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by Frederick E. Webster Jr.

22 yollHo.4 MARKITING MAmGEMENI


MARKETING MMGmm

Defining the
New Marketing Concept
Forget about being market-driven! The future belongs
to companies that are customer value-driven.

T
he old marketing concept—the man- The old marketing concept grew out of the
agement philosophy first articulated in need to serve customers created hy the conditions
the 195()s—is a relic of an earlier of post-World War II affluence and population
period in economic history. Most of growth. These consumers became the beneficiaries
its assumptions are no longer appro- of aggressive competition among domestic pro-
priate in the competitive global markets of the ducers, with new entrants in many industries as
1990s. As the marketplace evolves under the con- firms adjusted from military to peacetime produc-
verging pressures of changing demographics, poli- tion and entrepreneurs jumped at the prospect of
tics, economics, technology, and social mores, so unprecedented growth in consumer spending.
are organizations changing. And as organizations Marketers in the 1950s faced the necessity of
change, so must the role of marketing within them.
In the traditional business environment, trans-
actions are conducted in a competitive market-
place between hierarchical, divisionalized.
bureaucratic organizations and their customers.
EXECUTIVE BRIEFING
Today, however, the world is moving rapidly
toward a pattem of economic activity based on
long-term relationships and partnerships among
economic actors in the loose coalitional frame-
r his article, the first in a two-part series, outlines
a new marketing concept. The original niarketinii
concept was horn in the post-war economy of scarci-
works of "network" organizations. ty, pent-up consumer demand, and throwing consumer
To survive in the future, every business will confidence; the new one thrives in a world of afflu-
have to be customer-focused, market-driven, ence, sophisticated and informed consumers, eco-
global in scope, and flexible in its ability to
deliver superior value to customers whose prefer- nomic pessimism, and global competitors committed
ences and expectations change continuously as to delivering superior value based on their distinctive
they are exposed to new product offerings and competencies. The marketer's key strategic weapon is
communications about them. knowledge of customers and their dynamic definition
Global competition is now a fact of economic life of value. From the local savings bank to the largest
for the industrialized nations as well as for most of
multinational corporation, the focus of every compa-
the developing economies. The global marketplace
is a.s real for the small manufacturer and local retail- ny must he on managing loyalty among employees
er or bank as it is for the multinational corporation. and carefully chosen customers.
All customers have purchasing options that span the
globe, not just the community or the nation.

IMRKCTING MMGIMENT .4 23
becoming truly knowledgeable about and respon- tootbpaste, Swissair, Kodak film. Omega watches,
sive to ;i consumer with increased discretionary Sony Walkmen. Heineken beer, and Madonna are
spending power who was informed, demanding, everywhere! Consumers in developed countries
and confident about the future. Mass production have more than enough options in virtually every
and mass consumption of products with high category of product and service.
symbolic value characterized the era of the con- The global customer faces a fundamentally dif-
sumer, dubbed "The Affluent Society" by Jobn ferent economic scenario from the consumer of the
Kennetb Galbraith in his I9.S8 book of the same 1950s. Instead of scarcity, optimism, and growth,
name. It was an age of "conspicuous consump- tbe market environment of the 1990s is one of
tion." in whicb products were purchased as much material abundance, excess productive capacity,
on the basis of wbal they conveyed about the pessimism, and stagnation.
self-concept and lifestyle of the consumer as for Altbougb manufacturer brands remain impor-
the specific performance benefits tbey delivered. tant and global brands are becoming more domi-
nant, in most product categories, store brands ihat
The Global Customer promise the customer greater value increasingly
will replace manufacturers' brands on the shelves.
In many product categories, I expect to see only

T
he new marketing concept addresses
today's global customer who can cboose two or three national manufacturer brands survive
among a much larger variety of products tbe 1990s as merchants and their brands become
and services from producers located throughout increasingly powerful in the marketing channel.
the world. Tbe new consumer is much more likely Although retailing is likely to remain primarily
to judge products and services in terms of their national in scope, appearing with increasing fre-
fundamental value, defined simply as the ratio of quency will be global retailers such as Southland
benefits to cost/price, including costs in use. The Corp.'s "T-FIeven" convenience stores, which
concept of customer value is at tbe heart of the originated in tbe United States, expanded to
new marketing concept and must be tbe central Japan, and wound up being acquired in the United
element of all business strategy. States by their Japanese partner. Other large
The global customer quickly leams about tbe retailers with a growing international scope
wide range of choices available through many kinds include Price Club/Costco. Wal-Mart, Toys 'R'
of modem telecommunications technologies that Us, and fashion merchandisers sucb as Louis
give virtually instant access to cultural events, politi- Vuitton, Jaeger, and Chanel.
cal news, fashions, and economic developments
throughout the world. For example, a single perfor- Value-Delivery Strategy
mance by the three great tenors Jose Carreras.
Placido Domingo, and Luciano Pavarotti in 1990 at

