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Samenvatting - Value based marketing
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Complete summary of all Value-based marketing lectures. The course will be taught at VU Amsterdam in the second year of the EBE study.
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Article 1 (Marketing in Crisis?): Verhoef, P.C. & Leeflang, P.S.H. (2009).“Understanding the marketing department’s influence within the firm
This study investigates the decreasing influence of the marketing department within firms
and assesses its determinants and consequences. The results show that the accountability
and innovativeness of the marketing department represent the two major drivers of its
influence. However, the results do not indicate that the customer-connecting role of the
marketing department increases its influence, though this role is important for shaping the
firm’s market orientation.
A marketing department’s influence is related positively to market orientation, which in turn is
related positively to firm performance. This study also suggests a dual relationship between
the marketing department’s influence and market orientation. A key implication of this study
is that marketers should become more accountable and innovative to gain more influence.
Interim conclusions after lecture 1:
- Marketing plays a critical role in today’s
changing market environments but is often
perceived to be of minor importance
- This is because marketing is often
misperceived as a very narrow function,
creating mainly costs, and not showing its
value
- Marketing capabilities ≠ Marketing function
- Looking at the different facets of marketing, it has already been important in the past,
and will become even more important in the future
- But: to understand this and all the different ways marketing is crucial for an
organization, people need to understand what marketing encompasses and how
these different facets of marketing create value
Knowledge clip 2.1: What is value-based marketing?
Marketing in the business model
In this section three topics are covered:
- Marketing according to a value-creation perspective
- The business model and marketing’s role
- Adapting the business model through innovation
What exactly do we mean by “value-based marketing”?
And how is it different than previous approaches to marketing?
To determine what value-based marketing means we will divide the words.
- Value is: perceived value = Benefits - costs.
The benefits (/gains) are often product attributes, which constitutes a certain quality.
The costs (/what you have to give up) are the price that you have to pay for that
product. If the costs are higher than the benefits, you won’t buy the product. So what
do we do when there are several products that all provide positive value? → you
compare the products. In this case you will choose the alternative that gives you the
most value. So in a choice context, it is not about the absolute perceived value, but
, the relative perceived value the product/offering gives you. These differences are
highly subjective; they can differ per person.
- Marketing is: a cross functional concept, because it stretches across the entire
supply chain. Marketing is the management of competitive advantage. The
competitive advantage can arise anywhere in the supply chain and therefore it is a
cross functional concept.
Marketing has at its core three main parts:
- Customer needs
- Value provided by the company’s offering
- Value provided by competitors’ offerings
Marketing is not the provision of customer value or the fulfillment of customer needs;
it is these, while the company is making a profit; has fun doing it.
A competitive advantage can be anything that provides value for the customer and leads
the customer to the company’s offering (product).
The competitive advantage can be divided into:
- “to do the right things” which relates to the effectiveness of your offering. The
effectiveness is related to creating value for the customer . Requirements for a
competitive advantage to be effective are important and perceived.
- “to do things right” which relates to the efficiency of the offering. The efficiency is
related to creating value from the customer. Requirements for a competitive
advantage to be efficient are: protectable and profitable.
What does the value-based marketing perspective add?
In short there are two distinct features of value-based marketing:
- First, marketing is more than just the marketing triangle we saw. Marketing also
provides value in other areas through a network of stakeholders that co-create value
- The second distinctive feature of value-based marketing is that it stresses the
measurement of marketing's value.
These two features have been specified by Lusch & Webster (2011). They also made an
overview of marketing’s evolution. Here they identified three era’s of marketing:
- Era 1: marketing was about stimulating demand for products. Here the production
process itself was the main value creator and marketing was there to push the
products into the market.
- Era 2: was about satisfying customer needs. Value was not anymore limited to the
product itself, but also included additional services. Still the company was the main
provider of value and the customer was at the center of value creation.
- Era 3: value-based marketing is a product of era 3. In era 3 the scope has broadened
beyond the customer and company and includes other stakeholders in and around
the market. So, marketing is not only there to provide value for their customers, but
also for the stakeholders. The stakeholders themselves are part of the value-creating
process.
Because of the characteristic of value-based marketing that stakeholders play a key role, the
term co-creation of value has become a key characteristic of value-based marketing.
Another thing (apart from co-creation) that has changed in the past decade (era 3) is the
building of an ecosystem. What is meant with an ecosystem is that organizations connect
themselves to all their clients and connect their clients together and act almost like a broker
to make sure that everyone who is working with them has value and adds value to each
other and hence creating more loyalty.
, So, to summarizes the distinctive features of value-based marketing are:
- Marketing creates value beyond the customer → so in value-based marketing value
is created for customers, the organization, shareholders, and stakeholders.
- Value is not only the value of the core products/services → value can be created by
all interactions with the firm
- Marketing’s value is made explicit
Knowledge clip 2.2: Marketing and the business model
Here we will discuss how marketing, the management of the competitive advantage, fits into
the concept of the business model.
A business model is the organizing logic for value creation (which
means value for the customers) and value appropriation (which means
value for the firm and everyone that is involved with the firm).
To take a deeper look into value creation; value creation is done for the
customers and is expressed by the proposition, so what problem am I
solving as a company and for whom exactly. To determine the proposition
we need two things:
1. Customer needs and preferences
2. Resources
When we add these two things together it results in a, hopefully unique and superior value
proposition that prompts customers to do business with me.
To take a deeper look into value appropriation; apart from creating value for customers (in
value creation) it also is important to create value for the firm and stakeholders itself. So, we
need to find the sweet spot between effectiveness (value creation) and efficiency (value
appropriation). The cash flow/profit is determined by:
1. Costs
2. Sales
Marketing’s role in the business model:
Marketing has a part in sensing customer needs and looking for firm resources
(resourcing) to address these needs in value creation.
Apart from sensing and resourcing in value creation, marketing also realizes (realizing)
value for the firm, because marketing increases cash flows/profits.
There is a feedback loop that ensures learning over time and optimizing the marketing
process.
Sensing: is about having an ear on the customer or potential customer. Here it is important
that the organization creates and maintains competitive advantages that are important to
and perceived by the customers. In sensing there is a prominent role of market orientation
(MO). Market orientation is defined as the organizational activities that are related to the
generation and dissemination of market intelligence. In other words; how good is the
organization in understanding their customers and competitors.
Studies have found that a high market orientation positively affects firms performance.
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