MARKETING MATERIAL

9063 – Marketing Practice 3 Product

Chapter 3

PRODUCT:SERVICE STRATEGY

As we saw in the first chapter, there is a broad consensus of opinion which holds that marketing is focused on the customer. In general, this consensus also supports the view that the first thing to be considered, in any marketing situation, is that customer.

Why then does this book talk about the product or service before it investigate customer needs?

The main reason is that before you can hope to know your customer you must know yourself. It is not sufficient to approach your customer with a general, bland interest. Rather, if your investigations are to be productive, you must focus on those aspects of the customer which are most relevant to your, and your organisation's, specific interests. We will see, in the next section, that even your understanding of yourself, in the context of your marketing needs, ultimately has to be informed by the customer's viewpoint; but, before we can start to approach that level of sophistication, the first point of departure has to be an exploration of the product or service itself.

This approach also has the practical virtue of matching the one which most managers intuitively adopt! Starting from this point also reflects the fact that, perhaps not unexpectedly, the most important theory lies in this, product:service, area.

A word of warning, though. The product or service, in the marketing context, is almost certainly not what it appears to be; or, at least, it will be rather more than this. This concept is popularly known as the 'product package'; and it applies just as much to the service industries and non-profit sector. Any such package is (as we will see in the following paragraphs) a complex mix of product and service (of tangible and intangible elements) I will refer to this as the 'product:service package'. This 'package' embraces all the aspects of the product, tangible or intangible, which matter to the customer.

Thus, for that simplest of products, the soft drink, it will encompass far more than the main ingredient itself; for the water it contains comes, free of charge, out of the nearest tap, and even adding some sugar and carbon dioxide doesn't stop it being one of the cheapest of commodities. The flavouring may be proprietary, but in physical terms it is probably the distinctive pack - which promises far more than flavoured fizzy water - which first starts to justify the premium price. The overall package also contains a range of intangible elements. The advertising promises more still; and, invested in by the supplier over several generations, now manages to persuade the consumer that this is no ordinary fizzy water, but is Coke or Pepsi - which is something totally different. In cases such as this, even those revolving around the most basic of commodities, the intangibles - especially image - are all!

Even this list of categories misses some of the most important elements of the package, ones which may not even be evident to the consumer. In particular, distribution, the logistical chain which eventually brings the product or service to the consumer, may be a critical factor. If the 'product' is not easily available when the consumer wants to purchase it then it will probably not be purchased. In the case of complex products (and services)  the list grows even longer. Service and customer support may well become the most important aspects which build customer satisfaction.

THE PRODUCT:SERVICE PACKAGE

As a reminder, but no more, of some of the elements which may be important in the overall package;

One way of examining this Product:Service Package is to see what the organisation itself does at each stage of the process of producing and delivering the product or service. One popular approach, very effectively promoted by Michael Porter,  is that of the 'value chain';

VALUE CHAINS

Michael Porter[1] divides the elements of this value chain into nine parts:

Each of these is to be investigated separately, to optimise the value it adds to the product/service; though he also suggests you look at the links between them.

Although he carefully stresses that the investigation should look at added value in terms of 'differentiation' (his word for those activities which improve the customer's perceived value of the product or service, by making it seem different to its competitors) as much as in terms of reduced costs, it is the latter aspect (of 'cost reduction') which tends to dominate his work - and certainly dominates that of many of his followers.

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The focus on costs can, in any case, be very illuminating:

SENSITIVITY ANALYSIS

One especially enlightening approach is take the cost(s) in each of these areas (or part of an area) separately, and see what happens (in percentage terms) to the overall margin when each of these individual costs is reduced by 10%. Reductions in some areas will have little impact on the overall margin (and hence can be safely treated as of lower priority, in this cost reduction exercise). Some areas, though, will produce significant changes in the overall margin; and these are those to which the margin is said to be most 'sensitive', and are those on which attention should be focused.

