1. Branding
Seller's market: focus on product, like supermarket. providers products as much as possible. Benefits comes from lower cost and large market share.
Buyer's market: focus on specific customers marketing. (you need to identify who are you target customers, you cannot fulfill all customers) provides them what they need. Benefits comes from premium price, customer loyalty (lower cost to maintain the customers) and cross selling.
Connected community makes customers can communicate their experience. (network changes the marketing)
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Production orientation: offer as much as possible products, big company wins(market share)
Marketing orientation: learn customers requirement and provide what they need. If you know more about your customers, you will win.
Experience orientation: give customers better experiences and gain benefits from social media promotion.
Trust orientation: building a relationship with customers.
4 P's of Marketing:
Price - what customers pay
Product - what sellers sale
Promotion - how sellers reach or persuade customers to buy their products
Place - where the transaction happens, online or in the somewhere.
Case study:
In the blood donation scenario, price is the blood, which provided by customers. Product is the benefits of blood donation, such as a free meal. Promotion is how they communicate the benefits of blood donation. Place is the blood mobile comes to customers.
Customers have the final say.
customers will choose what they want. they can't consider everything.
There are three bundles they may consider: Operational things (price etc..), Product design (technology etc..), Customize to meet their needs. They will pick one product best in one of those three bundles (the bundle they care most about), and good enough in other two dimensions.
Fair value:
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Customers will expect more benefits they get if the price is higher, and expect less when the price is lower. So the fair value is the line that what customers expect with their cost. If you offer more benefits than their expectation, customers will consider to buy it. (not definitely)
However, the fair line is dynamic. For example, Apple invented the iPod (better design), then others will try to copy and mitigate the advantage. Then customers will expect more, the fair line will move.
Fair line not means the middle line, sometimes all sellers are above the fair line, but sometimes no one can achieve the fair line.
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Choose one axis and do the best, and the other ones you can above the fair value. That will influence your leadership. The axis you choose will also make impact on who you should hire and how your resource allocated. (Performace will focus on high tech employees, Customer intimacy will focus on research and market people, etc..)
STP: (Find your customer)
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Don't be average!
Different segment will need different 4P's. Different product, advertising, place and price.
How to segment:
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Characteristic: man/woman, young/old, rich/poor
Benefits care about: Running shoes comfort / tech / design
Behaviors: online shopping
Cohort Analysis: 90 generation / 00 generation and etc.. (very important)
Geographic Segmentation: Neighborhood
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Brand & Positioning
Point of Parity (POP): associations are shared by other brands, it is not unique.
Category POP: all brands have something in nature (instead of competition), so you should have it.
Competitive POP: some brand has a new feature, in order to mitigate the advantage, all brand have this feature.
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Red circle: when you mention mcdonald's, what can you remember?
Yellow circle: the advantages or the frame of reference(compare with other companies)
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Core brand value: the most important 5-10 values. (in mental map)
Brand Mantra: the DNA and guidance of brand. the core of advertising. (brand function & descriptive modifier & emotional modifier)
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Brand is a kind of experience. Need to focus on emotional experience. (Due to connections between customers and social media)
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Consistency delivery, Superior product, Distinctive customer experience, Alignment internal and external commitment.
2. Customer Centricity (Intimacy)
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Divergent thinking: jump out. think about use one tech to other market.
Cracks:
short product cycle => minimum the monopoly power (hard to stay ahead for product expertise)
smarter customers => they are more demanding (seek for "end-to-end" solution instead of just one vendor) and company become hard to get profit from product and service
convenient delivery => can not develop loyalty and easier to be mocked
Data-Driven Business Model: for instance, TESCO knows when to send which kind of coupon to which households to keep these customers (against Walmart).
Direct Marketing: target customers. recognize valuable customers.
something should do for Customer Centricity:
understand customers individually, not as a whole. (Walmart not achieve)
national not locally understanding. (Starbucks not achieve)
treat every customer different, consider their future value and pick the valuable customer. (Nordstorm not achieve)
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Compare to product centricity, customers centricity need to select customers (not try to lower product cost), invest long-term profit instead of short-term, develop new feature based on customers requirement.
Focus on future value, elevate the customer value monthly. Build long-term relationship with customers. Encourage forward looking instead of backward looking.
Customer centricity requires us to look ahead, figure out who the valuable customers will be and do things for them to help them recognize that we have their best interests in mind. That's the kind of investment that I'm looking for.
Product centricity will focus on push a new feature or product one by one, but customer centricity focus on celebrating heterogeneity, they know that some customers are more profitable.
customer acquisition, customer retention, customer development.
Customer-centric organizational structure: different customers => different product line => different organization
Relationship expertise
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Balance between focusing on most valuable customers and other people, you should not get rid of those people. Especially when you have millions of users, you cannot be pure customers centricity.
