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Sagi Langer and Yossi Perelman1. Rather than applying an ineffective and costly comprehensive marketing strategy, or waging a usually exhausting and ...
Status – Israel’s Journal of Marketing and Management

MARKETING AND SALES…

Before Waging an Additional Marketing War Sagi Langer and Yossi Perelman1

Rather than applying an ineffective and costly comprehensive marketing strategy, or waging a usually exhausting and expensive “war” on all fronts, the BM system proposes the application of a focused, effective and efficient marketing strategy.

1. Introduction Growing customers’ demands and constant competitive pressure has created an increasing awareness of the necessity of providing qualitative, unique and improved products and services. In order to succeed, companies have realized that they should position themselves as high quality suppliers sensitive to the demands of the market. A Company that wants to grow must be aware of the customers’ exact demands and the competitors tactics. However, that is not enough. One more step should be taken beyond this basic information. It is necessary for management to understand the operations of companies that demonstrate superior performance, in its own and in other industries, both in satisfying their customers and in controlling their costs. In other words, companies must measure their performances by objective external criteria: the customers’ needs, and the strategy and tactics of competitors. This approach, Benchmarking, which helps with identifying and with adopting the best performances by the company, plays a major role in a powerful approach in marketing – the BM system (Bench-Marketing system). A study recently conducted in the state of Georgia included 453 warehousing firms, and compared the performance of companies applying the BM system to those not applying it or doing so only partially. The findings were that 90% of the companies that practice BM in full, demonstrated superior performance in terms of profits, customer loyalty, operational efficiency, flexibility to changing demands and employees satisfaction when compared to similar firms. Although the study found that 95% of the companies do not know how to apply and carry out the system with all its ramifications, 79% of the companies checked claimed that the system plays a critical role in the company’s survival.

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Sagi Langer, M.Sc., MBA, Technion - Israel Institute of Technology. Professor of Marketing and Economics at the University of Haifa. General Manager in PLC Advanced Marketing Solutions ltd., which is engaged in consulting, training and application of the BM system in Israel. Yossi Perelman M.Sc., Technion – Department of Economics and Management with specialization in Industrial Organization. He lectures at the College for Management and the Emek-Israel Academic College. He serves as Manager of the Marketing Research Department and the Training Department in PLC.

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2. A Customer and Competitors Oriented Approach Until the last decade, most companies compared themselves to their competitors mainly by quantitative criteria, such as volume of sales, expenditures, advertising budgets, sales promotions etc. Recent developments in marketing theory reflect a transition from the approach of quantitative objective planning of goals, market share etc. to an approach of long-range planning that integrating constructive relationships with the customers, the opinions of the staff and an accurate estimates of the competitive position. This integration should ensure an effective choice of strategy. The resulting change process can be characterized by dividing the marketing efforts into three areas: 1. External marketing - which is performed on the basis of the company’s marketing strategies, 2. Internal marketing – directed at all non-marketing employees that are in constant contact with customers during pre-sale, sale and post-sale processes 3. Interactive marketing - which ensures that the system is in tune with customers needs and with competitors' tactics, including the necessary acquisition and use of relevant information. The BM system in marketing focuses not only on analyzing the company’s current competitive position, but also on the manner in which the company plans its products, services, processes and especially the degree of the relative efficiency of marketing, based on a customer and competitors oriented approach. All that is done against the background of actual developments in the industry as well as in other relevant industries. The BM system, which makes use of Technometric indices2 and integrates quantitative tools from the engineering and marketing disciplines with unique decision-making processes, offers an answer to the following needs: a. Improving the competitive position of the company basing on dominant strategies prevailing in the industry in each of the marketing parameters. This is done in line with the culture and character of the company. This implies the examination of performance improvement possibilities by the application of these new marketing strategies. The revised quantitative positioning applies numerical indices that enable comparison between the operations of the companies in the industry. Technometrics enables the formulation of optimal market penetration objectives, as well as performance improvement in the company’s operating domain. Both the objectives and the operational improvements form part of the system.

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Technometrics is a benchmarked approach that profiles a product's comparative strength in relation to its leading competitors, by selecting the product's key attributes that define its performance and quantifying them on a zero-one scale, where zero represents the lowest level of that attribute in the product class, and one represents the state-of-the-art in the highest-quality competing product. The zero-one metric enables ready aggregation and comparison of these attributes.

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b. Improving performance within the firm by learning from other branches and divisions that demonstrate the best performance in various criteria. c. Flexibility and adjustment to the changing demands of the market. d. Performing all the above while reducing costs by making optimal use of the resources. The marketing strategy does not focus on the weaknesses of the company only (product, brand, service etc.), but also on the most significant points drawn from the research conducted in the target market. The BM approach in marketing transforms the traditional marketing perception. Rather than applying inefficient and costly comprehensive marketing strategies, or “waging war” on all fronts (which may prove successful but is usually exhausting and expensive with uncertainty as to the results), the system furthers the optimal utilization of resources, thus reducing costs and improving the potential of market leadership.