One great value of the value chain approach is that it highlights aspects of the chain which are critical to the organisation's work. For example, this form of analysis often shows that distribution (in its most general sense) is much more important than managers think. The search for the total Product:Service Package will, as we will see later, cover all of the elements from the value chain - and more.

The main problem is that Michael Porter's approach may sometimes be too restrictive:

PRACTICAL VALUE CHAINS

A more practical approach is to split the activities of the organisation into those characteristic groupings which are natural to its specific operations (in line with the philosophy of 'individuality') - rather than the theoretical nine categories described by Michael Porter. In addition, his upper set of cross-organisation activities should be ignored, since - in our experience - they only tend to confuse managers trying to use the approach.

As can be seen, from the diagram above, the visual presentation is also made more meaningful if the size of each segment of the value chain reflects its importance (on whatever basis - volume, added value, sensitivity etc - which you decide is most useful).

Another type of diagram looks even more directly at the added-value (where this can simply be in financial terms, or - once more with greater difficulty - in terms of customer value or perceived value):

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First, and most important of all, however, is to determine what are the organisation's core competences. These are the absolutely essential ingredients, which are unique to your Product:Service Package, that will be responsible for the sustained success of your organisation in the future.

The starting point for this all important determination is the application of zero level marketing, described in the last chapter, and the subsequent use of the analytical 4-step to derive these core competences;

The isolation of the core competences represents by far the most productive use of the Analytical 4-Step across the whole of marketing. We will need to return to this determination of core competences a number of times, to ensure that (for example in the wider context of the customer viewpoint and the even wider one of the external environment) they are correct; and then to optimise their positioning in the light of this new information. Remember, from the principles of Realistic Marketing, iteration and incrementalism are central aspects of the strategy process

But - as in most things - starting the process from the right place is the best guarantee of if finishing in the right position.

This is, initially, a daunting task, since you are faced with a blank sheet of paper on which you are required to write only the key competences. It is, therefore, often easier to take an intermediate step and write down a much bigger list of possible 'competences' (without having to determine how important they are) - and then progressively refine these down to the much smaller list by iteratively applying Step 2 of the 4-Step.

Even then it is distinctly possible that you will need some help to get you going, so we have developed the concept of the 'Core Competences Pie' - four separate segments of the organisations internal and external environment which are used to stimulate separate approaches to the overall problem.

Using this intermediate approach, you first develop your wider list of competences within these initial, broad categories. Focusing your thoughts in this way may stimulate your imagination - to unearth competences which, blinkered by the more conventional approaches, you might not have considered. Perhaps more important, it will also show you which competences appear in a number of slices; and - since they have wider impact - are more likely to be the crucial ones.  The segments we find most useful in this context are:

HISTORICAL RESOURCES - this slice of the pie represents the traditional, inward-looking view of the organisatign. It reflects what the organisation sees as being most important to itself, typically those competences in which it has most pride, the activities it believes it does better than anyone else - and, in general, what has succeeded in the past is an especially good indication of what will succeed in the future.

COMPETITIVE POSITION - this slice, however, requires you to look more dispassionately at its position, in relation to its 'competitors' (who are defined in the widest possible sense, including other government departments in the public sector just as much as commercial competitors in the private sector). Which competences give the organisation a sustainable competitive advantage over those competitors?  The key word here is sustainable. In this context short term advantage means little - to be a genuine core competence it has to be sustainable over the  long term.

CUSTOMER BENEFITS - we will explore the customer viewpoint in much more detail in a later chapter of the book, but at this early stage it is sufficient merely to introduce the competences which relate to this slice of the pie, and to consider those which you (the supplier) think offer most to (or are most wanted by) that customer.

FUTURE DEVELOPMENTS - this is the aspect most often neglected, since most managers tend to look backward rather than forward. Put in a nutshell it simply asks which competences will be important in five or ten years time. This often turns out to be the most powerful contributor of all, because our experience shows that managers find it easiest to widen their vision if the timescale they are talking about is (in their terms) very long - this freedom acts as a potent stimulant for their, and your, imagination.

