B43 Customer Acquisition Elective C5 and C6

LOGS
December 17th : 1 classes : 4.50 pm - 6.00 pm
Preparing for a competitive onslaught 
Case Used : Wallace Fort Hotels
Main Lessons 

• Price is important because it impacts both the customer satisfaction and profits. Since Value > Price > Cost; you must know which cost is converted into value and which is not. In view of these it is important to know it is important to (A) The company whose resources can be used to create value so that you can select what resources and competencies you want to create in the long run  (B) Know various customers in the market so that you can select the customer who is Willing to Pay for what you can create from your competencies  (C) Know the competitor and his ability to create a better value for your targeted customers because of his competences (D) Know the value who can attract your customers to them
   That’s why knowing customer is important. That’s why you also must know who can create the same value better than you (eg delivery : that is why you need a partner )
  Value is an important part of the of an offering can be determined only from the viewpoint of the customer. It is reflected in the "willingness to pay" (WTP)  for the offer.
  Sometimes the sting of negative features - or sometimes the positive attraction of  some great features - disappears  when you change the target customer. "The beauty is in the eye of the beholder".
  No feature , by itself, is good or bad. The key question is "for whom" and "for what purpose / application"
  The cost, or the materials, or the technology that goes into an offering is designed to create value for the customer but many times it does not. There is always a waste. 3 circles models.
  Who are you competing with is an important question in marketing. For example, if City Center Hotel does not compete with Wallace Fort Hotels, there is not need for the Wallace Fort Hotel to do anything. But, on the other hand, if they are competing, then the Wallace Fort Hotels needs to do something.
  How do you resolve whether they are competing or not? Because BOTH of them are called "Hotels", are they competing ? Or, because they are at different locations and are offering different features, can we say they are not competing? Generally these kind of deep questions cannot be answered from an industry perspective (analysis of what goes into the products) but can be answered from a market perspective (analysis of who is appealed by the products). The concept of strategic groups.
  If the same customer (say, your customer) is attracted to consider 2 items, they are said to compete with each other in the mind of that customer.
  How to select or reject faatures : we saw 3 models : Kano's model , 3 Circles model , Value For Money line
  Process of Marketing
  Consumer Behavior, Decision Making Unit, Market Research
  QUESTION FOR YOU : Out of all the players in your industry, who is competing with you?  For any given product / offering you have, what are the different target audiences in the market and how do you rate the attractiveness of your offering to each of those audiences.    If customer satisfaction and profit are both important, price is important because it impacts both. Price will be paid if
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December 18th : 1 class : 3.20 pm - 4.30 pm 

Case Used : Everwrite Pen Company
How does marketing help the CEOs in helping him take decisions 

Main Lessons 

• The CEO sanctions acquisition or use of assets to the CMO so that he can create the right marketing mix. The "assets" are tangible (financial and physical) and also intangible assets (structural, human and relational). The process works in reverse : the CMO studies the market (similar customers grouped together : called "segments") and arrives at the appropriate marketing mix needed by that segment. After this, as the case shows, it becomes clear what tangible and intangible assets are needed to crack the market.  
• The process of marketing was discussed 

December 17th : 1 class : 4.50 pm - 6.00 pm 
Case Used : 3-in-1 Ram Baan 
How to estimate the sale of a completely new product
Main Lessons 

• MVC Model  

Choosing The Customer - HBR Article

Why Select The Customers You Want to Serve?

All companies claim that their strategies are customer driven

but many times they do not know / define who exactly is their “customer”

Customers are the people or businesses who buy what you sell and give you revenue. By that definition, end-consumers, wholesalers, re­tailers, purchasing departments …all become your customers. Sometimes a customer need not even give you revenue directly.

In the Pharma business, the most important customers are not the patients but the physicians who prescribe them. But Merck has chosen research scientists in labs and universities around the world as its primary customer. Accordingly, its business model re­lies on encouraging its own world-class researchers to act like university scientists by conducting basic research, publishing papers, and presenting results at conferences, all with the intent of discovering ground­breaking compounds that can then be com­mercialized by Merck’s marketing and sales group. The business is even configured like a research university— a simple functional structure in which a powerful, centralized R&D unit receives the bulk of organizational resources.

But most executives are reluctant to define their customers as narrowly as Merck has. By not singling out any group as the primary customer, ex­ecutives can sidestep difficult choices that might turn out badly – a temptation that’s particularly strong in new, rapidly evolving markets. What’s more, many business leaders believe that treating all value chain partners as customers improves internal coordina­tion and responsiveness.

But by not identifying a primary customer, companies run into problems. Consider Yahoo and Google.

