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Market-Based Management: Strategies for Growing Customer Value and Profitability, Fifth Edition

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Market-Based Management: Strategies for Growing Customer Value and Profitability, Fifth Edition

by Roger J. Best

Publisher: Prentice Hall

Copyright Year: 2009

Publishing Date: 2008/03/24

eText ISBN-10: 0-13-233657-X

eText ISBN-13: 978-0-13-233657-4

Print ISBN-10: 0-13-233653-7

Print ISBN-13: 978-0-13-233653-6

Course: Marketing Management, Marketing Strategy

Pages: 544

eTextbook $47.53

(180 day subscription)

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Table of Contents | Description

Instructor Resources | Student Resources

ABOUT THIS TITLE - TABLE OF CONTENTS

About the Author, xxvi

Acknowledgments, xxvii

Part I. Market Orientation and Performance, 1

Chapter 1. Customer Focus and Managing Customer Loyalty, 5

Customer Focus and Profitability, 6

How to “Underwhelm” Customers and Shareholders, 6

Customer Focus and Customer Satisfaction, 7

Customer Satisfaction: A Key Marketing Performance Metric, 8

A Wide-Angle View of Customer Satisfaction, 9

De-Averaging Customer Satisfaction and Customer Profitability, 10

Profit Impact of Customer Dissatisfaction, 13

Profit Impact of Customer Retention, 14

Customer Satisfaction and Customer Retention, 15

Estimating Customer Retention, 16

Customer Retention and Customer Life Expectancy, 16

The Lifetime Value of a Customer, 17

Net Promoter Score, 19

Customer Loyalty and Managing Customer Loyalty, 21

Measuring Customer Loyalty, 21

Managing Customer Loyalty, 22

Top Performers, 22

High Potentials, 23

New Opportunities, 24

Customer Focus, 26

Customer Focus and Marketing Knowledge, 26

Customer-Focused Behaviors and Practices, 27

Marketing Performance, 28

Marketing Profitability, 28

Market-Based Strategic Thinking, 30

Marketing Performance Tools, 31

Appendix 1.1: Present Value Table, 33

Chapter 2. Marketing Performance and Marketing Profitability, 35

Marketing Performance Versus Financial Performance, 36

Measuring and Tracking Marketing Performance, 37

A Market-Based Strategy, 38

Marketing Performance Metrics, 39

Internal Versus External Performance Metrics, 40

Process Versus Result Marketing Metrics, 41

Profit Impact of Marketing Performance Metrics, 42

Marketing Profitability and Profits, 42

Marketing Profitability and Performance Metrics, 44

Marketing Profitability and Product Lines, 46

Managing Marketing Profitability—A Product Focus, 47

Managing Marketing Profitability—A Customer Focus, 49

Profit Impact of Marketing Strategies, 51

Market Growth Strategy, 52

Market Share Strategy, 53

Customer Revenue Strategy, 54

Cost Reduction Strategy, 54

Advertising Strategy, 55

Channel Strategy, 55

Benchmarking Marketing Profitability, 56

Marketing Return on Sales, 57

Marketing Return on Investment, 58

Profit Impact of Marketing Profitability Metrics, 59

Managing Marketing Performance and Marketing Profitability, 60

Market-Based Strategic Thinking, 62

Marketing Performance Tools, 63

Part II. Market Analysis, 66

Chapter 3. Market Potential, Market Demand, and Market Share, 69

Market Definition—What Business Are We In?, 70

Broad Market Vision, 72

Market Potential, 73

Market Development Index, 77

Untapped Market Potential, 77

Market Potential and Market Growth, 79

Managing Market Growth, 80

Accelerating Market Growth, 81

Customer Adoption Forces, 82

Product Adoption Forces, 83

Product-Market Versus Product Life Cycle, 84

Product Life-Cycle Demand and Profits, 85

Market Demand and Prices, 86

Product Life-Cycle Margins and Marketing Expenses, 88

Product Life Cycle and Marketing Profitability, 89

Share Performance Metrics, 91

Market Share Index, 94

Share Potential and Market Share Management, 94

