Marketing Strategy

Hao-Chieh Lin Assistant Professor Institute of International Management National Cheng Kung University 2011-09-14
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ThreeNaveQuestions
Why are we here? (Why are you interested in MS?) Why should we care? (Why should we concern MS?) How much do we know? (What is MS?)

FundamentalQuestions:Asamarketer
Howmuchdoyoulikemarketing/selling? Whatdoyouexpectyourjobasamarketingprofessional? Whatarethedifferencesbetweenamarketingplanneranda salesperson?Howmuchdotheydiffer? Whatarethequalificationsasagoodmarketingplanner? Whatarethequalificationsasagoodsalesperson? Shouldeveryonebecomeamarketerinbusiness?
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FundamentalQuestions:5W1H
What ismarketing?What istherelationship betweenmarketingstrategy,businessstrategy, andcorporatestrategy? Why marketing?Why marketingstrategy(or strategicmarketing)? Whom,when,andwheretomarket? How toconductmarketingstrategy? Howmuch:Whatsthemarketingbudgetand marketingROI?
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SomeAnalyticalFrameworksin(Strategic)Marketing

SWOTAnalysis
Strength,weakness,opportunities,andthreat

STPAnalysis
Segmentation,targetmarket,positioning

4PAnalysis (McCarthy)
Product,price,promotion,place(channel)

4C Analysis(RobertLauterborn)
Customneedsandwants,Costtothe customer,Convenience,Communication
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ANewMarketing4Ps:AProcessPerspective

WhyStrategicMarketing?
IfyouaskaPR(publicrelations)company whatyoushoulddo toattractcustomers,theywilltellyoutosendoutamedia release. Ifyouaskagraphicdesignfirm,theywilltellyoutopreparea brochure. Allmarketingsupplierstrulyareexpertsattheirownarea,but aretheyworkingtowardacommongoal? StrategicMarketingistheprocessoftakingabigpicture viewofplanninghowyourcompanywillgrow,thenkeeping youreyeonthatgoalasyoudesignandimplementyour marketingplan.

Somestrategicmarketingissues
HowcanIconductinternalandexternalanalysesforlaunching amarketingstrategy/program? HowdoIinvest intheproductmarket?(BCGModel)
Investtogrow (orenteraproductmarket) Investonlytomaintain theexistingposition Milk thebusinessbyminimizinginvestment Recoverasmanyoftheassetsaspossiblebyliquidatingordivestingthe business

HowdoIgrow theproductmarket?(Ansoff Mix)

Marketpenetration,marketexpansion,productexpansion, diversification(&verticalintegration)

CanIleveragethebrand brandextension?
Doesthebrandfitthenewproductcontext? Doesthebrandaddvaluetotheofferinginthenewproductclass? Willtheextensionenhancethebrandnameandimage?

Whatarethevaluepropositionsofmyproducts?
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Pricevs.benefits(values)

BrandExtensionLogic
Add Value

Brand

Fit

New Offering

Enhance Brand

Figure 11.1

ValueProposition Put Customers in Mind Always!!!

Functional Emotional Social Self-expressive

Benefits

V A L U E
Value Proposition Value Proposition

Relative Price

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ValuePropositionExamples(cont.)
Excellenceonanimportantproductorservice attribute Thebestoverallquality Productlinebreadth Innovativeofferings Asharedpassionforanactivityoraproduct Globalconnectionsandprestige
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IntegratedMarketing

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Plans are nothing, planning is everything. - Dwight D. Eisenhower

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YourStrategicMarketingSteps
KeeptheVisionSimple!!!

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AFrameworkforMyTeachingMindset
Humanity
Change Change Renewal Renewal

Teaching and Mentor Teaching and Mentor

Learn and Unlearn

Flow Flow Knowledge Knowledge Creation Creation Knowledge Knowledge Transfer Transfer Knowledge Knowledge Integration Integration valuable valuable

Intellectual Capital
Stock Stock Human capital Social Capital Organized Capital

rare rare inimitable inimitable

nonsubstitutable nonsubstitutable

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Core Competence Core Competence

LetsMoveForwardTogether!!!

Put yourself into the process (learning, job, friendship, family, career), and the process will carry you through (Chen, 2008).

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Chapter 1 Imperatives for MarketDriven Strategy

Basic Marketing Concepts

* Marketing (AMA 2005 definition)
* an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

* Market
* A collection of buyers and sellers

Basic Marketing Concepts

* Marketspace
* Electronic marketplaces that are not bound by time or space

* Metamarket
* A cluster of closely related goods and services that center around a specific consumption activity

* Metamediary
* Provides a single access point where buyers can locate and contact many different sellers in the metamarket
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Common Metamarkets and Participants

What is Exchange?
* Exchange
* Process of obtaining something of value by offering something in return

* Five Conditions of Exchange

* * * * * There must be at least two parties to the exchange. Each party has something of value to the other party. Each party must be capable of communication and delivery. Each party must be free to accept or reject the exchange. Each party believes it is desirable to exchange with the other party.

What is a Product?
* Product
* Something that can be acquired via exchange to satisfy a need or a want

* Examples
Goods Services Ideas Information Digital Products People Places Experiences and Events Real or Financial Property - Organizations

Products

An idea is also a form of products

The Concept of Utility

* Utility
* Ability of a product to satisfy a customers desires

* Five Types of Utility

* * * * * Form Utility Time Utility Place Utility Possession Utility Psychological Utility

Characteristics of a Market-Driven Strategy

Becoming MarketOrientation (1)

Achieving Superior Performance (4)

Determining Distinctive Capabilities (2)

Customer Value/ Capabilities Match (3)

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Market-Driven Strategy (1): Becoming Market Oriented

Customer is the focal point of the organization Commitment to continuous creation of superior customer value Superior skills in understanding and satisfying customers Requires involvement and support of the entire workforce Monitor rapidly changing customer needs and wants Determine the impact of changes on customer satisfaction Increase the rate of product innovation Pursue strategies to create competitive advantage
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Characteristics of Market Orientation

Customer Focus
What are the customers value requirements? A philosophy and a process for delivering customer value.

Competitive Intelligence
Importance of understanding the competition as well as the customer The case of Polaroid, IBM, Mobile phone

Cross-Functional Coordination
Remove the walls between business functions

Performance Consequences
Market orientation leads to superior organizational performances

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Becoming A Market-oriented Organization

Information Acquisition

Cross-Functional Analysis of Information

Shared Diagnosis and Coordinated Action

Delivery of Superior Customer Value

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Market Orientation
Information Acquisition Gather relevant information on customers, competition, and markets Involve all business function Inter-functional Assessment Share information and develop innovative products with people from different function Shared diagnosis and action Deliver superior customer value
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Market-Driven Strategy (2): Distinctive Capabilities

Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.
George S. Day, Journal of Marketing, October 1994, p.38.

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Southwest Airlines Distinctive Capabilities Components of Distinctive Capabilities

Organizational Processes
Southwest uses a point-to-point route system rather than the hub-and-spoke design used by many airlines. The airline offers services to 57 cities in 29 states, with an average trip about 500 miles. The carriers value proposition consists of low fares and limited services (no meals). Nonetheless, major emphasis throughout the organization is placed on building a loyal customer base. Operating costs are kept low by using only Boeing 737 aircraft, minimizing the time span from landing to departure, and developing strong customer loyalty. The company continues to grow by expanding its point-to-point route network.

Skills and Accumulated Knowledge

The airline has developed impressive skills in operating its business model at very low cost levels. Accumulated knowledge has guided management in improving the business design over time.

Coordination of Activities
Coordination of activities across business functions is facilitated by the point-to-point business model. The high aircraft utilization, simplification of functions, and limited passenger services enable the airline to manage the activities very efficiently and to provide on-time point-to-point services offered on a frequent basis.

Assets
Southwests key assets are very low operating costs, loyal customer base, and high employee esprit de corps (feelings of pride)
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Capabilities
Disproportionate (higher) contribution to superior customer value Compelling Logic of Distinctive Capabilities Do customers concern whether you are costeffective?
Source: George S. Day, Journal of Marketing, October 1994, p. 38. 16

Provides value to customers on a more cost-effective basis

Capabilities
Desirable Capabilities

Applicable to Multiple Competition Situations Difficult to Duplicate

Source: George S. Day, Journal of Marketing, October 1994, 49.

Superior to the Competition

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Resources and capabilities that meet four criteria become a source of: (Barney, 1991)

Valuable Resources and Capabilities

Rare Costly to imitate Non-substitutable

Core Competencies/ Distinctive Capabilities

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Types of Capabilities
Outside-In Processes

Process-based capabilities
Inside-Out Processes

Spanning Processes

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Organizations Process
EXTERNAL EMPHASIS Outside-In Processes
Market sensing Customer linking Channel bonding (relationships) Technology monitoring

INTERNAL EMPHASIS Inside-Out Processes

Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety

Spanning Processes
Customer order fulfillment Pricing Purchasing Customer service delivery New product/service development Strategy development

Source: George S. Day, Journal of Marketing, October 1994, 41.

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Another Classification of Capabilities

Input Physical, IT, Human, Financial, Routine Process Entrepreneurship, culture, climate, managerial Output Reputation, image, brand, patent, customer loyalty
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Market-Driven Strategy (3): Matching Customer Value and Distinctive Capabilities

Value Requirements

Distinctive Capabilities

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Creating Value For Customers

Customer Value:
Value for buyers consists of the benefits less the costs resulting from the purchase of products. Superior value: positive net benefits

Creating Value:
Customer value is the outcome of a process that begins with a business strategy anchored in a deep understanding of customer needs. HP/Epson: Printers vs. Ink Cartridges; Gillette: Razor vs. blades; Main dish vs. side dishes

23 Source:

C. K. Troy, The Conference Board Inc., 1996, 5.

Creating Value for Customers

Customer Value

Benefits
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Costs

Value Composition
Product Services Employees
(RELATIONSHIP)

Benefits
Value (gain/loss) Costs/Price (sacrifices)

Image
Monetary costs

Time
Psychic and physic costs
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Value Proposition Put Customers in Mind always!!!

Functional Emotional Social Self-expressive

Benefits

V A L U E

Relative Price

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Basic Concepts: Capturing the Value Proposition (cont.)

Expectation 8

Performance 10

Expectation 10

Performance 8

Expectation> Performance, Satisfaction decreases!

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Expectation< Performance, Satisfaction increases!

The Value Proposition of McDonald

Philosophy of customer service QSCV Quality, Service, Cleanliness, Value Service: Appeals to customer service FAF Fast, Accurate, Friendly

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Matching Customer Value with Market Driven Initiatives 1. Market Sensing Capabilities Effective processes for learning about markets Sensing: Collected information needs to be shared across functions and interpreted to determine proper actions. 2. Customer Linking Capabilities Create and maintain close customer relationships But, how?

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Matching Customer Value with Market Driven Initiatives 3. Aligning Structure and Processes Potential change of organizational design Improve existing processes Process redesign Cross-functional coordination and involvement Primary targets for reengineering: Sales and marketing, customer relations, order fulfillment, and distribution

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Corporate, Business and Marketing Strategy (1): Corporate Strategy

Deciding the Scope and Purpose of the Business (based on Mission/Intent)

Corporate/Business Objectives

What business will you do? (e.g., BCG Model)

Actions and Resources for Achieving Objectives/Synergies

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Characteristics Of Successful Strategy

Unique competitive position for the company. Activities tailored to strategy. Clear trade-offs and choices vis--vis competitors. Competitive advantage arises from fit across activities. Sustainability comes from the activity system not the parts. Operational effectiveness.

Source: Michael E. Porter, What Is Strategy, Harvard Business Review, November-December 1996, 74.

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Corporate, Business and Marketing Strategy (2): Corporate strategy framework Managements long-term vision for the corporation (must be SHARED VISION) Objectives (marketing, innovation, resources, productivity, social responsibility, and finance) Assets, skills, and capabilities Businesses in which the corporation competes Structure, systems, and processes Creation of value
Source: David J. Collis and Cynthia A. Montgomery, Corporate Strategy, Chicago: Irwin, 1997, 7-12.

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Corporate, Business and Marketing Strategy (3): Business and marketing strategy

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Corporate, Business and Marketing Strategy (3): Marketing Strategy Process

Markets, Segments And Value Implementing and Managing Market-Driven Strategy Market-Driven Program Development Designing Market-Driven Strategies

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The marketing strategy process

Markets, segments and customer value
Markets and competitive space Strategic market segmentation Strategic customer relationship management (CRM)
Indifference or difference?

