dot-com crash, marketing isn't easier
May 21, 2001
BY MICHAEL KRAUSS
Sisyphus? That guy was condemned by the Greek gods to spend eternity
in the underworld pushing a stone to the top of a hill, only to
have it roll down when he reached the summit. Then he had to push
it to the top again.
If you’re a vice
president of marketing at a global 2000 company, you might feel
a bit like Sisyphus. For years, you’ve probably been playing
catch-up against the dot-coms. Finally, you have your interactive
marketing strategy and infrastructure in place, and now, there’s
a new challenge on the horizon, something even more daunting than
the business cycle: the threat that comes from your competitive
According to Fred Wiersema,
author of The New Market Leaders: Who’s Winning and How
in the Battle for Customers (to be published in June), in category
after category, market leaders are pulling away from their former
For his book, Wiersema
tracked a group of 5,009 companies over six years, updating his
data regularly in light of the highly volatile times. The market
leaders he identifies are companies you know and would expect
to see, including Wal-Mart, Sony, Home Depot, UPS, GE, Microsoft
and a host of others. On the basis of relative sales revenue growth,
Wiersema found that market leaders are, on average, growing 3.1
times faster than their peers. On a relative market value basis,
Wall Street values market leaders at a level 2.1 times their peers.
Even with the stock
market falling, the market leaders are suffering less, relative
to their peer group.
On top of this, BusinessWeek
reports what many marketers already suspect: There’s too
much capacity out there. In a recent feature, the magazine noted,
“After years of frantically investing to build up the human
and physical capacity to keep up with soaring growth, the U.S.
economy is struggling with over capacity as far as the eye can
What this meansfor
marketers is that the dot-com revolution was just a warm-up. The
rock is rolling down the hill, and it’s going to be heavier
to push back up. To succeed, marketers have to pay more attention
to business strategy, customers and technology than ever.
programs will be key, and isolated tactical efforts, even those
capitalizing on new, lower cost interactive techniques won’t
make a difference. Consider Oldsmobile: The company pulled off
a remarkable online marketing coup when its interactive marketing
initiatives began delivering the youthful target audience to Oldsmobile
dealers. Furthermore, online marketing techniques reportedly cut
the cost of delivering a prospect to the showroom by 60%, compared
with traditional offline methods. Even so, the Oldsmobile brand
is being phased out; GM can’t achieve market leadership
supporting so many brands.
Market leaders do at
least two things right compared with other organizations, Wiersema
said in a conversation. They invest in the right customers, and
they invest in the right technology.
UPS are good illustrations. Both are market leaders, but even
market leaders need to be vigilant to maintain their position.
If you’re McDonald’s in fast food or UPSin shipping,
you already have much of the marketshare, and so the challenge
is to achieve continuous rapid sales and revenue growth in order
to keep the pedal to the metal and earn market value ahead of
your peers. McDonald’s investment in the U.K.-based Pret
A Mange chain may provide a clue on how to do that. Pret’s,
as it’s known in the United Kingdom, appeals to the urban
sophisticate because it’s to a quick lunch what Starbuck’s
is to coffee: an experience.
33% of Pret’s in February, and through that investment,
McDonald’s execs likely will learn about a different type
of customer: the urban sophisticate, who typically buys a sandwich
at Pret’s but may be hard to please with a Big Mac. Other
marketers might simply write off a hard-to-serve segment no matter
what the upside, and so McDonald’s approach to this valuable
but difficult-to-serve customer is impressive.
As Wiersema reports,
that’s typical of market leaders. They’re not complacent;
they go after the so-called “stretch customer” who
may not be easy to please. Market leaders know that these challenging
customers will help them find the keys to incremental growth and
market value. No way should McDonald’s walk away from its
core kid franchise, but absolutely it can learn something from
the stretch customers.
Market leaders also
make significant investments in systems, tending to house technology
that’s massive in scale yet flexible in delivery. UPS reportedly
invested more than $11 billion dollars on technology in the 1990s,
which helped reposition UPS from the stiff, “Tightest ship
in the Shipping Business” brand image to a nimble solutions
provider. UPS now tracks packages in real time, as do its competitors,
but it also offers a set of flexible software tools to support
larger and small users. The company also had created business
partnerships with its customers.
Or, in commercial banking,
look at Citibank’s investment in flexible, global systems.
As one of the top capital markets players serving large businesses,
the company can instantaneously clear a currency trade for a business
client electronically in any currency around the world. It takes
flexible, large-scale technology investments to achieve that capability,
but such investments attract the biggest, most profitable clients
and help Citibank maintain market leadership.
While costly, the global
breadth and the functional nimbleness of these technology solutions
can create barriers to competition, build customer loyalty and
impress Wall Street. They can also bankrupt a company if the money
is spent chasing the wrong stretch customer. The easy answers
don’t exist, but indecision will only lead to further losses
to the competition. Marketers have no choice but to keep pushing
that stone up the hill.
The difference between
the myth and the reality, though, is that a dual focus on customers
and technology might make it easier to get to the top and stay
there, if only for a while.
Michael Krauss is a partner with DiamondCluster International
He can be reached at email@example.com.