Marketing Transformation A New Mindset and Logic for Marketingdownload.microsoft.com/download/E/9/0/E9064F52-0264-465E-B63… · A New Mindset and Logic for Marketing Univ.-Prof

1Microsoft Roundtable – May 2nd 2016

Marketing Transformation

A New Mindset and Logic for Marketing

Univ.-Prof. Dr. Anton Meyer

Ludwig-Maximilians-Universität München

Microsoft Roundtable 2016

Monday, May 2nd 2016


„The problem is not truth, the problem is trust.“

Heinz von Foerster


CRM or CMR?

More and more customer take

the lead and are interactive partners

in value creation and experience.

The challenge: CMR- Customer managed relationships-

The customer as an offensive marketer

Customers will increasingly control the creation of media(content) and how and when

they consume it:

mass media personal media

CMR: “Pull” not “push”, customers’ choice, personalization, interactivity and

integration:

value destroyers co-creators of value


A fundamental

change…


From product focus to customer focus

Therefore:

Anticipate your customers’ needs and

view your business through your customers’ eyes!

“It is the business seen from the point of view of its final result,

that is, from the customer’s point of view.”

Peter F. Drucker: The Practice of Management, New York/Evanston, 1954, p.39


Dissolution of product and company boundaries


Dissolution of product and industry boundaries

From sneakers mp3-player……

…to an integrated running

experience

…to a worldwide running

community.

+


Marketing as effective customer value management:

Create superior customer experiences!

Product value

Value of image

Cost of energy effort

Cost for psychological effort made

Cost of time effort

Price

Value through employees

Value added services

sum of value

experiences

sum of effort

experiences

Net customer

experience


Prime time: how do customers perceive value?

... unfair judgment

... critical incident driven

... subjective perception

... through daily experiences

Subjective perception of customers determine customer

value:

Therefore it is necessary to create unique experiences!

... high involvement situations


Understanding experience…

„Experiences provide sensory, emotional, cognitive, behavioral and

relational values that replace functional values.“(Schmitt, B.: Experiential Marketing ,1999)

„Experience can be defined as an event that involves a person in a

memorable way.”

(Bassi, F.; Parpagiola, L.: Experience goods and customer satisfaction measurement, Paper of

University of Padua, Nr. 5, 2005)

“A customer experience is an interaction between an organization

and a customer. It is blend of an organization’s physical

performances, the senses stimulated and emotions evoked, each

intuitively measured against customer expectations across all

moments of contact.”

(Shaw, C.; Ivens, J.: Building Great Customer Experiences, 2. Aufl., New York 2005)


Dynamics of customer expectations: Only marketers

who know and anticipate expectations can exceed them

Customer expectations are derived from cross-industry,

cross-cultural, cross-product experiences.

Therefore true excellence in customer orientation requires

a cross industry perspective with functional

benchmarking…

… or even more: anticipation of customer expectations,

experiences, wants, and wishes.


Consumer

expectations/preferences

are given

Strategic approach

Meet customer expectations

better than competition

Strategic approach:

Anticipate and form customer

expectations

Competitive advantage

Create customer preferences

for your brand, products

and services

Competitive advantage

Adapt products and services to

customer expectations and

preferences!

Be Ahead! Adapt customer

expectations and preferences to

your products and services!

Source: Nakamoto/ Brinberg (2003), pp. 166.

Two different strategic approaches:

Market Driven (reactive) or Driving Markets (proactive)


Proactive (offensive) Marketing in a nutshell

The key marketing tasks:

Anticipate

&

Differentiate


Do we need a new logic, understanding of marketing?

“The greatest danger in times of

turbulence is not the turbulence: it is

to act with yesterday’s logic.”

Peter Drucker


The fundamental change process!

From „buying“ KPI´s (degressive funnel)…

…to „earning“ KPI´s (progressive e(WOM))…

Awareness Familiarity Purchase LoyaltyConsideration


Service-Dominant Logic

(Customer oriented and relational)Market OrientationProduct Orientation

Service-Dominant Logic

(Consumer oriented

and relational)

to market market to market with

Flow of experiences/interactionsOfferingsProducts

SolutionBenefitFeature/attribute

Co-creation of valueCo-productionValue-added

Financial feedback/learningFinancial EngineeringProfit maximization

Value propositionValue deliveryPrice

Complex adaptive systemsDynamic systemsEquilibrium systems

Value-Creation network/constellationValue-ChainSupply Chain

Dialog/Interactive MarketingIntegrated marcom

Advertising

Source with adaptions: Vargo, Steven L.; Lusch, Robert F.: Evolving to a New Dominant Logic for Marketing (2004)

The service-dominant logic – a new mindset for marketing:

Relationships with customers as central asset and resource


The shift: more „with“, less „to“

More interaction and integration in

marketing and management!

