Introduction Lecture 1

Agenda Module Guide Assessment Customer Value New marketing: marketing is dead, long live marketing!

Customer value

value-based pricing   value chain value-added net present value value-positioning market value   net book value value migration   value driver   value engineering   fair value shareholder value   best value    Customer lifetime value

Chartered Institute of Marketing definition of marketing (2007) The strategic business function that creates value by stimulating, facilitating and fulfilling customer demand. It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits. With a customer-centric view, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioural change and a sustainable business future.

Definition of marketing Marketing is a customer focus that permeates organisational functions and processes and is geared towards marketing promises through value propositions, enabling the fulfilment of individual expectations created by such promises and fulfilling such expectations through support to customers’ value-generating processes, thereby supporting value creation in the firm’s as well as its customers’ and other stakeholders’ processes. Source: Gronroos, C., 2006 On defining marketing: finding a new roadmap for marketing, Marketing Theory, 6, 395-417

More definitions of marketing Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return Source: Kotler, P., Armstrong, G., Wong, V., Saunders, J., 2008, Principles of Marketing. 5th european ed Harlow Prentice Hall

Importance of Customer value Marketing - managerial process concerned with the facilitation and consumption of exchanges Exchange - transaction between two parties in which each party give up something of value in return for something of greater value, Consumer value plays a crucial role at the heart of all marketing activity (Holbrook, 1999 p. 1) Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Nature of consumer value Holbrook definition An interactive relativistic preference experience Interactive - interaction between some subject (consumer/customer) and some object (product). Relativistic – (a) comparative (involving preferences among objects) (b) personal (varying across people), (c) situational (specific to the context) Preferential – embodies a preference judgement Experience – resides in the consumption experience (s) Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Types of consumer value Three key dimensions Extrinsic vs intrinsic value Self-orientated vs other-orientated value Active vs reactive value

Typology of Consumer Value Extrinsic Intrinsic Active Efficiency Play Self-orientated Excellence Aesthetics Reactive Status Ethics Other-orientated Active Esteem Spirituality Reactive Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Customer perceived value definition … perceived value is the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given. Though what is received varies across consumers (i.e., some may want volume, others high quality, still others convenience) and what is given varies (i.e., some are concerned only with money expended, others with time and effort), value represents a trade-off of the salient give and get components. Source: Zeithaml, V. A., 1998 Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence Journal of Marketing 52 (July): 2-22

Customer perceived value Perceived Benefits Customer –perceived value = ______________ Perceived Sacrifice Benefits = attributes of core product/service and supporting services, perceived quality and price Sacrifice = customer costs involved in purchasing, such as time, travel, repairing faulty work, etc. – NOT just price Source:Monroe, K. B., 1991 Pricing – Making Profitable Decisions, McGraw-Hill, New York, NY. Quoted in Ravald, A. and Gronroos, C., The value concept and relationship marketing European Journal of Marketing Vol 30 No 2 1996 p 19 - 30

Customer perceived value in relationships Episode benefits + relationship benefits Total episode value = Episode sacrifices + relationship sacrifice poor episode value can be balanced by a positive perception of the relationship as a whole management of any firm should note that the episode value and the relationship value exist in a mutually dependent relationship Ravald, A. and Gronroos, C., The value concept and relationship marketing European Journal of Marketing Vol 30 No 2 1996 p 19 - 30

Value Customer value is a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations. Source: Woodruff, R. B., 1997 Customer Value: The Next Source for Competitive Advantage Journal of the Academy of Marketing Science Vol 25 No. 2, pages 139 - 153

Customer Value Hierarchy Model Source: Woodruff, R. B., 1997 Desired Customer Value Customer Satisfaction with Received Value Customers’ goals and purposes Goal-based satisfaction Desired consequences in use situations Consequence-based satisfaction Attribute-based satisfaction Customers’ goals and purposes

New marketing: marketing is dead, long live marketing!

Agenda The process of going to market What managers need to know Challenges for the 21st century manager The strategic pathway A route-map for market-led strategic change

The process of going to market Creativity Innovation Reinvention Processes that define value e.g., market knowledge and learning, CRM, research, intelligence Customer value Processes that create value e.g., new product development, innovation, brand development, strategic relationships Processes that deliver value e.g., channels, supply chain, customer service Resources Capabilities Strategic relationships

What managers need to know The process of going to market, not “marketing” in the traditional sense: understanding customers and superior value building marketing strategy to deliver a robust value proposition to customers achieving implementation by driving the things that matter through the corporate environment

21st Century challenges The process of going to market New business models Business agility Crisis survival Global recession Innovation Siege The process of going to market Aggressive investment Globalization Virtuality Paradox CSR Strategy

The strategic pathway Strategic thinking and thinking strategically Market sensing and learning strategy Strategic market choices and targets Customer value strategy and positioning Strategic relationships and networks Strategic transformation and strategy implementation

A route-map for market-led strategic change Part I Customer value imperatives Part II Developing a value-based marketing strategy Part III Processes for managing strategic transformation The strategic pathway Change strategy Market sensing and learning strategy The Customer is always right-handed Strategic gaps Strategic market choices and targets Strategic thinking and thinking strategically New marketing meets old marketing Organization and processes for change Customer value strategy and positioning Implementation process and internal marketing Value-based marketing strategy Strategic relationships and networks