• Strategy
  • CFO.com | US

In the Journals: Customers Before Brands

Consumer ''disaggregation'' is much more profitable than the aggregation provided by brand-centric strategies, writes a professor.

An old saying tells us that “the customer is always right.” In the marketing department, however, dollars have traditionally been directed less at customers and more at brands, which allowed the company to promise benefits, differentiate itself from competitors, and lay claim to aggregations of customers.

Today, what’s old is becoming new again, according to Niraj Dawar, a professor at the Ivey School of Business at the University of Western Ontario. Dawar — who happens to hold the title of Nabisco Professor of Marketing — examines how companies are increasingly able to court specific market segments or even individual customers, developing deeper relationships with their customers than ever before. In a word, says Dawar, consumer “disaggregation” is much more profitable than the aggregation provided by brand-centric strategies.

When “the brand was the focus of all market-related activities,” explains Dawar, the finance department often found that measuring the ROI of brand promotion was a nebulous prospect. Direct marketing to individual customers, on the other hand, allows a company to measure the profitability of each customer. “The CFO has a huge interest in moving towards a customer-centric organization,” maintains the professor.

So is the brand a less valuable asset than a base of profitable customers? Not necessarily, says Dawar. But brands play a different, sharper role in a customer-centric model: They become tools in the company’s toolkit. Rather than counting on a brand to acquire and keep customers, a company should use the brand as part of a portfolio of products that meet customers’ needs.

What Are Brands Good For?


from the October 2004 issue of the MIT Sloan Management Review

More articles:

Congratulations, You’re Controller: Now What?

from the CPA2Biz website, October 2004

“Physician, heal thyself. Accountant…organize yourself!” counsels consultant Mark Gorman in this how-to for first-time CFOs and financial managers as well as controllers. Gorman offers a guide to your first day, first week, and first month on the job. By your second month, you can begin to develop a vision of excellence for the finance department and for the company as a whole — but “you must first put your staff, peers, and supervisors at ease on a personal level.”

The New Role and Politics of State Regulation

from the Fall 2004 issue of Regulation magazine

“Is the recent trend of expanding state regulation beneficial or harmful?” asks Paul Teske, a professor in the Graduate School of Public affairs at the University of Colorado. He finds that states have done a “credible job” in regulating landline telecommunications and electricity, and less well regarding occupational regulation and insurance. Teske adds that in recent years, “a good argument can be made that state regulation has become relatively more important…as the federal government has deregulated more and “de-enforced” in a number of areas.”

Target Costing: Delighting Your Customers While Making a Profit

from the October 2004 issue of Focus magazine

Authors Hank Bird, Bob Albano, and W.P. Townsend give an overview of a quantitative, market-based process “for ensuring a company has profitable products that are well-matched to its customers’ needs.” Target costing, they maintain, “doesn’t require an army of specialists, large-scale software implementations, or complex management structures and procedures. It’s mostly logical, disciplined common sense that can be imbedded into a company’s existing procedures and processes.”

How Human Behavior Drives Investment Activity

from the Knowledge@Wharton website, October 2004

In May, efficient-markets theorist Eugene Fama presented a paper with his longtime collaborator Kenneth French conceding a point to behaviorists; Fama wrote that erroneous beliefs of poorly informed investors could, in theory, lead stock prices to “become somewhat irrational.” More recently, at the Wharton School of Business, Alliance Capital Management chief executive officer Lewis A. Sanders discussed the “inertia of regret” and maintained that “capital markets themselves are derivative of the biases and preferences people bring to decision-making.”

Lisa Yoon’s “In the Journals” column appears every other Friday. Contact her at LisaYoon@cfo.com.

Discuss

Your email address will not be published. Required fields are marked *