3. Company Orientations Towards
the Marketplace
Orientation Description Relative Time
Span
Basic Managerial
Objective
Production Transition from Home
Manufacturing to Factories
Industrial
Revolution
Profit Maximization via
Economies of Scale
Product &
Financial
Focus on Product Development,
Performance and Features and
the Growth of Large Scale
Industrial Empires
Profit Maximization
Through Superior
Product Performance
Sales Transition from Scarcity of
Goods to Scarcity of Markets;
Market Saturation with Basics
Profit Maximization via
Demand Generation
Marketing Transition from Internal
(Organization) to External
(Customer) Basis for Guiding
Marketing Decisions
1990s Profit Maximization via
Matching of Products to
Customer Wants
4. The Marketing Concept
A Customer Orientation
Backed By Integrated Marketing
Aimed at Generating Customer
Satisfaction and Repurchase As The Key To
Satisfying the Organizations Goals
5. The Marketing Concept (Contd..)
Focus Means End
Sales Concept Products Selling &
Promotion
Profits Through
Sales Volume
Marketing
Concept
Customer Needs Integrated
Marketing
Profits Through
Customer
Satisfaction
6.
7. Stages in Consumer Decision
Process
Awareness
Interest
Decision
Satisfaction
Action
Advertising
Channel
Product /
Service
Price
Word-
of- Mouth
8. Profits Through Customer Satisfaction
(One Customer)
Acquisition Costs
Referrals
Price Premium
Reduced Selling Effort
Increased Usage
Normal Profits
9. Time
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
-60
-40
-20
0
20
40
60
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Credit Card
Customer
Dollars($)
10. Customers
• Cost of Lost
Customers
• # Accounts = 64000
• Loss = 5% for poor
service = 3200
accounts
• Loss in Revenue /
Account = $40000
• Total Revenue Loss =
$ 128 MM
• Cost of Average Sales
Call = $300
• Average # Calls to
Convert Customer = 4
• Cost of New Customer
= $1200
• Annual Revenue from
Customer = $5000
• # Loyal Years = 2
• Profit Margin = 10%
• Lifetime Value = $1000
11. Cost of Losing and Attracting
Customers
• Cost of attracting a new customer can be upto
5 times the cost of keeping a current one
happy
• Cost of Offensive Marketing > Cost of
Defensive Marketing
• Some companies have increased profits from
25% to 85% by
reducing defections by 5%
12. Developing An Effective
Marketing Plan
• Conduct A Marketing Review
• Build A Marketing Strategy
• Implement Strategy Via Marketing Mix
• Evaluate The Success Of The Marketing
Plan
13. Conduct A Marketing Review (3-
C Analysis)
Opportunity Identification
B. Assessment of
COMPANY
Capabilities and
Current Marketing
Position
A. Analysis of
CUSTOMER
Trends, Needs,
Perceptions,
Behavior
C. Analysis of
COMPETITORS
Current Position,
Capabilities,
Actions
14. Build A Marketing Strategy
Generic Strategies For
DIFFERENTIAL
ADVANTAGE
* Product Differentiation
* Cost Leadership
* Special Market Focus
Selection of
TARGET MARKET
and Development of a
POSITIONING
STATEMENT
18. Marketing System
Short Term Controllable Factors
Product
Place
Price
Promotion
Long Term Factors
Technological
Legal
Socio / Cultural
Economic
19. Recasting the 3C - 4P Framework in
Value Terms
• Customer
• Company
• Competitor
• Product
• Price
• Place
• Promotion
Creating
Value
Capturing
Value
Communicating
Value
20. Mapping Value Migration
Value Inflow Value Stability Value Outflow
Market
Value
Revenues
2
1
• Limited competition
• High growth
• High profitability
• Competitive stability
• Stable market share
• Stable margins
• Competitive intensity
• Declining sales
• Low profits
In the outflow stage,
talent, resources &
customers leave at an
accelerating rate
21. Capturing Value Growth
1998
2001
1.
2.
3.
1.
2.
3.
Map Changing Customer Priorities
.
.
New Entrant
New Entrant
Identify New Business Designs
Old New
Key elements
Assumptions
Compare Business Designs
.
.
Build New Business Designs to Capture Growth
22. Value Migration in Coffee
Coffee Shops &
Office Coffee
Traditional
Grocery Blend
Gourmet
Cafes
Whole bean
Gourmet Coffee
1. Price
2. Ease of purchase
3. Uniform offering
1. Quality
2. Freshness
3. Close to office
1985
1990
Coffee is Coffee
Affordable
Luxury
.
.
.
Folgers
Maxwell House
Nestle
.
Chock Full O’ Nuts
.
Gloria Jean’s
.
Starbucks
.
.GCA
Millstone
Value Inflow Value Stability Value Outflow
Starbucks
Millstone
Folgers
Value Migration
Phases
23. Replaying the Game
• P&G: “We sell coffee” vs. “We sell canned coffee of
moderate quality in groceries”
• The brand we have built to sell mid-tier coffee will not cater
to gourmet coffee position as its made of Robusta rather
than Arabica beans. So we need to launch a new brand that
preempts the quality position. We may need a new design
(DSD), but we’ve done radical stuff before!
• Most restaurants, food chains and institutions sell Coke or
Pepsi (branded) but unbranded coffee. Once our gourmet
brand is established in grocery stores, we may be able to
move into the institutional market (after all, we sell to Wal-
Mart!)
• Whole bean provider: Could have built a brand by opening
a café division. Took 7 years for Brothers to catch on. By
