FUTURES
RESEARCH
7213 MEG98 - Long-Range Marketing
LONG-RANGE MARKETING
- David Mercer, Susan Mudambi, Antonis Simintiras -
- Open University Business School -
ABSTRACT
Long-range marketing looks beyond current corporate planning, since the aims of the robust strategies it focuses on, in particular the survival of the organisation over the longer-term, are quite different from the comparable ones of conventional corporate strategy, which typically focuses on optimisation of performance in the short-term. By separating out these longer-term robust strategies, in a formal long-range marketing plan, organisations may be better able to ensure survival in the longer term. Since a range of generic robust strategies - based on recognised, sound marketing practices - may be available, the price they might have to pay, in terms of short-term steering, is usually small.
Address for Correspondence: Centre for Strategy & Policy,
Open University Business School
Walton Hall
Milton Keynes
MK7 6AA
United Kingdom
Phone: 44 (0) 1908 232165
Fax: 44 (0) 1908 655898
Email: d.s.mercer@open.ac.uk
LONG-RANGE MARKETING
Marketing, as a discipline, already spans a wide range of subjects; wider, indeed, than most other management disciplines (Mercer 1996b, 1996c). It is simultaneously, at one extreme, a philosophy which applies to all parts of an organisation and, at the other extreme, a set of practices which apply to selected functions within the organisation (Baker 1985).
For more than three decades, the classic Western definitionxe " marketing: classic western definition", derived from economic theory and as succinctly summarised by Kotler (1976), has been;
`Marketing is human activity directed at satisfying needs and wants through exchange processesxe "exchange processes".'
Although this simple definition has been progressively developed, even the later versions definition usually fail to emphasise the long term aspect of marketing; for example, that of building xe "long-term relationships, definition of marketing"relationships with customers. On the other hand, Grönroos (1990) summarises some more recent European developments in his definition;
"Marketing is to establish, maintain and enhance long-term customer relationships at a profit, so that the objectives of the parties involved are met. This is done by mutual exchange and fulfilment of promises."
It is generally accepted that a key element of marketing is now, as reflected in the all the above definitions, that (unlike almost all other business activities) it represents an outward looking philosophy (Morgan 1988); which is firmly centred on the customer (Mercer 1996a). On the other hand, as we will see, the truly long-term aspects hinted at by Grönroos are still largely ignored.
MARKETING STRATEGY
What all the commentators do seem to agree upon, however, is that the 'highest' level of marketing is represented by 'marketing strategy' (for instance, Czinkota et al 1997); and that this is an essential input into the overall corporate strategy (Johnson & Scholes 1988), and usually determines the most important elements of that strategy. Typical approaches to the production of such marketing strategy, however, focus on the relatively short-term; for example, through the use of matrices balancing the impact of current actions (Ansoff 1988), or derived from existing forces such as competitive pressures (Porter 1985), or - even stressing the short-term nature of decisions - derived from incremental and emergent strategies (Quinn & Minzberg 1991). Even so, it is often claimed that the widely-reported problems of short-termism in corporate strategy come about not because the philosophy is incorrect, but because of management shortcomings.
On the other hand, with more than five years of direct experience (including teaching several thousand MBA students, and advising a range of clients) - backed by research amongst more than a thousand organisations (Mercer 1997a), we have come to the conclusion that the main problems for most organisations are not the result of incompetent management but are caused by a confusion of objectives. Thus, we now believe that, in most organisations, there should be at least two quite separate processes at work; rather than the one traditionally recommended (Johnson & Scholes 1993). There is, of course, the conventional corporate strategy process (Taylor 1984), optimising performance in the shorter term, which we all know about; and the traditional marketing strategy is a valuable contributor to this (McDonald 1989). But there should also be a separate, presently well-hidden, process of producing ‘robust' plans which underpin survival over the longer term (Taylor 1984).
That there are, or should be, these two quite distinct legs to the strategy process – whether hidden or not – is best demonstrated by table below which clearly establishes the significant differences between them:
Objectives OPTIMISING PERFORMANCE ENSURING SURVIVAL
Characteristics SHORT-TERM, LONG-TERM,
SINGLE-FOCUS DIVERGENT-COVERAGE
Outcomes EFFECTIVE COMPREHENSIVE
COMMITMENT UNDERSTANDING
Beneficiaries INDIVIDUAL COMMUNITY
PROFITEERS STAKEHOLDERS
Indeed, the two sets of strategies should have very different objectives. ‘Corporate’ (short-term) strategy is quintessentially about optimising current performance, 'matching the organisation's activities to the environment [and] …to its resource capability' (Johnson & Scholes 1993). Which requires that you find the single short-term solution which will deliver the optimal (internal) performance most effectively; to which members of the organization can be persuaded to commit themselves; 'a reflection of the attitudes and beliefs of those who have the most influence' (Johnson & Scholes 1993). The classical example demands the single objective of producing the highest bottom-line profit for the current year.
