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---
title: "Introduction to marketing: Part 1"
title: "Introduction to marketing: Part 1 - Course Notes"
author: "François Pelletier"
output: pdf_document
---
Wharton School - Introduction to marketing
# Week 1: BRANDING: Marketing Strategy and Brand Positioning
## 1.1: Building Strong brands
What is marketing ?
- Study of market exchange between two or more partners.
- This simpliest example is having one buyer and one seller.
- Study of market exchange between two or more partners.
- This simpliest example is having one buyer and one seller.
### Spectrum between two extremes:
@ -60,12 +62,12 @@ What is marketing ?
### Competitive advantage
No. | Advantage | Measure
---|---|---
1. | Lowest cost | Market share
2. | Quality and service: Customer knowledge and data | Customer share and loyalty
3. | Transformation: custoemr as co-creator of value | Buzz / Word of mouth / Referrals
4. | Trust: discipline | Reduced cost of acquisition of a customer
| No. | Advantage | Measure |
|-----|--------------------------------------------------|-------------------------------------------|
| 1. | Lowest cost | Market share |
| 2. | Quality and service: Customer knowledge and data | Customer share and loyalty |
| 3. | Transformation: custoemr as co-creator of value | Buzz / Word of mouth / Referrals |
| 4. | Trust: discipline | Reduced cost of acquisition of a customer |
### Three principles of marketing
@ -75,12 +77,12 @@ No. | Advantage | Measure
### 4 P's of marketing (marketing mix)
Name | Refers to
---|---
Product | Seller
Place | Distribution
Promotion | Advertisement
Price | Buyer
| Name | Refers to |
|-----------|---------------|
| Product | Seller |
| Place | Distribution |
| Promotion | Advertisement |
| Price | Buyer |
## 1.2 Strategic marketing
@ -103,13 +105,13 @@ Price | Buyer
### Value map
![Value map](file:///home/francois/Intro-to-marketing-course-notes/1_2_001_Value_Map.png)
![Value map](./1_2_001_Value_Map.png)
Provide a fair value for 2 of the 3 bundles. Provide superior value for 1 on the 3 bundles.
### Strategies for leadership
![Expectations](file:///home/francois/Intro-to-marketing-course-notes/1_2_001_Expectations.png)
![Expectations](./1_2_001_Expectations.png)
1. Product attributes -> Operational excellence -> Customization
2. What are customer expectations -> fair value
@ -146,9 +148,9 @@ Personal services: High customer intimacy, low cost efficiency
Market segment:
- Dividing into subsets
- Marketing target
- Reach with a distinct marketing mix (4P)
- Dividing into subsets
- Marketing target
- Reach with a distinct marketing mix (4P)
### How to divide market segments
@ -214,22 +216,22 @@ What makes a segment attractive ?
- Develop measures of segment attractiveness
- Select based on business capabilities
| | *Segment attractiveness* | |
|----------------------|-------------------------|---------|
| *Competitive strength* | *Low* | *High* |
| Low | Stay away | Beware |
| High | Domination is essential | Perfect |
| | *Segment attractiveness* | |
|------------------------|--------------------------|---------|
| *Competitive strength* | *Low* | *High* |
| Low | Stay away | Beware |
| High | Domination is essential | Perfect |
## 1.4 Positioning
A brand is a proprietary trademark:
- An informal contract, a relationship:
- Promise
- Specific benefits
- Quality
- Value
- It is whatever the customer thinks it is, in a relationship mindset
- An informal contract, a relationship:
- Promise
- Specific benefits
- Quality
- Value
- It is whatever the customer thinks it is, in a relationship mindset
### Positioning:
@ -239,35 +241,35 @@ A brand is a proprietary trademark:
A positioning:
- Make use of all of the elements in the marketing mix
- Focus on a few key benefits
- Must be defendable
- Require making choices, because you can't do everything
- Make use of all of the elements in the marketing mix
- Focus on a few key benefits
- Must be defendable
- Require making choices, because you can't do everything
A strategic idea:
- Big picture:
- What products to sell
- Customers and competitors
- Tactical
- Messaging
- Strategic and technological
- Big picture:
- What products to sell
- Customers and competitors
- Tactical
- Messaging
- Strategic and technological
### Points of parity
What is shared with other brands:
- Category: What is a grocery store (what it must have)
- Competitive: Negate competitors' points of difference
- Category: What is a grocery store (what it must have)
- Competitive: Negate competitors' points of difference
### Points of difference
Points of difference are what differentiate from other brands:
- Strong, favorable, unique brand associations
- Similar to notion of USP (Unique selling proposition)
- SCA (Sustainable competitive advantage, long-term advantage)
- Performance attributes, benefits, imagery, design
- Strong, favorable, unique brand associations
- Similar to notion of USP (Unique selling proposition)
- SCA (Sustainable competitive advantage, long-term advantage)
- Performance attributes, benefits, imagery, design
### Criteria:
@ -290,19 +292,19 @@ Mental map: brand associations and responses for a target market. What comes to
Core brand values:
- Set of abstract concepts and phrases
- Select 5-10 most important for points of parity and points of difference
- Set of abstract concepts and phrases
- Select 5-10 most important for points of parity and points of difference
Brand mantra:
- Heart and soul
- Brand essence: core brand promise
- Function (nature, type of experience)
- Descriptive modifier (clarifies nature)
- Emotional modifier (how provide benefits)
- Communicate
- Simplify
- Inspire
- Heart and soul
- Brand essence: core brand promise
- Function (nature, type of experience)
- Descriptive modifier (clarifies nature)
- Emotional modifier (how provide benefits)
- Communicate
- Simplify
- Inspire
Use internally to guide decisions and what should/shouldn't be associated with.
