Wednesday, May 25, 2005

Marketing Management (MBA 610): Final Exam

MBA 610: Marketing Management
Final Exam

Question #1-A (Readings)
How increasing values to customers improves business results (S. Vandermerwe)

Business fast change drives executives to concentrate and succeed with customer value. Marketing mindset needs creative attitude to win with customers and maximize profitability out of customer loyalty. Vandermerwe verified the profitability of focusing on customer demands and mapping all business activities with customer expectations to obtain higher values for and from the customer. There are four areas to increase consumer spending:
  • Longevity
  • Depth
  • Breadth  
  • Diversity of services
An executive should not seek higher single-product-revenues but wider share of customer’s wallet in a specific area. Cutting products, diversifying services and concentrating on customers needs, Unilever reached excellent revenues. Being obsessed with customer delight, Baxter model executive shifted his division activities from manufacturing bags to “care giving”.
All business activities should revolve around open customer focus strategy based on the following elements:
  • Shifting power to customer to judge the experience
  • Creating demands based customer needs analysis
  • Locking-on the customer instead of locking-in
  • Articulating new expandable market space
  • Tapping into customer’s mind for better positioning
  • Affecting results customers are looking for
  • Personalizing the service and delivery settings and environment
  • Training skilled employees to deliver higher value
  • Stretching demands based on related needs
  • Sweeping supplies
  • Drawing consistent strategy based on delighting customers
Word count: 200

Question #1-B
Delivering Excellent Service, Learning from The best firms (Ford, Heaton, Brown)

Themes (8), (5), (10) are reflected in this article.
(8)- Several points in the article highlight customer’s viewpoint at every stage of the service, emphasize the importance of customer delight commitment, and proved the success of customer satisfaction strategy in major service organizations. However excellent service requires extensive efforts to follow the following principles:
·         Sensing customer expectations
·         Aligning core competencies with customer values.
·         Leading and monitoring  at customer front end
·         Empowering employees to handle problems
·         Supporting strong service guestology culture
·         Avoiding failing a customer twice.

(5)- This article reflects also the importance empowering the customer to judge the value of the benefit bundle. It concentrates on continuous improvement and integration of the delivered experience from customer’s view. Building guest-focused-culture fills the gaps between delivery and customer expectations. For example, Sheraton bellman delighted his guest and resolved traffic issue without higher management intervention. “Larry chair” reflects also the importance of communicating customer care to guests.
Empowering customers to reproduce their own experience helps exploring undeveloped customer satisfaction sources in order to benefit of. An excellent example is Southwest airlines approach to let frequent fliers interview new attendants to retrieve their expectations.

(10)- Information solved most problems in the article. Extensive researching let companies assess customer demands and expectations and track market changes. Disney guestology culture relies heavily on extensive customer surveys as well as Ritz Carlton elevator dilemma solution.
Word count: 225

Question #1-C
Both articles emphasize strategic thinking (2) in order to build competitive advantage with customer delight. Without strategic thinking Disney could not build innovative guestology culture spread all over the company nor could Southwest airlines turn a plain customer into a loyal patron. Strategic vision helped Disney also to:
·         Improve customer experience
·         Tailor settings to meet customer expectations
·         Diversify customer spending within the company

Both articles reflect Creativity worth also. Locking-on customers helped Unilever to creatively breadth customer spending and attract even cleaning services to its profit sources. Similar creative philosophy was behind “Larry Chair” introduction also.
Imaginative thinking dominates both articles where managers or employees inspire unique solutions or anticipate future situations to improve customer experience. The Bellman example proves imagination importance to build customer relationship or when setting customer focus strategy as in the case of III that sacrificed all its information assets to inspire and boost customer loyalty.
Word Count: 150

Question #2 – A
Developing a marketing strategy does not require promotional vision only but it should respect financial conditions also. Financial executives suspect marketing forecast and substantial budgets that marketers treat as an investment. However, marketing expenditures on each component should be assessed also from an expense perspective to optimize resources allocation depending on the opportunities.
·         Product: Financial managers look at the basic product only; however, a product is more than the product itself for marketers who need extra financial resources to brand the augmented product in order to position it in customers’ mind. In here, a marketer should be very punctual not to spend too many resources for extensive positioning of his product.  All costs of potential product will be added to the product cost and a marketer should be very precise to discount resources on the longer term to rationalize his budget.
·         Price: Price is the major source of revenues and it is easier to adjust than other strategy components. From a marketer point of view, price is the way to enhance sales but for financial authorities a price is the way to make profit. However, a marketer should be careful with the financing of new prices especially when dealing with a price cut. Marketer has to handle pricing well and meet the financial limits at the same time. It is possible to set different prices based on: product items, market segments, distribution channels, and purchase occasions. Marketers should agree with financial managers to set general pricing objectives and policies based on value, quality, profit margin, and competitive situation before approving prices proposed by marketing departments.    
·         Promotion: Promotion expenditures are real cost center but a percentage of this budget is invested in fact in building the brand equity. In addition, this budget should be discounted over the year of the plan and not only for one year at the launch of a product. Some of the major factors controlling this budget are:
  • Product life cycle: Marketer should allocate higher budget to new products to build the brand recognition and less for known products.
  • Market share: Marketer should allocate higher resources for low market share products.
  • Competition: Marketing budget should reflect the level of competition in the market for a specific product.
  • Promotion frequency: Marketers should select wisely the frequency of their campaigns in order to minimize costs
·         Place: This component might absorb huge resources unless allocated wisely by the marketing department. Based on the marketing objective and within the financial limits, distribution channels should be set up in a timely fashion to cover the market segments of the product within launch period. Moreover, additional budgets should be allocated for inventories and transportation. It is advisable to rely on intermediaries when the company lacks enough financial resources to carry out direct marketing.
·         Target Market: Marketer should decide on his target before tailoring his marketing mix. Segmenting and branding calls for substantial amount of money and the marketer has to decide where and how much to invest in order to achieve the campaign and stays within profitable limits. Within, targeted segments, marketers can identify most profitable customers to build stronger relationship with them. However, they should not forget about other customers.
In few words, for a financial manager, marketing seek values in everything but knows the cost of nothing, and from a marketer point of view, a financial executive, see the value of nothing but allocate costs for everything. The ultimate mix is to make a marketing campaign profitable and achievable in order to sustain the competitive advantage of the company with its customers.