Capabilities for continuous learning about markets

Designing market-driven strategies

Market targeting and strategic positioning Strategic relationships Innovation and new product strategy

Market-driven program development

Strategic brand management Value chain strategy Pricing strategy Promotion strategy

Implementing and managing market-driven strategy

Designing market-driven organizations Marketing strategy implementation and control
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Major Marketing Activities and Decisions-1

Strategic Planning
Strategy Tactical Planning Marketing Plan

Social Responsibility and Ethics

Social Responsibility Marketing Ethics

Research and Analysis

Internal Analysis Competitive Intelligence Environmental Scanning Situation Analysis Competitive Advantage SWOT Analysis

Developing Competitive Advantage

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Major Marketing Activities and Decisions-2

Marketing Strategy Decisions
Market Segmentation and Target Marketing Product Decisions
* Product Positioning

Pricing Decisions
* * * * Leads to revenue and profit Directly connected to customer demand Easy to change Major quality cue for customers

Distribution and Supply Chain Decisions

* Distribution and Supply Chain Management * Supply Chain Effectiveness

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Promotion Decisions * Integrated Marketing Communications (IMC)

Major Marketing Activities and Decisions-3

Implementation and Control
* Marketing Implementation

Developing and Maintaining Customer Relationships

* Transactional Marketing * Relationship Marketing

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Major Characteristics of Transactional and Relationship Marketing

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Challenges in Modern Environment

Escalating globalization
The world is flat

Technology diversity and uncertainty The Web 2.0

My space, Face book, Youtube, blog, Twitter, buboo, Plurk, skype, Wikipedia

Ethical behaviour and corporate social responsibility (CSR) Changing customers roles
Power Shift to Customers Massive Increase in Product Selection Audience and Media Fragmentation Changing Value Propositions Shifting Demand Patterns

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Taking on the Challenges of Developing Marketing Strategy-1

Unending Change People-Driven Nature of Marketing Lack of Rules for Choosing Marketing Activities Basic Evolution of Marketing & Business Practice Increasing Demands of Customers Overall Decline in Brand Loyalty & Increase in Price Sensitivity

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Taking on the Challenges of Developing Marketing Strategy-2

Competing in Mature Markets

Increasing commoditization Little real differentiation among product offerings

Increasing Expansion into Foreign Markets Aggressive Cost-Cutting Measures Increasing Cooperation with Supply Chain Partners and Competitors

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Strategic Marketing Planning

Developing the strategic plan for each business Preparing the marketing plan Planning relationships and frequency Planning considerations Responsibility for preparing plans Planning unit Preparing the marketing plan

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Marketing Plan Outline

I. Strategic Situation Summary
Summarize the key points from your situation analysis (market analysis, segments, industry/competition) in order to recount the major events and provide information to better understand thestrategies outlined in the marketing plan.

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, (2) price, (3) distribution, (4) promotion (salesforce, advertising, sales promotion, and public relations), and (5) technical services.

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Marketing Plan Outline

III. Positioning Statements

Write statements that describe how you want each market target to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes and mind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers when buying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) The limitations of competitive products.

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IV.
A.

Market Mix Strategy for Each Market Target

Product Strategy
Identify how each product fits the market target. Other issues that may be addressed would be new product suggestions, adjustments in the mix of existing products, and product deletion candidates.

B.

Price Strategy
The overall pricing strategy (I.e., competitive, premium-priced, etc.) should be identified along with a cost/benefit analysis if applicable. Identify what role you want price to play, i.e., increase share, maintenance, etc.

C.

Distribution Strategy
Describe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, and assistance provided to distributors. The role of the sales force in distribution strategy should also be considered.

D.

Promotion Strategy
Promotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in developing the communications program, the attributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales forces responsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for (1) personal selling, (2) advertising, (3) sales promotion, and (4) public relations.

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E.

Marketing Research Describe the market research problem and the kind of information needed. Include a statement which addresses why this information is needed. The specific market research strategies can be written once the above two steps have been followed. Coordination with Other Business Functions Indicate other departments/functions that have responsibilities for implementing the marketing plan. Sales Forecasts and Budgets Contingency Plans Indicate how your plans should be modified if events should occur that are different from those assumed in the plan.

V.

VI. VII.

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Chapter2 MarketsandCompetitive Space

MARKETS AND COMPETITIVE SPACE

Markets and Strategies Defining and Analyzing Product-Markets Describing and Analyzing End-Users Analyzing Competition Market Size Estimation Developing a Strategic Vision about the Future
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MarketsAndStrategies
TheChallenges Marketsareincreasinglycomplex,turbulent,andinterrelated. Importanceof abroadviewofthemarket. Essentialtodevelopavisionabouthowthemarketislikelyto changeinthefuture. ContinuousMonitoringisNecessaryto: Findpromisingopportunities Identifyshiftsinvaluerequirements Understandcompetitors positioning Guidetargetingandpositioningdecisions
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MarketsImpactStrategies

Marketchangesoftenrequirealtering strategies Forcesofchangecreatebothmarket opportunitiesandthreats Inherentdangerinfaultymarketsensing

OpportunitiesOutsideTheCompetitiveBox
TheCompetitiveBox
NewTypesof Competition

Traditional Competitors

New Business Models New Customers

New Customers

ConventionalValue Propositions Existing CustomerBase NewCustomer Base(s)

Cannibalize

An Array of Challenges
Disruptive Innovation

Fast Changing Markets

DriversofChanges inMarkets

Commoditization Threats

CreatingNew MarketSpace

An Array Of Challenges
Disruptiveinnovation
Providesimplerandlesscostlywaystomatchthevaluerequirements, e.g.Amazon&Google.

Commoditizationthreats
Whenmodularization(productscomprisedofstandardized components)occurs,productsbecomecommodities,makingit difficulttoearnanythingmorethansubsistencereturns,e.g.PC.

Creatingnewmarketspace
Blueoceanstrategy.Cameramobilephonevs.digitalcamera; APPLESIPOD&iPhone

Fastchangingmarkets
Eveninmarketsassumedtobecomparativelystable,innovationcan quicklyaltermarketspace. ThesocalledOneshotboxingchampion theory
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Googlesstrategyfeature:DisruptiveInnovation
Initialincomewasfromsearchrelatedadvertising 100%relevantbeyondsearch:intendtoleveragecapabilities inareasbeyondsimplyWebsearching Targetingtheglobaladvertisingindustryonlineandoffline: thepurchaseofYouTube(video),theacquisitionofdMarc and adealwithClearChannel (audio),andtheagreementwith66 USnewspapers(print) Partneringwithmediacompaniestosupplyvideocontentto affiliatedwebsites,e.g.MTV.Also,haveanalliancewith Myspace toaccesssocialnetworking PositioningitselfasarivalofMicrosoft:Gmail,GoogleEarth andGoogleMaps,Onlineofficesuite Plansforebookdigitization:JustlikeiPodformusic Missionisorganizetheworldsinformation: Organizing peoplesdailylife
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MatchingNeedswithProductBenefits
Aproductmarketmatchespeoplewithneeds tothe productbenefits thatsatisfythoseneeds
Amarketexistsonlywhentherearebuyerswithneedswho havetheabilitytopurchasegoodsandservice,andproducts areavailabletosatisfytheneeds(ability&willingness)

Aproductmarketisthesetofproductsjudgedtobe substitutes withinthoseusagesituationsinwhich similarpatternsofbenefits aresoughtbygroupsof customers.*

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*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

ProgressivesInnovationfeature
Customer Needs at the Center of Strategy
Intheperiod1994to2004,ProgressiveInsuranceincreasedsalesfrom$1.3billionto $9.5billion,andrankshighintheBusinessWeek Top50U.S.companiesfor shareholdervaluecreation. Thecompanyinventsnewwaysofprovidingservicestosavecustomerstime,money andirritation,whileoftenloweringcostsatthesametime. Benefitstocustomers Lossadjustersaresenttotheroadaccidents ratherthanworkingatheadoffice, andtheyhavethepowertowritechecksonthespot. Progressivereducedthetimeneededtoseeadamagedautomobilefromseven daystoninehours. Policyholders carsarerepairedquicker,andthefocusonthiscentralcustomer needhaswonmuchautomobileinsurancebusinessforProgressive. BenefitstoProgressive: TheseinitiativesalsoenableProgressivetoreduceitsown costs thecostofstoringadamagedautomobileforadayis$28,aboutthesameas theprofitfromasixmonthpolicy.
Source: Adapted from Mitchell, Adrian (2004)Heart of the Matter, The Marketer, June 12, 14.

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DefiningandAnalyzingProductmarkets
DeterminetheBoundariesand StructureoftheProductMarket

FormtheProductMarket

DescribeandAnalyzeEndUsers

AnalyzeCompetition

ForecastMarketSizeandRateofChange
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ProductMarketBoundariesandStructure DeterminingProductMarketStructure
Acompanysbrandscompetewithothercompanies brandsin generic,producttype,andproductvariantproductmarkets. Genericproductmarket:includingabroadgroupofproductsthat satisfyageneral,yetsimilar,need.E.g.kitchenappliances. Producttype(aproductcategoryorclassification)product market:Includingallbrandsofaparticularproducttype,suchas ovens. Productvariants:Differencesintheproductswithinaproduct typeproductmarket.E.g.electronic,gas,andmicrowaveovens
1. Startwiththegenericneedsatisfiedbytheproductcategoryof interestto management 2. Identifytheproductcategories(types)thatcansatisfythegenericneed 3. Formthespecificproductmarketswithinthegenericproductmarket

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IllustrativeFastFooddelis ProductMarketStructure
The consumption need being satisfied is fast and convenient preparation of food.
Super Markets Microwave Ovens

FastfoodMarket
Convenience Stores
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Traditional Restaurants

FormingProductMarkets
Thefactorsthatinfluencehowproductmarkets shouldbedeterminedinclude
Thepurposeofanalysis
Oftennotrelatedwithwhetherornottoexitfromabusiness,but withfindingoneormoreattractivetargetmarket(s) Includingallrelevantproductsandbrands inananalysis.

Therateofchangesinmarketcomposition
Newtechnologyandnewcompetition Industryclassifications,typicallyhavingaproductsupply rather thanacustomerdemandorientation,oftendonotclearlydefine productmarketboundaries.

Theextentofmarketcomplexity
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Extent of Market Complexity

Threecharacteristicsofmarketsrelatedwith complexity:
Functions orusesoftheproduct:thevalueprovidedto thecustomer.E.g.PCorMobilephone Theenablingtechnology oftheproduct:e.g.voicecalls Customersegments intheproductmarket:Automobile marketcanbeclassifiedintohouseholdsvs. organizations.Italsocanbefurtherclassifiedinto sedans,SUV,andsports.

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IllustrativeProductMarketStructure
Food and beverages for breakfast meal

Generic Product Class

Cereals

Product Type

Ready to eat
Natural Nutritional Regular Pre-sweetened

Variant A Variant B

Life
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Product 19

Special K

Brands

DefiningandAnalyzingMarkets/Endusers
Define Product-Market Boundaries and Structures Identify and Describe End-Users

Analyze Industry and Value Added Chain

Evaluate Key Competitors

Forecast Market Size and Growth Trends

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DefiningandAnalyzingEndusers
Identifying and Describing Buyers

Building Customer Profiles

Describing and Analyzing End-users

How Buyers Make Choices

Environmental Influences
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IdentifyingandDescribingEndUsers
Illustrativebuyercharacteristicsinconsumer markets: Familysize,age,income,geographical location,sex,andoccupation Illustrativefactorsinorganizationalmarkets: Typeofindustry Companysize Location Typeofproducts

Issue:USorChinaisONEmarket?!
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HowBuyersMakeChoices
BuyingDecisionProcess:
1. Problemrecognition 2. Informationsearch 3. Alternativeevaluation 4. Purchasedecision 5. Postpurchasebehavior
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Findingoutwhat criteriapeople useinmaking decisions!!!

TheCustomerEnvironment
WhoareourCurrentandPotentialCustomers? WhatdoourCustomersdowithourProducts? WheredoCustomersPurchaseourProducts? WhendoCustomersPurchaseourProducts? Why(andHow)doCustomersSelectourProducts? WhydoPotentialCustomersnotPurchaseourProducts?

