Notes

[MUSIC]
Welcome, everybody.
It's David here.
By now you've been enjoying I'm sure, the
courses from Barbara and Pete, my two
colleagues.
what I'm going to do now, is spend a
little bit of time, just introducing
to you, the third module and also giving a
little bit of a personal introduction.
So, my name is David Bell, I'm the Xinmei
Zhang Yongge Dai Professor here, at the
Wharton School.
I arrived at the Wharton School, right
about the time of internet 1.0.
when people were first getting into things
like Webvan and
Pets.com, and all of those companies, that
ended up going bust.
over the last ten to 12 years, I've
been studying mainly, the internet,
teaching the marketing core
here, at the Wharton School, and also,
teaching
a new class on digital marketing and
electronic commerce.
That's mainly where my research interests
lie.
So without further adieu, let me just
introduce, what it
is, that we're going to do over the next
little bit.
we have three parts to the third module,
the
third module, of course, is all about
execution, and
go to market strategies.
So the first piece is going to
be about omni-channel strategy, and
online-offline interaction.
So, what happens when you can access
customers, both
in the real world, and also, in the
virtual world.
The second piece of the module is going to
be, how to find lead users, and how
to facilitate influence and contagion,
getting that word
of mouth and buzz going about your
product.
and then the third piece is going to
be about targeting and messaging pricing
to value,
access to customers, and also,
distribution issues.
As we go along, I'm going to be providing
a number of examples.
Of course our key case, which is
quidsey.com.,
that's the family of brands, soap.com,
diapers.com, and so on.
And also at the end of each module or
thereabouts, I'm going to give you some
food for thought questions to think about,
that
we can then discuss, through the message
board.
So, what are we going to do in this
particular session,
the introductory session to the third part
of the module?
First of all, I'm going to give a short
recap of some of the
key ideas, that Barbara and Pete have
talked about, around branding and around
customers.
And then, I'm going to go into a little
bit more
detail in each of those, as the relate to
execution.
So, first of all, thinking about brand
assets.
Second, thinking about customer assets.
And then thirdly and historically
controversially thinking about marketing
spend
itself, also, as an asset.
So if you look an income statement of a
traditional company, you'll
have top line sales, from which you then,
subtract things like marketing.
And the simplistic view of the world might
say, well if I eliminated
all of the spending that I'm
doing on marketing, my profitability would
increase.
But of course, as we all know from Barbara
and Pete, and
also what we're going to do together as
well, that that's just not true.
If we cut marketing, then of course, sales
and other things fall.
So, that's going to be our plan for today.
So, let me start with a little bit of a
recap of some of the things that
you looked at with Pete and Barbara, and
just go back to some of those key
acronyms.
So, first of all the three key marketing
acronyms
that you've already seen, are the five Cs,
'Kay?
I like to think of those Cs, as
constraints, that's another nice word that
starts with C.
So, we have customers, we need to
understand their needs.
We have competitors,
that Barbara talked about.
We need to understand our point of
differentiation, our point of advantage,
over competitors.
thirdly, we need to think about our own
company, what internal resources do
we have, in terms of our existing
customers, our brand strength, and so on.
fourth, we need to think about
collaborators.
These are partners that we may need to
facilitate our access to market.
And then finally, this idea of context.
And context is all of those things going
on in the macro environment,
such as age and populations.
New innovations in technology, more
concern
about environment, and so on and so.
So, those are the, the five Cs.
with Barbara and Pete Barbara in
particular,
we've also talked about the four Ps.
I think of Ps, as parameters.
Parameters are things that you can change,
and
manipulate, as a marketing person, or a
marketing executive.
They are the product, the price, the
promotion, and the place.
And that's re,
really, you and I are going to be spending
most of our time together.
and then finally, of course, the
other acronym is STP, segmentation,
targeting, positioning.
So you segmentation, targeting,
positioning strategy
provides the link between the environment,
the five Cs, and the parameters, the four
Ps that you implement.
That's how those things come together.
Okay, so little bit of a, an asterisk
beside product.
I know there are only four Ps, but I
would argue these days, product is
probably becoming
somewhat, almost, more important than the
other three.
Well, certainly the thing that you should
think about first, and that's
because it's never been easier to get
into, developing a new business.
Whether it's a business around content and
information,
or a business around physical goods and
services.
