CHAOTIC :
FIRM MANAGEMENT
AND MARKETING IN AGE
OF TURBULENCE
Ing. Jiří Šnajdar
Mgr. Evžen Staněk
2013
Kotler, P., Caskione, J.A. :
CHAOTIC :
FIRM MANAGEMENT AND MARKETING IN AGE
OF TURBULENCE
Brno, COMPUTER PRESS 2009, p. 214, ISBN
978-80-251-2599-1
Turbulence in MC :
Firms shift more and more investments from TV
advertisement to new media –web, email, blog.
All firms must live with risk, also turbulent, have
system of timely warning, system of chaos control,
critical scenario.
• Previously – long period of prosperity, short
periods of chaos = crisis.
• Today – long crisis periods, short ray of
prosperity.
WHAT IS IN FACT MARKET TURBULENCE ?
Unpredictable and sudden changeover in external
and internal ambience of organisation, that
influences its performance.
Butterfly wings effect
Comparison of normal and turbulent economics
Normal
Turbulent
Economic cycles
Foreseeable
Missing
Boom
Definable-7 years in Unpredictable,
average
variable
Recession
Definable-10 years in Unpredictable
average
variable
Potential of impacts
Extensive
Low
Access to investments Expansive, large
Cautious,
strict
Toleration of market Acceptation
Avoiding
risks
Consumers´ attitudes Self-assurance
Uncertain
Consumers´
Stable, developing
Cautious,
Preferences
Kotler, Caslione, page 35
NINE REVOLUTIONARY INNOVATION
REVOLUTIONARY TECHNOLOGY
TECHNOLOGY
Mini steelworks
steelworks
Container ships
workers
Desktop publishing
composition
Digital photos
Semiconductors
Personal computers
computers
Download and music sharing
E-books
books
VoIP
ORIGINAL
Vertically integrated
Free laid cargo,
Traditional
Chemical photos
Transistors
Indoor
CD
Paper
Traditional telephones
PRESSURE OF NON-FORMAL AND FORMAL
(IMK) COMMUNICATIONS – AGGRAVATION OF
VIRTUAL AND INFORMATION COMPETITION
Example : web of dissatisfied customer – change of
approach of public.
Possibility of misusage ??!!
Crews of Wirgin Atlantic and British Airways –
passengers´ slanders on facebook – slanders of
own employers.
Sacking.
USA COMMUNICATION STUDY
Email – 93%, web – 81% = the most used
communication until 2013
• Other network channels will appear.
• Increasing power of customers supported by
technologies = 76% positive influence on
development of new products, 73% positive
impact on revenues
• The most important future factor influencing
commercial models = changes in technologies
• Technological changes – fundamental changes of
care about customers from the company´s side –
40%
• Changes in sales and marketing initiatives –
24%, especially based on email and web.
WHAT CAUSES TURBULENCE ?
7 main factors
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Technological progress and information revolution
Revolutionary technologies and innovations
Gain of the rest of the world
Hyper competition
Environment
Sovereign funds
Increasing power of customers
1. Decision about allocation of means in contradiction with
firm strategy and culture. Change of culture Home Depot –
originally orientation on small tradesmen with quality
personnel fulfilling advisory services.
Change of director – rationalisation – lower of number of shop
assistants and their quality = effort of military organisation,
destruction of friendly cultural = temporary decay, return to
origin.
2. Decreasing of expenditures instead targeted steps
Page 69 – study from crisis 2000 – 48% of firms, that cut
expenses in total, lost its position on the market.
20% of firms that did so with aim on the basis of expense
analysis increased incomes.
Conference 2008 – profit by a crisis :
Firms that have skill, will and means should increase its
expenses to get new customers and to keep the existing.
Skills – marketing expertise, Will – predominates culture that
enables to go against stream, Means – can invest.
KOTLER / CASLIONE,
CRISIS – two signs are necessary observe
The first means danger
The second express opportunity
THE MOST FREQUENTED MISTAKES IN TURBULENT
AMBIENCE
• Decision about allocation of means in contraindication with
firm´s strategy and culture
• Total decrease of expenses instead of aimed and
elaborated steps.
• Abbreviated solution seeking for cash flow keeping without
consideration on key parameters
• Lowering of expenses for marketing, mark support and
development of new products
• Price lowering in time of decreased revenues – experience
in CZ – hotels
• Abstraction from customers in consequence of lowering of
expenses, connected with sales
• Reducing of expenses for training and employees
expansion in the time of crisis.
• Underestimation of suppliers and distributors.
COMPANY TO BE SEEN AS A SERVICE PROVIDERS
Services of a firm = combination of its identity (trade
mark, organisation and products that sells)
If anything does not work, then the whole value of a company
is destroyed.
To check permanently possible impact of prepared
proceedings.
