Strategic Marketing Management | Theory and Practice

Strategic Marketing Management | Theory and Practice
ISBN: January 2019 Copyright © 2019 by Alexander Chernev Author website: Chernev.com Supplemental materials: MarketingToolbox.com Published by Cerebellum Press | Chicago, IL | USA

Marketing as a Business Discipline
Chapter 1 Marketing as a Business Discipline

Figure 1. Making Decisions Using a Framework
Abstraction Application Trial and error Typical problem Specific solution Typical solution Specific problem

Marketing Strategy and Tactics
Chapter 2 Marketing Strategy and Tactics

Figure 1. Identifying the Target Market: The 5-C Framework
Company Competitors Collaborators Customers Context

Figure 2. Defining the Value Exchange
Company Value Value Customers Value Collaborators Value Value Value Competitors Context

Figure 3. The 3-V Market Value Principle
Customer value Collaborator value Company value OVP The Optimal Value Proposition

Figure 4. Marketing Tactics: The Seven Attributes Defining the Market Offering
Customer value Collaborator value Company value OVP Strategy Tactics Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 5. Marketing Tactics as a Process of Designing, Communicating and Delivering Value
Designing value Product Service Brand Value Price Incentives Communication Distribution Communicating value Delivering value

Figure 6. Marketing Tactics: Company Actions and Customer Impact
Communicating value Delivering Designing Awareness of the offering Availability of the offering Attractiveness of the offering Company actions Customer impact

Figure 7. The Market Value Map
Target Market Market Offering Customers Product What customer need does the company aim to fulfill? Who are the customers with this need? What are the key features of the company’s product? Collaborators What other entities will work with the company to fulfill the identified customer need? Service What are the key features of the company’s service? Company What are the company’s resources that will enable it to fulfill the identified customer need? Brand What are the key features of the offering’s brand? Competition What other offerings aim to fulfill the same need of the same target customers? Price Context What is the offering’s price? What are the sociocultural, technological, regulatory, economic, and physical aspects of the environment? Incentives Value Proposition What incentives does the offering provide? Customer Value What value does the offering create for target customers? Communication How will target customers and collaborators become aware of the company’s offering? Collaborator Value What value does the offering create for the company’s collaborators? Distribution Company Value How will the offering be delivered to target customers and collaborators? What value does the offering create for the company? Strategy Tactics

Figure 8. The 4-P Framework
Product Value Promotion Price Place

Figure 9. The Four Ps and the Marketing Mix
Product Value Product Service Brand Communication Distribution Price Incentives Price Promotion Place

Figure 10. The Five Forces of Competition
New entrants Competitors Suppliers Buyers Substitutes

Figure 11. Context Analysis
Technological Company Competitors Collaborators Customers Economic Sociocultural Physical Regulatory Context

Chapter 3 The Marketing Plan

Figure 1. The SWOT Framework for Assessing a Company’s Market Position
Favorable factors Unfavorable factors Internal factors Strengths Weaknesses Company analysis External factors Opportunities Threats Market analysis

Figure 2. The G-STIC Framework for Marketing Management
Goal Strategy Business model Tactics Implementation Control

Figure 3. The G-STIC Action-Planning Flowchart
The ultimate criterion for success Goal Focus Benchmarks The value created in the target market Strategy Target market Value proposition The specifics of the market offering Tactics Product Service Brand Price Incentives Communication Distribution The logistics of creating the offering Implementation Development Deployment Monitoring goal progress Control Performance Environment

Figure 4. Market Goals and Objectives
Customer objectives Collaborator objectives Company goal Company objectives Competitor objectives Context objectives

