MKT 401

Prospect Theory - Improving decision making

"Prospect theory is the best comprehensive description we can give of the decision process. It summarizes several centuries' worth of findings and insights concerning human decision behavior. Moreover it has produced an unmatched yield of new insights and predictions of human behavior in decision making." - Hastie and Dawes (2001)

Importance of pre-marketing prior to launch - 2. Pre-announcement to customers

"formal deliberate communication" prior to a new product's market launch Pro -competitive preemption -demand stimulation -distributor support -company image Con -Competitive cuing (revealing intentions prematurely) -Product line cannibalization -Company reputation -Antitrust (collusion or predatory behavior)

Benefit segmentation of equity fund investors - The four customer segments - self-oriented direct clients

- High product knowledge - High involvement - Use of direct distribution channels - Desire for a wide product range - Switch suppliers - More sensible to price changes

Alliances can enable strategic new game strategies - Distribution alliance

- Joint utilization of sales channels, field or customer service organizations -Joint pricing activities in logistics

Benefit segmentation of equity fund investors - The four customer segments - insecure beginners

- Pretend to have high product knowledge - High information expenses - High loyalty to supplier - Small product range sufficient - Focused on prices, but not highly price-sensitive (lacking price knowledge)

Benefit segmentation of equity fund investors - The four customer segments - quality-oriented consulting clients

- Product knowledge below average - Use of traditional channels - Strong focus on consulting - Desire for selectively enlarged product range - Tend to be more sensible to price changes

Strategy development is a sequential process

->Analysis of initial strategic situation -Macroenvironment -Microenvironment -Company situation ->Formulation of alternative marketing strategies ->Evaluation of alternative marketing strategies ->Selection of marketing strategy ->Strategy implementation and implementation monitoring

Basic objectives related to the additional marketing mix components in services - Process Decisions

-Accurate and error-free processes -Cost-effective processes -Flexible processes -Transparency of processes for customers -Reasonable processing time

Macroenvironment: Models and methods - Early warning systems

-Aim at timely detection of significant changes in the company environment -Help companies to account for such changes as early as possible when formulating a marketing strategy

Importance of pre-marketing prior to launch - 1. Internal commercialization

-Aims at organizational factors and is targeted at the management and employees involved in organizing and facilitating market launch in order to establish awareness and education of employees about the innovation ->explain advantages of innovation to own employees ->enable employees to market and sell innovation effectively

Four techniques for managing service quality - Measuring service quality - company-internal data sources - observations

-Analysis of quality indicators (e.g. occurrence of errors in service delivery) -Analysis of quality costs (e.g.costs of resolving errors in service delivery) -GAP model of service quality

Four techniques for managing service quality - Analyzing service quality - Overview

-Analytical methods are more detailed than measurement techniques -Not only recording of service quality, but also determination of reasons for low/high service quality Techniques for analyzing service quality: -Critical incident technique -Frequency-relevance analysis of quality problems -Benchmarking method -sequential incident method (blueprinting) -Fishbone analysis

Four techniques for managing service quality - Measuring service quality - The GAP model of service quality

-Approach that fosters a basic understanding of the development of service quality -Aid in analyzing and influencing service quality -Five potential GAPs GAP 1: Management perceptions of consumer expectations and expected service GAP 2: Management perceptions of consumer expectations and translation of perceptions into service quality specifications GAP 3: Translation of perceptions into service quality specifications and Service delivery (including pre- and post-contacts) GAP 4: Service delivery and External communications to consumers GAP 5: Perceived service and Expected service

Prospect Theory - 1. Editing phase

-Available options are organized and reformulated in order to simplify the subsequent evaluation -Operations in the course of the editing phase are, for example: >Coding >Combination >Segregation -> Many anomalies of preferences result from the editing of prospects

Definition of B2B marketing

-B2B marketing describes marketing activities that relate to business transactions between companies and organizational customers. -Purchases are made by organizations or institutions, not by individual end customers

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Overview

-Best-known approach for conceptualizing the construct of service quality: SERVQUAL -SERVQUAL is based on empirical work -Five dimensions of service quality, according to the SERVQUAL approach: 1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles

Measuring customer - based brand equity - Young & Rubicam's Brand Asset Valuator (BAV)

-Brand equity metric which reflects the notion that the power of brands resides "in people's hearts and minds" -Database of more than 44.000 brands in 49 countries -Four pillars that are based on brand knowledge -Each pillar is measured with multiple items to generate a single brand equity score 1. Differentiation 2. Relevance 3. Esteem 4. Knowledge

Brand management in B2B

-Branding is a relatively unexplored area in B2B marketing -Brands in B2B marketing are less important than in consumer goods marketing. ->objective product features (such as quality) are more important -However, a rise in the relevance of industrial brands can be observed!

Four techniques for managing service quality - Measuring service quality - company-external data sources - Surveys /Questionnaires

-Classification of external surveys/questionnaires on the basis of whether third persons (e.g. experts) or customers are questioned -> in company practice customer surveys by far most useful tool -approaches aimed at the measurement of customers' perceptions of service quality over time: -SERVQUAL -Vignette method -Net Promoter Score (NPS)

The essential ingredients of a market-orientation - 2. Market orientation of organizational structure

-Consideration of customer-related aspects when dealing with organizational divisions -Prominent hierarchical position of the head of marketing/sales Avoidance of over-specialization

Basic objectives related to the additional marketing mix components in services - Physical evidence decisions

-Conveys the image of know-how and efficiency -Customers can easily and quickly find their way -Located within a reasonable vicinity of the customer -Creation of an atmosphere that is consistent with the services being provided

Generic competitive strategies

-Cost leadership -Differentiation

Advantages of standardization

-Cost reduction -Improved quality -Addressing of global customers and global segments

Customer satisfaction to customer loyalty

-Customer satisfaction emerges from a psychological process that compares perceived and expected performance -Customer satisfaction alone does not represent an economic benefit -Customer satisfaction is a prerequisite for customer loyalty -Loyalty impacts company success -Loyalty is the primary objective of customer relationship management

Distinctive characteristics of service - 1. Variability

-Customers introduce external factors into the process of service industry (e.g.:a car when using a repair service) -Personnel variability: different members of the service staff render services in different ways

How to create a market-oriented company

-Demonstrate top management's commitment to customers -Build a strong marketing team staffed by seasoned marketing executives -Deliver strategy based on market activity and competitor benchmarking -Carry out market research and customer needs assessment -Build a customer orientation through the company - not just in the marketing department

Distinctive characteristics of service - 2. Perceived Purchase Risk

-Difficult/Impossible to assess the service before it has been purchased/experienced -High level of uncertainty relative to the service quality -Services exhibit more credence and experience qualities, fewer search qualities

An extended three Cs model for a global price setting - Government policies

-Direct impact on pricing: sales tax (e.g. from 15% in LUX to 213% in Denmark for car sales), tariffs, price controls (e.g. China sets a maximum price in 21 industries to combat hyperinflation) -indirect impact on pricing: interest rates (coc), currency volatility, and inflation spurred by high government deficits ->Variations in government policies lead to price differentials between countries

Ingredient brands and processing brands in B2B marketing

-Division of B2B brands into 2 types: Ingredient brand: is normally noticed by the end customer Processing brand: is typically not visible to the end customer

Importance of pre-marketing prior to launch

-Due to long lead times and decision cycles pre-marketing prior to the introduction of the innovation is key -Three step pre-marketing program 1.internal commercialization 2. Pre-announcement to customers 3. Development of lead customers

The relationship between functional and SBU objectives

-Due to strategic autonomy of SBU it is independently in charge of at least some functional areas -If SBU autonomously undertake practically all functions, SBU objectives are super ordinate to the functional objectives. -Some functions including marketing can be centralized in companies to a certain extent, and thus geared towards cross-SBU objectives and activities -The relationship between the functional and SBU objectives can be presented in the form of a matrix.

