STRATEGIC MARKETING

Sara Leroi-Werelds
December 20th, 10 am - deadline for the group report (30% + 70% for an exam)
Management Report: 10 pages: advice for a company of your choice (strategic marketing
suggestions) (details in the course manual + examples of report)
GFK - marketing research firm

Strategic marketing VS Marketing strategy

Strategic marketing: marketing as a guiding philosophy to develop, evaluate, implement
strategies: can not be oursourced
- Firm level (board level)
- Long-term performance of the firm
- Strategic advantage (VS competitive: not only competing on a market, but also creating
new markets)
- Marketing mindset  marketing is a source of revenue
- STP
- Canvas (key activities, propositions, relationships, customers, revenue, channels,
resources, costs, partners, activities)
Marketing strategy: how to go to the market (marketing mix, implementation of STP,
roadmap implementation)
- Go-to-market
- Marketing mix, plan
- Implementation of STP

Marketing's role (mental models in the boardroom):

- Functional (narrow)
- Core strategy, business models - strategic (broad)

Increasing revenue Designing products for

customers Managerial scope: narrow  broad
Managerial focus: internal  external

Selling more Adjusting product to

customer’s needs
Marketing as a mindset (investments) vs marketing from a functional perspective (costs)
- Frontline employees are important (call-centers, receptionists, etc) - service-profit
chain

- Customer-centricity
Barriers and solutions:
1. Organizational culture (beliefs  norms  values)  Leadership
commitment (time spent with customers, deeper customer understanding)
2. Structure  Organizational realignment (horizontal/hybrid firm structure)
 Get rid of the functional silos
 Focus should be on the customer (Chief Marketing Officer (CMO),
Chief Customer Officer (CCO)…)
3. Processes  Systems and process support (IT system, Database, CRM
system, Customer service center, Employee training, Communication
systems…)
 Strategy development (business strategy + customer strategy)
 Dual value creation
 Multichannel integration
 Information management (data collection and analysis)
 Performance assessment
 Customer segmentation
4. Financial metrics  Revised metrics (Customer lifetime value, Customer
perceived value, Customer satisfaction, Customer loyalty, Net Promotor Score
(NPS))
NPS: ‘How likely is it that you would recommend our company to smbd?
  Related to a company’s objectives
 Measuring performance
 Setting targets for KPI’s
 Not too much
5. Learning and continuous improvement
Customer VS Product-centric company
- Serve customers VS Selling more
- Relationship oriented VS Transaction oriented
- Product benefits (individual needs) VS Product features (technical specifications)
- CR managers, customer segment centers VS Product managers, product profit centers
 II. A service lens on value creation
Service lens = SDL + Service Logic + Jobs-to-be-done
Service is the application of resources, primarily knowledge and skills, for the benefit of
another or oneself
Value of the car depends on other things: oil, whether you have a license, roads...
Customer uses resource (a car) combined with other resources, it doesn't have value when
it's not used (electric cars have no value when there's no electricity)
 Products have value only when you use it
Traditional lens Service lens
Firm embeds value in the car (raw materials Firm creates potential value to the customer,
 vehicle) during the production customer creates real value during its use
- Porter’s value chain
Passive role of the customer: ‘Enabling’ Active role of the customer: ‘Relieving’
service service
Role of marketing: value distributor Role of marketing: value enabler
Porter’s value chain

Premises of the service lens:

- Service helps customers get their job done
- Customers co-create value to get their job done
- Firms and individuals integrate resources to get their job done
- Value is always specific to the context

I. Service-dominant logic (marketing approach) (Vargo and Lush)

mindset for understanding the purpose and nature of organizations, markets, society
- Proposition: organizations, markets, society exchange services
- Service - application of competences for the benefit of the other/oneself
G-D logic S-D logic
focus on goods, output, firms focus on service, value creation,
customers
Unit of Goods Services
exchange
Role of goods Operand Operant
Customer Recipient of goods, customer Coproducer of services, operant
– operand resource resource
Value Exchange-value Value-in-use
-Determined by producer -Determined by consumer
-Embedded in an operand -Transmitted through operand
resource resources
Source of Owning, controlling, Application and exchange of operant
growth producing operand resources resources

