Chapters 11 and 12 – Marketing

Role of Marketing
To design, develop, and communicate value
The Marketing Equation
Effective and well designed position + Effective marketing mix = value (real or perceived)
Two Principals of Consumer Behavior
1. Won’t pay more for a product if there is a cheaper alternative with the same value
2. Customers buy solutions to their needs
6 R’s of Marketing
1. The right need to pursue
2. The right solution to offer
3. The right value proposition
4. The right methodology for delivery
5. The right price to charge
6. The right communication method
6 Core Challenges of Marketing
1. Need identification
2. Ability to respond
3. Value proposition creation and positioning
4. Distribution capabilities
5. Price point attractiveness and profitability
6. Message development and delivery
The ability for organizations to develop a unique and valued place in the minds of our customer for its brand, or product
Customer Buying Criteria
1. Functionality
2. Psychological benefits
3. Personal taste
4. Augmented services
5. Social and group influences
Customer Profile Identification (Target Market)
1. Demographics – Age, gender, income
2. Geographic clustering – location, reach
3. Psychographics – ego, status, tastes
4. Behavioural – use, buying patterns
The Marketing Process (6 Steps)
1. Market research
2. Segmentation
3. Target Market
4. Value proposition development and profiling
5. Marketing mix development
6. Message rifling and concentration
Target Market
The clustering of potential customers in the market segment who are most likely to purchase the product and have the capacity to do so
Ansoff Matrix
1. Existing Products + Existing customer base = market penetration
2. Current market + new product = Product development
3. New market + current product = Market development (segmentation stretch)
4. New market + new product = diversification
Market Penetration Opportunities
Growing sales revenue through existing products in an existing customer base by increasing frequency of sales and increasing ATR
Product Development Opportunities
Identifying and cultivating new products from an existing customer base
Market Development Opportunities
Identifying and cultivating new customers for existing products — segmentation stretch
Diversification Opportunities
New business initiatives with new markets and customers — through either organic growth or acquisition
Customer Buying Process
1. Problem recognition
2. Information search
3. Identification of alternatives
4. Evaluation of alternatives
5. Point of purchase
6. Post – purchase influence
Marketers Tool Box (3 Techniques)
1. Company Driven Marketing Techniques
2. Customer Driven Marketing Techniques
3. Channel support and interaction techniques
Four Pillars of the Marketing Effort
1. Product Strategy (value proposition)
2. Communication Strategy (Communicate “fit”)
3. Delivery Strategy
4. Pricing Strategy
The Brand Ladder
1. Brand awareness
2. Brand Preference
3. Brand loyalty
4. Brand commitment
Two Responses to Pricing Pressures
1. Product does not have much differentiation — respond to price reduction requirements through innovation and operational efficiencies
2. Product has strong differentiation — protect our price point by effectively communicating value and quality with uniqueness
Average transaction revenue
Churn Rate
The rate of desertion of customers over a period of time
Four Key Fundamentals to Setting Price
1. Customers’ price sensitivity
2. Value proposition strength
3. Cost structure components
4. Competitors cost structures
Unit volume focuses, extensive reach (low cost)
Relationship focused, focuses system model, with fewer customers (premium pricing)
Payback Period
The length of time it takes to recover an investment
3 Components of Distribution Strategy
1. Direct, indirect, or mixed systems
2. Product delivery options
3. Degree of sales support
Direct Distribution
No use of channel intermediaries — direct sale to customer
Indirect Distribution
The use of a channel intermediary to facilitate sale
Mixed System
Incorporates both direct and indirect systems
Multi Channel Distribution
the incorporation of a number of channel connections through which a customer can purchase a product
Intensive Distribution
Supplying to as many distributors as we can — connivence goods
Selective Distribution
Selling through a limited number of channel intermediaries
Exclusive Distribution
Offering products through a single market representative
Message Rifling
A focused message driven by a well developed value proposition that is targeted at a specifically defined audience
Stages of a Products Life Cycle
1. Design
2. Commercialization
3. Introduction
4. Growth
5. Maturity
6. Decline
Product Centric Approach
Creating the product, then identifying the market segment, then developing the marketing mix, then using mass advertising to blanket targeted segment, followed by using aggregate sales for determining performance
Customer Centric Approach
Developing a product in response to needs, then developing the marketing mix and customizing the communication approach for the target market. Assesses the success on the basis of lifetime value (CLV) and Equity (CE)
Lifetime value of a product
4 I’s of Customer Centric Marketing
1. Individualize
2. Involve
3. Initiate
4. Integrate
Two Primary Life Cycle Drivers
1. Demand
2. Repurchase rate
5 Integration Components of Marketing Mix Execution
1. Demand potential
2. Customer focus
3. Pricing
4. Positioning
5. Industry structural shifts