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, both at 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 and 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 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 in 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 the 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 successful marketing strategies 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 are both in 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 on about their products. And it reminds me of (you know) the near disaster that IBM had when they thought they were in the mainframe market and more recently (oh, and Gestetner thought they were in the duplicator market) and more recently Kodak thought they were in the camera and film market and Nokia thought they were in the phones market. 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. 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 wittering on now and say that’s my answer.
That’s excellent Malcolm and I know that you are a big believer in marketing not being in the basement of companies and in a way that it is dangerous 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 ‘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 (you know) at corporate events. 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 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 those questions then I know they haven’t got 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 because sooner or later you have to get those components in place.
Thank you Malcolm, that’s excellent. That is a huge subject as we 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 I look forward to speaking to you again shortly.
- What Makes a Good Brand? - October 1, 2021
- How Does a Good Market Strategy Help to Create a Good Company? - September 24, 2021
- How does a Good Market Strategy Improves Shareholder Value? - September 17, 2021