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Cambridge Marketing Handbook: Stakeholder Marketing

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Cambridge Marketing PressMiddlewatchSwaveseyCambridge CB24 4AA

Tel: +44 (0)1954 234940http://www.cambridgemarketingpress.com

ISBN: 978-1-910958-33-9

Price £9.99

Stakeholder Marketing - A Cambridge Marketing HandbookMarketers have long held the view that the customer should be central to all they think about, all they do. Yet the developments of the last few years have shown that other forces are at play that can be at least as powerful and long lasting. A broader group of stakeholders exists, whose needs and interests must be understood and satisfied in the quest for a strong corporate reputation and business success. Most recently the impact of the internet and social media has amplified the power of individuals to comment on, and ultimately to influence, the activities of organisations of all types. This Handbook examines the identification of internal, connected and external stakeholders, their ability to affect the organisation, and how organisations should relate to them. It also examines the organisation itself and the factors which influence the development of its corporate image among its various stakeholder audiences.

About the AuthorTerry Nicklin has over thirty years’ experience of marketing in product and service-based organisations. He has worked at Marketing Director level in global markets for companies in technology and professional services, and has consulted for public and private sector clients including BT, Bosch, GE and Unilever. He runs PR and marketing consultancy Keynote PR to provide high quality marketing support to B2B clients in technology and business services sectors. At Cambridge Marketing College, Terry is Course Director for Digital Marketing. He is Chairman of the Chartered Institute of Marketing (CIM) Cambridgeshire Branch, a Member of the CIM East Regional Committee and the recipient of a CIPR Gold Award

This set of guides provides an invaluable resource for anyone wishing to further their career in marketing.

Professor Malcolm McDonald MA (Oxon) MSc PhD DLitt DScEmeritus Professor, Cranfield University School of Management

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STAKEHOLDER MARKETINGA HANDBOOK FOR PROFESSIONAL MARKETERS

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ISBN 9781910958339

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Terry Nicklin


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Publisher’s noteEvery possible effort has been made to ensure that the information contained in this

book is accurate at the time of going to press, and the publishers and authors cannot

accept responsibility for any errors or omissions, however caused. No responsibility for loss

or damage occasioned to any person acting, or refraining from action, as a result of

the material in this publication can be accepted by the editor, the publisher or any of

the authors.

First published in Great Britain and the United States in 2013 by Cambridge Marketing Press.

This revised edition published by Cambridge Marketing Press, 2015 © Cambridge Marketing Press, 2015.

Cambridge Marketing Press

Cygnus Business Park

Middlewatch, Swavesey

Cambs CB24 4AA, UK

Apart from any fair dealing for the purposes of research or private study, or criticism or

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The right of Cambridge Marketing College to be identified as the author of this work

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ISBN Paperback: 978-1-910958-33-9

eBook-eReader: 978-1-910958-34-6

eBook-PDF: 978-1-910958-35-3

British Library Cataloguing-in-Publication Data.

A catalogue record for this book is available from the British Library.

Design and layout by Cambridge Marketing Press.

Printed and bound by CPI/Antony Rowe, Chippenham, Wiltshire.

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DedicationDedicated to Charles Nixon, without whose vision and drive these Handbooks would not have come into being.

About the authorTerry Nicklin BSc DipM MBA FCIM FCMC Chartered Marketer

Terry Nicklin has over thirty years’ experience of marketing in product and service-based organisations. He has worked at Marketing Director level in global markets for companies in technology and professional

services, and has consulted for public and private sector clients including BT, Bosch, GE and Unilever.

His company, KeynotePR, provides marketing support to organisations in technology and business services sectors. Clients have included: Imperial Innovations, University of Cambridge and TT Electronics. He was awarded a Chartered Institute of Public Relations Gold Award in 2012.

Terry has worked with Cambridge Marketing Colleges (CMC) for over ten years. He is Course Director for Digital Marketing. He was the author of Stakeholder Marketing – part of Pearson Education’s Marketing in a Box.

Terry is Chairman of the Chartered Institute of Marketing (CIM) Cambridgeshire Branch, and a Member of the CIM East Regional Committee. He is a Fellow of the CIM and of CMC.

He holds the CIM Diploma in Marketing and has an MBA from Warwick University.


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ContentsWord Cloud VIPreface VII

Part 1: Public Opinion and Politics Introduction 3

Chapter 1: Beyond the Customer

1.1 Politics and social trends 81.2 Power of corporations 121.3 Balance of power 131.4 Customer trends 141.5 Ethics 161.6 The environmental issue 17

Chapter 2: Stakeholders and their Impact on the Organisation

2.1 Stakeholder interests 242.2 Power and interest 252.3 Stakeholder interactions 272.4 The power of digital communication 302.5 Crisis communications 32

Chapter 3: Corporate Reputation 3.1 Elements of corporate reputation 383.2 Corporate branding 393.3 Societal marketing 413.4 Corporate social responsibility 433.5 Corporate communications 453.6 Political marketing 55

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Chapter 4: Closing Remarks 57

Appendices Appendix 1: Domino’s pizza 59Appendix 2: Tobacco debate 63

Part 2: Partners Introduction 69

Chapter 5: Partners

5.1 Partnership types 71

Chapter 6: Internal Partnerships

6.1 Overview 736.2 Internal marketing 746.3 Part-time marketers 776.4 Achieving internal partnerships 786.5 Empowerment 79

Chapter 7: Vertical Partnerships

7.1 Supplier partnerships or partnership sourcing 867.2 Innovation networks 917.3 Outsourcing 917.4 Limitations of supplier partnering 937.5 Strategic business units 94

Chapter 8: Horizontal Partnerships

8.1 Personal networks 958.2 Collaborative partnerships 96

Epilogue 101References 102Index 106


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Word clouds produced through WordleTM (www.wordle.net)

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PrefaceMarketers have long held the view that the customer should be at the centre of all they think about, all they do. Yet the developments of the last few years have shown that other forces are at play that can be at least as powerful and long lasting as customer satisfaction alone. A broader group of stakeholders exists, whose needs and interests must be understood and satisfied in the quest for a strong, positive corporate reputation and business success.

Consider how you feel about any organisation in the financial services sector today, and it is likely that your general impression will be clouded by the actions of the banks in the early 21st Century, and the subsequent economic fallout that has affected most economies. This is true whether you have been personally affected or not. Simply by listening to the broadcast media, reading newspapers etc. we develop our opinions as part of a ‘groundswell’ of thought, which changes over time but is likely to subsist for several years. Often this public opinion is vague and simplistic (all bankers are bad; the NHS is under-funded), but without doubt affects the way individual organisations need to react to, and communicate with, their stakeholders.

Most recently, the impact of the internet and the dramatic rise in the use of social media have accelerated and amplified the power of individuals to comment on – and ultimately to influence – the activities of organisations of all types.

To account for the increased demands put on organisations by the complete range of stakeholders, we need to recognise:

• internal stakeholders (employees, temporary staff, interns, directors, etc.)

• external stakeholders (finance providers, media, regulators, government, etc.)

• connected stakeholders (suppliers, customers, partners, etc.)


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We also need to extend the framework of marketing and its scope, so that in addition to the familiar seven Ps of the ‘extended marketing mix’ (Product, Price, Promotion, Place, Physical evidence, Process and People), we can usefully identify three more Ps: Political Power, Public Opinion and Partners. This text examines the changing world of multiple stakeholders, their developing concerns and how they behave in response, and how organisations should relate to them.

It also examines the organisation itself and the factors that influence the development of its corporate image among its various stakeholder audiences.


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PART 1 Public Opinion

and Politics


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IntroductionUntil fairly recently, marketers focused on identifying customer needs and wants, and satisfying them with products and services. Marketing, put glibly, was about ‘selling products that won’t come back, to customers who will’. Later we recognised the need to delight them.

If you had a product to sell, let’s say a radio, you supplied it to as many retailers as you could, and they sold it at a higher price – often all at the same price: the ‘recommended retail price’. Customers duly trotted along to buy it. Their choice of goods was limited to the range stocked by the shops they could get to, and the products they could afford. If you wanted to promote your radios, you had signs made to go in the shops, i.e. ‘point of sale’ advertising, and perhaps some general press advertising or even broadcast media advertising if your budget/market justified it. Essentially, the impact of your campaigns would be a function of the size of the campaign spend and the success of this ‘interruption marketing’.

Contrast this with a company today: Samsung for example, marketing its latest DVD player. Potential customers may still go along to the shops – both specialist (e.g. hi-fi retailers) and general (e.g. department stores or even supermarkets), where they will expect product demonstrations from knowledgeable and personable sales staff, and maybe ‘master classes’ from more technically trained staff. However, they will almost certainly also consult other media to get a more rounded view of the product.

They may watch ‘The Gadget Show’ on Channel 5 for an independent review. They will almost certainly go online, both to Samsung’s own website in their own country – where they will expect a full list of technical features, bang up to date, and in their own language - and to other websites such as ‘evaluator intermediaries’. They will visit retail websites such as Amazon where they may well find keen pricing impossible for high street retailers to match.

They will read reviews from people who have previously bought the product. They will be shown similar, alternative products to tempt them on comparison sites such as Kelkoo.

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Beyond the Customer

Once they have made their decision, customers will expect to use their preferred payment method (credit card, store card, PayPal, etc.), and to enjoy full after sales support. They will even be able to return the goods within a few days if they change their mind and they bought online, under the Distance Selling Regulations!

As well as customers, Samsung will need to consider the views of its retail channels so that they are motivated to offer the products enthusiastically. This will include its international network, as products may be bought online from many countries. The company will need to be mindful of press commentators or special interest groups who may be interested in its policy on using bio-degradable materials or reducing unnecessary packaging. Samsung has shareholders who will be interested in what management is doing to maximise share price and dividends, while employees and possibly trade unions will be interested in working practices and employment terms. Even governments will take an interest in Samsung as a potential provider of employment to its citizens, especially in development support areas. If the company is seen as too successful, regulators may step in to demand a reduction in the power of the organisation; Microsoft and BT have experienced this in recent years.

Perhaps life in earlier times was not quite so simple as suggested above, but there is no doubt that companies in most countries are today required to reach ever-higher standards of performance, in ever more complex environments. In particular, there is a far wider range of individuals and businesses who have some interest in what the company is doing: suppliers, sales channel members, employees, regulators, legislators, analysts, media commentators, the general public and so on. Collectively we refer to these as stakeholders. How organisations should recognise and respond to this changing landscape, and how they can influence such diverse groups favourably is the principal focus of this Handbook.


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Chapter 1: Beyond the CustomerWe are familiar with the idea that marketing is ‘about’ the 4Ps. For some, they define the scope of marketing and provide a template for mapping out and planning marketing activities in our organisations. Much marketing activity is about managing product (or service), setting price, establishing channels of distribution and managing communication around our brand. This much is not in question. In the 1980s, marketing thinkers augmented the basic 4Ps of marketing: Product, Place (distribution channels), Price and Promotion to add: People, Physical Evidence and Process – giving us the ‘7Ps’.These elements have special resonance in services marketing.

However, it should be clear from the Introduction above that today our horizons need to be set much more broadly than the traditional ‘marketing mix’ would allow. For what we might call ‘stakeholder marketing’, even the 7Ps are not broad enough and it is worth adding three more:

• Political power• Public opinion• Partners

These additional factors give us the scope to describe many more of the forces affecting organisations today.

We could of course go further and add many more Ps – Positioning, Performance, Promise, Personalisation, Progression, Perception, Prediction, Physical asset, Payments and so on! These are just some of the additions one can find in the literature. Clearly none of these models is ‘right’, and we are free to select concepts that mean something relevant in our particular sector.

So why have we chosen Political power, Public opinion and Partners to form our 10Ps? These three topics allow us effectively to capture many of the issues that organisations face, and which are not directly a matter of gaining and satisfying customers.

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Beyond the Customer

They are issues partly or wholly beyond the customer, yet they may affect the success of the organisation just as potently. They recognise the importance of those other entities in and around the organisation whom we shall conveniently collectively describe as ‘stakeholders’. PR practitioners used to call them ‘publics’.

To take two examples of how these factors may have impact:

Public opinion: In 2002, health campaigners watched closely as a lawsuit was filed on behalf of several obese teenagers who claimed that the fast-food company McDonald’s was responsible for making them fat. They claimed that adequate information was not given on the health risks associated with fast food. In May 2012, after a great deal of discussion during the intervening years, McDonald’s’ investors soundly rejected a shareholder proposal that would have required the world’s biggest fast-food chain to assess its impact on childhood obesity. Clearly this issue remains very much ‘alive’, and public opinion on this issue continues to develop.

Partners: In a manufacturing company, attention to detail and concern for quality must be at the heart of the manufacturing process, supported by suppliers equally concerned to provide consistent quality and on-time delivery. Raw materials or components become part of the finished product and so determine its function, manufacturability and cost. Thus strategic suppliers are better treated as partners if the most value is to be gained from them. We deal with Partners in more detail in Part 2 of this Handbook.

It is becoming increasingly clear that organisations have a need to consider sometimes diverse stakeholder interests in their operations and especially in their communications. You may be thinking that this will take the focus away from the all-important customer – who should remain at the centre of attention. During the 1990s, a school of thought emerged, (actually several related ones), that to satisfy customers properly and to be successful, organisations needed to broaden the relationships they had with suppliers, employees, investors, sales channels, etc., and to harness these in support of the products and


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services they deliver to customers. To be competitive, all parts of the complex web of interactions have to be working effectively.

OrganisationsAt this point, it is worth noting that although the reference to ‘companies’ is often used as a convenience, the concepts described here are equally applicable to government departments, leisure resorts, business parks, individual owner/operators, even whole countries! As such, we are continuing to develop the application of marketing on a broader front than did earlier theories, many of which were developed for the consumer marketing of late 20th Century America. These theories may or may not have validity today in our more complex, internet-enabled environment.

Figure 1.1. The 10Ps of stakeholder marketing

You may be thinking that this is looking similar to a PESTER analysis (Political, Economic, Social, Technological, Environmental and Regulatory analysis), but the difference is important. A PESTER analysis seeks to identify the external factors impacting on an organisation, most of which are by definition, out of its direct control.

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Beyond the Customer

The 10Ps on the other hand represent a framework within which to plan activities, budgets and responsibilities, i.e. to exert as much control as possible over the full range of marketing activity.

1.1 Politics and Social Trends

“Politics? What’s that got to do with marketing?” I hear you say. Well, we are not concerned here principally with the mechanics of party politics (voting, elections, party manifestos, etc.), but with the issues that drive politics and are driven by them. “But that’s potentially every issue”, you may respond. You would be right, but from time to time, certain issues come to the fore and command particular attention from legislators, the media, organisations and individuals.

An obvious example would be the issue of the environment. Developing, producing and consuming products and services leaves its mark on the planet through use of resources or energy. Understanding this impact and how it can be reduced, or at least managed, has become a very important consideration for many societies in the last couple of decades.

