15 important marketing interview questions
saurabhmhase9
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Mar 25, 2014
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About This Presentation
15 marketing questions asked in interviews
Slide Content
1) Marketing – What is Marketing? Examples. Difference between Marketing and Selling. Why
is Marketing the most important function in an organisation? What are 4 Ps of Marketing Mix
and 7ps of Service Marketing Mix? What is the difference between Marketing a Good
(tangible product) and Marketing a Service?
Marketing – What is marketing? Examples.
Marketing is the concept started in early years of 20
th
century. Earlier when industrial
revolution took place, the supply for the goods exceeded the demand and there was need to
promote and sell the goods. With that need, the concept of selling evolved. As competition
increased, companies went beyond the concept of selling to generate the revenue and then
broader concept of marketing came to existence. The definition of marketing is as follows.
General Definition:
“Marketing is an integrated process of identifying the needs of customers, designing a product
to fulfill the need, creating that need into demand for product and at the end selling the
product profitably.”
Definition of Philip Kotler:
It is the Art and Science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, & communicating superior customer value.
Definition by Peter Drucker:
“The aim of marketing is to know and understand the customer so well that the product or
service fits him and sell itself”
E.g. Amazon started e-commerce. Customers wanted to save time of shopping. Amazon came
up with a service which actually was saving time of customers selling them things online. This
was an approach which met needs of the customer and this is a very good example of
marketing.
E.g. IKEA understood the need of the customers to have furniture in low price so they came up
with the knockdown furniture.
Difference between Marketing and Selling.
Sales Marketing
Sales starts with a product. Marketing starts with customer
Sales is subset of marketing. Marketing is vast concept. Sales is just part of
it.
Focus is to achieve sales target Focus is to fulfill the customer’s needs
Sales process is designed considering the
short term
Marketing process is designed considering the
long term
is Marketing the most important function in an organisation? What are 4 Ps of Marketing Mix
and 7ps of Service Marketing Mix? What is the difference between Marketing a Good
(tangible product) and Marketing a Service?
Marketing – What is marketing? Examples.
Marketing is the concept started in early years of 20
th
century. Earlier when industrial
revolution took place, the supply for the goods exceeded the demand and there was need to
promote and sell the goods. With that need, the concept of selling evolved. As competition
increased, companies went beyond the concept of selling to generate the revenue and then
broader concept of marketing came to existence. The definition of marketing is as follows.
General Definition:
“Marketing is an integrated process of identifying the needs of customers, designing a product
to fulfill the need, creating that need into demand for product and at the end selling the
product profitably.”
Definition of Philip Kotler:
It is the Art and Science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, & communicating superior customer value.
Definition by Peter Drucker:
“The aim of marketing is to know and understand the customer so well that the product or
service fits him and sell itself”
E.g. Amazon started e-commerce. Customers wanted to save time of shopping. Amazon came
up with a service which actually was saving time of customers selling them things online. This
was an approach which met needs of the customer and this is a very good example of
marketing.
E.g. IKEA understood the need of the customers to have furniture in low price so they came up
with the knockdown furniture.
Difference between Marketing and Selling.
Sales Marketing
Sales starts with a product. Marketing starts with customer
Sales is subset of marketing. Marketing is vast concept. Sales is just part of
it.
Focus is to achieve sales target Focus is to fulfill the customer’s needs
Sales process is designed considering the
short term
Marketing process is designed considering the
long term
Why is Marketing the most important function in an organization?
Following are the functions of Marketing which do make it as the most important function in
an organization.
i. Revenue generation: Marketing is the only department in an organization which brings
in the revenue for the organization. Other departments like finance, HR, operations etc.
do spend money. Marketing is the department which actually sells the product or the
service of an organization and deals with customers.
ii. Brand building:
Brand building and PR is the part of marketing so, marketing builds reputation of a
company.
iii. Sustainable growth:
The reputation and positioning of an organization will decide the growth and value of
the organization. So, marketing is the department which takes care of this is certainly
the most important function of any organization.
What are 4 Ps of Marketing Mix and 7ps of Service Marketing Mix?
The four P’s of marketing:
McCarthy gave the 4 P’s of marketing mix. The four P’s are the pillars of marketing which
becomes a frame for marketing campaigns.
