Marketing Concepts and Core Competence

Core Competence

• A skill set that is difficult for competitors to imitate.
• Not an output but an input which generates strategic assets.
• These assets ultimately provide benefits for customers.
• Ideally, a core competence provides access to multiple markets.

Caveats

• Strategic assets can be a consequence of core competencies but not always.
• Some companies may not have a core competence at all.
• Companies may not realize they have a core competence or have difficulty defining it.

Brand Architecture: Relationships between Brands in a Company's Portfolio

• A brand architecture is the relationship between different brands in a company's portfolio.
• Umbrella brand: One family of products that all deliver the same higher order benefit.
• Brand extensions: product line, category, branded variant, often used to accommodate different willingness to pay.

Customer Relationship Management

• Modern approach to marketing prioritizes customer relationship management over sales.
• Costs five times less to retain existing customers than acquiring new customers.

Defining and Identifying Customers

• Traditionally based on purchase behavior: recency, frequency, monetary value (RFM) analysis.
• Different industries define "current customer" with different RFM cutoffs.
• Better to combine purchase data with attitude data to identify profitable customers at risk.
• Retention is when the customer continues to interact with the firm, even without monetary exchange.

Determining Customer Base Size

• Different challenges for contractual and non-contractual settings.
• Contractual settings allow for observation of when customers become inactive.
• Non-contractual settings lack this observation time.
• Cohort analysis commonly used to examine retention.

Retention Campaigns

• Proactive and reactive retention campaigns.
• Proactive campaigns often result in false positives and false negatives.
• False negatives miss customers who intend to leave.
• False positives offer incentives to customers who wouldn't have left.
• Acquisition challenge: overcoming existing brand loyalties.

Brand Loyalty

• Deep commitment to repurchase a product or service despite situational influences.
• Positive link between loyalty and profitability but with caveats.
• Some consumers believe loyal customers deserve lower prices than new customers.
• Loyal customers may be more price-sensitive due to increased product knowledge.

Customer Segmentation (Profitability and Tenure)

• Butterflies: High profitability, short-term customers
• Strangers: Low profitability, short-term customers
• True Friends: High profitability, long-term customers
• Barnacles: Low profitability, long-term customers
• Must measure both "size of wallet" and "share of wallet" for barnacles due to indistinguishable internal data.

Customer Lifetime Value (CLV)

• Represents the present value of all future profits generated from a single customer.
• Useful for guiding acquisition and retention strategies.
• Multiple approaches to CLV calculations exist.
• Focus acquisition efforts on retaining customers with high CLV to maximize profitability.

Loyalty Programs

• Advantages: create barriers to exit, encourage greater share of wallet, and stimulate higher than normal purchase behavior.
• Disadvantages: missed sales due to giveaways, administrative costs, and may primarily benefit frequent purchasers who may not require additional discounts.

Challenges in Marketing Research and Practice

• Predicting churn: identifying at-risk customers.
• Determining who, when, and how to target customers.
• Integrating retention programs with broader marketing activities.
• Developing effective strategies to overcome competitor challenges.

Product Life Cycle

• Introduction Stage: Profits are low, competition is light, and sales growth is slow.
• Growth Stage: Rapid market acceptance and significant profit improvement.
• Maturity Stage: Sales slow down, profits stabilize due to high competition, and focus shifts to new product platforms.
• Decline Stage: Sales and profits decrease, and marketing budget is reduced.

Product Attributes

• Search Attributes: Can be evaluated before purchase (e.g., price of a product).
• Experience Attributes: Can only be evaluated after purchase (e.g., how enjoyable a restaurant is).
• Credence Attributes: Difficult to evaluate even after purchase (e.g., quality of medical services).

Interbrand Criteria for Brand Strength:

• Internal clarity about what the brand stands for and a commitment to its importance.
• Customers understand what makes the brand distinctive and generates positive word of mouth.

Functions of Brands

• Simplify search: Brand recognition (e.g., McDonald's logo).
• Enhance value: Name recognition adds value and subtle signals of group membership (e.g., fashion).
• Elicit feelings: Logos, colors, and packaging evoke emotions.

Packaging

• The "fifth P" of the marketing mix.
• Several objectives: brand identification, persuasive information, transport and protection, storage, and a short commercial.

4 P's of Marketing Mix

• Product: Change quality, design, sizes, warranties, return policy, packaging.
• Price: Modify list price, discounts, repayment periods, and financing terms.
• Promotion: Adjust sales force size and advertising campaigns.
• Place: Change distribution channels and accessibility.

Explore key marketing concepts including core competence and brand architecture. This quiz delves into the intricacies of how a company's strategic assets and relationships between brands shape customer relationship management. Test your knowledge and understanding of these critical elements in marketing strategy.