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EnvironmentalInfluences

Externalfactorsinfluencingbuyers needs andwants:

Government,socialchange,economicshifts,technology etc.

Thesefactorsareoftennoncontrollablebut canhaveamajorimpactonpurchasing decisions Thecaseoftheshiftinpopulationage groupcomposition

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Question
Duringthefinancialcrisis,doyouhaveany ideasaboutwhatkindofbusinessesarestill flourishingorgrowingup?Why?

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BuildingCustomerProfiles
Concernedaboutthesizeandgeneralcompositionof thecustomerbase (marketsize,growthrates,mixof customers,andothergeneralcharacteristics) Startwithgenericproductmarket Movenexttoproducttypeandvariantprofiles>> increasingly morespecific Customerprofilesguidedecisionmaking(e.g. targeting,positioning,marketsegmentationetc.)
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DiscussionQuestion Question
Understandingthemotivationsofafirmsnon customers isoftenjustasimportantasunderstanding itscustomers.Rethinkofthereasonswhyanindividual wouldnotpurchaseafirmsproducts.Howcanafirm reachouttononcustomersandsuccessfullyconvert themtocustomers?

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Analyzing Competition
1. Define the Competitive Arena for the Generic,
Specific, and Variant Product Markets

5. Identify and
Evaluate Potential Competitors

Product- Market Structure And Market Segments

2. Identify and
Describe Key Competitors

4. Anticipate Competitors Actions

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3. Evaluate
Key Competitors

ExamplesofLevelsofCompetition
Baseball cards Bottle water Regular colas Diet-Rite Cola Fruit flavored colas Diet Coke Diet Pepsi Wine Diet lemon limes Video Games Ice Cream

Fast Food Beer

Product from competition: Lemon diet colas limes Product category Juices competition: soft drinks Coffee Generic competition: beverages Budget competition: food & entertainment
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MajorTypesofCompetition
Product variants Product Type Generic

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Exhibit 4.6

IndustryAnalysis
Theindustryanalysisishorizontal andcoverssimilartypesof firms(e.g.softdrinkproducers),whereasthevaluechain analysisconsidersthevertical networksoffirms. Horizontalanalysis:Domesticvs.International;Includingall

relevantindustries
Industrysize,growth,andcomposition Typicalmarketingpractices Industrychangesthatareanticipated(e.g.consolidationtrends) Industrystrengthsandweaknesses StrategicalliancesandpotentialM&Aamongcompetitors
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DefiningIndustryStructure&Characteristics VerticalValueChain
Suppliers
IndustryForm IndustryEnvironment Competitiveforces

Producers Wholesalers/ distributors

Value Added Chain

Look at the types of relationships Retailers/dealers (collaborative vs. transactional) Consumer/organizational end The extent of users outsourcing
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CompetitiveForces
1. Rivalryamongexistingfirms(Googlevs.Microsoft) 2. Threatofnewentrants(WalMartintosupermarket business) 3. Threatofsubstituteproducts(PCmarket) 4. Bargainingpowerofsuppliers(keycomponents) 5. Bargainingpowerofbuyers(WalMart)

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Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

AssessingCompetitiveIntensity/Industry Attractiveness:PortersFiveForces

Threat of new entrants

Bargaining power of suppliers

Rivalry among existing industry firms

Bargaining power of buyers

Threat of substitute products

Source: Adapted from Michael E. Porter, Industry Structure and Competitive Strategy: Keys to Profitability, Financial Analysts Journal, July-August 1980, p. 33.

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KeyCompetitor(anyorganizationgoing afterthesamemarket)Analysis
Businessscopeandobjectives Managementexperience,capabilities,and weaknesses Marketpositionandtrends Markettarget(s)andcustomerbase Marketingprogrampositioningstrategy Financial,technical,andoperatingcapabilities (currentandpast) Keycompetitiveadvantages(e.g.,accessto resources,patents)
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KeyCompetitorAnalysis
Extent of Market Coverage

Current Capabilities

Competitor Evaluation

Customer Satisfaction

Past Performance
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AnticipatingCompetitors Actions
Estimatingcurrentcompetitors futurestrategies Identifyingnewcompetitors: Industrymargins Futuregrowthopportunities Entrybarrier Theextentofcompetition Competitiveadvantageconsideration

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MARKETSIZEESTIMATION
Product-Market Forecast Relationships
(area denotes sales in $s)

Market Potential Estimate

Unrealized Potential

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Company Sales Forecast/ market share

Industry Sales Forecast

ProductMarketForecastRelationshipsfor IndustrialPaintingUnits

Sales (in 1000s of units) 900 800 700 600 500 400 300 200 100 0 2003 2004
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Market Potential Sales Forecast

Company XYZ Sales Forecast

2005

2006

2007

2008

2009

2010

DevelopingAStrategicVisionAboutTheFuture
IndustryBoundariesBlurringandEvolving CompetitiveStructureandPlayersChanging ValueMigrationPaths ProductVersusBusinessDesignCompetition FirmsareCollaboratingtoInfluenceIndustry Standards

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Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.

DevelopingAStrategicVisionAboutTheFuture
Areproductmarketboundariesandcompositionofthe productmarketundergoingtransformation? Howandtowhatextentistheendusercustomerbasechanging? Arethescopeandstructureofcompetitorspacechangingdue tomarketandindustrytransformationandentry/exitof competitors? Arethesepotentialthreatsfromdisruptivetechnologiesand/or commoditization? Arethecompositionandstructureofthevaluechain(s)serving theendusermarket(s)changing? Dootherinfluencesoperatingintheproductmarkethavethe potentialtosignificantlytransformtheproduct? Atwhatlifecyclestageistheproductmarket(new,growth, maturity,decline)andhowfastisthelifecycleadvancing?
39

Conclusion

Opportunitiesareonlyasgood asthepeoplewhowillpursuethem

40

Week5:Chapter3 StrategicMarket Segmentation

DiscussionQuestion

Whyshouldwesegmentmarkets andtargetcertainsegments? Aretherebenefitsindoingso? Aretheredrawbacks?

2

Strategicmarketsegmentation(1) Levelsandtypesofmarketsegmentation
Market segmentation is the process of placing the buyers in a product-market into the subgroups so that the members of each segment display similar responsiveness to a particular positioning strategy.

BestBuy segmentationstrategy
Goal:Focusingonthemostattractivecustomers Basedonbasiclifestyle Jills soccermoms:Themainshopperforthefamily Barrys wealthyprofessionals:Thewealthyprofessional man Buzzs techenthusiasts:thosewhowanttech.and entertainment Rays thefamilyman:thosewhowanttechtoimprove familylife MrStorefront thesmallbusinesscustomer:for solutionsandservices Othersegmentations:Carries young,singlefemalesVS. HelenandCharlies oldercoupleswhosechildrenhaveleft home
4

Levelsandtypesofmarketsegmentation
Vision Strategic intent Product benefits Resource allocation Alignment Strategic Planning Segmentation Marketing programs - Advertising Managerial - Sales Segmentation - Distribution Operational Segmentation

Levelsandtypesofmarketsegmentation: ThecaseofBestBuy
Concerned with consumer lifestyles and the benefits that different consumers seek in choosing consumption electronics Strategic Segmentation Managerial Segmentation Concerned with identifying target segment members, redesigning stores to serve chosen segments, and training employees to meet segment targets Concerned with delivering relevant messages to targets and supporting the segmentation strategy at the store level

Operational Segmentation

Levelsandtypesofmarketsegmentation Thedeepestdecisionsarewhethertorevise thebusinessmodel Theshallowestdecisionsarewhethertomake smallimprovementsinexistingproducts, whethertoadjustprice Differentaspectsofsegmentationshouldbe alignedandintegrated.

FromMassMarketstoMicroMarkets
CONSUMERS OLD Passively receive whatever TV networks broadcast To keep up with the crowd Three networks plus maybe a PBS station Age of the big glossies: Time, Life, Newsweek Everyone hums the Alka-Seltzer jingle Rise of the big, ubiquitous brands from Coca-Cola to Tide NEW Empowered media users control and shape content thanks to TiVo, iPod and Internet To standout from the crowd Hundreds of channels plus video on demand Age of the special interest magazine for every age and affinity group Talking to a group of one, ads go ever narrower Niche brands, product extensions and mass customization mean many product variations

ASPIRATIONS TV CHOICE

MAGAZINES

ADS

BRANDS

8
Source: Anthony Bianco, The Vanishing Mass Market, Business Week, July 12 2004, 58-62

TypesofMarket/preference

homogeneous

Totally heterogeneous

Clusters

MassMarketing
Involvesnosegmentationwhatsoever Isanundifferentiatedapproach Worksbestwhentheneedsofanentiremarketare homogeneous Isefficientfromaproductionstandpoint Resultsinlowermarketingcosts Isinherentlyriskyandvulnerabletocompetitors

10

DifferentiatedMarketing
Involvesdividingthetotalmarketintogroupsof customershavingrelativelycommonorhomogenous needsanddevelopingastrategytopursueoneormore ofthesegroups Maybenecessarywhencustomerneedsaresimilar withingroupsbutdifferacrossgroups Involvestwooptions:
Multisegment approach Marketconcentrationapproach

11

NicheMarketing
Focusesmarketingeffortsononesmall,welldefined marketsegmentornichethathasaunique,specific setofneeds Requiresthatfirmsunderstandandmeettheneeds oftargetcustomerssocompletelythatthefirms substantialshareofthesegmentmakesithighly profitable

12

Strategicmarketsegmentation(2)
Marketdrivenstrategyandsegmentation Marketsegmentation,valueopportunitiesand newmarketspace Markettargetingandstrategicpositioning

13

SegmentationintheMarketDrivenStrategy
Segments Value Opportunities Capabilities/Segment Match Target(s) Positioning Strategy
14

MarketTargetingandStrategicPositioning
Markettargetingconsistsofevaluatingandselecting oneormoresegmentswhosevaluerequirements provideagoodmatchwiththeorganizations capabilities. Positioningstrategyinvolvesthecombinationofthe actionsmanagementtakestomeettheneedsand wantsofeachmarketsegments. Wrongpositioning:Oldsmobile

15

Strategicmarketsegmentation(3)
Marketdrivenstrategyandsegmentation Marketsegmentation,valueopportunitiesand newmarketspace Markettargetingandstrategicpositioning Activitiesanddecisionsinmarketsegmentation

16

MarketSegmentationActivitiesandDecisions
Defining the Market to Be Segmented Strategic Analysis of Segments (Decide target market) Decide How to Segment (selecting variables)

Finer Segmentation Strategies

17

Form Segments (Using judgments or statistical analysis-CRM)

Strategicmarketsegmentation(4)
Marketdrivenstrategyandsegmentation Marketsegmentation,valueopportunitiesand newmarketspace Markettargetingandstrategicpositioning Activitiesanddecisionsinmarketsegmentation Step1:Definingthemarkettobesegmented

18

Product Variant Segmentation (e.g. electric razors) Product Type Segmentation

(differences in price, quality and features of shaving equipment)

Generic Segmentation
(e.g. shopper types [available shopping time] for supermarket buyers) 19

Strategicmarketsegmentation(5)
Activitiesanddecisionsinmarketsegmentation Step1:Definingthemarkettobesegmented Step2:Identifyingmarketsegments:
Segmentationvariables Characteristics ofpeopleandorganizations(demographicor psychographic personalityorlifestyle) Consumermarkets Organizationalmarkets Productusesituation segmentation Buyers needsandpreferences Consumerneeds Attitudes,brandawareness,brandpreference Perceptions Purchasebehaviour
20

SegmentationVariables(CPPU)

Purchase Behavior
Buyers Needs/ Preferences
Characteristics of People/ Organizations

Use Situation
21

IllustrativeSegmentationVariables
Consumer Markets Age, gender, income, family size, lifecycle stage, geographic location, lifestyle Occasion, importance of purchase, prior experience with product, user status Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal Size of purchase, frequency of purchase Industrial/ Organizational Markets Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary Application, purchasing Procedure (new task, modified rebuy, straight rebuy Performance requirements, brand preferences, desired features, service requirements Volume, frequency of purchase

