MGT 411 E Course Title: Customer Term and Year - SOM Portal

COURSE INFORMATION

Course Number: MGT 411 E

Course Title: Customer

Term and Year: Fall 2015

Class Meeting Time, Day:

Saturday, October 17, 11:30am-2:30pm

Saturday, October 31, 11:30am-2:30pm

Friday, November 13, 2:30-5:30pm

Friday, December 4, 2:30-5:30pm

Friday, December 18, 9:00-12:00pm

Friday, January 8, 2:30-5:30pm

Course Support: [email protected], Monday-Friday 8:30am-5pm; after hours please contact

the TA or the faculty.

CONTACT INFORMATION

Professor(s) TA(s)

Name: K. Sudhir

Office Location: 5521 Evans

Telephone Number: 203-432-3289

E-mail Address: [email protected]

Office Hours: TBD

Name: Jai Subrahmanyam and Ian Evans

E-mail Address:

[email protected]

[email protected]

Review Sessions:

TEXTBOOKS AND RECOMMENDED/REQUIRED READINGS

Required Reading: Cases (available through Canvas); Class Notes (available through Canvas), the notes

along with the lecture slides are the primary reading materials for the class.

Optional Reading: Textbook: Kotler and Keller, Marketing Management, 14th ed. ISBN-13: 978-

0132102926, ISBN-10: 0132102927

Recommended Readings: Please see detailed outline of classes in syllabus. Articles marked with a * is

required reading. The Kotler and Keller text is optional reading. Articles without an asterisk are optional.

SOFTWARE USED

None

COURSE DESCRIPTION AND OBJECTIVES

Peter Drucker once said: “The sole purpose of a business is to create and keep a customer.” Through lectures and

cases, we will illustrate how to create a customer aligned company that responds to changes in the marketplace.

mailto:[email protected]




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Course Outline:

Class Participation

Almost every session of the course will involve interaction in the form of class discussion. I expect each student to be

prepared at all times to comment in any class session. To reinforce this expectation, I will randomly select (i.e., cold

call) students at the beginning of the session (to open the class) and may continue to do so during the ensuing

discussion.

Many of the sessions in this course follow a case discussion format. The case method is one of the most effective

means of sharpening your decision-making abilities, because it requires you to be an active participant in the resolution

of a decision problem. The assigned cases are intended to give you practice in assembling data and arguments to

support a decision. The case method allows you to apply theories, concepts, and analytical devices discussed in a class

or in the reading materials. The discussion forum gives you an opportunity to argue your position and to learn from

others by listening to their comments and criticisms.

Evaluating class participation

The criteria for evaluating effective class participation include:

1. Level of preparation: Are you prepared? Do your comments show evidence of analysis of the case? Do your

comments add to our understanding of the situation in the case? Do you provide more than repetition of case

facts? Do your comments show an understanding of relevant theories, concepts, and analytical devices

presented in class lectures or reading materials?

2. Listening skills: Are you a good listener? Are the points you make relevant to the discussion? Are they linked

to the comments of others? Do you interact effectively with other class members?

3. Rhetorical skills: Are you an effective communicator? Do you present concepts and arguments concisely and

persuasively?

4. Attendance and punctuality: If you miss more than 2 classes, you will receive a grade of zero for class

participation (exceptions made only for documented medical reasons). This allowance is meant to allow for

attending interviews, conferences, illness etc. Lateness will negatively affect class participation grade. More

importantly, late arrivals disrupt the classroom and affect the learning environment for your fellow students, so

please ensure to be on time.

Keep in mind that your grade for class participation is not simply a function of the amount of attendance or "air time"

you take up. In general, we will evaluate you on how well you respond to questions and on how effectively you take

into account the comments and analyses of your classmates.

Course Objectives: 1. Introduce a framework for customer driven marketing analysis (customer analysis, consumer behavior,

segmentation, positioning and marketing mix design) that help create and deliver a superior value

proposition.

2. Introduce tools for analyzing customer behavior, managing customer relationships, (e.g., customer lifetime

value and customer activity based costing) and customer feedback (e.g., preference measurement,

satisfaction and loyalty measurement).

