The 4 A's of Marketing

Creating Value for Customer, Company and Society

Jagdish Sheth, Rajendra Sisodia

• Publisher: Routledge
• Year: 2012
• eBook ISBN: 9781136624902
• Topic: Business
• Subtopic: Business generale
• Index: Business

The authors present a powerful and tested approach that helps managers see a business's every action through the eyes of its customers. This approach is organized around the values that matter most to customers: Acceptability, Affordability, Accessibility and Awareness. Taken together, these attributes are called the "4A's." The 4A framework derives from a customer-value perspective based on the four distinct roles that customers play in the market: seekers, selectors, payers and users. For a marketing campaign to succeed, it must achieve high marks on all four A's, using a blend of marketing and non-marketing resources.

The 4A framework helps companies create value for customers by identifying exactly what they want and need, as well as by uncovering new wants and needs. (For example, none of us knew we "needed" an iPad until Apple created it.) That means not only ensuring that customers are aware of the product, but also ensuring that the product is affordable, accessible and acceptable to them.

Throughout this book, the authors demonstrate how looking at the world through the 4A lens helps companies avoid marketing myopia (an excessive focus on the product) as well as managerial myopia (an excessive focus on process). In fact, it is a powerful way to operationalize the marketing concept; it enables managers to look at the world through the customer's eyes. This ability has become an absolute necessity for success in today's hyper-competitive marketplace.

Chapter 1 Marketing Remix

Introducing the 4A's

DOI: 10.4324/9780203802168-2

Why Marketing Needs a Makeover

Seeing a growing need for convenience, Kellogg launched Breakfast Mates, a product that combined cereal, milk, a bowl, and a spoon in one package, in August 1998. Breakfast Mates was originally targeted at working parents with small children. It was positioned as a product that children could use themselves without parental help, and something that parents themselves could take from the fridge and eat on the go. However, the packaging was too difficult for children to open by themselves. The product had many parts and required considerable effort to eat; you had to open the package, open the cereal, open the milk, pour the cereal in, and then sit down and eat it with a spoon. While promising greater convenience, the product was anything but convenient, especially compared to the portable breakfast bars that could be eaten with one hand on the road. Psychologically, the product’s high level of packaging was unacceptable to consumers concerned about the packaging’s impact on the environment. Americans believed that vacuum sealed milk was artificial and not nutritious, and most found the taste of warm milk disgusting. In response, Kellogg started selling the product in the refrigerator section, which caused the cereal to be cold. So customers had two unappetizing choices: warm milk and warm cereal or cold cereal and cold milk. Kellogg only offered four cereal options and customers could not choose the type of milk to be included in the package (e.g. 1 percent, 2 percent or skim). The product achieved a low level of Accessibility, since it was found in the refrigerated section, which is not where most customers look for breakfast options. In terms of Affordability, the cost per serving for 4 ounces of cereal and 4 ounces of milk was $1.39 with the Breakfast Mate and only $0.21 out of a regular box of cereal. Not surprisingly, Breakfast Mates was a big failure. One year and $30 million later, Kellogg discontinued the offering.¹

After its initial release in 1954, the Ford Thunderbird quickly became an icon: the epitome of a classic American automobile. Ford discontinued the line in the 1990s, but decided to bring it back in 2001 as a retro vehicle that harkened back to the T-Bird’s 1950s and 1960s glory days. The car’s launch was highly anticipated by customers as well as the automotive press. However, Ford sold only 19,000 T-Birds in the first year, well below its sales target, and sales declined rapidly after that. The reasons for the Thunderbird’s failure become clear when looked at through the 4A lens. While Ford was very successful in drumming up hype around the car, it failed to deliver in terms of the vehicle’s design and function, availability and price. The re-launch was described as “one of the most hyped rollouts in history,” with two years of appearances in auto shows, on magazine covers, and in TV shows. Initial demand was very high, but Ford ran into production issues and delayed shipments to dealerships, frustrating potential customers. Because of the shortage of cars, initial customers paid $8,000 to $10,000 above its $35,495 base MSRP. At nearly $50,000, the car was competing with luxury models from Mercedes, BMW, and Audi. Initially, the Thunderbird enjoyed a high level of psychological acceptability. Ford went to great lengths to ensure the new T-Bird was true to the spirit of its famous predecessors, even studying recordings of the 1957 Thunderbird to ensure the new exhaust growl produced the same roar. The Wall Street Journal reported that the car literally “stopped traffic” during a road test. Functional acceptability soon emerged as a fail point, eventually taking psychological acceptability down with it. The car used molded plastic-chrome, and its grille, wheels, instrument panel, interior trim, and switches all looked and felt cheap. Approximately 65 percent of the car’s parts, including body structure, transmission, instrument panel, seats, and even keys were borrowed from other cheaper Ford vehicles such as the Taurus. The T-Bird was ultimately psychologically and functionally unacceptable because it was a contradiction in terms: a “luxury” car constructed of common parts; an expensive car, but still a Ford; a sports car not strong or sporty enough to fit that bill, but not practical enough to serve as anything else. As production picked up and quality problems started to surface, the car went from commanding a $10,000 premium to being sold for $10,000 below sticker price. The car was discontinued in 2005.²

“Marketing as usual” simply doesn’t work anymore. Fundamentally new thinking is needed to revive and rejuvenate this vital business function and to overcome growing skepticism and distrust among its stakeholders within and outside the company. Marketing executives need a new way of looking at the world because of two interrelated reasons: poor marketing productivity and the marginalization of the marketing function within the organization.

