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Answer & Explanation:Format: Two-page maximum, single space, business block, justified margins, 10-point font APA bibliographic citation of the work as your ‘title’ Your name, course, section number and date at the upper rightContent: Central theme – identify author’s main lesson/argument – what is the author(s) teaching us Critical analysis – evaluate the lesson/argument – strengths/weaknesses – considering pointing to a frame of reference in your own life or your training in the subject Main takeaways – so what and now what? How do we best apply the knowledge from this article/book?Absolutely no plagiarism!!!!!!!mckenna_hbr_on__marketing_is_everything__1_.pdf
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Marketing Is Everything
by Regis McKenna
Harvard Business Review
Reprint 91108
HBR
J A N U A RY– F E B R U A RY 1 9 9 1
Marketing Is Everything
Regis McKenna
T
he 1990s will belong to the customer. And
that is great news for the marketer.
Technology is transforming choice, and
choice is transforming the marketplace. As a result,
we are witnessing the emergence of a new marketing
paradigm—not a “do more” marketing that simply
turns up the volume on the sales spiels of the past but
a knowledge- and experience-based marketing that
represents the once-and-for-all death of the salesman.
Marketing’s transformation is driven by the enormous power and ubiquitous spread of technology. So
pervasive is technology today that it is virtually
meaningless to make distinctions between technology and nontechnology businesses and industries:
there are only technology companies. Technology has
moved into products, the workplace, and the marketplace with astonishing speed and thoroughness. Seventy years after they were invented, fractional horsepower motors are in some 15 to 20 household
products in the average American home today. In less
than 20 years, the microprocessor has achieved a
similar penetration. Twenty years ago, there were
fewer than 50,000 computers in use; today more than
50,000 computers are purchased every day.
The defining characteristic of this new technological push is programmability. In a computer chip,
programmability means the capability to alter a command, so that one chip can perform a variety of
prescribed functions and produce a variety of prescribed outcomes. On the factory floor, programmability transforms the production operation, enabling one machine to produce a wide variety of
models and products. More broadly, programmability
is the new corporate capability to produce more and
more varieties and choices for customers—even to
offer each individual customer the chance to design
and implement the “program” that will yield the
precise product, service, or variety that is right for
him or her. The technological promise of programmability has exploded into the reality of almost unlimited choice.
Take the world of drugstores and supermarkets.
According to Gorman’s New Product News, which
tracks new product introductions in these two consumer-products arenas, between 1985 and 1989 the
number of new products grew by an astonishing 60%
to an all-time annual high of 12,055. As venerable a
brand as Tide illustrates this multiplication of brand
variety. In 1946, Procter & Gamble introduced the
laundry detergent, the first ever. For 38 years, one
version of Tide served the entire market. Then, in the
mid-1980s, Procter & Gamble began to bring out a
succession of new Tides: Unscented Tide and Liquid
Tide in 1984, Tide with Bleach in 1988, and the
concentrated Ultra Tide in 1990.
To some marketers, the creation of almost unlimRegis McKenna is chairman of Regis McKenna Inc., a Palo
Alto-headquartered marketing consulting firm that advises some of America’s leading high-tech companies. He
is also a general partner of Kleiner Perkins Caufield &
Byers, a technology venture-capital company. He is the
author of Who’s Afraid of Big Blue? (Addison-Wesley, 1989)
and The Regis Touch (Addison-Wesley, 1985).
Copyright © 1991 by the President and Fellows of Harvard College. All rights reserved.
ited customer choice represents a threat—particularly when choice is accompanied by new competitors. Twenty years ago, IBM had only 20 competitors;
today it faces more than 5,000, when you count any
company that is in the “computer” business. Twenty
years ago, there were fewer than 90 semiconductor
companies; today there are almost 300 in the United
States alone. And not only are the competitors new,
bringing with them new products and new strategies,
but the customers also are new: 90% of the people
who used a computer in 1990 were not using one in
1980. These new customers don’t know about the old
rules, the old understandings, or the old ways of doing
business—and they don’t care. What they do care
about is a company that is willing to adapt its products or services to fit their strategies. This represents
the evolution of marketing to the market-driven
company.
