Philip Kotler - Los 10 Principios Del Nuevo Marketing

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Business & Mgmt

Published on October 26, 2008

Author: oliver.barreto

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Philip Kotler - Los 10 Principios Del Nuevo Marketing

A Strategy Document on The New Marketing Paradigm Holistic Marketing ● Lateral Marketing ● High-tech Marketing by PHILIP KOTLER Documentation Sponsored by Canon

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Kotler On Marketing How To Create, Win, and Dominate Markets Philip Kotler, Ph.D Kellogg School of Management Northwestern University Indiatimes Mindscape Mumbai and Delhi October 11, 12, 2004 Printed on CANON

Philip Kotler, Ph.D

Kellogg School of Management

Northwestern University

Indiatimes Mindscape

Mumbai and Delhi

October 11, 12, 2004

Two Challenges Facing Indian Companies Will Indian companies be able to defend their market against the growing invasion of foreign global brands? Can Indian companies develop strong global brands? Printed on CANON

Will Indian companies be able to defend their market against the growing invasion of foreign global brands?

Can Indian companies develop strong global brands?

Can Indian Companies Defend the Domestic Market? Foreign competitors will not only go after the high end market in India. They will target the middle and eventually the low end. The main defense for India will be developing stronger skills in innovation, differentiation, branding, and service. In a word, MARKETING! Printed on CANON

Foreign competitors will not only go after the high end market in India. They will target the middle and eventually the low end.

The main defense for India will be developing stronger skills in innovation, differentiation, branding, and service. In a word, MARKETING!

But India Needs Stronger Marketing Confusing marketing with advertising. Advertising is hard sell. Sometimes ads appear before the product is in distribution. Some companies over-spend on advertising and go broke. Little use of marketing research; can’t trust. Therefore little segmentation of market and poor targeting. Over focus on winning through low price; neglecting differentiation. Retailers carry the same goods and their service is poor. Printed on CANON

Confusing marketing with advertising.

Advertising is hard sell.

Sometimes ads appear before the product is in distribution.

Some companies over-spend on advertising and go broke.

Little use of marketing research; can’t trust.

Therefore little segmentation of market and poor targeting.

Over focus on winning through low price; neglecting differentiation.

Retailers carry the same goods and their service is poor.

Marketing is More Important than Production! The Indian manufacturer of a Hugo Boss shirt gets only $12, or 10% of the final price of $120 that is paid by a customer of Saks Fifth Avenue. The retailer gets 60% ($72) and the Brand company gets 30%, or $36. Would you rather be the manufacturer, Brand owner, or retailer? The Indian manufacturer has no defense if the Brand Owner wants to switch to another manufacturer to whom he will pay $8 and keep $2 or pass it to the retailer to get more retail support. Yet India pays more attention to the product engineer than the marketing “engineer.” But India’s future success will require investing in marketing and branding. Printed on CANON

The Indian manufacturer of a Hugo Boss shirt gets only $12, or 10% of the final price of $120 that is paid by a customer of Saks Fifth Avenue.

The retailer gets 60% ($72) and the Brand company gets 30%, or $36.

Would you rather be the manufacturer, Brand owner, or retailer?

The Indian manufacturer has no defense if the Brand Owner wants to switch to another manufacturer to whom he will pay $8 and keep $2 or pass it to the retailer to get more retail support.

Yet India pays more attention to the product engineer than the marketing “engineer.” But India’s future success will require investing in marketing and branding.

The Strategic Trajectory for India Low cost, average quality domestic products. Low cost, good quality domestic products. Indian high-end products made for other companies. Indian branded products (regional). Indian branded products (global). Indian dominant brands (global). Printed on CANON

Low cost, average quality domestic products.

Low cost, good quality domestic products.

Indian high-end products made for other companies.

Indian branded products (regional).

Indian branded products (global).

Indian dominant brands (global).

Ranbaxy Pharmaceuticals (India) Originally sold bulk substances to unsophisticated markets but gross margins were too low to cover export costs. New CEO, Parvinder Singh, challenged Ranbaxy to become a truly global company. He said: “Ranbaxy cannot change India. What it can do is to create a pocket of excellence. Ranbaxy must be an island within India.” The company moved into higher-margin businesses like selling branded generics in large volume markets like China and Russia. Ranbaxy then entered the U.S. and Western Europe. In just five years, more than half of its US$ 250 million revenues now come from outside of India. Printed on CANON

Originally sold bulk substances to unsophisticated markets but gross margins were too low to cover export costs.

New CEO, Parvinder Singh, challenged Ranbaxy to become a truly global company. He said: “Ranbaxy cannot change India. What it can do is to create a pocket of excellence. Ranbaxy must be an island within India.”

The company moved into higher-margin businesses like selling branded generics in large volume markets like China and Russia.

Ranbaxy then entered the U.S. and Western Europe. In just five years, more than half of its US$ 250 million revenues now come from outside of India.

The Case of Haier Haier developed through three stages. 1. Fix quality (Zhang Ruimin smashed 76 refrigerators). 2. Diversify (Microwaves, toasters, air conditioners, dishwasher, vacuum cleaners, etc.) 3. Globalize (Asia Region, U.S., Europe) Haier entered with a U.S. partner and is challenging Whirlpool and GE. Haier’s brand name products are sold in Wal-Mart, Best Buy, Sears, Lowe’s, Home Depot and Target. Haier is promoted as a global brand, not a Chinese one. (Many people think it is German). Puts lower price models in price-only stores and higher price models in top stores. Printed on CANON

Haier developed through three stages.

1. Fix quality

(Zhang Ruimin smashed 76 refrigerators).

2. Diversify

(Microwaves, toasters, air conditioners, dishwasher, vacuum cleaners, etc.)

3. Globalize

(Asia Region, U.S., Europe)

Haier entered with a U.S. partner and is challenging Whirlpool and GE.

Haier’s brand name products are sold in Wal-Mart, Best Buy, Sears, Lowe’s, Home Depot and Target.

Haier is promoted as a global brand, not a Chinese one. (Many people think it is German).

Puts lower price models in price-only stores and higher price models in top stores.

Five C’s Favoring India Capital: India has and can attract capital. Cost: Another 50 years of low cost production Capability: Large number of trained workers, engineers, scientists, and business people Consumers: Immense domestic market Calm and stability: in a world of turmoil and uncertainty Printed on CANON

Capital: India has and can attract capital.

Cost: Another 50 years of low cost production

Capability: Large number of trained workers, engineers, scientists, and business people

Consumers: Immense domestic market

Calm and stability: in a world of turmoil and uncertainty

A Quiz: Who Said This? “ The purpose of a company is ‘to create a customer…The only profit center is the customer.’” “ A business has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results: all the rest are costs.” “ The aim of marketing is to make selling unnecessary.” “ While great devices are invented in the Laboratory, great products are invented in the Marketing department.” “ Marketing is too important to be left to the marketing department.” Printed on CANON

“ The purpose of a company is ‘to create a customer…The only profit center is the customer.’”

