When Marketing is Strategy a Lesson for Solution Providers

A recent article in the Harvard Business Review, entitled When Strategy is Marketing (Dawar, December, 2013)
got me thinking seriously how downstream, market-facing activities can impact a companys planning around
designing and delivering successful solution offerings. As a start, it would be helpful to quickly review the main
tenets of this interesting paper.

The Shifting Business Landscape: Customers and Markets at the Core

Dawar argues that companies upstream activities such as sourcing, production, and logistics are being
commoditized or outsourced, while downstream activities aimed at shaping consumers perceptions and reducing
their costs and risks are emerging as the main sources of competitive advantage. Moreover, the reality is that
companies are increasingly finding success less from simply being responsive to customers stated preferences but
by carefully defining what customers are looking for and helping shape their criteria for purchase. Think, for
example, of the success of Volvo and Nike in defining what performance means in their respective categories. These
criteria become the basis on which companies segment markets, target and position their brands, and develop
strategic market positions for competitive superiority. The strategic objective for the downstream business,
therefore, is to influence how consumers perceive the relative importance of various existing purchase criteria within
well-defined problem settings while wherever possible introducing new, favorable criteria.

Technology Innovation: A Variable Threat

Dawar also states that most executives believe technology innovations are the greatest threat to competitive
advantage. But he goes on to explain that you dont need to sweat every product launch and every new feature
introduction by a competitor just those that attempt to wrest control of the customers criteria of purchase.
Further, innovation is not confined to products or technology. Competitive battles are won by offering innovations
that reduce customers costs and risks over the entire purchase, consumption, and disposal cycle. He gives the
example of Hyundais unique risk reduction guarantee during the recent recession of if you lose your job or income
within a year, you can return it (the car) with no penalty to your credit rating. Hyundai didnt innovate to sell better
cars it innovated by selling cars better.

When Marketing is Strategy: a Solutions Essential

This discussion should stimulate great interest among solution players. Good marketing has always sought those
moments, or touch points, when consumers are open to influence. Undoubtedly it has become more difficult to
capture all of the touch points and key buying factors that have resulted from the explosion of product/service
choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed customer.
Solutions marketers are increasingly aware of the profound changes in the way consumers research and buy
products for instance, the shift away from one-way communication (from marketer to consumer) toward a twoway conversation. Yet failure to change the focus of marketing toward integrating all consumer-facing activities
across the firms dynamic value chain can undermine the core goal of reaching customers at the moments that most
influence their purchases and retained custom.
Although these forces of change have made life more complex for the solutions marketer, they have, at the same
time, presented new and exciting opportunities for the savvy CMO and his/her team. It is important that we look at
this issue through a consistent solutions lens. Solutions Insights, a specialized consulting and research company,
have defined a solution as:
A combination of products, services, and intellectual property focused on a business problem or opportunity that
drives measurable business value and can be significantly standardized. The solutions components can be from
either the vendor and one or more partners, and the solutions implementer can be the vendor, the partner, the
customer itself, or a combination of the three

Market-Facing Activity: A Key to Competitive Advantage

When customers are unsure of the product needs they are trying to satisfy but are clear (or can be made clear) of the
problems they face a typical situation in the solutions space where market complexity makes decision making
difficult the marketers job turns to the shaping of the criteria of purchase. This is based on tailoring the
offering to consumption circumstances and reducing customer costs and risks. With care, advantage grows over time
with the number of customers served in other words it is replicable or accumulative. This is facilitated, in large
part, by both network effects (e.g., on-line communities; digital opinion leaders) and amassing and deploying big
data. Dawar references an excellent example of this process:

Orica, was an explosives company mired in a commodity business (quarries that blast rock for use in landscaping
and construction) in Australia. By gathering data on hundreds of blasts across a wide range of quarries they were
able to guarantee outcomes within specific tolerances, greatly reduce result uncertainty for consumers and
successfully raise prices over competition. In other words, they were able to demonstrate measurable value delivered

through its combined services and mining IP that was critical to the customers core business requirements that
competition was unable to match.