SD Logic Axioms
1. Service - basis for exchange (car for transportation)
- Indirect exchange (we pay a company, it buys some services for production)
- Good - mechanism for service provision (car for transportation)
- Operant resources (knowledge, skills)  strategic benefit
- Service economies
2. Cocreated value (always beneficiary=customer)
- Actors can't create value, but cocreate it, offering value proposition
- Service-centered view is beneficiary oriented and based on relations
3. Social and economic actors are resource integrators
4. Value is determined by beneficiaries
5. Value cocreation is coordinated through institutions

II. Service logic (marketing approach) (Gronroos)

- Less abstract than SDL
 - Value as a basis of business
- Value creation: direct interaction with a firm (cocreation in SDL: customer has to
do smth)
- Goal of marketing: engage a firm with the customer’s processes in value creation
o Objective: making a firm relevant
o Service: use of resources to support everyday activities  facilitation to
the value creation
- Value spheres
o Provider sphere (design, development, manufacturing): creates resources
that have potential value for the customer  value facilitation
o Joint sphere (delivery): value cocreation (but don’t always happen >
should be direct interaction)
o Customer sphere: social cocreation/creation of real value-in-use

SDL
Firm-driven value creation
Service is a basis for business
1: all actors are involved in value co-creation
Provides is in charge of value creation
Customer determines value (as value-in-use)
Provider co-creates value, offers value
proposition
SL
Customer-driven value creation
Value creation is a basis
3 spheres of value creation: provider, joint,
consumer
Customer is in charge
Customer creates and determines value (as
value-in-use)
Provider only embedded resources for value
creation; undertake actions that influence
 customers’ value creation

III. Jobs-to-be-done (innovative approach)

"People don't want to buy a drill, they want a hole"  people ‘hire’ products to do a job
 it’s about the needs and wants of the customers
Segmentation is not always about choice > customers just want to get things done
3 dimensions:
1. Social
2. Functional
3. Emotional
Example: milkshakes are hired because people have long and boring ride and get hungry
Expanding market possibilities:

Value varies:
Context

Value-in-exchange (during acquisition)  value-in-achievement (during job

accomplishment): value is determined by the customer
Job mapping (what has to be done; not how)
 Traditional lens Service lens
Purpose of a firm Production and distribution of Helping customers create their value
goods with embedded value (firm cant directly create value)
Basis of exchange Goods, services Service
Goods End products Distribution mechanism for service
provision
Services Units of output Direct application of service provision
Customers Passive receiver of value, Creator of value
destroys it when using a
product
Firm (Value Creates value during the Make value proposition; create inputs
facilitator) production to customer’s value creation process
Customer-firm Firms do things for customers Customers are active resource
interaction integrators
Primary resources Operand resources (things that Operant resources (employed to act on
have to be acted upon to be operand resources): intangible
useful): tangible (land, (knowledge, competences), dynamic,
materials), static, finite infinite
Innovation Create improved goods and Help customers create value
services

>>> Combine resources to make value to customers > Resources integration

Co-creation = creating things together in direct two-way interactions not passive responses
>> merge into one collaborative = joint phere (Ex: chat bot, customer call, digital smart
kiosk,…)
Service vs Services: to get the service (application of service provision) > can use services or
products > aligned with job-to-be done
 How to implement a service lens
- Changing the perspective on value creation
- New capabilities
- Service lens should be embedded into existing processes
- Partnerships with stakeholders outside the firm

Example: Smartphone:
Service: communication with friends, source of information
Other resources needed: electricity, charger, SIM card, internet connection, apps
Provider of complementary resources: manufacturer/ city authorities
Value without complementary resources: 0
 Value for the customer

