Strategic Marketing of Cisco - Assignment Example

Strategic Marketing Contents Executive Summary 3 Theoretical and conceptual perspective 3 Effective practical foundation with management recommendations 8 References 13 Executive Summary The entire study is focused towards analyzing the role of service in strategic marketing. Service is often stated as a secondary element for many product companies but in the present scenario the approach of product-service continuum is effectively implemented by every organization. Cisco is one such company which gives more focus on its exceptional service in comparison to its high quality products. This company considers service to be the major differentiating tool and incorporates it within all the strategic marketing tools and techniques. Theoretical and conceptual perspective According to the view of Schwartz (2004), the businesses across different industries can be mapped in the product service spectrum on the basis of whether the business is dominated by the tangible products or the intangible products (Schwartz, 2004). Also, the position of a business on the product service continuum is based on whether the operating model of the business is inclined towards products or towards services. On one side of the product-service continuum lie the businesses which follow a product centric operating model and which gain competitive advantage through the product differentiation within the industry of operation. The businesses that focus on service delivery along with the tangible product offerings and which leverage on the intangible aspects of the business to create competitive advantage lay on the other side of the continuum. For these businesses, the delivery of intangible products account for the majority of revenues in the company. These businesses are dominated either by the services associated with the tangible products or by the services which act as products by themselves. Figure 1: The Product-Services Continuum (Source: Carmon, Wertenbroch & Zeelenberg, 2003). There has been a paradigm shift noted in the domain of marketing in the last few years. According to the work of Vargo and Lusch (2004), an emerging new determinant logic of marketing has evolved in recent year. This paradigm shift is characterized by the consumers and marketers focusing towards augmented service offerings rather than on the quality of products and branding of products. This new determinant in marketing discipline has been termed as the service revolution in which the core element underlying the exchange between the companies and the customers is the provision of high quality and consistent service (Vargo & Lusch, 2004). As such, the boundaries separating products and services are becoming increasingly blurred in the modern business environment. The conventional characteristics of products and services that are used to differentiate between the two are also becoming narrower and are often proved to be ineffective and artificial in the real world scenario. Thus, a wider perspective of marketing has evolved in which physical products are considered to be distribution modes and mechanisms through which services are provided to the consumers. Often, it is seen that the consumers are interested to obtain products in order to acquire the services associated with these products. As per Peteraf (2003), this shift has been noted in a wide number of industries across the world (Peteraf, 2003). For example, the software companies which operate in both the Business to Consumer (B2C) and the Business to Business (B2B) segments are experiencing a revolutionary change in the missions of the business with the focus of the operations shifting from manufacturing of products to the service delivered to the customers. Software manufacturing companies like Oracle, Cisco, IBM, HP and Dell have altered their existing business models and introduced new business models that are reliant on service delivery as the most significant source of profits and revenues for the business. However, the trend of shifting the focus from the tangible products to the intangible products is not restricted to the technology based industry. Instead, the trend is spreading at an accelerating rate across a wide array of differentiated industries. The focus on service delivery needs the presence of suitable factors in the external environment. At the same time it has to review the strategic goals, customer relationships, resources and capabilities and internal structure of the firms. Thus, the service revolution has affected both the microeconomic situations and the macroeconomic situations of the business world. The emerging service based economy has changed the requirements for businesses. At the micro level, the managers of modern businesses are compelled to move away from the traditional product branding and marketing strategies to the development of customer relationships based on service delivery. Ambler, Carpenter, Kumar & Srivastava (2004) state that the changes in the focus of strategic marketing from the tangible products to the intangible products of a business has made it necessary for the managers to rethink the existing traditional marketing concepts and establish new ways to formulation and implementation of marketing strategies (Ambler, Carpenter, Kumar & Srivastava, 2004). This also calls for the establishment of innovative business models in which service is viewed as an important source of opportunities rather than a mere extension of the product portfolio of a company. The intangible business offerings act as an important resource for generating more revenues and profitability and ensuring higher customer satisfaction. As identified by Sawhney and Deval (2001), the use of intangible products as a source of competitive advantage has found its way in the B2B business much earlier than in the B2C businesses (Sawhney and Deval, 2001). However, in recent times the B2C trend also show a profound implication of the use of the intangible aspects as the main sources of competitive advantage and sustainability. Most of the leading enterprises of the world have started innovating and introducing business models based on service values and deliverables in order to ensure survival in the ever changing business environment and also to thrive in an evolving and competitive business landscape. Companies which focus on manufacturing and selling only tangible products are experiencing specific strategic