Figure 5. The Marketing Plan
What are the key aspects of the markets in which the company competes? What are the company’s history, culture, resources, offerings, and ongoing activities? What is the key performance metric the company aims to achieve with the offering? How will the company evaluate the progress toward its goal? How is the company offering being developed? Who are the target customers, competitors, and collaborators? What are the company’s resources and context? Company Tactics Goal What are the criteria (temporal and quantitative) for reaching the goal? Benchmarks Target market Strategy What value does the offering create for target customers, collaborators, and company stakeholders? Value proposition Development Implementation What processes will be used to bring the offering to market? Deployment Performance Control How will the company monitor the environment to identify new opportunities and threats? Environment Market offering What are the product, service, brand, price, incentives, communication, and distribution aspects of the offering? Executive Summary Exhibits Situation Overview Market Focus What are the key aspects of the company’s marketing plan? What are the details/evidence supporting the company’s action plan? G-STIC Action Plan

Figure 6. The Critical Path Method
B D 4 5 2 7 6

Figure 7. The Responsibility Assignment Matrix
Responsibilities Activity Role/Team 1 Role/Team 2 Role/Team 3 Role/Team 4 Activity A Activity B Activity C Activity D

Figure 8. Gantt Matrix Timeline (weeks) Activity 1 2 3 4 5 6 7 8 9 10
Activity A Team 1 Activity B Team 2 Activity C Team 3 Team 4 Activity D

Understanding Consumer Markets
Chapter 4 Understanding Consumer Markets

Figure 1. The Customer Journey Map
Evaluate Active need Search Choose Use Purchase

Figure 2. Customer Need States
Customer value Delight (fully met need) Experience enhancement Indifference (largely met need) Solution to a problem Problem (unmet need)

Figure 3. The Dynamics of Customer Needs
Value Delight Desired benefits Consumption Satisfaction Need activation Current benefits Problem

Figure 4. The Information Processing Funnel
Selective processing Received information Selective memory Selective attention Processed information

Figure 5. The Value Function
Offering performance

Figure 6. Reference-Point Dependence
Value Gains Performance Losses Reference point

Figure 7. Loss Aversion Value Value of a gain Performance of a loss

Figure 8. Diminishing Marginal Value
Performance

Figure 9. Maslow’s Hierarchy of Needs
Self-fulfillment needs Self-actualization Esteem needs Psychological needs Belongingness and love needs Safety needs Basic needs Physiological needs

Gathering Market Insights
Chapter 5 Gathering Market Insights

Figure 1. The Problem-Driven Market Research Process
Define the business problem Manager Manager Research team Formulate the research question Define the research method Research team Gather and analyze the data Research team Research team Manager Interpret the results Solve the business problem Manager

Figure 2. Key Types of Business Problems
Market analysis Action planning Market opportunity Designing a new offering Market change Optimizing an existing offering Performance gap

Figure 3. Experimentation as a Tool for Gathering Market Insights
Company Actions Customer Response Product Service Brand Price Incentives Communication Distribution Awareness Beliefs Preference Purchase intent Intent to promote Purchase Usage Advocacy Customer mindset Offering attributes Customer behavior Factors tested Factors measured

Figure 4. Managing Decision Errors
Reality True False Correct False positive True Data False negative Correct False

Figure 5. Evidence-Based Decision Making
Focus on creating market value Business problem Research question Focus on gathering relevant market insights Data analysis Data selection Real world

Figure 6. Making Necessary Tradeoffs
Pros Option A Tradeoff Cons Decision Tradeoff Pros Option B Tradeoff Cons

Identifying Target Customers
Chapter 6 Identifying Target Customers

Figure 1. Segment-Based Targeting
Customers whose needs the company aims to fulfill (target market) Targeting All potential customers (entire market)

Figure 2. Strategic Targeting: Key Principles
Target Compatibility Target Attractiveness Company resources Customer needs Customer resources Company goals Customer value Company value

Figure 3. The Resource Advantage Principle
Unutilized company resources Company resources The company’s ideal customers Competitive wasteland Unmet customer needs Customer needs Competitor resources Intense competition

Figure 4. Customer Profile and Customer Needs
Need-based targeting Profile-based targeting Identifiable customer needs

Figure 5. Linking Customer Value and Profile
Needs Customer value Resources Strategic targeting Target customers Customer identification Demographics Psychographics Customer profile Geolocation Behavior Tactical targeting

