Marketing Flashcards
What is the customer value equation?
Value = Benefits / Price
superior percieved value
What is the Myth of excellence?
- The false idea that a value proposition should be good at everything.
The 5 “Key Attributes” that determine competition in an industry
- Price
- Product
- Service
- Experience
- Access
Customer Relevancy Rules: Goals for Key Attributes
- Maintiain the ‘most sustainable score’
- Anything less than 3 is not sustainable
- Domination or differentiation on more than one attribute is unsustainable
- Definition of a 3 continually changes.
Customer Relevancy Rules: What is the most sustainable ‘score’?
- Dominate on one dimension (5/5)
- Differentiate on a second dimension (4/5)
- Achieve industry-par levels on the remaining dimensions (3/5)
What is ‘Market Orientation’?
“Satisfying Needs and Wants”
- True customer focus throughout the value chain
- Every person / department in the organization act in an integrated way to create value for customers
Modern Marketing in the Value Chain
Modern marketing is introduced at the beginning of the value chain.
Market Orientation: Implementation
(5 steps)
-
Intelligence Generation
- Customers, Competitors, Collaborators - Dissemination (internal comms)
- Interfunctional coordination (internal work)
- Response
- $$$ Value Proposition
Market Orientation: Measure
Scorecard based on survey data for each aspect:
- generation
- dissemination
- responsiveness
What is the ‘Strategy Curve’?
Factors of competition’ group into what categories?
Red Ocean
All the industries in existence, the known market space:
- Demand is fought over
- Competition is critical
Blue Ocean
All the industries not in existence, the unknown market space:
- Demand is created rather than fought over
- Competition becomes irrelevant, as new rules of the game are being set
What is the ‘Leaky Bucket’ approach to customer management?
Increase acquisition, rather than fix attrition. This is a costly approach.
Why do customers leave?
The biggest single hole is customer neglect, eg:
1. Complicated complaint procedures
2. Delays in product or service changes
3. Many escape clauses in promises & agreements
4. Premise that customers cause product/service problems
5. Poor or non-existent customer-information management
6. Lack of focus on the core category benefits
What are “Core Category Benefits”?
Features customer expect for the type or product they are purchasing
- Differentiation outside of this can be misplaced
- Particularly if these hygiene factors have not been satisfied
How is customer loyalty impacted by complaints and recovery?
If a customer complaint is addressed and fixed,
- this can result in greater loyalty
- due to the share experience
- and trust built
Service failure as an opportunity
Most customers will be retained if the issue is resolved, particularly if it’s resolved quickly.
Customer Satisfaction vs Customer Delight
- Customer satisfaction is created when customers get what they want
- Customer delight is created when customers get something that they like, but do not expect
Why is customer delight important?
Key driver for creating ‘apostles’ or ‘promotors’ (NPS)
What are the 5 dimensions of Service Quality (SERVQUAL)?
- Reliability
- Assurance
- Tangibles
- Empathy
- Responsiveness
What are ‘bad profits’?
These are profits derived from operations which:
- Negatively impact the customer
- Increase detractors
- Demoralize employees
- Impact reputation
These impact the ability to find new customer and high quality employees
What are ‘good profits’?
Profits from activities that:
- Delight customers
- Make your customers your best marketers
What is the ‘Net Promoter Score’?
One question:
- How likely is it that you would recommend our company / product / service to a friend or colleague?
Answers from 0-10
What are the ‘Net Promoter Score’ categories?
- 0-6 - Detractors
- 7 or 8 - Passives
- 9 or 10 - Promotors
How is the NPS calculated?
NPS = Avg % Promotors - Avg % Detractors
What can the NPS be used for?
To measure of the efficiency of a growth engine is the conversion rate from detractors to promotors.
What are the two missing links between: Customer Satisfaction & Purchase Behaviour?
- Word of mouth and referrals
- Outward activity, leveraging customer’s network - Customer participation and co-creation
- Inward activity, leveraging your relationship with the customer
What is the ‘Blemishing Effect’?
- a 100% score seeds mistrust
- at least some negative reviews builds credibility
What types of risk are associated with purchase choices?
- Functional Risk
- Financial Risk
- Social Risk
- Physical Risk
- Time Risk
Customers & Brands
- Most customers don’t care about brands
- No. 1 reason customer interact via social sites is to get a discount
- Most customers dont follow brands on social networks
- A brand’s health depends on lots of people who don’t know you very well, don’t think very much of you, and don’t buy you that often
- Customers are non-exclusive (Most coke drinkers drink Pepsi)
Therefore:
- Target distinctiveness not just brand differentiation
What does Excellence in marketing management aim for?
