Marketing Strategies to Consumers

Question 1

Value Proposition

Answer 1

A set of benefits that satisfy customers’ needs.

It is made physical by an actual offering which is usually a combination of:

1. Products
2. Services
3. Experiences
4. Information

Question 2

Brand

Answer 2

An offering coming from a known source that customers are familiar with (such as a particular firm, NPO or person)

• Certainty
• Comfort
• Expectations

Question 3

5 Dimensions of Brand Personality

Answer 3

1. Sincerity – down to earth, honest, wholesome, cheerful (Tropicana)
2. Excitement – daring, spirited, imaginative, up to date (Pepsi)
3. Competence – reliable, intelligent, successful, have expertise (IBM)
4. Sophistication – upper-class, elegant, charming, refined (L’Oréal)
5. Ruggedness – tough, outdoorsy (Wrangler)

Question 4

Value Perceptions

Answer 4

Value - The sum of tangible and intangible benefits and costs

Value Perceptions - increase with quality and service but decrease with price.

Marketing in this sense, is a form of customer value managment

Question 5

Customer Perceived Value (CPV)

Answer 5

The difference between customers evaluation of all the benefits and all the costs of a specific offering.

1. Total Customer Benefit – The perceived monetary value of the bundle of economic functional and psychological benefits customers expect from a given market offering (due to product, service, people and image)
2. Total Customer Cost – The perceived bundle of costs customers expects to incur in evaluating, obtaining, using and exposing the given market offering (including monetary, time, energy and psychological cost)

What Can marketers do to improve CPV?

1. Increase their Total customer benefit
2. Reduce the buyer’s opportunity costs
3. Can reduce the products monetary cost by reducing the price of the product

See: Customer Value Triad

Question 6

Customer Expectations

Answer 6

The perceived value a customer seeks before purchasing a product

Question 7

Customer Satisfaction

Answer 7

• Reflects a customer’s judgment of a product’s perceived performance in relationship to its expectations
• The extent to which products meet or surpass customer expectations

Therefore, Marketers must manage customer expectations too…

Advantages of Satisfied Customers:

• More loyal
• Spend more on brand
• Talks favorably to others about company (Word of Mouth)
• Pays less attention to competing brands
• Less sensitive to changes in price
• May offer insights and inputs about products
• Costs less to serve existing customers than recruiting new ones

Question 8

Customer Loyalty

Answer 8

A customer’s commitment or attachment to a brand, store, manufacturer, service provider or other entity.

Measured by P (Brand repurchase) – 5 levels

1. Indifference - Low loyalty and no preference for brand over competitors
2. Divided - Loyal to a small group of brands
3. Switch- Loyal to a couple of brands but switch once in a while
4. Occasional - Loyal but once in a while switches brand
5. Undivided -Buyer never switches to another brand whatsoever

Question 9

Customer Satisfaction to Customer Loyalty Relationship

Answer 9

Highly satisfied customers tend to be more Loyal to the company

Effects at different levels of satisfaction (1-5)

1. At Level 1
   
   1. Leave
   2. Bad word of mouth
   3. Sales loss
      
      1. Of existing customers
      2. Of potential customers
2. At Level 2-4
   
   1. Fairly satisfied
   2. Low confidence/trust of value received
   3. Easily switch to competitors
   4. Loyalty depends on Competitors actions
      
      1. Such as product availability
      2. Such as special offers, salesperson efforts
3. At Level 5
   
   1. Lower sensitivity to competitor’s price
   2. Less likely to meet competitor’s salespeople
   3. Repurchase products and upgrades
   4. Good word of mouth – refer new customers to company
   5. Lower revenue fluctuation

Question 10

Marketing Management

Answer 10

The art and science of:

Choosing target markets, getting, keeping and growing customers through creating, delivering and communicating superior customer value.

Question 11

Marketing Management Tasks

Answer 11

1. Developing marketing strategies and plans
2. Capturing Marketing Insights
3. Connecting with customers
4. Building strong brands: Existing brand (understand strengths and weaknesses) Vs. New brand (Unknown potential)
5. Shaping Market Offerings
6. Product decisions
7. Pricing policy
8. Delivering Value
9. Communicating Value
10. Creating successful long-term growth

Question 12

The Value of Customers to the Firm

Answer 12

Attract new customers & Retain existing customers?

