Accounting for the way markets work

Greater opportunities but new hurdles to jump

Large and small

Technology and globalization have, paradoxically, combined to make the world both smaller and larger as far as many companies are concerned. Its a smaller world in the sense that the worldwide revolution in communications has brought everyone closer together; but larger because of the opportunities that now exist for wider reach and for expansion into new markets. What is true for rms is true for clients. More companies are nding that their customers operate in a global marketplace. This creates opportunities for nding new business, but there are challenges too. Use of global account management (GAM) can provide numerous benets, including reduced costs, economies of scale and the opening of inroads for business expansion throughout the world. But none of these goals will be achieved unless certain drivers, described in Georg Krentzels article, are in place. The rst involves aligning all operations towards the customer. It is vital to know precisely who is doing what, in other words what should be managed and who should be doing it, both locally and globally. GAM approaches vary widely, from coordinating local sales to having a separate business for global accounts. It all depends on customers and products, and a shared view of how to conduct business is essential.

Lessons from car industry

The second challenge involves customer alignment. Again, exibility has to be the key. The global nature of the operation could inhibit development of the specialized service which customers require. Both a product and total solution package must be developed. Krentzel cites an example from the car industry where the company opted for a GAM approach specically because of what it could bring to service for customers. The company decided that the GAM approach should be focused on the key issues which concern customers. The most signicant were nancing and higher resell values, repair and insurance costs, and safety features. This total solutions package ts in with a move by customers away from obsession with price to playing the long game: an awareness that the total cost of ownership is far more signicant in the long-run. The third challenge involves the need to align and coordinate the organization to adapt implementation. Thus where local market know-how will be important; where organizations have customers throughout the world, every country must be managed appropriately. This means managing what Krentzel refers to as users, local and central choosers but also the different needs of each account: each global account requires its own implementation

PAGE 12

STRATEGIC DIRECTION

VOL. 26 NO. 5 2010, pp. 12-15, Q Emerald Group Publishing Limited, ISSN 0258-0543

DOI 10.1108/02580541011035401

strategy, and ways of doing this might vary. Two information technology businesses achieved their goal through different approaches, one opting for a model of control and the other using coordination between the different entities. A pitfall here is the danger that a GAM approach ends up in a no mans land, between central and local decision making. Each country has different competitive environments and, of course, different business cultures. A supplier could nd in one place that signing a deal did not mean selling it, whereas in another country, this would have been the nal seal on negotiations. Final responsibility lies with the suppliers at the local levels, and understanding their importance in the scheme of things is paramount. GAM is in part a response to the fact that we now live in a global marketplace. Its in the nature of the way the business and technological landscape changes that new opportunities to create competitive advantage are always emerging and being handled astutely or not. The arrival of e-mail must have seemed like a godsend to marketers trying to get their message across cheaply and effectively. The truth, of course, was rather more painful. As Dan Matthews article makes clear, e-mails ease of use made it easy to abuse and an easily-wasted source of marketing. Things arent as bad as they were but even today, many ofce workers especially heads of departments whose name are out there for anyone to latch on to can nd themselves feeling that sorting out the e-mails is a mornings work in itself.

Spam falling
E-mail marketing has improved, in fact Matthews goes so far as to say that marketers in this eld have cleaned up their act and EU directives have reduced dramatically the amount of Spam ying around. Simple tactics such as segmentation, timing and use of from and subject lines can now make all the difference. Segmentation involves getting away from a standard e-mail offer that lumps all the recipients together, whether or not they are likely to have the slightest interest in a product or offer. It involves some groundwork, including pulling together relevant information about customers, combined with data on their buying habits. The right software can now take these basics much further and Dela Quist, chief executive of Alchemy Worx, an e-mail marketing rm, speaks highly of inferential marketing. When 2,000 people responded to a cutest pet competition, run by Alchemy Worx for a client, a follow-up e-mail targeted pet owners and produced an opening rate of 70 percent. Segmentation can actually make customers feel well looked after if the e-mails are well timed, and the response can be positive. On behalf of Ikea Denmark, Epsilon International targeted 170,000 members of the Ikea family customer loyalty program to plug products not contained within the company catalog. The system, based on personalized e-newsletters, resulted within a fortnight in double-digit increase in sales for Ikea Denmark. Matthews says that its useful to think pea shooter rather than elephant gun, paying attention to the days and times on which messages might get the best response. Subject headings can be evocative or at least useful, rather than simply a function. Free delivery

. . . e-mails ease of use made it easy to abuse and an easily-wasted source of marketing. Things arent as bad as they were but even today, many ofce workers especially heads of departments whose name are out there for anyone to latch on to can nd themselves feeling that sorting out the e-mails is a mornings work in itself.

