MARKETING PLANNING & STRATEGY

Rahul Gandhi

• Congress launched him as their marketing weapon

• He has added a new constituency” the youth “

• Shows freshness , sincerity , positivity – all of which is a rare combination amongst the politicians

• Political scion gifted with a glorious smile

Virgin Mobile

• Decided to target youngistan – focused exclusively on youth

• Focus on communication where the youth “ gets around “ not necessarily rebels ..they find a way

• Introduced many first “ including ..get paid to receive a call” -Cut clutter

• It has achieved a 92 % awareness , and 69 % consideration a year since its launch

Rakhi Sawant

• From an item girl she became the biggest start for NDTV imagine

• As a brand she is brash , crude , willingly flaunts her unsophistication

• Her appeal connected with the masses

•

Sun Tze on Strategy

• “Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”

Strategic Marketing Planning

…is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities.

Org Objectives Resources

Changing Environment

Strategic Fit

Strategic Marketing

“Marketing Strategy is a series of integrated actions leading to a sustainable competitive advantage.”

John Scully

Corporate Mission

• Broad purposes of the organization• General criteria for assessing the long-

term organizational effectiveness• Driven by heritage & environment• Mission statements are increasingly

being developed at the SBU level as well

Examples of Corporate Mission

SINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company

Examples of Corporate Mission (cont’d)

MARRIOTT’S Mission Statement:

We are committed to being the best lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value

Corporate Culture

• The most abstract level of managerial thinking

• How do you define culture?

• What is the significance of culture to an organization?

• How does marketing affect culture in the organization?

Corporate Objectives & Goals

• An objective is a long-range purpose – Not quantified and not limited to a time period– E.g. increasing the return on shareholders’ equity

• A goal is a measurable objective of the business– Attainable at some specific future date through

planned actions– E.g. 10% growth in the next two years

SMART

STRATEGIC MANAGEMENT

“Insights and hard work deliver results”

• What types of strategies are used by organizations?

• How are strategies formulated and implemented in strategic management?

Investor’s Relations

Business Strategy

PlanSalesforceHR, Training &

Recruiting Plan

FDA Regulations

Marketing Strategy Plan

Certificate Program

Sales

Cap

ital

Infrastructure

Public Offering

Production & Logistics

Legal

Financial Plan

Business Strategy covers all basic goals and objectives of the business

Management

Ope

ratio

ns

Financial Controlling

Project Management

All stakeholders will benefit from the business strategy approach

Bus

ines

s S

trat

egy

Operational Business Plan

Project Management Plan

Interviewing and Briefing of AgenciesMarketing

Strategy Plan

Agency 1

Agency 2

Agency 3

Management Support

Communicating and implementing

Management orders

Structuring business operations

Team

Investors

Customers

Re-sellers

Revenue: Sales and Distribution

Potential Buyers

Salespeople

MarketMarketing Strategy

Plan

Man

agem

ent

Promotion Policy

Product Mix

Pricing PolicyT

actic

s

Sales & Distribution

Momentum

AgencyArtefill Marketing Dept.

Positioning

Branding

Objectives

Target Market

Momentum develops the Marketing Strategy and prepares the tactics to the market

Communication

Marketing Planning is a step-by-step process

Market Research

Communication

Positioning

Branding

Target market Definition

Strategy

Tactics

Marketing Strategy DevelopmentCompetition An.

Bus. Review

The Role of Strategy

CorporateMission &Objectives

Strategy:•Corporate•Business•Functional

Operating Plans

Funnel

Phase One:Where are we now?

Phase ThreeHow will we get there?

Phase Two:Where do you want to be?

Market ScanPortfolios

SWOT/TOWS

Objectives/Financial DecisionsSegmentation

Position

Action PlanControl

Implementation

Figure 1.3: The Marketing Strategy Funnel

Corporate Social Responsibility

Phase FourDid we get there?

PURPOSE OF STRATEGY

To set the future direction for the organisation.

To state how it is to create value to customers.

To identify what product/s and in which markets the firm will invest its resources.

To describe how it is to perform better than competition.

STRATEGY HELPS IN:

Defining the scope of business.

Finding ‘Strategic Fit’ between organisation and its environment.

Identifying a Sustainable Competitive Advantage (SCA).

Guiding the allocation of resources.

HIERARCHY OF STRATEGY

CORPORATE

SBUs

FUNCTIONAL AREAS

3 LEVELS OF STRATEGY

Corporate The overall goals of the business; often expressed in financial terms

Competitive/Business (SBU)How to compete in individual product-markets and support the corporate strategy

Functional Functional strategies for the organisation’s functional areas in support of SBUs and corporate strategies

What is a Strategic Business Unit? (SBU)

• A set of products or product lines – With clear independence from other

products or product lines – for which a business or marketing strategy

should be designed

Types Of Strategies

• Strategy is a comprehensive plan for achieving competitive advantage.

• Organizations use strategy at the corporate, business and functional levels.

• Growth and diversification strategies focus on expansion. • Restructuring and divestiture strategies focus on consolidation. • Global strategies focus on international business initiatives. • E-business strategies focus on using the Internet for business

transactions.

Types Of Strategies• Strategy

– a comprehensive plan guiding resource allocation to achieve long-term organization goals.

• Strategic Intent – focuses organizational energies on achieving a

compelling goal.

• Competitive Advantage– operating in successful ways that are difficult to

duplicate

Corporate Strategies• Corporate Strategy

– Sets long-term direction for the total enterprise

• Business Strategy– Identifies how a strategic business unit or division will

compete in its product or service domain

• Functional Strategy– Guides activities within one specific area of

operations

Corporate Strategies

Growth And Diversification Strategies

• Growth Strategy– Expansion through current operations

• Concentration– Expansion within an existing business area

• Diversification– Expansion occurs by entering new business areas

• Vertical Integration– Expansion by acquiring existing suppliers or

distributors

Restructuring and Retrenchment Strategies

• Retrenchment– Changes operations to correct weaknesses– Liquidation

• An extreme form of retrenchment wherein the business closes and sells off its assets

• Restructuring– Reduces the scale or mix of operations

• Downsizing– Decreases the size of operations

• Divestiture– Sells off part of the organization to focus on core

businesses

Global Strategies• Globalization Strategy

– Adopts standardized products and advertising for use worldwide

• Multidomestic Strategy– Customizes advertising and products to best

fit local needs

• Transnational Strategy– Seeks efficiencies of global operations with

attention to local markets

E-Business Strategies• E-Business Strategies

– Focus on Using the Internet for Business Transactions

• B2B Business Strategies – use IT and Web portals to vertically link organizations

with members of their supply chains.

