Marketing Management Essay Sample
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Marketing Management Essay Sample
In Strategy from the Outside In: Profiting from Customer Value, George S. Day and Christine Moorman use research to determine business strategies that separate successful from unsuccessful firms. This write-up shall have a section, titled § II. Brief Summary, which outlines each chapter in Chapters 7 through 13, including the conclusion. This write-up shall also have a section, titled III. Application, which shall apply the material from § II. Brief Summary to a firm (hereinafter “Firm A”) with which I worked as a business consultant. Firm A is a multi-national holding company that specializes in acquiring, supporting, and growing its subsidiary companies through accelerated organic growth as well as through acquisitions and/or strategic joint ventures and divestitures.
II. Brief Summary
Chapter 7. The Third Imperative: Capitalize on the Customer as an Asset
For a firm, the profitability of the customer asset – the sum of the discounted long-term profits associated with the customer’s purchases and referrals – is based on three principles. First, that a firm must distinguish between behavioral loyalty – the frequency of customer purchases from a firm when a need arises – and attitudinal loyalty – an attachment to the firm and/or its specific products or services. Second, that a firm must manage customers to engage in behaviors that directly result in increased economic profits for the firm. These include giving the firm a greater share of wallet, purchasing new products and services, and lowering price sensitivity, etc. And third, that a firm must be capable of capitalizing on the customer asset, which will be addressed in Chapter 8.
Chapter 8. Capitalizing on the Customer as an Asset
To be capable of capitalizing on the customer asset, a firm must use strategies to select, develop, protect, and leverage customers. First, to
select customer assets, a firm may use customer lifetime value (CLV) models to value current and potential customers. Second, to develop customer assets, a firm may: (1) Create a learning relationship with customers; (2) Treat different customers differently; (3) Reward valuable customer behavior; and (4) Engage customers in communities. Third, to protect customer assets, a firm may: (1) Act proactively to differentiate value, rebuff competitors’ challenges, and raise customer switching costs, etc; and (2) Increase customer engagement by fostering customer co-creation and creating multiple relationships. And fourth, to leverage customers, a firm may activate customers across current categories, migrate customers to a higher-value segment, and create complementary sources of value, etc.
Chapter 9. The Fourth Imperative: Capitalize on the Brand as an Asset
A firm, in order to capitalize on the brand asset, must do three things that emphasize the value-creating pathways – purchase and non-purchase – associated with brands. First, it must satisfy the first imperative of customer value leadership. Second, it must use brand-building activities to maximize the value proposition and strengthen brand reputation; brand-protecting activities to protect the brand and anticipate counter threats; and brand-leveraging activities. And third, it must support these actions with a comprehensive dashboard of brand metrics on customer recognition and recall, customer attitudinal loyalty, and ongoing customer purchases, etc.
Chapter 10. Capitalizing on the Brand as an Asset
A firm, in order to effectuate brand-leveraging activities, must use pathways to generate growth, such as adjacencies and global markets, and the internet to manage these activities. First, to enter adjacent markets, a firm may use an emerging growth strategy, as opposed to a dilution strategy; this provides that a firm identifies and communicates unique customer benefits to distinct customers. Second, to enter global markets, a firm may use a global brand strategy, local brand strategy, or hybrid brand strategy. To faciliate brand asset management, a firm may use the internet to establish a community, indentify connectors in the market, and engage the market.
Chapter 11. Market Insights and the Customer Value Imperatives
A firm, in order to implement the four customer value imperatives, must have a foundation based on three principles. The first, a deep market insights capabilitiy, provides that a firm must be disciplined; learn from customers; manage market insights internally; and that customer information be shared across the organization. A firm with this capabilitiy will learn to ask and answer insightful questions about customers, competitors, channel partners, and market forces. Additionally, it will use metrics on inputs, processes, and outcomes, to evaluate performance on this capability.
Chapter 12. Organizing to Compete on the Customer Value Imperatives
A firm, to have the second principle necessary to implement the four customer value imperatives – organizational capability – must have three organizational factors. First, a firm must have an outside-in culture, held together by pervasive, externally oriented activities. Second, a firm must align itself with the market through its organizational structure, metrics, and incentives; assuring customers seamless interaction and accountability. And third, a firm must have the capabilities to compete on customer value, which are organizational level processes that allow the firm to implement the four imperatives on a continual basis.
Chapter 13. Leading for Customer Value
A firm, to implement the four customer value imperatives, must have the third principle necessary to implement the four customer value imperatives – marketing leadership capability. This leadership, due to variations in industry type, the role of sales, and the importance of information technology to the business, groups the marketer into one of four categories as a top-line leader, market advocate, service resource, or sales support. To establish their role in the company, a marketer may use a number of strategies, including: (1) Gaining credibility and buy-in; (2) Being the market expert; (3) Focusing on the customer; (4) Obsessing about talent; (5) Accepting accountability and advocating for metrics; (6) Partnering with sales; and (7) Showing relevance to corporate executives.