Product: Product is an item that satisfies the needs of consumers. It could be tangible good or
an intangible service. Product has various attributes like product variety, quality, design,
features, packaging etc. Marketer is expected to design all the attributes of the product and
also expected to communicate those values to the customers.
Price:
Price is the amount the customer pays for the product or service. Price is a very important
attribute. As price has direct impact on the profits of the company, it should be adjusted
properly. The price should be well placed keeping in mind the value of offered product. Price
should also complement the other elements of the marketing mix.
Promotion:
Promotion includes all of the methods of communication that a marketer may use to provide
information to different parties about the product. Promotion comprises elements such
as: advertising, public relations, sales organization and sales promotion.
Place: Place refers to providing the product at a place which is convenient for consumers to
access.
The 7P’s of service marketing:
Product:
Following are the functions of Marketing which do make it as the most important function in
an organization.
i. Revenue generation: Marketing is the only department in an organization which brings
in the revenue for the organization. Other departments like finance, HR, operations etc.
do spend money. Marketing is the department which actually sells the product or the
service of an organization and deals with customers.
ii. Brand building:
Brand building and PR is the part of marketing so, marketing builds reputation of a
company.
iii. Sustainable growth:
The reputation and positioning of an organization will decide the growth and value of
the organization. So, marketing is the department which takes care of this is certainly
the most important function of any organization.
What are 4 Ps of Marketing Mix and 7ps of Service Marketing Mix?
The four P’s of marketing:
McCarthy gave the 4 P’s of marketing mix. The four P’s are the pillars of marketing which
becomes a frame for marketing campaigns.
Product: Product is an item that satisfies the needs of consumers. It could be tangible good or
an intangible service. Product has various attributes like product variety, quality, design,
features, packaging etc. Marketer is expected to design all the attributes of the product and
also expected to communicate those values to the customers.
Price:
Price is the amount the customer pays for the product or service. Price is a very important
attribute. As price has direct impact on the profits of the company, it should be adjusted
properly. The price should be well placed keeping in mind the value of offered product. Price
should also complement the other elements of the marketing mix.
Promotion:
Promotion includes all of the methods of communication that a marketer may use to provide
information to different parties about the product. Promotion comprises elements such
as: advertising, public relations, sales organization and sales promotion.
Place: Place refers to providing the product at a place which is convenient for consumers to
access.
The 7P’s of service marketing:
Product:
In case of services, the ‘product’ is intangible, heterogeneous and perishable. Moreover, its
production and consumption are inseparable. Hence, there is scope for customizing the offering
as per customer requirements and the actual customer encounter therefore assumes particular
significance.
Pricing:
Pricing of services is tougher than pricing of goods. While the latter can be priced easily by
taking into account the raw material costs. In the case of services, labor and overhead costs -
also need to be considered.
Promotion:
Service offering can be easily replicated so, promotion is a crucial in differentiating a service
offering in the mind of the consumer. Thus, service providers offering identical services such as
airlines or banks and insurance companies invest heavily in advertising their services.
People:
People are a defining factor in a service delivery process, since a service is inseparable from the
person providing it. Thus, a restaurant is known as much for its food as for the service provided
by its staff. The same is true of banks and department stores. Consequently, customer service
training for staff has become a top priority for many organizations today.
Process:
The process of service delivery is crucial since it ensures that the same standard of service is
repeatedly delivered to the customers. Therefore, most companies have a service
blueprint which provides the details of the service delivery process, often going down to even
defining the service script and the greeting phrases to be used by the service staff.
Physical Evidence:
Services are intangible in nature most service providers strive to incorporate certain tangible
elements into their offering to enhance customer experience. For e.g. there are hair salons that
have well designed waiting areas often with magazines and plush sofas to relax while they
await their turn.
What is the difference between Marketing a Good (tangible product) and Marketing a
Service?
While marketing a good, focus is on the Product, Price, Place, and Promotion. While marketing
a service, emphasis is surely on the 4P’s of goods marketing but there are additional elements
like Process, Physical evidence, and People also. Product is tangible and services are intangible
so physical evidence is the factor which is included in the 7P’s of service marketing.