Figure 6. Tactical Targeting: Effectiveness
Value-based segment Profile-based segment “Sniper” targeting (optimal) “Slice-of-the-pie” targeting (too narrow) “Shot-in-the-dark” targeting (off base)

Figure 7. Tactical Targeting: Cost-Efficiency
Value-based segment Profile-based segment “Sniper” targeting (optimal) “Shotgun” targeting (too broad)

Figure 8. Targeting Multiple Segments
Offering B Offering A

Figure 9. Market Segmentation and Targeting
Customers with similar needs (segmented market) All potential customers (entire market) Customers whose needs the company aims to fulfill (target market) Defining market segments Identifying target customers

Figure 10. Segmentation, Mass Marketing, & One-to-One Marketing
Segment-based marketing Offering A Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Offering B Mass marketing Offering One-to-one marketing Offering C Offering D Offering E Offering F

Figure 11. Strategic and Tactical Segmentation Facilitates the Process of Identifying Target Customers All potential customers (entire market) Strategic targeting (value-based) Strategic segmentation Channel A Channel B Channel C Tactical targeting (profile-based) Tactical segmentation

Figure 12. Common Segmentation Errors
A. Irrelevant B. Heterogeneous C. Not exhaustive

Figure 13. The Long Tail Popularity Mass market The long tail
Offerings

Developing a Customer Value Proposition
Chapter 7 Developing a Customer Value Proposition

Figure 1. Value as a Function of Customer Needs and Offering Attributes
Customer value Customer needs Company offering

Figure 2. Dimensions of Customer Value
Functional value Customer value Psychological value Monetary value

Figure 3. The Customer Value Proposition
Company offering Reason to choose Alternative options Value Value Customer needs

Figure 4. Competitive Value Map
Competitive disadvantage Competitive advantage Attribute 1 Customer value Attribute 2 Attribute 3 Attribute 4 Attribute 5 Attribute importance Competitive parity Competitive offering Company offering

Figure 5. Customer Value Proposition and Positioning
Primary benefit(s) Positioning Value proposition Secondary benefit(s) Trivial benefits Costs

Figure 6. Single-Benefit Positioning
Key reason for choice Primary benefit Benefit 1 Benefit 2 Benefit 3 Benefit 4 Benefit 5 Secondary benefits

Figure 7. Multi-Benefit Positioning
Key reason for choice Primary benefits Benefit 1 Benefit 2 Benefit 3 Secondary benefits Benefit 4 Benefit 5

Figure 8. Holistic Positioning
Benefit 1 Benefit 2 Key reason for choice Overall benefit Benefit 3 Benefit 4 Benefit 5

Psychological benefits
Figure 9. Positioning Strategies Based on their Ability to Create a Sustainable Competitive Advantage Psychological benefits Positioning Functional benefits Sustainable competitive advantage Monetary benefits

Figure 10. Positioning Map
Attribute 1 Offering A Offering B Offering C Attribute 2 Offering E Offering D

Figure 11. Blue Ocean Strategy
Red Ocean Strategy Blue Ocean Strategy Compete in existing markets Create uncontested markets Fulfill existing demand Create new demand Beat the competition Make the competition irrelevant Improve the value-cost tradeoff Redefine the value-cost tradeoff Focus on differentiation or low cost Achieve differentiation at low cost

Creating Company Value
Chapter 8 Creating Company Value

Figure 1. Dimensions of Company Value
Monetary value Company value Strategic value

Figure 2. The Key Profit Drivers
Sales volume Unit price Revenues Profit Variable costs Fixed costs Costs

Figure 3. Strategies for Growing Sales Volume
New to the category Market-growth strategy New customers Competitors’ customers Steal-share strategy Sales volume Current customers Market-penetration strategy

Figure 4. Managing Profits by Lowering Costs
COGS R&D costs Marketing costs Other costs Costs