Characteristics of people/ organizations

Use situation

Buyers needs/ preferences

Purchase behavior
22

Lifestylesegmentationformaleshopper

Themetrosexual Thematuriteen Themodernman Thedad Theretrosexual

23

Benefit/NeedsSegmentationoftheSnackFoodMarket

24

Strategicmarketsegmentation(6)
Formingmarketsegments
Requirementsforsegmentation:Fivecriteria Responsedifferences Identifiablesegments Actionablesegments Cost/benefits Stability Approachestosegmentidentification Customergroupidentification Forminggroupsbasedonresponsedifferences

25

MillerBrewings beerbrandtargets
Millergenuinedraft mainstreamsophisticates MilwaukeesBestLight hardworkingmen PilsnerUrquell beerafficionados MillerIcehouse fordrinkingbuddies

26

RequirementsforSegmentation(FAIRS)
Identifiable segments Response differences Segmentation Requirements Actionable segments

Stability over time

Favorable cost/benefit

27

CharacteristicsofGoodSegmentationSchemes
Segmentsare Substantial MeasurableandIdentifiable Accessible/Actionable ResponsiveandDifferentiable Timebound/Stable Avoidethicallysensitive,butlegal,segments Avoidsegmentsthatdonotmatchthefirmsexpertise

28

ApproachestoSegmentIdentification
IDENTIFIERS OF CUSTOMER GROUPS CUSTOMER RESPONSE PROFILE Use Situation

Characteristics of People and Organizations

Buyers Needs and Preferences

29

Purchase Behavior and Loyalty

CustomerGroupIdentification SegmentDimensionsforHotelLodgingServices

30

IllustrativeExample:GasolineBuyers
Road Warriors Higher-income, middle-aged men, drive 2550000 miles a year buy premium with a credit card purchase sandwiches and drinks from the convenience store will sometimes use carwash Men and women with moderate to high incomes, loyal to a brand and sometimes a particular station frequently buy premium, pay in cash Upwardly mobile men and women half under 25 years of age constantly on the go drive a lot snack heavily from the convenience store Usually housewives who shuttle children around during the day and use whatever gas station is based on town or on route of travel Not loyal to brand or station and rarely buy premium frequently on tight budgets. 16% of buyers

True Blues Generation F3 (Fuel, Food & Fast)

16% of buyers

27% of buyers

Homebodies

21% of buyers 20% of buyers

Price Shoppers
31

IllustrativeConsumerPerceptionMap
(Forminggroupsbasedonresponsedifferences)
Expensive
GROUP II

Brand E
Low Quality GROUP I

Brand A
High Quality

Brand B
GROUP III

GROUP V

Brand D

Brand C

GROUP IV

Inexpensive
32

Strategicmarketsegmentation(7)
Finer/Individualized segmentationstrategies Logic Customizedofferings Diversecustomerbase Closecustomerrelationships Finersegmentationstrategies Microsegmentation: Eachsegmentreceivesamarketingmatrix designedtomeettherequirements Onetoonemarketing: Involvescreatinganentirelyunique productofferingforeachcustomer Masscustomization: Providingcustomizedproductsatpricesnot muchhigherthanmassproduceditemsbyusingcomputeraid designandmanufacturingsoftwares,FMS,andFSS.Refersto providinguniquesolutionstoindividualcustomersonamassscale. Varietyseekingstrategy: Offerbuyersopportunitiestovarytheir choices(morechoices)incontrasttomakinguniquechoices Permissionmarketing: Customerschoosetobecomeamemberof thefirmstargetmarket;Keyadvantage Customersarealready interestedintheproductoffering
33

Strategicmarketsegmentation(8)
Selectingthesegmentationstrategy Decidinghowtosegment Strategicanalysisofmarketsegments Customeranalysis Competitoranalysis Positioninganalysis Estimatingsegmentattractiveness Segmentationfit andimplementation

34

Decidinghowtosegment
Thechoiceofsegmentationmethoddependsonthe maturityofmarket,thecompetitivestructure,andthe organizationsexperienceinmarket Thefivecriterianeedtobeapplied TargetMarketingStrategies SingleSegmentTargeting SelectiveTargeting MassMarketTargeting ProductSpecialization

35

BasicStrategiesforTargetMarketSelection

36

StrategicAnalysisofMarketSegments

Customer Analysis
Financial and Market Attractiveness

Competitor Analysis

Positioning Analysis
37

SegmentationFit forImplementation
Segment Attractiveness and Internal Compatibility
Internal Compatibility
High
Attractive segments that match with company capabilities Unattractive segments but with match to company capabilities

Low
Attractive segments but with poor match with company capabilities Unattractive segments that do not match with company capabilities

High

Market Segment Attractiveness

Low

38

HowshouldweDecideWhichSegmentstoTarget?Stepsin ConstructingaMarketAttractiveness/CompetitivePositionMatrix

1. Choose criteria to measure market attractiveness and competitive position. 2. Weigh market attractiveness and competitive position factors to reflect their relative importance. 3. Assess the current position of each potential target market on each factor. 4. Project the future position of each market based on expected environmental, customer, and competitive trends 5. Evaluate implications of possible future changes for business strategies and resources requirements.
39

Tip AUsefulToolforAssessingMarketSegments:Segment RatingChart

WEIGHT RATING (0-10) TOTAL Market attractiveness factors Customer needs and behavior Segment size and growth rate Macro trends Total: Market attractiveness Competitive position factors Opportunity for competitive advantage Capabilities and resources Industry attractiveness Total: Competitive position 40 .6 .2 .2 1.0 7 5 7 4.2 1.0 1.4 6.6 .5 .3 .2 1.0 10 7 8 5.0 2.1 1.6 8.7

TheMarketAttractiveness/CompetitivePosition Matrix
Market Attractiveness High (8-10) Moderate (4-7) Low (0-3) Weak (0-3) Medium (4-7) Strong (8-10)

Companys Competitive Position

l
41

= Market attractiveness and competitive position of distance runners segment

Implications of Alternative Positions Within the MarketAttractiveness/Competitive-Position Matrix

Competitive Position
Desirable Potential Target Invest to build: Challenge for leadership Build selectively on strengths Reinforce vulnerable areas Manage for earnings: Protect existing strengths Invest to improve position only in areas where risk is low Manage for earnings: Protect position Minimize investment

Weak
Build selectively: Spec. in limited strengths Seek to overcome weak. Withdraw if indications of sustainable growth are lacking Limited expansion or harvest: Look for ways to expand w/out high risk; otherwise min. invest. and focus operations

Medium

Strong
Desirable Potential Target Protect position: Invest to grow at max. digestible rate Concentrate on maintaining strength Desirable Potential Target Build selectively: Emphasize profitability by increasing productivity Build up ability to counter competition Protect and refocus: Defend strengths Seek ways to increase current earnings without speeding markets decline

High

Market Attractiveness

Mod.

Low

Divest: Sell when possible to maximize cash value Meantime, cut fixed costs & avoid further investment

Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems and Analytical Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, The Directional Policy Matrix: Tool for Strategic Planning, Long Range Planning 11 (1978), pp. 8-15.

42

Chapter 4

StrategicCustomerRelationship Management

IntegratedCRM

PivotalRoleofCustomerRelationshipManagement
Developing A CRM Strategy
CRM Levels CRM Strategy Development CRM Implementation

Value Creation Process

Customer Value Value Received by the Organization CRM and Value Chain Strategy

CRM and Strategic Marketing

4

Implementation Performance Metrics Short-Term Versus Long-Term Value Competitive Differentiation

CustomerRelationshipManagement
CRMisacrossfunctionalcorebusinessprocess concernedwithachievingimprovedshareholder valuethroughthedevelopmentofeffective relationshipswithkeycustomersandcustomer segments.
CRMRecognizesThatCustomers: Varyintheireconomicvalue tothecompany Differintheirexpectations towardthefirm
5

CustomerRelationshipManagement
CRMsupportsacustomerresponsivestrategy
Deliversuperiorcustomervaluebypersonalizingthe interactionbetweenthecustomerandthecompany Demonstratethecompanystrustworthinessand reliabilitytothecustomer Tightenconnectionswiththecustomer Achievethecoordinationofcomplexorganizational capabilitiesaboundthecustomer

Focusoncustomerloyalty andretention
5%increaseinretentionresultin95%increaseonNPVby thecustomer Repeatcustomersgenerateovertwiceasmuchgross incomeasnewcustomers.
6

CustomerRelationshipManagement
TheoverarchingframeworkofCRMincludesmuch morethandatabasesandITsystems. AdatabasecreatedthroughCRMtech.should contain:
Transactions Customercontacts Descriptiveinformation Responsetomarketingstimuli Marketsegmentation:Identifyinggroupsofcustomersby theirpurchasebehavior.CRM:Examineindividualcustomers ornarrowlydefinedgroups.
7

CustomerLifetimeValue
Customerlifetimevalue(CLV):Ametricthatcalculatespast profitproducedbythecustomer forthefirm thesumofallthe marginsofalltheproductspurchasedovertime,lessthecostof reachingthatcustomertying Tothisisaddedaforecastofmarginsonfuturepurchases (underdifferentassumptionsfordifferentcustomers), discountedbacktotheirpresentvalue. Thisprocessprovidesanestimateoftheprofitabilityofa customerduringthetimespanoftherelationship. TheCLVcalculationisapowerfultoolforfocusingmarketing andpromotionaleffortswheretheywillbemostproductive.
8

CRMLevels:PerspectivesTowardCRM
Consider the implications of knowledge about customers and their preferences across the entire company

Company wide level: StrategicThe Entire Company

Functional level: Required Marketing Functions

THE Customerfacing Level

Consider the processes that are needed to fulfill required marketing functions.
9

Offer a single view of the customer across all of the organizations access channels to the customer. It involves coordination.

TheStepsinDevelopingaCRMStrategy

Gain enterprise commitment

Build a CRM project team

Business needs analysis

Define the CRM strategy

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & Sons, Inc.), 2006, 39.

10

DefineTheCRMStrategy
Value Proposition
1 2
What the organization must provide in order to satisfy customer expectations.

All relevant stakeholders must be familiar with the plan.

Other Stakeholders

Business Case
An assessment which indicates the shareholders value and financial return of delivery of the required customer value.

CRM STRATEGY
4 Enterprise Transformation Plan
The changes which are required throughout the enterprise.

Customer Strategy
How different customer segments will be formed and managed.

Source: V. Kumar and Werner J. Reinartz, Customer Relationship Management (Hoboken, NJ: John Wiley & sons, Inc.), 2006, 42.

11

SuccessfulImplementation
A front office that integrates sales, marketing, and service functions across all media (call centers, people, retail outlets, value chain members, and internet) Data warehouse Business rules to encourage learning from customers Suitable performance measure (e.g. BSC model) Integration into back office
12

Implementation Dangers
ImplementingWithoutDevelopingaCustomerStrategy: Failtomakecustomerandpositioningchoices.Focus onlyonITandcallcentersetc. FailingtoInitiateNecessaryOrganizationalChange: Processes,cultureandstructureareallinvolved. AllowingTechnology toDominatetheCRMProcess: NeedtomatchITwithcustomerstrategy. FocusingontheWrongCustomers

13

VALUE CREATION PROCESS

ValueReceivedbythe Customer

ValueReceivedbythe Organization

THEVALUEEXCHANGE

SuccessfulValueExchange

14

ValueProposition
Thebenefitsthecustomerreceivesareexpressedby thevalueproposition. Explaintherelationshipamongtheperformanceof theproduct,thefulfillmentofthecustomersneeds, andthetotalcosttothecustomeroverthecustomer relationshiplifecycle.

15

METRICS FEATURE

How General Electric Co. Measures Customers Experience

Happy (And Not-So-Happy) Customers General Electric is a big user of the Net Promoter concept of customer satisfaction, popularized by Fred Reichheld of Bain & Co. Below, questions similar to those on which GEs Capital Solutions unit asks customers to rate the units performance on a 0 10 scale. How willing are you to recommend us to a friend or associate? How would you rate our ability to meet your needs? How would you rate our people? How would you rate our processes? What is your impression of our market reputation? How would you rate the cost of doing business with us? How would you rate the overall value of our product or service as being worth what you paid?
16
Source: Kathryn Kranhold, Client-Satisfaction Tool Takes Root, The Wall Street Journal, July 10, 2006, B3.

