
regulatory law it would have to begin to create a number of reports and filings
and routinely submit these to the government. This would have created a lot of
new internal expenses and a need to staff new departments.
Second, a more insidious problem, such an approach would defocus manage-
ment from their core business—sugar—and on to an entirely new and different
industry: electricity. Such a shift into a new complex industry in which they were
novices meant that British Sugar really could not compete successfully long term
234 Marketing in the 21st Century and Beyond

unless it wanted to refocus its current driving forces from that of a manufacturer
and marketer of sugar to a full-time generator and marketer of electricity.
Attempting to do both would likely jeopardize the success of both, and British
Sugar’s executive management was unwilling to take such a dangerous step.

INTERNATIONAL TRADING COMPANIES

The international trading operating system in China is changing dramatically.
International trading companies, which used to specialize in sales and marketing,
now have started to develop their manufacturing branches in order to provide
value-added services to its customers. These trading companies have managed to
establish strategic relationships with their customers, obtaining accurate under-
standings of their needs. This is an effective strategy, because customers tend to
pay more attention to the value-added services that the suppliers can bring to
them.
Shartex International Trading Co., a Shanghai-based trading company, estab-
lished its research and development (R&D) center, engaging in market trend
projection, raw-material proportion, product design, and product sample develop-
ment. This enables the company to improve the efficiency of product renovation,
hence significantly reducing the time that customers usually spend examining the
sample products.
Another international trading company, located in Beijing, specializes in hand-
crafted products selected from a supplying base of over 10 manufacturing factories
in Jiangsu and Zhejiang provinces. These 10 factories are responsible for manu-
facturing the products to meet the requirement and demand of the trading
company, while the trading company is responsible for the sales of these products
to its major customer, a large-scale retailer from South America. By simply
contacting the trading company, customers are able to complete their purchasing
tasks. The suppliers are able to expand their market share by providing these
value-added services to the customers.

WHAT ABOUT VALUE-ADDED IN A SERVICES COMPANY?

About a year ago when I was conducting a value-added marketing and sales
management workshop in Europe, a participant asked me how to apply value-
added strategy in a services company and not just a product company. My answer
was simple. I asked her to truly understand what services her company is currently
providing at a specified price, and then determine which of these services should
become value-added contributions, or services without charge.
This participant provided a great example. She was the senior marketing and
sales director for the largest and most prestigious advertising and communications
 Global Value-Added Strategies 235

services agency in Germany. She shared with all of us in the workshop group her
company’s current marketing dilemma.
There were five major companies in Germany that they were unable to really
break into to do a lot of business. The problem was always the same. In this
industry, the marketing director was the equivalent of most companies’ purchas-
ing director, and the marketing director routinely prevented access by ad agencies
and other suppliers to the company president. Although this ad agency was doing
some business with these clients, it was a fraction of the potential that they could
be doing.
In the seminar I asked if her company offered speech mentoring and speech
writing as a service in her company. She immediately replied that they did and
that although they were viewed as the best in Germany in providing this service,
it was never a big revenue generator.
After hearing her answer, I offered her a challenge. I told her to send a letter to
the presidents of five clients offering private, personalized speech mentoring at no
cost to them under a special program with “exclusive clients.”
I also instructed her to continue reinforcing this offer every few weeks for at
least three months. Finally, I made her promise to notify me at the end of the
three months and then after six months with a progress report.
At the end of the second month, she contacted me to tell me that three of the
five presidents had accepted their offer and had begun their one-on-one, person-
alized speech-mentoring classes. She proceeded to tell me that within a matter
of weeks, a great deal of rapport was developed between each client president
and his or her personal speech coach.
Not long afterward, the marketing directors from each of these client compa-
nies had begun to invite this agency in to bid on more and more business. And
even though this agency was usually higher priced than most of its competitors
in the bidding process, the agency had begun to quickly increase its business in
all three clients.
The agency always had this tool available to them. At the same time, they never
recognized it for what it was, a powerful value-added contribution. Speech men-
toring now was a valuable asset that could open doors otherwise inaccessible if
they had kept it in their traditional portfolio of services for sale. The same is true
for product companies with the services that they sell.

USING VALUE-ADDED STRATEGY IN A TARGETED

MARKET SEGMENT
In the telecommunications industry throughout the 1990s, the long-distance
providers began to encounter a problem called “churning,” in which small-
business and residential customers would change long-distance carriers, sometimes
monthly, to take advantage of promotional discounts and other pricing incentives.
236 Marketing in the 21st Century and Beyond

AT&T was one such company that was victimized by the widespread churning
in the marketplace, until one day when one of its suppliers presented them with
an innovative strategy to help regain customer loyalty and minimize churning.

AT&T SOHO Division

To market to and service small businesses with fewer than 100 employees,
AT&T created a dedicated group called the Small Office/Home Office (SOHO)
division. This department was charged with the responsibility to build the market
share in this fast-growing customer segment that was very vulnerable to being
“churned” by competitors. Needless to say, in this very price-conscious segment
of the business, churning became almost “sport” for a many SOHO small-
business customers.
A woman whose husband became a victim of a downsizing initiative of his
company in the late 1990s relayed a story to me in one of my executive marketing
seminars. Her husband had over 25 years of employment with his company and
found it difficult to land a new job, so, like so many other middle-aged unem-
ployed business executives, he became a consultant. Having recently seen their
last of four children off to college, he converted one of their now vacant bedrooms
in their home into his business office. He proceeded to begin his new and exciting
career in consulting.
AT&T SOHO Division wanted this man’s long-distance business, as did all of
AT&T’s competitors. Over time, it had become increasingly difficult to differen-
tiate long-distance “dial tone” and, not surprisingly, the industry had become
commoditized with price discounting running rampant.
As a result, there was little price difference between suppliers in this industry;
the spread between the highest priced and the lowest priced competitors was typ-
ically less than 5 percent. This created especially tight operating margins when the
average SOHO customer working out of his or her home spent less than $200
each month on his or her long-distance service.
As the story goes, one of AT&T’s suppliers of office products proposed an
innovative value-added strategy to AT&T in an effort to help it stem the increas-
ing trend of churning. It seemingly caught the attention of the right AT&T
executive and led to the development of a full-blown value-added strategy.
The recently unemployed company executive, now-turned-consultant, was
offered a full package of inducements if he would sign a one-year service agree-
ment with AT&T. The package included all of the following value-added contri-
butions from AT&T at no additional charge:
• An offer to provide a customized office design to make the most efficient and effective
utilization of space within the consultant’s “office”
 Global Value-Added Strategies 237

• The ability to purchase everything from computer and office furniture, office sup-
plies, courier and shipping services, etc., at AT&T’s steep volume price discounts
• The ability to take advantage of AT&T’s discounted group health and life insurance,
which would save the consultant several hundreds of dollars each month after his
former employer’s extended insurance coverage ran out
• A list of accountants and bookkeepers that specialize in working with small businesses
in the consultant’s local area
The consultant was provided several hundreds, or even thousands, of dollars
each year in savings if he was willing to commit to AT&T for one year. This com-
mitment would require him to pay, at most, a $10 price premium each month,
calculated at a rate of 5 percent on $200 each month. When he analyzed the total
value proposition that AT&T was providing him, it was an easy and quick deci-
sion for him. He signed up immediately and has stayed loyal to AT&T for more
than three years now.
In this case study, AT&T’s service became almost incidental and even unim-
portant to the relationship as it was tacitly acknowledged by AT&T that the prod-
uct of long-distance service was a commodity and nearly impossible to
differentiate from the competition.
AT&T approached the situation differently than its competitors. It made some
minimal investments in developing this new value-added strategy, and then by
engaging its own suppliers to help execute the plan, AT&T created such an attrac-
tive total value proposition that it began to reduce the problem of churning and
once again regain substantial stability in its small-business customer base.

