Transcript: How Does a Good Market Strategy Improve Shareholder Value?
Hello everyone this is Edmund Bradford and I’m delighted to have with me my good friend and colleague Professor Malcolm Mcdonald we’ve done a lot of things together um both universities and out there with real companies.
Malcolm has over 30 years I would say without putting too much of a number on it over 30 years of experience in marketing and is truly one of the great marketers out there in the world and in this short series of videos we’re talking about shareholder value we’re talking about marketing how they both connect together and also how they connect into just being a good company so welcome again Malcolm and thank you for joining us so I’ve asked now is that simple question about how does a good market strategy improve shareholder value?
Wow again Ed you are known certainly to me and those who know you for asking very difficult questions and this isn’t the easiest question to answer but
I will give it a go I mean first of all to put it in perspective what are the components of a marketing strategy anyway and you know I’ve sort of made a bit of a list here it’s not complete but it’s got the essential elements it, first of all, you need in an organization:
An inspiring vision you need clear strategies you need rigorous segment and brand positioning you need consistent innovation you need superior customer value you need high employee morale you need tight cost control and concern for all stakeholders.
Now what could be easier than that and thing is I’ve got 127 scholarly references which obviously I won’t bore people with today but over a long long period, these scholarly references have drawn a link between a successful marketing strategy and long-run financial success and you know they are very similar to the list I’ve just you know spoken about I mean firstly you know you’ve got a deep understanding of how the market works that’s common across all successful companies correct needs-based market segmentation.
Not that garbage that’s taught in many places about socioeconomics and demographics and geodemographics i mean for example just to get it out of the way Prince Charles and Ozzy Osborne ED are both socioeconomic group A but I don’t think they behave the same.
And you’ve got understanding customer needs it sounds simple hard to do but it’s a factor and then differentiation positioning and branding and planning for the future now i know in my work Ed what kind of organization I’m going to be facing when I get the board of directors the operating board of directors and my first question to them is without talking to each other write down on a piece of paper or type into your computer what are your key target markets in order of priority the second part of that question is pretty obvious against each of these key target markets what’s your company’s sources of differential advantage and invariably companies that haven’t got those characteristics instead of talking about key target markets, they start wittering about their products and it reminds me of you know the near disaster that Ibm had when they thought they were in the main frame market and um more recently oh guest step they thought they were in the duplicator market more recently Kodak thought they were in the camera and film market the Nokia thought they were in the phones market you know it’s not products and it hasn’t been for ages that give you differentiation and create satisfaction for customers it’s the way you relate to your customers and your markets.
I just want to by way of closing this off to give you one quick example of the silly notion that people have about what is called CSR corporate social responsibility of course you have to have it but it has to go hand in hand with shareholder value-added because if it doesn’t it’s not going to work.
I give you one example there is a famous chemical company that used to be the bellwether of the British stock exchange and it was a wonderful company it was good to its employees loved working for it it was good to local communities it was good to charities and so on and so forth the problem was it wasn’t as good as satisfying customer needs as the Duponts and the Siemens of the world consequently their shareholder value was not in the same category and started reducing and the result of that was hundreds of thousands of people unemployed no more money for charities no more money for local communities and so on and so forth so I’m afraid in order to be a good citizen you also have to create shareholder value and I hope during these brief few minutes Ed I’ve given you the components of what the successful strategies are so I better stop whispering on now and say that’s my answer.
That’s excellent Malcolm and I know that you are a big believer in marketing you know not being in the basement of companies and in a way that is dangerous not being in the basement of companies it needs to be in the boardroom of companies and there’s a big misunderstanding I think around marketing that you know the strategy is done by somebody else somewhere else another function another person and marketing I remember you saying marketing is really the people that blow the balloons of you know at corporate events and so I think
the point you’re making is that marketing has a major role to play in actually creating shareholder value by the impact and the influence that they have on the market-facing strategy that the company is adopting
Of course and i mean if you think about that example i gave you when i’ve got a board of directors there and I asked them what their key target markets are and what in order of priority and what their sources of differential advantage are if they can’t answer those questions Ed it tells you straight away that whatever they think marketing is they haven’t got it in the organization because what is it that makes organizations successful it’s actually selling something to somebody you better know who you want to sell it to you’d better understand their needs and you’d better make them an offer that makes them want to buy from you rather than from somebody else who’s got something similar now I don’t care whether you call that marketing strategy or what but it’s a bit fundamental and if companies can’t answer that quest those questions then I know they haven’t got um successful marketing strategies and therefore they will either be in a growth market but they won’t be profitable for long or they’re about to go belly up the sooner or later you have to get those components in place thank you Malcolm that’s excellent and that’s that’s is it is a huge subject to be said but we’re deliberately keeping these little conversations short in the next conversation we’re going to be talking about how a good market strategy helps you to be a better company so thank you once again Malcolm and look forward to speaking to you again shortly