@ -312,58 +314,58 @@ Use internally to guide decisions and what should/shouldn't be associated with.
Customer experience is:
- Social, behavioral, emotional
- Triggered stimulations
- Social, behavioral, emotional
- Triggered stimulations
Process / Result / Living / Undergoing / Situations
- Connect brand and company to customer lifestyle.
- Put actions and purchase occasions in a broader social context
- Connect brand and company to customer lifestyle.
- Put actions and purchase occasions in a broader social context
Traditional view | Experience view
---|---
Differentiation | Experience
Promise | Relationship
Attributes | Personality
Static | Dynamic
Mass | Individual
Awareness | Relevance
| Traditional view | Experience view |
|------------------|-----------------|
| Differentiation | Experience |
| Promise | Relationship |
| Attributes | Personality |
| Static | Dynamic |
| Mass | Individual |
| Awareness | Relevance |
### Experiential brand positioning
Experiential brand positioning is:
- Multisensory
- Different from all competitors
- Multisensory
- Different from all competitors
Brand value promise: describe what customers:
- Gets, sense, feel, think, act, relate to, ...
- For all channels of distirubtion
- Gets, sense, feel, think, act, relate to, ...
- For all channels of distirubtion
### Experiential components
Experiential components are: (Schmitt 1999)
- 5 senses: Across senses
- Emotions: Mild / Strong positive feeling
- Cognitive: appeal to intellect / creativity / surprise
- Behave: Experience / lifestyle / enrich / alternative
- Social: community, belonging, culture
- 5 senses: Across senses
- Emotions: Mild / Strong positive feeling
- Cognitive: appeal to intellect / creativity / surprise
- Behave: Experience / lifestyle / enrich / alternative
- Social: community, belonging, culture
### Strong vs weak brands
Strong | Weak
---|---
Make clear promises kept over time | Vague promise that change
Rich unique brand equity | Very general equity
Strong thoughts and feelings | Low emotional commitment
Dependable, delivers consistently | Spatly reputation, create doubt
Loyal frachise | little loyalty, pricing based and short-term
Superior product and processes | Promotional incentives
Distinctive | Not distinctive
Alignment of internal and external commitment to the brand | No internal alignment
Stay relevant | Gets outdated
| Strong | Weak |
|------------------------------------------------------------|----------------------------------------------|
| Make clear promises kept over time | Vague promise that change |
| Rich unique brand equity | Very general equity |
| Strong thoughts and feelings | Low emotional commitment |
| Dependable, delivers consistently | Spatly reputation, create doubt |
| Loyal frachise | little loyalty, pricing based and short-term |
| Superior product and processes | Promotional incentives |
| Distinctive | Not distinctive |
| Alignment of internal and external commitment to the brand | No internal alignment |
| Stay relevant | Gets outdated |
# Week 2 - Customer Decision Making and the Role of Brand
@ -371,24 +373,24 @@ Stay relevant | Gets outdated
How customers make decisions: shopping experience
- Impulse purchase
- Habit, intuition, emotion
- What they see and what they miss
- Personal relevance
- Impulse purchase
- Habit, intuition, emotion
- What they see and what they miss
- Personal relevance
Multi-staged / Multi-channeled process
Simple stage models:
- Customer behavior
- Marketing actions:
1. Awareness of need
2. Identification of products
3. Information
4. Evaluation
5. Purchase
6. Use
7. Post-purchase evaluation
- Customer behavior
- Marketing actions:
1. Awareness of need
2. Identification of products
3. Information
4. Evaluation
5. Purchase
6. Use
7. Post-purchase evaluation
Strategy: Sources of information axis and time of day axis: focus on each stage at each time
@ -396,18 +398,18 @@ Strategy: Sources of information axis and time of day axis: focus on each stage
The shooping process consists of the following steps:
- Recognise a need: Satisfy by buying a product
- Natural need: food, replace a product
- Create a need:
1. Pay attention to product and brands
2. Know the trigger events and when they occurs
3. Create a new trigger event
- Shopping goals:
1. Seasons and holidays (triggers in store and online)
2. Exclusive offers (emails)
3. Oil change (reminders)
4. Haircut (notices)
- Create "news" for customers on website and social networks
- Recognise a need: Satisfy by buying a product
- Natural need: food, replace a product
- Create a need:
1. Pay attention to product and brands
2. Know the trigger events and when they occurs
3. Create a new trigger event
- Shopping goals:
1. Seasons and holidays (triggers in store and online)
2. Exclusive offers (emails)
3. Oil change (reminders)
4. Haircut (notices)
- Create "news" for customers on website and social networks
## 2.3 Information search stage
@ -428,23 +430,23 @@ The next stage after identifying a need:
Online:
- Interactive display
- Website search
- Online flagship store
- Interactive display
- Website search
- Online flagship store
In store:
- Flagship stores
- External search (what drives attention, goal for going in store)
- Social influences: social networks, salesperson, customer reviews
- Flagship stores