‘Robust’ strategies, on the other hand, are, above all, about survival in the longer term; ensuring that all the potential threats are covered (Pfeffer and Salancik, 1978). They demand that multiple, and often divergent, objectives are met; in order to exploit the potential emerging from changes in the (external) environment, and especially to guard against the whole range of threats which might endanger survival in the longer-term; with the aim of understanding what these might be.
It should be clear, therefore, that there may be considerable tension between these two forms of strategy; not least because they have very different objectives aimed at producing potentially very different outcomes to satisfy very different groups of stakeholders!
DIFFERENT STAKEHOLDERS
To expand upon this last point, In the modern corporation, the individual ‘shareholders’ are no longer involved in managing the company themselves. Indeed, their investment in it may be as fleeting as the millisecond, as the computers the shares on the electronic stock-markets around the world. Understandably, therefore, their focus is only on the ephemeral performance of the share-price. They will not even take an interest the underlying realities which are tied to the short-term financial results and are - even then only indirectly – reflected in the share-price. The individual senior managers of the organisations, on the other hand, are interested in financial performance; but again only the short term results. Their own performance – and even more directly their income – is often tied to the share-price. As they are usually but a few years away from claiming their pension, they have every incentive to optimize the current results – on which that pension will be based – and to ignore the long-term. Put in this context, it is obvious why these key actors ensure that most corporate strategy focuses on short-term financial performance.
The various communities, though, hold a very different perspective. The employees of the organisation, most of whom are some way from retirement, have a very direct interest in the long-term survival of the organisation; for on this depends their own survival. Even though many of them will, in fact, change to jobs with other organisations, they still want the safety-net of a future in their current position. The other communities of stakeholders, from suppliers and customers through to the local communities which are dependent upon the organisation, have similar requirements – demanding long-term survival. With the growing involvement of these communities, for example as a result of the philosophies propounded by relationship marketing, it is likely that longer-term viewpoints may prevail – and robust strategies will come into their own!
LONG-RANGE MARKETING
We believe that the best answer to reconciling the differences between these two aspects of strategy is simply to separate the two processes; the opposite of what is currently recommended (Wack 1985). In view of the fact that it deals almost exclusively with forces which come from outside of the organisation itself, which would normally be incorporated – if at all - in ‘marketing’ strategy, we call this process long-range marketing. This philosophy is formally encapsulated in the production of a long-range marketing plan which, much like the conventional (short-term) marketing plan, ultimately feeds into the corporate plan (McDonald 1989). This is the ‘long-range planning’ process we now teach our students, and recommend for our consultancy clients, with some success; at least in terms of raising their awareness of long-term trends.
ENVIRONMENTAL ANALYSIS
Much as conventional marketing is based upon sound marketing research, long-range marketing demands the best possible environmental analysis; often referred to as 'scanning' (Aguilar 1967). In practice, though, we have found that almost all the participants in our successful long-range marketing programmes have used general reading as the main source of their analysis, combined with the more specific information they receive from their industry and specialist press they read as a normal part of their work. Indeed, it has to be noted that the type of information which is required for the subsequent scenarios is most probably that which the participants have already assimilated They need to bring to the scenario process no more than their existing knowledge. .
In addition, there seems to be no special expertise involved in detecting significant shifts in the environment. Indeed, we have found that the best approach is to analyse the external environment as a team. If nothing else, this extends the coverage of the scanning; but it also seems to go much further to amplify the early signs of change and develop resonances, as the six to eight team members interact with each other - comparing notes as the process develops.
SCENARIO FORECASTING
The subsequent 'formal' planning processes start with scenario forecasting, though in a much simpler form (Mercer 1995) than the approaches which were more usually adopted in the past (Van Der Heijden 1996). Indeed, it can be undertaken in as little as half a day, with a management team using little more than Post-It-Notes stuck on a wall to facilitate their thinking (Mercer 1997c). Even so, this is a critical aspect of the process; since only if the key turning points are identified in these scenarios will the (robust) strategies developed in response be valid.
Reducing the rest of the long-range marketing process to the bare minimum, there are just five further, simple steps to producing a long-range marketing plan:
Isolate Turning Points
The starting point of the plan itself must be a definitive statement, of what has emerged from the scenario work. Ideally this should be a formal 'map' of some kind; of the issues, the turning points, which will decide the long-term future of your organization - perhaps its very survival. This is the step which defeats most organisations. If you do not recognize what factors will determine your fate, then you will not be able to create the most effective robust strategies to address them.
