Naturally, this increases complexity — and there is a trade-off between the extent to which firms can tailor experiences to individual consumers and their own need to remain profitable. That is the issue explored by Booz Allen’s Keith Oliver, Leslie H. Moeller, and Bill Lakenan in the chapter entitled “Smart Customization: Profitable Growth Through Tailored Business Streams.” They explain how research among firms including Unilever, Campbell Soup, Rohm & Haas, BP Castrol, Sprint, Ericsson, and Time Warner reveals a two-to-one performance gap between “smart customizers” and “simple customizers.” They then offer a roadmap to help firms optimize their business processes in the face of complexity.
Allied to evolving markets is the second touchstone: understanding customers. Markets, after all, are the sum of individual customer needs. There is no substitute for understanding how their purchasing decisions affect the firm’s bottom line. In “Customer ROI: The New Science of Profitable Customer Relationships,” Booz Allen’s Mike Fritsch explains how a new approach called customer profitability management (CPM) is supplanting customer relationship management (CRM) by providing the missing link between customers and the creation of value. “Almost 50 percent of a company’s customers are likely to be either unprofitable or only marginally profitable,” writes Mr. Fritsch. “Yet many companies have introduced CRM systems and loyalty schemes that do not differentiate on the basis of profitability.”
Also firmly on the trail of profitable customers are Guillermo D’Andrea, chairman of the marketing department at Instituto de Altos Estudios Empresariales, Universidad Austral in Buenos Aires; E. Alejandro Stengel, a Booz Allen senior director; and Anne Goebel-Krstelj, a former Booz Allen consultant. In “Six Truths about Emerging-Market Consumers,” they explain that selling consumer products to Latin America’s 250 million low-income consumers — men and women who constitute 50 to 60 percent of the region’s population and wield some $120 billion in annual purchasing power — is more than an attractive opportunity: It is a necessity for large corporations trying to accelerate their growth.
Moving Beyond Commodities
And if customers and markets are important, so, too, is differentiation. Much has been written about the commoditization of products and services, and its squeezing effect on margins. But, as Sam I. Hill, Jack McGrath, and Sandeep Dayal remind us in their s+b classic “How to Brand Sand,” it doesn’t have to be this way. The authors, current and former Booz Allen marketing specialists, explain that it is possible to brand not only sand (actually diatomaceous earth, a chalky white mineral used as an industrial absorbent and filtration medium) but also wheat, beef, bricks, metals, concrete, chemicals, corn grits, and an endless variety of other commodities traditionally considered immune to the process.
From sand to vodka: In their chapter, “The Superpremium Premium,” Leslie H. Moeller, Nick Hodson, and Brad Wolfsen examine the other end of the commodities spectrum — the creation of new “superpremium” brands in markets that are already considered overloaded. They explain how, in the seemingly saturated markets for vodka and gasoline, smart marketers have built multimillion-dollar superpremium brands.
Of course, creating a brand is one thing; nurturing and sustaining it over the long run, quite another. In “Reality Is Perception: The Truth about Car Brands,” current and former Booz Allen consultants Evan Hirsh, Steve Hedlund, and Mark Schweizer examine how customers perceive automobile brands. Their findings, based on extensive research, suggest that the barrage of advertising laden with lifestyle and emotional imagery is largely ineffective, as car buyers are pretty shrewd about what car brands actually stand for thanks to their own experiences in two key areas: product quality and total ownership cost. It is on these two criteria that automotive marketers should focus their attention.