“ A business has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results: all the rest are costs.”

“ The aim of marketing is to make selling unnecessary.”

“ While great devices are invented in the Laboratory, great products are invented in the Marketing department.”

“ Marketing is too important to be left to the marketing department.”

My Message Marketing’s performance has been disappointing. You must replace your Old Marketing with New Marketing that is: holistic, technology-enabled, and strategic. Printed on CANON

Marketing’s performance has been disappointing.

You must replace your Old Marketing with New Marketing that is:

holistic,

technology-enabled,

and strategic.

Facing the Increasing Pressure for Marketing Accountability Marketing has become a one P discipline = selling. Marketing involves a great deal of waste. $2 million for 30 seconds on the Superbowl. Direct mail campaigns with a 1% response rate. Cold sales calls which play the numbers. High rate of new product failure. Marketing costs are high and rising. Marketing lacks accountability. Marketing does not create major new ideas. Marketing is too involved in short-term thinking. Marketing doesn’t focus on its real assets. Brands, customers, service quality, stakeholder relationships, intellectual capital, corporate reputation Printed on CANON

Marketing has become a one P discipline = selling.

Marketing involves a great deal of waste.

$2 million for 30 seconds on the Superbowl.

Direct mail campaigns with a 1% response rate.

Cold sales calls which play the numbers.

High rate of new product failure.

Marketing costs are high and rising.

Marketing lacks accountability.

Marketing does not create major new ideas.

Marketing is too involved in short-term thinking.

Marketing doesn’t focus on its real assets.

Brands, customers, service quality, stakeholder relationships, intellectual capital, corporate reputation

Needed: Holistic Marketing Marketing must become strategic and drive business strategy. A company needs to take a more holistic view of: the target customers’ activities, lifestyle, and social space. the company’s channels and supply chain. the company’s communications. the company’s stakeholders’ interests. Holistic marketing will require strong software support. Printed on CANON

Marketing must become strategic and drive business strategy.

A company needs to take a more holistic view of:

the target customers’ activities, lifestyle, and social space.

the company’s channels and supply chain.

the company’s communications.

the company’s stakeholders’ interests.

Holistic marketing will require strong software support.

HOLISTIC RELATIONSHIP MARKETING FRAMEWORK Printed on CANON MARKET SPACE POTENTIAL OPPORTUNITIES BUSINESS INVESTMENT CUSTOMERS CORPORATION COLLABORATORS CUSTOMER FOCUS CORE COMPETENCIES COLLABORATIVE NETWORK 2) How can we define relevant market space? 3) What are the potential opportunities emerging from the market space? 4) What business capabilities and infrastructure required? 1) Who is involved?

4 COMPETITIVE PLATFORMS Printed on CANON Market Offerings COGNITIVE SPACE CUSTOMER VALUE BUSINESS DOMAIN COMPETENCY SPACE Business Architecture BUSINESS PARTNERS CRM ERP RESOURCE SPACE SCM Marketing Activities Operational System Creating Value Delivering Value Customer Focus Core Competencies Collaborative Network Exploring Value

Responding to Low Margins and the Economic Slowdown Commoditization and rapid imitation leading to shorter product life cycles. Competition of cheaper brands from China and elsewhere. Rising selling and promotion costs and decreasing sales effectiveness. Shrinking margins. Proliferation of sales and media channels. Power shifting to giant retailers who are demanding lower prices. Recession: lower incomes and purchasing power. Mergers, large company bankruptcies. Printed on CANON

Commoditization and rapid imitation leading to shorter product life cycles.

Competition of cheaper brands from China and elsewhere.

Rising selling and promotion costs and decreasing sales effectiveness.

Shrinking margins.

Proliferation of sales and media channels.

Power shifting to giant retailers who are demanding lower prices.

Recession: lower incomes and purchasing power.

Mergers, large company bankruptcies.

Improving Marketing Efficiency and Effectiveness Improving marketing efficiency buying inputs more efficiently hunting down excessive communication and sales travel expenses closing unproductive sales offices cutting back on unproven promotion programs and tactics putting advertising agencies on a pay-for-performance basis Improving marketing effectiveness replacing higher cost channels with lower cost channels shifting advertising money into better uses reducing the number of brands or sku’s Improving supply chain responsiveness Printed on CANON

Improving marketing efficiency

buying inputs more efficiently

hunting down excessive communication and sales travel expenses

closing unproductive sales offices

cutting back on unproven promotion programs and tactics

putting advertising agencies on a pay-for-performance basis

Improving marketing effectiveness

replacing higher cost channels with lower cost channels

shifting advertising money into better uses

reducing the number of brands or sku’s

Improving supply chain responsiveness

Responding to the Economic Slowdown Reevaluate your current resource allocations. Geographical mix Market segment mix Customer mix Product mix Channel mix Promotion mix Decide whether to attack to gain market share rather than retrench. Be sure to maintain the value proposition promised by your brand. Try to add value instead of cutting the price. Printed on CANON

Reevaluate your current resource allocations.

Geographical mix

Market segment mix

Customer mix

Product mix

Channel mix

Promotion mix

Decide whether to attack to gain market share rather than retrench.

Be sure to maintain the value proposition promised by your brand.

Try to add value instead of cutting the price.

Marketing Strategies Are Showing Diminishing Returns Product differentiation is harder to achieve. Acquisitions and mergers have as many failures as successes. Internationalization is offering less opportunities because either the good markets are overcrowded or the poor markets have no money. New products unfortunately fail more times than they succeed. Price cutting doesn’t work because competitors will match. Pricing raising doesn’t work since there isn’t enough differentiation to support it. Cost cutting has eliminated much of the fat but is now risking cutting the muscles. Printed on CANON

Product differentiation is harder to achieve.

Acquisitions and mergers have as many failures as successes.

Internationalization is offering less opportunities because either the good markets are overcrowded or the poor markets have no money.

New products unfortunately fail more times than they succeed.

Price cutting doesn’t work because competitors will match.

Pricing raising doesn’t work since there isn’t enough differentiation to support it.

Cost cutting has eliminated much of the fat but is now risking cutting the muscles.

Strategies for Firms in Different Market Positions Printed on CANON Jagdish Sheth, Singapore Marketer, 2002

Five Winning Strategies Cost reduction : (IKEA, Southwest Airlines, Wal-Mart, Enterprise Rent-a-Car). Improved customer experience (Starbucks, Harley Davidson) Innovative business model (Barnes & Noble, Charles Schwab, FedEx, Sony). Improved product quality (P&G, Toyota). Niching: (Progressive Insurance, Tetra) Printed on CANON

Cost reduction : (IKEA, Southwest Airlines, Wal-Mart, Enterprise Rent-a-Car).

