MARKETING MATERIAL

9029 MARKETING MANAGER 8 - LONG RANGE MARKETING

As we saw, in the last chapter, typical approaches to marketing strategy focus on the relatively short-term; for example, through the use of matrices balancing the impact of current actions, or derived from existing forces such as  competitive pressures,  or - even stressing the short-term nature of decisions - derived from incremental and emergent strategies. 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, 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 these organisations, there should be at least two quite separate processes at work; rather than the one traditionally recommended. There is, of course, the conventional corporate strategy process, optimising performance in the shorter term, which we all know about. But there should also be a separate, presently well-hidden, process of producing ‘robust strategies’ which underpin survival over the longer term.

That there are, or should be, these two quite distinct legs to the strategy process – whether hidden or not – is demonstrated by table below which clearly establishes the significant differences between them:

Indeed, the two sets of strategies should have very different objectives. Marketing (Corporate - short-term) strategy is quintessentially about optimising current performance. 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. 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. 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.

In terms of basic characteristics, marketing (corporate )strategy is usually supposed to follow a rational approach (often deductive, arguing from the general to the particular), where robust strategies are evolutionary in nature (and best approached inductively, working from the specific pieces of evidence to some general conclusions).

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!

ACTIVITY

Try out this comparison for your own organisation.

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 a millisecond, as computers trade the shares on the electronic stock-markets around the world. Understandably, therefore, their focus is only on the ephemeral performance of the share-price; which may – in the very short term on which they single-mindedly concentrate – be more directly linked to stock-market rumours than to the financial performance of the firm. The individual senior managers of the organisations, the ‘fat cats’ (the other group of ‘insider’ beneficiaries), are interested in financial performance; but again only in terms of 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 optimise the current results – on which that pension will be based – and to hell with the long-term. Put in this context, it is obvious why both these sets of key actors demand that corporate strategy focuses on short-term financial performance. To put it crudely, neither group will be around when long-term strategy saves the company!

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 time, 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 governments increasingly recognising the right of these communities to participate in the management of organisations, however, it is likely that such longer-term viewpoints may eventually prevail – and robust strategies will finally come into their own!

ACTIVITY

Does a similar conflict of interest (potentially) exist with your own organisation?

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. 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 (as we ,saw in the last chapter). 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'.  This is a very wide ranging activity, covering much more ground than traditional market research. Indeed, in its broadest sense it encompasses all those activities which the organization uses, formally and informally, to keep abreast of those changes in the external environment which will affect its future. At its widest it can include all the factual (news and documentary) material to be seen on television or read in the newspapers and periodicals! In this widest sense, scanning is defined as general exposure to information where you have no specific purpose in mind with the possible exception of exploration. It is characterized by your general unawareness as to what issues might be raised. The sources of information are many and varied, the amounts are relatively great, and the screening is generally coarse, only alerting you to the fact that something has changed. This compares with market research, where there is a deliberate effort to seek out specific information. You can see why such scanning is not just difficult but also potentially very expensive. In practice, an organization can focus on only a small part of the information that keeps pouring in upon it from its environment. As we have seen, the ultimate incentive, for investing the necessary time and resources in these processes, is a realisation of just how important these activities may be to preserving the long-term future of the organization.

Possibly the simplest, and best, practical advice is to cultivate a deep, on-going, curiosity about that external world; coupled with an ability to recognise which signals, from amongst the mass of data which every new day brings, are relevant - and important - to the future of the organization. Indeed, in practice, 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 understanding, as the six to eight team members interact with each other - comparing notes as the process develops.

ACTIVITY

Briefly undertake a similar (environmental) analysis of those parts of the external environment which will most impact the future of your organisation. Do the same for your own group, perhaps involving other members of your group in this activity.

SCENARIO FORECASTING

The subsequent 'formal' planning processes start with scenario forecasting, though in a much simpler form than the approaches which were more usually adopted in the past Our own version, of  'simpler scenarios', comprises five main steps:

1. Decide The Drivers For Change - what are the forces which will decide the long-term futures of your organisation

2. Cluster the  Drivers Together - into groups which are easier to handle, but which still make sense

3. Reduce These Groups to Nine Mini-Scenarios - again so that these are easier to handle

4. Finally Reduce To Two Scenarios - but only because more than this number will confuse the managers using them

5. Write The Scenarios - as reports about two alternative futures

Indeed, the whole process is now so simple that 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. 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.