• B2C Business Strategies – use IT and Web portals to vertically link organizations

with members of their customers.

Strategic Management

• Strategy formulation begins with the organization’s mission and objectives.

• SWOT analysis identifies strengths, weaknesses, opportunities, and threats.

• Porter’s five forces model examines industry attractiveness.

• Porter’s competitive strategies model examines business or product strategies.

• Portfolio planning examines strategies across multiple businesses or products.

• Strategic leadership activates organizations for strategy implementation.

Strategic Management

• Strategic management – the process of formulating and implementing

strategies.

• Strategy Formulation – the process of creating strategies

• Strategy Implementation – the process of putting strategies into action.

Strategic Management

Strategy Formulation• Mission Statement

– The reason for the organizations existence in society• Operating Objectives

– Specific results that organizations attempt to achieve

Common Operating Objectives of Organizations •Profitability •Market share •High-quality workforce •Cost efficiency •Product and service quality •Innovativeness •Social responsibility

Market-oriented: Strategy based upon the needs & wants of the

marketplace

Establishes a profitable market

position:

End goal of strategy to make a profit in the for-profit sector or to meet alternate metrics (NFP

sector)

Establishes a sustainable market

position:

Marketing strategy not about one-off transactions. Aim is to find a place in the

market

Forces that determine industry

competition:

Complex mix of ingredients that create the marketing ‘whirlwind’

Continuously creating &

developing CA:

Find a spot where, if need be, the primary challenges can be tackled

Potential sources that exist in a

firm’s value chain:

What value any organisation wants to create using its available marketing resources

STRATEGIC PLANNING MODEL

THE INTER-RELATIONSHIP BETWEEN MARKETING AND CORPORATE

STRATEGY INFORMS DIRECTS GUIDES CONTROLS

ACHIEVES SUPPORTS

OPERATIONALISE

Corporate Strategy• Specifying the

organisation’s mission• Allocating resources• Defining Organisational

objectives

Marketing Strategy• Identifying product market/s to

compete in• Selecting market segments to

target• Developing the marketing mix

OPERATIONAL vs STRATEGIC MARKETING

Operational Marketing• Action-oriented• Existing opportunities• Non-product variables• Stable environment• Reactive behaviour• Day-to-day management• Marketing department

Strategic Marketing• Analysis-oriented• New opportunities• Product market variables• Dynamic environment• Proactive behaviour• Longer range management• Cross-functional

organisation

STRATEGIC MARKETING MANAGEMENT PROCESS

SMM process aims to answer a complete set of strategic questions:

Where are we now?Where we want to go?How might we get there?How can we ensure arrival?

STRATEGIC MARKETING MANAGEMENT PROCESS

STRATEGIC ANALYSIS

Strategic analysis is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources & competencies, and the expectations and influence of stakeholders

WHERE ARE WE NOW? Analysis of Current Situation

What are the major trends and possible changes in the marketing environment?

Who are our competitors? How can we make ourselves different from competition?

Who are our target customers & what are their needs?

What competitive advantages and core competences do we have?

STRATEGIC CHOICE

Strategic choice involves understanding the underlying bases guiding future

strategy, and generating strategic options for evaluation and selecting from among

them

Johnson and Scholes (1999)

WHERE WE WANT TO GO? Strategic Choice

A set of interrelated strategic decisions about:

Strategic direction (generic strategy) Product/s to offer Market/s to target Competitive stance to take Positioning strategy

STRATEGIC IMPLEMENTATION

Strategic implementation is concerned with the translation of strategy into organisational

action through organisational structure & design, resource planning and the management of strategic change

Johnson and Scholes (1999)

HOW MIGHT WE GET THERE? Plan Marketing Activities

Design the Marketing Mix to support the chosen strategy and achieve strategic objectives.

Decide on tactics for positioning products in the chosen markets.

Define targets & time frame.

Identify who will be responsible for different tactics.

HOW CAN WE ENSURE ARRIVAL?Measure, Evaluate & Control Activities

Methods of control and evaluation.

Not only at the end of the time frame but on a regular basis.

Ease of measurement depends on the types of activities implemented.

Measurement reveals effectiveness of evaluation & helps decide if contingencies must be put in action.

VALIDITY OF SMM MODEL?

Rational, formalized, systematic

Orderly thinking

Deliberate, logical response to changes in the environment

‘Top down’ approach

Think THEN act & formulate THEN implement

Identify actions which need to be undertaken

MARKETING ENVIRONMENT

THINKING FIRST

SEEING FIRST

DOING FIRST

SIMPLE RULES

COMPETITIVEMARKETINGSTRATEGY

4 Main Ways of Approaching Marketing Strategy

ENVIRONMENTAL ANALYSIS

Environmental scanning is the process of gathering information about the various forces in the environment. It involves observation, perusal of secondary sources, such as business, trade, government and general interest publications and marketing research.

Environmental analysis is the process of assessing and interpreting the information gathered through market intelligence and environmental scanning.

MACRO (REMOTE) ENVIRONMENT:

PEST MODELPEST:

Political Factors, Economic Factors, Socio-cultural Factors, Technological Factors

A framework that assists in analyzing the external (remote) environment and identifying the existing opportunities & threats

STRATEGIC FIT

‘Strategic Fit’ is the effective match and management of the environmental

opportunities and threats while taking into account the organisation strengths and

weaknesses

STRATEGIC FIT

Drawing upon the strategic analysis undertaken previously, strategic managers have to:

Find ‘strategic fit’ between what the environment wants and what the organisation has to offer, and between what the organisation needs and what the environment can provide

Identify and assess alternative ways in which their organisation can use its specific strengths to capitalise on opportunities and/or minimise threats, and invest in available opportunities to overcome its weaknesses

SWOT ANALYSIS

Integrates the internal and external environmental analysis Not just a list of SWOT variables!

