Lecture 1: Marketing in the 21st Century

Marketing – classic definition

Marketing is planning and development of (4P) products, services and ideas, determining
sales prices, deciding on marketing communications and marketing channels, in order to
conduct an exchange that meets the goals of consumers and businesses.
Some recent definitions…
Marketing is an organizational function and a set of processes for creating, communicating
and delivering value to consumers and managing relationships with consumers in a way that
benefits the organization and stakeholders.
Marketing management is the science and art of selecting target markets and obtaining,
conserving and growing consumers through the development, delivery and communication of
value for the consumer.
Basic concepts of marketing:
• Needs („basic human requirements“ see p.32), wants („objects that satisfy needs“) and
demand („wants for products backed by ability to pay“)
• Markets, environment and competitors
• Segmentation and positioning
• Marketing mix (4P)
• Marketing planning and control

 Product: broad elements that are important to consider when making a decision
 Modern marketing realities: people, processes, programs, performance
Major Societal Forces shape marketing (marketing needs to respond to several forces)
•Globalization (brings opportunities and challenges) •Deregulation •Privatization
•Heightened competition •Industry convergence •Retail transformation
•Disintermediation •Network information technology •Consumer buying power •Consumer
participation •Consumer resistance
Information technology: informed, connected, powerful customers
Digital technologies and connectivity paradoxes:
1. Online vs. Offline interaction (combination of both might be the best solution)
2. Informed vs. Distracted and confused customer (because there is a lot of information, the
customers might be confused)
3. Positive vs. Negative customer advocacy (engaging influencers; there is also a large
proportion of negative oppinions)
Impact of new technologies… Nike
 High workload (they treated workers badly => getting negative view from the public –
it affected their view)
 Marketing managers have to think beyond the product => they have to take in mind
that customers have their views on brand
Hollistic marketing concept (slika)
 1 idea that we need to cover to be successful on the market
Key Marketing capabilities (HBR paper)
Market oriented: • Excellence in customer insights • Communication of a societal purpose •
Delivery of a rich customer experience
Internally oriented: • Cross-functional collaboration, strategic focus • Organizational agility
and training • New, fluid organizational structures facilitate these capabilities.
Core busines processes that provide customer value (slika)
 Porter value chain (adjusted for marketing)
Is strategic planning dead? …
Forget strategic planning that is slow, structured and stable – instead think of strategy like a
portfolio of fast and relentless experiments, seizing and shaping the best opportunities for
growth. It still needs direction and choices – a vision still matters, making sense of change,
having a clarity purpose, and a defined context in which to hack. Strategy becomes agile and
creative, outside in, big ideas and small experiments, driven by changing markets and
customer aspirations, rather than fixed by your own capabilities and products.
Strategic planning as the only approach?(slika)
 It's not, there are also new ones
Marketing plan
„Instrument for directing and coordinating the marketing efforts, that operates at two levels:
strategic and tactical “
Essential Contents: 1. Executive summary for top management 2. Situational analysis
(environment, market, consumers, category trends) 3. Marketing strategy (segmentation /
positioning / goals) 4. Tactical activities (4P‘s) 5. Implementation and control (metrics)

Lecture 2: Managing customer relationships

 We learn to establish mutually beneficial relationships (long – term and cooperative)
=> marketing connects the company with the customers
From the definitions to implications and „delivery“ (CRM deals with all of this)
• Quality: All product features that affect its ability to meet the needs of the consumer
• Satisfaction: Feeling of pleasure or disappointment on the basis of comparison of the
perceived performance of the product with expectations (deals with short term feelings)
• Perceived value: The difference between the total of the perceived benefits and costs (what
are benefits and costs)
• Loyalty: A deep commitment to repurchasing or recommending a product, despite the
circumstances and efforts of its competitors (deep commitment over longer period is a
guarantee that customer will remain loyal => effecting profitability)
• Profitable consumer: The one whose revenue stream exceeds its costs (in certain time
period) – (pay attention to relationship outcomes)
Managing profitable customers: Chain of effects/links
 Profit => it's important to be profitable on competitive markets
Loyal customers are more profitable because…?
• Consumers are cheaper to retain than to acquire
• Loyal consumers are more likely to buy more
• The costs of doing business with loyal customers are lower (they need less information and
help, they make fewer mistakes, etc.)
• Loyal consumers act as unpaid promoters and sellers (lower promo-costs, give
recommendations)
• Confidence in the provider decreases the price sensitivity of loyal consumers – they pay
higher prices
- they make repurchases
- they recommend to others
- less costs with gaining new customers
 Satisfied customer is or isn't loyal =>
we have to exceed the expectations
to achieve higher satisfaction

