Ten Deadly Marketing Sins

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■ Identify...and overcome the 10 mostglaring marketing deficien-cies that keep companiesfrom succeeding in themarketplace.

■ Attain...high marketing productivityand profitability by segment-ing your market, choosingthe best segments, anddeveloping a strong positionin each segment.

■ Understand...your customers’ needs, per-ceptions, preferences, andbehavior, and motivate yourstakeholders to obsess aboutserving and satisfying thecustomers.

■ Develop...systems for identifying andstimulating opportunities,ranking them, and choosingthe best ones.

■ Manage...a marketing planning sys-tem that leads to insightfullong-term and short-termplans, and exercise strongercontrol over your productand service mix.

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Ten Deadly Marketing SinsSigns and Solutions

by Philip Kotler

A summary of the original text.

Marketing is in bad shape.Not marketing theory,

but marketing practice.Every new product or serviceneeds to be supported by amarketing plan that bringsin a good return that coversthe investment of time andmoney. But then why do 75percent of new products, services, and businesses fail?

Volume 13, No. 5 (2 sections). Section 1, May 2004.© 2004 Audio-Tech Business Book Summaries 13-9.No part of this publication may be used or reproducedin any manner whatsoever without written permission.

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marketing mix, a misdirectedSTP, or poor market research.

But today, too many market-ing departments don’t handlethis whole process. It’s han-dled by a mix of marketers,strategists, finance types, andoperations people. Somehow,a new product or serviceemerges, and marketing isleft to its true mission asconceived by others in thecompany, namely selling andpromoting.

Most of marketing is reducedto a one-P function —Promotion — not a four-P job.If the company ends up mak-ing a product that doesn’tsell well, most of market-ing’s task is to clear up themess through hard sellingand advertising.

Every indication suggeststhat marketing will becomeeven more challenging in thefuture than it is today.Consider the following sevenchallenges:

1. National brands are find-ing it harder to get anadequate premium tocover their brand-build-ing cost. Why? Wal-Mart

Marketing is supposed todrive business strategy. Themarketers’ job is to researchnew opportunities for thecompany and carefully applysegmentation, targeting andpositioning — or STP — topoint a new business in theright direction.

Then marketers are sup-posed to flesh out the 4Ps —Product, Price, Place andPromotion — making surethat they are consistent witheach other and with the STPstrategy.

Then marketers are sup-posed to implement the planand monitor the results.When the results deviatefrom the plan, marketershave to decide if the culpritis weak information, a bad

Kotler set out to identify themost glaring marketing defi-ciencies that handicap com-panies from succeeding inthe marketplace. He foundwhat he calls the 10 DeadlySins of Marketing:

1. Your company is not suf-ficiently market-focusedand customer-driven.

2. Your company doesn’tfully understand its target customers.

3. Your company needs tobetter define its competi-tors and monitor them.

4. Your company has notproperly managed itsrelationships with stake-holders.

5. Your company is not good at finding newopportunities.

6. Your company’s market-ing plans and planningprocess are deficient.

7. Your company’s productand service policies needtightening.

8. Your company’s brand-building and communica-tions skills are weak.

9. Your company is notwell-organized to carryon effective and efficientmarketing.

10. Your company has notmade maximum use oftechnology.

Let’s discuss each of thesesins in detail, including boththe signs that it is a problemin your company, and thebest solutions for fixing it.

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2 A U D I O - T E C H

and its imitators areinsisting on much lowerprices from suppliers ifthese suppliers wantWal-Mart’s business.And mega-retailers areincreasingly putting outtheir own store brandsthat are reaching a levelof quality equal to thenational brands. Storebrands don’t have to payfor research, advertising,and selling.

2. Companies have beenembracing CustomerRelationship Managementas the latest cure fortheir ills. This meanscollecting private infor-mation about individualsto make a better guessat what they can betempted to buy. Butthere is growing opposi-tion to the collection ofpersonal information.Furthermore, people areincreasingly upset withjunk mail, spam e-mail,and telemarketing phonecalls. Companies bettermove to permission or"opt-in" marketing assoon as they can.

3. No matter how cheaply acompany can produce itsproducts domestically, itcan’t be the cheapest aslong as China has a say.China can produce every-thing cheaper and isstarting to make it asgood. China will havethe power to repeat theJapanese game: betterquality at lower prices.

4. Mass marketing costs arerising even though massmarketing effectivenessis falling. As fewer peoplepay attention to TV com-mercials — either ignor-ing or zapping them — TVnetworks are raising theirprices. This will forcemarketers to find a moreeffective media.

5. Differentiation isn’t work-ing. Professor TheodoreLevitt said years ago thatyou could differentiateanything, including saltand cement. But theproblem is two-fold. Manydifferentiations don’tmatter to customers —they are spurious or notcompelling. Worse, com-petitors are quick to copyany effective differentia-tion, leading innovatorsto enjoy even shorter life-cycles, barely recoveringtheir investments.