SWOT/TOWS Matrix can be helpful

SWOT/TOWS analysis is the alternative ways in which an organisation can use its specific strengths to capitalise on opportunities or to minimise threats and invest in available opportunities to overcome its weaknesses

SWOT (TOWS) MATRIX

STRATEGY FORMULATION

SWOT• SWOT Analysis

– Identifies Organization’s Strengths, Weaknesses, Opportunities, and Threats• Core Competency

– A special strength that gives an organization a competitive advantage

STRATEGY FORMULATION

Porter’s Five Forces

STRATEGY FORMULATION

Porter’s Five Forces

• Porter’s Competitive Strategies – Differentiation Strategy

• Offers products and services that are uniquely different from the competition

– Focused Differentiation Strategy• offers a unique product to a special market segment.

– Cost Leadership Strategy• Seeks to operate at lower costs than competitors

– Focused Cost Leadership Strategy• uses cost leadership and target needs of a special market.

STRATEGY FORMULATION

Porter’s Five ForcesCOMPETITIVE ANALYSIS

STRATEGY FORMULATION

Boston Consulting Group (BCG)• BCG Matrix

– Analyzes business opportunities according to growth rate and market share

Ansoff’s Product-Market Grid

Current products New products

Current Mkts

New Mkts

Mkt penetrationstrategy

Mkt developmentstrategy

Product developmentstrategy

Diversificationstrategy

A way to analyze a company's competitive position in comparison to the offerings of competitors. As with Porter's Generic Strategies, Bowman considers competitive advantage in relation to cost advantage or differentiation advantage. There are six core strategic options

STRATEGIC MANAGEMENT

Strategy Implementation

• Strategic Leadership – the capability to inspire people to successfully

engage in a process of continuous change, performance enhancement, and implementation of organizational strategies.

Marketing at the SBU Level—Strategic Marketing

• Strategic Marketing requires–Detailed understanding of market needs, and

–Proactive use of competitive intelligence at the corporate as well as SBU’s levels

• Strategic Marketing –Focuses on what the firm do best at the SBU level

–To secure and maintain a sustainable competitive advantage

Key Elements of Marketing Strategy Formulation

• The strategic 3 Cs –Customers, Competitors & the Corporation

• Environment analysis -- PEST•  Strategic Marketing Decisions

–Where to compete

–How to compete

–When to compete

• Must have a clearly defined market • Must have a good match between

corporate strengths and market needs• Must have significant positive

differentiation in the key success factors of the business

A Viable Marketing Strategy

WHERE WE WANT TO GO? Strategic Decisions

Strategic decisions at the corporate level Developing/re-stating mission statement Directional strategy Resource allocation

Strategic decisions at the SBU level Choosing Generic Strategy:

Cost leadership strategy, Differentiation strategy, Focus strategy: Cost focus & Differentiation focus

Strategic decisions at the functional level Products to offer Market segments to target Market position tactics

DIRECTIONAL (Grand) STRATEGIES

• Growth Strategies– Concentration

• Vertical Growth

• Horizontal Growth

– Diversification• Concentric

• Conglomerate

• Stability Strategies– Pause/Proceed with caution– No Change

– Profit

• Retrenchment strategies – Turnaround– Captive Company– Sell-Out/Divestment– Bankruptcy/Liquidation

The Competitive Environment

Information on Competitors

Competitive Barriers

Competitive Rivals

Competitor Analysis

Kinds of Markets

KeyConcepts

in theCompetitiveEnvironment

What is Competitive Advantage?

• “Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.” Philip Kotler

• “If you don’t have a competitive advantage, don’t compete.”

Jack Welch, GE

Other Characteristics of Competitive Advantage

• Substantiality– Is it substantial enough to make a difference?

• Sustainability– Can it be neutralized by competitors quickly?

• Ability to be leveraged into visible business attributes that will influence customers

(Source: Strategic Marketing Management, Aakers)

Seeking Competitive Advantages

• Positions of advantage– Superior customer value– Lower relative total cost

• Performance advantages– Customer satisfaction, Loyalty, Market

Share, Profit

• Sources of advantages– Superior skills & knowledge, Superior

resources, Superior business process

COMPETITIVE POSITION TACTICS

Marketing Strategy

Attacker(smaller)

Defender(bigger)

PositionDefense

PreemptiveDefense

Counteroffensive

ContractionDefense

Flanking Defense

Mobile Defense

Flank Attack

Frontal

Attack

Encirclement

Bypass

Guerilla Attack

Information seeking ?

Emotions , feelings

Truth ,realityCritical thinking

OptimisticForward lookingfuturisticCreative

thinkingOverviewSequence of thinking

goLook aroundStop, exit

CREATIVE THINKING6 HATS6 HATS

TRAFFIC LIGHTSTRAFFIC LIGHTS

Samsung

• Launched 225 products in 2009 against 2000 the year before

• It is closing the gap effectively with technology breakthrough / products customized to Indian needs

• They made an exclusive 32” LED TV for Indian customers as Indians have smaller rooms

• They target to lead in product innovation space & be relevant to consumers

Aircel

• Till 2006 it was just in 2 circles with 2.2 million consumers

• Positioning was on non-voice uses –pay bills/book tickets/network with friends

• Monthly susbscriber additions have doubled from 600,000 6 months ago to 1.4 million

Gajni

Before 25th December

• First Look: Ghajini's marketing started way back from March 20 

• when he came out on the premier of RACE with his new BALD look.

• It actually gave the perfect sneak peek at the two looks of Aamir in the movie.

• Notice the jacket and rolled up half sleeves?• Did anyone say Sanjay Singhania?

• And then – in November, this photo shot across leading dailies

and Aamir without even showing his face and his 8 packs instantly became the talk of the town.

• The 8 pack promotion:October 2007 and remember SRK and the ho-hallah around his 6 pack abs.

• It was only around that time that Aamir silently started working on his own, and just to make it better, he added a pair and made it eight!

• The fact that the man now had a 8 pack and a fantastic body, he decided to show the world how he got it!