Thus, the first stage ('deciding the drivers for change') of our scenario forecasting should be to examine the results of the prior environmental analysis to determine which are the most important factors that will decide the nature of the future environment within which the organization operates. In reality, as formal scanning is rarely undertaken and the participants should all have been exposed to a wide range of analytical inputs as part of their day to day work, their existing knowledge proves quite sufficient for them to productively engage in the debate - and for them to produce meaningful results. As hinted at above, the simple technique we have come to recommend requires only a conference room with a bare wall and copious supplies of 3M Post-It Notes. The six to eight people taking part in the scenario group are simply asked to identify the most important 'drivers' for (global) change, which are then written, with a  thick magic marker so they can be read from a distance, on separate Post-It Notes. These Post-It Notes are then placed on the wall. Since the workings are largely self-evident, participants very quickly come to understand exactly what is involved.

ACTIVITY

Try this process on your own group. Do not take it too seriously, do it primarily for the sake of understanding what is involved, but you should still find the outcomes enlightening.

The next step is to link these drivers together to provide a meaningful framework. This is where managers' 'intuition' - their ability to make sense of complex patterns of  'soft' data which more rigorous analysis would be unable to handle - plays an important role. At this stage, therefore, participants are asked to try and arrange the drivers, which have emerged, into groups which seem to make sense to them. Then these are merged into the 6 - 8 larger groupings; the clusters or 'mini-scenarios'. In the final stage, that of reducing to just two scenarios, the group members are, in the first instance, encouraged to find a theme - and in particular a title - for each of the two scenarios. These themes should, as far as possible, encapsulate the main trends which have been unearthed. We have found it best to talk about the 'flavour' of the future for their industry. They then allocate, again as far as possible, the clusters (or mini-scenarios) to each of these alternative scenarios (themes); to create the final scenarios. This process is very different to that used by the most sophisticated forecasters. But it does produce results, and results which are good enough to use as input to your long-range marketing plan.

ACTIVITY

Continue your group exercise along these lines.

Reducing the rest of the long-range marketing process to the bare minimum, there are just five further, simple steps to producing that 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 prioritisation. 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 also 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. 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.

ACTIVITY

And, once more, extend the group's work to these further steps.

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 prioritisation levels and resource requirements should be listed, at least, along with their target outcomes and times.  Allowing for updating, in this way, emphasises the true role of the long-range marketing plan and its relationship to the subsequent monitoring.

ACTIVITY

Finally, complete your group exercise by extending through the final steps to the action plan. What have your learned - about the long-term future of your group - from this exercise?

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 – 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 was stressed in the earlier part of the book) - 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 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. Indeed, the best solution, to creating the degree of flexibility needed, is to engender a parallel sense of goodwill amongst your own staff - another key set of stakeholders - exactly as I explained in the earlier section on 'inner marketing'.

ACTIVITY

How does your organisation stand in relation to these two groups of stakeholders (customers and employees)? Does it have the necessary goodwill to underwrite its long term survival?

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'. 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 than one of the matrices recommended for shorter term planning. 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 once more as an investment in the longer term – be it in brand position or customer relationships – rather than a current cost.

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.

ACTIVITY

What steering is needed to gently direct your own group towards the longer-term robust strategies you have developed, without unduly affecting its short-term performance.

THE INVESTMENT MULTIPLIER

This brings us nicely to the final reminder of the most important aspect of marketing; which has been stressed throughout the book, but which is still not widely recognised. This is the investment over time. In the earlier chapters we saw that the most successful brands have very long lives. The difference in philosophy which this leads to is best evidenced by our preferred terminology, in the context of new products, of Runners versus Stars (from the Boston Matrix) and Winners versus Cash Cows - we believe that Winners - the brands which have proved themselves over time - are to be cosseted (and not Cash Cows to be milked) where Runners - those still creating their places in the market - have to be carefully assessed (and not automatically presumed to be future Stars). Indeed,  the history of a brand is the best indicator of its future. If it has been a high performer, it will continue to be so. If it has been long-lived, it will have a long life in the future too. What is more, a successful high investment brand multiplies its already high return  - as a brand leader - by having a longer life, over which the annual returns accumulate.

The brand investment over time is now usually the biggest investment any organisation makes. Yet it appears on very few balance sheets, and is ignored by most managers, indeed it is vandalised by many of them in their search for cost savings! Above all, though, this investment is in the relationship between the organisation, symbolised by the brand, and its customers. If this book has taught you nothing else, please remember just how important that relationship is!

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