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Customer is the source of all cash-flows
Importance of marketing performance - Reason number 3
“Without customers, you do not have a business, you have a hobby” Return On Customers, Peppers and Rogers.
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Characteristics of successful marketing companies
Customer centric Companies that are really customer centric • Monitor customer needs and get insights in behaviors • Are loyal to their customers so that the customers are loyal to the company • Do not build exit barriers
Management maturity They also • Measure marketing activities in terms of impact on the bottomline • Identify leading indicators • Develop integration programs • Are very good in the implementation of coordinated initiatives (sales, marketing, customer service, and possibly other departments)
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The building blocks for optimizing your marketing investments
Value Capturing model
Marketing Strategy Marketing Drivers Customer Equity Marketing Value Customer Value
Skill Development, Better Process, Better Tools
Source: THOM interpretation of Marketing Dashboard, Marketing by the dashboard light, P. LaPointe, 2005 4
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Marketing Drivers Customer Equity Marketing Value
Striving for commercial efficiency will lead to a number of benefits
Skill Development, Better Process, Better Tools
• It aligns marketing objectives to the company’s financial objectives through the selection of critical metrics and sharing of results • It creates organizational alignment within marketing and it clarifies the relationship between marketing and other corporate functional areas. • It establishes direct links between spending and profits. • It creates a learning organization that makes decisions on hard facts supplemented with experiential intuition. • It creates transparency in marketing’s goals, operations and performance, creating stronger alliances outside the departments. • It promotes accountability
A return to focus, simple process discipline and attention to only the most important goals should be paramount.
Source: Marketing by the dasbhoard light by P. Lapointe and own experience @ THOM 5
– Draft – Integration and consistency Value creation model Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Services Purchase Process & Experience Communication Awareness Perception & Reputation Preference Acquisition Engine Retention Commitment Market Share Business Paradigms Customer Value Positioning Relationship Building Channel Management Scope Price Positioning Recommendation CLV ROC Deep Channel & Customer Insights Tangible Action Plans Presentation1 6 Business Results Segmentation & Targeting Intention Behaviour .
– Draft – The model integrates 2 perspectives Marketing Value Price Premium Market Share The competitive perspective • Comparing your position from relative measures: price premium and market share • Giving the opportunity to compare the evolution of the relative positions over time Customer Value CLV ROC The financial perspective • CLV is the NPV of all cash-flows generated by your customer base • CLV creates insights in actual profit contribution Presentation1 .
– Draft – Combining CE(1) with MV(2) will result in the strategic options to increase marketing value capturing capacity Missed Opportunities Vulnerable position Low Marketing Value High (1) (2) Customer equity Marketing value 8 Presentation1 .
– Draft – Strategic options to increase value capturing capacity depend on a brand’s position Sales Conversion Consolidate Protect Prioritize Low Drive Brand Equity Marketing Value High Presentation1 9 .
– Draft – This approach provides a useful measurement indicator for marketing efficiency Marketing Value Price Premium Market Share MEI Marketing Value = Marketing Investments Marketing Efficiency Indicator Presentation1 10 .
could be taken into account. As an example. Market Share Presentation1 11 . which are often the lowest price in the market. with the third formula. private labels.– Draft – Calculation of the marketing value in an efficient way Marketing Value Price Premium Marketing Value = Price Premium x Volume How much value marketing generates (driven by what consumers are willing to pay & measured by market share & price premium) Price Premium = 3 possible definitions 1) The average price of the brand x minus the average of the average prices of the three lowest priced brands 2) The average price of the brand x minus the lowest price in the market 3) The average price of the brand x divided by the lowest price in the market The right formula has to be used in accordance to the company analyzed.
– Draft – This approach provides a useful measurement indicator for marketing efficiency Marketing Value Price Premium Market Share MEI = Marketing Value Marketing Investments This will allow us to calculate the required value creation when we increase our marketing investments: MEI = ∆ Marketing value / ∆ Marketing Investments means ∆ Marketing value = MEI x ∆ Marketing Investments Presentation1 12 .
Marketing Performance Competitive Perspective .
– Draft – Customer equity: What does it mean? Value creation model Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Services Purchase Process & Experience Communication Awareness Perception & Reputation Preference Acquisition Engine Retention Commitment Market Share Business Paradigms Customer Value Positioning Relationship Building Channel Management Scope Price Positioning Recommendation CLV ROC Deep Channel & Customer Insights Tangible Action Plans Presentation1 14 Business Results Segmentation & Targeting Intention Behaviour .
– Draft – Customer equity is a logical gradation of perceptions and behaviors How customers feel How customers behave Market Share Aided Awareness Recommend Buy Preference Spontaneous Awareness Consideration Top of Mind Buy More Buy Again Presentation1 .
– Draft – Marketing Value: What does it mean? Value creation model Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Services Purchase Process & Experience Communication Awareness Perception & Reputation Preference Acquisition Engine Retention Commitment Market Share Business Paradigms Customer Value Positioning Relationship Building Channel Management Scope Price Positioning Recommendation CLV ROC Deep Channel & Customer Insights Tangible Action Plans Presentation1 16 Business Results Segmentation & Targeting Intention Behaviour .
Brands Volume (units sold) 100 50 50 120 50 370 Price Price premium ($) 4 0 3 2 1 Marketing value 400 0 150 240 50 840 A B C D E Total 9 5 8 7 6 Presentation1 17 .– Draft – MEI formula: example for a brand with a price premium The table has been built by using the second definition of the price premium.
– Draft – MEI formula: example for a brand with a price discount The third definition of the price premium gives other figures: Brands Volume (units sold) 100 50 50 120 50 370 Price Price premium ($) 1.4 1.6 1.8 1 1.2 Marketing value 180 50 80 168 60 538 A B C D E Total 9 5 8 7 6 Presentation1 18 .
– Draft – Let’s consider Brand A for further investigation Brands Volume (units sold) 100 50 50 120 50 370 Price ($) Price premium ($) 4 0 3 2 1 Marketing value 400 0 150 240 50 840 A B C D E Total 9 5 8 7 6 Presentation1 19 .
– Draft – Let’s consider Brand A for further investigation Brands Volume (units sold) 100 (25%) 50 50 120 50 370 Price ($) Price premium ($) 4 0 3 2 1 Marketing value 400 (48%) 0 150 240 50 840 A B C D E Total 9 5 8 7 6 Presentation1 20 .
a good structure is needed in order to make successful analyses.– Draft – MEI formula: usage (1) Imagine that brand A considers to increase its marketing investments and desires to maintain its current MEI level: •Marketing Investments ($): Last year = 1000 This year = 1200 •MEI (%): Last year = 400/1000 = 40% = current objective We know that: MEI = ∆ Marketing value / ∆ Marketing Investments means ∆ Marketing value = MEI x ∆ Marketing Investments As a result. Presentation1 21 .4 x 200 = 80. TARGET MEI THIS YEAR = 480. This calculation seems to be easy but many more factors have to be taken into account. ∆ Marketing value = 0. Hence.
Hence.– Draft – MEI formula: usage (2) Imagine that brand A considers to decrease its marketing investments and desires to maintain its current MEI level: •Marketing Investments ($): Last year = 1000 This year = 800 •MEI (%): Last year = 400/1000 = 40% = current objective We know that: MEI = ∆ Marketing value / ∆ Marketing Investments means ∆ Marketing value = MEI x ∆ Marketing Investments As a result.4 x (-200) = -80. NEW TARGET = 320. a good structure is needed in order to make successful analyses. ∆ Marketing value = 0. Presentation1 22 . This calculation seems to be easy but many more factors have to be taken into account.
– Draft – MEI formula: usage (4) Imagine that brand A considers to decrease its marketing investments and desires to maintain its current MARKET POSITION. it will need to INCREASE the MEI TARGET: •Marketing Investments ($): Last year = 1000 This year = 800 •MEI (%): Last year = 400/800 = 50% = current objective MEI last year = 40%. new target for this year = 50% What are the leverages to improve the MEI? (see marketing drivers) Presentation1 23 .
Presentation1 24 .– Draft – Application of MEI formula for a low cost company Fictitious data for a flight Brussels-Barcelona Volume (seats) Price Price premium (*) x 100 230 Marketing value (€) British Airways KLM Ryan Air Total 50 69 11500 30 60 (MS=43%) 90 30 300 100 9000 6000 (share in MV =23%) 140 26500 The analysis of Marketing Value year on year and the evolution of the difference between Volume and Marketing Value in terms of percentage of the total gives insights but it stays very limited… MEI calculation is much more useful to make comparisons with other actors of the market (*): The third definition of the price premium has been used.
– Draft – Application of MEI formula for a low cost company Fictitious data for a flight Brussels-Barcelona Volume (seats) British Airways KLM Ryan Air Total 50 Price premium (*) x 100 230 Marketing value (€) 11500 MEI (%) 20 (hypothesis) 30 60 140 (43%) 300 100 9000 6000 26500 (23%) 25 ? As Ryan Air is a low cost company. (6000 : 25%) (*): The third definition of the price premium has been used. Ryan Air should at least have 20% as MEI. Presentation1 25 . It means that its investments should amount to a maximum of 30 000 euros (6000 : 20%) -If Ryan Air will become more efficient than the two other players in marketing. its marketing costs must by definition be lower than traditional airways companies. marketing investments should be less than 24 000 euros. By how much? -In order to be competitive.
the focus should be put on the amount of investments made in Marketing. Presentation1 26 . (*): The third definition of the price premium has been used.– Draft – Application of MEI formula for a low cost company Fictitious data for a flight Brussels-Barcelona MEI calculation should be done year on year in order to: -Analyze the evolution of MEI for the other actors of the market: • By how much does it change? • What are the drivers of the changes in MEI: Marketing Value (Price premium or Volume?) or the amount of Marketing Investments? -Understand your own MEI evolution: • Is it improving or not? • What are the drivers of the changes in MEI: Marketing Value (Price premium or Volume?) or the amount of Marketing Investments? For a low cost company.
Presentation1 27 .– Draft – Analysis year on year Illustration Brands Volume (units sold) Price ($) Price premium ($) Marketing value Investments MEI (%) A 100 135 117 9 9 10 8 7 7 6 6 6 4 4 5 3 2 2 1 1 1 400 540 585 150 134 110 50 56 63 1000 1200 1245 600 582 550 250 224 210 40 45 47 25 23 20 20 25 30 C 50 67 55 E 50 56 63 Note: The table has been built by using the second definition of the price premium. The lowest price of the market is 5 $ for the three years.
– Draft – Visualization Analysis year on year 1400 50 45 1200 40 1000 35 30 25 600 MEI (A) 20 MEI (C) 400 15 MEI (E) 10 200 5 0 Year 1 Year 2 Year 3 0 Investments (A) Investments (C) Investments (E) 800 Presentation1 28 .
– Draft – Depending on your situation in the model. the commercial actions will be different Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Price Positioning Drive sales conversion Consolidate/ improve Boost Brand Building Drive customer equity High Low Marketing Value 29 Presentation1 .
– Draft – Illustrative An example: The communication driver will be different within each quadrant Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Price Positioning •ATL / PR << BTL / Trade communication •Media close to the shops to drive trade relationships •Focus on product specific values •ATL / PR >> BTL / Trade communication •SOV >>>> market share •Sponsoring should be part of media mix •Focus on brand values Low Marketing value 30 High Presentation1 .
– Draft – Illustrative An example: The channel management driver will be different within each quadrant Brand Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Price Positioning • Identify route causes for “not being pushed harder by the trade” • Coverage issue? • Quality issue? • Brand image issue? • Margin issue? • Focus on relevant & differentiating relationship drivers • Drive partnerships capabilities • Train & educate trade to support the brand image • Focus trade incentives on ‘providing the right brand stories to the consumers’ • Select channels with positive impact on brand image • Build brand equity without losing existing channel support Low Marketing value 31 High Presentation1 .
– Draft – Drilling down is key Example: identifying optimal communication efforts High Customer Equity Missed Opportunities Market Share Aided Awareness Preference M ing et k ar v lue a u pt ca ing r t im Op al Spontaneous Awareness Consideration Top of Mind Low air F Low Vulnerable position High Marketing Value 32 32 Presentation1 .
142 (1) A value between 0.117 5 0.500 30 0.500 20 4.555 D 96 75 0.885 10 0.781 15 0.927 20 0.900 10 0.750 40 1.8 and 1.816 (1) 40 0.200 14 0.000 C 97 90 0.933 30 2.222 18 0.333 B 96 85 0.– Draft – Understanding where to put the money Concept – let’s discuss Aided Awareness Spontaneous Awareness Top of Mind Preference Market Share A 98 80 0.2 is considered as appropriate Presentation1 33 .
– Draft – Drilling down Pricing High Customer Equity Missed Opportunities Recommend M et k ar ing v lue a ing Buyr u pt ca t im Op al Buy More Buy Again Low air F Low Vulnerable position Marketing Value 34 34 High Presentation1 .
– Draft – Analysis of price positioning >1 (high value) Price increase potential (Price Check-up) Consolidate price structure Huge potential <1 Price increase potential (Mix check-up) Low Pricing Evolution (Market = cut off) High Pricing Opportunity Framework : Own brand price evolution vs. total market & main competitors *: Brand Index= Market share in value divided by Market share in volume Presentation1 35 .
but act Model level High Price Elasticity* Pricing Opportunity Framework: In search for the balance between opportunity and risk *: Price Elasticity= Change in Price divided by Change in Market Share Presentation1 36 .– Draft – Analysis of price positioning Potential (low risk) Category level Dangerous (no pricing opportunity) Huge potential (low risk) Category level Low Careful.
feelings and perceptions in the mind of the customer from awareness to preference and conviction. It is tangible.– Draft – Hard and soft measures: definitions BEHAVIOUR Loyalty Hard measures Purchase Hard KPI’s are related to sales actions from trial offers to customer retention. It is intangible MINDSET Presentation1 37 . Trial Preference/Conviction Soft measures Consideration/Liking Knowledge Awareness Soft KPI’s are related to ideas.
– Draft – Soft measures are related to Customer equity Here some examples Awareness & Knowledge • • • • • • Brand Awareness (Do you know?) Unaided Brand Awareness Slogan Recall Campaign Penetration Ad Awareness Awareness of Other Marketing Tools Spontaneous Awareness Top of Mind Beliefs (What do you think of?) Knowledge (What do you know?) • • • Consideration/Liking Brand consideration Brand relevance Brand credibility • • • Preference/Conviction Purchase Intentions Brand Equity Metrics Willingness to recommend • Likeability (usually on a qualitative rating scale) • Q Score (familiarity and appeal) • Revenue generation capabilities of brand • Customer satisfaction • • • • Presentation1 38 .
etc • Product-Market level measurement Related to the results of the product on the market (price premium) •Financial measurement Looking at the financial value of the brand if it would be sold on the market. Preference. Universiteit Hasselt.– Draft – How to measure brand equity? Brand equity is included in the main components of customer equity There are three main methods: • Customer Mindset measurement Trying to determine Awareness. 2008 Presentation1 39 . Q score. België. Source: Tim Jans. Loyalty. Likeability. De meting van Brand Equity.
Perceived quality (10%) .– Draft – How to measure brand equity? Example mobile phones Brand Equity Index (score out of 100) could be divided into five main components equally weighted in the total: •Loyalty (20%): .Price Premium (10%) .Organization (5%) . De meting van Brand Equity.Personality (5%) . Universiteit Hasselt. België. 2008 Presentation1 40 .Perceived value (5%) .Leadership (10%) •Differentiation (20%): .Satisfaction (10%) •Perceived quality/ Leadership (20%): .Differentiation (5%) •Brand Awareness (20%) •Market Value (20%) Source: Tim Jans.