It has to be remembered that the whole point of the Core Competences Pie lies in integrating the slices; the reverse of what might be expected - but we hope this will, yet again, make it that much more memorable.

MATRICES

The 'Core Competences Pie' might look like a matrix, but where possible - throughout the whole book - I have deliberately avoided the use of matrices, which many other academics recommend, because in general we have found that such matrices tend to distort the messages they are set to contain.

No matter how sophisticated the claims made for them, all matrices are essentially simple. Most often the pigeon-holes are given 'explanatory' titles, in the Core Competences Pie these would be ;

MOST IMPORTANTLY, THOUGH, THE ITEMS THEY CONTAIN ARE THEN ALSO ASCRIBED CERTAIN PERFORMANCE OR ACTION CHARACTERISTICS - depending upon which of the four boxes they have been allocated to.

CRITICISM OF MATRICES

In recent years there has been some debate amongst academics as to the practical value of such matrices; especially in terms of the Boston Matrix described later. The reasons we ourselves avoid the use of matrices are:

LIMITED FACTOR INPUTS - for a 2 X 2 matrix there can only be two true dimensions, and these are usually so generalised that they can offer only very limited analytical power.

SUBJECTIVE ALLOCATION - which box to put a product into is often a very subjective decision. Once the product is in the box, however, its given characteristics acquire a gloss of respectability which the original judgement would not have had - which often deludes users (not least into a false sense of security).

BLACK & WHITE OUTCOMES - probably the worst feature is that outcomes are limited to just four categories, and are black and white - with no shades of grey. A hair's breadth to one or other side of the dividing line and the strategy for a product, say, changes totally.

MOST MATRICES WERE ORIGINALLY QUITE LIMITED IN THEIR AMBITIONS - which is understandable when the gross simplifications they contain are taken into account. Their inventors, who were usually sophisticated academics, well recognised these limitations. Unfortunately, much wider reaching claims, which  have typically come from later 'evangelists', are often made for them that hide some important flaws.

HOW TO USE MATRICES

The above criticisms should not discourage you from using matrices; but they should persuade you to use them properly.

Matrices should only be used to obtain a different view - which should be combined with all the other information available to build an overall, balanced picture

As it is, I must issue one stern warning about the use of even a 'pie' in the case of Core Competences. That is that the ultimate aim of the Core Competences Pie is to condense the number of core competences and to prioritise them'. There ir no virtue, and much vice, in lengthening the lists in each slice of the pie; and considerable danger in trying to balance them with those in the other slices

If you simply cannot think of anything to put under 'Future Developments', say, then leave it blank!

The immediate outcome of all this work is a listing of, and hopefully an understanding of, what is central to the current work of, and the future of, the organisation; its Core Competences. The reason for this work will now begin to emerge.

One of the most important keys to success, in almost all walks of life, is to concentrate resources where they may be most productively deployed. Resources, even in the richest of organisations, are never boundless; and are rarely sufficient to meet all the demands which might be placed upon them. Resources have, therefore, to be allocated - even rationed - between groups of competing activities. In practice this often appears, at least to outsiders, to be a remarkably random process.
 

Thus, to formalise this process, and to help concentrate resources where they can be most effectively used, a number of rules have been developed. Below I group together some of the most useful of these under the overall banner of the 80:20 Rule;

The 80:20 Rule itself has been in use for more than a century. First enunciated by an Italian, Pareto (hence its alternative title, the Pareto Rule), it is just as relevant today. It is still one of the most productive tools, and one of the few general ones which can be applied to almost any marketing situation.

It simply recognises that the distribution of potential, be it in terms of products or customers or whatever, will almost inevitably be skewed; some of these will be more important than others (and some much more important). That the typical skew is so large that 80% of sales, say, comes from 20% of customers (and conversely that 80% of customers contribute no more than 20% of turnover) may come as a surprise; but has been born out by countless practical examples. On the other hand, as it is only a general principle and not an exact equation, the outcome may be 70:30 or 90:10 (but, by definition, it will almost never be 50:50).

