Managing Customer Value Lectures 1 & 2 PDF

Managing Customer Value Lectures 1 & 2 Htut Aung Session Outline Core Concepts ○ Introduction to MCV ○ Customer value and value drivers ○ Fundamental principles of marketing ○ Marketing vs. MCV Roadmap for MCV Value creation: STP Q&A...

Managing Customer Value Lectures 1 & 2 Htut Aung Session Outline Core Concepts ○ Introduction to MCV ○ Customer value and value drivers ○ Fundamental principles of marketing ○ Marketing vs. MCV Roadmap for MCV Value creation: STP Q&A As a note: Everyone is welcome to scholar sessions, but they are often of more use to those unfamiliar with marketing Schedules are posted on the scholar page Customer Value Definition: benefits - costs when you buy and use a product/service Value drivers are the factors you consider in terms of benefits and costs ○ Can be real ○ Can be perceived ○ Can be practical ○ Can be emotional Fundamental Principles 1 2 3 We don’t see products in Competing products are Since consumers will terms of their attributes, but those that satisfy the same purchase the product that as solutions for delivering needs as our product gives them the highest customer value perceived value... What product or service Who are the competitors What are my customers’ could we offer whose that satisfy the same or value drivers? attributes deliver value similar needs? better than competitors? Marketing Vs. MCV Marketing Managing Customer Value Focus on what the organization does Focus on what customers do Product-oriented Experience-oriented Value is hard to measure Value is quantified Customer is king Customer is sometimes king Driven by the top line Driven by the bottom line Effectiveness is key Effectiveness and efficiency are key Serves as a “going-to-market” function Embedded in the organization’s operations Marketing Myopia Where the focus is on selling products and services, instead of giving customers what they really want. Marketing = Process of Creating Value Value to Customer Value of Customer (VTC) (VOC) How the customer values How the organization your product or service values the customer Roadmap The 3 Cs Defining your business strategy Company Company Customer Competition The intersection of the 3 Cs is your business opportunity. Opportunity Customer Competition Company Internal Analysis Vision Strengths Weaknesses Core competencies Customer External Analysis Who are you selling your product/service to? Competition External Analysis: Evaluate what others in the same market space are doing. A company’s competition is defined by how the company positions itself and how they define their customer. Consider: What are competitors offering (or not offering) to meet customer needs? How do they set their VOC and VTC? How does it differ from yours? How do competitors go to market? How are you defining your competitors? The key to success in marketing: Offer the right product/service to the right customer Use the STP process to guide the business strategy by defining the customer and positioning the business in a relevant way in the customers’ minds. Get the Right Product/Service to the Right Customer Use STP to define the customer and position the business It is the act of slicing up the market: Segmentation Identify segmentation variables and segment the market Develop profiles of resulting segments Act of choosing one or more slices: Evaluate the attractiveness of each segment by matching Targeting value drivers with company core competencies Select the target segment(s) Identifying value driver to emphasize to target segment: What is important for a target customer segment? Positioning What is my differentiator? Segmentation Divide the market into smaller groups Better tailors offerings Understand that it is difficult to serve everyone Types of Segmentation: Demographic/Firmographic o Age, family size, firm size Geographic Psychographic ○ Personality, lifestyle, class, attitudes Behavioural ○ Rates of use, benefits wanted, loyalty Two Methods of segmentation The Simple Way The Rigorous Way, aka Conjoint Analysis Step 1: Define (a) the value drivers of customers in Step 1: Get individuals to rank/rate three products, general and (b) the descriptor variables that are likely which vary on one attribute, at a time x 50 sets to correlate with the value drivers Step 2: Repeat for 2,000 people Step 2: Check your correlation assumption using available research. Can you use the descriptor Step 3: Conduct cluster analysis to get number of variables as proxy to the value drivers? If yes... segments, size, sensitivity and market share Step 3: Group people based on descriptor variables to V = w1VD1 + w2VD2 + … + w10VD10, where form the segments Step 4: Identify the competitors in each segment V is value w is weight, or sensitivity to value driver Step 5: Get the size and growth rate VD is value driver What do you think are adv/disadvantages of each? Important! People within the same segment should have the same value drivers. People across different segments should have different value drivers. Thus, different segments should have different sensitivities to the key value drivers of a product or service. THIS IS THE FUNDAMENTAL CRITERIA TO SEGMENTATION Segmentation Automobile Market 1 2 3 How would you segment 4 the market for coffee? 5 Targeting The process of choosing the segment desired. This is done to best allocate resources. How to select target segment/s: 1. Match the segments’ value drivers based on company’s competencies and constraints. Keep segments where match is good; drop those where match is bad. 2. Filter based on market size, growth rate, competitive intensity (present and future). Targeting Types Full Market Single-segment Selective Product Market Coverage Concentration Specialization Specialization Specialization M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3 P1 P1 P1 P1 P1 P2 P2 P2 P2 P2 P3 P3 P3 P3 P3 Targeting Examples Full Market Single-segment Selective Product Market Coverage Concentration Specialization Specialization Specialization Multiple products across Single product for a Distinct products for Single product for Multiple products for a multiple markets: single market: individual markets: multiple markets: single market: Products: Soda (Coke, Product: Cars Product: Home use Product: Tires Products: Razors & Sprite), Bottled Water Market: High-end laptops, gaming laptops Markets: Transportation blades, shave gel, after (Dasani, Smart Water), automobile market Markets: Everyday use, and logistics companies, shave, disposables Coffee (Georgia, Costa) Gaming consumers (luxury cars, Market: Male hair removal Markets: Multiple sedans, family SUVs) beverage markets (soda, bottled water, tea, coffee) Positioning Implementation of your marketing strategy. This guides the direction of your company and its method of differentiation. Criteria for positioning: 1. Emphasize value drivers that are important to customers in target segment 2. Emphasize value drivers that differentiate you from the competition in the target segment 3. “Rule of two” ⇒ focus builds salience and memorability Positioning Example High Price Consumers’ perceptions of how brands compare along certain value drivers Can see who your competitors are, they may not be the market leaders Perceptual Map as a tool Functional Emotional Benefits Benefits Low Price Positioning Statement Internal document to guide direction. Important as research shows customers usually only focus on one attribute in association with your brand. Components Target Market: Who are you looking to target? Leverage STP to help define your customer Core Benefit: What is the one thing you want your customers to believe about your brand/product/service? Other Benefits: What other attributes do you want associated with your brand/product/service? Support: Why should your target market believe that your brand/product/service can deliver on the core benefit? What is its value to the target market? Competitive Advantage: What are the conditions that help you achieve your core benefit? Positioning Statement Example Target Market: Consumers who seek a conveniently placed shop for their daily coffee Core Benefit: Fresh and affordable coffee Other Benefits: A wide range of offerings Seasonal contests (Roll up the rim) Support: Offers conveniently placed coffee breaks that don’t hurt the wallet Competitive Advantage Well-established Canadian brand with a long-lasting history and growing international expansions Cultural phenomenon for Canadian identity