6. Consumers are moreinformed and sophisticat-ed in their buying habits.A customer who wants tobuy a digital camera goeson www.mysimon.comand finds over 25 on-linemerchants stating theirprices for this camera.People are being trainedinto price consciousness.Buying on-line is all aboutprice, not reliability orservice differences.

7. Companies continue tocut their marketingexpenses during reces-sions, the one prop onwhich their sales depend.But because companiesdon’t get hard data onwhat their marketingexpenditures are doing,can you blame them?

The point is that marketerswill face increasing chal-lenges in trying to preservecompany margins and hitcompany profit targets. Tomake matters worse, manycompanies are inefficientlyorganized from a marketingstandpoint. Adding companymarketing inefficiency andineffectiveness to all thesechallenges is a recipe fordisaster.

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1. YOUR COMPANY IS NOTSUFFICIENTLY MARKET-FOCUSED AND CUSTOMER-DRIVEN

Let’s look at the first sin —your company is not suffi-ciently market-focused andcustomer-driven. Here wesingle out the two sides ofthe most handicapping defi-ciency in most companies.Either your firm has notgained insight into your market opportunities, or it isnot well-organized to serveand deliver what your targetcustomers want or expect.

The signs that your mar-keters have not sufficientlyanalyzed your marketinclude:

• Poor identification ofmarket segments.

• Weak or no prioritizationof market segments.

• A lack of market segmentmanagers.

When you ask, "Who are youtrying to sell to?" the answer"everyone" is unacceptable.The owner of a retail storemight say, "We sell clothingto women between ages 20and 50," but that doesn’t meanthe store’s target market isclearly focused. That’s apretty large group whose needsare quite varied. Youngerwomen are more likely todress for the social scene,while the 35 and older groupis probably more interestedin clothes for work and home.

Many companies do identifydifferent segments of themarket and make offers toeach segment. An aluminummanufacturer may sell alu-minum on different terms tomanufacturers of airplanes,cars, and kitchen appliances.But has the company really

analyzed the attractivenessof each segment? Has it esti-mated the rates of return onits investment in the differentsegments? Has it prioritizedthe segments and reallocatedits resources to the moreprofitable segments?

The more important segmentsshould have managers who areempowered to ask for budgetsthat they believe will producethe company’s target rate ofreturn — and they should berewarded accordingly.

Now let’s talk about solutions.Most companies can do abetter job of segmentingthe market. Too many arestopping at the demographicor descriptive level. A givendemographic group — say30- to 50-year-old men —usually contains quite differ-ent individuals, with varyingneeds and preferences.

Ford found this out when itlaunched the new Mustangto appeal to young sports-minded drivers, only to findthat many young people werenot interested and manyolder people rushed to buythe car.

In general, try to segmentthe members of a market bydifferent needs, or by thebenefits they seek. Then tryto find demographic descrip-tors that might correlatewith these needs and bene-fits to make the search forthese prospects easier.

Then, prioritize the seg-ments. Suppose your com-pany has identified more thanone segment. For example,IBM sells mainframe com-puters to companies in manyindustries. IBM recognizedthat some segments weremore important than others.It identified 12 industrieswhere it could focus its effort

— industries such as bank-ing, insurance, hotels,telecommunications, andtransportation. By focusingon these industries, IBM wasable to design more compellingofferings than unfocusedcompetitors could present.

Also, if customer segmentsare different, then youshould develop specializedsales forces. IBM learnedlong ago that sending thesame IBM salesperson to sella computer to a bank and tosell a computer to a hotelchain didn’t result in muchbusiness. The salespersonknew too little about theneeds of either banks orhotels. IBM found that it ismuch better to hire ex-bankersand ex-hoteliers to sell tothese industries. They havedeep experience and a net-work of relationships in theseindustries, all of which putsthem in a better position tosell effectively.

Another problem is insuffi-cient customer orientation.This occurs when mostemployees think that it’s thejob of marketing and sales toserve the customers; whenthere is no training programto create a customer culture;and when there are no incen-tives to treat the customerespecially well.

The solution to this is todevelop a clear hierarchyof company values, withthe customer at the top. Andmake it easy for customersto reach the company byphone, fax or e-mail — andrespond to them quickly.

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2. YOUR COMPANY DOESN’TFULLY UNDERSTAND ITSTARGET CUSTOMERS

The second deadly sin is that

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your firm doesn’t fully under-stand its target customers.The signs include:

• Your last study of cus-tomers is out of date.

• Your customers are notbuying your product atthe expected rate.

• Competitors’ productsare selling better.

• There is a high level ofcustomer returns andcomplaints.