WHAT IS “VALUE-EXPECTED”?
In my executive management seminars, I am repeatedly asked if there is a log-
ical and inevitable end to value-added contributions; i.e., at some point aren’t
all value-added contributions likely to be matched by competitors, thus becoming
part of the product offering and eliminating any prior competitive advantage by a
competitor? The answer is both yes and no.
Certainly, at the very foundation of free competition, if a competitor has a
competitive advantage—especially a significant advantage, competitors in the
industry will seek ways to minimize or eliminate that advantage. Sometimes when
a value-added contribution becomes something that many competitors have
matched, it does become part of the combined standard product offering. This
is what is called value-expected. Technically it is still value-added, but because it
no longer differentiates as it once did, the value-added contribution now becomes
an expected value-added contribution, or just value-expected.
A good example of this is supplier-managed inventory (SMI) or vendor-
managed inventory (VMI), wherein a supplier manages the inventory of its
238 Marketing in the 21st Century and Beyond

products on behalf of the customer. When it was first introduced in the late 1980s
and into the early 1990s, it presented a significant competitive advantage for a
number of suppliers in many industries. Beginning in the 1990s in many indus-
tries, it became a standard service offering, and soon it was considered as a basic
component of a supplier’s product offering. It became value-expected.
To minimize or delay a value-added contribution from becoming value-
expected, two things can and should be considered.
There is a greater likelihood that a supplier can prolong its competitive advan-
tage if it can proactively recommend value-added contributions before the cus-
tomer even thinks about it. Too often, most suppliers are reactive in this
endeavor, and if they do offer a value-added contribution to a customer, it is done
for one of two reasons:
1. The first is that a competitor is already providing it to a customer and has gained a
competitive advantage. The market’s many reactive suppliers then want to minimize
their competitor’s advantage, thus creating a motivation to match the competitor’s
same value-added contribution.
2. The second is when the customer asks or demands that the supplier provide the addi-
tional service because it will represent a cost savings to the customer. The trouble
with this scenario is that when a customer initiates a cost or revenue improvement
initiative, a supplier-provided value-added contribution, the customer typically
designs it so there is a high level of substitutability in the service requested; i.e., the
customer can easily substitute one supplier’s value-added contribution for another
supplier’s value-added contribution.
The key for a supplier is to propose value-added contributions to the market-
place that the customers have not yet even considered. In this way, suppliers can
design and engineer their value-added contributions in ways to minimize the degree
of substitutability that can exist in the contribution provided. In essence, suppliers
can more readily maintain a balanced peer relationship with its customers.
The most effective way to design any value-added contribution to be as non-
substitutable as possible by a customer is to make the contribution systemic and
as integrated as possible between both the customer’s and the supplier’s many
different functional departments and their business operations.
For example, a manufacturer of flour and other mixing and baking ingredients
supplied a leading commercial bakery in North America. The flour supplier was
noted for its world-class transportation logistics.
However, when the flour manufacturer’s trucks unloaded its raw flour and
other mixing ingredients at the customer’s commercial baking facilities, some of
these trucks “deadheaded” back to the supplier’s production locations; that is,
they traveled back empty. Not surprisingly, the commercial bakery’s trucks also
did a lot of deadheading back to their sites after they unloaded the finished baked
goods at their customer’s locations, the major supermarket chains.
 Global Value-Added Strategies 239

The flour manufacturer proposed that a lot of operating costs between both
companies could be driven out if the two companies were to merge their transpor-
tation logistics functions, and the bakery agreed. By combining the two
transportation-scheduling functions, and by utilizing the supplier’s expertise in
transportation logistics planning, both companies saved millions of dollars each
year in operating costs. Moreover, the supplier was able to maintain a high degree
of control of its business within the customer’s business because it systematized
the value-added contribution and made it essential to the operation of both
companies.
As compelling as it is, if the supplier were to stop here with only this single
value-added contribution as part of its strategy, it would be only a matter of time,
even if it were an extended period of time, before a competing flour producer
would find a way to replicate and eliminate any competitive advantage in the
market.
But what the incumbent supplier does have is access to this customer’s people
and information in key areas of this customer’s business that its competitors do
not have. With this proprietary access, the supplier has the ability to pursue addi-
tional proactive integrations of customer systems and processes.
In doing so and in pursuing a deliberate, cogent strategic supplier alliance strat-
egy, the supplier can create a multitude of such linkages and entanglements,
which can integrate the two companies so much that they create tremendously
high barriers of entry to competitors. This prevents, or severely hampers, the
competitors’ ability to gain a foothold into this customer’s business.
Likewise, such a series of entanglements will also be critical in creating the high
barriers of exit necessary to make it costly and difficult for the customer to substitute
this supplier for another.

VALUE-ADDED: KEY TO DEVELOPING ACCESS STRATEGY

Let’s examine more closely some of the examples just presented. They under-
score the fact that in most companies, the executive management does not know
the difference between value-added and added-value. Moreover, they often fail to
recognize the difference between what are products and services they should
be selling and what is customer service that supports the presales and postsales
servicing of the products and services sold.
Even more important, companies are unaware of the value-added contributions
they currently or potentially can provide as key components of their total value
proposition. These value-added contributions provided by companies facilitate
the needed access to people and information within the customer’s organization.
When the supplier believes that it has a service that may be of value to a cus-
tomer, the temptation to put a price tag on it to develop new revenue streams
240 Marketing in the 21st Century and Beyond

becomes so great that most suppliers end up pricing everything they can. This is
almost always a critical mistake.
Imagine three buckets. Also imagine a supplier that understands what should
properly go into each of the three buckets. A supplier that understands this is a
supplier that can build true strategic market differentiation strategy.
Obviously, the key is to know what rightly goes into each bucket and then how
to use each in practical business strategy, particularly value-added contributions.
The fundamental and essential advantage of a value-added contribution is gain-
ing access to people and information in the targeted customer’s organization that
would otherwise be unattainable by pursuing the traditional sales process. This
exclusive access is critical to the successful execution of the supplier’s marketing
differentiation strategy.
Let’s examine the three earlier case study examples.

UPS
In the shipping industry, the customer’s traditional buying department typi-
cally chooses two suppliers, and then the actual end users of the service in each
department of the account are able to use their shipper of choice on a case-by-
case basis.
Imagine that UPS’s telecommunications consultants have been given free rein
to meet with every department manager, every project manager, every secretary,
etc., within the account. Also imagine that this is being done as an effort to effec-
tively design the voice/data/video specifications for the new telecommunications
system, rather than as an effort to sell traditional UPS shipping services.
Over time, UPS telecommunications experts did this. They dug deep into
every department within the European Economic Community (EEC), and along
the way built a tremendous amount of rapport with virtually everyone in the EEC
who could be a potential decision maker in each department.
It is no wonder that UPS became the shipper of choice in 8 out of 10 times that
managers and secretaries had to select their preferred shipper.

British Sugar
Think about all of the customer’s different departments and managers that the
account team from British Sugar needed to work with to implement the two
value-added contributions it offered. With the environmental consultancy at no
additional charge, the list of managers in the targeted food-manufacturing com-
pany include the plant manager, quality control manager, operations manager,
CFO, the legal department, etc. All of these departments are very influential
 Global Value-Added Strategies 241

within these organizations, and British Sugar interacted closely with a large number
of them.
These managers have a tremendous amount of influence concerning the deci-
sion to use or not use British Sugar as a supplier. Furthermore, this is also the
group of managers that will be in the best position to consider British Sugar’s
value-added contributions, and subsequently assess the true total value proposition
that British Sugar will bring to their company.

Advertising Agency (Service Company)

As we learned in the example of the German advertising and marketing com-
munications company, the marketing director was the key decision maker, and
oftentimes a hindrance in the marketing and sales process. The marketing depart-
ment routinely withheld access to the client company’s president, making it virtu-
ally impossible for the ad agency’s account managers to develop any real
relationship with the client company’s president.
Consider that, through this ad agency’s value-added contribution, the company
president is in a closed room with a speech mentor from the ad agency several
times over a month or more. In these sessions, the president allows himself or her-
self to be exposed to criticisms in a very personal and sensitive area, that of his or
her public speaking skills. In addition, the president realizes after a few sessions
that there is noticeable improvement of his or her public speaking skills.
Imagine the closeness of the relationship and the level of rapport that now exists
between the client president and his or her speech mentor.
With such a positive halo effect spilling over to the ad agency overall, it is not
surprising that the clients’ marketing directors were strongly encouraged to do
more business with this particular ad agency, even with their higher fees.