ValueReceivedbytheOrganization
CLV:usefulinselectingvaluablecustomersfor targeting Customerequity:ThesumofCLVforallofafirms customers Payattentiontocustomers trustandprivacy Identifyingunfavorableconsumerbehavior (e.g. wardrobing,packattacks,andexcessivereturning) isalsocritical

17

CRM and Value Chain Strategy

CRM needs to be integrated across multiple channels: Salespersons, value chain partners, email and internet, telephoning, and direct marketing

18 Adrian Payne and Pennie Frow, A Strategic Framework for Customer Relationship Management, Journal of Marketing (October 2005), 173.

CRM and Value Chain Strategy

The Perfect Customer Experience
The perfect customer experience, which must be affordable for the company in the context of the segments in which it operates and its competition, is a relatively new concept. This concept is now being embraced in industry by companies such as TNT, Toyotas Lexus, Oce, and Guinness Breweries, but it has yet to receive much attention in the academic literature. Therefore, multi-channel integration is a critical process in CRM because it represents the point of co-creation of customer value. However, a companys ability to execute multi-channel integration successfully is heavily dependent on the organizations ability to gather and deploy customer information, from all channels and to integrate it with other relevant information.
19 Adrian Payne and Pennie Frow, A Strategic Framework for Customer Relationship Management, Journal of Marketing (October 2005), 173.

CRM and Strategic Marketing

CRM

STRATEGIC MARKETING

From the perspective of strategic marketing, there are several reasons why CRM is important and why there should be extensive marketing involvement in decisions about CRM. Importantly, an organizational perspective is needed in guiding the CRM strategy.
20

CMRbasedPerformanceMeasures
Sales,profitability,marketshare Customeracquisitioncost,conversionrates(from lookerstobuyers),retention/churnrates,same customersalesrates,loyaltymeasures,andcustomer shareofwallet Longtermvalue:e.g.targetingatunder and graduatestudents.

21

Conclusions
Decisionsaboutcustomerchoicesreflectstrategic priorities. TheinvestmentsinCRMcantfocusonlyon automatedcallcentersandcustomercomplaint systems. Creatingamajornewsourceofknowledgeabout customerstobuildcompetitiveadvantage

22

Chapter5

CapabilitiesforLearningabout CustomersandMarkets

Capabilitiesforlearningaboutcustomersandmarkets Marketdrivenstrategy,marketsensingand learningprocesses Marketinginformationandknowledgeresources Marketingintelligenceandknowledgemanagement Ethicalissuesincollectingandusinginformation

Premise
Learningaboutmarketsismoreabout interpreting/understandinginformationthanfinding it Overwhelmedbyinformation:Internet,AIsystem, agencyreportsandsurvey,ethnographicalresearch techniques Marketsensingandlearningarerequiredcore competenciesunderpinningmarketdrivenstrategy

LearningCapabilitiesatP&G
Competitivestrengthisfromsuperiorcustomerknowledge Todeliveracustomerexperience(morethanbrand):Lessformal research,yetmoreonetoonecommunication ConsumerVillage(facilitiesthatreplicatecustomers home environmenttoidentifycustomerneeds) OnlinevirtualrealityCave:testalternativeretailconceptsand experiences Watchpeoplecleanbaths Mr.CleanMagicReach Understandwhatitisliketoliveon$50/month TideClean WhiteinChina Twosocialnetworkingsites

MarketSensingandLearningProcesses
Marketdrivencompaniesarecharacterizedbytheirabilityto senseandrespondtoeventsandtrendsintheirmarkets Marketorientationisbothacultureandalsoaprocess committedtoachievingsuperiorcustomervalue.Theprocess includes:Informationacquisition,broadininformation dissemination,andshareddiagnosisandcoordinationaction Marketsensingprocesses
Buildingopenmindedinquiryprocesses Analyzingcompetitorsactions Listeningtofrontlineemployees Searchingforlatentcustomerneeds Scanningtheperipheryofthemarket Encouragingexperimentation

MarketSensing
Marketsensingresultsinknowledgeintensity, inwhich revealingandrelevantdataaregatheredandstudied frequently. Knowledgeintensity identifiesmarketrisks andnew opportunities forgrowth Itsansweringthequestions:whatdoweknowabout customersthatothersdont? Andthenusingthat knowledgetomakeandkeepcustomersforlife

MarketSensingandLearningProcesses
P&Gillustratesthecloserelationshipbetweenmarket orientedcultureandorganizationallearning Learningorganization: Thefivedisciplines(PeterSenge,1990)
PersonalMastery Mentalmodels Buildingsharedvision Teamlearning Systemsthinking:TheFifthDisciplinethatintegratestheother 4

Learningandcompetitiveadvantage
Learningmakesfirmsabletoquicklyandeffectivelyrespondto opportunitiesandthreatsandtosatisfycustomers needswithnew productsandimprovedservices. H&M:Threemonthsforgettingnewdesignintothestore TheneedsforsupplierstoidentifyENDUSERmarketopportunitiesfor theircustomers

Learningorganization
Learningaboutmarkets
Objective(openminded)inquiry:Tryingtoexplorenew viewsaboutmarket Informationdistributionforsynergy:Removefunctional hurdlesandpractices Mutuallyinformedinterpretations:sharedvision sharedmentalmodel Accessiblememory:knowledgestorage

Barrierstomarketlearningprocesses
Managers support,organizationalstructure/process, politics(e.g.activeinertiarespondingtomarketshiftsby acceleratingactivitiesthatsucceededinthepast)

LearningAboutMarkets
Objective Inquiry Keepingand GainingAccess toPrior Learning Mutually Informed Interpretations
Source: George S. Day, Journal of Marketing, October 1994.

Synergistic Information Distribution

Barriers to market learning

Managersrejectnewinsights/information Rigidorganizationalstructuresandinflexibleinformation systems Politicsfavourthestatusquo Overwhelmingpressureofexistingbusinessoperations Tendencytoactiveinertia

Market sensing at Tesco International

RetailerwithentrytoU.S.grocerymarket(Fresh&Easy anew neighbourhoodstorechainsellingfreshfood),notwithexisting format DiscoveringwhatU.S.consumerswant: 50seniormanagerslivewithU.S.familiesfortwoweeks Probetherefrigeratorcontentsandlifestylesof60families PrototypestorebuiltinsecrecyinLA Theyweremakinga movie.Morethan200focusgroups Developinganewretailformatandtargetingthegrocerygap: storesarelocatednotonlyatprosperoussuburbs,butalsoin poor,innercityareas

Best Buys customer knowledge strategy

Strategytreatscustomersasindividual,developssolutions forneedsandengagesemployeestoservethem Newideasfromlisteningmorecloselytocustomersand employees Knowledgesharedwithmanufacturersandproduct developers Coreinnovationcompetencyisgatheringandsynthesizing customerintelligence

Customers and design at Xerox

Customerledinnovation dreamingwiththecustomer Notjustbuildingprototypeandgettingfeedback Focusgroupsasfirststepincommercialprinterdesign Changingdesignsinresponsetocustomerinsights Investmentinunderstandingwhatcustomersthinkabout thebrightideas

Marketinginformationandknowledgeresources
Concernedwith
Continuousscanningprocesses,or Specificmarketingresearchstudies

Internalandexternalmarketinginformation resources
Relationshipswithexternalmarketingresearchproviders

Existing(e.g.Google)ordevelopingnewresources throughsurveyorobservationalmethods Marketinginformationmaychallengemanagers assumptionsaboutcustomersand

ScreeningANew ResearchSupplier
1.Client Wouldyourecommendthissupplier? 2.Supplier Doyouhavesufficientfundsforthisproject? 3.Whatpartsoftheprojectwillbesubcontracted,andhowdo youmanagesubcontractors? 4.MayIseeyourinterviewersmanualanddataentrymanual? 5.Howdoyoutrainandsuperviseinterviewers? 6.Whatpercentageofinterviewsarevalidated? 7.MayIseeatypicalquestionnaire? 8.Whodrawsyoursamples? 9.Whatpercentageofyourdataentryisverified? 10.Managers Whatdoyouthinkaboutthissupplier?
Source: Seymour Sudman and Edward Blair, Marketing Research, A Problem-Solving Approach, Irwin/McGraw-Hill, 1998, 67.

ScanningProcesses
Bealert:Watchingfornewmarketopportunities (especially,disruptiveinnovation)outsidetheexisting coremarkets Usingonlinereviewfacilitiestogetrapidfeedback becomesmorepopular Involveafewinitiativesorapproaches
Makingexistingfunctionalgroupsresponsibleforscanning Createadhocgroups Ahighlevellookout Newinitiatives Investinginstartups Outsource

FrameworkforMarketSensing (presentthescanningresults)
Probability of the Event Occurring
High 7 6 Utopia Things to Field of Dreams Medium Low

Effect of the Event on the Company

5 4 3 2 1 Danger

Watch

Future

Risks

1=Disaster, 2=Very bad, 3=Bad, 4=Neutral, 5=Good, 6=Very good, 7=Ideal

Specificmarketingresearchstudies
Thestartingpointiscarefullydeterminingthe problemtobestudied,indicatingspecificobjectives, anddeterminingwhatinformationisneeded.

Problemdefinitiontoguidemarketingresearch studies
Describethetopicforthestudyand thebackground. Setspecificgoalsforthestudy whyisitbeingundertaken? Identifythespecificpiecesof informationrequiredandthe questionsthatneedtobeaskedto obtainthatinformation Whencompletedhowshouldthe resultsbepresentedformanagement use?

Research Project and Scope

Research Objectives

Research Questions

Planned Outcomes

Marketingresearchproject
Definingtheproblem Understandingthelimitationsoftheresearch Qualityoftheresearch Costs Evaluatingandselectingsuppliers Researchmethods

DefiningProblem&Objectives
CokesIntroductionofNEWFORMULAin1985.Problem: LosingmarketsharetoPepsi.Wemustresearchthetaste preferences ofconsumers.

Existingmarketinginformationresources
Incompanyresources Opensourceresources Researchagencyresources

Creatingnewmarketinginformation
Observationandethnographicstudies(Assumption:richer
informationandinsightcanbegeneratedbyimmersionincustomerslife)

Marriott rethinkhotelexperiencefortheyoung, technologysophisticatedroadwarriors GE developingplasticfibers business position Intel useofcomputersbychildreninChina

Researchsurveys Internetbasedresearch

ImpactoftheInternetonMarketingCostsandAvailability OnlineSurveys
Fast Inexpensive Limitationsinpopulationcoverage ResistancetoexcessiveWebcommunications

CustomerfeedbackandpeertopeerWeb communications MonitoringcustomerWebbehaviour

Marketingandmanagementinformationsystems
Marketinginformationsystems Managementinformationsystems Marketingdecisionsupportsystems

Marketing Information System Model

Input subsystems
Accounting information system

Data

Information

Output subsystems

D A T A B A S E

Product subsystem

Internal sources
Marketing research subsystem

Place subsystem

Promotion subsystem

Users

Environmental sources
Marketing intelligence subsystem

Price subsystem

Integratedmix subsystem

Material, Money, and Information Flow

Money Money Money Money

Supplier

Material

Manufacturer

Material

Wholesaler

Material

Retailer Material

Consumer

Two-way information flow

MarketingDecisionSupportSystemComponents

Database

Display

Analysis Capabilities

Models

Marketingintelligenceandknowledgemanagement
Marketingintelligence Knowledgemanagement Roleofthechiefknowledgeofficer Leveragingcustomerknowledge

Ethicalissuesincollectingandusinginformation
Invasionofcustomerprivacy Informationandethics Informationcollection Researchsubjects Informationsharing

Neuromarketing
Magnetic resonance imaging (MRI) Pictures response of brain to stimuli Probing consumer preferences is controversial Invasive Privacy issues Information sharing
Insurance companies Employers Law enforcement

Chapter1 ImperativesforMarket DrivenStrategy

Apple Internal Experience

Remember that Think Different ad campaign that we ran? It was certainly for customers, but it was even more for Apple.
Steve Jobs, October 2004

What the Hell Is Market Oriented'?

by Benson P Shapiro

Product-Oriented versus Market-Oriented Definitions of a Business

Company Missouri-Pacific Railroad Xerox Standard Oil Columbia Pictures Encyclopaedia Carrier Product Definition We run a railroad We make copying equipment We sell gasoline We make movies We sell encyclopedias We make air conditioners and furnaces Market Definition We are a people-andgoods mover We help improve office productivity We supply energy We market entertainment We distribute Information We provide climate control in the home

Product-Oriented versus Market-Oriented

Company Kodak Product-Oriented We make cameras and film. We sell books and recordings. We make computer printers. We make blue jeans We sell smartphones. MarketingOriented We help preserve beautiful memories. ? ? ? ?
5

Amazon.co m HewlettPackard Levi Strauss HTC

The Gaps model (Zeithaml, Parasuraman & Berry 1990)

The gaps model proposes that consumers overall service quality perceptions are a result of comparisons between expectations and perceptions.

