L1 Basics Flashcards
Marketing def=
+ 2 aspects
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
DUAL CHARACTER of M
- 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
Marketing Mix def=
Marketing Mix is the set of tactical marketing tools that the firm blends to produce the desired response in the target market.
Traditional 4 Ps of M.:
+ 3 criticisms
most relevant for physical goods:
PrPrPrPl
- product or service or idea, eg political / religious / not for profit
- price usually money but could be data
- place
- promotion
+ 3 criticisms:
- old-fashioned
- product-focused, not too suitable for service Cos
- undervalues relationship
New 7(8) Ps of M:
traditional 4 Ps PrPrPrPl:
- product
- price
- place
- promotion
+ CRM PePePr!
- people
- processes
- physical evidence
- (productivity & quality)
2 trends in M.:
- becoming quantitative
- engineers have to design together w clients!
Traditional market research VS disruptive innovation:
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”
M as a Co activity is directed where?
outward looking
1st German lecturer of M
Ludwig Erhard ~ Minister Wirtschaftswunder
Services vs goods:
- 3 differential properties
- 2 important elements
3 differential properties IMtoPER
- intangible
- produced on demand (can’t produce n store)
- personal (but now + automated)
2 important elements PePr
- promise, then experience
- (physical) environment of experience: delivery is important
Entry level M job
Product mgr
If M is organised by products, not customers…
then comm is uncoordinated n maybe duplicated
2 M trends originated and enabled by IT
-
massive customisation
(fidelity programs like Cumulus, 2n)
-
massive customisation
- fb-like Cos, interested in data not money
50s vs our age, M:
2 differential properties & 1 conseq
- many brands, cust choice more difficult
- ==> 70% of 600k DE brands fail!*
- difficult reach to parallel societies of consumers via many channels
50s vs our age, macroeco diff.:
Then destruction: goal = increase production
Now oversupply: goal = increase demand
Relationship Mgmt important coz:
- 1 overarching theme:
- 3 revenue reasons, ‘inside out’:
- 2 (chained) cost reasons:
1 overarching theme:
- rels are firms’ top asset
(Requires initial inv. for acquisition)
- rels are firms’ top asset
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
- cheaper to retain than acquire, therefore this allows…
All this on top of base profits.
Planning time horizon depends on what?
on the economic sector!
CUSTOMER LIFETIME VALUE
def=
formula
w related definitions
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%
MARKETING def w 2 elements and 1 attribute
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!
Sales n marketing:
relative scope & power
diff. PoVs
- 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
Customer future activity is predicted w:
2 possibilities + 1 consideration for both
- logistic regression n other stat techniques
- machine learning Etc.
With input values usually more important than models
Customer Equity def=
+consideration for IT Cos
+consideration for customer quantiles
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
Retention, fidelity program can look to future or past: explain
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
3 dimensions of customer rel. that CEq Mgmt aims to increase:
- (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
2 general ways to increase CLV
- increase Word of Mouth
- decrease costs (migrate to self service)
2 modern ways to increase word of mouth
- viral videos like WestJet Xmas campaign
- “forced” WoM like Hotmail free hotmail line tag
CUSTOMER RELATIONSHIP MANAGEMENT def=
with 2 deliverables and 3 methods
PROCESS OF BUILDING n MAINTAINING PROFITABLE CRs thru delivering VALUE n SATISFACTION via the 3 Rs:
RecRecRet
- recruitment
- retention
- recovery/regainment
1-STATIC vs 2-DYNAMIC PERSPECTIVE to CEq Mgmt
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
dynamic perspective to CLV: 5=3+1-1 levers to increase CLV
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)
