By Taddy Hall, Project Director, The Cambridge Group
Much has been discussed about the short tenure of CMOs. The primary reason for the brevity, however, is a frequent misgiving that successful marketing begins with allocation and ends with execution and measurement. Their dedication to an "allocations model"—relying on establishing a budget, allocating it, executing tactics, focusing on results and performing analysis—leads them adrift. Instead, successful marketing begins with a demand driven business model that provides the CEO with strategic options and paves the way for sustained growth and profitability.
Let's examine what could have happened to Anheuser Busch (AB) in 2006. They had the dominant share of the overall U.S. beer category. They had historically built their business via the introduction of valuable and innovative new products launched over time. Whatever they were doing seemed to be working; they had commanding market leadership position and enjoyed their position as category captain as opposed to their competitors.
What made AB great was their total dominance of the market. They had successfully launched and supported a range of products and had cemented relationships with their most valuable customers. They were an adult beverage giant.
However, AB was also vulnerable. Given their market dominance, it would have been all too easy to grow complacent in their identification of future market opportunities. It’s not always straightforward to see the next big opportunity, regardless of your size. Such was the case for AB in 2006. As they surveyed the landscape, they had reached a point where the next big growth opportunity was not clear. But they knew they needed to find it before their competitors did.
At the same time, AB was beginning to consider where the next great product opportunity would come from, so too were their competitors. Enter Miller Chill, a new lime-sweetened beer, launched by Miller.
Both Miller and AB had uncovered a latent demand opportunity for sweeter products. Looking across adjacent alcohol beverage categories, the teams had found that the majority of growth was being driven by sweeter products, including flavored vodkas. This went against the industry's long-term view that beer had to be pleasantly bitter.
AB responded by launching their own version of a slightly sweeter beer in Bud Light Lime. However, Bud Light Lime launched with several very important differences to the competitive Miller Chill product. Miller Chill used artificial lime flavoring and added salt to the product while Bud Light Lime used a splash of natural lime flavor, offering a refreshing, citrus-infused alternative to traditional light beers.
While both recognized the emerging opportunity, AB excelled at all of the nuances. They recognized consumers' desire for the naturally sweeter flavor as opposed to the slightly tart flavor associated with Chill's artificial flavor and salt combination.
This is the power of AB's demand-driven business model. By placing the latent consumer demand for sweeter beer at the center, AB built a comprehensive business model to deliver the product. The proof is in the results. Bud Light Lime sold four times the amount that Miller Chill sold in the previous year, and in half the time. Ultimately Bud Light Lime was ranked the number one product launch in the consumer goods industry in 2008.
AB, in short, developed a complete business model: a demand-driven commercial concept, a strategy for generating revenue and profit, a product-requirements specification, and a tactical go-to-market plan.
The tale highlights an important truth: a core function of a great marketing organization is to identify and articulate strategic options based on insight into latent and emerging consumer demand.
The kernel of truth in the wisecrack "marketing is too important to be left to marketers" is that too many marketers define their job as to develop a plan, execute it, and deliver on accepted metrics. This narrow view of marketing focuses downstream from the source of growth. Successful marketers, however, understand that growth comes from identifying demand and fulfilling it in innovative, new ways.
This article was originally published on the Huffington Post.