Siva Marketing TP

8/7/2019 Siva Marketing TP

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Value Based Marketing

Submitted By:

1.A Swathi (10202)2.Siva Chebrolu (10209)3.Kovali Karthik (10252)4.Bhargava R (10307)5.Siva M (10344)6.CD HariPriya (10353)

2010

12/19/2010

ADVANCED MARKETING MANAGEMENT


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VALUE BASED MARKETING

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Table of Contents

Introduction: ........................................................................................................................................... 3

Defining Value: ....................................................................................................................................... 3

Creating Value:........................................................................................................................................ 3

Communicating Value: ............................. ....................... ................................ ....................... .................. 4

Marketing Pentadigm: ............................................................................................................................. 6

The Marketing Pentadigm in the context of Cadbury India: ........................... ....................... .................... 7

(I).Discover .............................................................................................................................................. 7

(II).Commitment ...................................................................................................................................... 7

Lessons in CVE through competitors failures & success: ............................. ................................ ............. 9

Branding .............................................................................................................................................. 9

Ethics: .................................................................................................................................................. 9

Product Innovation by Listening to Customers: .................................................................................... 9

(III).Create customer value commitment culture: ............................. ........................ .............................. 10

(IV &V). Asses customer feedbacks & Improve customer value ratio: .......................... ........................... 11

Conclusion: ............................................................................................................................................ 13

LIST OF REFERENCES: ............................................................................................................................. 13


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Introduction:

Value Based Marketingisa marketing Lexicon,usedtoconceptualizetheprocessof value

creation, in the firm, for the customers, without losing focus on profitability and thus

increasingshareholder value.

Value based marketing is a concept comprises of knowledge of three of its components:

a) Defining value

b) Creating value

c) Communicating the value

In this competitive era one has to be very much cleared about the concept and sense of the

expression marketing'! People consider it as just to dispose off what they make rather than

understanding product or service and that ought to be clearer to our customer as well, therefore

the value lies in the values of what they make. Deeds have to have the apparent view of what

value we have for our customers in our point of fact requires to be well defined for customer

understanding, created for customer ease and to end with well communicated to give the clearer

depiction of what we made for our customers.

DefiningValue:

This is a first step and a critical research to pick the target market that includes several

imperative points such as target market's demographic and the taste they essentially belongs to.

And what we make is according to those several diverse aspects.

Example: A pen has feature of sharpen color with wet shiny ink while writing. Sharpen and

shiny color is a value which a pen contains with it!

CreatingValue:

The next step is how to create value? Now that's in addition give some hard-hitting time. The

value will be created through distributors. In this step, we need to make our target market realize

that what they wonder we have just made with respect to that and for the sake of their ease and

benefit.


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Example: It is doubtful that 15 years ago a large number of consumers would have said they

would like to spend more time on the phone. But in the age of wireless cellular service, a

majority of consumers are now always connected and spend far more minutes talking via phone

than ever before.

Communicating Value:

This the third and last step of the term marketing' is communicating the value which has been

defined and created for the target customer now this can be done through advertisement,

promotion, direct marketing etc. But the point is that how that value' can be delivered so

effectively that directly accomplish customer's mind? And the exceptionally simple answer is the

delivery of value in what we have made, should be incredibly captivating and no long stories

rather just a short and sharp message which openly hit the customer's attention. This really

sounds interesting!

Example: Surf excel delivers the value of their product very well in just a short sentence "Stains

are good (Daagh tou achay hotay hain)" and this single sentence they delivered through an

assortment of channels of communication. They actually extraordinarily hit the target! Just

Wow! In this single sentence they quoted the whole idea of their product very ingeniously.


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De Bonis, Balinski & Allen approach to

value based marketing is, essentially

focusing on customer value, through the

concept of - Marketing Pentadigm.

Marketing metrics used for evaluating marketing performance, such Brand Equity, CLV, repeat

purchase rate etc, generally fall shy of management needs - due to lack of conformity with

dominant accounting-finance language of the firm, making it difficult to compare with

alternative expenditures undertaken in the firm, humorously reflected in:

I know I am wasting half of my advertisement budget, but I just dont know which half

Hence the concept of VBM has evolved further. Peter Doyle conceptualizes it as the Marketing-

Finance Interface and attempts to link marketing activities to financial consequences and

creation of intangible assets.

Kolter defines,

Customer Value = Perceived

Customer Benefits (product,

services, quality and personal or

image benefits) Customer Cost


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Marketing Pentadigm:

Pentadigm: 5 steps to Customer Value

Understandthe customer

Commit to

the customer

CreateCustomer

Value

ObtainCustomerFeedback

ImproveCustomer

Value Value Based

Marketing


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The Marketing Pentadigm in the context of Cadbury India:

(I).Discover:

Market segment, based on customers having similar value ratios, Assess competitive position

and only serve customers with high Customer Lifetime Value.

