Whilst attending a Tastemakers gathering in New York, he has the opportunity to witness one of his CMO’s (Nevin Wallace) marketing strategies. New features also include interactive corners and a call centre. According to research these front-end techniques (aimed at creating a personal connection between customers and the brand) have resulted in an increase in sales. This is mostly due to brand loyalty.
However, the company’s CFO (Ewan McCallum) notifies him that the costs for marketing are half of the company’s total costs. This is a problem according to the company’s master distiller (Ellis Cameron) because not enough money is left for Research and Development. Not to mention that if costs are too high in marketing, you are in that awkward position where it is as if you’re paying the customer to buy your product. As Ellis mentions, “customer care is what you focus on when you can’t compete on product superiority”. Bob is now faced with the main issue of the case study: marketing costs that are ensuring the current increase in sales versus R&D costs that may ensure profitability and brand loyalty on the long run.
The case study clearly highlights that Bob is trying to decide which technique will be most efficient in terms of profit, growth and sustainability.
His master distiller’s R&D efforts have gained Glenmeadie four gold medals for superior quality and his CFO’s marketing techniques have made Glenmeadie a medallist in Corporate Events.
Nevin’s techniques are demanding a lot of investment and are focused on the front-end of the business. Ellis’ dream of being able to do single-cask bottling at scale would also require a lot of money but focuses more on the culture of the brand. Both of their strategies therefore involve securing customer satisfaction.
Marketing efforts are putting sales up but demand may outstrip supply. Innovation efforts would guarantee that the product continues to beat competitions and please the connoisseurs but would mean a decrease in marketing investment.
By looking at a simple model of a good strategy the first step is to understand the market and customer’s needs and wants. Glenmeadie is introduced as a quality scotch; a luxury good. Customers are therefore more likely to be connoisseurs and upscale customers. The marketing techniques currently used seem more appropriate for mass-market ambitions, according to Stephen Dull (vice president of strategy at VF corporation).
This brings us to the second step, which is designing a customer-driven marketing strategy. As David Herman (president of Tennessee-based Hartmann Incorporated) suggests, marketing costs could be reduced if Glenmeadie was clearer on what type of customers they are targeting. The marketing director for North America (Paula Laughlin) averages a common cost of $15,000 for each Tastemaker programme. Perhaps some cities have less targeted customers than others so costs for these could be reduced.
The third step requires the construction of an intergraded marketing programme that delivers superior value. As Jeffrey F. Rayport (founder and chairman of Marketspace) suggests, Ellis’ project “is about as front end as a production innovation can get. Numbering barrels and packaging their contents in limited-edition batches represents more of a go-to-market plan than a production strategy.” Here is where marketing efforts could be used wisely in respect of the culture of the brand.
The interdependence of marketing and R&D is well explained by Butler: “The fact is that our Research & Development activities and our marketing activities are very interdependent. Without a flow of significant innovations coming from the development effort, our marketing team could not be effective. Without an effective marketing team which