Figure 5. The Profit Impact of Strategic Offerings
Company value Profit Profit Offering A Offering B Offering C Strategic value Strategic value

Figure 6. Economic Value Analysis
Monetary value Company value Monetizing strategic value Strategic value

Figure 7. Analyzing the Total Cost of a Company’s Offering in a Competitive Context
Price Durability Reliability Warranty Service Difference in strategic value Price Durability Reliability Warranty Service Strategic value Purchase price Difference in monetary value Company offering Competitive offering

Figure 8. Creating Market Value through Collaboration
B2B B2C Company Collaborator Customer Value Value Value

Figure 10. Calculating Trade Margins
Manufacturer cost: $3 Selling price to the wholesaler: $10 Margin: $7 Margin (% of selling price): $7/$10 = 70% Manufacturer Purchase price from the manufacturer: $10 Selling price to the retailer: $15 Margin: $5 Margin (% of selling price): $5/$15 = 33% Wholesaler Purchase price from the wholesaler: $15 Selling price to the customer: $20 Margin: $5 Margin (% of selling price): $5/$20 = 25% Retailer Customer Purchase price: $20

Figure 11. Break-Even of a Fixed Cost Investment
Costs Revenues Revenues Profit Break-even point Total costs Fixed costs Loss Volume

Chapter 9 Managing Products

Figure 1. Product Management as a Value-Creation Process
Customer value Collaborator value Company value OVP Product Service Brand Communication Distribution Price Incentives Market Offering

Figure 2. Product Attributes and Customer Benefits
Attribute A Benefit A Functional benefits Attribute B Benefit B Attribute C Benefit C Psychological benefits Product Attribute D Benefit D Attribute E Benefit E Monetary benefits Attribute F Benefit F Product attributes Customer needs

Figure 3. Product Portfolio and Product Lines
Product line X Product line Y Product A Product B Product C Product D Product E

Figure 4. Product Platforms and Product Lines
Customer benefits Product A Product B Product C Product D Company processes Product platform X Product platform Y

Figure 5. Network Product Platforms
Company product line Product A Product B Product C Product D Product platform X Product platform Y Product E Product F Product G Product H Competitor product line

Figure 6. Managing the Product Lifecycle
Financial performance Revenues Profits Time Introduction Growth Maturity Decline

Figure 7. Extending Product Lifestyle through Innovation
Sales Third generation Second generation First generation Time

Figure 8. Benefit Visibility in Product Design
Search attributes Observability of benefits Customer value Experience attributes Credence attributes

Chapter 10 Managing Services

Figure 1. Service Management as a Value-Creation Process

Figure 2. Creating Market Value Through Superior Customer Service
Employee selection, training and motivation Employee competence and satisfaction Superior service delivery Company profits Customer loyalty Customer value

Figure 3. Managing Employee Performance
Recruit Motivate Empower Control Train Inform Company culture Service delivery

Figure 4. Building a Service-Oriented Company Culture
Management beliefs Company policies Employee selection Norms of behavior Teamwork Service quality

Figure 5. Customer Reaction to Service Failures
Stay loyal and endorse Delight Resolve Satisfaction Stay loyal Service failure Stay less loyal Acquiescence Ignore Stay disloyal or leave quietly Dissatisfaction Stay and disparage or leave and disparage Anger Company action Customer experience Customer behavior

Figure 6. The Gap Model of Service Quality
Management beliefs Gap 1 Gap 2 Service design Gap 3 Service delivery Communication Gap 4 Company Customer Perceived service Gap 5 Expected service Experience Needs Word of mouth

Chapter 11 Managing Brands

Figure 1. Branding as a Value-Creation Process

Figure 2. Brand Association Maps of Starbucks and Apple
Great taste Nearby Coffee My drink Self-identity Fast Friendly My place Home Workplace Great service Energy Indulgence My ritual Consistent experience Convenient Morning Starbucks iPad Mac iPod Connectivity iPhone Innovative Easy to use Stylish Different Sleek design Microsoft Easy to learn Creative iTunes Tablet Music on the go Entertainment Apple

