The March issue of Fast Company came out this week and in it was a list of the World’s 50 Most Innovative Companies. Now, I like a good list and I particularly like this one. The list of the World’s 50 Most Innovative Companies is compiled based on expert opinion, data, reports, interviews and debate. More importantly, the list gives “a snapshot of creativity at work in the global market place”. 

When you skim through the top 50, there are some companies you would expect to find on such a list – for example, Facebook, Amazon, Apple and Google took the top 4 spots. A number of other high-profile companies were also on the top 50: HP, Hulu, Netflix, Nike, Intel, GE, IBM, and Disney.

But there were others that really captured my attention – for example, First Solar and PG&E for their work in sustainability and renewables.

Others would be pleased to find themselves on the list – for example, Wal-Mart at #9. For a long time, Wal-Mart positioned itself as excelling in cost leadership and was well regarded for its excellence in supply chain management. But Wal-Mart is now making inroads into sustainability by working with its 100,000 suppliers and encouraging them to “go green”. A number of years ago, Wal-Mart tried to have the same impact on supply chain management with the introduction of Radio Frequency Identification (RFID) tags by mandating their suppliers had to comply with Wal-Mart’s RFID requirements. The use of RFID tags never took off as predicted (I’ve been told it is because the price of RFID tags never really dropped). Let’s hope that Wal-Mart can succeed in their efforts to impact sustainable business practices because without an organization with the clout of Wal-Mart, many managers might have been slower to grasp the concept of sustainability and determine what it means for their organization.

There is another characteristic that defines the inclusion of many firms on the top 50 list. Many have had a substantial impact on the way in which the markets behave. Hulu (#11) and Netflix (#12), for example, are both altering the way in which consumers access TV and movies. The impact of Netflix, with its 11m subscribers who have accessed 2.5b DVDs, Blu-ray discs and video streams since Netflix launched in 1999, has already altered the structure of the industry by making traditional video rental stores an endangered species. Or Patients Like Me (#23), a website that allows you to click on a symptom and connect with others who have the same symptom, identify treatment options and talk to other patients about their experiences. What a great example of peer-to-peer communication and, again, a service that has the potential to change consumer behavior – this time, with respect to how we find health related information. Here’s another one: Sportsvision (#34), a service that captures and analyzes sports movement and provides data that on the ability of a player – how fast the player moves, the player’s offensive ability and reaction time, etc. Very soon, this type of data will infuse Monday morning water cooler discussions about sports games.

Every now and then I stop to reflect upon different iterations of products I have used to satisfy different needs – e.g., listening to music on vinyl records and cassettes, to CDs, to the iPod or making phone calls through a switchboard operator using a phone that shared a party line with three other families, through to Skype. I often feel that when an innovation is successful, I can’t imagine life without it. I feel like that about many of the companies that made the top-50 list. For me, I can’t imagine life without Google or Netflix. Soon, I will probably add the Apple iPad to the list. I wonder what else I will add to my own “can’t live without it” list in five years time.

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com

Key words:  Fast Company, innovation, consumer behavior, sustainability, top-50 innovative companies, Facebook, Amazon, Apple, Google, Hewlett Packard, HP, Hulu, Netflix, Nike, Intel, GE, IBM, Disney, First Solar, PG&E, Wal-Mart, Patients Like Me, Sports Vision

I teach marketing strategy at the Drucker School of Management, a graduate only School that offers MBAs and Executive MBAs. I witnessed first hand the passion many of my students showed toward Obama, his campaign and his election to President. Many of my students volunteered during the campaign and participated in the grass roots marketing approach used by Obama’s team.

The day after the election of President Obama, I recall a heated discussion in one of my classes. I boldly walked into class and asked my students to link the concept of customer (dis)satisfaction to the election of Obama and tell me what is likely to be the greatest danger Obama faces going forward. 

The discussion was heated mostly because of the celebratory mood among many of my students and perhaps because of a lack of willingness to accept that things might not go well for President Obama. After all, irrespective of your personal political affiliation, there was much to note about the election of President Obama. Aside from the historic significance of his election, as a marketer I was intrigued by the way in which Obama reached out to the people with the compelling message of hope, used social media to rally the masses, and urged people to mobilize and make a difference to the future of the United States. As President Obama stated in the opening lines of his Presidential acceptance speech:

“If there is anyone out there who still doubts that America is a place where all things are possible; who still wonders if the dream of our founders is alive in our time; who still questions the power of our democracy, tonight is your answer.”

But to me, the period within which President Obama was elected also represented a period of great contradiction: on the one hand Obama made people feel hopeful; on the other hand, the speed and severity with which the recession took hold and a fear of the unknown made people feel hopeless. So, we were left with an unusual situation in which hopefulness and hopelessness were finding a way to co-exist.   (Incidentally, this is what motivated me to write by book, “Marketing Through Turbulent Times” to address the contradiction between hopefulness and hopelessness against the backdrop of Obama’s election and the recession and think about what this means for business leaders and marketers.)

