Book Review on Lateral

marketing
by Philip Kotler & Fernando Trias De
BES
The evolution of markets and dynamics of
competition
• Distributors respond by concentrating. Channels are concentrated in
the hands of fewer distributors with a lot of power.
• Number of competitors has been reduced, but the number of brands
has strongly increased:-Multinationals and other corporations have
been gaining in power. There are fewer players but higher number
of brands.
• Product life cycles have been dramatically shortened:-Launching
new brands is costing less. New products survive in the market for
shorten times.
• It is cheaper to replace than to repair:- Manufacturing process are so
efficient than replacing becomes cheaper than repairing. This
accelerates the frenetic rhythm of new launches.
• Digital technology has been provoked a revolution in many
markets:- The digital era facilitates the appearance the rhythm of
innovation and number of new products. The internet facilitates the
appearance of new brands and ways of capturing business.
• The number of trademark and patent increasing:- The growth of
number of patents and trademarks proves the increasing
competitiveness of the markets.
• The number of varieties of a given product has increased radically:-
Within the given category, the number of varieties available for
consumer choice has increased exponentially. Categories are
saturated with varieties.
• Market are hyper-fragmented:- Market are fragmented into small
niches, which are less profitable.
• Advertising saturation is reaching its highest levels, and the
fragmentation of media is complicating the launch of new products:-
Advertising saturation is occurring. Market segments are smaller
and smaller. Communicating a new product is getting more
expensive. It is necessary to be present with a brand in many media
 to obtain good coverage. This makes new products launches more
expensive.
• The capacity of obtaining space in the mind of the consumer has
been reduce:-Consumers become selective. They are increasing
ignoring commercial communication. Novelty may be the only way
to catch the attention.

Conclusion: - Markets are much more competitive

Summary

Innovation is the key and the basic of competitive strategies today. The
rate of new product introductions is frenetic, but the failure rate is high. It
is absolutely crucial to understand how innovation is done today. We need
to split marketing process into pieces and analyse it in order to
understand the type of novelties it might produce.

Strength and weakness of traditional marketing

thinking
Need identification as the starting point:- Market start by analyzing the
need that products and services satisfy. Logically, identifying and selecting
some needs implies discarding others.

Market definition-then after-Selecting a market:-The market is the set of

current and potential persons / situations where the product can satisfy
one or several needs. The consideration and definition of a market
provides a frame (arena) where competing will take place. The act of
selecting potential persons/situation leads to discarding persons/situations
where the product will not be appropriate.

Adoption of market category and subcategory by marketers:-The selection

of the concrete needs and of the specific persons/situation where a
product or service can be present constitutes a closed and complete
system called category and subcategory.

The consideration and definition of a market provides a

frame of where to compete. The same act of selecting potential needs,
persons, and situation leads to dicardingthe needs, persons, and
situations where we cannot be present. When marketers adopt a category
they assume as fixed the elements within it (need, target, situation, and
product).Normally these elements will not be consideration anymore.

Adoption a market as something fixed leads to segmentation:- the

definition of market inevitable leads to segmentation and positioning
strategies. Defining market leaves only one option to compete: to
fragment the market into parts. This is the essence of the segmentation
strategy.

Segmentation:-segmentation consists of dividing the market to obtain new

sales. Segmentation can increase the size of the market as well. Repeated
use of segmentation finally fragmentation leaves little room for new
products. But new products are the key components for companies that
want to grow.

Immediate effects:- generation of competitive advantages to new

competitor that enters the market.

Long-term effects:- repeated segmentation lead to hyper fragmentation of

markets. Segments are converted into niches and eventually start talking
about one-to-one marketing. Saturated products reduce the success of the
new products and brands.

Segmentation consists of dividing the market to obtain new sales.

Segmentation can increase the size of the market as well. Repeated use of
segmentation finally fragments and saturates the markets. Market
fragmentation leaves little room for new products. But new products are
key component for companies that want to grow.

Positioning as a strategy for generating completive advantageous:-

Poisoning consist of choosing something by which we want to recognised.
Positioning, as a strategy, opens further opportunities for variation.
Positioning consist of choosing characteristics and highlighting them.
Selecting logical characteristics of our products may blind us to innovative
new concepts.

Immediate effects:- Positioning strategy creates differentiated brand

personalities even within the same market.

Long term effects:- Positioning opens up even more possibility than the
number of brands, because the same brand can be poisoning differently in
different markets.

Summary

The marketing process is a sequence. It starts with needs identification in

order to establish the persons/situations that become our potential
market. The market such as it is defined is considered fixed and stable.
Using prefixed markets allows the establishment of a competitive frame
and allows tracking of key performance indicators about the market (or
category): size, variation and market share. Defining a market is a basis of
the segmentation, targeting, and the marketing mix. In fact the
operational segmentation is possible only because of a context named
market has been defined. Repeated segmentation leads to a hyper
segmentation of markets, which reduce the chances of innovating
successful new products. To visualize a market as a fixed model is
extremely useful, but at the same time its blind us to other innovation
possibilities. This can constitute a loss of opportunities.