3. Communications Strategy & Fundamentals of Pricing
Communications Campaign (Promotions)
advertising will be more effective when it is not looks like an advertising method. for example, a BMW car in a movie.
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Design your campaign strategy first, not influenced by media choice. (even TV goes down, but we still watch video on websites)
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Rational Appeals Example:
- Product demonstration
- Spokesperson
- Testimonials
- Product Comparison
Emotional Appeals Example:
- positive : affection, humors
- negative : fear (too much or not enough will be not effective)
Three types of Media:
- Paid Media (TV, search)
- Earned (hold an event)
- Owned (on your own website, or your product, like the name on the behind not front of your car, other cars can read it)
Budget decision:
Not set budget as percentage of your sales. Firstly, consider the tasks that what you want to achieve by advertisement, such as 40% awareness, then think about how much you should spend on to achieve that goal.
Measurement should be decided ahead of campaign.
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Improvement on price can bring most profits instead on cost or sales volume.
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7 different drivers of price sensitivity：
- the availability and awareness of substitute. (the awareness and the existence of substitutes, e.g. when you go to an unfamiliar city, you will be not sensitive to price because you don't know substitutes.)
- easy of direct comparison
- expenditure (total cost and fraction of your total cost. e.g. bigger family will be more sensitive when they buy groceries)
- shared cost. (insurance)
- switching cost.
- price-quality inference. (people know less about how to evaluate the product, so they prefer the expensive one. e.g. doctor/lawyer consulting)
- ability to carry inventory. (buy more when the price is low)
Price Elasticity
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(worldwide, not related with unit and business)
If you raise your product price by 1%, and your demand reduce by 2%, it means your product is price elastic. On the contrary, if you raise your product price by 1%, and your demand reduce by 0.5%, it means inelastic.
So the balance is change in demand / change in price is 1. (profit not change)
How to calculate:
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Survey: divide target customers into several group and offer different price, ask them whether they will buy it. (Quick & inexpensive / people often don't do what they say they will do & does not explicitly account for comparative prices & not talking about purchase frequency)
Trade off: choose between price or taste. e.g. 1dollar&good taste, 0.5dollar&normal taste
Psychologies
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Impact of 9 Price Ending
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- Weber Fechner ''law'' (prefer save 5 dollars for 10 dollars product, compared to save 5 dollars for 1000 dollars product) React more to percentage change not absolute changes.
- Endowment efforts (let customers feel they own the product already before they buy it. e.g. cars test-drive, allows you drive the car alone instead of being companied by sales)
- Reference price (past price, start with high price and goes down)
- Context effects (choice set, middle price will attract more customers when you offer lower and higher price)
Basic Analytic for Pricing Decision
- Margin/Contribution Analysis
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If you can only make 10,000 lens, you will choose which one? If your customer is fixed, daily lens will be more profitable. but if your production capacity is fixed, 2 weeks' lens will be more profitable.
Find your key resource. when your key resource is production capacity, your margin is determined by margin per lens.
For retail store, the square shelf space is the key resource (profit can be calculated by per square), but for law office, the lawyers count is the key resource (profit can be calculated by per hour / person).
Split the pie(profit) with your partner (in this case is ECP) by the same percentage for each kind of product. - break-even Analysis
whether the advertising budget is reasonable? instead of using (budget / profit per lens), you should better use (budget / per user cost) to consider how many new customer you need to attract by this advertisement, not you need to sale how many leans to cover the budget.
More generally then break-even cannibalization is equal to the margin on the new product, divided by the margin on the existing product. In this particular case, it's a 104 divided by 208 which is 50 percent. (if less than 50% customer trans from old 208 product to 104 product, that's ok. but if more than 50%, you will earn less)
Economic Value to the Customer (EVC)
target customer and how to identify/find them
competition (take customers from where)
price decision (including channel partner)
worthwhile? customer & channel partner & sellers all be happy
Creating Customer Access
more expensive than advertisement
information & logic => buy or not
digital attributes / non-digital attributes => online / offline customer access
(after first purchase, non-digital attributes can be transformed to digital attributes, so customers may turn to online shopping)
Businesses often spend significantly more money on creating customer access for their products/service than they spend on advertising
Channel Management
Conflicts vertical : between channel partners and you (profit allocation)
Conflicts horizontal : between channel partners (free riding, get high service from offline shop but buy it in online low service website/ and price diff)
Digital Marketing
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4. Effective Brand Communications Strategies and Repositioning Strategies
Brand name => perception (hard to change) for quality and price
Looks similar / place nearly => assume the same quality and price
Brand name
Memorable & Meaningful (Descriptive) & Appealing (fun, attractive) & Protectable & Adaptable (times change flexible) & Transferable (all product line current and future, global)
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