Chaotic : Firm management and marketing in age of turbulence

2. Chaotic : Firm management and marketing in age of turbulence Ing. Jiří Šnajdar 2013 Mgr. Evžen Staněk

3. Kotler, P., Caskione, J.A. : Chaotic : Firm management and marketing in age of turbulence Brno, COMPUTER PRESS 2009, p. 214, ISBN 978-80-251-2599-1 Turbulence in MC : Firms shift more and more investments from TV advertisement to new media –web, email, blog. All firms must live with risk, also turbulent, have system of timely warning, system of chaos control, critical scenario.

4. Previously – long period of prosperity, short periods of chaos = crisis. • Today – long crisis periods, short ray of prosperity. • WHAT IS IN FACT MARKET TURBULENCE ? • Unpredictable and sudden changeover in external and internal ambience of organisation, that influences its performance. • Butterfly wings effect

5. Comparison of normal and turbulent economics NormalTurbulent Economic cyclesForeseeable Missing BoomDefinable-7 years in Unpredictable, average variable Recession Definable-10 years inUnpredictable average variable Potential of impactsExtensiveLow Access to investments Expansive, large Cautious,strict Toleration of market AcceptationAvoiding risks Consumers´ attitudesSelf-assuranceUncertain Consumers´ Stable, developing Cautious, Preferences Kotler, Caslione, page 35

6. NINE REVOLUTIONARY INNOVATION REVOLUTIONARY TECHNOLOGY ORIGINAL TECHNOLOGY Mini steelworks Vertically integrated steelworks Container ships Free laid cargo,workers Desktop publishing Traditional composition Digital photos Chemical photos Semiconductors Transistors Personal computers Indoor computers Download and music sharing CD E-books Paper books VoIP Traditional telephones

7. Pressure of non-formal and formal (IMK) communications – aggravation of virtual and information competition Example : web of dissatisfied customer – change of approach of public. Possibility of misusage ??!! Crews of Wirgin Atlantic and British Airways – passengers´ slanders on facebook – slanders of own employers. Sacking.

8. USA communication study • Email – 93%, web – 81% = the most used communication until 2013 • Other network channels will appear. • Increasing power of customers supported by technologies = 76% positive influence on development of new products, 73% positive impact on revenues • The most important future factor influencing commercial models = changes in technologies • Technological changes – fundamental changes of care about customers from the company´s side – 40% • Changes in sales and marketing initiatives – 24%, especially based on email and web.

9. What causes turbulence ? • 7 main factors • Technological progress and information revolution • Revolutionary technologies and innovations • Gain of the rest of the world • Hyper competition • Environment • Sovereign funds • Increasing power of customers • 1. Decision about allocation of means in contradiction with firm strategy and culture. Change of culture Home Depot – originally orientation on small tradesmen with qualitypersonnel fulfilling advisory services.

10. Change of director – rationalisation – lower of number of shop assistants and their quality = effort of military organisation, destruction of friendly cultural = temporary decay, return to origin. 2. Decreasing of expenditures instead targeted steps Page 69 – study from crisis 2000 – 48% of firms, that cut expenses in total, lost its position on the market. 20% of firms that did so with aim on the basis of expense analysisincreased incomes. Conference 2008 – profit by a crisis : Firms that have skill, will and means should increase its expenses to get new customers and to keep the existing. Skills– marketing expertise, Will – predominates culture that enables to go against stream, Means – can invest.

11. KOTLER / CASLIONE, • CRISIS – two signs are necessary observe • The first means danger • The second express opportunity • The most frequented mistakes in turbulent ambience • Decision about allocation of means in contraindication with firm´s strategy and culture • Total decrease of expenses instead of aimed and elaborated steps. • Abbreviated solution seeking for cash flow keeping without consideration on key parameters

12. Lowering of expenses for marketing, mark support and development of new products • Price lowering in time of decreased revenues – experience in CZ – hotels • Abstraction from customers in consequence of lowering of expenses, connected with sales • Reducing of expenses for training and employees expansion in the time of crisis. • Underestimation of suppliers and distributors.

13. COMPANY TO BE SEEN AS A SERVICE PROVIDERS Services of a firm = combination of its identity (trade mark, organisation and products that sells) If anything does not work, then the whole value of a company is destroyed. To check permanently possible impact of prepared proceedings. Lasting, urgent, question important of life : Where we want to be when the crisis ends. Keeping of cash flow out of consideration for key parameters Sacking of key qualified employees when crisis – in time of increase are missing capable employees, not capital. The company is losing market.