Social trends may affect many aspects of the marketing mix, including: Product - car manufacturers need to be concerned about recycling of materials used; Price - utility companies have their pricing monitored by regulators; Promotion - pharmaceutical companies are governed by the ABPI Code of Practice and so on. Marketers are part of society and as such have to adapt to an ever-changing set of standards that define acceptable behaviour. This informal frame of reference is not the same as the legal framework with which companies are required to comply. In many cases, the voluntary code of conduct exceeds, or at least pre-empts, the requirements of the law. We return to the subject of ethics below.

Changes in public opinion arise in part from demographic and other macro changes in our society. At times, these changes can be significant and far-reaching.


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Governments monitor and report on collected data, and this information can be used by marketers to develop a better understanding of underlying social trends that underpin behaviour.

Social trends reported by the Office for National Statistics (ONS) are presented under the following broad categories (ONS, 2010/11):

• Labour Market • Education • Population • Social Protection • Transport • Crime and Justice • Households and Families • Lifestyles • Environment • Income and Wealth • Expenditure • Health and Housing

Examples of social trends from the latest report at the time of writing (2015) include:

Technology and business• UK adults have taken more quickly to online purchasing than those

of any other EU country. In 2009, 66% of us bought or ordered goods and services over the internet.

• Websites were the second most popular source of reading for boys aged 9-14. For girls it was e-mail.

• The value of fraudulent credit and debit card usage reached almost £610 million in 2008, an increase of 14% on the previous year, and 350% up on 1998.

Environment• Only 4% of people (in the UK) and across the EU-27 considered the

environment to be one of the two most important issues facing their country in 2010. 35% thought it was the third most important issue after the economy and unemployment.

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Beyond the Customer

• In both the UK and across the EU-27 minimising waste and recycling was regarded as the action that would have the highest impact on solving environmental problems, with 34% of people in the UK and 30% of people across the rest of the EU-27 selecting this option in 2009.

Older people

• In 1983, 70% of people in Great Britain agreed or agreed strongly that older people should be encouraged to retire earlier to reduce unemployment. By 2009 this had fallen to 15%.

Political engagement

• Trust in political parties in the UK fell from 18% in autumn 2008 to 9% in autumn 2009. However, interest in politics in the UK increased in the years leading up to the 2010 General Election, with 12.6% of people saying they were ‘very interested’ in politics in 2008 compared with 10.9% in 2006.

Health

• In autumn 2009, 70% of citizens across the EU and 86% of citizens in the UK, rated the quality of healthcare in their country as ‘good’ or ‘very good’.

• In England in 2008, 24.5% of adults aged 16 and over had a body mass index classed as obese (c.f. 15.7% in 1994).

Earnings growth

• Between 2008 and 2009, earnings growth was largest for part-time employees and smallest for male full-time employees.

• Between 1998 and 2009, earnings grew on average at a faster rate than inflation.

Population

• Between 1950 and 2010, Europe’s share of world population halved from 21.6% to 10.6%. In 2010 Asia accounted for 60.3% of world population.


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• The number of people aged 85 or over reached 1.3 million by mid-2008, accounting for 2% of the population compared with 1% in 1971.

Some of these insights represent huge structural shifts in society, and clearly could impact significantly on attitudes to organisations as well as commercial behaviour.

The extent to which any of this impacts on marketing plans depends, of course, on our market sector and whether we serve consumers directly, and if so which specific demographic groups.

Figure 1.2. Examples of interactions between government, consumers and companies

Companies and organisations of all types interact with consumers and with government in a multitude of ways, only a very few of which are shown in Figure 1.2 above. Government can incentivise corporations to modify their behaviour, while companies and consumers could be said to be continually influencing each other through normal commerce. As this Handbook seeks to show, the multiplicity of issues and influences, acting on organisations in particular, are making marketers’ lives ever more complex, yet ever more important.

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Beyond the Customer

1.2 Power of Corporations

In capitalist economies, corporations are responsible for many aspects of daily life. This responsibility is clearly of huge importance when one considers the scale of the entities involved:

Some corporations are larger than entire states:

• Walmart is ‘bigger’ than Norway o Norway’s GDP: $414.46 billion o Walmart’s Revenue: $421.89 billion

Walmart would rank as the world’s 25th biggest country

• Exxon Mobil is ‘bigger’ than Thailand o Thailand’s GDP: $318.85 billion o Exxon Mobil’s Revenue: $354.67 billion

Exxon Mobil would rank as the world’s 30th biggest country

You can find more examples at: http://www.businessinsider.com/

Nor is this just a trick of comparing income figures.

On an asset valuation basis, the same pattern is found.

According to James Mackintosh writing in the Financial Times (Mackintosh, 2012):

“Apple became the world’s most valuable ever company two weeks ago. It is worth $624bn, more than all the listed companies in Portugal, Ireland, Greece and Spain together. The employer of 63,300 people – each valued at $10m – is more valuable than all the shares available to investors in the MSCI China index, the international benchmark.”

We could also compare numbers of people:

From The Independent: “Facebook hits one billion users” (Williams, 2012)


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Based on the one billion figure, if Facebook were a country it would now be the third largest in the world, behind China’s 1.34 billion people and India which has a population of 1.2 billion.

For more evidence of the enormous power of the (few) companies behind (many) consumer brands, try searching Google Images for ‘illusion of choice’.

1.3 Balance of Power

Faced with such extreme power in the hands of the major brand owners, it should not be surprising that balancing forces have emerged aimed at achieving greater fairness and especially protecting the vulnerable.

One example is the UK Government-backed Consumer Focus organisation, whose vision statement is: ‘More power to the people’. This enables consumers, particularly those considered more vulnerable, to have a voice in relation to the goods and services they receive.

From its website: “Despite major advances in UK consumers’ rights over the past couple of decades, there is still a huge amount to do, and many improvements need to take place. All too often, consumers still receive inadequate service or aren’t given value for money. Worse, the most vulnerable are also sometimes the ones who are treated worst or pay most.

“We work both with and on behalf of consumers to address these problems and make a difference to people’s lives. When every organisation, business and market has a consumer focus, our work will be done.” See www.consumerfocus.org.uk for more information.

In April 2013, the Citizens Advice service took on responsibility from Consumer Focus for representing consumers’ interests in unregulated sectors.

A new, technical Regulated Industries Unit (RIU) will replace Consumer Focus working with the energy and postal services sectors and their regulators, until this too transfers to the Citizens Advice service in 2014.

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Beyond the Customer

1.4 Customer Trends

The 1999 Bain report ‘The Future of Customer Service’ (Bain & Co, 1999) made it clear that customer service demands had increased dramatically towards the end of the 20th Century. This trend has not been reversed. Customers clearly show the following traits:

• They demand more access time (e.g. Sunday trading, 24-hour call centres) • They are less willing to wait• They complain more, and are more aggressive in their telephone

manner• They want more information (e.g. multi-lingual listing of ingredients

on foods)• They have less patience with broken promises

If things do not go their way, consumers are now more likely to make their dissatisfaction known:

• Demanding to see ‘the manager’• Expecting compensation (e.g. credit notes)• Contacting traditional media to gain their support• Using social media to share their experiences• Writing to a) their MP, b) Ombudsmen, c) anyone who will listen• Citizens’ Charters (e.g. rail users)• Using an internet site for advice or assistance:

www.howtocomplain.com or www.which.net

If still not satisfied, they may threaten or take legal action, i.e. they are becoming more litigious:

• Medical negligence claims• Mass torts (e.g. tobacco class actions)• ‘No win, no fee’ lawyers

You may have noticed that some of the things in this list are marketers’ attempts to win customers by responding to, or anticipating trends in, customer behaviour. So, you may be wondering whether


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‘politico-legal’ issues drive marketers to adopt certain policies, or whether it is customers whose changing concerns drive the development of associated marketing strategies. In reality, it is probably a bit of both. Customers, legislators, commentators and marketers all develop heightened senses for what concerns the other groups, and each in turn leads – and is led by – the development of events. Each becomes attuned to the changing zeitgeist.

The Independent ran an article one Easter in which it compared leading brands of Easter eggs. Were they reviewing the eggs for taste, appearance, novelty? No, the issues highlighted were: ‘How much of the product weight is packaging?’, and ‘Is the packaging recycled?’. The article was part of a ‘Campaign Against Waste’ and had an overall critical stance, highlighting that fact that of the ten eggs sampled, between 26% and 45% of the weight was made up of packaging, and only one egg brand had any recycled content in the packaging.

Other viewpoints were represented from The Women’s Institute, Recycle Now, Friends of the Earth as well as several MPs. The British Retail Consortium was allowed a balancing comment. (Hickman, 2007)

Brand owners today need to be acutely aware both of the powerful role of industry commentators in shaping customer opinion, and of the increasingly wide range of issues against which they may be judged.

Gaining and maintaining public trust has become the biggest corporate challenge, according to a survey reported in PR Week (PR Week, 2012).

60% of the communications directors surveyed identified this as a concern, ahead of ‘ensuring a consistent brand message’ and ‘integrating communications activities across the business’.

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Beyond the Customer

1.5 Ethics

One important dimension of the increasingly demanding consumer is the ethical dimension:

• Reacting against GM crop trials• Not wearing real fur• Rejecting goods which may have been produced by child labour in

the Third World • Demanding higher standards in animal welfare (e.g. free range

chickens, ‘dolphin-friendly tuna’)• Supporting ‘Fair Trade’ brands• Advertising to children• Ethical investment funds (FTSE4Good index) • Campaigns against ‘rip off Britain’, CD prices etc.

It is important to note that corporations cannot fall back on a ‘legal defence’ in determining its strategy, i.e. ‘as long as we don’t break the law, we’ll be ok’. Many of the issues above demand standards beyond those required by law in most countries. In practice, the law tends to lag behind the increasingly ethical standards of consumers.

This difference between ethical and legal requirements is illustrated in Figure 1.3 below

Figure 1.3 Comparison of legal and ethical issues


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These arguments in developed countries become quite subtle and sophisticated. For example, companies such as Tesco and Primark are finding that some consumers react against ultra-low prices for clothes, on the grounds that they must have been produced under exploitative third world conditions.

1.6 The Environmental Issue

Since Rachel Carson’s book Silent Spring shocked the world by describing the damage she believed man was doing to the planet (Carson, 1966), and in the light of growing evidence of global warming, businesses have steadily increased their attention to the impact their products and processes have on the environment. In particular, groups such as Friends of the Earth have had a major impact on business practices in four areas:

• Shortages of raw materials• Increasing costs of energy• Increasing levels of pollution• Increasing need for government involvement in resource management

So powerful has the environmental or ‘green’ movement become, that it could be said that it is no longer just a special movement, but an established element of consciousness which pervades our thinking.

On the other hand, sceptics would point to the way in which marketers have sought to capitalise cynically on such concerns. How many food products do you see proudly boasting of being ‘natural’ as if naturalness were always a wonderful thing. (Deadly Nightshade is natural, while paracetamol is synthetic; which would you rather take?). Similarly the ‘organic’ label is spread around liberally in the food sector without much in the way of a definition hitherto (organic as opposed to metallic or ceramic perhaps!).

According to Mintel in 2009, the most popular way to market food or drink during 2008 was to brand it as ‘natural’. In the UK 36% of new products were branded as natural, and 23% globally. (Mintel, 2009).

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Beyond the Customer

General concern about the environmental impact of packaging has led retailers to introduce more environmentally-friendly materials for carrier bags such as bio-degradable plastics, and ‘lifetime’ bags designed for re-use. Meanwhile, politicians have sought to drive new consumer behaviour through economic means. From October 2011, retailers in Wales have had to impose a charge of 5p on all single-use carrier bags. A similar scheme went live in Northern Ireland in 2013, in Scotland in 2014 and at the time of writing (Sept 2015) a similar legislation is about to be passed in England “The 5p charge should be enough to influence consumer behaviour and reduce the number of bags given out…” says the Government communication website

BT plans to develop wind farms aimed at generating up to 25% of its existing UK electricity requirements by 2016. The wind farm scheme represents the UK’s biggest corporate wind power project outside of the energy sector. The project is part of the company’s strategy to reduce carbon emissions. BT is one of Britain’s biggest consumers of electricity, with an annual requirement of around 0.7 % of the UK’s entire consumption. BT’s wind farms could generate a total of 250MW of electricity – enough to meet the power needs of 122,000 homes, or a city the size of Coventry. This would prevent the release of 500,000 tonnes of CO2 each year compared with coal generation – equivalent to a quarter of a million return air trips to New York. The then Secretary of State for Business, Enterprise and Regulatory Reform said: “Tackling climate change while ensuring we have enough energy for the future is one of the biggest challenges of our time”. Jonathon Porritt, Co-Founder and Programme Director of Forum for the Future, added: “[This is] precisely the kind of decisive, ambitious intervention that more and more companies are going to have to come forward with.” (Sherriff, 2007).


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Starbucks: From Hero to Zero (profits)?

With a firm place on Interbrand’s Best Global Brands 2012 list, and a brand valuation up 11% to over $4 billion, Starbucks seemed to be getting it right. Interbrand’s CEO Jez Frampton remarked that (along with a few other top brands) they demonstrate an understanding of “the role they play in peoples’ lives and respond accordingly — building on successes and making up for mistakes. They are constantly nurturing their brands to keep pace in a rapidly changing world; they know that every market is different, every interaction counts, and every individual matters. Quite an achievement in such turbulent times.” (Interbrand, 2012)

However, by October of 2012, a storm was brewing along with the coffee. Margaret Hodge, Chair of the House of Commons Public Accounts Committee (PAC), told Parliament that the company, along with Apple, eBay, Facebook and Google had, in total, avoided paying nearly £900m of tax.

Others were motivated to do further investigation, and it was reported widely that Starbucks had paid only £8.6m in tax since it opened its first store in the UK 14 years earlier. Over that period, the company was said to have made £3 billion in sales yet had used (legal) accounting methods to ensure it made a reported loss in Britain every year. Customers began to go elsewhere for their coffee fix as the story moved to the front pages of media titles.

Starbucks’ Twitter campaign backfired as consumers used the ‘#spreadthecheer’ hash tag to complain about the coffee giant’s fiscal behaviour.

On 3rd December, the PAC released its report criticising multinational companies for avoiding paying UK tax, despite huge sales in the UK. The Parliamentary Committee singled out as examples Amazon, Google and Starbucks... continued on next page...

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Beyond the Customer

continued from previous page... In its report, the PAC said: “Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK. We found it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK. This was inconsistent with claims the company was making in briefings to its shareholders that the UK business was successful and it was making 15% profits in the UK.” (PAC, 2012).

The report said: “We were not convinced that their actions, in using the letter of tax laws both nationally and internationally to immorally minimise their tax obligations, are defensible. They all accepted that the perceived ethical behaviour of corporations could affect consumer behaviour.”

5th December: Chancellor George Osborne announced in his Autumn Statement that more money was going to HM Revenue & Customs to tackle tax avoidance and evasion. This served to keep the issue in the public mind a little longer.

