Midterm Marketing

Business model

Business model

Architecture of value creation by defining the entities, factors, and processes involved in delivering and capturing value in the marketplace.

Narrow business model

Describes fairly generic value creation strategies related to a particular marketing activity, such as pricing, promotion, and distribution.

Franchising model

Describes the strategy of adopting (leasing) an already existing business model.

3 important aspects of Business model

Value focused Intangible Universal

Value focus aspect of B.M.

Central to any business model and can be associated with both monetary and non monetary outcomes.

Intangible aspects of B.M.

A subjective representation of reality. Represent the way in which the organization conceptualizes the value-creation process.

Universal aspect of B.M.

A viable model is essential for the success of any organization, be it a start-up or an established market leader.

Strategy

Identifies the market in which the company operates, defines the value exchanges among the key market entities, and outlines the ways in which an offering will create value for the relevant participants in the market exchange. Defining the target market and the value exchange among the relevant market entities.

Tactics

Describe a set of activities (marketing mix) employed to execute a given strategy by designing, communicating and delivering specific market offerings. Describe the particular aspects of the offering that will ultimately create market value.

Marketing strategy 2 key components

Target market and value proposition

5 key factors of target market (five Cs)

• customer • company • collaborators • competitors • context

Customers

Are potential buyers defined by the needs the company aims to fulfill with its offering. Can be B2B or B2C

Company

The organization managing the offering. Could be a business unit or strategic business unit.

Collaborators

Entities that work within the company to create value for target customers.

Competitors

Are entities with offerings that target the same customers and aim to fulfill the same customer need. Competition can be in the same industry or not, is any entity that fullfil the needs same customer need.

Context

Involves the relevant aspects of the environment in which the company operates. Economic ( growth, money supply, inflation, r) Business (emergence of new business models) Technological ( diffusion of existing technologies) Sociocultural (demographic trends) Regulatory ( import/export teriffs) Physical (natural resources)

6 context factors

Economic ( growth, money supplyinflation, r) Business (emergence of new business models) Technological ( diffusion of existing technologies) Sociocultural (demographic trends) Regulatory ( import/export teriffs) Physical (natural resources)

Value proposition

The value that an offerings aims to create for relevant participants in the market.

Value exchange

Refers to the value-based relationships among the different entities in a given market. Entities: customer , company, collaborators and competition acting in a context.

Value exchange

Process of giving (creating) and receiving (capturing) value. Company creates value for → Customer Customer creates value → companies capture it same with collaborators.

3 value propositions for optimal value propositions

• defining the value for target customers • defining the value for its collaborators • defining the value for the company

Optimal value proposition

The … is balancing the value among its stakeholders, customers and collaborators.

Marketing mix: tactics

• product • service • brand • price • communication • distribution

Product aspect

Reflects its key functional characteristics. Change ownership during purchase. Can be distributed to buyers via multiple Chanels.

Service aspect

Reflect its functional characteristics but do not imply a change in ownership; customers obtain the right to use it for a period of time.

Brand

A set of unique marks and associations that identify the offering and create value beyond The product or / and service aspects of the offering.

Price

The amount of money the company charges its customers and collaborators for the benefits provided by the offering.

Incentives

Tools used to selectively enhance the value of the offering for its customers, collaborators and or employees. Can be monetary or non-monetary.

Communication

Refers to the process of informing current and potential buyers about the specifics of the offering.

Distribution

Defines the channels through which the offering is delivered to customers.

Marketing tactics as processes

• process of designing • process of communicating • delivering value

Top-down analysis of A Business model

Broader consideration of the target market and the relevant value exchange which is followed by designing a specific offering. Starts with the strategy then tactics.

Bottom-up analysis of - Business model

Starts with designing the specific aspect of the offering, which is then followed by identifying the target market and developing an optimal value proposition From tactics to strategy.

Targeting

The process of identifying customers for whomthe company will optimize its offering.

One-for-all strategy

Develop same offering for different customers Might not be effective for customers with different needs because the offering will end up not creating value for at least one.

One-for-each strategy

Develop different offerings based on the needs of each one (customers). Might not be effective because the company might not have the resources to develop offerings that meet the needs of both customers.

Customer segments

Group of customers that share similar characteristics.

Functionally of segmenting

Enables the company to improve the cost efficacy of its marketing activities by not having to customize the offering for individual customers.

Customer characteristics

Value-based factors and profile factors-based

Value based factors

Reflect customers needs and their willingness and ability to pay for the company's offerings

Profile-based factors

That reflect customers observable characteristics like age, gender, income, social status, geographical location, and buying behavior

Strategic targeting

Focuses on the value defined by customer needs and the potential to create value for the company. Can the company create superior value for those customers? Can these customers create vale for the company and the collaborators?

Tactical targeting

Focuses on customer profile, including factors like age, gender, income, social status, geographical location and buying behavior, to identify effective and cost efficient ways to reach customers.

2 key targeting criteria

Target attractiveness and target compatibility

Target attractiveness

Reflects the ability of a given segment to deliver superior value to the company. Could be monetary or strategic

monetary value (ch.4)

Ability to generate profits for the company.

Strategic Value

Customers ability to create non monetary benefits that are of strategic importance for the company.

Target compatibility

Reflects the company's ability to fulfill the needs of target customers better than the competition.

Target-specific

Resources compatible with one segment might not be compatoble with another segment.