• Up came the videos with 'Making of Aamir's 8 pack' on all news and entertainment channels.

• Videos similar to this you tube got thousands of visits! He even went a step ahead and called a press conference to introduce his trainer and explain his diet chart!

– Television appearancesWith the TV channels filled with Ghajini promos, Aamir went into overdrive with his interviews, which came in by the day on every news and entertainment channel. Not to forget the guest appearances on reality shows, which is now a sort of a norm.

– Offline Promos at Theaters

– 'Theater personnels with Ghajini hair cut' act that he did on the release on Rab neBana di Jodi.Simply Fantastic. Imagine going to a cinema hall to watch RNBDJ and you watch all these Aamir Khan look alikes and his life size cut outs. You almost wish that you had come to watch Ghajini!

Co branding

• Tata Sky started running Ghajini “specials” complete with behind-the-scenes stories of the upcoming film. Samsung launched special Ghajini edition mobile phones of L700 and M200 models. These handsets have preloaded with Ghajini ringtones, pictures and songs.Tata Indicom started with a outbound dialer service with Khan's pre-recorded voice.

Co branding

• Van Heusen launched Ghajini's apparels in their stores all across India and is backing it with in-store campaigns and giant posters of Khan dressed in formal attire.Van Heusen also organized a fashion show wherein models along with Aamir sported the Ghajini look.Add a little big of jig and a bit of Guzarish and he had all the TV

channels beaming again!

Viral SMS campaign

• Remember the chain SMS which threatened to reveal what could possibly be the climax of the film? For those who were not on the mailing list, here it goes...“Someone killed Aamir’s girlfriend and he lost his memory. Then he tries to find out the killer. Suspense… Aamir himself is the killer. Now enjoy Ghajini!” 

• I bet this one was proposed by someone at Tata Indicom!!!

Digital Promotion• With so much happening offline, something had to be done online

to. • And Ghajini makers had that well covered.

• Websites like www.rememberghajini.com, www.findghajini.com and www.wallofsuspects.com were built to drive curiousity levels around the movie and provide a movie like experience on the Internet.Add to that a 3D PC game and a number of mobile games and applications, and you have the digital space busy.

Not to forget that he has his own popular blog, which was a constant source of dope for all those waiting for Ghajini to release.

Final Week Controversy

• Just to cap it all, we had this 'Ghajini Release Stayed' court notices which threatened to stop the release of the immensely anticipated film a day before 25th December. Naturally, this became breaking news with minute to minute tracking on the latest updates. And after much drama, when the permission was granted, it was like a whole nation had taken a sigh of relief and they could all breath again!

 10 month Campaign, where we saw Aamir from 8 pack fighting machine to turning in to a barber on the streets of Delhi, is a real case study in motion picture marketing.

• To hear from the horse's mouth :

With Ghajini we've opened with the highest number of screens ever. So the marketing needed to have depth and width, so we needed to be very aggressive with the marketing of the film.

After 25th December:

• 100% opening day collections with over 1500 prints

• Over 90 crore business by the end of first Sunday

• Expected 120 crore by end of first week

• Best Ever Opening

• Top film of 2008 already

The end result

• It raked in Rs 90 crores in the ist weekend of its release

• Marketing cost was Rs 7.5 crore and the global box office off-take Rs 260 crore

• They honestly told the consumers – what to expect through a major use of IMC – Aamir’s

physical appearance , the haircut , the in cinema visibility ; ushers having a similar haircut

– The audience was prepared for what they were going to see

The Marketing ConceptThe Marketing Concept

ProfitProfit

CustomerSatisfaction

CustomerSatisfaction

Total CompanyEffort

Total CompanyEffort

TheMarketingConcept

Utility and MarketingUtility and MarketingFrom Production

From Marketing

FormForm

TaskTask

TimeTime

PlacePlace

PossessionPossession

UtilityValue that comesfrom satisfyinghuman needs

UtilityValue that comesfrom satisfyinghuman needs

Customer ValueCustomer Value

CostsCosts BenefitsBenefits

• One customer’s views may vary from another customer’s view, so firm may not be able to satisfy everybody

• Customer value concept takes the customer’s point of view, but customers may not explicitly weigh costs and benefits

• One customer’s views may vary from another customer’s view, so firm may not be able to satisfy everybody

• Customer value concept takes the customer’s point of view, but customers may not explicitly weigh costs and benefits

The Marketing Management The Marketing Management ProcessProcess

Whole-CompanyStrategic

ManagementPlanning

Whole-CompanyStrategic

ManagementPlanning

MarketingPlanning

MarketingPlanning

Implement MarketingPlan(s) and Program

Implement MarketingPlan(s) and Program

Control MarketingPlan(s) and Program

Control MarketingPlan(s) and Program

Adjust PlansAs Needed

The Four Ps of the Marketing MixThe Four Ps of the Marketing Mix

Product Place

Price Promotion

C

ProductPhysical GoodsServiceFeaturesQuality LevelAccessoriesInstallationInstructionsWarrantyProduct LinesPackagingBranding

PlaceObjectivesChannel TypeMarket ExposureKinds of

MiddlemanKinds and

Locations of Stores

How to Handle Transporting and Storing

Service LevelsRecruiting

MiddlemenManaging

Channels

PromotionObjectivesBlendSalespeople Kind Number Selection Training MotivationAdvertising Targets Kinds of Ads Media Type Copy Thrust Who Prepares?Sales PromotionPublicity

PriceObjectivesFlexibilityLevel over PLCGeographic

TermsDiscountsAllowances

Strategy Decision AreasStrategy Decision Areas

Marketing Strategy Planning ProcessMarketing Strategy Planning Process

Customers

Company

Competitors

S.W.O.T.