Its power, and that of the other rules listed, comes from the fact that it enables you to concentrate your resources on just that 20%; confident that these are the important ones, responsible for 80% of your 'business' - and can safely limit any investment in the other 80%.

A very practical device which assists this process is what is called:

 by descending order of sales volumes, for instance. In this way, the key items are always at the top and receive your immediate attention. On the other hand, the minor ones are at the bottom where it does not matter if they are ignored. This may sound trivial, but by itself it may revolutionise your view of the world. No longer will those customers, and products, whose name starts with the letter 'A' dominate your life!

As was stated above, it is the 'boosting' of the core competences which is the most positive act. Core Competences are sometimes described as 'focus', on what the organisation does best, but to me the term 'core competences' (albeit now already associated with the ornamentation and gimmickry which seems to be added to any useful idea) best encapsulates what is needed. However, in this context - early in the book - it is not resources which need to be concentrated, but is the attention of management in general, and yourself in particular, which must be focused on those Core Competences.

That having been said, deciding just what are these Core Competences is a long process, which demands constant review - as new lessons are learned. If you are using the Analytical 4-Step as a device to aid this analysis then these are Levels 3 and 4, where you have ruthlessly to cut back to no more than six Competences (though these may be portmanteau categories) and prioritise them to no more than two prime directives.

These Core Competences are, then, a distillation of what gives your organisation its distinctive character; or, to be more precise, that which positively distinguishes from other organisations in the same field (in the commercial field this is now often referred to as 'competitive advantage'). This must, though, be looked at in the context of the longer term - thus, it must also represent substantial competitive advantage.

The next step, having searched your own (organisational) soul in this way and drawn the outline, is to determine what the detailed features your 'Product:Service Package' should be. Despite the work which has already been undertaken, this may not be as easy as at first it may appear. You may know what you expect - and want - to sell, a packet of corn flakes for instance, but the consumers may have very different ideas. You know what goes into those corn flakes, the highest quality you can afford perhaps, but the consumers will frequently pose different demands. They may first of all want reassurance that it is a healthy food for the family, something that may possibly be difficult to justify (when at least one critic claimed that the cardboard box they came in contained more nourishment!), and indeed may finally purchase the product on the back of an image; waking up happy and full of life, say, which may be somewhat easier to convey in the world of perfect families which inhabit television commercials!

The overall content of the Product:Service Package is ultimately determined by the customer, by design or by default

You may provide the physical framework but they (aided, of course, by what you say in your advertising and promotional output) will read into it the wider offering which they want to see.

Most of the rest of this chapter is devoted to exploring what this Product:Sevice Package might be.

The first of these explorations takes us into a definition of what might be the 'market', in which this product or service exists;

WHAT IS A MARKET?

To a producer or service provider, the most practical feature of a market is that it is 'where' the product or service is sold or delivered - and the profits generated. It can also be described in terms of the 'physical' definition of the product or service, and this is the framework favoured by many economists. It can be defined geographically. It may even be defined demographically.

The key for a marketer, however, should be that the market is always defined in terms of the customer. Thus, Philip Kotler[2] sees buyers (actual and potential) as constituting the market, where sellers constitute the industry

The concept even applies to non-profit organisations, every one of which has clients; or 'customers' in the conventional marketing terminology. Their 'markets' are ultimately just as powerful a force on their strategies.

WHO IS THE MARKET?

In the long run it is the customers who decide what the market really is; by their buying patterns. They set the boundaries, and by their purchases choose what products or services will remain in the market. The inevitable outcome is that to understand the market, the producer must understand the customer.

But, because of the more traditional views of producers and despite marketing theory, in the shorter term the practical definitions of markets tend to revolve around the following factors;

PRODUCT OR SERVICE CATEGORY - this says what is bought, as defined in the 'physical' terms of the producer.

GEOGRAPHY - where the product or service is sold or delivered is another clearly understood concept.