3. Introduce a framework for creating an organization aligned with customer needs.

By the end of the course you should understand customer analysis, the creation of a superior value proposition, and

ways to organize the firm around strategic objectives. Following the educational philosophy articulated below, we

will focus on general principles, rather than facts or terms:

“Whatever be the detail with which you cram your student, the chance of her/his meeting in after-life exactly

that detail is almost infinitesimal; and if s/he does meet it, s/he will probably have forgotten what you taught

her/him about it. The really useful training yields a comprehension of a few general principles with a

thorough grounding in the way they apply to a variety of concrete details. In subsequent practice the

(students) will have forgotten your particular details; but they will remember by an unconscious common

sense how to apply principles to immediate circumstances.”

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Alfred Whitehead, The Aims of Education and Other Essays (1929)

COURSE REQUIREMENTS AND SPECIFIC GRADING POLICY

Course Requirements

Final Examination Take home 25%

Class Participation 10%

Case analyses (4 X 10%) In class 40%

CRM Exercise In class 10%

Conjoint Exercise December 22/5pm 10%

Consumer Choice Exercise October 30/5pm 5%

Grades

There are five grades at Yale SOM: High Honors, Honors, Proficient, Pass, and Fail. The grade

distribution that faculty use, and the policy with respect to the reporting of grades on official transcripts,

are described below.

HH: High Honors. Up to top 10 percent of class. Reported on transcript.

H: Honors. Next 25 percent. Reported on transcript.

PR: Proficient. Next 55 percent. Not reported on transcript.

P: Pass. Lowest 10 percent in core courses; guideline of 5 percent in electives. Not reported on

transcript.

F: Fail. An absolute standard; no minimum requirement. To the extent it is used, the F grade

counts toward the 10 percent Pass category. Not reported on transcript.*

Once grades are officially recorded, they may not be changed except in cases in which a mathematical

error has been made in computing the grade or a clerical error has been made in recording it. Students

seeking correction to a grading error must contact the instructor within two weeks (ten working days)

from the receipt of the grade.

If a student takes a course in another school at Yale, the SOM registrar will ask the instructor to submit the

grade according to the SOM grade scale.

*F grades in core courses require remediation. The failed core course is not reflected on the official

transcript until remediated. Elective courses with F grades are not reflected on the official transcript.

Students must replace failed electives with other electives to meet total credit requirements for graduation.

DESCRIPTIONS OF ASSIGNMENTS/PROJECTS

Project Paper/Problem Sets/Cases write up Assignments

The cases are group assignments (answer all discussion questions). The conjoint assignment is an individual exercise.

Every member of the group should contribute to the group write ups. Attaching one’s name to a case write-up that one

has not participated in writing violates SOM’s honor code.

Case Assignments (Group)

Population Services International, Clarke, Atlantic Computer, RBC and RRH: Answer all discussion questions in

a PowerPoint deck, with answers to each question in one or two slides each. The answers should be reasonably

transparent by reading the slide deck, you may augment the logic of your answers through the notes page of the slides.

The assignment (printed PowerPoint slides with notes) is due at the beginning of class. No exceptions. Every group is

required to submit four out of the five case assignments, but should be prepared for class discussion on every case.

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Consumer Choice Survey Exercise (Individual)

An exercise based on a customer interview will be discussed on Oct 31. This individual exercise is due one day in

advance of class on 10/30 (Friday) at 5 pm, so that I can use this for orienting class discussion the next day.

Conjoint Exercise (Individual)

There will be one exercise using conjoint analysis to estimate and interpret consumer preferences. This individual

exercise is due on December 22 by 5 pm.

Final Examination

The final examination will be a take home exam, consisting of short answer questions over a 90 minute period. The

exam will be closed book, closed notes, outside of the class room. You may use your laptop to answer the questions.

Case Preparation

In all classes, all students should be prepared to answer all discussion questions, irrespective of whether you have or

have not prepared written responses.

Individual Preparation

In preparing for a case discussion, we recommend that you read the case more than once before working in groups. The

first reading should give you an impression of what the case is about and the types of data it contains. Once you have a

good idea of the fundamentals, you should read the case again to understand the specific situation. You should identify

the root causes of problems and gather data from the case that will allow you to make specific action recommendations.

