Management consulting

assumptions about the corporate image, the nature of customers, the perception and use of existing products and needs, and the acceptability of future new products. Since this work is often very specialized and may require substantial numbers of trained interviewers, the consultant, unless he or she belongs to an organization with its own market research division, may find it more efficient and less time-consuming to subcontract the research to a specialist rather than to undertake it internally. The consultant should keep abreast of market research techniques, market research organizations, the areas in which they specialize and the quality of their work. The consultant should also keep up to date on trends and changes in the market research field.

Information technology (IT), using computers, the Internet and telephone networks, is now firmly established in marketing and distribution. Its growth has been explosive, as witnessed by developments in e-commerce and e-business (see Chapter 16). Applications, for the next few years at least, will be limited more by the ingenuity of the users than by the capabilities of the technology. Its effects have been profound and are by no means confined to e-commerce applications. The marketing consultancy that does not keep in touch with developments in this field will rapidly become obsolete.

15.1 The marketing strategy level

Strategic decisions in marketing have far-reaching implications for the enterprise as a whole and for the management of particular functions, such as production, product development or financial control. It is no wonder, therefore, that even minor proposals may meet with strong objections from senior management of other departments. Major changes, such as dropping or adding product lines, committing substantial funds to advertising or product promotion, developing new products to satisfy new market demands or changing overall pricing policies, are clearly general management decisions to be taken at top levels.

A useful starting-point is to classify the client’s orientation towards the market. Three classifications are recognized: product-oriented, productionoriented, and market-oriented. In a product-oriented firm the emphasis is on the product itself while in the production-oriented firm the dominant considerations in product design or modification are those of ease, cost-efficiency or capacity of production. In both cases, market considerations are ignored or suppressed. In a market-oriented firm the decisions are based on analysis of market needs and demands. The object is to capitalize on the opportunities the market offers that fall within the production and R&D capabilities. This approach can produce all of the good effects of the other two orientations, and avoids their drawbacks. More importantly, it can identify new opportunities. Figuratively speaking, the management of the firm asks the following questions:

●What are the problems of our customers that our products (or services) can solve more efficiently or better than products of other suppliers?

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●Who, in addition to our current customers, has these same needs?

●What particular circumstances of our customers, actual or potential, would suggest modifications in our products, conditions of delivery, after-sales service, etc.?

●Can we use our existing facilities and skills to design, produce, market and distribute this product, or do we need to acquire new facilities and/or skills?

●Can we offer an effective and affordable solution to the problem and still produce an acceptable profit?

The idea of thinking in terms of providing solutions to problems is a very useful one in marketing. It helps considerably in identifying new markets, finding new products for existing customers, finding new customers for existing products and, most importantly, discovering potential and possibly unsuspected competition.

As a very simple case, consider a manufacturer of nuts and bolts. This enterprise probably thinks of itself as a metalworking business, and looks for new business on this basis. But what about its customers? Their problem is joining things together. So the firm could meet competition from firms making welding equipment, rivets, cotter pins, or glue. This threat is also an opportunity, since the firm’s sales force and distributors are already in touch with people who form a potential market for these items, which suggests that they could profitably be added to the firm’s product line if they could be manufactured with existing facilities. The costs of marketing are high, so anything that can add to the effectiveness of the various marketing functions (i.e. reduce the unit costs of marketing activities) can be surprisingly profitable. Such help can come from selling more items per sales visit, sending out more items per shipment, and turning small, unprofitable accounts into medium-sized ones. Creatively developing products is a key to success.

Another emerging theme is that of the global market. A wide range of branded goods, from jet aircraft and cars to compact disc players, jeans and hamburgers, is being sold worldwide with little or no adaptation to local conditions. Production for a global market gives substantial economies of scale compared with production for a national market, and even compared with multinational firms that adapt their production to what they believe are local preferences. Thus national and multinational firms are vulnerable in the face of firms that adopt a global strategy.

Stated in this way, this thesis appears to advocate a product orientation rather that a market orientation, and it is ironic that the chief proponent of the global market strategy was Theodore Levitt, whose 1960 article was such a devastating attack on firms obsessed with their products.1 It can also, however, be interpreted as an assault on the marketing excesses of the boom years when marketers became hypnotized with their own jargon, marketing departments were swollen beyond all reason, and markets were segmented for segmentation’s sake.

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The global market concept is still a controversial subject, but it appears to be widely accepted that the firms that most successfully weathered the hard years of the 1980s were those that had adopted and understood the marketing concept, and applied it in pursuit of clear objectives. Marketing has emerged leaner and fitter. Globalization has also expanded beyond the effects on manufacturers and service providers to embrace industrial and retail customers.

Marketing strategy analysis

Since the firm’s products are the hub of its whole marketing strategy, the first step in a marketing assignment should be to analyse the client’s whole product line in the way described above, checking whether the products (1) provide answers to consumers’ problems, (2) are mutually supportive, and (3) can be modified to solve consumer or market problems. It is also important that the range of products offered is consistent with the firm’s overall objectives. Ideally, all the products in the line should be of interest to every customer, and should fit in well with the production facilities. This ideal is unlikely to exist in practice, of course, and a certain amount of departure from it must be tolerated. Consultants should pay attention, however, to the “odd” product, which is in line because it fits the production facilities but is aimed at a different set of customers and thus requires a sales effort out of proportion to its potential sales. Such spare production capacity might be better used in producing items for other firms under contract or subcontract. Also, a check needs to be made for gaps in the product line which could be filled by buying-in, in order to make full use of the available sales efforts. Since each product maintained in inventory requires space and cash, seeking opportunities to eliminate slow-selling items (line consolidation) can be equally beneficial as a cost-cutting/profit improvement issue. Reviewing the product line and eliminating slower-selling items should be an ongoing process.