On 6th December, The Guardian reported that Starbucks UK Managing Director, Kris Engskov, had agreed to the payment of corporation tax of around £10 million over the next two years – directly in response to consumer anger.

Two days later, activists staged a series of sit-ins, asserting that that firm’s decision to pay the tax missed the point. Some suggested that by ‘over-paying’ the tax for two years, the company would be able to avoid later tax due. Starbucks attempted to assure us that it would not do that. The company was not without its supporters however.

On 16 December, London Mayor, Boris Johnson, urged people not to “sneer” at the coffee chain over its decision to pay the tax. continued on next page...


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continued from previous page... Mr Johnson said the tax issue was “a very difficult one”, adding: “I cannot exactly blame the finance directors of these companies for doing their job.”

Faced with similar criticism, Google took a completely different stance. The Sunday Times on 16th December reported Eric Schmidt, Google Chairman, as saying: “It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”

So what can we learn from this unfortunate development? Well, it is a good example of how:

• Companies cannot disingenuously feed different messages to different stakeholder groups e.g. investors and customers, without risk of getting caught

• News, especially bad news, travels faster than ever before, through traditional and new forms of media, especially social media

• Appropriately fast action needs to be taken if crises of communication are to be avoided or at least managed

• Organisations need to be alert to the increasing interest that stakeholders will have in all aspects of its operations, even those not directly connected with its supply of products and services


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Chapter 2: Stakeholders and their Impact on the OrganisationHaving seen some of the issues that can arise from the widening external scope that organisations and their marketing staff need to consider, let’s take a more detailed look at who exactly comprises the wider stakeholder universe.

A working definition of stakeholders is given by: Individuals, groups or organisations who can influence, or are influenced by, the activities of an organisation.

Internal Connected External

Owners Customers Industry regulators

Directors Suppliers Local communities

Senior managementFinance providerse.g. VCs

Trade Associations

Specialist employees Bankers Interest groups

General workforce Government

Contractors Trade companies

Students on placement General public

Shareholders (Competitors)

Table 2.1 Internal, connected and external stakeholders

You may be wondering about the inclusion of competitors in the list above; are they truly stakeholders? Well, many texts say that they are not, in the sense that we do not run our businesses with their needs in mind.

However, they certainly can have a considerable impact on our strategies and on our pricing, product development, promotional activities and so on.

For this reason, and since we need to consider their activities, goals and likely reaction to all we do, they deserve to be included in our wider group

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Stakeholders and their Impact on the Organisation

of stakeholders. Check again the definition of stakeholders given above if you are still not convinced.

Stakeholder theory was originally described in 1984 by R. Edward Freeman to help in addressing the ethics involved in running a business (Freeman, 1984).

2.1 Stakeholder Interests

It follows from the very wide variety of people and groups we call stakeholders that these individuals or groups will have a wide range of different interests (or perceive that they have). Each will tend to look after their own interests. Individuals may belong to more than one stakeholder grouping of course. In extreme circumstances, stakeholders may even have mutually exclusive expectations.

Stakeholder groups also align according to their shared interests, and this will be a dynamic situation. Where groups align in different ways according to specific events, the use of an ‘attitude matrix’ is useful to indicate how each identified group is likely to react to a number of possible strategic developments (Johnson & Scholes, 1993). See Table 2.2.

For example, the decision to outsource manufacturing to an overseas country might be welcomed by Sales and Marketing and business owners if it results in a lower cost of supply, but might well be opposed by Production as it implies fewer jobs will be required at home.

Table 2.2 Simplified attitude matrix

StrategyMarketing management

Shop floor Suppliers

Close plant and make product overseas

Acquire competitor Invest in new production technology


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Table 2.2 Simplified attitude matrix

2.2 Power and Interest

PowerNot all stakeholder groups have equal ability to influence events. For instance, one would not expect contractors to have as much influence as directors. This ability to influence is called power, and needs to be taken into account when considering alternative strategies.

Power can be hierarchical, so that senior managers exert their influence over more junior people by virtue of their position.

Power can also be due to influence rather than being formally bestowed.

Examples of other specific sources of influencing power include:

• Charisma• Specialist skills• Knowledge or experience• Relationships with others inside or outside the organisation

Interestingly, this compares closely with the five sources of personal power identified by French & Raven in 1959: Reward power (ability to reward), Coercive power (ability to punish), Legitimate power (authority), Expert power (skill and knowledge) and Referent power (others identify with an individual).

InterestIn addition to their power, we need to consider the level of interest of each of the stakeholder groups.

Important stakeholders with little day to day interest in our organisation (journalists perhaps) will receive proactive efforts from our PR team to gain their attention. On the other hand, temporary employees might have relatively low power and low interest and will receive a lower level of attention. Major strategic customers may be very powerful (they can take their business away), but the nature of the product supplied (how important it is to their operations) will determine their level of interest in us.

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Stakeholder mappingWe need to understand what level of attention to pay to each type of stakeholder, for example in our marketing communications, or in our level of telephone support.

To gain a better perspective on the nature and influence of the many and various stakeholder groups, a useful tool is stakeholder mapping. Stakeholders can be categorised on a classic 2-by-2 box diagram according to their level of interest in the organisation and their power to influence it (Mendelow, 1991). The four quadrants suggest a requirement for different levels of support.

Figure 2.1 Stakeholders need custom treatment

Stakeholder support

A major research and licensing organisation with a stock market listing had a large number of inbound contacts. These ranged from science students wanting to know more about the technology for project work, to large institutional shareholders seeking updates on development milestones. The former were politely directed to the company’s website where fuller technical detail was available, while the latter were invited to participate in webcasts where the CEO would provide the desired updates and answer questions.


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2.3 Stakeholder Interactions

Another useful dimension to understanding stakeholders is to consider the extent to which stakeholder groups are supportive of the aims and activities of the organisation. They could for example be characterised into the following groups (Egan, 1994):

• Partners who actively support your agenda• Allies who will provide support and encouragement if motivated • Passive supporters or ‘fellow travellers’, committed to the agenda

but not to you• ‘Fence sitters’ whose allegiance is not clear• ‘Loose cannons’ who have a different agenda and whose actions

are unpredictable• Opponents who oppose your agenda and possibly you• ‘Bedfellows’ who support the agenda but may not trust you• ‘Voiceless’ who have no power but may be used by the opposition

An appropriate communications response to each of these groups might be as follows:

Partners Little interaction but keep informed

Allies Light touch, but seek to keep motivated

Passive supporters Build relationship

Fence sitters Assess value of developing relationship first

Loose cannons Caution in information provided

Opponents Structured approach e.g. formalised meetings

Bedfellows Keep informed of benefits of agenda

Voiceless Light touch communications, be alert to coalitions

Table 2.3. Possible communication responses

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Bus companies have come in for criticism for not running frequent services between rural village locations. This is regarded by many as an essential social provision, and without it, elderly or needy groups may not be able to access services such as shops or post offices. The companies would argue that it is not their job to provide these services since, as private companies, their primary responsibility is to their shareholders, owners and employees, and running buses with few passengers makes no economic sense. (BT has had similar issues with rural phone boxes.)

Special interest groupsStakeholders united by a common interest may form into groups, informal or formal, the better to exert their influence.

An especially important type of stakeholder group which has become more vociferous in recent years is the ‘special interest group’. They usually have a well-defined agenda and use their collective strength to gain publicity, and as a source of power to influence decision makers.

Two principal types of special interest groups can be identified:

Pressure groupsAlso referred to as causal groups, citizen action groups, advocacy groups or lobby groups, these have a single issue on which their members feel strongly. Their aim is to change opinions and attitudes. Examples are: Friends of the Earth and the League Against Cruel Sports. Some need no introduction – such as the RSPCA, while others may be less familiar: Surfers Against Sewage.

Once again, the marketer may be faced with attempting to satisfy – or at least placate – conflicting interests. A tobacco company will be keen to monitor the activities of Action on Smoking and Health (ASH), who oppose smoking, yet will also be interested in FOREST, the Freedom Organisation for the Right to Enjoy Smoking Tobacco.


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Perhaps the most famous example of the power of pressure groups came in 1995, when Shell proposed the disposal of its disused Brent Spar oil storage facility by sinking it in the North Sea. Greenpeace ran a high profile media campaign in opposition to this plan. Many people supported the cause and despite the campaign turning violent in some instances, the public supported Greenpeace; many people refusing to buy Shell products for a while. Ironically, the Greenpeace argument was based in part on an inaccurate assessment of the quantity of oil involved, and Shell had expert support for its assertion that the alternative plan, of disposing of the facility by towing it ashore, would actually cause greater levels of environmental harm.

Sectional groupsThese represent the interests of their members. Notable examples include: The Chartered Institute of Marketing, the Trades Union Congress and the Society of Motor Manufacturers and Traders.

Marketers need to be aware of the potential for conflict (or occasionally co-operation) with the variety of such groups which exist in their industry. High profile battles between large corporates and (seemingly) small ‘rights’ groups can often result in public sympathy for the ‘underdog’, and in extreme cases, significant damage to the reputation or sales of the company concerned.

What is the role of marketing in managing societal issues/interest groups? It is a tricky decision whether to get involved in the arguments of pressure groups. On the one hand, you do not want to commit valuable resources to reacting to every negative comment and, given the possible volume of such comments, that is probably an impossible task anyway. Equally, it may be better to remain ‘above the fray’, confident that reasonable people will see your side of the issue – or at least both sides. Perhaps the critical dialogue that is taking place is a necessary safety valve and actually quite useful in alerting you to issues which you might wish to address in company initiatives and communications.

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On the other hand, if untrue, derogatory, even defamatory allegations are being made, you may need to take appropriate legal action to stop these. On balance, most commentators would advocate maintaining a dialogue of some sort with pressure groups. Shell has created the ‘Tell Shell’ facility on its website to enable a dialogue. The company moderates the content.

What should be clear is that rather than looking for quick, reactive solutions to controversial issues, marketers need to take a step back and assess how society and the market/customer environment is changing, and how the company should respond strategically. What changes should be considered for example in:

• Products supplied e.g. for their environmental impact• Claims made for product efficacy• Regional variations in price or availability• Channel management e.g. in developing countries

2.4 The Power of Digital Communication

The internet and its associated digital tools of mobile phones and

e-mail have of course given individuals unprecedented ability to communicate on a global scale. There is a commonly repeated marketing aphorism that customers who have a good experience tell, on average, three people about it, while those who have a bad experience will tell, on average, 22.

Nowadays, they are more likely to write a blog, send a Tweet or contribute to an online forum and potentially tell millions of people!

There was a website called www.ihateikea.co.uk which suggests a well thought out and continuing campaign of antagonism towards the Sweden-based furniture retailer. The IKEA logo and corporate styling were not used directly, thereby probably avoiding legal action on the basis of trade mark or copyright infringement. Although the site is no longer active, a Google search on ‘I hate IKEA’ will provide


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ample evidence of the emotion still evident among its fans and detractors. Facebook now has ‘the I hate IKEA group’ (sic). And social media analytics service ‘Amplicate’, which collates opinions from social media, has an active ‘Hate, Ikea’ stream of comments (http://amplicate.com).

For a similar active site (at the time of writing) see what became of the ‘NT Hell’ website at www.nthellworld.co.uk – “for information, help and advice that Virgin Media’s technical support or customer services forgot to give you …”.

See the following for more examples of online assistance and advice on making your views felt:

• www.weeklygripe.co.uk• www.complainer.co.uk• www.faircomment.com• www.webgripesites.com

Given the unregulated nature of the internet, and the fact that the posters of content can remain anonymous, the elimination of all such activity is clearly impossible. This is increasingly a concern as less responsible individuals take the opportunity to air their views, or make reckless allegations against organisations or individuals. In 2012, following a report by BBC’s Newsnight programme claiming a senior politician was a paedophile, many social media commentators passed on a rumour concerning Lord McAlpine. He proceeded to pursue many of those involved through the courts, successfully extracting apologies and financial penalties.

In some cases, social media comment has been shown to be beyond the practical reach of the law. An example is the 2011 case of Ryan Giggs, who was named as the footballer having an illicit affair with a TV ‘celebrity’, despite a High Court injunction forbidding his identity being revealed. In this case, over 75,000 Twitter users had named the player, prompting one MP to use parliamentary privilege to name the player in the Commons during a question on privacy orders.

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McDonald’s food chain has been the focus for criticism both over the nutritional value of its products (you may remember the TV documentary ‘Supersize Me’), and also due to its very success. In France especially, the number of outlets and the impact on traditional eating habits has been the excuse for at least one arson attack.

A pressure group website: www.mcspotlight.org proudly states: “McDonald’s spends over $2 billion a year broadcasting their glossy image to the world. This is a small space for alternatives to be heard.”

2.5 Crisis Communications

Many examples have been given above of organisations being on the wrong end of bad publicity; sometimes through their own fault, sometimes not. Despite the best of planning, unexpected events do arise, and marketers in particular are well advised to be prepared with a crisis communications plan. A ‘perfect’ response is not necessary, but a timely one is essential, before issues become out of control; and speculation fans the flames.

Figure 2.2 on the following page illustrates how an issue might develop over time, with pressure on the organisation growing at first steadily, then rapidly as the crisis unfolds. Management has the opportunity early on to identify and address issues, but this becomes difficult as the intensity of the crisis rises.


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Figure 2.2 The ‘issue lifecycle’ model (Hainsworth, 1990)

The issue lifecycle model (Hainsworth, 1990) “Reprinted from Public Relations Review,

16 (1), Hainsworth, Brad E, Issues Management: an Overview (1990), with permission

from Elsevier

Often, the CEO – or at least a senior manager – will be designated as the spokesperson for the organisation and the contact point for media enquiries. These people may have had media training and will be able to speak on behalf of the whole organisation, while other employees may not have been briefed on the ‘company line’.

Saying “No comment” in response to a reporter’s questions is more likely to arouse suspicion and antagonise public opinion further. A better response would be to admit that there are some things not yet known about the situation and to set out what the company is doing to resolve matters. The company website may be used to carry the latest news from the company viewpoint.

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In short, the principles of communicating effectively in a crisis are:

• honesty and openness• identification with the audience• timeliness• proactive, not reactive

The key is to be seen to be driving events, not being dragged along by them, and to ensure that your side of the story is available to those who take a fair minded approach. This includes all stakeholders: employees, investors and customers, as well as media commentators.

In 2009, when US Airways flight 1549 had to make a forced touchdown on New York City’s Hudson River, the traditional broadcast and press media scrambled to get footage and to confirm the facts for some hours.

Yet some passengers were already standing on the plane’s wing broadcasting their plight to the world on their cell phones!

See Appendix 1 for a case study on how Domino’s Pizza managed a crisis.

Four broad strategies for dealing with societal marketing issues are as follows:

1. Reaction strategy

Here, the situation is allowed to continue unresolved until discovered, for example by enforcement agencies or consumer groups. When the problem becomes known, managers will often deny responsibility while, in the background, trying to resolve the issue.

2. Defence strategy

This uses defensive tactics to avoid obligations which the company might otherwise have. Lobbying government or legal manoeuvring would be suitable defensive measures.