Marketing's Productivity Crisis

Marketing budgets have been rising steadily over the past several decades, as companies in many industries have stepped up their marketing spending in order to survive in increasingly competitive markets where customers have a wealth of choices. The proportion of corporate spending attributable to marketing activities has grown from approximately 25 percent in 1950 to approximately 50 percent in 2006. Spending on manufacturing/operations has declined from approximately 50 percent to approximately 25 percent, while spending on management went through a period of increase in the 1960s and 1970s before declining again back to approximately 25 percent.³ The increased spending on marketing did not result in higher levels of performance. In fact, a study of Fortune 1000 firms found that companies that increased their marketing spending the most over a 20-year period (1985–2004) grew at a lower rate than those that increased their spending the least.⁴ The explanation for these rather stunning results is that marketing spending is often aimed at trying to make up for fundamental weaknesses in products and overall strategy.

Nevertheless, marketers are for the most part responsible for marketing’s malaise. Too few marketing campaigns capture the imagination or generate any excitement among customers. Customer satisfaction and loyalty are unacceptably low and customer trust is almost non-existent.⁵ The majority of new products fail. Tactics such as advertising, sales promotions, direct marketing, and telemarketing drain millions of dollars from corporate coffers, but usually fail to deliver sufficient value to the company or to customers. Customers typically view marketing efforts as irritants or entitlements. For example, too many “loyalty” programs elicit more gluttony than fidelity, by conditioning customers to always expect more rewards. The ironic result: Companies must fund ever fatter inducements to get customers to stick with the brand.

Marketing’s productivity crisis is reflected in some startling numbers. Here are some lowlights:

• In the US, companies collectively spend $11,000 every year per family of five on advertising and sales promotion alone—an amount that exceeds the percapita income of 85 percent of the world’s population!⁶
• Research shows that many large companies waste billions of dollars on unnecessary and poorly conceived advertising.⁷ For example, one study found that doubling advertising expenditures for established brands raises sales by only 1 percent.⁸ Numerous companies with well established and universally recognized brands nonetheless spend hundreds of millions of dollars every year on advertising, much of it with nothing new to say.
• Yankelovich estimates that city dwellers now see up to 5,000 advertising messages a day! Obviously, only a tiny fraction of those messages actually impact people’s attitudes and behavior.⁹
• Studies have found that 84–90 percent of sales promotions for packaged goods result in lowered profits.¹⁰ This is because many sales promotions are very effective at moving large volumes of products but at very low or even negative net profit margins. The frequency with which they are used also diminishes their effectiveness over time in attracting and retaining new customers.

Most sales promotions are so poorly designed and targeted, they achieve redemption rates of 1 percent or less, and most of those who redeem are not the consumers the company needs to target; they are just the most “deal prone” and thus inherently less brand loyal customers in the market. For example, in 2005, companies sent out six billion pre-approved credit card applications to 120 million consumers in the US alone. The response rate fell from 2.8 percent in 1992 to 0.3 percent in 2005—that is, just three out of every 1000 offers generated a response. Yet most companies blithely ignore the implications of a 99.7 percent rejection rate, and continue to assail unwilling consumers with unwanted sales pitches. What a colossal misuse of society’s resources!

Three primary forces account for marketing’s troubles:

• Misguided resource allocation: Few companies allocate marketing resources in a way that maximizes profits. More typically, they respond reflexively to disappointing sales by increasing advertising and promotions and/or lowering prices.
• Faulty metrics: Lacking reliable metrics for measuring the factors and variables that matter most, companies track weak proxies instead. “What gets measured gets managed” is not necessarily an effective marketing strategy!
• Lack of customer focus: Despite decades of paying lip service to the concept, very few companies are truly customer-driven. Most remain product and profit driven, focusing their measurement and management efforts on financial reporting and numbers. Ironically, such short-term, bottom-line thinking is usually detrimental to the company’s well-being and that of its customers.

The Marginalization of Marketing

Given the growing consensus around the need for companies to become more customer-centric, it was once believed that marketing would assume ultimate influence and control over the corporation and become the dominant business function. As Fred Webster wrote in 1992, “Marketing can no longer be the sole responsibility of a few specialists. Rather, everyone in the firm must be charged with responsibility for understanding customers and contributing to developing and delivering value for them. It must be part of everyone’s job description and part of the organization culture.”¹¹ However, this is not the case at the vast majority of companies today.

