Market Your Way to Growth

8 Ways to Win

Philip Kotler, Milton Kotler

• Publisher: Wiley
• Year: 2012
• Print ISBN: 9781118496404
• eBook ISBN: 9781118519646
• Edition: 1
• Topic: Business
• Subtopic: Business Development
• Index: Business

Marketing guru Philip Kotler and global marketing strategist Milton Kotler show you how to survive rough economic waters

With the developed world facing slow economic growth, successfully competing for a limited customer base means using creative and strategic marketing strategies. Market Your Way to Growth presents eight effective ways to grow in even the slowest economy. They include how to increase your market share, develop enthusiastic customers, build your brand, innovate, expand internationally, acquire other businesses, build a great reputation for social responsibility, and more. By engaging any of these pathways to growth, you can achieve growth rates that your competitors will envy.

• Proven business and marketing advice from leading names in the industry
• Written by Philip Kotler, the major exponent of planning through segmentation, targeting, and position followed by "the 4 Ps of marketing" and author of the books Marketing 3.0, Ten Deadly Marketing Sins, and Corporate Social Responsibility, among others
• Milton Kotler is Chairman and CEO of Kotler Marketing Group, headquartered in Washington, DC, author of A Clear-sighted View of Chinese Marketing, and a frequent contributor to the China business press

Chapter 1

Grow by Building Your Market Share

Poor firms ignore their competitors; average firms copy their competitors; winning firms lead their competitors.

In a recent survey, the Conference Board asked CEOs to rank various business priorities and found unsurprisingly, that the top priority was business growth. Procter & Gamble (P&G) CEO Bob McDonald highlighted the point by saying “We've got to grow; that's the main thing.”¹ Growth is the goal in normal times, and is especially the goal in depressed times.

Growth, however, is not that easy to achieve, even in normal times. And even before the Great Recession started in 2008, times were far from normal. Excess supply existed in almost every industry. Companies found it hard to raise or even hold prices. Their margins were low and in danger of getting lower.

The onset of recession and its slow recovery have only worsened the situation. Companies find that they don't merely need a growth strategy; they need a defense strategy. However, they're far more lax about defense than about growth—since growth is where the action is and where the rewards go. CEOs don't get kudos for keeping what they have in place; they get kudos for expanding it.² Yet in hard times, the attacks on one's core business will increase in frequency and severity as a result of competitors' desperation. Since many companies are losing customers or sales, they are willing to cut prices and resort to aggressive or predatory moves against other competitors to preserve these sales. And because their customers are having problems too, their customers are likely to press for deeper discounts.

Companies will usually turn to many traditional strategies—such as cost reduction, product and package adaptation, and new communication tactics—to preserve their margins. But today's companies are facing even more challenges than before: cheaper competition from abroad, quick competitive reaction, price transparency, and lost control over messages that customers receive.

A company has three options with respect to handling competitors who cut their prices:

1. Keep prices where they are, but add other benefits.

2. Give discounts to those worthwhile customers who press for a deeper discount.

3. Lower the prices for all customers.

Companies can hope to maintain their current prices by augmenting their benefit package. They can improve product features, offer better delivery terms, or improve their service quality. But if they can't create an augmented benefit package, they will have to reduce their prices directly or through sales promotion tactics (discounts, rebates, and so on). To preserve their profit margin, they would have to trim their costs.

As such, we urge businesses to take the following five steps to develop plans for gaining market share:

1. Search for more efficiency.

2. Prepare an analysis of Strengths, Weaknesses, Opportunities, and Threats (SWOT).

3. Improve your financial and marketing strength.

4. Reassess your marketing mix and profile.

5. Develop winning market share strategies.

Let's look at each in detail.

Search for More Efficiency

Every business will develop “fat” in normal good times, since companies are more generous and spend more liberally during periods of growth. There is less financial and operational discipline. Profits grow, but fat accumulates. In fact, we could probably find 15 to 20 percent fat in a company during good times.

Even a major company will eventually recognize that its costs have become too high and that it needs to cut them. For example, when P&G's business growth slowed down some years ago, the company recognized that its marketing costs were 25 percent of sales—and that they needed to reduce them to 20 percent of its sales. As such, P&G took the following steps:

• Reduced the number of its sizes and versions of its various products, including toothpaste, detergents, soaps, and so on.
• Standardized more of its product, packaging, and advertising formulations to reduce costs.
• Dropped some of its weaker brands (i.e., eliminating two from the eight brands of detergents that they'd carried).
• Reduced investment in new product development and only concentrated on the most promising concepts.

Clearly, every company facing a period of prolonged low economic growth has to take steps to become leaner. Exhibit 1.1 lists questions that your company should consider.

