Book Review On Lateral Marketing

Book Review on Lateral marketing by Philip Kotler & Fernando Trias De BES The evolution of markets and dynamics of competition • •

•

•

•

•

•

• •

Distributors respond by concentrating. Channels are concentrated in the hands of fewer distributors with a lot of power. Number of competitors has been reduced, but the number of brands has strongly increased:-Multinationals and other corporations have been gaining in power. There are fewer players but higher number of brands. Product life cycles have been dramatically shortened:-Launching new brands is costing less. New products survive in the market for shorten times. It is cheaper to replace than to repair:- Manufacturing process are so efficient than replacing becomes cheaper than repairing. This accelerates the frenetic rhythm of new launches. Digital technology has been provoked a revolution in many markets:- The digital era facilitates the appearance the rhythm of innovation and number of new products. The internet facilitates the appearance of new brands and ways of capturing business. The number of trademark and patent increasing:- The growth of number of patents and trademarks proves the increasing competitiveness of the markets. The number of varieties of a given product has increased radically:Within the given category, the number of varieties available for consumer choice has increased exponentially. Categories are saturated with varieties. Market are hyper-fragmented:- Market are fragmented into small niches, which are less profitable. Advertising saturation is reaching its highest levels, and the fragmentation of media is complicating the launch of new products:Advertising saturation is occurring. Market segments are smaller and smaller. Communicating a new product is getting more expensive. It is necessary to be present with a brand in many media

•

to obtain good coverage. This makes new products launches more expensive. The capacity of obtaining space in the mind of the consumer has been reduce:-Consumers become selective. They are increasing ignoring commercial communication. Novelty may be the only way to catch the attention.

Conclusion: - Markets are much more competitive Summary Innovation is the key and the basic of competitive strategies today. The rate of new product introductions is frenetic, but the failure rate is high. It is absolutely crucial to understand how innovation is done today. We need to split marketing process into pieces and analyse it in order to understand the type of novelties it might produce.

Strength and weakness of traditional marketing thinking Need identification as the starting point:- Market start by analyzing the need that products and services satisfy. Logically, identifying and selecting some needs implies discarding others. Market definition-then after-Selecting a market:-The market is the set of current and potential persons / situations where the product can satisfy one or several needs. The consideration and definition of a market provides a frame (arena) where competing will take place. The act of selecting potential persons/situation leads to discarding persons/situations where the product will not be appropriate. Adoption of market category and subcategory by marketers:-The selection of the concrete needs and of the specific persons/situation where a product or service can be present constitutes a closed and complete system called category and subcategory. The consideration and definition of a market provides a frame of where to compete. The same act of selecting potential needs, persons, and situation leads to dicardingthe needs, persons, and situations where we cannot be present. When marketers adopt a category they assume as fixed the elements within it (need, target, situation, and product).Normally these elements will not be consideration anymore. Adoption a market as something fixed leads to segmentation:- the definition of market inevitable leads to segmentation and positioning strategies. Defining market leaves only one option to compete: to

fragment the market into parts. This is the essence of the segmentation strategy. Segmentation:-segmentation consists of dividing the market to obtain new sales. Segmentation can increase the size of the market as well. Repeated use of segmentation finally fragmentation leaves little room for new products. But new products are the key components for companies that want to grow. Immediate effects:- generation of competitive advantages to new competitor that enters the market. Long-term effects:- repeated segmentation lead to hyper fragmentation of markets. Segments are converted into niches and eventually start talking about one-to-one marketing. Saturated products reduce the success of the new products and brands. Segmentation consists of dividing the market to obtain new sales. Segmentation can increase the size of the market as well. Repeated use of segmentation finally fragments and saturates the markets. Market fragmentation leaves little room for new products. But new products are key component for companies that want to grow.

Positioning as a strategy for generating completive advantageous:Poisoning consist of choosing something by which we want to recognised. Positioning, as a strategy, opens further opportunities for variation. Positioning consist of choosing characteristics and highlighting them. Selecting logical characteristics of our products may blind us to innovative new concepts. Immediate effects:- Positioning strategy creates differentiated brand personalities even within the same market. Long term effects:- Positioning opens up even more possibility than the number of brands, because the same brand can be poisoning differently in different markets. Summary The marketing process is a sequence. It starts with needs identification in order to establish the persons/situations that become our potential market. The market such as it is defined is considered fixed and stable. Using prefixed markets allows the establishment of a competitive frame and allows tracking of key performance indicators about the market (or category): size, variation and market share. Defining a market is a basis of the segmentation, targeting, and the marketing mix. In fact the operational segmentation is possible only because of a context named

market has been defined. Repeated segmentation leads to a hyper segmentation of markets, which reduce the chances of innovating successful new products. To visualize a market as a fixed model is extremely useful, but at the same time its blind us to other innovation possibilities. This can constitute a loss of opportunities.