CONCLUSION
With a better understanding of the fundamental differences between value-
added and added-value, a company can utilize value-added concepts in strategy
development. Knowing how to do this will assist in avoiding the mistakes com-
monly made by so many companies, the most common one being the develop-
ment of product-based marketing differentiation strategies that routinely create
higher operating costs and encourage even greater price competition.
In fact, many such purported value-adding programs routinely become nothing
more than mere “giveaway programs,” or programs that provide ever-increasing
benefits to customers, but do very little to actually generate any real reciprocal
benefits for the supplier.
242 Marketing in the 21st Century and Beyond

The flip side of this approach is to put a price tag on all value-added contribu-
tions, turning them into nothing more than added-value services to be sold within
the supplier’s portfolio of products and services. By doing this over the long term,
suppliers inadvertently accelerate the commoditization of their product and ser-
vice offerings, as well as stimulate even more aggressive price discounting in the
marketplace.
One might say that if a “value-adding service” provided by a supplier is so valu-
able, then a customer should be willing to pay for it. Though this makes sense, it
is not always the case. The willingness of a customer to pay is “sometimes yes” and
“most often no.” The question of whether or not to charge for value-adding
services holds dire consequences for suppliers that get the answer wrong.
Most often, by charging for a value-added contribution, suppliers inadvertently
enter into new and different industries that provide this contribution as one of
their primary service offerings. When companies mistakenly begin to offer serv-
ices for a price that are either tangential or complementary to their core business,
they end up shifting their company’s driving force and find they are unable to
compete in new and different industries, for example, British Sugar and the elec-
tric utility industry. The results are usually disastrous, unless the company is
willing to make a full commitment to the new industry they are entering, a com-
mitment complete with a long-term plan to compete head-to-head with these
new competitors in the new industry.
It is absolutely necessary to understand how to apply value-added contributions
in strategy, by utilizing the strategic supplier alliance continuum to develop long-
term, sustainable customer-supplier relationships.
It is only a matter of time before more companies acknowledge that they can-
not compete on price- or product-based strategy. They must instead forge true
value-adding relationships together. Value-added strategies will enable customer
and supplier alike to a secure truly beneficial scenario every time.
 CHAPTER 15

GLOBAL CUSTOMER SERVICE

Calin Veghes

INTRODUCTION
The days are long gone when a company can rest on their past laurels with the rel-
ative assurance that their customers will not stray to “the other side.” A lot of
money and resources are spent each year to obtain faithful customers; it would
be a shame to risk losing them to poor customer service. Inventory shortages, back
orders, and long delivery times can quickly eat up profits with returns and can-
celed orders. This has been true for some time now, whether a company is only
doing business domestically or starting to venture into the new global market-
place. The challenges are certainly compounded, sometimes exponentially, when
dealing at the global level.
To maintain and cultivate relationships with existing customers or initiate busi-
ness with new ones, companies are compelled to constantly and consistently pro-
vide the best products, at competitive prices that give the most value and at the
highest levels of service possible. Only now, companies must find ways to do all
of this on a global level.
As a result of this new decree from the global marketplace, companies need to
focus more and more on providing the best service to their customers. But a prob-
lem arises, because every company, in every industry, wants to deliver quality cus-
tomer service. Therefore the real issue before global business leaders is not “How
do I offer and deliver stronger customer service?” Instead, the fundamental ques-
tions are, first, “How do I develop a global customer service strategy?” and second,
“What must I actually do to deliver high-quality customer service globally?”
244 Marketing in the 21st Century and Beyond

DEVELOPING A GLOBAL CUSTOMER SERVICE STRATEGY

For most companies doing global business, it is likely that the only thing their
customers share is the fact that they buy the same products and services. Beyond
basic product requirements, however, each global customer is as unique as the cul-
ture and nation from which it comes. In addition, global customers can differ in
terms of product application, geographic area, market mix, and target markets.
A successful global customer service strategy must recognize customers’ differ-
ences and then address these differences as fundamental parts of the global cus-
tomer service strategy. This is best accomplished by:
• Customer-focused mind-set: learning what is most important to your customers
• Overdelivering: exceeding customer expectations
• Flexibility: the ability to respond quickly and appropriately
• Adaptability: growth requires continuous ability to embrace changes
• Delivering value: differentiating the company’s offerings in a commoditized world
• Empathy: getting into the customer’s thinking
• Spotting trends: listening for the future
• Reinforcing your message: reminding customers of how the company serves them

Customer-Focused Mind-Set: Learning What Is Most Important

to Your Customers
Global customer service should be far more than a department title or a promo-
tional slogan; it should be an integral part of the global strategic plan. Partnering
with key suppliers to deliver recognized and measurable global customer service
should be as much a part of the corporate culture as achieving sales goals, increasing
inventory turns, or improving return on investment.
For the proper execution of a global customer strategy, a company must clearly
understand the expectations and needs of its key customers. To best do this, many
global firms learn as much as they can about the top 20 percent of their custom-
ers, who probably represent about 80 percent of their business according to
Pareto’s Rule of 80/20. Some of the ways they investigate include:
• Holding regular meetings with a key customer’s functional management groups
• Meeting routinely with key distribution partners in each market where the company
employs independent distributors or agents to market, sell, or service your company’s
products and services
• Conducting local market customer focus groups for the smaller customers (nonglobal
account customers), consumers, etc.
• Engaging in discussions with end users of the company’s products and services
 Global Customer Service 245

• Observing firsthand selected customers’ business and work processes and procedures
in selected key markets (or all of their individual markets if necessary), especially as
they relate to how customers use your products or services
• Documenting each key customer’s or customer segments, industry segments, unique
traits, and capabilities by individual market
• Sharing all relevant information with your company’s own sales, marketing, manu-
facturing, and customer service personnel, which will help to enhance customer
service globally and locally

Overdelivering: Exceeding Customer Expectations

Implementing successful global customer service requires carefully analyzing
customers individually, the major customers’ groups, and specific markets to find
specific areas where a company can excel in terms of product and service offerings
and the accompanying customer service to be provided, with the ultimate objec-
tive being to consistently exceed the customer’s expectations. Some of the ways
this can be accomplished include:
• Making it easy for customers to do business with the company
• Developing a website and pursuing e-commerce for product information, order
entry, project status, etc.
• Demanding accurate and reliable shipping dates from vendors, and handling field
installation and quality issues in a priority manner
• Keeping customers apprised of current codes and regulations, and sharing new product
information from key suppliers

Flexibility: The Ability to Respond Quickly and Appropriately

The ability to be flexible and change quickly is fundamental to global business
success. The great distances and dimensions that affect the normal conduct of
global business demand that leaders maintain a high degree of flexibility. In addi-
tion to the routine customer service issues facing those who do business beyond
their own domestic markets, things can get off track quickly and in a big way
when a company elevates business to a multicontinental and global level, perhaps
due to weather, material supply problems, or a myriad of other reasons. It can
happen quite quickly and with little or no warning.
To constantly improve their level of global customer service, leaders align
themselves with manufacturers and other suppliers who are also flexible. They
also develop delivery programs unilaterally or with their suppliers that use their
own warehouse facilities as a resource to always be best positioned to meet their
global customers’ service requirements.
246 Marketing in the 21st Century and Beyond

Adaptability: Growth Requires Continuous Ability to Embrace Changes

In global markets, customer groups and market segments will most likely differ
in terms of product requirements and service requirements from one market to
another in each newly entered market. As with any new experience, bringing
new product and service offerings will require certain amounts of adaptation to
each local market’s needs and wants, especially as experience in these markets
grows and evolves.
Not only will your company’s product and service offerings need to be adapted
to each local market over time, so too will the customer service organization itself
have to adapt to the changes in each market. Very often this will require that spe-
cific groups within the customer service organization assemble and become mar-
ket or regional experts to ensure the proper level of localization and
regionalization is brought to each market and region. These experts greatly assist
in maintaining high-quality market and culturally sensitive customer service.
Unlike adapting to changes in a domestic market, global customer service
organizations will need to either develop their own internal expertise or develop
trusted alliances with local enterprises to serve as a channel of customer and con-
sumer information and competitive product and service information. Such infor-
mation is essential for the successful global company to identify trends in these
faraway markets, which then enables the company to maintain and enhance the
company’s customer service, keeping it competitive.

Delivering Value: Differentiating the Company’s Offerings

in a Commoditized World
It is often said that “value is total benefits delivered minus price.” If price is the
only measurement for products and services, then there is usually no differentiating
characteristic to the buyer in today’s world of commoditized products and services.
If there is no perceived value, product and service together becomes a commodity.
Thus there is no measurable way to differentiate one supplier from another.
To assure value, global firms must partner to provide clear, consistent, and reli-
able product and service features that deliver measurable benefits to customers
and end users. A few obvious (but often overlooked) traits of extraordinary customer
service include quality products, complete and on-time deliveries, unexpected prod-
uct and service features at no extra cost, professional and knowledgeable support
staff, problem solving, and attention to detail.

