MKTG 1010 Study Guide

Segmentation: What can databases provide? (For example, what are the advantages of PRIZM?)

Database - gives in depth info PRIZM - used for geographic segmentation - can use it to understand many things about the people who live there (wealth, education, age) Secondary data (census, PRISM)

Consumer Decision Journey and Systems: Understand the premise behind the customer funnel model

Decision making - Often proceeds in stages - Is more complex and simpler than this picture - Yet, simple stage models help us identify what marketing actions are most likely to be successful at each stage Customer "funnel" too simplistic - Process is less linear and more complicated than funnel suggests - In the traditional funnel metaphor, consumers start with a set of potential brands and methodically reduce that number to make a purchase --doesn't capture all touchpoints - Funnel doesn't formally account for post-purchase stages

Consumer Decision Journey and Systems: 4-Quadrant Loyalty Map - types of loyalty (For example, given certain combination of behaviors and attitudes, which is the most likely loyalty description; how should a marketer react to this type of loyalty behavior)

Increase Satisfaction to Build Loyalty: But Not all Loyalty is equal - Active loyalists do not only stick with a brand but also recommend it - Passive loyalists stay with a brand without being committed to it - The new CDJ model emphasizes spending more on touch points to develop and continuously expand a base of active loyalists **View SS

Product vs. Customer Focused: Understand the differences in market share vs customer share growth strategies

Market-share: you sell to as many people as possible Growth Strategies: Scale (sell products in diff markets) or become an expert in making this product Customer-share: want to get as much of the wallet of each customer Growth strategy: customer knowledge/data

Context: Understand how to think about context variables, such as economic, political, social and technological, and how they might affect marketing strategy

P: Are there any political movements, new or proposed laws or regulations that may affect my business? E: Are there economic trends that might affect customer behaviors? S: Are there sociological trends that may affect the things that people buy or the way people buy them? T: Are there any new or emerging technologies that may change the way my customers act or the way my business operates?

Consumer Decision Journey and Systems: Satisfaction: Overcoming satiation

- For example, I may ask you to identify a case of satiation (as opposed to other consumer experiences) -> Satiation: effect where more of a good one posses, the less one is willing to give up to get more - For example, I may ask you to identify a good way to reduce satiation in a given situation -> Companies want to prolong satisfaction in order to keep customers coming back and decrease churn Satisfaction Changes Over Time - This means that exceeding expectations gets harder and harder - And the likelihood of churn might increase rather than decrease over time

Positioning: Definition of positioning

Positioning: How We Appeal to our Target Segments - To (target segment) our (brand) is the concept that provides (point of difference and reasons to believe) - Influences how a particular segment perceives an offering in comparison to the competition (frame of reference) - Internal statement that outlines the essence of the strategy - Externally manifested in the Marketing Mix (4Ps)

Segmentation: Different types of segmentation (For example, we may ask you to contrast different segmentation methods and identify the benefits/weaknesses of each)

- Demographic: Age, gender, incomeFamily size Education - Geographic: Zip Code, MSA, or region/Country - Behavioral: Usage occasion, Usage rate, Repeat purchasing/CLV - Psychographic: Personality, Values - Attitudinal: Benefits sought

Consumer Decision Journey and Systems: Customer Journey Maps (For example, we might ask what are various actions marketers should take at different stages of the journey)

- Detailed visual depictions of customers' unique set of experiences with a particular brand - Focuses on specific steps and activities a customer might experience what are various actions marketers should take at different stages of the journey? - Initial consideration set: company driven marketing - Active Evaluation: past experience - Closure: store, agent, dealer interactions

Customer Lifetime Value: Understand how heterogeneity affects CLV

- Different customers will have different customer lifetime values - 70-80% of business came from 20% of customers

Brand Measurement/Value Methodologies: For example, we might ask you to identify a method by which we can figure out the price premium a brand commands

BAV Method to place it in the quadrant

Simple Model of Satisfaction

Come in with some expectation of service, if the perception of the service you receive doesn't match your expectation, then you're dissatisfied - How to fix satisfaction? - lower expectation

Big Picture: Why do we spend so much time on the customer "C" in this course?

