'Market Practice'

Marketing is the one fundamental activity undertaken by all organisations. For most of them it is also the most important contributor to their success or failure.

No organisation can totally isolate itself from the outside world. Even the most remote of monasteries still need to acquire some goods and thus involve themselves, albeit reluctantly, in basic marketing activities. Indeed marketing, in its practical sense, has existed since before the days of the Pharaohs.

It is this practice of marketing, now much more complex but still very practical, which is the focus of this book.

In its most general sense, marketing is brought into play as soon as any group, or any individual, needs to exchange goods or services with any other group or individual. To this extent it can be just as important within organisations as outside them. In this wider context it is, therefore, directly relevant to every manager and professional; and may be just as important to those individuals within an organisation, in the successful performance of their roles, as it is to the organisation itself. Indeed, our own research shows that up to 90% of managers already understand that their organisation should be committed a marketing philosophy - which they correctly see as being a customer cemtred philosophy - and a third of organisations claim that their business orientation is marketing led; though their managers are somehwat cynical of this claim, with a third in even these 'marketing oriented' organisations doubting that this is really true.

No matter that the philosophy is widely accepted, the problem, which this book addresses, is that - despite its importance - effective marketing practice is not widely enough implemented, or even recognised as a necessity.

This is a question which has preoccupied marketing academics for decades. To give a flavour of the wide range of viewpoints that are held by such academics, even about the starting point for marketing theory, some of the most useful of their ideas are shown - italicised - in the box below; a device I will use throughout the book in order to indicate that I am giving you a brief overview of more traditional marketing theory which is not directly applicable in practice.

Marketing is human activity directed at satisfying needs and wants through exchange processes

This is the classical definition of marketing, given by a leading marketing academic, Philip Kotler, in the earlier editions of his influential book, 'Marketing Management'. It perhaps betrays something of the economists view ('exchange processes' is very much in this camp!). It is, however, very direct - and has worked well for many organisations. But what complications might you let yourself in for when you start to introduce the wider aspects of marketing theory?

Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others.

This is Kotler's later offering, in his 1991 edition. It still has a flavour of economics, but starts to generalise the concept to include, for instance, non-profit organisations.

......competitive advantage;. Without competitors there would be no need for strategy....

This is the very Japanese viewpoint offered by the leading Japanese strategist (Kenichi Ohmae - who, though, works for McKinsey). It is very alien to Western views of marketing - though it has become increasingly accepted as a strategic viewpoint.

The Japanese came to the United States to study marketing and went home understanding its principles better than most US companies did.

On the other hand, Philip Kotler (again, but this time in conjunction with Liam Fahey) retorts that the Japanese learn their lessons well; and really are excellent marketers. Perhaps the truth lies somewhere in between.

This quote, from Michael Baker (of Strathclyde University), illustrates one potential area of confusion. On the one hand, marketing is a philosophy; equally applicable to all parts of the organisation - and one of the key tasks is to get all parts to recognise the importance of marketing (and to commit to a customer focus). But is also, much more specifically, a department within the organisation which handles - often in splendid isolation - the marketing activities.

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.

This is a recent European view, from Christian Gronroos. It encapsulates many of the recent developments in terms of partnership, especially those which emphasise the long term nature of marketing relationships. This is an important contribution - since it looks to a new form of marketing; that where organisations collaborate rather than compete (the traditional 'zero-sum' model of the buyer-seller relationship).

[All of these definitions are explained in much more detail in my MBA text and reference book (which, published by Basil Blackwell, is simply called 'Marketing'). This may very easily be used as a reference work to complement the theory which is provided throughout this book - should you wish to explore any particular aspect further. The two books have been written to complement each other in this way.]

It would be much easier for practitioners if marketing could neatly defined in a few precise words; but the very wide range of ideas illustrated above - not one of which is wholly inaccurate and yet none of which is comprehensively right - indicates just how complex is the situation facing the marketing theorist. In practice, which is what this book is about, marketing cannot be confined to a few neat - generally applicable - theorems. It is, instead a collection of many specific ideas; there are nearly 200 detailed rules listed in this book precisely because there are at least that many approaches to specific situations across the range of marketing practice. On the other hand, the philosophies behind marketing are much easier to describe; which may be why they are so widely accpeted. Thus, successful marketing practice demands a quite specific attitude of mind; but even in terms of this attitude of mind it is useful to distinguish two separate levels of marketing approach:

These general processes may become clearer if I describe the special situation of a salesperson (in a shoe shop, say) making a sale of one product as a result of one face to face contact - the supposedly classical sales situation. Here the 'relationship' is abbreviated to a single transaction, where the product (a pair of shoes) is exchanged for a sum of money, and there are no more elements to that relationship. Accompanying this is the 'dialogue', which in this special case is the conversation between salesperson and customer that builds up to that transaction (the sale/purchase of the pair of shoes). Typically, much of this dialogue is devoted to finding out what the customer needs and wants (what size, what colour, what style etc) rather then being devoted to persuasion as might traditionally be expected.