Also the pricing of product is little easier than the pricing of a service.
production and consumption are inseparable. Hence, there is scope for customizing the offering
as per customer requirements and the actual customer encounter therefore assumes particular
significance.
Pricing:
Pricing of services is tougher than pricing of goods. While the latter can be priced easily by
taking into account the raw material costs. In the case of services, labor and overhead costs -
also need to be considered.
Promotion:
Service offering can be easily replicated so, promotion is a crucial in differentiating a service
offering in the mind of the consumer. Thus, service providers offering identical services such as
airlines or banks and insurance companies invest heavily in advertising their services.
People:
People are a defining factor in a service delivery process, since a service is inseparable from the
person providing it. Thus, a restaurant is known as much for its food as for the service provided
by its staff. The same is true of banks and department stores. Consequently, customer service
training for staff has become a top priority for many organizations today.
Process:
The process of service delivery is crucial since it ensures that the same standard of service is
repeatedly delivered to the customers. Therefore, most companies have a service
blueprint which provides the details of the service delivery process, often going down to even
defining the service script and the greeting phrases to be used by the service staff.
Physical Evidence:
Services are intangible in nature most service providers strive to incorporate certain tangible
elements into their offering to enhance customer experience. For e.g. there are hair salons that
have well designed waiting areas often with magazines and plush sofas to relax while they
await their turn.
What is the difference between Marketing a Good (tangible product) and Marketing a
Service?
While marketing a good, focus is on the Product, Price, Place, and Promotion. While marketing
a service, emphasis is surely on the 4P’s of goods marketing but there are additional elements
like Process, Physical evidence, and People also. Product is tangible and services are intangible
so physical evidence is the factor which is included in the 7P’s of service marketing.
Also the pricing of product is little easier than the pricing of a service.
2) What is Positioning? What is a Positioning Map? What is an FCB Grid? What are Points Of
Parity (POP) and Points Of Differences? What is Branding?
Positioning: Positioning is the distinct way by which the marketers attempt to create a distinct
impression on the customer’s mind.
Positioning is actually getting closer to the mind of customer and creating a good impression of
a product/service which will create a sort of faith in customer’s mind about the product. There
are different strategies used for positioning, distinction is the best way for positioning.
Organizations do always find a distinct way for differentiation of product/service. E.g. UBS is
distinguished from the other range of business school by the impression of “green b-school”.
Positioning map:
Positioning map is a diagrammatic representation of the perceptions of potential customers.
Positioning map has ‘n’ number of dimensions. Generally it has two dimensions.
Fig1- Positioning map of automobiles.
This map is the positioning map of automobile companies. There are four attributes viz.
conservative, sporty, practical affordable and classy distinctive. There are companies which are
positioned on the map with regard to their offerings.
FCB Grid:
The FCB Grid was created by Richard Vaughn. With this model, messages are categorized by
"thinking" and "feeling", "low" and "high."
Parity (POP) and Points Of Differences? What is Branding?
Positioning: Positioning is the distinct way by which the marketers attempt to create a distinct
impression on the customer’s mind.
Positioning is actually getting closer to the mind of customer and creating a good impression of
a product/service which will create a sort of faith in customer’s mind about the product. There
are different strategies used for positioning, distinction is the best way for positioning.
Organizations do always find a distinct way for differentiation of product/service. E.g. UBS is
distinguished from the other range of business school by the impression of “green b-school”.
Positioning map:
Positioning map is a diagrammatic representation of the perceptions of potential customers.
Positioning map has ‘n’ number of dimensions. Generally it has two dimensions.
Fig1- Positioning map of automobiles.
This map is the positioning map of automobile companies. There are four attributes viz.
conservative, sporty, practical affordable and classy distinctive. There are companies which are
positioned on the map with regard to their offerings.
FCB Grid:
The FCB Grid was created by Richard Vaughn. With this model, messages are categorized by
"thinking" and "feeling", "low" and "high."
Following diagram is demonstrating the structure of FCB grid.
Fig 2: Structure of FCB grid.