A
necessary response lo an increasingly
the Baths of Caracalla in Rome was aired informed, sophisticated, cautious, and
Value is live to more than 5{M) million television value-conscious global customer is ihe
viewers throughout the world. Tbe Cable value-delivery concept of strategy. Tbis concept
defined in the News Network (CNN) broadcasts politi- has helped bring customer-orientation, as called for
marketplace— cal events and military actions around the
world as they are happening in places
by the old marketing concept, back into tbe fore-
front. But it also added ihe fundamental notion thai
not in the sucb as Kuwait, Tianiunen Square, the firm's value-delivery strategy must be based on
Somalia, and Bosnia-Herzegovina. The some distinctive competence, a source of unique
factory. traveler can view CNN 24 hours a day in and sustainable competitive advantage.
hotels almost everywhere in the world. More often than not, this distinctive compe-
International travel is becoming increasingly tence springs from intellect and knowledge, which
common, giving first-band exposure to global is to say. people, not physical materials, plant, and
products and services of all kinds and creating equipment. In Intelligent Enterprise, James Brian
informed, sophisticated, and demanding cus- Quinn says that "al their core, most successful
tomers. Travelers likewise infomi tbeir host coun- enterprises today can be considered "intelligent
tries* consumers about choices available to them enteiprises,' converting intellectual resources into
in the global marketplace, helping to spread and a chain of service outputs and integrating these
homogenize consumer needs and preferences as into a form most useful for certain customers... .
well as create tbe demand for global products and [MJost of the processes that add value to materials
services. Coca-Cola. Levi's jeans. Fritos corn derive from knowledge-based service activities."
chips. Honda automobiles. McDonald's burgers, All businesses, including manufacturing com-
Inter-Continental Hotels. Caterpillar tractors. IBM panies, should define themselves as service busi-
PCs. Avis rental cars. Hermes scarves. Colgate nesses because customers buy benefits, nol prod-

24 M2JO.4 MARKETING imAmm


Defining the New Marketing Concept
ucts. Usually, the physical product itself is only Not Just Any Customer
one part of the total value-delivery system for the Every finn {and every network organization) is
customer; customer expectations revolve around limited in its competencies: the finn committed tn
the service aspects of the product offering. a strategy of value delivery must, therefore, limit
Infonnation can turn any product into a ser- the customers with which it proposes to do busi-
vice and. thereby, build a customer relationship. ness. Customers define ihc business by placing a
For example, a package of Procter & Gamble's set of demands on it for delivering superior value.
Crest toothpaste includes a toll-free telephone Customer selection—the market segmentation and
number allowing customers to call in with ques- targeting decision—thus establishes the criteria by
tions or comments. When callers request infor- which the firm will be judged in the marketplace.
._ . mation about dental Selecting the right customers becomes the criti-
L o s i n g a c u s t o m e r I care, their names and cal strategic choice, the polestar for everything
can b e the best t h i n g I ^^^dresses^become that happens in the business, most especially,
• part ot a database, in development of the product offering. The product
is a variable: the customer is the given.
to h a p p e n to a business. I this way. the product Under both the old marketing concept and the
becomes a service
new. market segmentation, market targeting, and
and a two-way relationship between the marketer
positioning are essential requirements for effective
and the customer, who is buying improved dental
strategic planning. In the new marketing concept,
health, not just a physical product.
however, the focus is sharpened by adding the
A company's ability to command natural
idea of the value proposition.
resources, technology, and capital as sources of
competitive advantage is taking a back seat strate- The value proposition is the verbal statement
gically as the ability to control knowledge and that matches up the firm's distinctive competen-
inibnnation moves to the forefront. The value- cies with the needs and preferences of a carefully
delivery concept of strategy is based on the funda- defined set of potential customers. It's a commu-
mental assumption that value is defined in the mar- nication device that links the people in an organi-
ketplace—not in the factory. It is defined by cus- zation with its customers, concentrating employee
tomers who continuously assess competitive prod- efforts and customer expectations on things that
uct offerings as well as their own needs and prefer- the company does hest in a system for delivering
ences, which change as the customer leams. superior value. The value proposition creates a
shared understanding needed to form a long-term
Customer Knowledge relationship that meets the goals of both the com-
pany and its eustomers.

