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.