CHAPTER 2 Creating marketing strategies for customer-centric organisations
Consumer analysis The process of understanding consumer trends, global consumer markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively Strategy A decisive allocation of resources (capital, technology, and people) in a particular direction
Customer-centric organisations A strategic commitment to focus every resource of the firm on serving and delighting profitable customers
Characteristics of customer-centric organisations Shared vision and values Cross-functional integration System-wide simultaneous training Customer-based metrics The goal of a customer-centric organisation is to provide a consumer with more value than its competitors
Value The difference between what consumers give up (pay with time, money or other resources) for a product and the benefits they receive
Marketing strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services
Implementation in marketplace Marketing mix Product, Brand, Price, Place Promotion, and 7Rs Market analysis Consumer Company Environmental Political/Legal Segmentation Demographic situational psychographic
Market analysis The process of analysing 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
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
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 (e.g. iPod accessories)
Market analysis: Corporate strengths and resources Resources: - Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising
Market analysis: Current and potential competitors <ul><li>- Who are current competitors and which firms are likely to become competitors? </li></ul><ul><li>- What are advantages/disadvantages of competitors and competitive products? </li></ul><ul><li>What do alternative scenarios show of how competitors react to new products or innovations? </li></ul>
Market analysis: Market Environment Physical conditions Government stability and regulations Market environment Technology State of economy
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 behaviours and needs that differ from those of the entire mass market Goal: minimise variance within groups and maximise variance between groups Opposite of market aggregation
Market segmentation Market aggregation : when organisations choose to market and sell the same product or service to all customers (also known as mass marketing )
Market segmentation Increasing diversity in consumer needs and wants leads to mass customisation : customising 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’ Segmentation can increase customer satisfaction and profitability - decreases marketing expenses - increases value (and therefore price) to consumers
Criteria for choosing segments Measurability : ability to obtain information about the size, nature, and behaviour of a market segment Accessibility : degree to which segments can be reached, either through targeted advertising and communication programs or multiple retail channels Substantiality : size of the market – is it large enough to be profitable? Congruity : how similar members within the segment exhibit behaviours or characteristics that correlate with consumption behaviour
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 behaviour or ‘why people buy’ Analyses data collected from point-of-sale (POS) scanners to identify patterns of behaviour that define market segments
Market mix strategies: Product Product : the total bundle of utilities (or benefits) obtained by consumers in the exchange process 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?
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?
Market mix strategies: Price Price : total bundle of disutilities (costs) given up by consumers in exchange for the product 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?
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?
Market mix strategies: Brand <ul><li>Brand : A product or product line, store, or service with an identifiable set of benefits, wrapped in a recognisable personality </li></ul><ul><li>Functional elements </li></ul><ul><li>Performance, quality, price, reliability, logistics </li></ul><ul><li>Does the brand solve a problem as expected and do what it is supposed to do? </li></ul><ul><li>Emotional elements </li></ul><ul><li>Image, personality, style, evoked feelings </li></ul><ul><li>Does the brand create an emotional connections between the customer and the product or firm? </li></ul><ul><li>Brand promise </li></ul><ul><li>What can consumer expect in exchange for their money? </li></ul>
Market mix strategies: Brand Brand : A product or product line, store or service with an identifiable set of benefits, wrapped in a recognisable personality 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
Strategy implementation Even the best strategies are worthless if not implemented well in the marketplace 7Rs for formulation and implementation
Customer loyalty and customer relationship management
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 behaviour increases To retain current customers, firms must focus on customer expectations of future benefits Customer loyalty
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 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
Customer relationship management <ul><li>Implementing CRM </li></ul><ul><li>Identify all customers and the nature of contacts with them </li></ul><ul><li>- Identify which types of customers are most profitable </li></ul><ul><li>- Identify and understand behaviours of the most profitable customers </li></ul><ul><li>Manage contact with most profitable customers </li></ul><ul><li>Manage firm activities including strategies and tactics to please the most profitable customers </li></ul>
Global marketing strategy <ul><li>Thinking globally involves ability to understand markets beyond one’s own country of origin with respect to: </li></ul><ul><li>Sources of demand </li></ul><ul><li>Sources of supply </li></ul><ul><li>Management and marketing </li></ul><ul><li>methods </li></ul><ul><li>Organisations must understand markets on a global basis in terms of people </li></ul><ul><li>Consumers have a myriad array of foreign-made and globally branded products </li></ul><ul><li>Cultural, ethnic, and motivation variables also affect consumer decisions </li></ul>
Global marketing strategy Can marketing be standardised? - Can a firm use the same marketing program in all target countries, or must it create a different program for each? - Which are greater – the 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?
Global marketing strategy Cross-cultural analysis : the comparison of similarities and differences in behavioural 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 behaviour by interviewing and observing consumers in real-world situations
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 standardisation
Global advertising effectiveness <ul><li>Global advertising sends the same message to consumers around the world </li></ul><ul><li>Localised campaigns adapt messages to the norms of the different cultures </li></ul><ul><li>When is global advertising most effective? </li></ul><ul><li>- Message is based on similar lifestyle </li></ul><ul><li>- Ad appeals to basic human needs and emotions </li></ul><ul><li>Product satisfies universal needs and desires </li></ul><ul><li>Language problems may occur, but back- translation , visual language, and local experts (advice) helps overcome them </li></ul>
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?