What we now call “marketing” began long before the name was coined. In the mid-1800s, traveling salesmen dressed “snake oil” and other tonics in fancy packaging and extolled their virtues to a gullible public. New marketing applications soon proliferated in the belief that marketing could make many new things possible in virtually any business situation. For more than a century, implementation, experience and ultimately strategy have helped marketing evolve from crude beginnings to today’s sophisticated practices that integrate strategic planning with tactical initiatives.
Market Player vs. Market Leader
Consumer product firms have been the pioneers in the marketing field. The most successful have created marketing best practices that have enabled them to achieve and maintain strong leadership positions. The importance of market leadership is not lost on firms that understand its true value. In fact, the term “leader’s advantage” was created to recognize the many benefits that accrue to a leadership position. The leadership position provides the ability to exploit opportunities and leverage these advantages to remain well ahead of the competition.
The consumer products area offers the most convenient window to see the effects of establishing a leadership position. Suasion Resources researched market leaders of eighty years ago to test the durability of niche leadership. The chart below lists some leading products of 1926, along with their ranking in today’s market.
This irrefutable evidence of the importance of establishing a leadership position in a clearly defined marketplace niche should not be lost on any marketer. Further, it is evident that most companies who have worked hard to secure their leadership position also understand that it is just as important to take rigorous methods to protect it.
The Importance of a Strong Strategic Focus
Aggressive financial services firms aspiring to create market leadership must first understand that securing such a position is a critical strategic planning issue. It won’t be realized merely as the result of a clever advertising campaign or corporate promotions.
While the financial services industry increasingly acknowledges the value of strategic marketing to obtain a leadership position in different market niches, it has not reached a consensus on how to approach the planning process. Our belief is that the starting point for the development of an effective strategic plan should be the definition of a business’s role in the marketplace. A clear business definition facilitates the planning process by providing a focal point for corporate decisions concerning target markets, product offerings, competitive standings and appropriate marketing activities. How management answers the question, “What business(es) are we in?” can have a significant effect not only on the company’s strategic planning, but also on its ultimate success.
Theodore Levitt, the Harvard University marketing guru, believed that the greatest threat to a company’s growth was not market saturation, but rather the failure to create a strategy that properly defines the organization’s driving purpose. In Marketing Myopia, published in 1983, Levitt offers the railroads as an object lesson of what can happen when a business loses its sense of direction and purpose. Levitt contends that the railroads did not stop growing because the need for passenger or freight transportation declined or because others — e.g. trucks, airplanes — moved in to usurp the railroad’s transportation mandate. His research shows that the railroads made themselves vulnerable by adhering to a product-driven strategy that made them inflexible and unable — or unwilling — to respond to the needs of the marketplace. They assumed that they were in the railroad business rather than the transportation business.
Financial service firms committed to creating effective strategy and achieving a leadership position must discard their product-driven precedents and adopt a customer-centric strategic process. They should begin by identifying the consumer groups and consumer functions their business can best serve and then define their business in terms of how to most effectively penetrate and serve those target markets. This consumer-driven focus will provide the best strategic starting point and serve as the context within which all other strategic questions can be answered. The important thing financial services firms should not lose sight of, however, is that the definition of their business should drive their marketplace approach — not the other way around.
Implementing a Customer-centric Marketing Strategy
Peter Drucker, a sage of the marketing discipline, discussed customer defined value almost 50 years ago. During the last decade his concept of a customer-centric focus has become part of popular marketing literature and is now the guiding principle of the marketing discipline. Drucker’s fundamental mandate that “the customer’s interests must come first” can be summarized by the following statements paraphrased from his extensive writings:
o The only valid definition of business purpose is to create a customer.
o What the business thinks it is producing is not as important as what customers think they are buying; what customers consider to be of value is decisive.
o Every business has only two basic functions: marketing and innovation.
o Marketing is your whole business as seen from the customer’s point of view.
While easy to articulate, customer-centric practices are difficult to implement in most financial services organizations. Obstacles include a product-push mentality, a focus on short-term profitability, under-investment in marketing activities, and the lack of solid market intelligence about the needs and wants of target markets. In many financial organizations, the persistent problem of differentiating marketing from sales still remains largely unresolved.
I believe, however, that in the future, the most successful financial services organizations — those who will become leaders in their own market niches — will be those that make Drucker’s principles their own through creative application. These firms will fully realize that marketing responsibilities include not only developing the firm’s mission statement and key messages, but also defining its business, relevant differentiation, competitive advantages and value proposition. As effective marketing evolves, successful financial services firms will create a culture of customer orientation throughout the organization and incorporate advocacy for customer welfare in all corporate decision-making.
In our commoditized business, where product or service successes can be easily replicated, a company’s future can depend on management’s willingness to invest resources to develop an effective market leadership strategy. If that challenge is met, the result will be a culture of innovation, improved performance and increasing profitability.