Blackwell Ch02

CHAPTER 2Creating marketing strategies for customer-centric organisationsConsumer Behaviour

Consumer analysisThe process of understanding consumer trends, global consumer markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively

StrategyA decisive allocation of resources (capital, technology, and people) in a particular direction

Customer-centric organisationsA strategic commitment to focus every resource of the firm on serving and delighting profitable customers

Characteristics of customer-centric organisations

Shared vision and valuesCross-functional integrationSystem-wide simultaneous trainingCustomer-based metricsThe goal of a customer-centric organisation is to provide a consumer with more value than its competitors

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

Marketing strategyInvolves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services

Implementationin marketplace

Marketing mix Product, Brand,Price, PlacePromotion, and7RsMarket analysisConsumerCompanyEnvironmentalPolitical/LegalSegmentationDemographicsituationalpsychographic

Market analysisThe process of analysing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environmentsOne 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 developmentConsumer 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 environmentIncludes 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 resourcesResources:- Financial- Technological- Personnel / managerial - Production- Development and design- Research - Marketing / advertising

Market analysis: Current and potential competitors- 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?

Market analysis: Market EnvironmentPhysical conditionsGovernment stability and regulationsMarket environmentTechnologyState of economy

Inferring other behaviours from product usage

Market segmentationProcess 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 segmentationMarket aggregation: when organisations choose to market and sell the same product or service to all customers (also known as mass marketing)

Market segmentationIdentifying segments

Market segmentationIncreasing 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 segmentsMeasurability: 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 analysisStatistical 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: ProductProduct: 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: PlacePlace: 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: PricePrice: total bundle of disutilities (costs) given up by consumers in exchange for the productPricing 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: PromotionPromotion: 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: BrandBrand: A product or product line, store, or service with an identifiable set of benefits, wrapped in a recognisable personality

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 promiseWhat can consumer expect in exchange for their money?

Market mix strategies: BrandBrand: A product or product line, store or service with an identifiable set of benefits, wrapped in a recognisable personality

Brand EquityDifference in value created by the brand minus the cost of creating the brand

Brand PersonalityReflection consumers see of themselves or think will develop by using a brand

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

Strategy implementationEven the best strategies are worthless if not implemented well in the marketplace7Rs 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 oneLoyal customers generate superior margins and recruit additional customersWith increased choices, consumers are becoming more fickle and less loyalConsumer feel entitled to try new brands and switching behaviour increasesTo retain current customers, firms must focus on customer expectations of future benefitsCustomer loyalty

Customer relationship managementProcess of managing all the elements of the relationship a firm has with its customers and potential customers with CRM solutions and enterprise systemsProvides 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 managementImplementing CRM Identify all customers and the nature of contacts with them- Identify which types of customers are most profitable- Identify and understand behaviours of the most profitable customers Manage contact with most profitable customers Manage firm activities including strategies and tactics to please the most profitable customers

Global marketing strategyThinking globally involves ability to understand markets beyond ones own country of origin with respect to:Sources of demandSources of supplyManagement and marketing methodsOrganisations must understand markets on a global basis in terms of peopleConsumers have a myriad array of foreign-made and globally branded productsCultural, ethnic, and motivation variables also affect consumer decisions

Global marketing strategyCan 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 strategyCross-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 strategyIntermarket 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 effectivenessGlobal advertising sends the same message to consumers around the worldLocalised campaigns adapt messages to the norms of the different culturesWhen is global advertising most effective? - Message is based on similar lifestyle- Ad appeals to basic human needs and emotions Product satisfies universal needs and desiresLanguage problems may occur, but back- translation, visual language, and local experts (advice) helps overcome them

Global advertising effectivenessBefore 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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