Marketing in the Ecosystem

Robert LuschThe new marketing ecosystem requires marketers to work with stakeholders of all kinds to co-create value with customers, says Robert Lusch, who spoke at MSI’s Fall Trustees Meeting. 

“Firms need to move beyond thinking of sellers and buyers, firms and customers, and even supply chains and value constellations," he noted. "They need to consider how they fit into a broader service ecosystem comprised of many actors—including firms, customers, suppliers, and stakeholders—where value is mutually created through service exchange.”

He and coauthor Frederick Webster develop this idea in their working paper, “Marketing’s Responsibility for the Value of the Enterprise.” They begin by tracing marketing's evolution over the past century.

In the early 1900s, marketing first emerged in manufacturing firms as a distinct management function. Its major responsibility: to stimulate demand for a firm’s productive capacity through product pricing, promotion, and distribution strategies.

No company illustrates this better than Ford Motor. Integrating all aspects of production and distribution, Ford’s goal was to bring the car price so low that even the people who built it could afford to own it. Profit strategy centered on high volume and low cost. Even though their specific needs were rarely met, customers were attracted to the “standardized, less-than-ideal product offerings” because prices were low and products were readily available.

Marketing’s role has evolved into one that should help firms co-create value.

This product-centric view of marketing began to evolve in the 1950s. Lusch and Webster credit Peter F. Drucker with creating a management philosophy built around customer orientation. The essential premise was that firms should put the customer at the core of their activities and concentrate on “creating a satisfied customer, with profit as a reward, not a goal itself,” says Lusch.

The seed for this era of marketing was planted when Procter & Gamble developed its brand management system in the 1940s. A brand manager had responsibility for a brand aimed at a well-defined market segment, promoted with a unique value proposition of product benefits, often competing with other P&G products in the same category serving a different market segment. Many other consumer packaged goods firms, and other industries, emulated this successful system.

During this time, advertising shifted away from product attributes and features toward how customers would benefit. Marketing centered on creating a Unique Selling Proposition (which evolved later into the “value proposition”) to distinguish firms from their competitors.

Yet, even as the idea of putting the customer first in marketing with profit as a reward took hold, another offsetting mindset began to encroach on it. Return on investment (ROI) became a major, if not the primary, strategic goal of enterprises. What suffered as a result, said Lusch and Webster, was the long-term view of a firm’s value and the things that create it, things like innovation, management and employee development, revenue growth, customer loyalty, brand equity, reseller support, and sustainable return on assets.

Today, marketing’s role has evolved into one that should help firms co-create value, reaching into the network to influence and serve all stakeholders to enhance the total value of the entire network enterprise, not just the focal firm. Lusch points to Nike as a good example of a true network organization: the company relies on manufacturing partners in several countries to actually make its shoes while it concentrates on managing the Nike brand and overseeing product design and continuous innovation.

In today’s network-centric economy, firms have become part of an enterprise structure much broader than the “standalone” company of traditional economic theory. Just consider the financial crisis of 2008-2009, where firm failures had harmful ripple effects on employees, suppliers, local and regional communities, and even the government.

In the end, a winning marketing strategy comes back to the simple idea of evolution. “The customer’s definition of value changes continuously,” says Lusch, “and therefore marketing must be a learning process.” The new marketing framework “must incorporate customer sovereignty, organizational complexity, information-enabled networks, and global partnerships as facts of everyday life.” Successfully adapting marketing to these facts will result “in value propositions that unite stakeholders in co-creating value and increase the value of the enterprise as a whole.”

Marketing’s Responsibility for the Value of the Enterprise
Robert F. Lusch and Frederick E. Webster, Jr. (2010)


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