Week 1:

The Marketing Mindset:

Customer Focus and Value

Kapil Gupta
 Introduction – the course
• To apply a marketing perspective to strategy
development

• To develop an understanding of key concepts and

decision options in marketing

• To refine decision-making skills in marketing, and

the ability to express the results of marketing
analysis
 Principles of course
• Marketing is a thinking process more than a body
of knowledge
• Conceptual basis of marketing (objective # 2)
delivered by notes. You read beforehand, we can
discuss in class
• Emphasis in class on skill development (objective
# 3). Extensive use of cases. Thorough pre-class
analysis of cases expected.
 This Session
• A framework for marketing
• Examples of great/bad marketing in practice
• Core concept – value
• Where is marketing going?
• What does it take to be good at marketing
strategy?
 What is a marketing strategy?
• IT IS NOT:
- An objective (increase shareholder value by x )

- A functional policy (“put a Coke within arm’s

reach of the world”)

- A general focus (“cost leadership”, “stick to the

knitting”)

- An outcome of strategy (“command a 10%

premium over market average”, “achieve x%
market share”)
 What is a marketing strategy?
• IT IS:
How the organization will create and capture
value
• And it considers:
Customer need (source of value)
Company resources (source of advantage)
Competitor offers (source of differentiation)
Collaborators (source of market access/power)
 The core concept is value. . .
Perceived Perceived
Value = -
benefits Price

Benefits

Price
 Marketing Analysis (The 4 Cs)

Customers Company Competitors Collaborators

Creating
Value
MARKETING STRATEGY or POSITIONING =

Target customers + Value Proposition

Marketing Mix (The 4 Ps)

Capturing Product & Place/
Promotion
Value Service Channels

Pricing

Customer Customer
Sustaining Acquisition Retention
Value

Profits
Source: adapted from Note on
Marketing Strategy, HBS 9-598-061
 Answering the four questions defines
the marketing strategy…
CUSTOMER COMPANY COMPETITION COLLABORATOR
   
What doesn’t What is the What makes Who/what is
work very well asset that us different there to help
for them? enables us from the make it easy
to meet competition? to buy and
that need? consume?
   
INSIGHT REASON TO DIFFEREN- EASY
BELIEVE TIATION ACTION
…and guides us to specific and actionable
choices
INSIGHT REASON TO BELIEVE
Focus on something Offer clear description of what
that improves the we are offering and how it improves
value proposition – the customer’s experience
an unmet need, or
lower costs

DIFFERENTIATION EASY ACTION

Offer clear explanation of why Make it clear how customer
our offer is different and better can act to adopt the offer
 Value is coming to dominate
business markets
“
In business markets, buying executives are under increasing
pressure to demonstrate how they have worked with
suppliers to create value within their operations….This means less emphasis
on simple buying criteria like product performance or price….and the
tougher challenge for suppliers of demonstrating how their product
or service delivers better value to that individual customer.

Many business customers will not even agree to meet with a potential
supplier unless they have a promise that the supplier will
demonstrate the value to the customer of its offer.

“
J. Anderson, N. Kumar, J. Narus, Value Merchants (2007)
Winning trends in marketing
strategy
• Disruption = better value, not better product

• Relationship building = cross-selling

• Customization = breaking down markets

• Insight = identifying what doesn’t work very well for the

customer
 Think value, not product
Contribution to Cost Contribution to Benefit

A 25% A 20%

B 40%
B 30%

C 20% C 15%
D 15% D 15%
E 10% E 10%
 Think value, not product
Contribution to Cost Contribution to Benefit

A 25% A 20%

B 40%
B 30%

C 20% C 15%
D 15% D 15%
E 10% E 10%
Winning trends in marketing
strategy
• Disruption = better value, not better product

• Relationship building = cross-selling

• Customization = breaking down markets

• Insight = identifying what doesn’t work very well for the

customer
 Marketing Product Value
Product scope
Broad

Share of market -> Economies of scale

Narrow product line

Market
scope
Narrow Broad
 Marketing Customer
Value
Product scope
Broad Share of customer -> Economies of scope

Broad product line

Market
scope
Narrow Broad
 Economies of scope – the logic
of customer-based marketing
Cost to serve

Penetration of customer

It can be up to 600% cheaper to sell something to an existing

customer than to acquire a new customer for the same product.
The Loyalty Effect, Frederick Reichheld
Winning trends in marketing
strategy
• Disruption = better value, not better product

• Relationship building = cross-selling

• Customization = breaking down markets

• Insight = identifying what doesn’t work very well for the

customer
 Great marketing is often breaking the
economic compromise…

Addressable Salesperson

Major product
launch event

Broadcast

Two-way with
One-way message Two-way with
instant response
time lag in response
Winning trends in marketing
strategy
• Disruption = better value, not better product

• Relationship building = cross-selling

• Customization = breaking down markets

• Insight = identifying what doesn’t work very well for the

customer
 Great marketing is often breaking the
informational compromise…

VERTICAL
More
Easier SALES RANK accurate
information, Product and information,
Buying
i.e. more Preferences i.e. better
feasible to customer
gather insight

(currently often described as ‘insight’)

 Trends summary – what you
should expect to see in marketing
• Development of offers that improve the customer value
proposition, even if it’s a ‘low-end’ product

• Development of services that offer greater personalization and

customization

• Relationship building = cross-selling

• Innovation that targets unmet needs

 On being good at marketing
• Insistence on good market data
Refusal to accept generalizations from personal preferences

• Ability to stick with the basic questions (e.g. what are we selling? to whom?
how much do they value it?) and not get lost in tactics

• Understanding of role and objectives of all actors in the marketing system

• Sensitivity to change
Commitment to continuous improvement of value proposition delivered to
the market

• Ability to frame tactical decisions in a strategy for business growth, including

interface with other functions and the implications of marketing investments