Lecture 1: Customer Value

Marketing Definition AMA (American Marketing Assosiation)

• An activity, set of institutions and processes

• For Creating, Communicating and Delivering Offerings

• That have value for customers and society

Marketing Definition Kotler

• A Social and Managerial Process

• Helps Individuals/Organizations obtain what they need

• Through creating/exchanging value with others

Two Underlying Questions of Marketing

• How does this create value for the customer

• How does the firm get value in return

Theodore Leavitt: Old View of Marketing (Marketing Myopia)

• Leavitt: Firms are shortsighted → Chase emptying their stock, rather than fulfilling customer needs

Old View Railroad Example:

• Railroads: If they thought of themselves as travel companies → They could’ve Adapted

The New View of Marketing

• Build Long Term Customer Relationships → Satisfy Needs

• Brands: Should

  • Listen to Feedback

  • Be sustainable

  • Provide good customer engagement

New View Dyson Example

• Find Issues Customers have in the Market → Fix them

• Effective and Efficient

Marketing (Focus + Metrics and Scope): (Comparing Marketing vs. Sales

• Focus on Long Term Strategy for:

  • Generating Awareness and Demand

  • Meeting Customer Needs

• Scope: Market Wide Research, Customer Experience

• Metrics: Traffic, Engagement Rates

Sales (Focus + Scope + Metrics): (Comparing Marketing vs. Sales)

• Focus: Short Term Strategy for Converting Leads into Paying Customers

• Scope: Negotiating, Closing, Presenting

• Metrics: Conversion Rate, Revenue

B2B: Definition, What matters, Characteristics

• Business to Business Relationships

• Functional Values Matter as well as Trust and Dependability

• Longer Term Relationship, Larger Transactions

B2C: Definition, What matters, Characteristics

• Business to Consumer

• Emotions, Branding, Customer Experience Matter (Differentiation)

• Fast Process

Quick List of the 4 P’s of Marketing + 1 Key Point

• Product

• Price

• Place

• Promotion

• Key Point: Never view the P’s isolated → Align them

Product:

• What do we offer to satisfy Customer Needs

• Encompasses entire Customer Experience

Price

• What is the value the customer receives, What are they willing to pay

• Strategic Choice → Influences Market Position

Place

• How is the product made available to Customers → Distribution Channels

Promotion

How does Firm Communicate its Value proposition

The New 4 P’s of Marketing

• People

• Processes

• Programs

• Performance

People

• Employees and Customers: Central to value creation

Processes

• Coordination and Planning of Marketing Activities

Programs

• Integrating Marketing Activities

Performance

• Metrics to see if value is being created (Keeps us accountable)

The 5 Step Marketing Process (5 Steps):

1. Understand Marketplace and Customer Needs/Wants

2. Design Customer Driven Marketing Strategy

3. Make Integrated Marketing Program → Delivers Superior Value

4. Build Profitable Relationship + Enable Customer Delight

5. Capture Customer Value

Step 1: What are Needs and Wants + Demands

• Needs: Universal Basic Requirements (Food, Water)

• Wants: Shaped by Culture and Personality

  • Expressed through Products and Services

• Demands: Wants backed by purchasing power

Step 1: How do we Find Wants, Demands and Needs

• Invest in Data Analytics

Step 2: What goes into designing a Customer Driven Marketing Strategy

• Find Target Market

• Find our Value Proposition (Unique Benefit that attracts Customers)

Step 3: What is Integration, Why is it Key, What about Fragmentation?

