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  • Geography Matters!

    Many companies manage their business on some geographic basis—whether called districts, territories, markets, regions, or zones— and evaluate metrics and managers correspondingly. It is not uncommon to find large variations in market shares for brands across these geographic markets. These regional skews appear to be ubiquitous across most industries.

    Our interest in the topic was inspired by a real-life example that occurred in the retail gasoline industry. A major oil company found wide variation in loyalty rates for its brand in each of its marketing territories. Specifically, one territory was identified as a low performer. Loyalty matters in the gasoline industry. A loyal heavy user spends about $1,800 towards a particular brand. The company spent enormous resources to improve loyalty in this market by employing a variety of strategies including customer satisfaction programs, promoting ownership of its proprietary credit card, and even replacing managers but loyalty rates were stagnant. Then someone suggested an analysis of the loyalty rates of all brands in this specific market and they found that all brands in the market had low loyalty rates. Perhaps the specific market had some distinct characteristics. So how should one manage and evaluate company performance across geographic markets?
     
    In a recent paper, my co-authors, Rupi Jindal and Ed Blair, and I provide some pointers to how managers should utilize the marketing levers at their disposal. A firm would do well to allocate relatively more effort to customer satisfaction efforts in territories where it holds a lower market share and relatively more effort to relational investments (e.g. proprietary credit card, loyalty programs etc.,) in territories where it holds a higher share. A “one size fits all geographic markets” approach is not appropriate for either evaluating or managing brand performance at a territorial level.
     
    A brand’s performance in any given territory should be evaluated by comparing it to the other brands operating in the specific territory rather than by comparing it with its performance in other territories. Tailoring plans at the territorial level by utilizing different levers for different markets, customizing patterns of local expenditures, and evaluating local managers with due consideration to differences in their territorial markets is the path to “national” dominance for brands.

    _________________________
    Raj Echambadi
    Professor of Business Administration and
    James F. Towey Faculty Fellow and
    Executive MBA Academic Director