A firm that uses an outside-in strategy, as opposed to an inside-out strategy, will realize success, and often as a result become complacent; it can use a number of strategies to prevent this trend. First, it must seize the initiative, by focusing on superior customer value, successful execution of an outside-in strategy, and managing customer value imperatives. Second, it must stay focused on the market,through strategies on gaining, sustaining, and renewing the customer value imperatives. Third, it must stay vigilant, through effective leadership. Fourth, the firm must master an ambidextrous strategy, by balancing an intended strategy process with an emergent strategy process. And fifth, it must mobilize everyone, by selling the outside-in strategy to each employee so that they can create, keep, and leverage customers.
Firm A, as a multinational holding company, assumes the customers of the companies it acquires. For example, one company (hereinafter “Company A”) was a supplier of flexographic and digital labels, which presented difficulty capitalizing on the customer asset, which included companies in the food and beverage, household products, and health and beauty/cosmetics, etc., industrities. To improve, Firm A first built Company A’s attitudinal loyalty by improving its technologies and designs. Second, this attitudinal loyalty allowed Company A to manage customers to engage in behavior that resulted in increased firm profits. This included: (1) Letting Company A cross into more categories, such as with medical and industrial companies; (2) Purchasing new products and services, such as short run flexible packaging and specialty printing; and (3) Not defecting to the competition.
And third, Firm A improved Company B’s strategies for selecting, developing, protecting, and leveraging customers. For example, it employed customer lifetime value models to select customers; this allowed it to realize that acquisitions costs should never exceed the lifetime value of a customer. Second, it developed customers by creating a learning relationship with customers, through processes of information-gathering and feedback. Third, it protected customer assets by increasing investments in customers, through customer involvement in internal processes, and resolved customer need for variety, by offering new products and services. And fourth, it leveraged customers by transferring customer knowledge in the medical brands market to related markets, such as the pharmaceuticals market.
Firm A, as a multinational holding company, also assumes the brands of the companies it acquires. For example, one company (hereinafter “Company B”) was a supplier of temporary retail displays, specialty packaging and custom folding cartons, and offset print and finishing, etc., for the retail, manufacturing, and hospitality, etc., industries. To capitalize on the brand asset, Firm A first used brand-building activities to create brandawareness, maintain brand relevance, and make decisions about how to manage all the brands in Company B’s portfolio. For example, Firm A both kept the brand relevant to existing customers, such as those in hospitality, while also evolving the brand for new customers, such as those in higher education. This was achieved through upgrading printing and packaging technology and design methods.
Second, it used brand-protecting activities to both extend the brand to new market segments, and to eliminate entry points for competition. For example, it extended Company B’s brand from a printing and packaging brand in the retail and manufacturing market segments, to include those services in the health and beauty and sports and entertainment market segments. It also effectively used legal redress to protect the brand against market competition. For example, it used patents to protect intellectual property associated with its printing processes against market competition; in particular, from a former employee.
And third, it used brand-leveraging activities, based on emerging growth and global brand strategies, to expand Company B’s presence into new market segments. For example, it expanded its product offerings to include digital asset management and digital storefronts for companies in the consumer and household products industries. The management of these brand assets was facilitated through the use of the internet, which allowed Company B to establish and engage the community, while also monitoring its brands. These brand asset measures benefited Company B through ongoing purchase behavior and endorsements, which were demonstrated through brand metrics on customer recognition and recall and customer attitudinal loyalty.
Firm A did not, however, always acquire companies that effectively implemented the four customer value imperatives and/or their associated strategies. For example, one company (hereinafter “Company C”), which did not use an outside-in strategy, was a supplier of graphics production solutions for consumer packaging and in-store promotions and displays for the apparel and beauty care industries. To establish a foundation for the four customer value imperatives, Firm A first improved Company C’s market insights capability, by making the company more disciplined, sharing customer information across the organization, and managing market insights internally. The company’s performance on the market insights capability was evaluated using metrics on inputs, processes, and outcomes, including the quantity and quality of customer and competitor reports and management opinion on market-related issues.
Second, Firm A improved Company C’s organizational capability to implement the four customer value imperatives. It first created an outside-in strategy by changing company culture about the market, managing the market, and talent. Second, it aligned the company’s organizational structure with the market, through the use of cross-functional segments and account teams, customer managers and a customer department, and improving the marketing-sales alignment. And third, it improved the company’s capability to compete on customer value by, amongst other things, creating incentive programs for continuing education for employees. These programs, however, had to effectively address shifting incentives and incentives across employee levels.
And third, Firm A improved on Company C’s marketing leadership capability by establishing a defined role for marketing leadership and its work product within the company. For example, it established positions on the company’s board of directors and in executive management for individuals with marketing experience. In improving on the customer value imperatives, Company C may, however, become complacent and revert to an inside-out strategy, as opposed to an outside-in strategy. To prevent or reverse this trend, Firm A may use a number of strategies, including focusing on superior customer value, focusing on the market, and creating a willingness to challenge prevailing assumptions about the market, etc.