'PHYSICAL' CUSTOMER GROUPINGS' - producers do recognise obvious groupings of customers; teenagers versus senior citizens for instance.

INTANGIBLES the only intangible which is widely recognised, and then only as differentiating commercial markets, is price.

CUSTOMERS, PROSPECTS AND PENETRATION

Taking the producers' myopia about markets one stage further, they mainly see markets in terms of their own participation in those markets;

CUSTOMERS - they are defined quite simply - as the buyers of your brand, but the dividing line is often not quite so clear and may need to be further defined by marketing research.

USERS - this may be a fine distinction, but users are often not the same as purchasers.

PROSPECTS - the term 'prospects' is most often used in face-to-face selling, potential customers more often being used in mass markets, but the meaning is the same; those individuals in the market who are not the organisation's customers. Again, however, the boundaries need defining for each situation.

The important fact is that some of the individuals in the market buy the producer's brand and some don't. The measure of this difference is often given by brand 'penetration';

PENETRATION - this is the proportion (%) of individuals in the market who are users of the specific (brand) product or service.

The measure of 'penetration', though, does not allow for the rate of usage or purchase by different individuals. The most commonly used measure, therefore, is market share or brand share;

BRAND (OR MARKET) SHARE - this is the share of overall market sales taken by each brand. Even then, there may be further complexity, since the share can be of volume or of value - depending upon what the producer wants to measure. This can sometimes lead to two producers claiming to be market leader, one in terms of volume and one in terms of value - though the latter is usually judged to be ultimately the more important measure.

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These are classical definitions of markets and the various actors within them, and the shares they hold. Once more, though, life may be much more complex - as is hinted at above, and is taken further in my textbook. For example, Andrew Ehrenberg, of the London Business School says that consumers buy 'portfolios of brands'. They switch regularly between brands, often simply because they want a change. Thus:

Influencing the statistical probabilities facing a consumer choosing from a portfolio of preferred brands, which is required in this context, is a very different role for a brand manager; compared with the - much simpler - one traditionally described, of recruiting and holding dedicated customers. The concept also emphasises the need for managing continuity - by rules such as the Competitive Saw.

On the other hand, one of the most prominent features of many markets is their overall stability - or inertia, whichever description you find most useful. Thus, in their essential characteristics they change very slowly, often over decades - sometimes centuries - rather than over months.

This stability has two very important implications. The first is that if you are a clear brand leader you are especially well placed in relation to your competitors, and should want to further the inertia which lies behind that stable position. This will, however, still demand a continuing pattern of minor changes, to keep up with the marginal changes in consumer taste (which may be minor to the theorist, but will still be crucial in terms of those consumers' purchasing patterns - markets do not favour the over-complacent!). But these minor investments are a small price to pay for the long term profits which brand leaders usually enjoy.

The second, and more important is that if you want to overturn this stability, and change the market (or significantly change your position in it), then you must expect to make massive investments to succeed!

Even though stability is the natural state of markets, sudden changes can still occur, and the environment must be constantly scanned for signs of these;

STABILITY - although this, 'steady-state', may be the natural state it will often require significant investment to maintain this

FRACTURE - albeit occasionally, outside events can destroy that stability; sometimes so completely that its most important characteristics are changed completely (and the market is overturned - hence the precarious balance shown above)

MYOPIA - despite this omni-present potential threat, many organisations are short-sighted and never see beyond the minor changes taking place in the stable, steady-state, universe which seems to protectively surround them. They may not even recognise a fracture when it is actually upon them, and destroying the very foundations of the organisation.

Few organisations, however, seem to be able to recognise this even when the foundations of their business have been destroyed; they suffer from terminal myopia! Paradoxically, the very few which do see what is coming often emerge strengthened by what has happened to them. It may be painful at the time, but a 'fracture' is an excellent environment in which to learn about what is really important to your organisation; what are its real Core Competences.