- External search (what drives attention, goal for going in store)
- Social influences: social networks, salesperson, customer reviews
Get customer's attention:
- Capacity is limited
- Information can be too much: filters, cocktail party effects
- "get it"
- Color blocks / packaging
- Pack structures: different lines of quality / natural / flavours
- Capacity is limited
- Information can be too much: filters, cocktail party effects
- "get it"
- Color blocks / packaging
- Pack structures: different lines of quality / natural / flavours
## 2.4 Choice overload
@ -452,11 +454,11 @@ Too much information = Choose not to choose
Perceived variaty vs actual variety: reconciling the paradox
- Assortment stage: Variety is good
- Choice stage: Variety can be complex
- Align the attributes (one shelf for a characteristic)
- Have an expert on-site
- Aligh products the way the customer thinks they should be
- Assortment stage: Variety is good
- Choice stage: Variety can be complex
- Align the attributes (one shelf for a characteristic)
- Have an expert on-site
- Aligh products the way the customer thinks they should be
## 2.5 Purchase stage
@ -484,28 +486,29 @@ Choose to repurchase or tell others
Customer satisfaction:
- Actual performance not really evaluated
- Perceived performance
- Expectations are reasonable: happy or unhappy in respect to expectation
- Actual performance not really evaluated
- Perceived performance
- Expectations are reasonable: happy or unhappy in respect to expectation
Positive | Negative
--- | ---
Repurchase | Switch to competitor
Positive word of mouth | Negative word of mouth
|| Complain to company (address complaint can result in positive)
|| Lawsuit
| Positive | Negative |
|------------------------|----------------------------------------------------------------|
| Repurchase | Switch to competitor |
| Positive word of mouth | Negative word of mouth |
| | Complain to company (address complaint can result in positive) |
| | Lawsuit |
- Customer reviews are effective.
### Messages that catch on
--- | --- | ---
S|ocial currency | Share what makes us look good
T|riggers | When reminded, one share
E|motion | Emotional messages are more powerful
P|ublic | Public is more catching
P|ractical value | Useful and informative
S|tories | Like to tell good stories (background of a product)
| STEPPS | Meaning |---|
|---|----------------|---|
| S | ocial currency | Share what makes us look good |
| T | riggers | When reminded, one share |
| E | motion | Emotional messages are more powerful |
| P | ublic | Public is more catching |
| P | ractical value | Useful and informative |
| S | tories | Like to tell good stories (background of a product) |
# Week 3 - Effective Brand Communications Strategies and Repositioning Strategies
@ -513,14 +516,14 @@ S|tories | Like to tell good stories (background of a product)
Perception:
- Developing an interpretation of a stimulus
- Most crucial process:
- Affect actions
- Affect what is "true"
- Developing an interpretation of a stimulus
- Most crucial process:
- Affect actions
- Affect what is "true"
Is constructive
- Function of context
- Function of context
Two major factors of bias:
@ -546,40 +549,40 @@ Process:
Choosing a brand name:
- Brand name, logo, symbol, character, packaging, slogan, colors
- They all work together to provide an identity
- What would they think about the product if they only see brand elements
- Brand name, logo, symbol, character, packaging, slogan, colors
- They all work together to provide an identity
- What would they think about the product if they only see brand elements
Criteria:
- Memorable
- Easily recognised
- Easily recalled
- Meaningful
- Descriptive
- Persuasive
- Appealing
- Fun and interesting aesthetically
- Rich visual and verbal imagery
- Protectable
- Legally
- Competitively
- Adaptable
- Flexible
- Updateable
- Transferable
- Within / across categories
- Geographical boundaries and cultures
- Memorable
- Easily recognised
- Easily recalled
- Meaningful
- Descriptive
- Persuasive
- Appealing
- Fun and interesting aesthetically
- Rich visual and verbal imagery
- Protectable
- Legally
- Competitively
- Adaptable
- Flexible
- Updateable
- Transferable
- Within / across categories
- Geographical boundaries and cultures
Strength and weaknesses, strategically balance
Element | Advantages | Disavantages
---|---|---
Names | Anchor, Quick | Difficult to change, globalization
Logos / Symbols | Attention calling / Associative / Transferable | Outdated / Ambiguous
Characters | Rich meaning / Attention getting | Outdated / Globalization
Slogan / Jingle | Highly memorable / catchy / meaningful | Translation / music taste
Packages | Recognision / info / meaning | Production / Channel
| Element | Advantages | Disavantages |
|-----------------|------------------------------------------------|------------------------------------|
| Names | Anchor, Quick | Difficult to change, globalization |
| Logos / Symbols | Attention calling / Associative / Transferable | Outdated / Ambiguous |
| Characters | Rich meaning / Attention getting | Outdated / Globalization |
| Slogan / Jingle | Highly memorable / catchy / meaningful | Translation / music taste |
| Packages | Recognision / info / meaning | Production / Channel |
## 3.3 Color and taglines
@ -590,57 +593,57 @@ Packages | Recognision / info / meaning | Production / Channel