Don't sell what you can make... - MAKE WHAT YOU CAN SELL - It's all about the customer Value is determined by customers

Brand Measurement/Value Methodologies: How brands are brands valued

Four Methodologies - Customer Based Measures - Market value measures - Shareholder value measures - Conjoint

Brand Strategy: House of Brands v. Branded House and when each makes sense

House of Brands: Pros: - Allows more positioning opportunities (including some conflicting positions) - Makes acquisitions easier - Corporate name is protected from negative news with brands Cons: - More expensive and complicated to manage - Lose benefit of big brand Branded House: Pros: - Efficiency of communication - New acquisitions or products have instant credibility - House size is seen as bigger - may impress customers and deter competition Cons: - Risk of dilution or ambiguity - Bad news affects all products - Management talent may wish for more autonomy

Brand Strategy: Sources of brand value: for customers, firms and collaborators

How do Brands create customer value - Functional: they identify company's offerings, signal superior performance - Psychological: emotional connection, self-expression (Vans), social cause (Allbirds) - Monetary: Walmart signals low price, Gucci signals high price and status How do brands create company value Strategic: increase demand, incent employees Monetary: drive a price premium, actual asset

Product vs. Customer Focused: Understand how technology and competition has changed market conditions and consequently consumer behavior

Pre 1990s thats when deregulation and globalization happened, globe became a big market, so increased competition led to a buyer's market

Brand Strategy: How does a brand stay relevant? (For example, what does a brand have to consider with its repositioning strategy?)

REPOSITIONING: KEEPING A LEGACY BRAND YOUNG (ADDING BRAND EXPERIENCES) Ways that would make it necessary to reposition - Brand Repositioning: Change in value prop Change in customer demographic, changes in context, changes in company goals (Redskins)

Targeting: Using the Targeting matrix shown in class (i.e., (attractiveness v. compatibility matrix) identify the appropriate strategy

See screenshot

Segmentation: Understand the definitions of segmentation, targeting and positioning

Segmentation: Identify variables that allow one to segment the market Targeting: Evaluate the attractiveness of each segment and choose a target segment Positioning: Identify positioning concepts for each target segment, select the best, & communicate it.

Consumer Decision Journey and Systems: System 1 and System 2 processing: Be able to identify, understand how to match and how to change behavior

System 1: Peripheral route (low effort) System 2: Central route (high effort) When are Consumers in System 1 (peripheral) vs. System 2 (central)? - Motivation, opportunity, and ability to process system 2 •Otherwise, system 1 - Mismatching systems will lead to wasted efforts and ineffective investments.

Targeting: Definition of Targeting

Targeting is the process of identifying customers for whom the company will optimize its offering • Strategic targeting: identifying which customers (segments) to serve and which to ignore • Tactical targeting (implementation): involves identifying effective and cost-efficient ways to reach strategically viable customers An Ideal Target Segment will have: - Sufficient size, growth, and profitability - But: Be attractive to us specifically, and capitalize on our strengths and not highlight our weaknesses

Segmentation: The degrees-of-freedom approach to determining sufficiently defined segments

The number of factors that can vary independently: - The more homogenous a segment is, the fewer degrees of freedom a manager has in managing the 4 P's. - Ultimately, each segment should have relatively few degrees of freedom - The degrees of freedom approach can then be used to determine the minimum number of variables needed to describe the segment adequately.

Targeting: Challenges of targeting multiple segments

What marketing actions allow targeting additional segments? • Coupons, pricing promotions • Offer new products, sub-brands Does the incremental value outweigh the cost? - Even if it does, consider your brand: • Often requires multiple positions, which can create inconsistency in brand perceptions • You may have to change your product to appeal to your new segment - is it worth it?

Targeting: Assessing a target segment's attractiveness (For example, using either a verbal description or data, and you may be asked to indicate which one is the most attractive/how attractive a given segment is)

When do You Have a "GOOD" Target Segment? - You can reach them - Group is large enough to be profitable - You have the capability to build a marketing program targeted for them - Strategic targeting: Who are the customers with whom the company can establish a mutually beneficial relationship (value-based) - Tactical targeting: How can these customers be reached in the most cost-efficient manner (profile-based)

Segmentation: Why we might question gender-based segmentation (And other types of profile-based segmentation, in general - what biases do we often fall prey to when we do this?)