In a more general description, this dialogue is more complex. More individuals, especially others who may influence the decision to purchase, may enter the process and other media (letters and proposals, or the mass media, such as advertising) may be used. Still, the principle of the two-way dialogue (exploring what the customer wants, even if this is by marketing research rather than face to face) is much the same.

Similarly, the single transaction, in evolving to the more general 'relationship', becomes more complex in two directions. In the first, the elements within it become more diverse. There will be a number of separate transactions involved, not just one. Some of these may be obviously 'physical' in nature; the archetypal product sale. Others, though, may revolve around intangible exchanges, including - most intangibly of all - the corporate/brand image which is needed to reassure the customer. One way in which the description presented in this book departs from most others is that it expects some of these other transactions to flow from the customer, who will not just pay money for the goods - which is traditionally all that is expected of him or her - but will also commit a range of other elements; such as the time and effort involved in buying the product and using it (and perhaps learning to use it), possibly even the purchase of related items to enable the product to be used (or to be used more effectively), a commitment to the supplier (loyalty) etc.

The second aspect is that of time. The traditional single transaction takes no more than the few minutes that the brief dialogue lasts. In the more general model the more complex relationship, extending over multiple transactions, similarly extends over time; and also develops over time. At the most basic level this recognises that in most markets the customers place repeat purchases with the same supplier; in which process customer loyalty is a major factor. The essence of this on-going relationship is, however, more than this. It is the investment made by both sides - such that the 'natural state' of the relationship is continuity. It is only in the exceptional condition, when the relationship breaks down, that it briefly returns to the traditional single transaction mode.

Surprisingly, in view of its importance to both sides, this relationship over time - and the mutual 'investments' associated with maintaining and developing it - is little debated in conventional marketing theory!

These two elements, 'dialogue' and 'relationship', are external elements. Thus, while they may be defined in an unconventional way, they will be quite recognisable to the most traditionally minded marketer - since they clearly represent marketing links with the outside world, especially with customers. There is, however, a third leg to marketing practice which is the antithesis of traditional marketing - since it is totally internally oriented. This is the cross-functional co-ordination of the organisation's operations;

This third element is not considered by, and is by most definitions excluded from, conventional marketing theory. Yet it is probably the most important aspect of marketing; and 5% of managers actually rate it more important than having a customer centred philosophy. It should be noted, though, that members of marketing departments - who it might be expected would welcome such an empire building definition - typically take a much more isolationist view! But for most managers, I repeat, it is this element which is seen as ensuring that the organisation delivers what it has promised.

These three legs combine to make up what in this book is defined as marketing practice. This compares with the more traditional approach, which has concentrated more mechanistically on a narrower set of discrete topics. Recently these have been most popularly defined as the 4 Ps (see below) which generally fall within the 'dialogue' and 'relationship' sections of my own definition above, but only cover parts of these.

There are a number of ways that the separate elements of marketing are traditionally described, but over the past decade many business schools have used the framework of the 4 Ps (as originally proposed by E. Jerome McCarthy[1]);

The first two are, in effect the product related elements. Perhaps influenced by economics, price is split off as an element worthy of separate consideration; though this may, in many cases, over-emphasise it importance.

The other two are parts of the delivery system; Place is about delivering the physical product or service, and Promotion is about delivering the 'sales message'.

Despite its commendable simplicity and its usefulness in structuring marketing concepts for undergraduates, I do not recommend this as a framework for taking practical marketing decisions, no matter how popular it is - and indeed suggest that you positively avoid it! As you can see, in its rather desperate attempt to find four categories which began with 'P' it ignores services, it places undue emphasis on Price and comes up with a catch-all category for left-overs, called Place, which tends to be meaningless - no matter how much time is devoted to trying to explain what it covers. Not least of the problems posed, though, is that the 4 Ps make no reference to the customer or client - who is at the centre of the whole process!

