Strategic Archery

 

Just as “All models are wrong, but some are useful” (George Box), I’d like to suggest that “All metaphors are oversimplified, but some are quite helpful“.

Archery, darts, and other target metaphors are frequently used in strategy discussions e.g.

“Hitting our target”
“Missed our target”
“Ready, Fire, Aim” (criticism)

Strategic targets are set as part of the strategic planning process, usually as a means by which to determine whether goals have been achieved. These targets are sometimes called Indicators or Key Performance Indicators (KPIs).

The header image for this post reflects on this ‘archery’ metaphor to seek insights into strategic goal development and execution. While interpretations and circumstances can differ, when metaphors are used often it is worth examining how these mini-stories, or ‘narratives’, inform our approach to a key governance activity.

Confusing ‘means’ and ‘ends’

I have often found that directors have difficulty in framing goal statements, and that they are too ready to accept a goal which is actually an action or activity by which an ‘unstated goal’ may be achieved e.g. to publish updated information resources for members/clients. Using this example, the goal is to enhance member/client response or decision-making capacity, and the means to that end is to update information resources in a highly engaging manner.

Where a goal can be simply reported as ‘done’, and offers no qualitative or quantitative metric by which to judge how effectively it was achieved, it is more likely to be a ‘means’ than an ‘end’. Saying, for example, that web materials were updated and then viewed by 3000 members/clients, would not really tell us whether we had achieved the underlying goal of enhancing response or decision-making capacity.

Strategic goals need to be expressed in terms of the outcomes and impact sought, to allow the identification and use of relevant indicators of success. Hitting a target in itself is necessary, but not sufficient. Having hit a quantitative target, we also need to know what impact the achievement had and how well we achieved our intended outcome.

Bringing the future into the present

Sports psychologists help athletes to achieve peak performance by coaching them to visualise themselves performing ideal moves at optimum levels. Consequently, when they are in the game or a competition they can successfully repeat an outcome that they have vividly imagined and rehearsed many times before.

The use of creative imagination was once thought to be limited to artists such as Michelangelo, famously quoted as saying “The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material”. We can now see this as a precursor to ‘back-casting‘ in strategic planning, whereby a beneficial scenario is used as a starting point, and its origins and lines of development are traced back to the present. This process is sometimes also called ‘reverse-engineering’, as illustrated in the chart below.

More recently the wider use of this approach across all fields has been summed up in the quote “Everything begins with a thought, and thoughts are turned into plans, and plans into reality” (Marshall Sylver).

Just as peak athletic or artistic performance requires the vivid picturing of a desired future state, so too does effective strategic planning (and career planning). The chart below augments the messages in the header image by unpacking some of the elements of the process. This tabular presentation may also skim over some aspects that are important in your field, but it nonetheless conveys broadly relevant considerations for most organisations.

Potential, possible, plausible, probable, preferred

Scenario mapping is one of the processes recommended for strategic planning and we are indebted to futurists such as Hancock and Bezold (1994) for the development of taxonomies and schematics distinguishing between possible, plausible, probable and preferred futures (The Futures Cone). My version of this (below) adapts the standard model by blending it with the strategic archery metaphor, and McKinsey’s 3 Horizon model.

A strategic plan consists of a selection of goals, which can range over a number of focal areas. It is not one arrow aimed at one target, but a number of arrows aimed at a collection of chosen targets. The process of choosing which targets should be priorities for the next stage of your organisation’s work necessarily involves rejecting various potential or possible targets. While implausible (or preposterous) ones are relatively easy to reject, the critical debate is about which targets should be preferred, so that the board adds value to the organisation. As discussed previously, the trade-off between benefits, costs, and risks informs that process.

Some targets are shorter term, and others medium or longer term in nature (usually 3-5 years). Depending on the horizon under consideration, certain targets will focus on capacity building for later initiatives, while most will seek full delivery of outcomes and ‘impact benefits’ within the first ‘horizon’.

