1. MKTM028 Strategic Marketing
Value…..
Week 6
Dr Stephen Castle
Dr Elizabth Kim
Iain Bromley

2. Learning Objectives: To understand what is value
To appreciate value is personal
Explore ways to create value
To appreciate the importance of Porter’s Value Chain and Buttle’s CRM Value Chain

3. What is value?
1.Accounting: The monetary worth of an asset, business entity, good sold, service rendered, or liability or obligation acquired.
2.Economics: The worth of all the benefits and rights arising from ownership. Two types of economic value are (1) the utility of a good or service, and (2) power of a good or service to command other goods, services, or money, in voluntary exchange.
3.Mathematics: A magnitude or quantity represented by numbers.
4.Marketing: The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by customers’ willingness to pay for it. It commonly depends more on the customer's perception of the worth of the product than on its intrinsic value.

4. Peter Doyle’s view Doyle (2000)
“The essential idea of marketing is offering customers superior value.
By delivering superior value to customers, management can in turn deliver superior value to shareholders.
Indeed, this formula – customer value creates shareholder value – is the fundamental principle of capitalism.”

5. What is value based marketing?

6. Understanding Value
“Value is the customer’s perception of the balance between benefits received from a product or service and the sacrifices made to experience those benefits” Buttle 2009 Therefore: Value = Benefits Sacrifices

7. Determining Customer Value and Satisfaction
Customer perceived value (CPV)
is the difference between the
prospective customer’s evaluation
of all the benefits and costs
of an offering and the perceived
alternatives

8. The search for customer value
The danger of making assumptions
“we know what our customers want”
“bung in some customer service”
“just make it cheaper”
or, perhaps, take customer value seriously?

9. The search for customer value
Value as rational cost/benefit analysis
Value migration
value migrates from one attribute feature to another
different people buy different value
Customer value is complex, multi-dimensional, unstable and idiosyncratic, but it is what matters

10. Value-driven strategy
Value has become the central focus of strategy (because there is no choice)
The key issue is now value innovation (in the customer’s terms)
But value does not have a single meaning
e.g., operational excellence vs. customer intimacy vs. product leadership (Treacy and Wiersema, 1995)

11. The Discipline of Market Leaders
Operational excellence
develop teams, run them together
optimise systems
integrate internal and external activities
aim for highest customer service
Product leadership
direct the portfolio of activities
create flexible and robust structures
nurture talent
Customer intimacy
assemble, integrate and retain
talented people
co-ordinate expertise
build and foster deep
relationships
Treacy and Wiersema (1995)

12. The four support activities
Value-chain analysis
Inbound
logistics
Operations
Outbound
Marketing
and
sales
Service
The five primary activities
The four
support
activities
Firm’s infrastructure
Human resource management
Technology development
Procurement M A R G I N
Porter (1985)

13. The Marketing Value Chain (Gronholdt and Martensen, 2006)
Marketing Performance Measures
Marketing
actions
Mental
consumer results
Behavioural
consumer results
Marketing
results
Financial
results
Brand awareness
Perceived quality
Perceived differentiation
Perceived value
Customer satisfaction
Recommendation

14. The Marketing Value Chain (Gronholdt and Martensen, 2006)
Marketing Performance Measures
Marketing
actions
Mental
consumer results
Behavioural
consumer results
Marketing
results
Financial
results
Customer loyalty
Customer retention
Churn rate
Complaints
Share of wallet

15. The Marketing Value Chain (Gronholdt and Martensen, 2006)
Marketing Performance Measures
Marketing
actions
Mental
consumer results
Behavioural
consumer results
Marketing
results
Financial
results
Sales (volume, value)
Sales trends
Share (volume, value)
Number of customers
Availability
Price premium

16. The Marketing Value Chain (Gronholdt and Martensen, 2006)
Marketing Performance Measures
Marketing
actions
Mental
consumer results
Behavioural
consumer results
Marketing
results
Financial
results
Profit GM
Profitability
Cash flow
CLV
Shareholder

17. Strategy & Implementation
The attractiveness of opportunities open to the organisation is highly dependent on the effective use of resources available to exploit them. Strategies that are not built on resource strength are unlikely to get off the ground or be sustainable in the long-term.

