The president and CEO of the American Red Cross talks about changing its organizational structure, making processes more collaborative, and learning the power of emotion.
VOSS is a Norwegian bottled water company that produces one of the world's purest drinking waters, sold at an ultra-premium price in a sleek cylindrical glass bottle of minimalist design. In the U.S. (the company's primary market), VOSS' high-end brand presence is strongest in on-premise locations -specifically, top-of-the-line restaurants, hotels, and clubs. The brand has only recently begun penetrating the off-premise channel. In June 2007, Ole Christian Sandberg, VOSS' founder and Head of U.S. Operations is considering how to grow the brand. The key question is whether VOSS should increase its distribution in the off-premise channel: Will this diminish VOSS' high-end brand cachet? A related question is whether VOSS should begin expanding its portfolio by offering, for example, flavored water for the rapidly-evolving U.S. bottled water market.
Why do companies bind customers with contracts, bleed them with fees, and baffle them with fine print? Because bewildered customers, who often make bad purchasing decisions, can be highly profitable. Most firms that profit from customers' confusion are on a slippery slope. Over time, their customer-centric strategies for delivering value have evolved into company-centric strategies for extracting it. Not surprisingly, when a rival comes along with a friendlier alternative, customers defect. Adversarial value-extracting strategies are common in such industries as cell phone service, retail banking, and health clubs. Overly complex product and pricing options, for example, may have been designed to serve various segments. But in fact they take advantage of how difficult it is for customers to predict their needs (such as how many cell phone minutes they'll use each month) and make it hard for them to choose the right product. Similarly, penalties and fees, which may have been instituted to offset the costs of undesirable customer behavior, like bouncing checks, turn out to be very profitable. As a result, companies have no incentive to help customers avoid them. Tactics like these generate bad publicity and fuel customer defections, creating opportunities for competitors. Virgin Mobile USA, for example, has lured millions of angry cell phone customers away from the incumbents by offering a straightforward plan with no hidden fees, no time-of-day restrictions, and no contracts. ING Direct, now the fourth-largest thrift bank in the United States, offers accounts with no fees, no tiered interest rates, and no minimums. In industries where squeezing value from customers is commonplace, companies that dismantle these harmful practices and design a transparent, value-creating offer can head off customer retaliation and spur rapid growth.
In 2005, Cabo San Viejo, a premier health and fitness spa resort located in Palm Springs, California, is debating whether to introduce a Customer Rewards Program. Describes the customer management challenges the firm is facing and outlines the various ways in which a rewards program might be structured to help address those challenges.
Over the decades, Kinko's had forged a deep emotional bond with consumers by easing their anxiety and helping them solve pressing document processing problems. By 2003, however, consumer research revealed that a confusing retail experience had eroded some of this good will. Challenged to increase revenues for this segment and the company as a whole, Kinko's CEO and president faced a momentous decision: Should he radically overhaul the retail business, or should he shift resources to Kinko's healthier commercial business, "harvesting" the retail business for short-term profit?
Marketing is becoming more analytic and less creative. That's why, HBS professors Gail McGovern and John Quelch assert, more companies are finding it makes sense to outsource many marketing functions.
Misguided marketing strategies have destroyed more shareholder value than shoddy accounting or shady fiscal practices. Yet, marketing functions typically reside deep in the organization, far from the executive suite and boardroom, and they are often poorly aligned with corporate strategy. Boards of directors, it would seem, have compelling reasons to monitor their companies' marketing activities. The authors argue that boards lack a clear understanding of how their companies are meeting customer needs and how their marketing strategies drive (or often fail to drive) top-line growth. To help remedy that problem, they've devised a "marketing dashboard," a series of management reports that could give the board this critical knowledge. The dashboard has three parts, each of which the board should review regularly. The first part tracks the company's main business drivers--those business conditions that, when manipulated or otherwise changed, will directly and predictably affect the company's performance. The second part describes the specific innovations in a pipeline of growth ideas that will allow the company to reach its short- and long-term revenue goals. And the third part provides an overview of the company's marketing skill set so the board can determine not only if the company has enough marketing talent, but also if it has the right marketing talent. Unlike isolated measures of marketing performance that are often insufficient, irrelevant, or misleading, the dashboard allows the board to assess quickly and routinely the effectiveness of its company's marketing strategies. Armed with a clear understanding of marketing's role and performance, the board can expose inadequate marketing campaigns, direct management to address the problem, and monitor progress.
In the winter of 2003, Billy Lagor, the Hasbro toy company's brand manager for G.I. JOE, faced a set of decisions that would ultimately determine the 2004 marketing plan for the G.I. JOE brand. Under consideration were three different ways to market the military action figure: use traditional media: supplement traditional media with a short, animated DVD; or rely entirely on nontraditional marketing. In evaluating these options, Lagor grappled with a more basic question: What is the nature of the G.I. JOE and Hasbro brands? Should he market G.I. JOE as a short-term fad or as a marquee property akin to the Barbie franchise? Includes color exhibits.
Debra Taeschler, CEO of Grafica, is considering how to structure her agency's bid for the New Jersey Lottery account. The Lottery is facing declining sales in all major categories and plans to slash its 1999 marketing budget by 32%. Taeschler is debating whether to take a conservative approach and submit a bid that builds on the Lottery's current product-focused marketing strategy or take a riskier approach and advocate an entirely new umbrella branding campaign.
Dan Schulman, the CEO of Virgin Mobile USA, must develop a pricing strategy for a new wireless phone service targeted toward consumers in their teens and twenties, many of whom are believed to have poor credit quality and uneven usage patterns. Contrary to conventional industry wisdom, Schulman is convinced that he can build a profitable business based on this underrepresented target segment. The key is pricing. Schulman is currently debating three pricing options: 1) adopting a pricing structure that is roughly equivalent to the major carriers, 2) adopting a similar pricing structure, but with actual prices below the major carriers, or 3) coming up with a radically different pricing structure. With respect to the third option, Schulman is considering various alternatives, including a reliance on prepaid (as opposed to post-paid) plans and the total elimination of contracts. Includes color exhibits.