Similarly, SKF a Swedish ball bearing company changed a segment of its low price commodity business by
integrating value-added services to its products. Through deep customer research they discovered that many
customers were wrongly installing and maintaining ball-bearings, with a consequent adverse impact on product
performance. They concluded that they must take more responsibility for how the customer was using their
products. By providing a newly created proprietary service, they were able to offer a new solutions offering that
aided in both correct product installation and lubrication. They subsequently successfully positioned themselves as
trouble-free operations.

In both cases, continued success depends on maintaining control of the customers criteria of purchase. Market
change can be evolutionary, where the boundaries of existing criteria of purchase are pushed to the limit (e.g., more
efficacious prescription drugs), or revolutionary, where changes just dont introduce new criteria but often make the
old ones obsolete (e.g., touch screens and the smart phone). Good solutions providers should be at the cutting edge
of such change opportunity due to their continuous assessment of the ability of solution investment to guide
customer purchase criteria.

Key Takeaways: Shaping Criteria of Purchase

In summary, a criteria of purchase approach to the solution process drives some critical considerations. If the
relative importance of purchase criteria remains uncertain at the early stages of the decision process as is often the
case with complex problems the active solution provider must help potential consumers make sense of and connect
with the marketplace as they seek information (and reassurance). The thoughtful marketer can select the competitive
set in which they position their offering in the mind of the customer as Dow did in the solar energy market when
they promised the power to use less power. In todays decision journey, consumer-driven marketing is
increasingly important as customers seize control of the process and actively pull information helpful to them.
Solution providers must use key customers as active partners and co-creators in the establishment of criteria of
purchase. Post purchase, all marketers should make expanding the base of active loyalists a priority. This requires
focusing spending on a new set of touch points solution modification, delivery enhancement and any other
methodology that thwarts competitors attempt to control the clients criteria for purchase. To repeat, Competitive
battles are won by offering innovation that reduces customer costs and risks over the entire purchase, consumption
and disposal cycle. In a growing age of transient (rather than sustainable) competitive advantage, the solution

marketer that can continuously define the competitive market space through fluid establishment of important
purchase criteria, should stay one step ahead of rivals.

Food for thought for the solutions marketing fraternity!

Phil Dover is on the Marketing faculty at Babson College as well as the co-founder of the MEL Institute, a research
consultancy aimed at understanding the role of managers, leaders and entrepreneurs in sustaining innovation within
the ambidextrous organization. (www.mel-institute.com)

Advanced Strategic Marketing Article Review: When Marketing is Strategy

In the Harvard Business Review article, When Marketing is Strategy, author Professor Niraj
Dawar makes the case for moving marketing strategy downstream towards the customers.
He points out that downstream competitive advantage comes from outside of the company,
from the customers and other external stakeholders. In order to compete and win
downstream he calls for a shift in focus to downstream efforts such as how you define your
"competitive set, influence customers' purchase criteria, innovate to solve customer
problems, and build advantage by accumulating customer data and harnessing network
effect." Professor Dawar asks readers to "rethink" traditional strategy pillars and move
thinking downstream to where competitive advantage is outside of the firm and
accumulative, to where focus is on customer needs and "...your position relative to their
purchase criteria." This becomes a space where you work to define how the market
perceives your offering and markets are driven by shifts in this regard, instead of by
product improvements.
Professor Dawar builds his case with a number of examples, including one about Cialis and
Viagra. When Eli Lilly was bringing Cialis to market they were facing a critical decision about
whether to center marketing strategy on Cialis's lack of side effects or to establish longer
duration as a new criterion. The team at Eli Lilly went with duration, 36 hours for intimacy,
which focused on romance over sex. This proved to be critical as duration overtook efficacy
to be the key criterion for purchase in the ED market. This decision to redefine the
customer's purchase criteria is of course easier said than done; however, if it is done well
the impact can be game changing.
What he does not mention (because his article was published in HBR in December) is that
Eli

Lilly

continues

to

push

the

"downstream"

opportunity

with

Cialis

by

making

CONVENIENCE the key overarching focus of Cialis, i.e. "Take it 24/7 now, so you are ready
whenever your partner is." Then, capturing a ton of visual images for the chance
opportunities when the partner may be ready.
Most recently, however, Eli Lilly announced on May 28 that they plan to sell Cialis to Sanofi,
who will then market this as an over-the-counter drug. Sanofi has a clear strategy to pursue
a number of RX-to-OTC conversions (examples: Actonel for osteoporosis, Plavix for stroke
and heart attack prevention to compete directly with Bayer 80mg aspirin). They will start
with US, EU, Canada and Australia, to be ready for the OTC brand conversion as soon after
the product expires as possible. We think this latest development by Sanofi is an even
stronger example of downstream marketing than the examples he gives of Eli Lilly.

