MANAGING MARKETING PERFORMANCE INTRODUCTIONS 1 about David Kilburn

MANAGING MARKETING PERFORMANCE INTRODUCTIONS 1

about David Kilburn • Head of Business Development, Associate Professor and DSGi Marketing Fellow, formerly Barclays Fellow • Dip. M, MCIM, Chartered Marketer • Marketing management experience in retail industry- home improvements, food, and consumer electronics • Worked part time for CMC for 5 years • Marketing Director for BSM Electronics • Store Director – WHSmith Do-It-All • Online marketing tutor/ Dissertation advisor for worldwide MBA programme - Liverpool University • External Examiner for Marketing/Business University of Wales in Spain and Italy • Marketing Tutor for ISTUD in Milan, Italy each summer 2

ABOUT YOU! • Tell us something about yourself – Who you are? – Where you work? – What your role is? – Your marketing experience? – Academic path? – Your involvement with strategic marketing management issues? 3

SETTING THE SCENE • Assignment or exam? – Dates, requirements and deadlines • • • 4 Use College Web facilities CIM Learning Zone and EBSCO Reading Study Guide – text book Previous papers and answers Examiners comments Tutor Forum – February 2009 Webinars Revision session – assignment session Contact me – dkilburn@bournemouth. ac. uk

The 5 elements 1. Creating organisational context for effective implementation of strategy 2. Managing change and internal marketing 3. Implementing strategy through marketing activities 4. Management techniques for managing the marketing function 5. Measurement, evaluation and control 5

Fit with overall pg syllabi ANALYSIS & EVALUATION • Strategic marketing • Evaluation of performance • Internal analysis • External analysis • The global marketplace MANAGING MARKETING PERFORMANCE • • • 6 Organisational context Internal marketing Implementing strategy Managing marketing Measurement & control STRATEGIC MARKETING DECISIONS • Competitive advantage • Innovation/reorientation • SMD in global marketplace • SMD in portfolio management • Investment decisions/control STRATEGIC MARKETING IN PRACTICE Learning outcomes only. No specified syllabus elements

Scope of the syllabus • ‘How to do the job of marketing’ – relates to marketing practice • Tests application rather than knowledge: – extend knowledge into thinking – from ‘what’ to ‘why’ and ‘how’ • Draws on a wide range of resources • CONTEXT 7

Focus • The “How” of marketing rather than the “what” • Delivery emphasis is on “ Listen and Challenge” • Shift from analysis to critical evaluation 8

MMP ‘AUDIT’ • • 9 Discussion with examiner Key points Tutor forum Last ‘diet’

MMP Focus Meeting Feedback • Key issues resulting from the first set of marking – Referencing is important but there is recognition of the work based nature of the assignments and the increase thereby in Internet based referencing. – Looking for sound theoretical underpinning – Looking for ‘Trail of evidence’ - linkage between audit, selection of options and recommendations – Students need to define the boundaries of the project clearly e. g. 1 or 2 products in 1 or 2 markets is enough 10

MMP Focus Meeting Feedback • Good practice – Trail of evidence – Support in audit findings – A good audit is: • Relevant to the topics • Linked to the report • NOT cut and pasted! – Numbered report and good structure – Good index – KEY – Do mind maps to sort ideas prior to writing the report 11

MMP Focus Meeting Feedback • Good practice more. . – Evaluation (acid test is ‘so what? ’) – Depth not breadth is critical 12

MMP Focus Meeting Feedback • Poor practice – Unapplied models (Senior examiner’s bete noir) – vital to apply in context – Too much description not evaluation – looking for ability to use data to discriminate in decisions – Poor referencing – misspelling of authors’ names! – Poor use of appendices – this is a business report 13

Grade Descriptors • Example assignment from last assessment 14

MY ASSUMPTIONS! • You have prior knowledge and some experience of using theories that apply to this syllabus • If you are unsure at any stage – SHOUT! 15

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE Session 1 The role and practice of leadership 16

CIM Definition of Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably. 17

Learning outcomes • At the end of the session you will be able to: – Explain the role of the strategic leader in managing marketing performance – Explain the role of the strategic leader in achieving marketing orientation – Explain the role of the strategic leader in building shareholder value through marketing activities – Explain the role of the strategic leader in ensuring marketing effectiveness 18

What is leadership? • Leadership is the process of influencing others to work willingly towards the achievement of organisational goals. • Leadership can be characterised in terms of traits or characteristics (of leaders) and styles (which are to be adopted). • Leadership skills can be learnt and improved 19

