MKT 455 Marketing Strategy Knowledge of customers is essential for - - PDF document

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MKT 455

Marketing Strategy Market Analysis

MKT 455

Marketing Strategy

Market Analysis and Understanding Customers

Introductory Comments Knowledge of customers is essential for most marketing strategy endeavors: Markets are groups of customers and potential customers. Identification of market segments and selection of target markets. Development of total market offerings (marketing mix). Projection of costs, sales, revenues. Anticipation of competitor responses. MKT 455

Marketing Strategy

Market Analysis and Understanding Customers

Analyzing markets for marketing strategy purposes revolves around two assessments: The value of company’s products to customers The value of brand’s customers to a company Marketing Strategy MKT 455

Marketing Strategy

Market Analysis and Understanding Customers

Analyzing markets for marketing strategy purposes revolves around two assessments: Marketing Strategy The value of company’s products to customers The value of brand’s customers to a company MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers Who Buys?

Demographics Psychographics Geographics age, sex, race, income, education, marital status, etc. activities, interests, opinions locations, location characteristics

MKT 455

Marketing Strategy

Describing Customers

MKT 455 Who Buys?

Demographics Psychographics Geographics

Predicting The Value of Products to Customers MKT 455

Marketing Strategy

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Describing Customers

Who Buys?

Demographics Geographics Psychographics Desired Benefits

“What” They Buy Text adds assortment, uses to list, but benefits are far and away most important. Predicting The Value of Products to Customers MKT 455

Marketing Strategy

Describing Customers

Who Buys?

Demographics Geographics Psychographics Desired Benefits

“What” They Buy How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

Predicting The Value of Products to Customers MKT 455

Marketing Strategy

Describing Customers

How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

Predicting The Value of Products to Customers MKT 455

Marketing Strategy

Describing Customers

How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

Predicting The Value of Products to Customers MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Ao = ∑ i =1 n Biai Ao = Attitude toward some object (branded product) Bi = the ith belief about the object ai = the ith evaluation of the belief n = the number of beliefs(attributes) considered MKT 455

Marketing Strategy

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Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Ao = ∑ i =1 n Biai Ao = Attitude toward some object (branded product) Bi = the ith belief about the object ai = the ith evaluation of the belief n = the number of beliefs(attributes) considered Measuring Bi i1: The shoes should be less than $100. i2: The shoes must have high cushioning from impact. i3: The shoes must have plenty of room for my toes. i4: The shoes should perform well for over 300 miles. Does Not Describe Brand At All Describes Brand Very Well 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Ao = ∑ i =1 n Biai Ao = Attitude toward some object (branded product) Bi = the ith belief about the object ai = the ith evaluation of the belief n = the number of beliefs(attributes) considered Measuring ai MKT 455

Marketing Strategy

i1: The shoes should be less than $100. i2: The shoes must have high cushioning from impact. i3: The shoes must have plenty of room for my toes. i4: The shoes should perform well for over 300 miles. Not At All Important Very Important 1 2 3 4 5

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Ao = ∑ i =1 n Biai Ao = Attitude toward some object (branded product) Bi = the ith belief about the object ai = the ith evaluation of the belief n = the number of beliefs(attributes) considered Measuring ai less than $100. high cushioning from impact. plenty of room for toes. perform well for over 300 miles.

100

MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Ao = ∑ i =1 n Biai Ao = Attitude toward some object (branded product) Bi = the ith belief about the object ai = the ith evaluation of the belief n = the number of beliefs(attributes) considered MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

(Original) Fishbein Model Evaluative Criteria Bi ai Bi x ai i1: less than $100 5 30 150 i2: cushioning 3 40 120 i3: room for toes 1 15 15 i4: perform for 300 miles 4 15 60 Ao 345 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model Improves on original by merging attitudes and actions with consequences. including reference group influences on behavior. focusing on predicting behavioral intentions and future behavior. MKT 455