Low Think (practicality, pragmatism)
High Think
Low Feel (sensuality, pleasure)
High Feel (product as extension of self)
A Low Feel commercial demonstrates the pleasure obtained by using the product. This
approach is popular for foods.
A High Feel commercial could emphasize how the product makes the consumer hip or cool. This
approach is popular for advertising products like clothing, shoes, or sports cars.
Fig 3: FCB grid strategies for advertisement
FCB grid helps in developing the strategies for advertisements. It clarifies how consumer
approaches the buying process.
Fig 2: Structure of FCB grid.
Low Think (practicality, pragmatism)
High Think
Low Feel (sensuality, pleasure)
High Feel (product as extension of self)
A Low Feel commercial demonstrates the pleasure obtained by using the product. This
approach is popular for foods.
A High Feel commercial could emphasize how the product makes the consumer hip or cool. This
approach is popular for advertising products like clothing, shoes, or sports cars.
Fig 3: FCB grid strategies for advertisement
FCB grid helps in developing the strategies for advertisements. It clarifies how consumer
approaches the buying process.
Points of Parity (POPs):
POP are the associations those are not unique to the brand but those are the once which
cannot be missed by the brands. POPs are the associations where you can match the bets of
competitors. POPs may not be the reasons behind selection of brands. But, POPs could be the
reasons behind the rejections of brands.
Points of difference (PODs):
PODs are the associations/benefits those are unique to the brand. PODs are the points where
you claim the exclusivity over the other products in the category.
What is Branding?
Branding is the marketing practice of creating a name, symbol or design that identifies and
differentiates a product from other products. It’s all about creating differences between the
products. Marketers need to teach customers “who” the product is – by giving it name and
other brand elements to identify it.
Branding creates mental structures that help consumers organize their knowledge about
products and services in a way that clarifies their decision making.
3) What is Segmentation? What is Target Marketing? What is a Target Group (TG)? What is the
difference between Target Market or Target Group and Target Audience?
What is segmentation?
Market segmentation is dividing the group of potential customers with similar needs or
characteristics who are likely to exhibit similar purchase behavior.
Types of segmentation:
Geographic-
Marketers can segment according to geographic criteria—nations, states, regions,
countries, cities, neighborhoods, or postal codes. The geo-cluster approach combines
demographic data with geographic data to create a more accurate or specific
profile. With respect to region, in rainy regions merchants can sell things like raincoats,
umbrellas and gumboots. In hot regions, one can sell summer clothing.
Demographic- Based on age, gender, income family size
Psychographic- Based on lifestyle, personality and SEC grid.
POP are the associations those are not unique to the brand but those are the once which
cannot be missed by the brands. POPs are the associations where you can match the bets of
competitors. POPs may not be the reasons behind selection of brands. But, POPs could be the
reasons behind the rejections of brands.
Points of difference (PODs):
PODs are the associations/benefits those are unique to the brand. PODs are the points where
you claim the exclusivity over the other products in the category.
What is Branding?
Branding is the marketing practice of creating a name, symbol or design that identifies and
differentiates a product from other products. It’s all about creating differences between the
products. Marketers need to teach customers “who” the product is – by giving it name and
other brand elements to identify it.
Branding creates mental structures that help consumers organize their knowledge about
products and services in a way that clarifies their decision making.
3) What is Segmentation? What is Target Marketing? What is a Target Group (TG)? What is the
difference between Target Market or Target Group and Target Audience?
What is segmentation?
Market segmentation is dividing the group of potential customers with similar needs or
characteristics who are likely to exhibit similar purchase behavior.
Types of segmentation:
Geographic-
Marketers can segment according to geographic criteria—nations, states, regions,
countries, cities, neighborhoods, or postal codes. The geo-cluster approach combines
demographic data with geographic data to create a more accurate or specific
profile. With respect to region, in rainy regions merchants can sell things like raincoats,
umbrellas and gumboots. In hot regions, one can sell summer clothing.
Demographic- Based on age, gender, income family size
Psychographic- Based on lifestyle, personality and SEC grid.
Behavioural-
Behavioral segmentation divides consumers into groups according to their knowledge
of, attitude towards, usage rate or response to a product
What is target marketing?
