Perspectives from ISB

[Based on the article: “Marketing Excellence: Nature, Measurement, and Investor Valuations,” by Christian Homburg, Marcus Theel, and Sebastian Hohenberg, published in the Journal of Marketing (Online version, dated: June 3, 2020.)]

By Astha Sharma, ISB-Centre for Business Markets

According to Christian Homburg, Marcus Theel, and Sebastian Hohenberg, the authors of the above article, “Marketing Excellence” can be defined as a strategy focussed on creating organic growth through an increase in revenues for the organisation by executing the activities clubbed under the following priorities:
1. Marketing ecosystem priority
2. End-user priority
3. Marketing agility priority

This strategy may also result in the creation of new revenue streams through differentiation.

The research on Marketing Excellence builds upon the previous research on concepts such as Marketing Orientation and Marketing Capabilities. The research on the latter two areas date back to the 1960s and 1970s. They define marketing as the function that focusses on customer needs and generates profit for the firm. The marketing function is also responsible for gathering the voice of the customer and communicating it to all the departments in the organisation.

The concept of “Marketing Orientation” evolved from these seminal ideas. Marketing orientation involves one or more departments of the firm developing deep understanding of customer needs and sharing this understanding across different departments in the firm. Various departments of the firm then use these insights to meet the selected needs of the customers. The two pillars of marketing orientation are customer focus and coordination between different departments within the organisation.

“Marketing Capabilities” represents the firm’s ability to deploy the available resources to perform marketing tasks in ways that deliver value to its targeted customers to generate the desired marketing outcomes. The two pillars of marketing capabilities are customer focus and profitability. Marketing capabilities seeks to move the focus from customer to end-user. It puts the spotlight on agility of the firm. The relentless quest of the marketing capabilities approach is to ensure higher profitability for the firm.

Motivation for the move from Marketing Orientation and Marketing Capabilities perspectives to “Marketing Excellence” perspective: Marketing Excellence extends the research to multiple dimensions of ecosystem creation. While in summary, Marketing Orientation and Marketing Capability were both focused on the focal firm and were hence intra-firm; Marketing Excellence extends the original ideals of Marketing to a network of firms and therefore brings in the inter-firm dimension as well. The reason why this extension is so vital in today’s context is that the days of an insular firm delivering customer value all by itself are long over. We now have moved into an era where multiple organisations work in tandem in a synchronised manner, to deliver customer value. This has largely been propelled by the staggering strides made by Information Technology and its pervasiveness. Thus, the world has moved from an atomistic view of organisations to a potentially expansive view that comprises of large numbers of legally independent firms cutting across geographic boundaries that work together in the form of a network for mutual benefit to create extraordinary customer value. Li and Fund (Hong Kong), that is into apparels and calls itself a “smokeless factory” has for many years been an exemplar of such a networked organisation. The next logical step in this evolution is the emergence of “Platforms” where one or more organisations architect the platform that then provides the infrastructure for many others to leverage it. A relatively recent and extremely successful example of a “Platform-enabled Network” is Alibaba (China), which has created a formidable platform through which thousands of organisations can come together to serve the customer.

Based on the above introduction, we now take a deep dive into the paper titled, “Marketing Excellence: Nature, Measurement, and Investor Valuations,” referenced above.

Research Methodology: For the present research study on marketing excellence, the researchers have conducted 39 interviews with the managers in marketing, sales, and general management roles across 39 global companies. They also analysed the publicly available data of 150 American, European, and Chinese companies, to study the strategies of these firms. The authors have used this data to identify the activities that result marketing excellence. They have categorised the strategic actions that the firm should take into the following three buckets, that they refer to as “priorities.”

Development of the marketing ecosystem priority: The research suggests that it is essential for organisations to create a “mutually beneficial system of networks” to achieve marketing excellence. While the benefits of forming alliances and partnerships are known to the business community for a long time, this research brings out the scope and complexity of these networks.

The activities required to achieve “marketing ecosystem priority” fall within two main categories:
• Building ecosystems with the organizations in the same domain as well as outside the domain of the firm
• Fostering integrated ecosystems by various methods such as knowledge sharing, providing tools, and training on marketing skills.

Different types of marketing ecosystems can be developed depending on the extent of the firm’s participation (active vs. passive) and the firm’s positioning within the ecosystem (dominant vs. equal). There are three distinct marketing ecosystems as follows:

1. In a knowledge transfer–based marketing ecosystem, participating firms create a network that facilitates the exchange of knowledge.
2. For offering-based marketing ecosystems, the focal firm builds a platform in which the firm dictates the terms of platform usage and owns all the offerings created on the platform. An example of such ecosystems is Apple, which has created an ecosystem of hardware, software, and services.
3. In a platform-based marketing ecosystem, the focal firm creates a marketplace where other actors can engage and interact.
There are two types of platform-based ecosystems:
a. The first type is the “Owned platform-based ecosystem”, in which the focal firm passively participates and dominantly positions itself in the ecosystem by owning the platform. An excellent example of this is Amazon, which plays a dominant role in the usage of the platform but a passive role (until recent past) in selecting or promoting items sold on its platform.
b. In the second type of platform-based ecosystem, the firm passively participates in the “open-source platform-based ecosystem” and equally positions itself in the ecosystem by owning the platform.

For creating such ecosystems, companies are also hiring talent with experience in other domains. These recruits help the company develop new perspectives on product development and enhancements. The training and development of the existing employees could also be done to upskill or re-skill them to work effectively on the platforms with multiple stakeholders.

Development of the end-user priority: The research defines the “end-user priority” as the strategy of reaching out to the final customer and engaging them to gain insights that can be leveraged for growing the business. Many research papers have discussed the importance of building great relationships with customers and leveraging it to achieve superior outcomes. The present research talks about configuring all value-creating processes from the perspective of the end-user.

The end-user priority involves activities that can be clubbed under two main categories:
1. Interacting with the final customer: This activity can help firms create valuable offerings. This activity is particularly important for firms operating in business markets.
2. Leveraging the resulting end-user insights to re-configure the business to keep it relevant and profitable in today’s rapidly changing world.

Development of the marketing agility priority: The authors define the “marketing agility priority” as the strategy of simplifying processes and structures within marketing organisations to facilitate fast decision making and learning by trial and error. Firms should understand the customer’s problem, come up with the required solution, and flexibly move resources within different departments, to complete the required tasks.

The authors recommend managers to consider taking a sequential approach in implementing marketing excellence within their organisations.

The priorities associated with Marketing Excellence strategy can be broken down into sub-categories. These sub-categories can be developed into Key Performance Indicators (KPIs). Such an approach will ensure that the KPIs and incentives for all the employees within the organisation are aligned with the performance of the organisation.

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