During this reading, carefully prepare your answers to the assigned discussion questions. As is often true in actual

practice, cases may not have all the data you would like. It is critical that you develop a reasoned plan of attack based

on the available data. Your recommendation should be based from the facts on hand, not from the actual outcome (if it

is presented or if you happen to know it.) First, the actual decisions may involve information not presented in the case.

Second, the chosen course of action may not have been optimal. NOTE: Of course, the submission of papers or notes

from prior or concurrent courses violates the Honor Code.

Group Preparation

During the group meeting, you should discuss and reconcile your different positions and provide one answer based on

the consensus opinion of the group. In the class discussion, you should feel free to express any differences of opinions

you may have had within the group.

Class Discussion

In class discussions, we will ask one or more groups to present certain aspects of the case. Thereafter, we will try to

build a complete analysis of the situation and address the problems and issues in the case. Each person should be

prepared to share his or her individual views with the class. The principal objective of the discussions is to examine all

aspects of the situation: facts, suppositions, alternatives, and final action. Instructors will facilitate discussion by

organizing the disparate views in these sessions, but the direction and quality of the discussion is the collective

responsibility of the group.

Case discussions often conclude with queries about the “correct answer.” Often, there is none. Several distinct, and

viable alternate approaches can often be developed. You should, however, be prepared to defend some specific action,

and marshal a defense for your position that is consistent with the broad goal of maintaining customer alignment.

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YALE SOM HONOR CODE

Guiding Principles

Honesty is fundamental to the profession and practice of management. It is therefore the bedrock premise

of management education at Yale. To the community of students, faculty, and staff of the Yale School of

Management, honesty and integrity build the trust essential to a free and lively exchange of ideas.

The Yale SOM Honor Code is intended to foster the School’s exceptional learning environment and to

support conduct that will distinguish the faculty, staff, and students in their lives as managers, at

school, at school-related functions, and in the larger management community. The Honor Code will be

referred to as the “Code” hereafter.

The Honor Committee has jurisdiction over all Code violations including matters of academic

dishonesty and egregious violations of the social and professional norms of behavior.

Academic Integrity

The Yale SOM community, including faculty, staff, and students, supports the highest standards of

academic integrity. All academic work affords an unparalleled opportunity to put forward new and

innovative ideas; at SOM, we aspire to always acknowledge the ideas upon which new solutions are

based.

When working on any assignment with a team, students must clarify the expectations for each member

of the team.

Faculty will provide clear guidelines for students on the parameters of any group work, as well as

guidelines for proper citation.

A student will contact the professor for clarification if there is a question about the way in which the

group work is to be completed.

Students are encouraged to consult print resources as well as online resources, available on the SOM

portal, concerning proper citation.

Community Standards

A hallmark of the Yale SOM community is its inclusive nature, which respects the diverse backgrounds

and views of its members. SOM faculty, students, and alumni aspire to standards of conduct while at Yale,

and as they function in the larger management community, that will further distinguish SOM as a center of

integrity and fair dealing.

Students must uphold, among themselves, the highest standards of professional behavior.

Students must strictly adhere to ethical guidelines during the job search—with interviewers,

prospective employers, and their student colleagues.

Students must remember that they represent the School as they take part in activities in the University,

New Haven, and the larger management community.

Standards of individual responsibility in the job search, and in the use of School and University

information technology resources, are detailed under Policies and Guidelines of the Career

Development Office and Policies on the Use of Information Technology Facilities in this chapter.

GENERAL STATEMENTS

Attendance

M.B.A. for Executives students are expected to attend classes regularly, be on time, and be prepared to

contribute to class discussion. We recognize that there are times when circumstances may cause a student

to miss class. If these absences are due to religious observance, unplanned hospitalization, extended

illness, or a personal or family emergency that directly affects the student or an immediate family

member, the absence would be considered excused. Students will be informed about whether their absence

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is excused or unexcused by a program administrator. Whenever students are unable to attend class, they

are required to notify a program administrator and then must inform the instructors. If the circumstances

make advance notice impossible, an e-mail as soon as possible after the missed class is the next best

alternative. The student must make arrangements with a classmate to get notes and copies of class

handouts, and to complete all missed work.

