In The Practice of Management, Peter Drucker wrote: "The business enterprise has two and only 
two basic functions: marketing and innovation. Marketing and innovation produce results; all the
rest are costs." Today, chief executives at many leading companies are frustrated over marketing's
inability to produce measurable results. Increasingly, they view the marketing department as an 
expense rather than an investment and, as a result, marketing is losing power in the corporation.

During the past two decades, marketing's role as the company growth engine has spluttered amid 
fragmenting markets, strong global competition, product commoditisation, shorter product life 
cycles and powerful distribution channels.

Studies suggest that Chief Executive Officers (CEOs) view their most important challenges as 
those of marketing, such as price pressures and keeping customers loyal. However, they are not 
sure marketers can confront them. What, if anything, can marketing do?

For marketers to capture the imagination of CEOs, they must first break away from the 
tactics of the four Ps -- product, price, place and promotion -- and become more strategic, 
cross-functional and focused on the bottom line. Second, they must lead transforming 
initiatives across the organisation that are worthy of the CEO's agenda.

Other functions have rallied around such initiatives: operations led the re-engineering movement;
finance promoted the "economic value added" measure of performance; and accounting drove 
interest in the balanced scorecard.

Strategic thinking

The fundamental concepts in marketing are segmentation and the 4Ps. Segmentation is the process 
of dividing the total market into homogeneous groups of consumers who respond similarly to the 
marketing mix, or the 4Ps. It helps the marketer determine what mix
to deploy.

The problem with this is that it consigns marketing to a relatively tactical level within the 
organisation. If marketers are to aspire to strategic conversations, then the marketing 
discipline must distinguish between strategic segments and market segments, and consequently, 
adopt what I refer to as the 3Vs in addition to the 4Ps.

Strategic segments are those that require the organisation to develop unique networks of value. 
In contrast to market segments, changes limited to the marketing mix or the 4Ps are inadequate 
for serving different strategic segments. Instead, with strategic segments one needs to align 
the 3Vs:
1) Valued customer -- who to serve? For example, EasyJet serves people who pay from their own 
pocket in contrast to the traditional flag carriers, which tend to focus on business travellers.
2) Value proposition -- what to offer? In return for remarkably low prices, EasyJet offers none 
of the frills associated with flag carriers, such as complimentary meals, pre-assigned seating, 
business class, frequent flyer miles and refundable tickets.
3) Value network -- how to deliver? In order to deliver its value proposition to the most valued
customers profitably, EasyJet has outsourced many functions, simplified its operations, and 
accepts only direct bookings.

Using the 3V model to understand strategic segmentation helps marketers confront some critical 
strategic issues. For one thing, it gets marketing out of its tactical rut. For another, 
addressing the questions posed by the 3Vs can help foster marketing innovation. Are there 
customers who are unhappy with the industry (such as airline passengers) or not served at all 
(such as Aids sufferers in Africa)? What does the industry currently offer that could be 
eliminated (consider how Dell bypassed the retail network) or what new attributes could be 
offered to customers for the first time (such as customised personal computers)?

Is it possible to develop a radical new value network that would offer a superior solution for 
the customer and/or a much lower cost? Marketing innovation is what companies want. Marketers 
should concentrate on organisational-wide transformational initiatives that profitably deliver - 
· Value to customers; 
· Require a high level of marketing expertise; 
· Need cross-functional orchestration to be carried out successfully; and 
· Are focused on results.

Examples could include a move from selling products to providing solutions. The traditional 
marketing technique of simply offering another standard product under a "brand name" is no 
longer capable of locking in customers. Today, customers are time-starved, impatient and 
demanding.

Companies as diverse as Baxter International, W. W. Grainger, Home Depot and International 
Business Machines have recognised these demands. For example, Home Depot's research indicates 
that traditional "do-it-yourselfer's" are evolving into "do-it-for-me's." As a result, the 
company is intensifying service and training personnel to ask potential shoppers, "What project 
are you working on?" rather than "What product are you looking for?"

The opportunity for marketers

Giving customers solutions rather than products requires a broader set of skills, the willingness
to take greater responsibility for performance at the customer site, more flexibility in 
operations and organisation and the ability to manage numerous partnerships with suppliers and 
competitors. And capturing the value of those solutions requires flexibility on pricing options.

As IBM observed during its transformation from a seller of products to a solution provider, 
many of its strengths, such as a decentralised organisation, a technology focus and strong 
product divisions can become precisely those things that stop the company from making an 
effective transition.

Marketers can also lead the move from being "branded bulldozers" to global distribution partners.
Distribution channels have consolidated and grown more sophisticated. Fastmoving consumer goods 
(FMCG) companies, including the most famous household names, have been taken by surprise by the 
dramatic growth in the power of retailers. The largest retailers such as Carrefour in France, 
Metro in Germany, Tesco in the UK and WalMart in the US have global reach.

The problem for manufacturers is that prices for their nearly identical products can differ by 
as much as 40 to 60 per cent between countries. Global retailers, though, make this transparent 
by demanding a single worldwide price. And retailers excel at playing weak manufacturer brands 
against each other and holding brands hostage.

CEOs are demanding that marketers coldly examine the brand portfolio and then delete, merge or 
sell weaker brands to concentrate on the few truly differentiated ones. The challenge is how to 
delete marginal brands without losing their associated customers and sales. Successful brand 
rationalisation means shrinking the brand portfolio, while building sales and profitability 
through greater focus on the remaining brands. In addition, FMCG companies have to change from 
being organised around countries and products to being structured around the 10 to 15 retail 
accounts that comprise 45-65 per cent of their global sales. Marketers have to develop account-
specific marketing strategies instead of those based around countries, brands or specific 
products.

However, organisations should keep the following in mind as they ask more of their marketing 
departments. 

Respect for customers starts at the top

Unfortunately, CEOs often lose touch with their customers and do not actively engage in the sales
and marketing processes. Symbolic gestures communicate this role most effectively to employees. 
For example, if an executive of the Mandarin Oriental Hotel sees a full ashtray while he is 
walking through the lobby, he will empty it. The CEO should be the customer champion -- a quality 
controller who regularly tests the systems. At South west Airlines, senior executives regularly 
spend time in customer contact areas to witness other employees' interaction with customers. Top
executives at Sony tried to set up their own video recorders using the accompanying instruction 
booklet. The exercise led to the development of an easier, menu-based application. Power in 
organisations is moving away from those with marketing expertise tied to specific countries and 
industries. 

The demand from CEOs is for foresight rather than hindsight, for innovators not tacticians, and 
for market strategists not marketing planners. Marketers must learn to lead with imagination 
driven by consumer insight and not rely on market research for predictions. As marketers, are 
we ready to face these challenges? We have nothing to lose except hierarchies, national and 
functional boundaries, and most of all, the four Ps. 

The writer is professor of marketing, director of the Centre for Marketing, and co-director 
of Aditya Birla Centre at London Business School. 
Source: http://financialexpress-bd.com/index3.asp?cnd=8/21/2005§ion_id=9&newsid=11431&spcl=no1