Empathy: Getting into the Customer’s Thinking

Global firms consider what they want from manufacturing partners; they cer-
tainly want more than a competitive price point. They want reliability, effective
 Global Customer Service 247

promotions, market intelligence, specification interpretation, loyalty, unique sales

features, and polite and courteous personal attention. This list is basic, but it is
not negotiable. All items must be present all the time to ensure satisfaction.
A global customer service strategy makes sure that a firm is giving their customers
the same consideration.

Spotting Trends: Listening for the Future

Global firms continually ask their customers what they want and what they
expect. They try to spot trends before their competitors, and they carefully listen
for subtle ways to improve their customer service. They also search for what their
competitor is doing well, is not doing, or is doing poorly. Moreover, besides the
salesperson selling the actual product or service, it is the customer service person
who has ongoing contact and communication with customers and consumers
using the product or service. In fact, even more than the salesperson, it is the cus-
tomer service representative, whose primary responsibility is only servicing the
customer, who is in the better position to probe customers and consumers in a
nonthreatening manner, under the guise of servicing versus selling.
As the founder of Sony was once quoted as saying when he spotted a new
emerging trend, “We do not create products, we create markets.” His new com-
pany’s initial success was launched with the development of the Sony Walkman
to capitalize on the trends he saw with the emerging generation that embraced
music as a new religion, i.e., the Woodstock Generation that needed to have
music with them everywhere they went. So it is with a global company’s customer
service organization; they will need to work very closely with global marketing,
sales, and product and service development groups to communicate the new trend
information they receive from the customers. Additionally, the global customer
service organization serves a vital role as a key conduit for these departments to
initiate discussions with customers and consumers alike to elicit perceptions,
opinions, experiences, and other needed information. With such invaluable infor-
mation, the global company is in the best position to spot and confirm trends,
and then to capitalize on these trends with new and enhanced product and service
offerings.

Reinforcing Your Message: Reminding Customers of How the Company

Serves Them
How customers view their suppliers may be directly related to how often they
are reminded of how they are being supported. Global firms let their customers
know what is done for them on a regular basis, in terms of both products deliv-
ered and customer service support.
248 Marketing in the 21st Century and Beyond

KEY AREAS TO FOCUS UPON

To help you go further in delivering excellent customer service to customers
globally, here are a few key areas upon which to focus.

Making Ordering Easy

Superior global customer service starts from the first customer contact; make it
especially easy for your customers to order from you and order in many different
ways to suit their own needs. This requires spending time adapting your com-
pany’s ordering processes right down to the forms that you ask customers to fill
out. A few key areas to pay close attention to are:
1. Customer name and address: Make sure you leave plenty of space for the name and
address; foreign addresses tend to be a lot longer than U.S. addresses.
2. Instructions: If you are selling clothing or shoes, reduce the number of potential cus-
tomer returns by providing easy access to easy-to-read size conversions. By adapting
your product and service descriptions and order form into the local language and pre-
ferred color schemes, you will also reduce any possible confusion by the customer
when they are ordering from you.
3. Mailings: If you are mailing anything directly to the customer, consider a multilingual
format with ordering instructions in both English and all local languages. Also, be
sure to specify that the customer should complete the information in printed
Roman characters. If you do not, you may need to have your orders deciphered or
translated. This will take a lot more time than you think, and the costs are high.
4. Customer responses: Provide your customers alternative and convenient ways to
respond back to you, such as telephone, fax, mail, or Web. Most orders taken today
in the United States still are done by telephone. This is not necessarily the case in
other markets where the cost of a telephone call is much higher as compared to the
United States, so most orders are placed via fax or through the mail. If you are selling
business-to-business, you need to include an Internet option as well as a fax option.
Despite the seemingly ubiquitous use of the Internet, many business-to-business
orders are still received via fax.

Handling Customer Orders

If your company offers a telephone ordering option, carefully consider how
your company will handle incoming calls from customers in foreign markets.
How will your company route these calls to its domestic operation? Will your
company set up facilities in Europe, in Asia, etc.? Differing cultures, multiple lan-
guages, time, and operating costs are key reasons why it often makes sense to set
up an overseas call center. While many people living outside of North America
comprehend and speak English to varying degrees, they typically feel more
 Global Customer Service 249

comfortable talking in their native language when placing orders and for request-
ing service.
An overseas customer call center may make financial sense, too. It is generally
less costly to have a large volume of calls that originate in Europe also terminate
in Europe at a European call center versus a U.S.-based call center. Also, if non-
domestic calls are being routed to the U.S.-based call center, make sure your com-
pany considers time zone changes when it schedules its customer call center
hours.
One aspect of handling customer orders to particularly consider is payment
alternatives. Be sure your company understands the preferred methods of pay-
ment in each local market, and then offer a variety of market-appropriate payment
options. The United States and Canada are still largely check-based economies,
whereas most of the rest of the world (industrialized or developing markets) are
transaction-based economies that use either direct debit or bank transfer. Also,
cash on delivery, check, and payment by invoice may be other options to
consider.
Unlike the United States and Canada, it would be a mistake to assume that cus-
tomers will pay by credit card. In much of Europe and especially in Germany, the
payment for most mail-order goods is done on open account; in other words,
customers are billed only after the product is received and in good order.

Product Fulfillment
Product fulfillment depends on the products your company is shipping, your
company’s acceptable turnaround time, and its investment in its global markets,
including its global customer service. If your company is in the early stages of
developing its global business or if it has products with relatively low rates of
return, it should generally consider using your current domestic fulfillment oper-
ation. If your company’s strategy is committed to establishing a fully globalized
business or it has products that have high rates of return, it may be better to set
up foreign product fulfillment operations or hire a local market firm to handle
local order fulfillment.
How your company ships products will impact delivery time. It will be a lot
cheaper to ship products via ocean freight, but your company will definitely save
more time by sending your products by airfreight.
Also, if you are shipping products as individual orders and the U.S. Postal
Service (USPS) or your company’s freight consolidator uses the USPS as its deliv-
ery agent, the order travels as mail from your company to the customer. This can
be quite expensive. Alternatively, if the package is being shipped from the United
States for delivery by a host market postal administration, the package travels to
the destination country as cargo and then it becomes mail upon entering the
250 Marketing in the 21st Century and Beyond

postal system of the destination country, a process that is typically at lower cost to
the shipping company, your company.
If your company is distributing from a nondomestic fulfillment location, prod-
ucts usually leave the United States in bulk. Then the products are usually deliv-
ered to your company’s overseas operation or a contracted operation in the local
market. The local fulfillment operation then separates the merchandise, and pack-
ages and addresses the orders. Packages then enter the local market postal distribu-
tion system via an optimized and cost-effective fulfillment scheme.

Customer Returns and Refunds

To provide superior customer service, companies should not allow currency
fluctuations to impact a customer’s refund. Customers around the world should
be reimbursed at the same conversion rate as when the sale was processed.
Companies and customers should not seek to make or lose money on returns or
refunds.
Decisions to reimburse customers for postage spent to return an item usually
depend on your company’s profit margin on that product or that specific order
or order type. If margins are substantial, companies may want to refund the cus-
tomer for any shipping costs incurred to demonstrate its dedication to superior
customer service and to motivate the customer for future purchases.

CREATING GLOBAL CUSTOMER SERVICE STANDARDS

When creating standards for global customer service, global firms make certain
that they are measurable. For example, one objective may be 100 percent packing
accuracy. Packing inspection of 100 percent packing inspection is not an objec-
tive. It is one possible solution. Packing inspection is only one task of many that
could achieve the objective. Other tasks or alternatives may be more effective for
accomplishing the objective.
How will you measure the objective on an ongoing basis? If you cannot mea-
sure an objective, you will never know whether it was achieved. For example,
100 percent shipping accuracy may be measured using statistical sampling after
final packing but prior to shipment.

Establish Global Customer Service Rules and Constraints

Identify key restrictions (hard rules) and guidelines (soft rules) that will form
the boundaries around the customer service strategy. These rules include com-
pany policies, expected return on investment, project organization, personnel
 Global Customer Service 251

availability, computer system development/support constraints, and internal

operations procedures.
The rules represent key compromises between revenue producers (customer
support, marketing, and sales personnel) with operations, engineering, MIS,
and other project resources. Only upper management can change the rules and
guidelines after the project starts. These rules are the foundation for effective
communication and timely decision making.