• Integration: All Marketing Actions work together → Reinforce one value Proposition

  • Fragmentation = Bad

Step 3: Why are the 4 P’s of marketing Key Here

• When we align the 4 P’s → We can Deliver Superior Value + Build Long Lasting Relationships

Step 4: Why is CRM so Important for Long Term Relationships, What are the Objectives

• Process of Building and Maintaining Key Customer Relationships → Through Value and Satisfaction

• Objective: Acquire Customers, Engage them, Grow Relationship

Step 4: Defining Perceived Value and Satisfaction

• Satisfaction: Does Product meet/exceed Expectations → If yes: Increases loyalty

• Perceived Value: Customer Evaluates Benefits vs Costs → Perceived = Not Objective

Step 5: How do we capture Customer Value + Benefits

• We need to deliver Superior Customer Value

• This makes them Loyal and Satisfied

• Increases Customer Lifetime Value and Customer Equity (Total Value of Current + future Customers)

What is Customer Centric Marketing and How do we do it

• Customer is put at center of everything the company does (Proactive Approach)

• Understand their needs, behaviors etc. → Use that Information to deliver Superior Value

The 3 Objective of Customer Centric Marketing

• Build Long Term and Loyal Relationships

• Build Great Customer Experience

• Maximize Customer Lifetime Value (CLV)

Why is Customer Centric Important in a Modern world

• Digitalization means people are more informed, less loyal

  • We need to treat them well to attract and keep them

Some Benefits of Customer Centric Marketing

• Customer Feels Valued → Loyal, Recommends further

• More Efficient and Agile → We know exactly what the customer wants, Are aware of changing Preferences

• Differentiates ourselves from the Competition

3 Forms of Centricity

1. Price

2. Product

3. Customer

Price Centricity

• Offer Lowest Price

• Low Loyalty and Thin Margins

Product Centricity

• Compete on Innovation and Quality → Best Product wins customers

Customer Centricity:

• Understand the customer, Serve all their needs throughout the relationship

• Has the largest Moat, Builds Long Term Loyalty

Amazon Example as a Customer Centric Brand

• Empty Chair in Meetings (Represents Customer)

• All Decision Starts with customer → Work Backwards

• Customer Representative

5 Action Steps

1. Assign Customer Champion/Representative

2. Recognize what matters to customer → Where we can improve

3. Cross Functional Collaboration → Towards customer goals

4. Embed Feedback Loops

5. Customer First Culture

Defining customer Value + Why being Consistent matters

• CV = Perceived Benefit - Perceived Cost

• Dynamic: Evolves with Expectations and Experiences

• Consistency = Long Term Relationship

4 Dimensions of Customer Value

1. Functional

2. Economic

3. Social

4. Experiential

Functional Value Definition + Features/Benefits and Feature Fatigue

• Tangible benefit product/service provides to fulfill customer need

• Feature only matters if it solves Customer Needs (These are benefits and should be emphasized)

  • Feature Fatigue: Overwhelming and Irrelevant Features

Economic Value: Formula, Lifetime Value, Where it Matters most

• EVC = Cost Savings + Performance Gains - Price Difference

• Captures Benefit over entire lifecycle → Companies should discuss Lifetime Value over Price (LED Lightbulb Benefit)

• Matters: Price Sensitive Markets

Social Value Definition + Examples

• Customer Chose Product based off of who they aspire to be (Branding, Identity, Social Standing)

• Examples: WhatsApp (Social Connectivity), GitHub (Contributors Recognition)

Experiential Value Definition + Examples

• Emotional and Psychological Benefit Customer Gains → From Interacting with product

• Examples: Luxury, Customer Service, Aesthetics

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What is the Value Proposition Canvas

• Customer Side: Understand the Customer, What they want → Perceived Pains and Gains

• Value Prop Side: How do we relieve pain, create gain

5 Action Steps for Delivering Customer Value

1. Understand Customer Pains and Gains

2. Use Value Proposition Canvas → Connect Needs with Product Benefits

3. Prototype, Test → Get Feedback

4. Iterate on Feedback

5. Communicate Clearly how you provide customer value

How AI effects the marketing Journey

1. Quick Data Processing, Understand Market Sentiment

2. Hyper Personalized and Tailored Offerings

3. Automatic Campaign Management, Monitoring Performance

4. Immediate Chatbot Assistance → Good at building relationships

5. Captures CLV through identifying high value customers

5 Action Steps Surrounding AI

1. Identify High Impact Areas

2. Data Foundation Strengthened

3. Select right AI Tool

4. Use it Ethically

5. Compare Models continuously