It's the main way of achieving

profitability

Customers are more profitable over time (slika)

 Profitability does increase over time, when we have satisfied customers => we also
develop closer relationships
Are loyal customers indded profitable?
Reintartz & Kumar (2000) study found that:
• Longterm customers are not more profitable • Profitability does not increases over time
• Costs of loyal customers are not lower • Loyal customers does not pay higher prices
• Key factors of customer pofitability are „Recency“ (how recently they bought), „Frequency“
(how frequently they buy) and „Monetary value“ (RFM)
Possible explanations;
• Non-contractual type of relationship (retail) – (this study included retail – you don't have a
contract with your retailer – as a customer)
• Impulsive and emotional buying decisions (these are not following above affect)
Management of customer relationships require MEASUREMENT and ANALYSIS
(how to check for satisfaction)
• Customer surveys (of satisfaction, quality, value, +) => done 1 or 2 times / per year
• Analysis of complaints (and compliments)
• Analysis of lost customers (churn) => we need to do interviews of why they are leaving us
• Mystery shopping, Critical Incidents technique (CIT)
• Analysis of trends, comparisons, consequences, key profitability factors (RFM) => we need
to find trends: are they more satisfied than with the competitor => compare
• + More advanced, cost efficient, methods:
• Online = Net promoter score
• Sentiment analysis (customer's post evaluations on the internet spontanueosly – we just
need to collect it and analyze; the analysis transfers this data to quantitative data)
Customer profitability Measurement
• Profitable customer: the one who‘s revenue stream over time (Rt) exceeds the costs of the
acquisition, sale and supply of consumers (Ct). => over a certain time period
 (M = Rt – Ct).
• Customer Lifetime Value (CLV) = profitability during expected / actual Lifetime:
 (Average / segment): CLV = M/(k+d); (M= net margin; k = discount rate; d = churn)

 Individual / actual:
p…price; c…costs; r…returning; AC…acquistion cost (how much does it cost to
acquire customer)
• Profitability asessment: RFM analysis (collected from service or transactual data) -
(Recency, Frequency, Monetary)
• Share of customer wallet
Loyal, bring profit

Profitable, how to
reduce loosing money

The basis for loyalty programs

Loyatly programs
• Rewards for ‚profitable‘ customers • Foundations: databases (and some simple yet clever
tricks) • Different schemes and rewards
An effective loyalty program?
• Simple (to underestand and appy) => they should not be too complicated • Meaningful
(attractive) rewards => money or discounts • Motivating logic (game!) • Does not
demotivate „bad“ customers => you should not punish the disloyal customers • Different
from competitors • Various contact points and partners => eg. Pika Mercator ond others •
Assures customer data and learning => over time learn what is working, what products pull
the customer
 2 stamps are free => appears to be
more efficient => more customers
filled this out; because they got an
impression that they got something
for free (psychological mechanism)

Harrah’s: efficient Loyalty program

• Centralized data warehouse (where they collected interactions with customers) • Advanced
predictive analytics • Identification of ‚hundreds of detailed‘ segments • In ‚near real
time‘ (system works in real time => they continously suggest rewards) • Rewards and sales
promotion act. • Direct communications • Mobile marketing • Duplicated consumer
revenues • Reduction of advertising expenditures (which proves this was effective) •
Purchase of a competitor hotel (Ceasar's) – (customers often spend the night there)
Databases for advanced customer relationship management (CRM) (+slika)
• Identification of prospective customers • Attracting and retaining customers (Funnel)
• Direct marketing, additional sales • Prevention of churn and reactivation (why people
are leaving => we prevent before they leave – contact them before they go)