After identifying the market segments, the one which provides greatest opportunities is the
target segment. Targeting the target segment to achieve the goal of marketing is target
marketing.
What is target group?
A target market is a group of customers that the business has decided to aim its marketing
efforts and ultimately its merchandise. A well-defined target market is the first element to a
marketing strategy. The target market and the marketing mix variables of product,
place(distribution), promotion and price are the four elements of a marketing mix strategy that
determine the success of a product in the marketplace.
What is difference between target market and target audience?
Target market: A target market is a group of customers that the business has decided to aim its
marketing efforts and ultimately its merchandise. A well-defined target market is the first
element to a marketing strategy.
Target audience: Target audience is a specific group of people within the target market at which
a product or the marketing message of a product is aimed at. For example, if a company sells
new diet programs for men with heart disease problems (target market) the communication
may be aimed at the spouse (target audience) who takes care of the nutrition plan of her
husband and child.
4) What is a Product Strategy? Explain the Total Product Concept with Examples? What are Product Mix
and Product Line?
Customers will choose a product based on their perceived value of it. Satisfaction is the degree
to which the actual use of a product matches the perceived value at the time of the purchase. A
customer is satisfied only if the actual value is the same or exceeds the perceived value. Kotler
defined five levels to a product:
Behavioral segmentation divides consumers into groups according to their knowledge
of, attitude towards, usage rate or response to a product
What is target marketing?
After identifying the market segments, the one which provides greatest opportunities is the
target segment. Targeting the target segment to achieve the goal of marketing is target
marketing.
What is target group?
A target market is a group of customers that the business has decided to aim its marketing
efforts and ultimately its merchandise. A well-defined target market is the first element to a
marketing strategy. The target market and the marketing mix variables of product,
place(distribution), promotion and price are the four elements of a marketing mix strategy that
determine the success of a product in the marketplace.
What is difference between target market and target audience?
Target market: A target market is a group of customers that the business has decided to aim its
marketing efforts and ultimately its merchandise. A well-defined target market is the first
element to a marketing strategy.
Target audience: Target audience is a specific group of people within the target market at which
a product or the marketing message of a product is aimed at. For example, if a company sells
new diet programs for men with heart disease problems (target market) the communication
may be aimed at the spouse (target audience) who takes care of the nutrition plan of her
husband and child.
4) What is a Product Strategy? Explain the Total Product Concept with Examples? What are Product Mix
and Product Line?
Customers will choose a product based on their perceived value of it. Satisfaction is the degree
to which the actual use of a product matches the perceived value at the time of the purchase. A
customer is satisfied only if the actual value is the same or exceeds the perceived value. Kotler
defined five levels to a product:
1. Core Benefit
The fundamental need or want that consumers satisfy by consuming the product or service.
The core product is just an abstract which is basic idea of the product. E.g. For a hotel service,
core product would be rest or sleep.
2. Generic Product/ basic product
A version of the product containing only those attributes or characteristics absolutely necessary
for it to function. Generic product includes all the basic facilities those are essential for offering.
E.g. Hotel having Bed, bathroom etc.
3. Expected Product
The set of attributes or characteristics that buyers normally expect and agree to when they
purchase a product. E.g. Buyer expects clean bed, working lamps and relative degree of quiet
etc.
4. Augmented Product
Inclusion of additional features, benefits, attributes or related services that serve to
differentiate the product from its competitors. E.g. Hotels provide Wi-Fi services etc.
5. Potential Product
All the augmentations and transformations a product might undergo in the future. There are
always
The fundamental need or want that consumers satisfy by consuming the product or service.
The core product is just an abstract which is basic idea of the product. E.g. For a hotel service,
core product would be rest or sleep.
2. Generic Product/ basic product
A version of the product containing only those attributes or characteristics absolutely necessary
for it to function. Generic product includes all the basic facilities those are essential for offering.
E.g. Hotel having Bed, bathroom etc.
3. Expected Product
The set of attributes or characteristics that buyers normally expect and agree to when they
purchase a product. E.g. Buyer expects clean bed, working lamps and relative degree of quiet
etc.
4. Augmented Product
Inclusion of additional features, benefits, attributes or related services that serve to
differentiate the product from its competitors. E.g. Hotels provide Wi-Fi services etc.