Several decades ago, there were sales-driven companies. These organizations focused their energies on
changing customers’ minds to fit the product—practicing the “any color as long as it’s black” school of
marketing.
As technology developed and competition increased, some companies shifted their approach and
became customer driven. These companies expressed
a new willingness to change their product to fit customers’ requests—practicing the “tell us what color
you want” school of marketing.
In the 1990s, successful companies are becoming
market driven, adapting their products to fit their
customers’ strategies. These companies will practice
“let’s figure out together whether and how color
matters to your larger goal” marketing. It is marketing that is oriented toward creating rather than controlling a market; it is based on developmental education, incremental improvement, and ongoing
process rather than on simple market-share tactics,
raw sales, and one-time events. Most important, it
draws on the base of knowledge and experience that
exists in the organization.
T
hese two fundamentals, knowledge-based and
experience-based marketing, will increasingly
define the capabilities of a successful marketing
organization. They will supplant the old approach to
marketing and new product development. The old
approach—getting an idea, conducting traditional
market research, developing a product, testing the
market, and finally going to market—is slow, unresponsive, and turf-ridden. Moreover, given the fastchanging marketplace, there is less and less reason to
believe that this traditional approach can keep up
with real customer wishes and demands or with the
rigors of competition.
Consider the much-publicized 1988 lawsuit that
HARVARD BUSINESS REVIEW
January–February 1991
Beecham, the international consumer products group,
filed against advertising giant Saatchi & Saatchi. The
suit, which sought more than $24 million in damages,
argued that Yankelovich Clancy Shulman, at that time
Saatchi’s U.S. market-research subsidiary, had “vastly
overstated” the projected market share of a new detergent that Beecham launched. Yankelovich forecast
that Beecham’s product, Delicare, a cold-water detergent, would win between 45.4% and 52.3% of the U.S.
market if Beecham backed it with $18 million of advertising. According to Beecham, however, Delicare’s
highest market share was 25%; the product generally
achieved a market share of between 15% and 20%. The
lawsuit was settled out of court, with no clear winner
or loser. Regardless of the outcome, however, the issue
it illustrates is widespread and fundamental: forecasts,
by their very nature, must be unreliable, particularly
with technology, competitors, customers, and markets all shifting ground so often, so rapidly, and so
radically.
The alternative to this old approach is knowledgebased and experience-based marketing. Knowledgebased marketing requires a company to master a scale
of knowledge: of the technology in which it competes; of its competition; of its customers; of new
sources of technology that can alter its competitive
environment; and of its own organization, capabilities, plans, and way of doing business. Armed with
this mastery, companies can put knowledge-based
marketing to work in three essential ways: integrating the customer into the design process to guarantee
a product that is tailored not only to the customers’
needs and desires but also to the customers’ strategies; generating niche thinking to use the company’s
knowledge of channels and markets to identify segments of the market the company can own; and
developing the infrastructure of suppliers, vendors,
partners, and users whose relationships will help
sustain and support the company’s reputation and
technological edge.
The other half of this new marketing paradigm is
experience-based marketing, which emphasizes interactivity, connectivity, and creativity. With this
approach, companies spend time with their customers, constantly monitor their competitors, and develop a feedback-analysis system that turns this information about the market and the competition into
important new product intelligence. At the same
time, these companies both evaluate their own technology to assess its currency and cooperate with other
companies to create mutually advantageous systems
and solutions. These close encounters—with customers, competitors, and internal and external technologies—give companies the firsthand experience
they need to invest in market development and to
take intelligent, calculated risks.
3
In a time of exploding choice and unpredictable
change, marketing—the new marketing—is the answer. With so much choice for customers, companies
face the end of loyalty. To combat that threat, they
can add sales and marketing people, throwing costly
resources at the market as a way to retain customers.
But the real solution, of course, is not more marketing
but better marketing. And that means marketing that
finds a way to integrate the customer into the company, to create and sustain a relationship between the
company and the customer.