Process of acquiring and

maintaining a customer

- we are moving the customer

throughout the process => this
approach is called CRM

Information and benefits

- complex system

- might not be aplicable for all kinds of

customers , companies
Limitations of (big) CRM systems?
• One-time purchases and small-value purchases (not for CRM) • Not all consumers want
"close/contractual“ relationships (they are not interested in close relationships) • Indirect
contact with the actual (final) consumer (eg.: producing something sold by other companies)
• High costs of obtaining information (investment in CRM) – (costly & high investments) •
Need for internal marketing efforts of CRM among employees (you need to put enogh efforts)
Back to the essence of partner relationships…
• Relationship = ? • Close (partner) relationship = ? • Can we manage healty and mutually
beneficial relationships without databases and CRM tools? • „CRM“ should stand for: (ANY)
business activity that results in added value by development of effective relationships with
customers (Cravens & Piercy, 2010).
 Advancing and obtaining customers  how to improve CRM beyond existing tools
 The idea is CRM should be for any kind of activity, not neccesserly starts for customer
profitability)
 Reurn to the idea of relationship  what type of relationships the customers are
interested in.
 Slika WELCOME RIDERS – Harley Davidson:
o Supporting community
o Idea: advance CRM in aspects, where we learn what kind of relationships they
are interested in and they value
o Engaging interaction with the customer
o Relationship is a two-way street (include other qualities in, not just money)
Not
interested in
long

term

More
interested in

long term
cooperation
Having
fun
 You get an idea how to deal with
the customer

From CRM to „CMR“ (=Customer Managed Relationships)

How can companies co-develop relationships that will add value – for both „partners“? 1.
CMR as identification of value: relationships with customers as „research and learning
partners“ 2. CMR as vaue creation: customers as „co-creators“ 3. CMR as value delivery,
communication and experiencing : customers as resource providers and community members“
Customer might be a part of
development of the value

We open up, so that customer

might cooperate can be involved
in value creation

Everything is done by the company we sell to customer

Starbucks – transforming the company with customer reccomendations system

Slika my starbucks idea – like suggestion and complaint system
Slika customize – how to strategically adjust
 Customers were able to vote for ideas
 Successful way of cooperating with the customers

AND1: Customers as research and learning partners

Video: Guy from the street, music and image of the street is important, feel and understand
the customer in order to create a relationship
It was essential to learn what the sport means to the customer. From the street what
kind of music, outfit, background… to use when advertising  showing that this is a way of
life of our customers
Product customization
  Many products today can be customized (eg. Even contributing what kind of product
to build, not only adding a name..)
Threadless: more than customization
 Customers might be partner in development of production
LEGO: customer products co-creation

 you might become a partner in the company, when you submit an idea
 also posses a dilema when to stop  to make a barrier between a customer and the
company
SLIDE MISSING: WINEFOUNDRY
 wine co-creation
 you can work during the year and then pull it (customer can be a winemaker and then
sell it too – market it
 outcome: being a winemaker
Customer communities
 when our products are produced, we also need to be involved in the community (eg.
Of the competition for rollerskates
 you can grow up with your community
 customer is therefore connected with the brand  customer interacts and experiences
the brand

!!!! EXAM LEARN THE AUTHORS TOO!!!!

Platforms for experience
Customers co-creation
and comunities are involved as co-creators
 • Products (Lego) • Production process • Retail Stores (Apple) – (Apple stores are more open
up and you can actually use the product) • Web-pages • Meetings, events • Mobile phones •
Public places

Not just source

of money

QUESTION: Explain model of value experience?  learn the model and authors!!!
How crisis affect customer relationships and how to respond? (it negatively affect)
Are they more loyal? How to deal with the customer during crisis?
• Crises negatively affect organization-public relationships and relationship outcomes
(satisfaction, trust, commitment) • It is important to differentiate between different types of
crisis, and responses to them – since; (was the company the cause of the crisis? In COVID –
no) • Conventional communication strategies may not work (during crisis)… for each
segment (maybe students are the segment – you need the right strategy) , channel,…and crisis
type • Still…pre-crisis relationship efforts do pay off (pre-crisis outcomes (satisfaction, trust,
commitment) are stronly related with post-crisis ones.
 Communicate effectively with your customer
Trust as key issue during crisis
How can to maintain relationship and get support – by simbolic gestures
Reacting not just by communicating with community but also by helping others
How can organizations collaborate with and support local partners?
 In crisis companies need to become more local, ethical, commited to doing right
things.
 They should focus on being local, not global
 They should have a good CRM before the crisis