The maximization of corporate value.
What drives a firm’s cash flow?
A firm’s cash flow is affected by four operating factors:
* Anticipated level of cash flow.
* Anticipated timing of cash flow.
* Anticipated sustainability of cash flow.
* Anticipated riskiness of cash flow.
What tool can be used to analyse a product portolio?
The “Pioneer-Migrator-Settler Map” (Kim & Mauborgne)
What is the ‘Pioneer, Migrator, Settler Map’?
Whare are Pioneers, Migrators and Settlers?
- Settlers: services that converge with those of the competition
- Migrators: services that diverge from what the competition offers, and offers a value-improvement for customers
- Pioneers: services that break away from anything that the competition has and offer unprecedented value for customers
What balance of Pioneers, Migrators and Settlers should you have?
You should have a balance of settlers and migrators, and one or two pioneers
NOTE: the faster the industry moves, the more pioneers you need
What are the three steps to the Pioneer-Migrator-Settler-Map?
- Brainstorming: List the the key businesses or services that are currently in your business portfolio
- Critical Reflection: Determine which businesses or services are currently Pioneers, Migrators, or Settlers from the point of view of customers
-
Thinking about tomorrow: Working off that list, plot those Pioneers, Migrators, and Settlers in the Pioneer-Migrator-Settler-Map
Then, decide on the need to re-balance the portfolio
How do you re-balance the portfolio mapped out?
By deciding, with the help of a SWOT (1-7):
- Which settlers and migrators represent attractive markets
- Which new businesses (not currently in the portfolio) represent attractive markets
SWOT: Which are the factors that should be reviewed in terms of opportunities and threats (OT) in order to determine the attractiveness of a market?
Principle Factors:
- Size of the market
- Growth of the market
Competitive structure of the market:
- Competitor hostility
- Supplier power
- Threat of substitutes
- Buyer power
- Threat of new entry
- The cyclicality of the market
- Market risks
SWOT: Which are the factors that should be reviewed in terms of strengths and weaknesses (SW) in order to determine the attractiveness of a market?
- Cost factors (fixed/variable costs)
- Differentiation factors
What has a greater impact on corporate value—competitive advantage or market attractiveness?
Competitive advantage. Research shows that the variation of profitability within an industry exceeds variation between industries.
Which competitive advantage is more vulnerable—a cost advantage or a differentiation advantage?
Some argue that a cost advantage is more vulnerable.
What is the Strategic Characterisation Matrix (SCM) Matrix?
Which areas in the Strategic Characterisation Matrix (SCM) are value creating, and which are value-destroying?
Strategic Objectives: Divest
- Exiting from markets or market segments that no longer offer profit potential.
- Rationalising unprofitable products, cutting costs and reducing complexity and focus on more profitable parts of the business.
Advantages include:
- Ideal under a combination of high market attractiveness and disadvantaged position
- Or low market attractiveness and disadvantaged position.
- When another company values the business more highly than the current owner.
Strategic Objectives: Harvest
- Maximising the firm’s cash flow from its existing assets in a situation
- When it is likely that the volume of sales will be maintained at present levels or, more likely, declining levels.
- Usually be associated with efforts to increase margins and to prune investment.
Strategic Objectives: Maintain
Undertaking efforts that will lead to current market share being retained
- Price competition will be avoided
- Current players will attempt to maintain barriers to entry
Strategic Objectives: Grow
- Opportunities depend primarily on the firm possessing a differential advantage
- But it also depends on the attractiveness of the market
- Growth may well be associated with lower cash flows and generally lower profits in the early years
- But, what matters is the prospect of future returns
Strategic Objectives: Enter
Innovation. Companies may adopt an enter strategy by:
- Developing new products,
- New processes
- New markets
- Or new marketing strategies
Strategic Objectives: What are the 5 strategic objectives?
- Divest
- Harvest
- Maintain
- Grow
- Enter
Strategic Focus: What are the two principal strategic market focuses?
- Increase sales volume
- Increase productivity
Strategic Focus: How do I know which focus belongs to which objective?
The focus depends on the strategic objective. Best practice research indicates:
- Enter or Grow: Increasing sales volume
- Maintain, Harvest, or Divest: Increase Productivity
Strategic Focus: Which 4 marketing tasks are involved with a volume focus?
- Convert non-users.
- Enter new market segments.
- Increase the usage rate.
- Win competitors’ customers.
Strategic Focus: Which 3 marketing tasks are involved with a productivity focus?
- Reduce costs (e.g., fixed and variable cost of marketing).
- Increase prices (e.g., lease rates across the organisation).
