Cranfield School of Management
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Welcome to this Knowledge Interchange Podcast. I am Steve
Macaulay from the Learning Services Team and I am interviewing
Professor Malcolm McDonald about his book, which he coauthored , Marketing in a Nutshell . Professor McDonald, who is this book aimed at and can you really distil such wisdom into a nutshell?
It ' s aimed at busy managers, not necessarily marketing managers, but non marketing managers, senior non marketing managers, in particular and the reason that it is aimed at them is that (a) they are busy and (b) they are not going to study marketing, but since marketing is so important in companies and organisations, it equips them with a basic knowledge so that they can ask the right questions of those whose job it is. As a by product it is also quite useful for lazy students and it is useful for them because they often benefit from a simplification of often very complex concepts and it’s a very useful quick and dirty sort of revision aid – and it is also a route map through the fog of marketing, so that is who it is aimed at and that is what it appears to do.
One of the things that stuck in my mind of what you said was something like organisations can survive without marketing, but not for long. You have got a lifetime ' s experience in marketing, and dealing with organisations, what has that experience taught you?
It has taught me that, if you are indeed in a high growth market there is usually sufficient growth for all competitors and you don’t have to use your brains too much because the very act of getting out of bed in the morning and approaching customers is enough to survive. The problem is it comes back to bite you eventually because all markets get mature and oversupplied and the classic example of this is Marks and Spencer, for whom marketing was a dirty word and their customer service was going down and the attitude of their consumers was going down, while the share price was going up and eventually people just abandoned them en-
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Cranfield School of Management
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Professor Malcolm McDonald masse and it has now taken them almost a decade to get back to half of what they were, so you can get away for a certain amount of time in growth markets, but eventually if you want long term success marketing has to be at the heart of what you do.
You put a lot of emphasis in the book on marketing as a total business process – can you say a bit more about that?
Yes, I mean I would say what you need – I don’t care what you call them, but you need a director in the board room who is representing customers outside the organisation and surprisingly in 2007 many organisations still haven’t got this. There is a trend today for companies to have what you call a chief revenue officer, which I find encouraging, but in the best companies in the world – the Proctor and Gambles, the 3Ms, the General Electrics of the world, and certainly the company where I was marketing director thirty three years ago, Canada Dry, we use to do the strategic marketing plan first and then build all our IT programmes, R+D programmes, production programmes, distribution programmes around it and that way you become customer and market focused.
So it is not that one is subservient to the other, its just the order in which they are done that matters and obviously markets and customers must come first – not the other way round.
Now marketing is a big subject, if you were to pick the most essential pieces from the marketing jigsaw what would they be?
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Well I have taken my cues from other gurus like the chairman of
Unilever and Phil ip K ot l er and Tom Peters and many others whose work I have paid close attention to and when you distil them down they all say the same thing, top of the list of all them, in similar words, they say you have got to have a deep understanding of the market. They say you have got to have proper segmentation.
You have got to understand the needs of the customers in the segment s . You have then got to develop your offers around those needs, position them and brand them – in that order, branding comes towards the end, not at the beginning. And then the other common piece in what they all say is integrated marketing processes, which I call marketing planning of course, so those are perennial and without those pieces in place, it doesn’t matter how good your advertising is or your sales force, or anything else, it just isn’t going to work in the long run.
Now you mentioned Marks and Spencer a few years ago earlier on, most organisations say markets are important, customers are
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Cranfield School of Management
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Professor Malcolm McDonald important and yet often my observation is that other things are actually more important, like finances for example, so in practice how do you get the benefits from marketing?
The first thing is you have to demonstrate the benefits, it ' s no good just making a bald assertion that you need marketing and organisations often fall back on financial husbandry because the marketing people let them down and the problem with falling back on financial husbandry, or indeed production engineering or anything else, is that that isn’t the way the world works today.
Fi n anc e people, all they do is keep the score, it’s the lag effects of something that has happened. Marketing is what causes those lag effects and you have got to do both, so the orientation that many companies have got at the moment which is financial orientation or production orientation increasingly they are finding it doesn’t work in this overcrowded and very competitive market and that is why marketing is creeping to the top of the pile as a discipline that companies are quite desperate to understand better and implement.
Now, your book is highly practical, if I were to ask you to draw the threads together and say what are the preconditions for successfully implementing and sustaining marketing in an organisation – what would they be?
It has to be to get the hearts and minds of the people who run the company, which is the board of directors, and without their buy in, without their active support, no matter how good you are at marketing it is going to be something that happens on the fourth floor, a bit like the corporate zit blowing up the balloons and organising the tee shirts and that kind of thing. And indeed in many organisations it is like that, I mean an example of this is financial service companies, they recruit someone from Proctor and Gamble and what they are really asking them to do is to beef up the promotion and that has never been what marketing is.
People from Proctor and Gamble expect to be at the heart of strategy making and they often get really de-motivated when they go into organisations like this and aren’t allowed to do proper marketing.
If I were to look at a time line and you look ahead twenty five years, I mean that is a long time ahead to predict, but what do you think the future direction and shape of marketing is going to look like then?
It has to be a much more quantitative, measurable discipline. We
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Cranfield School of Management Professor Malcolm McDonald have got a research club at Cranfield which I don’t think I have mentioned – it’s a marketing accountability research club, sponsored by some of the biggest companies in the world, I mean if you look at profit and loss accounts in a typical company, you get one line for revenue and loads and loads of lines for costs and the board spend all their time arguing over the costs and paying no attention to where the revenue has come from, so we need clearly two profit and loss accounts – one that breaks the revenue down, one that breaks the costs down and then a bringing together of those things, so hence, this notion of a chief revenue officer. But the biggest change of the lot is that in capital markets today, chief executives and chairmen are judged on shareholder value added having taken account of the risks associated with future strategies, the time value of money and the cost of capital and this is a totally different notion from ROI, ROCE - it is all the financial institutions are interested in. We work very closely with the investment community in the City of London and elsewhere and that is how they judge whether shares are to be supported, or not and it is nothing to do with what accountants do looking backwards, its about looking forward and marketing has to be central to that because most of the assets of organisations – 85% of assets in
Britain are intangibles and nobody seems to be paying sufficient attention to it. So the marketing community has to work with the financial community to get a more quantitative grip on those intangible assets and how they can be managed to produce shareholder value added.
SM Fascinating. Thank you very much indeed, that has been very useful.
Transcript prepared by Learning Services for the Knowledge Interchange www.cranfield.ac.uk/som
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Cranfield School of Management