Marketing Principles and Customer Value
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Questions and Answers

What is the main goal of marketing?

Engage the customer so they advertise on the brand's behalf.

Which perspective focuses on creating and improving products based on the company's expertise and vision?

  • Product Centric Perspective (correct)
  • Customer Centric Perspective

    • Apple designs products without conducting extensive customer research.

    True (A)

    What does the customer-centric perspective focus on?

    <p>Understanding and meeting customer needs and preferences.</p> Signup and view all the answers

    What is a key example of a company that implements a customer-centric approach?

    <p>Amazon</p> Signup and view all the answers

    What does the marketing strategy formation process aim to develop?

    <p>An effective strategy for reaching their target market and achieving their marketing goals.</p> Signup and view all the answers

    Why is it crucial for businesses to capture value from customers?

    <p>To stay in business and generate profits.</p> Signup and view all the answers

    Marketing strategy decisions and actions are focused on building a sustainable differential advantage, relative to competitors, in the perception of customers.

    <p>True (A)</p> Signup and view all the answers

    Marketing strategies are static and remain unchanged over time.

    <p>False (B)</p> Signup and view all the answers

    Why are marketing departments increasingly becoming more powerful over time?

    <p>They are often held accountable for their spending and performance, leading to a greater focus on achieving measurable results.</p> Signup and view all the answers

    Customer value creation is primarily focused on creating value for customers only, without considering the organization's needs.

    <p>False (B)</p> Signup and view all the answers

    What are two examples of products that are considered 'means to an end' in the context of customer value creation?

    <p>Drills and mice traps.</p> Signup and view all the answers

    Which of the following are types of customer value?

    <p>Experiential (A), Social (B), Economic (C), Functional (D)</p> Signup and view all the answers

    Economic value of a product is determined solely by its purchase price.

    <p>False (B)</p> Signup and view all the answers

    What is the concept of 'willingness to pay' (WTP) in the context of economic value?

    <p>The maximum price that a customer would be willing to pay for a product.</p> Signup and view all the answers

    Different customers always derive the same value from the same product.

    <p>False (B)</p> Signup and view all the answers

    Which of the following is a customer decision-making rule that considers all available attributes and allows for trade-offs between them?

    <p>Compensatory (A)</p> Signup and view all the answers

    Which of the following is a customer decision-making rule that does not allow for trade-offs and rejects products with any low-scoring attributes, even if they excel in other areas?

    <p>Non-compensatory (A)</p> Signup and view all the answers

    Understanding and shaping customer decision-making rules is essential for creating a winning strategy.

    <p>True (A)</p> Signup and view all the answers

    Experiential value refers to the objective, tangible benefits a customer gets from using a product.

    <p>False (B)</p> Signup and view all the answers

    Experiential value often requires the customer to actively experience the product to grasp its true value.

    <p>True (A)</p> Signup and view all the answers

    Experiential value is typically easier to imitate for competitors compared to functional or economic value.

    <p>False (B)</p> Signup and view all the answers

    Social value refers to the benefits that a product provides to society or specific communities.

    <p>True (A)</p> Signup and view all the answers

    What is an example of a feature that Disney added to its streaming service that exemplifies social value?

    <p>The ability to watch content simultaneously with other people, even if they are not physically together.</p> Signup and view all the answers

    Internal locus of value refers to the belief that product value comes from the product's ability to meet the individual's personal needs and desires.

    <p>True (A)</p> Signup and view all the answers

    External locus of value refers to the belief that product value comes from the benefits it provides in enabling the user to do things in their life.

    <p>True (A)</p> Signup and view all the answers

    Which of the following are key success metrics for customer value creation?

    <p>Customer Satisfaction (A), Customer Loyalty (B), Net Promoter Score (C)</p> Signup and view all the answers

    Customer satisfaction is a reliable measure for comparing customer value across different markets.

    <p>False (B)</p> Signup and view all the answers

    The Net Promoter Score is a standardized metric for measuring customer satisfaction and loyalty.

    <p>True (A)</p> Signup and view all the answers

    The Net Promoter Score, like customer satisfaction, is free from bias and always accurately reflects the true customer sentiment across different categories.

    <p>False (B)</p> Signup and view all the answers

    Customer value creation requires a holistic view, considering the diverse needs of customers and the impact of marketing efforts on both financial and non-financial aspects.

    <p>True (A)</p> Signup and view all the answers

    Customer value types, such as economic, functional, experiential, and social value, can be combined in a single product to enhance its overall value for customers.

    <p>True (A)</p> Signup and view all the answers

    Product innovations can solely focus on internal aspects of the customer experience, without considering external factors, such as how the product impacts other activities or relationships.

    <p>False (B)</p> Signup and view all the answers

    Companies should actively monitor and adapt the value they provide to customers to keep pace with evolving customer needs and market dynamics.

    <p>True (A)</p> Signup and view all the answers

    What are the key components of a strategic approach to managing customer heterogeneity?

    <p>Positioning (A), Segmentation (B), Targeting (C)</p> Signup and view all the answers

    Customer heterogeneity can be either latent or hidden, making it difficult to accurately assess and address.

