WHAT IS MARKETING’S ROLE IN BUSINESS: Customer Journey: Decision Process Stages:

create value and capture it • Search/Evaluation: Gathering information and comparing options.
• Purchase: Final decision influenced by perceived benefits and costs.
Consumer value is trade off between perceived gain and perceived • Post-Purchase: Experience shapes long-term perceptions and loyalty.
pain from the product • Micro-Moments: Key touchpoints during the consumer journey (e.g., a timely search ad during flight delay
• Gain from the benefits to the consumer. NOT (although related to)
the product features NOR the FIRM’s costs. Depends on both 1. Identify set of relevant product features
perception and actual information 2. Define reusables levels for these features
• Pain comes from the perceived costs, risks, and/or hassles: From 3. Create product profiles
the obtaining the product & From using the product 4. Obtain consumer preferences for these profiles
5. Analyze data
Perceived benefits and costs: 6. Simulate market level outcomes
• Need to account that it is specific to each consumer (consumer
heterogeneity) Problem:
• Needs to be quantified to serve as input for managerial decisions • It’s still a survey: reveal information is different
• Perception is Reality from actual behaviors
• Functional and economic attribute are better
Understand purchase decision process – consumer journey: WHAT (brand b/c it’s hard to quantity should not be used)
IS YOUR GOAL AND COMMS OBJECTIVE?
Awareness > Familiarity > Consideration > Purchase > Loyalty
Customer Lifetime Value - net present value of all
• Micro-moments (when added together, it determines how the
future streams of profits that a customer generates
journey ends)
over the life of his/her business with the firm.
• Customer journeys are context and product specific and collecting
non-noisy data is essential
Customer equity is the combined customer lifetime
values of all of company’s customers.
Value depends on 4 Types of benefits:
• Social (obsv studies, computational linguistics, digital analysis)
What Drives Customer Equity?
• Functional (can do conjoint analysis, auctions, surveys,
1. Customer acquisition (gain new customers)
experiments, digital tactics)
2. Customer retention
• Economic (Economic Value Estimation, e.g. total cost of
3. Customer expansion
ownership, surveys, experiments) (savings generated)
• Experiential (emotions and feelings)
I. Customer Acquisition Strategies
• Communications
• Affiliation
Frameworks:
• M&A
• Strategic: 3Cs (direct financial consequences for company;
changes customers’ product experience and preferences;
II. Managing Customer Expansion
differentiates from competitors), STP
• Bundling to reduce churn (Bundling reduces
• Customer, Company, Competitor Analysis
churn as much as 50% in 3 product homes!)
• Tactical 4Ps
• Share of wallet (e.g. Disney: hotels, restaurants)
• Product, Price, Place, Promotion
• Refining your business: Core business does not
have to be the most profitable!
Roger’s Innovation ACCORD model: to predict customer adoption
(what drives customers to adopt a product or service)
III. Customer retention: Satisfaction
• NPS score: 0-6 Detractors: 6-9 Passive; 9-10 promoters

You'll always have to spend money to acquire new customers and to retain existing ones, but the former costs five times as much

Segmentation, Targeting, Positioning

Segmentation: Dividing a market into smaller groups b/c clients are heterogeneous, need to do PROFILING
Positioning Statement: Defines Who, What, Among Competitors and How

1. Use consumer characteristics to develop segments.

Differential: Consumers within the segment are different from others
Measurable: Characteristics, size and growth of segments can be measured
Substantial: Large and profitable (or small but with a high margin or growth rate)
Actionable: Company can use marketing activities to target those consumers
Conjoint Analysis: The technique to understand and statistically
2. Develop profiles of the resulting segments (Groups have the same desires, needs, wants, purchase
measure the value customers place on features
decision process, profile, etc.) - Demographical, Motivational, Behavioral
• Best for functional features
WHO, WHY, WHAT (product usage, loyalty, responsiveness to Mark mix)
• Customers find it hard to assess the importance of each specific
attribute or feature because: 1. It is difficult to imagine individual
Targeting: (Focusing on Segments)
attributes in isolation from other features. 2. Attributes in isolation
3. Evaluate the attractiveness of each segment.
are perceived differently than in the combinations found in the
4. Select the target segment(s).
product or service
Positioning: (Brand image in someone’s mind)
Branding 5. Identify possible positioning concepts for each segment.
• A name, term, sign, symbol, or design, or a combination of them 6. Select, develop and communicate the chosen positioning.
intended to identify the goods and services of one seller or group
of sellers and to differentiate them from those of competition.
• A promise that a firm makes to its customers. Perceptual maps: Plotting Perceptions of Brands & Consumer Wants on Same Dimensions)
• A positioning statement

Brand equity: Response to a product due to brand name over and

above other aspects of the product offering. (BE = Tropicana –
generic orange juice: 5$ -1$ = 4$) FINANCIAL POWER

Branding (Cont.)
Salience:
1. Depth – ease of recall/recognition
2. Breadth – range of consumption situations

COLD: fact, functionality. HOT: imagery and feelings to a brand.