Key models and methods for analyzing the initial strategic situation - Macroenvironment

-Early warning systems -PEST analysis -Forecasting methods (e.g. Delphi method) -Scenario techniques

Basic objectives related to the additional marketing mix components in services - Personnel decisions

-Employee competence -Employee motivation -Employee performance / productivity -Employee loyalty -Customer-oriented employees

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Assurance

-Employees who instill confidence in customers -Making customers feel safe in their transactions -Employees who are consistently courteous -Employees who have the knowledge to answer customer questions

Where does globalization stand today? - Economic improvements

-Extreme poverty worldwide ($1 a day or less) was reduced between 1999 and 2004 by 135 million people -The world's economic balance is tilting from rich industrialized countries to emerging markets

Macroenvironment: Models and methods - Forecasting methods (e.g. Delphi Method)

-Generate estimates concerning future developments based on the experiences and knowledge of experts -are well-suited if no sufficient historical data is available for a formal mathematical forecast

The essential ingredients of a market-orientation - 3. Market orientation of organizational processes

-Generation and cross-functional sharing of market-related information and knowledge -Delegation of decision authority to employees in customer contact -Implementation of the principle of the 'internal customer' within the firm

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Empathy

-Giving customers individual attention -Employees who deal with customers in a caring fashion -Having the customers' best interests at heart -Employees who understand the needs of their customers -Convenient business hours

Alliances can enable strategic new game strategies - Product alliance

-Granting of a manufacturing license for another company -Bundled marketing of complementary products of both partners -Joint new product development or market launches

Marketing advantages of high equity brands - Marketing mix - Product

-High equity corporate brands as platforms for new product introductions -Perception of higher product quality -More potential for brand extensions

Marketing advantages of high equity brands - Marketing mix - Communication

-Higher effectiveness of promotions and marketing communications -Higher resistance against the impact of negative events occurring in the brand environment

Innovator advantages

-Higher levels of awareness -Higher rates of customer trial -Greater likelihood of brand loyalty -Selection of most efficient distribution channels -Lower costs due to greater experience and scale -Price leadership -Opportunity to set standards

Four techniques for managing service quality - Analyzing service quality - The Blueprint Technique - Application

-Identification of any potential quality problems(so-called fail points) in the service delivery process steps -Identification of internal interfaces, which are vital for service quality -Usage in surveys to guide the customer step-by-step through the service process to recap her interaction with the service provider (storytelling) and draw conclusions regarding service quality from subjective impressions and assessments

Where does globalization stand today? - Social improvements

-Improvements in basic services(canalization, water treatment plants): ->in South Asia the number of those people without clean water has halved since 1990 -Decline in fertility -> The fertility rate has fallen from 4.8 to 2.6 in the world as a whole in the last 25 years -Rise of literacy rate ->In 1975 75% of people aged 15-25 were literate, today 90% are literate

Factors leading to service customer switching behavior

-Inconvenience -Core service failure -Service encounter failures -Response to service failure -Pricing

Prospect Theory - 2. Evaluation phase

-Individuals will choose the alternative with the highest subjective value (SV) -SV=subjective probability that alternative will lead to certain outcome x subjective value of outcome -Value of options is treated as a function in two arguments: 1.the current asset position (reference point) 2.the magnitude of the change (positive or negative/gains or losses) from the reference point -The function relating the subjective value and the corresponding losses is steeper than that for gains

2. Multiple buying influences - Members of the buying centers

-Initiator -Decider -Gatekeeper -Users -Purchaser -Influencer

Alliances can enable strategic new game strategies - Price alliance

-Joint pricing activities on the part of several companies

Alliances can enable strategic new game strategies - Communication alliance

-Joint usage of communication tools, possibly with a common advertising message

Four techniques for managing service quality - Monitoring service quality - The importance-performance analysis - overview

-Judgment of services on customer importance and company performance -This analysis is used to rate the various elements of the service bundle and identify what actions are required MATRIX

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Responsiveness

-Keeping customer informed as to when services will be performed -Prompt service to customers -Willingness to help customers -Readiness to respond to customers' requests

Distinctive characteristics of service - 4. perishability

-Large degree of inseparability between service production and service provision -Impossible to produce services in advance or to carry forward stock of service for later moments in time -> services cannot be stored!

Customer integration into B2B innovation process - Major risks

-Leakage of company know-how to competitors via customers -Dependency on customers (specificity) -Customer is a difficult partner in innovation development

Innovator disadvantages

-Many new products fail -Higher R&D costs -Risk of premature technology or suboptimal product features -Higher costs of market development -May lack complementary assets -May create a market for competitors

Key models and methods for analyzing the initial strategic situation - Microenvironment

-Market research methods -Competitive structure model (Porter's Five Forces) -Strategic groups model

Blue ocean strategy

-Markets can be divided into red and blue oceans -Blue oceans refer to either newly invented industries or existing industries with altered boundaries -These strategies neglect traditional trade-offs between differentiation and low cost -Companies pursuing blue ocean strategies do not use competition as a benchmark -E.g. Wii video game console -> console can detect the position of a player in a three dimensional space -e.g.nintendo expanded dimensions to the value curve that surpassed the abilities of current offerings

Customer irrationality - Endowment effect - Conclusion & Implication

-Maximum buying prices and minimum selling prices are not alternate expressions of a good's value -Selling prices are more than two times higher than buying prices -Application in marketing: Free or low-cost trials

Four techniques for managing service quality - Measuring service quality - Net promoter score (NPS) - Critics

-Methodological concept of NPS ignores the fine art of customer satisfaction analysis - from driver analysis right through the deduction of appropriate measures (such as CLV) -Driver analysis based on NPS is impossible (no individual values) -The truly "ultimate" index can only be ascertained in longitudinal studies because only in this way can the index be calibrated in line with actual behavior - there is no reason for "believing" in the one and only question -The construct it professes to measure is not embedded in a sound behavior model, and reduction to one question for all sectors is accompanied by a reduction in predictive power -Most importantly: The number of net promoters is not significantly associated with either firm's sales growth or gross margin performance

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Tangibles

-Modern equipment -Visually appealing facilities -Employees who have a neat, professional appearance -Visually appealing materials associated with the service

Degrees of globalization-localization

-Modular approach: range of product parts are used worldwide -Core product (common platform approach): design of a mostly uniform core product /platform with attachments that match local requirements

Drawbacks of standardization

-Off-target/failure to meet local customer needs -lack of uniqueness -vulnerability to trade barriers -vulnerability to strong local competitors

Three tools for identifying important customers - Disadvantages of classical ABC analysis

-Often only a single criterion (revenues) -Often based on revenues and not on profitability -No consideration of potential behind customer purchases -Retrospective and static perspective, instead of estimating future revenues

Macroenvironment: Models and methods - Scenario techniques

-Outline several potential future developments (scenarios) -provide statements with regard to the probability of occurrence of particular scenarios

Marketing advantages of high equity brands - Marketing mix - Pricing

-Potential to command a price premium -Lower price sensitivity by consumers -Relative immunity to price competition

External factors also influence international pricing strategies

-Price controls -Exchange rate fluctuations -Pricing escalation -Inflation ->differing conditions in international markets additionally lead to differentiated international prices

Selected criteria for market segmentation - Buying behavior based criteria

-Price sensitivity -Information behavior B2C: -Selection of shipping venues -Product selection -Buying Frequency B2B: -Selection of sales channels -Buying frequency

Influences on the customer decision process - Marketing Mix Influences

-Product -Price -Promotion -Place

Alliances can enable strategic new game strategies - types of alliances

-Product alliance -Communication alliance -Distribution alliance -Price alliance -Customer loyalty alliance

Benefit segmentation of equity fund investors - The four customer segments - Security-oriented traditionalists

-Product knowledge below average -Low information expenses -Use of traditional channels -High level of loyalty to suppliers -Relatives/friends with influence about average

Four techniques for managing service quality - Measuring service quality - Conceptualization and dimensions of service quality - Reliability

-Providing service as promised -Dependability in handling customers' service problems -Performing services right the first time -Providing services at the promised time -Maintaining error-free records

Distinctive characteristics of service - 5. Intangibility

-Result of a service activity is not concrete; it has no tangible properties

Four techniques for managing service quality - Measuring service quality - The SERVQUAL approach

-SERVQUAL approach provides a method to operationalize service quality -Illustration of quality assessment based on the dual scale Measures service quality using 22 items Assessment of service attributes reflecting the five quality dimensions -For each item a positive and a negative quantitative assessment of service quality is derived from the difference between perceived service and expected service -For each of the five SERVQUAL dimensions an average difference is calculated across all items -Overall service quality is measured by average scores across all five dimensions

Distinctive characteristics of service - 3. Inseparability

-Simultaneous occurrence of production and consumption -Interaction of service provider and service customer necessary for exchange -Production process is critical element in company-customer interaction

Selected criteria for market segmentation

-Socio-demographic criteria -Geographic criteria -General personality characteristics -Benefits and needs criteria -Buying behavior based criteria

Marketing advantages of high equity brands - Marketing mix - Sales

-Stronger network effects in distribution channels due to pull effects -Higher customer loyalty

Four techniques for managing service quality - Analyzing service quality - Benchmarking method

-Systematic comparison of certain company processes and activities with those of other companies -Usage of standardized indicators and benchmarks -Goal: Improve own performance and service

Four techniques for managing service quality - Analyzing service quality - Critical incident technique

-Systematic customer survey asking customers to recall situations they found particularly satisfying/dissatisfying -Goal: Determination/analysis of incidents between customers and the service provier in contact situations ->moments of truth

Specific characteristics of communication decisions in B2B

-Technical information plays a major role in B2B marketing as organizational buyers generally require very detailed information about product features -Necessity for suppliers to satisfy different information requirements of various stakeholders in the buying center -Personal character of B2B marketing communication due to a limited number of customers and the importance of direct sales -Trade fairs and exhibitions as important platforms for a)presenting and demonstrating products to potential customers b)establishing new customer contacts c)keeping track of the competition -Conventional media advertising less significant in B2B marketing -Seller should integrate downstream customers in communication decisions ->ingredient branding as a relevant concept in this context

Four techniques for managing service quality - Analyzing service quality - Fishbone analysis

-Technique for analyzing the causes of quality problems which are then entered into a fishbone diagram -"head" of the fish-bone represents the quality problem -Bones represent the main causal dimensions