ValueProposition

Put Customers in Mind always!!!

Kaplan & Norton: Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.

Functional Emotional Social Self-expressive

Benefits

V A L U E

Relative Price
Monetary Cost + Time Cost + Energy Cost + Psychic Cost

Value Proposition: The core value derived from how a company differentiates its offering from the competitors

Functionalvalue
Product attributes (features or ingredients of the product) Application (what the product is used for) Performance (what the product does) Usage (how the product is used) Product quality (how good the product is) Price/value (value for money) Benefits for the consumer (what the consumer gets)

What is McDonalds CORE?

What is Starbucks CORE?

10

The Price of the Coffee Experience

The price of a cup of coffee

$5

Experience USD 2.00-$5.00

Service USD 1.00-1.50 Commodity 2 Good 25

$1

11

SomeMythsinMarket/Customeroriented
Myth 1 The larger the range of products, the more customer-centric I am.

Mythbuster The range of products has emerged from being competition- centric.

 Myth 2 Better technology (read CRM) leads to better customer service.

Mythbuster Technology alone does not deliver, but people do.

 Myth 3 Launch a product and the customer will start using instantly. - Give a customer a card and he will learn how to play with it immediately

Mythbuster Customers need to be educated too

 Myth 4 The only way to get a customer is from competition.

Mythbuster Customers are not only present where competition is.

 Myth 5 Just advertise and You will sell.

Mythbuster Advertising will only sell, Not retain customers.

Myth 6 No difference between marketing & selling

Mythbuster Selling focuses on the needs of the seller; marketing on the needs of the buyer.

Myth 7 A trust relationship differentiates a brand

Mythbuster Trust is not a differentiator essentially it is the very minimum that the customer expects!!

New challenge: digital media execution

Social networks Sharing

Blogging

Content

Devices

Chapter2 MarketsandCompetitive Space

Levels of Competition

Budget Competition Generic Competition Product type Competition Brand Competition

Competition?DynamicandRelative

CompetitiveAsymmetry

Because of asymmetry, firms often overestimate or underestimate their rivals.

(1)

Strategy

Execution

(2)
Strategy

Transform Competition into Cooperation

Fight

Together work

Chapter 3

Strategic Market Segmentation

Extension
Whatisthe80/20Rule?!! =largevolumesofareducednumberof popularitems afewcustomers WhatisLongTailTheory?!! =smallvolumesofhardtofinditems manycustomers **Thegroupcomprisingalargenumberof "nonhit"itemsiscalledtheLongTail.
26

LongTailTheory
ThetheoryoftheLongTailisthatourcultureandeconomyisincreasinglyshiftingaway fromafocusonarelativelysmallnumberof"hits"(mainstreamproductsandmarkets) attheheadofthedemandcurveandtowardahugenumberofnichesinthetail.Asthe costsofinventoryanddistributionfall,especiallyonline,thereisnowlessneedtolump productsandconsumersintoonesizefitsallcontainers(ChrisAndersonpresentedin anOctober2004Wired magazine). Inanerawithouttheconstraintsofphysicalshelfspaceandotherbottlenecksof distribution,narrowlytargetedgoodsandservicescanbeaseconomicallyattractiveas mainstreamfare.

27

LongTailTheory
DataontravelfromtheUK,from19982008.Overthatperiod,thetop50 destinationsfromtheUK(thehead oftravel fellfrom36%ofthetotalto just26%,whileeverythingelse(thetail)grew.

28

EvidenceofLongTailTheory
Googles:MostofadsarefromSME,notbigfirms. eBay:Mostofprofitsarefromnicheproducts,e.g. exquisitecarsandhighprice&delicategolfhandle Amason:onefourthprofitisfromnonhitsbooks. Internet,superstores,bigbookstores,andchainstores: Alargevarietyofnicheproducts sellingvolumes=big volumes

29

AnExtensionofLongTailTheory

30

Thefortuneatthebottomofthepyramid

31

Chapter 4

StrategicCustomerRelationship Management(CRM)

32

Customerloyalty
Aloyalcustomer
Verysatisfied Willingtorecommend Keeppurchasing

Profitearninglaw:
20/80 20/100 20/120
satisfied recommend Repurchase

Satisfactionloyalty

33

Threewaystogrowbusiness/sales

DerivedRelationships

A
Original: AB AC

D
Original: DE DF

Through C & E, ADAEAFBDBEBFCDCF are derived

35

From 5 to 15 relationships

Plannedbehaviortheory

Chapter5

CapabilitiesforLearning AboutCustomersand Markets

MarketResearch

SecondaryResearch

InternalSources
CompanyAccounts InternalReportsandAnalysis StockAnalysis Retaildata loyaltycards,tilldata,etc.

ExternalSources
GovernmentStatistics(ONS) Tradepublications CommercialData Gallup,Mintel,etc. HouseholdExpenditureSurvey Magazinesurveys Otherfirms research Researchdocuments publications,journals,etc.

SamplingMethods

MarketResearch
SamplingMethods: RandomSamples equalchanceofanyonebeingpicked Mayselectthosenotinthetargetgroup indiscriminate Samplesizesmayneedtobelarge toberepresentative Canbeveryexpensive StratifiedorSegmentRandomSampling
Samplesonthebasisofarepresentativestrataorsegment Stillrandombutmorefocussed Maygivemorerelevantinformation Maybemorecosteffective

MarketResearch
QuotaSampling
Again bysegment Notrandomlyselected Specificnumberoneachsegmentareinterviewed,etc. Maynotbefullyrepresentative Cheapermethod

ClusterSampling
Primarilybasedongeographicalareasorclusters thatcanbeseenas beingrepresentativeofthewholepopulation

MultiStageSampling
Sampleselectedfrommultistagesubgroups

SnowballSampling
Samplesdevelopedfromcontacts ofexistingcustomers wordofmouth typeapproach!

PrimaryResearch

MarketResearch
PrimaryResearch
Firsthandinformation Expensivetocollect,analyseandevaluate Canbehighlyfocussedandrelevant Careneedstobetakenwiththeapproachand methodologytoensureaccuracy Typesofquestion closed limitedinformationgained; open usefulinformationbutdifficulttoanalyse

MarketResearch
QuantitativeandQualitativeInformation: Quantitative basedonnumbers 56%of18yearolds
drinkalcoholatleastfourtimesaweek doesnttellyouwhy, when,how

Qualitative moredetail tellsyouwhy,whenandhow!

Purpose

MarketResearch
AdvantagesofMarketResearch
Helpsfocusattentiononobjectives Aidsforecasting,planningandstrategicdevelopment Mayhelptoreduceriskofnewproductdevelopment Communicatesimage,vision,etc. Globalisationmakesmarketinformationvaluable(HSBC adverts!!)

MarketResearch
DisadvantagesofMarketResearch
Informationonlyasgood asthemethodologyused Canbeinaccurateorunreliable Resultsmaynotbewhatthebusinesswantstohear! Maystifleinitiativeandgutfeeling Alwaysaproblemthatwemayneverknowenoughtobe sure!

Chapter 6
Market Targeting and Strategic Positioning

Market targeting strategy

The Marketing Targeting Decision identities the people or organizations in a product-market toward which a firm directs its positioning strategy guided by an understanding of: The product-market Its buyers Firms capabilities resources Competition

Market Targeting and Strategic Positioning

Core dimensions of market-driven strategy: deciding which buyers to target and how to position the firms products Effective targeting and positioning strategies are essential in gaining and sustaining superior performance

Market Targeting and Strategic Positioning

Segments Value opportunities Capabilities/ segment match Target(s) Positioning for each Target

Market Targeting and Strategic Positioning

Identify segments within the product-market
Targeting And Positioning

Decide and implement a positioning strategy for each targeted segment

Decide which segment(s) to target

Examples of Target Market and Value Propositions

Company and Product Perdue (chicken)

Target Customers Qualityconscious consumers of chicken Safetyconscious upscale families Convenienceminded pizza lovers

Benefits Tenderness

Price 10% premium

Value Proposition More tender golden chicken at a moderate premium price The safest, most durable wagon in which your family can ride A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price

Volvo (station wagon) Dominos (pizza)

Durability and safety

20% premium

Delivery speed and good quality

15% premium

Market Targeting Alternatives

Segments Clearly Defined

Selective Targeting

Target Selected Niche(s) Product Specialization

Target Multiple Segments Product Variety

Extensive Targeting

Differentiated But Segments Not Clearly Defined

Factors Influencing Targeting Decisions

Stage of productmarket maturity Extent of diversity in preferences Industry structure Capabilities and resources Opportunities to gain competitive advantage

Life-Cycle Targeting Strategies

To say that a product has a life cycle asserts four things
1. Products have a limited life. 2. Product sales pass through distance stages, each posing different challenges, opportunities, and problems to the seller. 3. Profits rise and fall at different stages of the product life cycle. 4. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.
9

Product Life Cycle (Stage of productmarket)

Sales and Profits ($) Sales

Profits Time Product Development Introduction/Birth/ Emerging Growth Maturity Decline

Losses/ Investments ($)

10

Life-Cycle Targeting Strategies

Variants in Product Life-Cycle Patterns

11

Case: Levi's managed to reinvent their jeans brand through the use of different fabrics and cuts that have given their product a new, youthful look.

Life-Cycle Targeting Strategies

Style, Fashion, and Fad Products Life Cycles

12

Emerging Market
Buyer Diversity Segmentation limited due to similarity of buyers preferences Industry Structure Typically small new organizations Limited access to resources Capabilities and Resources Unique benefit (differentiation) strategy rather than lowcost First-mover advantage Targeting Strategy Single target or a few broad segments
13

Growth Market
Buyer Diversity
Segments should exist

Industry Structure
Numerous competitors

Capabilities and Resources

Survival requires aggressive actions by firms that seek large market positions Otherwise select one or a few market segments

Targeting Strategy
Three possible strategies 1. Extensive market coverage by firms with established businesses in related markets 2. Selective targeting by firms with diversified product portfolios 3. Very focused targeting strategies by small organizations serving one or a few market segments.

14

Mature Markets
Buyer Diversity
Segmentation essential for competitive advantage

Industry Structure
Intense competition for market share Emphasis on cost and service, and pressures on profits

Capabilities and Resources

Managements objectives: cost reduction, selective targeting,

product differentiation

Targeting Strategy Deciding which segment to serve Firms pursuing extensive targeting strategies may decide to exit from certain segments
15

Global Markets
Global Reach and Standardization
Identify market segments that span global markets and serve these needs with global positioning strategies

Local Adaptation
Consider requirements of domestic buyers Buyers needs and preferences affected by social, political, cultural, economic, and language differences

Industry Structure
Restructuring, acquisitions, mergers, and strategic alliances altering industries and competition

Targeting Strategy
Targeting a single country, regional (multinational) targeting, or global targeting
16

GLOBAL FEATURE

Successful British Retailer Tesco Enters the U.S. Market

Tesco announced plans to open a chain of convenience stores on the U.S. West Coast in 2007, spending an estimated $453 M. The very successful retailer has four types of stores, including the convenience chain, Tesco Express. This initiative is being launched even though the U.S. retail grocery market is experiencing intense competition, and some chains are cutting back or selling out. Tescos decision to enter the U.S. convenience market is bold and risky. Some authorities consider the action questionable. However, Tesco has a very impressive success record in Britain. With its Tesco Express, Tesco Metro, Superstore, and Extra hypermarkets, the giant retailer has dulled Wal-Marts drive to dominate the retail scene. Tesco has no brand awareness in the U.S. so building brand identity will be challenging. Yet the retailer has global buying power, powerful information technology, and strong supply chain capabilities. The stores will offer groceries, produce, and private-label ready-to-eat meals. Some observers think Tesco is planning to compete with Wal-Mart in its home market.
Source: Kerry Capell, Tesco: California Dreaming? BusinessWeek, February 27, 2006, 38. 17

Positioning strategy
Positioning: The place a product, brand, or group of products occupies in consumers minds relative to competing offerings. Deciding the desired perception/association of an organization/ brand by market target buyersand designing the marketing program to meet (and exceed) buyers value requirements. Creating distinct and valued physical and perceptual differences between ones product and its competitors, as perceived by the target customer.
18

Developing a Market-Positioning Strategy

Market Analysis (Size, Location, Trends) Definition and Analysis of Market Segments

Selection of Most Appropriate Target Market Segments to Serve Internal Corporate Analysis (Resources, Constraints, Values) Marketing Action Plan

Articulation of Desired Position in the Marketplace

Competitive Analysis (Strengths,Weaknesses, Current Positioning as perceived By consumers)

19

Selection of Which Benefits To Emphasize To Customers Analysis of Possibilities for Effective Differentiation Against Competition

Positioning Statement Target group Benefit Resulting goal facilitation

20

Palm Pilot: Positioning Statement

Target group
To busy professionals who need to stay organized with coordination of address book, schedule, and notepad

Benefit
Let you carry your organization tools in your pocket and backup your files with your PC at the touch of a button.