Since participation and attendance are critical to the M.B.A. for Executives experience for students, their

classmates, and study groups, an unexcused absence (any absence that does not fall into those listed

above) may jeopardize a student’s academic standing in class. Under these circumstances, those students

who miss more than 15 percent of the total number of class sessions for any given course may, at the

discretion of the faculty, receive a final course grade of Pass or Fail. The threshold at which unexcused

absences may affect a student’s grade varies depending on the number of the sessions in the class, as

follows:

Six-session class 1 class session or 3 hours

Four-session class ½ class session or 1½ hours

No unexcused absences are allowed for a two- or three-session class. If a student has to leave town for a

personal or family emergency, or will be out of class for an extended period because of illness, he/she

must first contact the program director.

Using cell phones, browsing the Internet, or reading e-mail during class distracts the instructor and

classmates and interrupts the learning experience. Cell phones and other electronic devices are to be

turned off during class. Laptops and tablets are not to be used in the classroom unless explicitly permitted

by the instructor.

Course Recording

All EMBA course lectures are recorded with permission of the faculty and posted to the specific course

site.

Laptop/Device Policy

Usage not allowed without the express permission of the instructor.

DETAILED OUTLINE OF CLASS SESSIONS

Weeks Topics Readings Assignments

Due

Week

1

Framework for

Marketing Analysis

Market Segmentation

Application

See detailed list reading and assignment list below

Week

2

Customer Analysis-I:

Consumer Behavior:

Choice and Persuasion

Consumer Behavior

Application-

See detailed list reading and assignment list below Friday,

October 30

by 5pm

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Weeks Topics Readings Assignments

Due

Social Marketing in

Emerging Markets

Week

3

Positioning and

Branding

Customer Analysis-II

CLV and CRM


Week

4

Customer Preference

Measurement-

Conjoint Analysis

Designing Customer

Aligned

Organizations: The

ARC Framework


Week

5

Extracting Customer

Value through Pricing

Customer Feedback

Measurement


Week

6

Using Customer

Feedback to Align

Service Operations

Marketing in the Age

of Social Media and

Course Summary

See detailed list reading and assignment list below Tuesday,

December 22

by 5pm

The instructor reserves the right to modify and/or change the course syllabus as needed during the course.

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Yale School of Management MGT 411E: The Customer

YALE UNIVERSITY Fall 2015

SHORT OUTLINE OF ASSIGNMENTS

10/17 11:30-12:55 PM

1. Introduction: Framework for

Marketing Analysis (3Cs-STP-4Ps)

(Lecture/Discussion)

10/17 1:05 PM-2:30 PM

2. Market Segmentation Application

(Case: Cardiothoracic Systems)

10/31 11:30-12:55 PM

3. Customer Analysis-I: Consumer

Behavior: Choice and Persuasion


10/31 1:05 PM-2:30 PM

4. Consumer Behavior Application-

Social Marketing in Emerging Markets

(Case: PSI)

11/13 2:30 PM-3:55 PM

5. Positioning and Branding

(Case: Clarke)

11/13 4:05 PM-5:30 PM

6. Customer Analysis-II

CLV and CRM


12/04 2:30 PM-3:55 PM

7. Customer Preference Measurement-

Conjoint Analysis


12/04 4:05 PM-5:30 PM

8. Designing Customer Aligned

Organizations: The ARC Framework

(Case: Royal Bank of Canada)

12/18 9:00 AM-10:25 AM

9. Extracting Customer Value through

Pricing

(Case: Atlantic Computer)

12/18 10:35 AM-12:00 PM

10. Customer Feedback Measurement-


1/08 2:30 PM-3:55 PM

11. Using Customer Feedback to Align

Service Operations

(Case: Starbucks)

1/08 4:05 PM-5:30 PM

12. Marketing in the Age of Social Media

and Course Summary


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OUTLINE OF CLASS ASSIGNMENTS

Articles marked with a * is required reading. The Kotler and Keller text is optional reading. Articles without an

asterisk are optional.

Module 1: Customer Analysis and Marketing Strategy

1: Framework for Marketing Analysis

We will briefly discuss the overall structure of the class. Specifically it will focus on an overarching framework for

marketing analysis that we will cover in Module 1, usually referred to as the 3Cs-STP-4Ps framework. The

framework involved marketing opportunity analysis (“3Cs”), segmentation, targeting, and positioning (“STP”), and

implementing the chose positioning though the marketing mix (“4Ps”).