The marketer must be the integrator, both internally—synthesizing technological capability with
market needs—and externally—bringing the customer into the company as a participant in the development and adaptation of goods and services. It is a
fundamental shift in the role and purpose of marketing: from manipulation of the customer to genuine
customer involvement; from telling and selling to
communicating and sharing knowledge; from last-inline function to corporate-credibility champion.
Playing the integrator requires the marketer to
command credibility. In a marketplace characterized
by rapid change and potentially paralyzing choice,
credibility becomes the company’s sustaining value.
The character of its management, the strength of its
financials, the quality of its innovations, the congeniality of its customer references, the capabilities of
its alliances—these are the measures of a company’s
credibility. They are measures that, in turn, directly
affect its capacity to attract quality people, generate
new ideas, and form quality relationships.
The relationships are the key, the basis of customer
choice and company adaptation. After all, what is a
successful brand but a special relationship? And who
better than a company’s marketing people to create,
sustain, and interpret the relationship between the
company, its suppliers, and its customers? That is
why, as the demands on the company have shifted
from controlling costs to competing on products to
serving customers, the center of gravity in the company has shifted from finance to engineering—and
now to marketing. In the 1990s, marketing will do
more than sell. It will define the way a company does
business.
The old notion of marketing was epitomized by the
ritual phone call from the CEO to the corporate
headhunter saying, “Find me a good marketing person to run my marketing operation!” What the CEO
wanted, of course, was someone who could take on a
discrete set of textbook functions that were generally
associated with run-of-the-mill marketing. That person would immediately go to Madison Avenue to hire
an advertising agency, change the ad campaign, redesign the company logo, redo the brochures, train the
sales force, retain a high-powered public relations
4
firm, and alter or otherwise reposition the company’s
image.
Behind the CEO’s call for “a good marketing person” were a number of assumptions and attitudes
about marketing: that it is a distinct function in the
company, separate from and usually subordinate to
the core functions; that its job is to identify groups of
potential customers and find ways to convince them
to buy the company’s product or service; and that at
the heart of it is image making—creating and projecting a false sense of the company and its offerings to
lure the customer into the company’s grasp. If those
assumptions ever were warranted in the past, however, all three are totally unsupportable and obsolete
today.
Marketing today is not a function; it is a way of
doing business. Marketing is not a new ad campaign
or this month’s promotion. Marketing has to be allpervasive, part of everyone’s job description, from the
receptionists to the board of directors. Its job is neither to fool the customer nor to falsify the company’s
image. It is to integrate the customer into the design
of the product and to design a systematic process for
interaction that will create substance in the relationship.
To understand the difference between the old and
the new marketing, compare how two high-tech
medical instrument companies recently handled
similar customer telephone calls requesting the repair and replacement of their equipment. The first
company—call it Gluco—delivered the replacement
instrument to the customer within 24 hours of the
request, no questions asked. The box in which it
arrived contained instructions for sending back the
broken instrument, a mailing label, and even tape to
reseal the box. The phone call and the exchange of
instruments were handled conveniently, professionally, and with maximum consideration for and minimum disruption to the customer.
The second company—call it Pumpco—handled
things quite differently. The person who took the
customer’s telephone call had never been asked about
repairing a piece of equipment; she thoughtlessly sent
the customer into the limbo of hold. Finally, she came
back on the line to say that the customer would have
to pay for the equipment repair and that a temporary
replacement would cost an additional $15.
Several days later, the customer received the replacement with no instructions, no information, no
directions. Several weeks after the customer returned
the broken equipment, it reappeared, repaired but
with no instructions concerning the temporary replacement. Finally, the customer got a demand letter
from Pumpco, indicating that someone at Pumpco
had made the mistake of not sending the equipment
C.O.D.
HARVARD BUSINESS REVIEW
January–February 1991
To Pumpco, marketing means selling things and
collecting money; to Gluco, marketing means building relationships with its customers. The way the
two companies handled two simple customer requests reflects the questions that customers increasingly ask in interactions with all kinds of businesses,
from airlines to software makers: Which company is
competent, responsive, and well organized? Which
company do I trust to get it right? Which company
would I rather do business with?