Question #2 - B
The information spread affected most industries and business functions. In the new marketing paradigm, information plays an important role to support all other activities and it has major impact on the marketing strategy.
1.      Product: The information boom affected most products and put tighter limits on marketer on how to design and define their products. From one side, information helped marketers to reflect the features of the core benefits and basic products. Information makes it easier for marketers to assess the needs of the customer in order to design the expected and augmented product and win in the competition.
2.      Price: Prices had been highly affected by the information spread. The most striking example of price information correlation is the internet. Any customer can visit a web site and will have free wide scale price comparison for everything. The dilemma of marketer now is not to set up a price but to know how much is the customer willing to pay and obtain the value from this prevailing price.
3.      Promotion: The popularity and cheapness of information has lead to explosive growth of promotion tools. Information gathering and analyzing became cheaper and easier to acquire. For example, direct marketing had undergone astonishing expansion because of larger database usage, easier communications with customers, faster delivery and higher interactivity with clients due to online electronic presence.
4.      Place: The information boom makes it easier to identify profitable distribution channels and how to allocate distribution efficiently and effectively in order to build stronger, more accessible, and profitable outlets. At the same time, major distributors benefit of the information also to target customer bases differently based on their demands, social classes, or consumption behavior. The internet opened also other distribution channels whether with customers or with other businesses and facilitated data transfer and information sharing in order to enhance customer experience and tap deeper into customer mind at his own spare time.
5.      Target: With the wealth of information, it is much easier to analyze the market needs and customer information in order to segment the market and find niche markets for a specific product. Positioning becomes easier to handle also because the marketer knows what to target and on what basis. Data-mining also improves this procedure to a great extent because it facilitates market monitoring and assessment and trend anticipating.

Question #3
(1): High interrelationship: Promotion is a master key to build the real competitive advantage and if the company continues to treats promotion tools as mere functions in the marketing department then it will not make a real difference for the product and for the customer. All components of promotion need a new mindset and innovative way of doing business. However, personal selling and direct marketing concentrates more on the commitment to customer delight and each sales person should realize his responsibility to build customer satisfaction with the company.

(2): High interrelationship: Strategic thinking in promotion yields best results because it improves the delivery of marketing message through all promotion tools. Nature of relationship varies from one promotional tool to the other:
·         Advertisement: In this speedy age, Ads can not be differentiated without deep imagination and creative message.
·         Direct Marketing: Because of its direct relation to information technology, this tool should be always updated on a solid vision in order to anticipate future trends and proactively explore its benefits.
·         Public relations: A company should build its strategic relations with media agencies long before launching its advertisement story.
·         Sales promotion: This component also needs wise strategy to distribute and focus on profitable events in designated areas to achieve best output.

(3): Highest interrelationship: Promotion success is mainly due to unbeaten planning that makes things happen. It needs proactive tactics to attract the customer and new ideas to design the promotional copy that benefit of personalized and customized message to link a product with customer experience. All victorious companies struggle continuously to invent creative approach and visions for its promotional mix. However, new approach does not make things happen but the plan should concentrate on getting the desired outcome in the mind of the customer and influence his demands. Planned promotions could help the marketer to suit customer demands on a regular basis.

(4): high interrelationship: The promotional mix absorb a major percentage of the marketing budget and sometimes its ROI is not accepted financially but this theme applies in here as well and all promotional activities should be assessed from profitability point of view in order to see where to invest and where to focus the expenditure. Response functions should be designed for personal selling and sales promotion specially in order to assess the return of campaigns in these two tools. Advertisement and public relations are inexpensive, though; their return should be assessed also.

(5): High interrelationship: Creating maximum value for the customer will not yield better experience unless this value is communicated to the customer and here is the power of promotion. Creative advertisement is fastest and cheapest method to convey the value built in a product or via a well designed story if highly credible. Personal sales however is the easiest way to convince the customer of the value attached to the provided bundle and help to read customer feedback in order to extrapolate other benefits that improve customer satisfaction.