Why question gender-based segmentation: - Most products are no longer divided between males and females → gender neutrality is better - gendering can alienate possible customers Why might profile-based segmentation fail if used alone? - Heterogeneity may exist within segments (consumers within a particular market may have different needs, preferences, and behaviors) - Homology may exist between segments (Homology of market segments would imply that these segments are not completely distinct and may share commonalities that go beyond superficial similarities in demographics or psychographics. This could be due to factors such as shared cultural or social influences, similar life experiences, or underlying psychological or emotional drivers.) Biases of profile-based segmentation - In v. Out-Group bias: How different are we from one another?- Outgroup homogeneity bias: How similar are all people in a given group? - Confirmation bias: Are you looking for evidence that you may be wrong about what a segment wants?

SERVQUAL

expected service - perceived service helps you figure out exactly where you're missing

BAV

how much money will this brand bring you in the marketplace Brand Strength - strongest brands are the ones that are energized and differentiated and you feel emotional - how appropriate is that differentiation is to you Once you have strength then you build awareness

Conjoint

survey analysis tool that allows companies to identify which features of a product are most important to the customers and estimate the individual value/ranking of each feature and level feature ex. price, color level ex. $50/$75/$100, red/blue/green

Brand Measurement/Value Methodologies: We may ask what is the philosophy behind the BAV model? (LOOK AT BRAND HEALTH GRAPH)

- 800,000+ consumers - l47,000 brands - Up to 181 categories - Over 200 studies since 1993 using the same methodology - l50 countries (Links to financial outcomes) Brand Asset Valuator (BAV Model): two things to know about a brand are its strength and stature - Strength: differentiation (brand's point of difference) and relevance (how appropriate the brand is to you) - Stature: esteem (how well regarded brand is) and knowledge (intimate understanding of brand) *Study found that brand relevance and energy provide incremental info to accounting measures in explaining stock returns but esteem and knowledge do not

Consumer Decision Journey and Systems: For example, we might ask what stops customers from buying?

- Awareness of need -Don't realize they have a problem - Awareness of solution -Don't realize the solution exists - Awareness of your product§Don't understand your value proposition - Don't believe product will benefit them - Think it's too expensive; not in stock - Depending on where we think the problem is, different solutions (i.e., marketing actions) should be applied

Customer Lifetime Value: Know what it is and the strategic implications

- Customer Lifetime Value is the net present value of all future streams of profitsthat a customer generates over the lifeof his/her business with the firm ...less the acquisition cost Why does it matter? - There is heterogeneity in customer value70-80% of business came from 20% of customers - Customer value is more than initial purchase Additional Complexities: Higher revenue in future years - Individual customers spend more - Existing customers exert word-of-mouth influence and generate new customers Different retention rates in future years - Retention rates increase with "lock in"?§Retention rates decrease when customer is dissatisfied? Different retention and profit rates across segments Takeaways - Average can be misleading (some people like hot tea, some people like cold tea, but no one like lukewarm tea) - Always think about segmentation and how they may have different underlying values - Customer Heterogeneity! Knowing CLV Helps Us Decide - Acquire an individual customer - Retain an individual customer - Fire an individual customer - Acquire an entire customer base or a company Customer-centricity connects STP + CLV - Segmentation, targeting and positioning help us understand: •The consumers to whom we can provide a unique, differentiated value •And how we can reach and serve them. - CLV helps us understand: •The consumers that provide (different types of ) value to us •And how our choices about serving them change that value.

Brand Strategy: Brand portfolios and vertical/horizontal extensions (For example, we might ask you about the trade-offs of extending a brand either vertically or horizontally)

- Horizontal Brand Extension - the brand name is applied to a new product or service in either a related product class or in a product category completely new to the firm - Vertical Brand Extension - the introduction of a product or service in the same product category as the core brand, but at a different price point or quality level trade-offs of extending a brand either vertically or horizontally? - Vertical extensions may be less risky because they leverage the existing brand equity and reputation. Customers may be more willing to try a new product if they already trust the brand. However, vertical extensions may also dilute the brand image if the new product does not meet customer expectations. - Horizontal extensions may be riskier because they may not benefit from the same brand equity as vertical extensions. Customers may be skeptical of a brand's ability to produce a high-quality product in an unrelated category. However, horizontal extensions may also help companies expand into new markets and diversify their product offerings.