Improved customer experience (Starbucks, Harley Davidson)

Innovative business model (Barnes & Noble, Charles Schwab, FedEx, Sony).

Improved product quality (P&G, Toyota).

Niching: (Progressive Insurance, Tetra)

Dual Strategies Planning for today Defining the business. Shaping the business to meet needs of today’s customers Improving alignment between functional activities and business definition Organization mirrors current business activities Optimizing current operations to achieve excellence. Planning for tomorrow Redefining the business Reshaping the business to compete for future customers and markets Making bold moves away from the existing ways of doing business Reorganizing for future business challenges Managing change to create future operations and processes Printed on CANON

Planning for today

Defining the business.

Shaping the business to meet needs of today’s customers

Improving alignment between functional activities and business definition

Organization mirrors current business activities

Optimizing current operations to achieve excellence.

Planning for tomorrow

Redefining the business

Reshaping the business to compete for future customers and markets

Making bold moves away from the existing ways of doing business

Reorganizing for future business challenges

Managing change to create future operations and processes

Printed on CANON In many markets, the growing number of competitors in mature markets leads companies to target niches of low profitability. Market Size Number of competitors Average profitability of all competitors or players Y O G U R T S M A R K E T Time

Some Vertical Marketing Methods Modulation The juice manufacturer varies the sugar content, fruit concentrate, with or without vitamins… Sizing Potato chips are offered in sizes 35 grams, 50 grams, 75grams, 125 grams, 200 grams, multi-packs… Packaging Nestle’s Red Box chocolates comes in different containers: cheap paper box for the grocery trade, premium metal box for the gift trade… Design BMW designs cars with different styling and features... Complements Biscuits with sugar spread on it, with cinnamon, with chocolate, with white chocolate, with black chocolate, filled biscuits… Efforts reduction Charles Schwab offers different channels for transacting such as retail stores, telephone, internet…. Printed on CANON

Modulation

The juice manufacturer varies the sugar content, fruit concentrate, with or without vitamins…

Sizing

Potato chips are offered in sizes 35 grams, 50 grams, 75grams, 125 grams, 200 grams, multi-packs…

Packaging

Nestle’s Red Box chocolates comes in different containers: cheap paper box for the grocery trade, premium metal box for the gift trade…

Design

BMW designs cars with different styling and features...

Complements

Biscuits with sugar spread on it, with cinnamon, with chocolate, with white chocolate, with black chocolate, filled biscuits…

Efforts reduction

Charles Schwab offers different channels for transacting such as retail stores, telephone, internet….

Printed on CANON Lateral Marketing Process The case of Cereal Bars into Cereals for breakfast market Cereal varieties New category Vertical Marketing Process STREETS =

Printed on CANON Baby dolls market Doll varieties New category Lateral Marketing Process Vertical Marketing Process To feel as... = Teenager The case of Barbie

Other Examples of Lateral Marketing Kinder Surprise = candy + toy. Seven Eleven = food + depot. Actimel = yogurt + bacteria protection. Gas station stores = gas station + food. Cyber cafes = cafeteria + Internet. “ Be the godfather of a kid” = Donation + adoption. Huggies Pull-ups = diapers + 3 year olds. Walkman = audio + portable Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A New Approach to Finding Product, Market and Marketing Mix Ideas (Wiley, 2004) Printed on CANON

Kinder Surprise = candy + toy.

Seven Eleven = food + depot.

Actimel = yogurt + bacteria protection.

Gas station stores = gas station + food.

Cyber cafes = cafeteria + Internet.

“ Be the godfather of a kid” = Donation + adoption.

Huggies Pull-ups = diapers + 3 year olds.

Walkman = audio + portable

Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A New Approach to Finding Product, Market and Marketing Mix Ideas (Wiley, 2004)

Check Where You Stand Marketing does the marketing -> everyone does the marketing. Organizing by product units -> organizing by customer segments. Making everything -> outsourcing more goods and services. Using many suppliers -> working with fewer suppliers. Emphasizing tangible assets -> emphasizing intangible assets. Building brands through advertising -> building brands through integrated communications.  Attracting customers to stores -> making products available on-line. Selling to everyone -> selling to target markets. Focusing on profitable transactions -> focusing on customer lifetime value.  Focusing on market share -> focusing on customer share. Being local -> being “glocal. Focusing on the financial scorecard -> focusing on the marketing scorecard.  Focusing on shareholders -> focusing on stakeholders  Printed on CANON

Marketing does the marketing -> everyone does the marketing.

Organizing by product units -> organizing by customer segments.

Making everything -> outsourcing more goods and services.

Using many suppliers -> working with fewer suppliers.

Emphasizing tangible assets -> emphasizing intangible assets.

Building brands through advertising -> building brands through integrated communications. 

Attracting customers to stores -> making products available on-line.

Selling to everyone -> selling to target markets.

Focusing on profitable transactions -> focusing on customer lifetime value. 

Focusing on market share -> focusing on customer share.

Being local -> being “glocal.

Focusing on the financial scorecard -> focusing on the marketing scorecard. 

Focusing on shareholders -> focusing on stakeholders 

MARKETING IS THE ART OF BRAND BUILDING * IF YOU ARE NOT A BRAND, YOU ARE A COMMODITY . * THEN PRICE IS EVERYTHING AND THE LOW-COST PRODUCER IS THE ONLY WINNER! Building Brand Equity Printed on CANON

MARKETING IS THE ART OF BRAND BUILDING

*

IF YOU ARE NOT A BRAND,

YOU ARE A COMMODITY .

*

THEN PRICE IS EVERYTHING

AND THE LOW-COST PRODUCER

IS THE ONLY WINNER!

1. How Important is Branding? The NUMMI plant in California produces two nearly identical models called the Toyota Corolla and the Chevrolet Prizm. Toyota sold 230,000 Corollas compared to sales of 52,000 Prizms. And Toyota’s net price is $650 higher! Printed on CANON

The NUMMI plant in California produces two nearly identical models called the Toyota Corolla and the Chevrolet Prizm.

Toyota sold 230,000 Corollas compared to sales of 52,000 Prizms.

And Toyota’s net price is $650 higher!

A Strong Brand Improves Demand and Supply On the demand side: higher price increased sales volume lower churn more brand stretching On the supply side: greater trade acceptance, more favorable supplier terms, lower rejection lower staff acquisition and retention costs lower cost of capital better scale economics through higher volume Printed on CANON

On the demand side:

higher price

increased sales volume

lower churn

more brand stretching

On the supply side:

greater trade acceptance, more favorable supplier terms, lower rejection

lower staff acquisition and retention costs

lower cost of capital

better scale economics through higher volume

Names are Important in Branding Donald Trump’s family name is Drumpf. But he can’t call it Drumpf Towers. Alan Alda’s name was Alphonso D’Abruzzo. Chinese gooseberry was renamed kiwifruit. Paradise Island in the Bahamas used to be Hog Island. Printed on CANON

Donald Trump’s family name is Drumpf. But he can’t call it Drumpf Towers.