Reichheld.35%) 35% F.– Draft – Net promoter score 46% Net promotor score = 11 (46% . Bain & Company: The best way to measure loyalty is just to ask people one simple question: “Would you recommend us to a friend?” One single measure will not be sufficient to measure loyalty ☺ Simple metric to follow-up on evolution in time Presentation1 41 .
com/pdf/whitepaper-NPScore.pdf Presentation1 42 . NPS Response Bias: Research in other industries has shown that the most satisfied customers (including patients and clients) are the ones most likely to respond to surveys. Besides. They don't have time to quibble about theory and minutia. leading to artificial inflation of satisfaction ratings. the search for meaningful minimalism is to be applauded.customersatisfactionstrategy. when the actual answer might be somewhat grey or open-ended. NPS: The Bad The question (Would you refer a friend?) is irrelevant in many situations and industries. and these types of questions have various benefits and disadvantages: They are easier for measurement purposes but force a binary choice on the respondent.– Draft – Zoom on qualitative measurement: net promoter score NPS: The Good Clients want simplicity and they want action. - Source: http://www. When it is all too common for companies to overload on numbers and facts. it doesn’t get at root causes and there are serious concerns about its biased wording. NPS Question Bias: The NPS question presupposes a positive response NPS Question Validity: The Net Promoter question is by nature close-ended.
Detractor. The methodology is pretty straightforward: ask people if they’d recommend your firm. and outcomes of satisfaction on the right side (customer complaints and customer loyalty. or neither.– Draft – Net Promoter Score versus Customer satisfaction Index Pro’s and Con’s On one side of the ring is the tag team of Fred Reicheld. Based on their response. Let’s start by handing out some awards to the teams: . and perceived value).com/ Presentation1 43 . ”father” of the American Customer Satisfaction Index (ACSI) and ForeSee Results. they get categorized as a Promoter. implementer.Easiest to use: Net Promoter (many studies show that CEO’s believe it) . including customer retention and price tolerance).Sexiest: Net Promoter Net Promoter has gained a lot of momentum over the last few years as many large companies have adopted it.Best marketed: Net Promoter (Reicheld is very good at sharing his concept — and in writing compelling books about it) . perceived quality. On the other side of the ring in the red trunks.wordpress. satisfaction (ACSI) in the center. You take the percentage of Promoters and subtract the percentage of Detractors and that leaves you with a Net Promoter percentage. implementer of NPS-based survey systems. ”father” of the Net Promoter System (NPS) concept and Satmetrix Systems. The American Customer Satisfaction Index uses customer interviews as input to a multiequation econometric model. Source: http://experiencematters. The ACSI model is a cause-and-effect model with indices for drivers of satisfaction on the left side (customer expectations. we find Claes Fornell.Most quantitative: Satisfaction .Most mature: Satisfaction (The ACSI has been tracking data since about 1994 and satisfaction has been around as long as I can remember) .
Net Promoter is not the “ultimate” measure for a customer relationship. But companies are better off when they have more satisfied than dissatisfied customers and more Promoters than Detractors. So.wordpress. the perception that the firm does what’s best for customers. Main recommendations: .– Draft – Net Promoter Score versus Customer satisfaction Index Pro’s and Con’s Using industries Reicheld cites as exemplars of Net Promoter. Just make sure that you do something and are prepared to learn and evolve over time. neither is satisfaction. in the purple trunks is Customer Advocacy. Then again.Evolve your metrics over time . not just what’s best for its own bottom line.Don’t expect any single measure to be eutopia . the research fails to replicate his assertions regarding the “clear superiority” of Net Promoter compared with other measures in those industries.Focus on one measure to build alignment .com/ Presentation1 44 . We strongly recommend that financial services and healthcare firms take a very close look at this measure. The bottom line: Don’t get too caught up in determining the winner of this battle.Look at other metrics such as Customer Advocacy. Source: http://experiencematters.
– Draft – Hard measures are related to Marketing Value Here some examples as well Trial • • • • • • Trial Prospect Lifetime Value Average Acquisition cost Average new appointments generated per sales rep New Account cycle time Number of leads to be generated to achieve revenue goal • • • • • • • • • • • • • • • • • • • • Purchase Number of Customers Recency Customer profit Customer Lifetime Value Purchase Habits Unit Margin/Margin (%) Contribution per unit Contribution Margin (%) Break-Even Sales Level Target Volume/ Target Revenues Net profit Return on Sales Return on Investment Payback Net Present Value Internal Rate of Return Market Share Brand Development Index Penetration Share Share of Requirements • • • • • • • • • • • Re-purchase/Loyalty Retention rate Average retention cost Loyalty Repeat volume Year-on-Year Growth Compound Annual Growth Rate Opportunity success rate % of sales lost % of returning customers Involuntary customer churn Voluntary customer churn Presentation1 45 .
Logo client Marketing Performance Financial Perspective .
– Draft – Agenda 2. Measurement tools: from basics to predictive Pareto RFM Analysis Marketing ROI at campaign level Customer Lifetime Value Marketing ROI on CLTV Return on Customers Presentation1 .
RFM. ROA.As a delta (%): e. CLTV.– Draft – Nominal value and relative performance High-level view on 2 different groups of metrics There are two main types of measurements regarding return on investments (ROI): .: ROI.g.g. ROC. Payback period. Customer Lifetime Value. etc .As an absolute value (€ or time): e. etc The focus will be put on RFM Analysis. Marketing ROI.: NPV. Marketing Return on Investments and Return on Customers Presentation1 48 .
– Draft – Who are the customers with the highest value? Revenue 1400 1200 1000 800 Revenue 600 400 200 0 1 9 17 25 33 41 49 57 65 73 81 89 97 Presentation1 49 .
– Draft – Who are the customers with the highest value? Cumulative 120% 100% 80% 60% 40% 20% 0% 1 8 15 22 29 36 43 50 57 64 71 78 85 92 99 Cumulative Same exercise can should be done with profit Presentation1 50 .
http://www.techtarget.2.com/sDefinition/0. customers are assigned a ranking number of 1. or 5 (with 5 being highest) for each RFM parameter -The three scores together are referred to as an RFM "cell" .– Draft – RFM: What does it mean? RFM is a method to determine the value of a customer or group of customers where: R = Recency the time since the last purchase was made F = Frequency the number of purchases made during a time period M = Monetary Value the dollar value of the purchases made -Categories for each variable have to be defined by applying business rules or using data mining techniques -Once it is done.00.4.sid91_gci751219.3. The database is sorted to determine which customers were "the best customers" in the past. with a cell ranking of "555" being ideal.html Presentation1 51 ..answers.com/topic/recency-frequency-monetary-value http://searchdatamanagement.
example major retailer in B # Art / Visite Dépenses / Trim Silver Golden Fréquence 25+ OneShot StockPiler Commuter Nugget 1-24 # Art / Visite Focused Hopper € / Trim 1-2 3-6 7-15 16+ Visits / Trim Presentation1 52 .– Draft – Variance on RFM .
according to their value and their behavior priorité Bons Max Fréquence Total Bons/V visite/trim Bons/trim isite Reward Diriger Reward/B Diriger/bons strat % strat % ons/trim /trim récompenser GOLDEN récompenser SILVER orienter COMMUTER fréquence HOPPER orienter STOCKPILER fréquence ONESHOT orienter FOCUSED orienter NUGGET 2.– Draft – Managing clients differently.5 3 3 4 3 4 3 1 31 11 10 5 5 2 2 20 78 33 31 20 15 8 7 20 75% 75% 25% 25% 25% 75% 25% 0% 25% 25% 75% 75% 75% 25% 75% 100% 58 25 8 5 4 6 2 0 20 8 23 15 11 2 5 20 Presentation1 53 .
com/articles/Art149.answers.org/wiki/RFM Presentation1 54 .– Draft – RFM: limitations The focus is only put on profitable existing customers.wikipedia.dbmarketing.com/topic/recency-frequency-monetary-value http://www. The method is backward oriented and: •assumes that customers are likely to continue behaving in the same manner •is too much descriptive so no forecasts related to consumers’ behaviors are possible There is no reference to the acquisition and to the retention of existing customers… http://www. it leads to two risks: •over-marketing to the most attractive RFM segments •negligence of other segments that would be profitable if developed properly.htm http://en.
– Draft – Marketing ROI at campaign level Basic formula ( (Acquisition (#) – Churn (#)) * Margin (€) ) .Investment ROI = Investment (€) Presentation1 55 .
5 € (NPV of future cash profit) ROI = ? Presentation1 56 . Total program costs: 5.– Draft – Direct Marketing • • • • • Number of pieces you are mailing or e-mailing: 100.000 ex.000€ Response Rate: % of responses expected: 5% Purchase Rate: % of responses expected to make purchases: 3% Average profit per sale: 2.
5% -1 = = Presentation1 57 . Total program costs: 5.000 x (5%) x (3%) x 2.– Draft – Direct Marketing • • • • • Number of pieces you are mailing or e-mailing: 100.92.000€ Response Rate: % of responses expected: 5% Purchase Rate: % of responses expected to make purchases: 3% Average profit per sale: 2.1 .000 .5 ROI = 5.000 ex.000 375 / 5.5 € (NPV of future cash profit) 100.
6% to 1.– Draft – ROI as a decision making tool Direct marketing Campaign A • Number of contacts targeted: 500.0% • Marketing investments 290.000 • Response rate: % of responses expected: 1.6% Would you go for the additional incentive (campaign B)? Presentation1 58 .000€ • Incremental customer value per sale: 75€ Campaign B •Campaign A •+ additional 25€ incentive (additional discount voucher for customers who buy) will increase response with 0.
000€ 3€ 225.3% Direct mail + 25€ offer 500.0% 5.000€ 58€ 75€ 375.000€ 6.000 490.9% Presentation1 59 .000€ 29.4% Difference 3.000 200.000 1.000 1.– Draft – ROI as a decision making tool Direct Marketing Direct mail • Number targeted • Sales conversion rate • Number of sales • Marketing investment • Cost per sale • Incremental customer value (ICV) per sale • Net profit • Net ROI 500.6% 8.000€ 61€ 75€ 600.000€ 22.000 290.
Presentation1 60 .– Draft – CLTV is nothing else than the NPV of all the profits from a customer during its lifetime.
Presentation1 61 . Then they are summed.– Draft – Customer Lifetime Value: What does it mean? CLTV takes three factors into account: Get Keep Increase Acquisition (#) Loyalty (time) Customer Value (€) Hence. Therefore NPV is the sum of all terms . CLTV = Revenues – Cost of Acquisition – Cost of Retention – Cost-to-Serve Each cash inflow/outflow is discounted back to its present value (PV).
but • The minimum rate should never be lower than the WACC (Weighted Average Cost of Capital.– Draft – Choosing the discount rate for NPV Different perspectives are possible. taking into account the different financing sources) • The capital needed for the project should return as much as if invested in an alternative initiative • The rate should be much higher if the initiative is a risky one Presentation1 62 .
What about investments. fixed structure costs… Marginal contribution per customer: • Gross margin per customer: what is left when all variable costs have been deduced from revenue? • Which means: what does the company lose in value that it cannot save in costs when the customer has left Free cash flows • Here meant as Net Income – Capital Expenditure (direct costs) • Still 2 options: fully allocated or marginal In practice: marginal free cash flow is the most pragmatic one – no capital and depreciations reconciliation. no discussions on indirect costs Presentation1 63 . • Pre-requisite: costs can be allocated per customer or per customer group.– Draft – Choosing the calculation methodology: 3 option Fully allocated profit: • Profit is calculated per customer or per customer group.
– Draft – Example Revenue Service costs COGS GROSS MARGIN Campaign (Acquisition) COS NET MARGIN Overhead costs Depreciation EBIT Financial costs EBT Tax NET PROFIT 700000 10000 25000 665000 250000 100000 315000 15000 300000 100000 200000 ? ? ? ? 100 150 3750 3500 Presentation1 64 Fully Allocated Profit Marginal Contribution Free Cash Flow P&L 1000000 50000 250000 Customer x 5000 250 1000 .
– Draft – What is the value of my customers? Example (1) Y1: turnover/customer Y2: turnover/ customer Annual cost/year 35 000 45 000 30 000 Year # of clients 1000 600 390 273 205 160 126 101 81 65 Retention rate 60% 65% 70% 75% 78% 79% 80% 80% 80% 80% Total revenue (millions) 35 000 000 27 000 000 17 550 000 12 285 000 9 213 750 7 186 725 5 677 513 4 542 010 3 633 608 2 906 887 Variable costs 30 000 000 18 000 000 11 700 000 8 190 000 6 142 500 4 791 150 3 785 009 3 028 007 2 422 405 1 937 924 Gross margin 5 000 000 9 000 000 5 850 000 4 095 000 3 071 250 2 395 575 1 892 504 1 514 003 1 211 203 968 962 34 998 498 NPV at 5% 1 2 3 4 5 6 7 8 9 10 Total 5 000 000 8 571 429 5 306 122 3 537 415 2 526 725 1 876 996 1412 216 1 075 974 819 790 624 602 30 751 268 CLTV/ customer 30 751 Presentation1 65 .
– Draft – What is the value of my customers? Example (1) Y1: turnover/customer Y2: turnover/ customer Annual cost/year 35 000 45 000 30 000 Retention rate increased by 10% (1000 new customers acquired) Year # of clients 1000 700 525 420 349 307 273 246 221 199 Retention rate 70% 75% 80% 83% 88% 89% 90% 90% 90% 90% Total revenue (millions) 35 000 000 31 500 000 23 625 000 18 900 000 15 687 000 13 804 560 12 268 058 11 057 453 9 951 707 8 956 537 Variable costs 30 000 000 21 000 000 15 750 000 12 600 000 10 458 000 9 203 040 8 190 706 7 371 635 6 634 472 5 971 024 Gross margin 5 000 000 10 500 000 7 875 000 6 300 000 5 229 000 4 601 520 4 095 353 3 685 818 3 317 236 2 985 512 53 589 438 NPV at 5% 1 2 3 4 5 6 7 8 9 10 Total 5 000 000 10 000 000 7 142 857 5 442 177 4 301 911 3 605 411 3 056 015 2 619 442 2 245 236 1 924 488 45 337 537 CLTV/ customer Presentation1 45 338 66 .
– Draft – What is the value of my customers? Example (1) Y1: turnover/customer Y2: turnover/ customer Annual cost/year 35 000 50 000 30 000 Cross-selling (turnover increased by 10%) Year # of clients 1000 600 390 273 205 160 126 101 81 65 Retention rate 60% 65% 70% 75% 78% 79% 80% 80% 80% 80% Total revenue (millions) 35 000 000 30 000 000 19 500 000 13 650 000 10 237 500 7 985 250 6 308 348 5 046 678 4 037 342 3 229 874 Variable costs 30 000 000 18 000 000 11 700 000 8 190 000 6 142 500 4 791 150 3 785 009 3 028 007 2 422 405 1 937 924 Gross margin 5 000 000 12 000 000 7 800 000 5 460 000 4 095 000 3 194 100 2 523 339 2 018 671 1 614 937 1 291 950 44 997 997 NPV at 5% 1 2 3 4 5 6 7 8 9 10 Total 5 000 000 11 428 571 7 074 830 4 716 553 3 368 967 2 502 661 1882 954 1 434 632 1 093 053 832 802 39 335 024 CLTV/ customer 39 335 Presentation1 67 .