A
base of knowledge about customers, their To maintain its strategic focus, fulfill its com-
characteristics, needs, and preferences mitment to customers, and develop its distinctive
will be at the core of the successful busi- competence, the firm must be selective. Not all
ness of the future. This knowledge will be sup- customers are valuable customers: opportunism
ported by technology that makes the infonnation and the siren song of sales volume must be avoid-
instantly available to decision-niiikers throughout ed. Losing a customer ean be the best thing to hap-
the organizational network. Becau.se customers pen to a business if that customer cannot be satis-
define value, infonnation about them becomes the fied at a reasonable cost.
critical strategic resource. However, customers who value the things
Through their definition of value, customers the firm does well must be attraeted and
also define the business by the demands they place retained. In the slow-growth markets of the
on it. In a business world increasingly character- 1990s, the key to survival for most firms will
ized by network organizations—coalitions of firms be retaining their best customers, rather than
bringing together their distinctive competencies to attracting hordes of new customers.
create customer value-—customer knowledge is the
link that holds the network together and defines its Customer Loyalty
shared objective and common purpose.

U
It is only one of several distinctive competen- nder the old marketing concept, the
cies necessary for survival, however, and by objective was to make a sale. Under the
itself won't differentiate the firm from its com- new marketing concept, the objective is
petitors. The firm must have other knowledge- to develop a customer relationship, in which the
based competencies, especially those related to sale is only the beginning. The customer is a
technology and other dimensions of the product long-term strategic business asset. As customer
offering, that allow it to design, develop, and relationships and strategic buyer-seller partner-
deliver superior customer value. ships replace transactions and simple repeat pur-

11 Ho. 4 25
chases as the focus of marketing activity, a new must commit tbe resources necessary to retain the
definition of customer loyalty emerges. gix)d customers hy offering them a broad range of
"Brand loyalty" used to be defined as the por- lelated products and services that will keep tbem
tion of a customer's purchases concentrated on tbe loyal as their needs change and evolve over time.
brand. It was a definition based on statistical char-
acteristics of a string of purchases by an anony- Innovation Revisited
mous customer. Customers were defined as statis-
tical averages and central tendencies within a pt>p-