Tactical targeting

Aims to determine which customers to target and which to ignore Aims to identify an effective and cost-efficient approach to communicate and deliver the offering to already selected target customers.

Two aspects of devleoping value propisition

1. Intangible

2. idiosyncratic

Intangible

A customers subjective evalutation of the worth (utility) of the company’s offering does not physically exists in the marketplace.

Idiosyncratic

The same offering can have different value for different customers.

Functional value

Th benefits and costs directly related to an offering’s performance.

Psychological value

The psychological benefits and costs associated with the offering.

Monetary value (ch.5)

Monetary benefits and costs associated with the offering.

Three factors of an offering’s ability to create value

1. The attributes defining the company’s offering.

2. The relative importance of these attributes for target customers.

3. The offering’s performance on these attributes.

Customers valuation of a market offering formula

Reference-point dependence

Aspects of the value function reflects the fact that consumers often do not have well-articulated preferences and that their evalutations of market offereings depend on the decision context.

Loss-aversion aspect

Extends the principle of reference point dependence to assert that people value the positive (gains) and negative (lossess) deviations from the reference point in a different fashion, placing more weight on losses than gains.

Principle of diminishing marginal value

Implies that the utility from improving an offering’s performance on the same dimension does not increase in a monotonic fashing, and that after a certain point improving the offering’s performance will produce marginally diminishing increases in the subject valuation of the offering.

Satisficing (one popular decision heuristic)

Involves selecting the first option that meets the buyers’ criteria without necessarily considering all of the available options. Buyers might end up choosing different options depending on the order in which they evaluate the options.

Equal-weight heuristic

Buyers might evaluate only the most important attributes, without taking into account the performance of the options on all attributes.

Lexicographic heuristic

Buyers might consider only the most important attribute describing the choice options and select the option with the highest value on that attribute.

Two factors of an offering’s competitive advantage

1. Points of difference

2. Points of parity

Points of difference

Involve attributes that are important for target customers and on which the company’s offering is percieved to be different from that of its competitors.

Points of parity

Refer to attributes on which an offering’s performance matches that of the competition.

Three strategies for increasing the offering’s value

1. Improve the offering’s performance on a given attribute.

2. Add new attribute on which the offering has an advantage.

3. Increase the perceived importance of an attribute on which the offering has an advantage.

Positioning

Reflects the company’s view of how its offering should be thought of by customers; it is the process of creating a distinct image of the company’s offering ina customer’s mind. Customer valuation of market offerings is influenced by the refrence points used to assess the attributes of individual offering.

Five types of frames of reference

1. Need-based framing

2. User-based framing

3. Category-based framing

4. Competitive framing

5. Product-line framing

Need-based framing

Directly links the benefits of the offering to a particular customer need.

User based framing

Defines the offering by associating it to a particular type of buyer.

Category-based framing

Defines the offering by relating it to an already established product category.

Competitive framing

Defines the offering by explicitly contrasting it to competitor’s offerings and typically highlighting those aspects of the offering that differentiate it form the competition.

Product-line framing

Defines the offering by comparing it to other offerings in the company’s product line.

Three positioning strategies

1. Positioning on functional benefits.

2. Positioning on psychological benefits.

3. Positioning on monetary benefits.

Positioning on functional benefits

Aims to create functional value by emphasizing a particular aspect of an offering’s performance.

Positioning on psychological benefits

Emphasizes the psychological value associated with the offering.

Positioning on monetary benefits

emphasized the monetary value associated with the offering.

Products

Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisify want or need. Once created, they can be physically seperated from the manufacturer and distributed to end users via multiple channels.

Durable goods

Consumed over multiple occasions and over an extended period.

Nondurable goods

Typically consumed on a single occasion or over a short period.

Three catogories of product uncertainty

Search, experience, and credence.

Search products or services

Associated with the least amount of uncertainty and are typically identifiable through inspection before purchase.

Experience products and services

Carry greater uncertainty and are revealed only through consumption.

Credence products and services

Have the greatest amount of uncertainty, and their quality is not truly revealed even after consumption.

Specific decisions concerning factors of managing products and services

Performance, consistency, reliability, durability, compatibility, ease of use, technological design, degree of customization, form, style, and packaging.

Performance

Products vary in their performance on different attributes.

Consistency

An important aspect of designing an offering is ensuring that in-kind products and services are identical and consistent with specification.

Reliability

Refers to the probability that the product or service will operate according to its specifications and willl not malfunction for the duration of its projected life cycle.

Durability

Another important consideration in product design involves the expected length of the offering’s life cycle.

Ease of use

An important aspect of many products and services is their ease of use.

Two technological design methods

Product-innovation aproach

Product-variation aproach

Product-innovation aproach

Involves technology-based innovations and innovative use of existing technology to design new offerings.

Product-variation approach

Leads to offerings characterized by relatively minor variations in their functionality, such as adding different colors, flavours, tastes, sizes, designs, or packaging variations.

Degree of customizations

When designing its offerings, a company needs to decide on the degree to which these offerings will be customized for target customers.

Mass-production strategy

Offering the same products and services to all customers.

One-to-one customization

The company’s products and services are customized for each individual customers.

Segment-based customization

A compromise between the mass-production approach and the one-to-one customization approach.

Form

Product design typically involves decisions concerning the physical aspects of the offering, such as its size and shape.