Manager or leader - differences? Managers Leaders Cope with complexity change Address the present and the short term the future and the longer term Performance meets expectations Focus controlling (John Kotter) 20 exceeds expectations unlocking potential

Models of leadership style • Huneryager and Heckman; Likert – Dictatorial, autocratic, democratic, laissez-faire • Ashridge Management College – Autocratic, persuasive, consultative, democratic (omits the extremes at each end) – Tells, sells, consults, joins • Mc. Gregor – Theory X and theory Y • Hersey and Blanchard: situational leadership – Match the style to the development level of the subordinate http: //changingminds. org/disciplines/leadership/styles/situational_leadership_he rsey_blanchard. htm 21

Mini Case -Autoglass: Leadership success factors • • 22 Customer driven Energy, drive and change Analytical thinker Commercial ideas and action Planner and implementer Open communicator Leading and motivating teams Partnership builder (see handouts)

Mini Case -Autoglass: Leadership success factors Question one Think of two successful leaders that you have known, preferably selecting examples that display different approaches. Assess each of them in relation to the various Autoglass success factors. 23

Mini Case -Autoglass: Leadership success factors Question two Now consider a less effective leader. To what extent did he or she demonstrate the various success factors? 24

What guides the organisation? Strategy ‘Strategic fit’ Style Employees Culture Leadership Values 25

Leadership skills (Belbin) • • • 26 Versatility Feedback Charisma Integrity Altruism • • • Decision making Problem solving Initiating action Fostering linkages Assisting in evolution and change

What does the leader do? • Adair identifies 8 leadership activities – – – – 27 Defining the task Planning Briefing Controlling Evaluation Motivating Organising Setting an example

Leaders determine how organisations develop • Strategic choice theory (Stacey, 2003) • Formulation and implementation of strategy are different • It is the role of leaders to formulate strategy and to direct its implementation 28 • Theory of the learning organisation (Senge, 1990) • Organisations evolve as a result of high levels of learning by individuals and teams

Marketing Management’s Role 29

Life cycle of marketing 30

Relationship marketing – implications for marketing practice 31

Useful web-sites • www. shapetheagenda. com – Go to ‘past agendas’ then select ‘hard edged marketing’. – The most recent paper on ‘managing marketing people’ is also worth a look • www. wnim. com – What’s new in marketing • http: //www. thewisemarketer. com/ – VERY GOOD! • www. cim. co. uk • www. excellencenorthwest. co. uk/Resources /Steve_Kempster_19 th_July. ppt – A useful overview 32

Minicase - Leadership Consider a small manufacturing company, t/over circa £ 25 m p/a, marketing team of 3 – Manager (you), executive and assistant. The corporate objective is to increase sales by 25% over the next 3 years and the marketing objectives are to increase brand awareness by 50% & the number of new prospects by 50%. You need to increase your team by one, what are the leadership issues to consider? 33

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CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE Session 2 Planning the team 35

Learning outcomes • At the end of the session, you will be able to: – Appraise the requirements of a given set of tasks and their context, and assess the impact of relevant factors on the creation or development of a team to perform those tasks. – Determine the skills, characteristics and roles required within a team to carry out specific tasks effectively. – Prepare a plan showing how the team should be structured, selected, formed and developed to ensure effective performance. 36

A group is a collection of people … • …. who perceive themselves to be a group! • In ‘Understanding Organisations’ Charles Handy differentiates a group from a random collection of individuals. • Members of a group: – have a common sense of identity and belonging – are loyal to the group and conform to its standards 37

A group is not a team: teams have synergy • A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable 38 • Katzenbach and Smith, The Wisdom of Teams, 1994

Groups become teams when they have a sense of purpose • Needs are complex and multi-layered and need to be managed as such (Adair) • Their members play particular roles (Belbin) • They are likely to pass through stages of development (Tuckman) • Their effectiveness depends on their terms of reference and their conduct (Handy) • Leadership is key (Ashridge; Belasco & Stayer) 39

6 differences between a team and a group (Belbin) 40 Teams Groups Size Limited Medium/large Selection Critical Limited Leadership Shared/rotating Solo Perception Mutual knowledge Focus on leader Style Role spread Conformism Spirit Dynamic interaction Togetherness