R
etaining customers means keeping them sat-
ulation, nol as individuals. isfied, and keeping them satisfied requires
The concept of'"customer loyalty" replaces innovation. Even though mosl people
brand loyally in ihe new marketing concept. In remember that cuslomer orientation was the central
this sense, loyalty becomes a two-way street; Cus- theme of the old marketing concept, few may recall
tomers remain loyal to ihe company that serves that innovation held nearly equal importance.
iheir needs and preferences with a total set of Back in the m^Os and l%Os the word "innova-
related products and services, while companies tion" was synonymous with new product develop-
demonstrate iheir loyalty to customers by becom- ment. That was entirely consistent wilh tbe growth
ing knowledgeable about tbem and responding markets of tbe time and the opportunity lo exploit
with enhanced product offerings. The commitment technology, much of it developed as part of mili-
to deliver superior value to customers contains an tary and space exploration programs and made
explicit commitment to manage customer loyalty. available for the consumer society. The objective
Customer loyalty bas meaning only within Ihe was lo invent pr(Klucts that could be produced in
context of relationship niiirketing. Relationship large quantities at low cost and sold at Ihe low
marketing is only possible wben the company prices required to create mass markets.
.. _ , . _ knows the cuslomer as an The concept of innovation for mass prtxiuction
Mass m a r k e t i n g was I individual, not as a statisti- created an interesting paradox: Innovation implies
t h e h a n d m a i d e n I cal phenomenon, and can dynamic change, whereas mass production calls for
1 - B address communications an unchanging product and a stable production
of m a s s p r o d u c t i o n . I and specific product offer- process. As finns saw the huge growth in consumer
ings to him or her. In this markets, managers assumed that ihe key to prof-
way, the customer also develops a relationship with itability would be efficient production of large
tbe company, not just with a product or brand. quantities of standardized products that would per-
A repeat customer is much more valuable than mit economies of scale. Once product designs were
a new customer for many reasons: multiple pur- set, it was marketing s job to generate the necessary
chases from the same customer, the likelihood volume. Because mass marketing was tbe hand-
ihal Ihe loyal customer will pay a somewhat maiden of mass production, marketing could quick-
higher price, lbe opportunity to sell other prod- ly reven to a sales orientation—and it often did.
ucts and services, the benefits of favorable word- The quality movement of the I97()sand 1980s
of-moutb, and tbe avoided costs of finding and redefined innovation to emphasize the notion of
attracting new customers. Price-oriented promo- continuous improvement. Tbis sbifting emphasis
tions often attract tbe "wrong" customers, those and the quest for new and better solutions to cus-
who are interested only in price, reducing both tomer problems are major hallmarks of the new
loyalty and profitability in the long run. marketing concept. Tbe dynamic mechanism of
In relationship marketing, the objective is to customer expectations guarantees that tbe defini-
retain loyal customers by offering them superior tion of quality keeps changing. As companies
value, defined as the ratio of benefits lo cost/price. meet customers' expectations, they revise them
Tbere is a positive trade-off between spending upward. Competitors respond in kind with
money to retain customers vs. spending promotional improvements and innovation, adding another
dollars to attract new ones. However, when design- stimulus to the firm's own innovation.
ing their customer retention programs, most man- Continuous improvement represents a dramatic
agers assume tbat the customers in danger of being shift from the ideology of mass production, where
lost are, in fact, wortb retaining. This is only true if the emphasis was on getting an oplimuni design
tbe business has carefully and strategically selected and process and then maximizing the volume
tbe correct customers in the first place, namely, being run ibrougb ihal process. Continuous
those who value the things the finn tries to do well. improvement applies more to prtKesscs than prod-
Pricing should be used as part of the process by ucts, although prcKluct improvement often is a by-
which customers and companies select one another, product. The new concem for process improve-
not as an indiscriminate t(H)i for attracting as many ment was closely related lo tbe realization tbat the
customers as iwssible. good and bad. The company supporting service bundle is often at least as

26 M2.NO.4 MARKETING mmfmi


Defining the New Marketing Concept
important as the physical product in defining cus- munications and other forms of mass marketing
tomer value. This has led many companies to to attract and persuade the largest possible num-
redefine their business as a service business. ber of potential buyers.
Mass marketing, using the mass media and
Corporate Reengineering especially the new medium of television, provid-
The commilment to continuous improvement ed the sales volume necessary to support the large
has led to the development of the relatively new factories delivering the economies of scale in pro-
discipline called "reengineering," defined by duction necessary for low cost and profitability.
Michael Hammer and James Champey in Reengi- Mass production and mass marketing depended
neering the Corporatiflii as a fundamental, radical on highly standardized products and messages
rethinking of the business from the ground up. that had the greatest appeal for the maximum
To improve the level of customer service and to number of potential customers.
find and eliminate unnecessary costs, many com- Customers of the 1990s demand more precise
panies arc engaged in iii-depth study of the and more complete response to their needs and
processes involved in developing and delivering preferences. With domestic and foreign producers
customer value. In reengineering. managemenl aggressively competing for their
looks at the company and its processes of value
delivery from the customer's perspective and
business, people can afford to
be demanding and ask for a
We have moved
redesigns those processes and their related organi- larger variety of products and from the age
zational structure "from scratch." even custom-tailored products.
And they can get them!
of mass production
Reengineering concentrates on process
improvement. Although continuous improvement We have moved from the to an era of mass
in the pursuit of ctistomer satisfaction and loyalty
is an iniportanl part of the new marketing con-
age of mass production to an
era of mass customization,
customization.
cept, product innovation in the more traditional made possible by the impact of infonnation tech-
sense of truly new ideas, major technical break- nology on the processes of order entry, product
throughs, and totally new products should not be design, production scheduling, manufacturing,
dismissed. 1 have been involved in research with inventory management, product delivery and dis-
companies in Japan, Europe, and the United tribution, and customer feedback.
States that shows a business' ability to innovate in Cable television and the advent of literally thou-
this traditional sense is among the strongest deter- sands of new special interest magazines aimed at
minants of its growth and profitability. This find- smaller target audiences created media fragmenta-
ing has been consistent across countries and dif- tion that has decimated the large audiences once
ferent types of corporate cultures. delivered by the Big Three TV networks and gen-
The lower costs of doing business v^'ith exist- eral interest magazines. By the late 1980s, it v/as
ing customers is undoubtedly one of the major abundantly clear that the mass production and mass
reasons for the strong, positive relationship the consumption view of business was ob.solete. Mass
research found between innovativeness and busi- markets continue to disintegrate, and the costs
ness performance. Innovation results in products as.sociated with serving them—both production and
that are in tune with the customer's changing marketing costs—are too high.
needs and preferences, in new products that have The objective of the old mass-production/mass-
the potential to attract valued new customers and marketing paradigm was producing products in
build customer loyalty. Continuous improvement sufficient quality at a cost most people could
and new product development are essential afford. Low cost still is a necessary condition for
ingredients in relationship marketing. profitability, but the new mass-customization par-
adigm is based on the goal of developing, produc-
Mass Customization ing, and delivering affordable goods and services
The old marketing concept evolved in a world with enough variety and customization that nearly
of standardized products, mass production, and everyone finds exactly what he or she wants.
mass marketing. Traditional methods of market- With the commitment to continuous improve-
ing research were built around survey method- ment thai came out of the total quality movement
ologies that sought the common denominators of and rising customer expectations, firms learned
customer needs and preferences, the characteris- to live with dynamic process change instead of
tics of the "average" consumer. Once that profile stable processes. The next and final step is to
was established, perhaps for multiple market seg- make the form of the product as dynamic as the
ments in the case of the more sophisticated mar- process that produces it.
keters, a standard product was designed for maxi- The concept of mass customization is easier to
mum appeal. Then the company used mass com- understand in the case of services because there is