18. The resource –based view
Do we look outwards toward the market or inward toward our resources & capabilities?
Does the generation of sustainable competitive advantage reconcile the two?
The attractiveness of markets will depend in part on the resources available to build a strong competitive position.

19. Resource utilisation
Brand reputation
Customer relationships
Effective distribution networks
Intellectual property
NPD/Service development
Competitive position

20. Isolating mechanisms
The creation & defence of a competitive position into the future………………..
1 – The competitive position is likely to be a complex interplay of different elements.
2 – After identification, can you acquire the resources?
3 – How do you keep reinventing yourself?

21. Dynamic Capabilities…….
“ The capacity of an organisation to purposefully create, extend or modify its resource base.” (Helfat et al 2007.)
This view recognises that as markets change, become more globally integrated, new forms of competition emerge and new technologies are employed, firms cannot rest on their existing capabilities alone (Winter 2003)

22. The resource portfolio
Hooley et al. (2012)

23. Developing and exploiting resources
Hooley et al. (2012) Adapted from Homel and Prahalad (1994)

24. Creating & exploiting marketing assets
Customer based & reputation assets
Supply chain assets
Internal or marketing support assets
Alliance-based assets

25. Who says satisfied customers will be loyal? (Piercy 2000)
Customer Loyalty
High
Low
SATISFIED
STAYERS
HAPPY
WANDERERS
High
Customer
satisfaction
HOSTAGES
DEALERS
Low

26. Returns from customer satisfaction
High
Repeat purchase rates
Low
Not at all satisfied
Very satisfied
Customer satisfaction level
Buttle (2004)

27. Relationship marketing is seductive
Do organisations want a relationship with all customers?
Do all customers want a relationship with us?

28. So what’s in it for the company?
Customer retention:
marketing costs reduced
better customer insight
revenue and profit stream reliability
How many customers do we want?

29. Customer retention and customer volume
Year
Company A
(5% churn)
Company B
(10% churn)
Existing
customers
New
Total customers
2009
1000
100
1100
2010
1045
1145
990
1090
2011
1088
1188
981
1081
2012
1129
1229
973
1073
2013
1168
1268
966
1066

30. The CRM Value Chain The four support activities
Leadership and culture
The four
support
activities
Data and information technology
Customer
People
Processes
The five primary activities
Manage
the
customer
lifecycle
profitability
Value
proposition
development
Customer
portfolio
analysis
Customer
intimacy
Network
development
(Buttle, 2004)

31. Customer portfolio analysis
Analysis of:
actual customers
potential customers
To identify customers:
you want to serve in the future
which will drive profitability

32. of the selected customers
Customer intimacy
Establish the:
identity, profile, characteristics
requirements, expectations, preferences
of the selected customers

33. Network Development
Identify network members who help create and deliver the value proposition Brief and manage relationships within the network…… …..external partners and internal contributors (employees)

34. Value proposition development
Identify sources of customer value Create a proposition and experience that meets customer expectations

35. Manage the customer lifecycle
Encourage customers up the loyalty ladder through:
process:
customer acquisition, retention and development
measuring performance of the CRM strategy
structure: organisation to manage customer relationships

36. Segmenting markets by customer relationship requirements
Type of relationship customer
wants with supplier
Short-term/
transactional
Long-term
Close
relationship
Relationship
seekers
Relationship
exploiters
Closeness wanted
by customer in
supplier
relationship
Arm’s length
transactional
customers
Loyal
buyers
Distant
relationship

37. Value-based marketing
Customer loyalty
High
Low
High
Value-based
marketing
Relationship
marketing
Customer
sophistication
Transactional
marketing
and selling
Brand
marketing
Low

38. Learning Objectives: To understand what is value
To appreciate value is personal
Explore ways to create value
To appreciate the importance of Porter’s Value Chain and Buttle’s CRM Value Chain