Value-based marketing strategy Lecture 3. New marketing meets old marketing : New marketing wins

Value-based marketing strategyLecture 3

New marketing meets old marketing:New marketing wins

A route-map for market-led strategic change

Value-basedmarketingstrategy

New marketing

meetsold

marketing

Strategicthinking and

thinkingstrategically

Customer valuestrategy andpositioning

The strategic pathway

Strategicmarket choices

and targets

Market sensingand learning

strategy

Strategicrelationshipsand networks

Change strategy

Strategicgaps

Organizationand processes

for change

Implementationprocess and

internalmarketing

Part ICustomer value

imperatives

Part IIDeveloping a value-based

marketing strategy

Part IIIProcesses for managingstrategic transformation

The Customeris always

right-handed

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

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

Marketing strategy and marketing programmes (the ‘marketing mix’)

Marketingstrategy

Marketingprogramme

Customermarketplace

* Product policies* Pricing policies

* Place/distribution* Promotion/marketing

communications

The value offering

Marketing tools

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

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

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

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

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

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

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

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

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

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

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

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

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

The “new marketing” challenge

• Confronting revolution in markets• Identifying renewal opportunities• Developing new ways of doing business/new business

models or reinvention

Market revolution drives renewal and reinvention

Disruptive pressureson existing businessmodels

Value-creatingopportunities fornew business models

REVOLUTIONRadical marketand customerchange/trends

RENEWALCoping/

adaptationmechanisms

REINVENTIONDesigning newways of doing

business

Marketing is strategy

“the fate of marketing hinges on elevatingthe 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

Value-based marketing strategy

A route-map for market-led strategic change

Value-basedmarketingstrategy

New marketing

meetsold

marketing

Strategicthinking and

thinkingstrategically

Customer valuestrategy andpositioning

The strategic pathway

Strategicmarket choices

and targets

Market sensingand learning

strategy

Strategicrelationshipsand networks

Change strategy

Strategicgaps

Organizationand processes

for change

Implementationprocess and

internalmarketing

Part ICustomer value

imperatives

Part IIDeveloping a value-based

marketing strategy

Part IIIProcesses for managingstrategic transformation

The Customeris always

right-handed

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

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

Value-based marketing

Customer loyalty

Customersophistication

High

Low

High Low

Value-basedmarketing

Relationshipmarketing

Brandmarketing

Transactionalmarketingand selling


Customer loyalty


High

Low

High Low



Brandmarketing


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


Customer loyalty


High

Low

High Low



Brandmarketing


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)

Brand marketing

• Branding can transform markets• Cool brands often win• BUT – brands do not make you unbeatable

– Coca-Cola– Levi-Strauss– Marlboro

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

• 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

Dazani

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”

Brand marketing

• Strategic brand management is the priority not creativity• Does the brand create customer value and how?


Customer loyalty


High

Low

High Low



Brandmarketing


Relationship marketing

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

want

How B2B purchasers look at supplier relationships

Impact of supplieron cost structure

and competitiveness

Marketrisk/lack ofchoice

High

Low

High Low

CRITICALpartner to

createcompetitiveadvantage

LEVERAGEmanage for

financialimpact

RECURRINGconsolidate,

simplify,manage byexception

SHOW-STOPPERSmanage toreduce risk

Relationships with strategic customers

Seller Buyer

Seller Buyer

Seller Buyer

Major account sellingThe seller devotes specializedresources to dealing with animportant major account, e.g., anaccount team, specialized salespeople,but the relationship is transactional

Strategic account investmentThe seller dedicates resourcesto the buyer organization andplans around the individualcustomer’s needs, e.g., may locate specialist personnel ator near the buyer’s locations

Strategic account partnershipThe buyer and seller collaborate,plan jointly, and both investresources and share risks cross-boundary links extend beyondpurchasing and sales to includemanagement and technology.

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)

Segmenting markets by customer relationship requirements

Type of relationship customerwants with supplier

Closeness wantedby customer insupplierrelationship

Closerelationship

Distantrelationship

Long-termShort-term/transactional

Relationshipseekers

Relationshipexploiters

Loyalbuyers

Arm’s lengthtransactional

customers


Customer loyalty


High

Low

High Low



Brandmarketing


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)

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

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?

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

Documents

Value-based marketing strategy Lecture 3. New marketing meets old marketing : New marketing wins