Figure 3. Key Brand Identifiers
Logo Motto Character Brand name Soundmark Packaging Product design

Single-brand strategy
Figure 5. Single-Brand, Cobranding, and Multi-Brand Portfolio Strategies Single parent brand New sub-brand Endorsed new brand Independent new brand Single-brand strategy Multi-brand strategy Cobranding

Figure 6. Vertical Brand Extensions
Price Upscale extension Price tier A Price tier B Core offering Downscale extension Price tier C Benefits

Figure 7. Horizontal Brand Extensions
Price Extension A Core offering Extension B Benefits Category A Category B Category C

Figure 8. Brand Power, and Brand Equity
Branding activities Brand image Customer value Customer behavior Company value Brand power Brand equity

Chapter 12 Managing Price

Figure 1. Pricing as a Value-Creation Process

Figure 2. The Price Elasticity of Demand
$15 $10 Inelastic demand Elastic demand 20 25 50 Quantity

Figure 3. Price Segmentation as a Targeting Tool
Price for Segment A Price for Segment B Price for Segment C

Figure 4. The Relationship Between Variable and Fixed Costs
Total costs Fixed costs Variable costs Volume

Figure 5. Penetration, Skim, and Loss-Leader Pricing
Range of unprofitable prices Range of profitable prices Skim pricing Penetration pricing Loss-leader pricing Customer willingness to pay

Figure 6. Competitive Price–Benefit Map
Value-equivalence line Offering A Offering B Offering D Offering E Offering C Benefits

Chapter 13 Managing Incentives

Figure 1. Managing Incentives as a Value-Creation Process

Figure 2. Incentive Types

Figure 3. Push and Pull Promotions
Manufacturer Manufacturer Communication Incentives Demand Demand Retailer Retailer Communication Incentives Communication Incentives Demand Demand Customers Customers Push promotions Pull promotions

Figure 4. The Prisoner’s Dilemma
-10 / -1 -5 / -5 -3 / -3 -1 / -10 Not confess Confess Prisoner B Prisoner A

Figure 5. The Prisoner’s Dilemma in Sales Promotion
Not discount Discount Company B Company A

Managing Communication
Chapter 14 Managing Communication

Figure 1. Communication as a Value-Creation Process

Figure 2. The G-STIC Framework for Managing Communication
Marketing Strategy Marketing plan Target market Value proposition Goal Focus Benchmarks Strategy Audience Message Tactics Communication campaign Media Creative Implementation Development Deployment Control Performance Environment

Figure 3. Communication Goals as a Function of the Customer Decision Journey
Evaluate Build preferences Generate interest Activate the need Create awareness Active need Discover Choose Encourage repurchase Nudge to buy Use Purchase Foster usage

Figure 4. Programmatic Media Buying
Advertising exchange Advertiser Demand-side platform Supply-side platform Publisher

Figure 5. The Communication Plan
What is the value proposition of the company’s offering? Value What are the key aspects of the target market in which the company aims to compete? Market Executive Summary Marketing Strategy What are the key aspects of the company’s communication campaign? Exhibits What are the details/evidence supporting the company’s communication plan? Media How will the company evaluate the effectiveness of the communication campaign? Performance Control How will the company monitor the environment to identify emerging opportunities and threats? Environment What is the focus of the company’s communication? Focus Goal What are the temporal and quantitative benchmarks for reaching the goal? Benchmarks Deployment What resources need to be developed/acquired to communicate the company’s message? Development Implementation What is the process of bringing the company’s message to the target audience? Who is the company’s target audience? Audience Strategy What is the message the company aims to communicate? Message Where will the audience encounter the company’s communication? Tactics How will the company’s message be expressed? Creative G-STIC Action Plan

Chapter 15 Personal Selling

Figure 1. Sales Productivity as a Function of Sales Force Size
Salesforce productivity Salesforce costs Breakeven point Optimal size Salesforce revenues Salesforce size