Alan Alda’s name was Alphonso D’Abruzzo.

Chinese gooseberry was renamed kiwifruit.

Paradise Island in the Bahamas used to be Hog Island.

A Brand Must be More Than a Name A brand must trigger words or associations (features and benefits). A brand should depict a process (McDonald’s, Amazon). A great brand triggers emotions (Harley-Davidson). A great brand represents a promise of value (Sony). The ultimate brand builders are your employees and operations , i.e., your performance, not your marketing communications. Printed on CANON

A brand must trigger words or associations (features and benefits).

A brand should depict a process (McDonald’s, Amazon).

A great brand triggers emotions (Harley-Davidson).

A great brand represents a promise of value (Sony).

The ultimate brand builders are your employees and operations , i.e., your performance, not your marketing communications.

Your Company’s Brand What word does your brand own? 2. Write down other words triggered by your brand name? A. Circle the favorable words; square the unfavorable words. B. Underline the words that are favorable but not widely known. C. Double underline the words that are unique to your company. 3. Are any of the following a source for strengthening your brand’s personality? A. Founders B. Spokespersons C. Characters D. Objects E. Stories and mythologies Printed on CANON

What word does your brand own?

2. Write down other words triggered by your brand name?

A. Circle the favorable words; square the unfavorable words.

B. Underline the words that are favorable but not widely known.

C. Double underline the words that are unique to your company.

3. Are any of the following a source for strengthening your brand’s personality?

A. Founders

B. Spokespersons

C. Characters

D. Objects

E. Stories and mythologies

2. How Do You Develop a Brand Concept? “ The brand must be an essence, an ideal, an emotion. ” It must be supported by beautiful logos, clever tag lines, creative turns, edgy names, rave launch parties, big ticket giveaway promotions, and publicity buzz-making. (Advertising agency view) “ The brand should have a target group in mind and be positioned to solve one of their problems better than competitive offerings.” Furthermore the brand’s reputation is ultimately based on product quality, customer satisfaction, employee communications, social responsibility, etc. (Kevin Clancy, CEO of Copernicus) Printed on CANON

“ The brand must be an essence, an ideal, an emotion. ” It must be supported by beautiful logos, clever tag lines, creative turns, edgy names, rave launch parties, big ticket giveaway promotions, and publicity buzz-making. (Advertising agency view)

“ The brand should have a target group in mind and be positioned to solve one of their problems better than competitive offerings.” Furthermore the brand’s reputation is ultimately based on product quality, customer satisfaction, employee communications, social responsibility, etc. (Kevin Clancy, CEO of Copernicus)

Branding Components Name Short, suggestive, memorable, unique, pronounceable Slogan Logo and typeface Colors Music Themelines (Got Milk!) Stationery and business cards Offices Trucks Dress code Printed on CANON

Name

Short, suggestive, memorable, unique, pronounceable

Slogan

Logo and typeface

Colors

Music

Themelines (Got Milk!)

Stationery and business cards

Offices

Trucks

Dress code

Brand Slogans BA, “The World’s Favorite Airline” American Express, “The Natural Choice” AT&T, “The Right Choice” Budweiser , “King of Beers” Ford, “Quality is #1 Job” Holiday Inn, “No Surprises” Lloyds Bank, “The Bank that Likes to Say Yes” Philips, “ From Sand to Chips” “ Philips Invents for You” “ Let’s Make Things Better” Printed on CANON

BA, “The World’s Favorite Airline”

American Express, “The Natural Choice”

AT&T, “The Right Choice”

Budweiser , “King of Beers”

Ford, “Quality is #1 Job”

Holiday Inn, “No Surprises”

Lloyds Bank, “The Bank that Likes to Say Yes”

Philips,

“ From Sand to Chips”

“ Philips Invents for You”

“ Let’s Make Things Better”

There is No Such Thing as a Commodity: Differentiate by Segments Mobil conducted a study of 2,000 gasoline buyers and identified five segments: Road Warriors (always driving) True Blues (brand or dealer loyal) Generation F3 (liked convenience store aspect) Homebodies (fills up at nearest station) Price Shoppers (20% of all the buyers) Mobil rolled out Friendly Serve : cleaner property, bathrooms, better lighting, well-stocked stores, and friendlier personnel. Mobil charged $.02 more and sales increased by 20-25 percent. Printed on CANON

Mobil conducted a study of 2,000 gasoline buyers and identified five segments:

Road Warriors (always driving)

True Blues (brand or dealer loyal)

Generation F3 (liked convenience store aspect)

Homebodies (fills up at nearest station)

Price Shoppers (20% of all the buyers)

Mobil rolled out Friendly Serve : cleaner property, bathrooms, better lighting, well-stocked stores, and friendlier personnel.

Mobil charged $.02 more and sales increased by 20-25 percent.

3. How Do You Promote a Brand? “ How do I justify spending millions on creating an image. That’s millions my customers have to spend when they buy from us.” Tom Parker, CEO of Clark’s shoes . Brands are built by performance, not advertising. Printed on CANON

“ How do I justify spending millions on creating an image. That’s millions my customers have to spend when they buy from us.” Tom Parker, CEO of Clark’s shoes .

Brands are built by performance, not advertising.

Don’t Overuse Advertising to Build a Brand People don’t pay that much attention to ads anymore (wallpaper). Some exceptional TV ads grab attention but do not provide motivation. Advertising doesn’t have much credibility or believability. The existence of so much advertising makes advertising less effective. Yet the cost of advertising keeps rising. Printed on CANON

People don’t pay that much attention to ads anymore (wallpaper).

Some exceptional TV ads grab attention but do not provide motivation.

Advertising doesn’t have much credibility or believability.

The existence of so much advertising makes advertising less effective. Yet the cost of advertising keeps rising.

Tools for Building Brands Advertising (e.g.,Absolut Vodka) Sponsorships (e.g., Kodak and Olympics) Clubs (e.g. Nestle’s Casa Buitoni Club) Company visits (e.g., Cadbury’s theme park, Hallmark’s Museum) Trade shows Traveling exhibits Worldwide web casts of presentations, roundtables, entertainment Distribution outlets (e.g., Haagen-Dazs) Public facilities (e.g., Nestle Nestops) Social causes (e.g., American Express) High value for the money (e.g. buzz created by Ikea, etc.) User community building (e.g., Harley-Davidson) Founder’s personality (e.g., Colonel Saunders) Celebrity spokespersons Printed on CANON

Advertising (e.g.,Absolut Vodka)

Sponsorships (e.g., Kodak and Olympics)

Clubs (e.g. Nestle’s Casa Buitoni Club)

Company visits (e.g., Cadbury’s theme park, Hallmark’s Museum)

Trade shows

Traveling exhibits

Worldwide web casts of presentations, roundtables, entertainment

Distribution outlets (e.g., Haagen-Dazs)

Public facilities (e.g., Nestle Nestops)

Social causes (e.g., American Express)

High value for the money (e.g. buzz created by Ikea, etc.)