Disassemble Each Objective into Unique Tasks

A task identifies what must be accomplished, not how. After analyzing the
objectives, clearly identify what tasks are within the scope of the global customer
service team and prioritize the tasks to optimize dependencies and return on
investment. The task definition and sequence is very critical to the effectiveness
of the program.
It is important to establish minimum customer service standards, make sure
everyone understands them, and have a way to recognize superior performance.
As procedures are developed, be sure that all three criteria are satisfied. Use cre-
ative problem-solving techniques to develop a list of feasible solutions for the task.
Select a combination of possible solutions that will accomplish the objective with
minimal ongoing effort.

MAINTAINING GLOBAL CUSTOMER SERVICE STANDARDS

Beyond developing a global customer service strategy, a global firm must main-
tain customer service standards for their employees, suppliers, and, ultimately,
their customers. Unfortunately, some companies have been unwilling to enhance
their customer service functions and create standards because they assumed it was
not required, or the benefits did not appear tangible. Historically, it was wiser to
wait until external circumstances (e.g., economic conditions, product trends)
appeared imminent and then react. In today’s global economy, however, such
thinking is clearly contradictory to the proactive global customer service approach
demanded if a company is to transform itself into a truly successful global
company competing in the new global marketplace.

What Are the Standards We Are Maintaining?

Maintaining standards may involve the weekly or monthly analysis of the meas-
urement of a company’s global customer service standards. Such questions as
“Can we offer additional services that the customer may not be aware we offer?”
252 Marketing in the 21st Century and Beyond

or “What would it take to have the customer use only our services?” make this
process more fluid and responsive to customer needs.

Handling Complaints
Companies must maintain standards for the handling of complaints. One study
by the Technical Assistance Research Program Institute shows that 70 percent of
unhappy global customers will not make another purchase from the offending
firm. On the other hand, 95 percent of customers will return if their complaint
is resolved quickly. It goes without saying that effective, speedy resolution of com-
plaints keeps customers happy.

CONCLUSION
Successful global customer service does not just happen. It must be planned,
implemented, monitored, and then continually refined. The creation of a global
customer service strategy and the organization to deliver it successfully requires
fine-tuning new management processes to bring about exceptional customer ser-
vice on a global scale. Shifting an organization’s central focus from primarily
domestic customers to customers in markets in the four corners of the world
means that extraordinary multicultural customer relations and service will need
to become a natural operating procedure for the aspiring global customer service
organization. When customers from markets around the world feel that they are
the central and primary concern of a company, they buy more and repeatedly
from that company regardless of where that company may be located, whether
it is around the corner or around the world.
Making the shift from a domestically focused customer service approach to a
global customer service approach requires a complete change of mind-set of how
a company does business. Such new thinking will undoubtedly require customer
service executives to concentrate on the critical success factors of people, process,
technology, and environment, and all of these at a global level. Ultimately, a tight
focus on these critical factors leads to the creation of an environment that sup-
ports the acquisition and maintenance of the right people, the right processes,
and the right technology to compete on a global basis.
In the exploding borderless economy, a long-term dedication to not only devel-
oping a full global customer service strategy but also evolving such a strategy when
implemented as a comprehensive approach to building the total global company
will undoubtedly produce a true, sustainable competitive advantage.
 INDEX

Note: Page numbers followed by f indicate figure.

Accountability, 27–29 Baby boomers, 72–74, 163–64,

Acquisition, attitudes toward, 221–22 167–70, 207
Action plans, 22 Baby Gap, 125
Acxiom, 129 Background pattern recognition, 77
Adaptability, 35–37, 139, 246 Bargaining, 47
Adaptive positioning, 131 BATNA (best alternative to a negotiated
Added-value, 229–31 agreement), 48, 51, 57
Advertising, traditional, 93–94 Battelle, 81–83
Advertising blunders, 150 Behavioral market segmentation, 129
Advertising renewal rate, 146 Benefit market segmentation, 129
Aesthetics, 223–25 Best alternative to a negotiated agreement
Age groupings, 71–72, 163–64, 167–71, 207 (BATNA), 48, 51, 57
Alexa.com, 145–46 Between-channel competition, 125
Allocation of scarce resources, 45 Billboards, 97
Alternative futures, 79–80 Blogs, 108–9
Ambi-Pure, 87 Blunders and mistakes, integrated
Analytical marketing, 120–26 marketing, 149–51
Animism, 213–14 Boeing Airplane Company, 64–65
Apple, 89 Borderless marketing systems, 135
Appreciation, client, 39, 43 Born globals, 192–93
Aromas, 88 Boulewar, Lemuel, 49
Asians’ consumer behavior, 73 Boulewarism, 49
Asking price, 48 Branding, global, 198–99
Assets: categories of, 123; intangible, 119 Bridging, 57
AT&T, 193, 236 British Sugar, Ltd., Europe,
Attitudes and values, international, 221–23 232–34, 240–41
254 Index

Broadcast channels, 136 Clorox, 87

Buddhism, 215–18 Closing of sale, 5–6
Budgets, marketing, 102, 143, 151–52, 155 Coaching, 29–31
Business activities, international attitudes Coca-Cola, 89–91
toward, 221 Cocoa colonization, 211
Business as agent of change, 222 Coexistence, 125
Business houses, 189 Collaborative selling, 6
Business landscape, 102–5 Collusion, 125
Business-to-business accounts, 15–16, 92 Color, 97, 224–25
Business-to-business integrated marketing. COMDEX, 153–54
See Integrated marketing, business-to- Common territory, 206
business Communication trends, 165–67
Business-to-business marketing, 121 Community knowledge, 104
Compaq Computer, 188
CAD (computer-aided design), 197 Competition: degrees of, 125–26, 126f;
Call centers, 155–56, 249 forms of, 125; levels of, 124–25, 124f
Calvinism, 219 Competitor analysis, 123–26
Capabilities, defined, 123 Competitor knowledge, 9–10, 26
Capabilities scans, 122–23 Complaints, 252
Carlson, Chester, 81–82 Computer-aided design (CAD), 197
Caste system, 206–7, 220 Computer-based analytical tools
Category competition, 124 for personnel selection, 24
Catholicism, 219 Concessions, 48–50
Chaebols, 189 Conflict, 125
Change, business as agent of, 222 Confucianism, 217–18
Channel adaptation, 139 Consistency, 9
Channel conflict, 138 Constraints and rules, global customer
Channel flows, 137 service, 250–51
Channel length, 137 Consultative advisors, 43
Channel management, 136–39 Consultative selling, 6
Channel managers, 137 Consumer behavior, international attitudes
Channel multiplicity, 137 toward, 223
Channels, marketing, 133–35, 134f Consumer channels, 135
Channels, social media, 107–11 Consumer debt, 74
Channel stakeholders, 136 Consumer privacy, 15–16
Channel structure, 137 Consumers, 21st-century, 163–74; baby
Channel width, 137 boomers, 72–74, 163–64, 167–70, 207;
Chicken, game of, 53 and communication trends, 165–67;
China, as emerging market, 188–99 cultural diversity of, 171–72; environ-
Christianity, 218–19 mental concerns of, 173–74; Generation
Churning, 235–36 X, 164, 168–71, 207; global, 172–73;
Claritas, 129 mature market, 167–68; overview,
Class groupings, 206–7 163–64; value, importance to, 165, 174
Cleanest Dishwasher, 97 Contact center industry, 155–56
Clean Shower, 90, 93–96, 98–99 Content for social media posts, 113–14
Client appreciation, 39, 43 Contingency planning, 79
Clients: ideal, 37–38; interviewing, 38–39 Continuing education, 26–27
 Index 255