Segmentation& Targeting

Differentiation& Positioning

Product Place

PromoPrice

Narrowing down to focused strategy with screening criteria

External Market Environment

TargetMarket

External Factors

StrategyPlanning

Internal Factors

Strengths Opportunities

Weaknesses Threats

SWOT Analysis

Segmentation Targeting Positioning Perceptual Mapping

STP

Steps in Market Segmentation, Targeting, and Positioning

1. Identifysegmentationvariables andsegment themarket

2. Develop profiles ofresultingsegments

MarketSegmentation

3. Evaluateattractivenessof eachsegment

4. Select thetargetsegment(s)

MarketTargeting

5. Identifypossible

positioningconcepts foreach target

segment

6. Select,develop, andcommunicate

the chosenpositioning

concept

MarketPositioning

Basic Market-Preference Patterns

(a) Homogeneous(a) Homogeneouspreferencespreferences

SweetnessSweetness

Cre

amin

ess

Cre

amin

ess

(c) Clustered(c) Clusteredpreferencespreferences

Cre

amin

ess

Cre

amin

ess

SweetnessSweetness

(b) Diffused(b) Diffusedpreferencespreferences

Cre

amin

ess

Cre

amin

ess

SweetnessSweetness

Market Aggregation – The Strategy of Mass Marketing

• Advantages & Disadvantages

• Product Differentiation

Step 1. Market SegmentationLevels of Market Segmentation

Mass MarketingSame product to all consumers

(no segmentation)

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Niche MarketingDifferent products to subgroups within segments

(more segmentation)

Niche MarketingDifferent products to subgroups within segments

(more segmentation)

Local Marketing

Tailoring brands/ promotions to local customer groups

Individual Marketing

Tailoring products/ programs to individual customers

Steps in the Market Segmentation Process

• Determine Market Boundaries

• Decide Which Segmentation Variables to Use

• Collect and Analyze Segmentation Data• Develop a Profile of Each Segment

• Target Segments to be Served

• Design a Marketing Plan

Bases for Segmenting Consumer Markets

Occasions, Benefits, Uses, or Attitudes

Behavioral

GeographicRegion, City or MetroSize, Density, Climate Demographic

Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ...

Lifestyle or PersonalityPsychographic

Step 1. Market SegmentationBases for Segmenting Business

Markets

Basesfor Segmenting

BusinessMarkets

Basesfor Segmenting

BusinessMarkets

DemographicsPersonalCharacteristics

SituationalFactors

OperatingCharacteristics

PurchasingApproaches

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

• Segments must be large or profitable enough to serve.

• Segments can be effectively reached and served.

ActionableActionable

• Size, purchasing power, profiles of segments can be measured.

• Segments must respond differently to

different marketing mix elements & actions.

• Must be able to attract and serve

the segments.

Effective Segmentation

Descriptive Bases

• Age

• Gender• Income• Occupation• Education

• Family Size or Family Life Cycle

• Religion or Nationality

Geographic Bases

• Region

• Density

• Climate

• Population

Behavioral Bases

• User Status & Brand Loyalty

• Personality/Lifestyle• Social Class

• Occasion• Readiness to Buy• Benefits Sought• Usage Rate

Step 2. Market TargetingEvaluating Market Segments

Segment Size and GrowthAnalyze sales, growth rates and expected

profitability for various segments.Segment Structural Attractiveness

Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.

Company Objectives and ResourcesCompany skills & resources relative to the segment(s).Look for Competitive Advantages.

Five Patterns of Target Market Selection

Single-segmentconcentration

Productspecialization

M1 M2 M3 P1

P2

P3

Selectivespecialization

M1 M2 M3 P1

P2

P3

M1 M2 M3

Full marketcoverage

P1

P2

P3

Marketspecialization

M1 M2 M3 P1

P2

P3

P1

P2

P3

M1 M2 M3

P = ProductM = Market

Step 2. Market TargetingMarket Coverage Strategies

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing Mix 1

CompanyMarketing Mix 1

CompanyMarketing Mix 2

CompanyMarketing Mix 2

CompanyMarketing Mix 3

CompanyMarketing Mix 3

MarketMarket

A. Undifferentiated Marketing

B. Differentiated Marketing

C. Concentrated Marketing

Step 2. Market TargetingChoosing a Market-Coverage

StrategyCompany Resources

ProductVariability

Product’s Life-Cycle Stage

Market Variability

Competitors’Marketing Strategies

Positioning is the act of designing the company’s

offering and image to occupy a distinctive

place in the the target market’s mind. P 298

The BCG CompetitiveAdvantage Matrix

Volume

FragmentedStalemated

Specialized

Siz

e o

f th

e A

dva

nta

ge

SmallSmall

LargeLarge

Number of Approachesto Achieve Advantage

FewFew ManyMany

Product Differentiation

FormFea-

turesPerfor-mance

QualityConform-

anceQuality

Dura-bility

Relia-bility

Repair-ability

Style Design

DeliveryDelivery

Services Differentiation

OrderingEase

OrderingEase

Maintenance& Repair

Maintenance& Repair

CustomerTraining

CustomerTraining

InstallationInstallation CustomerConsulting

CustomerConsulting

Miscellan

eou

sS

ervices

Differentiation

• Personnel

• Channel

Media Atmosphere

Symbols

Events

Image Differentiation

Differences WorthDifferences WorthEstablishingEstablishing

AffordableAffordable SuperiorSuperior

ProfitableProfitable

PreemptivePreemptive

DistinctiveDistinctive

ImportantImportant

Perceptual Map

0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2

1.01.0

0.80.8

0.60.6

0.40.4

0.20.2

-0.2-0.2

-0.4-0.4

-0.6-0.6

-0.8-0.8

MagicMagicMountainMountain

JapaneseDeer Park

BuschBuschGardensGardens

Knott’sKnott’sBerryBerryFarmFarm

LionLionCountryCountrySafariSafari

MarinelandMarinelandof theof thePacificPacific

DisneylandDisneyland

Economical

Fun ridesExercise

FantasyGood food

Easy to reach

Educational,animals

Little waitingLive shows

Positioning Strategies

• Product Attributes

• Benefits, Problem Solutions & Basic Needs• Price & Quality

• Specific Use

• Against Other Products

• Product User• Against a Competitor

Push-Pull Strategies

WholesalerPromotion

Push

WholesalerPromotion

Push

RetailerPromotion

Push

FinalConsumer

Pull

BusinessCustomer

Pull

Pro

mo

tio

n t

oB

us

ine

ss

Cu

sto

me

rsP

rom

otio

n to

Fin

al C

usto

mers

Promotion toChannel Members

Producer’s Promotion BlendPersonal Selling, Sales Promotion, Advertising, Publicity