Awareness of change is, therefore, a vital aptitude; to be cultivated by the managers any organisation. Traditionally, though, it has only been approached from the viewpoint of the minor ups and downs which afflict the stable market. It is even more surprising, therefore, that tradition leaves this management of change to a concept as limited, and of as such dubious value, as the Product Life Cycle;

THE 'PRODUCT' LIFE CYCLE

The 'life-cycle' has long been a very important element of marketing theory. You should be aware, though, that its supposed universal applicability is largely a myth[3]; but an important one, which you will need to appreciate before you can dismiss it!

Its 'intuitive appeal' is based on the analogy of natural (human) lives. It, thus, suggests that any product or service moves through identifiable stages, each of which is related to the passage of time (as the product or service grows older) and each of which has different characteristics;

introductory stage

At this first stage of a product's life, the supplier can choose from strategies which range from 'penetration', where the supplier invests to gain the maximum share of a new market, through to 'skimming', where the maximum short term profit is derived from the 'innovation'. In either case the main task is to create awareness of the brand. In general the 'pioneer' which invests can expect to retain the highest market share; usually double the share of later entrants, even over the longer term.

growth stage

As a result of awareness having been largely established, and in the light of growing competition, the emphasis at this stage may well be on promotion of the 'brand'; establishing the correct attitudes to the product. Promotion is still heavy, and suppliers often have to make further, substantial investments. In recent years, another feature of this phase has been the battle for distribution.

maturity

No product or service can grow forever; and eventually all the significant, potential uses will have been developed. The sales curve will flatten, and it will have reached maturity. The majority of products or services currently in the market place are at this stage, and much of the theory and practice of marketing revolves around this 'steady state'; building groups of loyal users, and attracting those of competitors.

decline stage

Eventually the whole market may decline or other newer products may be introduced which are themselves a substitute for the established product. The product or service thus goes into a terminal decline - though this decline can last for years.

lessons of the life cycle

Every product or service must, almost by definition, have a life cycle. It is launched, it grows, then it dies. As such, it offers a useful 'model' to keep at the back of your mind. Indeed, if you are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of your mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary to have that vision of mortality on front of you.

The most important aspect of product life-cycles is, however, that to all practical intents and purposes they often do not exist! In most markets the majority of the major (dominant) brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolise many markets, is therefore one of continuity!

In the most respected criticism of the product life cycle, Dhalla & Yuspeh[4] state;

"...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."

Thus, the life cycle may be useful as a description, but not as a predictor;; and usually should be firmly under the control of the marketer! The important point is that in many, if not most, markets the product or brand life cycle is significantly longer than the planning cycle of the organisations involved. It, thus, offers little of practical value for most marketers. Even if the PLC exists for them, their plans will be based just upon that piece of the curve where they currently reside (most probably in the 'mature' stage); and their view of that part of it will almost certainly be 'linear', and will not encompass the whole range from growth to decline.

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The above section on the Product Life Cycle is long, despite the fact that - as you no doubt detected - I think that it has little value in practice. Indeed, I believe that its use may be positively dangerous for many organisations; since it tempts managers of successful, mature brands to prematurely anticipate their move into decline. But is probably the most widely known, and taught and respected, piece of marketing theory! It is imperative, therefore, that you appreciate the problems that its use, in any form, might pose.

How, then, might you manage change?

At one extreme, seeing fractures in advance, or even recognising their implications after they have occurred, is very difficult. This is best handled by 'scanning', described in a later chapter. Responding to them once they have been detected is perhaps best ensured by undertaking the most effective possible marketing - better than that of other organisations which might also attempt to take advantage of the fracture - and, most important of all, reacting much faster than these competitors.

Handling the less dramatic changes which regularly occur in the stable market - and are the staple diet of most marketers - is a different matter. These are dealt with especially poorly by the PLC. The technique which has accordingly been developed, as a positive alternative to ineffective use of the PLC in this ('Mature') range, is called the 'Competitive Saw';

The principles involved are very simple: as is indicated by the chart above.