Continuum of competition, 124–25, 124f 147–49; and relationship marketing,

Cooperation, 125 11–12
Copiers, 80–82 Customer response alternatives, 248
Core competence and value proposition, Customers, unprofitable, 13–14
61–69; Boeing Airplane Company case Customer satisfaction and loyalty, 3, 6–8,
example, 64–65; conflicting 10, 148
fundamentals case example, 62–64; food Customer service: and relationship
products company case example, 68–69; marketing, 7–8; and supply chain
Honda Corporation case example, 67–68; management, 188. See also Global
lawn tractors case example, 68; overview, customer service
61–62; Swiss watches industry case Cyber-maze, 176–77
example, 66–67
Core set of values. See Values Database analysis, 126–27
Corporate image, 9 Database marketing, 120, 126–30
Cost cutting, 56 Deep customer relationships, 178
Creative positioning, 131 Demographic market segmentation, 129
Crisco, 87, 97 Demographics, 71–73, 103, 163–74
CRM. See Customer Relationship Design, 224
Management Differentiation, 131, 143–45, 149–50, 246
Cultural diversity, 171–72 Digital China, 227
Culture and international marketing, Digital Solidarity Fund, 208
203–25; and aesthetics, 223–25; and age Direct interactive marketing, 158–80;
groupings, 107; attitudes and values, advances in, 174–79; and communication
221–23; and business activities, 221; and trends, 165–67; and cultural diversity,
caste system, 206–7; and change, 222; 171–72; and cyber-maze, 176–77; and
and class groupings, 206–7; and color, environmental concerns, 173–74; and
224–25; and common territory, 206; and Generation X market, 168–71; and global
consumer behavior, 223; and design, 224; CRM, 177–79; and globalization,
and education, 211–13; and kinship, 172–73; and mature market, 167–68;
205–6; and language, 204–5; and music, multichannel marketing, 174–76; over-
225; overview, 203; and religion, 213–21; view, 158–60; and prophecy, 162–63;
and risk taking, 222–23; and social and trend evolution, 162; and trend
organization, 205–7; and special interest messengers, 160–63; 21st-century
groups, 206; technology and material consumers, 163–74; and value, 165
culture, 207–11; and wealth, material Direct mail, 248
gain, and acquisition, 221–22 Dirty tricks, 50–54
Culture of success, 27–29 Disposable wipes, 82–83
Customer analysis, 120–21 Dissatisfaction, customer, 7
Customer assets, 123 Distributive negotiation, 45–54
Customer buyer behavior, 120–21 Diversified growth, 132
Customer dissatisfaction, 7 Diversity, 171–72
Customer-focused mind-set, 244–45 Downsizing, 29, 151, 164
Customer knowledge, 102–3 Dressing for success, 28
Customer knowledge training, 26
Customer Relationship Management Ease of purchasing, 97–98
(CRM): described, 33–35, 34f; global, Easterling, Barry, 96
177–79, 195; and integrated marketing, Echo Boomer Generation, 164
256 Index

Economic determinism, 208 Forecasting, 80

Economic forecasting, 74 Foreign direct investment (FDI), 187, 191
Economy, 219–21 Formal training curriculum, 25–26
Education, international attitudes toward, Four Ps of marketing strategy, 4
211–13 Foursquare, 110
Educational marketing, 157 Fragrances, 88
Effectiveness, evaluating, 11 Freeplay Energy, 210
Efficiency, 13 Functional silos, 33, 35
80/20 rule, 12, 198, 244 Futuring, 70–85; alternative futures, 79–80;
Electronic channels, 136 applications of, 83–84; Battelle case
Emerging markets, 188–89 history, 82–83; expert judgment, 78–79;
Emerging pattern recognition, 77–78 intuitive champion case history, 80–82;
Emerging technologies, 75 methods of, 75–80; overview, 70–71;
Empathy, 246–47 predictive scenario case history, 82–83;
Employee satisfaction and loyalty, 11 substance of, 71–75; trend analysis,
Entrepreneurship, international, 192–93 75–78, 76f; Xerox case history, 80–82
Environmental analysis, 121–23
Environmental concerns, 173–74 Garbology, 89
Environments of success, 28 Gender demographics, 73
Equifax, 129 General Electric, 49, 79
Ethics, 15–16, 19 General Motors, 194
Ethnic identity, 72–73 Generational cohorts, 71–72, 163–64,
Evaluating effectiveness, 11 167–71, 207
Evaluation, subjective, 23 Generational trend analysis, 71–72
Exceeding expectations, 245 Generation X, 164, 168–71, 207
Excellence, 19 Generative changes in channel
Expanding the pie, 55–57 structure, 139
Expert judgment, 80 Generic competition, 124–25
Export pull, 192 Geodemographic market segmentation, 129
Export push, 192 Geographic market segmentation, 129
Extended families, 206 Give-and-take, 46, 49
External environmental analysis, 121–22 Global branding, 198–99
Global CRM, 177–79
Facebook, 102, 104–14 Global customer service, 243–52; and
Face-to-face marketing channels, 136 adaptability, 246; complaints, 252; and
Failure, reasons for, 151–57 customer-focused mind-set, 244–45;
Family conglomerates (FCs), 189 developing, 244–47; and differentiation,
FDI (foreign direct investment), 187, 191 246; disassembling objectives into tasks,
Feedback. See Market feedback 251; and empathy, 246–47; exceeding
Field training, 26–27 expectations, 245; and flexibility, 245;
Financial assets, 123 key areas of, 248–50; ordering, ease of,
Five-year action plan, 22 248; orders, handling, 248–49; overde-
Flexibility, 245 livering, 245; overview, 243; product
Flickr, 107, 110 fulfillment, 249–50; reinforcing company
Focus groups, 78 message, 247; returns and refunds,
Follow-up, 7, 43 250–51; rules and constraints, 250–51;
Food trends, 75, 76f standards for, creating, 250–51; standards
 Index 257

for, maintaining, 251–52; and trends, Hong Kong Shanghai Bank, 203
spotting, 247; and value-added Hootsuite, 111
strategies, 228–29 Horizontal channel conflict, 138
Globalization, 172–73, 185–86 Horizontal integration, 132
Global marketing, 183–201; born globals, Household incomes, 74
192–93; China, 190; collaborative Household wealth, 74
approaches to, 193–94; contemporary Hypercompetition, 9, 11
approaches to, 195–96; and CRM,
177–79, 195; emerging markets, 188–89; IBM, 194
and global branding, 198–99; ICTs (information and communications
globalization, 185–86; of global products, technologies), 184–85
197–98; India, 190; information and Ideal client/customer, 37–38, 103
communications technologies, 184–85; IFS (Interactive Futures Simulation), 80
international services marketing, 190–91; Ignorance, entrepreneurial, 151
international SMEs, 192–93; managerial Inbound telemarketing, 136
imperative for, 199–200; market India, as emerging market, 188–89,
orientation, 195; overview, 183–84; and 190, 208
product innovation, 196–97; strategies Indirect competition, 124
for, 195–96; and terrorism, 186–88 Industrial accounts/markets, 15–16,
Global products, 197–98 121, 189
Global sourcing, 190 Industrial channels, 135
Global value-added strategies. See Inflation, 74
Value-added strategies Information and communications
Good cop/bad cop tactic, 51–52 technologies (ICTs), 184–85
Google+, 107–8 Information overload, 176–77
Government markets, 121, 189 Initial offer, 48–49
Green marketing, 174 Initial training programs, 25–26
Group meetings, 29 Innovation: and channel adaptation, 139;
Growth strategies, 131–32 and CRM, 11–12; product, 196–97
Grupos, 189 Innovativeness, 35–37
Guidelines, global customer service, 250–51 Institutional markets, 121
Intangible assets, 119, 130
Habits of success, 28 Intangible capital, 123
Hanes, 97–98 Integrated growth opportunities, 132
Hard sell, 6 Integrated marketing, business-to-business,
Harrison Assessment, 24 141–57; and CRM, 147–49; defined,
Headspace, 88 142–43; differentiation and positioning,
Head-to-head competition, 124 143–45; failure, reasons for, 151–57;
Health care insurance, 74 leads generation, 146–47; marketing
Highball/lowball tactic, 52 blunders, 149–51; online marketing,
Hinduism, 214–15 145–46; overview, 141–42; through
Hispanic consumer behavior, 72–73 education, 157
Holding companies, 189 Integrative negotiation, 54–57
Home Depot, 125 Integrity, 18
Homestar Runner, 95 Intellectual capital, 123
Honda Corporation, 67–68 Intellectual property, 189
Honesty, 9 Intensive growth strategies, 132
258 Index