Innovations originated from inside a given market: The most common way of creating innovations Working from the market definition downward leads to new products that are just variations of existing products and services. Innovation based on modulation:- Modulation based innovations vary any basic characteristic of the product and service by increasing or reducing the weight, importance , or degree of that characteristic. Innovation based on sizing:- Sizing based innovations consist of introduction of a new product or service in the market by varying the volume., frequency , size , or number of products or services offered. Package based innovation:-It consists of creating new products by modifying only the container, the packing or the environment. Many times, packaging changes can be made together with the sizing changes. Design based innovations:- are those which create a new product by changing its external appearance. Innovations based on complements development:- It consist of adding complementary ingredients or additional services to the basic product or service. Innovation based on the effort reduction:-It consist of modifying not the product or service , but rather the efforts and risks involved in the purchase. Summary Innovations consist of continued variations on what the product or service is, but do not intend to modify its essence. The innovations occur within the category in which they compete, since the methodologies for creating them assumed a fixed market.

Innovations originated outside of a market: An alternative way to create innovation

The case of Cereal Bars (Breakfast cereal category) :-merging the concept of cereals and chocolates bars by this new category born. The case of Kinder Surprise (Chocolate eggs):-merging the novel concept: a chocolate egg with a toy inside. The case of 7-Eleven Japan (Convenience stores):- Collaborate with ecommerce The case of Actimel, from Dannon (neither yogurt nor juice it’s a new product in itself): The product protect your organism from bacteria with ten thousand million of L. Casei immunities. The case of Food Store inside the Gas Stations:- The new concept by selling impulse product as well The case of the Cyber Cafe Concept “Be the godfather of a kid”: Internet access to a cafeteria The case of “be the godfather of the kid”:- Doner can know where and how their money being used. The case of “Big Brother” TV contest:-New concept no script, no specific competitions , no interruptions (The TV audience observe their lives, behaviours , and personalities and votes for prefer one) The case of Huggies Pull Ups:- The concept was to transform a diaper into something similar to panties for children. The case of Barbie:-Ruth created a teenage fashion model doll named Barbie, and rest is history. The case of Walkman:- The audio equipment with the concept of mobility (Personal audio).

The need for lateral marketing to complement vertical marketing The lateral marketing is a complement of vertical marketing Lateral marketing works in the areas where the vertical marketing does not. Lateral marketing restructuring a product by adding needs, uses, situations, or targets unreachable without the appropriate changes. Lateral marketing consist of analysing models and provoking changes in the models. Vertical marketing uses a logical process. Lateral marketing uses a probabilistic process.

Situation where each types of marketing is more appropriate Vertical Marketing More adequate in markets of recent creation that are in the first stage of development For developing a markets and for making them later thorough the conversion of potential customers into current customers

Under a less risky business When a few resources are available

When a secure , even low, incremental volume need to be ensured In order to defend markets, by fragmenting them through the number of brands and therefore making markets less attractive for new entrants To innovate stemming from our mission and keeping our business focus

Lateral Marketing More adequate for mature markets where growth is zero For creating a markets and categories from scratch , for merging different types of businesses , for reaching targets we could never reach with our current product, and for finding new uses Under a more risky business philosophy When there are more resources available or business is ready to invest and wait When we want to reach a high volume of business To attack market with a generic completion from outside the arena of direct competitors

To redefine our mission, and to seek other markets

Defining the lateral marketing process Lateral marketing is a work process which , when applied to existing products or services, produces innovative new products and services that cover needs , uses , situations, or targets not currently covered and , therefore , is a process that offers a high chance of creating new categories or markets.

GAP

Gap created by the lateral displacement

ARTIFICIAL

Connection

Innovations are a result of connecting two ideas which, in principle, had no apparent or immediate connection. The logic of creativity consist of talking an element, displacing the lateral one aspect of it , and connecting the gap that has been provoked. The logic of the creativity follows a process similar to that of humour. The lateral marketing process begins with choosing a product or service. Three levels of lateral marketing

MARKET= NEED, TARGET, USE/SITUATION

MARKET ON ROADS

PRODCUT CAFETERIA

REST OF MIX PAYMENT AFETR USING

The first step is to choose one out of the following three levels: market, product, or rest of the marketing mix. Focusing on the market level or product level for making a displacement generates a gap between these two elements. This will easily leads toward creation of new categories. Focus on the rest of marking leaves the product and the market connected. Displacement will lead toward to subcategories or innovative commercial formulas. Generating a marketing gap:- the second step is to do a lateral displacement on one of the three levels. There are the six techniques for doing these lateral displacements: Substitution, inversion, combination, exaggeration, elimination, and reordering. Substitution (price): paying for diapers with a bank loan. Inversion (price): shops without prices on the products. Combination (channel): buying gasoline from kiosks and the gas stations together. Exaggeration (postal service): a painting the customer always returns after buying Elimination (communication): cloths with no advertising or brand Reordering (payment modality): paying for phone calls before making them. The way to determine whether we are doing lateral or vertical marketing is by checking if we have a gap in front of us or not. The absence of a gap implies that we are working an innovation into the same market or category.