To solve this problem, youneed to do more sophisticat-ed customer research. Thecurrent buzzword is customerinsight — and the companythat gains deeper insight intocustomers’ needs, perceptions,preferences, and behavior willgain the competitive edge.

What research does yourcompany do? Sometimes thebest research consists of con-tinuously dialoguing withyour target consumers,singly and in groups. Whilevaluable, this sort of "streettalk" is not sufficient. Moreformal approaches are need-ed. These might includefocus groups, surveys, depth interviewing, in-homeresearch, in-store research,and mystery shopping.

One can learn a great deal byinviting eight to 12 individualsto participate in a focusgroup led by a skilled moder-ator on a focused topic. Forexample, Mercedes was con-sidering introducing to theU.S. its Smart Car — a smallbut stylish car that is a hit inEurope. But participants infocus groups were skeptical,saying that the car lookedunsafe, was too expensive,and might be considered onlyif they needed a third car forshort shopping trips. After

hearing this from severalfocus groups, Mercedesdecided not to introduce thecar in the U.S.

Surveys can be used if theyare designed correctly and ifall the interviewees answerthe questions. When thereare a lot of non-cooperatingrespondents, the hope is thatthey do not differ significantlyfrom the cooperators.

Depth interviews — whichare one-on-one encountersbased on Freudian, Jungian,or other psychologicalapproaches — attempt tobypass the individual’s ratio-nal faculties. But like focusgroups, it is difficult to knowhow representative the findings are relative to thegeneral population.

In-home research is a behav-ioral-oriented technique usedto observe people’s behaviorin a real situation. Familiesagree to carry on their normalactivities while researchersarmed with video camerasrecord their interactions.

In-store research studies howshoppers react in stores.Paco Underhill revealedsome of his findings on in-store research in his book,Why We Buy: The Science ofShopping.

• First, he observed thatthere is a transition zoneupon entering a store.Shoppers may move tooquickly to observe orrespond to signs, or mer-chandise immediatelyupon entering, but theydo begin to slow down.

• Second, merchandisemust be available to thetouch. Shoppers confirmtheir interest in an itemby handling it.

• Third, men don’t askquestions. They wouldrather leave a store thanask where something is.Also, they move fasterthan women throughstores, and it’s hard toget them to look at any-thing they didn’t intendto buy.

Mystery shopping involveshiring people to act as shop-pers in your own companyand your competitors’ loca-tions. Companies often findinsights into their own fail-ures to satisfy customersthrough this technique.

But beyond collecting rawdata, consumer needs can beprobed more deeply throughprojective techniques such asword association, sentencecompletion, and thematicapperception tests. Someresearchers use a ladderingtechnique in which they followthe consumer’s explanationwith another probing question.

For example, a consumermay say that he bought aMercedes because it is betterengineered.

"Why is this important toyou?"

"Because the car will ridemore smoothly."

"Why is that important toyou?"

"Because I like to be comfort-able."

"Why is that important toyou?"

"Because I feel importantand deserve the best."

Thus we move from a simpleexplanation to a much deeperset of meanings motivatingthe customer.

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Using a technique called per-ceptual mapping, researcherscan show how consumersperceive different brands inrelation to a set of attributes.Suppose consumers areasked to rate car brands ontwo dimensions, status andreliability.

The research might showthat the average consumerwould position Jaguar as high in status, but mediumin reliability. By viewing allthe cars in the perceptualmapping space, one can dis-cover which cars are the clos-est competitors to a specificbrand.

Companies can also use anumber of techniques toassess consumer preferences.Among the simpler approach-es are consumer ratings andrankings. A more sophisti-cated approach is conjointanalysis, where consumersrank their choices among ahypothetical set of fullydescribed concepts.

Their choices can be ana-lyzed to reveal the relativeimportance they place oneach attribute, which guidesthe company to know whichconcept would be the mostsuccessful.

Consumer data can also beanalyzed by regression, dis-criminant, and cluster analy-sis methods to predict howlikely consumers are torespond to different stimuli,such as prices, features, andso on. Predictive analyticsare used by direct mailers toselect the prospects who havethe highest probability ofresponding positively to anoffer.

Companies are also increas-ingly gathering informationabout a customer’s past pur-chases, demographics, and

psychographics in the hopesof gaining a fine understand-ing of each customer. Ofthese strands of information,past purchases serve as themost useful information,indicating the customer’srevealed preferences.

Such customer data is storedin a data warehouse. A sam-ple of this data is put into adata mart and analyzed byskilled data miners. The dataminers are often able to spotnew segments that can rep-resent a new opportunity forthe company. Or they canspot trends in products, fea-tures, or services that mightalert them to new offerings.They can also test the effec-tiveness of predictive analyticsin reaching the best prospects.

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3. YOUR COMPANY NEEDSTO BETTER DEFINE ITSCOMPETITORS AND MONITORTHEM

The third deadly sin occurswhen you need to betterdefine and monitor your competition. Danger signsinclude:

• Focusing on the wrongcompetitor.