Customer integration into B2B innovation process - advantages

-Testing of the market acceptance of new products -Time and cost savings -Quality improvements (due to increased customer orientation) -Image enhancement -Gaining information on competitors

Three tools for identifying important customers - ABC analysis

-The ABC Analysis is a great tool which can be used to identify important (and less important) customers. -The results of an ABC analysis can support prioritization of resources A-Customers: few customers make up high amounts of revenue B-Customers: a bit more customers make up medium amount of revenue C-Customers: most customers make up the smallest share of revenue

Importance of pre-marketing prior to launch - 3. Develop lead customers

-The development of lead customers is concerned with bringing a set of first key customers on board -These lead customers (often industry leaders) matter in particular because they influence other customers to buy. -Implication: Identify lead customers, sell to them, and encourage them to recommend the innovation -> faster acceptance

Companies can differentiate themselves by creating new markets

-The first point to appreciate is that to create a new market you do not necessarily have to discover a new product or service -Often companies create huge new markets using the same product as everybody else by redefining what benefits the companies are offering customers

The essential ingredients of a market-orientation - 1. Market orientation of organizational culture

-The layer of values -The layer of norms -The layer of artifacts

Strategies that facilitate product differentiation - Explanation of Ansoff

-The product-market growth matrix of Ansoff (1965) is a well known concept in the area of marketing with important strategic growth implications. -The concept illustrates the risks inherent in the different strategies -The matrix can be regarded as a portfolio of strategies with an emphasis on the notion of a balanced product market growth matrix

Product-price positioning strategies should be aligned with differentiation strategy

-The product-price positioning of a company is related to the general design and structure of the marketing mix -The attribute "performance" relates to non-price marketing instruments -Price and performance can be assessed both qualitatively or quantitatively relative to the competition

Additional marketing mix components required by services

-Traditional breakdown of marketing mix into four classic components (the 'four Ps') must be supplemented regarding services -3 elements generally added to traditional marketing mix areas (Product Pricing Communication, Sales decision): -Personnel decisions -Physical evidence decisions -Process decisions

Four techniques for managing service quality - Analyzing service quality - Frequency-relevance analysis of quality problems

-Used to classify quality problems based on their frequency and significance for the customer -Implication: the more important the quality problem is to the customer and the more frequently it occurs, the more urgently the service provider has to address the problem

Key models and methods for analyzing the initial strategic situation - Company situation

-Value chain analysis -Benchmarking -SWOT analysis

Four techniques for managing service quality - Analyzing service quality - The fishbone analysis of service quality - overview

-Visualization of problem structure as a basis for discussion of quality problems in the company -However, fishbone analysis does not offer specific solutions to problems; it only helps to identify the most probable causes of a specific problem

Prospect Theory - Implications for marketing

-What markets will respond to what type of offer -How an advertising message is framed -how a product is priced and the premium a customer is willing to pay -How a product's price is perceived relative to the competition and customer expectations -How a new product is positioned

Branding and the country-of-origin effect (COE) - What is the country-of-origin effect?

-When customers are unfamiliar with a product (e.g. product quality) country image has a "halo effect" on their evaluation of the product. -A positive country image may allow marketers to introduce new products that quickly gain customer recognition and acceptance -Products made in developing countries are only marketable when they are priced far less than products offered by regional or global competitors

Areas relevant for strategic analysis - questions

-Which general developments in society are relevant for formulating a marketing strategy? -Which general macroenconomic developments are relevant for formulating a marketing strategy? -Which general political developments are relevant for formulating a marketing strategy? -Which general legal developments are relevant for formulating a marketing strategy? -Which general technological developments are relevant for formulating a marketing strategy?

Importance of international marketing

-Worldwide growth in international business operations -continued increase of international exports -ever-increasing economic interdependencies between major economic regions of the world

Microenvironment and company situation: Models and methods - Competitive structure model (Porter's Five Forces)

-analyzes five forces that determine the attractiveness of an industry -considers intensity of rivalry among existing competitors, bargaining power of customers as well as suppliers, threat of new entrants, and threat from substitute products

2. Multiple buying influences - Members of the buying centers - Decider

-approves the contemplated purchase -often with major purchases, several of the company's senior managers act together

2. Multiple buying influences - Members of the buying centers - Purchaser

-concerned with obtaining the product or service -usually the corporate purchasing department fulfills the purchaser role

2. Multiple buying influences - Members of the buying centers - Users

-concerned with using the product or service -who fulfills the user role depends on the product or service

Microenvironment and company situation: Models and methods - SWOT analysis

-is an integrated approach that combines analyses of the macroenvironment, microenvironment and the company -compares the company-external opportunities and threats to the company-internal strengths and weaknesses

Influences on the customer decision process - Psychological influences

-motivation -personality -perception -learning -values, beliefs and attitude lifestyle (VALS)

A new management paradigm prevails the interrelated characteristics of the successful 21st century enterprise

-networked(alliances) -global perspective -customer driven -stakeholder focused -value added & quality -time competitive organization -technology based information -flatter, less hierarchical, cross functional -innovative, entrepreneurial -vision directed with shared values & culture -flexible learning -individually&group empowered organization

2. Multiple buying influences - Members of the buying centers - Gatekeeper

-often keeps up on the range of offerings available -controls flow of information

Influences on the customer decision process - Sociocultural Influences

-personal influence -reference groups -family -social class -culture -subculture

Importance of customer behavior for marketing - The study of customers helps firms and organizations improve their marketing strategies by understanding issues such as:

-psychology of how customers think, feel, reason, and select between different alternatives (brands, products, stores) -psychology of how the customers are influenced by their environment(culture, family, media) -behavior of customers while shopping or making other marketing decisions -how customer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer -limitations in customer knowledge or information processing abilities influence decisions and marketing outcome -how marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the customer

Influences on the customer decision process - Situational influences

-purchase task -social surroundings -physical surroundings -temporal effects -antecedent states

Five-stage model of the customer decision process - 1. Problem recognition

-the buying process begins when the customer acknowledges a problem or a need -People first fill lower order needs before filling higher order needs (Maslow) -It is important to recognize the conditions that trigger a particular need in order to develop marketing strategies based on these triggers -Products and services create benefits for customers through the satisfaction of their needs -> Thus a meticulous evaluation of customer needs should be the basis of all product decisions

An extended three Cs model for a global price setting - Competitive factors

...Strategic goals: Anticipate competitor price changes and anticipate competitor reaction to price changes ...Modes of competitive pricing behavior: -Cooperative pricing -Opportunistic pricing: -Global vs. local players, state-owned companies enjoying subsidies -Price leader vs. price taker - Other factors: smuggling operations put price pressures on affected products

An extended three Cs model for a global price setting - Company related factors

...Strategic goals: profit maximization, market penetration... ...Costs: differentials between countries may lead to price gaps ...Cost reduction potential: -manufacturing scale economies through product standardization -logistics cost savings through centralization -marketing cost savings -savings through local sourcing ->Costs set a floor to pricing

Create new markets by redefining...

...who the customer is (IKEA, easyJet) ...what is offered to the customer (Starbucks, Nespresso)

Specific characteristics of B2B marketing - Overview

1. Derivative character of organizational demand 2. Multiple buying influences 3. Multi-organizational participation 4. Long-term nature of business relationships 5. high degree of personal interaction

The essential ingredients of a market-orientation

1. Market orientation of organizational culture 2. Market orientation of organizational structure 3. Market orientation of organizational processes

Four techniques for managing service quality - Overview

1. Measuring the service quality -Company-internal data sources -company-external data sources 2. Analyzing the service quality 3. Influencing the service quality -Organizational structure -Workflow organization -Company culture / employee management 4. Monitoring the service quality

Primary areas of relevance for selected customer relationship management instruments

1. Personal instruments 2. Impersonal sales instruments 3. Personal customer service instruments 4. Impersonal customer service instruments

Blue oceans - Four key questions need to be adressed to implement new game strategies

1. Which of the factors that our industry takes for granted should be eliminated? i.e. whether factors that companies compete on actually deliver value to customers 2. Which factors should be reduced well below industry standard? i.e. whether products and services have been overdesigned in race o match and beat the competition 3. Which factors should be raised well above the industry standard? i.e. uncover and eliminate compromises industry forces customers to make 4. Which factors should be created that the industry never has offered? i.e. break out of industry's established boundaries to discover entirely new sources of value for customers -> costs low, benefits high - > Blue Ocean Strategy

Customer loyalty - Multi-dimensional phenomenon

1. Willingness to recommend the company or product -> recommending 2. Willingness to buy a higher share of purchases from the company 3. Willingness to buy additional product categories (cross-buying) 2+3->expanding 4.Willingness to buy again ->repeat buying

Three drivers of customer value for your company

1.Customer acquisition 2.Customer margin 3.Customer retention

Service quality in online environment

1.Reliability/Fulfillment 2.Web Site design 3. security/privacy 4.Customer service -> The most basic building blocks of a compelling online experience are reliability and outstanding website functionality in terms of time savings, easy transactions, good selection, in-depth information, and the right level of personalization

