1. Value-based marketing strategy
Lecture 3

2. New marketing meets old marketing: New marketing wins

3. A route-map for market-led strategic change
Part I
Customer value
imperatives
Part II
Developing a value-based
marketing strategy
Part III
Processes for managing
strategic transformation
The strategic pathway
Change strategy
Market sensing
and learning
strategy
The Customer
is always
right-handed
Strategic
gaps
Strategic
market choices
and targets
Strategic
thinking and
thinking
strategically
New marketing
meets
old marketing
Organization
and processes
for change
Customer value
strategy and
positioning
Implementation
process and
internal
marketing
Value-based
marketing
strategy
Strategic
relationships
and networks

4. Agenda
Old marketing has not kept up with new markets and new priorities
Products, brands and innovation
Price and value
Distribution channels and value chains
Marketing communications
The “new marketing” challenge
Marketing is strategy

5. Old marketing has not kept up…
Old marketing is about marketing programmes
structured/planned around traditional model
operations/tactical
New marketing is concerned with the underlying process of going to market and strategic choices

6. Marketing strategy and marketing programmes (the ‘marketing mix’)
Customer
marketplace
Marketing
strategy
* Product policies
* Pricing policies
* Place/distribution
* Promotion/marketing
communications
The value offering
Marketing tools

7. Products, brands and innovation
Conventional views of product policy
defining the product itself
choosing the product mix
creating a branding policy
developing and launching new products
managing product deletions
Much emphasis on brands to compete

8. Products, brands and innovation
So what’s wrong with that?
it produces incremental, marginal changes in product offerings which impress no-one
the real challenge is building creative, innovative companies
marketing processes must drive creative and powerful innovations that re-shape markets

9. Price and value Conventional views of pricing policy
price-based positioning in the market
price levels and relativities
price discounts
pricing to different markets
price seen as a calculation based on cost and competition
usually the role of junior executives

10. Price and value So what’s wrong with that?
the price/profit relationship
dangers of seeing price as a quick-fix
ignoring real price sensitivity
underestimating importance of price visibility and architecture
misses price-based strategic vulnerability
fails to link price to customer value

11. Distribution channels and value chains
Conventional views of distribution policy (place):
managing the channel and intermediaries – recruiting distributors, motivating and controlling them
direct marketing approaches as an alternative to intermediaries

12. Distribution channels and value chains
So what’s wrong with that?
underestimates Internet impact on business models and digitization of products and channels
ignores massive power of distributors, e.g. supermarkets in consumer goods
neglects new types of direct marketing strategy
focus needs to be on value chain between buyer and seller, not traditional vertical marketing channel

13. Marketing communications
Conventional view of “marcoms”
deciding role of each form of communication, setting objectives, managing process, integrating communications activities
distinguishes between: advertising/promotion, sales and account management, public relations

14. Marketing communications – advertising/promotion
Conventional view of advertising/promotion
advertising in mass media and more specialised vehicles like direct mail, exhibitions
sales promotion more short-term, e.g., coupons, price cuts, special offers

15. Marketing communications – advertising/promotion
So what’s wrong with that?
mass markets are an illusion and mass media no longer exist
audiences are fragmented by digital/wireless communications
“big ideas” replaced by “small ideas” for specialised consumer communities
online communities resistant to commercial messages, e.g., on social networks
traditional advertising agencies are struggling to keep up

16. Marketing communications – sales and account management
Conventional views of sales and account management
Selling is face-to-face representation plus supporting materials for presentation, display
Sales management focused on recruitment, selection, motivation, reward and organization of salesforce
account management is service provision, e.g. call centres

17. Marketing communications – sales and account management
So what’s wrong with that?
strategic customer management is replacing traditional sales approaches
major customers demand dedicated account teams and partnership – strategic account management
the focus has shifted from adversarial transactions to cooperative relationships
dominant customers always get their own way

18. Marketing communications – public relations
Conventional view of PR:
creation and maintenance of corporate image relevant to different audiences
publicity, e.g. press releases, sports/arts sponsorship
house style, e.g. logos

19. Marketing communications – public relations
So what’s wrong with that?
PR looks at trivia while corporate reputation has become a major strategic issue
sustaining and managing risk to corporate reputation is a critical management concern
corporate reputation management poses a major cross-functional challnege largely ignored by conventional PR

20. The “new marketing” challenge
Confronting revolution in markets
Identifying renewal opportunities
Developing new ways of doing business/new business models or reinvention

21. Market revolution drives renewal and reinvention
Coping/
adaptation
mechanisms
Disruptive pressures
on existing business
models
REVOLUTION
Radical market
and customer
change/trends
Value-creating
opportunities for
new business models
REINVENTION
Designing new
ways of doing
business

22. Marketing is strategy “the fate of marketing hinges on elevating
the role of marketing executives from promotions- focused tacticians to customer-focused leaders of transformational initiatives that are strategic, cross-functional and bottom-line oriented”
Nirmalya Kumar, 2004