So, if you're thinking about product, you
should try to make
sure, that the product has the potential
to deliver exceptional value.
if you're lucky,
secondly, it should be a product, that
could address a large market.
And thirdly, it should also be a product,
that's very, very easy to explain and
describe.
So, as we now have about a billion people
around the world
holding onto their computers in their
pockets, things like this little iPhone
here.
that means that if I come across some
interesting new product or service, and I
want to
tell you about it, I might be able to
actually show you, in the phone itself.
So, it should be a product
that's easy to explain and describe.
And then finally, it should hopefully be a
product
that doesn't cost much to test it and to
scale.
So, even though the four Ps are all equal
in some respects, I'd
like you to start thinking about product
first, with respect to the four
conditions.
So, to get us started thinking about
execution, I'd
like all of us to focus on, what I
consider
to be the key question, when it comes to
developing
new business ideas and thinking about, how
to execute them.
Question's a very simple one, and the
question's
just what is wrong with the status quo?
So as you're going about your daily life,
buying groceries,
ordering taxis, booking hotels,
interacting with your friends and family.
I'd like you to think about, what could be
improved about all those experiences that
we go through.
Indeed, what is wrong with the status quo
way of doing things?
Now, let me illustrate this with a famous
brand
and example that we all know and perhaps
many
of us love, that brand is Starbucks.
And several years ago Mr. Howard Schultz
in founding Starbucks noticed that
in the United States, people were drinking
coffee, quite a lot of coffee.
most of it, however, was not very good
coffee, it was coffee they were buying in
the supermarket, coffee that they were
consuming at
home or maybe, picking up from gas
stations.
In short, it was just simply a product,
without
much peripheral experience or service to
go with it.
Then he went to Europe and he noticed in
Europe people also drank coffee.
But when they drank coffee, they did so
with their friends, they drank higher
ends of coffee, they knew about things
like macchiatos and lattes and so on.
So, it was really, a completely different
experience.
It was the core product, with all of these
other things wrapped around it.
And so when he came back to the United
States and started Starbucks, in his mind,
he had
the notion of Starbucks being something
what he refers
to, or Starbucks refers to, as the third
place.
So, the first place is your home.
most of us in our
home life, is getting probably a little
bit more stressful
and difficult, than it used to be, perhaps
50 years ago.
the second place is our work life,
workplace.
That's certainly more difficult and more
stressful, we're all working a lot harder.
And the idea of Starbucks, is the third
place.
That's where can you go and all of your
troubles float away, on a steamy latte.
So, this was a really great example, of
someone who saw, what was
wrong with the status quo, and then he
went about, and improved upon it.
So, that's the starting point for
thinking about execution.
in addition to that, within the notion of
the
sea of context, contextual change, I
wanted to share
with you, four changes that we should have
in
the back of our mind, when we think about
execution.
That are really effecting the way new
business
are coming about and new business are
growing.
So, the first big contextual trend that's
pretty hard to stop and
it's one that we can leverage, is what I
call, democratization in access.
What do I mean by that?
I mean that technology, through scale and
low cost, has allowed people
to get access to things, that they never
before, were able to do.
a great example of that would in fact, be
our, our course together, on Coursera.
So, we have about 100,000 of us, all
participating, all interacting,
because of technology giving us the scale
and ability to do so.
So previously, if you wanted to come to
the
Wharton School, you'd have to physically
be in Philadelphia,
for a class.
So that's a big trend and Coursera is but
one
example, I'd like you to try and think
about some more.
Second big trend that's occurring, again,
partly because of the
Internet, is this idea of what I call,
value chain disruption.
And what I mean by that is, there are many
markets, markets for eye-wear, markets for
shaving, markets for furniture,
markets for bedding, where the price
that's paid by the
end consumer is very, very high, relative
to the cost.
Perhaps, some monopoly has that market
locked up.
Perhaps, there's some kind of structural
impediments that mean,
consumers are really getting a bit of a
raw deal.
So, one example of this is, the company
again, listed on the slide, harrys.com.
So Harry's is a company, that ships for
guys, like
me, razors, cream and shaving foam,
directly to my home.
And Harry's is built on the notion, that
there are
some competitors out there that offer a
very good shave,
but an extremely high price.
Perhaps companies like Gillette.
So Gillette maybe, respects your face,
gives you
a nice shave, but doesn't really respect
your wallet.
You pay in the U.S. maybe $4 to $5 for a
shaving cartridge.