Product-market growth matrix of Ansoff

2x2 Matrix Product dimension (a)Present products | (b)new products Market dimension (1)Present markets | (2)new markets (a1) Market penetration (a2) Market development (b1) Product development (b2) Diversification

how to open up new international opportunities - Matrix

2x2 Matrix of Segments | Countries concentration | diversification on each side Segments concentration x countries concentration -Narrow Focus Segments Diversification x countries concentration -Country Focus segments concentration x countries diversification -Country Diversification segments diversification x countries diversification -Global Diversification

Adapted approaches to strategy

70s portfolio models -Growth-share matrix -Experience curve 80s industrial organization models -industry structure analysis -generic strategies -barriers to entry 90s capability focus -competitive dynamics, hyper-competition -core competences, processes, learning ability, quick adaption 21st new game & stakeholder focus -blue ocean/red ocean -network and stakeholder orientation

Five-stage model of the customer decision process - 5. Post purchase behavior

A customer's satisfaction determines if they will buy the product again and talk favorably or unfavorably about the product to their peers. Perception >/</=Expectation Ways to increase customer satisfaction (CRM) -increase performance -influence perception -manage expectation

Customer irrationality - Endowment effect - Explanation

A good is evaluated as a loss when it is given up and as a gain when it is acquired (see prospect theory)

Four techniques for managing service quality - Measuring service quality - Net promoter score (NPS) - overview

A net promoter program consists of five elements: -Key metrics (NPS) -Leadership practices that instill customer focus -Organizational strategies to ensure adoption -Integration with core business processes -Operational systems as a support

Three drivers of customer value - Acquisition

Aim: Increasing the customer base Metrics: acquisition rate and costs

Three drivers of customer value - Margin

Aim: growing profit from existing customers Metrics: realized margin and margin growth

Three drivers of customer value - Retention

Aim: minimizing customer defection Metrics: retention rate and costs

Customer Irrationality - Status quo bias - Conclusion & Implications

Application in marketing: -Customers resistance to adopt innovations -> marketing activities directed to tear down "adoption barriers" -See FoC Coca-Cola (Drink cola during the winter)

B

B2B marketing

C

B2C marketing

Selected criteria for market segmentation - Benefits and needs criteria

B2C/B2B -Price -Quality -Image -Service

Selected criteria for market segmentation - Socio-demographic criteria

B2C: -Gender -Age -Marital status -Income -Education B2B -Duration of business relationship -Sales -Industry

Selected criteria for market segmentation - General personality characteristics

B2C: -Lifestyle -Attitudes -Interests B2B: -Attitudes and interests of business partners

Selected criteria for market segmentation - Geographic Criteria

B2C: -Location of residence B2B -Location of headquarters

Forecasting with the Delphi method - Company example

Bell Telecommunications, Canada Objective/forecasting subject: -Identification of corporate opportunities (or threats) that will arise through changes in society and/or technology in the next decades. Interview participants: -Members of a panel: experts in different fields e.g. education, medicine, business, science etc. Results: -Value changes in North American society were forecasted (e.g. decrease of traditionalism, increase of individualism), changes of professions (e.g. medical professions, business procedures) and technology usage in these professions

Benefits and dangers of international price differentiation

Benefits: -Skimming willingness to pay in each country optimizes revenues Dangers (if customers find out) -Annoying and potentially losing customers -Lowering the customers' reference prices -Arbitrage tendencies (grey imports)

Four techniques for managing service quality - Analyzing service quality - The Blueprint Technique

Blueprint technique = analytical method with a focus on the service delivery process along all key activities -Three important "lines" within the process 1.Line of external interaction: separates the activities of the customers from those of the service provider 2. Line of visibility: separates all activities that are visible from those that are not visible to the customer 3. Line of internal interaction: separates the activities of the contact persons from activities taking place in the course of supporting processes (e.g. back-office processes)

Dimensions of brand knowledge

Brand knowledge -Brand awareness a)Brand recall b)brand recognition -Brand image a)types of brand associations a)A)Attributes a)A)Benefits a)C)Attitudes b)favorability, strength and uniqueness of brand associations Customer-based brand equity occurs when the customer is familiar with the brand and holds some favorable, strong, and unique brand associations in memory.

Specific characteristics of B2B marketing - 4. Long-term nature of business relationships

Business relationships tend to be close and enduring because of -product longevity -importance of service and maintenance Suppliers can help to promote long-term business relationships through the implementation of measures that establish customer satisfaction

The challenge of B2B brands

Buying centers of companies/institutions purchase mostly technical, non-standardized, high-involvement products from other companies/institutions, through direct distribution channels, while cultivating a relationship with the respective sales force. -More emphasis on the companies behind the brands than the brands themselves -The sales force is a major brand-building tool in a B2B context. -The brand choice does not only depend on an assessment of the product's functional benefits, but also the competence of company's employees.

2. Multiple buying influences

Buying decisions by business customers often involve multiple buying influences, rather than a single decision maker ->verschiedene Leute in der Firma nötig für Abschluss Several members of an organization contribute to the purchase decision. When selling industrial products firms need to consider these different members, their roles in the purchase decision, and their degree of influence.

Customer-based brand equity (CBBE) - Definition

CBBE defines the differential effect of brand knowledge on customer response to the marketing of the brand -CBBE is a conceptual framework to provide a perspective on strategic brand management and comprises three key aspects 1. Differential effect 2. Brand knowledge 3. Customer response ->Brand knowledge forms the foundation of CBBE

Customer Relationship Management (CRM)

CRM refers to the tools and methods employable by companies to create and maintain customer relationships and promote customer loyalty -Approaches to creating customer loyalty: --Focus on interaction --Focus on bonuses/rewards --Focus on barriers to switching companies

New Game Strategies: How to diversify - Characteristics

Characteristics: -New game strategies are more effective and successful the more competitors are taken by surprise -New game strategies aim at shaping competitive conditions in a way that favors the particular strengths of the company -New game strategies can lead to high profits, but also pose significant risks

Innovation management in B2B

Companies are operating in difficult market environments: -saturated markets -intensified competition -information overload -pressure on margins -Marketing managers are aware of the importance of innovations as a prerequisite for future growth and long-term company success -In 2010 German companies spent 121.3 bn on innovations. in 2012 this number is expected to increase to 129.2bn -However developing and launching innovations is complex, especially due to customer dependencies and the need for a stakeholder perspective

Integrating brand equity and customer equity - Two sides of a coin

Complementary view on customer equity and brand equity Customer equity: -Focus on financial value extracted from customers -Ignores network effects and growth opportunities provided by strong brands -Realized value of marketing programs ->customer as key success drivers Brand equity -focus on strategic issues in managing brands and prescriptive insights for the marketing mix -ignores a disaggregated view on customer segments -potential value created by marketing programs ->brands as necessary touchpoints

Level 1: Business mission

Consists of the long term objectives related to the nature and purpose of the company. The business mision determines how the company intends to achieve the company vision. ->"Every day, we use our technology and expertise to make payments safe..".

Marketing as a dominant functional strategy (Nestlé)

Corporate strategy -marketing strategy --Personnel strategy --Production strategy --Procurement strategy --R&D strategy ->Marketing strategy plays a key role compared to other functional strategies ->The marketing area has a central role with respect to strategic issues in the company

Marketing strategy as the corporate strategy (P&G)

Corporate strategy=marketing strategy (P&G) -Personnel strategy -Production strategy -Procurement strategy -R&D strategy ->The definition of the company philosophy and strategic objectives constitute main tasks of strategic marketing ->Marketing strategy has a very high value for the company

Reasons for standardizing prices

Cost-related considerations -High costs of implementing price differentiation High interdependence of markets -lower trade barriers -lower currency risks -existence of international key accounts -high degree of international M&A activity between customers -centralized procurement of customers -higher price transparency Other considerations -Legal restrictions on price differences -customer emphasis on price fairness

Reasons for standardization in global communication

Cost-related considerations -economies of scale/scope -critical mass for brand recognition -cross-fertilization customer-related considerations -consistent (brand) image -benefit from cross-cultural similarities of targeted customer segments -anticipate converging customer needs -needs of internationally expanding customers and distributors -Bargaining power vis-à-vis international customers and distributors

Branding and the country-of-origin effect (COE) - What is the country-of-origin?

Country associated with the product: -country of headquarters -country of manufacture or assembly -country of product design -country associated with the brand name (e.g. German cars)...

Branding and the country-of-origin effect (COE) - What does the effect depend on?