- Strong perceptions
- Consistencty is difficult
![](file:///home/francois/Intro-to-marketing-course-notes/3_3_001_Axes_Color.png)
![](./3_3_001_Axes_Color.png)
### Color table
Color | Attributes
---|---
Red | Appetite, love, excitement
Blue | Productive, men, curb appetite
Green | Tranquillity, health, money, nature, fertility
Brown | Reliable, boredom, practical
White | Purity, innocence, empty, spacious
Black | Evil, death, mourning, slim
Yellow | Bright, energy, eye fatigue
Orange | Excitement, enthusiasm, warmth, action
Lavender | Calm, relaxation
Purple | Royalty, waelth, success, wisdom
Pink | Girl, calming, warm
| Color | Attributes |
|----------|------------------------------------------------|
| Red | Appetite, love, excitement |
| Blue | Productive, men, curb appetite |
| Green | Tranquillity, health, money, nature, fertility |
| Brown | Reliable, boredom, practical |
| White | Purity, innocence, empty, spacious |
| Black | Evil, death, mourning, slim |
| Yellow | Bright, energy, eye fatigue |
| Orange | Excitement, enthusiasm, warmth, action |
| Lavender | Calm, relaxation |
| Purple | Royalty, waelth, success, wisdom |
| Pink | Girl, calming, warm |
### Color emotion guide (by The Logo Company)
![](file:///home/francois/Intro-to-marketing-course-notes/color-emotion-guide-small.png)
![](./color-emotion-guide-small.png)
2. Symbols
- Communicate associations
- Multiple associations
- Positive feelings: liking
- Can get outdated
- Communicate associations
- Multiple associations
- Positive feelings: liking
- Can get outdated
3. Slogans
- Positioning strategy
- Remove ambiguity
- Create equity and emotion
- Reinforce the name and symbol
- Positioning strategy
- Remove ambiguity
- Create equity and emotion
- Reinforce the name and symbol
Basics:
- Short
- Differentiated from competition
- Unique
- Easy to say and remember
- Cannt have any connotation
- Protect and trademark
- Emotion
- Short
- Differentiated from competition
- Unique
- Easy to say and remember
- Cannt have any connotation
- Protect and trademark
- Emotion
Types:
- Imperative
- Descriptive
- Superlative
- Provocative
- Clever
- Imperative
- Descriptive
- Superlative
- Provocative
- Clever
## 3.4 Brand elements: Packaging
@ -652,18 +655,18 @@ Aesthetic and function: Grab attention and work well
Distribution channels:
- Retailers
- Changing channels
- Which Retailer like which package
- Retailers
- Changing channels
- Which Retailer like which package
Colors:
- See preceding section
- See preceding section
Shape:
- excuse for a new product
- Really strong brand image
- excuse for a new product
- Really strong brand image
## 3.5 Brand elements: Persuasion
@ -695,8 +698,8 @@ Difficult ! Interpret what they already believe
A good celebrity endorser is:
- Expert: Information
- Peripheral: Attractive
- Expert: Information
- Peripheral: Attractive
1. Considerations:
- Audience fit
@ -725,11 +728,12 @@ Why some companies kept Tiger Woods and others not ?
### Use of celebrity
---|---
Explicit| Endorse product
Implicit| Use product
Imperative| Should use product
Co-present| Appears with product
| Type of use | Reason |
|-------------|----------------------|
| Explicit | Endorse product |
| Implicit | Use product |
| Imperative | Should use product |
| Co-present | Appears with product |
Exposure to marketing cues:
- Motivation to elaborate + ability -> Central route
@ -741,12 +745,13 @@ Brand equity must be actively managed over time: must be reinforced
### 5 rationale for brand change
---|---
Initial identity and execution was poorly conceived | Consumer interest, brand association, sales
Target for identity and execution is limited | Reach a broader market
Identity and execution is out of date | keep up to date
Identity and execution loses its edge | old fashioned
Identity and execution just became tired | Change generate "news"
| Situation | Rationale |
|-----------------------------------------------------|---------------------------------------------|
| Initial identity and execution was poorly conceived | Consumer interest, brand association, sales |
| Target for identity and execution is limited | Reach a broader market |
| Identity and execution is out of date | keep up to date |
| Identity and execution loses its edge | old fashioned |
| Identity and execution just became tired | Change generate "news" |
**Consistency**
@ -774,7 +779,7 @@ Important that people believe changes
Major points:
- Consistency is valuable for strong brands
- All elements works in harmony
- Change is sometimes necessary but be cautious
- Understand sources of equity: Point of parity / Points of differentiation
- Consistency is valuable for strong brands
- All elements works in harmony
- Change is sometimes necessary but be cautious
- Understand sources of equity: Point of parity / Points of differentiation

233
Week2.md
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@ -4,15 +4,17 @@ author: "François Pelletier"
output: pdf_document
---
Wharton School - Introduction to marketing
# Week 4: Customer centricity
## 4.1 From product-centric to customer-centric management
Three axis of marketing
- Performance superiority: Having the best products
- Operational excellence: Low cost and efficiency
- Customer intimacy: Who is the customer. How intimate we want to get to add value.