4 27
no factory that must be tuned for flexibility. Even in then tailor the product as precisely as possible to
Ihe prtxiuction of services, however, Quinn points deliver superior value. That is the ultimate fulfill-
oul that some "'factory-hke" technology, such as a ment ofthe new marketing concept!
computer and a database, usually can be accessed in In the world of mass customization, the task of
modular fonii in the background, allowing the ser- the marketing function is to understand customers
vice provider to assemble components into a ser- as individuals, not as part of a "mass" market.
vice package that appears to be completely tailored Increasingly, it makes sense for the firm to think
to an individual customer. of itself not as a producer of goods or services for
When a traveler contacts a travel agent or airline the customer, hut as engaging in a process of co-
sales representative, for example, she selects desti- development and co-production with the customer.
nation, time of day, class of travel, routing, seat The co-production idea can be understood more
k)cation. a special meal, payment terms, and other easily in the context of business-lo-business mar-
variables that represent a unique product. Her prod- keting, in which case a producer of raw materials
uct is "assembled" in the computerized reservations coordinates efforts with ihe customer in designing
system where it is "held in inventory" until it is and managing the customer's manufacturing
delivered at the time of travel. But it is truly a process. Increasingly, however, the concept also
unique product; it literally has her name on it. and makes sense for marketers in the consumer arena,
she is identified in the customer from home-office personal computers to banking
Customer and information file by a large ;iniount of services and insurance to kitchen appliances and
data describing a unique individual frozen foods. In every instance, the marketer must
employee loyalty to whom communications can be understand the individual customer and his or her
are related; addressed ;uid whose needs and pref-
erences have been duly noted. If she
application of the product or service.
In the new marketing concept, this knowledge,
each reinforces is a frequent traveler, her traveling understanding, and commitment is not the special
history—a series of transactions—is
the other. noted clearly, and the value ofthe
province ofthe marketing department. Rather, it
is shared throughout the organization, as market-
relationship can be determined rather precisely. ing becomes part of the organization's culture as
Even though the concept of mass customization well as the knowledge systems that guide decision
may appear to be more applicable to services, it is making at all levels.
increasingly relevant for the production of products
as well. In the case of automobiles, for example, Managing Culture
the number of options available in styles, acces- Before companies can implement the new mar-
sories, colors, and so forth, makes it possible to keting concept, they must actively manage the
produce a unique car for each of the millions of organizational culture, strategy, and organization
people who purchase one eaeh year. structure. Organizational culture is the basic set of
The automotive press reports that Toyota is values and beliefs that are shared throughout the
working on an information and production system organization. These values and beliefs help
that will make it possible for an individual con- employees understand how the company tunctions
sumer to specify a car that will be delivered to his and dictate behavioral norms.
or her home within a few days of ordering. A A customer-oriented organizational culture is
Japanese bicycle company already offers a similar one in which the customer's interests come first,
service, tailoring each bike to the physical charac- always. The firm stays focused on the customer in
teristics of the rider, although delivery takes a few everything it does, and management constantly
weeks. Personal computers can be assembled with asks how it can do things better on behalf of the
hardware features, such as modems and software customer. The customer-oriented finn puts the cus-
chosen from hundreds of options and installed to tomer's interests ahead of those of the owners, the
meet the unique needs of the customer. management, and the employees. Everyone's job is
With mass customization, the product truly defined in terms of how it helps to create and deliv-
becomes a variable, as called for by the new mar- er value for the customer, and internal processes
keting concept. Mass customization means work- are designed and managed to ensure responsive-
ing with existing product technology, often in ness to customer needs and maximum efficiency in
modular form, to create specific product bundles value delivery. The customer-oriented finn is com-
for a parlicular customer. From time to time, the mitted to relationship marketing, and employees
whole process is invigorated with the introduc- work together to solve customer problems.
tion of new technology, created through the Employee morale is a critical success factor in
ongoing process of invention. In either case, the the customer-oriented company, especially for
company should start with a customer whose employees who deliver ,some aspect of a product's
needs and preferences match its capabilities and service bundle. Management issues a clear stale-