To differentiate the more general, three-legged, model used in this book it is called the 'marketing triad' (or TRIAD for short - not to be confused, though, with Kenichi Ohmae's 'triad' of international markets)

DIALOGUE - to establish what are the customer needs and to negotiate suitable solutions to these

RELATIONSHIP - investment in the effective external exchanges necessary to optimise these solutions, in practice, to the mutual benefit of both sides

CO-ORDINATION - management of internal operational resources across the whole organisation in order to deliver this relationship

The difference between marketing theory and practice - such as that evidenced in the 4Ps - is not necessarily due to academic bloody-mindedness; even though the real-life practice is there for all to see. But that practice, if less than perfect, is clearly what managers employ - with some degree of success! Indeed, for several decades, as marketing theory was first being developed from practice, the process of learning marketing was essentially by apprenticeship; it was, and in many respects still is, a very practical craft. At the other end of the spectrum, however, the leading academics soon were, and still are, attempting to provide the theory which, in as simple - and academically elegant - a fashion as possible, explained the key factors involved. The essence here was simplification, and abstraction. On the positive side, this theoretical work has produced a number of genuinely useful theories which have helped to explain specific aspects of marketing practice; and have thus led to improved practice.

It is the over-inflated body of false theory which, on the other hand, this book aims to bring to your attention - so that you may be able to avoid its seductive simplifications. The book, however, still recognises that the best of marketing theory - coupled with sound marketing practice - can provide the a most effective framework for at least some of the more important marketing activities. In this context its role, therefore, is to identify just what is that 'best of marketing theory', and to encapsulate this in the most practical 'rules of thumb'.

The complexity of marketing theory is perhaps best summed up by one of the three 'Is' from the first chapter - that of 'Individuality'. The only marketing theory which matters is that which applies to the unique circumstances facing the marketer in the individual situation. The latter part of this first chapter, therefore, concentrates on some techniques which can help managers, such as yourself, judge which is the most appropriate theory to use.

Selection of the theory is, though, one of the most difficult tasks facing a manager. Accordingly, to help you to critically appraise the various 'theories' - the new Rules we are suggesting in this book just as much as the traditional approaches - the first of these techniques is:

It should be obvious, from the list above, that the most important feature of the above approach is the rejection of anything and everything which does not directly help you solve your specific problem. This may sound trivial, for why should anyone think of offering solutions which are irrelevant or simply do not work? But, in their enthusiasm to help, many marketing experts will rush to do just that! As we saw earlier, the recognition of the individuality of each situation is normally a key requirement for sound marketing practice.

This process will inevitably discard most of the theories and techniques on. Even so, there is a reasonable chance that, from the wide variety on offer, there should be at least one idea which can offer some new insight into the problems at hand.

However you use theory, though, you should only use it as an aid to your own judgement. In marketing you cannot delegate important decisions to outsiders. No matter how expert they are, they cannot have the amount of experience, of the matter in hand, as you do!

The rules later in this book should all be approached in the spirit of the above charter. Their practicality, rather than their academic elegance, should be the acid test they must pass. As far as possible I have already applied these principles. Thus, each of the existing models has been evaluated (based on almost half a decade of research across hundreds of managers, and three decades of practical experience) in terms of its value for marketing practice.

The rest of this chapter concentrates on just two general aspects of applying marketing theory. The first offers one general suggestion - this time a more positive and proactive one - as to how you may best apply your own judgement to any given marketing situation. The second is more specifically an introduction to 'Realistic Marketing', another basic set of philosophies which lies behind the collection of rules which makes up the rest of this book.

The next framework I will offer, therefore, is the 'Analytical 4-Step' This simply outlines the stages which may help you to deploy your own judgement in any given marketing situation.

This process, which may be used in a variety of management situations but is especially suited to handling the complexities and uncertainties to be found in marketing, is deliberately kept as simple as possible. The hallmark of effective marketing practice is often simplicity.

The most powerful starting point for analysis is, thus, the simplest. It is a blank sheet of paper! Without any preconceptions about what to expect, without any artificial frameworks to bias your views, without any tick-lists to limit your horizons, you simply write down the key factors about the situation which faces you. This may be the simplest approach, but it is not necessarily the easiest of starting points! Many managers feel threatened by its lack of guidance. Later in the book you will find a number of techniques which help you over this first hurdle. In any case, this is a search process, so these factors should already have emerged from your previous desk research (which we will be looking at in a later chapter) or more likely will already have been known to you as a result of previous experience.

Then start the selection process; following much the same process as in the 'Critic's Charter', delete all those which will not be absolutely crucial to the marketing strategy or tactics you are planning. It is likely that, even so, few will disappear at this stage - since most will seem essential - so be more ruthless and progressively discard the least essential until you have no more than six factors left (though these may be modified to encompass some aspects of those deleted - as long as this does not dilute their impact).

Then prioritise these six factors (from one to six, in descending order of importance) and note why you have chosen these priorities (since, at a later stage and as conditions change, you may want to change the order of these items).

