March 2010

IN THIS ISSUE

A Letter from CEO Michael Dunn

This issue of Prophet’s newsletter takes a look at a cross-section of our thinking.

Check out Andy Stefanovich’s unique perspective about models for spurring creativity and innovation. We also offer Aneysha Pearce and Julie Purser’s thoughts on Toyota’s chances of successfully repairing the damage to its reputation and business with the massive recalls. And we share our perspective on M&A activity, particularly how marketing can be a critical component for success.

Finally, take a look at a new feature, Consultants’ Corner. In it, we ask our colleagues what they have seen, heard, and/or bought this year that has inspired them. Check it out — you may be surprised!

Warmest regards,

Michael Dunn
Chairman & CEO
m_dunn@prophet.com

LAMSTAIH today for creativity — and innovation — tomorrow

By Andy Stefanovich

Look at more stuff. Think about it harder. It’s our philosophy of creativity and thus innovation. Creativity asks, “What if?” in order to examine realities and reveal possibilities. It’s about looking at “what is” and seeing “what’s next.” And without creativity, innovation doesn’t exist. 

Many businesses falter, though, at the challenge of creating systemic innovation. It takes a framework based around five domains; the “5M” Model will help you foster a creative environment where innovation flourishes.

Mood: The attitudes, feelings and emotions that affect creative thinking. Mood is the climate for innovation. It’s the mindspace where people work; the mental environments in which people operate and collaborate.

Mindset: The intellectual foundation of creativity – the personality traits, behaviors, and overall brainpower that affect innovation. Mindset is an individual’s or organization’s baseline capacity in terms of aptitude and skill sets for creative thinking.

Mechanisms: The tools and processes of innovation at work – including the actions taken to generate large quantities of ideas. From idea formation through marketplace execution, mechanisms focus on the “how” of innovation.

Measurement: The indicators and success criteria for innovation. Measurement is a tool for learning that leverages both qualitative and quantitative measures of innovation performance to provide the individual and the organization with critical feedback.

Momentum: The rituals, spaces, and conversations that keep creativity and innovation alive and relevant. Momentum is the active inspiration and purposeful championing of innovation to create a self-reinforcing cycle for fostering and growing innovation.

Want to learn more? Click here to watch a webinar that explores the subject in depth.

Andy Stefanovich is a Senior Partner of Prophet and can be reached via e-mail here. To follow Andy on Twitter, click here.

The Speedbump on Toyota’s Road

By Aneysha Pearce and Julie Lundy Purser

Will the unprecedented product recalls that currently have Toyota reeling cause permanent damage and the end of its standing as the world’s most respected automaker?

Problems like Toyota’s have the potential to affect the company over the long term. But given the consumer goodwill that Toyota has built up over the years, it may be better positioned to manage through these tough times than other companies.

Re-focusing its efforts on building cars that consumers can trust will allow Toyota to rebuild the image and reputation that have been integral to its brand and business for decades.

This reinforced commitment to core business and reputation drivers such as “offers reliable products and services,” “offers high-quality products and services,” and “has products and services that provide a good value” will encourage customers to regain the peace of mind they need to purchase and recommend Toyota to others.

The automaker’s first steps back have been right on. Its ad campaign around “Commitment” openly communicates how Toyota is addressing quality issues and reassuring consumers of its commitment to making things right. An entire section of its Web site addresses the recall issues, from how consumers can get specific issues resolved to news updates. Toyota also uses Facebook as a platform for consumers to have a voice in the conversation.

All are critical steps on the road to recovery, tangibly demonstrating Toyota’s commitment to making things right. Ultimately, though, only time and Toyota’s actions in the weeks and months ahead will really tell if this is a permanent fall from grace or a speedbump.

Aneysha Pearce is an Associate Partner and Julie Lundy Purser, a Senior Associate, with Prophet. They can be reached at apearce@prophet.com and jpurser@prophet.com.

How Marketing Helps Make Mergers Work

By Kevin O'Donnell

Today’s M&A environment is all about creating the synergies that grow the combined business. It’s a quest that puts the customer at the center of the discussion – because without the synergies, the “new” business won’t wow new customers, grab a bigger share of wallet, or create a greater lifetime value.
 
It falls to senior marketers to play a lead role in the integration process by identifying revenue synergies in the new brand portfolio, and set the newly combined company’s strategic agenda. Some considerations:
 
Set a clear customer focus. First, understand customer profitability by segment, identify customer targets, and evaluate how well the brands in the portfolio meet their needs. At the same time, a merger gives a unique opportunity to think about customers in a broader and more integrated fashion. Combining and analyzing both companies’ knowledge of their customers provides a broader view of their behaviors.
 