User community building (e.g., Harley-Davidson)

Founder’s personality (e.g., Colonel Saunders)

Celebrity spokespersons

4. What Makes a Strong Brand? Strong brand = Product Benefits x Distinct Identity x Emotional Values Peter Doyle, Marketing Management & Strategy , 1997 Printed on CANON

Strong brand = Product Benefits x Distinct Identity x Emotional Values

Peter Doyle, Marketing Management & Strategy , 1997

THE Y&R MODEL OF BRAND STRENGTH A successful brand has brand vitality and brand stature . Brand vitality consists of: 1. Differentiation , the brand is distinct 2. Relevance, the brand is meaningful and personally appropriate. Brand stature consists of: 1. Esteem , the brand is seen to have quality and momentum. 2. Familiarity , the brand is known and understood by many people. Some conclusions: 1. A brand that has high familiarity but low likeability is a troubled brand. 2. A brand that has high likeability but low familiarity has high advertising potential. 3. A brand with high vitality but low stature has excellent potential. 4. When a brand’s differentiation and relevance start slipping, esteem will slip next, and then familiarity will decline. Printed on CANON

A successful brand has brand vitality and brand stature .

Brand vitality consists of:

1. Differentiation , the brand is distinct

2. Relevance, the brand is meaningful and personally

appropriate.

Brand stature consists of:

1. Esteem , the brand is seen to have quality and momentum.

2. Familiarity , the brand is known and understood by many people.

Some conclusions:

1. A brand that has high familiarity but low likeability is a troubled brand.

2. A brand that has high likeability but low familiarity has high advertising potential.

3. A brand with high vitality but low stature has excellent potential.

4. When a brand’s differentiation and relevance start slipping, esteem will slip next, and then familiarity will decline.

Characteristics of Strong Brands Provides superior delivery of desired benefits. (Starbucks, FedEx, Amazon) Maintain innovation and relevance for the brand. (Gillette, Charles Schwab) Establish credibility and create appropriate brand personality and imagery. (Apple, Virgin) Communicate with a consistent voice. (Coca-Cola, Accenture) Strategically design and implement a brand hierarchy and portfolio. (BMW, The Gap) Printed on CANON

Provides superior delivery of desired benefits.

(Starbucks, FedEx, Amazon)

Maintain innovation and relevance for the brand.

(Gillette, Charles Schwab)

Establish credibility and create appropriate brand personality and imagery.

(Apple, Virgin)

Communicate with a consistent voice.

(Coca-Cola, Accenture)

Strategically design and implement a brand hierarchy and portfolio.

(BMW, The Gap)

Strong Brands Supply Use Value as Well as Purchase Value Nestle: Sells baby food Provides free dietitian phone line Nestops along the highway Home Depot: Sells home improvement products, such as paint, electrical supplies, plumbing Offers free kitchen remodeling design service Offers free workshops on how to paint, fix faucets, etc. Volvo Teaches safe driving, Supports lower insurance rates for safe drivers Printed on CANON

Nestle:

Sells baby food

Provides free dietitian phone line

Nestops along the highway

Home Depot:

Sells home improvement products, such as paint, electrical supplies, plumbing

Offers free kitchen remodeling design service

Offers free workshops on how to paint, fix faucets, etc.

Volvo

Teaches safe driving,

Supports lower insurance rates for safe drivers

When Do You Stretch a Brand Name? Mercedes is putting its name on large, medium and small cars. Gap decided to invent Old Navy in going down and buying Banana Republic in going up. Printed on CANON

Mercedes is putting its name on large, medium and small cars.

Gap decided to invent Old Navy in going down and buying Banana Republic in going up.

How Do You Revitalize a Brand? A dowager brand pioneered the market but now is declining. It will be hard to reverse the decline and give it new life but the decline can be slowed down. Two general approaches: Marketing mix modification Improve the product, distribution, price, or promotion Market modification Find new segments, new usage benefits or occasions, more frequent usage, etc. Find out to whom the dowager brand is losing share: Old peer brands New peer brands Retail store brands Generic brands Elite brands Find out to whom the dowager brand is losing sales. Interview people who defected to each competitive class and their dissenting rationales. Determine a counterlogic for each group and direct them to the groups that can most easily be won back. Source: Dennis W. Rook and Sidney J. Levy, “Defending the Dowager: Communication Strategies for Declining Main Brands.” Printed on CANON

A dowager brand pioneered the market but now is declining. It will be hard to reverse the decline and give it new life but the decline can be slowed down.

Two general approaches:

Marketing mix modification

Improve the product, distribution, price, or promotion

Market modification

Find new segments, new usage benefits or occasions, more frequent usage, etc.

Find out to whom the dowager brand is losing share:

Old peer brands

New peer brands

Retail store brands

Generic brands

Elite brands

Find out to whom the dowager brand is losing sales.

Interview people who defected to each competitive class and their dissenting rationales.

Determine a counterlogic for each group and direct them to the groups that can most easily be won back.

Source: Dennis W. Rook and Sidney J. Levy, “Defending the Dowager: Communication Strategies for Declining Main Brands.”

How Do You Rationalize Your Product Line? Unilever found that the largest 50 brands accounted for 63% of its revenues. Unilever decided to emphasize 400 core brands and dispose, delete or consolidate 1,200 of its marginal brands. Unilever selected its 400 core brands based on brand scale, brand power (#1or 2), and brand growth potential. 40 brands were designated as core global brands (e.g., Dove, Knorr, Lipton), and 360 as regional core brands. The core brands would get disproportionate investments in advertising and promotion, innovation, marketing competence and management time. The core brands would be extended. Weak brands had small market shares; poor profitability; negative cash flow; weak channel support; disproportionate consumption of management time. The weak brands would be milked, sold, delisted, or their attribute would be migrated to another brand. Printed on CANON

Unilever found that the largest 50 brands accounted for 63% of its revenues.

Unilever decided to emphasize 400 core brands and dispose, delete or consolidate 1,200 of its marginal brands.

Unilever selected its 400 core brands based on brand scale, brand power (#1or 2), and brand growth potential.

40 brands were designated as core global brands (e.g., Dove, Knorr, Lipton), and 360 as regional core brands.

The core brands would get disproportionate investments in advertising and promotion, innovation, marketing competence and management time. The core brands would be extended.

