CHAOTIC :

FIRM MANAGEMENT AND MARKETING IN AGE OF TURBULENCE

Ing. Jiří Šnajdar 2013Mgr. Evžen Staněk

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 TurbulentEconomic cycles Foreseeable MissingBoom Definable-7 years in Unpredictable, average variableRecession Definable-10 years in Unpredictable

average variablePotential of impacts Extensive LowAccess to investments Expansive, large Cautious,

strictToleration of market Acceptation Avoiding risksConsumers´ attitudes Self-assurance UncertainConsumers´ Stable, developing Cautious, Preferences

Kotler, Caslione, page 35

 

 

 NINE REVOLUTIONARY INNOVATION

REVOLUTIONARY TECHNOLOGY ORIGINAL TECHNOLOGY

Mini steelworks Vertically integrated steelworksContainer ships Free laid cargo, workersDesktop publishing Traditional compositionDigital photos Chemical photosSemiconductors TransistorsPersonal computers Indoor computersDownload and music sharing CDE-books Paper booksVoIP 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

•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 stepsPage 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 PROVIDERSServices 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  •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 productsTECHNOLOGIES – internet, computers, mobile telephones – information immediately at disposalTURBULENCE – STABILITY AND PREDICTABILITY OF SITUATION IS DISAPPEARING, SOCIOLOGY – Bauman – fluidity, instability, permanence of changesFIRMS 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 REDUCINGEXPENSES 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 haulThey 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 DEVELOPMENTEMPLOYEES 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 DISTRIBUTORSThese 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 thembetter 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

•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 :• Change in customers´ perception and their motivation to

bigger purchases.• Offer of temporary financial impulses leading to bigger

amounts of purchases• Extending the availability of brands in order to buy more5. 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

•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. •Sensibility to world around them•Knowledge of own identity + ethic•Tolerance of new thoughts•Conservative financing  High weight is attached to :

•To value people, not assets•To free management and control•To learn continuously•To create interpersonal community

   

CORPORATE SOCIAL RESPONSIBILITYAND ENVIRONMENTAL SUSTAINABILITY  FIRM SOCIAL THEMA

•Avon breast cancer•Best Buy electronics recycling•British Airways vulnerable children •General Mills better food•Home Depot human conditions of

habitation•General Motors traffic safety•Kraft Foods reduction of obesity

   

• Levi Strauss AIDS prevention• Motorola Reducing the

amount of solid waste

• Pepsi-Cola keeping of active life

• Shell seashores cleaning

• Starbucks protection of rainforests