Rethinking STP: focus – jobs to be done

Segmentation
Job – fundamental unit of analysis
Understanding the job  Design a product or service that does the job  Deliver it in a
way that reinforces its intended use  Customers hire a product
E.g.: Joe and milkshakes on working days; on weekends – with family
Segmentation criteria
1) Measurable – size, purchasing power or profiles of customers can be measured
2) Substantial – segments must me large or profitable enough to serve
3) Accessible – segments can be effectively reached and served
4) Differential – segments must respond differently to different marketing mix elements
5) Actionable – effective programs can be designed to attract and serve the segment
Job-defined market is larger than product-defined!
Positioning
Act of designing the company’s offering so that it occupies a meaningful and distinct
position in the customer’s mind
E.g. furniture market
- Traditional positioning/differentiation: price, quality, style, breadth of assortment
- Based on JTBD:
o Starter’s home
o Long-term residence
Value proposition
Why should the customer buy your product or service?
Osterwalder’s value proposition canvas
 Value perception
assessment of the utility of a product based on perceptions of what is received and what is given
Customer value:
- Trade-off (utility is based on what is received and what is given)
- Perception (it’s customer not supplier who defines value)
- Personal (value is perceived based on personal needs, desires…)
- Situational (based on circumstances, time frame, etc
(hot tea in summer VS in winter))
- Interaction (between subject (customer)
and object (product, supplier, etc))
- Experiential (value is derived not from the
product itself but from consumption experience)
Assessment

One-dimensional approach

1. Dodds: overal value perception: bad/good value

E.g. ‘This X is very good for the money’, ‘this is a good buy’

Multi-dimensional approaches

Multi-dimensional approaches are based on means-end chain

Means-end chain:

Perceived customer value may be measured at the attibutes and consequences level

Attributes (product characteristics)  consequences (what does product do for customers)  states or
values/ desired end-states (general goals products help achieve)

E.g. means-end chain (toothpaste)

2. Gale: customers are asked to rate attributes relative to competitors (importance and performance of
the product)
List of most important attributes  weights of quality attributes (‘please evaluate the importance’)
 performance of a product and competing offerings on each of the products  performance score
* weight of the attribute = market-percieved quality score
E.g.
 Importance: indicate how important each of characteristics of toothpaste is to you;
 Performance: indicate how you evaluate your toothpaste relative to competitors
3. Woodruff: Value = trade-off between the positive and negative consequences of using the product
(benefits and sacrafices)
4. Holbrook: value typology Product as ability to achieve smth End-in-itself

Customer acts Price, convenience Fun, pleasure

Effect on oneself
on a product

Object acts on a Quality Beauty

customer

Show off, brand Effect of consumption on

Effect on others others

How you feel, related to status Intrinsic feelings

Status + Esteem = Social value (consumption behavior as a mean to influence the responses of others)

Importance-performance analysis (IPA)

Kano: how different categories of customer need and product characteristics have the ability to
influence customer satisfaction in different ways
Must be: basic requirements (taken
for granted; when present – neutral,
when not – dissatisfied)
E.g. clean room
More is better: liner relations with
satisfaction (when present – very
satisfied; when absent – very
dissatisfied)
E.g. shampoo in a hotel room
Delighters: unexpected surprises
(when present – very satisfied;
when absent – neutral)
E.g. cake in a hotel room
 Lecture 4: Value for the firm and value for society
Customer lifetime value (CLV) - the present value of future profits generated from a customer
over his or her life of business with the firm
- Total financial contribution of transactions of a customer with the firm
- Reflects future profitability of the customer
- Relates to customers’ purchase behavior
Depends on:
1. Cost to attract a customer = acquisition cost (AC)
2. Annual profits (= contribution margin = m)
customer generates
3. # years customer is to purchase from the firm
4. Time value of money
r – probability that customer will stay in a firm
T
CLV =∑ m− AC
t =0

T
CLV =∑ m∗r −AC
t =0

T
CLV =∑ (m∗r) /(1+i)(t −1)− AC
t =0

Customer equity = the sum of all the CLVs of all the customers of the company

Application of CLV:
- Targeting
- Scaling up/down expenditures
- ‘Firing’ customers
- Spendings on customer acquisition/retention…

CEV – customer engagement value

4 types of value from customers (CEV)
1. Customer lifetime value (CLV) – purchasing behavior
2. Customer referral value (CRV) – referral programs (bring a friend and get a discount)
(extrinsically motivated)
3. Customer influencer value (CIV) – word of mouth (intrinsically motivated)
4. Customer knowledge value (CKV) – feedbacks with ideas of innovations and
improvements