John Adair identified 3 overlapping needs Task Roles Initiating Information Seeking Strategic planning Evaluating Decision-making Task needs Group maintenance roles Encouraging Clarifying vision Standard setting Peace-keeping www. johnadair. co. uk 41 Group needs Individual maintenance roles Individual needs Objective setting Feedback Recognition Training Empowerment Counselling

Team skills, characteristics and roles • Need for key competences across the team • Need to achieve a balance of personalities and skills • Need to consider the tasks to be undertaken, the individuals who make up the team, and the cohesiveness of that team 42

Designing a team 43 • Meredith Belbin identified 9 distinct management roles – Chairman - presides and has a co-ordinating style – Shaper- team leader with a directive style – Plant- introvert but intellectually dominant/ imaginative – Monitor/ Evaluator - analytically intelligent/ critical – Resource Investigator - source of contacts. – Company Worker / Implementer - getting the job done – Team Worker - handles personal relationships in the team – Completer/ Finisher - keeping the team to its deadlines www. belbin. co. uk – (Specialist)

TEAM DEVELOPMENT (TUCKMAN AND JENSEN) • • 2 STAGE 1 - Forming STAGE 2 - Storming STAGE 3 - Norming STAGE 4 - Performing Tuckman (1965) • 3 STAGE 5 - Dorming Tuckman and Jensen (1977) 44 4

Choosing the right people is not always straightforward 45

Forming and developing (marketing) teams • Teams don’t just ‘happen’ • There is a process • Leader needs to nurture the team through these stages of development • Recruit for attitude, train for skill • Consider motivational and morale issues • Consider the personal and skill development needs 46

Handy: team effectiveness 47

Planning and control is a discipline • Plan, do, check and adjust (PDCA) – Plan what is to be done – Do it – Check that it has been done right – Adjust: make any changes necessary 48

Types of Teams • • • Multi-disciplinary Multi-skilled Project Virtual Managers role – prioritisation, planning, control, decision making & problem solving • Leadership 49

Virtual teams • No manager: this makes them very democratic • No meetings: this is enabled by modern technology • No organisation or structure: members are typically multi-skilled 50

Case Studies 51

Finally: Elton Mayo and the Hawthorne studies • Performance responds to attention • People perform better if they perceive that they are a group singled out for attention – Tom Peters…. • Relationships within work are important to employees • Groups develop spontaneously and can set their own rules, attitudes and standards • 52 www. accel-team. com/human_relations/hrels_01_mayo. html

Useful web-sites • www. belbin. com – A basic introduction to Belbin ideas • www. teamtechnology. co. uk – Leadership, management, teamwork and business • www. buildingyourteam. com – Free articles and tips for team building • www. greatplacetowork. com – Does what it says on the tin • www. johnadair. co. uk – Leadership and management 53

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE Session 3 Developing and managing teams 54

Learning outcomes • At the end of the session, you will be able to: – Demonstrate an ability to manage the work of teams and individuals to achieve objectives and create effective working relationships within the team and with other teams – Critically evaluate the productivity, satisfaction and effectiveness of teams against their objectives using appropriate techniques. – Analyse the causes of any sub-optimal performance and recommend how to improve the team’s performance, including plans to improve motivation, commitment and loyalty. 55

Motivation: what is it and what’s theory? • Motivation is simply reason(s) for behaviour • There are two types of theories: – Content theories eg Maslow (hierarchy of needs) and Herzberg (two-factor theory) – Process theories eg Vroom (expectancy theory) and Handy (motivation calculus) Need 56 Want Action Result

Maslow’s hierarchy of needs Fulfilment of potential Selfactualisation Independence Relationships, affection, belonging Security, order, predictability, freedom Food, shelter 57 Esteem Love/Social Needs Safety Needs Physiological Needs

Maslow 58

Herzberg • Herzberg identifies two factors which affect motivation at work: 1. Hygiene factors – elements which cause job dissatisfaction 2. The motivators – elements which cause job satisfaction 59

Handy’s motivational calculus • Each individual has a motivation calculus which is concerned with: – Energising behaviour; – Direction of behaviour; and – Sustaining behaviour • Motivation is based on strength of need • E= effort, energy, enthusiasm and expenditure of time, resources and passion • 60 http: //www. businessballs. com/charleshandy. htm

Schein (1965) says that different people are motivated in different ways 61 • • Rational economic: scientific management Social man: human relations Self-actualising man: Maslow/Herzberg Complex man: all of the above • Schein, E. H. (1965) Organisational Psychology. Prentice-Hall Inc, New Jersey

