Lecture 1: Introduction

Question 1

Customer Value

Answer 1

Benefits gained from purchasing and consuming a product/service – Costs incurred

OR: Positive and negative consequences of purchasing and consuming a product/service

Question 2

Value Drivers

Answer 2

Factors that the customer weighs while purchasing and consuming a product/service.

Value drivers are factors that increase the worth of a product, service.

Question 3

Calculating Value

Answer 3

Value = f (value drivers) = f (sum of value drivers that are benefits – sum of value drivers that are costs)

Question 4

Fundamental Principles of Marketing (First Principle)

Answer 4

First Principle: Related to Consumers

We don’t see products in terms of their attributes but as solutions for delivering customer value

The value of your product is largely based on how it solves problems/provides solutions for consumers

Question 5

Fundamental Principles of Marketing (Second Principle)

Answer 5

Second Principle: Related to Competitors

Competing products satisfy the same/similar needs as your product.

Any technology that accomplishes the same goal.

Note: it can compete with a product in a different category.

For instance, Macbook doing better than Dell but still doesn’t do as well against smartphones.

E.g., Macbook (Microsoft, Dell, the biggest competitor is actually smartphones, a different product category), Coke (Pepsi, biggest competitor in India was actually tea).

Question 6

Fundamental Principles of Marketing (Third Principle)

Answer 6

Third Principle: Relate to The Company

Consumers will purchase the product that gives them the highest perceived value. Therefore, the firm should know the value drivers of consumers (what drives your consumers to buy, what do they value) and the competitors who are satisfying those value drivers or similar ones.

Bearing these two things in mind, the firm should then design a product/service that satisfies the value drivers of consumers better than their competitors.

Question 7

Fundamental Principles of Marketing: Summary

Answer 7

The starting point for Marketing is:
1. Do you know your consumers’ value drivers (explicit and implicit)?
2. Do you know your competitors?
3. Do you know how to sell your product to consumers and convince them to buy it over your competitors.

Note: By realizing who you are really competiting with, you make the appropriate product offering changes and that helps you stay competitive.

Question 8

Price Customization

Answer 8

On the Demand Curve:

Triangle Y:
Money left on table, meaning if you charge a higher price, certain people would still have been willing to pay for your product.

Triangle X:
On the other hand, if you had charged a even lower price, there would have been more people who would buy your product. And so you’re losing some of the passed up profit.

So the idea of price customization is how can we minimize money left on the table and passed up profit (the sizes of the triangles X and Y).

In theory if you can perfect price customization, then both X and Y should be zero.

Question 9

Price Discrimination

Answer 9

A pricing strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to pay: airlines

Using the term discount instead of Surcharge influences how consumers react.

Example: Gas stations in the US used to say there was a surcharge for using a credit card instead of cash. Credit card companies sued the cash stations and now its worded as a cash discount, even though its the same thing.

Question 10

Cost Explanation

Answer 10

Consumers generally are more OK with being charged at a higher price when they are convinced that the company has to spend more money in making a product.

Or provide a choice: give people the sense of choice in how much money
want to actually spend (pay in increments), even though the end product is the same.

Question 11

Managing Customer Value Approach

Answer 11

Traditional view of marketing vs MCV approach

Experience oriented in MCV Approach:
- Consider the customers experience, and not just immediate experience
but long term experience. How do you cultivate and create value and maintain value for your customers.
-Create this connection between the company and the consumers,
what they’re going through, create a emotional identification with the brand.

Value in MCV Approach:
- Value is quantifiable.
-We can measure it, we can manipulate it thereby influence it, and
we can scientifically study it.

Customer is sometimes king in MCV Approach:
- If customers don’t actually know certain values that you are capable of creating for them, then you can actually influence them in some very powerful ways.

MCV looks at the bottom line, the long term profitability of your company.

MCV considers effectiveness and efficiency of lots of marketing functions.
-Not just advertising or promotion, but also pricing of your product.
-How do you price it properly?
- The features of your product.
- All of those are actually part of marketing.They’re not subsidiary to marketing.