Country-of-origin effects are not stable over time. -country images can change when customers become more familiar with the country, the marketing practices behind the product improve, or when the actual quality of products improves. Example: Japanese-made cars' image... When customers are more knowledgable about country's products -Country image may be less important in forming their beliefs about product and brand attributes Demographics make a difference: Country-of-origin influences are particularly strong among the elderly, less educated, and politically conservative COE depend on product category -Japan is strongly linked in customers' minds with "high-tech" and performance-type attributes, but is perceived poorly on attributes like design, hedonism, or style. COE effects are more relevant for products like cars or customer electronics, while COE effects would be less relevant for cosmetics or designer clothes

Global communications and culture

Culture is the set of traditional beliefs and values that are transmitted and shared in a given society. Cultural forces: -Behavior/Consumption -Thought Processes -Communication process

Three tools for identifying important customers

Customer classification -ABC analysis -Scoring models -Customer portfolio

Aspects of customer loyalty in B2B marketing - overview

Customer loyalty as the main objective of CRM activities Two levels of customer loyalty: -Customer loyalty on an individual level -Customer loyalty on an organizational level Analysis of customer loyalty according to 4 aspects: 1. Quantity-related aspects 2. Price-related aspects 3. Resource-related aspects 4. Time-related aspects

Complaint management as an opportunity

Customer loyalty before critical incident(average) critical incident leading to complaint(sharp drop) -result of effective complaint handling: permanently increased customer loyalty -result of ineffective complaint handling: permanently reduced customer loyalty

Customer-based brand equity (CBBE) - Customer response

Customer perceptions, preferences, and behavior arising from marketing mix activity

The impact chain of CRM

Customer satisfaction -> Customer retention(re-buying, cross-buying, recommendation->relationship success) -> Increase in profit (sales volume, price, cost) ->economic success

Customer satisfaction - measurement pyramid

Customer satisfaction is measured in a pyramidal way 1. Overall satisfaction 2. Satisfaction areas 2.a)product-related areas -product quality -assortment/customization -availability 2.b)service-related areas -order processing -in-house reps -services -complaint management 3.Satisfaction criteria -single questions

Reasons for differentiation in global communication

Customer-related considerations -fill cultural gaps in terms of lifestyles, benefits sought, usage contexts, etc -avoid cross-cultural misunderstandings of names, symbols, and even colors -address different stages of market development, e.g. need to create brand awareness and to educate the customer in new markets -make use of country-of-origin effect Environmental considerations -Different climate conditions -different technical and legal norms Strategic considerations -Possibility to spin-off and sell brands -occupying niche markets -supporting price differentiation and fighting gray imports

Five-stage model of the customer decision process - 3. Evaluation of alternatives

Customers base their problem-solving process on the benefits a product offers to them. Thus markets are often segmented according to the benefits that are important to specific customer groups. Moreover a company must: -strategically achieve a place in a customer's awareness set, evoked set, and especially, choice set -recognize its competitors in a customer's choice set in order to plan appropriately -identify customers' information sources and evaluate their relative influence

Five-stage model of the customer decision process - 3. Evaluation of alternatives - Expectancy-value model

Customers evaluate products and services according to evaluation criteria (attributes) which are weighted by their perceived importance

Typology of organizational customers - overview

Customers in B2B marketing: a)Governmental organizations b)Private sector companies b)i)Users b)ii)Original Equipment Manufacturers (OEM) b)iii)Retailers c)Public and non-profit institutions

Defining the relevant market requires collecting market data first

Data basis -Collection of primary data --observation --Combination of survey and observation ---Experiment(Laboratory/Field) ---Panel(Consumer/Retail/Special) --survey ---qualitative focus: ----In-depth interview ----group discussion ---quantitative focus: ----Standardized personal interview ----Standardized written interview ----standardized telephone interview ----online survey -Collection of secondary data --Internal data --External data(public/commercial)

Four techniques for managing service quality - Measuring service quality

Data sources -Company internal a)survey/questionnaire b)observation -company-external a)observation b)survey/questionnaire b)1.third persons b)2.customers ->In general company-external data sources are of greater relevance when measuring service quality -> in practice various data sources are used that complement each other (e.g. the analysis of company-internal quality indicators can supplement data from customer surveys)

Customer Irrationality - Anchoring Effect - Explanation

Decision makers, in developing their final estimate, adjust the considered anchor but tend to do so insufficiently

Making decisions about standardization

Decisions about the degree of standardization largely depend on situational variables: PRO standardization: -High degree of customer similarity across target markets -strong interdependence of of markets -high degree of cross-national cost synergies -extensive marketing experience Decision-making areas for product standardization: 1. Product mix 2. Communication mix 3. Pricing 4. Distribution 5. CRM

How to manage complaints professionally

Decisions concerning... ...Management of employees' attitudes ...Complaint definition ...Organizational implementation ... complaint stimulation ...complaint reception ...complaint solution ...complaint analysis ...performance control ...IT system supporting complaint management

Definition and importance of service

Def: -The "production of an essentially intangible benefit, either in its own right or as a significant element of a tangible product, which through some form of exchange, satisfies an identified need" (palmer 2001) -Economic exchange activity that creates a non-physical output for which production and consumption usually occur simultaneously (Zeithaml et al. 2006) -Greater need for service differentiation due to increased product harmonization

Company vision

Defines what the future is supposed to look like (visionary goals) -> "A world beyond cash".

Forecasting with the Delphi method

Definition of forecasting subject ->Selection of delphi interview participants ->individual interviews ->Collection and (statistical) evaluation of answers ->Submission of results to participants (back to interviews) ->Final analysis of answers ->Convergence towards a group opinion

1. Derivative character of organizational demand

Demand for industrial products is derived from the ultimate demand for consumer products. -> ohne Endnutzer kein B2B B2B companies need to consider not only direct customers, but also the customers located downstream in the process (customer's customer)

Value chain analysis aids in the analysis of individual competitors

Depiction of a company's business process as a series of value generating activities -The analysis identifies sources of customer benefits and thus potential competitive advantages rooted in individual company activities -The firm's profitability depends on how well and efficiently it can perform these activities and in doing so it can create 'value added' for its customers (and realize the profit margin)

Relevance of the additional 'three Ps'

Derived from key service characteristics: -Intangibility: (service normally cannot be patented, high risk of copy, three Ps critical in creation of competitive advantage) -High perceived purchase risk: (Measures in the areas of personnel, physical evidence and pricing as quality indicators) -Variability and integration of external factors

Descriptive decision theory

Descriptive decision theory explains how individuals actually make decisions and takes into account psychological influences and limited information processing capacity. Descriptive decision theory explains irrationality and decision anomalies

An extended three Cs model for a global price setting - Channels

Distribution channels -Variations in trade channel and length of channels exist across countries -Arbitrage opportunities through cross-country price gaps lead to parallel imports (gray markets) from low-price countries to high-price countries ->Variations in distribution channels lead to price differentials between countries

Level 4: Instrumental objectives

Effected by functional objectives: -Tangible and specific company goals which are derived from the functional objectives -Functional objectives from a marketing standpoint are concerned with the individual components of the marketing mix -Instrumental objectives refer to decisions concerning product, pricing, sales and distribution and communication. ->Maintain sales despite a downturn in the market

Usually there is more than one country candidate

Entry Evaluation Procedure Stage 1 - Country identification Stage 2 - Preliminary screening Stage 3 - in-depth screening -Social/cultural forces -Economic forces -Competitive forces -Technological forces -Regulatory/legal/political forces Stage 4 - Final selection

Benefit segmentation of equity fund investors - The four customer segments

Equity funds market in Germany: -23.8% security-oriented traditionalists -23.2% self-oriented direct clients -38.1% quality-oriented consulting clients - 14.9% insecure beginners

Steps between evaluation of alternatives and purchase decision

Evaluation of alternatives ->Purchase intention ........->attitudes of others ........->unanticipated situational factors -> purchase decision

Aspects of customer loyalty in B2B marketing - Quantity-related aspects

Expansion of the business relationship via additional purchases ("share-of-customer")e.g. -a buyer of glass does not only purchase special glass, but also standard glass -Buyer covers 80% of its demand for special glass with one supplier

Distinctive characteristics of service - Overview

Five fundamental and distinctive characteristics can be differentiated when characterizing services: 1. Variability 2. Perceived purchase risk 3. inseparability 4. perishability 5. intangibility

What drives globalization?

Five major globalization drivers: 1. Market drivers -customer needs, the emergence of global customers and channels 2. Competitive drivers -Competitors who go global provide reasons for firms to follow 3. Cost drivers -Economies of scale, economies of scope, and sourcing advantages 4. Technology drivers -e.g. the internet, convergence of technologies 5. Government drivers -e.g. ISO 9000 - a global standard of quality certification -Political systems /more open, democratic systems -free trade zones

Levels of competition: A complete understanding of competitive area is needed to guide strategy (with example)

From large to small: Budged competition: -Food and entertainment Generic competition: -Beverages Product category competition: -Soft drinks Product form competition: -diet colas

SWOT analysis - resulting strategies

From right to middle: Neutralization strategy From right to left: Conversion strategy Strengths to opportunities: Matching strategy

Level 3: Functional objectives

Functional objectives are formulated for the various functional areas within the company, such as marketing, finance, or R&D. They facilitate the accomplishment of higher-order company objectives ->effective internal collaboration between sales and marketing Strategic business unit (SBU) objectives - Objectives are frequently defined for SBUs which are organizational units within a company that have their own business and market mission along with a certain strategic decision-making autonomy. -> Two of ten business units should focus on expansion into new markets

Often a "Think globally but act locally" approach is practiced

Global -Global low-cost production and selling -Global roll-out of concepts/high-speed -Low complexity Local -Culturally close to customers -Flexible response to local customer needs -Regional and local market penetration --> Glocal