28 U2JQ.4 MARKETING MHASEMENI


Defining the New Marketing Concept
ment ofthe value proposition, which becomes the • "Be an agent for the customer" is one of the specif-
focal point for the organization and a rallying cry ic values articulated as part of the Wal-Mart culture.
for employees. It becomes part of the symbols and
rituals of the organizational culture. To perpetuate the Wal-Mart culture, each new
Hierarchy and authority are relatively unim- store is headed up by a manager with at least
portant in a customer-oriented company culture. seven years of Wal-Mart experience. Assistant
Over time, it's likely that a value-delivery defini- managers, in contrast, are moved about every
tion of strategy will result in a fiattening ofthe two years to give them additional experience and
organization and elimination of layers of middle exposure to the Wal-Mart culture. Most employ-
management as the firm attempts to improve its ees/associates own stock in the company. Every-
responsiveness to customers. one is focused on serving the customer and beat-
ing the competition. It is the essence of a mar-
Loyal Customers and Employees ket-driven company, focused on delivering cus-
In relationship marketing, employees know cus- tomer value through motivated employees who
tomers by name and may even develop enduring have a sense of ownership. Customer orientation
personal relationships. Loyal customers are treated is a core value in the corporate culture.
as a key strategic asset and resource, one that must
be preserved and defended. Loyal employees also Market Intelligence
are essential—to maintain a strong culture, to
improve efficiency in the value-delivery process,

C
ustomer orientation is more than a set of
and to build long-term customer relationships. beliefs, however. It must be supported by
Customer and employee loyalt> are related; up-to-date and accurate infonnation about
each reinforces the other. Experienced employees the needs, wants, preferences, and buying habits
can serve customers best because they understand of customers ohtained through direct contact with
each customer's needs. This knowledge is an them. The central question that should guide al!
essential part of continuous improvement. Tlie cus- information gathering is. "How does the customer
tomer's sense of confidence and trust in the organi- define value and how well are we providing it?"
zation is enhanced by dealing with the employees Although traditional survey research methods
as individuals, helping to form a bond with the still play an important role in specific instances-
organization. Likewise, this ongoing relationship such as routine measurement of customer satisfac-
helps bond the employee to the customer and tion with a large, valid sample of recent cus-
builds the commitment to customer satisfaction. tomers—other techniques are likely to be more
Wal-Mart often is used as an example of a valuable for management problem solving.
customer-oriented company with a strong orga- Small focus groups with actual or potential
nizational culture. Until his death in 1992, com- customers may be particularly helpful in devel-
pany founder Sam Walton was clearly the foun- oping new product offerings and service features,
tainhead of Wal-Mart's culture, its chief for example. For business marketers, carefully
spokesman and cheerleader. Today, top manage- planned visits to customer sites can be invaluable
ment carries on this tradition vigorously. in providing information to guide R&D, manu-
Among the most important and more tangible facturing planning, and sales force development.
aspects of the culture are: In any company, top management's understand-
ing of market conditions must be obtained first-
• A commitment to the customer and value based hand via frequent field visits and one-on-one
on low prices. conversations with customers.
The new marketing concept calls for defining
• A strong dedication to the welfare of employees the business "from the outside in," being an
and their families. infonned "expert" about the customer, and letting
the customer define value by matching up the cus-
• "Greeters" who welcome customers at the tomer's needs and preferences with the firm's
store door. capabilities. As Ross Perot would say, "It's just
that simple!" Of course, it's a simple idea, but its
• The famous Saturday morning management implementation is not simple at all.
staff meetings. Top-level professionals should manage the
marketing information function. Most compa-
• Several company cheers regularly repeated in nies also will need up-to-date knowledge about
employee meetings. For example, every employ- information technology, commercially available
ee pledges to greet any customer who is within databases, management science methods for
10 feet of him. "so help me. Sam!" building models and analyzing data, and the

