Harvard Business Review - HBRs 10 Must Reads Ultimate Boxed Set

HBRs 10 Must Reads series is the definitive collection of ideas and best practices for aspiring and experienced leaders alike. These books offer essential reading selected from the pages of Harvard Business Review on topics critical to the success of every manager.

Titles include:

HBRs 10 Must Reads 2015

HBRs 10 Must Reads 2016

HBRs 10 Must Reads 2017

HBRs 10 Must Reads for New Managers

HBRs 10 Must Reads on Change Management

HBRs 10 Must Reads on Collaboration

HBRs 10 Must Reads on Communication

HBRs 10 Must Reads on Emotional Intelligence

HBRs 10 Must Reads on Innovation

HBRs 10 Must Reads on Leadership

HBRs 10 Must Reads on Making Smart Decisions

HBRs 10 Must Reads on Managing Across Cultures

HBRs 10 Must Reads on Managing People

HBRs 10 Must Reads on Managing Yourself

HBRs 10 Must Reads on Sales

HBRs 10 Must Reads on Strategic Marketing

HBRs 10 Must Reads on Strategy

HBRs 10 Must Reads on Teams

HBRs 10 Must Reads: The Essentials

On
Strategic Marketing

HARVARD BUSINESS REVIEW PRESS

Boston, Massachusetts

Find more digital content or join the discussion on www.hbr.org.

Copyright 2013 Harvard Business School Publishing Corporation

All rights reserved

No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to , or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.

The web addresses referenced in this book were live and correct at the time of the books publication but may be subject to change.

Library of Congress Cataloging-in-Publication Data

HBRs 10 must reads on strategic marketing.

p. cm. (HBRs 10 must read series)

Includes index.

ISBN 978-1-4221-8988-7

1. MarketingManagement. 2. Strategic planning. I. Harvard business review. II. Title: HBRs ten must reads on strategic marketing. III. Title: Harvard business reviews 10 must reads on strategic marketing.

HF5415.13.H368 2013

658.8'02dc23

2012037855

eISBN: 978-1-4221-9152-1

Contents

Roland T. Rust, Christine Moorman, and Gaurav Bhalla

David C. Edelman

Theodore Levitt

Clayton M. Christensen, Scott Cook, and Taddy Hall

Kevin Lane Keller

Michael J. Silverstein and Kate Sayre

James C. Anderson, James A. Narus, and Wouter van Rossum

Susan Fournier and Lara Lee

Frederick F. Reichheld

Philip Kotler, Neil Rackham, and Suj Krishnaswamy

Rethinking Marketing

by Roland T. Rust, Christine Moorman, and Gaurav Bhalla

IMAGINE A BRAND MANAGER sitting in his office developing a marketing strategy for his companys new sports drink. He identifies which broad market segments to target, sets prices and promotions, and plans mass media communications. The brands performance will be measured by aggregate sales and profitability, and his pay and future prospects will hinge on those numbers.

Whats wrong with this picture? This firmlike too manyis still managed as if it were stuck in the 1960s, an era of mass markets, mass media, and impersonal transactions. Yet never before have companies had such powerful technologies for interacting directly with customers, collecting and mining information about them, and tailoring their offerings accordingly. And never before have customers expected to interact so deeply with companies, and each other, to shape the products and services they use. To be sure, most companies use customer relationship management and other technologies to get a handle on customers, but no amount of technology can really improve the situation as long as companies are set up to market products rather than cultivate customers. To compete in this aggressively interactive environment, companies must shift their focus from driving transactions to maximizing customer lifetime value. That means making products and brands subservient to long-term customer relationships. And that means changing strategy and structure across the organizationand reinventing the marketing department altogether.

Not long ago, companies looking to get a message out to a large population had only one real option: blanket a huge swath of customers simultaneously, mostly using one-way mass communication. Information about customers consisted primarily of aggregate sales statistics augmented by marketing research data. There was little, if any, direct communication between individual customers and the firm. Today, companies have a host of options at their disposal, making such mass marketing far too crude.

The exhibit shows where many companies are headed, and all must inevitably go if they hope to remain competitive. The key distinction between a traditional and a customer-cultivating company is that one is organized to push products and brands whereas the other is designed to serve customers and customer segments. In the latter, communication is two-way and individualized, or at least tightly targeted at thinly sliced segments. This strategy may be more challenging for firms whose distribution channels own or control customer informationas is the case for many packaged-goods companies. But more and more firms now have access to the rich data they need to make a customer-cultivating strategy work.

B2B companies, for instance, use key account managers and global account directors to focus on meeting customers evolving needs, rather than selling specific products. IBM organizes according to customer needs, such as energy efficiency or server consolidation, and coordinates its marketing efforts across products for a particular customer. IBMs Insurance Process Acceleration Framework is one example of this service-oriented architecture. Customer and industry specialists in IBMs insurance practice work with lead customers to build fast and flexible processes in areas like claims, new business processing, and underwriting. Instead of focusing on short- term product sales, IBM measures the practices performance according to long-term customer metrics.

Idea in Brief

Companies have never before had such powerful technologies for understanding and interacting with customers. Yet too many firms operate as if theyre stuck in the 1960s, an era of mass marketing, mass media, and impersonal transactions.

To compete in an aggressively interactive environment, companies must shift their focus from driving transactions to maximizing customer lifetime value. That means products and brands must be made subservient to customer relationships. And that means transforming the marketing departmenttraditionally focused on current salesinto a customer department by: replacing the CMO with a chief customer officer, cultivating customers rather than pushing products, adopting new performance metrics, and bringing under the marketing umbrella all customer-focused departments, including R&D and customer service.

Building relationships

Product-Manager Driven

Many companies still depend on product managers and one-way mass marketing to push a product to many customers.

Customer-Manager Driven

Whats needed is customer managers who engage individual customers or narrow segments in two-way communications, building long-term relationships by promoting whichever of the companys products the customer would value most at any given time.