Customer Irrationality - Framing Effect - Explanation

Identical options can be framed as gain or loss. The prospect of loosing 400 lives looms larger than the gain of saving 200 (prospect theory)

Importance of pre-marketing prior to launch - 2. pre-announcement to customers - wheel of factors

Image/reputation advantage, need for software/programming high: should pre-announce low: should not pre-announce Length of customer decision process long: should pre-announce short: should not pre-announce market share low: should pre-announce high: should not pre-announce customer learning requirements, customer switching costs major: should pre-announce minor: should not pre-announce

An extended three Cs model for a global price setting

In developing a pricing strategy the firm must take into account -Customer -Government policies -Competitors -Company -Channels

Five-stage model of the customer decision process - 4. Purchase decision

In executing a purchase decision the customer may make several sub-decisions 1. brand 2. specific features 3. retailer 4. quantity 5. timing 6. payment method -Purchases for everyday products involve fewer decisions, for example, in buying low-involvement products a customer usually does not think about the brand or payment method. Involvement determines decision intensity -In some cases a customer may decide not to evaluate each product and/or intervening factors may affect the decision

Defining the relevant market sets parameters for analysis of microenvironment

In market-oriented companies the relevant market is predominantly based on buyers and their needs Criteria for defining the relevant market: -Buyers -Companies -Products -Needs

Prospect Theory - 1. Editing phase - Coding

Individuals normally perceive outcomes as gains and losses, rather than final states of wealth. These gains and losses are defined relative to some neutral reference point which is usually the current asset position.

E

International marketing

Definition of international marketing

International marketing refers to the marketing activities of a company that serves different markets in various countries International marketing aims at setting the stage within the company for an effective implementation of market-related activities and customer relationship management across countries

Customer integration into B2B innovation process

It is particularly important to integrate customers into the innovation process of industrial goods Customer integration could comprise -Information sharing: sharing of technological, marketing, production, and inventory information etc. -Product co-development: joint product design, process engineering, and production operations with key suppliers and customers

Alliances can enable strategic new game strategies - Customer Loyalty Alliance

Joint customer loyalty activities by companies

Prospect theory - definition

Kahneman/Tversky(1979) Prospect theory is a descriptive decision theory that describes decisions between alternatives that involve risk where the probabilities are known. In this sense, the theory predicts real-life choices, rather than optimal decisions. It distinguishes between two phases of the choice process: 1. the early phase of editing 2. the subsequent phase of evaluation

Forecasting with the scenario technique

Kegelform (geometrischer Kegel, keiner zum Bowlen) today(small end) to different scenarios(wide end) in the future -In contrast to other forecasting methods the scenario technique offers several potential future developments, depicted by a scenario funnel. -A scenario funnel illustrates the process of scenario development: --Developments in the future are predetermined by present conditions (status quo) --The further we look into the future the wider the spectrum of potential developments --Several scenarios are provided based on trends, disruptive events, and decision points -> Highly relevant for industries in which the environment evidences strong discontinuities

Strategic group analysis

Key assumption: Firms within an industry differ in the strategic choices they make which explains differences in profitability

Towards a new marketing paradigm

Last Millennium -function -separate organization -product management -mass markets -marketing research -assessing customer needs -transactions -"self-sufficiency" bias New Millennium -philosophy -cross-functional organization -market management -market segments, customization -market sensing -anticipate and channel customer needs -long-term customer relationship -co-marketing and strategic alliances ->Market-orientation

Reasons for differentiating prices

Low interdependence of market -customers are local -customers have less transparency of foreign prices -insulating market sub-segments is possible -products are differentiated -products are easier to customize large differences of markets -heterogenous customer needs -heterogenous willingness to pay

Aspects of customer loyalty in B2B marketing - Resource-related aspects

Making relationship-specific additional investments; e.g. -Supplier adapts the production equipment to the customer's products -EDI-based networking of the transaction process with the supplier -coordination of logistics

A thorough assessment of international markets is a key to success

Market assessment -after the decision has been made whether to internalize (reactive vs. proactive approach), a thorough market assessment is necessary to decide which market(s) to enter. -A useful tool is an environmental scan as traditionally conducted in marketing Forces assessed in such a scan are -Social/cultural forces -Economic forces -Competitive forces -Technological forces -Regulatory/legal/political forces

Influences on the customer decision process

Marketing Mix Influences Sociocultural Influences Situational influences Psychological influences

A

Marketing Strategy

Marketing advantages of high equity brands - Marketing mix

Marketing mix: -Product -Pricing -Communication -Sales

Market-orientation initially impacts objectives related to potential...

Marketing objectives related to potential -> Marketing objectives related to market success -> Economic marketing objectives and ultimately drives economic success

strategic marketing and the marketing strategy concept

Marketing strategy includes all basic and long-term activities in the field of marketing that deal with -the analysis of the strategic initial situation of a company and -the formulation, evaluation and selection of market-oriented strategies and therefore contribute to the goals of the company and its marketing objectives. Companies require a broad road map that defines their conduct over an extended period of time This planning process is illustrated through the strategic aspects of marketing.

Four techniques for managing service quality - Influencing service quality - Overview

Methods for improving service quality particularly relevant in 3 areas: 1.organizational structure 2.workflow organization 3.company culture/employee management

System of company objectives

Multiple levels - different objectives Company vision -> Level 1: Business mission -> Level 2: Company objectives -> Level 3: Functional objectives (R&D, Finance, Mkt); SBU objectives -> Level 4: Instrumental objectives

Specific characteristics of B2B marketing - 3. Multi-organizational participation

Multiple organizations are often involved in the procurement process, in addition to the supplier and buyer organizations ->banks, plants, firms, authorities... This multi-organizational participation necessitates stakeholder management

Four techniques for managing service quality - Measuring service quality - Net promoter score (NPS) - Ablauf

NPS: Measure of the probability that customers recommend a product/service to other customers -> it actually gauges customer satisfaction Customers can be categorized according to their answers on a 0-10 rating scale: -Promoters(9-10): loyal enthusiasts who keep buying from company and recommend it -Passives (7-8): satisfied but unenthusiastic customers who easily switch to competition Detractors(0-6): unhappy customers

Breaking down customer satisfaction by attractiveness yields important insights into the resource allocation of the sales force

Normal situation: A-Customers: high satisfaction B-Customers: medium satisfaction C-Customers: lowest satisfaction Problematic situation: A-Customers: Lowest satisfaction B-Customers: Medium satisfaction C-Customers: Highest satisfaction

Differentiation of strategies according to level in the organization

Objectives lead to strategy What to achieve: Objectives -> How to achieve it: Corporate strategy -> -Business unit strategy -Functional strategy -Instrumental strategy

Companies involved in international marketing face multiple challenges

Operating in a multi-country context implies: -differences in environments such as social/cultural, economic, competitive, technological, regulatory/political/legal environments -differences in customer behavior/market segments -differences in marketing infrastructures: media, distribution, logistics In response companies need to: -adjust to these differences -coordinate operations across national borders

Specific characteristics of B2B marketing - 5. High degree of personal interaction

Organizational buying behavior is characterized by a high degree of personal interaction between the company and the organizational buyer ->constant dialogue When marketing industrial goods, personal contacts play a key role in the success of the business relationship. -> Personal selling and systematic customer relationship management (CRM) are of major importance!

An extended three Cs model for a global price setting - Customer related factors

Price sensitivity is the strongest factor impacting pricing and is determined by -Economic value to the customer -availability and awareness of substitutes -difficulty of product comparison -expenditure on the product: large purchases are more price sensitive Customer demand across countries is also a function of buying power -price premiums often a major hurdle in low income countries -mass market targeting with product adjustment vs. niche targeting of the upper-end of the foreign market -product portfolio often adjusted for different income tiers -> price sensitivity sets a ceiling to pricing

Specific characteristics of classic marketing mix instruments arising from service characteristics - Perishability

Pricing -Importance of temporal price differentiation to harmonize service capacities & service demand (e.g. flights, holiday resorts)

Specific characteristics of classic marketing mix instruments arising from service characteristics - Perceived Purchase Risk

Pricing -Reduction of perceived purchase risk through image-based premium pricing Product -Importance of product branding and quality guarantees to signal high quality Communication -Reduction of perceived purchase risk by using opinion leaders, quality certificats and word-of-mouth advertising Sales -Importance of promotional offers to reduce perceived purchase risk

Specific characteristics of classic marketing mix instruments arising from service characteristics - Variability

Pricing -Usage of price differentiation highly recommended (e.g. cinema, hairdresser) Communication -Importance of personal communication with customers Sales -Excellent cross-selling opportunities -Importance of close proximity to customers -(e.g. franchising)

Specific characteristics of classic marketing mix instruments arising from service characteristics - Intangibility

Pricing -necessity to justify prices with customer benefits Product -Importance of product branding due to low imitation barriers Communication -Necessity to make services more tangible (e.g. visualization of concrete service results) Sales -Faciliators highly important -Intermediaries less important

Specific characteristics of classic marketing mix instruments arising from service characteristics - Inseparability