– Draft – What is the value of my customers? Example (1) Y1: turnover/customer Y2: turnover/ customer Annual cost/year 35 000 50 000 30 000 Revenue and Loyalty (retention and turnover increased by 10%) Year # of clients 1000 700 525 420 349 307 273 246 221 199 Retention rate 70% 75% 80% 85% 88% 89% 90% 90% 90% 90% Total revenue (millions) 35 000 000 35 000 000 26 250 000 21 000 000 17 430 000 15 388 400 13 651 176 12 286 058 11 057 453 9 951 707 Variable costs 30 000 000 21 000 000 15 750 000 12 600 000 10 458 000 9 203 040 8 190 706 7 371 635 6 634 472 5 971 024 Gross margin 5 000 000 14 000 000 10 500 000 8 400 000 6 972 000 6 135 360 5 460 470 4 914 423 4 422 981 3 980 683 69 785 918 NPV at 5% 1 2 3 4 5 6 7 8 9 10 Total 5 000 000 13 333 333 9 523 810 7 256 236 5 735 882 4 807 215 4 074 687 3 492 589 2 993 648 2 565 984 58 783 383 CLTV/ customer Presentation1 58 783 68 .
g. a year) .(r/1+i-r) = margin multiple Source: Sunil Gupta and Donald R.i = discount rate (decimal or percentage) .m = margin or profit from a customer per period (e.r = retention rate (decimal or percentage) . Lehmann. Wharton School Publishing. University of Pennsylvania.– Draft – “A simpler approach”: the margin multiple CLTV = m ( r ) 1+i-r . Managing customers as investments. 2005 Presentation1 69 .
Lehmann.r = retention rate 80% .m = margin or profit from a customer per period (e.i = discount rate 10% Source: Sunil Gupta and Donald R.– Draft – The margin multiple: example m ( 0. 2005 Presentation1 70 .8 ) = 2. University of Pennsylvania.67 1+0. Wharton School Publishing.1-0. a year) .8 .g. Managing customers as investments.
Managing customers as investments. 2005 Presentation1 71 .– Draft – “A simpler approach” Assumptions: • Margins remain constant over time • Customer retention rate is also constant • CLTV is estimated over an infinite time horizon (even at 80% retention.) Source: Sunil Gupta and Donald R. Wharton School Publishing. Lehmann. University of Pennsylvania. a customer is almost 90% ‘used up’ after just ten years.
Managing customers as investments.52 2. Wharton School Publishing.15 1.20 1.11 1.07 1. University of Pennsylvania.5!” Source: Sunil Gupta and Donald R.35 4.– Draft – “The margin multiple” Retention rate 60% 70% 80% 90% 10% 1.59 2.50 2.67 4.46 “For most companies.67 1. the multiple is in the range of 1 to 4. 2005 Presentation1 72 .22 3.75 2. Lehmann.75 16% 1.50 Discount rate 12% 14% 1.09 3.
38% 55.00 € Discount rate 12% 14% 1.50 2. 2005 .77% Source: Sunil Gupta and Donald R.52 2.09 3. University of Pennsylvania.75 2.35 4.– Draft – Customer Lifetime Value Retention rate 60% 70% 80% 90% Annual margin Retention rate 60% 70% 80% 90% 10% 120 € 175 € 267 € 450 € 10% 1.46 Discount rate 12% 14% 115 € 111 € 167 € 159 € 250 € 235 € 409 € 375 € 44.50 100.64% 73 16% 107 € 152 € 222 € 346 € 68.15 1.11 1.59 2.75 16% 1.44% 50.20 1. Managing customers as investments. Lehmann.00% 63.67 4.75% Presentation1 59.07 1.67 1. Wharton School Publishing.22 3.
+ # new cust.Investment Marketing ROI = Investment CLTV CLTV Corporate SME Get Increase 2 marketing initiatives • SME retention & upsell program • Corporate acquisition program Keep Legend Situation t0 Presentation1 # customers Launch t1 No Launch t1 74 .) x ∆ CLTV .– Draft – More sophisticated financial ROI calculation Keep Get Increase Σ ∆ (# retained cust. .# lost cust.
immense difference in CLTV per segment • Don’t use ROI as the only criteria . Check competitive action .) x ∆ CLTV .Use data mining tools to detect correlations • Estimating the long term financial impact of Brand Value . the execution is not Keep Get Increase Σ ∆ (# retained cust.Use historical data to estimate long term effect of Brand Value . + # new cust.Make simple hypothesis & adjust 75 Presentation1 .Think in delta and make impact measurable • Look at impact per segment .Think in control & test group when setting up the measurement.Investment Marketing ROI = Investment Tips • Think incremental .Prioritize marketing activities in line with strategy Key Challenges • Isolating Cause & effect . Financial ROI calculation The formula is easy.– Draft – 3. .# lost cust.
Logo client Customer loyalty and ROMI .
Marnix Bügel. renews his contract with his service provider… is seen in many companies as a loyal customer Behavioral loyalty HOWEVER this does not mean these customers are truly loyal !! They might leave once situation changes! Attitudinal loyalty THEREFORE loyalty is to be defined as: Commitment to continue using a product or service. definition Olivier 1997 Presentation1 77 . despite situational influences and marketing efforts of competitors which make it more attractive to switch providers Source: Klantenloyaliteit.– Draft – To define customer loyalty a distinction is to be made between loyal behavior and a loyal attitude A customer who stays. is doing repeat purchases in the same retail store.
telco.and discount programs implemented in various industries (retail.– Draft – Focus on customer loyalty management has evolved over the past decades 1970s -Managing customer satisfaction as a driver for loyalty -Measurement of defection rates and root causes -Launch of frequent flyer miles-programs 1980s 1990s -Churn prediction modeling -Concept of points. Marketing NPV 2005. Measurement and Analysis for Marketing 2004. with varying results -Partnerships & coalition programs -Increasing number of programs threatens relevance of traditional loyalty programs -Shift from ‘points’ scheme to ‘club’ programs with no rewards other than special recognition and individual communication >2000 Source: Journal of Targeting. FMCG…). Mc Kinsey Quarterly 2002 Presentation1 .
and shares my ideals” “ Transactional. emotional loyalty Inertial. emotive loyalty Marketing NPV Mc Kinsey Quarterly Presentation1 . features. understands me.– Draft – But what is customer loyalty? There are multiple definitions in marketing literature “Real loyalty happens when you have captured both customers’ heads and their hearts: F. Reichheld. deliberative. Bain & Company The head wants to know that you offer outstanding value. contractual. pricing The heart wants to feel things like “this company knows me. cares about me. functional.
Reichheld) loyaltists • For an average of 75% satisfied customers. a company will typically have 30% loyal customers • HABITUAL USERS will switch as soon as competition offers interesting promo defectors Dissatisfied Merely satisfied Delighted Level of customer satisfaction • INERT RESIDENTS may switch if competition’s offer is worth the effort.– Draft – Satisfaction does not necessarily grow loyalty There is a correlation between satisfaction and loyalty Impact on loyalty But satisfaction is an insufficient solo condition to loyalty • “65%-85% of customers who defect say they were satisfied with their supplier” (F. Marketing Leadership Council 2004 Presentation1 80 . or giving better return than switching cost Source: Ipsos Loyalty.
.Through value lies not only in a focus on the key purchasing criteria. – Draft – Blue ocean strategy: Which of the factors that the industry takes for granted should be eliminated? • Which factors should be reduced well below the industry’s standard? • Which factors should be raised well above the industry’s standard? • Which factors should be created that the industry has never offered? • Where do you want to excel in? Source: W. Instigate Group . but also in divestments of “over-delivered” criteria.Strategy training Presentation1 . Chan Kim ..Blue Ocean Strategy.
social or functional risk of switching DELIBERATIVE CONFIRMERS Loyal by consciously reconfirming their brand choice upon purchase HABITUAL USERS Loyal by making an un-deliberate same choice out of habit CONVINCED LOYALISTS Loyal by identifying with the brand Two directions Involvement High Increased loyal behavior INERT RESIDENTS Loyal because they are locked in or switching is “not worth the effort” High Low Increased loyal attitude and behavior Low Switching barriers = perceived effort.– Draft – Loyal behavior is driven by two dimensions: switching barriers & level of involvement. involvement is important for driving loyal attitude = Perceived emotional. time to switch / frequency of transactions Source: ThoM analysis of McKinsey Quarterly 2002 & Marketing NPV 2005 Presentation1 82 . cost.
– Draft – Level of involvement & switching barriers vary per sector and product DELIBERATIVE CONFIRMERS CONVINCED LOYALISTS = Perceived emotional. time to switch / frequency of transactions Source: ThoM analysis of McKinsey Quarterly 2002 & Marketing NPV 2005 Presentation1 83 . social or functional risk of switching High Involvement HABITUAL USERS INERT RESIDENTS Low Low High Switching barriers = perceived effort. cost.
– Draft – Loyalty drivers are different for each individual. Marnix Bügel Presentation1 84 . and experiences need to match expectations Each individual will have specific motivations and drivers influencing attitudinal loyalty Trust + Loyalty drivers Expectations Satisfaction + Loyalty Quality of competitive alternatives Investment in relation Experiences + Source: Klantenloyaliteit.
e.g. via member gets member actions Source: Klantenloyaliteit.– Draft – Loyalty increases the lifetime value of a company’s customer base Lifetime Retention effect Lifetime Value Profitability Loyal customers are more open to up. Marnix Bügel Presentation1 85 .and cross-selling Number of customers Loyal customers tend to refer more.
– Draft – Loyalty increases the lifetime value of a company’s customer base Financial benefits of customer loyalty Annual customer profit Legend: Acquisition Base profit Revenue growth Cost savings Referrals Price premiums • • • • Loyal customers are more susceptible to up and cross-selling Cost saving by retaining customers rather than acquiring them Happy loyal customers are likely to be brand ambassadors Customer loyalty can be associated with lower price elasticity Source: Marketing NPV 2005 Presentation1 86 .
– Draft – Loyalty as a growth strategy also impacts the value capturing model Sales Conversion Consolidate Protect Two directions Positive correlation: customer equity drives loyal attitude Prioritize Low Drive Brand Equity Marketing Value High Increased loyal behavior impacts captured marketing value Presentation1 87 .
– Draft – Main loyalty instruments are brand positioning and marketing drivers Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Services Purchase Process & Experience Communication Awareness Perception & Reputation Preference Acquisition Engine Retention Commitment Market Share Business Paradigms Customer Value Positioning Relationship Building Channel Management Scope Price Positioning Recommendation CLTV ROC Deep Channel & Customer Insights Tangible Action Plans Presentation1 88 Business Results Segmentation & Targeting Intention Behaviour .
– Draft – Loyalty instruments: brand positioning Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Scope Price Positioning ROC Value Capturing Customer Equity Intenti on Awareness Behavi our Acquisition Engine Marketing Value Positioning Business Results Business Objectives Segmentation & Targeting Price Premium Market Share Business Paradigms Perception & Retention Reputation Commitment RecommenPreference dation Positioning on benefits and target groups impacts • Expectations > trust • Affinity with brand Positioning Customer Value CLTV Deep Channel & Customer Insights Tangible Action Plans Presentation1 89 .
– Draft – Loyalty instruments: quality of product. and service as experienced by customers Product Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Scope Price Positioning ROC Value Capturing Perceived quality of product impacts • Trust • Satisfaction Customer Equity Intenti on Awareness Behavi our Acquisition Engine Marketing Value Business Objectives Market Share Business Paradigms Perception & Retention Reputation Commitment RecommenPreference dation Positioning Customer Value CLTV Business Results Segmentation & Targeting Price Premium Service Customer experience during interactions with company impacts • Trust • Satisfaction Deep Channel & Customer Insights Tangible Action Plans Presentation1 90 .
– Draft – Loyalty instruments: loyalty actions versus loyalty programs Loyalty actions Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Scope Price Positioning ROC Value Capturing Customer Equity Intenti on Awareness Behavi our Acquisition Engine Marketing Value Ad hoc marketing actions with as purpose to improve loyalty (repurchase rate. visit frequency. contract prolongation…) Business Results Business Objectives Segmentation & Targeting Price Premium Market Share Business Paradigms Perception & Retention Reputation Commitment RecommenPreference dation Positioning Customer Value CLTV Loyalty programs Are a set of activities that are communicated to customers in advance. with pre-defined rules Deep Channel & Customer Insights Tangible Action Plans Presentation1 91 .
retaining customers Through fixing the basics.and retention management have a different objective… Loyalty management Long term Aims at retaining customers and increasing customer value Through building sustainable relationships Focuses on increasing Involvement KEEP GET Retention management Short-Medium term Aims at reducing and preventing churn. and lock-in systems GROW Involvement DELIBERATIVE CONFIRMERS CONVINCED LOYALISTS High Low HABITUAL USERS INERT RESIDENTS Primary dynamic is increasing switching barriers. secondary increasing involvement Low High Switching barriers Source: ThoM analysis Presentation1 92 .– Draft – Loyalty.
– Draft – … and focus on different customer groups Loyalty management Customer value Retention management High Build sustainable relationship with customers with a high potential (customer lifetime) value Medium Retain high & medium value clients with a high churn risk Low Low High Churn risk Source: ThoM analysis Presentation1 93 .
– Draft – What aspects should be considered when managing customer retention & -loyalty? -Assessment customer lifecycle & ‘moments of truth’ per segment -Where is higher churn faced? -What actions can be taken to reduce churn? To which clients? -What % of churn reduction can be reached? ROI? ⇒ Quick fixes for ST churn reduction ⇒ LT plan for retention management -What are the loyalty drivers? -What are the objectives you want to reach? -Which clients to target? -Determine appropriate loyalty program -Expected ROI from customer retention & development? ⇒ LT loyalty program Retention management Loyalty management Source: ThoM analysis Presentation1 94 .
– Draft – Customer lifetime management means having the right approach at each customer lifestage to improve CLTV Profit Loyalty Time Get! Acquisition Grow! Development Keep! Retention – Win back Source: ThoM analysis Presentation1 95 .
– Draft – In general. required counteraction & customer initiative 1 Reward-moment Immediate benefit 2 Postponed benefit Counteraction Transaction based Not transaction based Direct Adv Program 3 Relationship Program Service related & other advantages Savings Program Saving points for gifts via transaction No initiative Customer initiative Direct discount Initiative Contest Program Advantage won through contest Event Program Event invitation Customer Adv Program Saving points for gifts via initiative Source: Klantenloyaliteit. Marnix Bügel Presentation1 96 . loyalty programs can be ranked on 3 axes: the reward-moment.
– Draft – Current programs mostly combine several features and we see a shift from ‘save’ to ‘relationship’ focus Immediate benefit Transaction based Direct Adv Program Not transaction based Relationship Program Savings Program Postponed benefit No initiative Initiative Contest Program Event Program Customer Adv Program Source: ThoM analysis Presentation1 97 .
and savings program being most effective Effectiveness of loyalty programs Score loyalty impact (Likert) Large effect Rewards directly linked to transactions are more effective than any other reward Customers are less motivated if they need to perform an initiative on top of transactional process Immediate rewards are more effective than postponed rewards Limited effect No effect Cust Adv Pr Contest Pr Saving Pr Event Pr Relationsh Pr Dir Adv Pr Type of program Source: Klantenloyaliteit.– Draft – Research shows that effectiveness of loyalty programs differs. direct advantage. Marnix Bügel Presentation1 98 .
Marnix Bügel Presentation1 99 .– Draft – According to research. program effectiveness is slightly different per industry: 4 industries tested • Following overall trend in effectiveness • Direct Advantage Program scores even relatively better • Example Direct Advantage Program: AG • Shows different trend: Savings program more efficient than Direct Advantage Program • Example Savings Program: Financial Clothing Editing / media • Following overall trend in effectiveness • Example: discount when renewing subscription • Following overall trend in effectiveness • Relationship program less effective than in general • Example Savings program: TopStar & Telco Source: Klantenloyaliteit.