New Products & Sustainability innovation Market Research - Summary
• Most new products are not new products but are new product lines, additions to existing products,
repositioning's, revisions and improvements or cost reductions Customer Journey Management
• Stages:
• Unawareness → Awareness (Build recognition).
Product Life Cycle
• Familiarity → Consideration (Inform and motivate).
• Introduction, Growth, Maturity, Decline • Trial → Repeat Purchase → Loyalty (Foster long-term relationships).
• At each stage: SALES, CAC / CPC, PROFITS, • Purchase Funnel:
CUSTOMERS (type, #), COMPETITORS • Awareness (100%) → Consideration (60%) → Trial (20%) → Repeat (15%).
• Could have different shapes • Each stage has tailored strategies to maximize conversion rates.

Think outside of box for truly new ideas Product Lifecycle (PLC) Strategies
1. Introduction Stage:
• Create awareness and market presence.
Framework for Sustainability Innovation (Patagonia don’t buy jacket case)
• Strategies: High promotional spend, introductory pricing.
2. Growth Stage:
• Maximize reach and strengthen brand preference.
• Strategies: Advertising, distribution expansion.
3. Maturity Stage:
• Retain market share, optimize costs.
• Strategies: Loyalty programs, line extensions.
4. Decline Stage:
• Harvest or exit.
• Strategies: Focus on loyal customers, reduce marketing expenditure.

Practice Exam Key Topics

• Customer Lifetime Value
Extracting Customer Value – PRICING ****************** • Strategy for retention, increasing revenue and changing customer mix
• “Product, promotion and distribution ... are a firm’s attempt to create value in the marketplace. • Reference price (price customer expects it to be before purchase)
Pricing is the firm’s attempt to capture the value in the profit it earns” • Behavioral reactions to sales and discounts (promotions in general)
• Pricing decisions are fundamental for profitability and must align with customer value perceptions • Graphing reactions to promotions or discounts (demand up during sale, prices
and competitive realities. lower higher demand)
• Price discrimination (when a company charges different prices to different
customers for the same product or service, based on their willingness to pay, rather
5 Step Pricing Tool than differences in production costs.)
1. Value based pricing is the method of setting a price by which a company calculates & tries to earn the differentiated
• Self selection (Self-selection is a pricing strategy where customers are offered a
worth of its product for a particular customer segment when compared to its competitor
a. True Economic Value (TEV) = Cost of the Next Best Alternative + Value of Performance Differential (competing menu of pricing or product options and choose the one that best fits their needs or
alternatives, price and perf of the alternatives, buyer’s costs) willingness to pay
b. Incentive to Purchase = Perceived value – Price • Comparison of Price Discrimination and Self-Selection:
c. Incentive to Sell = Price - COGS • Price Discrimination: The firm actively determines the price for each segment
2. Use price discrimination (ACROSS SEGMENTATION) • Self-Selection: Customers voluntarily choose among options
- BEST - First Degree: based on the seller's ability to determine exactly how much each customer is willing to pay for a • Loyalty programs
good. (car sales). Best: complete extraction; Exclusion; Inclusion. • Economic Value of Advertisement (See Excel)
- Second Degree: involves the establishment of a pricing structure for a particular good based on the number of units • Visibility & Conversion Rate
sold. (e..g French fries sizes as fast foods) • Market Campaign plans (Increasing circulation, increasing purchases, reduce
- Third Degree: where the firm is able to segment its customers into two or more separate markets, each market churn, all scenarios just in case)
defined by unique demand characteristics (senior discounts) • Reasons behind pricing movements (innovators, capture etc)
3. Pricing “structure”: pricing multiple products (bundling’s) • Price Sensitivity & Price anchoring
4. Manage competitive reaction (Emphasis differentiation, don’t get caught in price war)
5. Manage customer emotions and leverage customer psychology : (Loss aversion, reference prices (predictions by the
Seg 1 Seg 2 Seg 3 Seg 4
consumer on what the price will be), anchoring effect, attraction effect, compromise effect) % of customers 0.65 0.1 0.2 0.05
Revenue 200 400 600 2000
Psychological and Behavioral Insights Retention Costs
Margin
160
40
240
160
300
300
400
1600
• Reference Prices: Retention Rate 0.85 0.85 0.85 0.85
• Consumers predict prices based on historical or expected norms. Discount Rate 0.1 0.1 0.1 0.1
• Contextual Design:
Answer a) CLV 136 544 1020 5440 Assuming an infinite lifetime period
• Design product menus and customer interactions to anchor customers on high-value choices Total Weighted CLV 618.8
• Anchoring: Customers default or anchor on first given number
• Other Examples: Answer b)
• Rebate structures enhance perceived savings.
Scenarion i: % of customers 0.65 0.1 0.2 0.05
• People will pay more if thinking they are getting a deal Change in net revenue 220 440 660 2200
• Bundling shifts focus from individual prices to total value Retention Costs 160 240 300 400
Margin 60 200 360 1800
Retention Rate 0.85 0.85 0.85 0.85
Summary Discount Rate 0.1 0.1 0.1 0.1
• Pricing is the mechanism for capturing value from customers.
CLV 204 680 1224 6120 Assuming an infinite lifetime period
• Value Pricing is essential in B2B and consumer markets. Total Weighted CLV 751.4
• A well-thought-out pricing strategy considers:
• Customer psychology.
Scenarion ii: % of customers 0.6 0.15 0.18 0.07
• Competitive landscape. Change in net revenue 200 400 600 2000
• Product line synergies. Retention Costs 160 240 300 400
Margin 40 160 300 1600
• Failing to price effectively leaves money on the table or damages brand value. Retention Rate 0.85 0.85 0.85 0.85
Discount Rate 0.1 0.1 0.1 0.1