READINGS:

Sudhir, "The Customer Perspective: An Introductory Note”*

Sudhir, “Market Segmentation”*

Kotler and Keller, Chapters 1 and 8

Videos of Senior Executives discussing the importance of the customer perspective and how they

integrate it in their decision making. You may watch these videos at leisure. We highly recommend

watching Anil Menon’s video.

Not all consumers have the same needs. Nor are all customers equally attractive. Nor do they respond in similar

ways to marketing activities. Segmentation is a tool to divide heterogeneous markets into more homogeneous

submarkets based on customer characteristics. Targeting is the process of selecting the most attractive segments for

the company to pursue. We will develop a framework to perform market segmentation and choosing the right target

segment.

2: Customer Identification and Market Segmentation

Case: Cardio Thoracic Systems (Submission not required)

CardioThoracic Systems, a company that has developed a new system for performing heart surgery on a beating

heart, is facing problems of low market adoption by surgeons. What should it do to improve adoption?

DISCUSSION QUESTIONS:

1. Who is the customer for the product? What needs does the surgery system satisfy? What are the potential

drivers/barriers to adoption? How do these drivers/barriers change over time?

2. Estimate the potential demand for this product during the first year. What would your projections be for

demand over the first five years? Make your assumptions explicit. Is this product likely to be profitable?

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3. How should the CTS marketing team take into account the needs of different decision makers involved in

product adoption? Would you recommend marketing to surgeons, patients or hospital administrators?

4. Estimate the value to CTS of converting a surgeon into an adopter.

3: Frameworks for Customer Analysis-I: Consumer Choice and Persuasion

Exercise: Customer Interview Exercise to be submitted by October 30, 5 pm through Canvas.

This class provides frameworks to understand customer needs, how to persuade them, and their value to firms. First,

we discuss two models of consumer behavior: model of consumer choice and a model of persuasion. We will

discuss how the choice model can differ for different types of products.

READINGS:

Sudhir, “Consumer Behavior”

Kotler and Keller Chapters 6

4: Social Marketing & Consumer Behavior in Emerging Markets

Case: Population Services International

Population Services International (PSI) is a not-for-profit agency founded to disseminate family planning

information and to market birth control products, primarily in developing countries seeking to curb population

growth. PSI concluded an agreement with the government of Bangladesh to conduct the Social Marketing Project

(SMP): a campaign to sell subsidized contraceptives through commercial outlets. About 7 years later, three PSI

managers are meeting to discuss their strategy for the next three years for two products: Raja condoms and Maya

birth control pills. They were particularly concerned that the marketing approach that had proven extremely

successful for Raja was failing for Maya.

ASSIGNED READING:

Do Better at Doing Good, HBR*

Selling Birth Control to India’s Poor


1. What are the conceptual differences and additional difficulties of marketing of birth control products in

Bangladesh, as compared to “conventional” product marketing?

2. Examine the marketing program for Raja and Maya and explain why Maya was deemed a failure and Raja

was deemed a success.

3. Based on your analysis above, suggest two alternative ways in which you can improve sales of pills for PSI

(i.e., with or without Maya).

4. How would you characterize the objectives of the Bangladesh government? USAID? PSI? In light of these

objectives, how does that impact your recommendation for increasing the sale of PSI Pills listed in response

to question 3?

5. Assume that PSI decides to use the RMP’s to build Maya. Briefly describe a marketing plan outlining

specific recommendations that engages RMP’s to market Maya. Be specific with respect to your decisions

regarding four factors: ( i.)the role of RMP in the buying process, (ii). How and whether to advertise Maya

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(iii). How to distribute Maya (i.e., which channels to use), and (iv.)How to price Maya (i.e., whether to raise

or lower prices). Assume that RMP would need to be incentivized to carry Maya and that PSI wants to at

least triple sales for Maya in accordance with objectives of other constituents.

5: Positioning and Branding

Positioning is the process of creating a unique space for a product or service (with respect to competitive alternatives)

in the mind of the customer. Good positioning involves i. making clear the core value proposition and ii. its point of

differences from competition. Brands are a key strategic asset and a primary source of differential competitive

advantage to firms.