Figure 2. Managing Sales Force Performance
Recruit Motivate Empower Control Train Support Company culture Salesforce Customers: HDI; Collaborators: HDI; Competitors: AT&T vs. Version, politics; Context: economy, technology, regulatory (monopoly)

Figure 3. Decision-Making Unit: Key Roles
Decider Initiator Personal selling Purchaser Gatekeeper User Influencer

Figure 4. The Customer Decision Journey
Search Evaluate Active need Define Choose Use Purchase

Figure 5. The Personal Selling Process
Prospecting Customizing Presenting Negotiating Closing Servicing

Figure 6. The SPIN Model of Selling
Establish the context Situation questions Reveal implied needs Problem questions SPIN questions Define the problem faced by the buyer Implication questions Underscore the importance of solving the problem Need-payoff questions Articulate the benefits of the proposed solution Benefits of the offering

Managing Distribution
Chapter 16 Managing Distribution

Figure 1. Distribution as a Value-Creation Process
Customer value Collaborator value Company value OVP Market Offering Product Service Brand Price Incentives Communication Distribution

Figure 2. Distribution Channel Structure
Wholesaler Retailer Customers Company Direct channel Indirect channels Hybrid channel

Chapter 17 Retail Management

Figure 1. Key Trends in Retail Management
Consolidation Retailer power Private labels Omnichannel New retail formats Speed Convenience Mobile shopping Customer insight Improved logistics Retailing

Figure 2. Retailing as a Value-Creation Process
Customer value Collaborator value Retailer value OVP Market Offering Product Service Brand Price Incentives Communication Distribution

Figure 3. Price Image Drivers and Market Outcomes
Average price level Known value items Price range Sales promotions Communication Physical attributes Service level Retailer policies Price evaluation Price fairness Store choice Choice deferral Purchase quantity Product choice Price image Price image drivers Market outcomes

Gaining and Defending Market Position
Chapter 18 Gaining and Defending Market Position

Figure 1. Steal-Share Strategy
Current users New users

Figure 2. Market-Growth Strategy

Figure 3. Market-Growth Strategy for a Superior Offering

Figure 4. Market-Penetration Strategy

Figure 5. Market-Creation Strategy
Current market New market

Figure 6. Defensive Marketing Strategies
Price Benefits Stay the course Move upscale Increase benefits Reduce price Move downscale Launch value offering Launch premium offering Source: Stephen Hoch (1996), “How Should National Brands Think about Private Labels?” Sloan Management Review, 37 (2), 89–102

Figure 7. The Adoption Funnel
Awareness Attractiveness Affordability Availability Purchase

Figure 8. Identifying Adoption Gaps
Awareness gap Attractiveness gap Affordability gap Availability gap Purchase gap All target customers Aware of the offering’s existence Perceive the offering to be attractive Perceive the offering to be affordable Have access to the offering Purchase the offering

Figure 9. The Usage Funnel
Satisfaction Usage frequency Usage quantity Repurchase

Figure 10. Identifying Usage Gaps
Satisfaction gap Usage-frequency gap Usage-quantity gap Repurchase gap Purchased the offering Satisfied with the offering Use the offering frequently Use large quantity per occasion Repurchase the offering

Figure 11. Vertical Product-Line Extensions
Price Upscale offering Core offering Downscale offering Benefits

Figure 12. Horizontal Product-Line Extensions
Price Benefits Core offering Offering A Offering B

Figure 13. Product-Line Cannibalization
Competitive offerings Current offering Competitive offerings Current offering New offering Competitive offerings New offering Current offering Cannibalized sales A. Single offering B. Two offerings without cannibalization C. Two offerings with cannibalization

Figure 14. The Fighting-Brand Strategy
Time Price Quality Incumbent brand Fighting brand Low-price competitors

Figure 15. The Sandwich Strategy
Time Price Quality Incumbent brand Fighting brand Low-price competitors Premium brand

Figure 16. The Good-Better-Best Strategy
Price Quality Incumbent brand Good Low-price competitors Best Better Time