Schein also talks of a psychological contract • This exists between individuals and their employer: – Coercive: employee feels he/she is being forced to contribute – Calculative: employee accepts a reward/effort relationship – Co-operative: employee identifies with the organisation • Motivation exists when both the individual and the employer view the contract in the same way. 62

Then the accepted motivators are well known • Job design, enrichment, enlargement and rotation • Participation in decision making and empowerment • Pay and incentive schemes – Individual and group • Good people management 63

Creating effective working relationships Nine strategies for creating trust (Robbins & Finley) • Have clear, consistent goals • Be open, fair and willing to listen • Be decisive – and how to be decisive • Support all other team members • Take responsibility for team actions • Give credit to team members • Be sensitive to the needs of team members • Respect the opinions of others • Empower team members to act 64

Evaluating team performance • Performance management/performance appraisal systems • Review achievement to objectives • Discuss progress of the team and of individuals • Look forward – don’t slip into a ‘blame culture’ approach • Learn lessons from mistakes and move on • Review regularly • Give recognition and praise where due • Celebrate team success 65

Be sure about 4 key factors • Goals – must be established at the forming stage • Roles – Should be established before the norming stage • Processes – Often get developed during storming • Relationships – Critical for performing 66

Management of Peripheral Workers • • What sort of working? Benefits Challenges Management Challenges – Trust – Communication – Measurement & achievement – Involvement 67

Summary • Forming and developing marketing teams – Teams don’t just ‘happen’ – “Forming, storming, norming and performing” – Leader needs to nurture the team through these stages of development – Recruit for attitude, train for skill – Consider motivational and morale issues – Consider the personal and skill development 68

Minicase – Motivation & Team Management In your small marketing team of 5 there is a manager, 2 executives and 2 assistants. One of the executives is not performing to full strength and complains a lot! Taking the role of manager, discuss how you would try to motivate this executive and how you would manage this situation going forward? Which theories might assist in your management strategy? 69

LUNCH 70

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE – Managing Change Session 4 Strategic marketing, culture and change 71

Learning outcomes At the end of the session, you will be able to: • Recommend how an organisation should become more strongly market oriented, taking into account the nature of its environment and culture. • Assess the main pressures on an organisation to change and the initiatives available or being used to respond. • Critically evaluate the role and content of an internal marketing communications plan and its contribution to managing change in an organisation. 72

Market Orientation • Definition 1 –. . entails one of more departments engaging in activities geared towards developing an understanding of customers’ current and future needs and the factors affecting them, sharing of this understanding across departments and the various departments engaging in activities designed to meet select customer needs (Kohli and Jaworski, 1990) 73

Market orientation Ø An organisational culture where beating the competition through the creation of superior customer value is the paramount objective throughout the business. – Oriented towards customer – Alert to competitive situation – Co-operation between functions – Emphasis on profit, not turnover – Responsiveness to changes • (Piercy, Market Led Strategic Change, 2001) 74

Market Led Strategic Management • Market orientation – ‘…beating the competition through the creation of superior customer value…’ (Piercy) • Components – Customers, Competition, Inter-functional, Culture, Long-term profit focus • Challenges – New: Customers, Competitors, types of organisation, ways of doing business 75

Organisational Culture • The sum total of the beliefs, knowledge, attitudes of mind and customs to which people are exposed during their interaction with the organisation. 76

Culture “ The way we do things around here” – Deal and Kennedy 1982 “Collective programming of the mind” – Distinguishes one group from another – Hofstede (1991) 77

Corporate Cultures Speed of feedback Slow High risk ‘Bet your company culture’ Fast ‘Hard macho culture’ Attitude to risk Low risk ‘Process culture’ Source: Deal and Kennedy (2000) 78 ‘Work hard/play hard culture’

Changing philosophies and orientations Product Orientated Sales Orientated Supply increases DEMAND EXCEEDS SUPPLY Seller’s market Emphasis is on increasing output Source: Kotler 79 Market Orientated Supply increases DEMAND EQUALS SUPPLY Products are pushed at customers. Emphasis is on advertising and selling Societal Orientated Environmental concerns SUPPLY EXCEEDS DEMAND Buyers’ market Emphasis is on customer needs and allocation of resources to satisfy them CUSTOMER NEEDS EXPAND Demands are now on quality issues. Management must satisfy long-term interests of society and individual – as well as needs of customers and the organisation’s mission

