Sunday, January 5, 2014

Is Business Really All About Trade-Offs?

In an interesting article back in 2009 by Kevin Keller and Frederick Webster, they wrote that “one of the realities of modern brand marketing is that many of the decisions that marketers make with respect to their brands are seemingly characterized by conflicting goals, objectives and possible outcomes. Unfortunately, in our experience, too many marketers define their problems in ‘either/or’ terms, creating situations where one idea, one individual or one option wins out, (p.13).”
In this scenario opportunities are potentially missed as the ‘organisation’ doesn’t look at optimizing the branding options through synergies between the ideas or looking at completely new ideas.
Keller and Webster also highlighted that “conflict and trade-offs are inherent in marketing decision making, and are the most fundamental challenges of marketing and brand management;” and highlight four broad categories for these trade-offs, “strategic, tactical, financial and/or organizational, (p.13).” But trade-offs are a key part of business, not just marketing management. 
Anyone who has been through a strategy development process will know that trade-offs are being considered all the time and what the best organisations do, is to look at the optimization of their future growth and see ‘trade-offs’ as opportunities to optimize ‘all the potential, positive, outcomes’ for their business; i.e. they turn the perceived ‘trade-off’ into a ‘new’ winning formula for success.
Where organisations miss potential growth opportunities, is when their operational philosophy encourages their employees to choose between potential trade-offs like, for example, setting performance targets that look at quantity, but don’t consider quality.
Keller and Webster highlight how “to understand the nature and extent of marketing trade-offs, some key questions must be answered: How severe are they? Are they unavoidable, inherent in the nature of the decision problem and situation? How have they been dealt with before? And of particular importance is to recognize whether the trade-offs result from internal organizational considerations or external structural issues inherent in the marketing environment where management has less control, (p.15).”
The key to dealing with trade-offs, not just in the marketing function but throughout the organization, is how you approach them and whether you see the process as ‘creating’ a win-lose or compromise result; or if your organisation seeks to create the ‘best’ outcome for the organisation.
At least Keller and Webster mention that “one compelling way to resolve potential marketing strategy trade-offs is through product or service innovations. For example, Miller Lite became the first successful nationally marketed light beer through an innovative brewing formulation that was able to retain more of the taste profile of a full-strength beer, while still having a lower calorie count, (p.15).”
As another example, when BMW first made a strong competitive push into the US market in the early 1980’s, it positioned the brand as being the only automobile that offered both luxury and performance. At that time, American luxury cars were seen by many as lacking performance, and American performance cars were seen as lacking luxury. By relying on the incomparable design of their car, and to some extent their German heritage, BMW was able to simultaneously achieve (1) a point of difference on performance and a point of parity on luxury with respect to luxury cars and (2) a point of difference on luxury and a point of parity on performance with respect to performance cars. The clever slogan, ‘The Ultimate Driving Machine’ effectively captured the newly created umbrella category - luxury performance cars.
Dealing with trade-offs is as much about ‘effective decision making’ as it is about the ‘culture’ of the business. If employees are debating the pros and cons of a trade-off because they want to ‘win’ then the business is very likely going to miss out on some real synergistic multi-dimensional solutions. 
Keller and Webster conclude that “achieving marketing balance requires penetrating insights, shrewd judgments and a knack for arriving at solutions that go beyond the obvious. Creativity, the combination of previously unrelated ideas into new forms, is often the inspiration to achieve marketing balance,” (p.17).
What is clear is that effective marketing is a key function of business success and organisations will always be presented with ‘trade-offs’ if that is how they wish to view their marketing opportunities. The ‘smart’ business will not see trade-offs but will see a set of ‘factors’, where some are opportunities and some are ‘limitations’ and they will work with these factors – not to choose one over and other – but to create the most effective marketing-mix of solutions at the micro level, for their range of products and/or services in their respective target markets, both for ‘today’ and the foreseeable future.
Keller, K.L. and Webster, F.E. (2009). The Branding Sweet Spot. Marketing Management, Vol. 18, Issue 4, p.12-17.

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