A Model of Buyer Behavior

5-5

Purchase ReasonTimeSurroundings

PurchaseSituation

MotivationPerceptionLearningAttitudePersonality/Lifestyle

PsychologicalVariables

FamilySocial ClassReference GroupsCulture

SocialInfluence

Problem-Solving Process

Person Does or Does Not Purchase (Response)

Marketing Mixes All Other Stimuli

PersonMakingDecision

5-6

The PSSP Hierarchy of Needs

Physiological Needs

Safety Needs

Social Needs

PersonalNeeds

Purchase SituationSocial InfluencesPsychological

Variables

Need-want Awareness

Information Search

Set Criteria

Decide on Solution

Purchase Product

Routinized Response

Postpone Decision Postpurchase

Evaluation

Feedback ofinformationas attitudes

Person making decision

Marketing mixes All other stimuli

5-13

The Consumer Problem Solving Process

Levels of Problem Solving

Extensive Problem Solving

Limited Problem Solving

Routinized Response Behavior

Involvement Continuum

Low Involvement High Involvement

Low involvementFrequently purchasedInexpensiveLittle riskLittle information needed

High involvementInfrequently purchasedExpensiveHigh riskMuch information desired

Brand identity

Brand equity

Brand relationship

spectrum

Unique characteristics of services

Markup chainin channels

17-

Key Factors That Influence Price Setting

Pricing objectives

Discounts andallowances

Legal environment

Price flexibility

Geographicpricing terms

Demand

Cost

Price of otherproducts in the line

Competition

Pricesettin

g

SuccessfulPricing

Variationsin Value

ReverseCost-Plus

POS

PriceSensitivity

Individual?Bundled?

CompetitorReaction

EmotionCustomer

Costs

Strategic Pricing Options

Pricing Objectives

Dollar or UnitSales Growth

Growth in Market Share

TargetReturn

MaximizeProfits

MeetingCompetition

NonpriceCompetition

PricingObjectives

SalesOriented

ProfitOriented

Status QuoOriented

Strategy Planning for Price

Pricingobjectives

TargetMarket

PricePromotionPlaceProduct

Geographicterm —

who paystransportation

and how

Discounts andallowances—to whom and

when

Price levelsover product

life cycle

Priceflexibility

Distribution Options*

Direct

•Internet•Telephone

•Mail•Catalogue

•Own channel

Salesforce

•Own•Another firm’s

•Contract

Intermediary•Franchise

•Wholesaler•Agent/Merchant

•Distributor•Partner

*More limited for services

The Transporting Function

Modesof

Transportation

Water

Air

RailTruck

Pipeline

Conven-tionalofferings

Single- andlimited-linestores

Expandedassortmentand service

Specialty shops anddepartment stores

Expandedassortmentand/or reducedmargins/service

Supermarkets, discounthouses, mass-merchandisers,supercenters

Added conveniencehigher marginsless assortment

Telephone/mail order,vending machines,door-to-door, conveniencestores, electronic shopping

Expandedassortmentreduced marginsmore information

Internet

Types of Retailers

Types of WholesalersDoes wholesaler own

the products?

Limited-functionmerchant

Wholesalers

Servicemerchant

wholesalers

Agent middlemen

How many functions does the wholesaler

provide?

All the functions

Some functions

Yes (merchant wholesaler) No (agent middleman)

Four Examples of Basic Channels of Distribution for Consumer Products

Manufacturer or producer

Consumer

Procter &Gamble

DelMonteNissanCitibank

Wholesaler

Wholesaler

Retailer

Wholesaler

RetailerRetailer

1) Identifying a Target Market

2) Selecting a Product Strategy

3) Selecting a Customer Service Strategy

4) Selecting a Pricing Strategy

5) Choosing a Location

6) Building a Promotional Strategy

7) Creating a Store Atmosphere

1) Identifying a Target Market

2) Selecting a Product Strategy

3) Selecting a Customer Service Strategy

4) Selecting a Pricing Strategy

5) Choosing a Location

6) Building a Promotional Strategy

7) Creating a Store Atmosphere

How Retailers

Compete

Market Leader•Distribution in place•Price main weapon

•Premium price•Variety of options

Market Niche•Stay with markets

•Add niches•Premium price

•Selective distribution

Market Challenger•Focus on flanks

•Direct or indirect attack

Market Follower•‘Cloning’

•Set lower prices

Price and Distribution Strategies

Marketing Information Systems

MarketResearchStudies

InternalData

Sources

ExternalData

Sources

DatabasesDecisionSupportSystem(DSS)

MarketingManager

DecisionsOutcomes

MarketingModels

InformationTechnologySpecialists

Inputs?

AnswersN

ew I

nfo

rmat

ion

Feedback

Information

Sources

Questionsand

Answers

Decision

MakerResult

s

Product Development

• Overestimation of Market Size• Product Design Problems• Product Incorrectly Positioned, Priced or Advertised• Costs of Product Development• Competitive Actions

• To create successful new products, the company must:– understand it’s customers, markets and

competitors – develop products that deliver superior value to

customers.

PRODUCT DEVELOPMENT

New Product Development Process

• Idea Generation and Screening

• Concept Development and Testing

• Marketing Strategy

• Business Analysis

• Product Development

• Test Marketing

• Commercialization

Systematic Search for New Product Ideas

Internal sources

Customers

Competitors

Distributors

Suppliers

• Process to spot good ideas and drop poor ones

• Criteria– Market Size– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return

Definingthe

Problem

Analyzingthe

Situation

GettingProblem-Specific

Data

Inter-preting

Data

Solvingthe

Problem

EarlyIdentification

ofSolution

Feedback to Previous Steps

Marketing Research Process

SecondaryData

Sources

Inside Company

Outside Company

Observation

Questioning

PrimaryData

Sources

AllData

Sources

Sources of Data

1. Develop Product Ideas into Alternative

Product Concepts

1. Develop Product Ideas into Alternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One3. Choose the Best One

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Two - Short-Term:Product’s Planned Price

DistributionMarketing Budget

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Part One - Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

If Yes, Move to Product Development

If Yes, Move to Product Development

If No, Eliminate Product Concept

If No, Eliminate Product Concept

StandardTest Market

Full marketing campaignin a small number of representative cities.

