MARKETING MATERIAL
7255 MEG96 - Management's Commitment to Marketing Theory
_______________________________________________________________
MANAGEMENT'S COMMITMENT TO MARKETING THEORY
COMPARED WITH ACTUAL PRACTICE
David Mercer
Open University Business School
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ABSTRACT
Marketing theories are supposed to underpin marketing practice. Recently, there have been a number of questions raised concerning the validity of some leading theories. The research (on 566 managers/professionals) investigated the differences - in terms of usefulness to practitioners - of seven of the leading marketing theories, split into two groups. The first comprised predictive models, which were the Product Lifecycle (PLC), Boston Matrix and Ansoff Matrix, and the second those that offered frameworks for analysis, which were the 4Ps, Segmentation, SWOT and Marketing Plans.
The group defined as frameworks were reported to be to be more useful - being actually used to provide frameworks for strategic decision-making - where the predictive theories forced reviews of existing strategy. The frameworks reportedly offered a clarity of focus in potentially complex processes; especially evident in the clear leadership (in terms of usefulness) held by SWOT.
Address for Correspondence:
D.S. Mercer
Senior Lecturer
Open University Business School
Walton Hall
Milton Keynes
MK7 6AA
Telephone: (44) 1908 656878
Fax: (44) 1908 655898
E-mail: d.s.mercer@open.ac.uk
MANAGEMENT'S COMMITMENT TO MARKETING THEORY COMPARED WITH ACTUAL PRACTICE
Introduction
Marketing theories are, in addition to their contribution to a general understanding of of the subject, supposed to underpin marketing practice. Recently, however, there have been a number of questions raised concerning the validity of some leading marketing theories. Thus, in 1993 a paper (Mercer, 1993) was published which questioned the practical validity of one of the major theories quoted in marketing literature. This theory was the Product Life Cycle (PLC) Although the concept was first developed from the 1950s (Dean, 1950), it was in the late 1960s, following the influential article by Theodore Levitt (1965), that much of the definitive work was undertaken; a pattern over time which has been followed by a number of other such theories. For example, William E Cox Jr (1967) examined 754 ethical drug introductions and found several forms of life cycle, though he was only able to track 2% of these to their 'death'. Two years later Polli and Cook (1969) conducted their widely quoted survey of 76 selected product forms and 37 product classes in the fields of health and personal care, food and cigarettes. Much of the work was though anecdotal, or concentrated on a very limited number of examples, again typical of a number of other marketing theories which emerged during the 1960s and 1970s. The article by Dhalla and Yuspeh (1976) was one of the few to offer a counter viewpoint; and they made the important observation that "...clearly, the PLC is a dependent variable which is determined by market actions; it is not an independent variable to which companies should adapt their marketing programs. Marketing management itself can alter the shape and duration of a brand's life cycle." Despite its relative isolation, in some quarters this critical article seemingly had an influence out of all proportion to its limited objectives; since it is the one most often quoted as the basis for the more recent doubts about the general applicability of PLC theory - a pattern of limited, but influential, dissent which may once more be now applied to a number of other theories. The research evidence presented in the more recent paper (Mercer, 1993) - based on the twenty year history of 929 brands spread across 150 FMCG markets in the UK - supported this view; and confirmed that the theory was, in fact, of little use to practising managers.
Some months later, Armstrong and Brodie (1994) published a paper in a similar vein about one of the other pillars of marketing strategy, the Boston Consulting Group Share/Growth Matrix. This theory was also widely taught; Morrison & Wensley (1991) reporting, for example, that all of the 34 UK business schools they surveyed taught it - most of them uncritically. On the other hand, it too had been criticised; on theoretical grounds, for example by Wensley (1981, 1991), and on practical grounds, including the paper by Capon et al (1987). The paper by Armstrong and Brodie (1994) concluded - based on experimental tests with 1015 subjects - that "detrimental effects of the BCG matrix (in misleading some decision makers) outweigh possible gains (e.g. additional insights, adding structure to chaos) that might be produced when firms use the matrix as a diagnostic aid."
Prompted by these very similar findings, suggesting that two of the most important theories in the field were questionable in terms of their practical value, a wider investigation into the more general usefulness of theory, in practice, across the field of marketing strategy was started. Initially, this research looked for success factors which were common across all types of theory. After the results of a number of focus groups had been analysed, however, the research was concentrated, in particular, on the usefulness - to practitioners - of predictive theories versus those which offer a framework for practitioners to undertake their own individual analysis; since the comments of participants indicated that these two groups of theories were perceived to be used by practitioners in rather different ways.
