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Definition of Marketing?

Marketing is concerned with the firms relationship to customers

It can provide long-term value to firms if done right 

Crucial in a market with multiple sellers and diverse customers


Marketing's Dual Character

  1. Leadership philosophy: Strategic management, guiding activities of all members of an organization
  2. Managerial Function: Marketing Management, everyday-marketing, campaigns, research 


The 4 P's?

  • Product
  • Price
  • Promotion
  • Place


Product in the 4 P's

  • Product variety
  • Quality
  • Design
  • Features
  • Brand name
  • Packaging
  • Sizes
  • Services
  • Warranties
  • Returns


Price in the 4 P's

  • List price
  • Discounts
  • Allowances
  • Payment period
  • Credit terms


Promotion in the 4 P's

  • Advertisement
  • Personal selling
  • Sales promotion
  • Public relations


Place in the 4 P's

  • Channels
  • Coverage
  • Assortment
  • Locations
  • Inventory
  • Transportation
  • Logistics



The new additional 3 P's?

  • People
  • Physical Evidence
  • Processes


People in the additional 3 P's

  • Employees
  • Customers
  • Communicating culture and value
  • Employee research


Physical Evidence in the additional 3 P's

  • Facility Design
  • Equipment
  • Signage
  • Employee Dress
  • Other tangibles


Processes in the additional 3 P's

  • Flow of activities
  • Number of steps
  • Level of customer involvement


What is the problem when only considering the 4 P's?

It was invented in the 1940s and thus targets mass marketing over mass media

It is more product oriented than customer oriented and does not justice to service providers

-> relationship management


Relationship management?

Is the process of creating, maintaining and enhancing strong relationships with customers and other stakeholders


Basic three elements of relationship management

  • Customer recruitment
  • Customer retention
  • Customer recovery

but only of profitable customers


Yearly profit of a customer

Long-term customers are more profitable


How come frims which don't produce anything in a factory have so much value?

Today customers are value


Three key points for strong brands

  1. When they help acquire new profitable customers
  2. help extend existing customer relationships
  3. help prolong existing customer relationships

the main asset that brings cash flow is the customer


Customer Livetime Value


Customer Equity

Describes the sum of the lifetime values of all present and future customers

This means investments pay off when they increase the customer equity


What approaches are there for customer equity management?

  1. Static perspective
  2. Dynamic perspective


Static perspective

Focuses on the customers with the highest CLV

How can I retain these customers how can I gain them?

  • No-cost upgrades
  • Selection for downgrades/denied services
  • Differential complaint handling
  • Waiting time in call center
  • Loyalty program status
  • Special phone number
  • Added services

Differential treatment for these customers


Dynamic persective

Focuses on those customers for which CLV increase has the highest return on investment

Which customers are reactiv

  • Increasing relationship length
  • Increasing relationship breath (# of transaction, cross-selling)
  • Increasing relationship depth (frequency of purchases, purchase value)
  • Reduce per-customer costs (migrate to self-service)


Customer Loyalty

Loyalty is a multidimensional construct (repurchase, word-of-mouth, cross selling intentions)

According to industry can either be contractual or non-contractual


Customer Loyalty
Net Promoter Score (NPS)

It asks the question:
"How likely is it that you would recommend our company/product/service to a friend?"

Scoring is based on a 0 to 10 Scale

  • %Promoters (9, 10) - %Detractors = NPS

it is still not recommended to use NPS as a predictor for financial performance 


CLV Modes

They are forward looking investment models based on
prediction. In these models, customer retention as well as the varying degree of customer cashflow
are considered directly or indirectly. The customer relationship is viewed as an investment or