The Hindu Business Line : `Marketing is losing its pre-eminence in boardrooms'

IT'S a wintry evening in Chennai, or, at least, as wintry as the city can get. Prof Jagdish Sheth is getting ready to speak to the students of the Loyola Institute of Business Administration before he inaugurates its PhD programme at the expansive campus of Loyola College.

It's a homecoming for Dr Sheth, distinguished alumni — he passed out with a B.Com degree in 1960 — and the Charles Kellstadt Professor of Marketing at Emory University's Goizueta Business School, and a consultant to several large corporations. He has published more than 200 books and research papers on different areas of marketing.

The dapper Dr Sheth begins by saying that he started out life at 6 foot 4 inches, but the pressures of academic life took away many inches! He later goes on to present his worldview on a wide variety of subjects to the students and faculty who pepper him with questions later after his talk on India's competitive advantage.

Prior to his talk, Catalyst caught up with Dr Sheth for an interview on what's hot in marketing.

What is the current debate on marketing about?

There are three areas of debate in marketing: the first is around marketing as a practice. In the US, marketing as a discipline got organised at the beginning of the 20th century where (the concept of) branding and aspects of branding arose. Marketing was primarily organised to create customers, convert non-users to users. All practices were designed for that.

Now in all the advanced countries, the customers are already created. So the question is how you retain customers and gain more share of their wallet than market share. Now that companies have gained market share, marketing is uneasy; they don't know how to retain customers — they know how to gain customers, but are not comfortable with retention marketing. That's the debate: how many dollars one needs to retain customers. In the old days, it used to be 90 per cent for acquisition and 10 per cent for retaining them. Now, it may be the other way round.

The second major debate is that marketing came out of the manufacturing sector. All the great marketers were manufacturers of branded products. But now the economy is services-driven, so the question is, are the marketing concepts we learnt and taught for manufacturers equally useful for services? And, there is an uneasiness, because in services, the customer now is a co-producer with you. So, the question is do we need to use the same marketing practices or do it differently?

The third debate has to do with marketing losing its power in the boardroom. Today, there's no CMO coming and talking in the boardroom. It's losing its pre-eminence as a discipline in the boardrooms in advanced countries. I've challenged marketing professionals in the US, asking them to give one major idea in the past quarter of a century that the CEO and the board got excited about. Take customer satisfaction; it didn't come from marketing; it came from the quality movement. Internet marketing came from technology people. There is not a single idea we have created which became a passion for the company. One idea is we should be customer-focused, but then that's a motherhood statement. And, even the idea of creating value for customers has not come from marketing, but from operations people. So, what is it that marketing is bringing to the table?

My view is that we need to radically re-engineer the marketing function in corporations and take it from the line function it is now to a staff function, directly reporting to the CEO of the corporation. Now, that's where the CFO and the HR guy and CIO report. However, marketing is now decentralised by divisions, by business units and even by product categories. So, it is three levels below.

Now that idea will work well. Marketing will then be touching the CEO's office. It will get to work on the corporate brand. Like HR and finance, marketing also has functional expertise in all the areas. Marketing should also do business development. All PR should be part of marketing. There are five stakeholders and they all need to be marketed to. You have internal customers too — the employees — and they need to be marketed too. In fact, a hot area emerging today is employer branding, especially in IT. Because they need to capture talent and motivate them. They are like products; companies too make money on them. Marketing two levels down at the level of a product manager is only to do with external marketing. The third major stakeholder is the shareholder. Investors should be handled by the corporate marketing function. The fourth one is the community that you live in. The fifth is the suppliers; how do you treat them as customers? The sixth one is the government; you need to market to the government as well. And then there's the media. This multi-stakeholder approach is equally important and I am advocating that.

You have postulated the 4 As of marketing. Has that created a tectonic shift in the marketing discipline?

In the marketing field, it has created great excitement. 4 Ps is designed as a budgeting, planning and operational tool, from a product viewpoint. Whereas the 4 As is a customer perspective. Clearly, we need to have another framework. In fact, Prof Kotler himself is promoting this concept worldwide.

Is it finding acceptability?

It is finding acceptability as the framework is intuitive. It then adds certain things where the power of marketing could be released more. Marketing is primarily about creating awareness and acceptability. It has never focused on affordability which links very well with C.K. Prahalad's view about the fortune at the bottom of the pyramid. Affordability has become a key opportunity and if you can break that barrier in redesigning the product to make it either affordable or accessible ... most marketing dollars are not spent well on these two activities.

The framework is catching on; all the four As are multiplicative. A customer will not be willing to make a trade-off. He won't say give me the best product and I am willing to pay more for it - which is how marketing got organised as differentiation, how to charge more ... but the best marketing is simple. If you are for me a superior product, from a customer viewpoint, and with lower prices in a customer-friendly manner — which is accessibility — I will buy your product forever. And the company that is winning worldwide with such a simple idea is Toyota, which has understood and managed this paradigm.

Are companies buying into the 360-degree branding approach? Are they looking at their branding in a holistic fashion?

Yes, clearly, the 360-degree approach which began in HR practice ... I believe the HR practice of internal marketing, and everything we do there can be extended outside as well. In HR you are selective about your employees when you hire them. So, why can't you tell someone that you should not be my customer? We are indiscriminate in our choice of customers. For some, you are not even able to fulfil their needs and wants. Once we hire employees, we immediately orient them about what the company is all about - but we never orient our customers about who we are. And whether you need us. We always worry about employees' career path. So, why can't we have a "career path" for our customers? What is the next thing customers should be asking for and are we ready to provide that? Are we ready to fulfil their aspirations when they are satisfied with what we've given them?

Well, you also fire employees, so have you thought about firing customers in a positive way? We retire employees gracefully and then they remain loyal. So, can't we do the same with customers ... and then they brag about us?

Which companies do you think are the cutting edge of marketing today?

They are in three domains. Probably, the most cutting edge services are done in services marketing, such as cellular telephony; in financial services, they are doing more clever things. Second, surprisingly, are the hi-tech firms. To give you an example, in one week Microsoft, I am told, spent close to $500 million on the launch of Windows XP. Even a P&G will never dream of it ... for the launch of a variant of an existing product, let alone a new category. They know how to take risks. It was more than advertising with a lot of infomercials; they made it an event. Now, they are doing the same for X-box. So, these are not traditional marketers but technology firms learning by themselves and doing a good job. And the third area is the B2B space - they are getting smarter at marketing.