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3. Accommodation strategy

This involves taking responsibility for the firm’s actions, accommodating the views of the stakeholders. This might result from the activities of special interest groups, or impending government legislation.

4. Proactive strategy

Here, the company takes action before it is compelled or embarrassed into doing so. It implies a ‘thought through’ approach which recognises the wider social responsibilities of organisations. In the marketing communications toolkit, it is public relations (PR) which is the most useful in this context. A proactive PR campaign has the most chance of influencing public opinion. Regester and Larkin provide an excellent critique on how to manage a crisis (Regester and Larkin, 2001).


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Chapter 3: Corporate ReputationThe concerns shown by changing public opinion manifest themselves by and large at the corporate level.

Today, organisations in the public eye can expect to be challenged on a much wider range of issues. The public, and its self-appointed moral representative the media, increasingly look behind the external face carefully created by organisations and their promotional agencies to see what lies within. What are the values of this company? Are they behaving fairly? Are they giving customers, suppliers and employees an appropriate deal? Is there sound governance to ensure that any future unscrupulous behaviour is detected and remedied?

Several points should be recognised at this point:

• All organisations have a reputation, whether they choose to manage it or not

• Corporate reputation exists in the mind of the stakeholder; it is not something that can be contrived internally in organisations, though influence is possible

• Among the multiplicity of stakeholders, different opinions of an organisation will exist simultaneously

• Reputations are formed as a result of experiences over long periods; any attempt to shift reputation consequently requires a consistent long term planning approach

• Regrettably though, a good reputation can be damaged very quickly

Reputation then is formed from the multiple experiences of stakeholders over time as they process the external corporate image. In turn, image is formed from the way the organisation sees itself – its corporate identity, and this results from the essential personality of the organisation.

A further factor that affects the way organisations are perceived is the existence of ‘filters’ that colour perception according to broad characteristics (see Figure 3.1 below). These filters may include the country of origin, the industry sector image and the prevailing media attitude. To

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Corporate Reputation

see the truth of this, just consider how German engineering is preferred to many alternatives in the car market, or how Italian food is widely admired. At the sector level, consider the general regard in which politicians are held, or the reputational fate that has befallen the financial services industry of late.

Organisations have to operate against the background of one or more such filters, seeking to overcome or capitalise on any pre-conceptions. Audi has successfully used the notion of build quality implicit in German engineering through its slogan of around 30 years: “Vorsprung Durch Technik”.

Figure 3.1 Possible reputation filters

3.1 Elements of Corporate Reputation

We can break down the concept of reputation into four elements: credibility, trustworthiness, reliability and responsibility (van Riel & Fombrun, 2007).

• Investors may be looking for credibility in a company, reducing their risk through backing those with strong management and good market standing

• Employees will look for an organisation they can trust, to support their employment rights, provide an ongoing livelihood etc.


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• Customers may look for a reliable provider of goods and services, consistently delivered

• The community as a whole may be looking for a responsible business, taking into account impacts on people and the environment

As an example, consider Nokia, the Finnish mobile phone manufacturer. Credibility is established through its high quality, branded product range. Trustworthiness has been developed through attention to customer service; reliability through maintenance of quality; responsibility through strong product development and innovation policy.

3.2 Corporate Branding

The increased appetite of stakeholders for knowledge of the essential nature of organisations – and a readiness to judge them – has fuelled more rapid development of a concept first seen in the early 1990s: corporate branding.

Definition: Corporate branding is the visual, verbal and behavioural expression of an organisation’s unique business model (Knox & Bickerton, 2003).

Note that this definition is not confined to visual aspects of communication and devices such as logos. Behaviour is at least as important. A product brand is effectively a promise from the brand owner that its customers can expect a certain mix of values, based on quality, design, price, performance, cachet, availability, after-sales service, innovation and so on. So it is with corporate branding: a broader group of stakeholders is concerned with a range of issues as these apply to the whole organisation.

Typically they might be based around ethical issues such as the impact on society, political affiliations, governance and so on.

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Responsibility for corporate branding lies at the top of the organisation, or at least with advisors directly responsible to the Chief Executive.

Other dimensions of corporate and product branding are compared in the table below.

Stuart Rose, at the time Chairman and CEO of Marks and Spencer, appearing on BBC Breakfast TV in early 2010 faced a range of questions, not one of which was about the products or services his company offers or its operational performance. Instead he was asked about: justifying his personal remuneration package, M&S policy on fair dealing with suppliers, recyclable carrier bags and so on. Commentators had often challenged him on the wisdom of combining the roles of Chairman and CEO and achieving effective governance

Responsibility for corporate branding lies at the top of the organisation, or at least with advisors directly responsible to the Chief Executive.

Other dimensions of corporate and product branding are compared in the table below.

Dimension Corporate brands Product brands

Time to form brand Medium/long Short

Source Corporate identity Marketing strategy

Brand custodian CEO Brand manager

Implementation All personnel Brand manager

Stakeholders Everyone Customers and channels

Communication platform Corporate communication Marketing communication


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3.3 Societal Marketing

So important has the concern for ethical behaviour become in corporate management, that a whole new management discipline has emerged in what we may call ‘societal marketing’.

We define societal marketing as being concerned with achieving a balance between three considerations:

• Company profits and returns to shareholders• Satisfying customers’ wants and needs• Public interest

Organisations have found that paying attention to these additional ‘softer’ issues can actually boost profits through gaining customer goodwill and good publicity.

A linked concept, the ‘triple bottom line’, is made up of social, economic and environmental factors, sometimes abbreviated to ‘people, profits and planet’ (Elkington,1994).

Figure 3.2 Triple bottom line concept

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In Figure 3.2:

• Social factors could include: support for small, local suppliers; family-friendly employment policies; community initiatives

• Economic factors include: financial returns; reduced raw material usage; impact on others’ profitability

• Environmental factors include: reducing carbon footprint; reducing energy wastage; recycling and reducing pollution

McKinsey’s Ian David believes that the ultimate purpose of business should be described as “The efficient provision of goods and services that society wants”, and that “Profits should not be seen as an end in themselves, but rather as a signal from society that their company is succeeding in its mission of providing something people want – and doing it in a way that uses resources efficiently relative to other possible uses.” (Gambetti & Quigley, 2013).

Barratt Developments plc is a builder of homes and commercial property. In their Annual Report and Accounts document 2012 they state: “We continue to focus on our sustainability philosophies: People, Partners, Planet and Customers, and our commitment to Health and Safety”. They go on to report against each of these factors in a table giving Key Performance Indicators:

Customers Recommendations to friends

Health & safety Injury incidence rate per 100,000 workers

Partners Social completions (houses built)

People CSCS carded workforce (evidence of training)

Planet Proportion if construction waste segregated on site for recycling

Similar data are given each year, broadly covering corporate social responsibility measures, as well as the traditional and mandatory operational and financial ones.


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3.4 Corporate Social Responsibility

The term ‘corporate social responsibility’ (CSR) has been in use since the 1960s, but in the last couple of decades has grown in importance along with increasing concerns about organisational ethics discussed above. It even has its own International Standard providing guidelines for social responsibility (SR), named ISO 26000

Definition: Corporate social responsibility means organisations taking responsibility for the impact of their operations on society and on their stakeholders: employees, customers, communities, etc.

Something of an industry has built up around CSR. The term is applied to widely different issues. The Confederation of British Industry (CBI) succinctly states: “CSR is the acknowledgement by companies that they should be accountable not only for their financial performance, but for the impact of their activities on society and/or the environment.”

Discussions surrounding the concept are still at an evolutionary stage, although the principles of CSR have long been part of business strategy.

The CBI again: “Business is already accountable for its activities over the diverse strands that now come under the ‘CSR’ umbrella – such as human resources and environmental issues, sustainable development, waste management, health and safety practices, through a wide range of existing guidelines at national, EU and global levels. But it is important to distinguish between these base-line standards and CSR activity which is voluntary, business-driven and often goes well beyond what is required by legislation.” Find out more at: www.cbi.org.uk

Many authors have suggested a hierarchy of responsibilities in increasing levels of altruism:

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Basic level

Highest level

Economic Be profitable

LegalObey the lawPlay by the rules of society

EthicalObligation to do what is rightAvoid harm

PhilanthropicContribute resources to the communityBe a good corporate citizenImprove quality of life

Table 3.2 Hierarchy of corporate social responsibility

Shell and GSK are among the many public companies that have devoted pages of their Annual Report & Accounts to corporate social responsibility issues. However, even the most unpromising corporation can address CSR issues. Boliden Kokkola Oy is a large Finnish zinc smelter that takes corporate social responsibility very seriously. It has created what it calls the “New Boliden Way” as a foundation for a uniform corporate culture. The company’s mission is: “To produce zinc for the needs of the modern world, responsibly and safely.” The company is “committed to being a responsible member of society” and declares that it is convinced that “an ethically sound company has the best potential for coping with the challenges of the future”. In its Corporate Responsibility Report, Boliden includes sections on: Responsible product policy, Economic responsibility, Social responsibility and Environmental responsibility. Sub-sections include: “Every accident is avoidable” and “Personnel wellbeing as a profit factor”. By including data such as the levels of zinc in their plant’s surrounding areas, they are encouraging debate and ultimately trust among the local community.


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Figure 3.3 Boliden’s view of corporate responsibility

3.5 Corporate Communications

While corporate behaviour is a powerful determinant of the impression that stakeholders develop over time, so is the organisation’s communication activity and the symbolism used. These comprise familiar elements such as logos, slogans, colours, language, building design, etc. that organisations use as they attempt to shape their reputations favourably.

Given the disparate nature of the stakeholder audience, it is not surprising that a variety of corporate communication tools need to be deployed to reach them. Specialist terms such as ‘employee relations’, ‘public affairs’ and ‘investor relations’ are used to label the activities and to distinguish them from normal (commercial) marketing communications. Indeed, responsibility for these areas is often not with the marketing department, but is run from the Chairman’s office, or from HR.

Ultimately, the goal of corporate communication is to create and maintain a favourable reputation for the organisation in the minds of its key stakeholders.

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Bob Worcester of MORI has said that we should think about communicating:

• ‘Here’s who we are’• ‘Here’s what we can do for you’• ‘Here’s what we think’

Worcester believes that the first two are essential pre-requisites to achievement of the third, as trust needs to be built up ahead of credibility (Worcester, 1983).

Interestingly, many organisations seem to adopt a determinedly neutral stance in their communications, as if to avoid offending anyone. They talk of offering ‘total solutions’ and claim ‘a quality approach’, rather than identifying the specific and characteristic factors that set them apart from their competitors.

Bernstein neatly summarises the tendency for blandness and homogeneity seen even between business sectors in Bernstein’s Law (Bernstein, 1984):

“Product advertising takes minor differences and maximises them; whereas corporate advertising takes major differences and minimises them.”

The principal tools used for corporate communications are the ones that reach large numbers of people efficiently, and which have the best chance of shaping public opinion: advertising (through its high profile) and PR (through its credibility).

Corporate advertising Corporate advertising has been said to be about “selling the corporate personality”, to “enhance or change the corporate image of an organisation” and “talking about the corporation to promote its identity” (Ogilvy, 1995).

It can be distinguished from product advertising by not being focused on sales of a particular product or service. That is not to say that products cannot be used in corporate advertising, they are just not the main focus


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Garbett identifies ten jobs which corporate advertising can carry out (Garbett, 1981):

• Build awareness of a corporation’s identity• Improve understanding of a company’s area of business• Overcome poor attitudes towards a company• Explain corporate philosophy and policies• Illustrate achievement• Enhance a company’s image as an investment• Advocate social change useful to a corporation• Secure support of useful legislation• Provide a unified view of a corporation to its employees• Aid in recruitment

Corporations commonly try to sum up their vision and values in one phrase or sentence – a company slogan. These range from the vacuous: “Committed to innovation, quality and service”, to the specific: Avis – “We’re number two, so we try harder”. The latter was hugely successful over several decades, being eventually truncated to “We try harder”.

The author attended an awards ceremony at which a brief description of each of the contenders was read out; he lost count of how many included the epithet “World leaders in digital solutions”!

Devising an effective company slogan can be tremendously difficult. Poor examples greatly outnumber good ones. Here are a few quoted in Bernstein’s ‘Company Image and Reality’. Make up your own mind which camp they fall into! (Bernstein, op cit)

• ‘Simply Years Ahead’ – Philips• ‘Becoming a part of everyone’s life’ – Colgate• ‘A powerful part of your life’ – Westinghouse• ‘We have Connections’ – Cable & Wireless• ‘There’s no stopping us’ – Computer Technology Ltd.

Sometimes, slogans are not intended to represent a lasting statement of ‘who we are’. The following examples are more accurately described as campaign slogans, and can be expected to be shorter-lived.

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Motorola adopted a constantly switching set of slogans:

• ‘What you never thought possible’ (1996-2000)• ‘Intelligence Everywhere’ (2000-2004)• ‘Seamless Mobility’ (2004)• ‘Mobile Me’ (2005)• ‘Hello Moto’ (2006-2008)• ‘We Generation’ (2008)

By contrast, Nokia stuck to one consistent slogan over many years:

• ‘Connecting People’ (1992-2000+)

Public relationsPublic relations has always recognised the existence of multiple stakeholders, including those beyond the customer. The Chartered Institute of Public Relations has defined PR as “the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics”. For ‘publics’ read stakeholders.

The scope of PR must therefore be very broad:

• Community and social affairs• Investor or ‘capital’ markets• Business and industry – small, medium and large• Government – national, local, international• Regulatory markets • Educational institutions, universities, colleges• Charities and not-for-profit• International affairs

Common activities are as follows:

• Trade and general press relations – news, articles, speeches• Issues tracking• Local or central government lobbying• Facility visits


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• Corporate materials such as video for offline or online use, company statements, podcasts, in-house magazines

• Sponsorship • Stunts designed primarily to gain attention • Special events e.g. celebrity store openings • Community involvement• Shareholder communication and meetings e.g. results

announcements• Analyst briefings• Regulatory news releases (RNS)

Internal communications techniques include:

• In-house magazines and newsletters• Management communications• Recruitment exhibitions• Company-wide briefings• Formal employee feedback networks

Communication with multiple stakeholders

Imagine you are the person in the unenviable position of being responsible for writing a press release to announce that a third of the workforce of your large manufacturing company is to be made redundant due to market pressures. You would need to consider as many important stakeholder groups as possible, three of which would be: customers, employees and shareholders (let’s assume it’s a public company). What messages should you be thinking of including in the press release if you had each of these stakeholders in mind?

For customers, you would want to stress continuity – that you are still in business and able to supply their needs. They will be interested in reliability of supply and risk. What you probably do not want to stress is that the action has significantly... continued on next page...

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continued from previous page... reduced costs or made you more competitive (unless you want to give away the cost savings in the form of price reductions!).

