The Hindu Business Line : Marketing is NOT strategy

THERE, we've said it! In an age where the slogans of the day are `Marketing is Strategy,' `Marketing is Business,' or even `Marketing is Everything,' the statement in the title could rank close to heresy (at least among the marketing fraternity). Nonetheless, we see some good reasons for this viewpoint.

But first, the logic behind the ascent of marketing.

Traditionally, the function most closely associated with a company's strategy tends to be the one most critical for its industry. In brand-led sectors, it has been marketing. In commodities, it is typically purchase or production. In technology or big pharma, it could be R&D.

But this is changing. As competition has intensified across sectors, managers have been looking for a way to protect their sales and profits. Increasingly, it appears, they are looking to `branding' (which appears nowadays to be synonymous with marketing). Taking a cue from FMCG and similar industries, their aim is to develop brands that will insulate them from competitive pressures and cyclical downturns. Naturally, marketing needs to play an ever-increasing role in strategy development. But that's a far cry from calling it everything. And to see that, we need to look at FMCG, one sector where it could justifiably be expected to be "everything."

We recently met the CEO of one of India's most respected FMCG companies. "The value of our company lies in its brands," he said. "Consequently, our strategy is to strengthen our brands with appropriate investments." That sounds reasonable, but a different perspective emerges when we look deeper.

His company's success has been counter-intuitive. It has entered new segments, discovered new value propositions, and done all this profitably without much investment in traditional branding (i.e., media). In our view, a significant part of the success can be attributed to its technical mastery of its industry. Competitors who have tried to follow find themselves either incapable of making money in the same segment, or unable to sustain any initial gains. His strategy has worked for him — it will not work for his competitors.

Strategy is all about choices and trade-offs. A quest for greater volumes generally entails reducing gross margins. A low-end disruption would mean giving up a self-image of being `world class.' At the business model level, these are choices about the customer to target, the value proposition to offer, and how to deliver the promised value. Some of these, like product features, pricing and media spend, are in the marketing domain. Others, like outsourcing, source of funding, and cost leadership, are not. Nonetheless, all these choices are interlinked — the set has to be internally consistent, or the strategy will fail.

Nirma consistently figures among India's largest and most trusted brands, but try and imagine it being a success without its low-cost production and distribution model. On the flip side, HLL just could not counter Nirma bar with consumer and trade promotions on Rin. There was an inherent inconsistency between its choice to counter a low-price product, and its choice to do so through a world-class product with high gross margins. Ultimately, it had to go in for a new brand with a new, low-cost, business model.

Which points the way to another thought — not only does the strategy have to be internally consistent, but it also has to be different. If you are doing the same thing as your competitors, how can you expect to outpace them in the market?

Amul's success in the ice-cream wars is the modern day equivalent of the Nirma story, but could it have been possible without the co-operative business model? We think not, else Baskin Robbins, Blue Bunny, and myriad others who came in with high-end brands, and the same model as HLL, would have been giants as well. HLL had enough and more answers to the Amul brand — what it did not have an answer to was Amul's cooperative philosophy.

A quick look at some recent successes in India, whether it be Nirma, CavinKare, L'Oreal, Amul in FMCG, LG in consumer electronics, or Apollo, Café Coffee Day, and Jet in services, bears this out. All of them made a consistent set of choices, and had a fundamentally different business model from their main competitors. On the other hand, in markets which are considered `commoditised,' like soaps, oils, or chemicals, practically all companies in the industry follow a boilerplate strategy. Products are differentiated with claims like "the first brand in India to contain vita-fruits" (or whatever), then target the same customers with similar pricing in the same outlets with very similar ads on the same channels. Are these products really different? Are they following a truly different strategy? If not, how can they expect truly different results? Perhaps this explains the recent plethora of brand flops.

Looking ahead: The logic for the ascent of marketing in strategy still holds good. As competition continues to intensify, companies will need to market and brand themselves and their products or services better. But they need to remember that brands are not infinitely elastic resources that can almost magically deliver a steady stream of revenues and profits. Brands communicate a value proposition to the customer — but unless the value proposition is delivered as promised, the brand will fail. And delivering on the brand promise takes a concerted effort across the organisation.

So yes, marketing is important. And yes, marketing is strategic. But it is not strategy. The twin requirements of internal consistency and strategic differentiation usually mean that trade-offs have to be made between elements of the business model. And that is a corporate, not a marketing, decision.

(Radhika Chadha is Principal at Paradigm, a Chennai-based strategy consultancy. Parmit Chadha is Principal with Strategic Decisions Group.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Marketing is NOT strategy

The year the penny dropped

Leadership is branding

An eminently forgettable year

India Shining to Sensex Climbing

Is Indian advertising missing the BPO bus?

The two-in-one nation!

It happened this Brand Year