Marketing Strategy

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Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN B = Behavior BI = Behavioral Intentions Aact = Attitude toward some action (purchase some branded product) SN = “Subjective Norms” about the action (influence of others) MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN AACT =∑ i =1 n biei bi = Belief that action will produce consequence i. ei = Evaluation of consequence i. MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN AACT =∑ i =1 n biei bi = Belief that action will produce consequence i. ei = Evaluation of consequence i. Measuring bi If I buy Olympiad running shoes. . . . . . they will effectively cushion my feet and legs when I run. . . . they will last for at least 300 miles of running. etc. Strongly Disagree Strongly Agree 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN AACT =∑ i =1 n biei bi = Belief that action will produce consequence i. ei = Evaluation of consequence i. Measuring bi If I buy Olympiad running shoes. . . . . . they will effectively cushion my feet and legs when I run. . . . they will last for at least 300 miles of running. etc. Strongly Disagree Strongly Agree 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN AACT =∑ i =1 n biei bi = Belief that action will produce consequence i. ei = Evaluation of consequence i. Measuring ei How important is it that your running shoes. . . . . . effectively cushion your feet and legs. . . . last for at least 300 miles of running. etc. Not At All Important Very Important 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN SN = ∑ j =1 n Gj MCj Gj = Belief that Group j favors performing an action MCj = Motivation to comply with Group j MKT 455

Marketing Strategy

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Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN SN = ∑ j =1 n Gj MCj Gj = Belief that Group j favors performing an action MCj = Motivation to comply with Group j Measuring Gj The people I run with think I should buy Olympiad shoes. My family thinks I should buy Olympiad shoes. My coaches think I should buy Olympiad shoes. Strongly Disagree Strongly Agree 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN SN = ∑ j =1 n Gj MCj Gj = Belief that Group j favors performing an action MCj = Motivation to comply with Group j Measuring Gj The people I run with think I should buy Olympiad shoes. My family thinks I should buy Olympiad shoes. My coaches think I should buy Olympiad shoes. Strongly Disagree Strongly Agree 1 2 3 4 5 MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN SN = ∑ j =1 n Gj MCj Gj = Belief that Group j favors performing an action MCj = Motivation to comply with Group j Measuring MCj Not At All Important Very Important 1 2 3 4 5 . . .to do what the people you run with think you should do? . . .to do what your family thinks you should do? . . .to do what your coach thinks you should do? How important is it . . . MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

“Extended” Fishbein Model B ≈ BI = w1Aact + w2SN Importance weights can be. . . estimated by management estimated empirically through regression analysis. MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Products to Customers How They Choose

Non-Compensatory Choice Models (unweighted) Compensatory Choice Models (weighted)

MKT 455

Marketing Strategy

Compensatory Regression Models Estimate regression model to see which attributes predict attitude. Use product of belief and evaluation for each attribute as independent. Obtain separate measure of attitude as dependent. Based on idea that attitude is a linear combination of attributes.

Describing Customers

Predicting The Value of Customers to Companies What They’re Worth: Customer Lifetime Value (CLV) Theoretically: The projected present value of lifetime profits for a customer. Practically: The sum of discounted gross profits for several time periods for a single customer. Based on two ideas: Not all customers are equally valuable. It’s cheaper to keep customers than to acquire customers. MKT 455

Marketing Strategy

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Describing Customers

Predicting The Value of Customers to Companies Marketing Strategy Customer Value Customer Acquisition Customer Growth Customer Retention This basic series is quantified over some period of estimated future purchases. What They’re Worth: Customer Lifetime Value (CLV) Data come from past purchases, past costs, estimated purchases, and estimated costs. MKT 455

Marketing Strategy

Describing Customers

Predicting The Value of Customers to Companies What They’re Worth: Customer Lifetime Value (CLV) MKT 455

Marketing Strategy

CLV = Margin($) Margin($) = Revenue – (Variable Costs + Average Fixed Costs)

Describing Customers

Predicting The Value of Customers to Companies What They’re Worth: Customer Lifetime Value (CLV) MKT 455

Marketing Strategy

CLV = Margin($) × Retention(%) 1 + Discount Rate(%) – Retention(%) How much less is future money worth than present money?

Describing Customers

Predicting The Value of Customers to Companies What They’re Worth: Customer Lifetime Value (CLV) MKT 455

Marketing Strategy

CLV = Margin($) × Retention(%) 1 + Discount Rate(%) – Retention(%) NOTE: Assumes constancy of margin, discount, and retention.

Describing Customers

Predicting The Value of Customers to Companies What They’re Worth: Customer Lifetime Value (CLV) CLV = ∑ t =1 n (GMt ) (1 + d)t

∏

n t=1 rt

GMt = Gross Margin (Dollars) for period t rt = Retention or Growth for period t d = “Discount Rate” for period t MKT 455

Marketing Strategy