The limits on organisational resources and the skills of the ‘execution’ team all need to be taken into account. The addition of each extra goal can potentially impede success in achievement of the existing goals. Boards therefore need to consider those goals collectively, as well as individually. Part of that process involves ranking them in priority order, so that where decisions need to be made about which goals take precedence, the answer is usually obvious.

Future studies have given us the ‘Cone of Plausibility‘ (Taylor), ‘Utopian, Protopian and Dystopian‘ (Kelly) perspectives, and the ‘Futurist’s Framework for Strategic Development‘ (Webb) amongst many other models, all of which can aid your thinking about the areas requiring attention in your next strategic plan. Perhaps your board might also benefit from practicing strategic ‘archery’ to better align their intentions and the outcomes achieved.

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Principles of Marketing. Unit 1 Setting the Stage. Chapter 1 Marketing and Customer Value. 1.1 Marketing and the Marketing Process

 

LEARNING OUTCOMES

By the end of this section, you will be able to:

• 1 Define and describe marketing.
• 2 Describe the benefits of marketing to the organization, its interested parties, and society.
• 3 Explain the marketing process.

Marketing Defined

When you ask a group of people, “What’s marketing?” most people will answer “advertising” or “selling.” It’s true that both of these functions are part of marketing, but marketing is also so much more. The American Marketing Association (AMA) defines marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”6 That’s kind of a mouthful, so let’s see if we can simplify it a bit.

At its most basic level, marketing is made up of every process involved in moving a product or service from the organization to the consumer. It includes discerning the needs of customers, developing products or services to meet those needs, identifying who is likely to purchase the products or services, promoting them, and moving them through the appropriate distribution channels to reach those customers. Marketing, quite simply, is about understanding what your customers want and using that understanding to drive the business.

Marketing can also be defined as the set of activities involved in identifying and anticipating customer needs and then attempting to satisfy those needs profitably.7 But what does that really mean? Let’s break down that definition:

• Identifying customer needs. This is typically where marketing research comes in. Methods of marketing research will be covered in a later chapter, but market research helps a company develop a detailed picture of its customers, including a clear understanding of their wants and needs.
• Anticipating customer needs. After analyzing the data collected, marketers can predict how products might be changed, adapted, or updated.
• Satisfying customer needs. If marketers have done their homework correctly and clearly understand their customers’ needs, consumers will be pleased with their product purchase and will be more likely to make additional purchases.
• Profitably. Profitability is a relatively simple term; it’s when a company’s revenue is greater than its expenses. In terms of marketing, the road to profitability means adding value to a product so that the price customers pay is greater than the cost of making the product.8

MARKETING IN PRACTICE

Reconciling Segmentation and Diversity

We live in a multicultural world where diversity, equity, inclusion, and belonging (DEIB) is no longer the “right” thing to do; rather, it’s imperative. This is particularly true in marketing, because as the consumer population diversifies, brands have to authentically reflect a wide range of backgrounds and life experiences in order to effectively connect with consumers. Therefore, marketers must increasingly respect individual preferences, celebrate differences, and promote customization of products and services to meet customers’ needs, wants, and preferences.

At the same time, to profitably produce and sell a viable product or service, marketers must identify potential customer groups and types with certain characteristics in common—i.e., market segmentation. Segmentation requires assigning individuals to predefined categories with predictable behaviors, based on standardized assumptions.

How does segmentation differ from stereotyping? How can segmentation support diversity?

Read the following articles to further explore these nuances:

• Chron: “Difference Between Stereotyping & Market Segmentation”
• Retail Dive: “Segmentation is dead!”
• Spectrem Group Blog: “Why Segmentation Is OK in Market Research Not Life”

Keep these questions in mind as you explore Unit 2 of this book, where you will learn more about Market Segmentation, Targeting, and Positioning before exploring the considerations of Marketing in a Diverse Marketplace.

How Marketing Benefits the Organization, Its Interested Parties, and Society

Before we go on, let’s consider all the people and groups that an organization needs to consider and serve. Interested parties are those persons or entities that have an interest in the success or failure of a company. These parties can be categorized into two types: internal and external, as shown in Figure 1.2. You may see these people and groups referred to as “stakeholders” in business writing and other media.