• Lacking a way to gatherand distribute competitiveintelligence.

For instance, whileMcDonald’s would correctlyname Burger King andWendy’s as its main competi-tors, it would be helpful forthem to also include TacoBell and Subway — andinclude supermarkets thathave added prepared foods.

But once you’ve identifiedyour competitors, how do youmonitor their resources,strategies, and practices?

First, establish a person oroffice responsible for col-lecting and disseminatingall the competitive intelli-gence. Find someone whowould function as a librarianand is gifted at trackingnews about competitors onthe Internet and developingcompetitor profiles. Tellemployees who face competi-tors to check in with this per-son to be briefed on how thecompetitor thinks.

Another solution is to hirepeople away from yourmajor competitors. Thisshould not be done to stealsecrets that belong to theother companies (which isunlawful) but to get to knowhow the competitor thinksand acts.

You should also monitorevery new technology thatmight hurt your business,because there is no greaterthreat to many companiesthan a new or better techno-logical advance. View thesethreatening technologies asinvestment options. Adoptthe maxim: "Every companyshould cannibalize itselfbefore someone else does."

There’s a story about themanager of General Electric’svacuum tube division, whocame into his boss’s officeboasting of having increasedthe business by 20 percent.His boss fired him. "Youincreased the vacuum tubebusiness because our com-petitors went out of business.That was easy. What youshould have done is gotten usinto the transistor business.You kept us in the past whenyou should have prepared usfor the future."

You should also prepareofferings similar to thoseof your competitors.Consider the Austrian crystal


firm Swarovski. One of itsdivisions makes fine leadcrystals for chandeliers.Their crystals are the finestand the most expensive.However, a European com-petitor emerged who charged20 percent less thanSwarovski and then anEgyptian competitor emergedwho charged 50 percent less.

What should Swarovski do?The easy way out is to lowerits price, but that would cutinto profits. A better answeris to use strong pull brandingto get hotels and homes thatbuy chandeliers to insist onSwarovski crystal. A stillbetter answer is to showchandelier makers or hotelshow they can save money ortime using Swarovski crystalbecause it doesn’t have to becleaned as often or it can bemounted quickly with a spe-cial Swarovski patentedprocess. Maybe the bestanswer is for Swarovski tobuy the European and theEgyptian competitors, or tostart lower-end businesses sothat the crystal buyer can buy"good, better, or best" crys-tals depending on his budget.

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4. YOUR COMPANY HASNOT PROPERLY MANAGEDITS RELATIONSHIPS WITHITS STAKEHOLDERS

The fourth deadly sin is thatyour company has not man-aged its relationships withstakeholders well. Signs oftrouble are:

• Your employees are nothappy.

• You have not attractedthe best suppliers or distributors.

• Your investors areunhappy.

To solve this problem, beginby moving from zero-sumthinking to positive sumthinking.

In earlier times, a busi-nessperson thought that thesize of his pie was fixed. Hisconclusion: He could gainthe most by paying his part-ners — including employees,suppliers, and distributors —the least. This is zero-sumthinking. Today there isgrowing evidence that youreconomic results will varywith the manner in whichyou treat your partners.

Fred Reichheld, in his bookLoyalty Rules!, describesmany successful companiesthat reward their employees,suppliers, and distributorsgenerously. This creates alarger pie, including theshare that goes to your com-pany. Your company willattract better and more moti-vated employees, suppliers,and distributors and theywill manage as a team tooutperform the competition.

Another solution is to man-age your employees better.Employees work best whenthey are well-chosen, well-trained, well-motivated, andwell-respected. This doesn’thappen when a firm just hirespeople, gives them little or notraining, gives them little lat-itude in decision making, andfrequently criticizes their work.Such workers can easilybecome in-company saboteurs.

Employees should not behired until senior manage-ment has clearly defined thecompany’s values, vision,mission, positioning, and tar-get customers. Then thecompany can search for theright people, train themappropriately, empowerthem, and know they will"live the company’s brand."

Also, you may need to man-age supplier relations bet-ter. Seek the best suppliersand reward them at a levelthat will bring forth theirbest efforts. The old game —using three suppliers in acategory, giving 60 percent tothe lead supplier, 30 percentto a second supplier, and 10percent to a third supplier —is giving way to choosing oneexcellent supplier. The autoindustry has moved in thisdirection. The company andits supplier partners co-investin each other and act as awinning team in designingand making cars. This levelof partnership can increasethe company’s quality, pro-ductivity, and innovation,while reducing costs.

Finally, you may need tomanage distributors anddealers better. The key isto get them to place a highvalue on their relationshipwith you and to put out special effort on your behalf.Much depends on the termsof engagement you set withthem. Caterpillar believesthat dealers with whom theyforge close ties can serve assources of market informa-tion and intelligence, asproxies for customers, and asproblem solvers. Its dealersplay a vital role in almostevery aspect of the business,including product design anddelivery, service, and fieldsupport. Dealers can bemuch more than a channel tocustomers.

