L1 Basics

Question 1

Marketing def=

+ 2 aspects

Answer 1

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have (long-term) value for customers, clients, partners, and society at large

+ 2 aspects:

• exchange
• relationship

Question 2

DUAL CHARACTER of M

Answer 2

• managerial function
• leadership philosophy

=> M is more than a Co function, it is a pervasive activity involving the CEO heavily eg

“Marketing is too important… to be left to the Marketing Dept” David Packard

Question 3

Marketing Mix def=

Answer 3

Marketing Mix is the set of tactical marketing tools that the firm blends to produce the desired response in the target market.

Question 4

Traditional 4 Ps of M.:

+ 3 criticisms

Answer 4

most relevant for physical goods:
PrPrPrPl

1. • product or service or idea, eg political / religious / not for profit
2. • price usually money but could be data
3. • place
4. • promotion

+ 3 criticisms:

• old-fashioned
• product-focused, not too suitable for service Cos
• undervalues relationship

Question 5

New 7(8) Ps of M:

Answer 5

traditional 4 Ps PrPrPrPl:

1. • product
2. • price
3. • place
4. • promotion

+ CRM PePePr!

1. people
2. processes
3. physical evidence
4. (productivity & quality)

Question 6

2 trends in M.:

Answer 6

• • becoming quantitative
• • engineers have to design together w clients!

Question 7

Traditional market research VS disruptive innovation:

Answer 7

Traditional market research (ie asking clients what they want) produces incremental product innovation.

Innovators like Apple go beyond -> S Jobs: “it’s not the customers’ job to know what they want”

Question 8

M as a Co activity is directed where?

Answer 8

outward looking

Question 9

1st German lecturer of M

Answer 9

Ludwig Erhard ~ Minister Wirtschaftswunder

Question 10

Services vs goods:

• 3 differential properties
• 2 important elements

Answer 10

3 differential properties IMtoPER

1. • intangible
2. • produced on demand (can’t produce n store)
3. • personal (but now + automated)

2 important elements PePr

1. • promise, then experience
2. • (physical) environment of experience: delivery is important

Question 11

Entry level M job

Answer 11

Product mgr

Question 12

If M is organised by products, not customers…

Answer 12

then comm is uncoordinated n maybe duplicated

Question 13

2 M trends originated and enabled by IT

Answer 13

• • massive customisation
    (fidelity programs like Cumulus, 2n)
• • fb-like Cos, interested in data not money

Question 14

50s vs our age, M:
2 differential properties & 1 conseq

Answer 14

• • many brands, cust choice more difficult
• ==> 70% of 600k DE brands fail!*
• • difficult reach to parallel societies of consumers via many channels

Question 15

50s vs our age, macroeco diff.:

Answer 15

Then destruction: goal = increase production

Now oversupply: goal = increase demand

Question 16

Relationship Mgmt important coz:

• 1 overarching theme:
• 3 revenue reasons, ‘inside out’:
• 2 (chained) cost reasons:

Answer 16

1 overarching theme:

• • rels are firms’ top asset
    (Requires initial inv. for acquisition)

3 revenue reasons, ‘inside out’:

• • price premium! loyal Customers are willing to pay it
• • can increase revenues (cross-buying ~ upsell)
• • give word of mouth

2 cost reasons:

• • cheaper to retain than acquire, therefore this allows…
    
    • • cost savings

All this on top of base profits.

Question 17

Planning time horizon depends on what?

Answer 17

on the economic sector!

Question 18

CUSTOMER LIFETIME VALUE
def=

formula

w related definitions

Answer 18

present value of whole stream of customer’s predicted CFs (Revs-costs)

w predicted survival/retention rate P = 1 - hazard rate,

n predicted value value/cashflow V

for cust j (having a statistical validity):

CLVj = Sum_t=0_T V_jt * P_t / (1+i)^t

where the discount rate i depends on investor (exp. ~ avg cost of cap) and P typically ~80%

Question 19

MARKETING def w 2 elements and 1 attribute

Answer 19

MANAGING PROFITABLE CUSTOMER RELATIONSHIP
w 2 els:

• an exchange = create value for customers n so capture value from them (non monetary may be psych.ly better received!)
• a relationship, of course!

Question 20

Sales n marketing:

relative scope & power

diff. PoVs

Answer 20

• conceptually sales included in M;
  
  • In many real Cos: the reverse, because Sales have more power thru direct, measurable revenue from clients.
• Also, sales typically focuses on pushing products to meet short-term hard metrics goals, while marketing thinks of the long term relationship and (necessarily) uses ‘soft’ metrics

Question 21

Customer future activity is predicted w:

2 possibilities + 1 consideration for both

Answer 21

• • logistic regression n other stat techniques
• • machine learning Etc.

With input values usually more important than models

Question 22

Customer Equity def=

+consideration for IT Cos

+consideration for customer quantiles

Answer 22

Sum_j CLV_j

For IT Cos like Google n TW n FB ~ value (coz other assets pale in comparison)

Often 20% bring 80% of revenue (20/80 rule) -> keep those, sometimes get rid f lowest

Question 23

Retention, fidelity program can look to future or past: explain

Answer 23

look to future (expectations < age,…) not to past (but w fairness)

Related to dynamic (focus on clients w biggest potential ROI incr) vs static (most valuable clients) perspective on CEq mgmt

Question 24

3 dimensions of customer rel. that CEq Mgmt aims to increase:

Answer 24

• (time) length <= loyalty programs/mgmt, trust, lock ins (eg razor n blade/Nespresso)
• breadth => cross selling (maybe start w loss leader to lock them in)
• depth => incr. purchase freq or purch value

Question 25

2 general ways to increase CLV

Answer 25

• increase Word of Mouth
• decrease costs (migrate to self service)

Question 26

2 modern ways to increase word of mouth

Answer 26

• viral videos like WestJet Xmas campaign
• “forced” WoM like Hotmail free hotmail line tag

Question 27

CUSTOMER RELATIONSHIP MANAGEMENT def=
with 2 deliverables and 3 methods

Answer 27

PROCESS OF BUILDING n MAINTAINING PROFITABLE CRs thru delivering VALUE n SATISFACTION via the 3 Rs:

RecRecRet

1. • recruitment
2. • retention
3. • recovery/regainment

Question 28

1-STATIC vs 2-DYNAMIC PERSPECTIVE to CEq Mgmt

Answer 28

1- increase attractiveness for customers w focus on current class of clients w highest CLV2- increase CE by increasing CUSTOMER RELATIONSHIP, thus increasing CLV, w focus on most reactive clients

Question 29

dynamic perspective to CLV: 5=3+1-1 levers to increase CLV

Answer 29

5 levers:

• increase length (loyalty)
• increase breadth (next-product-to-buy models)
• increase depth (purchase frequency & value)
• increase word of mouth (e.g. w campaigns)
• decrease costs per customers (e.g. self-service)