Tinkering with the Go-to-Market(ing) Model

Every marketing department has its preferred go-to-market model. It's well developed, implemented and tracked. The problem is, it doesn't always match up with the company strategy or changing market conditions. Sound familiar? If so, it is probably time for a frank conversation about marketing—one that begins with building a model that connects with your growth expectations and challenges.

A FEW YEARS AGO, ADVERTISING AGE published an editorial called "A Modest Proposal," in deference to Jonathan Swift's satirical 18th century essay. While Swift suggested that poor Irish families should sell their children as food for the rich—to prevent them from being a burden on their parents and instead make them beneficial to the public—Advertising Age writers suggested that we might do away with our marketing departments and chief marketing officers for the "good" of the company.

The Advertising Age editorial, much like Swift's essay, brought fundamental issues into sharp focus and forced people into a conversation. What exactly is wrong with so many of today's marketing departments? Why is marketing often at odds with its peers in sales, IT, operations and finance? Why do so many chief marketing officers struggle to keep up with corporate strategy?

Certainly, this is not to say that marketing leadership at the head office is inappropriate. Rather, many companies have a hard time defining exactly what that leadership should look like. In the resulting vacuum, the chief marketing officer and his or her team are unable to get their arms around the full range of media, are ignored by other functions and resented by their counterparts within business units. Marketing thus becomes the quintessential scapegoat blamed for many of a company's problems.

Too many CEOs, after successfully identifying the problems within their marketing group, nevertheless fail to cure them. Why? They're usually pursuing the perfect marketing model: the new, ideal approach that will solve everything. But you can't remake your marketing department the way you would your wardrobe—by donning the latest styles. In fact there is no single model, no perfect approach to marketing that fits all companies in all markets and geographies.

In fact there is no single model, no perfect approach to marketing that fits all companies in all markets and geographies.

The reason so many chief marketing officers (CMOs) have failed is not that they have inherited a set of organizations, structures and skills that are disorganized, redundant and resistant to change. (Those are situations that competent executives can easily identify and address.) Rather, CMO flameouts are often symptoms of deeper underlying issues. The central marketing function may not reflect the company's strategy or the broader corporate go-to-market models. Or worse, they stick to business models that don't match the changing market conditions in which their companies compete.

To avoid marketing fiascos, we suggest connecting your marketing model with your corporate go-to-market strategy and the business environment—and ensuring that all three stay connected over time.

Dancing on Three Pillars

People use the phrase "go-to-market model" to refer to many different things, so let's first define what we're talking about. For the sake of clarity, all companies' go-to-market models rest on three pillars: the customer, the product and the channel (see figure 1). Marketing, supported by operations, finance, and IT systems and tools, is the key enabler of the go-to-market strategy. Marketing interprets customer needs and behaviors, designs products and services to meet those needs, and determines how best to deliver those products and services.

To meet business needs, most companies generally emphasize one or two of the pillars. While they are not mutually exclusive, it's rare that all three receive equal attention. In a product focus, products and innovation define corporate objectives, key activities and the role of support functions. In a channel focus, channel expansion, management and efficiency drive revenue, profitability and other performance indicators. In a customer focus, deep customer insight informs product and channel development, customization, and strategic priorities. The choice around which pillar to emphasize is inextricably linked to the maturity of the company's market.

Figure 1: Three pillars of the go-to-market model

We can illustrate this with a hypothetical example. When New Company, Inc., (NewCo for short) launches its business, it has a new, innovative product or service. By definition, it is entering markets where competitive pressures are low and growth opportunities abound. Thus the customer and channel pillars are less important—the company's future depends on its product. Of course the customer always matters, for without customers there is no market. But what's unique about the product phase is that, because the product is new, because the concept is innovative, there are few options. There is no competition. The focus, therefore, is on the product.

After a few years, competitors enter NewCo's market. But shareholders still demand continued growth. So now it focuses on the channel pillar, seeking to make its primary channel more efficient (to drive down costs) and to exploit new channels (to increase sales). Eventually the market reaches maturity, with few obvious growth opportunities. NewCo is already exploiting all possible channels, and running those channel operations efficiently. New growth potential relies on new product development based on a detailed understanding of customer needs.

Avon, Campbell's and McDonald's HAVE ALL ALIGNED THEIR GO-TO-MARKET MODELS with evolving business environments.

Of course a real-world company is never as simplistic as NewCo. But several examples demonstrate these broad patterns. Consider Avon, which for most of its history has focused on the channel pillar. In spite of a recent focus on product brand-building, revenue growth through its attractive direct-sales model has long been the company's top priority. In contrast, growth at the Campbell Soup Company, despite being a long-term competitor in many mature markets, is fueled by new-product launches in new geographic regions. Overall, its go-to-market model is primarily product-focused.