The answer to my question of what could go wrong is linked to the basic principles of customer satisfaction. Put simply, when there is a gap between expectations and delivery, people are dissatisfied. To minimize dissatisfaction means to close the gap by either lowering peoples’ expectations or improving delivery.  

Without even taking into account specific changes President Obama has made or is trying to make, the expectations placed on Obama were colossal. To illustrate, here are some quotes from the media at the time Obama was elected, …“[although Obama] must tackle two wars, a calamitous recession and the unexpected … [y]et by a three-to-one majority, American’s are more optimistic with him in charge” (The Economist, January 24, 2009, p. 34).  Or in a poll published in Newsweek on January 26, 2009 (p. 43), 66% said they were very/somewhat optimistic that the new administration would be able to improve the way things are going in the country and 71% were confident Obama would successfully turn the economy around.

With so much hope placed on what President Obama can achieve during his term as President, the chance of Obama living up to expectations will always be slim.  The lessons of marketing apply to Obama just as they do to Procter & Gamble, Exxon Mobil, Mattel or Apple – if the goal is to get people to remain loyal, repurchase (i.e., vote again) and be advocates for your brand by recommending the brand to friends, then the perceived gap between expectations and delivery needs to be closed.

 

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com

Key words: President Obama, customer satisfaction, customer dissatisfaction, brand management, political marketing, hope, expectations, delivery, marketing in a recession

There aren’t many companies around that practice marketing the way that Apple does.  I call Apple’s approach to marketing “Heretical Marketing” because Apple clearly departs from accepted beliefs or practices when they develop and launch new products.  Here’s why.

Central to marketing is the goal of identifying customer needs and wants, such as problems consumers have with existing products, and then developing solutions to satisfy those needs.

One of the problems that plagues marketing is its limited success in coming up with ideas that will result in the development of a disruptive innovation.  The problem is that when we go to the market to identify customer needs and wants, people will respond in terms of the mental models they hold of the market. What this means is that when people respond to marketing research, most will do so in terms of the product attributes they are familiar with based on what they know about products currently available on the market. It is difficult, if not impossible, for respondents to suggest solutions for problems they didn’t know they had or evaluate something that is beyond their comprehension.

 Why then did I call Apple a bunch of “Heretical Marketers”? Because, what Apple has become well known for is first developing a solution (a new product) and then building demand for the new product by telling consumers about the needs and wants the new product solves. As Kim of Mac Rumors said when asked about the rumored Apple Tablet, “People hold out hope that Apple will surprise them and make a device they didn’t even know they wanted” (The Los Angeles Times, December 31, 2009).

Other things we read about Apple simply demonstrate good practice: a strong brand we trust to deliver something reliable, exciting and innovative, an organization that manages to build hype and gets free publicity along the way, and an organization that is confident enough in its own ability that it lets the product find its own feet in the market.  As Daniel Lyons wrote recently in Newsweek (Jan 5 2010), “…the cool thing about technology is that no one ever knows how new ideas will evolve.  … The lesson we’ve learned since then is that even the people who created the iPhone could not have imagined what people would do with the device.”

And we know that Apple has been successful not just in monetary terms but in marketing terms because as a consequence of buying the iPod or iPhone, consumer behavior has substantially altered.  There aren’t that many products around that can be attributed with creating categories, forming new reference points for consumers and underscoring cultural shifts.

I liked the title of Lyons’ article: “The Tablet will be what we make of it” because we can’t comprehend the attributes the Tablet will embody, nor do we know who will first adopt the Tablet and what these early adopters will use the Tablet for. And of course, we don’t know how the Tablet will evolve once it hits the market. It will be interesting to look back in a couple of years and see just how much impact the Tablet has had on consumer behavior.

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.co

Key words: Marketing strategies, new product development, innovation, technology, Apple iPod, Apple Table, Apple iPhone, consumer behavior, marketing research, cultural shifts

Super Bowl time is almost upon us and once again the question of whether companies should spend money on Super Bowl commercials has arisen.

Last year, circumstances were quite different. For example, Monday January 26, 2009 was labeled Black Monday because it was the day that many large corporations announced fourth quarter results for 2008 and, predictably, the results were not good. In one day, Home Depot announced it would lay off 7,000 employees, Sprint 8,000, Caterpillar a further 5,000 (for a total of 20,000), Pfizer announced it would buy Wyeth and lay off 10% of the workforce or about 5,000 people, and ING cut 7,000 positions. In total, 71,400 jobs were shed on Monday January 26 2009, making a total of over 200,000 jobs in the first few weeks of 2009 – not to mention the 2.6 million jobs lost in 2008, the most jobs lost in one year since the end of World War II. And of course, job losses continued and unemployment is now hindering a quick economic recovery.