(II).Commitment

To find the critical customer value factors & quantify them, develop customer value commitment

superior to competitors, then align organizational capability - sales, service, supply chain, to

deliver value, so to make economic profit (EVA).

In (Fig 1) we discuss a model to identify and maximize a set of hypothetical customer value

drivers in the context of Cadbury India. In practice customer value drivers are identified by co-

joint analysis. Customer value drivers & their relative importance would depend on the type of

industry/product and also on market factors like demographics, culture, income levels etc.

The customer value commitments must be communicated by means of both marketing

communications and internal communications processes. Repurchase behavior in customers is

caused by the differential between promised and perceived value.

Customer value drivers are important to formulate Marketing Strategy. Since marking is the art

of attracting and retaining profitable customers- the company should ideally target the market

segment in which its value proposition has competitive advantage. It has to communicate

effectively the value proposition of a particular product category and brand, which in turn would

help enhance the total customer perceived values/benefits.

Definekeyperformanceindicators like - Brand awareness and position, customer acquisition

& retention figures, proportion of total sales/profit from new customers/products. Some external

indicators are customer satisfaction ratings, status in the industry as a value creator, customer

referrals etc.

Oliver Wymans CustomerValue Engineering (TM) model, allows companies to identify and

quantify the true emerging drivers of customer valuethose things that customers are actually


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CUSTOMERVALUE =

PRICE: PriceofCadbury Chocolates/Bournvita withrespect to

Nestle. Marginsgivento vendorscomparedtonestleforpushing

products.

QUALITY: Customerperceivedtastecompared Nestleproducts.

PRODUCT BENEFIT:itshealthbenefits-nutrients,sugarcontent,

differentiation- Ex:Fruit & Nuts variants,chocoshakes/ice-creams.

CONVENIENCE: Easyavailability-emphasizeonchannels Ex:

vending machines,packaging & size, Easy: Nescafe (3 in 1), Maggi

Insta-Noddles.

SERVICE:takingcareofvendorinterest-flexibilityinsupply,buybackofdefects,credit/financingofstocks,andeaseofpayments.

ENTERTAINMENT : Createaproductassociation withfun,family,

festivity. Ex: Cadbury Celebrationsgiftpacksassubstitutetosweets.

ETHICS & SUCURITY: Parentsfavor Cadburyfortheirchildrenas

wearesafe,healthy. Ex:Audit StorageFacilityof

Distributors/Channels

willing to pay for in a competitive environment and evaluate the profitability of alternative

strategies.

(Figure: 1) CUSTOMERVALUE SYSTEM:

PRODUCT /NEED CATAGORYOCCATIONS

SELFACTUALIZATION: Notapplicable

ESTEEM: Childrensheightincreases with Bournvita

Drinks;hesabletodobetterinacademics. Chocolates

appealto women, Sexuality.

SOCIAL: Chocolates mostlysatisfiesthisneed.

SURVIVAL: Ex: Bournvita- Drinkscomplementsdiets,

bridgesgapinintakeofvitalnutrients.

CONVENIANCE: related

to distribution/channels

DISCOVERY: N.A

REPLENISHMENT:

Notion of quick & easy

food value.Ex:Nestle Kit

Kat, Cadbury Perk

SELFEXPRESSION:

Moments of happiness

rewarded with chocolates,

Ex: Adv showing fans

having chocolates after

winning a cricket match.

Students having chocolates

after passing an exam

SOLUTIONS:Ex: Solution

to nutrients deficiency,

child growth via Bournvita.


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The values given here are notional based on judgement; however actual weightings of value

drivers and their component are dependent on market surveys and data analytics? Its important

to note that from Cadburys point of view both the end consumers and distribution channels- like

stockiest, retailers are customers, so some of the value drivers are not pertaining to end

consumers.

Lessons in CVE through competitors failures & success:

Branding: Nestle can be credited for revolutionizing the snack market in India - both Maggi

andNescafe, has attained generic brand status. HoweverMilo has failed in India, despite being

the No.1 malted drink brand globally. The reason I believe is that Milo is also a sorghum grain

used as horse fodder, 50% of Milo production is still eaten by the worlds poorest, and during the

great famine Indians had to eat Milo imported from USA, as we didnt have dollars to import

wheat.

Ethics: Nestle has helped farmers of Moga district in India, to developing good dairy practices

in this area with concepts like high-yield cows, quality fodder and balanced cattle feed. Kraft

Foods- became the first to stop advertising junk food to children, CEO-Roger Deromedi said,

Our relationship with consumers is about trust. If you dont align with society and you get out

of step with that, then youre going to destroy shareholder value.

