Ch 17

Question 1

What is the ultimate purpose of marketing

Answer 1

to create value for customers, the firm, & shareholders

Question 2

What is a firm’s most important strategic asset?

Answer 2

customer equity & brand equity

Question 3

Strategic marketing assets AKA intangible assets are

Answer 3

• Resources that are difficult to create
• Are challenging for competitors to imitate
• Substitutes for their roles are hard to identify & cannot be easily obtained/purchased
• Can be critical generators of sustainable competitive advantage for the firm

Question 4

How do intangible marketing assets…

• lower costs
• attain price premiums
• generate barriers to competition
• improve value of other firm resources
• create growth options ofr managers

Answer 4

• lower costs: Strong customer relationships & related knowledge lower sales & service costs
• attain price premiums: Strong brands improve perceived value of offering
• generate barriers to competition: Customer loyalty increases switching costs
• improve value of other firm resources: Satisfied customers are more responsive to marketing expenditures & new products
• create growth options for managers: Strong brands can be leveraged to introduce extensions in current & new categories

Question 5

How strong customer relationships increase firm revenue

Answer 5

• Lower defection rates
• Greater share of wallet
• Cross into new categories & buy new offerings (strong roots/loyalty in area x can cause those customers to buy something from area y when they notmally wouldnt – disney movie fans suddently roped into being hardcore amusement park fans)
• Endorse the firm (word of mouth!!!)

Question 6

How strong brands impact firm revenues

Answer 6

• Increased brand consideration (brand easier to recall)
• More likely to purchase (good brand = reassure consumer, know what gonna get)
• Pay price premiums (more loyalty = more inelastic demand)
• Bigger growth options (foundation to build from)
• Stronger endorsements

Question 7

3 insights into brand value growth from reading

Answer 7

1) The big get bigger
2) marketing makes a difference
3) smart investment

Question 8

The effect of marketing assets on future value of a firm’s cash flow

Answer 8

Firm’s cash flow arrives faster

Firm can receive higher cash flow levels

Firm’s cash flows are less volatile

Firm’s cash flow is less vulnerable

Question 9

How does branding/marketing assets impact faster cash flows?

Answer 9

Faster brand retrieval (stay in evoked set and take up space so competitors cant fit in)

Faster purchase decision (know brand = know what getting)

Faster response to marketing spending (ppl already talking about you, consumers have heard of you)

Question 10

How does branding/marketing assets impact higher cash flows?

Answer 10

(increase revenue or decrease costs)

• Lower marketing research & new product development costs (can outsource dev to dedicated customers!)
• Lower marketing expenditures to acquire customers (word of mouth is free!)
• Lower employee pay & better human capital (big brand = people wanna work there for less bc want the name on their resume)
• Lower costs of debt (access relatinoships easier)
• Larger relationship investments (leverage cash flows - ex: walmart)

Question 11

How does branding/marketing assets impact less vulnerable and less volatile cash flows?

Answer 11

Greater customer stability (strong relationships = good retention)
Protection against rival switching strategies
Protection against rival entry
Protection against internal mistakes