Tool Box
Issue No. 45 - Feb/March 2009
Time to question your marketing rules
by Dr David Corkindale and Dr David Corkindale
In normal times businesses make small adjustments to their marketing practices to deal with changing competitive pressures. Mostly they try to stick with what has worked in the past – why take a risk, is the mindset.
However, 2009 is not going to bring normal market circumstances. To keep our revenue and margins we are going to have to take business from our competitors more than ever. How can we do that? Answer: unusual times require unusual solutions.
Question the rules The airline market worked for decades by the ‘full service model’ and in the US domestic market the operational method was known as ‘hub and spoke.’ Then along came Southwest Airlines that broke these rules with, among other things, no-frills, budget prices and direct flights. A formula which was and still is commercially successful. Their model has been replicated around the world by airlines such as Virgin Blue and Jetstar.
Southwest asked the question: why do we have to operate like all the other airlines that have set implicit rules about how an airline is supposed to run? Michael Dell had the inspiration that computers did not have to be sold by the ‘rules’, through retail shops.
He believed PCs had become sufficiently commoditised that people would buy them by direct marketing, particularly if some of distribution savings were shared with them in some way.
Another company that broke the rules for a while was Blockbuster. At one point they realised 30% of their profits were coming from late fees. In order to drive this area of profit higher while taking business away from competitors, they instituted the “hire two videos, get another one free” strategy which of course increased the chances that people would return a video late. This move did not win them much endearment among clientele and was dropped eventually, but it illustrates the ‘change the rules’ idea.
Are you in a market whose rules can be changed to your advantage?
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