Metrics for CEV

Value for society
 Competitive advantage
Competitive advantage – short-term; sustainable competitive advantage (SCA) – long-term
DESTEP (demographical, economic, social-cultural, technological, ecological, political)
Competitive forces model: customers, suppliers, competitors, distributors
Five forces model of Porter – industry’s average profitability (the more powerful the force, the
more pressure it is on price or costs)  less profitable the industry is

How to conduct analysis:

1. Define the industry: JTBD, product scope, geographical scope
2. Identify the players
3. Assess the underlying drivers of each force (e.g. economies of scope/scale): strong and
weak ones
4. Evaluate the industry’s structure (which forces have the most effect on profitability, most
profitable companies)
5. Recent and future trends
6. Your firm positioning in relation to 5 forces
Resource
-based theory:
Firms have different resources (SD logic: operand (static, finite) and operant (knowledge, skills,
intangible)
Assumptions:
- Resource heterogeneity: some firms are more skilled in accomplishing certain activities,
because they possess unique resources
- Resource immobility: differences in resources because it’s difficult to trade resources
across firms
VRIO framework:
We have to evaluate a resource, not the company!! (data science skill of Netflix)
 Condition Key question

Valuable Does the resource enable the firm to develop and implement
strategies that lower the firm’s costs and/or increase a firm’s
revenues?
Rare Is this resource not available to (most) competitors?
Imperfectly imitable Is it substantially costly to obtain or develop for competing firms?
Organization Is the firm organized (in terms of processes, procedures, policies,
…) to exploit the full competitive potential of this resource?

Strategic marketing ambidexterity: current value extraction (exploitation: stronger

competitive advantage) + future value creation (exploration: innovations)
CX innovation (customer experience): pre-purchase, purchase, post-purchase experience
CRM (narrow): implementation of specific technology
CRM (broad): strategic approach to managing customer relationships to create shareholder value
Strategic perspective on CRM

1. Strategy development process (business strategy + customer strategy)

2. Value creation process (value for the customer + value for the firm)
3. Multichannel integration process – interaction with customers
4. Performance assessment process – key metrics, KPI (shareholders results + performance
monitoring)
5. Information management process – data gathering, collection, reporting, etc
Principle of reciprocity: a firm invests in me  I stay with a firm
Relationship marketing

I. Tactics: activities that are built to improve relations with customer

 II. Perceived relationship investment: how a customer perceives relations
III. Relationship quality: an overall assessment of the strength of a relationship
a. Trust
b. Relationship satisfaction
c. Relationship commitment
IV. Behavioral loyalty: all types of engagement values
V. Product category involvement = a consumer’s enduring perceptions of the
importance of the product category based on the consumer’s inherent needs, values,
and interests
VI. Relationship proneness = a relatively stable and conscious tendency to engage in
relationships with firms of a particular product category

Loyalty programs
Share of wallet – how a wallet of customer is ‘shared’ among particular companies offering a
service/product
Characteristics of a good loyalty program:
1. Divisibility of rewards – redemption (you give points and gets something instead: 500
point or 100 to exchange points?)
2. Sense of momentum – in the beginning program is not used often, so some incentives
are needed (bonus for new members)
3. Nature of rewards (pleasure-providing reward: cinema ticket is better than price
reduction because people will remember longer)
4. Expansion of relationship – buy 10, get one for free (better: to offer a cookie after 10
cups)
5. Combined currency flexibility – if you want to get a gift, you can combine e.g. travel
miles with money
Resource integration: customers use different resources together to create value (about the
customer; something what customer does): combining toothpaste and toothbrush
Amazon example: smartphone (app) + Amazon account + shop

Linking Holsfbrook’s value typology and Gronroos (service logic)

Customer value creation in Gronson  Holfbrook’s value typology (about value in use): provide
examples on the exam

Link between customer centricity and CRM

Shah has 5 building blocks. Overlap in processes (in the paper of CRM they refer to customer
centricity); CRM is about how processes in organization look like