A model of market orientation 80

Key components of achieving marketing orientation • Customers: know them well enough to give superior value • Competition: what are their short and long-term capabilities? • Inter-functional: mobilise the entire company to create superior customer value • Culture: employee behaviour should be managed to ensure customer satisfaction • Long term profit focus: have a strategic but realistic vision • 82 Hooley, Sounders and Piercey; 2003

Role of marketing in strategic management • Identify and monitor customer needs and market situation • Link customer needs to organisation’s capabilities • Contribute to determining competitive positioning • Implement marketing programmes to deliver value and retain customers • Measure the effectiveness of marketing activities 83

What’s driving all this? Changes outside 84

Environmental analysis 85

External analysis 86

If everyone in the company does marketing what does marketing do? • It orchestrates the marketing that everyone else does • It is the font of all knowledge – About customers; – About competitors; and – About the company and its products/services • It is the ‘engine’ of growth 87

Marketing and change 88

“Nothing is permanent except change” Heraclitus 89

Organisation & Change Model All of these could change! 90 Mc. Kinsey 7 S model Effective internal marketing can help!

Kenichi Ohmae got there first; the strategic triangle 91

Key drivers of change? • ICT – Eg Music marketing • Globalisation – Wal-Mart? • Ethical concerns – Fair Trade – Cause related marketing 92

The world is changing External issues (PESTER) • Political • Economic • Sociological • Technological • Environmental • Regulatory and • Competitive 93 Internal issues • Retention or gain of competitive advantage • Cost-savings • New senior management • New owners and other stakeholders

Internal marketing • Deals with internal customers - an important stakeholder group • Essential in effecting marketing oriented culture • Marketing techniques can help to motivate staff and increase level of ‘involvement’ 94

Kotler sums it up as a marketing triangle (1999) 95

Internal marketing • Provides communication to help employees identify with corporate objectives - the common goal • Breaks down ‘them and us’ culture • Competitive advantage can be achieved through employee knowledge • Product/service innovation can come from employee ideas • Good customer service needs constant reinforcement 96

Internal marketing - 3 phases 1. Employee motivation and satisfaction 2. Customer orientation 3. Strategy implementation and change management Source : Ahmed and Rafiq (2002) 97

First segment the market Segmentation • Different levels of management • Different functions • Different locations, cultures • Supporters, opposers, neutrals (Jobber 2001) – It’s not single dimensional 98

STAKEHOLDERS Mendelow’s power/interest matrix Low Interest. High Interest Low Power High Power 99 Minimal Effort Keep Satisfied Keep Informed Key Players

Then use the marketing mix internally Product • Strategy and process of change • Job or function may be internal ‘product’ Price • Psychological price loss of status, uncertainty, loss of productivity 100 Promotion • Clear communication essential • Noticeboards, meetings, intranet, newsletters, etc Place • Information, training etc - channel providing services to the internal customer

Discussion point • Why do so many organisations fail in their efforts to be truly marketing oriented? • List the internal cultural barriers that may be frustrating their ambitions and provide suggestions as to ways in which these barriers might be overcome. • What theories might assist? 101

Useful references • www. valuebasedmarketingmanagement. ne t – a useful reference about just about everything marketing • www. organisationalchange. co. uk – a consultancy in organisational change • www. mad. co. uk – delivering business insight 102

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE Session 5 Change management 103

Learning outcomes At the end of the session, you will be able to: • Identify and evaluate the sources of and the techniques for overcoming resistance to change. • Assess the impact of change in a marketing department. • Prepare a plan to deal with change in the marketing department, including the development of appropriate skills and capabilities to meet the objectives. 104

Managing Strategic Change • Styles – Education/comms, collaboration/partic, intervention, direction (coercion). • Roles – Leadership/change agent, middle mgt. , outsiders • Levers – – 105 Organisational routines Symbolic processes Politics/Alliances Communications

What kind of change? The Johnson and Scholes model 106

Change and the individual: people don’t like change • They resist it because of: – Fear – Uncertainty – Lack of confidence – Dissonance • It changes them – Physiologically – Circumstantially – Psychologically 107

People respond to change in different ways • Acceptance – Enthusiastic or otherwise • Indifference • Passive resistance • Active resistance 108

Change is a process: it can be managed 1: determine need for change 2: plan the change 3: analyse possible reactions 4: consider alternatives 5: develop final plan 6: communicate the plan 7: implement, review and evaluate, modify as appropriate Put it all into the hands of a change agent but make sure that he gets visible top management support. 109