– Draft – In order to improve effectiveness of loyalty initiatives it is important to differentiate approach depending on customer value and needs Value differentiation % CLTV Needs based differentiation Product Service % cust base 80/20 rule: 20% of customers generate 80% of revenues ⇒ Prioritize loyalty initiatives to.and adapt loyalty offers for high value clients ⇒ Should be in line with general level of customer experience Loyalty action Loyalty program Presentation1 100 .
and score on each of these loyalty drivers versus competition USE: Defining direction for loyalty instruments: branding. product. loyalty actions and programs 101 Presentation1 . service? What is driving their loyalty? Would they recommend us to others? MEASURES . during and after loyalty initiative USE: Business case.GENERAL: -CLTV MEASURES – SPECIFIC: -Retention target versus control group -Evolution of customer value before. ROMI Measuring attitudinal loyalty = CUSTOMER EQUITY KEY QUESTIONS: How loyal do customers feel themselves towards our brand. product.GENERAL: -NPS MEASURES – SPECIFIC: -Research on loyalty drivers.– Draft – Loyalty is to be measured in different ways and for different objectives Measuring effect of behavioral loyalty = MARKETING VALUE KEY QUESTIONS: What is ROMI of loyalty initiative? To what extent did it help reaching customer retention & –development? How did it evolve CLTV of customer base? MEASURES . service.
– Draft – Measuring effect of behavioral loyalty: CLTV customer lifetime value Why CLTV Increased loyalty > Increased CLTV > increased profit Net actual value of expected profit during customers’ lifetime Definition Value yr 1 + Value yr 2 + … + Value yr n (1 + r) (1 + r)n-1 Start – before initiative: -Current customer base -Current profitability -Current retention % -Current referral % After initiative: -# extra customers -profitability -retention % -referral % How to measure impact of loyalty initiative on CLTV Change in CLTV Investment loyalty initiative Presentation1 102 .
Contract renewal rates. frequency. monetary value.Price sensitivity Target Control Time .– Draft – Measuring effect of behavioral loyalty: survivor modeling and other Survivor modeling Survivor modeling # customers Other . latency . profitability… Group Before During After Value of clients retained Presentation1 103 .Changes in customer recency.
Attitudinal surveys on brand preference: ‘a brand I can trust.Qualitative research on brand drivers and quantitative tracking of performance on each of these drivers on a regular basis 46% Net promotor score = 11 (46% .35%) 35% “Would you recommend us to a friend?” Presentation1 .– Draft – Measuring attitudinal loyalty: NPS net promoter score and other Net promoter score Net promoter score Other . like’ .
Logo client Segmentation Ichec program 2010-2011 .
Enables clear and focused brand/product positioning .Provides guidelines to develop the marketing driver mix Presentation1 106 Business Results Segmentation & Targeting .– Draft – Where does it fit in the Value Creation Model? Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Positioning Relationship Building Channel Management Scope Price Positioning ROC Intention Awareness Perception & Reputation Behaviour Acquisition Engine Retention Commitment Customer Value Preference Recommen dation CLTV Market Share Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Business Paradigms Deep Channel & Customer Insights Tangible Action Plans Impact on all further strategy development: .
dobney. 2004. product. price) to different groups you are able to more precisely meet the needs of more customers and consequently to gain a higher overall level of share or profit from a market(1) • Market segmentation is the process of splitting customers. set of needs satisfied by a distinct marketing proposition(2) • Marketing segmentation is the first step in the marketing triptych segmentation – targeting .com. Source (3): Definition inspired of Jean-Pierre Baeyens. or segments. in a market into different groups.– Draft – Segmentation: what does it mean? • Segmentation is about identifying different groups of purchasers in a market in order to target specific products and services for each group or segment. or comparable. Oxford. Solvay Business School. Presentation1 107 . Introduction to marketing.positioning which enables companies to optimize their marketing strategies in relation to their core resources(3) Source (1): www. Brussels. INGE3. channel. market research and choice consultancy based in the UK Source (2): Malcolm McDonald and Ian Dunbar. 2005. How to profit from it. Elsevier Butterworth-Heinemann. By tailoring the offering (communication. Market segmentation How to do it. or potential customers. within which customers share a similar level of interest in the same.
but not able to be serviced due to the particular mix of capabilities within the organization(1). Targeting investigates specific segments in terms of how they should be approached to optimize their value for the company(3).– Draft – Target marketing: What does it mean? Target marketing is about selecting the segments that the organization is willing and able to service. […]. Source (1): http://gnomejournal.da-group. The successful product marketing manager.htm Presentation1 108 .uk/main/s6/st72798. Any given segment may be attractive in some way. LMS International September 2003.org/article/39/marketing-gnome-part-two-segmentation-targeting-and-positioning Source (2): Jan Jacobs. Target marketing is defined as the detection of the market segments that are identified as being the most likely purchasers of a company’s products. Leuven Source (3): http://www. Targeting involves concentrating marketing efforts on one or a few key segments determined after having broken down the market into homogenous segments based on pre-defined criteria(2).co.
•Market and product appeals through manipulation of the marketing mix can be more delicately tuned to the needs of the potential customer. Such gaps can be real (e. silly or moody).co. Marketing investments are focused on the profitable segment(s) to which the company is really able to deliver added-value.g.be the goals to maximize profit potential or to secure the best long-term position for the product or any other appropriate goal. harsh or mild) or they can be illusionary in terms of the way people want to view the product (e.uk/main/s6/st72798.g. happy. Source (1): http://www. •Marketing effort can be concentrated on the market segment(s) which offer the greatest potential for the company to achieve its goals .– Draft – What are the benefits of target marketing? Specifically. strong.da-group.htm Presentation1 109 . Better targeting leads to better marketing performance (higher Marketing ROI and CLTV). the advantages of target marketing are that(1) : •Marketing opportunities and unfilled ‘gaps’ in a market may be more accurately appraised and identified. Targeting means optimizing. aloof. sweet.
The main benefits consists in: Finding and establishing your playing field. It is typically defined by customers on the basis of important attributes. Clarifying your distinct ability to make an impact.– Draft – Positioning Positioning = The place the product or service occupies in customers’ minds relative to competing products. Describing your organization—and building a clear public image—in relationship to your competitors Defining your character and how you want to be seen - Presentation1 .
Attitudinal or Psychographic-based segmentation schemes 4. Descriptive segmentation schemes 2.– Draft – There exist 4 different ways to segment your customers 1. Behavior based segmentation schemes 3. Value-based segmentation schemes Presentation1 111 .
– Draft – There exist 4 different ways to segment your customers 1. Descriptive segmentation schemes -> segment customers based on who they are •region of the world or country •country size •density of the area •climate •age •gender •family size •family life cycle •education •income •occupation •socioeconomic status •religion •nationality/race •language 112 Geographic variables Demographic variables ! Presentation1 .
– Draft – There exist 4 different ways to segment your customers 1. Descriptive segmentation schemes 2. Behavior based segmentation schemes -> segment customers based on how they behave Behavioral variables •benefit sought •product usage rate •brand loyalty •product end use •readiness-to-buy stage •decision making unit •profitability •income status Presentation1 113 .
Descriptive segmentation schemes 2.– Draft – There exist 4 different ways to segment your customers 1. Behavior based segmentation schemes 3. Attitudinal or Psychographic-based segmentation schemes -> segment customers based on how they think (about the features of a product/service) and what they prefer Advantage: gets an idea of the actual aspect of the product that will get customers to respond •personality •life style •value •attitude Psychograhic variables Presentation1 114 .
– Draft – There exist 4 different ways to segment your customers 1. Attitudinal or Psychographic-based segmentation schemes 4. Descriptive segmentation schemes 2. Value-based segmentation schemes -> segment customers based on how much worth they potentially hold for the organization Value variables •turnover •profit (direct or net contribution) •customer lifetime value (CLTV) Presentation1 115 . Behavior based segmentation schemes 3.
4% 76.2% 63.8% 58.9% 116 .8% 51.9% 44.9% Demographics 29.7% 76.4% Characteristics of Purchasing Department Source: THoM Yearly Marketing Survey 2008 Presentation1 20.1% Geography 50.4% Net Adjusted Index (%) 16.8% Operational Elements 31.8% 40.0% 32.– Draft – The basic models are the most currently used Frequency of occurrence of criteria used amongst respondents using segmentation B2B C’ies only Company Specific Statistics B2C C’ies only B2B&B2C C’ies 77.5% 21.7% 20.4% Customer Behaviour 46.2% 58.5% 53.2% 47.2% 30.6% 9.2% 28.5% Psychological Customer Profile Internal Financial Results 24.
– Draft – Value-based segmentation Presentation1 117 .
or activity centers.net Presentation1 118 . Static view of the model could be based on yearly figures of: • Turnover • Direct profit contribution • Net profit contribution: .– Draft – Segmenting on value can be made on a yearly period or on the full customer life time Value-based segmentation is the process of splitting the market into more homogenous groups by using quantitative criteria. (1): www.Include direct contribution and indirect costs.valuebasedmanagement. Dynamic view of the model is mainly based on the analysis of the Customer Lifetime Value (CLTV) on a complete period (from the acquisition till the last purchase) and enables to make forecasts for the other companies in the same pre-defined segment.Cost allocation by Activity-Based Costing (ABC) which is a costing model that identifies the cost pools. . in an organization and assigns costs to products or services based on the number of events or transactions (cost drivers) involved in the process of providing a product or a service(1).
– Draft – Two different ways to look at value: present vs. potential value Present value Value potential • Based on : • • Current turnover Current profit • Based on : • • Market potential Product Market Share Example: IT Presentation1 Example: Pharmaceutical 119 .
– Draft – Comparison of alternative segmentation models Presentation1 120 .
g. December 2006. Presentation1 121 . banking sector) Pro’s and Con’s Segments Demographic Pro’s Easy customer classification and marketing strategies Used to assess market for placement of ATM and for efficient management of branch staffing and service levels Past or current behavior is the best predictor of future behavior Understanding lifestyle and attributes can help banks enhance image or determine promotional strategies Companies can focus greatest attention on customers creating greatest profits Con’s Behavior does not necessarily correlate with demographic data Of limited use to product development and marketing strategies Geographic Behavioral Complex data collection and application process Complex data collection and application process Psychographic Value Can result in poor service for lower profitability segments with a detrimental effect on the brand. and a fight for higher profitability customers Source: Council of Financial Competition.– Draft – Segmentation strategies (e. Checking Account Design by Life Stages. Corporate Executive Board.
– Draft – Improving segmentation approaches is all about enhancing customer understanding The more we increase our understanding of customer values the more likely we are to develop successful marketing strategies Information acquisition complexity Presentation1 Information actionability 122 .
net contribution margin because: .the required information tends to be readily available the goal of attracting and retaining the highest value customers would logically have a high ROI PROBLEM: This “value-based” segmentation assumes that all high-value customers have identical needs and preferences which is not the case most of the time SOLUTION: “needs-based” segmentation will have far more impact on determining what combination of products and services will be required to create a compelling value proposition for different customer segments Presentation1 123 .high value .low value measuring the customer’s: .gross contribution margin .medium value .– Draft – Why needs-based segmentation goes beyond simple value-based segmentation… Many companies view segmentation as dividing customers into: .
– Draft – Combining value-based segmentation with behavioral or descriptive segmentations improves the likeliness to reach superior targeting and ROMI Both approaches can be crossed and used simultaneously: • customer segmentation focuses on what can be offered • value based segmentation focuses on which customers are most profitable Presentation1 124 .
bottom line and the value management capabilities Ichec program 2008-2009 Presentation1 .– Draft – Pricing To grow clients’ top line.
– Draft – Where does it fit in the Value Creation Model? Value Proposition Value Creation Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Positioning Relationship Building Channel Management Scope Price Positioning ROC Intention Awareness Perception & Reputation Behaviour Acquisition Engine Retention Commitment Customer Value Preference Recommen dation CLTV Market Share Value Capturing Customer Equity Marketing Value Price Premium Business Objectives Segmentation & Targeting Business Paradigms Deep Channel & Customer Insights Tangible Action Plans Pricing is an important strategic issue because (1) it is a huge lever to increase profits and (2) it is related to other marketing mix elements such as product positioning & features. and promotion. Presentation1 126 Business Results . channel decisions.
October 2007 Presentation1 127 .– Draft – Achieving top line and profitable growth are among top five priorities of European CEO’s Pricing plays a key role in achieving these priorities Source: The Conference Board. “CEO Challenges 2007”.
– Draft – Pricing is a powerful lever to increase profits Profit increase Profit + 13% Profit = 10 Variable Cost = 25 Reduce Variable Costs by 5% Profit + 50% Improve Price by 5% Total Revenue = 100 Fixed Cost = 65 Improved price realization of 5% generates 50% profit improvement* * Note: Assuming Average Fortune 500 Company Presentation1 128 .
short term focus. Management) Presentation1 129 .– Draft – Cost Cust Three inputs to strategic pricing exist and yet some companies price using just one… Comp Philosophy: Financial prudence ensures that each unit of sale achieves a target return over its full cost (Finance & Accounting) Philosophy: Market demand requires that pricing of products and services reflects what customers willing to pay (Marketing & sales) Costs Customers Competition Philosophy: Price to maintain or grow market share. or “me too” pricing (Sales.
– Draft – Cost Cust Costing: deciding on the most profitable activities Comp Step 1: Determine contribution margin Step 2: Identify incremental costs Step 3: Identify volume/price trade-offs Step 4: Evaluate the market context to understand profit implications Presentation1 130 .
..... 1.....500 € Unit Sales Ex.... 7 € Total Contribution Per Unit = 3 € ........000 Total Contribution = Sales revenue – Total Variable Cost Contribution Margin (%) = Total Contribution / Sales Revenue Presentation1 131 ... 1. 10 € Comp Unit variable cost Ex....500 € Profits = 1..– Draft – Cost Cust Contribution margin: variable & fixed costs Company XYZ: Price Ex..000/10.... Fixed Costs Contribution Margin if sell 1000 units = 3.000 = 30% Ex..
– Draft – Cost Cust Costing: deciding on the most profitable activities Comp Step 1: Determine contribution margin Step 2: Identify incremental costs Step 3: Identify volume/price trade-offs Step 4: Evaluate the market context to understand profit implications Presentation1 132 .
5 € 0. Variable production costs would only be € 6.000 10.350 € 10.– Draft – Cost Cust Identify relevant costs for pricing decision Comp At Company XYZ.5 € 7.General & admin costs Total Costs Profits € 1.Direct Fixed Costs .500 € 12.93 € 500 € 200 € 700 € 0.000 Euros per unit 1.500 € 1.9 € 8.3 Revenues Revenues €8 Costs Costs .8 € 0.500 € 14.1 € 1.3 € 1.000 € 10.000 + 500 € 4.550 (+3%) 133 € 8. For this.0 Presentation1 . Total Euros Units 1.000 = 1. there’s an opportunity to sell 500 more units at a price of € 8/Unit.7 € 6.450 € 1.000 € 10 +500 (Incremental) Full cost € 9.400 €1 € 0.000 € 400 € 1.4 € 0.000 € 3.350 €7 € 6.5 € 0.47 € 8.7 per unit…. Costs € 7.Direct Var.9 . additional capacity is required at a cost of € 400 and admin costs would increase with € 200.
– Draft – Cost Cust Identifying The Incremental Costs Incremental costs: Cost of production for one additional unit Variable cost: Cost of last produced unit NOT average variable cost Fixed costs: Most seen as incremental BUT be careful of step changes… Opportunity costs: The contribution foregone when an asset is used for one purpose instead of another Comp Understanding How Costs Change with Changes in Sales is a Prerequisite to Managing Costs Strategically Cost Type High Variable costs High Fixed Costs Opportunity Costs Implications… Low CM High CM CM foregone (=left) Strategic Objective Drive Price Drive Volume Capacity Optimization Presentation1 134 .
– Draft – Cost Cust Costing: deciding on the most profitable activities Comp Step 1: Determine contribution margin Step 2: Identify incremental costs Step 3: Identify volume/price trade-offs Step 4: Evaluate the market context to understand profit implications Presentation1 135 .