.4 29
communication aspects of management infor- ners focused on the customer's definition of
mation systems. value. This is a new responsibility for market-
The principal responsibility of tbe marketing ing, and it requires close cooperation with
function in a customer-oriented, market-driven other management functions including pur-
company is to provide decision makers through- chasing, R&D, engineering, manufacturing,
out the organization with up-to-date information and distribution.
about customers and competitors, helping every- Many kinds of marketing partners make up
one understand tbe customer's constantly shifting tbe network organization. These include pro-
definition of value. curement, where marketing and purchasing
managers must work together to ensure that sup-
The Learning Organization pliers of raw materials, components, subassem-
blies, or complete products with the company's
name on them understand the nuances of the

A relevant new idea is that of "the leaming


organization," one that is dedicated to
continuous improvement and reinventing
itself as market conditions demand. To change
productively, an organization must first see the
company's value proposition and customer
needs and preferences. Some companies transfer
managers between tbe marketing and purchasing
functions because tbey have negotiation skills
changes occurring "on its periphery," Jobn Seely valuable in both areas. These companies recog-
Brown of Xerox Corp. is quoted as saying in nize that each function can benefit from a better
Seeing Differently: lniprovini> the Ability of understanding of the other.
Organizations to Anticipate and Respond to Technology partnerships, increasingly neces-
Changing Needs of Customers and Markets. sary where distinct and rapidly developing
Management must carefully watcb its markets, technologies converge on a particular product
capture new ideas, and learn from tbese events. category, require close cooperation under the
Market intelligence is a key input to tbe learn- guidance of both qualitative and quantitative
ing organization. It must be committed to under- market research. In really new areas, where
standing customer needs, defining specific areas customers may not be able to express tbeir pref-
that need improvement, and identifying "best erences for products that do not yet exist, expe-
practice" wherever it is occur- rienced marketing managers must work witb
Customer value ring throughout the organiza- their technical colleagues to make subtle judg-
tion and in other companies. ments based on an intimate understanding of
must be the central The learning organization customer needs and wants. Tbeir relationship
element of all creates and manages strategic with the customer must be strong enough to
lead the customer into the new product future.
b u s i n e s s s t r a t e g y . | all.ances with customers and Managers with experience in both marketing
o / " other partners. It is mherent m and R&D/engineering may be best able to make
the definition of an "adhocracy" type of culture, such judgments.
one that remains extemally focused and capable of
quick and flexible response to a changing market. Partnerships with resellers are perhaps the best
Tbe concept of tbe learning organization will known marketing alliances. In fact, the acade-
become increasingly important in tbe network mics have focused their study of strategic mar-
organizations of the 1990s, with more opportu- keting alliances on marketing channels and distri-
nities for parts of the organization to learn from bution, areas where there is a useful body of
one another. In fact, the motivation for many knowledge dealing with power, trust, cooperation
strategic alliances is simply to create a learning and conflict, and other aspects of interorganiza-
organization, introducing change into the exist- tional relationships.
ing structure to develop and improve its distinc- In network organizations, however, the tradi-
tive competence and learn critical new skills tional interorganizational conflict between man-
from the new partner. ufacturers and resellers is replaced by a new
emphasis on cooperation in serving the cus-
Network Organizations tomer. Instead of asking "'Who's customer is it?"
and fighting for control of the customer relation-
ship, participants focus their energies on tbe

I
n the firm committed to a value-delivery
concept of strategy, management will have shared tasks of understanding and delivering
defined the distinctive competencies it customer value. It may be belpful to define tbe
must own and develop and those tbat it needs customer for any company as the party who pays
to acquire through partnership with others in the bill. Different companies will answer the
the value chain. The role of marketing in the question of customer definition within the net-
network organization is to keep all of the part- work in different ways.