Such an analysis should provide a sound basis for the consultant’s recommendations for potential product additions or deletions that need further investigation. For example, the marketing manager might insist that some sizes in a product line, although very small sellers, are necessary because the firm’s distributors demand a full line from their suppliers. This should be investigated (sometimes “demand” means simply a mild preference), as should the possibility of “buying-in” the more extreme sizes. The analysis is also, of course, a prerequisite for a review of the client’s new product development programme.

It is widely believed, probably correctly, that recessions bring managers back in touch with business basics that are too easily forgotten in boom times. In periods of recession, the quality of goods and reliability of delivery are generally perceived as more important than price, especially by industrial purchasers. The implications of this for marketing strategy are clear.

In many enterprises pricing is regarded as the special province of accountants, who determine the prices at which the marketing staff must sell. Yet this is an area in which both marketing considerations and cost criteria

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apply. If a marketing consultant finds that prices are being set by unilateral decisions of accountants, he or she should review how this affects marketing and the volume of sales. This may lead to a revision of pricing policy, including the establishment of new procedures for price setting. The ultimate objective would be to make better use of prices as a marketing tool, but without running the risk that an increased volume of sales of underpriced products would cause a financial loss. It should be noted that absorption costing and other cost accounting methods can give rise to misleading ideas about the profitability of different items in the product line. Pricing is a major tool in the marketing manager’s toolbox but prices cannot be adjusted in a vacuum – the effects of a pricing action must be carefully assessed, evaluated and tested (if possible) before the action is finalized.

Another problem area for consideration by top management is the firm’s public image – the opinion that customers, current and, more importantly, potential, have of the firm. This should be broadly consistent with the image the firm has of itself, and which its product line, advertising, public relations and sales staff are expected to create.

The consultant who suspects a clash between the client’s internal and external images should investigate this possibility thoroughly. How to approach it is a question of consulting strategy. To change a firm’s image is a difficult decision to take; the case for change must therefore be very strong. For example, the marketing consultant may call for the help of an independent market research consultant of good reputation, familiar with attitude research techniques. In any case, the relevant evidence should be collected and presented by a disinterested party, so that the client is assured of the objectivity of the recommendations.

Concentration in retailing

The trend towards concentration, apparent for many years in food retailing, is, if anything, intensifying and extending into other goods. For example, hardware is increasingly being sold through do-it-yourself outlets, themselves often subsidiaries of other retailers. Large speciality retailers have become dominant in the United States and other countries in office supplies, pet supplies, toys, computers, books and other similar categories. This trend will have increasingly profound effects on the marketing of such goods:

(1)The major firms will obviously use their purchasing power leverage to get the greatest possible discounts; this drive will be strengthened as the chains fight for market share. In order to maximize purchasing power many chains have moved to centralized purchasing, which means that all buying, for many regional divisions, is being consolidated into one central buying office. As many retailers globalize (e.g. Walmart, Safeway), there is a move to aggregate volume from multiple countries to obtain preferred pricing and promotion from manufacturers.

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(2)The major retailers will try to influence and to participate in manufacturers’ advertising. In recent years, power has shifted from the manufacturer to the retailer; retailers now aggressively sell advertising and merchandising support without which a manufacturer’s products cannot survive.

(3)Selling techniques have changed. A large part of the role of the salesperson dealing with independent firms and small chains is to function as “order takers”, and the actual selling function is relatively limited. With re-ordering being increasingly automated through the use of sophisticated computer programs and electric point-of-sale ordering, the order-taking function is being reduced, and centralized purchasing means that the salesperson now deals with buyers who are sophisticated negotiators with abundant data at their disposal. This will entail corresponding training for sales representatives if they are to hold their own in these negotiations.

(4)The spread of house brands and generics means that in many lines of goods major retailers are in effect competing directly with manufacturers on ground of their own choosing. Some brands such as Sears Craftsman or Kenmore have built brand identity and brand loyalty.

(5)New retail formats, which reflect the further specialization in merchandizing, are proliferating: in the United States, examples include club stores (Sam’s, Costco) and specialty retailers such as Circuit City (appliances),

Toys’R Us (toys), Kids’R Us (children’s clothing), Home Depot (home improvements and hardware), Office Depot (office supplies), CompUSA (computers), and PetSmart (pet supplies).

At the other end of the scale, many small food retailers are being forced to become convenience stores in order to survive. The different mix of goods sold by such stores is reflected in changed stocking and purchasing patterns by their wholesalers; this may work back in due course to different assemblages of manufacturing facilities.

These trends are affecting, and will continue to affect, the overall and marketing strategies of all the firms involved, and the marketing consultant must be aware of them and of their effects if he or she is to provide sound advice to clients.

What the advice is will depend on various factors, such as the strength of the client’s brand name, the technology behind the products (a new product that can be copied in a matter of months has no market strength), the legal protection of the technology, product or concept, the negotiating skills of sales staff, and so on. One practice that must be looked at with concern is that of recouping the discounts exacted by large customers by charging high prices to small customers. This hastens their demise and makes the manufacturer even more dependent on a few large customers, any one of whom could stop buying his products and bankrupt him in a matter of months.

There would seem to be good prospects for the consultant who can show groups of non-competing manufacturers how to provide low-cost support to

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