Managing Customer Value Lectures 1 & 2

Managing Customer Value Lectures 1 & 2

• The lectures cover the core concepts of managing customer value (MCV), a roadmap for MCV, value creation (STP), and a comparison of marketing vs. MCV.
• Session outlines include an introduction to MCV, customer value and value drivers, fundamental marketing principles, marketing versus MCV, value creation (STP), and Q&A.
• A note states that sessions are open to everyone but are most helpful for those unfamiliar with marketing. Schedules are posted on a scholar page.

Customer Value

• Customer value is defined as benefits minus costs.
• Value drivers are factors considered in terms of benefits and costs, which can be real, perceived, practical, and emotional.

Fundamental Principles

• Products are viewed as solutions that deliver customer value, not just attributes.
• Competing products satisfy similar needs.
• Consumers purchase products based on perceived value. (Customers will want the item with the highest perceived value.)
• Questions to consider: Customer value drivers, competitors satisfying similar needs, and product/service attributes that offer better value.

Marketing vs. MCV

• Marketing focuses on what the organization does. It is product-oriented and value is hard to measure. Focuses on the top line and effectiveness.
• MCV focuses on what customers do. It is experience-oriented and value is quantifiable and measured. Focuses on the bottom line and effectiveness/efficiency.
• MCV is embedded in the organization's operations.

Marketing Myopia

• Marketing myopia occurs when the focus is on selling products/services instead of understanding and meeting customer needs.
• Companies like BlackBerry, Nokia, and Kodak are cited as examples.

Marketing - Process of Creating Value

• Value to Customer (VTC) evaluates how customers value a product/service.
• Value of Customer (VOC) assesses how the organization values the customer.

Roadmap

• The roadmap for value creation includes: Competitor analysis, Environmental Analysis (3Cs), Segmentation, Targeting, Positioning (STP), Product, Place, Price, and Promotion (Tactical Marketing Decisions (4Ps)).

The 3 Cs

• The 3Cs (Company, Customer, Competition) define a business strategy.
• The intersection of the 3Cs represents an opportunity.

Company Analysis

• Company analysis utilizes internal analysis, including vision, strengths, weaknesses, and core competencies. (This focuses on internal factors)
• Example company: Tim Hortons.

Customer Analysis

• Customer analysis involves external analysis to identify who the product/service is intended for.

Competititor Analysis

• Competitor external analysis evaluates what other organizations are doing in the same market, how they position themselves, and their definition of a customer.
• Questions to consider: What are competitors offering, how do they define customer value, and how do competitors go to market?

Success in Marketing

• Success in marketing involves offering the right product/service to the right customer.
• Segmentation, targeting, and positioning (STP) guides the business strategy.

Get the Right Product/Service to the Right Customer

• STP: Segmentation, Targeting, Positioning - are used to define the customer and position the business.
• Segmentation: Dividing a market into smaller, more homogenous segments to tailor offerings to specific groups.
• Types of Segmentation: Demographic/Firmographic, Geographic, Psychographic, and Behavioral.
• Targeting: Evaluating segment attractiveness based on value drivers, core competencies, and selecting target segments for the business.
• Positioning: Identifying value drivers for the target customer and their needs to emphasize differentiators and unique selling points.

Two Methods of Segmentation

• Simple Way: Defining customer value drivers and descriptor variables (using existing research). Grouping people into segments and finding competitors in each segment. Determining the growth and size of the segments.
• Rigorous Way (Conjoint Analysis): Getting individual rankings/ratings of product attributes and conducting cluster analysis to determine segments, size, sensitivity, and market share.

Important!

• Within a segment, people are similar; across segments, they are different.
• Different segments have different sensitivities to value drivers and product attributes. This is critical to understanding how to position products.

Segmentation Example

• Example: Automobile market segmentation into Young Childless Affluent Adults, Families, and Older Traditionalists using value drivers, profiles, competitors, size, and growth rate.
• Other Examples: Coffee shops, different coffee brands and their offerings to attract customers.

Targeting

• The process of choosing the most appropriate segment(s) using company competencies/constraints and filtering by market size, growth, and competition.
• Types of targeting include: Full Market Coverage, Single-Segment Concentration, Selective Specialization, Product Specialization, and Market Specialization.
• Examples of each type are given with different brands in different marketing scenarios.

Positioning

• The method for guiding company strategy based on differentiating in the minds of customers, emphasizing value drivers important to the target customer segment and differentiating the company to stand out from the competition.
• Criteria for positioning includes value drivers, and differentiation to stand out from competition. (Rule of two).
• Positioning Example using perceptual map visually shows how consumers perceive different brands in a market.

Positioning Statement

• Developing positioning statements, including the target market, core benefit, other benefits, support, and competitive advantage relevant to that segment.
• Positioning Statement Example: Defining the target market, core, benefit, support and competitive advantage, for a coffee shop. Showing examples like Tim Hortons. Methods for developing these statements, including using research and STP to guide your efforts.