Market Share Potential, 95

Share Development Index, 96

Market-Based Strategic Thinking, 98

Marketing Performance Tools, 99

Chapter 4. The Customer Experience and Value Creation, 101

The Total Customer Experience, 102

Empathic Design, 102

Hypothetical Videos: Current Versus Desired Customer Experience, 103

The Customer Experience of Lead Users, 104

Reverse Innovation—Invent to Order, 106

Managing Customer Touch Points, 107

Mass Collaboration, 108

Prosumers—Customers as Co-Inventors, 110

Partners—Engaging Professionals, 110

Suppliers—Leveraging Supplier Participation, 110

Employees—An Under-Leveraged Opportunity, 111

Life-Cycle Cost and Customer Value, 111

Price Paid, 113

Acquisition Costs, 113

Usage Costs, 114

Ownership Costs, 115

Maintenance Costs, 115

Disposal Costs, 116

Price-Performance and Value Creation, 117

Relative Performance, 117

Relative Price, 118

Customer Value, 119

Value Mapping, 120

Perceived Benefits and Value Creation, 120

Product Benefits, 120

Service Benefits, 121

Company or Brand Benefits, 122

Overall Customer Benefits, 123

Cost of Purchase Index, 123

Customer Value Index, 124

Emotion Benefits and Value Creation, 126

Emotional Benefits and Psychological Value, 126

Brand Personality and Value Creation, 127

Transaction Cost and Value Creation, 128

Space Value, 128

Transaction Value, 129

Value Creation Across the Supply Chain, 129

Identifying Value Drivers, 130

Customer Preferences, 131

Customer Value, 132

Market-Based Strategic Thinking, 135

Marketing Performance Tools, 136

Appendix 4.1: Trade-Off Analysis Computations, 138

Chapter 5. Market Segmentation and Segmentation Strategies, 139

Needs-Based Market Segmentation, 140

Customer Needs, 143

Forces That Shape Consumer Market Needs, 143

Demographic Influences, 144

Lifestyle Influences, 144

Usage Behaviors, 144

Forces That Shape Business Market Needs, 144

Firm Demographics, 145

Business Culture, 145

Usage Behaviors, 146

Needs-Based Market Segmentation, 146

The Demographic Trap, 147

Needs-Based Market Segments, 148

Segment Identification, 149

Segment Attractiveness, 150

Segment Profitability, 151

Segment Positioning, 154

Segment Strategy Acid Test, 155

Segment Marketing Mix Strategy, 156

Segmentation Strategies, 157

Mass-Market Strategy, 157

Large-Segment Strategy, 157

Adjacent-Segment Strategy, 158

Multi-Segment Strategies, 159

Small-Segment Strategy, 161

Niche-Segment Strategies, 161

Sub-Segment Strategies, 161

Customer Relationship Marketing, 163

Customer Value Versus Company Value, 164

Database Marketing, 165

Mass Personalization, 166

Mass Customization, 166

Customer Relationship Management, 167

Market-Based Strategic Thinking, 170

Marketing Performance Tools, 171

Chapter 6. Competitor Analysis and Sources of Advantage, 175

Sources of Competitive Advantage, 177

Cost Advantage, 177

Variable Cost Advantage, 178

Marketing Cost Advantage, 180

Operating Cost Advantage, 180

Differentiation Advantage, 181

Product Advantage, 181

Service Advantage, 182

Reputation Advantage, 183

Marketing Advantage, 183

Market Share Advantage, 184

Product Line Advantage, 185

Channel Advantage, 186

Knowledge as a Source of Advantage, 187

Competitor Intelligence, 189

Benchmark Competitors, 189

Competitor Analysis, 191

Obtaining Competitor Intelligence, 191

A Sample Competitor Analysis, 193

Competitive Benchmarking, 194

Industry Analysis, 196

Barriers to Entry, 196

Barriers to Exit, 197

Customer Buying Power, 197

Supplier Selling Power, 197

Product Substitutes, 197

Competitive Rivalry, 198

The Prisoner’s Dilemma, 199

Sustainable Advantage, 199

Market-Based Strategic Thinking, 201

Marketing Performance Tools, 202

Appendix 6.1: Estimating an Experience Curve Coefficient and the Percent Experience Curve, 204