Employees, both those who are having to leave, and especially the all-important ones who remain, will expect to see sentiments of regret. The news will hit many people and their families hard, and some sympathy for them is in order. Management may want to explain that all other avenues had been explored before deciding to take this action. The release could refer to measures that management is taking to mitigate the impact on those affected (if true), such as outplacement, re-training, and searching for alternative opportunities within the organisation. (The last is a legal requirement in the UK anyway, so you may as well make a virtue out of a necessity.) What management should not do of course is to refer to safeguarding the remaining jobs, as conditions may yet worsen and further redundancies may prove unavoidable. Trades Unions may be involved, and one would hope that employees and their representatives will have already received the news by appropriate personal means, not be reading about it for the first time in a press release; though this has happened, as has firing people by text message!

Shareholders are again a rather different proposition. They may see the downsizing action as broadly favourable if it results in lower costs and a more efficient operation – a case of management taking the opportunity for early decisive action perhaps. They will be looking out for the company to hold on to as much of its current business as it can, and to plan its new future, taking advantage of its lowered cost base.

Faced with such conflicting issues, one cannot simply issue several statements with different facts. Employees and customers will read the content of the website, and all stakeholders will read the media comment that is based on management briefings. continued on next page...


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continued from previous page... If this were not a difficult enough task, consider the situation of a company operating in a politically sensitive sector, say located in a region where unemployment is already very high, or the last British manufacturer of some product class. What if it were a high profile brand such as British Aerospace or Rolls Royce, where the signal this news may send internationally will be important? What if the company is a supplier to government e.g. for defence equipment, and the government could arguably have done more to safeguard the jobs? These are immensely complex issues, and an understanding of its complex stakeholder network is essential to any large organisation today.

Digital communicationDigital technologies have given ordinary people hugely increased power to communicate with each other through websites, blogs and especially through social media. Everyone now has the opportunity to share their experiences (good and bad), air their views and opinions, and vent their frustrations online. Unlike earlier available channels, writing to the newspapers perhaps, these voiced opinions can remain accessible for a long time, possibly permanently. Anyone searching for BP on a search engine in 20 years’ time will uncover all shades of opinion on what happened at Deepwater Horizon in 2010.

It follows then that organisations have to monitor mentions of their brands online, and review the new marcoms toolkit for up to date ways of engaging with stakeholders. Social media in particular are relevant since they provide the opportunity for two-way or multi-way dialogue, rather than being just another broadcast channel for the organisation’s messages.

Remember though that social media were not developed as a promotional channel for marketers. Social media emerged spontaneously in society, a result of the possibilities afforded by new technologies. Marketers are struggling with the challenge of how to use social media for their own purposes.

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Participants actively look for an alternative to the propaganda (as they see it) put out by corporations, politicians and so on; an alternative that represents the authentic face of the organisation. Any evidence that there is a lack of authenticity will be unwelcome to say the least.

WalMart found itself unpopular when its ‘WalMarting Across America’ campaign – involving a blog written by two people travelling and writing about the company’s beneficial impact on the visited communities – was discovered to have been written by a writer in the pay of WalMart. The fact that the reported stories may have been true was not the point. The subterfuge was simply not acceptable.

Some examples of web-based tools used to communicate and engage with external audiences are as follows:

Websites

• Interactive content (e.g. product configurators)• Forms (to gather feedback or data systematically)• RSS (to provide up to date information)• Podcasts, files for download• Streaming video• Blogs (opinion pieces and online diaries)• Mash-ups (combinations of data e.g. on maps)

Social media

• Micro-blogging• Social bookmarking• Social networking

Advertising

• Banners• Affiliate• Viral


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E-mail/Mobile

• SMS/MMS• Applications (‘apps’)

Many of these tools are an improvement on traditional media in their use as communications tools, offering:

• much lower cost (although sometimes a high time burden)• faster implementation and updates• two-way communication• built-in metrics for evaluation

However, there is a question over whether organisations should be seeking to manage their organisation’s social media activity in a controlled and co-ordinated fashion. Is it even possible? Whose job is it? In the PR Week survey mentioned in Chapter 1, only 28% of communications directors said their communications teams managed their company’s social media presence.

Internal marketingEmployees are an important audience for corporate communication for at least two reasons:

1. They are a stakeholder group in their own right, whose efforts are vital to the success of the organisation; and

2. Employees are part of the effort to interact with external stakeholders through service and innovation.

Internal marketing attempts to smooth the working relationship between functional areas of the firm, and in so doing, seeks to establish the firm as an integrated whole, rather than an aggregation of disparate and possibly opposing units.

Legislation has affected the way groups of employees are treated within organisations. Maternity/paternity leave and flexible working hours are two examples. Organisations are increasingly realising that these provisions can

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increase their attractiveness as employers, allow them to attract and keep the best people, and maximise the motivation of their staff.

As a key stakeholder group, employees require their own communications channels.

The organisation needs to have a system of internal communication which keeps employees at all levels informed about the past, current and future activities of the organisation.

Typical media for internal communications are:

Print Visual Electronic

• Memos

• Newsletters

• Internal newspapers

• Staff magazines

• Slide presentations

• Video conferencing (especially for geographically dispersed groups)

• TV and radio (for larger companies)

• Corporate intranet

• Voice mail

• E-mail

• Telephone

• Text

Communication should of course be two-way. Employees need a forum to discuss their views, and management needs to be kept updated on issues that concern employees. Whole-company meetings and suggestion schemes are common ways of giving employees a voice.

Sainsbury’s has used online blogs from selected employees as a way to attract recruits. Formatted as ‘A Day in the Life’ diaries, real-life employees describe their jobs and what makes working at the company so interesting Former Sainsbury’s Chief Executive, Justin King ran the highly successful ‘Tell Justin’ scheme on www.sainsburys.co.uk, where he recorded a video message for potential recruits, allowing, employees and would-be employees to share their thoughts at the highest level. Sainsbury’s also declares that it prides itself on “our Corporate Social Responsibility, with initiatives including a food donation programme, promotion of Fairtrade™ produce and our Active Kids scheme”.


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3.6 Political Marketing

Having said at the start that we are not principally concerned here with the political process of electing particular governments or influencing voters, we should acknowledge that there is a branch of marketing that does just that. Political marketing is a well-developed discipline that seeks to influence particular groups of public sector stakeholders in order to persuade them to particular causes.

One definition of political marketing is given by Hughes & Dann:

“A set of activities, processes or political institutions used by political organisations, candidates and individuals to create, communicate, deliver and exchange promises of value with voter-consumers, political party stakeholders and society at large.” (Hughes & Dann, 2009).

Stakeholders for political marketing would include:

• Government/civil servants• Party donors• Party members• Aspiring political candidates• Special interest groups• Traditional media journalists• ‘New media’ participants, including social media, bloggers• General public/voters• Political opposition

Each of these stakeholders can be characterised according to their interest and power using the Mendelow matrix (see figure 2.3) in Chapter 2.

Organisations, and occasionally individuals, and their representatives such

Companies complying with Sarbanes-Oxley regulations in the USA have set up systems to allow employees anonymously to report perceived wrongdoing to independent bodies.

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as PR agencies, seek to influence governments directly through lobbying. They will also use a variety of communication tools to present facts, examples and viewpoints to those in positions of authority and will seek to raise the profile of their particular issues.

Microsoft and BT have both found it necessary to argue their cases strongly in the face of governments who believed their high profits and dominant market position meant that real competition could not exist in the market.

The increased mobility across borders of people, money, goods and services brings about dramatic changes in market conditions. These may or may not favour an individual company at any point in time. Examples would include the influx of workers from Poland, Czech Republic, etc. following these countries’ accession to the EU in 2004, and the subsequent impact on, for example, the agricultural and hospitality sectors.

The European single market also means that European Union (EU) citizens have the right to live and work in any other EU country. Doctors, dentists, pharmacists and architects are among the groups whose national qualifications are recognised automatically (from January 2013).

Such issues tend to have strong political overtones, with interested parties using political marketing techniques to seek to persuade others to their viewpoint.


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Chapter 4: Closing RemarksMarketers must realise they are living through continuously changing times. What was fine yesterday is not today, even less tomorrow. When the Humble oil company proudly declared in its advertising that “Every day we supply enough energy to melt 7 million tons of glacier!”, they could not have foreseen the public sensitivity to global warming that would emerge decades later.

Not only do we have to be alert to changing views in our own country but also internationally. Business practices that today are regarded as standard may become unacceptable in the future. Payments to officials for ‘administrative favours’ may be regarded as perks or Schmiergeld (‘smoothing money’) right now, but could well be disallowed at some later date.

We cannot know the future precisely, but perhaps we can develop sensitivity to the kinds of issues that may emerge in societies and how this may affect our products, our companies and our marketing. One wonders how our attitudes may change to:

• Tobacco smoking• Pyramid selling schemes• Donations to political parties• Unpaid internships• Foie gras (banned in the House of Lords December 2012, having

already been banned in the Commons)• Halal and Kosher meats


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Appendices

Appendix 1: Domino’s Pizza Manages a Viral Video Nightmare

Domino’s Pizza is the one of the world’s leading pizza chains, and the company has built a reputation as a trusted doorstep delivery business that supports the communities in which it resides.

The company has also built a fairly ‘well-oiled machine’ when it comes to dealing with various crisis situations that threaten to spoil that trust. However, none of that prepared the company for what took place on the evening of April 12, 2009 (Easter Sunday), when two bored adult employees produced a video that showed one of them tainting supposed customer food orders with bodily fluids. They then posted the video to YouTube.

Domino’s learned of the video after it had been posted to YouTube and several other sites, including The Consumerist, which was courteous enough to inform Domino’s within an hour of its posting.

It was a nightmare for Domino’s and a reality shock for many corporations that now see just how quickly and easily the digital world can help turn respectable businesses into unsuspecting victims.

These are the actions Domino’s took to regain control over the situation and preserve its reputation. Over the following few days, Domino’s took the following steps:

1. Identifying and taking action against the culprits

The company started by capturing digital images of the two employees’ faces from the video and distributed a message to all US locations seeking help in identifying them by name. On confirming their identities and pinpointing the location, it then contacted the storeowner and requested that they be fired.

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Having no way of knowing at the time whether the video was a hoax, the company contacted the Health Department and local police to file charges against the two culprits.

2. Getting the video removedSimultaneously, the company’s social media team immediately contacted YouTube to ask that the video be removed since it was in violation of several of the site’s guidelines. YouTube responded that it would pull the video only at the copyright owner’s request; it considered the woman who had filmed her co-workers to be the rightful owner.

After identifying her from the digital stills, and minutes before she turned herself in three days after the filming, a company representative met the copyright owner and her lawyer on the steps of the local police department with a letter that authorised YouTube to remove the video. Under her lawyer’s recommendation, she signed the letter.

3. Responding to public queriesDomino’s decided it best not to go public with a press release or news conference right away. It knew that by making a public statement, anyone hearing of the issue for the first time would become intent on seeing the original video, thereby encouraging it to spread.

Instead, it responded to those who approached the company about the story. It also communicated with those forums that had either posted the video or hosted conversations about the issue. In each case, it drove home that this was something done to the company, not something the company itself had done inappropriately.

Ultimately, it became clear that the buzz was starting to spread through chatter on Twitter, so the company responded with a posted statement on its website and by entering the conversation on Twitter and directing users to that post on its site.

Soon afterwards, video views on YouTube grew to half a million.


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4. Fighting fire with fireThree days after the original incident, Domino’s posted its own video to YouTube. The video, which used no script and was simply filmed using the Communication Department’s flip camera, featured company President, Patrick Doyle, addressing the issue, calmly and sincerely venting his anger and reiterating how sacred the company holds its customers’ trust.

In posting the video response, Domino’s used the word “disgusting” in the video title – just as had been done with the original video – so that the new video would come up first when users searched for the original.

The company then posted links to its video on Twitter and on its Facebook page wall.

ResultsWithin three hours of posting the company’s video response to YouTube, views of the original video surged to over one million. On that day only, search queries for the keyword ‘Domino’s’ surpassed those for ‘Paris Hilton’!

The company-posted video also quickly propelled the story into mainstream US news, then global media, starting with the BBC and working its way onto Chinese National Television, then Australia and Peru – markets where Domino’s does not even have stores. A company analysis reckoned 60 million media impressions were made.

Nevertheless, although the company’s video response triggered widespread awareness, it also served to change the story in the company’s favour.

“On Monday, for the 100,000 people who first saw the [employee] video, the story was ‘look at these disgusting people at Domino’s.’ Then it became ‘What is Domino’s doing about it?’ When we posted our video, the story morphed into ‘How can companies protect themselves in a YouTube world?,’ with Domino’s cited as a company who is handling this crisis”, the company said.

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Since then, the company has been contacted on multiple occasions by other organisations seeking advice on how to prepare themselves for similar crises.

Some key learning points:• Domino’s already had a social media team in place to respond as

needed, and well-trained staff throughout the company able quickly to take up the tasks at hand. It was also advantageous that senior management had consented to trust its people to do what was right and not hold things up with boardroom-style meetings.

• Domino’s had already established customer loyalty that worked to offset consumer doubts even before the issue had been resolved.

• By initially responding only within the forums where the story was already unleashed, Domino’s was able to keep the issue somewhat manageable, until it had a better understanding of what had happened, and could begin taking steps to rectify the situation.

Even after the news hit mainstream, when Domino’s had its story straight, and was able to showcase itself as a company taking action, it turned down every request from the talk-show circuit to appear on television – a conscious refusal to have its president and brand featured alongside the original video.

The company did respond to every incoming query. And it responded openly and truthfully, off the cuff, with criticism against the perpetrators and contending that it had been victimised – and always understanding that whatever was said would ultimately find its way into the public arena.

Case adapted from a piece by Kimberly Smith on MarketingProfs.com (Smith, 2009).


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Appendix 2: Tobacco Debate

The tobacco smoking industry provides a good example of how important public issues are dealt with in our democracy. While the law sets out the basic permissible behaviours, the rights of individuals to hold differing opinions is respected and organisations are formed to represent them. Lobbying of government is professional and sometimes very well-funded.

Tobacco products have given pleasure to millions of people for decades. The industry has created many jobs and the products have been heavily taxed by governments. In 2010, the cumulative revenue of tobacco taxation was over $17 billion in the USA alone! At the same time, many people have died from smoking-related diseases and many more have had their lives impaired. Treating diseases caused by smoking, costs the UK National Health Service approximately £2.7 billion a year.

For most of that time, advertising has been heavy, especially advertising associated with sport (Formula 1 for example) and outdoor activity (Marlboro Man). Not to mention the now infamous Camel advertisements showing a smoking clinician next to the slogan: “More Doctors Smoke CAMELS than any other cigarette!”. In the year to August 2002, tobacco companies spent £25 million advertising in the UK, excluding sponsorship and indirect advertising, (AC Nielsen, 2003).

Since the link between smoking and damage to health was proven, the industry has been under pressure from almost all sides and in most countries. In the EU, advertising of tobacco is no longer allowed, and plain packaging is proposed as mandatory – as it has been in Australia since late 2012. However, in the USA in 2010, the tobacco industry spent $16.6 million on lobbyists to represent the industry to Congress.