Product -importance of quality standards concerning service delivery

The impact on profit

Profit = (Price-variable costs)*sales volume-fixed costs sensibility of variables to profits (1% steps): prices-> increase profit by 11.2% variable costs -> 7.8% sales volume -> 3.3% fixed costs -> 2.3%

Prospect Theory - 1. Editing phase - Combination

Prospects can, for example, be simplified by combining the probabilities associated with identical outcomes

Red oceans - Blue oceans

Red oceans: existing markets with clearly defined industry boundaries and companies striving to beat the competition Blue oceans: not yet existing markets, here demand is created making competition irrelevant

Customer Irrationality - Anchoring Effect - Definition

Refers to a biased estimate towards an arbitrary value considered by judges before making a numerical estimate

Customer Irrationality - Framing Effect - Definition

Refers to the changes in risk preferences as a result of how choices are described (framed)

Customer irrationality - Endowment effect - definition

Refers to the increased value of a good to an individual when the good becomes part of the individual's endowment

Prospect Theory - 1. Editing phase - Segregation

Riskless components are often segregated from risky components. For example, the prospect (300, .8; 200, .2) will be decomposed into a sure gain of 200 and a risky prospect of (100, 0.8)

A typology based on the degree of customer interaction/customization and labor intensity of the service - Strategic marketing priorities - Service factory

Service factory: e.g. focus on manipulating demand to facilitate optimal capacity utilization

Tangibilizing the intangible

Service providers make use of physical evidence and presentation in order to demonstrate service quality

Services are difficult to evaluate for customers

Service qualities experience qualities credence qualities ->services are mostly high in experience and credence qualities ->difficult evaluation and high perceived purchase risk

Four techniques for managing service quality - definition

Service quality is defined by comparing the customer's perceptions of the service and the customer's desired expectations of the service. Customer satisfaction emerges from a psychological process that compares perceived and expected performance

D

Services Marketing

Macroenvironment: Models and methods - PEST analysis

Takes into account Political, Economic, Social, and Technological factors

Compound Annual Growth Rate - Definition

The CAGR is a measure of growth It measures the average annual growth rate (in%) for a specific period of time The CAGR represents a hypothetical rate at which an investment would have grown if it grew at a steady rate each year

Take-aways from CLV analysis for effective CRM

The CLV analysis for effective CRM -Acquiring customers regardless of the associated costs is short-sighted. For a positive CLV future cash flow from a customer must exceed acquisition costs. -When satisfying customer needs the cost of doing so must be considered -Customer retention is not costless either. Allocate resources to those customers that create value. A retention rate of 100% is not optimal -Customers are risky assets, like stocks. It is advisable to have a well-balanced portfolio Balance "Customer is king" with a "customer is equity" perspective

Calculating the Customer Lifetime Value

The CLV concept assesses the net NPV of a customer incorporating a long-term perspective on a company's relationship with its customers -All three components of customer value are reflected in the CLV concept r(t)= (expected) revenues in period t c(t)= (expected) costs in perio t D(t)= retention rate in period t i= discount rate t=period n=length of relationship CLV= Summe(t=0;t=n) ((r-c)/(1+i) *D -> The sum of the CLVs of all the firm's customers is c alled customer equity

Customer Irrationality - Status quo bias - explanation

The current state serves as a reference point. The expected loss from trading looms larger than the expected gain (see prospect theory).

Aspects of customer loyalty in B2B marketing - Time-related aspects

The customer decision remains stable over time; e.g. -obligation to the supplier due to a long-term contract -buyer decides to renew the contract

Aspects of customer loyalty in B2B marketing - Price-related aspects

The customer displays a disproportionately high willingness to pay compared to the competition; e.g. -buyer is willing to pay a higher price if the supplier's products and services are superior -Preference for the supplier given an equal price level as the competition

Examples for standardizing local brand names - Transparent forewarning

The customers are intensely informed about the changed brand name (Raider - Twix)

Five-stage model of the customer decision process - 3. Evaluation of alternatives: Evoked set - definition

The evoked set (or consideration set) refers to the number of alternatives (e.g. products and brands) that are considered by customers during the problem-solving process. This set tends to be small relative to the total number of options available.

Net Output Ratio (NOR)

The extend to which a firm buys preliminary products or intermediate products in the market as oppose to producing them in-house

Measuring customer - based brand equity - Young & Rubicam's Brand Asset Valuator (BAV) - Knowledge

The extent to which customers are familiar with the brand

Measuring customer - based brand equity - Young & Rubicam's Brand Asset Valuator (BAV) - Relevance

The extent to which customers find the brand to be relevant to their needs

Measuring customer - based brand equity - Young & Rubicam's Brand Asset Valuator (BAV) - 1. Differentiation

The extent to which the brand is seen as different, unique, or distinct

Five-stage model of the customer decision process

The five-stage model describes how customers process information during a purchase decision: 1.problem recognition -perceiving a need 2.information search -seeking value 3. evaluation of alternatives -assessing value 4. purchase decision -buying value 5. post purchase behavior -value in consumption or use ASSUMPTION: The customer is cognitive

Examples for standardizing local brand names - Co-Branding

The local brand is combined with a global brand. The object of co-branding is to link the different perceived properties associated with these two brands with a single product.

Examples for standardizing local brand names - Summary Axing

The local brand name is dropped almost overnight an replaced by the global brand

Continuum of evaluation for different types of products/services

The nature of the service has implications for how customers evaluate quality services are higher in credence qualities, while goods are higher in search qualities, hybrids are highest in experience qualities

The real challenge is the degree of adjustment and coordination to different markets

The need for global rationalization -economies of scale and scope on a global basis The need for local responsiveness -adaption to local markets

Examples for standardizing local brand names - Fade-in / fade-out

The new global brand is combined with the existing brand name. After a transition period, the old name is dropped (D2 to Vodafone)

Level 2: Company objectives

The overall company objectives are divided into financial objectives such as realizing a sufficient return on investment and non-financial such as attaining a high degree of customer retention. -> "We seek to increase the number of payment channels...".

Measuring customer - based brand equity - Young & Rubicam's Brand Asset Valuator (BAV) - Esteem

The regard customers have for the bran's quality, leadership, and reliability

Importance of customer behavior for marketing - definition

The study of individuals, groups, or organizations and the processes they use to select, secure, use and dispose of products, services, experiences, or ideas to satisfy needs and the impact that these processes have on the customer and society

The relationship between customer satisfaction and customer loyalty

There is an area of indifference in which "average customers" should be, that have an average loyalty.. The target position for valuable customers is higher in customer satisfaction and therefore higher in customer loyalty

Five-stage model of the customer decision process - 3. Evaluation of alternatives: Evoked set - Example

Total Set (number of generally available products or brands) Awareness set(Number of products or brands the customer will become aware of) Evoked set (number of alternatives considered by the customer (satisfy initial buying criteria)) Choice set (Number of products or brands for which more information is processed) Decision

Five-stage model of the customer decision process - 2. Information search

Two stages of information search 1. heightened attention 2. active information search Sources of information: Personal (friends, family...) experimental (touching, examining, using..) commercial (websites, adverts...) public (mass media, customer rating...)

Customer Irrationality - Anchoring Effect - Conclusion & Implications

Typical application in marketing: Pricing

Customer Irrationality - Framing Effect - Conclusion & Implications

Typical application in marketing: Sales promotions

Scoring model

Used to rank customers based on pre-defined criteria

Four techniques for managing service quality - Analyzing service quality - Sequential incident method (blueprinting)

Used to specify how the service delivery process should be designed -A graphical flowchart describes the ideal process of service delivery along all key activities

Four techniques for managing service quality - Measuring service quality - company-external data sources - Observations

Useful data sources include: -data on frequency of complaints and reasons for complaints -information from test shopper analyses -information from expert observations

brand appearance in the goods industry vs. in the service sector

Value promise packaged goods: -typically through promotion, advertisement etc. Value promise B2B, service -typically through people Value fulfillment packaged goods: -a homogeneous physical product value fulfillment B2B, service -Through people and a physical product

Once countries have been selected timing becomes key decision

Waterfall strategy -Concentration -gradually entering international markets -extensive research -customization Sprinkler strategy -diversification -many markets in short time -high standardization -failure an withdrawal from some markets accepted

Customer-based brand equity (CBBE) - Brand knowledge

What customers know about and associate with a brand

Branding and the country-of-origin effect (COE) - Overview

What is the country-of-origin? What is the country-of-origin effect? What does the COE depend on?