Optimize the brand portfolio. Here, the goals are to drive growth and generate marketing efficiencies. Getting there often requires tough calls, guided by a detailed analysis of customer targets, brand performance and opportunities, and the brands’ impact on business results. Ultimately, some brands can be leveraged through repositioning or the creation of new offers or concepts; others can be divested or the underlying products and services re-branded.
 
Organize for success. Most companies with multiple brands fail to optimally manage their brand portfolios. An acquisition is the perfect time to effect significant change. Led by the CMO, senior management must institute the organizational structures, processes, and metrics that foster long-term brand building. Brand managers must both evangelize brand’s role and also translate brand ideas into practical, yet compelling, operational standards. Finally, the CMO should track brand portfolio moves and financial performance to demonstrate how brand management drives tangible business impact.

Kevin O’Donnell (kodonnell@prophet.com) is a Senior Partner at Prophet. Read an expanded version of this article here.

Consultants Corner: What Inspires Us...

We asked our consultants what the most inspiring thing is that they have seen, heard, or purchased so far in 2010. Here are their answers.

Recommended Reading

How to Come up With a Breakthrough Marketing Idea
By David Warren and Joseph Gelman
For years, companies have been equating performance with speed and “lean” thinking. They have invested in streamlining processes, reducing costs and applying stringent “Six Sigma-esque” criteria to kill ideas that don’t deliver ROI. What they do not do is explore the world of possibilities. (Utalkmarketing.com, March 18, 2010)

Paths to Purchase [PDF]
By Fred Geyer
Most successful marketers agree that achieving outstanding results requires tailoring marketing programs to the ways consumers make purchase decisions and adopt new products in their category. It is remarkable, however, how few put this principle into practice. (Marketing Management, Spring 2010)

Prophet Perspective: Brand Portfolio Strategy [PDF]
By Kevin O'Donnell
Businesses generate up to 90 percent of their profits from fewer than 20 percent of their brands, various studies have shown. This suggests that many companies are missing an opportunity to gain both more efficiency and effectiveness from their brand portfolios. (February 4, 2010)

Reputation’s Linkage to Business Performance [PDF]
By Aneysha Pearce
Does reputation matter? If attracting and retaining the best talent, getting customers to buy more and pay more for products and services, and strong financial and/or stock market performance is a priority for your company — then the answer is “Yes.” (February 4, 2010)

News and Events

David Aaker spoke to Marketing Week about the top marketing trends in 2010 in an article titled, “Start the New Decade With an Upper Hand.”

Across Europe we sounded off on a variety of topics. In London, Vanessa Cohen talked to MarketingWeek about brands targeting children in schools. Also in London, Roland Bernhard commented in Media and Marketing about the Kraft/Cadbury merger in Asia.

Aneysha Pearce discussed consumer confidence in the financial services industry and the path to recovery. She was also quoted in a Fortune/CNN Money blog discussing how banks are using social media as an attempt to repair their damaged reputations.

Our leadership structure has recently undergone some exciting changes, including creation of the new positions of President U.S., Chief Growth Officer, and Chief Operating Officer within the firm. We also have expanded our Board of Directors. William Dean Donovan, a San Francisco-based entrepreneur, equity fund manager and former senior business consultant, is our newest member.

Spotlight on Speaking

Energizing Your Brand
April 12 — Berkeley, CA
David Aaker is speaking at the Haas School on April 14 discussing "Energizing Your Brand" as part of the annual David Aaker Distinguished Lecture Series in Marketing.

Marketing Society ‘Makes You Think’ with John Kearon, BrainJuicer and Mark Earls, Author of ‘Herd’
April 14 — London, UK
Prophet is proud to sponsor this event, which will provide insight into how marketers ensure they are driving the growth of their business through innovation, acquisition, organic growth and effective marketing.

Prophet/ANA webinar: How to Win With Customer-Centric Marketing
April 21
In this presentation, Fred Geyer and Chiaki Nishino will discuss how companies can use a customer-centric approach to become the ultimate triple threat — one in which customers, associates, and the company/its shareholders win. *Please note, there is a $49 charge for non-ANA members to attend.

SMART xchange 2010
May 5–7 — Chicago, IL
Scott Davis will outline concepts from his book, The Shift. Other speakers include leading marketers like Barry Judge, CMO, Best Buy; Paul Ballew, SVP Consumer Insights and Analytics, Nationwide; Bill Pearce, SVP & CMO, Del Monte; Bob Calamari, SVP, Bank of America; and Larry Light, Former CMO, McDonald’s. Register using Prophet's discount code "Frnd" and receive the AMA member rate.

Achieving Customer Relevance
May 10–12 — Chicago, IL
Andy Stefanovich is keynoting this event in a session titled, "Innovate your segments, not your channels."


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