It's often said that marketing and operations serve different masters. Operations strives for low costs, often by standardizing products to generate maximum scale and minimal complexity. By contrast, marketing usually promotes more assortment and bells and whistles in the hope of endearing themselves to customers, even if it means higher costs and more complexity. Not surprisingly, the very things that marketers see in the best interests of their performance are the opposite of the kinds of initiatives that enhance operations' record.
It doesn't have to, and shouldn't, be that way.
Barry Cross' recent blog on lean manufacturing (Lean and the Duct Tape Conundrum) shows that reducing costs doesn't have to mean lower quality. Best of all, the lower costs generated by a lean mentality results in a capacity to offer the same quality at lower prices: "better value" for customers.
However, that same line of reasoning can also provide marketing with an enhanced ability to play the "marketing game" and elevate the business above competing on price. The process starts with lean management removing waste and unnecessary costs. However, the marketing play is NOT to offer lower prices. Instead, marketers reallocate the costs to other areas (like new features, better service, and the like) in order to give the customer higher "quality" at the same price: again, raising the value received by customers. (see Figure 1)
But why be one dimensional in the use of cost savings? What if some of the cost reduction is given to customers in the form of lower price and some of the cost savings are used to give better quality. Now the customer gets higher quality at a lower price: not just better value but "superior value". And if you divide the use of cost savings into three parts – lower prices, better quality and higher profits – the result could be called IKEA…or 3M…or Westjet…or….
You see, marketing doesn't have to wait for operations to develop lean approaches. Marketing can, and should be applying the same concepts to its own areas of responsibility. And if it did, marketers would discover that long before it became synonymous with advertising and promotion, marketing was designed to do exactly the same thing as the lean movement.
The Big "But"
If all of this seems obvious, well, it should be. Which raises the question "so why doesn't everyone do it?" The reason is simple: not everyone has the discipline to follow through. And the reason they lack that discipline is because they believe there is one magic approach that delivers great value for all customers. There isn't.
It all starts with segmentation – the process used to categorize customers based on differences in their characteristics. Strategic segments usually are based upon whatever characteristic - economic, demographic, usage etc. - best correlates with the kind of product or services that different customers want.
In this context, a product is viewed as a "bundle" of attributes and each segment or bucket of customers is distinguished by the type and level of attributes in their desired bundle. For marketers, any product attribute that customers aren't willing to pay for is a form of "waste". Ridding the product of that waste allows us to give more of what customers would pay to receive WITHOUT the need to raise costs and prices. I think you can see the connection to Lean Manufacturing.
The problem is that the presence of segments means that not all customers want, value and will pay for the same things. Similarly, while some may not miss a certain product feature, others would see its absence as a deal-breaker. In short, while all customers deserve great value, they will not value the same product to the same extent.
As a result, unless you correctly segment your market and have the discipline to build your lean operation around that target segment, the process will fail…miserably. Suddenly everything becomes a "good cost" and nothing looks to be a "bad cost". When that happens we build excess cost – and price – into our products. In our attempt to appeal to everyone we find ourselves with best value for no one.
Good marketing isn't a science. Nor is it an art. It's a discipline. Follow it and marketing will not just co-exist with operations: it will embrace it as its greatest ally.
Kenneth B. Wong
Ken Wong is a faculty member and The Distinguished Professor of Marketing at Queen's School of Business and is also the Managing Partner, Knowledge Development for Level 5, a marketing consulting firm focused on brand strategy and execution.
As a teacher, Ken has received numerous awards for his courses in strategic planning, marketing and business strategy. Beyond Queen's, he has also taught in degree programs at Cornell, Carleton University, Radcliffe College and Harvard's Continuing Education Program and in executive programs at York University, University of Toronto, Dalhousie University and the University of Alberta.
He writes regularly for Strategy magazine, Canadian Grocer and Meetings and Incentives, and had served as a regular columnist for Marketing magazine and the National Post. He has also written for the Financial Times, Globe and Mail and the Conference Board Review. His current research focuses on enhancing "marketing productivity" and brand profitability.