The first requirement, here, is to identify which are the key issues which the robust strategies should address. This is, once more, a process of focusing on the key factors which must be addressed; in the context of limited resources. The main emphasis in this process is, therefore, on prioritization. Which factors are crucial to the future of the organization, matters of life and death, and which are relatively less important. A lesser dimension in this process will also be that of the likelihood of the ‘event’ actually occurring; but it should be noted that even a relatively unlikely event will need to be considered if its impacts could be central to the future development of the organization.
This is probably best undertaken as a group process. Our practical experience suggests that most groups move, at this stage, from the use of Post-It-Notes (which are usually the staple diet of our scenario work) to use of more mundane flip-charts to communicate and record their decisions
Decide The Robust Strategies
This stage clearly is at the heart of the whole process. What is needed is a set of strategies to protect against (or to capitalise on) what has emerged from the previous step - in terms of effectively addressing the key turning points (Wack 1985). In practice, it often proves to be easier than the earlier stages; since, as is often the case, asking the right question is harder than producing the most effective answer. Indeed, the best format for this part of the long-range marketing plan may just be a simple two-column table; with the key turning points in the left-hand column and the matching robust strategies in the right-hand one.
Test Against ‘Corporate’ Strategy
The step which follows is the one which definitively separates the new approach from the traditional one. It is' however, one which requires a degree of self-confidence! It is to take these (long-term) ‘robust’ strategies and map them onto the (short-term) ‘corporate’ strategy which already exists (or is in the process of emerging from the other parts of the strategy process). Exactly what form this comparison takes will depend upon what form you have adopted for presenting these strategies. The essence, however, is that each (robust versus corporate) should be compared statement by statement. Ideally this should again be in the form of a simple table, with just two columns, one for each side of the comparison.
Decide Strategic Changes
Emerging directly from the 'test' will be a clear definition of the divergences, if any, between the two types of strategy. This will, therefore, immediately highlight the nature of any changes to be made. These should then be addressed, again statement by statement, in terms of the changes which will accordingly be made in the overall corporate strategy statement; even if the decision is to do nothing! The simplest way to record these changes is to add them as a third column to the table from the preceding step.
Translate To Action
The final stage of any planning process should always be to do something! It may be that, the action is to positively incorporate these changes in the overall corporate plan. In this case, a single sentence, stating that this has happened may be enough; though to reassure yourself, at least, that this has happened, you may want to incorporate a brief statement of what real changes have then taken place.
The more thorough alternative is to produce a separate action plan where the shorter-term (more certain) elements of the revised strategy are translated into the necessary actions (and related timescales). Again this may be in the form of a table which describes the key activities in terms of the most relevant parameters. Their prioritization levels and resource requirements should be listed, at least, along with their target outcomes and times. Allowing for updating, in this way, emphasizes the true role of the long-range marketing plan and its relationship to the subsequent monitoring.
GENERIC ROBUST STRATEGIES
The process could pose problems for management, especially where they might be asked to definitely reduce short-term profits to safeguard against possible problems in the longer-term; when they will probably have retired - on a pension linked to those short-term profits! Fortunately, in practice the problem is usually not as acute as it might be expected to be. Thus, in our experience (Mercer and Wilter) – despite the seeming contradictions - the two types of strategy typically converge on much the same approach. Indeed, the two processes most often converge on a range of ‘generic’ long-term strategies; most typically on strategies which are, in any case, justifiable as sound marketing practice - such as ‘building relationships’ with customers - which prove equally effective in both the shorter- and longer-term
Indeed, our work has shown that there may be a range of traditional ‘investments’, typically in intangibles, which can go some way to underwriting the long-term survival of most organisations regardless of what the future developments are. We refer to these as ‘generic’ robust strategies. It should be noted that these are quite different to Michael Porter’s (1985) generic strategies – which relate to the province of (shorter-term) corporate strategies.
In general, the main investments - in this category - relate to the relationships built up (invested in) with the main groups of stakeholders. In essence, the benefit of such investment is to create the goodwill which allows any organization the breathing space necessary for it to regroup - for instance carrying through a programme of creative imitation - in the face of changes which would otherwise be cataclysmic. Of course, the organization has to have sufficient speed of reaction to overcome the problems before the goodwill runs out, but the goodwill itself is what allows the possibility of recovery.
THE CUSTOMER FRANCHISE
The most obvious such investment in such relationships is that with the customer. A close relationship with him or her, much as with a friend, will help your organisation weather future difficulties - as well as take advantage of the benefits offered in the shorter term by relationship marketing.