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5. YOUR COMPANY IS NOTGOOD AT FINDING NEWOPPORTUNITIES

The fifth deadly sin is thatyour company is not good atfinding new opportunities.The danger signs are:


• Your company hasn’tidentified any excitingnew opportunities inrecent years.

• The new ideas it haslaunched have failed.

The solutions are to set up asystem for stimulating theflow of new ideas fromyour partners and to find away to use creativity sys-tems for generating newideas.

Some companies believe thatthere are no new opportuni-ties. They say their industryis mature, or that they areselling a commodity. But it’sonly that their beliefs aregetting in the way of theirimagination. For example,Starbucks didn’t see the coffee market as mature.

No company has to go with-out new ideas. First of all,the company’s employeesprobably have many ideas forimprovement. All they lackis a place to send these ideasand the motivation to sendthem.

Second, the company’s sup-pliers, distributors, advertis-ing agency, and other partnersprobably could suggest manynew ideas.

Third, there are systematicways to help employees generate new ideas.

In an excellent article called"Bringing Silicon ValleyInside," Gary Hamel presentsone recipe for generating suc-cessful new ideas. SiliconValley, he said, scored its suc-cesses because it was the siteof three markets: an ideamarket, a capital market, anda talent market.

Many creative and entrepre-neurial people poured into

the Valley with new ideas,especially for starting dot-coms. Venture-capital firmsabounded to lend money topeople with superior ideas,and the Valley attractedmany talented people whocould write software andimplement ideas.

The implication is that com-panies need to duplicateSilicon Valley internally. Thecompany should place a highvalue on new ideas and facil-itate their collection andevaluation. The better ideasshould draw on an internalpool of money to facilitateresearch and development.The best ideas should thenbe assigned to the right tal-ent to develop and launchthem.

To manage the idea flow, thecompany should appoint ahigh-level executive to be theIdea Captain. He shouldform an Idea Committee withrepresentatives from eachmajor department. Everyonein the company should beencouraged to send ideas tothe committee. Everyonesubmitting an idea will betold of its fate. The strongestideas that are eventuallyimplemented successfullyshould carry rewards to thepeople who suggested them,either with money, vacations,or other tangible rewards.For example, Kodak pays$10,000 each year to itsemployees who have con-tributed top money-makingor money-saving ideas.

Many of the best ideas willcome from observing majorshifts in the market environ-ment. These shifts may bepolitical, economic, social,technological, or environmen-tal. For example, one compa-ny responded to an economictrend — the high price ofhotel rooms in Tokyo — by

inventing a hotel that rentsberths, not rooms, at a lowprice.

Companies can also usegroup or individual creativitytechniques to stimulate newideas. These include brain-storming and several othertechniques.

Most companies search fornew ideas by starting withtheir current product andvarying it in some way. Forexample, a cereal companywill add raisins or nuts orchange the package size.This results in line extensionsor brand extensions added tothe cereal aisle in the super-market. Their competitorsdo the same. The cerealaisle gets longer, but notmore profitable. Each prod-uct variant draws a smallernumber of customers whodefect from the larger-sellingbrands.

Kotler calls this vertical mar-keting. Its three techniquesare:

1. Modulation, as when ajuice manufacturervaries the sugar content.

2. Sizing, such as whenpotato chips are offeredin several sizes.

3. Packaging, as when thesame chocolates come indifferent containers.

The main problem with verti-cal marketing is that thisleads to a hyper-fragmentedmarket where few productshave the volume to make alot of money.

Companies need to make useof an alternative idea-gener-ating process that Kotlercalls lateral marketing.Lateral marketing is to thinkof your product in relation to


another product, service, oridea.

For example, gas station plusfood store equals conveniencestore. Audio plus portabilityequals Walkman. Café pluscomputers equals cyber café.

Lateral marketing has greatpotential to create new prod-uct categories, new markets,or new marketing mixes.But in truth, a companyneeds to master both process-es, vertical and lateral mar-keting, to be successful atinnovating.

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6. YOUR COMPANY’SMARKETING PLANNINGPROCESS IS DEFICIENT

The sixth deadly sin is thatyour marketing plan is defi-cient. The danger signs are:

• Your marketing plan for-mat does not include theright components orlogic.

• The planning softwaredoes not allow you tosimulate the impact ofalternative strategies.

• The plan does not considercontingencies.

The solution includes estab-lishing a standard planformat. A marketing planshould string together thefollowing components: situa-tional analysis; strengths,weakness, opportunities, andthreats; major issues; objec-tives; strategy; tactics; budgets;and controls.