Interactive Futures Simulation (IFS), 80 Macroscopic economic forecasting, 74

Internal environmental analysis, 122–23 Magic, 214
International entrepreneurship, 192–93 Magnitude of concessions, 49
International services marketing, 190–91 Main Street Gourmet, 96
International SMEs, 192–93 Malm, William, 225
International trading companies, 234 Manipulative selling, 6
Internet, 75, 78, 135–36, 142, Market analysis, 127–30
144, 146, 158, 160, 165, 184–85, Market definition, 128, 128f
210, 223, 248 Market development, 132
Internship programs, 24–25 Market feedback, 33–44; and adaptability,
Intertype competition, 125 35–37; asking for, 38–39; follow-up to,
Interviewing clients, 38–39 43; goals of, 43–44; and ideal client,
Intratype competition, 125 37–38; and innovativeness, 35–37;
Intuition, 78, 80–82 negative responses to requests for, 41–42;
IPod, 89 overview, 33–35; positive responses to
Islam, 216–17 requests for, 39–41; uses for, 42–43
Marketing blunders, 149–51
Jabil Circuit, 188 Marketing budgets, 102, 143, 151–52, 155
Japan, religions of, 217–18 Marketing channels, 133–36, 134f
J.Jill, 127 Marketing frequency, 149
Joint families, 215, 220 Marketing offers, 132–33
Marketing strategies, 130–32
Key account management, 12–13 Market orientation, 195
Khan, Herman, 79 Market penetration, 132
Kinship, 205–6 Market positioning, 129–31
Kmart, 125 Market segmentation, 129
Knowledge of customer, community, Market targeting, 129
and self, 102–5 Marks, Steve, 96
Kroc, Ray, 90–91, 93 Marx, Karl, 208
Material gain, international attitudes
Labels, 97 toward, 221–22
Language, 204–5, 248–49 Mature market, 163, 167–68, 206
Leadership development, 31 McDonald’s, 90–91, 93, 96–97
Leads generation, 146–47 Measurement tools, 11
Learning in the field, 26–27 Media, creative use of, 94–95
Levi Strauss, 125 Microblogs, 108–9
Life stages, 71–72, 163–64, 167–71, 207 Mission statements, 10, 20–21
Lilian Vernon, 129 Mistakes and blunders, integrated
Limbaugh, Rush, 95 marketing, 149–51
LinkedIn, 107–8 MNCs (multinational corporations), 189
Location-based social media, 110–11 Mobile phone marketing, 139
Logrolling, 56 Mobile phones, 208
Long channels, 137 Multichannel marketing, 119–40; analytical
Lowe’s, 125 marketing, 120–26; channel adaptation,
Loyalty: customer (See Customer satisfaction 139; channel management, 136–39;
and loyalty); employee, 11 competition, degrees of, 125–26, 126f;
Lucent Technologies, 227 competition, forms of, 125; competition,
 Index 259

level of, 124–25, 124f; competitor Nonmanipulative selling, 6

analysis, 123–26; customer analysis, Nonspecific compensation, 56
120–21; customer buyer behavior, North, Douglas, 221
120–21; database analysis, 126–27; Northwestern Mutual Financial
database marketing, 126–30; defined, Network, 18–20
119; direct interactive, 174–76; Nostradamus, 158–59, 174, 179–80
environmental analysis, 121–23; external NTT, 194
environmental analysis, 121–22; growth
strategies, 131–32; internal Objections, 6
environmental analysis, 122–23; market Objective analysis, 23
analysis, 127–30; market definition, 128, Offers to customers, 133
128f; marketing channels, 133–36, 134f; Offshoring, 190
marketing offers, 132–33; marketing Old-fashioned marketing habits, 149–51
strategies, 130–32; organizational buying One-on-one meetings, 29
behavior, 121; overview, 119–20; Online marketing, 145–46
reference strategies, 130–31; relationship Open-ended questions, 43
marketing, 136–39; strategic marketing, Optimal profiling scheme, 175
130–35 Ordering, ease of, 248
Multichannel marketing networks, 138 Orders, handling, 248–49
Multidimensional profiling, 175 Organizational assets, 123
Multimedia, 110 Organizational buyers, 15
Multinational corporations (MNCs), 189 Organizational buying behavior, 121
Multioptions analysis, 75 Organizational learning theory, 193
Music, 225 Outbound telemarketing, 136
MySpace, 107–8 Overcoming objections, 6
Overdelivering, 245
Nabisco, 193
Naming, product, 91–92 Packaging, 96–98
National Hockey League Players Pareto’s Rule of 80/20, 12, 198, 244
Association, 55 Partnering, 6
Needs research, 88–90 Pattern of concessions, 49–50
Negotiation, 45–58; alternatives to, 46; Pattern recognition, 77–78
approaches to, 47; chicken, game of, 53; Payment alternatives, 249
and concessions, 48–50; and dirty tricks, Perdue, Frank, 89
50–54; distributive, 45–54; integrative, Perdue chicken, 89
54–57; the nibble, 53–54; overview, Personal channels, 136
45–47; pie expansion tactics, 55–57 Personnel activities, 10–11
Nelson, Harvey, 96 Philips Electronics, 193, 210
Nepotism, 220 Physical assets, 123
Net household wealth, 74 Pie expansion tactics, 55–57
New-millennium consumers. See Pinterest, 110
Consumers, 21st-century Piracy, 189
New product management, 91–95 Playing chicken, 53
Next-line management development, 31 Points of difference, 131, 133
The nibble, 53–54 Political instability, 189
Nickermans Menswear, 92 Positioning, market, 129–31,
Nonliterate religions, 213–14 143–45, 149–50
260 Index

Possibilities scans, 122 136–39; and organizational buyers, 15;

Posts, social media, timing and content of, origins of, 5–6; overview, 3–4; and
112–14 reputation, 9; and sales effectiveness, 11;
PR. See Public relations and sales force, building of, 10–11; and
Print channels, 136 small-business communications, 14–15;
Privacy, consumer, 15–16, 176 and trust, 8–9; and unprofitable
Problem-solving selling, 6 customers, 13–14
Procter & Gamble, 195, 220 Relevance, 158
Product development, 33, 83–84, Religion, 213–21; animism, 213–14;
86–88, 132 Buddhism, 215–18; Christianity,
Product fulfillment, 249–50 218–19; Confucianism, 217–18; and the
Product innovation, 196–97 economy, 219–21; Hinduism, 214–15;
Product introductions, 90–91 Islam, 216–17; nonliterate, 213–14;
Product naming, 91–92 Shinto, 217–18; Sikhism, 215
Product/service knowledge training, 26 Religious divisions, 220
Professionalism, 18 Religious institutions, 220
Profiling, 175 Renewal rate, advertising, 146
Profitability, 10, 16–17, 36, 133, Reputation, 9
148, 226, 228–29 Research and development (R&D),
Programmed observation, 88 33, 83, 196
Prophecy, 162–63 Researching needs, 88–90
Proprietary position, 87 Reseller markets, 121
Prospecting, 5 Reservation point, 48
Protectionism, 189 Restrictions, global customer service,
Protestant Christianity, 219 250–51
Psychographic market segmentation, 129 Returns and refunds, 250–51
PSYTE U.S. Advantage, 129 Risk avoidance, 223
Public relations, 155 Risk taking, 222–23
“Pull” sales strategies, 14, 98 Rolls Royce, 87
“Push” sales strategies, 14, 97–98 Rule of 80/20, 12, 198, 244
Rules and constraints, global customer
R&D (research and development), service, 250–51
33, 83, 196 Rush to market, 153
Radio, 94–95
RAND Corporation, 79 SAIC (Shanghai Automotive Industry
Recruitment process, 22–25 Corp.), 194
Reference strategies, 130–31 Sales effectiveness, 11
Referrals, 38, 41 Sales force building strategies, 17–32; and
Refunds and returns, 250–51 accountability, 27–29; and coaching,
Reinforcing company message, 247 29–31; identifying values in, 18–20; keys
Relationship marketing, 3–16; and to success from inside, 10–11; and
competition knowledge, 9–10; and mission statements, 20–21; next line
CRM, 11–12; and customer satisfaction management development, 31; overview,
and loyalty, 7–8; defined, 4–5, 119; 17–18; recruitment process, 22–25;
differences in, 6–7; ethical issues in, training and development, 25–27; and
15–16; and key account management, vision statements, 21–22
12–13; as multichannel marketing, Sales techniques training, 26
 Index 261