- Performance superiority: Having the best products
- Operational excellence: Low cost and efficiency
- Customer intimacy: Who is the customer. How intimate we want to get to add value.
What stores are customer inmtimate ?
@ -22,11 +24,11 @@ All about making money by maximising the value of the company
Total value of the company = time value of money -> Maximising shareholders value
Volume and cost reduction:
- Will it scale : Can we deliver our products and services at scale ?
- Different metrics:
- Volume
- Costs
- Market share (how well you will do right in the future)
- Will it scale : Can we deliver our products and services at scale ?
- Different metrics:
- Volume
- Costs
- Market share (how well you will do right in the future)
1. Fine tuning the metrics
2. Growth
@ -36,61 +38,62 @@ Volume and cost reduction:
- Innovation (extending products)
- Companies work in product/service expertise (silos).
- Competitive advantage
4. Mental process: Divergent thinking, different uses for the same product
3. Mental process: Divergent thinking, different uses for the same product
## 4.2 Cracks in the product centric approach
Changes in the last 15-20 years:
- Emerging trends are here to stay
- Emerging trends are here to stay
Leading factors:
- Commoditization (technology enables product development)
- Lifecycle is shorter
- Always must have a new product coming
- No more natural monopoly power
- Smart customers
- Technology enabled informatino flow
- Aware of options availabl for them
- Put mode demand of companies
- Have to extract value from product
- Retail saturation
- Tech enabled delivery
- Instant availability
- Globalisation
- Deregularization : Must be more competitive
- Commoditization (technology enables product development)
- Lifecycle is shorter
- Always must have a new product coming
- No more natural monopoly power
- Smart customers
- Technology enabled informatino flow
- Aware of options availabl for them
- Put mode demand of companies
- Have to extract value from product
- Retail saturation
- Tech enabled delivery
- Instant availability
- Globalisation
- Deregularization : Must be more competitive
More demanding customers:
- How will the product solve my problem
- end-to-end solutions with products form multiple vendors
- Example: IBM
- Customer centric solutions provider
- Harder to commoditize
- Left building and slling products
- How will the product solve my problem
- end-to-end solutions with products form multiple vendors
- Example: IBM
- Customer centric solutions provider
- Harder to commoditize
- Left building and slling products
Information systems allow customer tracking
- Before:
Know the sales
Don't know who buys and how many they buy
- Now: Know who buys what and when
- Before:
Know the sales
Don't know who buys and how many they buy
- Now: Know who buys what and when
## 4.3 Data driven business models
Harrahs:
- Casino chain in the US
- Loyalty programs
- Games / meals / rooms at a really granular data
- Detect thresholds (when to offer a meal, ...)
- Casino chain in the US
- Loyalty programs
- Games / meals / rooms at a really granular data
- Detect thresholds (when to offer a meal, ...)
Tesco:
- Grocery chain in UK
- Loyalty program
- What products are boucht in Tesco vs. products bought elsewhere.
- Know which customer can switch to competition easilyDefending against Wal-Mart
- Grocery chain in UK
- Loyalty program
- What products are boucht in Tesco vs. products bought elsewhere.
- Know which customer can switch to competition easilyDefending against Wal-Mart
## 4.4 Three cheers from direct marketing
@ -108,10 +111,10 @@ What kind of product for the most valuable customers and how to attract them. Ca
None of the big firms are really customer centric:
- Walmart: Best at product-centric
- Apple: Best at product superiority, begins to collect data abour customers with iStore
- Starbucks: Customer-centric only at local level.
- Nordstorm: Great personalized service, but not based on CLV, so does not target the best customers but all of them.
- Walmart: Best at product-centric
- Apple: Best at product superiority, begins to collect data abour customers with iStore
- Starbucks: Customer-centric only at local level.
- Nordstorm: Great personalized service, but not based on CLV, so does not target the best customers but all of them.
# Week 5: The Opportunities and Challenges of Customer Centricity
@ -119,14 +122,14 @@ None of the big firms are really customer centric:
How do you define customer centricity ?
- Development and delivery of product and services
- Fulfill the current and future needs of a select set of customers
- Maximise their long-term value to the firm
- Development and delivery of product and services
- Fulfill the current and future needs of a select set of customers
- Maximise their long-term value to the firm
You have to be willing to change:
- Risky
- Require data and models
- Risky
- Require data and models
Do something even if someone is not an actual customer because he/she will be one later
@ -161,34 +164,34 @@ Who is your customer ?
Example: Healthcare:
- Patient
- Doctor
- Hospital
- Insurance company
- Patient
- Doctor
- Hospital
- Insurance company
Procter & Gamble: Customer = Retailers
- It could be the customers in a few years: get ready for a direct marketing approach
- It could be the customers in a few years: get ready for a direct marketing approach
Barriers to customer-centricity:
- Data
- Regulatory issues
- Control: Impossible to move
- Specific challenges for each company
- Resources available
- Build IT, hire employees
- Data
- Regulatory issues
- Control: Impossible to move
- Specific challenges for each company
- Resources available
- Build IT, hire employees
What competitors are doing in this area:
- Financial services
- Hotels and hospitality
- Be the first ones !