Product Innovation by Listening to Customers: Food habits are influenced by local

tastes and flavors Nestle India has customized its products to satisfy customer needs. This has

allowed them to command higher price premium.


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(III).Create customer value commitment culture:

As an expected, normative behavior throughout the organization. (Refer to Fi g: 2)Invest in

appropriate resources & infrastructure to deliver valuecost-effectively andefficiently, since a

customer may not choose to buy even if, the perceived customer benefits are higher than the

competitors, due to higher price proposition.

Value = Desired Benefits /Relative Costs. The components of Relative Costs are, Acquisition

costs, Possession costs like, inventory management cost and Usagecostslike,product shelf life,replacement costs, etc. Theless valueyoudeliver,the morepriceiscommoditized.

Fig-2:Value Chain Withinan Organizationby M.E Porter.

SUPPORTACTIVITIES

PROCUREMENTTECHNOLOGYHRFIRM INFRASTRUCTURE

INBOUNDLOGISTICS

OPERATIONSOUTBOUNDLOGISTICS

MARKETING &SALES

SERVICES


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PRIMARYACTIVITIES:

BenchmarkpracticesofCompetitors:

Procurement: Nestle faces stiff competition from Amul Dairy, which can operate on very thin

margins owing to its co-operative structure. Milk, constitutes 47% of Nestle's total raw material

costs. The company has replicated Amuls procurement system - in Moga district, it sources 1.1

m lts of milk per day from 980,000 farmers through 2,250 collection centers.

Technology : Nestle India has access to global technology, brands and product development

skills of the parent, Nestle SA, which spends more than US$1.5b on R&D every year.Nestle

India now uses its own ERP- Application Software for supply chain management.

(IV &V). Asses customer feedbacks & Improve customer value ratio:

As customer value needs and expectations are dynamic, so anticipate change and redefine

customer value commitments through innovation.

ConceptualFramework:VBM asthe Marketing Finance Interface

Market/Shareholder

Value

Intangible-Market Driven

Assets

Brand Equity Customer EquityChannel

RelationshipIntellectual

Property

Tangible Assets

Plant,Cash,&

Inventory,


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(Individual MarketingActivities:Advertisement, Customer Satisfaction, CustomerValue,

Branding, Promotions, Product Innovation)

Marketing is viewed as an investment that produces an improvement in the drivers of customer

equity. This leads to improved customer perceptions which result in increased customer

attraction and retention, better attraction and retention lead to increased CLV and customer

equity.

MARKETBASEDASSETS

CUSTOMER RELATIONS: BRANDS

PARTNER RELATIONS: CHANNELS, CO-BRANDING, NETWORKS

MARKETPERFORMANCE

FASTER MARKET PENETRATION, MARKET SHARE, PRICE PREMIUM,

CUSTOMER LOYALTY/RETENTION, SALES/SERVICE COST

SHAREHOLDERVALUE

ACCELARATED CASH FLOW, ENHANCED CF

REDUCED VOLATILITY & VUNERABILITY OF CASH FLOW, ENHANCED RESIDUALVALUE OF CF.


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Conclusion:

The purpose of business is to create and retain customer. But, the question is how? While

business thinks in terms of products and derived values, customer is looking at satisfaction. The

key question is whether all the strategy, product features, additional offers and value creation

lead to ultimate customer satisfaction. The customer is buying satisfaction. And highest value is

derived when the customer is fully satisfied with his purchase. The key here is to rollout more

value propositions with the very basic of the requirement whether the value proposed gives

satisfaction to the customers. Therefore, value is essentially to be thought at every point of

marketing function, and dynamic strategic models can create value in dynamic form to give

customer more satisfaction in different dimensions

VBM tools enables managers to integrate data on customer benefits and costs in a systematic

manner, analyse relative importance of attributes & anticipate market value of their products to

multiple targets groups. Its also a management system for marketing to grow its fianacial

contribution.

LIST OF REFERENCES:

Value-Based Marketing for Bottom-Line Success by De Bonis, Balinski, and Allen "Measuring Marketing Productivity: Current Knowledge and Future Directions" October

2004, Journal of Marketing article by Roland T. Rust, Tim Ambler, Kumar, and Rajendra

K.Srivastava

Roland T. Rust, Katherine N. Lemon, & Valarie A. Zeithaml, : Return on Marketing:Using Customer Equity to Focus Marketing Strategy, Journal of Marketing 68(1), 2004,

109-127)

Value Based Marketing by Peter Doyle Marketing Essentials by Philip Kotler www.investopedia.com


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