Make sure that each stagefollows from the previousstage. The situational analy-sis leads to sorting out thecompany’s major strengths,weaknesses, opportunities,

and threats. This leads tosetting the right objectives.A strategy is formulated thatpromises to achieve theobjectives. Tactics are devel-oped that flesh out the strat-egy. The tactics have coststhat add up to the budgetrequest. Controls are put inplace to check on whetherthe plan is delivering theobjectives or whether changesare needed in mid-course.

Senior management shouldalso establish flexible bud-geting. Ask managers whatthey can accomplish with 20percent more money. Eachmanager would have todescribe how he would usethe extra money and howmuch he thinks it wouldincrease his sales and profits.Ask the same managerswhat would happen to theirsales if their budgets werereduced by 20 percent.

Using all this information,the company can allocatemoney to those who can dothe best with their adjustedbudgets. The workability offlexible budgeting dependson the credibility of the esti-mates. After repeated use ofthis system, it will becomeclear which managers cancompetently forecast resultsand which ones are not to betrusted.

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7. YOUR COMPANY’SPRODUCT AND SERVICEPOLICIES NEED TIGHTENING

The seventh deadly sin iswhen your firm’s product andservice policies need tighten-ing. The danger signs are:

• The firm has too manyproducts, and many arelosing money.

• The firm is giving away

too many services free.

• The company is poor atcross-selling productsand services.

To solve this problem, use aproduct tracking andevaluation system to distin-guish strong products fromweaker ones and makeappropriate decisions.Despite the explosion ofproduct varieties, many ofthem lose money.

For example, in 1999,Unilever found that 50 of1,600 brands — or 3 percent— accounted for 63 percent oftheir revenue. Unileveridentified 400 of its strongestbrands, calling them core orpower brands. These brands,such as Dove, Lipton, andHellmann’s, were able to support more line, brand,channel, and geographicalextension. The other 1,200brands would be reduced innumber — through sale, liq-uidation, or combination.Ultimately, Unilever wouldsell fewer brands but makemore money. This refocusingon power brands is also goingon at Procter & Gamble,Nestle, Heinz, and severalother companies.

Another solution is to offerand price services at dif-ferent levels. Don’t giveaway free services that cus-tomers take but don’t valueor even use. This means thecompany is wasting moneyon services that are not val-ued. And don’t give away freeproducts that the customerwould have been willing topay for. Instead, establishdifferent customer segments,some of which have to payfor the service and othersthat will get the service forfree.

In addition, it’s important to


improve the processes for cross-selling andupselling. Some salespeopleresist mentioning other prod-ucts of their company. Theymay be happy making thesale and don’t want toappear pushy. They may notmake much or any commis-sions on other products.They may not think theother products are of suffi-ciently high quality to satisfythe customer.

The same problem occurs inthe professions. A CPA maynot recommend that hisclient use his firm's manage-ment consulting services. Inany case, a company with arange of products needs tosupply training and incen-tives to encourage its staff topromote other products thatmight interest the customer.

Upselling has two meanings.One is inducing a customerto buy a more expensive ver-sion of a product than the onehe came to see. The other isto approach a customer someyears after a purchase andsuggest that it is time toreplace the old product witha much better one. Yourstaff needs skills in bothupselling and cross-selling.

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8. YOUR COMPANY’SBRAND-BUILDING ANDCOMMUNICATIONS EFFORTSARE WEAK

The eighth deadly sin iswhen your brand buildingand communication skills areweak. The warning signsinclude:

• Your target market doesnot know much aboutyour company.

• Your brand is not seen asdistinctive and better

than other brands.

• Your company allocatesthe same amounts of itsbudget to the same mar-keting tools every year.

• You do little evaluationof the ROI impact of yourpromotional programs.

The solution is to improveyour brand-buildingstrategies and measurethe impact on your brandequity. Too many marketersthink that the magic bullet isadvertising. After all, adver-tising is designed to buildmore awareness, knowledge,interest, and — ideally —preference. But a brand isbuilt by many communica-tions tools, as well as thequality of the product and itspackaging, the reliability ofthe shipping, and many otherfactors. Among the commu-nication tools that createbrand impressions are sales-people, trade shows, and word-of-mouth from customers,competitors, and productreviewers.

A brand evokes a set of cus-tomer expectations. Brandequity results from how wellcustomer expectations arefulfilled. The higher the satisfaction, the higher thebrand equity.

To build brand equity, shiftmoney into marketinginstruments of greatereffectiveness. Most compa-nies see spending money oncostly ads as a form of insur-ance that the company willbe remembered, even when ithas nothing new to say or nonew way of saying it. The realquestion companies should askis whether the same amountof money would work betterif spent in improving theproduct’s quality of customerservice.

Remember that advertisingis a cost that the customerspay, and maybe many ofthem would prefer a lowerprice. Given that the aver-age GM car consumes $3,000in advertising cost, howmany more cars could GMsell if it reduced its price by$3,000 a car?