3. The marketing scope of BM Marketing supported by the BM system can be viewed as a triangle, the three sides of which are: the customers, the competitors and the company's decision-making process. These sides are "connected" by Technometric indices. Technometric indices are used here for quantitatively measuring the attributes of products, services or processes as determined by the company’s customers and it’s competitors' relative performance. These attributes are standardized through simple normalization of the different measuring values to an index between zero to one, which reflects the total relative value of the firm's product, service or process as valued by the target market. This index is the total technometric score. In order to stress the significance of each single attribute, this approach integrates qualitative with quantitative measurements, such that  the customers’ demands,  the competitors position and their strategies, as well as  the process of selection between the marketing alternatives are expressed by a single index reflecting the marketing quality of the company.

4. The Process In order to best meet market demands, ranking customers’ preferences is necessary. For that need, The BM system uses AHP (Analytical Hierarchy Process). The AHP process presents to the customer a set of questions in which a preference must be determined between two variables only. The AHP matrix is determined, and helps setting the customer’s order of importance of the product’s attributes. The competitive view of BM makes extensive use of Benchmarking, which is the process of evaluating performances, products, services and work processes against competitors and other organizations that are recognized as representing best practices in a structured fashion in order to achieve superior performance. Doing it the right way also leads to improved cost control and better utilization of company resources. Benchmarking can also be used as a creative-thinking process while using external information as the basis for improvements and new combinations of unique product or service attributes. June 1997

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Status – Israel’s Journal of Marketing and Management

Three levels of Benchmarking are used by the BM: 1. Internal - learning from best performances within the company (branches, divisions etc.); 2. Competitive - learning from competitors that demonstrate best practices; and 3. Generic - learning from the best-in-class performances of businesses with comparable activities, products or processes. In order to evaluate the marketing quality of the company we use The ISME index. It is an index computed of six marketing criteria:  Marketing orientation  Organization of marketing  Marketing to new customers  Marketing to current customers  Internal marketing, and the  Quality of service. The third tool used is QFD (Quality Function Deployment). QFD simplifies decision-making processes by rating marketing alternatives according the three “how’s”: “how important is it”, “how feasible is it” and “how much does it cost”.

At the end of this process, the company is able to launch an optimal marketing strategy that provides the company with maximum momentum and competitive advantage, is compatible with market demands and reflects existing organizational constraints. Finally, results are translated into Technometric Indices, to be used as a progress evaluation, monitoring and control tool.

A study conducted in 1992 in the market for executive airplanes can be used to demonstrate the application of the process. Executive airplanes, also termed business aircraft, can be divided into four groups: jets, turboprops, pistons and rotorcraft. The study focused on jets since they form approximately 35% of the total number of such airplanes and capture almost 80% of the total sales of the industry. The jet's group is divided into four sub-categories: 1. light jets (maximum takeoff weight of 18,500 pounds, cost 3-6 million $); 2. medium jets1 (maximum takeoff weight of 18,501-28,000 pounds, cost 7-13 million $); 3. medium jets2 (maximum takeoff weight of 28,001-38,000 pounds, cost 7-13 million $); 4. large jets (maximum takeoff weight of over 38,000 pounds, cost 14-25 million $). We chose to focus on the third sub-category, medium jests2. This group included, at the time the study was conducted, six major brands: Bae 125-800, Bae 125-1000, Citation VI, Citation VII, Astra SP, and Learjet 60. The first step in data collecting involved focus groups and personal interviews with managers (customers), pilots, and aeronautical engineers, in order to identify a list of salient attributes. This phase resulted in a list of 27 attributes, 15 of them were deleted either because no reliable public data was available or because they could not be measured technometrically. The final June 1997

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list of attributes included: maximum fuel-load range, maximum useful load (the difference between non-fueled jet and the maximum landing weight), cruise speed, mach number, rate of climb, takeoff distance, cruising-speed fuel consumption, cabin volume, cargo volume, noise level, total cost per mile and resale value. Information on attribute scores was gathered from published sources, and the scores were benchmarked into the [0,1] range, such that the lowest score (actual performance) in each attribute was represented by the value 0, and the highest score was represented by the value 1. Other scores were calculated through the equation: tij=(kij-kminj)/(kmaxj-kminj), where kij is the actual score (performance) of brand i in attribute j, and tij is the technometric score. The results are presented in table 1.

