The September CMO Magazine includes an article titled More Power, More Peril that discusses how chief marketing officers not only have a seat at the executive management table (no surprise) but their rising profile is bringing more daunting challenges including how to deal with commoditization, new and more innovative competitors, and overall economic conditions. Jeff Immelt, CEO of GE (and arguably one of the most capable CEO's in business today) is quoted in the recent Fortune Magazine 75th anniversary issue in the story titled Bionic Manager as saying "...virtually every product and service in today’s markets is in danger of being commoditized..". He went on to say "marketing [at GE] had become a lost function during the 1990s, so restoring it was a fat opportunity to make GE more competitive.". Immelt recently made GE’s marketing as great as its vaunted finance and human resources operations. GE's vice chairman Dave Calhoun said "at first no one knew what [Jeff Immelt] was talking about," It’s not that GE hated customers; it just wasn’t customer-centric.".
We have written numerous times in this blog about commoditization as it relates to the concept of economic value - the difference between price and cost. Marketing plays a central and vital role (as Mr. Immelt realizes) in this commoditization challenge.
Here's how.
The creation of economic value is the final determinant of business success and most experts would agree that there are only two ways a company can increase its economic value – operating at a lower cost and commanding a higher price for services, relative to the competition. For many company's, operating at a lower cost is becoming increasingly more difficult if not impossible (see related blog posting Staying In Demand with On-Demand HR Applications. So, that means companies must focus on commanding a higher price for services. There are many ways you can do this. A few examples are building better mouse traps (innovation) and stellar customer service/support. Again, quoting Jeff Immelt: "If GE scientists are on the leading edge of research, then GE has a fair chance of creating products the competition can’t match, at least for a while.".