    <p>True (A)</p> Signup and view all the answers

    Which of the following are reasons why customers differ?

    <p>Marketing Activities (A), Self Identity (B), Individual Differences (C), Functional Needs (D), Life Experiences (E)</p> Signup and view all the answers

    Customer segmentation aims to divide a heterogeneous market into smaller, more homogeneous groups based on their similarities in characteristics, requirements, and behavior.

    <p>True (A)</p> Signup and view all the answers

    Useful customer segmentation should be measurable, substantial, accessible, differentiable, and actionable.

    <p>True (A)</p> Signup and view all the answers

    The objective of targeting is to select the most profitable customer segments and actively engage them with tailored marketing efforts.

    <p>True (A)</p> Signup and view all the answers

    Positioning explains to the target customer why they should buy the product or service.

    <p>True (A)</p> Signup and view all the answers

    Effective positioning should be relevant to customers' needs, resonate with their values, and be realistic.

    <p>True (A)</p> Signup and view all the answers

    Clustering focuses on groupings where members within groups are similar, while maximizing the differences between groups.

    <p>True (A)</p> Signup and view all the answers

    Clustering analysis consists of two primary stages: segmenting and describing.

    <p>True (A)</p> Signup and view all the answers

    'Bases' in clustering are typically demographic and geographic information that help explain and describe the resulting customer segments.

    <p>False (B)</p> Signup and view all the answers

    Descriptors, unlike bases, influence the grouping process in clustering.

    <p>False (B)</p> Signup and view all the answers

    Cross-segment spillovers occur when marketing activities or strategic decisions aimed at one customer segment inadvertently affect other segments.

    <p>True (A)</p> Signup and view all the answers

    Cross-segment spillovers can only be negative, hurting brand reputation.

    <p>False (B)</p> Signup and view all the answers

    When managing customer dynamics, businesses should treat customers as static entities with unchanging needs and preferences.

    <p>False (B)</p> Signup and view all the answers

    What are the five sources of customer dynamics?

    <p>Product Lifecycle (A), Constantly Changing Environmental Context (B), Discrete Life Events (C), Learning Effects (D), Typical Lifecycle (E)</p> Signup and view all the answers

    The speed of change in the marketplace has slowed down in recent years, making it easier for businesses to manage customer dynamics.

    <p>False (B)</p> Signup and view all the answers

    Change in customer dynamics is inherently bad for businesses, posing a significant threat to their operations and profitability.

    <p>False (B)</p> Signup and view all the answers

    Which of the following is NOT a common approach for managing customer dynamics?

    <p>Customer Relationship Management (CRM) (B)</p> Signup and view all the answers

    The Lifecycle Approach focuses on categorizing customers based on their current life stage, such as age or family status, and applying a standardized strategy accordingly.

    <p>True (A)</p> Signup and view all the answers

    Dynamic Customer Segmentation focuses on creating customer segments based on their expected future behavior and potential for value creation.

    <p>True (A)</p> Signup and view all the answers

    The Customer Lifetime Value (CLV) model focuses on calculating the net present value of a customer's future cash flows based on their expected relationship with the company.

    <p>True (A)</p> Signup and view all the answers

    The AER (Acquisition, Expansion, Retention) model is a dynamic customer segmentation model that classifies customers into three distinct stages.

    <p>True (A)</p> Signup and view all the answers

    The AER model provides insights into customer profitability and the best strategies for moving customers between different stages.

    <p>False (B)</p> Signup and view all the answers

    Customer Lifetime Value (CLV) is a metric that assesses the total value of a customer over their entire relationship with the company.

    <p>True (A)</p> Signup and view all the answers

    Customer Lifetime Value (CLV) is typically treated as an asset, comparable to other financial assets, such as investments or inventory.

    <p>True (A)</p> Signup and view all the answers

    The Retention Rate (r) in the CLV model represents the probability that a customer will stay with the company for the next period.

    <p>True (A)</p> Signup and view all the answers

    Discount Rate (d) in the CLV model reflects the time value of money, recognizing that future cash flows are less valuable than immediate cash flows.

    <p>True (A)</p> Signup and view all the answers

    The CLV formula takes into account only the present value of future cash flows, ignoring the past cash flows generated by customers.

    <p>True (A)</p> Signup and view all the answers

    CLV is primarily useful for assessing the value of 'just-acquired' customers.

    <p>True (A)</p> Signup and view all the answers

    Not all customers are equally valuable, and companies should prioritize investing in high-value customers while limiting investments in low-value customers.

    <p>True (A)</p> Signup and view all the answers

    Confusing loyalty with profitability can lead to overinvesting in loyal customers who may not actually generate significant revenue for the company.

    <p>True (A)</p> Signup and view all the answers

    Sustainable Competitive Advantage (SCA) refers to the ability to consistently outperform competitors by providing unique and hard-to-imitate benefits that matter to customers.

    <p>True (A)</p> Signup and view all the answers

    Flashcards

    Marketing Goal

    To encourage customers to advertise brands on their behalf.