One of the most positive ways of consolidating the consumer as the most important focus of the organization is to look on this relationship (Grönroos, 1990) as a prime asset of the business; one that has been built up by a series of marketing investments over the years As with any other asset, this investment can be expected to bring returns over subsequent years. On the other hand, also like any other asset, it has to be protected and husbanded. This 'asset' is often referred to as the 'customer franchise'.
At one extreme it may come from the individual relationship developed face to face by the sales professional. At the other it is the cumulative image, held by the consumer, resulting from long exposure to all aspects of the product or service, and especially to a number of advertising and promotional campaigns.
In some markets the customer franchise may be so strong as to be exclusive; in effect giving the supplier a monopoly with those customers. Consumers may regularly switch brands, for variety, but they may still retain an image of the brand; which may swing the balance when their next purchase decision is taken. It may thus still have a value (upon which the advertiser can build) even if the current purchasing decision goes against it. A later decision may, once again, swing in its favor.
The customer franchise is, therefore, a very tangible asset, in terms of its potential effect on sales; even if it is intangible in every other respect. It is based, though, on an accumulation of impacts over time. Unfortunately, too many marketers - particularly those in creative departments within advertising agencies - signally fail recognize the importance, and long-term nature, of this investment. They treat each new campaign as if it could be taken in isolation - no matter how it meshes with previous messages which have been delivered to the consumer. The evidence is that the consumer, on the other hand, does not view the advertising and promotion in such lofty isolation; instead he or she incorporates it into their existing image - to good or bad effect, depending upon how well the new campaign complements the old.
THE POWER OF THE BRAND
The brand, which is the alter ego of the customer franchise, also can offer a generic basis for robust strategies; especially in the case of the brand leaders, those in the top three slots, which between them can account for around 70% of the total sales (Mercer 1993a). In FMCG markets, for instance, the brand leader often holds 40% of the overall market or more. This level is usually highly profitable; since in addition to the high value of sales generated, its strong position in the market normally allows the setting of a higher price (and hence significantly higher profit) - and economies of scale are possible, not least in terms of promotional and distribution costs (Mercer 1993b).
The profitability that a brand leader commands usually offers, therefore, the resources needed to defend its position against future challenges. In addition, it has the benefit of the ‘market inertia’ which will allow some breathing space, the crucial time to implement the necessary changes, and as well as the cashflow to fund the changes needed.
CONVERGENCE OF STRATEGIES
Even if the robust strategies and the corporate strategy prove to be almost identical, the process of establishing what the robust strategies might be is not just worthwhile but necessary. Without undertaking the work it is impossible to see whether there are any hidden conflicts between the two. It may be more comfortable to remain in ignorance: indeed, 'it is much more fun to do something' (Taylor 1986). But in terms of survival it is much better to know about any longer-term problems you may be creating for yourself in this way. More likely, there will only be minor changes; needed to ensure an even more secure long-term future. Indeed, despite any irrational fears, with the knowledge that - in most cases - the long- and short-term strategies complement each other, you will gain the additional confidence to positively reinforce your short-term strategies.
Generally speaking, therefore, the impact of undertaking a separate identification of robust strategies is not a major revision of corporate strategy. In the relatively few cases where that is needed, the robust strategies clearly need to become the dominant part of the whole planning process. In general, though, it is to develop a new prioritisation of existing strategy; with the emphasis subtly shifted to allow for the longer-term in addition to the shorter one.
STEERING
We refer to the final part of the process, implementing the changes that are found to be necessary, as ‘steering’; since it is analogous to the way an aircraft’s autopilot makes regular small changes to its short-term heading (the corporate strategy) in order to reach its ultimate destination (the robust strategies).
Even so, the techniques underpinning the long-range marketing planning processes are different from those more conventionally adopted, Not least, they are more open-ended than prescriptive. The starting point is more typically a blank sheet of paper (Mercer 1997d) than one of the matrices recommended for shorter term planning (McDonald 1989). In addition, as might perhaps be expected in view of the long timescales, they place much greater emphasis on investment. Thus, for instance, promotion is seen in this context as an investment in the longer term (Mercer 1997b) – be it in brand position or customer relationships – rather than a current cost.
CONCLUSION
In this
way, we have found that, simply by separating out the longer-term robust
strategies from the shorter-term corporate strategy in a formal long-range
marketing plan, organisations are better able to take account of the longer
term, avoiding the problems which can arise from the short-termism generated by
the pressures currently facing managements. In any case, if they follow sound
marketing practices, the price they might have to pay, in terms of short-term
steering, is usually small; where the long-term benefits – not least continued
survival - may be great.
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