FOREST – the Freedom Organisation for the Right to Enjoy Smoking Tobacco – is a political and media lobby group, generally recognised by government and other national and local authorities as the ‘voice of the smoker’. They present their views to government bodies, either in writing or in person, including to the Health and Safety Commission, House of Commons Health Select Committee, Greater London Authority Investigative Committee on Smoking in Public Places, Scottish

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Parliament Community Care Committee and so on. They are also active internationally, making submissions to the European Commission (EC) and representing consumers at meetings convened by the EC in Brussels.

In December 2010, they organised an online petition in response to an EC public consultation to revisions to the Tobacco Products Directive. Find out more at: www.forestonline.org

ASH – Action on Smoking and Health was established in 1971 by the Royal College of Physicians as a campaigning public health charity that works to eliminate the harm caused by tobacco. They do not attack smokers nor condemn smoking. While they aim to be innovative and agenda setting in their work, their policies are claimed always to be evidence based and follow a dual approach:

• Information and networking: To develop opinion and awareness about the ‘tobacco epidemic’

• Advocacy and campaigning: To press for policy measures that will reduce the burden of addiction, disease and premature death attributable to tobacco

ASH provides the secretariat for the All Party Parliamentary Group on Smoking and Health. Find out more at: www.ash.org.uk


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PART 2 Partners


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Introduction It seems obvious to state that organisations do not work in isolation. They are affected by external forces – as anyone who has conducted a PESTER analysis well knows – but as well as the truly external factors, outside our control, there are individuals, companies and organisations with which we can develop favourable relationships, and which help to position us for success.

Financial advisers working closely with particular banks to obtain recommendations, and companies taking part in government-sponsored trade missions to foreign markets are redefining the boundaries of their organisations, and effectively expanding the scope of their influence through the cultivation of a ‘partnership’ approach.

Partnerships are really just another manifestation of relationships, a concept most marketers have become familiar with through customer relationship management. However, partnerships in a broader sense go far beyond customer relationships. Perhaps the simplest taxonomy for the types of relationships we need to consider is given by Doyle, (Doyle, 1995):

• Customer partnerships• Supplier partnerships• Internal partnerships (e.g. employees, functional departments)• External partnerships (e.g. competitors, collaboration partners)

Gummesson goes further in an attempt to document much of the complexity in relationship mapping and offers us the 30Rs (Gummesson, 1999).

These are grouped further into:

Classic market relationships – these include the simple ‘customer-supplier’ relationship, the ‘customer-supplier-competitor’ model and the distribution network, all of which are probably familiar from other marketing texts.

Special market relationships – these represent certain specific aspects of the classic relationships, such as the ‘service encounter’, and the ‘customer as member of a loyalty programme’.

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Mega relationships – mega relationships concern the economy or society in general, and in a marketing context will include lobbying, mass media and market alliances.

Nano relationships – these are to be found within organisations, so include quality management, the ‘internal customer’, internal profit centres etc.

These concepts are developed in the following chapters.


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Chapter 5: Partners

5.1 Partnership Types

Clearly, both Doyle’s and Gummesson’s approaches refer to far more than just customer relationships; they take in other organisations, individuals and even whole economies. Customer relationships are covered extensively elsewhere and tend to dominate marketers’ daily lives, but in this Handbook, we are not concerned directly with customer relationships. Instead we consider the myriad of other relationship types that affect our personal and organisational effectiveness.

Rather than work through the 30Rs, we can usefully use Egan’s simpler categorisation of the other partnership types as follows:

Internal partnershipsResearch suggests that the quality of relationships a company has with its customers is largely determined by how they are made to feel by employees at the ‘front line’ (the marketing-customer interface). A few years ago, The Chartered Institute of Marketing (CIM) created a whole study module at Advanced Certificate level with that very title: ‘The Marketing Customer Interface’, in recognition of its importance. It follows that we must take care to nurture these front line employees and also those supporting them internally, if we are to achieve optimum performance as an organisation.

Supplier or ‘vertical’ partnershipsWhile marketers spend most of their time looking ‘forwards’ down the supply chain to their customers, it should become clear that looking ‘back’ up the supply chain is also a key component of putting together an offer which is attractive to customers. Suppliers are a key source of value, and contribute much in terms of innovation and improving efficiency. We shall look at the desirability and costs of developing supplier partnerships. Since suppliers are at different points in the supply chain, we call these vertical partnerships.

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Partners

External or ‘horizontal’ partnershipsIn contrast to supplier partnerships, collaboration can also take place between individuals or organisations at similar points in the distribution chain, perhaps through personal friendships and networking at one extreme, and co-operations between governments and agencies at the other. These tend to be relationships outside the organisation and are regarded as ‘horizontal’ with respect to the supply chain.


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Chapter 6: Internal Partnerships

6.1 Overview

Anyone who has spent time working inside a large organisation will already be familiar with the concept of the ‘internal customer’. Most people in organisations rely on the support of other people to do their jobs effectively. For example, you may depend on an efficient IT department to keep your computer system working properly, and you may expect the finance department to provide you with accurate and timely data on sales revenue, volume, profit, etc. In turn, you, as a marketer, will no doubt be tasked with providing an estimate of future product sales to enable capacity and human resources planning. Sales colleagues will expect some notice of future product launches and support in the form of literature, a good website and so on.

Achieving good organisation performance externally requires the internal organisation to be functioning in the same, high quality way with open communication and trust. In service companies, where the offering is delivered through human interaction of some kind, this connection should be clearly evident.

If restaurant staff are poorly trained or motivated, then the ‘customer experience’ they deliver will be poor and the customer will not return. In fact, it is worse than this: the disgruntled customer may pass on news of their bad experience to friends, colleagues and even to thousands of strangers through review websites and other social media.

In short, employees must be motivated, well trained and incentivised to perform well and in line with organisational values if the customer experience is to be as management would wish.

In product businesses, customer contact is often indirect e.g. through distributors or call centres, and so the link between employee performance and external performance is less obvious. It is not unusual to find large organisations with four or five layers between the customer and functional specialists. Partly for this reason, it was the growth of services

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Internal Partnerships

marketing as a concept during the 1980s that led to the concept of ‘internal marketing’ being taken more seriously.

Buttle observed that an organisation’s final output, be it goods or services, is almost always the result of a series of operations and processes performed by employees (Buttle, 1996).

6.2 Internal Marketing

Internal marketing has been described as: “Any form of marketing within the organisation which focuses attention on the internal activities that need to be changed in order that marketing plans can be implemented.” (Christopher et al, 1991).

By understanding the needs of employees, it is argued, organisations can ensure these are met, and in turn the employees can meet the external customers’ needs more effectively. How well this works depends on amongst other things: the culture of the organisation, the health of the organisation, the nature of the service or product provided and the level of interest of the customers themselves.

Egan found that internal marketing as a concept has had a chequered career (Egan, 2011). Initially more to do with persuading staff to take management’s view of a situation, it has since been associated with a wide variety of concepts, some of which overlap. You may well recognise some of this selection of examples from your own corporate career:

• The concept of the ‘internal customer’ who should be treated as if they were an external paying customer

• The use of techniques such as briefings, brand guidelines, product launches etc. to ‘sell’ the message of an organisation to its internal audiences

• The concept of ‘Total Quality Management’ (TQM), which is based on the premise that the quality of products and processes is the responsibility of everyone involved with the creation or consumption of the products or services offered by an organisation


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This requires the involvement of management, workforce, suppliers and customers, to meet or exceed customer expectations

• Activities that improve awareness of customer issues among employees, such as briefings and customer visits

• Development of a marketing orientation for an organisation (everyone’s a customer), even where this may have seemed odd e.g. in the provision of public services such as the NHS and the railways

• Recruitment of customer-conscious employees: recruit for attitude, train for skill

It is probably fair to say that to most people, it is the communication aspects of internal marketing which spring most readily to mind. However, achieving the best from internal partners goes much further than that. Doyle states that internal marketing focuses on the three core value-adding activities of (Doyle, op cit):

• innovation (finding new approaches in products and services to improve efficacy, add features, reduce costs etc.)

• effective processes• customer support and building networks which ‘design in’ quality

In accordance with this insight, companies increasingly appreciate that marketing is not wholly delegated to that function within the business, but is part of the task of everyone in the organisation. A firm’s competitiveness depends on the effectiveness with which it organises its three core value-generating processes – innovation, operations and customer service and support. To work effectively each of these processes needs a cross-disciplinary approach. None is the task of a single department, but depends upon the commitment of everyone in the firm.

Gummesson refers to internal relationships as ‘nano relationships’, which he regards as being ‘below’ the market relationships, and he gives the following examples (the numbers refer to his classification) (Gummesson, op cit):

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• R24: Market mechanisms are brought inside the company – by introducing profit centres in an organisation, a market inside the company is created and internal as well as external relationships of a new kind emerge.

• R25: Internal customer relationship – the dependency between the different tiers and departments in a company is seen as a process consisting of relationships between internal customers and internal suppliers.

• R26: Quality providing a relationship between operations management and marketing – the modern quality concept has built a bridge between design, manufacturing and other technology-based activities and marketing. It considers the company’s internal relationships as well as its relationship to the customers.

• R27: Internal marketing: relationships with the ‘employee market’ – internal marketing can be seen as part of a total relationship marketing approach as it gives indirect and necessary support to the relationships with external customers.

• R28: The two-dimensional matrix relationship – organisational matrices are frequent in large corporations and above all they are found in the relationships between product management and sales.

• R29: The relationship to external providers of marketing services – external providers reinforce the marketing function by supplying a series of services, such as those offered by advertising agencies and market research companies, but also in the area of sales and distribution.

• R30: The owner and financier relationship – owners and other financiers partly determine the conditions under which a marketing function can operate. The relationship to them influences the marketing strategy.


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Figure 6.1. Relationships seen as networks and interactions

6.3 Part-time Marketers

The concept of the ‘part-time marketer’ is relevant here. Internal partners are comprised not only of the folk who have ‘marketing’ and ‘sales’ (or their equivalents) on their business cards. It is argued that marketing is the responsibility of all employees.

Gummesson described how these non-marketing specialists – despite not being formally recognised as marketers – are crucial to the company’s marketing effort. Christopher et al, further subdivided employees into four types as the figure below shows:

Involvement with marketing mix

INVOLVED

HIGH

NOT DIRECTLY INVOLVED

LOW

Figure 6.2 Communications role of various employee groups

CONTRACTORSe.g. Sales, customer

service

INFLUENCERSe.g. R&D,

market research

ISOLATEDSe.g. HR,

IT

MODIFIERSe.g.

Receptionists, accounts staffFrequency of

contact with customers

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Contractors are heavily involved with conventional marketing activities and include sales personnel and customer service staff. They should naturally be well trained and tuned to satisfying customers on a daily basis.

Modifiers have frequent customer contact but not involvement in conventional marketing activity. Examples of modifiers would include receptionists, delivery personnel and so on. They should be trained in customer relationship skills.

Influencers are part of the ‘marketing machine’ but with less personal customer contact than Contractors. As such, they should be encouraged to be customer oriented. Influencers include market researchers and R&D staff.

Isolateds are not directly involved with customers or marketing, but their performance may impact on success. For example, IT or HR staff may have a strong long-term influence on the efficiency and effectiveness of marketing activity (Christopher et al, op cit).

6.4 Achieving Internal Partnerships

Achieving the maximum organisational benefit from the efforts of employees requires excellence in the following:

Recruitment of individuals with the appropriate personality, skills and aptitude – this may require techniques such as behavioural interviewing using simulation exercises and tests to confirm an individual’s attitude or level of competence in customer-facing activity.

Performance management and review – appropriate levels of supervision (see Empowerment below) are provided, along with clear deliverable objectives.

Training and development – often involving ‘on the job’ experience and self-directed learning opportunities.

Reward mechanisms – which may or may not be financial in nature, to reinforce and encourage desired behaviour patterns. Non-financial rewards may include awards or similar recognition among an individual’s peer group.


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6.5 Empowerment

Empowerment has been fashionable for so long, it has almost become a cliché. At its heart is the notion that people interfacing directly with customers know best what is required to achieve customer satisfaction, and to achieve that, they need to have the flexibility and authority to take action without the need to refer matters upward for approval.

At its best, empowerment brings about the following benefits (Bowen et al, 1992):

• Quicker online response to customers’ needs during service delivery• Quicker online response to dissatisfied customers during service

recovery• Employees feeling better about their jobs and themselves• Employees interacting with customers with more warmth and

enthusiasm • Empowered employees being a great source of service ideas• Great ‘word of mouth’ advertising and customer retention

Empowered employees could be trusted to give their best and promote their organisations effectively, and could truly be called partners in the deepest sense.

On the other hand, empowerment is not without its drawbacks. First, it comes at a price, as the selection and training processes will require more investment in time, and staff levels may need to be increased. Second, some employees will not take to being empowered, preferring to be managed rather than taking decisions themselves (“I’m not paid to think”). Organisations under intense pressure to improve efficiency may find empowerment not to be an available option, and empowerment may be much more difficult to achieve outside of the service sector.

Chris Daffy in Once a Customer, Always a Customer (Daffy, 2000), identified the need for ‘corporate integration’ (an adapted version is shown in Figure 6.3) to illustrate the key phases in delivering excellent customer service, including the drivers and outcomes from the ‘internal people things’.

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Phase Approach Through Outcomes

Phase 1 Leading from the top Company vision& values

Direction

Phase 2 Harnessing InternalResources

Recruitment& TrainingEmpowerment

Teamwork

Phase 3 Encouraging appropriate behaviour

FeedbackPartnershipRewardsSystems

Loyalty Referrals

Phase 4 Businessperformance

Commercialsuccess

ProfitGrowthValue Reputation

In phase one, we need a clear vision of what we are trying to achieve (‘begin with the end in mind’ to quote Stephen Covey). This responsibility lies firmly at the top of the organisation and CEOs must be seen wholeheartedly to embrace the relationship marketing culture if it is to succeed. The result will be clear direction for all.

In phase two, we can collect the ‘internal people things’ as Daffy called them. Good customer care must start internally if it is to have any chance of working externally. HR policies in particular must be geared towards creating the well-trained, empowered workforce we have been considering above.

In phase three, we group the ‘external customer things’. We need good mechanisms for capturing customer feedback and reward systems which encourage customer focused behaviour.

Figure 6.3. Organisation approach to delivering excellent customer service


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Terry Leahy, ex-CEO of Tesco once said: “When we stopped obsessing about Sainsbury’s and started obsessing about the customer, that’s when we beat Sainsbury’s.”

In phase four, we remind ourselves that the ultimate goal and the result of all the above (at least for most commercial organisations) is profitability and, usually, growth. In a wider stakeholder context, we might include providing employment, rewarding investors or contributing to society in various ways. Customer care is only part of the picture.