Professor Dawar also notes that if you are a late market entrant you can determine who
your competitors are, and whether or not to compete directly or through differentiation. In
regards to being able to choose competitors and not just being stuck with competitors,
Professor Dawar argues that this approach is determined or influenced by three decisions:
"how you position your offering in the mind of the customer, how you place yourself vis-vis your competitive set within the distribution channel, and your pricing."
In addition, when you are downstream you can choose to market your offering in a way that
does not associate you with competition, which may be an advantage especially in areas
with less differentiation. The key is then to establish dominance on the criterion for
purchase, which then makes it hard for "me too" products to compete with you. Food for
thought against generics (branded or otherwise) who need the Rx market leader to create
the leadership position to drive THEIR value for them as the lower-cost me too, unless they
have other value they can drive.
Another area for downstream marketing strategy to make an impact, is in innovation of
market activities and tools. Professor Dawar points out how during the 2008-2009 financial
crisis, Hyundai choose a risk reducing marketing approach versus the cash back offers and
dealer incentives that others were offering. They did this by allowing the buyer to return
their purchase if they lost their income or job within a year of that purchase. Huge sales
soon followed and clearly demonstrated the impact of this downstream strategic marketing
innovation.
Professor Dawar does a good job of pointing out that if you expect strategy to be
determined upstream then you are clearly missing big opportunities that you can impact
downstream. So, clear your mind and open up to the downstream possibilities that will drive
value

and

competitive

advantage.

While we like this article for its provocative thoughts about "downstream marketing" we
caution the reader not to be impressed just because it has been published in Harvard
Business Review. Rather than hard data backing his hypotheses, he has selected examples
that prove his point. However, we probably could find just as many (and many better)
examples of creating market opportunity via "upstream" marketing. We also want to caution
against adopting his definition of "upstream" marketing when speaking about healthcare
market creation. In the healthcare market specifically, upstream marketing does NOT refer
to 'vertical integration', e.g. controlling production from beginning to end. It refers to
epidemiology what causes a person to become at risk of a disease or poor health that
later, in a "downstream" stage, becomes acute and/or chronic disease that costs a lot to
control and manage. More and more today, governments are beginning to take the adage,
"An ounce of prevention is worth a pound of cure". Hence the global growth of preventative
health, and in industry, vaccines.

To us, "upstream marketing" in health care IS good strategy for many companies, as well,
engaged in nutrition, or for those who know that the number of people with early stages of
the disease who should and could be treated earlier represents a huge market opportunity.
The classic example was Merck launching Fosamax redefining the diagnosis of
osteoporosis as being about bone density, not about bone density post-fracture. Another
present-day example is "pre-diabetes". The company that can get governments to be more
aggressive about treating for pre-diabetes is a HUGE opportunity, also what really is needed
for patients. Imagine if they said to patients (as they did when Herceptin was first approved
for reimbursement), "To get access to cancer medications, first you have to let the disease
progress to metastatic stages!" The analogy is the same for diabetes. However, to be a truly
effective upstream marketing strategy, companies also will have to demonstrate the impact
on improved outcomes working with providers and their patients to achieve nutritional and
exercise improvements along with medical support.
So don't be overly impressed by this article. Be cautious in using the term downstream
marketing the way Prof. Dawar uses it as it could be extremely misleading within the
healthcare industry, resulting in your overlooking or not also considering the opportunity of
the true meaning of upstream healthcare marketing strategy.
Review by Barri Blauvelt and Aaron Carpenter, Innovara, Inc.