Yahoo began as a broad-based internet portal supported by proprietary editorial content. To attract users, it hired journalists to write entertainment stories and created utilities such as Yahoo finance, Yahoo mov­ies, and Yahoo sports. Over time, Yahoo executives began to spread resources among many additional initiatives, including social networks, products, media, and advertising. As a result, they underinvested in search, and the website became messy and confusing.

Then Google entered the field. From the outset, Google focused on users who appreciated technology and its ability to unlock new opportunities and appli­cations. Like Merck, Google allocated the lion’s share of its resources (and prestige) to its technologists and engineers, who were given freedom to innovate. The aim throughout the business was to build the best technology in the world—whether in search, Android, or maps. With that sharply focused value proposi­tion and business model, Google quickly leapfrogged Yahoo in the competitive marketplace.

The bottom line is this: The strategic choice of primary customer—with special emphasis on “pri­mary”—defines the business.

This is certainly true at Amazon, which serves four very different types of customer: consumers, sellers, enterprises, and con­tent providers. You might think that it considers all four customer groups to be equally important. But the company’s choice of primary customer is re­flected clearly in its well-known mission “to be the world’s most consumer-centric company.” Amazon devotes maximum resources to pleasing consum­ers, even if that means sellers or content providers sometimes feel shortchanged (sellers whose store­fronts are hosted on the Amazon platform have been known to sue Amazon for more resources).

This un­wavering focus on consumers has created innova­tions such as prime free shipping, detailed product reviews (including negative ones), look-inside-this-book, and the listing of lower-priced products from off-site competitors. These practices have often been criticized as inherently unprofitable or injurious to Amazon’s other constituents. But the main results of the company’s choice are the ones that count most: unparalleled customer loyalty and stratospheric stock valuations.

Here we present a truly cus­tomer-driven framework that can help executives build winning business models for their companies . The framework lays out four steps (1) Identifying the best primary customer for your business (2) Creating processes to learn what that customer values (3) Allo­cating resources accordingly (4) Building an inter­active control process to monitor the assumptions that underlie your choice.

Step 1 : Identify Your Primary Customer

As the cases of Merck, Google, and Amazon illus­trate, your most important customers are not those that generate the most revenue but those that can unlock the most value in your business. For some businesses, the primary customer will be the end user or consumer of the product or service. For oth­ers, an intermediary (such as a reseller or a broker) will be the critical customer to which organizational resources should be devoted.

But how can executives be confident that they’re making the right choice? Identifying the best pri­mary customer for your firm involves assessing each group of customers along three dimensions: perspective, capabilities, and profit potential. Let’s look briefly at each.

Perspective refers to the culture of a business, often revealed in stories about important events or people in the company’s history. It is the lens through which executives consider op­portunities and strategic direction. Steve Jobs’s ob­session with perfection in product design creates a leans which will decide which opportunities Apple manag­ers will consider and which they will not. Walmart’s Sam Wal­ton was famously frugal in his own life. And Amazon founder Jeff Bezos is a zealot about delivering a su­perior experience to shoppers. “When [executives of other companies] are in the shower in the morning, they’re thinking about how they’re going to get ahead of one of their top competitors,” he told Fortune in 2012. “Here in the shower, we’re thinking about how we are going to invent something on behalf of a customer.” Clearly, the choice of primary customer must reflect a company’s perspective; otherwise the company will be unable to leverage the energy and creativity of its people in service to the customer.

 Capabilities  refers to the embedded resources of the firm. Some firms excel at technology (Apple, Google, Airbus), some at logistics (Walmart, Ama­zon, Dell). Others provide superior brand market­ing (Ralph Lauren, Nestlé, P&G) or have industry-specific capabilities (original content production at HBO and Netflix, mining at BPH Billiton). Such capabilities, which are built up over time and are of­ten difficult to copy, position a business to serve the needs of certain customers better than others. Dell in its early years built a formidable low-cost logistics operation to support its direct-to-consumer sales model. Today, the company is attempting to change its primary customer by refocusing on CIOs of large enterprises. This pivot has proved difficult for Dell because CIOs look for a set of capabilities—inte­grated hardware, software, and services solutions—very different from what end consumers need.

Profit potential refers to a customer’s ability to deliver profits. Techniques such as Michael Porter’s five forces analysis can provide insight into the rela­tive profitability of various customer types—and help weed out those that would be a poor choice for primary customer. Consider HBO. Cable opera­tors that purchase HBO’s content might seem to be the obvious choice. But cable operators have low switching costs—they can easily buy content from a variety of producers. Thus HBO would have little market power and would be unable to extract high margins from cable operators. But by targeting film­makers as the primary customer and devoting sig­nificant resources to their needs, HBO can create the unique products that viewers demand, allowing it to charge premium prices that cable operators can­not negotiate. Of course, profit potential isn’t always about customers who can pay premium prices; be­coming the preferred destination for cost-conscious customers can deliver substantial profits through volume, as Walmart has demonstrated.

