Master BA: Change Management (RUG)
Summary Marketing Essentials (2016/2017)
Exam grade: 8.5
This summary includes:
- A summary of the lectures, including the lecture slides
- Summary of the following literature:
Argo, J.J., Popa, M., & Smith, M.C. (2010), The Sound of Brands, Journal of Marketing,
74(4), 97-109.
Bailey, Ch., P.R. Baines, H. Wilson and M. Clark (2009), Segmentation and customer insight
in contemporary services marketing practice: why grouping customers is no longer enough,
Journal of Marketing Management, 25 (3-4), 227-252.
Day, G. (2011), Closing the Marketing Capabilities Gap, Journal of Marketing, 75 (4), 183-
195. Feng, H., N.A.
Dorotic, M., Bijmolt T.H.A. and Verhoef P.C. (2012), Loyalty Programmes: Current
Knowledge and Research Directions, International Journal Management Reviews, 14 (3),
217-237.
Hill, T. and R Westbrook (1997), SWOT Analysis: It’s Time for a Product Recall, Long
Range Planning, 30 (1), 46- 52.
Keller, K.L. (1993), Conceptualizing, Measuring, and Managing Customer-Based Brand
Equity, Journal of Marketing, 57(1), 1-22.
Keller, K.L. (2016), Reflections on customer-based brand equity: perspective, progress, and
priorities, Academy of Marketing Science Review, 6, 1-16. Irmak, C.,
Kumar, V. et al. (2010), Undervalued or Overvalued Customers: Capturing Total Customer
Engagement Value, Journal of Service Research, 13 (3), 297-310.
Lamberti, L. (2013), Customer centricity: the construct and the operational antecedents,
Journal of Strategic Marketing, 21 (7), 588-612. Avery, J., S. Fournier and J.
Landwehr, J.R., McGill, A.L., & Herrmann, A. (2011), It's Got the Look: The Effect of
Friendly and Aggressive "Facial" Expressions on Product Liking and Sales, Journal of
Marketing, 75(3), 132-146.
Leone, R.P., V.R. Rao, K.L. Keller, A. Man Luo, L. McAllister and R. Srivastava (2006),
Linking Brand Equity to Customer Equity, Journal of Service Research, 9 (2), 125-138.
Lilien, G.L., A. Rangaswamy and A. de Bruyn (2013), Principles of Marketing Engineering,
Second Edition, pp 61- 96.
Lilien, G.L., A. Rangaswamy and A. de Bruyn (2013), Principles of Marketing Engineering,
Second Edition, pp 97- 118.
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,Montgomery, D.B., Chapman Moore, M. and Urbany, J.E. (2005), Reasoning About
Competitive Reactions: Evidence from Executives, Marketing Science, 24 (1), 138-149.
Morgan & L.L Rego (2015), Marketing Department Power and Firm Performance, Journal of
Marketing, 79(5), 1-20.
Panagiotou, G. (2007), Reference theory: strategic groups and competitive benchmarking,
Management Decision, 45 (10), 1595-1621.
Slater, S.F. and J.C. Narver (1994), Market orientation, customer value and superior
performance, Business Horizons, March/April, 37 (2), 22-28.
Treacy, M., and Wiersema F. (1993), Customer Intimacy and other Value Disciplines,
Harvard Business Review, 71 (1), 84-93.
Vallen, B., & Robinson, S.R. (2011), The Impact of Product Name on Dieters' and
Nondieters' Food Evaluations and Consumption, Journal of Consumer Research, 38(2), 390-
405
Van Osselaer, S.M.J., & Janiszewski, C. (2001), Two Ways of Learning Brand Associations,
Journal of Consumer Research, 28(2), 202-223.
Verhoef, P.C. and K.N. Lemon (2013), Successful customer value management: Key lessons
and emerging trends, European Management Journal, 31, 1-15.
Wittenbraker (2014), Unlock the Mysteries of Your Customer Relationships: Are you
connecting with consumers the way they want you to?, Harvard Business Review, July-
August, 72-81.
