CHAPTER 2

Creating Marketing
Strategies for Customer-
Centric Organizations

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Learning outcome

Market Analysis
Market Strategy
Customer Loyalty and Retention Strategies
Global Marketing Strategy

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 Market Analysis
Consumer
Company
Environmental
Political/Legal

Implementation Segmentation
in Marketplace Demographic
Situational
Psychographic

Marketing Mix
Product, Brand,
Price, Place
Promotion, and
7Rs
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 Customer-Centric Organizations
(80:20)
A strategic commitment to focus
every resource of the firm on
serving and delighting profitable
customers

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 Characteristics of Customer-
Centric Organizations
Shared Vision and Values
Cross-Functional Integration
System-Wide Simultaneous Training
Customer Based Metrics

The goal of a customer-centric organization

is to provide a consumer with more value
than its competitors

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 Value
The difference between what
consumers give up (pay with time,
money, or other resources) for a
product and the benefits they
receive

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 Net Value = (Benefits Outlays)

Effort Time
e
Perceived Perceived
Benefits Outlays

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Determining the Total Costs to the Consumer

Search Costs Price Operating Costs

Related Monetary
Costs Incidental
Expenses
Time Costs
Purchase and
Physical Costs
Use Costs
Psychological
Costs

Sensory Costs

Necessary
After Costs follow-up
Problem
solving
Slide by Lovelock, Wirtz and Chew Essentials of Services Marketing Chapter 1 - Page 8
 Marketing Strategy (Telco Industry) and nature of
competition

The allocation of resources to

develop and sell products or
services that consumers will
perceive to provide more value
than competitive products or
services

The process includes market analysis,

market segmentation, brand strategy, and
implementation with the consumer at the
core
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 Market Analysis (micro n macro)
The process of analyzing changing
consumer trends, current and
potential competitors, company
strengths and resources, and the
technological, legal, and economic
environments
One goal is to minimize the number
of failed products introduced to the
market by better understanding the
wants and needs of the market
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 Market Analysis: Consumer
Insight and Product Development
Consumer Insight: an understanding of
consumers expressed and unspoken
needs and realities that affect how they
make life, brand, and product choices.

Combines fact (from research) and

intuition to yield an insight that can lead
to a new product, existing product
innovation, brand extension, or revised
communication plan

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 Market Analysis: Consumer
Environment
Includes demographic trends, personal
and group influences, knowledge,
attitudes, motivation, purchase and
consumption patterns, changing
consumer needs, wants, and lifestyles

Changes in the consumer environment

can lead to new product ideas, product
adaptations, new packaging or new
services to help consumers meet their
changing needs -iPod Accessories
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 Market Analysis: Corporate
Strengths and Resources
Resources:
- Financial
- Technological
- Personnel / managerial
- Production
- Development and design
- Research
- Marketing / advertising
Examples

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 Market Analysis: Current and Potential Competitors: Keep
your enemies close to you

- Who are current competitors and which firms

are likely to become competitors?
- What are advantages/disadvantages of
competitors and competitive products?
-What do alternative scenarios show of how
competitors react to new products or
innovations?

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 Market Analysis: Market Environment (inter
country/market)

Government
State of Stability and
Economy Regulations

Market
Environment

Physical Technology
Conditions

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 Market Segmentation
Process of identifying groups of people
who behave in similar ways to each
other, but somewhat differently than
other groups
Results in market segment: a group of
consumers with similar behaviors and
needs that differ from those of the
entire mass market
Goal: minimize variance within groups
and maximize variance between groups
Opposite of market aggregation
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 Market Segmentation
Identifying Segments

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 Market Segmentation
Increasing diversity in consumer needs
and wants leads to mass customization:
customizing goods for individual
customers in high volumes and at
relatively low costs
Key is understanding which customized
features customers value the most

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 Market Segmentation
Increasing diversity in consumer needs
and wants leads to mass customization:
customizing goods for individual
customers in high volumes and at
relatively low costs
Key is understanding which customized
features customers value the most
Ability to reach segment of one

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 Market Segmentation
Segmentation can increase customer
satisfaction and profitability
- decreases marketing expenses
- increases value (and therefore price) to
consumers

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 Criteria for Choosing Segments
Measurability: ability to obtain information
about the size, nature, and behavior of a
market segment
Accessibility: degree to which segments
can be reached, either through targeted
advertising and communication programs
or multiple retail channels

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 Criteria for Choosing Segments
Substantiality: size of the marketis it
large enough to be profitable?
Congruity: how similar members within the
segment exhibit behaviors or
characteristics that correlate with
consumption behavior

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 Bayesian Analysis
Statistical technique based on a theorem
that expresses uncertainty in probability
terms
Allows consumer analysts to make
educated guesses on how the human
mind affects behavior or why people
buy
Analyzes data collected from point-of-
sale (POS) scanners to identify patterns
of behavior that define market segments

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 Market Mix Strategies: Product
Product: the total bundle of utilities (or
benefits) obtained by consumers in the
exchange process

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 Market Mix Strategies: Product
Internal considerations include:
- What are the costs of developing, producing,
distributing, and selling the product?

External considerations include:

- What form of product best serves consumption
patterns for the target segment
- What packaging will most likely attract
consumers and fulfill transportation, usage,
and disposal of the product?
- How will consumers compare this product to
competitive or substitute products?

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 Market Mix Strategies: Place

Place: physical distribution and location

of sale
- Where will consumers expect and want to buy
this product?
- What are the most effective outlets through
which to sell the product and how best to get it
there?