CASE: Clarke: Transformation for Environmental Stability

Clarke is the industry leader in the mosquito abatement sector, which traditionally uses highly toxic chemicals. The

company has developed Natular, which is much less toxic, but as effective as traditional products. How should the

company go about integrating Natular into its product line and whether it should change its business strategy and

market positioning around the Natular brand


1. Analyze consumer and competitor behavior in the market for mosquito abatement.

2. Should Clarke shift its business and branding strategy around sustainability and Natular at this time? Should

Clarke phase out the manufacturing and distribution of Temephos?

3. Write a positioning statement for Clarke around the sustainability branding strategy.

4. Clarke has businesses all around the world. Should Clarke implement the same strategy across all its

geographic markets?

5. If it decides to shift its business strategy, how should the CEO align the organization on the new strategy?

How should he handle skeptics and resisters to change?

READING:

Kotler and Keller, Chapter 9, 10

6: Frameworks for Customer Analysis-II: Customer Lifetime Value and Customer Relationship

Management

We introduce a framework to measure customer profitability and long-term value within a customer relationship

management framework. We discuss concepts such as customer life time value, the tradeoffs between customer

acquisition, the value of cross-selling etc.

READINGS:

“Note on Customer Lifetime Value (CLV)” by Sudhir*

Managing Customers as Investments, Chapters 2 and 3, by Gupta and Lehmann*

Kotler and Keller, Chapter 5

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7: Customer Preference Measurement: Conjoint Analysis

To align a firm’s strategy with customer needs, firms must learn about customer preferences. We will focus on one

systematic quantitative method – conjoint analysis. The output of a conjoint analysis is an individual level utility

function defined in terms of product attributes. This information can be used by the firm to influence new-product

development and pricing strategies.

READINGS:

Sudhir, “A Note on Conjoint Analysis.”*

Shedding the Commodity Mindset, McKinsey Quarterly, Nov 2000.


1. What are the key principles underlying conjoint analysis?

2. When is conjoint analysis useful?

3. How does one estimate the preference function for an individual consumer using conjoint?

4. How does one predict market shares for a new product using conjoint?

8: A Framework to Create a Customer Aligned Organization - The ARC Framework

This class will introduce the ARC framework, for organizational design. The framework explains how to create the

right organizational architecture (A) (i.e., firm design, employee incentives), routines (R) and Culture (C) that is

consistent with the firm’s customer strategy in order to create a customer-aligned organization. We will seek to

apply the ideas around the framework and how to implement Customer Relationship Management within an

organization.

CASE: Customer Profitability and CRM at Royal Bank of Canada Financial Group

Advances in data collection and storage technology have made customer relationship management (CRM) feasible.

The RBC case offers an opportunity to explore the following four issues relating to implementing CRM: (a)

understand the strategic benefits of customer based management as opposed to traditional product based

management (b) tactical issues such as customer segmentation to facilitate CRM (c) accounting challenges involved

in measuring customer profitability rather than product profitability and (d) organizational design to execute a CRM

strategy. To make CRM feasible, accounting systems using customer activity based costing methods need to be

integrated into management decisions. The need for accounting, marketing, information technology and

organizational functions to work in an integrated fashion to make CRM successful will be emphasized.


1. To understand how better information alters the options available to management, consider Exhibit 7 which

shows how costs associated with bill payments varies substantially across different channels, from a low of

$0.18 if done on the web to a high of $21.36 in a retail branch. Provide different actions that RBC could

pursue given that information (e.g., drop customers engaging in retail branch transactions). Keep in mind

the concerns laid out in the last two paragraphs of the case.

2. To develop the intuition underlying the benefits of cross-selling, compute life time value (over a five year

horizon) for the following two scenarios that arise when offering products to the niece. Assume RBC offers

only two products: i) a credit card that generates annual profits of $1,000 and ii) a car loan that generates an

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annual loss of -$100. The normal retention rate is 80% for both products; i.e., there is an 80% probability

that a customer with a credit card (loan) this year will continue to hold that credit card (loan) in the

following year. Assuming the niece already has a credit card, should RBCoffer her a car loan if it increases

the expected retention rate from 80% to 90% on both products?