Weak brands had small market shares; poor profitability; negative cash flow; weak channel support; disproportionate consumption of management time.

The weak brands would be milked, sold, delisted, or their attribute would be migrated to another brand.

What Are the Most Frequent Causes of Brand Failure? Failure to live up to the brand promise. Failure to adequately support the brand. Failure to adequately control the brand. Failure to properly balance consistency and change with the brand. Failure to do brand equity measurement and management. Printed on CANON

Failure to live up to the brand promise.

Failure to adequately support the brand.

Failure to adequately control the brand.

Failure to properly balance consistency and change with the brand.

Failure to do brand equity measurement and management.

Building Customer Equity How customer-centered is your company? How do you measure this? Does your company need to be more customer-centered? To all customers or only the more important customers? How can you go about becoming more customer-centered? How much would this cost you in new technology and training? How much would you gain as a result of becoming more customer-centered? Printed on CANON

How customer-centered is your company? How do you measure this?

Does your company need to be more customer-centered? To all customers or only the more important customers?

How can you go about becoming more customer-centered?

How much would this cost you in new technology and training?

How much would you gain as a result of becoming more customer-centered?

Achieving Outcomes in Market Space Achieving a deep customer focus is not done simply by building a customer database or customizing your product offerings. A company must define its marketspace not in terms of products but in terms of customer outcomes. Baxter Healthcare supplies “home-recovery enhancement,” not just nursing care or wheelchairs. IHI, a health insurance company, operates in the “lifetime health and personal safety” marketspace. A company then examines the customer activity cycle and the value gaps. The company then invests in filling the major value gaps. The company ends up being favored and grows through doing more things better for their customers. Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan Management Review, Spring 2004, pp. 26-34 Printed on CANON

Achieving a deep customer focus is not done simply by building a customer database or customizing your product offerings.

A company must define its marketspace not in terms of products but in terms of customer outcomes.

Baxter Healthcare supplies “home-recovery enhancement,” not just nursing care or wheelchairs.

IHI, a health insurance company, operates in the “lifetime health and personal safety” marketspace.

A company then examines the customer activity cycle and the value gaps.

The company then invests in filling the major value gaps.

The company ends up being favored and grows through doing more things better for their customers.

Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan Management Review, Spring 2004, pp. 26-34

Achieving Deep Customer Focus Create strategic excitement. Enlist “points of light.” Articulate the new market space focused on customer outcomes . Identify the value opportunities through using the customer activity cycle. Build a compelling case (not through a plan but a story). Size the prize. Modeling the concept with a few chosen customers. Get people working together. Get critical mass. Gather momentum. Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan Management Review, Spring 2004, pp. 26-34. Printed on CANON

Create strategic excitement.

Enlist “points of light.”

Articulate the new market space focused on customer outcomes .

Identify the value opportunities through using the customer activity cycle.

Build a compelling case (not through a plan but a story).

Size the prize.

Modeling the concept with a few chosen customers.

Get people working together.

Get critical mass.

Gather momentum.

Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan Management Review, Spring 2004, pp. 26-34.

Building Customer Equity Reduce the rate of defection. Increase the longevity of the relationship. Enhance the growth potential of each customer through cross-selling and up-selling. Make low-profit customers more profitable or terminate them. Focus disproportionate effort on high value customers. Printed on CANON

Reduce the rate of defection.

Increase the longevity of the relationship.

Enhance the growth potential of each customer through cross-selling and up-selling.

Make low-profit customers more profitable or terminate them.

Focus disproportionate effort on high value customers.

Components of Customer Equity Customer equity is driven by: Value equity Brand equity Relationship equity. Companies must decide which driver(s) underlie each equity. Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon, Driving Customer Equity (New York Free Press 2000). Printed on CANON

Customer equity is driven by:

Value equity

Brand equity

Relationship equity.

Companies must decide which driver(s) underlie each equity.

Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon, Driving Customer Equity (New York Free Press 2000).

Transaction Marketing vs. Customer Relationship Marketing Customer Relationship Marketing (CRM) represents a paradigm shift from Transaction Marketing (TM). TM companies focus on products and making a sale. CRM companies focus on building a long-term relationship that produces satisfaction for the customer and profitability for the company. TM companies promote everywhere in search of customers. CRM companies promote to a defined customer group and aim to make the right offer at the right time using the right channel to the right customer. All companies must practice a mix of TM and RM. TM will be stronger in companies facing a large number of customers; RM will be stronger in companies facing a small number of customers. Printed on CANON

Customer Relationship Marketing (CRM) represents a paradigm shift from Transaction Marketing (TM).

TM companies focus on products and making a sale. CRM companies focus on building a long-term relationship that produces satisfaction for the customer and profitability for the company.

TM companies promote everywhere in search of customers. CRM companies promote to a defined customer group and aim to make the right offer at the right time using the right channel to the right customer.

All companies must practice a mix of TM and RM. TM will be stronger in companies facing a large number of customers; RM will be stronger in companies facing a small number of customers.

Treat Different Customers Differently Most profitable customers Most unprofitable customers Most growable customers Most vulnerable customers Printed on CANON

Most profitable customers

Most unprofitable customers

Most growable customers

Most vulnerable customers

Needed: Technology-Enabled Marketing Technology-enabled marketing (TEM) combines information technology, analytical capacities, marketing data , and marketing knowledge , made available to one or more marketing decision makers to improve the quality of marketing management. Printed on CANON

Technology-enabled marketing (TEM) combines information technology, analytical capacities, marketing data , and marketing knowledge , made available to one or more marketing decision makers to improve the quality of marketing management.

A 5 Step Model for Database Marketing Gather useful data on customers. Classify customers by their needs and by their value to the firm. Prepare business rules that select the best prospects. Customize marketing treatments for each prospect in terms of product offers, service mix, media, and channel. Set up accountability procedures. Printed on CANON

Gather useful data on customers.

Classify customers by their needs and by their value to the firm.

Prepare business rules that select the best prospects.

Customize marketing treatments for each prospect in terms of product offers, service mix, media, and channel.

Set up accountability procedures.

Database Marketing is Expensive! Requires a tremendous investment in information gathering about individual customers and prospects. Requires constant updating of information. Some critical information may not be available. Requires a high investment in hardware and software. Requires integrating individual customer information from a variety of sources. Requires people skilled at data mining. Requires managing and training employees, dealers, and suppliers. Printed on CANON

Requires a tremendous investment in information gathering about individual customers and prospects.

Requires constant updating of information.

Some critical information may not be available.

Requires a high investment in hardware and software.

Requires integrating individual customer information from a variety of sources.

Requires people skilled at data mining.

Requires managing and training employees, dealers, and suppliers.