Starbucks

- Key Question: Given this strategic landscape, would you recommend that Starbucks should make the $40M investment? - Traditional vs. new customer base, CLV for different customers - changing customer base from 1990 to 2002 customer + competition require companies to change

Segmentation: Characteristics of good segmentation

- MECE: Mutually exclusive, collectively exhaustive (each category should be distinct from the others and should cover all possible options, so that nothing is left out) - Consumers are homogeneous within segments, and different across segments, - Responses are Measurable, - The segment is Reachable, - The segment is Reasonably durable*

Unlever in Bazil

- Marketing strategies for low-income consumers repositioning an existing brand or creating a new one IRL: Ala successful in N distinct packaging, hand-washing, city-by-city

MMBC case

- Preserving Mountain Man's brand equity while repositioning it for success - Potential (pros/cons) of introducing a light beer - Brand extension vs. new brands - Dilution from extension - High costs from new brand - Cannibalization from extension because shelf space

Segmentation: Tactical v. strategic segmentation -understand the differences

- Strategic segmentation: Unobservable needs/benefits that we'll design for (value-based) - Tactical segmentation: Observable and tactically important characteristics: how do we reach them? How do we price? Etc (profile-based) Iterating across strategic and tactical segmentation: - Identify the customers for whom a firm can provide and gain value (strategic) - Then use profile-based segmentation to figure out how to identify and reach them (tactical) - Provides strong guidance for 4 P's

Customer Lifetime Value: For example, understand how thinking in terms of CLV may alter strategic priorities with respect to investments

- Use CLV to determine if an investment is worth it, only worth it if CLV increases by more than the investment

Customer Lifetime Value: For example, think conceptually about what would raise or lower CLV

- m = customer contribution so you can increase customer contribution by increasing number of orders per year or increase unit contribution -> increase CLV - r = retention rate (increase retention rate by increasing customer satisfaction, loyalty) -> increase CLV

Blue Apron

- suffering from high CAC bc of free promotions - Overfocus on low loyalty segment with low retention Customer lifetime / CLV 2 segment model for CLV

Big Picture: 5 C's and 4 P's. Obviously. Know what they are and how they are used in analysis

5C's - Customers: target audience; consumer motivations and behaviors; communication channels; customer perceptions - Collaborators: partners and investors; suppliers and distributors; service providers; content relationships - Company: products; competitive advantage; brand; goals - Context/Climate: laws and regulations; social and behavioral trends; economic trends; technology - Competitors: established and emerging competitors; competitor strengths and weaknesses; competitive strategies; capacity gaps 4P's - Price: price strategy; pricing; allowance; discounts; allowances; payment terms - Place: channels; market coverage; assortment; location; inventory; transport - Promotion: sales promotion; advertising; public relations; direct marketing - Product: features; quality; branding; packaging; services; warranties

Big Picture: Understand how (good) marketers connect the 5 C's and 4 P's (moving from strategic analysis to tactical design!)

5C's are strategic analysis then you use STP and then you use 4P's to implement it

Positioning: Elements of a positioning statement - what makes a good/bad one? (For example, you should be able to look at a positioning statement and tell me what's missing)

A Good Positioning Statement: - Is rooted in your segmentation and targeting work - Addresses the goals, needs and values of the target segment (The REAL ones, not the ones you think they have or should have) - Includes a differentiator that you know matters to them - And provides a compelling reason that anyone should believe you 4 elements of a positioning statement: - Target segment; - Point of difference; - Frame of reference; - Reason to believe *Positioning choice should be defensible and should be achieved by all 4P's.

Consumer Decision Journey and Systems: For example, we might ask you to define a consideration set

A consideration set is a group of products or brands that a consumer will consider when making a purchase decision in a particular product category. Inclusion in consideration set - Top-of-mind awareness • large market share • brand equity - Distribution strategy - Social media/influencer Strategy How does the Consumer Journey work? - Media fragmentation and product proliferation have made consumers reduce number of brands they consider at the outset. - AND the number of brands under consideration during the active-evaluation phase may actually expand rather than narrow as consumers seek more information. - Brands may interrupt the decision-making process by entering into consideration and even force the exit of rivals.- - Brands already under consideration can no longer take that status for granted.