- Financial services
- Hotels and hospitality
- Be the first ones !
Does it make sense to be customer-centric ?
- Technology initiatives
- Experiments
- Technology initiatives
- Experiments
You have to prepare before taking the big step.
@ -200,27 +203,27 @@ Focus on the right customers for strategic advantage
Product-centric approach have some cracks:
- Commoditization
- Well-informed customers
- Globalization
- Commoditization
- Well-informed customers
- Globalization
Customer-centric:
- Promising alternative
- Not clearly understood
- Many firms are tauted to be customer-centric but are not really
- Promising alternative
- Not clearly understood
- Many firms are tauted to be customer-centric but are not really
Clear definition:
- Celebration of customer heterogeneity
- Customer lifetime value
- Celebration of customer heterogeneity
- Customer lifetime value
How to manage tactics:
- "Show me the money"
- Can't be world-calss on 3 tactics
- Doing one well can be really lucrative
- A lot trickier than we think of
- "Show me the money"
- Can't be world-calss on 3 tactics
- Doing one well can be really lucrative
- A lot trickier than we think of
Where tu put the extra dollar ?
- Most managers would put it either in retention or development
@ -234,17 +237,17 @@ Why for customers we would like the cheapest to acquire ?
VPA: Value per acquisition = Customer lifetime value
- Upper bound for spending to acquire a new customer
- A lot of value in customers that we don't appreciate
- Match info with what customer prove to be over time
- Upper bound for spending to acquire a new customer
- A lot of value in customers that we don't appreciate
- Match info with what customer prove to be over time
### Customer acquisition summary
- Avoid CPA mentality
- Ceiling instead of floors
- Heterogeneity with CLV (search words, geographical, social)
- Be more patient and forward-looking when judging acquisition efforts
- Firms tends to underspend on acquisition
- Avoid CPA mentality
- Ceiling instead of floors
- Heterogeneity with CLV (search words, geographical, social)
- Be more patient and forward-looking when judging acquisition efforts
- Firms tends to underspend on acquisition
## 6.2 Customer retention
@ -262,27 +265,27 @@ Average expected lifetime: Accounts for customer heterogeneity.
### Customer retention summary
- There is no average customer
- Difference can be huge between average measures and accounting for heterogeneity
- Attrition elasticity is much lower than in the homogeneous case
- Investment in reducing attrition give more modest returns than expected
- There is no average customer
- Difference can be huge between average measures and accounting for heterogeneity
- Attrition elasticity is much lower than in the homogeneous case
- Investment in reducing attrition give more modest returns than expected
## 6.3 Customer development I
Make existing customers as valuable as possible
Loyalty programs themselves are not a tool for customer development
- Cross selling
- Up-selling
- Increase frequency and volume
- Premium pricing
- Cross selling
- Up-selling
- Increase frequency and volume
- Premium pricing
## 6.4 Customer development II
Metric:
- Share of wallet: How many needs are met by this firm
- Amount of product and services
- Share of wallet: How many needs are met by this firm
- Amount of product and services
Share of wallet is not correlated with size of wallet
@ -291,34 +294,34 @@ Good and bad news about cross-selling
Good: Customer's share are correlated
Bad: Some customer will not become better customers
- Upside of developmenet opportunities is more limited than managers think
- Icing on the cake: Not to change the customer but unlock value that is already there
- Upside of developmenet opportunities is more limited than managers think
- Icing on the cake: Not to change the customer but unlock value that is already there
But: Acquisition is not valuable in saturated markets
### Overall summary
- Celebrating heterogeneity
- Smart acquisition
- Don't overspend retention:
flighty customers will fly away no matter what you do or will become unprofitable
- Celebrating heterogeneity
- Smart acquisition
- Don't overspend retention:
flighty customers will fly away no matter what you do or will become unprofitable
## 6.5 Wrap-up
Making customer centricity profitable:
- Need to have the technology to track data and do projections
- Update regularly the CLV
- Break customers into segments that we cam measure:
- When they reach us
- What products they buy first
- What campaign bring them to us
- Allocate retention and development ressources appropriately:
target marketing communications based on a segment characteristics
- Constantly experiment with these tactics
- Send different messages to different people
- Bottom up perspectives to drive product line decisions
- Think about competition identifying the same high-value customers too
- Need to have the technology to track data and do projections
- Update regularly the CLV
- Break customers into segments that we cam measure:
- When they reach us
- What products they buy first
- What campaign bring them to us
- Allocate retention and development ressources appropriately:
target marketing communications based on a segment characteristics
- Constantly experiment with these tactics
- Send different messages to different people
- Bottom up perspectives to drive product line decisions
- Think about competition identifying the same high-value customers too

171
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@ -4,7 +4,9 @@ author: "François Pelletier"
output: pdf_document
---
#Week 7 : Go to market strategies
Wharton School - Introduction to marketing
# Week 7 : Go to market strategies
## 7.1 Introduction and execution
@ -51,21 +53,20 @@ What is wrong with the status-quo ?