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

SimulatedTest Market

Test in a simulated shopping environment

to a sample of consumers.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

Time

The Adoption CurveP

erce

nt

Ad

op

tio

n

Innovators(3-5%)

EarlyAdopters(10-15%)

EarlyMajority

(34%)

LateMajority

(34%)

Laggards/Nonadopters

(5-16%)

05

20

50

90

The Adoption CurveThe Adoption Curve

• Innovators: – First to Adopt, Eager to Try– Young, Well-Educated, Mobile– Seek Info from non-salesperson Sources

• Early Adopters– Opinion Leaders– Greater Contact with Salespeople– Word-of-Mouth

The Adoption CurveThe Adoption Curve

• Early Majority: – Avoid Risk, Try Only if Others Have Usually

are Not Opinion Leaders

• Late Majority:– Cautious About New Ideas, Older and More

Set in Their Ways– More Subject to Peer Pressure

The Adoption CurveThe Adoption Curve

• Laggards:– Suspicious of New Ideas– Do Things the Way that They Have Always

Been Done

The Product Life Cycle

Total IndustryProfit

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

Total IndustrySales

PlaceProduct PricePromotion

Brand

Type of Brand:Individual or family

Manufacturer or dealer

ProductIdea

Physicalgood/service

FeaturesQuality levelAccessoriesInstallationInstructionsProduct line

Warranty

None, full, orlimited

Package

Protection,Promotion,

or both

Target Market

Defining “Product”

Strategy Planning for Advertising

SalesPromotion

Mass Selling

PersonalSelling

Target Market

PricePricePromotionPromotionPlacePlaceProductProduct

Copy thrustMedia typesKind of advertising

Target audience

Who will do the work?

PublicityAdvertising

Basic Promotion Methods

TargetMarketTargetMarket

PricePricePromotionPromotionPlacePlaceProductProduct

SalesPromotion

SalesPromotion

PersonalSelling

PersonalSelling

PublicityPublicityAdvertisingAdvertising

MassSellingMass

Selling

PESTLEPESTLE

CompetitorsCompetitors

SWOTSWOT

Strategic Intent/ObjectivesStrategic Intent/Objectives

Segment/TargetSegment/Target

PositionPosition

PropositionProposition

Creative ExecutionCreative ExecutionMedia ClassesMedia Classes

Media ExecutionMedia Execution

ContingencyContingencyPost-TestPost-Test

Pre-TestPre-Test

AUDIT

STRATEGY

OPERATIONS

InternationalInternational

MARCOMS Strategic Process

KeyReward

Values

Benefits

Features Preference, but not loyalty

Relationship & loyalty

Personality

Core of the claim

Brand Wheel

The Task

Isolate, in a simple statement why the advertising will have worked:

•Increase sales•Generate leads•Increase/maintain share•Stop decline•Justify price•Announce/Launch•Corporate reputation

Expand the Problem to a Higher Level

• Product Definition:– Make the central benefit salient (again?)

• Performance Superiority:– Solve a problem or better fulfill a desire

• Emotional:– Help brand matter to the consumer

• Cultural Identification:– Make the brand part of consumer’s

world

• Paradigm Shift:– Alter the consumer’s definition of

category

Types of MARCOMS Objectives

• “Exposure message to ...”• “Create 40% awareness amongst...”• “Create attitude/opinion that...”• “Increase preference amongst...”• “Encourage trial amongst...”• “Re-enforce loyalty amongst..”

Exposure

• The desired level of frequency (OTS = Opportunity to See) and coverage to achieve the advertising objectives

• Most agencies seek an average of 2-3 OTS’s amongst the target market in order to give advertising a chance to work

Describe Who We’re Talking To

• A person, not a “target”

• Beyond reports - talk to customers

• Paint a personal picture

• What’s really important to them?

Sources of a Proposition

• product characteristics• user characteristics• ways of using the product• how product is made• surprising points about the product• price characteristics• image characteristics• satisfying psychological/physiological needs• product heritage• disadvantages of non-use• direct comparisons with rivals• product comparisons• newsworthiness• generic benefits

What Proposition Will Do This?

• Specific core benefit brand delivers

• Key emotion, reason or blend

• Keep it singular

A good proposition

• Gives creatives an ‘angle’ or way in• Forces a strategic choice• Is single-minded not all encompassing• Is based on a truth (Rational or Emotional)• Is original, or expressed in an original way• Is liberating not limiting• Isn’t an end-line

MEDIUM DEFINITION HORIZON FORM SCOPE

ADVERTI SI NG A paid for communication by an identified sponsor with the aim of informing and influencing one or more people.

Mainly long-term TV, press, posters, radio, web, cinema, digital, SMS.

Awareness, attitudes

DI RECT MARKETI NG

The recording, analysis and tracking of customers’ direct responses in order to develop loyalty.

Short and long-term Direct mail, DRTV & radio, telemarketing, press, inserts, leaflets, web, digital, SMS.

Mainly retention but also acquisition

PR The formulation, execution and sustained effort to establish and maintain goodwill and mutual understanding and reciprocal goodwill between an organisation and its stakeholders.

Short and long-term Community relations/CSR, corporate advertising, crisis management, events, internal communications, investor relations, media relations, public affairs, lobbying, sponsorship, web, digital.

Credibility, visibility and reputation

SALES PROMOTI ONS

An incentive for the customer, sales force or distributor to make an immediate purchase.

Mainly short-term Consumer: Coupons, contests, trial, mail-in offers/refunds, group promotions, self- liquidations, in-store promotions, point-of-sale, web, digital, SMS. Trade: Dealer merchandise; contests’ advertising, allowance, trade allowance/ staff incentive, web.