VOL. 26 NO. 5 2010 STRATEGIC DIRECTION PAGE 13

 GAM is in part a response to the fact that we now live in a global marketplace. Its in the nature of the way the business and technological landscape changes that new opportunities to create competitive advantage are always emerging and being handled astutely or not.

ends Monday tells its own story, as does Dont forget to register by Friday. From lines have their uses, too, with one expert saying that Recipients overwhelmingly take into account who is sending them an email before considering its subject line and deciding whether to open the message. The lesson, then, is to stick to the same from address, from the company name or brand.

Cheap, not easy

The ease with which user trends can now be tracked enables marketers to know not just when to send but, crucially, how often. Too often can be as bad as too rarely and, to take an extreme example, it would be folly to send a daily e-mail for a product bought annually. Know your customers, and remember that e-mail marketing might be cheap, but that doesnt make it easy. Those lessons implicitly point to the value of all good marketing. Despite that, it must be acknowledged that marketing as a business tool, like its distant cousin public relations, is not without skeptics. However, marketing is far easier to defend than PR, which even practitioners might argue serves to oil the wheels. Good marketing is essential for any proactive organization, and this makes somewhat surprising the lack of research into how a rms marketing capabilities may be linked with prot growth. Morgan et al. used data from a cross-industry sample of 114 rms for their investigations. They were looking at the importance of brand management, market sensing and customer relationship (CRM), specically at how these three factors determine rms revenue and margin growth and, as a corollary, prot growth. The ndings were unequivocally that marketing capabilities and rm growth rates are connected. Several more specic hypotheses were tested, particularly in relation to the effects of market-sensing, CRM and brand management capabilities on revenue growth rate and margin growth rate. With CRM and brand management, there are opposing effects on revenue and margin. But, with market sensing, the effect on the direct revenue growth rate is weak and there is no direct effect on margin growth rate. Its clear, then, that managers need to understand how different marketing capabilities might produce different effects.

Growing concerns
The results also back previously untested propositions regarding the way in which companies marketing capabilities create useful knowledge which, in turn, can have a positive effect on demand growth. They provide support for a dynamic capabilities theory which suggests that rms with superior and complementary capabilities should be better placed to take full advantage of the boost to the bottom line which should come as a matter of course when demand for a product is growing. The fact that brand management and CRM capabilities effectively contradict one another in their effects on revenue and growth rates cannot be ignored. A potential masking effect occurs because of this pull in different directions. Manager and researchers need, therefore, to be aware of the trade-offs that might be expressed only tacitly in single aggregate

PAGE 14 STRATEGIC DIRECTION VOL. 26 NO. 5 2010

measures of performance. Managers must make explicit how they are aiming to achieve prot growth, because on their approach will depend the question of which marketing capabilities are given the highest prole. The trade-off between revenue and margin growth also offers areas for new research, especially into how these trade-offs can be managed so that there can be a concurrent increase in both components of prot growth. Marketers must work to ensure that they have the best of both worlds.

Comment
This review is based on Going global by Krentzel (2009), How to? Get results with email by Matthews (2009), and Linking marketing capabilities with prot growth by Morgan, Stotegraaf and Vorhies (2009). There are strengths and weaknesses attached to global account management. Krentzels article, while somewhat technical, focusses appropriately on the need to ensure that exibility is built into GAM approaches, so that the global element does not become a bureaucratic monolith. Matthews offers a crisp and pithy account of how to make e-mail marketing work. The simple errors made by some operators suggest that, by following a few rules, a cheap way of targeting as many people as possible can become highly effective. Theres a useful quick guide to dos and donts of sending e-mails. Morgan et al.s observations on the trade-off between revenue and margin growth rates are perhaps the most interesting things to emerge from this exhaustive and highly technical piece of research.

Keywords: Brand awareness, Electronic mail, Marketing strategy, International marketing

References
Krentzel, G. (2009), Going global, Marketing Management (USA), September/October, pp. 21-5, ISSN 1061-3846. Matthews, D. (2009), How to? Get results with email, The Marketer (UK), November No. 30, p. 33, ISSN 0954-1543. Morgan, N.A., Stotegraaf, R.J. and Vorhies, D.W. (2009), Linking marketing capabilities with prot growth, International Journal of Research in Marketing (Netherlands), Vol. 26 4, December, pp. 284-93, ISSN 0167-8116.

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints

VOL. 26 NO. 5 2010 STRATEGIC DIRECTION PAGE 15