. 10 Comp % Breakeven sales change Example Total Contribution Per Unit = 3 ..500 Unit variable cost Ex...... Current price: € 10.(-1) = 50% (3+ (-1)) Break-Even Sales = Fixed Costs / Total Contribution per unit -∆ Price %BE = (CM + ∆ Price) Presentation1 136 ......00 Current Weekly Sales: 1.....– Draft – Cost Cust Identify volume/price trade-offs: Breakeven analysis Unit Breakeven Sales Price Ex...00 Variable cost/unit: € 7.. 7 How much would sales have to increase to make a 10% price reduction profitable? BreakEven %BE = Unit Sales = 500 ...000 Units Fixed Costs Ex. 1..
it is only used to measure price sensitivity. consumers will buy a great deal more.wikipedia.com/cs/micfrohelp/a/priceelasticity.about. the more sensitive consumers are to price changes. consumers will buy a great deal less of it and when the price of that good goes down.– Draft – Understand price elasticity Price elasticity is defined as the percentage of change in quantity demanded as per the percentage change in price of the same commodity. Source: http://ingrimayne.org/wiki/Price_elasticity_of_demand Presentation1 .html http://economics. A very low price elasticity implies just the opposite. A very high price elasticity suggests that when the price of a good goes up. The higher the price elasticity. that changes in price have little influence on demand.com/econ/elasticity/Elastic1. The formula is the following: Price elasticity of demand = % change in demand / % change in price .htm http://en. The number is a means to an end.
Source: http://ingrimayne.com/cs/micfrohelp/a/priceelasticity.org/wiki/Price_elasticity_of_demand Presentation1 138 . decreasing the price from $2.about.99 to $1. but some luxury products are habit forming and can become "necessities" to some consumers.html http://economics.htm http://en.98.00 to $1.– Draft – Price elasticity and impacting factors The price elasticity of demand for a particular demand curve is influenced by the following factors: Availability of substitutes Degree of necessity Proportion of income Time period considered Permanent or temporary change Psychological factors the greater the number of substitute products. products requiring a larger portion of the consumer's income tend to have greater elasticity and purchase of these products will be postponed more rapidly elasticity tends to be greater over the long run because consumers have more time to adjust their behavior to price changes a one-day sale will result in a different response than a permanent price decrease of the same magnitude. luxury products tend to have greater elasticity than necessities. the greater the elasticity.com/econ/elasticity/Elastic1.99 may result in greater increase in quantity demanded than decreasing it from $1.wikipedia.
– Draft –
Impact on pricing: literature versus actual impact
Literature on pricing Elasticity puts a cap on prices
Actual impact on pricing Elasticity has a relative low impact on pricing • There is no precise measurement possible of price elasticity in reality (only past data extrapolated) • The ideal trade-off is not fixed: elasticity can be influenced by marketing, so no real cap exists - E.g.: Communicating the value of a product to a customer, can increase willingness to pay
• Price should be set according to the ideal trade-off between price and volume
• Pricing can not be put above a certain level because too much volume would be lost
– Draft –
Costing: deciding on the most profitable activities
Step 1: Determine contribution margin Step 2: Identify incremental costs Step 3: Identify volume/price trade-offs Step 4: Evaluate the market context to understand profit implications
– Draft –
Market context and profit implications
Can you get the required volume change needed to be profitable? Customer Considerations
• Customer value • Customer power • Customer groups
• Competition’s cost structure • Competition’s response • Competition’s power
– Draft –
• The more intense, the better •
The more intense, the worse
Play as hard as you can
Weigh the cost of each confrontation Goal is to profit, considering all costs
Goal is to win, regardless of the cost
– Draft –
Competition: To act or not to act…
(Actively adjusting strategy to minimize impact of threat)
If competitor matches you, develop an accommodating strategy
Price Reaction is…
(Attempt to cause competitor to back off)
If competitor initiates, do not match but target specific key competitor’s accounts for conversion with enhanced incentives
Weaker Competitor is strategically…
Neutral or Stronger
Modified from: The Strategy and Tactics of Pricing, 3rd Edition, Nagle and Holden, pg. 133g Presentation1
Form strategic partnerships by offering cooperative or exclusive deals with suppliers. quantity discounts. price promotions. resellers.– Draft – Cost Cust Competition Tactic Examples Comp Non price Responses Reveal your strategic intentions and capabilities Compete on quality Offer to match competitors' prices. Rao. Mark E. or providers of related services Co-opt contributors Price Responses Use complex price actions Offer bundled prices. or build awareness of existing features and their benefits. or loyalty programs for products Introduce flanking brands that compete in customer segments that are being challenged by competitors Adjust the product regular price in response to a competitor's price change or another potential entry into the market Introduce new products Deploy simple price actions Extract from How to Fight a Price War By Akshay R. Bergen and Scott Davis Presentation1 144 . two-part pricing. or reveal your cost advantage Increase product differentiation by adding features to a product. Emphasize the performance risks in low-priced options. offer everyday low pricing.
– Draft – Cost Cust Customer: The End Goal… Comp high Vulnerable – Sustainability of brand at stake Price Paid medium Unharvested Value low low medium high Value Received Presentation1 145 .
convenient metrics • Vary prices to reflect willingness-to-pay Comp Value-Based • Determine what benefits customers seek • Estimate objective value of benefits offered • Create price metrics that reflect value received • Justify prices to raise willingness-to-pay Presentation1 146 .– Draft – Cost Cust Customer Customer Driven • Determine what features customers want • Ask customers how they value features • Set prices using natural.
not based on the value of an individual deal COMPETITION BEST PRACTICE: • Identify current/potential competitive advantages and capabilities that leverage those advantages • Target customers (or jobs) that most value capabilities for profitable growth and focus your resource investments of service to those segments • Anticipate and plan for changes in competitor and customer behavior that could threaten your competitive position in your target segments • Collect and communicate competitive information to minimize the impact of negative-sum competitive confrontations • Evaluate your competitive success by your ability to grow profits. not features. CUSTOMER BEST PRACTICE: • Understand how the products and services that you sell generate value for customers (revenues or cost savings). noting particularly differences between the value delivered by you and by the competition • Sell “value delivered”.– Draft – Recap – Best Practices COSTING BEST PRACTICE: • Understand the incremental costs of product/service elements. while pricing to drive incremental contribution from the latter • Adjust non-negotiable price levels based on the ability to improve contribution from all customers who would qualify for that price level. not market share. enabling company to price to profitably recover capacity cost from the former. enabling company to profitably offer multiple product/service offerings at different price levels • Understand which sales drive incremental capacity costs and which do not. Presentation1 147 . and grow markets by educating more customers on the value that your company can deliver • Segment your market for pricing by offering different product/service bundles at different price levels to reflect differences in the value that you deliver.
not only on the price level MISTAKEN BELIEF: The price level is the only cause of price resistance. and is. Price Level Presentation1 148 . the only way to overcome it. therefore.– Draft – Value based pricing focuses on the entire Pricing Strategy Pyramid.
– Draft – You can unlock profitable growth by minimizing the gaps in the value waterfall Opportunities to get more from price 4 Value Creation Gap Value Communication Gap 2 3 Price Strategy Gap 1 Price Execution Gap Potential Value Delivered Value Perceived Value Willingness to Pay Price Paid Most price improvement efforts only focus here Profitable Growth Managing Margin Presentation1 149 .
.. companies face many barriers to achieving higher price realization 1 2 3 4 5 Organizational misalignment around pricing Gaps in price execution and management (Unwarranted variance in field.– Draft – From our experience. reactive pricing.) Offer not aligned to different value requirements of segments or desired customer behaviors Failure to drive and sustain value differential Not effectively communicating value to change customer’s perceptions Target price Price realized Value-based pricing is about addressing these gaps to increase profitability Presentation1 150 150 .
now” R&D Finance Marketing Sales BU Manager “We are well behind this quarter. Let’s do what it takes to start driving volume now” Operations “This is the best product with the best technology on the market.– Draft – 1 Organizational misalignment around pricing Differing. relating to pricing within same company can limit the effectiveness of pricing strategies President “Get me both higher market share and profit . . It’s driving our costs through the roof” Pricing should be addressed strategically after finding common grounds and approaches on pricing and value management Presentation1 151 . It should be worth millions” “This product took years to develop and our prices need to recapture this huge investment” “If we bundle in more services we can justify higher prices and drive market share” “Customers are saying our price is too high and competitors have and lowered price” “Special requests from customers are killing us. . and at times conflicting goals.
000 €900.– Draft – 2 Price execution gaps: Unwarranted variance across pricing Sophisticated customers use your discounting policies to gain unwarranted discounts Results Outliers Acceptable line 50% 45% Actual discount 40% 35% 30% 25% 20% 15% 10% 5% €0 Outliers €100.000 €800.000 Sales revenues Presentation1 Outliers 152 .000 €700.000 €500.000 €300.000 €200.000 €400.000 €600.000.000 €1.
policy-based price management ties pricing to value Example: • “Loyalty” discounts for high store share • “On-line”. drives prices down Example: • End-of-quarter discounts • Meeting competition Proactive.2 – Draft – Price execution gaps: Unwarranted variance across pricing Companies can decrease these gaps by managing pricing proactively Reactive. low service discounts Develop proactive policies that set proper customer expectations Presentation1 153 153 . fast pay. exception-based price management.
– Draft – 3 Offer is not aligned to different segments.leaves money on the table for these customers and communicates that value does not have to be paid for High Received Value Low 1 Setting price here A Segment Size 3 B C D .and misses growth opportunities by pricing these customers out of the market • Offer configuration is necessary to serve all segments more profitably • Differences in value can be captured with product variations or service augmentation that creates natural fences between segments Presentation1 154 . value requirements or desired customer behaviors 2 .
profitable products/services • Removing cost where it is not valued Presentation1 155 . more value can be captured 1 In this way you can capture value that would otherwise have been foregone… High Received Value Low Offer #4 2 Or secure business where you would have been too expensive… Offer #3 Offer #2 Offer #1 A Segment Size B C D And: Value-Based Segmentation Also Allows: • Identifying value drivers that inspire new.– Draft – 3 By tailoring the offer to customers needs.
g.07 Fewer Material Rejection € 0. IKEA Innovations sustain and expand differential value Presentation1 156 156 .85 / kg Change approach for new product development to ensure delivered value e.05 Drive differential advantage Traditional way Product Value-based way Product Cost Price Value Customers Positive differentiation Cost Price Value Customers Next best competitive Alternative internal mixing costs Reference Value € 0.03 Less Defective € 0.– Draft – 4 Failure to sustain and drive differential value Sustain differential advantage Less Freight € 0.08 Less WIP Scrap € 0.
.06 / kg 0. reduces total raw materials used.. decreasing input cost by Our cleaner product creates output reliability which.10 / kg Better articulating value helps to change price perceptions and justifying price points Presentation1 157 157 . generating improved revenue of € Value Customer Focus “What is that worth?” € 0.. allows you to target supply – sensitive segments.06 € 0..– Draft – Example Carbon Black Producer Not effectively communicating value to change customer’s perceptions Concept Features Product Focus “What do we offer?” 5 Example Carbon black particles Benefits Cost Drivers Revenue Drivers Application Focus “Why should the customer care?” Better product dispersability creates more complete mixing that.
Logo client Product Management .
– Draft – The Levels of Product Expected Product Source: Jan Jacobs. 29-30 September 2003. Leuven . The Successful Product Marketing Manager. LMS International -Empowering Engineering Innovation.
– Draft – The Value for: Metrics (KPI) Value for: • Market penetration Market share Share of wallet Usage Preference NPS .
- Physical Objects Services Events Persons Places Organizations Ideas Combinations of the above Source: Jan Jacobs. LMS International -Empowering Engineering Innovation.– Draft – What is a Product? A Product is anything that can be offered to a market for attention. 29-30 September 2003. Leuven . The Successful Product Marketing Manager. or consumption and that might satisfy a want or need. use. acquisition.
etc. 29-30 September 2003. . The Successful Product Marketing Manager. functionality. Source: Jan Jacobs. A restful night's sleep. capacity. . Leuven . • Physical size • A 75 horsepower motor • Patented mattress spring design It’s small enough to fit in your raincoat pocket. design. color. Benefits answer the customer’s question: What’s in it for me? This distinction is further illustrated in the following table: A feature is. . A benefit is. we buy products for their benefits. LMS International -Empowering Engineering Innovation. fabric content. hours of business. A mower that takes the work out of yard work.– Draft – Product Features & Benefits Features are product characteristics that deliver benefits. . Features are product characteristics such size.
A potentially important strategy for specialty products is differentiation.– Draft – Product Features & Benefits : Differentiation Products may be highly unique (specialty products) or virtually indistinguishable from competitors’ products (commodity products) and anything in between. Source: Jan Jacobs. but they do require different marketing strategies. Leuven . LMS International -Empowering Engineering Innovation. The Successful Product Marketing Manager. A company differentiates its products when it sets them apart from the competitors’ products in the minds of customers. Specialty products are not necessarily better than commodity products. Having a thorough understanding of how your product’s benefits compare to your competitors’ allows you to compete with them through differentiation. 29-30 September 2003.
– Draft – A methodology to determine a differentiating and relevant product or service proposition for a selected target group HIGH No differentiation and no relevance Core : “need to have” Limited possibilities for differentiation Satisfaction with current players Nice to have Strong relevance and possibilities to differentiate LOW LOW Importance of the offered features and benefits HIGH .
features are "grouped" into different product models—and prices—starting with a basic model to a "fully loaded" model. being known as "the first" organic body lotion to have Vitamin E will position your company as a leader. The Successful Product Marketing Manager. Improving/Modifying Instead of being at the head of the pack with a totally new feature. Stay on top of knowing the perceived benefits your product offers so you can communicate them in your marketing messages. This can even be true of services. For example. 29-30 September 2003. if the maker of one organic body lotion lowers its price. Modifying product features is a strategy many businesses use to compete with a competitor who lowers their price. Don’t forget that modifying features usually leads to changes in benefits. Leuven . Automobiles. the maker of another may add Vitamin E as a "new improved" feature but keep its price the same. Source: Jan Jacobs. For example. LMS International -Empowering Engineering Innovation. you might simply modify and/or improve your product’s features. "Improving" your product creates the impression that your company cares about satisfying its customers. - - Grouping Oftentimes. even vacation packages offer a variety of features to add to a basic product model. many electronic devices.– Draft – Strategies that are based upon features Introducing Being "the first" to offer a new product feature is a proven competitive strategy. at least for a while.
If the red x still appears.Additional illustration : car manufacturer 1. The image cannot be display ed. Identify the components of the solution/service The image cannot be display ed. The image cannot be display ed. or the image may hav e been corrupted. Restart y our computer. or the image may hav e been corrupted. Restart y our computer. y ou may hav e to delete the image and then insert it again. If the red x still appears. y ou may hav e to delete the image and then insert it again. Your computer may not hav e enough memory to open the image. . Your computer may not hav e enough memory to open the image. or the image may hav e been corrupted. y ou may hav e to delete the image and then insert it again. Your computer may not hav e enough memory to open the image. and then open the file again. Restart y our computer. and then open the file again. If the red x still appears. and then open the file again.
Additional illustration : car manufacturer 2. Develop the offer .
Relate products to customer needs .Additional illustration : car manufacturer 3.
29-30 September 2003.– Draft – Discovering your product's benefits Emotional Benefits Customer Benefits Product Benefits Product Attributes In groups of three. The Successful Product Marketing Manager. customer and emotional benefits Source: Jan Jacobs. Leuven . Describe core features and move to key product. choose a product that you market today. LMS International -Empowering Engineering Innovation.