Segmentation: Trade-offs in cost-efficiency and effectiveness as we move from mass to 1-to-1 marketing

As we move from mass towards customization (1-to-1 marketing) then cost efficiency goes down and effectiveness goes up

Brand Measurement/Value Methodologies: What is the shareholder value model for valuing brands? What are the underlying assumptions?

Brand Equity vs. Brand Value: Brand Equity - awareness, position, and image of brand - What the brand calls to memory - The reason consumers buy one brand as opposed to another Brand Value - dollar value of the brand to the owner - The Physical Asset - Value is derived from equity

Pete Fader

CLV - A prediction of each customer's profitability over their entire future relationship (In some cases, we go beyond financial aspects to incorporate other relevant factors; e.g., in pharmaceuticals we may also account for adherence, compliance, and other measures of therapeutic responsiveness (and quality of life) as well.) Five basic business models - Pure (single service) contractual (blue apron, netflix) - Multi-service contractual (verizon, retail banks) - Pure (single behavior) non-contractual (restaurant, retailers, airline, amazon) - Multi-behavior non-contractual (roblox - gaming) - Hybrid: contractual + non-contractual (amazon prime, local gym) Zodiac - brought lifetime value to life on a commercial scale (sold to Nike) Use cases of CLV - customer acquisition - customer retention - loyalty and insights - strategic development Customer-Based Corporate Valuation (CBCV) Explicitly decomposes cash flow into different customer metrics (and models): - Customer acquisition - Churn• Order rate - Spend per order - [Contribution margin, fixed costs, balance sheet effects, cost of capital, etc.] Can use internal data (transaction logs, disclosed customer metrics) and/or external data (from industry sources, data cooperatives, or third-party data vendors) to calibrate each model Case Study: Warby Parker - CAC -> here's how much money we spend and we should divide by new customers, instead they are dividing by customer base -> this will lower the CAC number The goal of the model is to tell a story that is consistent with the underlying behavior (acquisition, retention, spend) and care about forecasting) Warby Parker goes public at $54, but were actually worth like $16

Consumer Decision Journey and Systems: Satisfaction: Expectancy-disconfirmation (Understand the NPS model, What is expectations/disconfirmation model of satisfaction?, What added insights does the SERVQUAL model reveal?)

Expectancy Disconfirmation Model - Consumers compare their performance expectations to actual product performance - Quality is below expectations (emotional dissatisfaction) - Quality is above expectations (emotional satisfaction) - Quality is equal to expectations (expectancy confirmation) NPS Model - On a zero-to-ten scale, how likely is it that you would recommend us to a friend or colleague? What is the primary reason for your score? - Promoters: people who respond with a 9 or 10 - Passives: people who respond with 7 or 8 - Detractors: ratings less than 6§% of Promoters -% of Detractors = NPS What added insights does the SERVQUAL model reveal?** - The SERVQUAL model, which stands for Service Quality, is another model that measures customer satisfaction. It uses a questionnaire to evaluate five dimensions of service quality: tangibles, reliability, responsiveness, assurance, and empathy. By measuring these dimensions, the SERVQUAL model can reveal additional insights into what aspects of a product or service are driving customer satisfaction or dissatisfaction

Consumer Decision Journey and Systems: For example, we may present a given marketing tactic and description of a consumer's processing style and ask you whether this represents a match or mismatch

If people are in system 1, make it easy - Evaluation: Can you make your product's advantage blindingly obvious? Have you provided information on as many* attributes as possible?Is your brand "good enough?" - Moment of Purchase: Can you reduce friction, e.g., pain of payment, steps, delay? - Post-Purchase: Are you rewarding purchase in ways that build habits?Is customer service easy? - Trigger: Automatic?Time-dependent?Unmissable? - Can you make your brand the default?Is your brand physically easy to find/choose?Does your brand stimulate positive affect?Is your brand part of a consumption constellation? If people are in system 2, give them the information and logic they're looking for - Have you articulated your brand's objective superiority? (Better, not more reasons) - Moment of Purchase:Is the value the consumer receives clearly communicated? (This may mean *higher* pain of payment!) - Post-Purchase: Do consumers give and receive feedback about their experience?Do they have real grounds to be satisfied? - Does your segment have a real reason to purchase? - Have you used credible spokespeople?Is your brand highly-rated by respected sources?