3. What is the advantage of moving from an A/B/C Segmentation strategy based to a life stage segmentation

strategy for RBC. Why does the life stage segmentation strategy work for RBC?

4. Discuss the advantages and disadvantages of a customer segment-based organization relative to product-

based organization at RBC? Can the matrix organization overlaying the customer segment organization and

product based organization address the challenges?

Hint: Use the Saloner, Shepard and Saloney reading below on the ARC Framework to answer question 4.

READINGS:

Saloner, Shepard and Podolny, “Strategic Management”, Chapter 4, Internal Context: Organizational

Design.*

9: Customer Value and Pricing

The class will compare alternate bases for setting price. The case highlights the practical challenges of

implementing a pricing strategy within the organization that has stakeholders with conflicting interests.

READINGS:

Sudhir, “Pricing: A Value Based Approach”*

Kotler and Keller, Chapter 14

CASE: Atlantic Computer: A Bundle of Pricing Options

Atlantic Computer a leading player in the high-end server market has detected a marketplace opportunity in the

basic server segment. They have developed a new server, the Tronn, to meet the needs of this segment. In addition,

they have created a performance accelerator software tool called the PESA that quaduples the speed of the server.

The case provides an opportunity to estimate customer value-in-use, which can form a basis for setting prices.


1. Using the four approaches considered by Jowers (on p.6 of the case), what price should he charge

DayTradeJournal.com for the Atlantic Bundle? Compute the prices for 2 Tronns bundled with PESA

software.

2. Which of the four pricing strategies would you recommend? Why?

3. Discuss how different stakeholders (Matzer and the sales force) would react to your recommended pricing

strategy. How would you assuage any concerns they may have in accepting your recommendation.

4. How would customers in different segments react to the pricing strategy? How would you train the sales

force to address these concerns and obtain sales?

5. How would Ontario Zink's senior management react to the Atlantic Bundle?

10: Customer Feedback Systems

We will discuss ways of measuring how well customer needs are being satisfied, including satisfaction with the

purchase process, communication and delivery, consumption, (and, sometimes, disposal) of products and services.

Purchase and satisfaction are important feedback components relating to existing customers, but they do not

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consider opportunities missed among consumers who do not buy from the firm. Thus, we’ll discuss measurement

techniques to get feedback from customers who leave or do not purchase from the firm.

ASSIGNED READING

Putting the Service Profit-Chain to Work, HBR*

One Number You Need to Grow, HBR

11: Using Customer Feedback to Improve Service Operations and Delivery

CASE: Starbucks: Delivering Customer Service

In 2002, Starbucks is the dominant specialty-coffee brand in the world with more than 4500 retail outlets in North

America alone. Its aggressive expansion strategy calls for an additional 750 North American retail outlets in 2003,

even as the company explores other avenues of growth. At the same time, however, the company has gathered

evidence that customer satisfaction is on the decline, its brand image is showing some rough edges, and its customer

base has changed in significant ways. To address these problems – in particular, the decline in customer satisfaction

– Starbucks is considering investing an additional $40 million in labor in its stores. The case highlights the linkage

between service operations and customer strategy in a service environment.


1. What factors accounted for Starbucks’ extraordinary success in the early 90’s (consider their value

proposition to the target segment and brand image)?

2. How does Starbucks 2002 differ from Starbucks 1992?

3. Critically evaluate the various customer feedback metrics presented in Exhibits 7-11. What accounts for the

decline in customer satisfaction?

4. Describe an ideal customer from Starbucks profitability standpoint. How would you ensure their

satisfaction?

5. Should Starbucks make the $40M investment in labor in stores? What is their goal, and can they achieve it?

(Hint: From Exhibit 9, compute revenues per year from each unsatisfied/satisfied/highly satisfied

customers. Suppose the additional labor investment converted some satisfied customers to highly satisfied

customers and obtained incremental revenues, how many such conversions are required to cover the

investment in labor costs? Is this feasible?)

12: Marketing in the Age of Social Media and Course Summary

This lecture will discuss why social media has become a potent tool for marketers and how firms can use social

media for marketing. Social media can be used to listen to customers, proactively generate customer word of mouth,

and reusing the conversations effectively to generate future marketing value.

Documents

MGT 411 E Course Title: Customer Term and Year - SOM Portal