Finally, try and identify what relationships exist between these factors. Some may be trade-offs (price against quality, say), some may be complementary (support levels and image, say). This is also a stage when the 'rules' to be described later in the book may help. But, whatever aids you use, simply try to see what patterns emerge. At one extreme, this is a process of synthesis - trying to combine the components to produce something bigger, and better, than the individual parts. Ideally, you should reduce the six factors to no more than two 'prime directives' (the concepts or philosophies on which managers are able to focus, but which still encapsulate the key elements). At the other, it revolves around 'dilemmas', where there are several options which are apparently in conflict with each other. The management of the dilemma, so that apparently conflicting options may need to be simultaneously applied - with synergy rather than friction, is the route to success in these cases. The classic example is that of the Japanese who simply did not accept that raising quality standards would cost more; and who went on to show that in practice it actually reduced overall costs.

Depending upon the outcome of this final stage it may then be necessary to return to the first step - to add in the extra factors which this has suggested might be relevant. The whole process is then repeated. In many marketing planning activities iteration is the key to progressively optimising the final output.

This, then, is the 'Analytical 4-Step' approach to analysis; though to make it a bit more memorable, there are actually five steps - where Step Zero is perhaps the most important of all! In the present context this is referred to as 'Zero Level Marketing'. It is a commitment to approach each new activity afresh - a blank sheet of paper -without the prejudices derived from previous exposure to theories.

The factors which you write on that blank sheet of paper, therefore, should only be the key factors which are directly relevant to the individual situation in hand. The essence of this process, of Zero Level Marketing, is the distillation of exactly what is important to the current situation - unencumbered by any academic gimmickry (no matter how elegantly it may be packaged!). On the other hand, I will repeat the point that this may be very powerful in its simplicity, but is also quite sophisticated in use; it assumes a knowledge of a number of the other ideas described in this book if the manager is to make the most effective use of it.

Having undertaken this exercise in minimalism, and having achieved this initial distillation, you can then proceed directly to the rest of the 'Analytical 4-Step' and, as already suggested, this is where the marketing theory should help.

The theory you choose, to help at this stage (and especially at Step 4), should of course be tested once more against the eight steps of the 'Critics Charter'.

I will emphasise, however, that this approach, this particular form of analysis, is just one of those which are available. It is, as always, up to you to select (with the aid of the Critic's Charter, say) which one of these is best suited to your specific requirements at the time; if nothing else, this book should convince you that enlightened pragmatism is a virtue and a diversity of approaches a near necessity!

The one great virtue of the 'Analytical 4-Step', though, is that it is totally under your control - you know exactly where you are.

The final section of this chapter surfaces the basic assumptions behind the philosophies of 'Realistic Marketing' which shape the theories and rules described in the of the rest of the book.

Rule T8 - THE BASIC PHILOSOPHIES OF REALISTIC MARKETING -

a) PRAGMATISM - ABOVE ALL, ANY THEORY CLAIMING ADHERENCE TO THESE PHILOSOPHIES MUST OFFER VALUABLE, PRACTICAL SUPPORT FOR THE MARKETING PRACTITIONER

b) SUBSERVIENCE - but it must clearly limit itself to being just an AID to the manager's own marketing (decision-making), never as a replacement for it

c) COMMON-SENSE - and it must explained in terms which mean that it can be FULLY understood by, and supported by, all those implementing it

d) INDIVIDUALITY - it should normally be seen only as providing support for the specific elements of marketing currently under consideration, and should not be derived from irrelevant generalisations

g) ITERATION - and this action should generally be repeatable until an optimal outcome is reached

h) RESOURCEABILITY - but it must take account the reality of the resources - human and technical as well as financial - available to the organisation

i) INTEGRABILITY - indeed it should, as far as possible, make clear what role it also plays, if any, in co-ordinating the operational resources across the organisation as a whole

j) INVESTMENT - the time dimension, which means that marketing decisions must be viewed as investment decisions affecting the long-term as well as the short-term, must be allowed for

k) ZERO-LEVEL - FINALLY, IN SUMMARY OF A NUMBER OF THE ABOVE FACTORS, ANY THEORY, SUCH AS IT IS, SHOULD BE DIRECTLY RELEVANT TO THE SITUATION IN HAND - in line with the discussions earlier in this chapter

From this very long list, the first factor is normally the most important - since it encapsulates the 'realism' which is the definitive feature of this form of marketing. It also leads naturally to most of the other factors listed, including multiple, alternative approaches to marketing topics (best handled by the Zero Level approach) - as well as the very real constraints imposed by limited resources, and previous history - and it highlights (at least in this version) marketing's central role in co-ordinating the organisation's resources overall.

'Realistic Marketing' should be nothing if not pragmatic, and should judge itself by the practical outcomes of its advice to the managers it claims to support.

[1] E J McCarthy, Basic Marketing: a Managerial Approach (Ricahrd D Irwin, 1981)