Consumer: Trial, re-trial, extended trial, build database Trade: Gain a listing, increase distribution, increase inventory, improve shelving space/position

MARCOMS Overview

Media Scheduling

1. Reach

2. Creative Scope

3. Media History

4. Location

5. Distribution Channels

6. Budget

Budgeting

1. JUDGEMENTAL METHODS• Arbitrary• Affordable

2. OBJECTIVE and TASK3. MEASUREMENT

• ROI• Incremental

•Quantitative Models4. PERCENTAGE OF SALES

• % Last Year’s Sales• % Anticipated Sales• Unit Sales

5. SHARE OF VOICE• Competitive Absolute• Competitive Relative

Marketing Audit

“Marketing audit is a comprehensive, systematic, independent, and periodic examination of a company’s—or business unit’s—marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company’s marketing performance” Philip Kotler

Characteristics of Marketing Audit

• Comprehensive– Must cover all marketing areas

• Systematic– Sequential diagnostic steps

• Independent– Internal & external auditors

• Periodic– Performed at regular intervals

Marketing Audit Procedure

• Marketing environment audit• Marketing strategy audit• Marketing organization audit• Marketing system audit• Marketing productivity audit• Marketing function audit• Marketing excellence review• Ethical and social responsibility review

Basic Steps in Control

1. Set standards of performance (these are typically in the form of goals or objectives)

2. Evaluate the reality of what occurs against these steps

3. Take corrective or reinforcing action where required

1. Set Standards

e.g. Marketing Objective is to

attain 25% market share

2. Evaluate Standards

Against Reality

Possible Outcome 1:

15% market share

Possible Outcome 2:

35% market share

3. Take Action

CorrectiveAction

ReinforcingAction

Steps in the Control Process

Nature of Control

• Annual Plan control looks at the objectives set in the annual marketing plan, evaluates these against the actual results achieved, and takes corrective or reinforcing action when necessary

• Financial or Expense control considers the financial parameters and objectives set by a firm in its annual marketing plan, and the corrective or reinforcing actions needed to attain these

• The purpose of strategic control is to ensure that the organization is maximizing the opportunities that exist in its business environment. Strategic control often takes the form of a marketing audit

Marketing Strategy Formulation-Implementation Grid

StrategyFormulation

StrategyImplementation

Poor

Poor

Adequate

Adequate

Success

Failure Rescueor Ruin

Trouble

Figure 13.2: The Marketing Strategy Formulation-Implementation Grid

Barriers

The marketing strategy is implicit, not explicit, and peoplecannot implement what they don’t know

The marketing strategy is developed in isolation – and people cannot implement what they do not understand

Not everyone is a good strategic marketing thinker

The marketing strategy is developed by an external consultant

The marketing strategy has unanticipated consequences

(Robert, 1991)

Figure 13.3: A Process Model of Competitive Advantage (Day and Wensley, 1988)

Sources

• Superior Skills

• Superior Resources

Sources

• Superior Skills

• Superior Resources

Outcomes

• Customer satisfaction

• Customer Loyalty

• Market Share

• ROI

Reinvestment

Process Model

Loop in the Model

• “Hard” – expressed in numbers that can easily be calculated, compared and tracked

• However they are historical – a good way of tracking the past, but a rather inadequate indication of the future

• They are not good diagnostics of strategic health• By comparison measures of customer satisfaction and loyalty are

“soft,” and impression based but they are about the future• The astute firm will reinvest the financial outcomes of competitive

advantage in the sources of competitive advantage itself, namely superior skills and/or superior resources

• This activity closes the loop in the model, and suggests that managing for competitive advantage is indeed a process that is continually renewed, revived and refreshed

Customer Equity

• The outcomes of ROI and Market Share are hard but historical

• The outcomes of Customer Satisfaction and Customer Loyalty are future-oriented but soft

• The ideal marketing control variable would be a single outcome that is both hard (a number that can be expressed financially) and future (customer) oriented

• Customer Lifetime Value (CLTV), which in turn leads to Customer Equity, is that single appropriate outcome

Y E A R Y E A R Y E A R Y E A R Y E A RR e ve nue 1 2 3 4 5C u sto m e rs 1 0 0 0 4 0 0 1 8 0 9 0 5 0R e te n tio n R a te 4 0 .0 0 % 4 5 .0 0 % 5 0 .0 0 % 5 5 .0 0 % 6 0 .0 0 %A ve A n n S a le s 1 5 0 1 5 0 1 5 0 1 5 0 1 5 0T o ta l R e ve n u e 1 5 0 0 0 0 6 0 0 0 0 2 7 0 0 0 1 3 5 0 0 7 4 2 5C o s tsC o st% 5 0 .0 0 % 5 0 .0 0 % 5 0 .0 0 % 5 0 .0 0 % 5 0 .0 0 %T o ta l C o s ts 7 5 0 0 0 3 0 0 0 0 1 3 5 0 0 6 7 5 0 3 7 1 3P ro fitsG ro ss P ro fit 7 5 0 0 0 3 0 0 0 0 1 3 5 0 0 6 7 5 0 3 7 1 3D isco u n t R a te 1 .0 0 1 .2 0 1 .4 4 1 .7 3 2 .0 7N P V P ro fit 7 5 0 0 0 .0 0 2 5 0 0 0 .0 0 9 3 7 5 .0 0 3 9 0 6 .2 5 1 7 9 0 .3 6C u m N P V P ro fit 7 5 0 0 0 1 0 0 0 0 0 1 0 9 3 7 5 1 1 3 2 8 1 1 1 5 0 7 2C L T V 7 5 .0 0 1 0 0 .0 0 1 0 9 .3 8 1 1 3 .2 8 1 1 5 .0 7

F ig u re 1 3 .4 : A S im p le S p r e a d s h e e t fo r th e C a lc u la t io n o f C L T V

Customer Lifetime Value

Increasing CLTV

• Increasing retention rate, or increasing customer life (i.e. the number of years a customer can remain a customer)

• Increasing Sales to a Customer, either by increasing the firm’s share of the customer’s purchases, or by increasing the customer’s referral rate

• Cutting the Costs of serving a customer

Corporate Culture

• The Clan culture, which emphasises teamwork and cooperation

• The Adhocracy culture, which emphasizes entrepreneurship and creativity

• The Hierarchy culture, which emphasizes order, regulations and rules

• The Market culture, which emphasizes competitiveness and goal achievement

(Deshpande, Farley and Webster, 1993)