Successful companies realize that marketing is like
quality—integral to the organization. Like quality,
marketing is an intangible that the customer must
experience to appreciate. And like quality—which in
the United States has developed from early ideas like
planned obsolescence and inspecting quality in to
more ambitious concepts like the systemization of
quality in every aspect of the organization—marketing has been evolutionary.
Marketing has shifted from tricking the customer
to blaming the customer to satisfying the customer—and now to integrating the customer systematically. As its next move, marketing must permanently shed its reputation for hucksterism and image
making and create an award for marketing much like
the Malcolm Baldrige National Quality Award. In
fact, companies that continue to see marketing as a
bag of tricks will lose out in short order to companies
that stress substance and real performance.
Marketing’s ultimate assignment is to serve customers’ real needs and to communicate the substance
of the company—not to introduce the kinds of cosmetics that used to typify the auto industry’s annual
model changes. And because marketing in the 1990s
is an expression of the company’s character, it necessarily is a responsibility that belongs to the whole
company.
U.S. companies typically make two kinds of mistakes. Some get caught up in the excitement and drive
of making things, particularly new creations. Others
become absorbed in the competition of selling things,
particularly to increase their market share in a given
product line.
Both approaches could prove fatal to a business.
The problem with the first is that it leads to an
internal focus. Companies can become so fixated on
pursuing their R&D agendas that they forget about
the customer, the market, the competition. They end
up winning recognition as R&D pioneers but lack the
more important capability—sustaining their performance and, sometimes, maintaining their independence. Genentech, for example, clearly emerged
as the R&D pioneer in biotechnology, only to be
acquired by Roche.
The problem with the second approach is that it
leads to a market-share mentality, which inevitably
HARVARD BUSINESS REVIEW
January–February 1991
translates into undershooting the market. A marketshare mentality leads a company to think of its customers as “share points” and to use gimmicks, spiffs,
and promotions to eke out a percentage-point gain. It
pushes a company to look for incremental, sometimes even minuscule, growth out of existing products or to spend lavishly to launch a new product in
a market where competitors enjoy a fat, dominant
position. It turns marketing into an expensive fight
over crumbs rather than a smart effort to own the
whole pie.
The real goal of marketing is to own the market—not just to make or sell products. Smart marketing means defining what whole pie is yours. It means
thinking of your company, your technology, your
product in a fresh way, a way that begins by defining
what you can lead. Because in marketing, what you
lead, you own. Leadership is ownership.
When you own the market, you do different things
and you do things differently, as do your suppliers and
your customers. When you own the market, you
develop your products to serve that market specifically; you define the standards in that market; you
bring into your camp third parties who want to develop their own compatible products or offer you new
features or add-ons to augment your product; you get
the first look at new ideas that others are testing in
that market; you attract the most talented people
because of your acknowledged leadership position.
Owning a market can become a self-reinforcing
spiral. Because you own the market, you become the
dominant force in the field; because you dominate the
field, you deepen your ownership of the market. Ultimately, you deepen your relationship with your
customers as well, as they attribute more and more
leadership qualities to a company that exhibits such
an integrated performance.
To own the market, a company starts by thinking
of a new way to define a market. Take, for instance,
the case of Convex Computer. In 1984, Convex was
looking to put a new computer on the market. Because of the existing market segmentation, Convex
could have seen its only choice as competing for
market share in the predefined markets: in supercomputers where Cray dominated or in minicomputers
where Digital led. Determined to define a market it
could own, Convex created the “mini-supercomputer” market by offering a product with a price/performance ratio between Cray’s $5 million to $15
million supercomputers and Digital’s $300,000 to
$750,000 minicomputers. Convex’s product, priced
between $500,000 and $800,000, offered technological performance less than that of a full supercomputer
and more than that of a minicomputer. Within this
new market, Convex established itself as the leader.
Intel did the same thing with its microprocessor.
5
The company defined its early …
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