Sampling strategy, 86, 97, 99 Start-ups, 86–100; Clean Shower

Satisfaction, customer. See Customer case example, 98–99; new product
satisfaction and loyalty management, 91–95; overview, 86;
Scenario writing, 79–80, 82–83, 187 packaging considerations, 96–98; product
Sears, 125 development, 86–88; and product
Second-line management development, 31 introductions, 90–91; researching needs,
Self-knowledge, 105 88–90; word-of-mouth marketing, 95–96
Senior citizens. See Mature market Stickiness, 158
Service companies, 234–35 Strategic marketing, 84, 119, 130–35
Service differentiation, 131 Strategic supplier alliance, 227
Shanghai Automotive Industry Corp. Subjective evaluation, 23
(SAIC), 194 Substitute competition, 124
Shartex International Trading Co., 234 Success, culture of, 27–28
Sheehy, Gail, 71–72 Suing influential customers, 153
Shell, 79 Supplier knowledge training, 26
Shinto, 217–18 Supplier-managed inventory (SMI), 237–38
Shipping, 92, 240, 245, 249–50 Supply chain management, 188
Short channels, 137 Supply chain shocks, 186
Signal pattern recognition, 77 Systems competition, 125
Signs, 97
Sikhism, 215 Taboos, 220
SIM (supplier-managed inventory), 237–38 Talk radio, 94–95
Small and medium-size businesses (SMEs), Targeted market segments, 235–37
14–15, 184–85, 192–93 Target point, 48
SMART model for effective goals, 93 Team building, 80
Snapple, 90, 95 Technologies, emerging, 75
Social media, 101–15; blogs, 108–9; Technology and material culture, 207–11
choosing and integrating channels, Technology gap, 207
107–11; content for, 113–14; defining Telemarketing, 136, 145
measurable goals for, 105–7; integration Teleservices channels, 136
of, 111; knowing your business landscape, Teleservices industry, 155–56
102–5; location based, 110–11; Territory management, 12–13, 26
microblogs, 108–9; multimedia, 110; Terrorism, 186–88
overview, 101–2; social networking, Testing for personnel selection, 24
107–8; timing of posts, 112–13 T.G.I. Friday’s, 10
Social networking, 107–8 Thought leadership, 84
Social organization, 205–7 Time management training, 26
Soft sell, 6 Timing of concessions, 49
Sony, 247 Timing of social media posts, 112–13
Span of control, 29 Total value proposition, 231, 237, 239, 241.
Spare time training and development, 27 See also Value proposition
Special interest groups, 206 Trade shows, 142–43, 145, 147, 149–51,
Spokespersons, 95 153–54, 157
Spotify, 107, 110 Training and development, 25–27
Spry, 87, 96–98 Transaction costs, 193
Stakeholder assets, 123 Transaction selling, 6
Stakeholders, channel, 136 Trend analysis, 71–72, 75–78, 76f
262 Index

Trend evolution, 162 Value proposition, 4, 34, 83–84,

Trend messages, 160 131, 195, 198, 231. See also Core
Trend messengers, 160–63 competence and value proposition; Total
Trends: communication, 165–67; food, 75, value proposition
76f; spotting, 247 Values: international, 221–23; in sales force
Tribalism, 206 development, 18–20, 30
Trust, 6–9, 178 Values fit, 23
Tumblr, 105, 109 Vendor-managed inventory (VIM), 237–38
Tweetdeck, 111 Vertical channel conflict, 138
21st-century consumers. See Consumers, Vertical competition, 125
21st-century Vertical integration, 132
Twitter, 102–7, 109, 111–13 Veteran salesperson training, 26–27
VIM (vendor-managed inventory), 237–38
Unilever, 209–10 Virtual alliances, 185
Unique selling proposition, 4 Vision statements, 10, 21–22
United Parcel Service (UPS), Volkswagen, 194
231–32, 240 Volvo, 87
Unprofitable customers, 13–14
UPS (United Parcel Service), 231–32, 240 Wagner Act, 49
USAIR, 89 Walmart, 45, 125, 185
Wealth, international attitudes toward,
Value: and differentiation, 246; importance 221–22
of, 13, 165, 174 Wilson, Jerry, 96
Value-added strategies, 226–42; versus “Win-lose” approach to negotiation, 47, 50
added-value, 229–31; and AT&T “Win-win” agreement, 8, 47, 136, 227
SOHO, 236; becoming value-expected, Within-channel competition, 125
237–39; and British Sugar, Ltd., Europe, Women: consumer behavior of, 73, 207;
232–34, 240–41; defined, 229; and economic role of, 220
Digital China, 227; examples of, 231–34, Word-of-mouth marketing, 95–96
239–41; and global customer service, Word-of-Mouth Marketing (Wilson), 96
228–29; and international trading com- WordPress.com, 108
panies, 234; as key to access strategy, World Bank, 211–12
239–41; and Lucent Technologies, 227;
overview, 226–27; and service companies, Xerox, 80–82
234–35; in targeted market segment,
235–37; and total value proposition, 231; Yamazaki, 193
and UPS, 231–32, 240 YouTube, 102–3, 107, 110,
Value-expected, 237–39 112–13
ABOUT THE EDITOR AND CONTRIBUTORS

BRUCE D. KEILLOR is a professor of marketing and international business and

director of the Williamson Center for International Business at Youngstown State
University. He has published over 100 journal articles and is the author of
Winning in the Global Market: A Practical Guide to International Business Success
as well as general editor of the three-volume set International Business in the 21st
Century and the four-volume set Marketing in the 21st Century. He also serves
on the board of several U.S. firms. He received his MBA from Minnesota State
University and his PhD from the University of Memphis.

ROBERT BLACK has over 30 years of experience as a corporate executive and is

a registered professional engineer. A highly successful entrepreneur, he is the
inventor and marketer of Clean Shower.

JOHN CASLIONE is the founder of GCS Business Capital. He serves as director

and advisor for a number of companies in the United States, Asia, and Europe.
He earned his MBA from the University of New York and his JD from the
Illinois Institute of Technology.

KEN DICKEY is the cofounder of The Institute of Strategic Mapping. He has

served as president/CEO of the multinational Cleveland Motion Controls. Prior
to that he served in an executive capacity for Reliance/Rockwell Automation
and Reliance Electrical Industrial Motors. He holds an Executive MBA from
Case Western Reserve University.
264 About the Editor and Contributors

JASON DILAURO served as vice president and senior financial advisor for
Merrill Lynch.

WILLIAM J. HAUSER is an associate professor and the director of the Suarez

Institute at the University of Akron. Before joining academia he served for over
20 years as an executive for Rubber Maid, Inc., Little Tykes, and Key Bank.
He is ranked as one of the foremost experts in the fields of direct marketing and
market analytics.

JON M. HAWES is a retired professor emeritus at the University of Akron. He is

also the founding director of the Fisher Institute for Professional Selling at the
University of Akron.

GRETCHEN M. KEILLOR is a partner with BBA Associates, a social media and

marketing consulting firm. Her clients range from Fortune 500 firms to small
local businesses. She specializes in developing integrated social media marketing
strategies.

GARY A. KNIGHT is a professor at Florida State University. He has written over

100 articles and books and serves on numerous editorial boards. He obtained his
MBA from the University of Washington and his PhD from Michigan State
University and was an executive in industry before joining academia. He speaks
fluent Japanese and French.

DANIEL J. LESLIE has been an active salesperson and sales manager for several
Fortune 500 firms including Northwestern Mutual. He is a certified coach and
specializes in sales force strategy.

DALE M. LEWISON is a retired professor of marketing at the University of

Akron and founding director of the Taylor Institute for Direct Marketing at the
University of Akron.

STEPHEN M. MILLETT is a futurist and leader of Technology Foresight at

Social Technologies. He is coauthor of A Manager’s Guide to Technology
Forecasting and Analysis Methods. He has also authored several dozen professional
articles dealing with forecasting and proactively managing the future.

LINDA M. ORR is a professor of marketing and the former director of the Fisher
Institute for Professional Selling at the University of Akron. A recognized expert in
professional selling and sales force management, she specializes in relationship-based
selling and relational marketing. She received her PhD from the University of
Mississippi.
 About the Editor and Contributors 265

NADJI TEHRANI is the founder, chairman, and CEO of Technology

Marketing Corporation. Over the years he has served in an executive capacity in
a variety of organizations around the world. He is acknowledged as one of the
pioneers in the telemarketing industry and owns the copyright for the term
“telemarketing.”

VERN TERPSTRA is emeritus professor of international business at the

University of Michigan. He has served as a visiting professor in Hong Kong,
Indonesia, Taiwan, the Netherlands, and England.

CALIN VEGHES is senior lecturer, Department of Marketing, Faculty of

Marketing, Academy of Economic Studies, Bucharest, Romania.