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,Marketing Essentials
Session 1
Definition of marketing: “Marketing is the process by which companies create value for customers
(V2C) and build strong relationships in order to capture value from customers in return (V2F).”
Development of marketing:
- < 1930: production concept efficient production (inside-out perspective)
- < 1930: product concept product improvements (inside-out perspective)
- 1930 – 1950: selling concept increasing revenues (inside-out perspective)
- 1950 – 1990: marketing concept needs of groups of customers (outside-in perspective)
- > 1990: customer concept needs of individual customers (outside-in perspective)
Each concept has its own specific drivers of decision making
Marketing concept:
- Belief that a market orientation should increase business performance
- Market orientation is implementation of marketing concept
[ARTICLE] Slater & Narver 1994
- To achieve superior performance, business must develop and sustain competitive advantage
by delivering superior value to its customers. The company’s culture needs to be
systematically and entirely committed to the continuous creation of superior customer value.
- Top management leadership is a necessity for the transition to a market orientation.
- A company that adopt a market orientation fulfills three requirements:
o Customer (group/segment) orientation
have knowledge, not about the individual customers, but about the
segments in the market. What are the needs, the wants, and background
characteristics, how does this develop, what are the differences between
several groups. Understand buyer’s entire value chain, cost and revenue
dynamics, how do customers perceive value.
o Competitor orientation
what are the relevant competitors in this market, what are their strengths,
weaknesses, where are we better, where are they better, where are our
opportunities, where are threats. Superior value requires that the seller
identify and understand the principal competitors’ short-term strengths and
weaknesses and long-term capabilities and strategies. Should continuously
examine the competitive threats they pose.
Using this information, market-driven businesses often target opportunities
for competitive advantage based on competitors’ weaknesses.
o Inter-functional coordination
Horizontal structures focused on building value. When you want to fulfill the
needs of customers, you have to coordinate activities in your organization.
- Metrics for marketing concept: focus on segment needs and performance measures are
always aggregate measures. E.g. market share: which part of the market do I have with my
brand.
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,[SLIDES]
Kirca et al. 2005 did a meta-analysis and found that the antecedents of market orientation (what
drives market orientation) are:
- Interdepartmental connectedness (see before)
- Top management emphasis (also important in customer management and brand
management):
o the board needs to be convinced of market orientation and also have to promote
that throughout the organization.
- Market-based reward systems (what gets measured gets done):
o How did we increase market share, customer satisfaction, not on the individual level
but as an average, based on a survey for instance. What gets measured gets done. If
you are rewarded for increasing market share or increasing customer satisfaction,
then you will invest your time and energy in that. And develop plans for that.
Kirca et al. 2005 also found that market orientation had a direct positive effect on organizational
performance, but also indirectly. Market orientation positively effects innovativeness, which has a
positive effect on customer loyalty and quality, which positively influences organizational
performance. Thus, the better you are in market orientation, the better your performance.
Changing markets over the last decades that made the customer concept coming to existence:
- Growing customer diversity, more fragmented markets, social media, increasing level of
customer-to-firm and customer-to-customer interactions
- It became both necessary and possible to focus on the individual needs (instead of sufficing
with background characteristics)
Customer concept (sessions 6-7)
- Prevailing management philosophy since 90’s of last century for companies that possess
individual customer data.
- The belief that customer orientation should increase business performance
- “the belief that prescribes the unit of analysis of every marketing action and reaction to be
the individual customer”
- Focus on individual customer needs
- Performance measurement in terms of e.g., customer share (share of wallet).
o Customer share is the share of the relevant budget of the individual customer that I
have with my brand. You cannot aggregate this, only relevant for individual
customers
Market orientation versus customer orientation:
- Market orientation is about maximizing the value of products and/or services within
segments, implies finding as many customers as possible for your product. Company
performance is sum of all product results
- Customer orientation is about maximizing the value of the customers (not the brands).
Marketing has to do with finding as many products as possible for one customer and his
specific needs. Company performance is about adding up customer results. Life time values
of each separate customer.