It was decided to investigate the comparison between these groups by examining six especially important theories/concepts which are currently taught by business schools. In terms of predictive models (Group 1 - G1), these were the Product Lifecycle (PLC), Boston Matrix and Ansoff Matrix. As the comparison, the 'frameworks' (Group 2 - G2) were the 4Ps, Segmentation, SWOT and Marketing Plans. The prime intention was to see how useful these organisations found each of these groups of theories; as rated by their managers, on a simple semantic differential scale of 1 ('no use') to 5 ('very useful'). At the same time, to try and understand the differences which emerged, what managers perceived to be the specific benefits/disadvantages of each theory were also examined.
Research Methodology
The research required that the respondents should be able to comment technically upon aspects of marketing theory; at least in terms of its use in their own organisations. In order to be in a position to attempt this, the respondents had, therefore, to have achieved a certain level of education in the subject.Hence, to ensure that the respondents - practising managers and professionals - would be able to give meaningful answers to the questions involved in the survey, they were drawn from a population made up of those Open University Business School (OUBS) students who had already completed at least one marketing course with the School. They were, thus, both familiar with the each of the theories under investigation - together with an agreed vocabularly related to these (so that the misunderstandings over terminology which bedevil many such investigations would be minimised) - and currently working in the organisation to be investigated. They were, accordingly, in a position to give realistic answers as to the extent to which their organisation, which was the unit under observation rather than the individual manager, found these theories to be useful in practice; without any confusion due to different interpretation of the terms used.
To collect the range of data needed, which included background data on the organisations' use of marketing as well as other data to be used for categorisation purposes, 7 questions were used to provide classification data on the respondent and a further 11 classification data on the organisation. There were then 26 key questions, on various aspects of the practical use of these theories, reported in this paper. The questions were developed from comments recorded during four separate group discussions with a total of 35 students, and the questionnaire was piloted - and in particular the exact wordings of the questions on useful aspects/problems for each thekry were finalised - with 50 students randomly selected from the population.
The final questionnaire was mailed to 1,000 OUBS managers/professionals, chosen at random from the population. Completed questionnaires were received from 566 respondents (57% response). The size of the sample was such that the results had an accuracy (for this population) of better than ±4% (at the 95% confidence level). It also allowed for some statistically significant results for the larger sub-groups. As an adequately high level of response had already been achieved, there was no follow-up.
Hypotheses
The comments received from the focus groups reinforced the general trend of the debate - especially that exemplified in the paper from Broie and Armstrong (1994)- mentioned in the introduction. In general, the critics challenged the practical benefit of the predictive group of theories. An extension to this work based on the observation, from the focus groups, was that frameworks - on the other hand - did seem to offer a more general level of benefit. To inspect the validity these ideas, the hypotheses tested by the research were:
Hypothesis 1 (H1) - The predictive theories (G1) would not be rated significantly above the median level (3) in usefulness.
Hypothesis 2 (H2) - The frameworks (G2) would be rated significantly above average in terms of usefulness.
The key hypothesis, however, was that spelling out the expected relationship between the two groups:
Hypothesis 3 (H3) - The framework theories (G2) would be rated more useful than the predictive theories (G1).
A subsidiary hypothesis was that;
Hypothesis 4 (H4) - The theories, in both groups, would be found more useful by those organisations making greater use of marketing techniques in general - those larger organisations in the consumer field.
Overall Usefulness
As shown in Table 1, a main finding was that - in line with hypothesis 1, but out of line with their central position in many business school courses - there was a surprisingly low degree of usefulness reported for the predictive theories investigated. As reported earlier, this key question simply asked respondents to rate the usefulness - to their organisation - of each of the theories, on a five point semantic differential scale. The scale ran from 'of no use' (1) to 'very useful' (5). The median was, therefore, 3. In fact, the ratings for the Ansoff Matrix barely reached this median level (at 3.03) and the other two of the predictive theories (Boston Matrix, 2.91, the PLC, 2.91) failed - albeit marginally - to even reach this threshold.
TABLE 1,
Theory/Concept, Usefulness to Organisation
, (overall average - scale 1-5)
,
SWOT, 4.19
,
Marketing Plans, 3.68
Segmentation, 3.65
4Ps, 3.56
,
Ansoff Matrix, 3.03
Product Life Cycle (PLC), 2.98
Boston Matrix, 2.91
The most important finding, however, was that - on the other hand - the frameworks (4Ps, Marketing Plans and Segmentation) did record significantly better results (clustered around the same level - of 3.6), at a level sufficient to justify - at least in statistical terms - Hypothesis 2. SWOT (at 4.2) recorded a result, though, considerably above the median - indicating that it should be in a category apart from the rest of the frameworks.