CLV 136 544 1020 5440 Assuming an infinite lifetime period

Driving Customer Engagement Total Weighted CLV 727.6

• develop and implement effective communication strategies to engage customers at different stages of their
journey Scenarion iii: % of customers 0.65 0.1 0.2 0.05
Change in net revenue 200 400 600 2000
Retention Costs 160 240 300 400
For a communication campaign to result in consumer engagement, it needs to be well-planned and correctly Margin 40 160 300 1600
implemented: Change in Seg 1 Retention Rate 0.95 0.85 0.85 0.85
1. Set Objectives - Define clear and measurable goals Discount Rate 0.1 0.1 0.1 0.1
2. Define Budget: Ensure the budget aligns with objectives, taking into account ROI and competitive spend
CLV 253.3333 544 1020 5440 Assuming an infinite lifetime period
3. Implement Communication Activities: Use appropriate media and tailor messages to the target audience. Total Weighted CLV 695.0667
• Leverage the SEPPTS framework for effective content creation.
Your Competing
Magazine
Stories, Emotion, public, Practical Value, Triggers, Social Currency = STEPPS Magazine
Circulation/Sales 1,400,000 1,550,000 Price 200
Readers per copy 2.1 1.8 Margin % 30%
• Content: Content aligned with the SEPPTS framework enhances engagement. Total Readership 2,940,000 2,790,000 Margin $ 60
• Create a FIRESTORM Effects of ad:

• People and influencers play a critical role in driving campaigns % Customers who see ad 14.50% 9.20%
Our price $ 67,400
• Find and collaborate with the right people for amplification. % Customers who login
into the company
• Word of mouth driven by excitement, quality, differentiation, visibility website, given they see
2.20% 1.60%
4. Measure and Attribute Impact: Assess the changes in sales and profits attributable to different media ad Competitor $ 29,000
% Customers who
channels. purchase, given intention 20% 20%
• Use rigorous methodologies such as A/B tests to resolve attribution challenges. to buy
• Attribution: The attribution problem is real—it's hard to pinpoint what drives results
• Use advanced methods to ensure credit allocation is as accurate as possible. Customers Converted 1876 821
• Mass media = Gross Ratings Points (GRPs) = Reach x Frequency of Exposure Margin 60 60
• Digital media = PPC / CPC = Pay per click / cost per click – Also CPM (cost per thousand impressions Total Margin Created by Ad $ 112,543 $ 49,283 <---------- Economic Value = margin difference + price of the competitor
• A/B testing is a controlled experiment used to compare two (or more) variations of a single variable to Price of the Ad $ 67,400 $ 29,000 $ 92,261
determine which performs better in achieving a specific goal
Total Profit Created by Ad $ 45,143 $ 20,283