Innovations originated from inside a given

market: The most common way of creating
innovations
Working from the market definition downward leads to new products that
are just variations of existing products and services.

Innovation based on modulation:- Modulation based innovations vary any

basic characteristic of the product and service by increasing or reducing
the weight, importance , or degree of that characteristic.

Innovation based on sizing:- Sizing based innovations consist of

introduction of a new product or service in the market by varying the
volume., frequency , size , or number of products or services offered.

Package based innovation:-It consists of creating new products by

modifying only the container, the packing or the environment. Many
times, packaging changes can be made together with the sizing changes.

Design based innovations:- are those which create a new product by

changing its external appearance.
Innovations based on complements development:- It consist of adding
complementary ingredients or additional services to the basic product or
service.

Innovation based on the effort reduction:-It consist of modifying not the

product or service , but rather the efforts and risks involved in the
purchase.

Summary

Innovations consist of continued variations on what the product or service

is, but do not intend to modify its essence. The innovations occur within
the category in which they compete, since the methodologies for creating
them assumed a fixed market.

Innovations originated outside of a market: An

alternative way to create innovation
The case of Cereal Bars (Breakfast cereal category) :-merging the concept
of cereals and chocolates bars by this new category born.

The case of Kinder Surprise (Chocolate eggs):-merging the novel concept:

a chocolate egg with a toy inside.

The case of 7-Eleven Japan (Convenience stores):- Collaborate with e-

commerce

The case of Actimel, from Dannon (neither yogurt nor juice it’s a new
product in itself): The product protect your organism from bacteria with
ten thousand million of L. Casei immunities.

The case of Food Store inside the Gas Stations:- The new concept by
selling impulse product as well

The case of the Cyber Cafe Concept “Be the godfather of a kid”: Internet
access to a cafeteria

The case of “be the godfather of the kid”:- Doner can know where and
how their money being used.

The case of “Big Brother” TV contest:-New concept no script, no specific

competitions , no interruptions (The TV audience observe their lives,
behaviours , and personalities and votes for prefer one)

The case of Huggies Pull Ups:- The concept was to transform a diaper into
something similar to panties for children.

The case of Barbie:-Ruth created a teenage fashion model doll named

Barbie, and rest is history.

The case of Walkman:- The audio equipment with the concept of mobility
(Personal audio).

The need for lateral marketing to complement

vertical marketing
The lateral marketing is a complement of vertical marketing

Lateral marketing works in the areas where the vertical marketing does
not. Lateral marketing restructuring a product by adding needs, uses,
situations, or targets unreachable without the appropriate changes.

Lateral marketing consist of analysing models and provoking changes in

the models. Vertical marketing uses a logical process. Lateral marketing
uses a probabilistic process.
Situation where each types of marketing is more appropriate

Vertical Marketing Lateral Marketing

More adequate in markets of recent
creation that are in the first stage of
development
For developing a markets and for
making them later thorough the
conversion of potential customers
into current customers
Under a less risky business
When a few resources are available
When a secure , even low,
incremental volume need to be
ensured
In order to defend markets, by
fragmenting them through the
number of brands and therefore
making markets less attractive for
new entrants
To innovate stemming from our
mission and keeping our business
focus
More adequate for mature markets
where growth is zero
For creating a markets and
categories from scratch , for
merging different types of
businesses , for reaching targets we
could never reach with our current
product, and for finding new uses
Under a more risky business
philosophy
When there are more resources
available or business is ready to
invest and wait
When we want to reach a high
volume of business
To attack market with a generic
completion from outside the arena
of direct competitors
To redefine our mission, and to seek
other markets

Defining the lateral marketing process

Lateral marketing is a work process which , when applied to existing
products or services, produces innovative new products and services that
cover needs , uses , situations, or targets not currently covered and ,
therefore , is a process that offers a high chance of creating new
categories or markets.

GAP
Gap created by the lateral displacement

ARTIFICIAL

Connection

Innovations are a result of connecting two ideas which, in principle, had no

apparent or immediate connection.

The logic of creativity consist of talking an element, displacing the lateral

one aspect of it , and connecting the gap that has been provoked. The
logic of the creativity follows a process similar to that of humour.

The lateral marketing process begins with choosing a product or service.

Three levels of lateral marketing

MARKET= NEED, TARGET, USE/SITUATION

 MARKET
ON ROADS

PRODCUT
CAFETERIA

REST OF MIX
PAYMENT
AFETR
USING
The first step is to choose one out of the following three levels: market,
product, or rest of the marketing mix.

Focusing on the market level or product level for making a displacement

generates a gap between these two elements. This will easily leads
toward creation of new categories. Focus on the rest of marking leaves the
product and the market connected. Displacement will lead toward to
subcategories or innovative commercial formulas.

Generating a marketing gap:- the second step is to do a lateral

displacement on one of the three levels. There are the six techniques for
doing these lateral displacements: Substitution, inversion, combination,
exaggeration, elimination, and reordering.