Figure 1.2 Types of Interested Parties (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Internal interested parties are entities that reside within the organization and that affect—or are affected by—the actions of the company. These entities include employees, owners, managers, and investors (shareholders). When we think about marketing, marketers often tend to look outward. They build strategies to engage customers and show them what the company has to offer.

You might think that marketing would be primarily directed toward those outside the company, like customers, but marketing is also directed toward internal groups. Internal marketing involves promoting the objectives, products, and services of a company to its internal constituents—particularly employees.9

Think about a recent interaction you have had with a business employee. It could be the server who took your order at lunch or the sales associate at a big box store who showed you the features of the new laptop you were looking to purchase. Which interactions left you with a positive experience? Chances are that your evaluation of the experience is based on the interaction you had with the server or sales associate. That’s a function and benefit of good internal marketing, employees who are motivated and empowered to deliver a satisfying customer experience.

External interested parties include those outside the company, such as customers, creditors, suppliers, distributors, and even society at large. External groups don’t have a direct say in the company’s decision-making process. However they are vital to the success of the company because companies can only succeed with the support of others.

How does marketing benefit external parties? First, consider what marketing does for consumers. It draws out their needs, creates new demand, locates untapped opportunities, and determines the possibilities of selling new products. Second, marketing creates form, time, place, and possession utilities for the company’s goods and services. Utility refers to a product’s usefulness to customers so that they are convinced enough to make a purchase. In other words, when you hear “utility” in marketing, think “usefulness to customers.”

Marketing creates several different types of utility:

• Form utility. Form utility refers to how well an organization can increase the value of its product in the customer’s eyes by making changes and altering its physical appearance.10 For example, when you want a donut or a pastry, you don’t want to buy the ingredients to make it; you want a donut in its final form so you can eat it. That’s where the bakery and form utility come into play. The bakery combines flour, sugar, eggs, and other ingredients to make the cakes, donuts, and pastries that you purchase.
• Time utility. Marketing creates time utility when it makes products and services available to customers so that they can buy it when it is most convenient for them. Consider how many stores are open evenings, weekends, or even 24/7 to make it convenient for customers to shop there!
• Place utility. Marketing creates place utility when it makes goods or services physically available, convenient, and accessible to customers. Consider the ease a company like Uber Eats adds to your life when you’re craving tacos in the middle of the night and you don’t feel like getting dressed and driving to go get them. You can have your food delivered to you!
• Possession utility. Marketers facilitate possession utility by ensuring that a product is relatively easy to acquire. For example, many automobile manufacturers offer low (or sometimes no) interest rates on car loans to make it easy for you to walk out the door with a new set of car keys. Possession utility also encompasses the pride or satisfaction you get from owning a new product, such as a great-fitting pair of running shoes or a smartphone with all of the features you’ve been wanting.

Marketing’s primary benefit to society is that it drives the consumer economy. Marketing leads to increased sales and revenue for a business which enables them to expand operations, create more internal jobs and external jobs for partners like suppliers. Marketing also contributes tax revenue to local, state, and federal governments, ultimately leading to overall economic growth.

The Marketing Process Defined

The marketing process refers to the series of steps that assist businesses in planning, analyzing, implementing, and adjusting their marketing strategy. Do an internet search for “steps in the marketing process,” and you’ll immediately see that some websites outline a 10-step process, whereas others propose a 4-step or 6-step process. For our purposes, we’re going to use a 5-step process.

Steps in the Marketing Process

The 5-step process (see Figure 1.3) involves understanding the marketplace and customers, developing a marketing strategy, delivering value, growing customer relations, and capturing value from customers.11

Figure 1.3 Steps in the Marketing Process (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Step 1: Understand Both the Marketplace and Customers

Before you can start the marketing process, you need to have a good idea of what your marketplace looks like. This means answering some basic questions about your customers, like who they are, their income and purchasing power, and how much they’re likely to spend (particularly on your products or services). If you decide to sell at lower prices in order to attain higher unit sales volume, your marketing strategy would look very different than if you decided to sell fewer products at a higher price.