Part III. Marketing Mix Strategies, 206

Chapter 7. Product Positioning, Branding, and Product Line Strategies, 209

Product Positioning, 210

Product Positioning and Market Share, 212

Product Positioning Strategies, 213

Production Positioning and Differentiation, 215

Product Differentiation, 215

Service Differentiation, 218

Brand Differentiation, 219

Low Cost of Purchase, 220

Branding and Brand Management Strategies, 221

Brand Identity, 221

Brand Encoding, 221

Brand Name Development, 225

Creating a New Brand Name, 226

Brand Equity, 227

Brand Assets, 227

Brand Liabilities, 229

Brand Equity, 229

Brand and Product Line Strategies, 231

Product Line Development, 232

Umbrella and Flanker Brands, 232

Product Line Extensions, 234

Bundling and Unbundling Strategies, 236

Product Line Substitution Effects, 238

Product Line Scale Effects, 238

Market-Based Strategic Thinking, 240

Marketing Performance Tools, 241

Chapter 8. Value-Based Pricing and Pricing Strategies, 243

Value-Based Pricing, 244

Value-in-Use Pricing, 244

Perceived-Value Pricing, 246

Performance-Based Pricing, 248

Price-Margin Management, 252

Pocket-Price Bandwidth, 253

Product Life-Cycle Pricing Strategies, 255

Skim Pricing, 255

Single-Segment Pricing, 256

Penetration Pricing, 257

Low-Cost-Leader Pricing, 258

Multi-Segment Pricing, 258

Plus-One Pricing, 259

Reduced-Focused Pricing, 260

Harvest Pricing, 260

Pricing and Profitability, 262

Price Elasticity and Profitability, 264

Inelastic Price Management, 264

Elastic Price Management, 266

Prince and Break-Even Analysis, 268

Price and Break-Even Volume, 269

Price and Break-Even Market Share, 269

Product Line Pricing, 270

Pricing Substitute Products, 270

Pricing Complementary Products, 271

Market-Based Strategic Thinking, 275

Marketing Performance Tools, 276

Chapter 9. Marketing Channels and Channel Mapping, 279

Channel Mapping, 280

Marketing Channel Performance, 283

Customer Reach, 284

Operating Efficiency, 285

Service Quality, 286

Alternative Marketing Channels, 287

Direct Channels, 288

Indirect Channels, 289

Mixed Channels, 289

B2C Channels, 289

B2B Channels, 290

B2B and B2C Marketing Channels, 292

Marketing Channels That Improve Customer Value, 292

Product Benefits, 293

Service Benefits, 293

Brand Image, 295

Company Benefits, 295

Improving Cost Efficiency, 297

Marketing Channels and Competitive Advantage, 299

Sales Force Advantage, 299

Sales Productivity, 299

Distribution Advantage, 300

Profit Impact of Alternative Marketing Channels, 301

Market-Based Strategic Thinking, 304

Marketing Performance Tools, 304

Chapter 10. Marketing Communications and Customer Response, 307

Building Advertising Awareness, 311

Customer Response Index, 313

Strategies to Increase Customer Response, 314

Building Customer Awareness and Comprehension, 317

Media Selection and Customer Awareness, 317

Message Frequency and Customer Awareness, 317

Ad Copy and Customer Response, 320

Message Reinforcement, 321

Message Reinforcement and Pulsing, 321

Heavy-Up Message Frequency, 322

Stimulating Customer Action, 322

Pull Versus Push Communications Strategies, 322

Pull Communications and Customer Response, 324

Advertising Elasticity, 324

Advertising Carryover Effects, 325

Direct Marketing Promotions, 327

Promotional Price Elasticity, 328

Push Communications and Customer Response, 329

Trade Promotions and Customer Response, 329

Market Infrastructure and Push Communications, 330

Market-Based Strategic Thinking, 331

Marketing Performance Tools, 332

Part IV. Strategic Marketing, 334

Chapter 11. Portfolio Analysis and Stragetic Market Planning, 337

Strategic Market Planning, 338

Product Life Cycle/Market Share Portfolio, 344

GE/McKinsey Portfolio Analysis, 345

Competitive Position, 348

Portfolio Analysis and Strategic Market Plans, 350

Offensive Portfolio Strategy, 352

Defensive Portfolio Strategy, 354

Portfolio Diversification, 355

Two Levels of Diversification, 355

Marketing Mix Strategy and Performance Plan, 357