On the basis of a paired t-test (using SPSS) all of the differences between the means for predictive theories and frameworks were significant (ranging from a t value of 22.56, when the Boston Matrix was compared with SWOT, down to 11.25 when the Boston Matrix was compared with Segmentation). On the other hand, there were much lower differences within the two main groups (a t value of only 0.58 when the Boston Matrix was compared with the PLC, and one of 1.42 when 4Ps was compared with Segmentation); but the SWOT results were significantly different to those from the other frameworks (with a t value, for instance, of 11.941 when SWOT was compared with 4Ps).
Accordingly, all the first three hypotheses were shown to be valid for this population. In particular, the predictive frameworks studied were not seen to be above average in usefulness, and were seen to be significantly less useful than the frameworks investigated; thus tending to confirm their respective efficacies - in practice - as reported by the recent studies.
Analysis Of Sub-Groups
In terms of the differences between sub-groups there was a difference between larger and smaller organisations (both in terms of turnover and number of employees), with the large ones - as might be expected - slightly more likely to give higher ratings to the theories overall. This trend was, however, best seen in terms of the spending on advertising and number of sales persons employed. For example, Segmentation was on average rated 3.3 by organisations spending less than £1,000 pa on advertising but 4.3 by those spending more than £2 million pa; with a t-value of -5.7. Similarly, Segmentation was rated 3.3 by those with less than 5 salespersons, as compared with 4.2 by those with 200+ salespersons; with a t-value of -6.2. The comparable figures for PLC were 2.7 for less than £1,000 on advertising and 3.3 with more than £2 million - t-value -3.1, and 2.6 for less than 5 sales persons and 3.3 for 200+ - t-value -4.3. With the exception of SWOT (where there was no significant difference between such sub-groups) the other theories/concepts followed much the same pattern.
In this way, there was some support for hypothesis 4.
There was also a slight pattern, albeit on small sub-groups, in terms of the number of competitors. As might be expected, those with a monopoly found these theories less useful. On the other hand, less predictably, usefulness typically peaked for those with 5 competitors. For instance, in the case of the Boston Matrix, the average for those with 'zero competitors' was reported to be 2.4, compared with those with '5 competitors' (36 cases) at 3.3; giving a t-value of -3.9.
Most Useful Aspects Of Theory
The respondents reports of the aspects of they found most useful were expressed in different terms for each of the theories. When, however, these were grouped into comparable - broad - categories, as shown in Table 2, all the theories were seen to assist strategic decision making. On the other hand, the predictive theories were typically seen to assist, and indeed to force, a review of (existing) strategy where the frameworks were seen to provide the starting framework for the strategy process as a whole.
TABLE 2, , , , , , , ,
, Boston Matrix, PLC, Ansoff
Matrix, , 4Ps, Segment-ation, Market Plans, SWOT
Most Useful Aspects of Theory:, % Respond, % Respond, % Respond, , % Respond, % Respond, % Respond, % Respond
Review of Strategy/cash
flow/position, 25, 34, 65, , 0 , 16, 1, 0
Framework for Decisions/
Coordination, 0, 0, 0, , 19, 0, 51, 36
Position in Market, 0, 0, 0, , 0, 10, 6, 8
(Total 'Strategy'), (25), (34), (65), , (19), (26), (57), (44)
, , , , , , , ,
Focus/
Consumer Focus, 0, 0, 0, , 15, 49, 25, 26
, , , , , , , ,
Reminder of (all) Factors/
Perspective, 0, 0, 0, , 56, 0, 2, 13
, , , , , , , ,
Product Development, 64, 51, 23, , 0, 13, 0, 0
, , , , , , , ,
Other, 11, 15, 12, , 10, 12, 15, 17
Total, 100%, 100%, 100%, , 100%, 100%, 100%, 100%
Beyond this, the predictive theories were most closely related to product development in the general sense - most likely reflecting the specific thrust of those theories investigated, whilst frameworks were distinguished by being generally seen as approaches which helped to obtain a clarity of focus when analysing complex situations.
Apart from the fact that larger organisations were more likely to use segmentation to more accurately focus their efforts - 40% for organisations with more than 20,000 employees (75 cases) compared with 27% for those with less than 1,000 employees (327 cases) - there were no significant patterns in the detail elsewhere.
Problems In Use
The problems were much the same for both groups. Thus, as shown in Table 3, the main problems relating to almost all these theories were those associated with over-simplification/lack of reality and difficulty in application; coupled with their tendency to distract managers from more important issues, due typically to their narrow focus.