– Draft – Discovering your product's benefits To identify your product’s benefits. The Successful Product Marketing Manager. Leuven . LMS International -Empowering Engineering Innovation. you might set up a few systems to develop and track product benefits Ask customers for suggestions for improvement. Source: Jan Jacobs. talk to or survey them asking them to identify your product’s benefits. Besides putting yourself in your customers’ shoes mentally. They might provide you with information you never thought about! Look at who has purchased your product in the past. 29-30 September 2003. What does that customer profile tell you about your product’s benefits? Going forward. you must consider the customer’s viewpoint.
LMS International -Empowering Engineering Innovation. 29-30 September 2003. Analyze and learn from this input. Watch your competitors. • Use a variety of pricing and positioning strategies effectively Source: Jan Jacobs. • Differentiate–explain how your product is different ("better") than the competition’s. The Successful Product Marketing Manager.– Draft – Discovering your product's benefits Pay attention to customer complaints and prospect inquiries. Go so far as to train and reward employees for questioning customers and prospects to learn what they want and what they don’t like about your product. Leuven . Do the changes in their product offerings suggest desired product benefits? Why is it important to understand what my product’s features and benefits are? Understanding product features and benefits allows you to do such things as: • Describe your products in a way that is most relevant to customers. Be open to what your customers say.
Product and service decisions Individual Product Product Line Product Mix Product attributes : Quality Features Style Design Branding Packaging Labeling Product support Product services Product line length: Line stretching: adding products that are higher or lower priced than the existing line Line filling: adding more items within the present price range Product line width: Number of different product lines carried by company Product line depth: Number of different versions of each product in the line Product line consistency Source: Jan Jacobs. Leuven . The Successful Product Marketing Manager. 29-30 September 2003. LMS International -Empowering Engineering Innovation.
– Draft – Positioning map highlights potential of Product Leadership High Image Branding Experience Branding Examples: Kube Hotel Marlboro Benetton Examples: Nike Nokia Apple Eventually the product carries the brand Emotional Aspirations Threshold Branding Functional Branding Examples: Bic Lada Examples: Duracell Low Functional Benefits 173 High .
– Draft – Positioning map also highlights differentiating potential of position High By adopting that approach you build trust between yourself and your customer Emotional Aspirations Focusing on product development will differentiate Sorin CRM from competitors Low Functional Benefits High 174 .
– Draft – Managing the delivery Consumers Customer Experience Products Channels .
The most appropriate ones are indicated… HARVEST DIVEST Source: Jan Jacobs. Leuven .– Draft – Portfolio planning : Boston Consulting Matrix HOLD BUILD Four alternative objectives can be pursued in order to balance the company’s portfolio. 29-30 September 2003. LMS International -Empowering Engineering Innovation. The Successful Product Marketing Manager.
– Draft – Boston Consulting Matrix: example i-Phone Palm Kodak film .
– Draft – Product portfolio Management: key considerations • Strategic fit of product portfolio • Portfolio products performance • Coherence of product portfolio • Balanced composition of portfolio and evolutions therein • Synergies between products of product portfolio • Opportunities for new product initiations • Contribution of portfolio strategy to company mission and vision • Respect of timings indicated in the portfolio plan • Number of new products introduced in portfolio plan 178 .
Wharton School Publishing. Marketing Metrics: 50+ Metrics Every Executive should Master . 2006. New Jersey 179 .– Draft – Product portfolio Management: possible KPI’s • • • • • • • • • • • Trial (first try) Repeat volume Penetration Volume projections Year-on-Year Growth Compound Annual Growth Rate Cannibalization Rate Brand Equity Metrics Conjoint Utilities Segment Utilities Conjoint Utilities and Volume projections More general metrics: • • • • • Unit Margin or Margin (%) Contribution per unit or Contribution Margin (%) Break-Even Sales Level Target Volume Target Revenues Source: Paul Farris.
5% Early adopters 16% Laggards Late majority 2.5 % Innovators Time of adoption of innovations by users Source: Marketing Management.– Draft – Product Life Cycles Product Life Cycles are based on the theory that consumers will adopt new innovations at various rates 34% 34% Early majority 13. Philip Kotler .
Maturity. Introduction.Styles . Decline • Not all products follow this cycle: . 29-30 September 2003. The Successful Product Marketing Manager.Fads . Growth. LMS International -Empowering Engineering Innovation.Fashions The product life cycle concept can be applied to a: • Product class (soft drinks) • Product form (diet colas) • Brand (Coca Cola Light) Source: Jan Jacobs.– Draft – Product Life Cycle Strategies The Typical Product Life Cycle (PLC) Has Five Stages • Product Development. Leuven .
LMS International -Empowering Engineering Innovation. 29-30 September 2003.– Draft – Five stages of the PLC Source: Jan Jacobs. Leuven . The Successful Product Marketing Manager.
29-30 September 2003.Five stages of the PLC Stage 1 • Begins when the company develops a new-product idea • Sales are zero • Investment costs are high • Profits are negative Product development Introduction Growth Maturity Decline Source: Jan Jacobs. LMS International -Empowering Engineering Innovation. Leuven . The Successful Product Marketing Manager.
Five stages of the PLC
• Low sales • High cost per customer acquired • Negative profits • Innovators are targeted • Little competition
Product development Introduction Growth Maturity Decline
Source: Jan Jacobs, The Successful Product Marketing Manager, LMS International -Empowering Engineering Innovation, 29-30 September 2003, Leuven
– Draft –
Marketing Strategies: Introduction Stage
Product – Offer a basic product Price – Use cost-plus basis to set Distribution – Build selective distribution Advertising – Build awareness among early adopters and dealers/resellers Sales Promotion – Heavy expenditures to create trial
Marketing Objectives : Create product awareness and trial
Source: Jan Jacobs, The Successful Product Marketing Manager, LMS International -Empowering Engineering Innovation, 29-30 September 2003, Leuven
– Draft –
Targeting the right audience
Speed of adaptation
Five stages of the PLC
• Rapidly rising sales • Average cost per customer • Rising profits • Early adopters are targeted • Growing competition
Product development Introduction Growth Maturity Decline
Source: Jan Jacobs, The Successful Product Marketing Manager, LMS International -Empowering Engineering Innovation, 29-30 September 2003, Leuven
– Draft –
Marketing Strategies: Growth Stage
Product – Offer product extensions, service, warranty Price – Penetration pricing Distribution – Build intensive distribution Advertising – Build awareness and interest in the mass market Sales Promotion – Reduce expenditures to take advantage of consumer demand
Marketing Objectives : Maximize market share
Five stages of the PLC
• Sales peak • Low cost per customer • High profits • Middle majority are targeted • Competition begins to decline
Product development Introduction Growth Maturity Decline
– Draft –
Marketing Strategies: Maturity Stage
Product – Diversify brand and models Price – Set to match or beat competition Distribution – Build more intensive distribution Advertising – Stress brand differences and benefits Sales Promotion – Increase to encourage brand switching
Marketing Objectives : maximize profits while defending market share
Five stages of the PLC
• Declining sales • Low cost per customer • Declining profits • Laggards are targeted • Declining competition
Product development Introduction Growth Maturity Decline
29-30 September 2003.– Draft – Marketing Strategies: Decline Stage Product – Phase out weak items Price – Cut price Distribution – Use selective distribution: phase out unprofitable outlets Advertising – Reduce to level needed to retain hard-core loyalists Sales Promotion – Reduce to minimal level Marketing Objectives : reduce expenditure and milk the brand/product/service Source: Jan Jacobs. LMS International -Empowering Engineering Innovation. Leuven . The Successful Product Marketing Manager.
– Draft – Summary of marketing strategies for each phase of the life cycle Strategic Marketing Objectives Product Stimulate Primary Demand Quality Improvement Build Share Build Share Hold Share Harvest Continue Quality Improvements Broad Rationalize Concentrate on Features No Change Product Line Narrow Rationalize Hold Length of Line Reduce Length of Line Price Skimming vs. Penetration Reduce Reduce Hold or Slightly Reduce Reduce Channels Selective Intensive Intensive Intensive Selective Communications High High High to Declining High to Declining Reduce Source: Marketing Management. Philip Kotler .
Philip Kotler .– Draft – The framework can also highlight opportunities and threats… Life cycle Stage Characteristics Intro Market growth rate Technical change product design Moderate Growth High Shakeout Leveling Off Maturity Insignificant Decline Negative High Moderate Limited Limited Limited Segments Few Few .Many Few.Many Few-Many Few Competitors Small Large Decreasing Limited Few Profitability Negative Large Low Large for high marketshare holders Low Source: Marketing Management.
Profits level-off. heavy expense of product introduction Growth – rapid market acceptance and increasing profits Maturity slowdown in sales growth.– Draft – The product life cycle linked to business performance • € • • • • Product development sales are zero. 29-30 September 2003. investment costs are high Introduction profits do not exist. Leuven . Increase outlay to compete Decline – sales fall-off and profits drop Source: Jan Jacobs. LMS International -Empowering Engineering Innovation. The Successful Product Marketing Manager.
– Draft – There are several (dis)advantages to Conjoint Analysis Advantages • Estimates psychological tradeoffs that consumers make when evaluating several attributes together • Measures preferences at the individual level • Uncovers real or hidden drivers which may not be apparent to the respondent themselves • Realistic choice or shopping task • Able to use physical objects • Can be used to develop needs based segmentation • Respondents are unable to articulate attitudes toward new categories • Poorly designed studies may over-value emotional/preference variables and undervalue concrete variables Disadvantages • Designing conjoint studies can be complex • With too many options. respondents resort to simplification strategies • Difficult to use for product positioning research because there is no procedure for converting perceptions about actual features to perceptions about a reduced set of underlying features Note: Deloitte uses a Conjoint Analysis Source: Wikipedia 196 .
– Draft – Channel Management .
– Draft – Value Creation and Capturing Model Environmental and Competitive Scan Marketing Strategy Marketing Drivers Products / Technology Customer Equity Marketing Value Price Premium Business Objectives Purchase Process & Experience Positioning Communication Relationship Building Scope Channel Management Price Positioning Awareness Perception & Reputation Preference Acquisition Engine Retention Commitment Recommendation Market Share Customer Value CLTV ROC Deep Channel & Customer Insights Tangible Action Plans Business Results Segmentation & Targeting Services Intention Behaviour .
– Draft – Driver action planning – An example Marketing Drivers Products / Technology Services Purchase Process & Experience Communication Relationship Building Channel Management Price Positioning • Identify route causes for “not being pushed harder by the trade” • Coverage issue? • Quality issue? • Brand image issue? • Margin issue? • Focus on relevant & differentiating relationship drivers • Drive partnerships capabilities • Train & educate trade to support the brand image • Focus trade incentives on ‘providing the right brand stories to the consumers’ • Select channels with positive impact on brand image • Build brand equity without losing existing channel support Low Marketing value High .
– Draft – Benefits of working with channels? • • Enhanced reach in the market => Increase in revenues Lower cost of sale: Define ‘low cost’ routes to market and product/service configuration capabilities of your channel Lower customer support cost: Integration and extension of service components Reduced time to market: Shorter product lifecycles Spread of risk Ability to meet customer purchasing preference Provide customers with industry specific expertise Local & physical presence (culture. language. …) Increased capacity to integrate multiple products : ‘One stop shop’ requirement (Street) visibility • • • • • • • • .
– Draft – Type of channels & influence on branding Segmentation based on dominance of brands in customer decision taking Reseller Megabrand Independent dealer Dependent dealer Tied Dealer Franchise Direct Carrefour Accenture PC dealer Independent supermarkets Most HP dealers BMW Caterpillar Sony Centre Van de Velde (Marie-Jo) Dell Reseller Dominant brand Manufacturer .
e.– Draft – What are key challenges in working with channels? • • Cost to recruit partners Gaining partner mindshare: • Very hard to create loyal relationship and/or to ‘lock down’ your partners in preferential terms (i. legal implications) • • Delivering sales tools to partners Risk of partners selling competitive products • Multi-channel complexity • Reduced control over the sales process • • How to guarantee end-to-end quality in commercial process? Power of channels due to EU landscape (consolidation) • Coordinating partner & vendor sales teams efforts • • Need for transparent guidelines & communication Positive confrontation in channel conflict situations • Complex forecasting process .
– Draft – What are key challenges in working with channels? • • • • • • • • • Loss of end customer contact Margin issues Need to adjust internal business processes Channel dependence Competitive pressure Direct or indirect sales conflict Business cannibalization Vendor doesn’t reach all segments Take over of distribution (by another vendor or competition) .
1606-1661. Erin Anderson.S." Thomas Fuller. even desirable… "Progress flows only from struggle." Louis Brandeis. 1856-1941. INSEAD 204 . U. Supreme Court justice … if kept within bounds "Contradiction should awaken attention.– Draft – Channel conflicts: key points Conflict in a channel is inevitable. Chaplain to Charles II Source: Harnessing channel tension. not passion.
not just your cost structure • Reason should be transparent • You can’t build walls around customers • Above all.– Draft – Channel conflicts: key points Dual Distribution: Base it on end-user behavior. INSEAD 205 . don’t base the channels on the current size of the business the customer does with you Source: Harnessing channel tension. Erin Anderson.
Erin Anderson. growing markets • Differentiated products • Customers do their own buying Where dual routes to market work poorly • Customer segmentation is arbitrary • Customers act one way for one occasion and another way on a different occasion • Small. even on different purchasing occasions • Large. shrinking markets • Commodity • Buying groups dominate Source: Harnessing channel tension. INSEAD 206 .– Draft – Channel conflicts: key points Management should be the traffic officer: give the channels different spaces that the customer will respect • Customers fall into natural segments • Customers behave consistently.
INSEAD 207 .Simple rules that are approximately correct in the long run—don’t negotiate each sale Source: Harnessing channel tension. announced in advance and publicly enforced • When two channels contribute to a sale. credit both of them .– Draft – Channel conflicts: key points Collaboration between channels can happen—but not without management effort • Differentiate each channel’s offerings • Rules of engagement. Erin Anderson.
– Draft – Channel Design Decisions Analysing end user needs Setting channel objectives Identify major alternatives Evaluate Major alternatives .
selective. and exclusive distribution • Responsibilities of channel members Step 4: Evaluating Major Alternatives • Economic criteria • Control issues • Adaptive criteria . industrial distributors • Number of marketing intermediaries .Intensive.– Draft – Channel Design Decisions Step 1: Analyzing end user Needs • Cost and feasibility of meeting needs must be considered Step 2: Setting Channel Objectives • Set channel objectives in terms of targeted level of customer service • Many factors influence channel objectives Step 3: Identifying Major Alternatives • Types of intermediaries . manufacturer’s agency.Company sales force.
Perspectives théoriques et opérationnelles. Revue française de gestion 2008/2. La segmentation des portefeuilles distributeurs en B to B.. 210 . 171-189. p. n° 182.– Draft – Definition of successful partnerships in selling added value Bêche J.
Finance) • Skills (Sales. the success of added value sales through distribution is based on high fit partnership 2 leverages contributing to partnership (1) Strategic convergence Strategic fit • Vision of management • Resources (IT. service) Relational convergence Organizational fit • Sales structure • Incentives plan Engagement Co-dependency • How much business does the vendor do with the distributor • How much business does the distributor do with the vendor • Interest in added value philosophy • Behavior aligned with intentions Relational fit • Relationships between sales forces • Trust in mutual capabilities Performance in selling solutions Note: International research Source: Jerome Beche – Dever Consultants. HR.– Draft – Academic model In all industries. Paris 211 .
– Draft – Academic model Successful partnerships: final theoretical concept Strategic fit Strategic convergence with the supplier Co-dependency Interorganizational learning Organizational fit High performance for complex sales Organizational convergence with the supplier Relational fit • Turnover • Market share (€) • Net profits • Number of existing or new customers •… Note: International research Source: Jerome Beche – Dever Consultants. Paris 212 .