LinkedIn is one successful company whose pri­mary customer clearly fits all three dimensions. For more on how it settled on individuals (rather than job recruiters or advertisers), see the exhibit “How LinkedIn Chose Its Primary Customer.”

Step 2 : Understand What Your Primary Customer Values

Once you’ve determined who your primary customer is, the next step is to identify which product and ser­vice attributes the customer values. Within the same market and industry, different primary customers ( different buyer personas) (different customer segments) may value different things: Some demand the low­est possible price, others want a dedicated service relationship, and still others are looking for the best technology or brand or other specific attribute. To complicate matters, customers often don’t know ex­actly what do they value.

Uncovering the full truth about their needs requires systematic research at multiple levels.

Let’s take the easy part first. Assume you have already chosen the best primary customer and have a good working idea of what the customer wants. There’s still plenty of room for improvement. You can refine your understanding by leveraging today’s easy and cheap access to data on customer buying habits, preferences, and search activities. Data analytics is an important tool in uncovering and rapidly respond­ing to changing customer needs. At Google, separate analytics teams for display, search, and maps spend untold hours in their labs with customers studying eye movement and other variables to gauge their reactions to subtle product modifications such as changes in color. Nestlé has a war room where ana­lysts monitor social media to track chatter that relates to or affects the acceptance of its products. The ana­lysts use the intelligence to inform product research and marketing decisions and to evaluate in real time how well their value propositions are meeting the needs of the primary customer. Such data can help you fine-tune a product or a website’s functionality to better meet your custom­er’s known needs.

They’re unlikely, though, to help you identify what your customers want but aren’t getting. For that, you need to actually ask them. Smart companies set up systematic dialogues with their primary customers. Managers at FedEx, for ex­ample, hold twice-yearly summits where they bring in a sampling of business customers (the firm’s pri­mary customer) to ask them where FedEx is doing a good job of meeting their needs and where com­petitors are doing better. At Germany’s Henkel, the world’s leader in adhesives, CEO Kasper Rorsted has created a “tops to tops” program in which all executives are required to meet regularly with their counterparts at major customers to ensure that their needs are understood and the company is respond­ing appropriately. Other companies, especially those with rapid product cycles, manage the dialogue through new-product testing. Google’s Gmail, for example, was released after five years of beta testing by more than 1,000 technology opinion leaders.

Finally, you should set up processes for identi­fying products or services that customers may not know they need. This can be challenging—and ex­pensive. Smart companies typically rely on ethno­graphic methods. At P&G, for instance, where con­sumers are the primary customer, executives ask their managers and market researchers to spend days at a time accompanying consumers on shopping trips and sitting at the family dinner table to more fully un­derstand the extent to which various products meet consumer needs. CEO A.G. Lafley recounts in his book The Game Changer how the experiences of P&G executives living with lower-middle-class families in Mexico City produced Downy Single Rinse, a fabric softener that is simpler to use for markets where wa­ter is in short supply.

Most companies assume that their products and services meet the needs of their customers. But sur­prisingly few actually test this assumption. So ask yourself, What are the processes we use to make sure that we truly understand what our customers value and that we can deliver value better than our com­petitors do?

Step 3 Allocate Resources to Win

As we saw with Merck and Amazon, your choice of primary customer and your understanding of what the customer values provide all the information you need to make the critically important decision of how to organize your company’s resources—in other words, what kind of business model to adopt. There are five basic configurations you can choose from.

1. Low price. If your primary customer is looking for the lowest possible price, centralized operating functions (such as merchandising and distribution) should receive the bulk of organizational resources, in order to create economies of scale and scope. Customer-facing units, such as stores or restaurants, should receive relatively few resources. This is the configuration used by Walmart.
2. Local value creation. If your customer values products and services that are customized to local tastes, preferences, and regulations, you should or­ganize like Nestlé. It pushes resources out to regions so that local managers can customize product offer­ings, while operating core functions are limited to corporate-level support activities.
3. Global standard of excellence. If your cus­tomers are looking for the best possible technol­ogy or brand no matter where they are located, you should organize resources around global business units that are defined by product lines. This configu­ration allows focus and leverage in R&D, brand mar­keting, and distribution. Microsoft, for example, has separate business units for Windows, servers, MSN, mobile, and Xbox. Each unit has full revenue and profit responsibility and its own R&D. (Note: Micro­soft has recently announced that it intends to change its structure to more of an expert knowledge organi­zation—described below—to emulate Google.)
4. Dedicated service relationship. If your cus­tomer is looking for an ongoing, deeply embedded service relationship, you should organize like IBM. Customer teams in industry-based “verticals” mar­shal and coordinate product and service delivery from centralized, product-based “horizontal” units.
5. Expert knowledge. Finally, if your primary customer is looking for expert technical knowledge, you should follow the example of Google and Merck, where R&D sits prominently on top of product or­ganizations that receive the lion’s share of the com­pany’s attention and resources, with other functions playing a supporting role. These R&D-led product units, which may be distributed in centers around the world, have no revenue responsibility: They are focused entirely on product development and on creating breakthrough technology. All sales revenue is routed through a centralized, stand-alone sales di­vision that is configured as a distinct function.