Figure 17. The Product-Market Growth Framework
Product development Market penetration Diversification Market development New products Current products New customers Current customers

Figure 18. Break-Even Rate of Cannibalization
Sales volume of the incumbent offering unaffected by the new offering Sales volume of the incumbent offering cannibalized by the new offering Competitive offerings Sales volume of the new offering gained from the competitive offerings

Chapter 19 Managing New Products

Figure 1. The Stage-Gate Framework for Developing New Offerings
Idea generation Concept development Business model design Offering development Commercial deployment Gate 1 Idea validation Gate 2 Concept validation Gate 3 Business model validation Gate 4 Offering validation

Figure 2. Top-Down (Market-Driven) Idea Generation
Market opportunity Problem in search of an invention Top-down idea discovery Invention

Figure 3. Bottom-Up (Invention-Driven) Idea Generation
Market opportunity Invention in search of a problem Bottom-up idea discovery Invention

Figure 4. Concept Storyboard
1 2 3 4 Customer Problem Alternative Options Company Offering Customer Value How does the offering solve customers’ problem better than the alternative options? What customer problem does the company aim to solve? What are the alternative means to solve this problem? What are the key aspects of the company’s offering?

Figure 5. The Validated-Learning Approach
Observe the market Generate an idea Build a prototype Test the prototype Build the offering Learn from the outcome

Figure 6. The Key Components of a Business Model of a New Offering
Target market Market offering Customers Product Collaborators Service Company Brand Competitors Context Price Value proposition Incentives Customer Value Communication Collaborator Value Distribution Company Value

Figure 7. The Path of Least Resistance
Customers with an unmet need (all target customers) Path of least resistance Customers who recognize the unmet need as a problem that needs solving Customers who actively seek a solution to the problem

Figure 7. The Path of Least Resistance
Path of least resources Customers with an unmet need (all target customers) Customers who can be informed about the offering in a cost-efficient manner Customers to whom the offering can be delivered in a cost-efficient manner

Figure 9. The S-Curve of the Total Number of Adoptions of an Innovation
Time Total adoptions Inflection point Market potential Speed of diffusion

Figure 10. The Bell-Shaped Curve of the New Adoptions of an Innovation
Individual adoptions Peak of adoptions Time

Figure 11. Alternative Patterns of Adoption of Innovation
Individual adoptions Individual adoptions Time Time

Figure 12. Rogers’ Categorization of Customer Based on the Time of Adoption of Innovation
Innovators Early adopters Early majority Laggards Number of adoptions Time Late majority

Figure 13. Moore’s Application of the Rogers Model to Technology Markets
Number of adoptions The chasm Early market Mainstream market Enthusiasts Visionaries Pragmatists Conservatives Skeptics Time

Figure 14. The Minimum Viable Offering as a Function of Offering’s Desirability, Feasibility, and Viability Offering functionality Offering desirability (Diminishing marginal value) Offering viability (Increasing marginal costs) Offering feasibility (Increasing marginal complexity) Customer value Technological complexity Company costs MVO

Customer Relationship Management
Chapter 20 Customer Relationship Management

Figure 1. Promotion-Driven Customer Acquisition
Identify buyers likely to purchase the company’s offering Develop customer acquisition strategy Develop customer retention strategy Retention Acquisition Targeting

Figure 2. Loyalty-Driven Customer Acquisition
Value Retention Targeting Acquisition Identify drivers of long-term customer value Develop customer retention strategy Identify customers with high lifetime value potential Develop customer acquisition strategy

Figure 3. The Customer Equity Framework
Customers: HDI; Collaborators: HDI; Competitors: AT&T vs. Version, politics; Context: economy, technology, regulatory (monopoly) Sales revenues Operational costs Marketing costs Customer equity Monetary value Customer advocacy Customer insight Strategic value

Figure 4. Aligning Customer Equity and Consumer Value
Vulnerable customers High-value customers High Wasted effort Free riders Low Low High Value received by customers