On the other hand, there might be
companies like Dollar Shave
Club, I encourage you to look at the
video, It's very entertaining.
If you go to their website,
dollarshaveclub.
Where the blade cost is much, much lower,
but perhaps
the quality of the blade, is not quite as
good.
And then we have
Harry's in the middle, where Harry's is
both, respecting your wallet, the
product's not that
expensive, it's only about $2, but also,
respecting
your face, by giving you a good shave.
So, that's the second trend.
The value chain for many business, is
being disrupted.
The third trend, another sort of
unstoppable one
I believe, is what I'll call,
collaborative consumption.
And, what I mean by that is,
many, many product categories, let's start
with automobiles,
there's an oversupply of product.
So, if you own a car, like I do, it's
probably
the case, that your car is inactive, about
23 hours a day.
That seems like a real waste of that
resource.
You're only using the car, maybe seven to
ten hours a week
out of a total of 164 hours, that you
could be using it.
And so, wouldn't it be more efficient if,
perhaps, there
was just one car, or two cars per
apartment building, and
there was some efficient way of sharing
those things.
This is the idea behind a company like
Zipcar, which is here
in Philadelphia, and many other places
around the world under different names.
Or the bicycle sharing that you see in
Paris, and New York City, and other
places.
So the idea, that we could share assets
and consume them collaboratively.
And then the fourth trend which again, is
one I believe,
is facilitated a lot by the
use of technology, particularly mobile
technology,
is the matching of supply and demand.
So think about, going out at night with a
group of friends, and trying to find
a taxicab, particularly, if you're off the
main
area of whatever city it is, that you're
in.
It can be very, very difficult.
However, it turns out, that in many cities
there are limousine drivers or
black car drivers, who are sitting out
there, with actually, no one to drive.
And so, if there was some way of matching
that supply and demand,
then you could create a ride for someone
like me, who needs to get home, and
create some money for somebody like the
driver,
who would like to benefit from that excess
demand.
So, a company that really shows that is a
company called Uber, uber.com, that's also
on the slide.
So, those are the four key trends that I'd
like you think about, in
terms of, being able to execute our new
businesses, in innovative kind of ways.
Okay, next thing I
want to introduce here, is a framework for
execution that really ties back, to the
things that
Pete and Barbara have also been talking
about,
and this is something I call, marketing
math 101.
It's kind of a simple idea the only math
that's in there, is actually
a multiplication sign, so don't be too
concerned, that it's going to be overly
technical.
and marketing math 101 says the following.
It says, that your success in a market, is
equal to how good the product or service
is interacted, or multiplied by, how good
the marketing is.
So, let me explain those components.
First of all, let's start with a product.
So, the product or service that you're
offering, imagine it
could be rated on a scale of zero to ten.
With zero me, zero means the product is
really, really
lousy, and ten means, that the product is
absolutely fantastic.
Okay?
Marketing means two things.
First of all marketing means, the fit to
the costumer and the brand, through
segmentation, targeting, positioning.
And then the other three Ps, the price,
the
promotion, and also the place, or the
distribution strategies.
So imagine, you have the greatest product
in the
world, it's a ten out of ten product or
service.
But you've done lousy pricing, horrible
promotion, and you've used completely, the
wrong distribution strategy, such that
your
marketing effort is really worth zero.
Well, ten times zero is zero.
You know, having a great
product won't take you all the way.
Similarly, if you were just a marketing
genius, you
had exactly the right price, chasing
exactly the right people,
with exactly the right promotional
message, in exactly the
right place, but you know what, your
product was lousy.
And the word about that, got out pretty
quickly.
You were ten out of ten on marketing, but
you were zero
out of ten on product or service, ten
times zero is also zero.
Okay?
So, it shows two very interesting things
here, guys.
Number one, that you have to be good at
both.
It's a multiplicative relationship.
The product or service has to be great,
and so does the marketing.
And if both of them are great, you'll have
this exponential success.
Secondly, and I think more subtly,
sometimes if you're failing, your first
instinct
might be, gee what's wrong with my
product, what's wrong with my service?
That might in fact be, the wrong instinct.
It could be, that your product or service
is just fine,
but you haven't targeted it to the right
customers, you haven't used
the right promotional message, you haven't
set the right price and so on.
So, this is a way to think about success
or failure, as a
function of two very simple components,
the
marketing execution, and also, the product
execution.
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