Another way to approach this is to create separate brands and compete in both arenas. Consider Volkswagen. You might immediately think of the VW Beetle or the Jetta, but the company’s brand portfolio extends beyond VW passenger cars and SUVs. It’s also the parent company for Audi, Bentley, Lamborghini, Porsche, and others, and these vehicles sell at very different price points than VW passenger cars.12

Step 2: Develop a Customer-Driven Marketing Strategy

Marketing strategy refers to a business’s overall “game plan” to focus its limited resources in order to reach prospective customers and turn them into paying customers, hopefully for the long run.

It’s said that there are two basic types of marketing strategy: a product-driven, “build-it-and-they-will-come” strategy and a customer-driven strategy, in which you analyze prospective consumers and then—and only then—create something that they want or need. We’re going to focus on the latter strategy. What happens in a customer-driven marketing strategy is that the company shifts the focus from the product or service itself to its users. Customers’ needs are the central focus and the point of beginning, not an afterthought. Your primary goal in a customer-driven marketing strategy is to determine what users want and/or need and then satisfy those users. Instead of being product-centric, it’s about being customer-centric and developing a mutually beneficial relationship with customers.13

In a nutshell, it’s about establishing a connection and a relationship. It’s about understanding who your customers are, what their needs and wants are, and how you can best meet those needs and wants. It’s about knowing your target market better than your competitors do and creating a strong value proposition for those users—a promise of value that communicates the benefits of your company’s products or services. In short, it’s what makes your product or service desirable to potential customers, helps them understand why they should buy it, how your company’s product or service differs from those of its competitors, and how your offerings are superior to similar offerings from your competitors. 14

Step 3: Deliver High Customer Value

Customers have myriad buying options and alternatives today. Given that, how can a company attract and—even more importantly—retain its customers? The answer is relatively simple: you give them value for their money. By definition, customer value is the ratio between the perceived benefits and costs incurred by the customer in acquiring your products or services.

The mathematical formula is simple:

But “value” from the customer’s perspective is a complex term, because we’re really considering four different values types:

• Functional value: what the product “does” for the customer in terms of solving a particular want or need
• Monetary value: what the product actually costs relative to its perceived worth
• Social value: how much owning the product allows the customer to connect with others
• Psychological value: how much that product allows the customer to “feel better”15

Value is increased by boosting the benefits (in the form of product, place, or promotion) or minimizing the price.

Step 4: Grow Profitable Customer Relations

The bottom line is that profitable customer relationships are the “secret sauce” of any business. This step in the marketing process is where marketers acquire, keep, and grow customer relationships. Successful marketers know that acquiring customers is one of the hardest (not to mention one of the most expensive) elements of marketing. However, when you know clearly who those potential customers are, you can more effectively determine how to reach them, thus maximizing your marketing dollars.

It isn’t enough to have a one-and-done sale. You want repeat buyers, so marketers need to remind customers about the company’s products and/or services and how those products and services have met their needs and improved their lives so they make repeat purchases. Marketers need to consider how to reach customers about their offerings and make it easy and convenient for those customers to make continued purchases.

When customers have a positive relationship with a company or its products or services, they’re more likely to become repeat buyers. Satisfied customers are also more likely to be interested in buying additional products or services from your company, and they tend to recommend products to others, further reducing the company’s costs of getting new customers.16

Step 5: Capture Customer Value in the Form of Profits

The goal of successful customer relationship management (CRM) is creating high customer equity—the potential profits a company earns from its current and potential customers. It’s a relatively simple concept: increasing customer loyalty results in higher customer equity.

Increasing customer equity is the goal of marketers because it’s a bellwether for financial success. Think about it in simple terms: the higher a company’s customer equity, the more profit the company generates, and the more valuable that company (and its products or services) becomes on the market.17

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

1.

Coca-Cola’s mission is to refresh the world, and to that end, it has ensured that you can buy a Coke product at numerous locations—vending machines, convenience stores, restaurant fountains, stadiums, etc. What type of utility has marketing created through this process?

