Introduction to Six Sigma for Marketing Processes
This chapter is from the book
This chapter is from the book
This chapter is from the book
Growth and Innovation
Imagine the possibilities if you possessed a crystal ball that let you predict the future. You would know what will work and what won't work to create and sustain growth. You would know when to correct for competitive and environmental changes and how to prevent going off-course. Is this a fantasy? Can a business predict (with some certainty) what will drive success and how to stay on the right track? We believe the answer is yes. The appropriate data can inform executives, with high probability, whether the critical elements of the business are performing as planned to achieve desired results.
Performance against plan is how a business typically defines success. Businesses gauge success by a multitude of metrics—revenue, income, profit, customer satisfaction, market share, return on equity, return on assets, return on investments, and so on. Bottom-line, planned success means reaching and sustaining goals over time—usually growth goals. The challenge lies in determining the vital few results to focus on and the critical metrics that best monitor performance. The Fortune 500 list serves as another metric of success. Of the top 100 companies, 70 have been in the top 100 for five or more years. Interestingly, 63% of those 70 companies acknowledge implementing Six Sigma to some degree. Through further analysis, we have found that these same 44 Six Sigma users also reported on average 49% higher profits (compounded annually) and 2% higher Compounded Annual Growth Revenue (CAGR) than their peers. Notice how the profits outpaced the revenue growth for this group of companies. More than likely, they employ the "traditional" Six Sigma cost-cutting approach. Imagine the benefit these firms will enjoy when they also begin to apply Six Sigma to the top line to drive revenue. If they deploy Six Sigma into marketing and sales with as much discipline and rigor as they did to eliminate waste in manufacturing and engineering, these firms' CAGR will outrun their competitors as much as their profits have, and they will easily secure a prominent spot on the Top 100 list for another five or more years.
Benchmarking tells us that successful companies, which effectively implement Six Sigma tools, methods, and best practices find the following benefits:
- Systematic innovation: Generate and define more ideas linked with market opportunities in a structured way.
- Manage risk better: Identify critical issues early in the commercialization process such that plans can be developed to mitigate or eliminate risk going forward.
- Higher return yield from a project portfolio: Avoid overloading resources with too many low-risk, small-gain projects through a discriminating selection process. Select fewer projects—the "best fit" projects, not necessarily the easiest projects.
Business leaders often hold marketing and sales accountable for driving revenue growth—the panacea for most business ills. They want these teams to improve their accuracy rate of committing to, and achieving, their goals. Marketing executives seek new ideas to bolster their success rate. Applying Six Sigma to marketing may be a new approach, but it comes with an "insurance policy." Six Sigma has a proven track record in other parts of the business. Six Sigma concepts can provide additive elements to increase the competitive advantage marketing needs to act proactively, sustain its positive momentum, and keep pace with the ever-changing landscape.
To tailor Six Sigma to marketing, you start with an overview of how it works. We find that marketing professionals rarely view their own work as process-oriented; it often is depicted as project- or activity-based. However, the American Marketing Association (AMA) defines "marketing" as "a set of processes for creating, communicating, and delivering value to customers and . . . managing customer relationships in ways that benefit the organization and . . . stakeholders." The American Heritage Dictionary describes a "process" as a "series of actions, changes, or functions bringing about a result" and a "function" as "something closely related to another thing and dependent on it for its existence, value, or significance." Others define "marketing" as the process to identify, anticipate, and then meet customers' needs and requirements. This definition seems narrow. In a special issue of Journal of Marketing (1999, Volume 63, pp. 180–197), Christine Moorman and Roland Rust propose that
the marketing function should play a key role in managing several important connections between the customer and critical firm elements, including connecting the customer to (1) the product, (2) service delivery, and (3) financial accountability. . . . Marketing's value . . . is found to be a function of the degree to which it develops knowledge and skills in connecting the customer to the product and to financial accountability.
Hence, to fully capture marketing's value, the customization of Six Sigma should span the scope of connecting the customer to the product and to financial accountability.
Moorman and Rust's research suggests that the value of the marketing function is due to how well-developed the methodologies are for facilitating the customer-product connection. Marketing's customer-financial accountability linkage often is not well understood, but it needs to account for profitability considerations in attracting and retaining customers. It is not about cost; it is about profitable growth. Ideally, marketing should effectively and efficiently create and sustain growth for the firm. How is that best done? A challenge is to determine which marketing methodology best facilitates the customer-product-financial linkages. The marketing methodology should nurture and channel the firm's important creativity and growth capabilities.
The Six Sigma discipline gives business leaders the opportunity to drive more fact-based decisions into managing the business. Six Sigma has been successfully applied to the technical aspects of a business (such as engineering and manufacturing). A new effort is afoot to bring Six Sigma into the "softer" side of business—marketing. By adding more "science" to the "art" of marketing, the Six Sigma approach can be the next best thing to a crystal ball.
A decision-making process that lacks the appropriate facts causes leaders to fill the void with intuition. If facts are absent, statistically grounded probabilities can strengthen decision-making. Marketing executives should shed their use of intuition (or "gut feeling") to solve business issues and/or drive growth. Columnist and author Marilyn Savant said, "Not knowing the difference between opinion and fact makes it difficult to make decisions. . . ." Intuition sneaks into every business at some point. The objective is to recognize it when it appears and to deal with it directly by using facts to support or deny the "hypothesis." Bernard Baruch, an advisor to six U.S. presidents, said, "Every man has the right to be wrong in his opinions. But no man has a right to be wrong about his facts. . . ."
The Six Sigma concept has evolved over the past several decades to represent a set of fundamental business concepts that puts customers first and uses fact-based decision-making to drive improvements. It was first used in the U.S. at Motorola to cut costs by reducing variation in manufacturing. This book represents the next evolution of Six Sigma—a marketing application. We believe a unique view of Six Sigma's techniques and tools can be applied to drive income growth. It is our experience that companies are only beginning to implement Six Sigma to drive sales and marketing; however, the IDEA is increasingly discussed. In the fall of 2005, the Worldwide Conventions and Business Forums (WCBF) held its second annual conference on Six Sigma in sales and marketing. This is a cutting-edge application of Six Sigma.
This book focuses on the new frontier of applying the Six Sigma discipline to an integrated, enterprise-wide strategy to create measurable capabilities in sustaining top-line growth. This book can be read on two different levels. First, it introduces marketing managers and executives to Six Sigma (at a high level) and suggests a unique approach to applying its concepts to marketing. Second, for those familiar with Six Sigma, this book suggests a unique, flexible combination of tools and techniques tailored for marketing. Regardless of which audience you may find yourself in, we trust that this book contains new thinking and practical recommendations that will yield success.
Six Sigma has been successfully applied to engineering and manufacturing. Adding more "science" to the "art" of marketing offers a number of benefits, including project selections aligned with attractive market opportunities, a faster and more accurate product commercialization process, and better cross-functional communication. The Six Sigma approach of using proven tools, methods, and best practices across the entire marketing process can be the next best thing to a crystal ball because, with time and experience, it can deliver more predictable outcomes.