Some customers are Unprofitable whilst others are More Valuable.

“If they cannot be converted, get rid of the worst customers. Attract new customers whilst retaining profitable customers. “

Question 13

Unprofitable Consumer Characteristics

Answer 13

• Buys only when product is discounted
• Purchase small quantities
• Demands compensation for service failure
• Requires frequent maintenance/tech
• Often switches competitors

Question 14

Profitable Consumer Characteristics

Answer 14

• Pays Full Price
• Loyal
• Purchases Large Quantities
• Recommends the brand/store to others
• No service calls, no product returns

Question 15

The Effect of Size of Customer Base

Answer 15

• Large corporations* – Will pay lower prices and service costs but buy many units which results in high transaction costs.
• Individual Users* – Will pay full price and _require many service_s. Low to no transaction costs.
• Those in-between* – most profitable.

Question 16

Evaluating customer profitability

Answer 16

• Focus on the stream of revenue and cost over time, not on the profit from a particular transaction.
• Emphasize the lifetime stream of revenues and costs
• Marketers can assess profitability at different levels
  
  • By channel
  • By Market segment
  • Individually
• Many companies measure customer satisfaction
  
  • Few measure individual customer profitability

Question 17

Customer Profitibility Analysis (CPA)

Answer 17

Question 18

Customer Lifetime Value (CLV)

Answer 18

A prediction of the net profit attributed to the entire future relationship with a customer (or group of customers)

or

The discounted sum of all future customer revenue streams (Revenue) minus product, servicing and remarketing (Costs)

Framework:

• Calculates dollar value per relationship
• Based on stream of profits from multiple transactions
• Calculating values of past customers
• Using this information to project forward

Applications:

• How much to spend to acquire a customer
• How aggressively to spend to retain a customer?
• Product mix/development decisions
• To Value a company

Question 19

(CLV) Discount Rate

Answer 19

The time value of money

$1000 received today is NOT equivalent to $1000 received 24 months from now

Question 20

Net Present Value (NPV)

Answer 20

Today’s value of the expected cash flows

MINUS

Today’s value of invested cash

Question 21

(CLV) Rentention or Loyalty Rate

Answer 21

(1 minus Attrition (Lost) Rate)

• Fraction of current customers retained each period from t –> t+1
• The marketing manager considers Saving costs by cutting retention spending VS Increasing costs whereas customer attrition rate is expected to go down

Question 22

Customer Acquisition Cost (CAC) Management

Answer 22

How much should the marketer spend on recruiting a new customer?

Offensive vs Defensive

Question 23

Offensive Marketing

Answer 23

• Focus on customer acquisition
• Aggressive sales (CAC)
• Newcomers pour new revenue money
• Fill the leaky bucket

Question 24

Defensive Marketing

Answer 24

• Customer retention
• Customer relationship management
• Reduce customer churn
• Fix the Leaky Bucket

Question 25

The difference between a marketer and seller

Answer 25

Question 26

Holistic Marketing (HMO)

Answer 26

The philosophy which considers business and all its parts as **one single entity** and gives a shared purpose to every activity and person related to that business _Four Components:_ 1. **Relationship** Marketing 2. **Integrated** Marketing 3. **Internal** Marketing 4. **Performance** Marketing ​

Question 27

(HMO) Relationship Marketing

Answer 27

​Focus on the relationships with: * **Customers** (Consumers & Businesses) * **Employees** (From Customer service representative to assembly line workers) * **Members of the financial community** (Shareholders Investors & Analysts) * **Partners** (Channels, Supplier,Distributors, Dealers & Agencies)

Question 28

(HMO) Intergrated Marketing

Answer 28

**Two Key Principles:** 1. Marketing activities can create value 2. Any activity should be designed with all others in minds *Example: W*hen a hospital expects to buy a machine from GE, it expects a professional _installation_, high quality _maintenance_, _training_ services to hospital employees, top quality on demand _customer service_, **all this must be integrated into the offering**