30 M l No. 4 MARKiriNG mmGEMENI


Out With the Old next issue of Marketing Management, I will dis-
cuss what it means to be market-driven in the
'90s and set forth some guidelines for imple-

T
be new marketing concept is essential for
companies facing an economic scenario menting tbe new marketing concept.
where material abundance and excess pro-
ductive capacity coexist with pessimism and
stagnation. In an age of increasingly informed,
sophisticated, and value-conscious consumers,
the emphasis on customer value must be the cen-
Author's Note
tral element of all business strategy. This article is adapted from the author's
Companies must increase their knowledge of forthcoming book, Market-Driven Man-
customers and selectively target them. Continu- agement: Using the New Marketing Con-
ous improvement builds customer loyalty and cept to Create a Customer-Oriented Com-
feeds retention. And innovation can attract new pany, to be publisbed by John Wiley &
customers as well as keep old ones. In the shift Sons, Inc., in April 1994.
from mass production to mass customization, cus-
tomers are demanding, and getting, products tai-
lored to a variety of needs and wants.
In the end, the survivors will be organizations
that have tbe ability to reinvent themselves as Additional Reading
market conditions change and make a full com-
mitment to the new marketing concept. In the
Adams, Majorie (1993). "Seeing Differently:
Improving the Ability of Organizations to Antici-
pate and Respond to Changing Needs of Cus-
About the Author loniers and Markets." Conference Summary,
Report No. 93-103. Cambridge, Mass.: The Mar-
keting Science Institute.
Frederick E. Webster Jr. is tbe Charles
Henry Jones Third Century Professor of Deshpande. Rohit, John U. Farley, and Frederick E.
Management at tbe Amos Tuck Scbool of Webster Jr. (1993), "Corporate Culture. Cus-
Business Administration at Dartmouth Col- tomer Orientation, and Innovaliveness in Japan-
ese Firms: A Quadrad Analysis," yowr/jo/ of Mar-
lege, where he has been on the faculty since
keting, 57 (January), 23-27.
1965. He eamed his doctorate at Stanford's
Graduate School of Business. At Tuck, he Galbraith, John Kenneth (1958), The Afflucm Socicly.
bas served as Associate Dean and as Faculty Boston: Houghtori Mifflin Co.
Director for Executive Education. He has
Hammer, Michael and James Champey (1993),
been a visiting professor at tbe Intemational Reen^ineeritiii ihe Corporation: A Manifesto for
Management Institute in Geneva, Switzer- Business Revolution. New York: Harper Collins
land and Executive Director of the Market- Publishers Inc.
ing Science Institute. Fred's research in mar-
keting strategy, industrial marketing, sales Pine II, B. Joseph (1992), Ma.'is Customization: The
force management, corporate culture, and New Frontier in Business Competition. Boston:
Harvard Business School Press.
buyer behavior has resulted in the publica-
tion of over 50 joumal articles and book Quinn, James Brian (1993), Intelligent Enterpri.se.
chapters and a dozen books, including Indus- New York: The Free Press.
trial Marketing Strategy, whicb is in its third
Frederick R. Reichhetd (1993). "Loyalty-Based
edition. His article "The Changing Role of Management," Harvard Business Review, 71
Marketing in the Corporation" received the (March-April). 64-73.
Alpha Kappa Psi Award from the Journal of
Marketing as best paper in 1992. Fred is a Bill Saporito (1992). "A Week Aboard the Wal-Mart
management consultant and lecturer in exec- Express," Fortune. 126 (Aug. 24), 77-84.
utive programs, and President of FEW Con- Walton, Sam (1992), Made in America. New York:
sulting Services Inc. He serves on tbe boards Doubleday.
of several corporations, a savings bank, the
Vermont Public Radio network, and the Mar- Webster Jr.. Frederick E. (1992). "The Chiinging Role
keting Science Institute. of Marketing in the Corporation," Journal of Mar-
keting, 56 (October). 1-17.

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