Magazine article Marketing

Marketers' Vital Role

Magazine article Marketing

Marketers' Vital Role

Article excerpt

David Hearn, managing director of KP Foods, challenges marketers to seize business leadership

Very often in times like this you hear people complain, we've got tough times ahead. We can't afford the luxury of marketing.

In the 80s high company growth and high profit growth created the classic virtuous circle and of course we all made hay. Consumers were actually looking for opportunities to spend.

In those days you just had to stand around near people and they'd open their wallets. High margins were very easy to achieve. Too often added value came to mean added price and all we did was stick the price up, give it new packaging, charge more and get rich.

Some of the retailing concepts of the 80s; Next, Principles: where are they today? They're nowhere today and the reason is they weren't offering proper propositions. The quality of the product didn't answer to the price.

We launched too many "premium products with gold lines." Call it deluxe, quality, or premiere. Actually when we came down to it the proposition inside wasn't that different. We all thought we were being very clever. Segmenting the market; we were niche marketers. The truth is we were conning people and we were taken by surprise when they walked away.

There were a lot of products in the dairy market, premium products with gold lines. Muller comes along, with really quite an interesting proposition and takes great chunks of the market.

There are two fundamental responses to the 90s. They both have to happen. The first one is cost reduction. It's no good assuming we can go on spending money as we used to. We're in the business of strategic cost reduction. That is not simply a matter of not spending as much on paper clips. We must take cost out of the system.

Not more of the same -- be different

There are fundamentally two ways of reducing costs. You can do the same things you do now but better, or you can do things differently.

In the 60s, 70s and 80s the primary drive for cost reduction was doing the same things but doing them better. A huge growth in technology allowed very high speed packing lines, case packers, EPS machines in stores. Computers were driving enormous cost savings. Even in the cost reduction business things have changed.

The big cost savings opportunities have gone. The huge accounts departments have gone.

In our business today our cost savings programmes designed to save |pounds~5m net this year. We expect 65% to come from management-driven initiatives and 35% from capital cost reduction. Ten years ago 80% of saving would have been driven by capital.

Doing the same thing isn't going to be enough. In the 90s the focus is going to have to become doing things differently, taking total cost out of the system, saying: why do we invoice customers, why do we call on customers? Why do I have outercases?

It's much more difficult to achieve but it's much more enduring. When you've taken the cost out it's more difficult for it to grow back.

In my company we're taking a look at our entire chain of business. If our customers find savings we'll split the difference with them.

It's very important that we consider doing things differently -- eliminating friction in the whole value chain. It does require multifunctional leadership - the friction doesn't come within the functions, it tends to come between them.

It requires a proactive requirement for internal change. …

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