On the other hand, some adcampaigns are effective andboost the company’s sales.People wouldn’t have been soexcited to pay a higher pricefor Absolut Vodka if it wasn’tfor its brilliant ad campaign,but how many campaigns arebrilliant? Most are, at best,average. Why? The adagency would claim that thebrand manager wants to playit safe. The brand managerwould claim that the adagency didn’t come up with agreat ad idea.

Ads work better when theyare placed in the media thatreach the target market.Advertise in the magazinesread by fishermen, hobbyists,mechanical engineers — andthe ads will be read if you’readvertising products that areinteresting to them. The adsusually carry response cardsfor readers to get furtherinformation or place orders,making ROI measurementmuch easier.

There is a growing belief thatpublic relations deserves moreof the advertising budget. Itis a better audience-buildingtool for high-tech products, forwhich buyers want indepen-dent professional opinionsbefore they choose a brand.The maker of a high-techproduct should first identifyopinion leaders, such asexperts and columnists whoreview and talk about newproducts. Volvo launched itsXC90 SUV with a PR cam-paign that created a huge


buzz that resulted in pre-sales of 7,500 vehicles andtwo prestigious awards beforeany money was spent on ads.

Companies who use directmarketing enjoy considerableadvantages. They don’t paya commission to intermedi-aries, nor do they lose sightof who is actually buyingtheir products. Dell Computerbecame the world’s leadingPC manufacturer by sellingdirect.

Initially, the company tookorders by phone, but today itgets virtually 90 percent ofthe orders on-line. Customersspecify what features theywant, and Dell immediatelyorders any components itneeds from suppliers. Itassembles the new computerand ships it in a few days.

Meanwhile, Dell receivespayment immediately, butdoesn’t pay its suppliers for60 days, resulting in moneybeing made from the float aswell as from the price. Dellhas inspired more companiesto move from "producing forstock" to "producing fororders."

Finally, it’s critical torequire marketers to sup-ply estimates of the finan-cial impact of their spend-ing requests. At Coca-Cola,management is beginning toinsist that these estimates besupplied, before and after theexpenditure. They knowthat marketers are only mak-ing a guess, at best, butCoca-Cola’s real purpose is toproduce a financial mindsetin its marketers. The morethat marketers think infinancial terms, the betterthe dialogue that will takeplace between the marketingand financial people.

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9. YOUR COMPANY IS NOTWELL-ORGANIZED TO CARRYON EFFECTIVE ANDEFFICIENT MARKETING

The ninth deadly sin is whenyour firm is not well orga-nized to carry on effectiveand efficient marketing.

The signs of this include:

• The head of marketingdoes not seem very effec-tive.

• The staff lacks somemarketing skills neededin the 21st century.

• There are bad vibesbetween marketing andthe other departments.

The solutions begin withappointing a strongerleader of the marketingdepartment. The chief mar-keting officer must gain therespect of the CEO andeveryone else in the companyby making accurate marketingforecasts, and by demonstrat-ing how marketing expendi-tures are contributing toreturn on investment.

Another way to solve thisproblem is by building new skills in the market-ing department. Theseskills include positioning,brand asset management,customer relationship man-agement, partner relation-ship management, Internetmarketing, public relations,and profitability analysis.

Positioning your productmeans ensuring that it ownsa word in its category: Volvoowns "safety" and BMW owns"driving performance." A newbrand should offer an impor-tant new benefit and there-fore create a new category.

Positioning theory further

evolved when Michael Treacyand Fred Wiersema wroteThe Discipline of MarketLeaders. They distinguishedbetween three basic position-ings: product leadership,operational excellence, andcustomer intimacy.Companies cannot excel inall three ways because itwould be costly and becausethe three positions containcontradictions. To succeed,you must lead in one of thethree areas, and be at leastaverage in the other two.

Brand asset management isclosely related to positioning.Brand names such as Coca-Cola, Sony, and Disney canbe extended into new productsand services, but someone hasto police their use. None ofthese firms can let a disap-pointing product be launchedunder its name. Thesenames are well-positioned,and deviations from the posi-tioning center of thesebrands must be avoided.

Customer relationship management can improve acompany’s targeting preci-sion. Managers can accessthe customer database formarket planning, merchan-dising, product development,sales analysis, cross-selling,and so on. CRM skills arerapidly being added to mar-keting departments to createcompetitive advantages.

Similarly, partner relation-ship management becomescritical as more companiesperform more of their activi-ties through partners. Thefirm needs to periodicallytake the temperature of eachmajor partner and respond toany sign of dissatisfaction ordistancing.

Internet marketing is well-established, but there arestill opportunities that many


companies have not yettapped. These opportunitiesinclude market research,competitive intelligence, con-cept and product testing,coupon and sampling distrib-ution, product customization,and employee and dealertraining.