(6): Medium interrelationship: Promotions help the company to get closer of its customers because of the relationship building process attached to the promotional copy. Personal sales are the preferred methods to get closer to the customer if money is available because this tool is effective, interactive and create tension.

(7): Medium interrelationship: Promotion benefit of the focus strategy a company might follow because it is easier to target one market segment in an ad or a story. The company should however align its competitive promotional advantages with customer needs in the segment that can best serve.

(8): High interrelationship: Similar to all marketing activities, customer is the real assets of all companies and all activities should start and end at the customer. Promotional mix should be designed to match customer needs. Ads and personal sales should concentrate on customer delighting. Direct marketing relies heavily on personalized campaigns targeted to each customer in order to effectively convey the message.

(9): Highest interrelationship: Integration is the secret of successful promotions. Promotion mix can not succeed unless all components are interlinked together and linked to customers and marketplace in order to create the momentum and synergy to position the product in the customer mind.

(10): High interrelationship: Information is the essence of marketing strategy and consequently the essence of the marketing mix. From one part, direct marketing relies heavily on information and communication infrastructure these days. Advertisement also needs a lot of surveys and market sensing in order to test new trends and anticipate such changes in the campaigns. Sales promotion should be planned with solid statistical studies to forecast its efficiency in the market.

Question #4 – A: Product Policy
Dabblers: On the core benefit level, Marketers of the magazine must see themselves as benefit providers and present GROWIT as “Simple garden care”. Turning GROWIT into a basic product will present the magazine as a fast reference with charts and tutorials on how to acquire and care for the plants. The expected GROWIT should convince dabblers that it has clear how-to and straightforward discussion groups and a relative degree of professional care. At the fourth level, the marketer should present the augmented value of GROWIT as intermediary to provide wide variety of information, services, hints, checklists, and access to community views. At the potential level, GROWIT should always present another vision to satisfy dabblers and distinguish their offers.
Masters: On the core benefit level, GROWIT should be presented as the “complete encyclopedia of gardening” with extra sidebars and detailed professional information. At the expected level, the journal might allocate some space for expert suggestions. At the augmented level, the journal should allow enough space for customer experience and customer feedback or comments in order to let them feel a part of the story. Potential level for this segment calls for huge efforts because this category of customers always seeks augmentations and transformations. GROWIT should always allocate enough space to present what this category of customers prefers to see.

Question #4 – B: Positioning
Dabblers: GROWIT can be positioned based on its benefit delivering fantasy experience while gardening such as caring of your beloved flowers. It can be positioned based on its use as the ultimate source for busy people who has only one hour to enjoy garden caring. Finally, quality position is suitable where GROWIT can position itself as offering “Best care” for few dollars.

Masters: Positioning for masters is harder because of their devotion and expertise. Product positioning is applicable: “GROWIT the garden care magazine”. User position could be used also to position GROWIT as best for “plants caretaker”.  Last, application position builds life into the magazine “GROWIT: how to love your garden”.

Question #4 – C: Communications / Promotion mix
Advertisement: Though advertisement is inflexible and impersonal, it can be used to keep a pervasive contact with masters because it is cheaper and allows enough room for creativity. GROWIT can use seasonal ads to broadcast new values as long as it focuses on value creating and message differentiation. This method suits dabblers most because of lower activity and weaker involvement. In addition, creative ads and content can attract their attention and convince them to acquire the journal.
Direct Marketing: is most suitable for dabblers because of large segment as well as for masters because it is easy to customize and personalize. Dabblers are looking for convenience and easy information. However, both segments might show some fear of privacy invasion. Masters, on the other hand, might accepts dirct marketing as long as it has value.

Personal Selling: This tool is very effective with masters because they are looking for superior value and they are wiling to provide direct feedback on the delivered value. Representing 3% of the market only, it will be financially feasible to focus personal selling in this category and delight masters in order to build stronger relationship with them. Dabblers are not looking for special attention because they show less dedication and usually do not respond immediately to quality offering.

Sales Promotions: This tool lead to immediate sales in dabblers segments and it is easy to implement. However, it might affect the long term perceived quality of the journal if extensively used. Masters do not believe in such promotions and they are not willing to acquire the journal unless it prove the attractiveness during promotions.

Public relations: Building the value of the journal into a media story is very effective with dabblers who are willing to listen and believe. This method suits this category as it is inexpensive and holds people off guard. However, it might affect the masters if the story has false facts. In addition, this tool is not easy to be carried out because the same story can span both segments.

Question #4 – D: Pricing
Masters are willing to pay higher prices if delighted while dabblers exercise less loyalty while changing prices. However in both cases, price should not be cost oriented. For dabblers prices are very elastic and small changes in prices will affect the demand heavily and they are higher percentage of the clientele. Hence, GROWIT should provide them with lower prices or offer sufficient bundle to convince them to buy it. Masters are less sensitive to prices and willing to pay higher as long as they are satisfied. GROWIT can use perceived value pricing in this segment as long as it communicates higher value to this segment and should educate masters about the true value of its expertise but it should also reward this category from time to time.