IntroductionLecture 1

Agenda

• Module Guide• Assessment• Customer Value• New marketing: marketing is dead, long live marketing!

Customer value

value engineering  

value chain

value-positioning

net present value

value migration  

value driver  

value-added

value-based pricing  

shareholder value  

market value  

fair value

net book value

best value    Customer lifetime value

Chartered Institute of Marketing definition of marketing (2007)

The strategic business function that creates value by stimulating, facilitating and fulfilling customer demand.

It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits.

With a customer-centric view, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioural change and a sustainable business future.

Definition of marketingMarketing is a customer focus that permeates organisational functions and processes and is geared towards marketing promises through value propositions, enabling the fulfilment of individual expectations created by such promises and fulfilling such expectations through support to customers’ value-generating processes, thereby supporting value creation in the firm’s as well as its customers’ and other stakeholders’ processes.

Source: Gronroos, C., 2006 On defining marketing: finding a new roadmap for marketing, Marketing Theory, 6, 395-417

More definitions of marketingMarketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others

Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return

Source: Kotler, P., Armstrong, G., Wong, V., Saunders, J., 2008, Principles of Marketing. 5th european ed Harlow Prentice Hall

Importance of Customer value• Marketing - managerial process concerned with the

facilitation and consumption of exchanges• Exchange - transaction between two parties in which

each party give up something of value in return for something of greater value,

• Consumer value plays a crucial role at the heart of all marketing activity (Holbrook, 1999 p. 1)

Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Nature of consumer valueHolbrook definitionAn interactive relativistic preference experience

• Interactive - interaction between some subject (consumer/customer) and some object (product).

• Relativistic – (a) comparative (involving preferences among objects) (b) personal (varying across people), (c) situational (specific to the context)

• Preferential – embodies a preference judgement• Experience – resides in the consumption experience (s)

Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Types of consumer valueThree key dimensions Extrinsic vs intrinsic value

Self-orientated vs other-orientated value

Active vs reactive value

Typology of Consumer Value

Extrinsic Intrinsic

Self-orientated Active Efficiency Play

Excellence

Status

Esteem

Aesthetics

Ethics

Spirituality

Other-orientated

Reactive

Active

Reactive

Source: Holbrook, M. B., 1999 Consumer Value A framework for analysis and research. Abingdon: Routledge

Customer perceived value definition … perceived value is the consumer's overall assessment

of the utility of a product based on perceptions of what is received and what is given. Though what is received varies across consumers (i.e., some may want volume, others high quality, still others convenience) and what is given varies (i.e., some are concerned only with money expended, others with time and effort), value represents a trade-off of the salient give and get components.

Source: Zeithaml, V. A., 1998 Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence Journal of Marketing 52 (July): 2-22

Customer perceived valuePerceived Benefits

Customer –perceived value = ______________

Perceived Sacrifice

Benefits = attributes of core product/service and supporting services, perceived quality and price

Sacrifice = customer costs involved in purchasing, such as time, travel, repairing faulty work, etc. – NOT just price

Source:Monroe, K. B., 1991 Pricing – Making Profitable Decisions, McGraw-Hill, New York, NY. Quoted in Ravald, A. and Gronroos, C., The value concept and relationship marketing European Journal of Marketing Vol 30 No 2 1996 p 19 - 30

Customer perceived value in relationships

Episode benefits + relationship benefits

Total episode value =

Episode sacrifices + relationship sacrifice

• poor episode value can be balanced by a positive perception of the relationship as a whole

• management of any firm should note that the episode value and the relationship value exist in a mutually dependent relationship

Ravald, A. and Gronroos, C., The value concept and relationship marketing European Journal of Marketing Vol 30 No 2 1996 p 19 - 30

Value

Customer value is a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations.

Source: Woodruff, R. B., 1997 Customer Value: The Next Source for Competitive AdvantageJournal of the Academy of Marketing Science Vol 25 No. 2, pages 139 - 153

Customer Value Hierarchy Model Source: Woodruff, R. B., 1997

Desired Customer Value Customer Satisfaction with Received Value

Customers’ goals and purposes

Desired consequences in use situations

Customers’ goals and purposes

Goal-based satisfaction

Consequence-based satisfaction

Attribute-based satisfaction

New marketing:marketing is dead,long live marketing!

Agenda

• The process of going to market• What managers need to know• Challenges for the 21st century manager• The strategic pathway• A route-map for market-led strategic change

The process of going to market

Processes that define valuee.g., market knowledge andlearning, CRM, research, intelligence

Processes that create valuee.g., new product development, innovation,brand development, strategic relationships

Processes that deliver valuee.g., channels, supply chain,customer service

Customervalue

ResourcesCapabilities

Strategic relationships

CreativityInnovation

Reinvention

What managers need to know

• The process of going to market, not “marketing” in the traditional sense:– understanding customers and superior value– building marketing strategy to deliver a robust value

proposition to customers– achieving implementation by driving the things that

matter through the corporate environment

21st Century challenges

New businessmodels Innovation

Business agility

Crisissurvival Siege

Globalrecession

The process of going to market

Aggressiveinvestment

GlobalizationVirtuality Paradox CSR Strategy

The strategic pathway

Marketsensingandlearningstrategy

Strategicmarketchoicesandtargets

Customervaluestrategyand positioning

Strategicrelationshipsandnetworks

Strategic thinking andthinking strategically

Strategictransformationand strategyimplementation

A route-map for market-led strategic change

Value-basedmarketingstrategy

New marketing

meetsold

marketing

Strategicthinking and

thinkingstrategically

Customer valuestrategy andpositioning

The strategic pathway

Strategicmarket choices

and targets

Market sensingand learning

strategy

Strategicrelationshipsand networks

Change strategy

Strategicgaps

Organizationand processes

for change

Implementationprocess and

internalmarketing

Part ICustomer value

imperatives

Part IIDeveloping a value-based

marketing strategy

Part IIIProcesses for managingstrategic transformation

The Customeris always

right-handed