Success = Product x Marketing
You have to be good at both, on a scale of 0 to 10:
- Have a great product
- Have the right customer, brand fit, STP and 4P's
- Have a great product
- Have the right customer, brand fit, STP and 4P's
## 7.3 Friction
2 most important frictions
- Search frictions:
- Search frictions:
+ Where do I buy a TV ?
+ Who will have the best price and assortment
+ Search cost to get a better deal
- Geographical frictions:
+ Cost vs benefits
+ Leave the tyranny of local options
@ -74,43 +75,48 @@ You have to be good at both, on a scale of 0 to 10:
Prior to the internet: all markets were local
Internet: Allow businesses to pool customers
- In smaller markets: get unavailable goods
- Get information: How to spend our time (complement)
- In smaller markets: get unavailable goods
- Get information: How to spend our time (complement)
## 7.5 Academic research
Content:
- A lot is purely local (services, restaurants, people to date)
- Websites: Yelp, OKCupid
- A lot is purely local (services, restaurants, people to date)
- Websites: Yelp, OKCupid
1 million population yiends 50-60 websites
Product: Farther you live from physical retail location: go virtual else go to nearby store.
Online:
- Lower prices or lower search costs
- Transact with others more efficiently
- Better information about local activities
- Improved customer convenience
- Lower prices or lower search costs
- Transact with others more efficiently
- Better information about local activities
- Improved customer convenience
## 7.7 The long tail
![](file:///home/francois/Intro-to-marketing-course-notes/7_7_long_tail.png)
![](./7_7_long_tail.png)
Historically: World of hits
Now: Infinite slots
Long tail exists:
- Economics of storage and distribution (supply side)
- Endogenous: moreways to discover variety (demand side)
- Economics of storage and distribution (supply side)
- Endogenous: moreways to discover variety (demand side)
Old-new economics:
- Pareto: 80%/20% rule
- Zipf: 2nd: 1/2 of the first, 3rd = 1/3 of the first
- Pareto: 80%/20% rule
- Zipf: 2nd: 1/2 of the first, 3rd = 1/3 of the first
Key principles: tyranny of locality
- Once upon a time in India
- Once upon a time in India
Not enough demand for a movie theater but profitable from renting.
@ -134,7 +140,7 @@ Differences between 2 channels:
- Gini coefficient: G = A/(A+B)
- Lorenz curve
![](file:///home/francois/Intro-to-marketing-course-notes/7_8_Economics_Gini_coefficient2.svg)
![](./7_8_Economics_Gini_coefficient2.png)
Internet: More evenly distributed sales. differences not attributed to price and availability. More niche products sold.
@ -175,12 +181,12 @@ What matters the most in internet retailing:
2 important patterns:
1. Sales start in larger cities and spread through proximity
2. Sales in smaller areas with "similar" kinds of people (age, education, occupation, ...)
1. Sales start in larger cities and spread through proximity
2. Sales in smaller areas with "similar" kinds of people (age, education, occupation, ...)
Long tail over location
![](file:///home/francois/Intro-to-marketing-course-notes/7_9_long_tail_location.png)
![](./7_9_long_tail_location.png)
## 7.10 Preference isolation
@ -206,7 +212,7 @@ A third of the value is attributed to brands.
[Stocks for the long run](http://www.amazon.com/Stocks-Long-Run-Definitive-Investment/dp/0071800514)
![Top 20 brands](file:///home/francois/Intro-to-marketing-course-notes/8_1_brandz_100_chart.jpg)
![Top 20 brands](./8_1_brandz_100_chart.jpg)
Goals and tactics:
@ -239,27 +245,28 @@ Organic celebrity: [Ree Drummond](http://thepioneerwoman.com/), one of the large
Customer goals:
- Attract
- Engage
- Retain
- Attract
- Engage
- Retain
Subject to:
1. Never pay more to acquire than you will recoup (CLV > AV)
2. CLV need to incorporate RLV (referral lifetime value)
- 8% of customers are marketing agents
- Top 100 will generate 15000 other customers
1. Never pay more to acquire than you will recoup (CLV > AV)
2. CLV need to incorporate RLV (referral lifetime value)
- 8% of customers are marketing agents
- Top 100 will generate 15000 other customers
Attractive target customer:
- Monologue to conversation with technology
- Amplification through virtual and real world synergy
- Long tail leverage
- Marketing "spend" as an asset
- Monologue to conversation with technology
- Amplification through virtual and real world synergy
- Long tail leverage
- Marketing "spend" as an asset
Food for thoughht:
- Status-quo experience that is broken
- [Warby Parker](http://warbyparker.com/)
Food for thought:
- Status-quo experience that is broken
- [Warby Parker](http://warbyparker.com/)
## 8.3 Reputation and reviews
@ -272,24 +279,24 @@ One friction of market: we don't want to try new stuff
Lots of sites for vacation, restaurants, cars, movies, contractors:
- Chris Dixon from Trip Advisor:
Startup build from bringing information into market.
- More info: Almost always better
- Information by firms: might affect behavior as well (better or worse)
- Chris Dixon from Trip Advisor:
Startup build from bringing information into market.