John Lewis Partnership

John Lewis is the UK’s best known exponent of an employee partnership approach, and indeed refers to its employees as ‘Partners’. This from the JLP Corporate website (accessed September 2015):

“All 88,700 permanent staff are Partners who own 44 John Lewis shops across the UK (31 department stores, 11 John Lewis at home and shops at St Pancras International and Heathrow Terminal 2), 340 Waitrose supermarkets (www.waitrose.com), an online and catalogue business, johnlewis.com(www.johnlewis.com), a production unit and a farm. The business has annual gross sales of over £10bn. Partners share in the benefits and profits of a business that puts them first.

When our founder, John Spedan Lewis, set up the Partnership, he was careful to create a governance system, set out in our Constitution, that would be both commercial allowing us to move quickly to stay ahead in a competitive industry, and democratic giving every Partner a voice in the business they co-own. His combination of commercial acumen and corporate conscience, so ahead of its time, is what makes us what we are today.”

Despite operating in a difficult economic climate and intense competition from other retailers and from the internet, JLP’s results would seem to confirm that its approach can pay off, to the benefit of its employees and its customers.

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Fred Reichheld, in 1996, produced the ‘Service Profit Cycle’ concept (Figure 6.4) that established the linkages between internal strategic instruments and external service performance, and which operates as a self-reinforcing ‘circle of virtue’.

• If an organisation has a respectable level of profitability, it can more easily afford to produce external service quality.

• External service quality generates customer satisfaction (although the goal should be customer delight he argued).

• If customers are satisfied they will display loyalty, leading to favourable behaviours such as purchasing more and more often, making recommendations to friends, forgiving occasional lapses, etc.

• Customer loyalty leads to further profitable growth (as it is cheaper to keep a customer than to recruit another).

• Profitable growth is likely to be correlated with internal service quality because retained customers enable service providers to move more rapidly up the experience curve.

• If internal service quality is high, employee satisfaction will increase. Employee satisfaction would almost certainly mean that employee retention improves, again with consequential benefits as far as service standards are concerned.

Figure 6.4. Reichheld’s service-profit cycle


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Of course this virtuous cycle may operate in reverse where a reduction in profitability requires an organisation to cut its costs – with consequent deterioration in external service quality, and so on. This may be thought to be one reason why organisations including British Rail and the Royal Mail found it so difficult over the years to live up to customer expectations.

The cultivation of internal partners, harnessing this important source of innovation and effort, and using it to increase external customer satisfaction, clearly has a lasting significance. It may not be key to all organisations and may be difficult or impossible to deliver in some circumstances, but it deserves its place in the management toolkit (Reichheld, 1996).


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Chapter 7: Vertical PartnershipsHave you ever wondered how producers of goods can be expert at so many things? For instance, how can a car manufacturer develop state of the art electronics for its engine management system, be at the cutting edge of specialised tyre rubber development, and know all they need to know about the latest LED lighting systems? The answer of course is that they cannot; they rely on their suppliers to provide that expertise.

We noted above that supplier relationships offer a useful form of partnership. Development of strong relationships with suppliers is arguably as important as customer relationships. They can be a valuable source of innovation and may provide services such as stocks or logistics which are a source of competitive advantage. Increasingly, organisations look for partners who will provide specialist skills or know-how, and their ability to put together these partnership networks determines the effectiveness of the supply chain.

“It is about not trying to invent everything. 90% of what you do, someone out there can do better”, said John Brophy, General Manager, Corporate Research, BP Chemicals, speaking about outsourcing technology.

Doyle has said (Doyle, op cit): “We can summarise the key tasks of management in today’s organisation as three. The first task of management is to identify opportunities created by change. The second task of management is to build the networks or delivery processes which can realise these opportunities. This means creating the project teams within the firm and the partnerships with other organisations to deliver the innovations, efficient products and services, and customer service and support. The third task of management is to build the brands.”

Just as our approach to customers is re-thought in relationship marketing, so the way suppliers are perceived and treated can benefit from the more enlightened view of vertical partnerships. In the ‘new think’, suppliers are seen as partners not adversaries.

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Vertical Partnerships

7.1 Supplier Partnerships or Partnership Sourcing

Historically, people traded with those they knew and trusted. Only relatively recently, with effective laws and peaceful times, have anonymised transactions become the norm. We have become accustomed to business procedures and protocols that define how suppliers should be treated. These are enshrined in documents such as order specifications, terms and conditions, contracts etc. that seem to assume that unless everything is specified tightly, the other party will take unfair advantage; that each party is attempting to gain the upper hand and to maximise their profit at others’ expense.

Some would argue that suppliers should be kept at arm’s length. They would guard against being too ‘cosy’ with suppliers, and would adopt a strategy that:

• Focuses on getting the best deal (price) in the short term• Plays one supplier off against another• Treats information as power, not to be shared easily• Expects to change suppliers frequently• Uses market pressure and available capacity to drive the best deals

Today however, increasing numbers of organisations are developing a more collaborative supplier partnership approach in which the generic objective of the partnership is to improve the efficiency and effectiveness of what Porter called the ‘value chain’(Porter, 1985).

The dynamic in each market will be different, but the key point is that fostering co-operative networks with suppliers to the point where they can be regarded as partners can assuredly lead to long term commercial advantage. This is a far cry from the traditional ‘arm’s length’ adversarial arrangement where customers and suppliers viewed each other with suspicion, and negotiation with suppliers usually concentrated on price, with each party vying to get the upper hand. In business to business marketing, it is not now uncommon to find organisations sharing cost information (‘open book costing’), so that they might together drive costs


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out of the process, share innovation, and in so doing, develop a closer relationship for the benefit of both parties.

Replacing win-lose with win-win relationships can be achieved if both parties are committed to making it work. Maybe marriage is not a bad analogy. As noted by Brennan (Brennan, 1997): “Partnership can only flourish in a ‘positive-sum’ game where there are real economic advantages associated with this approach to doing business.”

Analogies for the complex world of business have also been made with dancing. Tom Peters expresses it with characteristic colour (Peters, 1992): “Today’s global economic dance is no Strauss waltz. It’s break dancing accompanied by street rap. The effective firm is much more like a carnival in Rio than a pyramid along the Nile.”

Partnership sourcing is based on customers and suppliers working together for mutual benefit. It has been adopted by many of the world’s leading companies, especially in the manufacturing sectors. Its supporters claim it can improve responsiveness, reduce costs and improve competitiveness. Partnership sourcing is the natural complement to other popular strategies such as Just-in-Time (JIT) manufacturing and Total Quality Management (TQM).

The principles of partnership sourcing are:

• The parties are making a long-term commitment• There is a change in emphasis from purchase price to total

acquisition cost• There is a strong commitment to quality – i.e. fitness for purpose

The main objectives of partnership sourcing are:

• To minimise the costs of doing business together• To ensure ongoing supplies and quality• To gain competitive advantage through, for example, innovation

or erecting barriers to entry• To delight the customer

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Additional objectives may include:

• Better management information• Reduced time to market for new products/services• Reduced costs of bringing products to market • Reduced inventory and waste

Activities that add value need not stop at the organisation’s boundaries. For example, when you order a book from Amazon, the speed of the delivery is, in part, a product of Amazon’s order processing efficiency, but is also affected by the efficiency of the courier network used. Since speed of delivery is a major driver for online purchasing, it is clear that much of the value is being added here by activity outside the direct control of the Amazon organisation. Similar examples would include the quality of food in restaurants (farmer or grower responsible), and user experience with a mobile phone (signal strength provided by local telco service).

Figure 7.1 below shows how organisations can partner with suppliers, customers or both, to form an integrated value chain, where each partner carries out those tasks to which they are best suited. These partnerships can be in either direction i.e. with customers or suppliers.

Figure 7.1 Concatenation of value chains

For an explanation of the value chain concept, see Porter’s Competitive Advantage (Porter, op cit).

Partnership sourcing Partnership marketing

Supplier value chains

Customer value chainsORGANISATION VALUE CHAIN


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There are many practical ways in which organisations can partner with others in the same value chain to cut costs, remove duplication or other inefficiencies, foster innovation and so on.

Some practical techniques are:

• ‘Just in time’ production methods• Joint R & D programmes• ‘Open’ purchasing arrangements (see example below)• Technology transfer and licensing• Staff transfer• Integrated e-commerce systems

Open purchase order systemImagine a company running a factory making vacuum cleaners, and its supplier of washers. The company could give all its washers business to one supplier, whose responsibility it would be to check stock levels at the cleaner factory, and ‘top up’ supplies as required. At the end of the month, if each cleaner needs 20 washers, and the factory had produced 5,000 cleaners, it must have used 100,000 washers, and the supplier would send an invoice for that amount. A large amount of unnecessary administration has now been cut out. Note that there is no need for ordering individual batches of washers, chasing and expediting deliveries, counting and checking washers on arrival, putting them into a raw materials warehouse (where they may get damaged, lost or stolen), raising paperwork at both ends for each batch and so on.

Both parties benefit from the trust they have shown by a reduction in administration costs, and the customer probably receives more attentive service and higher quality. Contrast this approach with the traditional model of keeping suppliers ‘hungry’ by splitting purchases among several, and making them fight for volume through frequent price negotiations.

Many texts can be found which give the context for this example under the topics of ‘Just in Time’ manufacture or Total Quality Management.

While ‘supplier as adversary’ and ‘supplier as partner’ may be seen

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as clear opposites, there is in fact a continuum of supplier relationship strategies that could be adopted, as represented on the following page (adapted from Hughes et al, 1998):

Spot buying

Bids/tenders

Certified suppliers

Preferred suppliers

Partnership approach

Joint ventures

Strategic alliance

Co-ownership

Increasing closeness of relationship

Figure 7.2 Continuum of supplier relationship strategies

Professional procurement texts carry much more on these alternative approaches.

Tritek Cardboard Packaging used a partnership approach to get closer to their customers by forming formal partnerships with them. They agreed reduced pricing targets over five years and these were reviewed every three months. They used ‘open book’ costings so that customers could see where costs were incurred, and both parties were able to suggest innovations and specification changes to reduce costs – i.e. ‘cost out’ as opposed to ‘cost down’. As a specific example of cost elimination, one customer asked Tritek to arrange for their delivery driver to unload and forklift deliveries directly into its warehouse, thereby reducing staffing costs for the customer. The results of partnership sourcing for Tritek were: greater levels of trust, greater security of business, better planning - with subsequent benefits in recruitment, training, capital efficiency, etc. – and improved quality systems.


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7.2 Innovation Networks

Suppliers and customers of an organisation can be powerful drivers of innovation, either because they have a special knowledge or interest in finding new answers to problems, or because they have some other advantage such as a novel technology. Although suppliers are often expected to provide innovations, networks between suppliers, customers and other parties can be established. In Total Relationship Marketing, Evert Gummesson quotes a study in the cable connections industry in which customers were responsible for 11% of innovations, while primary suppliers were responsible for 33% and secondary suppliers developed 56% of innovations (Gummesson, op cit).

7.3 Outsourcing

The decision not to produce components or services in house and to sub-contract work to external suppliers (the ‘make-buy’ decision) is referred to as outsourcing, and is not uncommon these days.

Outsourcing occurs when an organisation procures goods and services externally that it might conventionally be expected to produce using its own resources. The transition to an outsourcing arrangement may also involve transfer of the employees and assets involved to the outsourcing business partner. Many public sector services, including the running of prisons and hospitals, have been outsourced as a result of the perceived greater efficiencies and motivation of for-profit organisations.

In some cases, outsourcing involves overseas partners (‘offshoring’); call centres being a classic example. In the financial services sector, consumer reaction to this has been mixed, and in recent years, financial institutions have been returning their call centre activity to the UK.

In-house provision may be cheaper since an external supplier’s price will include an element of profit, but direct comparison with supplier prices is only one factor.

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Other issues to consider include the following:

• Resource usage – when a company makes products in house, it is tying up resources such as management, labour, working capital, space, etc. which could be used for other more profitable purposes, i.e. there is an opportunity cost.

• Flexibility and scalability – if a company cannot produce all the output it requires in-house, or its needs change over time, it can use external suppliers as the need arises. However, negotiating such a deal with external suppliers might necessitate guaranteeing a minimum supply quantity over a period of time.

• Control – in-house production should be easier to control in terms of product quality and availability.

• Compulsion – certain areas of the public sector are required to consider outsourcing.

• Vulnerability – a company may miss out on the opportunity to build in-house expertise and could then suffer if its external arrangements become uncompetitive.

• Contract compliance – Outsourcing arrangements require strict attention to contracts.

Obvious examples where companies have used outsourcing include catering and cleaning services, but more complicated ones might include electronic parts sub-assembly, HR and even marketing. Clearly, this policy may have some limits: imagine how your accounts department would react if you announced that you were bringing in external consultants to provide your financial information, rather than using the internal service!

Microsoft uses suppliers in a highly integrated way to provide tailored goods and services by combining the specialised capability of smaller suppliers with the muscle of the software giant. Human resources is an example of this, where the ‘insourced’ HR supplier maintains a full time staff located at Microsoft’s UK headquarters to carry out recruitment and other HR functions. To the outside world, these people are part of Microsoft and share its values and processes.


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Courier service FedEx came to public attention in the USA when it was found that organisations in large office buildings were using its services in preference to internal mailroom operations. They found it faster, despite the mail travelling far further!

Car company Rover spun out its advertising department to create a stand-alone advertising agency, with Rover as its largest client.

7.4 Limitations of Supplier Partnering

While there is a strong argument in favour of the partnership sourcing approach, it has its critics.

Disadvantages of a partnering approach include: the difficulty of leaving the partnership due to entrenched thinking, sharing of resources, joint investment and so on. Long-term relationships can become stale, so fail to provide the ‘dynamic tension’ necessary to maintain continuous improvement. In extreme cases, partnerships can lead to restricted choice for customers (perhaps intentionally!), and even to cartels or other corrupt practice.

Perhaps the ‘right’ answer is that partnership sourcing is not an end in itself. It is a means of continuously managing business relationships, and harnessing the power of suppliers in pursuit of greater competitiveness and quality. Hughes and Dann stress the need for flexibility when adopting closer partnership approaches, and refer to a number of preconditions and tests that need to be applied if partnership sourcing is to succeed (Hughes and Dann, op cit).

In particular there has to be:

• A commitment to openness on both sides and joint ways of working• A readiness to discuss future business plans and capital investment

requirements

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• A preparedness to share each other’s long-term strategies and business goals

• A willingness to understand each other’s business processes, managerial and operational cultures

• A strong sense of how the parties will mutually exploit cost, quality, technical or marketing advantage via their collaboration

• An agreed remedy in the event of a non-partnership source of greater advantage appearing in the supply market

• A review forum capable of assessing how well the partnership has exploited or distorted the market to the advantages of both sides

• A realistic assessment of the acceptability of the distribution of benefits from the relationship between the partners

7.5 Strategic Business Units

In an attempt to gain the benefits of specialised production without the perceived risks of outsourcing to other companies, some organisations create specialised divisions to provide the focus required – strategic business units. These divisions may have separate profit measurement and operate as nearly as possible as independent units within the larger corporate group. They may be free to purchase and supply to other companies inside and outside the group, even when the products and services are available within. By bringing market forces to bear in this way, it is argued, the units will be motivated to be as competitive as possible, but also free to adopt whichever policy is best for them at any time.