Question 29

(HMO) Internal Marketing

Answer 29

**Everyone in the company adopts marketing principles** 1. Synergy of Departments (Development, Manufacturing, Logicstics, Financial...) required to achieve customer goals 2. Requires horizontal alignment with other departments and vertical alignment with senior management 3. Marketing is equally important within and outside the company

Question 30

(HMO) Performance Marketing

Answer 30

**Quantifying returns (cash flow) for business for marketing activities** The range of possible outcomes is influcenced by: 1. **Micro Environment** 1. Customers 2. Competitors 3. Suppliers 4. Intermediaries 2. **Macro Environment (PEST)** 1. Political Legal 2. Economic 3. Social Cultural 4. Technological 3. **Assessing Returns** 1. Financial and nonfinancial returns to both business and society 4. **Marketers monitor** 1. Market share, customer satisfaction 2. Customer retention/loss rate 3. Product quality 5. **Financial accountability:** 1. Justifying marketing investments in terms of: 1. Financial return/profitability 2. Building the brand 3. Growing customer base 2. Measures direct/indirect value their efforts create 3. Intangible assets contributing to market value such as: 1. Brands, customer base 2. Distributor and supplier relations 3. Employees, intellectual property 6. **Social Responsibility marketing**: 1. Satisfying customers more effectively that competitors 2. While preserving society’s long-term well-being 3. E.g. Panasonic offers recycling programs with their products 4. **Commoditization** 1. The process by which distinguishable goods become simple commodities 2. Services/materials are available easily 3. **Commodity –** undifferentiated products 4. Becomes harder for specific products to stand out 5. **Consumer Social Consciousness** 1. care about impact on society and environment 2. Soc. Responsibility: means for differentiation 3. build preference for their offerings 4. increase sales and profits 5. e.g. Ben & Jerrys had a triple bottom line for their company: 1. Economic Mission 2. Product Mission 3. Social Mission

Question 31

Traditional Organization Hierarchy

Answer 31

Customers at the bottom

Question 32

Customer Centric Companies

Answer 32

**Customers (and thier loyalty) are the key to profit!** *Example:* **Amazon,Inc** Customers are key to their DNA: * Jeff Bezos Management Techniques * Symbols (empty chair in the offices showing customers importance) * Call centers – Every manager attends two days of call center training to ensure everybody understands importance of customers * Hiring Process – Importance of Customer experience, raising bars * New Product Development – develops new products based on customers desires rather than own workers opinions. This is a backwards development process. * Culture of Metrics – Amazon routinely tests companies reactions to different product qualities.

Question 33

Measurement Techniques

Answer 33

1. **Periodic Surveys** to own customers (Satisfaction & willingness to reccomend to others 2. **Timeline** (Survey through customer lifespan) 3. **Monitoring Competitors** (Loss rate, Hiring mystery shoppers & call to competitor service centers) 4. **Counting Complaints** (Fewer complaints should equal higher customer satisfaction. 1. Problem: Many who are dissatisfied will not complain (don’t know how, not worth the effort, etc.) 2. Those who do register complaints (60% will keep doing business if their complaint is resolved, 95% if it is resolved fast) 3. Buyers who have complaints that are _well solved_ are likely to share their postitive experience with **5** people & Buyers who have complaints that _are not resolved_ are likely to share their negative experience with **11** people.

Question 34

Consumer Behavior

Answer 34

The study of how individuals, groups and organizations select, buy, use and dispose of goods, services, ideas or experiences to satisfy their needs and wants.

Question 35

Factors of Consumer Behavior

Answer 35

1. **_Cultural Factors_** * Specific identification and belongingness for members * Nationalities, religions, geographic regions & ethnical-racial groups * Consumers who share similar values, interests and traits 2. **_Social Factors_** * Family, friends and co-workers * Statuses in society; Social class 3. **_Personal Factors_** * Personality, Self-Concept * Lifestyle, Values and Habits * Age, Sex, Life Cycle stages, Occupation