Nirmalya Kumar’s «Marketing as

Strategy – Understanding the CEO’s Agenda for

Driving Growth and Innovation», a reading.

Introduction:
Facing today’s marketers challenges Nirmalya Kumar nails the issue of why today marketing
departments in the companies are losing ground at the same time that marketing activities are
gaining importance. Their space is being taken by outsourced agents and positions, in the firms,
are being seized by people more finance and management driven than by marketing. Letting the
marketing activities be imprisoned in the tactical four Ps approach leads their role to be more
and more a cost/revenues operation, distancing themselves for the CEOs eyes. To reverse this,
it’s necessary to get again into the CEO’s agenda, evolving the role of marketers to understand
the organization’s culture and operations, collaborating on multidisciplinary teams and getting
their hands on creating new forms of delivering value for customers. In a phrase «It is about
marketers doing better things rather than simply doing things better.»

Nirmalya Kumar starts by pointing that one side of this challenge is already accomplished.
CEOs already see their most important challenges as marketing ones when they identify
“customer loyalty and retention” - being customers champions and quality controllers - ahead
of reducing costs or improving stock price, at the same time they favor “downward pressure on
prices” – by sponsoring marketing initiatives - in detriment of industry consolidation or access
to capital. The demand from CEOs is for innovators not tacticians, and for marketing strategists,
not marketing planners. So to bring the other side and meet their agenda, marketers must learn
to lead with imagination driven by consumer insights and not rely on market research for
predictions. They must be more strategic, cross-functional and bottom-line oriented.

The book develops a CEO’s Marketing Manifesto, where merging these two goals, Nirmalya
Kumar builds a seven organization-wide transformational steps that marketers could lead,
passing the previous tests above:

• Step1: From Market Segments to Strategic Segments

• Step 2: From Selling Products to Providing Solutions
• Step 3: From Declining to Growing Distribution Channels
• Step 4: From Branded Bulldozers to Global Distribution Partners
• Step 5: From Brand Acquisitions to Brand Rationalization
• Step 6: From Market-Driven to Market-Driving
• Step 7: From SBU (strategic business units) Marketing to Corporate Marketing

Exploring in each one with new concepts and perspectives it presents an altogether rich and
powerful tool-box to address the issue of the importance and strategic role of marketers today
without, as he concludes, «nothing to lose, except hierarchies, national and functional
boundaries, and, most of all, the four Ps».

Breaking the book – Market Strategy in a nutshell

Exposing this book in just two or three pages is an exercise to demanding because it requires
an almost executioner judgment on what to bring forward and what to surpass. Kumar’s writing
is already very synthetic and striped of whatever is not useful to the reader.

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 In order to do this I’ve decided to focus on only 4 of the steps presented, hoping that the
reader of this text will feel interested in grabbing Kumar’s book for discovering how the
remaining ones are presented and also to go deeper in the others I’ve chose to present arming
itself with the check-lists and tool-boxes given by the book to meet success in changing the
marketing role of the organization.

The steps I’ve chosen are steps one, three, five and six:

Step 1. From Market Segments to Strategic Segments

Opposing the traditional STP (segmentation, targeting and positioning) approach to create
differentiation, which so often frustrates CEOs by not being able to be perceived among
offerings and in creating distinguishing benefits that are sustainable and avoid
commoditization, Nurmalya Kumar presents a need to go from market segments to strategic
segments, that is, from the traditional four Ps to the value network, and more broadly to the
three Vs, as he calls it: Valued Customer, Value Proposition and Value Network:

• Valued Customer – Who to Serve? For example KLM and easyJet have two completely
different strategic segments in this point, requiring different value networks to serve
them effectively;
• Value Proposition - What to offer? Value propositions can be graphically contrasted
using a tool called the value curve which can be build using Professors Kim and
Mauborgne framework to establish its points:
1. Which attributes the industry takes for granted should be eliminated?
2. Which attributes should be reduced to below industry standards?
3. Which attributes should be increased to above industry standards?
4. Which new attributes should be created that the industry has never offered?
• Value Network – How to Deliver? Much of the competitive advantage of each type of
company lies in distinct value networks. They should explore different value networks
options for unique segments and analyze the financial implications of serving segments.

The value curve tool and the three Vs approach can help marketers by constantly forcing
them to ask the hard questions regarding segmentation, targeting, positioning.

Step 3. From Declining to Growing Distribution Channels

With the advance of the Interne and e-business a technological rupture took place affecting
large, established firms placing them in the cross-road between exploiting these emerging new
channels to reach new customers or jeopardize long-standing reseller partnerships cannibalizing
current revenues.

