Adi Dassler, a keen sportsman, started his shoe company with his brother Rudolf. Adi observed athletes, talked to them about their needs, and then experimented with novel ways of solving their problems. Business is not only about innovation and we have probably never heard this story if it wasn’t for Rudolf who was keen on selling. Later on, the story gets split into Adidas and Puma. strategy+business has published a series of pictures featuring Adidas’ success:
In one of the latest “Strategy+Business” articles, the authors are asking a very powerful question for anyone looking into seizing megatrends opportunities: “What made McDonald’s persevere in China, and why did its U.S.-centric marketing approach succeed?” Here is their answer:
Because its leaders were early to recognize an opportunity in the interplay between two global megatrends. The first was the shift in economic power toward Asia. In 2000, less than 2 percent of global middle-class consumption occurred in China and India. By 2013, that proportion had reached almost 10 percent, and it is predicted to multiply several times by the middle of this century.
The second megatrend involved cultural transformation stemming from demographic change. The prevalence of smaller families under China’s one-child-per-family policy, which has been in place since 1979, has led to a stronger emphasis on children’s well-being.
Together, these two trends suggested that a huge number of Chinese citizens would gain a noteworthy (albeit small by Western standards) increase in their discretionary income. With relatively few children to spend it on, and more opportunities to learn about cultures outside China, they would aspire to the lifestyle of their traditionally more affluent Western counterparts. Well-known Western brands would suddenly be an attainable status symbol.
In 2004, many Western fast-food brands were struggling in their home countries, where they faced highly competitive markets and shifting public food preferences. So McDonald’s seized the Chinese market. The chain put in place subtle variations to its basic menu, such as locally popular sauces, and adopted a few tailored innovations, such as take-out windows for drinks, and of course the McWeddings. The chain also kept adjusting its offerings to reflect the responses it observed from its customers. In this way, the company gained a substantial foothold in the vital China market.
With a clear idea of the interactions among large-scale trends and how they will play out during the coming years, your company could gain a similarly strong advantage.
With humor and persistence, filmmaker Morgan Spurlock dives into the hidden but influential world of brand marketing on his quest to make a completely sponsored film about sponsorship. Here’s the TED talk he provided afterwards:
Too many companies view marketing plans as little more than an exercise in where and when to buy media placement. Yet as the number of digital interactions increases, marketers must recognize the power that lies beyond traditional paid media.
The changing role of older media and the emergence of newer ones extend the marketer’s role well beyond the allocation of budgets and channels. Marketers today require a deep understanding of how consumers engage with different types of media at each stage of the journey toward a purchase decision. McKinsey’s study “Beyond paid media: Marketing’s new vocabulary” splits the media in 5 categories: paid, owned, earned, sold, and hijacked and makes an analysis of how media are evolving nowadays.
What’s there to think about?
1. Media are becoming more integrated. New ways to connect with customers, for example, are transforming traditional relationship management by requiring marketers to interact with consumers through multiple forms of media in increasingly personalized ways. JetBlue has promoted its Twitter offering through many channels, for instance, and now has about 1.6 million followers seeking a regular feed of special deals for tickets. This approach has given JetBlue the ability to deliver timely coupons at a minimal variable cost, reducing its reliance on expensive paid media while fostering closer relationships with consumers.
2. New publishing models are emerging because the increasing complexity of consumer needs. Computer maker Dell and automobile manufacturer Nissan, for example, worked with the Sundance Channel to create a television talk show hosted by Elvis Costello to attract their target demographic. With ads that seamlessly blended into the show’s content, Dell and Nissan not only gained exposure to a highly engaged audience but also shifted the perception of their brands to connect with Generation X.
3. Applications on wireless devices are spawning tools that provide useful information. For example, eBay’s Red Laser generates a list of prices for any product whose bar code has been scanned by a mobile phone. Beverage companies show where their products are available by overlaying icons onto maps on the screens of mobile phones. In Japan, food manufacturers can increase sales across entire product categories through marketing collaborations with platforms such as Cookpad, the country’s leading online recipe site, with 9 million members, more than 40 percent of whom are women in their 30s.
4. Marketing experiences are becoming more personally relevant. McDonald’s in Japan, for example, has developed expertise in the use of Twitter and other blogging platforms to promote new products and promotions by leveraging its huge fan base to talk about how much they love the company’s food. While this fan promotion is sometimes spontaneous, it’s often facilitated and encouraged by providing these fans with free meals. In this way, paid- and owned-media efforts (such as blog and Twitter campaigns) make consumers so enamored of McDonald’s products that the company generates a significant amount of earned media.
5. The evolution of new kinds of media means that consumers are engaging more often in real-time conversations, particularly on social networks and other digital platforms. One consumer electronics company, for example, has recognized the significance of every review or rating posted about its products. It now responds to all comments within 24 hours: positive feedback gets a thank you, an invitation to become a Facebook friend, and special offers; negative reviews get explanations of how to fix issues, instructions on how to navigate an interface more easily, or follow-up questions to learn more about what the consumer didn’t like. Some hotel chains, recognizing the importance of travel sites (such as the popular TripAdvisor), likewise encourage satisfied guests to post comments online, while employing staff to follow and answer negative comments.
I received today McKinsey’s survey on „Measuring marketing”. The survey was in the field in January 2009 and generated responses from 587 C-level executives representing the full range of industries and regions.
It was not quite surprising to find out that many companies, as the survey shows, don’t use basic best practices such as clearly allocating (or even defining) marketing spending across the whole company or regularly reviewing the results. Further, companies typically allocate their marketing budgets based on historical allocation levels and product-level priorities, rather than campaign effectiveness or the goals of the company as a whole.
The survey results begin to quantify another bit of common wisdom: consumer-focused companies are stronger marketers. Indeed, the results show that these types of companies are much likelier to use most of the best practices. Further, though reaction to the economic downturn is varied, consumer-focused companies are more likely than others to be planning to increase their marketing spending. Regardless of where they focus, companies that use best practices (such as ensuring that marketing spending is clearly allocated and well understood across the whole company) are also likelier than others to have plans to increase their spending.
According to McKinsey, nearly three-quarters of all companies are cutting operating costs in response to the global economic turmoil. However, the survey shows that marketing isn’t as hard hit: only 45% of companies said that they will decrease their marketing spending in the next 12 months, while 20% expect an increase. Executives at consumer-focused companies are far more likely to say their companies will increase their spending than executives at companies focused on selling to other businesses.
Among the companies that plan to decrease their marketing spending, 40% are making across-the-board cuts. Comparing all responses with those at companies where marketing spending is clearly allocated and understood across the company highlights that companies in the latter group make cuts that are more targeted, and, almost certainly, more effective.