Week 1 (Two Readings) Flashcards
The “first principles” of marketing strategy
Robert W. Palmatier & Andrew T. Crecelius
Pg. 5-26
Four first principles, or
underlying assumptions, that firms must address when designing and implementing an effective marketing strategy:
(1) All customers differ.
(2) All customers change.
(3) All competitors react.
(4) All resources are limited.
(1) All customers differ.
Marketers can apply tools such as
segmentation, targeting, and positioning (STP) to understand
how customers differ and develop specialize offerings and
messages to meet the needs of unique customers or segments.
(2) All customers change.
Due to intense global competition, products, markets, and customers are changing at a rapid pace, such that all customers change even faster
(3) All competitors react.
trends are accelerated by thriving competitive
rivalries across markets and countries; all competitors react more rapidly and decisively than ever
(4) All resources are limited.
Hmmm, duh?
Business practitioners
and academics borrowed two aspects of military strategy:
Decisions and actions could lead to differential advantages
In more recent decades, thought leaders have added facets, including the idea that a differential advantage must be ________ and the notion that a business strategy’s goal is to ______
sustainable
enhance firm performance
Overall then, marketing strategy has evolved to incorporate five facets:
(1) decisions and actions,
(2) differential advantages over competitors,
(3) sustainable advantages,
(4) a goal to enhance firm performance, and
(5) the customer perspective
The inconvenient yet inevitable conclusion is this:
No single marketing strategy
works for every firm, in every place, or for all time
First principle #1: All customers differ →
managing customer heterogeneity
-customers diverge wildly in their needs, perceptions, and behaviors
-
The most basic source of customer heterogeneity is _________, defined as each person’s consistent and stable manner of reacting to stimuli in a given domain
individual differences,
A second source of customer heterogeneity is ________, the set of events that define a person’s life and
drive his or her preferences, independent of individual differences.
life
experiences,
First principle #2: All customers change →
managing customer dynamics
All customer change as a fundamental assumption
of marketing
Why?
New technology can radically change customer preference
Sources of customer dynamics
Extant literature suggests three levels
of such sources:
1) Individual
2) Product market
3) Environment
1) Individual
Dramatic change can follow discrete life events. Divorce leads to less consumption of an exspouse’s preferred brands; a new job may require eating out
more
2) Product market
Customer responses to product/
service attributes and marketing efforts are contingent on
whether the offering is in its early, growth, maturity, or decline stage
3) Environment
(i.e., economy, government, culture, or industry)
For example, as the popularity of
green ideals grew, so did consumer responses to corporate
strategies that focus on broader societal goals such as
protecting natural resources
Firms that do not account for changing customer
preferences tend to fail
Word
customer lifetime value (CLV)
compute the present value of a customer’s future cash flows, according to customer-level metrics
for acquisition cost, ongoing marketing costs, ongoing margin, expected retention rate, and a discount rate applied to
future profits
First principle #3: All competitors react →
managing sustainable competitive advantage
All competitors react as a fundamental assumption
of marketing
SCA
Sustainable competitive advantage
First principle #4: All resources are limited →
managing resource trade-offs
All resources are limited as a fundamental
assumption of marketing