Of course, various permutations and combina­tions of these five basic configurations are possible. Many companies will want to leverage the advan­tages of several models at once. Some companies experiment with matrix structures that can simulta­neously emphasize, say, geography and function or business unit and region. This “split the difference” approach can be appealing if, for example, you are an engineering company like ABB and your primary cus­tomer is government purchasers that demand both the best technical features (global standard of excel­lence) and customized content (local value creation). But it should be noted that matrix organizations are notoriously difficult to manage; all too often, a matrix structure reflects an inherent confusion about who the primary customer is rather than an effective re­sponse to the customer’s needs and preferences.

As a general proposition, when a business finds that it has more than one primary customer, it should be split into separate units and adopt for each the configuration that best allows it to focus re­sources on the needs of its primary customer (“the rule of one”). At Nestlé, for example, although most of the business is structured using a local value con­figuration, the company’s strategy differs for two of its brands: Nespresso and Mövenpick. Customers want a consistent, premium experience from those brands regardless of location. Accordingly, those businesses are managed using a global standard of excellence configuration in which resources are cen­tralized and managed globally.

In reviewing a business model, the key ques­tion executives should ask is this: Do the choices we have made about the company’s structure reflect our choice of primary customer? If the answer is no, competitors whose business models are consistent with their chosen primary customer will almost cer­tainly be outplaying you.

Step 4 Make the Control Process Interactive

As good as your business model may be today, it can­not and will not survive forever. Customer tastes will change, new technologies will replace old, unfore­seen competitors will enter the market, and regula­tions and population demographics will evolve over time. That means you must constantly gather infor­mation on shifts in your competitive environment, especially those that might affect the criteria and behavior of your primary customer. You must be alert to emerg­ing threats and opportunities that will redefine what your customer values and that customer’s profit po­tential. If the changes are dramatic, you may need to fundamentally reorient your business model—and even, in the most radical situations, select a different primary customer.

The best way to get the information you need is to make sure that your company’s control systems are interactive. Everyone in the organization should be using the same performance measures as the basis for learning and debate. Monitoring changes in customer behavior and the competitive environ­ment, in particular, is not a function to be delegated to a special department. As a technology executive recently told me, “Companies that get it wrong are those that build departments with ‘innovation’ in their titles. We need to have everyone in the busi­ness innovating.”

Depending on your business strategy and indus­try, you can choose to use any of your current man­agement systems interactively—your profit planning system, your brand revenue system, your orders-on-book or new deal system. At HBO, for example, executives constantly track the company’s success rate in bidding for new shows from filmmakers and use that measure to prompt a discussion among managers throughout the business about changes in the competitive marketplace that could affect their strategy. Amazon’s category managers use their Monday morning meetings as a forum to study data about product assortment choices, revenue growth, customer orders, and inventory turnover. Reflecting the firm’s leadership principles (customer obses­sion; bias for action; earn trust of others; dive deep; and have backbone, disagree, and commit), these meetings are highly interactive as managers from a diverse array of functions work together to inter­pret the data and come up with action plans. Some of these actions may, over time, plant the seeds of a new strategy.

Systems that work well interactively—like those at HBO and Amazon—share three essential charac­teristics: They deliver information about uncertain­ties that could undermine the assumptions of a cur­rent strategy and require attention from the highest levels of management; they are widely used in the organization, receiving frequent and regular atten­tion from operating managers at all levels; and they involve face-to-face meetings that focus on emerg­ing data, assumptions, and action plans. There is no substitute for the energy and creativity that flow from open debate when participants leave their ti­tles at the door.

In using interactive control processes, manag­ers should continually ask three questions: What has changed? Why? and, most important, What are we going to do about it? If you identify changes in your customers’ profit potential, for instance, you might want to rethink your choice of your primary customer. Changes in tastes, regulations, technology, or competition may alter what it is that your primary customer values—resulting in a need to reallocate resources or redesign your business structure.