Marketing Mix Strategy, 357

Performance Plan, 358

Market-Based Strategic Thinking, 362

Marketing Performance Tools, 363

Chapter 12. Offensive Strategies, 365

Strategic Market Plans, 366

Offensive Strategic Market Plans, 367

Offensive Core Strategy I: Invest to Grow Sales, 369

Offensive Strategy IA: Grow Market Share, 369

Offensive Strategy IB: Grow Revenue per Customer, 370

Offensive Strategy IC: Enter New Market Segments, 371

Offensive Strategy ID: Expand Market Demand, 372

Offensive Core Strategy II: Improve Competitive Position, 374

Offensive Strategy IIA: Improve Customer Loyalty and Retention, 375

Offensive Strategy IIB: Improve Differentiation Advantage, 375

Offensive Strategy IIC: Lower Costs/Improve Marketing Productivity, 376

Offensive Strategy IID: Build Marketing Advantage, 376

Offensive Core Strategy III: Enter New Markets, 377

Offensive Strategy IIIA: Enter Related New Markets, 377

Offensive Strategy IIIB: Enter Unrelated New Markets, 378

Offensive Strategy IIIC: Enter New Emerging Markets, 379

Offensive Strategy IIID: Develop New Markets, 380

Choosing Offensive Strategic Market Plans, 381

Market-Based Strategic Thinking, 382

Marketing Performance Tools, 383

Chapter 13. Defensive Strategies, 385

Defensive Strategic Market Plans, 386

Defensive Core Strategy I: Protect Position, 389

Defensive Strategy IA: Protect Market Share, 389

Defensive Strategy IB: Build Customer Retention, 395

Defensive Core Strategy II: Optimize Position, 395

Defensive Strategy IIA: Maximize Net Marketing Contribution, 396

Defensive Strategy IIB: Reduce Market Focus, 399

Defensive Core Strategy III: Monetize, Harvest, or Divest, 400

Defensive Strategy IIIA: Manage for Cash Flow, 400

Defensive Strategy IIIB: Harvest or Divest for Cash Flow, 400

Selecting a Defensive Strategy, 403

Market-Based Strategic Thinking, 405

Marketing Performance Tools, 406

Part V. Marketing Plans and Performance, 408

Chapter 14. Building a Marketing Plan, 411

Creativity Versus Structure, 412

Benefits of Building a Market Plan, 413

Identifying Opportunities, 413

Leveraging Core Capabilities, 414

Focused Market Strategy, 414

Resource Allocation, 414

Building a Performance Roadmap, 414

Building a Marketing Plan, 415

Part I: Situation Analysis—Where Are We Now?, 415

Step 1: Current Situation, 417

Step 2: SWOT Analysis, 426

Part II: Marketing Strategy—Where Do We Want to Go?, 427

Step 3: Strategic Market Plan, 427

Step 4: Marketing Mix Strategy, 429

Part III: Performance Plan—What Is the Expected Impact?, 434

Step 5: Develop a Revenue Plan and Marketing Budget, 435

Step 6: Develop a Profit Plan, 438

Step 7: Performance Review, 443

Market-Based Strategic Thinking, 445

Marketing Performance Tools, 446

Chapter 15. Performance Metrics and Strategy Implementation, 447

Marketing Performance Metrics, 449

Process Versus Result Metrics, 451

Process Marketing Performance Metrics, 451

Result Marketing Performance Metrics, 452

Successful Strategy Implementation, 453

Managing Successful Strategy Implementation, 454

Owning the Marketing Plan, 455

Supporting the Strategic Market Plan, 457

Adapting the Market Plan, 459

Assessing the Implementation of a Market Plan, 460

Variance Analysis, 461

Market-Based Strategic Thinking, 466

Marketing Performance Tools, 467

Chapter 16. Market-Based Management and Financial Performance, 469

How to Overwhelm Customers and Shareholders, 471

Customer Satisfaction and Profitability, 472

How Market Strategies Affect Profitability, 474

Customer Volume, 474

Margin per Customer, 475

Gross Profit, 477

Net Marketing Contribution, 477

Net Profit (Before Taxes), 477

How Market Strategies Affect Assets, 478

Investment in Accounts Receivable, 478

Investment in Inventory, 479

Investment in Fixed Assets, 480

Return Measures of Profitability, 480

Measures of Shareholder Value, 482

Market-Based Management, 484

Market-Based Strategic Thinking, 487

Marketing Performance Tools, 487

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