Cisco Systems: Managing the Go-to-Market Evolution Case Solution

1. Analyze Cisco’s Marketing Strategy in 1995, 2001, and 2005.

Cisco’s marketing strategy has evolved over the time period 1995 till 2005. To begin with, when Chambers took over, the marketing strategy had to be more direct as Cisco was introducing newer products, which customers were not aware of. Moreover, there was increasing competition, and each firm looked to surpass the other by making customers more aware about their products. Later around 2001, the company engaged itself in partnerships with various companies and promoted its products and services with the help of electronic systems giants. This also meant that the company’s marketing strategy from the year 1995-2005 went from a direct channel to a more indirect one.

In the year 2005 onwards, since the Internet was well-established as a tool, the online means of marketing were employed by the company. This also happened because the company was now targeting nearly 10 million consumer accounts, who were regular users of the World Wide Web (WWW). Therefore, more marketing options opened up for Cisco due to the extensive use of the Internet both for business users as well as the end-consumers. Hence, the more commonly employed methods of marketing now for Cisco are intermediaries and the Internet.

2. How have Cisco’s channels evolved over last 10-15 years period and why in that way?

Over the last 10 to 15 years, Cisco’s channels evolved based on the market requirements. The very initial channels for the company were direct and then through systems houses. This is because the company began to look for arrangements with companies such as IBM to reach the market a few years after its formal channel strategy began. Later, as partnerships developed with telecommunication companies, Cisco’s products were channeled through by large telecommunication companies, such as SBC.

However, the company later realized the importance of resellers in its sales and distribution channel as intermediaries who were the company’s Value-Added Resellers (VARs). Cisco inclined itself more towards Value-Added Resellers due to many reasons. Firstly, such a move meant increasing competition and rivalry among the resellers who would be looking to perform better for each vendor. Hence, this gave Cisco more negotiation and bargaining power in deciding discounting policies. Cost was an important factor for Cisco when it had recently come out of a recessionary period that struck the whole information technology industry.

However, the company kept itself updated with changing market requirements and hence, the concept of value creation by the resellers is now more significant than the sales numbers they are generating for the company.

3. What grade would you give Cisco for managing channel evolution? Good or bad? Why?

Cisco has handled its channel evolution well and made channel changes as and when required. Hence, I would grade Cisco’s management of its channels as ‘good.’ This is because the company’s management and its sales and marketing staff were well aware of the markets that they were serving and understood the requirements of each market. However, the company’s performance was also affected while the whole industry suffered with a downturn for the information technology.

Moreover, when customers needed more awareness about Cisco’s products in the initial years, the company knew that customers and potential customers should be educated by the company. Hence, more trainings through the direct channel were included as part of sales and distribution. Later, in the year 2000 onwards, when customers were familiar with the evolving technology, the company then went towards intermediaries, such as resellers, so that it could now focus on more important tasks in which it specialized. The increasing competition and use of intermediaries by rival firms also made Cisco think about channels other than the direct ones. However, the decision of whether to go for resellers was also based on the complexity of the product and dynamism of the consumer. Therefore, the company seems to have handled the channel evolution effectively.

4. Against the background of your answers to 1 and 2 what marketing strategy should Cisco deploy for the VOIP products?

Since Voice Over IP (VOIP) is a technology, which will benefit both business users and the end consumers (including home users), Cisco will have to choose its marketing strategy very carefully. Business users and end consumers are two different target markets, who make use of VoIP in different environments. Although the functionality of VOIPs produced by Cisco will largely be the same for all types of customers, it might go for more sophisticated VoIP products for business organizations.

As long as VOIP remains a newer technology, the company may want to have its own sales persons engage in B2B (business to business) selling. Therefore, this would mean a more direct channel by scheduling appointments with commercial organizations.

On the other hand, the end consumer, including the home users, can be approached through marketing at retail outlets and Cisco’s own franchises. While the products may be user-friendly, a newer product would require demonstration and the end-consumer should get a ‘feel’ of the product. Therefore, it would be most suitable in this case to engage either resellers or the company’s own staff at retail outlets and franchises to distribute brochures about the VOIP products. This means that ‘on-site’ promotion would be effective for VOIP technology.

5. Which channels do you recommend, Voice VARs? Data VARs? Both?

I think both channels, that is, Voice and Data VARs, are important for the company given its vast range of customers. Currently, the company has been using Data VARs in its approach towards reselling. On the other hand, Voice VARs are more consolidated and comprehensive. Hence, the company is recommended to make use of Voice VARs where its customers are business enterprises. Therefore, the top two layers in the company’s Pyramid model can be approached with Voice VARs.

Due to the large number of customers that exist in the lower layers of the company’s Pyramid model, it is recommended to stick to the Data VARs, an approach that the company has successfully used in the past. This is because the value-added resellers will be extensively involved with a large number of customers. Hence, a more detailed and complex approach is required where such customers, including the end-consumers are involved.

As the information technology industry keeps evolving, Cisco Company Inc. is also going through a dynamic phase. Therefore, the company may later decide to keep just one of the two VARs: that is, either data or voice VARs. The success of the two systems can also be evaluated based on the performance of the resellers.