14. BUSINESS WEEK 2008-01-13 • The 10 worst mistakes in turbulent economy • To sack talented employees • To save on technologies • To reduce risk • To stop products´ development • To allow to take a new directors, oriented on expenses lowering, instead of directors, oriented on growth • Give up on globalization • To reject innovations • Change the performance criteria • To prefer hierarchy to cooperation • Download to fortification

15. Price lowering in time of decreased revenues Starbucks Coffee – profit in 3Q 2008 decreased of 97% McDonald´s in the same time increase of 8,2% from new opened places of business. McDonald´s - brought innovations – coffee, smaller portions, lower prices, more vegetable. Combination of sales support – price and non price proceedings. Starbucks – copies McD – Drive in windows, warm breakfasts instead of going other way – for example smaller coffee portions for lower price – a tribute to clients in times of crisis.

16. MAIN POWERS CONNECTED WITH FRAGILITY WITH WORLD ECONOMY GLOBALISATION – mutual export and import of raw materials and products TECHNOLOGIES – internet, computers, mobile telephones – information immediately at disposal TURBULENCE – stability and predictability of situation is disappearing,SOCIOLOGY – Bauman – fluidity, instability, permanence of changes FIRMS REACTIONS - marked reduction of budgets for innovations, development of new products and marketing

17. Reduction of expenses for marketing, trade mark support and development of new products • If a company reduce the intensity of marketing, design freedom to others, who will strengthen • Mistakes • Effort to get new sooner, then is fastened relation with existing • Reduction of M – attracts competitors, who will try to get the most valuable customers • We live in time of lasting information flows – everybody knows how is the firm. So not lie. • To keep down development and innovations – decrease of future values, space for competition.

18. Alienation CUSTOMERS BY REDUCING EXPENSES ASSOCIATED WITH THE SALE Relations between customers and incremental customers – 2% to 4% of population are actual and active customers. Then exist 96% - 98% of potentials. It is necessary to pay attention to incremental customers. What about to follow credible trade mark and sale expertise – these will return without respect to price. Classic : Singapore Airlines 1997 – crisis in Eastern Asia. Theycanceledpart of flights on short haul They invested in comfort and communication with high-end clients – businessmen and passengers of the 1st class 300 mil. USD. Competition advantage, they kept wealthy clients and prepared strong bindings client-mark. Experience of the company EMIRATES – luxury care in air plane.

19. restricted EXPENDITURE ON TRAINING AND DEVELOPMENT EMPLOYEES DURING CRISIS Seemingly expendable expenses, but preparation on time period of growth. Education of top experts, who will provide for competition advantage in time of growth. Australia – education in firms, Effects - 30% improvement in fuel consumption, in education of work safety. Unappreciated SUPPLIERS AND DISTRIBUTORS These are the ushers innovation into practice. In times of crisis - the company must integrate more into their decision-making. But usually - forcing suppliers to reduce prices, instead of the company discussed with them better cooperation.

20. system of timely warning Mattel-Barbie – in years 2001-2004 lost 20% of the market in segment of modish dolls. Its place – company MGA Entertainment , that produced a doll Bratz. MGA realised that girls mature faster and also faster lay aside their dolls Barbie and look for dolls, that look like their siblings. Barbie originally 3-11 years, today 3-5 years.

21. Market research, knowledge about scenarios of society development - life style, demography, free time etc. So Johnson/Johnson asks – how will the demography look like in the year XY, how many patients will visit doctors, with what, what devices, instruments will be necessary etc. Sociology, psychology, demography and the resulting age and major disease= It is necessary to know in this case. New requirements on marketers and marketing communicators !

22. QUESTIONS FOR MANAGEMENT - EARLY WARNING SYSTEM • Our weak point in the past? What's going on today? • Is an inspiration analogy from somewhere else ? • What we overlook important and tell ourselves that it is otherwise? • Who in our trade in first in intercepting of first signals of changes and starts as first to respond ? • What try to tell us our strayed customers ? • What future surprises could actually hurt us? • What technologies could change rules of game in the trade ? • All this is the subject of systematic market research and study of the broader socio-economic context of business.

