Customer Base200,000

Satisfied70% (140,000)

Dissatisfied30% (60,000)

New Customers Needed24.86%

Don’t Complain90% (54,000)

Do Complain10%(6,000)

Not Retained78%

Retained22%

Not Retained10%

Retained90%

Not retained5%

Retained95% 133,000

-7,000

5,400

-600

11,800

-42,120

49,720

Customer Performance

Retained Customers

Lost Customers

New Customers

Overall Performance

# of Customers 150,000 -50,000 50,000 200,000

Revenue per C. $800 $200 $400

Sales Revenue (millions) $120 $10 $20 $150

Percent Margin 50% 25% 25% 43.8%

Margin per C. $400 $50 $100

Gross Profit (millions) $60.0 $2.5 $5.0 $67.5

Marketing Expense per C. $60 $60 $300

Marketing Expenses (mill.)

$9.00 $3.00 $15.00 $27.0

Net Marketing Contribution (millions)

$51.00 -$0.50 -$10.00 $40.5

Operating Expenses (millions)

$33.0

Net Profit Before Taxes (millions)

$7.5

Customer Performance

Retained Customers

Lost Customers

New Customers

Overall Performance

# of Customers 160,000 -40,000 40,000 200,000

Revenue per C. $800 $200 $400

Sales Revenue (millions) $128 $8 $16 $152

Percent Margin 50% 25% 25% 43.8%

Margin per C. $400 $50 $100

Gross Profit (millions) $64.0 $2.0 $4.0 $70.0

Marketing Expense per C. $65 $65 $300

Marketing Expenses (mill.)

$10.40 $2.60 $12.00 $25.0

Net Marketing Contribution (millions)

$53.60 -$0.60 -$8.00 $45.0

Operating Expenses (millions)

$33.0

Net Profit Before Taxes (millions)

$12.0

Definitely Will Not Repurchase

Will Not Repurchase

Probably Will Not Repurchase

Probably Will Repurchase

Plan to Repurchase

Definitely Will Repurchase

How likely are you to buy this product or brand again on your next purchase?

Intention to Repurchase Percent

Probability

Definitely Will Repurchase 25% 1.00

Plan to Repurchase 35% .80

Probably Will Repurchase 20% .60

Probably Will Not Repurchase 15% .40

Will Not Repurchase 3% .20

Definitely Will Not Repurchase

2% 0.00

Total: 100% .72

Customer Retention 72%

50 % 55 % 60 % 65 % 70 % 75 % 80 % 85 % 90 % 95 %02468

101214161820

Customer Life Expectancy and Customer Retention

Cu

stom

er

Lif

e (

pu

rch

ase

peri

od

s)

Customer Life (N)(given rate of customer retention)

CRN

1

1

CR = Customer Retention Rate

Retention rate

0 1 2 3 4 5

-$60

-$40

-$20

$0

$20

$40

$60

$80

-$51

$30

$42 $44$49

$55

Average Profit per Credit Card Customer

Lifetime Value of a Customer

PeriodCash Flow

Present Value of

$1

Present Value of

Cash Flow

0 -$51 1.00 -$51,001 $30 .909 $27,302 $42 .826 $34,70

3 $44 .751 $33,004 $49 .683 $33,505 $55 .621 $34,20

Net Present Value of Cash Flow $111,70

Marketing strategy

Strategic market planning Offensive and defensive strategies Building a marketing plan

Outline

Specify strategic direction for each product/market and to allocate resources in a way that will bring about desired short- and long-run performance

Requires an assessment of:◦ Business performance◦ Market attractiveness◦ Competitive position