disadvantages in the recent times. According to Roland, Zeithaml & Lemon (2004), the product offerings of a company can become commoditized within a short period of the introduction of the products and may face extreme challenges and competition from the introduction of cheaper and more efficient options of products available in the market (Roland, Zeithaml & Lemon, 2004). Disruptive technologies and continuous innovations may lead to the redundancy of the existing product offering in a business. Also the saturation level in mature markets may also limit the opportunities of growth and profitability of a business in that particular market. The B2B companies which are mainly based on tangible products have been focusing on the service centric business strategies and models by strategically moving away from the traditional product centric business models. This is aimed at matching the customer needs more efficiently and effectively and at identifying new streams of revenue and profit generation. Zipkin (2001) has identified that the shift from the product quality and branding side to the service side of the product–service spectrum has made it possible for the companies to tap in the opportunities for more efficient operability, reduced risk levels, higher profit margins and more efficient revenue predictability within the respective businesses (Zipkin, 2001). Apart from this the focus on intangible offerings also helps the companies to establish a continuous customer dialogue that adds to the responsiveness of the companies towards customers’ needs and requirements. As per the work of Nambisan (2001), the increased responsiveness towards emerging market demands also enables the companies to act as the co-producers of innovation and differentiation in their areas of business (Nambisan, 2001). The maintenance of a continuous and ongoing customer communication also encourages the development of a feedback process that runs in a close loop and allows for the suitable alignment of the delivery of tangible and intangible offerings of the company with the customer expectations and requirements. This also creates the scope for the customers to engage in the moment of truth related to repeat purchase patterns. The companies which have shifted to the service side of the product–service spectrum have already started experiencing a high level of profitability and competitiveness. Hooley, Piercy & Nicoulaud (2012) argue that this indicates that moving towards the service side of the continuum is not only a new opportunity but also a necessity for surviving and succeeding in the shifting business landscape (Hooley, Piercy & Nicoulaud, 2012). Effective practical foundation with management recommendations The products-service continuum states that in today’s scenario service is considered to be the most attractive element for every business. Service centric business model is generally preferred by all companies operating in various business segments. The shift that has resulted towards service based economy has brought forth certain changes in business models. These innovative business models does not only consider service to be just a natural extension of major product line but relates it to a major opportunity for enhancing level of customer satisfaction and generating high revenue margins. This opportunity has been effectively explored by all players in the B2B segment. Over decades companies operating in the B2B segment considered products being offered equivalent to services (Cheverton, 2005). The B2B companies have always placed their services as a point of differentiation. In highly competitive scenario it becomes essential for companies to design their strategic marketing framework in such a manner that it overpowers all the existing players in the industry. Most of the companies highlight their product features and other components in advertisement or branding campaign as they consider their products to be a major source of revenue. However as per the continuum even product centric companies believe that services are a major factor that supports product being offered by a company. Services are highlighted in strategic marketing campaign of these companies as they consider services to be prime differentiating tool in the market place. Strategic marketing is all about establishing strong communication with customers. In order to communicate effectively with customers it is important to outline appropriate solutions for hidden need of customers (Thompson and Martin, 2010). This can be done through highlighting value added services along with the product range. B2B companies such as Cisco, Rolls-Royce, GE, etc., have been observed to make a major shift from its product line to value added services in its strategic marketing campaign. The major reasons behind such service centric business models in real time organizations are the very nature of services which tends to bring organizations closer to customers. Multiple points of interaction provide an opportunity to such organizations to stay connected with its consumer base during the different stages of product lifecycle. There are two major segments of offering service by product companies one is pre-sale service and other is post sale service. However in both the segments it is essential for companies operating in any business sector to involve customers in the work process. The role of service is so critical in strategic marketing that it can adversely affect company’s reputation or can help to improve upon the overall image of the company. This factor has been greatly noticed in one of the topmost companies across the globe Apple Inc., as this company in all its marketing technique do not only focus on products but services as well such as iBooks, Apps store etc., on platform of iTunes. The overall business of the company is estimated to grow 40% per year and this is not only because of its iPod or iPhone sales but due to its innovative services which are majorly highlighted while communicating with target customers. A practical example of a company which has considered service to be most important in its overall operations is Cisco Systems. This company has efficiently shifted to service centric business model with the help of which it maintains healthy relationships with all its business partners. Cisco Systems, Inc is a multinational corporation which is based in America and is indulged into selling, designing and manufacturing network