New Game Strategies: How to diversify - Matrix

Where to compete a-Selective (niche) b-Entire market How to compete 1-Same game (traditional rules) 2-New game(rewritten rules) a1-Focusing a2-Innovation in niche market (New Game Strategy) b1-Superior, comprehensive market coverage b2-Reconfiguration of rules of competition (New Game Strategy)

Brand globalization potential - implementation issues /change-over strategies

Which local brands should be chosen for the changeover and how to handle changeover? 1. fade-in/fade-out 2. co-branding 3. transparent forewarning 4. summary axing

Relationship evolution - different scenarios

a) Ideal evolution -beginning high costs, then sinking -beginning low revenue, then rising b)problematic sales evolution -beginning high costs, then sinking -beginning low revenues, then slowly rising, but stagnation c)problematic cost evolution -beginning high cost, then slowly sinking but stagnation -beginning low revenues, then rising

A typology based on the degree of customer interaction/customization and labor intensity of the service - Matrix

a)labor intensity (ratio of labor costs to value of infrastructure)| b) degree of customer interaction/ customization low a)|low b): service factory (airlines, hotels) low a)|high b): service shop (hospitals, repair service) high a) | low b): Mass service (retail, wholesale, school) high a) | high b): professional service (physician, attorney)

Avantages and disadvantages of the waterfall strategy

advantages: -Time for building-up financial and personnel resources -Time to learn from "teething problems" -Distribution of risk -Acceleration of diffusion in lag countries -Potential expansion of product life cycle disadvantages: -Competitors can leapfrog

Advantages and disadvantages of the sprinkler strategy

advantages: -market entry barriers against followers (first mover advantage) -distribution of risk(regionally) -volume for products/capacity utilization -Making full use of competitive edge -more rapid development of international markets disadvantages: -Need for many financial and personnel resources(short-time) -Major losses in the case of strategy failure

Microenvironment and company situation: Models and methods - Benchmarking

aims at evaluating various aspects of a company's business by means of standardized benchmarks, such as comparisons with 'best practice' companies

A contemporary marketing concept is market oriented

alle Felder miteinander verbunden: -Market orientation(Customer satisfaction is the basis of company decision making) -Total company effort(Activities are coordinated and consistent) -Profit objective/Value creation(Company activities are intended to increase profits and stakeholder value)

Four techniques for managing service quality - Measuring service quality - Company-internal data sources-Surveys/questionnaires

can be used in the context of company internal observations (e.g. employee surveys on perceived service quality)

Microenvironment and company situation: Models and methods - Strategic groups model

classifies competitors in strategic groups with each group consisting of firmst that are very similar in their corporate strategy

Marketing strategy as one of several functional strategies (BASF)

corporate strategy of BASF: -Production strategy -Personnel strategy -R&D strategy -Procurement strategy -Marketing strategy ->The marketing strategy is on a par with the other functional strategies ->The corporate strategy represents the framework for formulating the marketing strategy ->The marketing strategy is concerned with strategic questions regarding the use of marketing instruments

2. Multiple buying influences - The buying center

def: A group of individuals or groups who participate in an organizational purchasing decision-making process, and who share some common goals and the risk arising from the decisions. -number and type of participants vary -concentration on key players -therefore it is important to identify the patterns of influence within the buying center; active and influential role if -personal stake in decision -expert power -connections to top management

Hidden champions - Unknown but successful

def: Small and medium-sized business with low public visibility who are world market leaders in a specific niche market (usually with a world market share of >50%) Strategic positioning:Dominating global niche markets -Concentration of limited resources on niche strategies that combine product specialization with geographic diversification. ->Achievement of top global positions through global commercialization of niche products. Targeting of specific customer segments -Within their niche, Hidden Champions can isolate themselves from competition by serving the special needs of a very narrowly defined target segment. Typical characteristics of Hidden Champions: -Family ownership and cooperative corporate cultures -Outside professional management Technology-based product leadership -Close customer relationships -Positioning als "value leaders" combining superior product quality with a careful attention to customer needs -innovativeness in product and process, high R&D -strong leadership of managers who often stay for decades High and increasing number of HC in Germany: -More than 1000 hidden champions: backbone of Germany's export strengths -Increasing number

Five-stage model of the customer decision process - 2. Information Search - heightened attention

describes a person who is more open to information about products

Five-stage model of the customer decision process - 2. information search - active information search

describes the more intense searcher who seeks out reading material, assessing information from friends, peers and other users, e.g. via internet to learn about products

A typology based on the degree of customer interaction/customization and labor intensity of the service - Strategic marketing priorities - Professional service

e.g. acquisition and training of highly qualified customer contact employees

A typology based on the degree of customer interaction/customization and labor intensity of the service - Strategic marketing priorities - service shop

e.g. efficient training for cost-efficient delivery of individualized services

A typology based on the degree of customer interaction/customization and labor intensity of the service - Strategic marketing priorities - mass service

e.g. emphasis on standardization of processes

The customer portfolio overcomes some of the weaknesses of other tools

find parameters that are important for your customers/you and rate the customers and your own position, then set up a matrix in which you compare your own position with the needed position for your preferred customers, see whether the two match up

Marketing objectives related to potential

for example -degree of familiarity with company -degree of familiarity with service offer -company image -perceived service quality -customer attitude towards company -customer satisfaction...

Marketing objectives related to market success

for example -sales -market share -number of customers -customer loyalty -purchasing frequency -customer equity -price level

Economic marketing objectives

for example -turnover -marketing costs -contribution margin -profit -return on sales

Primary areas of relevance for selected customer relationship management instruments - 3. Personal customer service instruments

from small to large: (always) complaint management customer service points and info points customer hotline, front-end call center

Primary areas of relevance for selected customer relationship management instruments - 2. Impersonal sales instruments

from small to large: ... direct mailing member-get-member programs

Primary areas of relevance for selected customer relationship management instruments - 1. Personal instruments

from small to large: Key account management Sales force Point-of-sale contacts outbound telephone sales always: inbound order centers customer events

Primary areas of relevance for selected customer relationship management instruments - 4. impersonal customer service instruments

from small to large: corporate extranet homepage with customer service function customer magazines customer clubs&cards

Four techniques for managing service quality - Influencing service quality - Company culture/employee management

goal: Establishment of a service and quality culture method: Complaints analysis

Four techniques for managing service quality - Influencing service quality - organizational structure

goal: creation of an organizational framework that fosters a high level of service quality method: quality circles

Four techniques for managing service quality - Influencing service quality - Workflow organization

goal: systematic detection and elimination of error sources - particularly human mistakes - in the service process method: Poka-Yoke

Areas relevant for strategic analysis - Diagram

großer Kreis: Global environmental factors(=Macroenvironment) darin kleiner Kreis in 3 Teile geteilt (market=microenvironment) -Buyers in market -Competitors -Company situation

2. Multiple buying influences - Members of the buying centers - Influencer

has a say in whether a purchase is made and about what is bought

Customer-based brand equity (CBBE) - Differential effect

how customers react to the brand's marketing mix compared to how they would react if the product were not branded

Compound annual growth rate - application

in general: revenue, stock returns, customer base, unit output, population in international marketing: CAGR assesses the attractiveness of different countries regarding a specific market by comparing past market developments (e.g. sales growth)

Product-price positioning strategies - examples of brands

low relative price| low relative performance - H&M medium relative price | medium relative performance - Tommy Hilfiger High relative price | high relative performance - Chanel

A brief history of internationalization

mid 50s-70s: Multinational phase -Because of obvious needs foreign markets could be penetrated easily -Since production was often localized products could be adapted to local markets starting in 70s: Global phase -Standardization of products and integration of activities across countries -The appearance of strong foreign competitors in the western industrialized countries was a major force behind the emergence of the global perspective Starting end of 90s: Anti-Globalization Phase -The anti-globalization arguments involve a mix of economic, political, and social issues -One main complaint: globalization has failed to lift the standard of living of many third-world countries while multinational companies have profited significantly (Naomi Klein, Attac)

Five-stage model of the customer decision process - 1. Problem recognition - Needs

needs... ...are human requirements resulting from subjectively perceived deficiencies ...arise when there is a perceived difference between the actual and desired states of being ...motivate individuals by inducing desire to meet them ...can be triggered by internal (e.g. hunger) or external (e.g. advertisement) stimuli

Normative decision theory

normative decision theory is concerned with identifying the best decision to take, assuming an ideal decision maker who is fully informed, able to compute with perfect accuracy, and fully rational

SWOT analysis

provides insights on strengths, weaknesses, competitors and external factors -Overall evaluation of a company's strengths, weaknesses, opportunities, and threats -The external environmental analysis is concerned with opportunities an threats -Using the opportunity and threat analysis, a business unit monitors key macroenvironmental forces such as demographics, politics and technology -The internal environmental analysis is concerned with strengths and weaknesses of the company such as reputation, market share, product/service quality or economies of scale

Compound Annual Growth Rate - Formula

r=(V(n)/V(0))^(1/n) - 1

2. Multiple buying influences - Members of the buying centers - Initiator

recognizes that some company problem can be solved or avoided by acquiring a product or service

Customer Irrationality - Status quo bias - definition

refers to individual's tendency of doing nothing or maintaining one's current or previous decision

Microenvironment and company situation: Models and methods - Market research methods

refers to the process of gathering and evaluating information in the market (e.g. from actual and potential customers or competitors) in order to support marketing decision making

Microenvironment and company situation: Models and methods - Value chain analysis

represents a systematic approach for the identification of actual or potential sources of competitive advantage

Standardization vs. customization

standardization: uniform global/regional product strategy -capitalizes on commonalities in customer needs -cost savings passed on to customer product driven orientation (mass production, low cost) customization: Country-tailored product strategy -focus on cross-border differences in the needs and wants of target customers -appropriate changes are made to match local market conditions Market-driven orientation: increase customer satisfaction by adapting products to local needs