IF YOU HAVE significant first-mover advantage thanks to a new technology—or if competitors are evolving and struggling to find their way—you may be able to duck making a choice of primary customer, opting instead to stay fluid and focus on experimentation. But the entrepreneurial landscape is littered with the carcasses of companies that tried to be everything to everyone. Like Yahoo, they muddled along until they were overtaken by crisis, often bringing in a new leader in a last-ditch effort to impose discipline and focus on a failing business. It is, I believe, ultimately less risky to be proactive and make the key strategic bet of choosing a primary customer. Companies that hedge their bets usually find themselves looking at the taillights of their more decisive and committed competitors.

How LinkedIn Chose Its Primary Customer : Consider LinkedIn. In deciding where to focus, executives had to choose among three kinds of customers that all had the potential to generate substantial revenue: job recruiters, advertisers, and individual members. LinkedIn’s founding mission, to “connect the world’s professionals to make them more productive and successful,” speaks to job recruiters but is most strongly aligned with the needs of its individual members. Despite the fact that recruiters provide 54% of revenues and advertisers 26%, LinkedIn’s 250 million members offer the most profit potential: They are what makes the network so attractive to the other paying customers. LinkedIn excels at creating a superior experience for individual users. Its site is a less efficient platform for recruiters or third-party service providers.

PGEMP B47 MARKETING MANAGEMENT

B47 C2 (Core Marketing Management Course in PGEMP) November 2014 by Prof S K Palekar

Module 2 taken on 28th November  2014 ( 2 successive sessions of 70 minutes each)


How annual marketing plan is done in practice

STEP 1 : WORK STARTS AT TWO LEVELS IN THE ORGANIZATION: 

•  Top management creates its own “charter of possible issues” for which the organization needs to plan by asking internal heads of departments “what needs to be done in the plan period for your external stakeholders and internal stakeholders”. This is moderated by the top management group before passing it on to the market managers for incorporating in the plan.
• Simultaneously the market managers create their own “charter of possible issues” for which the top management needs to sanction release of resources (capex, opex, manpower).  This is generated by looking at 3 things (1) strategic thinking (MVC) (2) an analysis of what worked and what needs to be fixed and what needs to be dropped (3) complaints and suggestions from the customers, sales force and internal customers.

STEP 2 : THE TWO LEVELS MEET (FIGURE OF 8)

The purpose of this meeting is to create a realistic shortlist for the new year. The market managers will come to the meeting after examining the charter of top management from an external / market perspective to see if market conditions will permit what the top management wants. 

The top management will come to the meeting using internal / resource perspective to see  if they can release resources for what the market managers are proposing. 

This is an interactive and iterative meeting ending in both the top management and the market managers broadly agreeing on the agenda for the coming year in terms of 

• outcomes of marketing (sales, profit, market share, customer satisfaction, loyalty, complaints %, better support from collaborators)
• major changes in strategic design (MVC and Value Chain and different activities and doing activities differently)
• changes in deployment (Investment  what to downsize, what to scale up, what to jettison, what to invest in, what to fix, what to start) ( capex and organization and opex mix).     

During the class we focused only on the strategic thinking in red letters in the text above (MVC analysis)

Please click here to read the importance of defining the "Market".

Please click here to read how to actually write a marketing strategy.
 

Module 1 taken on 26th November  2014 ( 2 successive sessions of 70 minutes each)

Review of what we did in B47C1 

Is marketing a function or a department ? Every company needs to perform the basic marketing function. However, all these marketing functions are not necessarily always performed by the "designated" marketing department. In some companies some marketing functions are handled by CEO, Commercial Department, Sales Department and Service Department etc. But all are market-facing functions.

Definition of Marketing : There are two major parts (A) Marketing Strategy (B) Marketing Operations. I am giving below only the definition of Marketing Strategy (The thinking and planning part) and not of Marketing Operations (which are activities of new product development, pricing, selling, distribution, promotion, PR, advertising etc) involved in implementing the strategy. The operations will be covered in C3 and C4.

DEFINITION OF MARKETING STRATEGY : It performs the function of “focusing lens”  that helps bring together all internal functions, resources and activities of the whole company 

• to sharply focus on targeted opportunities and threats in the environment by installing and operating a “lookout” (“market sensing”) mechanism” which enables the organization to “see” the opportunities and threats in the external environment
• to achieve planned outcomes for all market-facing stakeholders of the company
• the company itself (outcome : sales, profits, market share)
• the customers (outcome : higher value than the asking price
• the collaborators (outcome : Return on Effort) 
• by formulating a marketing strategy plan for the company / division / product 
• by making a marketing strategy plan which spells out
• which issues to address during the plan period from all the issues
• what objectives / outcomes need to be achieved
• how to deploy internal resources and undertake cross-functional activities

Marketing is a lens for 

• taking photo of the outside world 
• focusing internal energies on the outside target.