Finally, like Campbell's, McDonald's operates in mature markets. But its market context leads it to rely almost equally on all three pillars. Since its comeback in 2003, McDonald's pays acute attention to the product pillar, in part because its products are synonymous with its brand. McDonald's also pays attention to the channel pillar because it owns its channel, rather than distributing through a third party. But McDonald's is also celebrated for its customer focus. The company expends a great deal of energy understanding buying behaviors of moms, kids and young adults—wherever in the world they live.

Know Your Markets

What Avon, Campbell's and McDonald's have each done well is to align their go-to-market models with evolving business environments. Markets vary in their growth potential and their challenges (a combination of competitive intensity and growth expectations). Smart companies recognize the environment they're working in and adjust the strategy appropriately. Figure 2 illustrates four environments and the preferred go-to-market strategy for each:

• The new-product-launch market, a high-growth and low-challenge environment, calls for a product-focused go-to-market model.
• A transition market, with greater competition and expectations, calls for an increasing focus on channel.
• A mature market, with slowing growth, calls for the most balance among the three pillars, maintaining product and channel strength while starting to focus on customers.
• A dead-end market reflects the end of a product's life cycle and requires customer focus to develop new, more marketable products.

Take Starbucks as an example. When Howard Schultz entered the coffee shop game in 1982, Starbucks had a new product: really good coffee. At the time, the company faced little serious competition and had identified a niche with high market receptivity and growth potential. To succeed, Starbucks needed to serve consistently great coffee in an attractive social setting. Its success with that product focus drove 16 years of global expansion.

Starting in about 1998, the Starbucks market began to evolve with the entry of serious—often regional—competitors, and the company shifted to more of a channel focus. It still opened stores in new geographies (product focus), and sought to improve the efficiency of existing stores (channel focus). It also sought new ways to reach customers, through new channels such as retail grocery and third-party vending machines.

Figure 2: Align the go-to-market model with the business enviroment

In the past two years or so, the coffee market has approached maturity, and Starbucks' financial performance has lagged. Returning to the management team in 2008, Schultz announced that he was instituting customer focus as the new vehicle for growth. In early 2009, Starbucks began implementing a $3.95 "value breakfast meal" including coffee cake, oatmeal or a breakfast sandwich. Will this new initiative tap into customer needs to drive renewed company growth? Or is it doomed, because—like Starbucks' ventures into music and fancy drinks with overly creative names—it is just another product-focused venture by a historically product-focused CEO in a market that is now product-saturated and requires more effective customer focus? Only time will tell.

Companies don't always move clockwise through figure 2. Some, like Avon, stay in a single quadrant for decades. Moreover, if a new product fails, its company moves directly from launch to dead end. In a sense, that's what happened to Apple in the mid-1990s: its initial growth slowed because PCs became the business standard. Everyone knows how Steve Jobs launched the iPod and a new generation of Mac products to return Apple to profitable growth. Rather than repeating the story here, we'll merely note that those innovations arose out of a go-to-market model focused, once again, on the product. A company's go-to-market strategy could repeat the cycle. Apple reached the customer phase (recognizing the maturity of the PC market) and started all over again with a new product launch. There was no competition, so back to the product phase.

New Roles, New Rules

In the context of these shifts in the go-to-market model, the strategic role of marketing must evolve as well: When the company is product-focused, key marketing responsibilities are commercialization and product support. With a channel focus, marketing should work toward cross-channel consistency and coordination. With a customer focus, marketing should enable the company to tailor product and channel offerings to customer segments with a constant overall goal of delighting the customer.

In each case, the evolving model suggests a different set of required capabilities to enable that role (see figure 3). Let's take a closer look at each.

Figure 3: The Strategic Role of marketing

Supporter role. In a product focus, marketing's key role is to get the product into the market. In light of the investment that the company has already made—picture a biotech company developing and getting approval for a great new drug—the product now must be monetized. Thus, a biotech marketer isn't really interested in grand ideas about what customers want out of healthcare. There's a more urgent task: to develop alliances with distributors or other drug companies to push the new product.

Compared to a channel or customer focus, the product-focused marketing department ought to play a strong supporting role for the sales function. Product-focused marketing is all about promotion: producing the brochures for salespeople to take to customers, producing the collateral for salespeople to take to trade shows, managing advertising to generate buzz for the salespeople to capitalize on. Marketing is an important enabler, and its functions must be executed effectively, but these activities are not burdened with the necessity of being strategically sophisticated or complex. The marketing organization's required capabilities include business development skills, a solid understanding of the market and a robust product map. For example, at Campbell's, global marketing groups provide brand guidelines and lead activities in marketing analytics. Because customer tastes differ by geography, decentralized country-based brand managers support strategy decisions for new products. R&D decides what products to develop, sales decides how to manage channels, operations and supply chain managers determine promotion and product bundling options, and finance and other departments collectively determine pricing. Marketing helps them all support the product.