TABLE 3, , , , , , , ,
, Boston Matrix, PLC, Ansoff
Matrix, , 4Ps, Segment-ation, Market Plans, SWOT
Problems in Use of Theory:, % Respond, % Respond, % Respond, , % Respond, % Respond, % Respond, % Respond
Difficult to Use, 46, 32, 27, , 8, 0, 62, 18
, , , , , , , ,
Over-simplification/
Lack of Realism, 33, 24, 20, , 46, 46, 26, 18
, , , , , , , ,
Distracts Attention from Real Issu%s/Narrow Focus, 8, 31, 44, , 38, 43, 2, 49
, , , , , , , ,
Other, 13, 13, 9, , 8, 11, 10, 15
Total, 100%, 100%, 100%, , 100%, 100%, 100%, 100%
The one surprising exception, in view of the degree of commitment needed to implement it fully, was that 'Segmentation' was not seen as difficult to use. Furthermore, it was reportedly used by almost all organisations - used 'formally' by 42% and 'informally' or 'by default' by another 50%; with larger organisations more likely to make formal use of it; with 61.2% of those with turnovers in excess of £200 million pa (67 cases) formally using it compared with 27% for those under £2 million pa (81 cases). It seems likely, however, that respondents were taking a very broad view of segmentation - as a principle of strategy - and were not reporting its use as a technique in a sophisticated positioning exercises.
Otherwise, there were no significant patterns in the detail within the subgroups.
Discussion
The main conclusion demonstrated by the results is that the main predictive theories are seen to be significantly less useful than those theories which offer frameworks rather than predictions; supporting hypothesis 3. Furthermore, these (predictive) theories would seem to be, for the organisations to which this audience - at least - belong, found to be no better than adequate in practical application (supporting hypothesis 1).
The reasons for the differences between the various theories, ranging - in terms of usefulness - from the low of 2.91(recorded by the Boston Matrix) to the high of 4.19 (for SWOT), are more difficult to assess; especially where they are addressing different issues in different ways. On the other hand, the group which we defined as frameworks did seem to be more useful in terms of being actually used to provide frameworks for strategic decision-making, where the predictive theories were most useful in forcing reviews of existing strategy. This confirmed our own, anecdotal evidence derived from our work with students, where we have found that the most useful theories - at least in terms of reception by students - do seem to be those which provide a practical framework for decision-making. Most specifically, however, the frameworks reportedly offered a clarity of focus in these potentially com0lex processes.
This was especially evident in the clear leadership (in terms of usefulness) held by SWOT. This was an unexpected result, because of its relative newness, and lack of recognition by some academics (Philip Kotler, 1991, does not even mention it); and accordingly no specific questions which might show why this performs so much better than even the other frameworks had been included. At this stage it is only possible to conjecture that its simplicity and consequent relative ease of use, both seen as problems for the other theories, might have combined with its inherent strength as a framework (as seen by the respondents) to offer the most attractive overall package. Whatever the reasons, this technique is (at least as seen by the practising managers in the survey) seen by them to offer an eminently practical framework and to clearly focus the process of strategic thinking.
This is reflected, as shown in Table 4, in the ways that respondents saw 'marketing theory' in general helping them, but with the major addition (which did not appear strongly in terms of the specific theories, but which might be coupled with the more practical aspects of the higher rated theories) of - overall - broadening their perspective (where SWOT, with its apparent ability to include a wide range of factors, scored somewhat better on this aspect than the others - with the exception of the 4Ps).
TABLE 4
Respondents recording way in which 'marketing theory' helps them
%
Gives structure/framework
13
Improves understanding of strategies
16
Gives broader perspective
32
Increases customer awareness
19
Conclusions
The results indicate that framework theories should in general be recommended as a starting point for the individual manager to develop his or her own solution to the specific issue to hand; and that predictive theories should be used more sparingly; in those areas where their predictions have demonstrable accuracy - such as cashflow across portfolios of different investments in high-tech industries - in the case of the Boston Matrix - and lifecycle tracking of predictable pharmaceutical products in the case of the PLC.
As a final footnote, the results indicate that - at the very least - it might be wise for academics to accept the popularity of SWOT, and to work to address its shortcomings - and to develop other frameworks which achieve a similar level of usefulness/popularity whilst having sounder theoretical underpinnings!
References
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Dhalla, Nariman K. and Sonia Yuspeh (1976), Forget the Product Life Cycle Concept!, Harvard Business Review,, January-February, 102-110.
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