Marketing output measurement : the company works for multiple stakeholders : Basic, impacting, faceless

1. Front-Facing : Company Shareholders : Profit
2. Front-Facing : Customer : Satisfaction
3. Front-Facing : Competitors : Market Share
4. Front-Facing : Collaborators : ROI
5. Front-Facing : PESTEL : Alignment
6. Back-Facing :  Vendors : ROI
7. Internal :  Employees : Progress
8. Internal :  Functions : Formal Expectations 

Marketing Process ( Input to Output ) : Designing (Discover, Diagnose, Design, Deploy, Deliver). The process remains the same but the inputs pertaining to each situation are different and therefore the "how to market" answer varies from situation to situation. More specifically it depends on the 5 Cs : who the customers are, who the competitors are, who the collaborators are, what situation the company is in. 

Last time we referred to the following concepts

• Sequence ( Study, Think, Plan, Act, Get ) 
• Decisions based on marketing : objectives / activities / expenses / investments
• Customer Analysis : CPV,  3 Circles,  Kano Model, Customer Behavior Model
• Market Sensing : Market Research and PESTEL
• Marketing mix : 7 Ps

We considered the following cases the last time:

1. Wallace Fort Hotels : Costs by themselves do not indicate value : ( only the knowledge of customer needs create value)
2. Trident Float Glass : You will know only when you open the bonnet ( underneath you will see 5Cs)

Assignments given the last time 

1. How the Marketing function is organised in your company? What factors in the context led to this Marketing Organisation? Do you think the existing Organisation Structure is suitable to take on future changes in the Context?
2. Take any two cross functional decisions taken by your company in 13-14 and explain the roots you find in  5Cs connected to it.

B47 C1 (Core Marketing Management Course in PGEMP) August 2014 by Prof S K Palekar

Module 1 taken on 20^th August 20, 2014 ( 2 successive sessions of 70 minutes each)

LEARNING OBJECTIVES

1. Marketing is a “5D” “process of design” to achieve two opposite objectives (1) Returns to customer (satisfaction) (2) Returns to the company (Profits). 
2. This process starts with knowing what creates value for customers and what does not. Then it goes on to formulation of strategy to help the CEO plan costs and activities. This results into the actual business activities of acquiring customers and fulfilling them happening according to the strategy which ultimately leads to returns for both the customer and the company. 
3. The company creates value for the customer through its "Product", In reality the "Product" offered by a company is not only the "physical product" but the entire bundle of "valued benefits" that are created by the company's planned “Marketing Mix” according to the formulated strategy (7 Ps). The customer for whom the value, thus created, makes is sufficient to pay the asking price of the company, is willing to pay it. 
4. But it should be noted that the "Price", from the customer perspective, is not only the money that he pays but the whole “Price Mix” of his scarce resources (the money, the risk involved, the time he spends and the inconvenience he incurs)   

Introduction To Marketing

How Marketing Helps Company Make  Money

1. Since marketing is essentially a process of “designing”, no two marketing solutions can be similar because the circumstances are different. 
2. Each marketing effort is “designed” using he “5D” Process (Discover, Diagnose, Design, Deploy and Deliver) based on situation assessment.
3. What does marketing “deliver” ? Both “Profit” and “Customer Satisfaction” at the same time and on a long term and sustainable basis. This means that the marketer must know
• what costs will create, what extent of value, for what kind of customer
• If pricing will be profitable,  and will attract enough customers
• If competition will retaliate and will succeed in their efforts to fight

Definitions

• Profit / Unit when the company sells = Company Surplus
  = ( Unit Price - Unit Cost ).  The company sells because Profit is +ve
• Customer Satisfaction from buying = Customer Surplus
  = ( Unit Value - Unit Price ). The customer buys because Satisfaction is +ve

Value is subjective. The value may not only differ from customer to customer but from time to time and from application to application. Only a customer can tell you how much value he attributes to your offer. To find out customer value, you must put yourselves into the shoes of the customer.

Cost is objective and does not change (much). Your cost accountant can tell you how much costs you to produce and sell a given product.   

The process of  delivering the twin objective of profit and customer satisfaction depends on the marketers understanding the needs, perception and behavior of customers, competitors and collaborators. 

1. PRE-STRATEGY STAGE : Starts with “Situation Assessment” ( 5Cs : Company, Customer, Competitor, Collaborator, Context)
2. STRATEGY FORMULATION STAGE : which customers to target, what to offer to them and how to connect with them
3. STRATEGY EXECUTION STAGE : consisting of activities leading to acquiring customers and then fulfilling them

Is strategy important or its execution? 
More than 95% expenditure of a company happens for undertaking visible activities at the “Strategy Execution Stage” but, unless these activities are based  on sound strategies and pre-strategy stage; the expenditure may not result into profits and customer satisfaction. Thus, the pre-strategy and strategy formulation stage are important. Not undertaking these steps can result into poor marketing because just undertaking any marketing activity anyhow does not produce good marketing results!.