23. Value-based marketing strategy23

24. A route-map for market-led strategic change
Part I
Customer value
imperatives
Part II
Developing a value-based
marketing strategy
Part III
Processes for managing
strategic transformation
The strategic pathway
Change strategy
Market sensing
and learning
strategy
The Customer
is always
right-handed
Strategic
gaps
Strategic
market choices
and targets
Strategic
thinking and
thinking
strategically
New marketing
meets
old marketing
Organization
and processes
for change
Customer value
strategy and
positioning
Implementation
process and
internal
marketing
Value-based
marketing
strategy
Strategic
relationships
and networks

25. Agenda Value as the driver of business and marketing strategy
Transactional marketing and selling
Brand marketing
Relationship marketing
Value-driven strategy
The search for customer value

26. Value as the driver of business and marketing strategy
Compare the search for customer loyalty with the escalating sophistication of customers
Suggests several phases in how we think and thought about the way we go to market

27. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

28. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

29. Transactional marketing and selling
Focuses on immediate revenue and profit – the deal, the sale, the contract
Often the dominant thinking in sales management in particular
Reinforced by paying people volume-based commission/bonus
BUT – maybe all some customers want from us is efficiently-managed transactions

30. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

31. Brand marketing
Branding is central to conventional marketing thinking – brand the product/service, company, person, country, etc.
Brands bring important benefits to customers (reduced search time) and companies (brand equity or value)

32. Brand marketing Branding can transform markets Cool brands often win
BUT – brands do not make you unbeatable
Coca-Cola
Levi-Strauss
Marlboro

33. Coca-cola Most valuable brand in world
1999 had 50% market share of world soft drinks market
Problem – world fell out of love with carbonated soft drinks
Tried to keep up with fragmenting soft drinks market
Introduced bottled water, flavoured water, juice-based drinks, flavoured iced tea and coffee drinks and energy drinks
Use local brands
Products not always branded with Coca-cola name

34. Dazani
UK customers assume bottled water from natural sources ie springs
Coca- Cola purified water from tap water in London
Origin came to light when a complaint was made to the British Food Standards Agency over Coke's use of the word "pure" in its Dasani marketing - implies that tap water is 'impure'.
Like Nestle, McDonald's and Cadbury Schweppes, Coke makes a gratifying target for journalists, in that all those companies trade heavily on their brand.
Source: Guardian March 4, 2004

35. Brand marketing Issues that go wrong with branding blind branding
private brand competition
brands which are liabilities
counterfeit brands
wrong brand trajectory, e.g., Stella Artois “wife beater”

36. Brand marketing
Strategic brand management is the priority not creativity
Does the brand create customer value and how?

37. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

38. Relationship marketing
What did relationship marketing do for us?
Customer relationship management (CRM) systems
BUT – what matters is the type of relationship customers want

39. How B2B purchasers look at supplier relationships
Impact of supplier
on cost structure
and competitiveness
High
Low
High
CRITICAL
partner to
create
competitive
advantage
SHOW-
STOPPERS
manage to
reduce risk
Market
risk/lack of
choice
LEVERAGE
manage for
financial
impact
RECURRING
consolidate,
simplify,
manage by
exception
Low

40. Relationships with strategic customers
Major account selling
The seller devotes specialized
resources to dealing with an
important major account, e.g., an
account team, specialized salespeople,
but the relationship is transactional
Seller
Buyer
Strategic account investment
The seller dedicates resources
to the buyer organization and
plans around the individual
customer’s needs, e.g., may
locate specialist personnel at
or near the buyer’s locations
Seller
Buyer
Strategic account partnership
The buyer and seller collaborate,
plan jointly, and both invest
resources and share risks cross-
boundary links extend beyond
purchasing and sales to include
management and technology.
Seller
Buyer

41. Relationship marketing
Customer relationship provides the basis for market segmentation
Contrast the relationship the customer wants (long-term vs short-term) with the closeness wanted in the supplier relationship (close vs distant)

42. Segmenting markets by customer relationship requirements
Type of relationship customer
wants with supplier
Short-term/
transactional
Long-term
Close
relationship
Relationship
seekers
Relationship
exploiters
Closeness wanted
by customer in
supplier
relationship
Arm’s length
transactional
customers
Loyal
buyers
Distant
relationship

43. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

44. Value-driven strategy
Value has become the central focus of strategy (because there is no choice)
The key issue is now value innovation (in the customer’s terms)
But value does not have a single meaning
e.g., operational excellence vs. customer intimacy vs. product leadership (Treacy and Wiersema, 1995)

45. Treacy and Wiersema- Value Disciplines
Operational Excellence
Providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience
Customer intimacy
Segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches
Companies combine detailed customer knowledge with operational flexibility – can respond quickly to almost any need and creates customer loyalty
Product Leadership
Offering leading-edge products and services that enhance the customer’s use or application of the product
Make rivals goods obsolete
Source: Treacy, M. and Wiersema, F., 1993, Customer Intimacy and Other Value Disciplines
Harvard Business Review January- February

46. The search for customer value
The danger of making assumptions
“we know what our customers want”
“bung in some customer service”
“just make it cheaper”
or, perhaps, take customer value seriously?

47. The search for customer value
Value as rational cost/benefit analysis
Value migration
value migrates from one attribute feature to another
different people buy different value
Customer value is complex, multi-dimensional, unstable and idiosyncratic, but it is what matters