- Enhance product mix (e.g., greater lease rate variation depending on location).
What is a segment characterization matrix (categorizing competitors)?
How can the degree of competition be categorized?
- Direct competition; taken into immediate consideration and available.
- Indirect competition; not considered an alternative at first, but available.
- Potential competition; considered, but not available in the market.
- Incipient competition; not considered an alternative and not available.
How do brands add value beyond differentiating a product through meaning?
Through its ability to reduce risk (for the buyer and seller):
- Quality risk
- Identity risk
- Time risk
- Trust risk
Do brands reduce risk for sellers, too?
Yes, by reducing:
- Demand risk
- Competitor risk
- Efficiency risk
- Legal risk
- Communication risk
What is brand equity?
The differential effect that brand knowledge has on consumer’s responses to the brand.
(Can be negative, zero or positive brand equity).
What is the range of a brand’s equity?
Negative to positive; consumers can react less favourably compared to a non-name product
What drives brand equity?
Brand knowledge drives brand equity.
This can be broken down into 2 areas:
- Awareness
- Image
Brand Awareness: How can brand awareness be characterised?
Depth and Breadth:
- Depth: the likelihood that the brand can be recognised and recalled.
- Breadth: the variety of purchase and consumption situations in which a brand can be recognised and recalled.
Brand Awareness: What is the relative importance of brand recall and brand recognition?
The importance depends on the extent to which consumers make product related decision with the brand present or not (ie in a shop vs at home).
Brand Image: How can brand image be characterized?
- Uniqueness (relates to how distinct the brand associations are).
- Strength (relates to how deeply a buyer thinks about the brand associations).
- Favourability (relates to how sympathetic brand associations are to buyers).
What are the 4 components of the ‘Strength-Stature Grid’?
- Brand uniqueness (“is there any other brand like this one?”)
- Brand strength (“how much can you remember about the brand?”)
- Brand favorability (“how much do the brand’s associations appeal to you?”)
- Brand awareness (“have you heard of the brand before?”)
What is the ‘Strength-Stature Grid’?
What 8 observations can be derived from the Strength-Stature Grid?
- Uniqueness and strength start the cycle of growth and start the cycle of decline.
- Favorability and awareness stabilize the cycle or dissolve it.
- For brands operating in the mass market, the upper left hand corner should not be a permanent position.
- For specialist or niche brands, the upper left hand corner is a desirable and sustainable position.
- Brands in the upper left corner are the emerging competition of brands in the upper right corner.
- Brands in the lower right corner can come back to haunt brands in the upper right corner.
- Brands in the upper right corner can stay there forever if managed well.
- Brands in the lower right corner are frequently drawn into price wars because of lack of differentiation and are, therefore, vulnerable to the threat of private label brands.
What is a Brand Elasticity Grid?
What 8 observations can be derived from the Brand Elasticity Grid?
- If the focal brand has ‘permission to play’ and a strong ability to set itself apart from the competition (i.e., has brand strength), then this is the clearest positive signal to extend the brand into the new segment.
- If the focal brand has a strong ability to set itself apart from the competition, but lacks ‘permission to play’, then entry into the new target market will require a lot of work. In the longer run, however, the extended brand may well be able to surprise the incumbents with its strong ability to differentiate and, in turn, gain credibility by defining an alternative image-standard.
- If the focal brand lacks ‘permission to play’ and lacks brand strength, then the chances of a successful extension are low, and an entry into the targeted market should occur via an acquisition of a new, more suitable, brand.
- If the focal brand has ‘permission to play’, but lacks brand strength, then it is clear that a successful entry can be achieved, but only with much investment into greater
differentiation. Alternatively, an alliance with another brand can be sought out and the combination of both brands may reinforce each other’s strengths.
So what are the 4 principles that underlie effective pricing?
- Pricing should be based on the value that the product offers to customers, not on its costs of production.
- Since different customers attach different values to a given product (good or service), prices should be customized so that these value differences can be capitalized on.
- Pricing decisions should anticipate the reactions of competitors and their long-run objectives in the market.
- Pricing should be integrated with a firm’s broad strategic positioning. Effectively, price determines cost if shareholder value is to be maximized; not the other way around
What is the pricing corridor?
What are the 4 Ps?
- Product
- Price
- Place
- Promotion
Types of customer need?
- Existing: Need is known, solution is known
- Latent: Need is known, solution is not
- Insipient: Need is unknown, solution is unknown
Growth-Share / BCG Matrix
The dimensions of the 2x2 Segment Characterization Matrix
- Available and Not available (x-axis)
- Considered and Not considered (y-axis)