Lasting, urgent, question important of life : Where we
want to be when the crisis ends.
Keeping of cash flow out of consideration for key parameters
Sacking of key qualified employees when crisis – in time of
increase are missing capable employees, not capital. The
company is losing market.
BUSINESS WEEK 2008-01-13
THE 10 WORST MISTAKES IN TURBULENT ECONOMY
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To sack talented employees
To save on technologies
To reduce risk
To stop products´ development
To allow to take a new directors, oriented on expenses
lowering, instead of directors, oriented on growth
Give up on globalization
To reject innovations
Change the performance criteria
To prefer hierarchy to cooperation
Download to fortification
PRICE LOWERING IN TIME OF DECREASED REVENUES
Starbucks Coffee – profit in 3Q 2008 decreased of 97%
McDonald´s in the same time increase of 8,2% from new
opened places of business.
McDonald´s - brought innovations – coffee, smaller portions,
lower prices, more vegetable.
Combination of sales support – price and non price
proceedings.
Starbucks – copies McD – Drive in windows, warm breakfasts
instead of going other way – for example smaller coffee
portions for lower price – a tribute to clients in times of crisis.
MAIN POWERS CONNECTED WITH FRAGILITY WITH
WORLD ECONOMY
GLOBALISATION – mutual export and import of raw
materials and products
TECHNOLOGIES – internet, computers, mobile telephones –
information immediately at disposal
TURBULENCE – STABILITY AND PREDICTABILITY OF
SITUATION IS DISAPPEARING, SOCIOLOGY – Bauman –
fluidity, instability, permanence of changes
FIRMS REACTIONS - marked reduction of budgets for
innovations, development of new products and marketing
REDUCTION OF
EXPENSES FOR MARKETING, TRADE MARK
SUPPORT AND DEVELOPMENT OF NEW PRODUCTS
If a company reduce the intensity of marketing, design
freedom to others, who will strengthen
Mistakes
• Effort to get new sooner, then is fastened relation with
existing
• Reduction of M – attracts competitors, who will try to get
the most valuable customers
• We live in time of lasting information flows – everybody
knows how is the firm. So not lie.
• To keep down development and innovations – decrease of
future values, space for competition.
ALIENATION CUSTOMERS BY REDUCING
EXPENSES ASSOCIATED WITH THE SALE
Relations between customers and incremental customers – 2%
to 4% of population are actual and active customers. Then exist
96% - 98% of potentials. It is necessary to pay attention to
incremental customers.
What about to follow credible trade mark and sale expertise –
these will return without respect to price.
Classic : Singapore Airlines 1997 – crisis in Eastern Asia.
They canceled part of flights on short haul
They invested in comfort and communication with high-end
clients – businessmen and passengers of the 1st class 300 mil.
USD.
Competition advantage, they kept wealthy clients and prepared
strong bindings client-mark.
Experience of the company EMIRATES – luxury care in air
plane.
RESTRICTED EXPENDITURE ON TRAINING AND
DEVELOPMENT
EMPLOYEES DURING CRISIS
Seemingly expendable expenses, but preparation on time
period of growth. Education of top experts, who will provide for
competition advantage in time of growth.
Australia – education in firms,
Effects - 30% improvement in fuel consumption, in education
of work safety.
UNAPPRECIATED SUPPLIERS AND DISTRIBUTORS
These are the ushers innovation into practice.
In times of crisis - the company must integrate more into their
decision-making.
But usually - forcing suppliers to reduce prices, instead of the
company discussed with them
better cooperation.
SYSTEM OF TIMELY WARNING
Mattel-Barbie – in years 2001-2004 lost 20% of the market in
segment of modish dolls.
Its place – company MGA Entertainment , that produced a doll
Bratz. MGA realised that girls mature faster and also faster lay
aside their dolls Barbie and look for dolls, that look like their
siblings.
Barbie originally 3-11 years, today 3-5 years.
Market research, knowledge about scenarios of society
development - life style, demography, free time etc.
So Johnson/Johnson asks – how will the demography look
like in the year XY, how many patients will visit doctors, with
what, what devices, instruments will be necessary etc.
Sociology, psychology, demography and the resulting
age and major disease = It is necessary to know in this
case.
New requirements on marketers and marketing
communicators !
QUESTIONS FOR MANAGEMENT - EARLY WARNING
SYSTEM
• Our weak point in the past? What's going on today?
• Is an inspiration analogy from somewhere else ?
• What we overlook important and tell ourselves that it is
otherwise?
• Who in our trade in first in intercepting of first signals of
changes and starts as first to respond ?
• What try to tell us our strayed customers ?
• What future surprises could actually hurt us?
• What technologies could change rules of game in the trade
?
All this is the subject of systematic market research and
study of the broader socio- economic context of
business.