equipments (Everett, 2003). The services and products of Cisco Systems focuses on three major segments such as enterprise and service provider, home as well as small business. In hardware segment the products being offered by the company are data enter products, routers, catalyst switches, Cisco wireless LAN products, telephony products, servers, set top boxes, Flip pocket camera, etc. On the other hand in the software segment the products offered by the organization are operating systems, remote connectivity, telephony such as Cisco call manager and WebEx collaboration tools, tidal enterprise scheduler, network management software, Cisco active network abstraction, Cisco Quad, Cisco SDM, Cisco Security Manager, Cisco Eos, Packet Tracker, etc. All of these company manufactured products clearly depicts that the organization possess high technical expertise and large base of customers. In the recent years in order to differentiate its product line and to stay ahead from all its competitors Cisco has implemented service centric business model in its system (Waters, 2002). This has helped the company to communicate well with all its business customers and even to establish long term relationships with these customers. For this B2B Company delivering services is an integral part of its business operations. It highlights all its services in the form of constantly updating its customers regarding latest technology and helping them to install their products. The company believes that not only pre-sales service should be above the industry standard but even equal focus should be given to post sales service. As per current statistics 20% of the total revenue of Cisco is contributed by its effective services. This has even outpaced the revenue growth of its products since many years. The various partners of this company are able to derive 50% of the revenue from the services being delivered by Cisco which was previously 20 to 25%. In the present scenario customers are demanding for better services from all the companies majorly those who are equipment providers. This has been considered by Cisco has an opportunity to capture large market share as most of the competitors would focus on maintaining quality of product range rather than on services. However, incorporating role of service in all its strategic marketing techniques has enabled the company to gain higher revenue margins (Waters, 2002). Cisco realizes the importance of services and hence highlights in all its advertisement campaign their exceptional pre-sales as well as post sales service which it offers to all the customers. Word of mouth publicity on the basis of Cisco’s services helps to acquire more customers through existing base of customers. The revenue potential attached with servicing is realized by the company and has shifted into various service horizontal phases such as financial services, consulting, logistics and engineering. B2B firms consider this factor to be a major tool to achieve growth and outperform in the industry. Cisco has been able to create a unique position in the industry majorly due to its wide range of products in various segments but its satisfactory services form the basis of its overall growth. It can be stated that the organization has achieved competitive advantage by realizing the role of services in strategic marketing. Customers are often not concerned with the product especially in case of such network equipments as they are with the services being offered by the manufacturers of industrial equipments (Assael, 2005). However, the management of Cisco Systems Inc. needs to focus more on illustrating their services which they offer to their wide range of customers. Strategic marketing techniques would enable the company to incorporate certain essential features which are related to their exceptional services in the form of consulting, designing, etc. The management needs to outline the benefits they have achieved by giving importance to service in all their marketing activities. There needs to be certain improvements in the level of services which they offer to customers. This can be in the form of maintaining a database of their customers which would help them to reach out to their large base of customers even before the customers reach out to the organization for service support (Doole and Lowe, 2008). The role of service which the company puts emphasis on can be effectively improved by following such technique and this value added features needs to be highlighted in the marketing campaigns. It can be in various forms such as designing an advertisement campaign where Cisco is portrayed as a company that solves all problems related to networking and connectivity. The business customers can only be acquired and retained if the company focuses more on additional services along with the high quality products which it offers (Kapferer, 2008). Cisco over the years has been delivering products as per requirements of customers and this is the major reason behind the success and growth of the company. In recent times the inclination towards service has made the organization attract large market share but at the same time even poses a challenge as marketing intangible elements is often difficult for organizations. It is recommended that Cisco needs to be a built a service team who would be indulged in providing best services to the customers (Carpenter and Hamilton, 2008). They would be handling the overall database operation along with developing a framework which can accommodate all the technical failures related to the wide set of products being offered by the company. However in the marketing techniques such as direct promotion or service bundling Cisco needs to highlight the problems associated with any network equipments and propose their organization or team members as service providers rather than manufacturers of such equipments. This would help in differentiating the company in the market place in relation to other players of the industry. References Ambler, T., Carpenter, G. S., Kumar, V. & Srivastava, R. K., 2004. Measuring marketing productivity: current knowledge and future directions. Journal of Marketing, 104(1). Assael, H., 2005. Consumer Behavior. New Delhi: Dreamtech Press. Carmon, Z., Wertenbroch, K. & Zeelenberg, M., 2003. Option Attachment: When Deliberating Makes Choosing Feel Like Losing. Journal of Consumer Research, 30 (1). 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