Bae 1000

Bae 800

Citation VI

Learjet 60

Citation VII

Astra SP

Kij

tij

Kij

tij

Kij

tij

Kij

tij

Kij

tij

Kij

tij

3095

1

2427

.481

1808

0

2440

.491

1852

.340

2727

.714

Payload

2.7

1

2.22

.050

2.3

.187

2.19

0

2.5

.529

2.77

1

Cruise speed

402

1

401

1

409

1

420

1

404

1

412

1

Mach number

.8

0

.8

0

.835

1

.81

.182

.835

1

.855

1

Climb rate

3577

.154

3500

0

3921

1

4000

1

3699

.398

3700

.400

Takeoff distance

6000

0

5600

.305

4690

1

5560

.336

5030

.740

5250

.572

Fuel consumption

.352

.787

.333

1

.351

.789

.404

.202

.381

.461

.422

0

Cabin volume

675

1

604

.771

438

.235

453

.284

438

.235

365

0

Cargo

45

.208

40

0

61

1

64

1

61

1

53

.542

Noise level

81

.480

80.9

1

77.1

1

83

.213

84.6

0

82.3

.307

10.35

0

8.58

.582

8.09

.717

7.68

.854

7.69

.844

7.2

1

77

1

63

.417

65

.500

53

0

65

.500

69

.867

Attribute Range

Cost per mile % Resale value Price (millions of $)

12.9

9.95

8.95

8.3

7.99

7.54

Table 1: Technometric scores for medium jets

The scores in table 1 provide a profile in the attribute level. However, decision weights are necessary to combine attribute-level technometric scores into a composite (total) score. For that need the AHP method was used. Through interviews and focus groups described above, weights were determined for the attributes. These weights were verified using a regression based on the Hedonic-Price Model, in which the coefficients are the market-valued weight of each attribute. The weight of each attribute should be between zero to one, such that all weights sum to 1. The weights found are listed in table 2.

Attribute

Weight

Range (Nautical miles) June 1997

0.091

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Payload ('000 of Lbs.)

0.076

Cruise speed (miles/hour)

0.084

Mach number

0.070

Climb rate

0.067

Takeoff distance

0.082

Fuel consumption (miles/gallon)

0.094

Cabin volume (sq. Feet)

0.089

Cargo

0.081

Noise level (EPN dB)

0.097

Cost per mile

0.087

% Resale value

0.082

Table 2: Attribute weights

Finally, the total score of each brand was calculated, using the weights as the fraction multipliers for the attribute-level technometric scores. These scores reflect the total relative performance of each brand, and can be used for various purposes, such as positioning, strategic planning, product development and performance measurement. The results are listed in table 3.

Brand

Total Technometric Score

0.570 0.501 0.694 0.456 0.572 0.600

Bae 1000 Bae 800 Citation VI Learjet 60 Citation VII Astra SP

Table 3: Total Technometric scores

To demonstrate the positioning application of the total technometric scores, we draw a map of which the horizontal axis is the total technometric score and the vertical axis is the price. The map is shown in figure 1.

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price

Status – Israel’s Journal of Marketing and Management

14 12 10 8 6 4 2 0

Bae 1000

Bae 800 Learjet 60

Citation VI Citation VII Astra SP

0

0.2

0.4

0.6

0.8

total technometric score Figure 1: Positioning map

5.

How to implement Bench-Marketing successfully? – 10 steps to best practice Bench-Marketing Step 1:

Determine marketing objectives and the process, product or service that will be the Bench-Marketing target.

Step 2:

Determine key variables: Characterize customers’ preference and their relative importance. At this stage, the attributes of the process, product or service are sorted by their importance to customers and weights are attached to each attribute. This step is performed by means of focus groups and customer’s interviews. The tool used at this stage is the AHP (Analytical Hierarchy Process).

Step 3:

Determine organizations to be used as benchmarks. It is recommended to include not only the best performers, but the bad ones as well, in order to get a clear and comprehensive view of the market. This is the first phase of the Benchmarking process.

Step 4:

Gather Data and analyze for gaps. This step involves creating a plan for collecting data from selected targets and performing an analysis of the company’s positioning through a Benchmarking process, which includes:  Data gathering by means of marketing intelligence, surveys and observations.  Relative marketing performance analysis. Execute this step in the following order: a. Find information sources (customers, competitors, company staff, excustomers, competitors' customers, professional publications, newspapers, periodicals, electronic information sources such as the Internet, etc.). b. Gather info on the key variables.

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c. Analyze performance comparison and determine performance gaps (against competitors and customers' preferences). The Benchmarking Analysis and the ISME (index of services marketing excellence) index are used to achieve optimal performance and gap analysis. Step 5:

Prepare Technometric indices. Use the Technometrics method in order to assign product-level technometric scores to each competitor in each attribute examined and to calculate the total technometric score to your firm and it's competitors.