Consumer Decision Journey and Systems: For example, given a certain consumer situation and firm tactic, understand whether you would recommend a change - and if so, what/why?

If people need to appreciate your complex value -> Get them into system 2. - Raise perceived risk or benefit -> motivation - Reduce distraction -> ability - Provide ample time -> opportunity - If you are not the market leader - If you have subtle differentiators - If your product/journey is complex - If you want them to build true loyalty - If you think their defection is unintended or damaging to them If you need people to make quick decisions, get them into system 1 - Raise cognitive or time pressure - Appeal to emotions - Present lots* of arguments - Reduce perceived risk - If you ARE the market leader/default - If your point of differentiation is concrete (and others' may be abstract) - If you benefit from shopping inertia - If people have habits, but may not have true loyalty

Positioning: How positioning statements might evolve

If you change the target segment, point of difference, reason to believe, frame of reference)

Brand Measurement/Value Methodologies: How can we calculate the monetary value of a brand?

Interbrand's Valuation Methodology - Value of brand is PV of its future benefits 3 Inputs to Brand Value - Financial Forecasting (projected future earnings) - Role of Branding (only includes brand-related considerations) - Brand Strength (used to adjust earnings for inflation & risk) Step 1: Financial Forecasting - Calculate Economic Value Added from all of a firm's intangible assets today and going forward - Firm Revenues - (Costs + Taxes + OC employing tangible assets) Step 2: Role of Branding - Percent of Buying Decision influenced by brand versus other intangibles (High for apparel, packaged goods, fragrances (especially high-end)− Tiffany & Co. role of branding roughly 67%) (Lower for manufacturers because other intangibles create a large amount of value (convenience, patents, etc)) (4-8% for pharmaceuticals) Step 3: Brand Strength - Brand Strength measures the brand's: - ability to secure demand - power to protect margin - survivability as a going concern - It is scored on a 0 to 100 scale. - Each business unit gets its own score. - The score is used to determine the rate that will discount future branded earnings to a present value. - The score is composed of ten metrics. Stage 3: Brand Risk Analysis: Convert the Brand Strength Score to a Discount Rate - In practice, use risk-free rate of 5% + premium between .5% to 15% (7% on average) WACC - Weighted average cost of capital (WACC) represents a firm's average cost of capital from all sources including equity, bonds and other forms of debt - A firm's WACC is the overall required return on the firm as a whole and is used internally by the company to determine the economic feasibility of expansionary opportunities. - It is the appropriate discount rate to use for cash flows with risk that is similar to that of the overall firm. The Brand Strength determined discount rate is applied to branded earnings The Discount Factor = Previous year's Discount Factor * (1+Discount Rate). Year 1 Discount Factor =1; (e..g., (1 + i), (1+i)2, (1+i)3, etc.)• ** Discounted Brand Earnings= Branded Earnings/ Discount Factor The values are summed to get an NPV of the forecast period Then the perpetuity value is considered Discount rate (8.74)- Growth Rate (2.5) = 6.24 Residual Value =(45.45X1.025)/.0624=746.57 The two combine for the final valuation

Brand Measurement/Value Methodologies: For example: We may ask you to describe the advantages and disadvantages of customer-based brand equity models; What are the different types of metrics used?

Level 1: Brand Awareness - Brand awareness is the accessibility of the brand in memory •Depth: How many consumers know the brand? How well do they know it? •Breadth: When does the brand come to mind? - Measures •Recall (aided, unaided) : Name all the brands of (beverages/soft drinks, ...) that you can think of. •Recognition: Do you recognize this? Have you seen this brand recently? Level 2: Brand Associations - Understanding the associations consumers hold regarding the brand• Which are strong? • Which are favorable? • Which are unique? - Here looking for strategic POD's Level 3: Emotional Response Emotion, arousal, advertising, & branding (Today) −Models of emotions: valence & circumplex - Facial expressions, Ekman's universal emotions & face Level 4: Loyalty/Relationship Net promoter score (NPS, Bain) - On a zero-to-ten scale, how likely is it that you would recommend us to a friend or colleague? What is the primary reason for your score? Customer Based: Measuring Brand Equity: Experimentally - Hold everything constant but the presence/absence of the brand.The amount the branded product commands over the unbranded equivalent is the brand premium. Expressed Value - What would you be willing to pay for this product? - How likely would you be to purchase this product?