1. Form utility
2. Time utility
3. Place utility
4. Possession utility

2.

Which of the following provides the most complete definition of marketing?

1. Marketing creates value.
2. Marketing is made up of every process involved in moving a product or service from your organization to the consumer.
3. Marketing includes distribution decisions.
4. Marketing is about building relationships.

3.

Which of the following is not an external interested party?

1. Employees
2. Customers
3. Suppliers
4. Society

4.

The total potential profits a company earns from its current and potential customers is known as ________.

1. customer equity
2. the value proposition
3. customer value
4. the marketing process

5.

At which step in the marketing process would the lifetime values to a company’s customers be considered?

1. Developing a customer-driven marketing strategy
2. Delivering high customer value
3. Growing profitable customer relations
4. Capturing value from customers

© Dec 20, 2022 OpenStax

Business Strategies and Frameworks. Part 4

 

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What Is A ‘Market-Driven’ Product?

 

By ADRIENNE TAN

As a product manager, I love the words ‘market-driven’. They have purpose and connotations of real market intelligence. ‘Customer-centric’ sits in the same bucket. These words describe not only the end-product but also how we got there.

But what do these words really mean? What is a market-driven product?

A Two-Tier Definition Of Market-Driven Product

Here’s two different ways of describing it:

1. A “Firm’s policy or strategy guided by market trends and customer needs instead of the firm’s productive capacity or current products.” (BusinessDictionary.com )
2. “Using market knowledge to determine the corporate strategy of an organization. A market driven organization has a customer focus, together with awareness of competitors, and an understanding of the market.” (BNET)

I like these definitions because they illustrate the two key parts of what makes up a market-driven product:

1. It’s a corporate strategy; and
2. It’s based on understanding market trends and your customer

The definition of market-driven is dependent on both these points.

If your company doesn’t believe in customer-centred design, then it’s unlikely to invest in understanding the market and your customers.

Similarly, even if being market-driven is part of your corporate strategy, you’re not market-driven if you don’t take the time to gain an in-depth understanding of the market and your customers, more specifically your customers’ problems.

You’re not market-driven
if you don’t take the time to gain an understanding of your customers’ problems.

It’s More Than Just Market Research

Let’s focus on the second point – understanding market trends and your customer.

It’s easy to say that a market-driven product is a result of market research – but market research does not really get to the heart of truly understanding the customer.

It may give you a broad and important understanding of the changes in the consumer, technology and or business environment, but it doesn’t offer sufficient insights into your customers’ lives and the problems they experience.

When conducting market-driven research, here’s some questions to include:

• Is there a customer problem to solve?
• What are your customers’ current behaviours, lifestyles, and aspirations? Are they likely to change as a result of your product?
• What experiences do your customers seek?
• What kind of quality of life do your customers want?
• What major trends are currently changing peoples’ beliefs, values and behaviours?
• What do customers need vs. want vs. ‘nice-to-have’?
• Under what different contexts will your customers use this product?
• How would you like your customers to feel about your product?

If we keep these questions in mind when we build our research programs, we can direct our customer research to include personal elements that will provide a better idea of who our customers are and what they really need.

The Whole Market Environment

The customer is only half of what needs to be understood. You also need to understand the market as a whole.

I like to think of a market as the sum of the interactions of all participants within that market (including your competitors).

Understanding those interactions enables us to get a wholistic perspective of what is going on and helps us make important product decisions like:

• Which is your most important target market?
• How will you differentiate your product?
• When will you bring it to market?
• Who should you partner with and who will you be competing with (both current and future)?

There are a number of different tools you can use to analyse this but one I like is the PESTEL analysis. It’s not a new one, but I like how big-picture and comprehensive it is. You can quickly identify which factors are relevant to you and then analyse those in more depth. You can also identify strengths and weaknesses and go further with a SWOT analysis.

From Market Research To Market-Driven

If you translate your market research into desired customer and business outcomes, and then meet these with product outcomes you can be certain your end-product has truly been created by the target customers and the market.

If you do this well, now all you need to do to make your millions is build a great product!

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