Force Field Analysis –the three step model Driving forces (for change) A requirement of New legislation. Professional Commitment To controlling the organisation. Requirement to report To external agencies A concern for quality Current State Restraining forces (resistance) Cynicism about change ‘another fad’ Existing systems are sufficient Trade Union concern Over effects on job Working conditions Complexity of producing Such reviews Cost of carrying out such reviews 110 Kurt Lewin Ideal Position

Emergent approach Stable/ predictable environment Turbulent/ unpredictable environment Planned change The change continuum Source: Adapted from Burnes (1996) 111 Emergent change

John Hunt (Managing People at Work) Unlearning is as important as learning • Unfreezing requires: – A ‘trigger’ – eg a crisis or event – A champion to challenge inherited thinking – Buy-in from colleagues – Restructuring UNFREEZE Existing behaviour 112 Attitudinal/ behavioural change REFREEZE new behaviour

Creating major change (Kotter 1996) 1. Establish sense of urgency 2. Create the guiding coalition 3. Develop a vision and strategy 4. Communicate the change vision 5. Empower broad-based action 6. Generate short term wins 7. Consolidate gains and produce more change 8. Anchor new approaches in the culture 113

Making time for change 1. Global change 2. Organisational change 3. Personal change Source: Robbins and Finley (1998) 114

The Change Curve 115 Originally developed by Kubler-Ross And adapted by Wilson 1993

Think about 3 phases in change (Conner and Patterson) • Preparation – Contact – Awareness • Acceptance – Understanding – Positive perception • Commitment – – 116 Installation Adoption Institutionalisation Internalisation

Cultural change is the most difficult • Get prepared • Hampden –Turner – – – Find the dangers Bring conflicts into the open Play out corporate dramas Reinterpret the corporate myths Look at symbols, images, rituals Create a new learning system • Take it through the entire organisation • Wait 3 (or even 8) years! 117

Don’t forget HR implications • There may be redundancies. These need to be carried out legally and meet the company’s social responsibility policies; • Recruitment policy and practice may need to be reviewed; and • Training is probably going to be a major need to bring everyone up to speed 118

Group discussion point Overcoming resistance to change through internal marketing. Consider (one of): • A small B 2 B machinery supplier looking to become a more market led organisation following recent acquisition • A national charity looking to change its strategy for attracting donations from local charity shops to national advertising • A local supermarket chain looking to build alliances with retailers elsewhere How would you do it? 119

Mini Case – Managing Change A new marketing director has come in to the business and is making changes in the strategy of the marketing team. This will result in job losses and changes in the structure of the team. To make matters worse their style is very ‘dictatorial’. What obstacles do you think this person will come up against, and how should they overcome them? 120

Summary • Change is inevitable, but it is not always welcomed, and often resisted. • Success with change programmes can be improved by taking people’s fears into account • May be necessary to have a ‘Change Agent’ • You can’t change too much too often – cynicism sets in and that is the most difficult to overcome • Cultural change is difficult 121

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE Session 6 Building shareholder value through marketing activities 122

Learning outcomes At the end of the session, you will be able to: • Explain the link between marketing activities and shareholder value. • Explain the measurement of economic value added • Determine the contribution to shareholder value of marketing activities undertaken. • Critically appraise methods available for valuing brands. • Explain how brand equity can be built and brands can be valued. • Recommend an appropriate approach for the organisation. 123

Strategic decisions are concerned with … • The long term direction of the organisation • Achieving some advantage • Scope of an organisation’s activities • Matching the activities of the organisation to the environment in which it operates Source: Johnson & Scholes 124

Implementation • Shareholder Value Analysis – Computing Value • Economic profit = NOPAT – (CE x cost of capital) – Discounting Cash flows – Value based management – Marketing assets 125

Firstly a useful reference • • • 126 SVA: shareholder value analysis EVA: economic value added NOPAT: net operating profit after tax ROCE: return on capital employed DCF: discounted cash flow NPV: net present value

Economic profit versus accounting profit • Accounting profit is what is reported in a company’s results and what is reported is strictly controlled by the principle of prudence (tell that to Enron!) • Many expenditures which are in fact investments and will pay off in the future are treated as expenses • Economic profit may treat such expenditures as investments 127