Resulting goal facilitation

Time is saved and backups are done more regularly, so info is more secure.

21

Mountain Dew: Positioning Statement

Target group
Young, active soft-drink consumers with little time for sleep

Benefit
Gives you more energy than rival brands, because it has more caffeine.

Resulting goal facilitation

You can stay alert and keep going even when you havent been able to get a good nights sleep.

22

Strategic positioning initiatives

Positioning concept The desired positioning of the product (brand) by targeted buyers

Positioning effectiveness How well managements positioning objectives are achieved for the market target
23

MARKET TARGET

Positioning strategy The combination of marketing actions used to communicate the positioning concept to targeted buyers

Comparison of Physical and Perceptual Positioning Analysis

Physical positioning
Technical orientation Physical characteristics Objective measures Data readily available Physical brand properties Large number of dimensions Represents impact of product specs and price Direct R&D implications

Perceptual positioning
Consumer orientation Perceptual attributes Perceptual measures Need for marketing research Perceptual brand positions and positioning intensities Limited number of dimensions Represents impact of product specs and communication R&D implications need to be interpreted

24

How Positioning Works

Objective
Match the organizations distinctive capabilities with the customer value requirements for the market target (How do we want to be perceived by targeted buyers?)

Desired result
Gain a relevant, distinct, and enduring position by the targeted buyers that they consider important.

Actions by the organization

Design and implement the positioning strategy (marketing program) for the market target.

25

Innovation Feature

Spotting Shifts in Demand in designing Hennes & Mauritz (H&M) Apparel

Its 1:30 p.m. on a Monday in the bustling H&M store on Manhattans fifth Avenue, and Alma Saldana, a 28-year-old makeup artist from Houston, is stuffing three tiny vests into her black Y&M shopping bag. Thats on top of blouses, jackets, and pants. Saldana is in a buying frenzy. This is her first visit to H&M, the Stockholm-based fashion retailer, and its everything she had hoped for. Somebody told me you find great fashion at a very cheap price, and its true! she exclaims. Such enthusiasm has made H&M one of the hottest fashion companies around. Central to its success is its ability to spot shifts in demand and respond with lightning speed. While traditional clothing retailers design their wares at least six months ahead of time, H&M can rush items into stores in as little as three weeks. Most of the work is done ahead, too. But when it sees consumers scooping up something like vests, it speeds a slew of new variations into stores within the same season, to the delight of shoppers like Saldana. Speed is important. You need to have system where you can react in a short lead time with the right products, says Chief Executive Rolf Eriksen.
26

How does it work? H&M designers had included a couple of cropped vests in their autumn/winter collections. In august, shortly after the vests went on sales, they started flying out of the stores, say Margareta van den Bosch, H&Ms head of design. H&Ms designers in Stockholm (it has more than 100) spotted the trend in the companys worldwide sales reports, published internally every Monday. About half of them immediately started sketching new styles. As quickly as designs came off their desks, pattern makers snipped and pinned, pressing employees into service as live models. At the same time, buyers ordered fabrics. The designs were zoomed electronically to workers at H&Ms production offices in Europe and Asia, which then selected manufacturers that could handle the jobs quickly. In less than two months most H&M stores had 5 to 10 new vest styles in stock. One of the secrets to H&Ms speed is decisiveness. The people in charge of each collection can dream up and produce new fashions on their own authority. Only huge orders require approval from higher ups. We have a flat organization. We have a shorter way to a decision, says Sanna Lindberg, president of H&M Hennes & Mauritz USA. That makes H&M fashionable in more ways than one.
27
Source: Steve Hamm, SPEEDDEMONS, BusinessWeek, March 27, 2006, 70-71.

The Perception or Association that Management Wants Buyers to Have Concerning the Brand
Relate to buyers internally generated needs for self-enhancemente.g. LV, Rolex To resolve consumption-related problems. E.g. product functions

Symbolic
SELECTING THE POSITIONING CONCEPT

Functional

Provide sensory pleasures, variety, and/or cognitive stimulation. E.g. BMWs driving experience

Experiential

28

Developing and Communicating Positioning Concepts

Theme parks positioning possibilities:
Attribute positioning Benefit positioning Use or application positioning User positioning Competitor positioning Product category positioning Quality or price positioning Which Positioning to Promote?
29

Developing the positioning strategy

The Positioning Strategy Places the Marketing Program (mix) Components into a Coordinated Set of Actions Designed to Deliver Superior Customer Value

PRODUCT PROMOTION PRICE VALUE CHAIN

30

Positioning Issues
1. The positioning concept applies to a specific

brand rather than all the competing brands that compose a product classification 2. The concept is used to guide positioning decisions over the life of the brand 3. Multiple concepts are likely to confuse buyers and may weaken the effectiveness of positioning actions

31

The positioning strategy indicates how (and why) the product mix, line, or brand is to be positioned for each market target. This strategy includes:
The product strategy, indicating how the product(s) will be positioned against the competition in the product-market. The value chain (distribution) strategy to be used. The pricing strategy, including the role and positioning of price relative to competition. The advertising and sales promotion strategy and the objectives these promotion components are expected to achieve. The sales force strategy, direct marketing strategy, and the Internet strategy, indicating how they are used in the positioning strategy.
32

Determining positioning effectiveness

The marketing offer (product, distribution, price, and promotion) is both distinct and valued in the minds of the customers in the market target.

33

Customer and Competitor Research

Methods for Determining Positioning Effectiveness

Analytical Positioning Models

34

Test Marketing

Customer and Competitor Research Research Studies Preference Maps Test Marketing Generates information about commercial feasibility and marketing program Provides market (sales forecasts) and effectiveness measures Positioning Models Incorporates research data into formal models of decision analysis
35

Positioning Map

Not Sweet

Sweet Nutritious Not Nutritious

Where would you plot your favorite cereals? Your kids favorites? Your grandmas?
36

Positioning Map

37

Using Positioning Maps To Plot Strategy: An Example from the Hotel Industry
E. M. Statler : Location, location and location Location depends on segment Location is NOT the only one determinants
Price Facilities Service Others

38

Position map of location vs. luxury level

39

Position map of service level vs. price level

40

Position map of location vs. luxury level

41

Position map of service level vs. price level

42

Some Key Questions Concerning Positioning Decisions For whom are they written? In what sort of language? Should they focus on features or benefits? How many differentiating attributes should anchor them?

43

Positioning Errors
Under-positioning customers have only vague ideas about the company and do not perceive anything distinctive about it Over-positioning Customers have too narrow an understanding of the company, product, or brand Confused positioning Frequent changes and contradictory messages confuse customers Doubtful positioning claims made for the product or brand are not regarded as credible

44

Positioning in Perspective
Positioning is a central part of business strategy Positioning analysis starts with an understanding of the value proposition for the target segment Value-driven positioning is the objective Positioning seeks to differentiate the organizations offer from the competition Positioning seeks to create a unique perception in buyers minds of the target market segment Positioning is the unifying dimension of market-driven strategy

45

Positioning usually means that an overt decision is being made to concentrate only on certain segments. Such an approach requires commitment and discipline because its not easy to turn your back on potential buyers. Yet, the effect of generating a distinct, meaningful position is to focus on the target segments and not to be constrained by the reaction of other segments.

Source: Aaker and Shansby, Business Horizons, May-June 1982, 61.

46

Illustrative Impacts of Changes in Business Strategy on Targeting and Positioning Strategies

Changes in Business Strategy Rapid Growth/ Retrenchment Changing the Product Mix Market Targeting Impact
Market scope may not change although targets may be increased or reduced. No change is necessary unless increase in product scope creates opportunities in new segments. Targeting is likely to change to include new targets. Should not have a major effect on targeting strategy. Should have no effect on targeting strategy. Targeting strategies must be selected in new business areas. Targeting strategy may be affected based on the nature and scope of the alliance.

Positioning Impact
Substantial changes in resource allocation (e.g. advertising expenditures Changes in product strategy, methods of distribution, and promotional strategies may be necessary. Positioning strategy must be developed for each new target. Product, distribution, price, and promotion strategies may be affected. Primary impact on channel, pricing and promotion strategies. Positioning strategies must be developed (or acquired) for the new business areas. Operating relationships and assignment or responsibilities must be established.

Changing the Market Scope Repositioning Value Chain Integration Diversification Strategic Alliance 47

Targeting and Positioning

Product Strategy

Positioning Strategy

Promotion Strategy

Market Target

Distribution Strategy

Price Strategy

48

Week 9 Chapter 7 Strategic Relationships

Strategic relationships at IBM

* Collaborative projects across all major parts of business services * Funding universities in services science * Partnership with Sony and Toshiba to produce new processor * Computer code shared with Apache open-source web-server * IBM programmers work on Linux projects * Collaborating with customers and competitors to invent new technologies * Strategy of openness

Collaborations in open-source software

IBM and Sun aggressive supporters of Linux open-source software Technology sharing and partnerships Rebuilding the technology ecosystem Reducing dependence on Microsoft

IBM + Sun = Perfect for open-source monetization

Strategic relationships

End-User Customers Suppliers

Intermediate Customers

Joint Ventures

Strategic Relationships

Competitors

Strategic Alliances

External Partners

Internal Partners

Strategic Relationships
The rationale for interorganizational relationships Forms of organizational relationships Managing interorganizational relationships Global relationships among organizations

The rationale for interorganizational relationships

Value-enhancing opportunities

Skills and resource gaps

Rationale for Forming Strategic Relationships

Environmental complexity

Competitive strategy

The rationale for interorganizational relationships (1)

Opportunities to enhance value Environmental complexity Competitive strategy Skills and resource gaps Technology constraints Financial constraints Market access Information technology

Collaborations in open-source software

IBM and Sun aggressive supporters of Linux open-source software Technology sharing and partnerships Rebuilding the technology ecosystem Reducing dependence on Microsoft

IBM + Sun = Perfect for open-source monetization ?

The rationale for interorganizational relationships (2)

Evaluating the potential for collaboration What is the strategy? The costs of collaboration Is relationship strategy essential? Are good candidates available? Do relationships fit our culture?

Mapping the Path to Market Leadership

Market-Oriented Culture and Process Organizational Change Superior Customer Value Proposition

Relationship Strategies Positioning with Distinctive Competencies

Forms of organizational relationships

Supplier relationships

Internal partnerships

Firm

Lateral partnerships

Customer relationships

Illustrative interorganizational relationships

Strategic Alliance Supplier/ Manufacturer Collaboration M M M M

JV Joint Venture

M&A

W R EU

Distribution Channel Relationship

Forms of interorganizational relationships (1)

Supplier relationships Strategic suppliers Outsourcing Intermediate customer relationships End-user customer relationships Strategic customers Dominant customers Strategic account management

Forms of interorganizational relationships (2)

Strategic alliances Alliance success Alliance weaknesses Types of alliance Requirements for alliance success Alliance vulnerabilities Joint ventures Internal partnering Merger & Acquisition (M&A)

Airline Alliances
Major global alliances Oneworld Skyteam Star Alliance Contain 18 of the worlds largest airline Account for 60% of total world airline capacity But a history of alliance failures and desertions

Sky Team vs. Star Alliance vs. One world

Sky team

Star Alliance

One World

Joint Venture

CostCo Versus Wal-Mart (Internal Partnership)

CostCo has achieved major position in U.S. warehouse club business against strong competitors Success based on customer choice and constant innovation and productivity improvement CostCo compensates employees more generously than competitors - to motivate and retain good workers - they get lower staff turnover and higher productivity

Merger & Acquisition

M&A is a critical strategic relationship, which needs to be concerned seriously before (rather than after) the action.

