There is a battle being waged on the fringe of the Six Sigma community. The battle is over how to apply Six Sigma to one of the last frontiers of business – marketing. There are two sides to the argument: those who favor a direct application, and those who feel the method should be modified. While the first approach may lead to less costly practices, the latter can not only make a marketing department more efficient, but also more effective.
The Direct Application Argument
On one side of the Six Sigma and marketing argument are those who feel that Six Sigma and its tools should be applied on a project by project basis to such marketing activities as sales, promotion and distribution. Extending the cost cutting focus of Six Sigma efforts to marketing is an attempt to make these activities more efficient. The undisciplined and creative activities that define marketing offer a rich treasure trove of cost savings when made more disciplined and structured. But what about making these activities more effective and value enhancing? How can Six Sigma grow market share or top-line revenues?
The Modified Six Sigma Argument
On the other side of the battle lines is the argument that Six Sigma should be modified to accommodate the special nature of marketing activities. This is the approach that Six Sigma Marketing (SSM) takes. SSM uses a modified DMAIC approach that provides a fact-based, disciplined approach to growing market share in targeted areas by providing superior value. Its focus on value, products and market share is where it differs from the application of Six Sigma to specific marketing activities.
The first step in the SSM approach is identifying specific products or markets that offer the organization its best options for growth. Six Sigma leaders evaluate products and markets using metrics such as current market share, market growth rate and competitive intensity to assess the best targets for the organization. SSM eschews the notion that a company can be everything to everybody, and instead focuses on key market opportunities. This occurs in the Define stage and differs from the more project-oriented approach that traditional Six Sigma uses.
SSM’s DMAIC Approach
In the Measure stage of SSM, the Six Sigma team creates a value model for each of the targeted product or markets. This value model is the voice of the market (VOM) that drives all operational and strategic initiatives undertaken by the organization. The VOM replaces agendas, hunches and strategic guessing as the guiding factor in growing market share. Value has been shown to be the best leading indicator of market share and top-line revenue growth. SSM uses superior value creation and delivery to propel growth within the targeted product or markets.
The value model depicts, in numerical terms, the relative tradeoff between the two components of value: quality and price. In most cases, quality is the more important driver of value. Within the model, the team identifies and prioritizes the critical-to-quality factors (CTQs), and ranks the CTQs in terms of their impact on value. This provides a focus that does not exist in most quality improvement efforts. Instead of quality being an abstraction, it is now highly granular and actionable, and it is based on how the market defines quality, not internal sources.
A key element of the value model is that it is holistic in nature and does not focus simply on product features. It includes such value creating and delivery components as product support, service, technical support, warranty and other aspects of the complete buyer experience.
In SSM’s Analyze phase, teams use a number of tools, including the competitive value matrix, the customer loyalty matrix and the competitor vulnerability matrix, to guide value delivery. These value tools are designed to facilitate the three elements of market share growth:
1. Acquiring new customers (competitive value matrix and competitor vulnerability matrix)
2. Retaining current customers (customer loyalty matrix)
3. Providing current customers with a reason to upgrade, renew contracts, increase purchase frequency and so on (customer loyalty matrix)
An organization’s value is relative to that of its competitors. This is part of the buyers’ comparative calculus in assessing where to buy. The buyer is asking a simple question: “Is this brand worth it?” By understanding their organization’s competitive value proposition, leaders can make better decisions regarding market share growth.
The Improve stage can also be called the Enhancement stage. For value leaders, the focus should be on enhancing value to sustain their leadership position. Extending the gap between the value an organization provides and the value provided by the nearest competitor can lead to best in market status.
Value followers will want to improve those elements of the value creation and delivery system that will close the gap. The principal tool used in this stage is value stream mapping. This process is informed by the value model and the conclusions drawn from the Analyze stage. This is when organizations need to enhance or improve their competitive value proposition in accordance to the directives of the market place.
The Control stage of SSM is where leaders put monitoring systems into place to ensure that their competitive value proposition accomplishes what is intended. This control effort focuses not only on the more strategic value proposition, but also can be set up to monitor specific transactions such as sales, repairs, inquires and other customer experiences. This monitoring process acts as a trip wire, providing information where there are potential people, product of process issues that require intervention.
Six Sigma Marketing is a comprehensive approach to growing market share. It is not a project-by-project approach for reducing the costs of marketing activities, but rather an approach that seeks to enhance marketing’s effectiveness and efficiency.
For organizations that have deployed Six Sigma or other quality initiatives, the SSM approach provides a user friendly bridge for moving the quality focus from the manufacturing floor to the marketplace. Those seeking to become best in market must shift their focus from a product orientation to a market orientation, from an internal efficiency focus to an external focus. Best in market companies will be those that can make this transformation and make it soon.