The first is quite simply that every 'stimulus' (every investment, be it an advertising or promotional campaign or a new feature added to the 'product') results, after a short delay, in an rapid improvement in 'output', raising the product or service's position (typically directly in terms of its competitive position, and indirectly in terms of sales levels).

The second is that this advantage is then steadily diluted as competitors invest in their own activities, and the performance level (the competitive advantage or sales) slowly drops until the next stimulus is applied. Because of the competitive aspect and because it largely removes variations due to seasonality etc, the measurements are usually in terms of relative share (though absolute figures may also be used).

This is a very simplified model of what actually happens, though something approaching it can be observed in practice (in the way that, for instance, advertising agencies routinely track the impact of advertising campaigns on awareness levels), which is not the case with the Product Life Cycle which it replaces. Despite its simplicity,  it offers a number of significant benefits:

INTIMATIONS OF MORTALITY - it very effectively replaces the one important function of the Product Life Cycle, that of reminding managers that there will be no future if they do not look after their brands, and continue to invest in them - but it does this more directly and practically, and without the major drawbacks inherent in the PLC model.

TIMESCALING - on much the same theme, it is an ever-present reminder that you cannot neglect your brands, or stop investing in them, for too long - especially during the very extended 'maturity' phase of a successful brand

LINKAGE OF INPUTS AND OUTPUTS - it encourages, and provides a framework for, managers to actively plan what inputs are needed, when, and what the outputs will be; and what the efficiency of conversion of inputs to outputs is

SURFACING OF INVESTMENT - it makes very clear the need for, and the results of, investment policies on brands. This becomes even more clear in the 'STEPPED SAW';

This looks at the effect of major inputs, major investments (such as new products or significantly increased promotional spending). These may have the effect of raising the average level of the 'saw teeth'; though, as shown above, later neglect (or a comparably strong competitive response) can just as easily result in a step down to a lower average level.

As the above illustration shows, there are two elements to performance. One is the average level; averaged over the short timescales that normally are reported on by the Competitive Saw. This is strategically most important since it shows longer term trends (a slowly decreasing average might be hidden by the variations in the short-term saw).

The other is the pattern of the saw itself, the time intervals and the performance variation per cycle, which determines the tactical approach.

The idea of the saw should not lull you into expecting regularity. Different stimuli will have different impacts, and will be more or less efficient, so the saw will be a jagged one;

As the saw is primarily an illustration of the impact of short term investments, the main criterion will be which of the stimuli available will result in the most efficient investment pattern (which, advertising or new features say, will produce the greatest impact for the same amount of money), though a mix of stimuli will usually produce the highest efficiency overall.

The three main lessons of the competitive saw are the importance of relative performance, the time related nature of this, and the investments which lie underneath.

Adopting the long-term perspective implied by the third of these observations reveals another important implication. Thus, following the implied principle of the fixed asset, the shorter-term sawtooth maintenance pattern can be overlaid on a gradually declining trend in performance; notionally equivalent to depreciation in financial accounting. Thus, over time there may be a slow drift away from the ideal position - as the customers' needs and wants change and/or competitive positioning improves. Your own response to this may take two forms. The first, and perhaps the most effective, is that of 'dynamic repositioning'. The need for change is regularly tracked and the brand's position readjusted - in much the same way that an autopilot's feedback mechanisms ensure that an airliner follows the correct flightpath. The emphasis here is on the dynamic approach to (current) change - where most of marketing theory revolves around decisions based upon static (historic) positions.

If such dynamic repositioning is not possible, perhaps because the necessary product changes come in discrete steps, then periodic readjustments may be needed. This is where the concept of depreciation is especially valuable. Thus, it allows the build-up of reserves to cover the significant costs of such repositioning exercises.

Encouraged by PLC theory, which seems to emphasises the futility of long term investment, the long-term asset investment aspect of brand performance is largely ignored by traditional marketing theory. We believe that, on the contrary, it should represent the main element of marketing strategy - and (in view of the dangers it poses for the unwary) the PLC should be dropped from the marketers vocabulary!

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