- More info: Almost always better
- Information by firms: might affect behavior as well (better or worse)
Data:
- Hygiene grades cards shown in window of restaurants (mandatory in LA/NYC)
- Impact of demand:
- A: increase of 5,7%
- B: Increase of 0.7%
- C: Decrease of 1%
- Objective quality went up: Hospital admission for gfood-borne illnesses down 13%
- Hygiene grades cards shown in window of restaurants (mandatory in LA/NYC)
- Impact of demand:
- A: increase of 5,7%
- B: Increase of 0.7%
- C: Decrease of 1%
- Objective quality went up: Hospital admission for gfood-borne illnesses down 13%
Principles:
- Review systems change behavior
- Should be objective and verifiable, not actually the case
- Review systems change behavior
- Should be objective and verifiable, not actually the case
** Amazon and BN **
@ -304,10 +311,10 @@ Might motivate to review their own books. Review writing service/ fake reviews.
According to Bing Lui, a data mining expert:
- 1/3 reviews are fake
- A lot of money is involved in this market
- 1/3 reviews are fake
- A lot of money is involved in this market
[This Man Made $28,000 A Month Writing Fake Book Reviews Online](read.bi/OiuMh0)
[This Man Made $28,000 A Month Writing Fake Book Reviews Online](https://read.bi/OiuMh0)
Difficult for a data mining algorithm because of sarcasm, jokes, ...
@ -317,13 +324,13 @@ Summary: Reviews could be helpful but authenticity is a concern.
Approach and key findings:
- Examine distributions of reviews
- Net gains should be highest for independent hotels with single-unit owners.
- Such hotels have more 5* and neighbors have more 1*
- Examine distributions of reviews
- Net gains should be highest for independent hotels with single-unit owners.
- Such hotels have more 5* and neighbors have more 1*
## 8.4 Product life cycle
![Top 20 brands](file:///home/francois/Intro-to-marketing-course-notes/8_4_life_cycle.png)
![Top 20 brands](./8_4_life_cycle.png)
1. Innovators (Research and Development)
2. Early adopters (Introduction)
@ -339,23 +346,23 @@ Obesity: Controversial / Spreads like a virus (video)
Network:
- Pathways through which information, advice, resources, support flows between people.
- Physical or virtual
- Homophily:
+ Characteristics of participants that are similar (cultural, taste, income)
- Can be simple (dyad) or complex (hundred, thousand of nodes)
- Nodes and connections
- Ability to share information and resources
- Constraints / geography
- Pathways through which information, advice, resources, support flows between people.
- Physical or virtual
- Homophily:
+ Characteristics of participants that are similar (cultural, taste, income)
- Can be simple (dyad) or complex (hundred, thousand of nodes)
- Nodes and connections
- Ability to share information and resources
- Constraints / geography
Participation in a network is a choice. You decide how many contacts you have, how you will be central and how transitive (embedded) you will be.
You are being affected ny a network:
- Strangers and loose connectinos can affect us
- 1 person is 4% of influence
- 15 people are 40% of influence
- Strangers and loose connectinos can affect us
- 1 person is 4% of influence
- 15 people are 40% of influence
Six degrees of separation between you and anyone in the world
@ -365,7 +372,7 @@ Unit of analysis: Zip code, city blocks
First order contiguity
![Matrices](file:///home/francois/Intro-to-marketing-course-notes/8_6_matrices.png)
![Matrices](./8_6_matrices.png)
* [Social contagion and trial on the internet: Evidence from online grocery retailing](http://d1c25a6gwz7q5e.cloudfront.net/papers/1283.pdf)
@ -520,14 +527,14 @@ Price is more than a number: It sends signals to customer (premium/discount)
- It lowers the price sensitivity
| Var measured | Natural | Experimental |
| --- | --- | --- |
| Actual purchase | Sales data | Field experiment
|Reference / Intention | Surveys | Tradeoff analysis
| Var measured | Natural | Experimental |
|-----------------------|------------|-------------------|
| Actual purchase | Sales data | Field experiment |
| Reference / Intention | Surveys | Tradeoff analysis |
Field experiment:
![fieldexp](file:///home/francois/Intro-to-marketing-course-notes/9_2_field_exp.png)
![fieldexp](./9_2_field_exp.png)
In a grocery in the 1990's
@ -607,9 +614,7 @@ Overview:
- Channel structure: Who are the players
Direct vs. Indirect
![channels](file:///home/francois/Intro-to-marketing-course-notes/9_4-channels.png)
### Direct vs. Indirect
Indirect reduce the amount of transactions
@ -619,9 +624,9 @@ Strategic advantage of direct:
- quality of direct marketing feedback
- Bundling with high margin products and services
Channel flow / functions
### Channel flow / functions
![channel-flow](file:///home/francois/Intro-to-marketing-course-notes/9_4-channelflow.png)
![channel-flow](./9_4-channelflow.png)
How it can be disrupted by technology
@ -644,7 +649,7 @@ Information flows:
- Matching needs and solutions
- Matching customers ans suppliers
- Assessing and certifying quality
- Negociation / closing the deal
- Negotiation / closing the deal
- Ordering
- Market feedback

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