Public relations is becomingmore prominent. TomHarris’s book The Marketer’sGuide to Public Relationsunderscored how many PRcampaigns, rather thanadvertising, deserved thecredit for creating manyproduct successes.Companies need to add PRskills in the marketingdepartment, and not rely onbegging and borrowing themon an as-needed basis.

Profitability analysis isanother crucial skill. Mostcompanies do not know theirreal profitability by locations,products, customers, andchannels. For example, atmany companies, the largestcustomers are not the mostprofitable customers. Largecustomers often demand thelowest prices and consider-able services. Some mid-sized customers are moreprofitable, measured as arate of return on the cost ofserving them.

The point is that two cus-tomers spending the sameamount may yield differentprofits. Robert Kaplan andRobin Cooper outlined a cor-rect approach to accounting forprofitability with theirActivity-Based Costingaccounting method. Thisrequires salespeople to reporthow much time and expenseeach customer consumes,much like lawyers bill clientsfor each half-hour of timeand expense. All told, mar-keters must add profit mea-surement to increase their

accountability for their budgets.

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10. YOUR COMPANY HAS NOTMADE MAXIMUM USE OFTECHNOLOGY

The tenth deadly sin is whenyour firm has not made max-imum use of technology. Thesigns include:

• The company has mademinimal use of theInternet.

• The company’s salesautomation system isoutdated.

• The company has notintroduced any marketautomation.

• The marketing grouplacks decision-supportmodels.

Many companies think theyare using the Internetbecause they have estab-lished a Web site and theysell on-line. But this repre-sents only 10 percent of theopportunities afforded by theInternet.

Therefore, solving this prob-lem begins with makingmore use of the Internet.Among the ways to do this is to create an effective anduser-friendly Web site.Survey your customers andWeb site experts to get theirsuggestions for improve-ments. Also, assess the effec-tiveness of your intranet forcommunications within thecompany, your extranets forlinking with suppliers anddealers, and your on-linetraining systems for keepingyour employees’ skills up-to-date. In addition, you shouldtake advantage of the powerof the Internet to recruit new

job candidates, procure sup-plies, and conduct marketresearch.

Another solution to the prob-lem of under-using technolo-gy is to improve your salesautomation system. Thesystem should enable yoursales force to answer ques-tions in the customer’s officeand empower them to makedecisions on behalf of thecompany.

You should also use moremarket automation. Anumber of routine marketingdecisions can be better han-dled by software than bycompany personnel. Airlinesuse yield-based pricing soft-ware to help maximize theirpassenger load factor. Thesoftware determines whenthe price of a seat should belowered before a flight, andsends the information totravel agents and certaincustomers.

Don’t overlook the need todevelop decision supportmodels. Firms are experi-menting with marketing mixmodeling that combines theseparate and collectiveeffects of a marketing mix onsales and profits. A companycan get help in developingthese and other models froma variety of marketingresource-managing vendors,such as Veridiem andMarketing ManagementAnalytics.

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It’s clear that the theory ofmarketing is solid, but the

practice of marketing leavesmuch to be desired. In thissummary, we have exploredthe 10 deadly sins of market-ing as practiced today. Wehave described the signs ofeach sin, and proposed thesolutions that can fix them in


your company.

Now it’s up to you. Applyingthe solutions will turn the 10sins into the 10 command-ments for attaining highmarketing productivity andprofitability. Here are the 10commandments:

1. Segment your market,chose the best segments,and develop a strongposition in each segment.

2. Map your customers’needs, perceptions, pref-erences, and behavior,and motivate your stake-holders to obsess aboutserving and satisfyingthe customers.

3. Develop a good under-standing of your majorcompetitors, and theirstrengths and weaknesses.

4. Build partners out ofyour stakeholders, andgenerously reward them.

5. Develop systems foridentifying and stimulat-ing opportunities, rank-ing them, and choosingthe best ones.

6. Manage a marketingplanning system thatleads to insightful long-term and short-termplans.

7. Exercise stronger controlover your product and

service mix.

8. Create strong brands byusing the most cost-effec-tive communication andpromotion tools.

9. Build marketing leader-ship and a team spiritamong your variousdepartments.

10. Constantly add technolo-gy that will give yourbusiness a competitiveadvantage in the market-place.

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ABOUT THE AUTHOR

Philip Kotler is the S.C. Johnson Distinguished Professor ofInternational Marketing at Northwestern University’s Kellogg School ofManagement and the author of thirty books, including MarketingInsights from A to Zand Lateral Marketing.

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Ten Deadly Marketing Sins, summarized by arrangement with John Wiley & Sons, Inc., fromTenDeadly Marketing Sins: Signs and Solutions by Philip Kotler. Copyright 2004 by Philip Kotler.

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Ten Deadly Marketing Sins