– Draft – Academic model Different kinds of distributors to work with. Paris 213 . some present high potential Independents with high stake Partners Developing skills Autonomists Enhancing Relationship Followers Low Relational convergence High Note: International research Source: Jerome Beche – Dever Consultants.
– Draft – Critical factors in partnerships 214 .
Exclusive focus on cost . Single-element business reviews (e.– Draft – The most critical failings in many partnerships 1. Failure to raise the opportunities to higher-level decision makers in both the supplier's and trade partner's organizations 3. one product. one service) 5. Narrowly defined problems 6. Failure to quantify the value of opportunities 2.g. Short term emphasis 4.
honest communication Everyone working together High standards and goals Continuous communication Clear.– Draft – Key elements of a successful partnering team Open. easy-tounderstand communications Willing to ask the "stupid" questions Ability to admit mistakes Everyone "pulling their weight" Partnering a high priority Continuous learning Frequent team meetings A fast start . common direction Committed to delivering best effort Meeting and exceeding deliverables Logic and in-depth quantification of issues Each presentation better than the last Concise.
or the image may hav e been corrupted. or the image may hav e been corrupted. y ou may hav e to delete the image and then insert it again. Your computer may not hav e enough memory to open the image. University of Pennsylvania. If the red x still appears. Lehmann. y ou may hav e to delete the image and then insert it again. Relation • Service • Communication The image cannot be display ed. and then open the file again. Restart y our computer. and then open the file again. Restart y our computer.– Draft – Channel management impacts the value for the customer by mainly playing on the customer experience Value for a customer Channel’s impact • Tangibles • Intangibles Product • Quality • Convenience Brand • Image •Attitude The image cannot be display ed. Wharton School Publishing. If the red x still appears. 2005 . Inspired by Sunil Gupta and Donald R. Managing customers as investments. Your computer may not hav e enough memory to open the image.
K De Wulf . Source: Pr.Vlerick 63 .– Draft – The right channel for the right value proposition + Zone of ineffectiveness Value Proposition “Ca ne marche pas” Face-to-face Call Center ATM Extranet Zone of inefficiency Internet Relational Power + “C’est inefficace” Example: financial services.
– Draft – The different types of channels could be mapped on these two axes High Sales rep’s Value Added Partners Distributors Direct Sales channels Delivered Added Value Telemarket -ing Retail Indirect channels Internet Low Direct Marketing channels Low Cost Required High Source: Philip Kötler. Marketing Management .
banner. C=Capex 220 . billboard. e-mail. visit…) Mass Mass Few Few One One One Addressable N N (+/-)* Y Y Y Y Y Interactive X XX XX XX XXX XXX XXX Cost OO OCC* O OC OC OCC OOCC •Cookies. seminar…) Phone (in/outbound) Extranet (portal with userID…) F2F (meeting. in/out) Event (road show. IP addresses. radio. TV…) Internet (site. social…) Mail (post. search.– Draft – A strong knowledge of the characteristics (strengths and weaknesses) of each channel has to be developed Audience Media (press. forum. Username… •O=Opex.
– Draft – Three main steps are required to build a strong channel communication Where to communicate What to communicate How to communicate Source: Telenet .
– Draft – Where to communicate What to communicate How to communicate Classification of POS Source: Telenet .
– Draft – POS / POC Matrix High Sales (High internal Traffic) POS Classfication (based on sales) High External Visibility Low external visibility Low Sales (Low internal Traffic) AAA Source: Telenet POC: Point of communication AA A B+ B- POC Classification (based on external visibility) .
Low Ext. Medium Ext. Medium Ext. Low Ext. High External Medium Int. Medium Int. Probably doesn’t exist POS Classfication (based on sales) Medium Int.– Draft – POS / POC Matrix AMBASSADORS FULL KIT INT & EXT TELENET SERVICE CENTER HIGH Internal Visibility HIGH External Visibility High Int. High External Low Int Medium Int. Medium Ext. Forget It AAA Source: Telenet AA A B+ B- POC Classification (based on external visibility) . Low Int.
– Draft – Where to communicate What to communicate How to communicate Defining Guidelines Source: Telenet .
(Help him sell) • Develop clients goodwill. (Win-Win relation) From a Marketing Perspective • Develop brand awareness. communicate values. • Build image.– Draft – Objectives of Visibility From a Sales Perspective • Tell the consumers where to go. • Communicate promotions. Source: Telenet . (« Here available ») • Develop clients sales.
• IDTV Communication Strategy. Telefonie. IDTV. Brown Goods.– Draft – Several factors will define guidelines IDTV • What kind of shop is it ? (PC Store. • • • • Corporate Policy ? One brand ? Two brands ? How do they live together ? Where do we put the focus on ? Source: Telenet . 2/3.…) • What does it sell ? (Internet. GSM. 3/3) • In which category is it ? (matrix) • IDTV Distribution policy.
– Draft – Where to communicate What to communicate How to communicate Defining Tools Source: Telenet .
… Prefer permanent material with « promotion carriers » Set Rules • Negociate presence • Secure places through charters and fixed material Control Reward Source: Telenet .… create « noise ». « Smoke less but smoke better » Zino Davidoff • We want communication not noise • Less material. better material • Placement guidelines to be defined : ex : Rather one great corner than one small element in each corner… • Try to get exclusivities on defined places Go for « flexible standardization » • Tailor-made.– Draft – Looking for efficient and qualitative POS communication. own initiatives. jalousy among retailers.
Telenet Corner (Panels only) Illuminated Totem Counter Promo Holder Illuminated Totem Counter Promo Holder Counter Promo Holder High Medium Low Source: Telenet . Large electric sign with own name "Raamomlijsting" (exclusive) Doorhandle Open/Closed Windmaster High Electric Sign (Standard) "Raamomlijsting" (exclusive on one window) Open/Closed Windmaster Medium "Raamomlijsting" (1 or 1/2) Open/Closed Windmaster Low Windmaster INTERNAL Telenet Corner with PC desk. Illuminated Totem Counter Promo Holder Amb.– Draft – Examples Kits based on POS/POC Matrix EXTERNAL Amb.
– Draft – Example Ambassadeur telenet telenet Huis X telenet .
– Draft – Example High telenet telenet telenet .
– Draft – Example Medium telenet .
– Draft – Example Low .
New Jersey 235 . Marketing Metrics: 50+ Metrics Every Executive should Master . Wharton School Publishing. sales pipeline • Out-of-Stocks • Inventories • Direct Product Profitability • Gross Margin per channel • Return on Inventory Investment Source: Paul Farris. 2006.– Draft – Key KPI’s to measure sales force and channel performance • Sales Potential Forecast • Sales Total • Sales Force Effectiveness • Break-Even Number of Employees • Sales funnel.
New Jersey 236 . Marketing Metrics: 50+ Metrics Every Executive should Master . Wharton School Publishing. 2006.– Draft – Additional KPI’s to monitor channel performance • Number of partners per type • • • • • • • • • Average Revenue per Distribution/Channel Partner Number of Distributors/Channel Partners that Account for 50% of Sales Sales growth (total and per partner) Average sales revenues or Net revenues (sales .commissions) per partner Number of subscriptions per partner Number of new subscriptions/Number of new users per partner Average users per subscription total and per partner Number of incoming leads per partner Number of calls generated per partner • Number of migrated subscriptions to other partners (cannibalization rate) • Lead conversion rate per partner • Commissions per partner and per type of work / support delivered by partner • Average commissions per partner (total and average) • Fees of partner program to finance partner marketing activities • Customer Service Quality per Distribution/Channel partner Source: Paul Farris.
Logo client Increasing Marketing Communications Effectiveness .
Communication is a major marketing driver of the Value Creation and Capturing Model
Environmental and Competitive Scan
Marketing Strategy Marketing Drivers
Products / Technology
Purchase Process & Experience Positioning Communication Relationship Building Scope Channel Management Price Positioning
Awareness Perception & Reputation Preference
Acquisition Engine Retention Commitment Recommendation
Deep Channel & Customer Insights Tangible Action Plans
Segmentation & Targeting
– Draft –
The communications effectiveness pyramid
Recom mendati on
Win again & again & again & …
Winning over the heart
MINDSET , ATTITUDE
Desire Knowledge Interest Awareness
Winning over the head
– Draft –
Awareness “I see” Interest “I look again” Knowledge “I understand” Desire “I like”
Cross Media Effectiveness
How to measure
Share Of Voice SOV CPM (cost/1000) Gross Rating Point GRP Opportunity To See OTS Pre test Post test Pre test Post test
CIM Website traffic Quanti research Quali/Quanti copy testing Day after recall
Top of Mind Spontaneous awareness Aided awareness Stopping power
Information power Clarity Correct Brand attribution Conviction power (credibility, brand commitment, likeability) Recall Evoked set Corporate reputation Persuasion
Positioning Creative work
Brand Identity Pre test Post test
Preference “I prefer” Conviction “I choose” Action to self “I do” Action to others “You do too”
Creative work General corporate image Creative work
Quali and Quanti reputation study Buying Intention research Trade info Nielsen (FMCG) CRM, loyalty prg Quanti research
Pre test Post test Coupon redemption Orders, sales Repurchase (RFM) Net Promoter Score
Trial Repurchase Loyalty Recommendation
Call to Action impact Client Satisfaction Client Delight
– Draft –
Some important concepts
Average frequency (OTS – OTH) An expression of the average number of times a particular campaign or advertisement will be seen or heard by an individual in the selected target audience for the campaign. In visual media, the expression is synonymous with "average opportunity-to-see" (OTS) and in radio with "average opportunity-to-hear" (OTH). Cost-per-thousand (CPM) Cost-per-thousand is a way in which cost-efficiency can be expressed. It is a measure of audience delivered per unit of cost (eg a TV spot costing £1000 seen by 100,000 housewives delivers a cost-perthousand of £1000/100 = £10.00). It is typically used in inter- or intra-media comparisons of costefficiency (usually abbreviated to 'cpt' - 'cpm' in some countries). Audiences may be general (eg 'All housewives') or highly specific (eg 'C1C2 males aged 15-44 who are regular readers of the Daily Telegraph'). Coverage The coverage is the number or percentage of the target audience who see or hear it an ad.
GRP (short for Gross Rating Point) = Frequency x Coverage Example: 19% of women aged between 18 and 39 watch the news at 1 pm; an ad is broadcasted 2x; 2X19%= 38 GRP
– Draft –
Advertising Research quick insights
Research can be conducted to optimize advertisements for any medium: radio, television, print (magazine, newspaper or direct mail), outdoor billboard (highway, bus, or train), or Internet. Different methods would be applied to gather the necessary data appropriately. First, there are two types of research, customized and syndicated. Customized research is conducted for a specific client to address that client’s needs. Only that client has access to the results of the research. Syndicated research is a single research study conducted by a research company with its results available, for sale, to multiple companies. Pre-testing / Copy Testing Pre-testing, is a form of customized research that predicts in-market performance of an ad, before it airs, by analyzing audience levels of attention, brand linkage, motivation, entertainment, and communication, as well as breaking down the ad’s Flow of Attention and Flow of Emotion. Pre-testing is also used on ads still in rough form. Pre-testing is also used to identify weak spots within an ad to improve performance, to more effectively edit 60’s to 30’s or 30’s to 15’s, to select images from the spot to use in an integrated campaign’s print ad, to pull out the key moments for use in ad tracking, and to identify branding moments. Post-testing / Ad Tracking Post-testing studies can be customized or syndicated. Tracking studies provide either periodic or continuous in-market research monitoring a brand’s performance, including brand awareness, brand preference, product usage and attitudes. Advertising tracking can be done by telephone interviews or online interviews—with the two approaches producing fundamentally different measures of consumer memories of advertising, recall versus recognition.
identify “hidden” communication moments •Relevant which channels does the customer want you to use? •Consistent using multiple communication channels means stepping up control & guarding consistency Presentation1 243 . or organization are RELEVANT to that person and CONSISTENT over time” •Planning develop the communication roadmap based on customer insights •All brand contacts identify the Moments of Truth in the Customer Lifecycle.– Draft – Integrated Marketing Communications = 360° Marketing Communications But what does it mean? The American Marketing Association describes it as … “a PLANNING process designed to assure that ALL BRAND CONTACTS received by a customer or prospect for a product. service.
appropriate (i.e. email. none of these attributes is seen as important by consumer receivers! They prefer communications to be enjoyable. More agreement as to which channels are most effective for B2C The phone. entertaining and reliable. Peter J Danaher and John R Rossiter**. 2006 Presentation1 244 . SMS and door-to-door media all result in lower purchase intentions than mail (personal and generic). catalogs. (1): A Comparison of the Effectiveness of Marketing Communication Channels: Perspectives from Both Receivers and Senders. properly targeted). Department of Marketing University of Auckland. difficult to ignore. newspapers and magazines.– Draft – Integrated Marketing Communications is more effective when senders transmit their message via channels and with attributes that receivers prefer(1) Different views on attributes of successful B2C communications Senders believe communications should be informative. but receivers place newspapers as equivalent to all other mass media in terms of effectiveness. They feel that purchase intentions will be raised if the communication is difficult to reject. B-to-C senders believe that receivers might be more receptive to the newspaper channel. television. not annoying. However.. radio.
For B-to-B recipients. Business receivers agree that a communication should not be disruptive. Different views on media usage in B2B Senders to the business segment often feel that newspapers and magazines are more effective. (1): A Comparison of the Effectiveness of Marketing Communication Channels: Perspectives from Both Receivers and Senders. but their preference is for acceptable and appropriate communications rather than entertaining ones.– Draft – B2B MarCom also demonstrates a disconnect between senders and receivers(1) Different views on view on attributes of successful B2B communications Senders generally think that entertaining and not disruptive communication will be more effective. their purchase intentions are equivalent. SMS and door-to-door channels perform consistently the lowest. receivers do not agree. Department of Marketing University of Auckland. Peter J Danaher and John R Rossiter**. for printed direct media and mass media. telephone. Email. 2006 Presentation1 245 . A comparison of predicted purchase probabilities when senders emphasize attributes that diverge from what receivers want results in 30 to 35% lower values of purchase intention. These differences between Bto-B senders and receivers can amount to quite large differences in downstream purchase intentions. and highest. and actual purchase.
the greater the volume opportunity Frequency The higher the frequency. the less opportunity to forget the message Examples – how would you rank objectives? 1. the more likely the message will be noticed & remembered (minimum 3-5 times) Continuity / duration The more weeks of support.– Draft – Developing the ideal Media Plan and setting Media Objectives is about making trade offs Budgets are not infinite. Launch of spectacular offering of mass retailer: come and collect products for free on day X Presentation1 . Launch of new taste of high quality and high price pet food within existing brand and existing broad portfolio 2. media planners will start by making a high level choice on the following objectives Reach The higher % we reach.
need to reach 50% of target Presentation1 .500 additional visits to shop Assume 5% of target households (HH) will respond to advertising Need to reach 50.000 HH in service area. 100.– Draft – Identifying reach objective – an example Objective: generate 2.500) Convert to % of total target.000 HH (50k x 5% = 2. e.g.
– Draft – Developing media strategies Evaluate & compare each media type against objectives and budget Reach Vehicles Targetable By Demographic Group Targetable By Geographic Group TV Magazines Newspapers Outdoor Local Radio Frequency Vehicles Radio Magazines Local Radio Local Media Presentation1 248 .
By contrast. Senders of marketing communications via digital channels. Perhaps they have come to trust and become comfortable with channels where there is already quite a lot of business communication. might be tempted to send more frequent communications. This could be interpreted as meaning that a business receiver does not see additional offers sent to them via high-activity channels as an impediment to consideration and action on future offers. where costs are lower. Presentation1 249 . this is likely to have a downstream negative impact on the response to the advertising. e-mail clutter). receivers in the business segment are more likely to act on an offer if they already receive higher volumes from that channel.– Draft – Media channel overkill jeopardizes effectiveness in B2C mainly Receivers in the consumer segment are less likely to act on an offer from a particular channel if there is already a lot of material sent to them via that channel (e.g. Clearly. TV clutter.