Figure 5. Key Customer Management Metrics
All target customers Aware of the offering Purchased the offering Repurchased the offering Awareness rate Conversion rate Penetration rate Retention rate 2 1 4 3 5 Attrition rate

Segmentation and Targeting Workbook
Appendix A Segmentation and Targeting Workbook

Figure 1. Identifying Target Customers
Define the key value drivers Segment the market Strategic targeting Assess segment attractiveness Assess segment compatibility Select strategically viable segment(s) Define the segment profile Tactical targeting Assess tactical viability of segment(s) Select target segment(s)

Figure 2. The Targeting Matrix

Figure 3. Customer Value Analysis Workbook (Two Segments)

Figure 4. Customer Value Analysis Workbook (Three Segments)

Figure 5. Compatibility Analysis Workbook (Tradesman Segment)

Figure 6. The Targeting Matrix: Black & Decker

The Business Model Workbook
Appendix B The Business Model Workbook

Figure 1. The Market Value Map
What are the key features of the company’s product? What are the key features of the company’s service? What are the key features of the offering’s brand? What is the offering’s price? What incentives does the offering provide? How will target customers and collaborators become aware of the company’s offering? How will the offering be delivered to target customers and collaborators? Market Offering Product Service Brand Price Incentives Communication Distribution What customer need does the company aim to fulfill? Who are the customers with this need? What other entities will work with the company to fulfill the identified customer need? What are the company’s resources that will enable it to fulfill the identified customer need? What other offerings aim to fulfill the same need of the same target customers? What are the sociocultural, technological, regulatory, economic, and physical aspects of the environment? Target Market Collaborators Customers Company Competition Context What value does the offering create for target customers? What value does the offering create for the company’s collaborators? What value does the offering create for the company? Value Proposition Collaborator Value Customer Value Company Value

Figure 2. The Customer Value Map
What are the features of the product that the company offers to target customers? What are the features of the service that the company offers to target customers? What are the features of the offering’s brand? What is the offering’s price for target customers? What incentives does the offering provide to target customers? How will target customers become aware of the company’s offering? How will the offering be delivered to target customers? Customer Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for target customers? Why would they choose this offering? Customer Value Reason to choose What customer need does the company aim to fulfill? Who are the customers with this need? Target Customers Customer need Customer profile What other offerings aim to fulfill the same customer need? What value do these offerings create for target customers? What are the key aspects of the competitive offerings? Competition Key competitors Value proposition Offering attributes

Figure 3. The Collaborator Value Map
What are the features of the product that the company offers to collaborators? What are the features of the service that the company offers to collaborators? What are the features of the offering’s brand? What is the offering’s price for collaborators? What incentives does the offering provide to collaborators? How will collaborators become aware of the company’s offering? How will the offering be delivered to collaborators? Collaborator Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for collaborators? Why would they partner with the company? Collaborator Value Reason to choose Which entities will partner with the company to create value for target customers? What goals do collaborators pursue by partnering with the company? Collaborators Collaborator profile Collaborator goals What other offerings aim to fulfill the same collaborator goals? What value do these offerings create for collaborators? What are the key aspects of the competitive offerings? Competition Key competitors Value proposition Offering attributes

Figure 4. The Company Value Map
What are the features of the product that the company offers to target customers and collaborators? What are the features of the service that the company offers to target customers and collaborators? What are the features of the offering’s brand? What is the offering’s price for target customers and collaborators ? What incentives does the offering provide to target customers and collaborators? How will target customers and collaborators become aware of the company’s offering? How will the offering be delivered to target customers and collaborators? Company Offering Product Service Brand Price Incentives Communication Distribution What value does the offering create for target customers? Why would customers choose this offering? Company Value Reason to choose What entity is managing the offering? What are its key resources? What goal does the company aim to fulfill with this offering? Company Company profile Company goals What alternative options can fulfill the same company goal? What value do these options create for the company? What are the key aspects of the alternative options? Alternative Options Key alternatives Value proposition Option attributes

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