CREATION OF RESISTANT MARKETING SYSTEMS
4 KEY CHANGES OF MARKETING AMBIENCE
• MUCH BETTER INFORMED CUSTOMERS - ALL YOU
CAN FIND ON THE INTERNET.
• Constantly higher willingness to buy private marks of shops
and trust them, when they are cheaper than advertised
national marks.
• Competition advantages have constantly shorter duration –
high products innovativeness
• Internet and social nets – new media and sources, together
tools of direct sales
FIRMS PERMANENTLY PROSPERING – CHAMPIONS
• Are flexible – react fast on external stimulus
• Are robust – resist the pressure, changes of procedures
and conditions
• They are resistant - the ability to stand back on its feet
CHARACTERISTICS OF FIRMS – CHAMPIONS
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Strong management
Ambitious targets
Relies on own power
Continual innovation
Right choice of motivated employees
Selected market concentration
Competition advantages
Immediateness to customer – including MC
Global orientation
MAIN CHANGES IN MARKETERS ´ THINKING
• Everybody in the firm thinks of the customer
• Not to sell to everybody, but to clearly defined target
markets
• Firms are not organised according to products, but
according to customers´ segments
• Firms do not do everything with their own forces, but more
often buy partial elements and services
• Firms reduce number of suppliers, deepen relationships
with them
• Material assets loose importance, transfer to marketing
immaterial assets – trade mark, customer´s loyalty, loyalty
with distribution nets etc.
• The trade marks are not only results of advertising, but their
value create the whole MC
• Firms do not insist on profitability of each activity that much,
but work with long term value of customer
• Instead of effort to increase market share they want the
bigger share in customer´s wallet
• Firms get out from locality to global approach
• Firms give up concentrating only on financial indexes and
concentrate of marketing indexes
• Orientation on shareholder´s value is changed into value for
all concerned.
PROCTOR & GAMBLE
lowered marketing expenses from 25% to 20% from
revenues so
• Standardisation larger amount of package, advertising on
the whole world
• Decreased number of sizes and flavours of offered products
• Did away with weaker brands or sold them
• Launched a number of smaller, but more promising brands
• Limited sales actions
• Reduced the rate of growth of advertising budget
FIVE BASIC QUESTIONS FOR MARKETERS
1. Have you total overview of your investments and can you
uncover ineffective expenses ?
2. Lead marketing investments to change in customers´
behaviour ?
3. It focuses investments on removing barriers to customer
buying corporate brand?
4. Is among investments the right combination of marketing
tools ? All investments must concentrate on at least one of
these things :
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Change in customers´ perception and their motivation to
bigger purchases.
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Offer of temporary financial impulses leading to bigger
amounts of purchases
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Extending the availability of brands in order to buy more
5. Does exist a system supporting winners and eliminating
losers ?
EIGHT MARKETING STRATEGIES OF CHAOS
MANAGEMENT
• To secure market share in key segments
• Aggressive in fight about market share of competition, that
attacks our segments
• Higher intensity of customer´s research = fast change of
their wishes and needs in turbulence
• To keep, but better increase marketing budget
• To aim on guarantees, to stress key values
• To throw away programmes, that do not work
• Not cheapen neither the best nor key marks
• To save strong, throw aside weak.
HOW TO EDUCATE CUSTOMERS
The company must delight the clients – they must want to
recommend the firm to others
Characteristics of BELOVED FIRMS in the USA
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Co-ordinate interests of all groups
Salaries of the highest are rather average
Open door to top management
Salaries and benefits of employees over average
Training of employees longer than average
• Fluctuation of employees lower than average
• Employees would cut up themselves for the customers
• Suppliers are perceived as real partners at searching for
higher quality, productivity and at expenses decreasing
• Firms believe that their culture it their biggest fortune and
primary source of competition advantage
• Marketing costs comparing with competition are lower and
rate of keeping of customers is far higher.
ANALYSIS OF PROSPERITY OF FIRMS OPERATING FOR
LONG-TERM ON MARKET
Firms are as living organisms when concentrating on
fundamental conditions of their life.
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Sensibility to world around them
Knowledge of own identity + ethic
Tolerance of new thoughts
Conservative financing
High weight is attached to :
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To value people, not assets
To free management and control
To learn continuously
To create interpersonal community
CORPORATE SOCIAL RESPONSIBILITY
AND ENVIRONMENTAL SUSTAINABILITY
FIRM
SOCIAL THEMA
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breast cancer
electronics recycling
vulnerable children
better food
human conditions of
habitation
traffic safety
reduction of obesity
Avon
Best Buy
British Airways
General Mills
Home Depot
• General Motors
• Kraft Foods
• Levi Strauss
• Motorola
• Pepsi-Cola
• Shell
• Starbucks
AIDS prevention
Reducing the amount
of solid waste
keeping of active life
seashores cleaning
protection of
rainforests