CMO Thought Leaders: A Snapshot

The book explores how leading marketers are grappling with and surmounting the challenges of heightened customization demands, fragmentation of media and markets, growing pressure for returns on marketing investments, and other crucial issues.

Key Challenges	What the CMOs Are Talking About
Put the Consumer at the Heart of Marketing	􀀗Knowing what consumers are actually thinking & doing 􀀗Changing research and knowledge management practices 􀀗Transitioning the mind-set of a whole organization	“HP knows the top 10 factors that drive customer loyalty, and it measures them constantly. Corporate marketing can then go back to each business and say, ‘Here’s where you’re falling behind in terms of the customer experience you’re providing, and here’s how it relates to market share and margin growth.’” -- Cathy Lyons, CMO Hewlett-Packard
Make Marketing Accountable	􀀗Marketing accountability on two levels 􀀗ROI metrics and the marketing dashboard 􀀗Measuring the impact of new media 􀀗Developing the measurement capability	“The most important thing that’s changed in the last 10 years is measurability of what we do… New channels are regularly emerging that allow us to understand what it is we’re doing as it related to acceptability with the marketplace. And we can do it with much faster turnaround.” - John Hayes, CMO, American Express
Embrace the Challenges of New Media	􀀗Openness to experimentation 􀀗Balancing the new and the old 􀀗Pull vs. push	“ …consumers are in control. It’s more than just click the remote capabilities or the ability to do a browse/search on the Internet. Consumers are telling us that they want to be in control of the storytelling. And as part of that desire, they want to engage in advertising in different ways.” - Beth Comstock, President, Integrated Media, NBC Universal
Live a New Agency Paradigm	􀀗Identifying the right agency partners to meet marketing’s needs 􀀗Creating a new kind of partnership between marketers and agencies 􀀗Balancing cooperation and competition to get the best ideas	“[Agencies] need to get more integrated. They need to collapse structures. They need to go digital. Those that are making those changes are turning away business. Those that haven’t adjusted are struggling.” - Jim Stengel, Global Mktg Officer, P&G
Recognize the New Organizational Imperative	􀀗Balancing generalist and specialist skills 􀀗Driving the training agenda 􀀗Integrating with other functions	“ In marketing, you need to use both halves of your brain…You need to have the analytics. You also need to have the intuition. And you have to be quite flexible at using and leveraging both parts of your brain” - Rob Malcolm, CMO, Diageo
Remain Adaptable	􀀗Making adaptability an inherent part of the marketing agenda 􀀗Raising senior leadership awareness of issues and implications 􀀗Driving marketing as an integral, integrated part of the enterprise	“ I’ve never worked for the same company for more than two years in a row, because FedEx keeps changing. We have new marketing challenges every day.” - Mike Glenn, CMO, FedEx

PEST Analysis

PEST factors play an important role in the value creation opportunities of a strategy. However they are usually beyond the control of the corporation and must normally be considered as either threats or opportunities. Remember macro-economical factors can differ per continent, country or even region, so normally a PEST analysis should be performed per country.

In the table below you find examples of each of these factors.

Political (incl. Legal)	Economic	Social	Technological
Environmental regulations and protection	Economic growth	Income distribution	Government research spending
Tax policies	Interest rates & monetary policies	Demographics, Population growth rates, Age distribution	Industry focus on technological effort
International trade regulations and restrictions	Government spending	Labor / social mobility	New inventions and development
Contract enforcement law Consumer protection	Unemployment policy	Lifestyle changes	Rate of technology transfer
Employment laws	Taxation	Work/career and leisure attitudes Entrepreneurial spirit	Life cycle and speed of technological obsolescence
Government organization / attitude	Exchange rates	Education	Energy use and costs
Competition regulation	Inflation rates	Fashion, hypes	(Changes in) Information Technology
Political Stability	Stage of the business cycle	Health consciousness & welfare, feelings on safety	(Changes in) Internet
Safety regulations	Consumer confidence	Living conditions	(Changes in) Mobile Technology

Completing a PEST analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from business and strategic planning, marketing planning, business and product development to research reports.

Sometimes extended forms of PEST analysis are used, such as SLEPT (plus Legal) or the STEEPLE analysis: Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors. Also Geographical factors may be relevant.

The 7S McKinsey model

Most of us grew up learning about 'the 4Ps' of the marketing mix: product, price, place, promotion. And this model still works when the focus is on product marketing. However most developed economies have moved on, with an ever-increasing focus on service businesses, and therefore service marketing. To better represent the challenges of service marketing, McKinsey developed a new framework for analyzing and improving organizational effectiveness, the 7S model:

The 3Ss across the top of the model are described as 'Hard Ss':

• Strategy: The direction and scope of the company over the long term. • Structure: The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate). • Systems: Formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call centre systems, online systems, etc).

The 4Ss across the bottom of the model are less tangible, more cultural in nature, and were termed 'Soft Ss' by McKinsey:

• Skills: The capabilities and competencies that exist within the company. What it does best. • Shared values: The values and beliefs of the company. Ultimately they guide employees towards 'valued' behavior. • Staff: The company's people resources and how they are developed, trained, and motivated. • Style: The leadership approach of top management and the company's overall operating approach.

In combination they provide another effective framework for analyzing the organization and its activities. In a marketing-led company they can be used to explore the extent to which the company is working coherently towards a distinctive and motivating place in the mind of consumer.

Pricing Strategies

Premium Pricing.

Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing.

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom in order to

Economy Pricing.

This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming.

Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing.

Psychological Pricing.

This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar.

Product Line Pricing.

Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

Optional Product Pricing.

Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing

Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing.

Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing.

Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing.

Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing.

This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

Predatory pricing
(also known as destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors. If the other firms cannot sustain equal or lower prices without losing money, they go out of business. The predatory pricer then has fewer competitors or even a monopoly, allowing it to raise prices above what the market would otherwise bear.
In many countries, including the United States, predatory pricing is considered anti-competitive and is illegal under antitrust laws. However, it is usually difficult to prove that a drop in prices is due to predatory pricing rather than normal competition, and predatory pricing claims are difficult to prove due to high legal hurdles designed to protect legitimate price competition.

Limit Pricing
A Limit Price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm did not decrease output. The limit price is often lower than the average cost of production or just low enough to make entering not profitable.

Loss Leader
In marketing, a loss leader (also called a key value item in the United Kingdom) is a type of pricing strategy where an item is sold below cost in an effort to stimulate other, profitable sales. It is a kind of sales promotion.

The Brand Gap

How to bridge the distance between business strategy and design