In contacts 1 and contact 2 we are going to study mainly the strategy part – situation assessment and strategy formulation. In contacts 3 and 4 we are going to study the execution part.

Let us now study the “marketing output” : “satisfaction for the customer” and “profit for the company”.

First we will study “satisfaction for the customer”. The key concept is “Value” : just because you incur cost (materials, process, selling, advertising) does not mean you are creating value for the customer. For creating value you must understand which costs create value for the customer and which do not. Good marketers have a better knowledge of the customer and hence can decide which costs will create value for the customer and which will not. In this context “Kano’s model” and “3 circles model” came useful.

The economists think that the customers buy products in exchange for the price they pay but the marketers understand the full scope of what a product is and what a price is

Product (the bundle of benefits that create value for the customer and are important for the customer to have) can be described more accurately in terms of “Marketing Mix”. A template for expressing such marketing mix is called “7 Ps” ( Product, Place, Price, Promotion, People, Process and Proof).  ( Please see "Checklist for what to write in a marketing plan" in your handbook) We took the examples of a man in a small UP town wanting a steel roofing sheet and also the example of HUL purchase dept  buying laminate for pouching its products. An important lesson was that the customers do not look for benefits arising only out of  the product but they expect benefits to come from each and every element of the Marketing Mix. Also check out a handout of slides given through your handbook titled "Creating a marketing plan" by American Marketing Association.  

Price (the bundle of scarce resources that the customer is willing to exchange for the benefit of buying the product) is not only the monetary value paid but also other scarce resources the customer has : time, risk taking ability and the social cost.

A “product” is only a cost unless you find a customer who sees enough value in it so that he can pay for it. 

How does the marketing contribute to making the company profitable?

• By increasing sales quantity
  How ? Reaching more, Convincing more, Making Value more competitive, 
• By increasing the price
  How ? Creating more value  
• By reducing the cost of making and selling
  How ? By reducing costs which do not create commensurate value

Marketing can increase the profit by

• making the product available to more customers
• realizing highest possible price by understanding how much value it creates
• making the product more salable compared to competition
• reaching more customers more efficiently and more effectively
• communicating the value of the product well to the potential customers
• avoiding various wastes in marketing
• reducing waste of reaching wrong people 
• reducing waste of keeping inventories in the wrong place
• reducing waste of using ineffective messages
• reducing waste of giving features which the customer do not value

To do all of this, an important resource for a marketing company is the knowledge of the customer. That is why the pre-strategy stage of “Situation Assessment” is fundamental. Your marketing plan cannot be better than the foundation of customer knowledge on which it is built.

Assignment : Explain how the marketing function is organized in your company? What factors led to your company organizing the function the way it did? Do you think the existing organization structure is suitable to take on the challenges of future for your company? In this connection you may like to refer to a handout given through your handbook titled "The difference between marketing and sales functions - or are they departments?"
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Module 2 taken on 24^th August 2014 ( 2 successive sessions of 70 minutes each)

LEARNING OBJECTIVES

1. Most business problems are like seeing a red light on "financial dashboard" (like what was depicted by Trident Float Glass) but you will not know what you need to do unless you "open the engine". In marketing when you open the engine, you see the "5Cs". 
2. The most basic and obvious two Cs are : Company and the Customer. When you consider the Customer you need to think of the options open to the customer : that means you also need to think of the Competitors also. Just as you consider your competitors are your "enemies" ; you must simultaneously think of your "friends" too : your collaborators. These 4 Cs have a face and a name and you can identify them but there is one more C : Context. The context is everywhere and does not reside in any specific party. The context is analyzed as PESTEL : Political, Economic, Social, Technological, Ecological and Legal.
3.  

TRIDENT FLOAT GLASS CASE

We discussed the Trident Float Glass Case in the class. How good is Trident's Marketing - let us apply basic two criteria - are profits increasing ? are customers more satisfied ? On Profit margins we know that the margins are shrinking. The Customer satisfaction also may not be going up because the relative value is not going up because relative price is in fact decreasing. Since the capacity is constant, the problem can only be with customer mix, geography mix or channel mix ( means the share of company pie of profitable customers , profitable geographies or profitable channels is decreasing). The consultant should therefore be mainly looking for this data. The main point to be noted from the case is that a mere "financial dashboard" will not tell you what exactly needs to be fixed. In order to understand to discover and diagnose that, you need to understand how to do "5Cs" analysis. 