The third step is to connect or solve the gap. The way to do it is by vaulting, rather than evaluating. There are three valuation techniques: following the purchase process, extracting the positive, and finding a setting. The final outcome of the lateral marketing process can be a new utility for the same product, a new category, or a new subcategory.

Lateral marketing at the market level Change of dimension as the most practical technique Market= Need, target, (place, time, situation, experience) occasion The method “change of dimension” consist of substituting one the dimensions of the market for another that is discarded. Changing the need: trying to cover another utility: The dimension consists of selecting a new need we are not covering and thinking about how the product should be in order to meet that need. Changing the target: a person, persons, or group: substituting a person or group consist of choosing someone who is a nonpotential target of the product or service. Changing the time: choosing new moments: this dimension consists of choosing new moments of buying, usage or consumption of a company’s offering. Changing the place: move your product into a new setting: this dimension consists of choosing places of purchase, usages, or consumption where the product or service cannot be present now. Changing the occasion: link your product to as event: the challenge for marketers is to propose events or occasions where the product is not considered now. Changing the activity: place products into experiences: the dimension consist of activities or experience where other products are strongly positioned but not the one being considered. Connecting the product with new the dimension: The change of dimension has provoked a gap between the product and service and a new dimension. Connections made without altering the product: after changing the dimension, if we want to change the product, we must seek a new utility for it and communicate it.

Connections made by altering the product: anchors are the product elements that do not let us get into the new dimension. We must change or eliminate them. Ancillary techniques for displacing market level Combining the dimension “Place”:- Using the same telephone for home and out of home Reordering the dimension ”Time”:- Welcoming a guest before arriving at the hotel (Hotel employee at the airport) Exaggerating the dimension “Place”:- a mobile phone with worldwide coverage (satellite) Inverting the dimension “Need”:- A book that cannot be read (decorative) Inverting the dimension “Target”:- A turnabout in the electricity sector (solar panels) Eliminating the dimension “Time”: A game with no dimension of time

Lateral marketing at the product level Applying the lateral displacements concept and examples Substitution:- it consist of removing one or several elements of the product and changing it/them. It also consists of imitating aspects of other products. Combination: it consists of adding one or several elements to the product or service, maintaining the rest. Inversion:- it consists of saying the contrary or adding “no” to one/several element(s) of the product or service. Elimination: it consists of removing one/several element(s) of the product or service. Exaggeration: it consists of exaggerating upward or downward one/several element(s) of the product or service. It also consists of imagining a perfect product or service. Reordering: it consists of changing the order or sequence of one/several element(s) of the product or service. Connecting a possible market with the new product • •

Finding the possible setting Extracting the positive things

• •

Imaging the purchase process The product may need to adjusted

Lateral marketing at the mix level Lateral marketing for diversifying our marketing mix: “taking the mix of other products”: it consists of applying existing pricing, distribution, or communication formulas that correspond to other existing products or services and which are not naturally associated with the category we compete in. Pricing:- Selling coffee with a prepaid card system, payment of bills through ATMs, transaction charge on the fixed price basis, rewards concept tied up regular household shopping(loyalty card), flat rate for variable quantities eaten, given away the razor and money making on blades. Distribution:- selling house in shops, selling logistics by e-mail, selling condoms in vending machines, selling books through internet, selling airplane tickets over phone or internet. Lateral marketing for finding new marketing mix formulas: the rest of the lateral displacements Combination: “phone + internet”, “TV + telephone” Elimination: “direct distribution”, “self-service distribution formulas” Exaggeration: “we want to be in every selling point”

Implementing lateral marketing Three systems for innovative company: The Gary Hamel model An idea market: Means Company has established a system for actively soliciting, collecting and evaluating new ideas. The company appoints a high-level executive to manage an idea development, collection, and evaluation (IDCE) system. A capital market: Funding must be set aside to support researching the ultimate worth of initially attractive ideas. Part of the funds should be destined not only to researching the potential of the new ideas, but also to engage the staff in thinking laterally. A talent market: The firms need to have or hire people with necessary talents to develop the best ideas.

Next step: managing the whole process 1. 2. 3. 4. 5. 6. 7. 8.

Idea development Concept development Concept testing Financial analysis Prototype development Prototype testing Market testing Market launch