Prof. Lakshman Krishnamurthi

Professor Lakshman Krishnamurthi is the A. Montgomery Ward Professor of Marketing and chair of the Marketing Department at the Kellogg School. His research addresses the impact of price and advertising on consumer purchase decisions, particularly in the estimation of price elasticity in brand choice and quantity purchased. He also studies strategy related to customer advantage, branding, segmentation and new products. His scholarship has earned him numerous awards, including the prestigious John D.C. Little Award for best paper. Kellogg World caught up with “Prof. K” to seek his strategic insights.

Kellogg World: What strategies must marketers adopt as they engage increasingly demanding consumers in a marketplace driven by technology?

Prof. Lakshman Krishnamurthi: The central focus of marketing strategy should be the insightful understanding of customer benefits and how to translate those benefits into meaningful products and services. Competitive advantage often ends up in wasteful strategies which may not address customer benefits. The key questions that must be answered have to do with customer benefits: what compelling customer advantage does the technology provide; is the customer better off; how hard must the customer work to enjoy the benefits?

Which firms best understand marketing strategy, and what are they doing so effectively?

Southwest Airlines is very focused in its customer targets and positioning. Anybody can charge a low price; very few can make money unless they are operationally excellent. Southwest is extremely cost-efficient. At the high end, Porsche is doing very well, as a niche player that dominates the premium sports car market with just two car lines, the 911 and the Boxster. Its positioning is its mystique which allows it to command high prices. At the same time, the company is run extremely efficiently using sophisticated supply chain optimization and JIT manufacturing. All low-value-added parts and mechanicals are manufactured by suppliers, leaving Porsche to concentrate on the car engine, the finishing and the marketing. IBM has also understood better than most that customers want solutions, not products, and has started to partner with key players in the systems marketplace to sell e-commerce solutions. Such partnering added $3 billion to IBM’s top line last year.

What are some misconceptions about marketing strategy, and why do these misconceptions persist?

A common misconception is that you have to dominate on one of the three value disciplines, either operational excellence, product leadership, or customer intimacy. Regardless of what business you are in, today’s marketplace does demand operational excellence. Neiman Marcus cannot be as operationally excellent as Target, but must be better than competitors like Saks. Porsche, after years of believing that simply having great cars — product leadership — is enough, has now embraced the operational excellence paradigm with a vengeance.

How are marketers meeting the challenge of disruptive technologies, such as TiVo, that allow viewers to eliminate commercials in broadcast media?

You have to be creative and take advantage of the disruption. Advertisers could work with TiVo (or the cable company) to provide targeted infomercials. Assuming two-way interaction, viewers could identify products and services that they are interested in. Customers want to learn about products, but at their discretion.

— MG