23. CREATION OF RESISTANT MARKETING SYSTEMS • 4 Key changes of marketing ambience • Much better informed customers - all you can find on the internet. • Constantly higher willingness to buy private marks of shops and trust them, when they are cheaper than advertised national marks. • Competition advantages have constantly shorter duration – high products innovativeness • Internet and social nets – new media and sources, together tools of direct sales

24. Firms permanently prospering – champions • Are flexible – react fast on external stimulus • Are robust – resist the pressure, changes of procedures and conditions • They are resistant - the ability to stand back on its feet • characteristics of firms – champions • Strong management • Ambitious targets • Relies on own power • Continual innovation • Right choice of motivated employees • Selected market concentration • Competition advantages • Immediateness to customer – including MC • Global orientation

25. Main changes in marketers ´ thinking • Everybody in the firm thinks of the customer • Not to sell to everybody, but to clearly defined target markets • Firms are not organised according to products, but according to customers´ segments • Firms do not do everything with their own forces, but more often buy partial elements and services • Firms reduce number of suppliers, deepen relationships with them • Material assets loose importance, transfer to marketing immaterial assets – trade mark, customer´s loyalty, loyalty with distribution nets etc. • The trade marks are not only results of advertising, but their value create the whole MC

26. Firms do not insist on profitability of each activity that much, but work with long term value of customer • Instead of effort to increase market share they want the bigger share in customer´s wallet • Firms get out from locality to global approach • Firms give up concentrating only on financial indexes and concentrate of marketing indexes • Orientation on shareholder´s value is changed into value for all concerned.

27. PROCTOR & GAMBLE • lowered marketing expenses from 25% to 20% from revenues so • Standardisation larger amount of package, advertising on the whole world • Decreased number of sizes and flavours of offered products • Did away with weaker brands or sold them • Launched a number of smaller, but more promising brands • Limited sales actions • Reduced the rate of growth of advertising budget

28. FIVE BASIC QUESTIONS FOR MARKETERS • Have you total overview of your investments and can you uncover ineffective expenses ? • Lead marketing investments to change in customers´ behaviour ? • It focuses investments on removing barriers to customer buying corporate brand? • Is among investments the right combination of marketing tools ? All investments must concentrate on at least one of these things : • Change in customers´ perception and their motivation to bigger purchases. • Offer of temporary financial impulses leading to bigger amounts of purchases • Extending the availability of brands in order to buy more • 5. Does exist a system supporting winners and eliminating • losers ?

29. EIGHT MARKETING STRATEGIES OF CHAOS MANAGEMENT • To secure market share in key segments • Aggressive in fight about market share of competition, that attacks our segments • Higher intensity of customer´s research = fast change of their wishes and needs in turbulence • To keep, but better increase marketing budget • To aim on guarantees, to stress key values • To throw away programmes, that do not work • Not cheapen neither the best nor key marks • To save strong, throw aside weak.

30. HOW TO EDUCATE CUSTOMERS • The company must delight the clients – they must want to recommend the firm to others • Characteristics of BELOVED FIRMS in the USA • Co-ordinate interests of all groups • Salaries of the highest are rather average • Open door to top management • Salaries and benefits of employees over average • Training of employees longer than average

31. Fluctuation of employees lower than average • Employees would cut up themselves for the customers • Suppliers are perceived as real partners at searching for higher quality, productivity and at expenses decreasing • Firms believe that their culture it their biggest fortune and primary source of competition advantage • Marketing costs comparing with competition are lower and rate of keeping of customers is far higher.

32. ANALYSIS OF PROSPERITY OF FIRMS OPERATING FOR LONG-TERM ON MARKET • Firms are as living organisms when concentrating on fundamental conditions of their life. • Sensibility to world around them • Knowledge of own identity + ethic • Tolerance of new thoughts • Conservative financing • High weight is attached to : • To value people, not assets • To free management and control • To learn continuously • To create interpersonal community

33. CORPORATE SOCIAL RESPONSIBILITY • AND ENVIRONMENTAL SUSTAINABILITY • FIRM SOCIAL THEMA • Avon breast cancer • Best Buy electronics recycling • British Airways vulnerable children • General Mills better food • Home Depot human conditions of habitation • General Motors traffic safety • Kraft Foods reduction of obesity

34. Levi Strauss AIDS prevention • Motorola Reducing the amount of solid waste • Pepsi-Cola keeping of active life • Shell seashores cleaning • Starbucks protection of rainforests