Manager role. In a channel focus, marketing manages a portfolio. The company sells multiple products through multiple channels, and the role of marketing is to sit behind them all and tweak them for maximum benefit. Which products should be sold in stores versus online? How should the channels collaborate? Are branding, advertising and promotional activities effective and consistent within channels and across channels? Are below-the-line campaigns effectively managed and coordinated? Can best practices be shared across geographies, product lines and channels?

A channel-focused marketing department has been entrusted with a valuable asset—the company's brand. Thus, like a financial portfolio manager, the channel portfolio manager seeks to maximize the return and minimize the risk. Typically the marketer strives to ensure that the customer experience is consistent and coordinated across all channels. (There may be exceptions, when the company intends for customer experiences to differ in different channels—but these must be known and planned for.) These tasks typically involve more juggling and a wider perspective than the product focus. The required capabilities include: a solid understanding of channel dynamics to ensure that products are effectively delivered to the market; a well-defined branding, product and channel strategy to ensure consistency and coordination; close collaboration with operational teams to ensure a consistent customer experience and quality across channels; and clearly defined sales management processes and incentives to encourage cross-selling and minimize channel conflict.

For example, at Avon, marketing is accountable for meeting revenue growth targets, which are achieved through rigorous management of agent sales channels. Marketing also drives pricing and promotion strategies. When you think of the Avon brand, you think of your local Avon lady, not a specific product. Thus, traditionally (although Avon is currently shifting more attention to its product line), marketing has been particularly engaged with providing selling tools (physical and web-based brochures) to its representatives, who manage the company's relationships with the ultimate end user.

Analyst and strategist roles. In a customer focus, the marketing organization's primary goal is delighting the customer. Everything else is secondary. Unlike the product-focused biotech company, a customer-focused healthcare company would be asking big-picture questions about what customers want and need from healthcare. It would then use that understanding to work backwards through the company's value chain to determine the best value proposition that it can deliver to customers.

Marketers must know a great deal about their customers, which is why customer-focused companies are often mature companies in mature markets—they've had plenty of time to develop insights. As analysts, they understand how to pave the way to new products. Furthermore, in most industries, the product development process is incredibly capital-intensive—yet a successful customer-focused company requires the product-development function to be subservient to the customer insights of the marketing department. Here the marketing organization is driving business strategy, which means the marketers must have an extraordinarily strategic mindset. The required enabling capabilities include:

• Organizational support to drive the business strategy
• A broad set of marketing skills, from strategic thinking to tactical execution
• Access to advanced market research tools, such as focus groups and conjoint analysis
• The flexibility and resources to tailor specific products and messages to different customers' needs

For example, at McDonald's, the marketing group's customer research directly influences branding, positioning and product development. McDonald's enforces a stunning consistency in its core products—but it matches that consistency with local product development. Furthermore, local product development is driven by deep knowledge of local tastes and consumer behaviors all around the globe. At McDonald's, the CMO heads brand positioning, enforces channel standards and influences product development—and it all ties back to customer insights (see sidebar: NewCo Gets Complicated).

Lather, Rinse and Repeat

Successful marketing organizations evolve. This simple fact makes us chuckle when we hear so-called experts discuss the future of marketing strictly in tactical terms. The future of marketing will be largely Internet-driven. Well, that's certainly true! It will harness social networking tools. Yes, we agree! It will be led by CMOs whose analytical skills are as outstanding as their creative ones. We love people like that! But taking the first step toward the future of marketing isn't about creating a Facebook application or writing a pie-in-the-sky job description. It's about establishing a well-defined go-to-market model that meets the challenges of growth in its environment.

The right go-to-market model can be used to identify the strategic role of marketing, which will in turn define the department's required capabilities. This leads to the individuals and tactics that will help the organization achieve its core business objectives.

Then, as the old shampoo marketers used to say, "lather, rinse and repeat." The marketing organization needs to pursue its objectives while also continually realigning with the changing market environment—because its most important feature is its genetic link to the changing strategic position of the company as a whole.

Consulting Authors

Mary Larson is an A.T. Kearney partner alumna formerly based in the Toronto office.

Mike Baum is a principal in the San Francisco office.

Craig Knox Lyttle is a consultant in the San Francisco office.

Andres Mendoza Pena is a consultant in the Chicago office.

For more information, please contact the authors.