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Exhibit 1.1 Searching for Ways to Bring Down Costs

Can our company …

• Lower the costs of paper, packaging, and other inputs by negotiating for lower prices or switching to lower-cost suppliers?
• Switch to lower-cost transportation carriers?
• Close down sales offices that aren't getting much use—and have more sales people who can work out of their home as a result of home-based information and communication resources?
• Put our advertising agency on a pay-for-performance basis? (Procter & Gamble has put most of its advertising agency on this pay basis.)
• Replace higher-cost traditional communication channels with lower-cost digital channels?
• Achieve more impact by shifting some promotion money from 30-second TV commercials into public relations and new social media?
• Drop some product features or services to which customers don't seem to assign much value?
• Hold fewer or shorter staff meetings in lower-cost locations, and/or hold these meetings via audio, video, or web teleconferencing (Cisco, a prime teleconferencing supplier, advertises “Meet Face-to-Face Without Travel”).

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Prepare a SWOT Analysis

Every company needs to prepare a fresh SWOT analysis—Strengths, Weaknesses, Opportunities, Threats—to reassess its current situation. You want to size up each SWOT element not only in absolute terms but in relation to key competitors. So even if your company maintains its quality at 95 percent, it's not an advantage if your key competitor maintains its quality at 98 percent—and customers prefer 98 percent quality.

Let's first look at your company's strengths and weaknesses and then examine your opportunities and threats.

Strengths and Weaknesses. Every business has a set of capabilities. Any capability that is an important contributor to the company's performance can be at one of four levels: superior, good, average, or poor in relation to competitors. If that capability is superior or good, we will call it a Strength—and we hope that the company uses it competitively. If that capability is poor, then it is clearly a Weakness. But whether it makes a great difference depends on how much that capability contributes to company performance. For example—T-Mobile's transmission network in the United States was a weakness and led the company to seek a merger with AT&T. This is an example of a weakness that has high relevance to company performance.

Exhibit 1.2 shows a list of strengths and weaknesses in four major company areas that will help the company to make a strength and weaknesses assessment.

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Exhibit 1.2 Strengths/Weaknesses Analysis

	Performance	Importance
	Hi Med Low	Hi Med Low
Marketing
1. Company reputation
2. Market share
3. Customer satisfaction
4. Customer retention
5. Product quality
6. Service quality
7. Pricing effectiveness
8. Distribution effectiveness
9. Promotion effectiveness
10. Sales force effectiveness
11. Innovation effectiveness
12. Geographical coverage
Finance
13. Capital cost or availability
14. Cash flow
15. Financial stability

	Performance	Importance
	Hi Med Low	Hi Med Low
Manufacturing
16. Facilities
17. Economies of scale
18. Capacity
19. Able, dedicated workforce
20. Ability to produce on time
21. Manufacturing skill
Organization
22. Visionary/capable leadership
23. Dedicated employees
24. Entrepreneurial orientation
25. Flexible or responsive

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The company will learn two important things from this exercise: First, it will be able to identify its major strengths. But perhaps more importantly, it will also be able to discern that some of these strengths don't really matter much to customers. Secondly, it will know its major weaknesses—and determine which weaknesses are not of much consequence to the buyers. It should keep its eyes on those strengths that have the most importance to the customers and to running its type of business successfully.

Opportunities and Threats. The next step is to take a more dynamic view of external and emerging factors that can affect a company's performance. There are two tools—Early Warning Systems and Scenario Planning—that are helpful in detecting opportunities and threats.

Early Warning Systems. We are living in an age of global interconnectedness where events taking place in one part of the world can have a profound effect in other parts of the world. For example, the March 11, 2011, Japanese earthquake killed hundreds of Japanese and damaged supplies and production and sales. It kept everyone on edge for months as to whether the nearby damaged nuclear plant would leak radiation into the atmosphere. Japanese c...

Table of contents

• Cover
• Praise for Market Your Way to Growth
• Title Page
• Copyright
• Dedication
• Introduction: Preparing to Master the Eight Pathways to Growth
• Chapter 1: Grow by Building Your Market Share
• Chapter 2: Grow through Developing Committed Customers and Stakeholders
• Chapter 3: Grow by Developing a Powerful Brand
• Chapter 4: Grow by Innovating New Products, Services, and Experiences
• Chapter 5: Grow by International Expansion
• Chapter 6: Grow by Mergers, Acquisitions, Alliances, and Joint Ventures
• Chapter 7: Grow by Building an Outstanding Reputation for Social Responsibility
• Chapter 8: Grow by Partnering with Government and NGOs
• Epilogue
• Index