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Chapter 8: Horizontal PartnershipsAs defined above, external or ‘horizontal’ partnerships occur between parties at similar points in the distribution chain. These are generally organisations or individuals that form alliances to gain a particular competitive advantage.

As Gummesson defined relationship marketing (Gummesson, 1999): “Relationship marketing is marketing seen as relationships, networks and interactions.” There is a good deal of overlap between the way the terms networks, partnerships and relationships are used in the literature, and they are even used interchangeably. But however it is defined, partnering with customers or with other members of an industry network can be an important source of knowledge, expertise and power.

We can adopt Egan’s definition of networks and collaborations to describe these arrangements (Egan, op cit).

8.1 Personal Networks

Definition: Personal networks are systematic or ad hoc relationships between individuals such as owners/managers who co-operate to obtain information or to optimise organisational performance.

Networks form as partnerships between individuals from different organisations, co-operating for the mutual benefit of themselves (career) or their organisations (competitive advantage). Such interactions are often informal and spontaneous. In exceptional cases they are legally in a grey area or even forbidden as anti-competitive; discussion on pricing matters would be an obvious example of the latter.

Gummesson included personal and social networks within the category ‘Mega relationships’, because they could be said to ‘sit above’ market relationships.

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Horizontal Partnerships

In particular he identified:

• R18: Personal and social relationships – which may be dominant in some cultures, where business is solely conducted between friends and friends of friends. The ‘old boy network’ can still be seen today in some professions.

Certain institutions e.g. Harvard University and the University of Tokyo provide their alumni with powerful influence in their respective economies. In the latter case, in Japan, the term keiretsu means the long-term relationships between companies that exist as a result of personal relationships. Firms are three times more likely to trade with other keiretsu members than with outsiders.

Nor is it only large organisations that can partner for competitive advantage: many ‘singleton’ consultants and service providers meet at breakfast clubs or other sharing meetings, passing on business leads or recommendations for their fellow networkers. Such partnerships are particularly valuable for freelancers, who may have little time for marketing or networking ‘at random’. With other professionals looking out for them, they can be many times more effective, and also benefit from the credibility of the ‘third party reference’. Partnering in this way also helps to overcome the sense of isolation from working alone.

Women in business have formed groups at all levels solely for the purpose of networking and providing mutual support.

In sectors such as executive recruitment, a strong network of contacts is a pre-requisite. Recent statistics for LinkedIn suggest that over 200 million people now belong to this social network, used mainly as a personal networking tool. This is perhaps 80% of the managers in many Western countries.

8.2 Collaborative Partnerships

Collaborative partnerships are more formal relationships between organisations, recognised across the companies. These are more likely to involve


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written agreements and procedures specifying the nature of the collaboration.

Collaborative partnerships can be further divided into industry collaboration between competitors or other players in the same industry sector, and external collaborations between partners in different sectors.

Industry collaborationCo-operation between organisations within an industry can result in what Sheth & Sisodia called a ‘positive-sum game’, as opposed to the ‘zero-sum’ proposition that results from participants attempting to gain market share at each other’s expense (Sheth and Sisodia, 1999). By working together to grow the entire industry sector, gains in sales volume can be achieved, it is argued, at lower cost.

Trade associations are one mechanism through which sector members can collaborate. Generic advertising can encourage consumers to adopt a product type, or to consume more.

In Canada, the British Columbia Dairy Association (BCDA) is a not-for-profit organisation that represents the B.C. dairy industry, raising awareness of the dynamic, economically sustainable nature of the industry, and delivering innovative nutrition education programmes to B.C. consumers. For more information go to: http://bcdairy.ca/milk/campaigns/must-drink-more-milk.

Although industry collaboration is not new, the use of partnership alliances – between some of the competing firms within the sector – appears to be on the increase. The motivation is often cost and efficiency improvements through sharing capacity or technology for example.

The next time you take a scheduled flight, watch the flight announcements board: you may see your flight number e.g. BA123 alternating with another number from a different airline such as AA456, as these airlines may be sharing the route and seeking to fill their planes by independently marketing the seats.

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In the airline industry, the Star Alliance, formed in 1997 between airlines including Lufthansa and Singapore Airlines, describes itself as ‘the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveller’. In the high street, collaborative marketing campaigns have been run between Disney, Coca-Cola and McDonald’s for a number of years.

A customer purchased car insurance using an evaluator website (let’s call it brand ‘A’), to provide instant quotes from a large number of vendors. Having selected a brand name (let’s call it ‘B’) that he recognised and trusted, he proceeded to go ahead with the transaction (‘conversion’ in modern marketing-speak), and awaited his confirmation. He quickly received an e-mail confirming his purchase of insurance – from brand ‘C’ – an unfamiliar brand. Later that week, through the mail, he received his documents advising him that his insurance was underwritten by brand ‘D’! Not only was this somewhat confusing, it concerned the customer that he had no knowledge – and therefore no control – over whom he was dealing with. This is perhaps an extreme case, but partnerships such as this are common, especially in consumer markets, where brand owners and product/ service providers share aspects of the communication/fulfilment chain, with little in the way of transparency for the end customer.

External collaborationExternal collaboration exists where organisations co-operate to some extent with others outside their sector, such as with governments, professional bodies, regulators, technology providers and so on.

Gummesson includes the following types of external relationships (Gummesson, op cit):

• R19: Mega marketing – where the real ‘customer’ is not always found in the market place; relationships must be formed with governments, regulators, financial institutions etc.


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Powerful groups require mega marketing: co-operation, persuasion or lobbying to make marketing even feasible. Pharmaceutical companies must carry out trials according to strict criteria, and even after the efficacy and safety of a new drug is proven, it must still get approval from the National Institute for Clinical Excellence (NICE) before a product is approved for use in the British NHS.

• R20: Alliances – change the market mechanisms, by partly curbing competition

British Airways has in the past been fined by the European Commission for its close relationships with travel agents under which incentives were offered to travel agents for promoting the airline’s flights.

The EU said that the practice of ‘fidelity rebates’ which rewarded agents who sold more tickets with higher commission fees was anti-competitive. The EU said the system “makes travel agents loyal to BA, discouraging them from selling travel agency services to other airlines. This has created an illegal barrier to airlines that wish to compete against BA in the UK markets for air transport”.

In its defence, BA said that its commission arrangements for travel agents were similar to those run by most major airlines in Europe and across the world and, in fact, were standard practice throughout the industry. However, it has now ended the system and instead pays a flat commission.

• R21: Knowledge relationships – recognising that knowledge is a critical strategic resource and often the rationale for alliances.

• R22: Mega alliances – change the basic conditions for marketing.

Mega alliances are formed, for instance, between nations as they seek to gain benefit from their combined economic strength and to reduced bureaucracy through co-operation. The Common Market, now evolved into the European Union, is a prime example. Adoption of the euro currency by most of the European nations has reduced costs and

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exchange risk significantly. Elsewhere in the world one can find the North America Free Trade Agreement (NAFTA) and the Association of South East Asian Nations (ASEAN). In fact, it is hard to think of an area which does not have some sort of economic alliance.

The collaboration between Apple and Nike is an excellent example of two major brands – not in direct competition – co-operating for mutual advantage. Both brands are seen as style-driven, modern and with strong youth appeal. By incorporating sensors in the Nike footwear which interface with an app on an Apple portable device, the parties have enabled a new level of functionality for both products, while erecting considerable (if temporary) barriers to entry for their competitors.


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EpilogueTo make sense of the complex world of partnerships, we have considered the three main types: internal, vertical and horizontal. However, marketers must be mindful of the fact that in addition to simple one-to-one (dyadic) relationships, markets will contain whole networks of simultaneous relationships.

Think of a key decision maker in a customer of your organisation. What networks are they part of? They may belong to their professional body (e.g. the Chartered Institute of Purchasing and Supply), they may attend meetings on specific industry topics where they will have discussion with other specialists. They may have colleagues and friends in other companies you sell to or buy from; they may play golf with other business people and read the output of opinion formers in the trade media or subscribe to certain RSS feeds online. All these interactions and more can affect their awareness and perception of your product, your service or your company.

A customer may also be a supplier. An agency working for your competitor may be a suitable partner for you in time to come.

Organisations today need to recognise how partnerships can add value, be a source of innovation, raise competitiveness and improve customer satisfaction.

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4Ps, 5

7Ps, 5

10Ps, 5, 7, 8

Advertising, 3, 16, 46, 49, 52, 57, 63, 76, 79, 93, 97

Amazon, 3, 19, 88

App, 53, 100

Attitudes, 11, 28, 47, 57

Barriers to entry, 87, 100

Blog, 30, 51, 52, 54, 55

Brand, 5, 13, 15, 16, 17, 19, 39-40, 51, 62, 85, 98, 100

Broadcast, 32, 34, 51

Budget, 3, 8

Business plan, 93

Channel management, 30

Collaborative partnerships, 96-100

Competition, 56, 81, 99, 100

Competitive advantage, 85, 87, 95, 96

Consumer behaviour, 18, 20

Copyright, 30, 60

Corporate communication, 40, 45-55

Corporate image, 37, 46

Corporate reputation, 37-56

Corporate social responsibility, 42, 43-45, 54

Costs, 17, 50, 63, 71, 75, 83, 86, 87, 88, 89, 90, 99

Crisis, 32, 33, 34, 35, 59, 61

Culture, 44, 74, 80, 94, 96

Demographic, 8,11

Distribution, 5, 69, 72, 76, 94, 95

E-commerce, 89

Egan, 27, 71, 74, 95

Empowerment, 78, 79-83

Environment, 4, 7, 8, 9, 10, 17-21, 29, 30, 39, 41, 42, 43, 44

Ethics, 8, 16, 24, 43

Facebook, 12, 13, 19, 61

GDP, 12

Google, 13, 19, 21, 30

Gummesson, 69, 71, 75, 77, 91, 95, 98

Horizontal partnerships, 72, 95-100

Innovation, 39, 47, 53, 71, 75, 83, 85, 87, 89, 90, 91, 101

Internal marketing, 53, 74-77

Internal partnerships, 71, 73-83

International, 4, 12, 20, 43, 48, 51, 57, 64, 98

Internet, 7, 9, 14, 30, 31, 81

Loyalty, 62, 69, 80, 82

Market research, 76, 77, 78

Marketing mix, 5, 8, 77

Marketing orientation, 75

Matrix, 24, 55, 76

Motivation,54, 91, 97

Objectives, 78, 87, 88

Outsourcing, 85, 91-93, 94

Packaging, 4, 15, 18, 63, 90

Partnerships, 69-101

PESTER, 7, 69

Planning, 5, 32, 37, 73, 90

Podcasts, 49, 52

Political marketing, 10, 55056

Political power, 5

Politics, 8-12

Porter, 86, 88

Positioning, 5

Index


107

Press, 3, 4, 34, 48, 49, 50, 60, 64

Price, 3, 4, 5, 8, 16, 17, 30, 39, 50, 79, 86, 87, 89, 91

Product, 3, 4, 5, 6, 8, 15, 17, 21, 24, 30, 32, 38, 39, 40, 44, 46, 51, 52, 57, 63, 73, 74, 75, 76, 85, 88, 92, 97, 98, 99, 101

Product development, 23, 39

Public opinion, 5, 6, 8, 33, 35, 37, 46

Public relations, 35, 48

Radio, 3, 54

Retail, 3, 4, 15, 18

Sales, 3, 4, 6, 19, 24, 29, 46, 73, 76, 77, 78, 81, 97

Service quality, 82, 83

Services, 3, 7, 8, 9, 13, 21, 28, 31, 38, 39, 40, 42, 56, 73, 74, 75, 76, 85, 88, 91, 92, 93, 94, 99

Services marketing, 5

Social media, 14, 21, 31, 51, 52, 53, 55, 60, 62, 73

Societal marketing, 34, 41-42

Special interest groups, 4, 28, 35, 55

Sponsorship, 49, 63

Stakeholder theory, 24

Strategic business units, 94

Strategy, 16, 18, 24, 34, 40, 43, 76, 86

Television, 31, 40, 54, 61, 62

Twitter, 19, 31, 60, 61

Value, 6, 9, 13, 27, 32, 37, 39, 47, 55, 71, 73, 75, 80, 81, 86, 88, 89, 92, 101

Vertical partnerships, 71, 85-94

Vision, 13, 47, 80

Website, 3, 9, 13, 18, 26, 30, 31, 32, 33, 50, 51, 52, 60, 73, 81, 98

108

Cambridge Marketing Handbooks This Stakeholder Marketing Handbook is one in a series of Handbooks for marketing practitioners and students, designed to cover the full spectrum of the Marketing Mix. The other Handbooks include:

• Digital Marketing

• Distribution for Marketers

• Law for Marketers

• Marketing Communications

• Marketing Philosophy

• Marketing Planning

• Pricing for Marketers

• Product Marketing

• Research for Marketers

• Services Marketing


109

110

Cambridge Marketing PressMiddlewatchSwaveseyCambridge CB24 4AA

Tel: +44 (0)1954 234940http://www.cambridgemarketingpress.com

ISBN: 978-1-910958-33-9

Price £9.99

Stakeholder Marketing - A Cambridge Marketing HandbookMarketers have long held the view that the customer should be central to all they think about, all they do. Yet the developments of the last few years have shown that other forces are at play that can be at least as powerful and long lasting. A broader group of stakeholders exists, whose needs and interests must be understood and satisfied in the quest for a strong corporate reputation and business success. Most recently the impact of the internet and social media has amplified the power of individuals to comment on, and ultimately to influence, the activities of organisations of all types. This Handbook examines the identification of internal, connected and external stakeholders, their ability to affect the organisation, and how organisations should relate to them. It also examines the organisation itself and the factors which influence the development of its corporate image among its various stakeholder audiences.

About the AuthorTerry Nicklin has over thirty years’ experience of marketing in product and service-based organisations. He has worked at Marketing Director level in global markets for companies in technology and professional services, and has consulted for public and private sector clients including BT, Bosch, GE and Unilever. He runs PR and marketing consultancy Keynote PR to provide high quality marketing support to B2B clients in technology and business services sectors. At Cambridge Marketing College, Terry is Course Director for Digital Marketing. He is Chairman of the Chartered Institute of Marketing (CIM) Cambridgeshire Branch, a Member of the CIM East Regional Committee and the recipient of a CIPR Gold Award

This set of guides provides an invaluable resource for anyone wishing to further their career in marketing.

Professor Malcolm McDonald MA (Oxon) MSc PhD DLitt DScEmeritus Professor, Cranfield University School of Management

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STAKEHOLDER MARKETINGA HANDBOOK FOR PROFESSIONAL MARKETERS

CAMBRIDGE MARKETING PRESS

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TERRY NICKLIN

Pantone 3015c 9583397819109

ISBN 9781910958339

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