Strategic market planning

Market forces◦ Market size◦ Growth rate◦ Buyer power

Competitive environment◦ Number of competitors◦ Price rivalry◦ Ease of entry

Market access◦ Customer familiarity◦ Channel access◦ Sales requirements

Market attractiveness

Differentiation position◦ Product quality◦ Service quality◦ Brand image

Cost position◦ Unit cost◦ Transaction cost◦ Marketing expenses

Marketing position (presence)◦ Market share◦ Brand awareness◦ Distribution

Competitive position

Invest to grow◦ Invest marketing resources to grow the market or

market share Improve position

◦ Invest to improve and/or strengthen competitive position

New market entry◦ Invest to enter new attractive markets or develop

new product markets

Offensive strategies

Protect position◦ Invest to protect market share and competitive

advantage Optimize position

◦ Optimize price-volume and marketing resources to maximize profits

Monetize◦ Manage market position for maximum cash flow

with limited marketing resources Harvest/Divest

◦ Manage the product for maximum short-run cash flow or minimum losses

Defensive strategies

New market entry

Improve position

Invest to growImprove positionProtect position

Invest to growProtect position

Improve positionOptimize positionHarvest

Improve positionOptimize position

Invest to growProtect position

Optimize position

Harvest or Divest

Monetize, Harvest, or

Divest

Monetize, Harvest, or

Divest

Mark

et

att

ract

iven

ess

Strategic market plans

Competitive position

Creativity versus structure Why marketing plan?

◦ Identifying opportunities◦ Focused market strategy◦ Resource allocation◦ Performance roadmap

Building a marketing plan

Building a marketing plan

Part I – Situation analysis (where are we now?)◦ Step 1: Current situation◦ Step 2: SWOT analysis

Part II – Marketing strategy (where do we want to go?)◦ Step 3: Strategic market plan◦ Step 4: Marketing mix strategy

Part III – Performance plan (what is the expected impact?)◦ Step 5: Develop a revenue plan + marketing

budget◦ Step 6: Develop a profit plan◦ Step 7: Performance review

Building a marketing plan cont.

Analyzing customers◦ Needs analysis◦ Decision making processes

Analyzing context◦ Demographic environment◦ Economic environment◦ Socio-cultural environment◦ Political/legal environment◦ Technological environment◦ Natural environment

Analyzing the company◦ Analysis of the business model◦ Competitive advantage◦ Collaborators and complementers analysis

Analyzing competitors

Current situation

Part I – Situation analysis (where are we now?)◦ Step 1: Current situation◦ Step 2: SWOT analysis

Part II – Marketing strategy (where do we want to go?)◦ Step 3: Strategic market plan◦ Step 4: Marketing mix strategy

Part III – Performance plan (what is the expected impact?)◦ Step 5: Develop a revenue plan + marketing

budget◦ Step 6: Develop a profit plan◦ Step 7: Performance review

Building a marketing plan cont.

External factors◦ Opportunities◦ Threats

Internal factors◦ Strengths◦ Weaknesses

SWOT analysis

Part I – Situation analysis (where are we now?)◦ Step 1: Current situation◦ Step 2: SWOT analysis

Part II – Marketing strategy (where do we want to go?)◦ Step 3: Strategic market plan◦ Step 4: Marketing mix strategy

Part III – Performance plan (what is the expected impact?)◦ Step 5: Develop a revenue plan + marketing

budget◦ Step 6: Develop a profit plan◦ Step 7: Performance review

Building a marketing plan cont.

Purpose◦ A marketing plan lays out a campaign to fulfill a

company’s marketing strategy Content

◦ Executive summary◦ Table of contents◦ Summary of current situation◦ Assessment of market opportunity◦ Summary of the company’s marketing strategy◦ A marketing budget◦ Forecast unit sales and revenues◦ Plan for monitoring and evaluating action plans

Marketing plan

Graphs copied from:◦ www.value-based-marketing.com/uncategorized/

what-would-you-do-with-dell-computer/#more-21 What would you do with Dell computer?

Dell Computer

”Create a better way to buy a computer” Reduced distribution costs: By cutting out

the middleman, distribution costs were reduced giving the company a competitive price position.◦ Improve the buying experience: Dell’s knowledgeable staff had

expertise to help customers who were frequently unknowing. In contrast, IBM, Apple and others were selling through resellers who were not necessarily knowledgeable about the product. Michael Dell surmised that customers would find value in talking to staff who had good product knowledge and could help guide purchase decisions to suit the customers’ needs.

◦ Guide future product development: The direct selling model gave Dell first-hand knowledge of customers’ needs.

Dell computer

Improve core business Shift portfolio to higher-margin offerings Balance liquidity, profitability, and growth

How has Dell responded?

Pride & Ferrell: Ch. 1, 2 & 3 Best, Roger J. (2009): Market-Based

Management: Strategies for Growing Customer Value and Profitability, 5th ed., Pearson Prentice Hall, New Jersey (ISBN-13: 978-0-13-233653-6)

Sources