Product vs. Customer Focused: Product-focused

Product-Focused (much easier to sell compared to customer-focused) - look for market penetration, you sell to as many people as possible Profitability (2 ways) 1. VOLUME - gain market share through selling a lot (one way to create volume is to lower price) - Revenues increase - the more you sell the more money you make - Product costs go down - the more you produce you get scale economies 2. INNOVATION - constantly creating a new product so people constantly want the new innovation - Product costs go up - R&D costs go up - SO have a high price to cover R&D - Revenues go up Growth opportunities - sell products in different markets OR your an expert in making this product and develop new products based on your expertise Sustainable competitive advantage - SCALE, the bigger you are, the better you are at producing the product the more advantage you have Seller's market - you create a product and you sell it out This product-focused approach works better when you don't have competition - make more money on margin because costs are going down

Big Picture: Different types of strategic orientations: how we got to customer-centricity

Production Orientation - Persuade customer to want what firm has - Standard Product - Competitive advantage: Lowest Cost R& D Adv - Profitability Drivers: Market Share Marketing Orientation - Persuade firm to offer what the customer wants - Differentiated product/service - Competitive Advantage: Quality & Service Customer Knowledge - Profitability Drivers: Customer share and customer loyalty Experience Orientation - Manage customer's entire experience with the firm - Experiential value - Competitive Advantage: Experiences, Transformation Customers as co-creators - Profitability Drivers: Buzz, word of mouth marketing (WOM), referrals IOT, Metaverse/Post COVID - Create interoperable, interconnected engagement - Loyalty loop - Competitive advantage: Connected home platform; Seamless Omni-channel Exp (seamless integration of all online, telecoms and brick and mortar platforms) - Profitability Drivers: Network effects, tech/data interactions

Brand Strategy: Understand the meaning of purpose-driven branding; What are the pitfalls and advantages from different perspectives (For example, I might ask you how Allbirds and Nike have responded to the push to move from me to we, and how this affects their business decisions)

What does a brand mean today? - Brands have the power to change the way people think and act - People want business to step in and fix things (they have lost faith in government) - People want a "we" - community coming together, BUT not at the expense of "me" - People want brands to deliver from "me" to "we" - ME-to-WE continuum to help businesses gain lasting credit for sustainability and social responsibility initiatives Allbirds - Goal: "We make better things in a better way:" Sustainability, climate change, zero carbon impact (implications on design (fashion), growth, performance product) - Vertical has always been part of their strategy; opening more stores and going global (Design with Sustainability at the Core, Reducing Carbon Footprint, Retail Stores: DTC, "Charlie", App: AR) Nike - Melanie Auguste, VP, Global Brand Narrative, Purpose, and Athlete Marketing at Nike discusses brands, marketing, and social issues. 1. A legacy of addressing social issues 2. Blending the art and science of marketing 3. Putting the consumer first, now and in the future Consumers Want Brands to Heal Divisions: Overwhelming majority of consumers agree on the importance of many core values - Open-mindedness, fairness, compassion, honesty - Example: Delta "Close the Gap" campaign; "we don't fly to bring people together, we fly to remind us that we have never been far apart" (pre-Covid) Do something don't just say something (Stand, Walk, Talk) When to Take a Side - If your target consumer is young, liberal and urban and your cause is authentic to your brand - Know your audience

Product vs. Customer Focused: Customer-focused

focus on the customer to create value (you can't go after the whole market, you have to segment the market so you don't go after big market share like you do in product-focused) Profitability (3 ways) Create value - sell to the segment that appreciates the product 1. Premium Price: making a custom product for the specific segment (because product costs are high you charge premium price to make a margin) 2. Loyalty: Create value for you and sell more to you over time 3. Cross-sell: if I know what you want then I can sell products similar to the main product because you already know what the customers like These 3 things increase wallet - meaning you don't have a lot of customers but you want to get as much as possible from each customer you have - the Goal is CUSTOMER SHARE (not market share) SO - revenues go up - selling more - product costs go up - making better products to make more customer value - customer costs go down- LOYALTY, so profitable b/c it costs a lot of money to get the initial customre, but less money to keep them Growth? - looking for new things the customer wants Sustainable competitive advantage? - customer knowledge/data, because the more you know about the customer the more you can sell to them