Does Every Business Need CRM? No. The following businesses may not benefit from CRM: Businesses where the CLV is low. Businesses with high churn. Businesses where there is no direct contact between the seller and ultimate buyer. Companies that are in the best position to invest in CRM. Companies that collect a lot of data (banks, insurance companies, credit card companies, telephone companies). Companies that can do a lot of cross-selling and up-selling (GE, Amazon, etc.). Companies whose customers have highly differentiated needs and are of highly differentiated value to the company. Printed on CANON

No. The following businesses may not benefit from CRM:

Businesses where the CLV is low.

Businesses with high churn.

Businesses where there is no direct contact between the seller and ultimate buyer.

Companies that are in the best position to invest in CRM.

Companies that collect a lot of data (banks, insurance companies, credit card companies, telephone companies).

Companies that can do a lot of cross-selling and up-selling (GE, Amazon, etc.).

Companies whose customers have highly differentiated needs and are of highly differentiated value to the company.

Printed on CANON Introduction Growth Mature Decline Database Management & Warehousing Historical Database Analytics Database-Driven Marketing Performance Dashboards Marketing Mix Modeling / Marketing Management Work-Flow Solutions Marketing Resource Management Campaign Management Yield-Based Pricing Optimum Tools Marketing Technology Platforms on the Market Development Curve Source: Gary Morris, Adapted from Marketing Advocate, Inc . Predictive analytics

Precision Marketing Precision marketing is achieved through looking at large quantities of historic data with the help of data mining tools that search for meaningful patterns, and then creating mathematical equations that represent the underlying relationships within the data. Predictive analytics are used to identify the right offers and right messages to beam through different channels to narrow customer segments, based on the propensity to respond. The expected profit of a campaign can be estimated. Many tactical marketer tasks will be automated and free up marketers to focus on more strategic decision making. Printed on CANON

Precision marketing is achieved through looking at large quantities of historic data with the help of data mining tools that search for meaningful patterns, and then creating mathematical equations that represent the underlying relationships within the data.

Predictive analytics are used to identify the right offers and right messages to beam through different channels to narrow customer segments, based on the propensity to respond. The expected profit of a campaign can be estimated.

Many tactical marketer tasks will be automated and free up marketers to focus on more strategic decision making.

SALES AUTOMATION The objective is to empower the salesperson to be an informed salesperson who virtually has the whole company’s knowledge at his or her command and can provide total sales quality . Printed on CANON

The objective is to empower the salesperson to be an informed salesperson who virtually has the whole company’s knowledge at his or her command and can provide total sales quality .

Marketing Automation Areas Ripe for Marketing Automation: Selecting names for a direct mail campaign Deciding who should receive loans or credit extensions Allocating product lines to shelf space Selecting media Customizing letters to individual customers Targeting coupons and samples Pricing airline seats and hotel reservations Printed on CANON

Areas Ripe for Marketing Automation:

Selecting names for a direct mail campaign

Deciding who should receive loans or credit extensions

Allocating product lines to shelf space

Selecting media

Customizing letters to individual customers

Targeting coupons and samples

Pricing airline seats and hotel reservations

Marketing Decision Models and Marketing Mix Response Models BRANDAID CALLPLAN DETAILER MEDIAC PROMOTER ADCAD See Kotler, Marketing Models Printed on CANON

BRANDAID

CALLPLAN

DETAILER

MEDIAC

PROMOTER

ADCAD

See Kotler, Marketing Models

Marketing Dashboards Tools dashboard Processes dashboard Performance dashboard Printed on CANON

Tools dashboard

Processes dashboard

Performance dashboard

Marketing Work-Flow Process Tools Project management Product management New product development Campaign management Printed on CANON

Project management

Product management

New product development

Campaign management

Exploit the Internet! Research a new product on the Internet (panel research, chat rooms). Create a site to explain how an existing or new product works ( ex., Tide ). Create a site that consults on a category ( Colgate on dental problems ). Create a site that consults on the customer’s profile ( Elizabeth Arden). Sponsor a chat room around your product category. Answer email questions instantly (Nestle baby care questions). Send free samples of new products ( freesample.com ). Send coupons of new products ( coolsavings.com ). Customize your product ( Acumin vitamins). Offer to sell very large orders direct. Offer valuable information to people who will register on the site. Printed on CANON

Research a new product on the Internet (panel research, chat rooms).

Create a site to explain how an existing or new product works ( ex., Tide ).

Create a site that consults on a category ( Colgate on dental problems ).

Create a site that consults on the customer’s profile ( Elizabeth Arden).

Sponsor a chat room around your product category.

Answer email questions instantly (Nestle baby care questions).

Send free samples of new products ( freesample.com ).

Send coupons of new products ( coolsavings.com ).

Customize your product ( Acumin vitamins).

Offer to sell very large orders direct.

Offer valuable information to people who will register on the site.

Is New Technology Enough? NT + OO = EOO New Technology + Old Organization = Expensive Old Organization Printed on CANON

NT + OO = EOO

New Technology + Old Organization = Expensive Old Organization

Technology-Enabled Marketing: Examples Royal Bank of Canada Decision to purchase CRM Halifax Bank Teller suggests financial products Capital One A credit card for everyone, but with different interest rates, credit lines, and cash advances. Tesco supermarkets Tesco has identified 5,000 customer “needs” segments. It sends out some 300,000 variations of any given offer with redemption rates of 90%. It has formed clubs such as Baby Club, A World of Wine Club, My Time Club Kraft Kraft has the names of 110 million customers and 20 thousand facts for each household. Kraft launched print magazine, Food & Family, that is delivered to the homes of 2.1 million Kraft customers in 32 versions tailored to 32 segments. Printed on CANON

Royal Bank of Canada

Decision to purchase CRM

Halifax Bank

Teller suggests financial products

Capital One

A credit card for everyone, but with different interest rates, credit lines, and cash advances.

Tesco supermarkets

Tesco has identified 5,000 customer “needs” segments. It sends out some 300,000 variations of any given offer with redemption rates of 90%. It has formed clubs such as Baby Club, A World of Wine Club, My Time Club

Kraft

Kraft has the names of 110 million customers and 20 thousand facts for each household. Kraft launched print magazine, Food & Family, that is delivered to the homes of 2.1 million Kraft customers in 32 versions tailored to 32 segments.

10 Earmarks of the New Marketing Recognize growing customer empowerment. Develop a focused offering to the target market Design the marketing from the customer-back. Focus on delivering outcomes, not products. Draw in the customer to co-create value. Use newer ways to reach the customer with a message. Develop metrics and ROI measurement. Develop high-tech marketing. Focus on building long run assets. View marketing holistically to regain influence in the company. Printed on CANON

Recognize growing customer empowerment.

Develop a focused offering to the target market

Design the marketing from the customer-back.

Focus on delivering outcomes, not products.

Draw in the customer to co-create value.

Use newer ways to reach the customer with a message.

Develop metrics and ROI measurement.