Nirmalya Kumar defends that when a new distribution channel emerges, managers must ask
two questions: (1) To what extent does the new channel complement r replace existing industry
distribution channels? (2) To what extent does the new channel enhance or devalue our existing
capabilities and value network? The answers should help pinpoint the necessary channel
migration strategy, the level of internal resistance, and the external channel conflict that one
should anticipate, as well as provide insight into the migration process.

Focused on defending existing distribution assets and value networks, established companies
tend not to counterattack when new innovative distribution channels challenge them, that rarely
fit the way the industry approaches the market, defines it, or organizes its value network to serve
it. But if they don’t their competitors will. The urgency of channel migration should be impaired
with the speed of its growth.

Channel migration strategies are presented through two axis of internal and external impact.
External impact ranges from replacement to complementary channel, and the internal ranges

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across enhancing and requiring new capabilities. Answering to the questions posed helps to fixe
the desired quadrant: Switching, Penetrating, Reinventing or Developing the channels.

Once decided the strategy the migration process goes around four steps:

• Conducting a Distribution Strategy Audit of Existing Channels;

• Articulating the Strategic Logic for Channel Migration;
• Mobilize Support for Channel Migration;
• Actively manage Channel Conflict

Developing these steps thoroughly, as sketched in the book, getting the CEO to grease the
wheels, brings innovation to serve overlooked customers segments, offering new value
propositions and more cost-efficient business models.

Step 5. From Brand Acquisitions to Brand Rationalization

Assessing brand portfolios, top managers worry that many of their brands are serving only
small niche segments with few customers, thereby generating insignificant revenues or profits,
for example, in 1999, 1200 bottom brands of Unilever 1600 brand portfolio accounted for only
8% of the company’s total sales. The dilemma for these companies is to prune their brand
portfolios without losing the customers and sales revenue associated with the brands that are to
be deleted, since managing mammoth multibrand portfolios presents the following problems:

• Insufficient Differentiation;
• Inefficiency;
• Lower Market Power;
• Management Complexity

Based on the experiences of several successful firms, Nirmalya Kumar sees the brand
rationalization process has the walking of, again, four steps: (1) Conducting brand portfolio
audits; (2) determine the optimal brand portfolio; (3) select appropriate brand deletion
strategies; and (4) develop a growth strategy for the survivors.

Step 6. From Market-Driven to Market-Driving

Henry Ford observed, «If I’d listened to customers, I’d have given them a faster horse.»

Incumbent firms typically launch incremental innovations rather than radical ones. The
main reasons for this to happen is their failure to accommodate market-driving ideas that
overturn industry assumptions, are risky and do not favor the reversible, divisible, tangible and
familiar processes of established product development, and finally that cannibalize existing
business.

Rather than focusing on obtaining market share in existing markets, market drivers create
new markets or redefine categories in such a fundamental way that competitors may rend
themselves obsolete, (of the top ten discounters of 1962, the year Wall-Mart was born, none is in
business today).

Firms are market drivers for three reasons:

1. They trigger industry breakpoints;

2. They are visionary rather than relying in market research approaches;
3. They often teach potential customers instead of learning from existing ones.

Market-driving stands on radical innovation in two dimensions – a discontinuous leap in the

value proposition and the rapid configuration of a unique value network. They seize their
advantages by a generation and development of their business “idea” as a combination of

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serendipity, inexperience and persistence. They redraw the industry segmentation replacing it
with a new set of segments reflecting the new, altered landscape. They pressure their
competitors with lower prices which they cannot quickly and successfully reproduce. But there
are also market-driving firms with a established elevated price, relying in their value proposition
that is substantially more compelling than the available alternatives. Also they exploit the “Buzz
Network” for Brand Attachment, since by offering a leap in customer value, surpassing customer
expectations by delivering a service at levels far above of what they expect, many of them will
notify others of their “amazing new find”. Consequently, these market drivers spend less money
on traditional advertising.

Conclusion:
The challenges to marketing are many, it must spearhead the firm’s move rethinking
segments, going from selling products to providing solutions, making the transition to global
account management structures at the same time that rationalizes its brand portfolios and resist
sterile consumers and market research results; it must allow innovation to bring and deliver
new and unimagined consumer experiences.

To do this marketing must prove its willingness for a leadership role in transforming the
company, and prove that it has matured as a discipline to become more strategic, cross-
functional and bottom-line oriented, gaining the CEOs place.

Rui Ribeiro

#153009019

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