Lecture 1

Understanding the Promotional Mix

Marketing Mix
 The Marketing Mix
(4Ps for Products and 7Ps for Services)

Market Research

Consumer Producer

People Physical Product Price

Evidence Process Promotion
Placement
(Distribution)
 Marketing Mix

Placement
Channels
Product Target Market Coverage
Product variety Assortment
Quality Locations
Design Inventory
Features Transport
Brand name
Packaging Price Promotion
List price Sales promotion
Discounts Advertising
Allowances Sales forces
Payment period Public relations
Credit terms Direct marketing
 The “New” Mantra of Marketing

CCD V T P
Create, Communicate Value To a Target At a Profit
and Deliver Market

Marketing Mix
)
 Two key marketing functions:
 Value Creation (Product, Price,
Placement)
Customer Deprivation: “Diabetic patients and
health conscious individuals also want to enjoy
their tea and deserts and may require a cheaper
alternative to imported sweeteners”

Solution: Sucral Sweetener

 Value Communication
(Promotion)

)
Companies create some sort of value for their target
customers …

… and then, find “appropriate ways” to

communicate this value to them
Understanding “Customer Value”
 Universal Fact

Every company in the world is in the “value business”

Companies survive by creating some kind of value for their customers

Customer value is at the heart of all
businesses
 Another Universal Fact

Whatever you have ever bought in life, there was some

degree of “value” which you perceived from the purchase?

)
Let’s see how the “Customer Value
Equation” works for the consumers …
 The Customer Value Equation

Customer Value = Perceived

Benefits – Perceived Sacrifice

)
 Customer Value Creation

Customer Value

Positive Negative

Perceived Benefits: Perceived Sacrifice:

 Product Benefits  Monetary Costs

 Service Benefits Minus  Time Costs
 Relationship Benefits  Energy Costs
 Image Benefits  Psychological Costs
Analyzing Customers’ Perceived Sacrifice
Sale Price

Running Cost

Resale Value

Residual / Scrap Value

Lifestyle / Maintenance
Cost

Monetary Switching Cost

 Reducing the customer’s monetary
Reducing the customer’s psychologicalswitching cost
switching cost

)
 Reducing the customer’s running and lifestyle cost

)
Although the sale price may be high of “Liquid Heaters”, the product lasts
longer (running cost is lower) compared to “Mat Heaters”
Analyzing Customers’ Perceived Sacrifice

In Acquiring the Product

In Using the Product

In Disposing the Product

Customer’s experience with the product can largely be
segmented into: Acquiring, Using and Disposing
 Companies carefully study the Customer Activity Cycle
(CAC) to provide support to the customers at each stage
of the cycle
Customer Support
Customer Support
Analyzing Customers’ Perceived Sacrifice

In Acquiring the Product

In Using the Product

In Disposing the Product

 Analyzing Customers’ Perceived Sacrifice

In Acquiring the Product

(Psychological Switching
Cost)

In Using the Product

In Disposing the Product

)
 Why would customers switch their telecom
service provider? (2010 Survey)

)
 The Customer Value Equation

Customer Value =
Functional Benefits + Image Benefits
Price +Time +Energy +Psychic Costs

Functional benefits refer to either “superior performance” or “superior

economy” whereas image benefits refer to the brand being used by the
customer as a vehicle of “self-expression”

)
 Customer Value Disciplines

Market-oriented companies attempt to create customer value in order to attract

and retain customers (their aim is to deliver superior value to their target
customers) …

Customer Value can be delivered by following one of the “value disciplines”:

 Operational Excellence : providing reliable products and services at competitive

prices, delivered by minimum difficulty
 Customer Intimacy: tailoring the offerings to meet customers’ demand very precisely
 Product Leadership: offering leading-edge products and services
 Product Leadership

Product

Customer

Customer Intimacy

Organization

Operational Excellence
 Customer Value Disciplines

Successful companies
Market-oriented companies attemptspecialize (are considered
to create customer value in order toby theand retain
attract
customers.
customers Theiras
aimthe
is tobest)
deliverin
superior
one value
of theto their
valuetarget customers.
disciplines and
maintain an “above average” performance (as compared to
competitors)
Customer Value canin the other two
be delivered …
by following one of the “value disciplines”:

 Operational Excellence : providing reliable products and services at competitive

prices, delivered by minimum difficulty
 Customer Intimacy: tailoring the offerings to meet customers’ demand very precisely
 Product Leadership: offering leading-edge products and services
New ways of delivering superior value to
customers is marketing as a process, not
marketing as a department or function …
Companies are known by the type of value they offer to their customers …

A company needs to specialize in providing one of the three types of customer value
dimensions …
 3 Customer Value Dimensions

Psychological Value

Economic Value Functional Value

 3 Customer Value Dimensions

Psychological Value

Economic Value Functional Value

1

Creating value for the customers by offering “relatively lower” prices

as compared to the other competing brands in the market or offering
“more quantity” for the same price or “much more quantity” for a
slightly more price …