Marketing used to have a seat at the table for senior management meetings, even at the board level. In many start-up companies, marketing is still highly valued. But as industries have matured, the traditional approach to marketing is becoming less effective and thus devalued. Marketing departments have become largely reactive and tactical rather than proactive and strategic; they have failed to take the lead in conceiving or implementing initiatives that have a significant impact on customers. For example, the customer satisfaction movement originated in operations rather than marketing. Likewise, the Total Quality Movement and “Six Sigma” had little to do with marketing. Even the recent emphasis on brand equity did not originate in marketing; it’s an offshoot of the thinking around intangible assets, a concept that grew out of the finance function.

Despite marketing’s demotion in the organizational hierarchy, few commentators question its value. Researchers have amply demonstrated that companies that can objectively be classified as “market oriented” deliver superior financial performance.¹² However, many companies have marginalized their marketing departments, letting other parts of the organization control such important functions as pricing and decisions about new products. Often, the finance department sets the budget for advertising, not the marketing group.

Marketing by Objectives

Anyone who’s worked on a faltering marketing campaign knows the fruitless feeling that’s captured in this widely circulated, anonymous quotation: “We didn’t know where we were going so we redoubled our efforts.” The 4A’s framework seeks to eliminate much of the guesswork that goes with marketing, because it lets managers work toward a set of objectives, rather than count on their intuition.

Fans of the late Peter Drucker will note that this notion of “marketing by objectives” owes a debt to “Management by Objectives” (MBO), which Drucker first described in his 1954 book, The Practice of Management. Company leaders who utilize the MBO framework establish a detailed set of goals, communicate them throughout the organization, and work to achieve them in a resource-efficient manner. This ensures that managers and employees have a clear understanding of their own roles and responsibilities in achieving those aims. MBO lets companies focus on the essential drivers of business success, rather than fritter away organizational energy and resources on activities that don’t help it achieve key objectives.

Drucker suggested that objectives should be focused on results (not activities), and that they be consistent, specific, measurable, related to time, and attainable. Corporate objectives are typically set at the board level; these then “trickle down” to specific objectives at the business unit, functional, and individual levels. Andy Grove, the former CEO of Intel and an ardent user of the MBO approach, emphasizes the need for focus: having a small number of precisely articulated objectives, and giving managers throughout the organization significant leeway in determining the best way to achieve the objectives.

Marketing departments often do not operate with clearly articulated objectives. Instead they rely on such fuzzy goals as “improve customer satisfaction” or “increase market share.” Since the factors that contribute to the attainment of such objectives are many and are diffused across the corporation, marketing has historically suffered from a lack of accountability and a poor ability to trace a problem back to its root causes and implement effective solutions.

This is where the 4A’s come in. The framework represents a powerful “marketing by objectives” approach to the management of this increasingly vital business function. The 4A’s deliver a clear and compelling set of goals; they can be easily communicated throughout the organization; and managers can be given far greater leeway in determining the most effective and efficient ways to achieve them.

Equally important, the 4A’s framework allows managers to predict the success of products and services before they are launched. Indeed, that is this book’s primary focus—to show managers how to use this framework to fine-tune their marketing plans so as to maximize their chances for success. Just consider the very different experiences of two widely heralded high-tech services, Airfone and DirecTV.

A key problem is that most marketing managers are not financially literate and therefore have difficulty demonstrating the return on marketing investments. Conversely, other managers are usually not marketing literate. Too often, they fail to understand how loyal customers and the power of the brand positively impact the balance sheet. Many companies view marketing expenditures as discretionary rather than committed costs, so the marketing budget is considered “soft money” that can readily be cut. Marketers, except in consumer packaged goods (CPG) industries, are hard-pressed to justify their budget requests, since they command little trust and credibility within many organizations. And yet, anyone who doubts marketing’s capacity to make—or break—a promising product would do well to consider the very different fortunes of two technological marvels, the Roomba robotic vacuum cleaner and the Segway Human Transporter.

Hits and Misses, Part I: Roomba vs. Segway

Two of the more intriguing and unusual products to come along in recent years are the Segway Human Transporter and the Roomba robotic vacuum cleaner. Both products r...

Table of contents

• Cover Page
• Half Title Page
• Epigraph
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Notes on the Authors
• Acknowledgements
• Introduction: How to Succeed in Marketing
• 1. Marketing Remix: Introducing the 4A’s
• 2. Think Like a Customer
• 3. Managing Acceptability
• 4. Managing Affordability
• 5. Managing Accessibility
• 6. Managing Awareness
• 7. Applying 4A Analysis
• Appendix A The “Market Value Coverage” (MVC) Audit
• Appendix B Mini Cases
• Notes
• Index