Merger & Acquisition

Managing interorganizational relationships (1)

Objective of the relationship New technologies and competencies Developing new markets and building market position Market selectivity Restructuring and cost reduction

Managing interorganizational relationships (2)

Relationship management Planning Trust and self-interest Conflicts Leadership structure Flexibility Cultural differences Technology transfer Learning from partners strengths

Managing interorganizational relationships (3)

Partnering capabilities Control, evaluation and review Exiting from alliance Identify/agree what triggers exit Detail rights of each partner to assets/products Design disengagement process Communication plan for all involved parties

Managing Interorganizational relationships

Objective of the Relationship Relationship Management Partnering Capabilities Control and Evaluation

Managing Interorganizational Relationships

Exiting from Alliance

Global relationships among organizations

The Global Integrated Enterprise Inter-nation collaborations The strategic role of government Government interventions Competing with state-owned enterprises Collaborating with state-owned enterprises Government regulation

Chapter 7 Strategic Relationships Supplement: Relational Marketing

The Evolution of Marketing

Mass Marketing

Target Marketing 1 to 1 Marketing

The Customer Life Cycle

Lose
Phase 5 Additional Purchases Relationship Mktg Reactivation Phase 4 Cross and Up Selling Networking Loyalty Programs

Developm ent Retention

Aw areness
Phase 1 Forming Opinions

Consideration
Phase 2 In the Window

Acquisition
Phase 3 New Buyers

Adapted from David Shepard Associates

Relationship Marketing
Relationship marketing concerns attracting, developing, and retaining customer relationships (Berry & Parasuraman, 1991) Relationship marketing refers to all marketing activities directed toward establishing, developing, and maintaining successful relational exchanges (Morgan & Hunt, 1994)

Relationship Marketing
is a philosophy of doing business, a strategic orientation, that focuses on keeping current customers and improving relationships with them does not necessarily emphasize acquiring new customers is usually cheaper (for the firm)
keeping a current customer costs less than attracting a new one

thus, the focus is less on attraction, and more on retention and enhancement of customer relationships

Customer Goals of Relationship Marketing

A Firms Potential Marketing Relationships

Supplier Partnerships Supplier Relationships
Goods Suppliers Services Suppliers

Lateral Lateral Partnerships Partnerships

Competitors

Business Units

Employees

Focal Firm

Nonprofit Organizations

Functional Departments

Government

Internal Internal Partnerships Partnerships

Intermediate Customers

Ultimate Customers

Buyer Partnerships Customer Relationships

Commitment & Trust vs. Satisfaction

Satisfaction is very unstable Satisfaction is a poor predictor of outcomes Commitment & Trust are very stable Commitment & Trust are good predictors of outcomes

Outcomes of Commitment & Trust

Retention Positive Word of Mouth Cooperation Ease of Complaining Willingness to Complain Uncertainty Functional Conflict Share of Wallet New Product Adoption

How do we generate Commitment & Trust?

Economic Content (distribution) Resource Content (procedure, extended economics) Social Content (interaction)

Understanding How Customer Relationships Develop

Relationships Economic Content

Attitudinal Outcomes

Relationships Resource Content

Relationship Attitudes

Relationships Social Content

Behavioral Outcomes

Building Relationships

Relationships Economic Content

The fundamental drivers of relationships: the economic, resource, and social contents.

Attitudinal Outcomes

Relationships Resource Content

Relationship Attitudes

Relationships Social Content

Behavioral Outcomes

Economic Content

The purely economic costs (price) and benefits (value) of participating in the relationships Examples:
Service fees Interest rates Costs saved due to superior management of customers wealth

Resource Content
Benefits gained that match/complement the needs or resources held by the partner, involving delivery and after-sales issues. Examples:
Professional competence Comprehensive financial services Business development assistance Convenience (time as a resource) Tangibles Brand equity

Social Content
Psychic benefits gained due to feelings of compatibility-- similar values, goals etc. -- that result in a feeling of comfort. Examples:
Relationships with employees Fit of firms mission and actions with customers values High quality communication programs

Building Relationships
The ultimate outcomes of relationships, which impact firms business performance.

Relationships Economic Content

Attitudinal Outcomes

Relationships Resource Content

Relationship Attitudes

Relationships Social Content

Behavioral Outcomes

Attitudinal Outcomes
Customer beliefs that result from relationship dynamics, these attitudes can go on to impact behaviors and the development of even stronger attitudes. Examples:
Uncertainty Brand ambivalence Brand equity Brand personality

Behavioral Outcomes
Partner behaviors and intended behaviors that directly or indirectly impact the firms performance. Examples:
Retention Positive word of mouth Complaining Willingness to try new/other services

Building Relationships
Whats missing? Intermediary, relationship attitudes. These attitudes are built from the particular content of the relationship and go on to impact critical outcomes!

Relationships Economic Content

Attitudinal Outcomes

Relationships Resource Content

Relationship Attitudes

Relationships Social Content

Behavioral Outcomes

Relationship Attitude
Example: Retail Banking Traditional wisdom: rates, fees, and calling the customer by name Research indicates: responsiveness, reliability, and brand equity

Multiple Constituencies Approach

Premise: Individuals develop commitment to an organization through the commitments developed first to individuals or groups of individuals. Organizations do the same thing, as a collection of individuals. If we can understand who these constituencies are, and how these constituency commitments develop, and their unique contribution, we can better manage the overall relationship.

Relationship Development Model

Financial bonds Social bonds Customization bonds Structural bonds

Relationship Bonds

Customer Benefits
Confidence benefits Social benefits Special treatment benefits

Core Service Provision

Satisfaction Perceived service quality Perceived value

Strong Customer Relationship (Loyalty)

Firm Benefits Switching Barriers

Economic benefits Customer behavior benefits Human resource management benefits

Customer inertia Switching costs

The Customer Pyramid

Most profitable customers

Platinum

What segment spends more with us over time, costs less to maintain, spreads positive wordof-mouth?

Gold

Iron What segment costs us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with?

Lead

Least profitable customers

Strategies for Building Relationships

Core Service Provision: service foundations built upon delivery of excellent service: satisfaction, perceived service quality, perceived value Switching Barriers: customer inertia switching costs: set up costs, search costs, learning costs, contractual costs Relationship Bonds: financial bonds social bonds customization bonds structural bonds

Levels of Relationship Strategies

Volume and frequency rewards Integrated information systems Stable pricing Bundling and cross selling

1. Financial bonds Excellent service and value 2. Social bonds

Continuous relationships

4. Joint Structural investments bonds

Shared processes and equipment

Personal relationships

3. Customization Bonds

Social bonds among customers Customer intimacy

Anticipation/ innovation

Mass customization

The Customer Is NOT Always Right

Not all customers are good relationship customers: wrong segment not profitable in the long term difficult customers

Mid-term exam
Time and Date: 14:10-17:00, Nov. 16th Chapters 1-7 and supplemental material PPT slides, in-class discussion, textbook, HarleyDavidson case (Ansoff growth Matrix) True-False, Multiple-Choice, and Short Essays No cell phone, no internet, no chat Notebook and Tablet are allowed!

Course Schedule Change

Date 12/7 Original Speech (Move to 12/22) New Case 6: Boston beer- Is Greater Growth Possible? (chap. 4) Case 7: Maytag- An Incredible Sales Promotion in England (chap. 16) NO Class (Prepare the marketing plan presentation on 12/28; I will be in the class for your inquiry if you need) Speech (J&J ex-GM Angela Chang) Time: 6:40-9:00pm

12/14

Case 6: Boston beer- Is Greater Growth Possible? (chap. 4) Case 7: Maytag- An Incredible Sales Promotion in England (chap. 16)

12/21

12/22

Marketing Strategy in Action

Your team is starting a new business. You have developed a line of fashion t-shirts. Whats your positioning statement (target market, benefit, and resulting goal facilitation) ? Whats the value proposition that can differentiate your products from those of your competitors? Whats your pricing strategy?! Whats your channel/distribution strategy? Whats the promotion campaign you are going to launch? What are the objectives you are going to achieve? Please design a marketing plan and prepare to present on Dec. 28th.

Topic: The essence of brand marketing- Case study

Speaker: Ms. Angela Chang ()
In addition to having worked as a multinational executive in both local and regional roles (Johnson & Johnson Taiwan & Asia Pacific) for nearly 20 years (retired in August 2011). Ms. Chang is actively engaged in a broad array of community and social organizations and currently serves on the board of United Way and PWR Foundation- one of the most successful social enterprise in Taiwan. Ms Chang currently teaches Brand Marketing at the Graduate School of Jiao Tong University working with SBDC, a foundation set up by Acers founder Mr Stan Shih.

Education: MBA, Harvard Business School; Bachelor of Economics, National Taiwan University

Date and Time: 6:40-9:00pm, Dec. 22th (Thurs.) 2011 Venue: R62401
4

Supplemental Material about Positioning Statement

Positioning Statement
A positioning statement is a succinct description of the core target audience to whom a brand is directed, and a compelling picture of how the marketer wants them to view the brand. Four elements or components of a positioning statement:
Target Audience - the attitudinal and demographic description of the core prospect to whom the brand is intended to appeal; the group of customers that most closely represents the brands most fervent users. Frame of Reference - the category in which the brand competes; the context that gives the brand relevance to the customer. Benefit/Point of Difference - the most compelling and motivating benefit that the brand can own in the hearts and minds of its target audience relative to the competition. Proof/Reason to Believe/Resulting goal facilitation - the most convincing proof that the brand delivers what it promises.

Template for a Positioning Statement: For (target audience), (brand name) is the (frame of reference) that delivers (benefit/point of difference) because only (brand name) is (reason to believe).

Positioning Statement-1
Criteria for evaluating the Target Audience description:
Should balance size and relevance. Your target audience must be large enough for your efforts to be profitable, but not so large that it is generic. Don't make the mistake of trying to appeal to everyone; if you do, you will not be able to effectively differentiate your brand. Be inclusive of users and non-users - What are the opportunities to grow revenue by converting the most likely non-users of your brand into users? Makes it clear who the target is, and who it is not Reinforces the essence of your brand by ensuring it is consistent with the characteristics of your target audience. For example, if the essence of your food brand is about being natural and 'pure', its unlikely that people who are uninterested in nutritional topics would be a good match for your brand.

Criteria for evaluating the Frame of Reference:

Does it define the competitive frame to the brands advantage? Does it reflect the relevant options or alternatives that the consumer sees for your brand?

Positioning Statement-2
Criteria for evaluating the Benefit/Point of differentiation:
Does it reflect an emotional hook? Is it sustainable? Is it credible and supportable? Does it truly differentiate?

Criteria for evaluating Reasons to Believe/Proof Points:

Does it provide a chain of evidence for your key benefit? Is every link substantiated? Does it state simply the reason WHY the benefit is true? Does it cement the link between your product and your key benefit in the mind of your target?

Positioning Statement
Target group Benefit (Including reference of frame if necessary) Proofs (Reasons to believe/Resulting goal facilitation)

Palm Pilot: Positioning Statement

Target group
To busy professionals who need to stay organized with coordination of address book, schedule, and notepad

Benefit
Let you carry your organization tools in your pocket and backup your files with your PC at the touch of a button.

Proof
Time is saved and backups are done more regularly, so info is more secure.

Mountain Dew: Positioning Statement

Target group
Young, active soft-drink consumers with little time for sleep

Benefit
Gives you more energy than rival brands, because it has more caffeine.

Proof
You can stay alert and keep going even when you havent been able to get a good nights sleep.

Positioning Statement: HTC 2009 Video

Target Audience Business-men/women and Hi-tech lovers Benefits High-effectiveness, Multifunctional mobile secretary Resulting Goal Facilitation You can use HTC to meet business and personal needs and thus advance your life quality