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
2Microsoft Roundtable – May 2nd 2016
„The problem is not truth, the problem is trust.“
Heinz von Foerster
3Microsoft Roundtable – May 2nd 2016
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
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A fundamental
change…
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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
6Microsoft Roundtable – May 2nd 2016
Dissolution of product and company boundaries
7Microsoft Roundtable – May 2nd 2016
Dissolution of product and industry boundaries
From sneakers mp3-player……
…to an integrated running
experience
…to a worldwide running
community.
+
8Microsoft Roundtable – May 2nd 2016
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
9Microsoft Roundtable – May 2nd 2016
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
10Microsoft Roundtable – May 2nd 2016
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)
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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.
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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)
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Proactive (offensive) Marketing in a nutshell
The key marketing tasks:
Anticipate
&
Differentiate
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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
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The fundamental change process!
From „buying“ KPI´s (degressive funnel)…
…to „earning“ KPI´s (progressive e(WOM))…
Awareness Familiarity Purchase LoyaltyConsideration
16Microsoft Roundtable – May 2nd 2016
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
17Microsoft Roundtable – May 2nd 2016
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)
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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
• Brand value through
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
• Brand value through
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
• Brand value through
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
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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).
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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
21Microsoft Roundtable – May 2nd 2016
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)
22Microsoft Roundtable – May 2nd 2016
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)
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“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?