Step 6:

Determine your competitive position. At this stage, the Price-Performance Map is drawn, using the total Technometric scores calculated earlier and future trends are identified. It is advisable to use the technometric indices to form efficiency-frontier maps of dual-attribute scales (regarding all possible attribute pairs) and to locate your company on them. The P-P map is the BM’s cutting- edge version of the traditional positioning map.

Step 7:

Identify alternative marketing strategies and preferred activity objectives. This is done using the TPI Map (Technometric Performance versus Importance), which enables categorization of attribute-level possible operations by their market value (the degree of their importance to customers) and their relative performance, and the QFD matrix. The QFD matrix ranks marketing alternatives by their cost, market value and feasibility.

Step 8:

Establish results of step 7, establish marketing operational objectives and strategies and establish operational activity plans. Innovation products, unfulfilled customer needs and new technologies requirements (if required) are to be defined here and solution must be integrated in the plan using the information and analysis of previous steps. For example, a new product may be one of the best alternatives, and it's specification (attributes and level of attribute performance) is drawn from the gaps, customer needs and "marketing niches" found in steps 4 - 7.

Step 9:

Implement plans and monitor results. This step involves executing the approved best-practice customer-oriented strategy. The Technometric indices are used for monitoring.

Step 10:

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Repeat stages 1-9 on basis of step 9.

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Determining marketing objectives and the process, product or service to be the Bench-Marketing target Determine key variables and Characterize customers' preferences

AHP

Determine organizations to be used as benchmarks

Gather data & analyze for gaps

Benchmarking

Setting Technometric indices

Internal and external data gathering

ISME Marketing performance analysis

Determine your competitive position

Technometrics

QFD

Marketing Strategy

Price-Performance map

TPI map

Monitoring and evaluating performance

Chart 1: The Bench-Marketing Process

6. Case Study The BM system was first applied in the early 90’s in the USA. Among the companies that applied it were: IBM, Intel, Marriott and AT&T. In Israel, Bench-Marketing was first practiced in 1995 at “Alhuot-Yam (Marine Wireless) Marine and Industrial Electronics”, which is engaged in manufacturing and marketing electronic parts and components, marine equipment and maintenance and service of detection and navigation systems. The project performed for at “Alhuot-Yam Marine and Industrial Electronics” examined the strategic dilemmas that faced the company: What is the optimal mix of products and services; Should the supply to the private yacht market be increased and in what extent etc. Furthermore, possible tactics based on strategic planning were evaluated. Since the company has a variety of customers – private and organizational, accurate analysis of the competitive status of the company and positioning had to be conducted. The introduction of new standards (GMDS - navigation standards, rescue beacons, EPIRB, etc.), improvements in the defense market and the prevailing competition, demanded new June 1997

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activity objectives and effective profitable strategy design. The major components of the program designated as most effective included:  transition to internal production of some of the components;  adjustment of the properties of the finished products, as well as  stock layout change;  a decision to increase the market share in the private yacht market by taking advantage of marine development in Israel and  becoming fully compatible with customers’ demands in this market.

It should be emphasized that applying the system is not a one-time project. Performance measurement and continuous application of the tools obtained throughout the project and guidance are necessary.

While this article is being written, the Bench-Marketing system is applied in several Israeli firms of different activity fields, such as Motorola Communication (Israel), ELOP ElectroOptics Ltd., Elbit Systems Ltd. (High-tech), Auto Depot (retailing and car service), Panorama center (retailing – shopping center), Bulus-Gad (constructions, holdings), Emek-Israel College, Sensor Electric and others.

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A comparison between the BM system and traditional marketing approaches

The Bench-Marketing System

Traditional Marketing Approaches

A structured and feasible system with clear and specific steps easy to comprehend. Exact identification of the competitive Evaluating the position of the competition and position and relative positioning according to relative positioning according to market the Benchmarks. surveys. Exact positioning according to technometric Evaluation according to market surveys only. measures, combined with market surveys. Focused marketing strategy which leads to Strategies constructed on a broad mix, general optimal use of resources and a cut in costs. and non-economical view. Specific identification of activity objectives.

General identification of activity objectives.

Narrowing the gaps between the company- Identifying gaps in views according to customer views by detecting the desired rather customer satisfaction surveys based on the than the existing. existing level of product/service. Focused shift from a Follower organization to a Leader one with maximum efficiency. Identifying the nature of the existing Evaluating the marketing performance. marketing strategy using relative standard grades. Optimizes the allocation of resources through Objective difficulties in application deriving the application and minimizes additional from the gap between the desired and existing expenditures. level causing a tendency for high expenditures

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