Introduction

Lecture 1

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

Customer value

value-based pricing

value-added
value-positioning

value chain net present value market value value migration

net book value value driver

value engineering fair value best value

shareholder 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 marketing
Marketing 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 valuegenerating processes, thereby supporting value creation in the firms 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 marketing

Marketing 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 value

Holbrook definition An 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 value

Three key dimensions Extrinsic vs intrinsic value
Self-orientated vs other-orientated value Active vs reactive value

Typology of Consumer Value

Extrinsic

Intrinsic
Play

Self-orientated

Active

Efficiency

Reactive Other-orientated Active

Excellence

Aesthetics

Status
Esteem

Ethics
Spirituality

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 value

Customer perceived value = Perceived Benefits ______________ 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 customers perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customers goals and purposes in use situations.
Source: Woodruff, R. B., 1997 Customer Value: The Next Source for Competitive Advantage Journal 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 Customers goals and purposes

Customer Satisfaction with Received Value Goal-based satisfaction

Desired consequences in use situations

Consequence-based satisfaction

Customers goals and purposes

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

Creativity Innovation Reinvention

Processes that define value

e.g., market knowledge and learning, CRM, research, intelligence

Processes that create value

e.g., new product development, innovation, brand development, strategic relationships

Customer value

Processes that deliver value

e.g., channels, supply chain, customer service

Resources Capabilities Strategic relationships

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 business Innovation models

Business agility

Crisis Global survival Siege recession

The process of going to market

Aggressive Globalization Virtuality investment

Paradox CSR

Strategy

The strategic pathway

Strategic thinking and thinking strategically

Market sensing and learning strategy

Strategic market choices and targets

Customer value Strategic strategy relationships and and positioning networks

Strategic transformation and strategy implementation

A route-map for marketled strategic change

Part I Customer value imperatives Part II Developing a value-based marketing strategy
The strategic pathway Market sensing and learning strategy

Part III Processes for managing strategic transformation

Change strategy

The Customer is always right-handed

Strategic gaps

New marketing meets old marketing

Strategic thinking and thinking strategically

Strategic market choices and targets

Organization and processes for change

Customer value strategy and positioning

Value-based marketing strategy

Strategic relationships and networks

Implementation process and internal marketing