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,Organizational strategies
Type of organizational strategy is linked to the orientation of the company:
Market orientation: Competitive strategies Porter (1980, 1985)
- Cost leadership: internally focused, efficiency improvements, standardization quality
measure: defect rate
- Differentiation: externally focused, offering something unique quality measure: customer
satisfaction, loyalty
- Focus: serve a niche of the market
- To be a leader, firms must choose, not get “stuck in the middle”
o But, dual strategy (e.g. IKEA) is successful too: success depends on ability to deliver
increased benefits to consumers at a low price, while keeping sufficient margins to
reinvest.
Mittal et al. 2005 found that long-term financial performance was higher when company focuses
on both revenue and cost. Dual strategy more successful in the long-run (but in the short-run
Porter may be right)
Compare Kumar & Reinartz (2012): Long-term customers are not always the most profitable ones
- This means that customers that stay longer and are more loyal are not always better or that
they give you more revenue, they also often cost more. You therefore have to take into
account that you have to be efficient.
Customer orientation: Value disciplines [ARTICLE] Treacy & Wiersema (1995)
- Porter strategies are based on a comparison with competition (competitive strategies).
Value disciplines are based on knowledge of customer value.
- Customer value in terms of what are customer’s: needs, perceived benefits, what does he
wants me to deliver. Not attributes (price/quality), but convenience of purchase, after sales
service, friendliness of front-office, dependability
- Only when you know the customer value you can choose one of the value disciplines. You
cannot do it based on knowledge of competition. You need knowledge of customer.
- Operational excellence
o Relevant values: convenience, reliable but not state-of-the-art quality, affordable.
o You can only, in a valid way, choose if these are the values that are important for
your customer. So first you need to know the values, only then you can make choice.
o Lead the industry in price and convenience: deliver reliable products and/or services
at competitive prices and with minimal inconvenience
Minimize overhead costs
Eliminate intermediate production steps
Reduce transaction costs
Optimize business processes
o Looks like cost leadership, but it is not! Can only be pursued when you have
knowledge of customers. Customer needs: affordability, convenience, reliability
- Product leadership
o Relevant values: state of the art quality, status
o Produce a continuous stream of state-of-the art products and/or services; render
obsolete the products and/or services they themselves have created (innovation)
Creativity
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, Quick commercialization of new ideas
Constantly search for new solutions
Fast reaction times
- Customer intimacy
o Relevant values: need for recognition, relationship proneness.
o Tailor and shape products and/or services to fit an increasingly fine definition of the
customer
Focus on lifetime value
Investment in customer loyalty
Customization
Interaction
Customer engagement
o Has to do with getting to know your individual customer. Recognize your individual
customer. Customize products and services as much as possible. Striving for
customer loyalty, retention and satisfaction
- To be a market leader, firms have to be champion in one of the disciplines, and meet
industry standards in the other two. (and firms can also be ‘masters of two’)
Sustainable competitive advantage
- A sustainable competitive advantage results when companies implement a strategy based on
their assets/resources and capabilities, that cannot be copied in the short run
o Assets/resources: Material and immaterial possessions of a company (buildings,
factories, brands, customer data)
o Capabilities/competences: “The glue that brings the assets together and enables
them to be deployed advantageously.” (Day 1994)
- Two main ways to assess competitive advantage:
o Competitor centered (based on management judgments)
Management team wonders, what are our strengths and weakness (internal
observation). How do we (managers) think our competitors are doing? Who
are our competitors?
o Customer focused (based on customer judgments)
Why do customers choose for a certain competitor?
- Do both management and customer focus, because customers can choose between different
competitors about more than management thinks of!
- Both will end up in points of superiority and end up in the SWOT
Marketing capabilities may be the most important input to arrive at a competitive advantage
[ARTICLE] Day (2011)
- The marketing capabilities gap: the accelerating complexity of the market require more
resources than are available to the organizations (capacity). The greater the mismatch
between the increasing demands of the market and the relatively immobile and
homogeneous resources available to the firm, the greater the capability gap.
- Many mass markets are becoming a mass of niches. It demands tailored programs, mass
customization, multimedia optimization, proliferating channels. Markets become fragmented
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