In the MCV Approach, marketing as deeply embedded in the organization’s operations. It’s the starting point, not the end point of the whole process.

Question 12

Marketing: A Working Definition

Answer 12

Marketing = The process of value creation

Primarily to the customer (VTC: Value To Customer)

But also to the organization (VOC: Value Of Customer): generating value for the organization

Question 13

How to Create and Manage Value

Answer 13

Question 14

Marketing Strategy

Answer 14

A marketing strategy is about creating value effectively.

Your environmental analysis will shape your understanding of how to create value. To create value, you have to figure out what are your customers value drivers and what is the competitive landscape in which you operate and lastly what is your company good at and not so good at, your strengths and your constraints.

The process of segmentation, targeting and positioning as STP.

Once you’ve decided what kind of value you want to create and how to create that value you have to produce the product (design and manufacture it), place it, meaning distribute the product effectively, price the product, and finally promote the product.

Question 15

Marketing Myopia

Answer 15

By narrowly just looking at your product you lose sight of the competitive landscape and your consumers value drivers.

Question 16

Value Proposition

Answer 16

A value proposition describes what sets your product or service apart from competitors. It gives an overview of the benefits a product or service provides.

A positioning statement is broader, and it’s created after you’ve developed your business’ value proposition.

Question 17

Positioning Statement

Answer 17

The positioning statement describes the value proposition. It helps you think about your product: who uses it, what it represents to them and how it differs from the competition.

It is a statement of strategic intent for internal use only: what you want your product to represent to customers and how it will give you a competitive advantage.

Note: The positioning statement is the “driver” of the four P’s. It informs your 4 P’s. Questions about strategies for the specific elements of your marketing should be referred back to the positioning statement for consistency with the brand’s overall marketing strategy.

Remember that you are not writing an ad. The positioning statement is an internal document that is intended to drive your marketing mix (four P’s) strategies.

Question 18

Benefits of Creating a Positioning Statement

Answer 18

By developing a positioning statement, you can
Ensure that all the elements of your marketing communicate the same message to consumers;
- Commit all functions in your organization to a set of common goals;
- Have a consistent basis for evaluating creative work and new programs;
- Minimize the damaging effects of management turnover on a brand over time.

Question 19

Key Elements of a Positioning Statement:

Answer 19

In drafting good positioning statements, there are three key questions that you will need to address.

1. First, who is your target customer?
2. Second, what value do you offer them?
3. And third, why should they believe you (this is usually called the “reason to believe”)?

Question 20

Defining the Target Market

Answer 20

Be as specific as you can about the target market; this will become the basis of your marketing mix. As such, the target market must be identifiable, reachable and qualified to buy. You could also include “purchase influencers” as a secondary target (a parent buying a product for their child).

In defining the target consumer, avoid being demographically descriptive (e.g., the average user is 23.2 years of age with mean annual salary of $57,300) but rather focus on relevant and meaningful descriptions (e.g., recent graduate from college, working on their first job who has only just started thinking about financial independence).

Question 21

Determining Value of the Product

Answer 21

What fundamental needs is it fulfilling for the customer? Think benefits, not features.

Note: Try to be single-minded. Although brands have succeeded with more than one benefit, it’s generally tough enough to get one benefit across to consumers, let alone two or several. Although consumers may have an interest in other features these are not emphasized.

Question 22

Determining a Competitive Advantage

Answer 22

Look for a sustainable competitive advantage that could serve as a compelling “reason to believe”.

Undifferentiated products generally have little chance of succeeding. However, your competitive advantage need not always be product-based: it could be a difference in added service, or an emotional benefit.

Question 23

Key Takeaways

Answer 23

1) Managing customer value is core to any business or organization

2) Customer value can be positive or negative, real or perceived, practical or emotional, due to the product or the environment

3) Marketing is the process of value creation, both VTC & VOC

4) 3Cs, STP, 4Ps: core pillars that remain unchanged over the ages

5) STP (and a clear positioning statement) is the building block of any MCV analysis

6) Strong positioning should attain a good product-market fit: Which segment values your positive differentiator(s)? Which segment is okay with your negative differentiator(s)?