Today Tomorrow

Outbound

(unternehme

ns-getrieben)

„With“

interactive

Inbound

(customer-

driven)

Outbound

(firm-driven)

„With“

(interactive)

Inbound

(customer-

driven)

Outbound

(firm-driven)


The evolving new brand logic: Brand eras and fundamental

ideas or propositions

Brand as dynamic and

social process

• The value co-creation

process is a continuous,

social, and highly

dynamic and interactive

process between the

firm, the brand and all

stakeholders

• process orientation

• all stakeholders are

operant resources

• brands as operant

resources

• Brand value through

value-in-interaction

Brand as functional and

symbolic image

• Creating unique brand

images became key in

an increasingly

competitive environment

• output orientation

• customers as orerand

resources

• brands as operand / t

resources


value-in-exchange

Brand as identifiers

• Brand value is

embedded in the

physical good and

created when goods are

sold

• output orientation

• customers as operand

resources

• brands as operand

resources


value-in-exchange

Brand as knowledge,

telationship partner and

promise

• Customers and

employees as co-

creators of brand value

who form relationships

with the brand

• process orientation

• external and internal

customers as operant

resourcers

• Brands as operant

resources


value-in-use

Source: Merz, Michael A.; He, Yi; Vargo , Stephen L. (2009), p. 331.

Stakeholder - FocusRelationship - FocusValue - FocusGoods - Focus

1900 - 19301930 - 1990

1990 – 2000s

2000s and forward


Our (extended) definition of marketing

“Marketing means to (co)-create a flow of superior customer value

experiences in an effective and efficient way by involving every

employee1/partner in the value chain2 in order to achieve above-

average profits.”

Focus on the customer and

the customer relationship !

Following the stakeholder view of the company,

key stakeholders(e.g. employees, suppliers and

customers) have to be involved in the value

chain to deliver superior customer value

experiences!

Delivering superior value to customers

has effects on market value and profits

of the company!

Customer perspective:

The perceived value

experiences count!

Company perspective:

Delivering customer value in

an efficient way!

1) Meyer/Davidson (2001)

2) Meyer/Davidson (2016, forthcoming)

Source: Meyer/Davidson (2016, forthcoming).


Customer Lifetime Value – measuring the value of an individual

customer

Customer Lifetime Value (CLV)Measure of the future profit flows from a specific customer to the firm, adjusted for the

customer‘s future probability of purchasing from the firm, and appropriately

discounted to the present. (Rust/Lemon/Narayandas)

Price paid by consumer at time t Direct cost of servicing the customer

at t

Acquisition costs

Discount rate or cost of capital

for the firm

Customer Lifetime Value

Probability of customer repeat

buying or being “alive” at time t

(r = (1-defection rate))𝑪𝑳𝑽 =

𝒕=𝟎

𝑻𝒑𝒕 − 𝒄𝒕 𝒓𝒕

𝟏 + 𝒊 𝒕− 𝑨𝑪

Source: Gupta et al. 2006, p.141


Customer equityThe total of the discounted lifetime values summed over all of the firm‘s current and

potential customers.(Rust/Lemon/Narayandas)

Computing Customer equity

Source: Blattberg/Getz/Thomas 2001, p.23

CE(t) = customer equity value for customers acquired at time t

Ni,t = number of potential customers at time t in segment i

αi,t = acquisition probability at time t in segment I

ρj,t+k = retention probability at time t for a customer for

segment I

c = costs, S = sales, d = discount rate

B = marketing costs - Bi,a,t : acquiring customers

- Bi,r,t+k : retained customers

- Bi,AO,t+k : add-on selling

Customer equity – measuring the value of the total

customer base

= 𝑵𝒊,𝒕 ∝𝒊,𝒕 𝑺𝒊,𝒕 − 𝒄𝒊,𝒕 −𝑵𝒊,𝒕𝑩𝒊,𝒂,𝒕CE(t)


0,00

2,00

4,00

6,00

Integration withfinance

Customerconnection

Creativity Accountability Innovativeness

Different views and roles of marketingIn

de

x The consequences:

Marketing has to be more

measurable, innovative and creative

in order to gain more influence.

Role:

Generate preferences

Focus:

Managing advertising and

communication

Role:

Generate leads

Focus:

Identify

people/organizations who

are likely to buy products or

services.

Role:

Generate revenue

Focus:

Managing sales (closing) of

products and services

1. step

2. step

3. step

4. step Role:

Generate and improve

customer (stakeholder)

equity

Focus:

Managing

customers/customer base

(stakeholders as assets in

the short and long term to

maximize organizational

wealth)

5. step

Role:

Generate profit

Focus:

Managing cash after costs

are subtracted

(EBIT/Contribution 3)

Marketing from advertising to relationship and asset

management

Source: Meyer (2010), „Innovationen im Absatzsystem Marke“, GEM Markendialog, Tim Ambler (2006)

23Microsoft Roundtable – May 2nd 2016 - 23 -

“Without customers you don’t have a business,

you have a hobby”

- Don Peppers and Martha Rogers

Customer focus: But who are your final customers?

Documents

Marketing Transformation A New Mindset and Logic for Marketingdownload.microsoft.com/download/E/9/0/E9064F52-0264-465E-B63… · A New Mindset and Logic for Marketing Univ.-Prof