Debate about whether or not to advertise during the 2009 Super Bowl provides great insights into the dilemma many marketers were facing at the time. Since a 30 second Super Bowl commercial costs $3m (or $100,000 per second!), the cost was hard to justify when so many people were either being laid off or fearful of being laid off.  Then there were questions of advertising effectiveness. As Bruce Horowitz noted in the USA Today (January 30, 2009), prior evidence suggests a direct relationship between consumer confidence and advertising recall – when consumer confidence is low, advertising recall is also low. Then there is the issue as to the appropriate message to use in a Super Bowl commercial. Is the Super Bowl a time to bring a “moment of joy” to consumers as Pepsi did? Or is the Super Bowl a time to show the company is still around, as Audi did? Or is the Super Bowl best avoided because advertising on the Super Bowl sends the wrong message to employees and constituents, which is why FedEx decided not to advertise during the Super Bowl of 2009 (Horowitz, 2009). As Steve Hayden, the Vice Chairman at Ogilvy Worldwide said, “This is the first Super Bowl of the Great Depression 2.0.”

But the dark days seem to be over and the Super Bowl is just a few weeks away. Let’s hope Super Bowl marks a return to good old-fashioned brand building, something that was lost through the recession.

 

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com

Key Words: Super Bowl, Super Bowl Ads, Marketing in a Recession, Marketing Strategies, Advertising Effectiveness, Unemployment, Recession, Job Losses, Black Monday

I have been a sponge for stories about how organizations have reacted during the turbulent times that defined 2009. Sometimes, I have watched in horror as managers panicked and unraveled strategies that had previously made sense. Other times, I have watched marketing and innovation at work as necessity forced managers to reevaluate assumptions held of the market and/or how to reach customers.  One example is the explosion in the use of social media – without the recession, marketing managers might not have been so quick to embrace and experiment with social media and include it as an integral part of their marketing communication strategies.

Here is a list of 10 lessons that I believe define good marketing practice during the turbulent times we experienced through 2009.

1.     Be customer focused and remember that customers are the reason you are in business.

2.     Maintain competitive levels of marketing expenditure. In an earlier post, I reported the results of some analysis I did on firm behavior through the 1980s recession. I found that firms that spent ahead of their competition during the 1980s recession had a higher market value five years after the recession ended than firms that did not.

3.     Be more accountable for marketing expenditure and be willing to demonstrate the return on marketing investment: “marketing must align itself more to the goals and language of finance.”  The current recession has put more pressure on marketing managers to justify every last dollar of marketing expenditure in a way that analysts and chief financial officers understand.

4.     Learn to work with the new metric of cash flow. Traditionally marketing activities have been tied to metrics such as sales, market share, awareness or preference. In 2009, firms sought to maximize profits and hoard cash and marketing managers had to adapt by justifying strategies in terms of their impact on cash flow.

5.     Don’t mess up the brands (Part 1). During a recession, brands can be used to empathize with customers: “I can see by its actions that the brand is on my side”. Examples include JetBlue, Hyundai, Denny’s Walgreen and FedEx – all of which ran special promotions to appeal to the immediate, and often dire needs of customers. But care needs to be taken not to alter the brand’s core market position in an attempt to stay relevant by for example, lowering prices, or cutting costs by reducing quality or making products smaller.

6.     Don’t mess up the brands (Part 2). In an attempt to generate short-term sales, marketing budgets have been diverted away from long-term brand building activities. While organizations need short-term marketing activities to stay afloat, a portion of the marketing budget needs to be retained for long-term brand building activities. If not, the danger is that once the recession ends, organizations will find they own irrelevant and confused brands that have been abandoned by their core customers.

7.     Understand the underlying profitability of customers. American Express provides the best example here of an organization that identified positive and negative customers and then set about firing those customers it deemed too risky. While the strategic fallout was significant, American Express obviously felt it was important to abandon unprofitable customers.

8.     Be decisive: “To do well in turbulent times requires a special blend of management and leadership skills”. During the recession, managers need to control and manage the bottom line while at the same time skillfully communicate a compelling vision, and inspire people to follow that vision. The skills required to manage and lead can appear to be contradictory but both are essential.

9.     Don’t mess up: “Don’t lose opportunities for growth through sloppy execution of the current marketing strategy”.

10. During recessionary times, it is important to focus on generating growth through the excellent execution of the current marketing strategy – this means, avoiding the temptation to divert scarce resources to a plethora of new activities in the hope that one will be successful. But markets are dynamic and evolve and so even during recessionary times, some attention needs to be placed on future growth opportunities.  Therefore, simultaneously engage in a disciplined approach to identify new growth opportunities.

The economic circumstances of 2008 and 2009 were beyond our comprehension – after all most of us did not live through the Great Depression and many of us were not in senior roles during the 1980s recession. The recession will pass and adversity has brought about some positive change and important lessons for marketing.

Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com