We saw some examples of "business situations” given by the class and how one can understand them better when you use the "5Cs" framework for analysis. 

"5 Cs" Analysis

Refer to a handout given through your handbook titled "5Cs format helps you understand the marketing forces for a given product in a given market"

The 4Cs who have a face/name
Main Layer : Company and Customer. 
Next Layer : competitors (enemies) and collaborators (friends)

For these 4 Cs we need to analyze

• Needs and Wants, what triggers and circumstances drive them to act 
• Psychology : Perceptions, Values and Pre-dispositions
• Behaviors :  what are their habits and compulsions and criteria 

The 5th C is context : it is not a "party" and does not have name/face
These are PESTEL factors : Political, Economic, Social, Technological, Ecological, Legal.

The analysis is to take each factor and - within the plan time frame - ask questions like

• will it increase / decrease the number of buyers for us ? competitors?
• will it increase / decrease the propensity to pay for our customers? competitors'?
• will it increase / decrease the interest of collaborators ?
• will it increase / decrease the company costs ?

Analysis of Customers

Concept of DMU : This is a very important part of the analysis. How do you define your customer? Is it a "person" or a "family" or a "housing society" or a "company"?  In low prices consumer products there is generally only one customer per purchase : example : purchase of a soft drink. But for complex and expensive B2B purchases there are many customers and play different roles : user, buyer, approver, initiator, etc. For example, when a company buys an effluent water treatment plant ; there are many who impact the decision making process : the maintenance department, the legal department, the plant manager, the chief financial officer, the users, the franchisee who will provide after-sales service to the client, the local factory inspector's opinion, reference checks with other nearby factories etc. Such a collection of people who are involved in impacting revenues over the entire product life cycle ( initiating, creating RFQ, seeking quotations, evaluating quotations, making internal case, placing order, arranging finance and delivery, commissioning, training, maintaining, using, upgrading, reconditioning, replacing, disposal, repairs ) form what is called as DMU (Decision Making Unit) of the customer. For low priced B2C products the DMU may consist only of 1 person but for a product like an air force deciding on a fighter jet, the air force which buys it may have a DMU involving dozens of people.

Concept of proximity : Some B2B companies have only a few and large customers and, for such customers, it is possible to engage with them very closely and deeply on a customized basis and you can have an almost endoscopic view of the customer. On the other hand for may B2C companies they have millions of customers, and for such customers, it is possible to engage them only through a telescopic view through standard products. How your customers wish to be engaged with the marketers is an important part of the analysis. Some customers would like to be deeply engaged through a key account management concept based on buying of enterprise capabilities. Some customers would like to be engaged through a solution selling mode. Other customers would like to be engaged only transactionally.

It is necessary to study how the needs and wants, psychology and behavior changes from customer to customer so that the company can decide which is the most attractive market for it which depends on the market characteristics and the company characteristics. An attractive market is the one which is (1) most attractive (2) your company's capabilities can make a difference to the chosen market. The attractiveness of the market depends on size, growth rate, access, competitiveness and margins.




Refer to a handout given through your handbook titled 
"Quantitative Research" and 
"Market Research" and 
"How to become a Market Expert"

Marketing MIS : 3 Ways of Getting Information in Marketing (1) Readily available internal company information (2)  Readily obtainable external marketing intelligence (3) Specially commissioned Market research projects. Many decisions would need all 3 types of data . Take up the articles (1) “5Cs format helps you understand the marketing forces for a given product in a given market” (2) Impact on buyer behavior of (1) Cultural / Social influences (2) Social status (3) Decision-making process (4) adopting new products (5) response to various stimuli (3) “Market Research”

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1)      B47C1 : 2 MODULES

2)      Module 1

a)      Learning Objectives

i)        Introduction to Marketing

ii)      Basic Process : starting in 5Cs and ending in Profits and Satisfaction

iii)    How this universal process is organized in various companies

b)      Case : Wallace Fort Hotels is used to introduce marketing

c)      Assignments

d)     How is the marketing function organized in your company? What factors led to this way of organizing ? Is it suitable to take on the challenges of the future?

e)      Any major cross functional initiative taken by the company : how PESTEL played a role

3)      B47C2 Assignments

a)      Do a 5C analysis for ​a major product of ​your company.​

b)      For the same product that you chose for the previous assignment, indicate how many different types of buyer personas exist ? Select any one of these personas and indicate what is the buying journey of that persona for the chosen product ? What are the gaps in the buying journey that your existing connection strategy is not effectively addressing?

c)      Describe your marketing strategy for ​the same product you had chosen for the earlier two assignments and describe what is your marketing strategy.