– Draft – Get into the brain of your receiver This theory of the structure and functions of the mind suggests that the 2 different sides of the brain control two different "modes" of thinking.e. Left Brain uses logic detail oriented facts rule words and language present and past math and science can comprehend knowing acknowledges order/pattern perception knows object name reality based forms strategies practical Right Brain uses feeling "big picture" oriented imagination rules symbols and images present and future philosophy & religion can "get it" (i. meaning) believes appreciates spatial perception knows object function fantasy based presents possibilities impetuous risk taking Presentation1 250 . Each of us prefers one mode over the other.
– Draft – Presentation1 251 .
to DO? Background info on the company / brand / market / competition / … Presentation1 252 .– Draft – Start with the conception of a clear briefing to a creative agency Target group & relevant insights into the target group Positioning of the brand / product / company Single Selling Idea: what 1 thing does the target audience need to remember? What is the expected outcome of the campaign? What do you expect the target audience to THINK. to FEEL.
– Draft – Why is the Single Selling Idea important? Pick out 8 balls and throw them towards someone in 1 movement… How many will he be able to catch? Right… if you’re lucky… 1 Presentation1 253 .
– Draft – Unless you’re a trained tennis ball catching dog ☺ Presentation1 254 .
Stewart & Koslow (1989). except for this: “there is no magic formula for the creation of effective advertising” “it is likely that the most important factor in effective advertising is the creative combination of many elements into a persuasive art form” ? (1): Ernst (1980). Laskey. Stewart & Furse (1986). Garnard & Morris (1988).– Draft – How to judge the effectiveness of Creative Work? We need to distinguish between the execution and the strategy behind the idea Conclusions of studies(1) about the execution elements of creative work were non-conclusive. Fox & Crask (1995) Presentation1 255 . Laskey et al (1994).
– Draft – It pays to look at the strategy behind the idea(1) Results of the Laskey et al study Conclusion: • There is a difference in effectiveness of 2 main message types (informational versus transformational) Effectiveness was measured in terms of • Related recall (% consumers who remember seeing the ad) • Key message comprehension (% consumers who remember key message point) • Persuasion (shift in brand preference attributable to exposure to ad) Typology on main message strategies • Informational advertising • Comparative (competition explicitly mentioned) • USP (explicit claim of uniqueness) • Pre-emptive ( testable claim of superiority based on attribute/benefit) • Hyperbole (untestable claim of superiority based on attribute/benefit) • Generic (focus on product class) • Transformational advertising • User image (focus on the user) • Brand image (focus on brand personality) • User occasion (focus on usage occasions) • Generic (focus on product class) (1): Laskey. Fox & Crask (1995) Presentation1 256 .
identity.– Draft – Some things to consider while looking at Creative Work Is there a BIG IDEA. or just a nice gimmick? Does it have STOPPING POWER (capture attention/create impact) ? Is the message EASY to UNDERSTAND? (Single Selling Idea) Does it allow DECLINATION to different media types? Is there a clear link with the BRAND (name but also positioning. tone of voice) Is it DIFFERENTIATING? Does it have the EFFECTS on the target in line with the briefing? Do people LIKE it? Presentation1 257 . sound signature. pack shots.
– Draft – Importance of advertising likeability according to Millward Brown 40% of advertising effectiveness is explained by its liking score Ad-liking correlates with Ad-recall/Awareness Liking = 5 : 3% impact/100GRPs Liking = 6 : 10% impact/100GRPs Liking = 7 : 33% impact/100GRPs Emotions •Create attention •Determine associations Emotive advertising works best One must understand what emotion is •Not interfering with rational or opposite rational •Determines the rational Presentation1 258 .
database of + 2M print ads found that excessive copy reduces the effectiveness of ads and recommends copy of max 50 words or less Increasing white space around the ad or headline increases effectiveness Presentation1 259 .– Draft – Increase Print Advertising Effectiveness Does the headline ‘grab’ the reader? Ideally the headline is 9 words or less (Ogilvy: high impact headline is read by x5 people) Does the headline promise an important benefit? (Ogilvy: ads with benefits are read by 4x more people) Body copy long enough for useful information and proof of promise – but not too long! Roper Starch Worldwide.
– Draft – Increase Direct Marketing Effectiveness Total response rates are less important than ROI calculation.for every dollar spent in DM. consider things such as •Number of buyers •Cost per buyer •Number of responses •Cost per response •Cost per Lead / per Order •Lead-To-Sales Conversion •Avg profit on order •Expense-to-revenue ratio Example of effectiveness DM: American Direct Marketing Association 2007: ROI of DM in automotive .81 dollar gained Presentation1 260 . 33.
– Draft – Customer Experience Ichec 2010-2011 Presentation1 .
mainly to sustain a premium positioning “Great customer experience and optimal results are achieved when the operational reality is aligned with the brand promise and business objectives” An effective Customer Experience strategy is a key driver of: •Strong brand image and differentiation building •Brand preference: ensuring consumer choice over competitors •Brand loyalty: ensuring repeat purchases •Optimization of cost to serve per customer segment Presentation1 262 .– Draft – For a company. The Customer Experience is core to the brand positioning.
– Draft – For the customers. to purchasing more! “Let’s take the example of a customer having seen a Wii advertising…” Want to find Find where to buy Buy & Pay Get started & Use Need help Repurchase Or exit Presentation1 263 . the customer experience is “all interactions that he has with the Brand” : from seeing an advertising….
– Draft – So. keep and increase the customer value Find & Buy Get Started Use Billing Need Help? Repurchase Get Keep Increase Acquisition (#) Loyalty (time) Customer Value (€) CLTV = Revenues – Cost of Acquisition – Cost of Retention – Cost-to-Serve Presentation1 264 . improving the customer experience will drive the “Customer Lifetime Value” by improving the way we get.
– Draft – “We create happiness for children of all ages” Disney Resorts Brand Promise Presentation1 265 .
products and services can be calibrated and structured Length of queues • Max 15 minutes Food quality standard Cleanness of alleys • Cleaning tour every 50 minutes • No paper • So clean you could eat on the ground but children are unpredictable customer experience is also a mindset for all employees Presentation1 266 .– Draft – Customer experience is not only a matter of standardized processes … Processes.
– Draft – Five building blocks for a pragmatic top down approach methodology Business strategy / Customer perception match ? 1 2 3 Understand Brand positioning Understand Brand values Get Customer insights 4 The interactions process as part of CE Define the aspirations per interactions Identify gaps Prioritization Define KPI’s per interaction Interaction identified & actions prioritized CE Financials Scenario building & implement Monitor 5 Turn KPI’s into business drivers 6 7 8 Build scenario’s Implement CPM Measure ROMI Presentation1 267 .
geo-marketing. satisfaction data Presentation1 268 .– Draft – Put yourself in the shoes of the consumer: gather customer insights data! • Step 3 a: Customer insights can be generated through various opportunities: • Economic value: Surveys Complaint registration Panel discussions • Data mining techniques Registration of products and contracts Loyalty registration • Step 3 b: Cluster the different Consumer Groups (segmentation) and deliver the right experience to the right Customer Group • Usage. distribution.
– Draft – The interaction process as part of the customer experience (step 4) Motivational segmentation Lifestage Wallet Interactions Want to find Find where to buy Buy & pay Get started & Use Need help Repurchase Or exit Channel Brand COM Products & services Price Products & services Relationship Management Presentation1 269 .
) • Best in class product quality & usability • Fast and easy configuration at installation (DIY) •Clear installation communication •Short lead time & timeslot • Tariff structure clearly reflected in the invoice • No billing errors • Broader channel accessibility • CS flexible hours • Fast handling • Easy website • Self service in shops • Friendly & competent staff • Automatic contract renewal • Open billing platform (cross selling) • Personalized direct marketing E M O T I O N A L He feels welcome • Friendly & competent staff • Customer identification He feels reassured • Clear installation communication at order intake He feels right He feels respected • Promotions & advantages clearly expressed He feels we like to taken care of him • First time right highest possible rate He trusts us • Right product proposal (CRM) • Usage is as intuitive as expected Presentation1 . 3G. Customer Services work flexible hours & have fast handling (low waiting time in shop and CS) • Easy website • Quick activation process & provisioning • Clear tariff structure • Clear product and service communication • E... and define their aspirations (what they expect from the Brand) at all those “interactions points” Get Started Find & Buy Use Billing Need Help? Repurchase R A T I O N A L • Clear “go to action” in the ads • Shops. device compatibility (GPS.– Draft – Let’s start from the customers.g.
needs to be manageable for people Presentation1 271 .– Draft – Prioritization of potential actions HOW = x x WHO WHO WHAT x WHEN x THROUGH Life stages Value Motivational Segmentation Interactions Channels 6 6 4 21 4 12 096 potential actions! Concept needs a human dimension.
– Draft – Prioritization according to relevant criteria Through Customer Research (and Business strategy) we now have the data necessary to priorities the actions through a 3-phase approach. They are depicted in the following prioritization funnel: n = # of actions 1st criteria – Relevance to the Customer 2nd criteria – Customer Satisfaction x 3rd criteria – Company Feasibility and/or Revenue Generator y z Presentation1 272 .
1 6.1 4.3 AxBxC 501 AxCxB 173 … Consumer Group 2 A B C 8.1 2.– Draft – Prioritizing by customer relevance This prioritization consists of multiplying the relevance ratings from the Customer Research to obtain an OMCE Relevance Score For example.9 4.4 5.4 A B C 5.4 AxCxA 495 AxBxB 231 … Presentation1 273 . for each consumer group: Service Type Score Channel Score Media Score OMCE Relevance Score Consumer Group 1 A B C 7.5 6.1 6.0 8.2 8.1 A B C 2. if as part of the Customer Experience exercise we wish to establish that the right service is offered through the right distribution channel and communicated through the right media.9 4.3 A B C 7.0 8.1 4.0 A B C 2.
– Draft – Prioritizing by customer satisfaction We can now plot the OMCE Relevance score against Customer Satisfaction to determine the most urgent attention points: High x x Satisfaction DISREGARD x x x CONTINUE x x x x INVEST x Minimum Level High OMCE Relevance Score Presentation1 274 .
1 2.3 ABC ACB ACA 4259 882 1251 Value For Value From Loyalty Margin Volumes Presentation1 .5 5. Priority 1-10 OMCE Priority Score Low High OMCE Relevance Score ABC ACB ACA 501 173 495 8. we can filter the results to obtain the OMCE’s that most urgently require attention: High x x Satisfaction DISREGARD x x x CONTINUE x x x x INVEST x OMCE Relevance Score Bus.– Draft – Prioritizing by business priorities Finally.
– Draft – Turn KPI’s into business drivers (step 5) Want to find Find where to buy Buy & pay Get started & Use Need help Repurchase Or exit KPI KPI KPI KPI KPI ACQUISITION LOYALTY UPSELLING DECREASE COST TO SERVE Presentation1 276 .
– Draft – KPI’s Want to find • • • • Awareness Top of Mind Ad awareness Brand/product knowledge Find where to buy • Web site satisfaction • Customer service easy reach • POS coverage • POS Visibility • POS Availability Buy & pay • # of shop visits related to billing • # calls related to billing • Share of e-Bill • # of bills sent par month per customer • # settlement issues • Market Share • Penetration • Volumes sold and margin calculation • Sole Usage • Numbers of brands purchased • Heavy usage index • Willingness to search Start & Use Need help • • • • • • • • • Repurchase Or exit Cross-selling rate Up-selling rate Margin Volume sold Churn rate while moving %billing issues when moving %movers needing a follow-up %movers filling a complaint %churn for winback customers • Attitude/Liking/ Image • Perceived value for money • Perceived quality • Intentions • Brand Preference • % of reworked • Customer orders Satisfaction on • % DIY • % of support explanations case received • Installation • % of issues solved lead time through • Time slot size • % waste web/selforders service • Per product: Availability. dropped calls. speed and usability • NPS • ACSI • Customer Advocacy • Willingness to recommend Presentation1 277 . down time. quality of service.
This is applicable to each separate Customer Group.Implicit guidelines . we can develop Scenarios to improve Customer Experience in the most relevant and feasible way. “Scenarios” include the following information: .– Draft – Developing scenarios for the priority actions • Step 6 & 7 : Based on the qualitative research collected during the Customer Research phase. and knowing which OMCE’s are prioritized.Explicit guidelines .A description of the Customer Group and behavior .Actionable recommendations Presentation1 278 . who will now each have a customized Scenario for their needs.
’ • Perceived value for money: % of customers who agree with statements like: ‘this brand has usually good value for money’ • Perceived quality: quality perception compared to other product and services in the market • Intentions: % of potential customers who agree with statements like: ‘It is very likely that I will buy this product • Brand Preference • • • • Number of new customers Market Share Penetration Volumes sold and margin calculation 279 Attitudes/ Purchase Intentions Acquisition Presentation1 .– Draft – How to measure pragmatically the impact of CE Awareness and Knowledge • Awareness: % of potential customers who recognize a brand • Top of Mind: First brand that comes to mind • Ad awareness: % of potential customers who recognize an add (could be aided). response rate to communication campaign • Brand/product knowledge: % customers who demonstrate specific knowledge or beliefs about the brand • Attitude/Liking/Image: % of potential customers who agree with statements like: ‘this is a brand for people like me.
only the category The willingness to delay a purchase in order to not switch brands = ‘Accept no subsitutes’ 280 Consumer Franchise and category usage Heavy usage index Willingness to search Presentation1 .– Draft – How to measure pragmatically the impact of CE Usage • Usage in a year. month. €)/ Average total purchases in category by all customers ! This index does not indicate how heavily customers use a specific brand. week • Relative usage: Usage of 1 brand compared to total usage in a given period of time • Sole Usage: The fraction of a brand’s customers who only use the branch in question • Sole Usage percentage: Proportion of sole users to customer base • Numbers of brands purchased • Repeat rate: The % of customers in a given time period who are also customers in a subsequent time period • Repurchase rate: The % of customers who repurchase the brand on a next occasion • Churn rate • Cross-selling rate and Up-selling rate = Average total purchases in category (#.
be it store attributes. moments of truth and brand consistency • Individual measurement and benchmark comparisons based on internal evaluation • Importance – Performance analysis is a graphical and analytical tool for developing prioritization in improvements on attributes.– Draft – How to measure pragmatically the impact of CE Maturity index • Concept introduced by Insites Consulting measuring the maturity of your company in delivering Customer Experience • It is based on 4 elements: Understanding your customers. service attributes. organizational alignment.… • Questionnaires will determine the importance and satisfaction on each attribute and plotted on the graph • The position of each attribute will determine the urgency of improvement • This model is the input in the THoM methodology IPA Presentation1 281 .
how easy it was to use or interact. but this also implies limited statistical significance • Customer Satisfaction Index is the main competitor to NPS • It is constituted by multiple questionnaires and calculations are based on regression models • The complexity of this model makes it easy to compare within sectors or industries. and the way the customer felt during this interaction (A)CSI CxPI Presentation1 282 . developed by Fred Reicheld.– Draft – How to measure pragmatically the impact of CE NPS • Net promotor score. The research has to be done by external sources • CSI used by Electrabel • The Customer Experience Index is developed by Forrester and gives the opportunity to make an overall view on Customer Experience of your company within the industry • The methodology is based on 3 items: The usefulness. calculates customer satisfaction through 1 question “Would you recommend us to your family and friends” • The advantage is the simplicity. but not useful for individual use.
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