Shareholder value and total shareholder return Investors focus 80% of their decision on cash beyond 4 years Today Total shareholder return (TSR) TSR = dividends + share price growth 128 +10 years Source : Valueline and PA Consulting Group 2002 www. cim. co. uk/mediastore/PA_unlockingrealvalue. pdf Investors are most interested in what will generate cash in future

Value drivers Read Doyle! Value based marketing 129

Key to enhancing value is to understand the drivers • Financial – – Volume Timing Risk Sustainability • Marketing – Choice of markets – Target customers – Positioning • Organisational – Internal and external 130

Positioning for differential advantage is a little more complex • • Product leadership Operational excellence Brand superiority Customer intimacy • There are often examples of all four positions taken in an industry 131

Marketing strategies to create value Marketing assets • Marketing knowledge • Brands • Customer loyalty • Strategic channel relationships 132

Marketing and shareholder value € CUSTOMERS 133 Value drivers Marketing skills Marketing results Marketing assets Financial results SHAREHOLDERS Marketing activities

Strategies to develop SV 1. 2. 3. 4. 5. 6. Economies of scale Economies of scope Cost advantages Product differentiation Access to distribution channel Government policy Source: Peterson (2004) 134

Boston matrix and shareholder value A selected few Remainder divested Liquidated Competitive position 135

Limitations of SVA • Forecasting • Cost of Capital • Estimating terminal value • Baseline business value • Options for the future • Market valuation 136

Brands 137

Strong brands can increase cashflow by • Obtaining higher prices; and • Higher volume growth; resulting in – Lower costs; and – Higher asset utilisation 138

But what’s a brand? • It’s an entity with ‘a collection of attributes that strongly influence purchase’ (Hugh Davidson) • It comprises an effective product, a distinctive identity and added values. 139

Branding • What is a brand? – ‘A name, sign, symbol, design or combination of them, intended to identify goods or services of one seller or group of sellers and to differentiate them from those of competitors’ (Kotler) • What makes up a brand? • Benefits of branding – Customers, Marketers, Shareholders 140

Brand building process Basic brand Augmented brand Extras Pack Training Features Guarantees Potential brand 141 Services Name Product Design Delivery Quality Logos Installations Technical support

Types of brand/brand image • Attribute brands – image conveys confidence in its functional attributes – e. g. Volvo (safety), Persil (washes whiter) • Aspirational brands – image conveys a lifestyle to which people aspire – e. g. Martini (sophisticated jet-setter), Rolex (top professional) • Experience brands – conveys an image of shared associations and emotions – e. g. Nike (just-do-it), Marlboro (rugged masculine values) Doyle ‘Value-Based Marketing, 2000 142

From Commodity Brand to Power Brand Components of a brand 143 CENTRAL VALUES EXPRESSIVE VALUES CORE VALUES What the brand the consumer share at a fundamental level What the brand says about the consumer What the brand does for the consumer

Brands are used in different ways: brand architecture • Company brands eg Mercedes • Source brands eg Kelloggs Corn Flakes • Range brands eg Sharwoods • Product brands eg Ronseal • Umbrella brands eg Philips What’s the difference between a range brand an umbrella brand? 144

Brand stretching: be careful • What is it? – Using a brand name successful in one market to enter another • Why do it? – It’s cheap, uses an existing asset and is less risky than a new brand • When to do it – When the brand core values are applicable to the new market and when activity in the new market will not adversely affect them • But: it may damage the first brand it’s not a substitute for real marketing 145

Brand Planning & Strategies • Brand Planning – – – Market Analysis Brand Situation Analysis Targeting future positions Testing new offers Planning & evaluating performance • Brand Strategies – Brand Stretching – Revitalising brands – Global or local? 146

Valuing Brands • Should brands be valued? • Methods – Cost – Royalties – Market Value – Economic Use Value – SVA Approach to brand Valuation • Discount rate • Future earnings 147

Business Week/ Interbrand valuations 2007 148

Young and Rubicam’s Brand Asset valuator www. yrbav. com 149

Millward Brown’s Brand. Dynamics www. millwardbrown. com 150

Interbrand’s strength index 151

Summary • Organisational value drivers – Mc. Kinsey 7 S model identifies these • SVA approach is good but has limitations • NPV = Sum of the present values of all future cashflows. • NPV can be used for project appraisal • Brands are important differentiators and can be, perhaps inaccurately, valued & exploited. 152

CIM PROFESSIONAL PG DIPLOMA MANAGING MARKETING PERFORMANCE That’s all for day 1! 153