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 Market Mix Strategies: Price
Price: total bundle of disutilities (costs)
given up by consumers in exchange for
the product

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 Market Mix Strategies: Price
Pricing considerations include:
- What is the best pricing policy for the product
or for the store?
- How will consumers react to Everyday Low
Prices or promotional prices?
- Is it more important to have the lowest price
or prices in the range consumers expect to
pay?
- What effect does price reduction or price
ending have on perceived quality of product?
- What does pricing policy need to be to
maintain a healthy profit margin?

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 Market Mix Strategies: Promotion
Promotion: activities involved in selling a
product, including advertising, public
relations, sales promotions, and personal
sales
- What message should be sent to consumers?
- Which forms of communication will best reach
specific segments?
- What type of communication should occur at
various stages of purchase and consumption
- How should different product attributes be
positioned through different forms of media?

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 Market Mix Strategies: Brand
Functional elements
- Performance, quality, price, reliability, logistics
Does the brand solve a problem as expected
and do what it is supposed to do?
Emotional elements
- Image, personality, style, evoked feelings
Does the brand create an emotional connections
between the customer and the product or firm?
Brand Promise
What can consumer expect in exchange for their
money?

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 Market Mix Strategies: Brand
Brand: A product or product line, store or
service with an identifiable set of
benefits, wrapped in a recognizable
personality
Brand Equity
Brand Personality
Brand Protection

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 Market Mix Strategies: Brand
Brand Equity
Difference in value created by the brand minus
the cost of creating the brand
Brand Personality
Reflection consumers see of themselves or
think will develop by using a brand

Brand Protection
By promising a certain outcome, brands reduce
the risk to consumers that the product may not
deliver as expected

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 Transforming Customers into
Friends and Fans

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 Strategy Implementation
Even the best strategies are worthless if
not implemented well in the marketplace
7Rs for formulation and implementation

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 Customer Loyalty and Customer
Relationship Management

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 Customer Loyalty
It is less costly and easier to keep a
customer than it is to create a new one
Loyal customers generate superior
margins and recruit additional customers
With increased choices, consumers are
becoming more fickle and less loyal
Consumer feel entitled to try new brands
and switching behavior increases

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 Customer Loyalty
It is less costly and easier to keep a
customer than it is to create a new one
Loyal customers generate superior
margins and recruit additional customers
With increased choices, consumers are
becoming more fickle and less loyal
Consumer feel entitled to try new brands
and switching behavior increases
To retain current customers, firms must
focus on customer expectations of future
benefits
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 Customer Relationship Management
Process of managing all the elements of
the relationship a firm has with its
customers and potential customers with
CRM solutions and enterprise systems

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 Customer Relationship Management
Implementing CRM
- Identify all customers and the nature of
contacts with them
- Identify which types of customers are most
profitable
- Identify and understand behaviors of the most
profitable customers
- Manage contact with most profitable customers
- Manage firm activities including strategies and
tactics to please the most profitable customers

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 Customer Relationship Management
Provides the ability to calculate the
Customer Lifetime Value
- The value to the company of a customer over
the whole time the customer relates to the
company

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 Global Marketing Strategy

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 Global Marketing Strategy
Thinking Globally: involves ability
to understand markets beyond
ones own country of origin with
respect to:
Sources of demand
Sources of supply
Management & marketing
methods

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 Global Marketing Strategy
Organizations must understand
markets on a global basis in terms
of people
Consumers have a myriad array of
foreign-made and globally branded
products
Cultural, ethnic, and motivation
variables also affect consumer
decisions

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 Global Marketing Strategy
Can marketing be standardized?
- Can a firm use the same marketing
program in all target countries, or must
it create a different program for each?
- Which are greaterthe similarities
among or differences between
consumers in different countries?
- How do advantages of economies of
scale and unified brand image compare
to advantages of culture-specific
messages?
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 Global Marketing Strategy
Cross-Cultural analysis: the comparison
of similarities and differences in behavioral and
physical aspects of cultures

Cultural empathy: the ability to

understand the inner logic and coherence of
other ways of life and refrain from judging other
value systems

Ethnography: describing and

understanding consumer behavior by
interviewing and observing consumers in real-
world situations

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 Global Marketing Strategy
Intermarket segmentation: the
identification of groups of customers who
transcend traditional market or geographic
boundaries (similar segments around the world)

Intermarket segmentation plays a key role in

understanding the similarities and differences
between consumers and countries that become
the foundation of market standardization

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 Global Advertising Effectiveness
Global advertising sends the same
message to consumers around the world
Localized campaigns adapt messages to
the norms of the different cultures
When is global advertising most effective?
- Message is based on similar lifestyle
- Ad appeals to basic human needs and
emotions
- Product satisfies universal needs and
desires
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 Global Advertising Effectiveness
Global advertising sends the same
message to consumers around the world
Localized campaigns adapt messages to
the norms of the different cultures
When is global advertising most effective?
Language problems may occur, but back-
translation, visual language, and local
experts (advice) helps overcome them

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 Global Advertising Effectiveness
Before choosing a brand name, marketers
should consider the following:
- Does the name of the product have another
meaning in one or more of the countries where
it might be marketed?
- Can the name be pronounced everywhere?
- Is the name close to that of a foreign brand, or
does it duplicate another product sold in other
markets?
- If the product is distinctly American, will national
pride and prejudice work against the acceptance
of the product?
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