Substitution (price): paying for diapers with a bank loan.

Inversion (price): shops without prices on the products.

Combination (channel): buying gasoline from kiosks and the gas stations
together.

Exaggeration (postal service): a painting the customer always returns

after buying

Elimination (communication): cloths with no advertising or brand

Reordering (payment modality): paying for phone calls before making

them.

The way to determine whether we are doing lateral or vertical marketing

is by checking if we have a gap in front of us or not. The absence of a gap
implies that we are working an innovation into the same market or
category.
The third step is to connect or solve the gap. The way to do it is by
vaulting, rather than evaluating. There are three valuation techniques:
following the purchase process, extracting the positive, and finding a
setting.

The final outcome of the lateral marketing process can be a new utility for
the same product, a new category, or a new subcategory.

Lateral marketing at the market level

Change of dimension as the most practical technique

Market= Need, target, (place, time, situation, experience) occasion

The method “change of dimension” consist of substituting one the

dimensions of the market for another that is discarded.

Changing the need: trying to cover another utility: The dimension consists
of selecting a new need we are not covering and thinking about how the
product should be in order to meet that need.

Changing the target: a person, persons, or group: substituting a person or

group consist of choosing someone who is a nonpotential target of the
product or service.

Changing the time: choosing new moments: this dimension consists of

choosing new moments of buying, usage or consumption of a company’s
offering.

Changing the place: move your product into a new setting: this dimension
consists of choosing places of purchase, usages, or consumption where
the product or service cannot be present now.

Changing the occasion: link your product to as event: the challenge for
marketers is to propose events or occasions where the product is not
considered now.

Changing the activity: place products into experiences: the dimension

consist of activities or experience where other products are strongly
positioned but not the one being considered.

Connecting the product with new the dimension: The change of dimension
has provoked a gap between the product and service and a new
dimension.

Connections made without altering the product: after changing the

dimension, if we want to change the product, we must seek a new utility
for it and communicate it.
Connections made by altering the product: anchors are the product
elements that do not let us get into the new dimension. We must change
or eliminate them.

Ancillary techniques for displacing market level

Combining the dimension “Place”:- Using the same telephone for home
and out of home

Reordering the dimension ”Time”:- Welcoming a guest before arriving at

the hotel (Hotel employee at the airport)

Exaggerating the dimension “Place”:- a mobile phone with worldwide

coverage (satellite)

Inverting the dimension “Need”:- A book that cannot be read (decorative)

Inverting the dimension “Target”:- A turnabout in the electricity sector

(solar panels)

Eliminating the dimension “Time”: A game with no dimension of time

Lateral marketing at the product level

Applying the lateral displacements concept and examples

Substitution:- it consist of removing one or several elements of the

product and changing it/them. It also consists of imitating aspects of other
products.

Combination: it consists of adding one or several elements to the product

or service, maintaining the rest.

Inversion:- it consists of saying the contrary or adding “no” to one/several

element(s) of the product or service.

Elimination: it consists of removing one/several element(s) of the product

or service.

Exaggeration: it consists of exaggerating upward or downward one/several

element(s) of the product or service. It also consists of imagining a perfect
product or service.

Reordering: it consists of changing the order or sequence of one/several

element(s) of the product or service.

Connecting a possible market with the new product

• Finding the possible setting

• Extracting the positive things
 • Imaging the purchase process
• The product may need to adjusted

Lateral marketing at the mix level

Lateral marketing for diversifying our marketing mix: “taking the mix of
other products”: it consists of applying existing pricing, distribution, or
communication formulas that correspond to other existing products or
services and which are not naturally associated with the category we
compete in.

Pricing:- Selling coffee with a prepaid card system, payment of bills

through ATMs, transaction charge on the fixed price basis, rewards
concept tied up regular household shopping(loyalty card), flat rate for
variable quantities eaten, given away the razor and money making on
blades.

Distribution:- selling house in shops, selling logistics by e-mail, selling

condoms in vending machines, selling books through internet, selling
airplane tickets over phone or internet.

Lateral marketing for finding new marketing mix formulas: the rest of the
lateral displacements

Combination: “phone + internet”, “TV + telephone”

Elimination: “direct distribution”, “self-service distribution formulas”

Exaggeration: “we want to be in every selling point”

Implementing lateral marketing

Three systems for innovative company: The Gary Hamel model

An idea market: Means Company has established a system for actively

soliciting, collecting and evaluating new ideas. The company appoints a
high-level executive to manage an idea development, collection, and
evaluation (IDCE) system.

A capital market: Funding must be set aside to support researching the

ultimate worth of initially attractive ideas. Part of the funds should be
destined not only to researching the potential of the new ideas, but also to
engage the staff in thinking laterally.

A talent market: The firms need to have or hire people with necessary
talents to develop the best ideas.
Next step: managing the whole process

1. Idea development
2. Concept development
3. Concept testing
4. Financial analysis
5. Prototype development
6. Prototype testing
7. Market testing
8. Market launch