    Product-Centric Perspective

    Focuses on creating/improving products based on company expertise and vision, rather than customer needs or market demands.

    Customer-Centric Perspective

    Focuses on understanding and meeting customer needs and preferences, prioritizing value for the target audience.

    Marketing Strategy Formation

    A framework outlining steps businesses take to develop an effective strategy for reaching their target market and achieving their marketing goals.

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    First Principles Approach

    An iterative process of refining marketing strategies based on feedback, results, and changing market conditions.

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    Customer Value Creation

    The process of creating value for customers by understanding their needs and tailoring products/services to meet them.

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    Economic Value

    The maximum price a customer would pay for a product compared to the next-best alternative, considering total cost of ownership.

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    Functional Value

    The practical benefits a product provides in fulfilling customer needs.

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    Experiential Value

    Emotional, sensory, or psychological benefits a product provides, enhancing the overall customer experience.

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    Social Value

    Benefits a product provides to society or specific communities, connecting customers to others.

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    Customer Satisfaction

    A measure of customer happiness with a product or service; subjective and prone to bias.

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    Net Promoter Score

    A measure of customer loyalty; subjective and prone to bias.

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    Customer Heterogeneity

    Differences in customer needs, preferences, and behaviors.

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    Input-Output Framework

    A framework for managing customer heterogeneity by organizing decision-making flow (inputs, processes, outputs).

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    Segmentation

    Dividing a heterogeneous market into smaller, more homogeneous groups based on shared characteristics.

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    Buyer Personas

    Representations of typical customers in each segment.

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    Targeting

    Selecting which segments to focus on.

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    Positioning

    Establishing a product's place in the market relative to competitors.

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    Clustering

    Grouping customers based on similarities in their characteristics and behaviors.

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    Bases

    Key characteristics used for segmenting customers.

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    Descriptors

    Variables used for describing characteristics of segments.

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    Cross-Segment Spillovers

    Marketing activities affecting customer segments not directly targeted.

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    Market Penetration Index

    Ratio of market demand to potential market consumers; shows market size.

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    Market Build-Up Method

    Process for sizing the market by considering the number of buyers, average quantity purchased, and average price paid.

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    Study Notes

    Introduction & Motivation

    • Marketing's main goal is engaging customers to promote the brand.
    • Product-centric perspective focuses on product improvement, not customer needs. Apple designs products without extensive customer research.
    • Customer-centric perspective prioritizes understanding and meeting customer needs. Focuses on delivering value to their target audience. Example: Amazon.

    Customer Value Creation

    • Marketing is full of "placebos", making the product seem more effective in the customer's perception.
    • Products are means to ends, like drills (for holes) or mice traps (for mice).
    • Underlying customer needs determine the scope of substitutes and competition.
    • Four types of customer value: social, functional, experiential, and economic.
    • Economic value of a product is relative to alternatives. It considers total cost of ownership, not just the purchase price. Customer Willingness to Pay (WTP) is key.
    • Customers respond differently to different trade-offs.

    Managing Customer Heterogeneity (STPD)

    • Market segmentation divides a heterogeneous market into smaller, homogeneous segments.
    • Segmentation helps identify customers with similar needs, behaviors, and characteristics.
    • Segmentation bases: geographic, demographic, psychographic, behavioral, and benefits sought (convenience, value, safety, status.)
    • Methods: clustering analysis, segmenting & describing, identifying and defining the target market.
    • Targeting selects the segment to focus resources on.
    • Positioning defines how a product will be positioned in the customer's mind.
    • Directional Policy Matrix (DPM) is a tool for evaluating segments.

    Managing Customer Dynamics: AER

    • Customer dynamics describes how and why customers change over time.
    • Influences include discrete life events, typical lifecycle stages, learning effects, and product lifecycles.
    • Five sources of customer change: discrete life events, typical lifecycle, learning effects, product lifecycle, and constantly changing environmental factors.
    • Customers' preferences evolve, so firms must adapt.
    • Customer lifetime value (CLV): assesses the total expected net profit from a customer relationship. Factors include customer retention rate and discount rate.

    Managing Sustainable Competitive Advantage

    • Sustainable Competitive Advantage (SCA) involves building a unique position for the business that enables it to deliver more customer value than competitors.
    • Cost advantages, differentiation, and innovation help create SCA.
    • Companies can achieve this through technical innovations, exploiting changes in customer desires, entrepreneurial activities or "me-too" actions designed to improve efficiency.

    Managing Resource Trade-offs

    • Resource limitations require tough trade-offs in managing resources.
    • Portfolio management is essential for distributing resources efficiently across various products and markets given different stages of a product life cycle.
    • Heuristic-based allocation and competitive parity are common methods but might not entirely represent market heterogenity

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    Description

    This quiz explores the essential concepts of marketing, focusing on the distinction between product-centric and customer-centric perspectives. It highlights the importance of understanding customer needs and creating value while examining various types of customer value, including social, functional, experiential, and economic dimensions. Test your knowledge on how these principles can impact brand engagement and competition.

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