Develop high-tech marketing.

Focus on building long run assets.

View marketing holistically to regain influence in the company.

1. P&G Recognizes the New Consumer Consumers want a conversation, to dialogue, to participate, to be more in control…We’re going from one-dimensional, product-myopic marketing to three-dimensional marketing – that offers better solutions…more delightful experiences… and the opportunity for on-going relationships. Alan Lafley, CEO, P&G Printed on CANON

Consumers want a conversation, to dialogue, to participate, to be more in control…We’re going from one-dimensional, product-myopic marketing to three-dimensional marketing – that offers better solutions…more delightful experiences… and the opportunity for on-going relationships.

Alan Lafley, CEO, P&G

Do-It-Yourself Marketing Self-Inform : Customers can research products and issues without relying on experts (e.g., WebMD, MedlinePlus.com) Self-evaluate : Customers can compare product features and prices with a few clicks of a mouse (e.g., PriceGrabber.com, DealTime.com) Self-segment : Customers can design and configure products (e.g., Dell, Reflect.com) Self-price : Customers can propose prices to sellers (e.g., eBay, PriceLine.com, Free Markets) Self-support : Customer can resolve problems by searching knowledgeable bases and discussion forums (e.g., www.remotecentral.com, www.treocentral.com ) Self-program : Customer can define their own media programming (e.g., TiVo, MyYahoo!) Self-organize : Customers can join communities of interest to discuss products and issues (e.g., Meetup.org., IVillage) Self-advertise : Customers can create feedback for their peers (e.g., Amazon.com, Planet Feeeback, BlogSpot.com) Self-police : Customers can monitor reputations of manufacturers (e.g., eBay, BizRate.com) Source: Mohan Sawhney lecture Printed on CANON

Self-Inform : Customers can research products and issues without relying on experts (e.g., WebMD, MedlinePlus.com)

Self-evaluate : Customers can compare product features and prices with a few clicks of a mouse (e.g., PriceGrabber.com, DealTime.com)

Self-segment : Customers can design and configure products (e.g., Dell, Reflect.com)

Self-price : Customers can propose prices to sellers (e.g., eBay, PriceLine.com, Free Markets)

Self-support : Customer can resolve problems by searching knowledgeable bases and discussion forums (e.g., www.remotecentral.com, www.treocentral.com )

Self-program : Customer can define their own media programming (e.g., TiVo, MyYahoo!)

Self-organize : Customers can join communities of interest to discuss products and issues (e.g., Meetup.org., IVillage)

Self-advertise : Customers can create feedback for their peers (e.g., Amazon.com, Planet Feeeback, BlogSpot.com)

Self-police : Customers can monitor reputations of manufacturers (e.g., eBay, BizRate.com)

Source: Mohan Sawhney lecture

The Evolution of Marketing Printed on CANON Adapted from Prahalad and Ramaswamy 2004 Transactional Marketing Relationship Marketing Collaborative Marketing Time frame 1950s 1980s Beyond 2000 View of value The company offering in an exchange The customer relationship in the long run Co-created experiences View of market Place where value is exchanged Market is where various offerings appear Market is a forum where value is co-created through dialogue Role of customer Passive buyers to be targeted with offerings Portfolio of relationships to be cultivated Prosumers-active participants in value co-creation Role of firm Define and create value for consumers Attract, develop and retain profitable customers Engage customers in defining and co-creating unique value Nature of customer interaction Survey customers to elicit needs and solicit feedback Observe customers and learn adaptively Active dialogue with customers and communities

2. Develop a Focused Offering to the Target Market Value customers : Which customer segment(s) do we want to serve? Value proposition : Can we create a value proposition that delivers superior value through dramatically higher benefits or lower costs? Value network : Can we run a better network or radically redefine the value delivery system for the industry such as Dell and IKEA have done? 3Vs framework of Nirmalya Kumar Printed on CANON

Value customers : Which customer segment(s) do we want to serve?

Value proposition : Can we create a value proposition that delivers superior value through dramatically higher benefits or lower costs?

Value network : Can we run a better network or radically redefine the value delivery system for the industry such as Dell and IKEA have done?

3Vs framework of Nirmalya Kumar

Choose to Serve a Unique Set of Customer Values 1. Identify the value expectations of potential customers. 2. Select the values on which to compete. Nike values: Winning, roar of the crowd, extreme effort, the smell of sweat, physical development New Balance values: Self-improvement, inner harmony, balanced, the smell of nature, spiritual development 3. Analyze the ability of the organization to deliver those values. 4. Communicate and sell the value message. 5. Deliver the value promised and continuously improve the company's value model. See J. Nicholas Debonnis, et. al, Value-Based Marketing for Bottom Line Success: 5 Steps to Creating Competitive Value (McGraw-Hill, 2004) Printed on CANON

1. Identify the value expectations of potential customers.

2. Select the values on which to compete.

Nike values: Winning, roar of the crowd, extreme effort, the smell of sweat, physical development

New Balance values: Self-improvement, inner harmony, balanced, the smell of nature, spiritual development

3. Analyze the ability of the organization to deliver those values.

4. Communicate and sell the value message.

5. Deliver the value promised and continuously improve the company's value model.

See J. Nicholas Debonnis, et. al, Value-Based Marketing for Bottom Line Success: 5 Steps to Creating Competitive Value (McGraw-Hill, 2004)

3. Design the Marketing From the Customer-Back Marketing must be run as a set of value finding, creation, and delivery processes, not 4P functions. The four Ps are seller oriented. The 4As are buyer oriented. Awareness (A1) Acceptability (A2) Affordability (A3) Accessibility (A4) Market value potential = A1 x A2 x A3 x A4 If A1=100%, A2=100%, A3=50%, A4=50%, Then MV=25% Source: Jagdish Sheth Printed on CANON

Marketing must be run as a set of value finding, creation, and delivery processes, not 4P functions. The four Ps are seller oriented.

The 4As are buyer oriented.

Awareness (A1)

Acceptability (A2)

Affordability (A3)

Accessibility (A4)

Market value potential = A1 x A2 x A3 x A4

If A1=100%, A2=100%, A3=50%, A4=50%, Then MV=25%

Source: Jagdish Sheth

4. Focus on Delivering Outcomes, Not Products. Printed on CANON Company Product focus Solutions focus Akzo Nobel Gallons of paint Painted cars BP Nutrition-Hendrix Animal feed Animal weight gain Cummings Diesel engines Uninterruptible power ICI Explosives Explosives Broken rock Scania Trucks Guaranteed uptime WW Grainger MRO items Indirect materials mgt. Source: Kumar

Visualize a Larger Market Nike now defines itself in the sports market rather than the shoe and clothing market. The late Roberto Goizueta told his company that while Coca Cola had a 35 percent share of the soft drink market, it had only a

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