5. Potential Product
All the augmentations and transformations a product might undergo in the future. There are
always
Product mix:
Product mix is the set of all the products and items a particular seller offers for sale. A product
mix is also termed as product assortments. A product mix consists of various product lines. For
e.g. HUL has a wide product mix. i.e. HUL offers products from personal care range, home care
and food. Under every category there are different brands.
Length- Width – Depth of product mix:
1. Width of the product mix refers to how many different product lines a company carries.
Over here in this example, HUL carries three product lines viz. personal care range,
home care and food.
2. Length of the product mix refers to total number of the products in the mix.
3. Depth of the product mix refers to how many variants are offered of each product line.
For e.g. Lux comes in four variants and in two sizes then Lux has depth of eight.
Product Line:
Product line is the category of the products offered by a company. For e.g. Personal care is a
product line offered by HUL. Personal care has different products under it like personal wash,
skin care cosmetics etc.
5) What are different types of Pricing Strategies?
Markup pricing-
Markup pricing is the most elementary method of pricing. Method is to add standard markup to
the product’s cost and adding markup to the profit. Lawyers and accountants typically price by
adding a standard markup on their time and cost.
Let’s take an example
Variable cost : Rs. 10
Fixed costs : Rs.300,000
Expected unite sales: 50,000
Suppose a toaster manufacturer has the following costs and sales expectations:
Unit cost= variable cost+ (fixed cost/unit sales)= Rs. 10+(300000/50000) = Rs. 16
Assuming manufacturer wants to earn 20 percent markup on sales. The manufacturer’s markup
price is given by :
Product mix is the set of all the products and items a particular seller offers for sale. A product
mix is also termed as product assortments. A product mix consists of various product lines. For
e.g. HUL has a wide product mix. i.e. HUL offers products from personal care range, home care
and food. Under every category there are different brands.
Length- Width – Depth of product mix:
1. Width of the product mix refers to how many different product lines a company carries.
Over here in this example, HUL carries three product lines viz. personal care range,
home care and food.
2. Length of the product mix refers to total number of the products in the mix.
3. Depth of the product mix refers to how many variants are offered of each product line.
For e.g. Lux comes in four variants and in two sizes then Lux has depth of eight.
Product Line:
Product line is the category of the products offered by a company. For e.g. Personal care is a
product line offered by HUL. Personal care has different products under it like personal wash,
skin care cosmetics etc.
5) What are different types of Pricing Strategies?
Markup pricing-
Markup pricing is the most elementary method of pricing. Method is to add standard markup to
the product’s cost and adding markup to the profit. Lawyers and accountants typically price by
adding a standard markup on their time and cost.
Let’s take an example
Variable cost : Rs. 10
Fixed costs : Rs.300,000
Expected unite sales: 50,000
Suppose a toaster manufacturer has the following costs and sales expectations:
Unit cost= variable cost+ (fixed cost/unit sales)= Rs. 10+(300000/50000) = Rs. 16
Assuming manufacturer wants to earn 20 percent markup on sales. The manufacturer’s markup
price is given by :
Markup price= unit cost/(1-desired return on sales) = Rs.16/(1-0.2) = Rs.20
The manufacturer will charge dealers Rs.20 per toaster and make profit of Rs. 4. If dealer wants
to earn 50 percent on their selling price they will markup the toster 100 percent to Rs.40.
Target- return pricing:
The process of setting an item's price by using an equation to compute the price that
will result in a certain level of planned profit given the sale of a specified amount of items. By
using a target return pricing method, a business is able to set its products' prices at such levels
that its corporate profit objectives are likely to be met if sales continue to run at or above the
amount specified.
Perceived value pricing :
The valuation of good or service according to how much consumers are willing to pay for it,
rather than upon its production and delivery costs. Using a perceived
value pricing technique might be somewhat arbitrary, but it can greatly assist in
the effective marketing of a product since it sets product pricing in line with its perceived value
by potential buyers.
Value based pricing:
Value-based pricing (also value optimized pricing) is a pricing strategy which sets prices
primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than
on the cost of the product or historical prices. Where it is successfully used, it will improve
profitability due to the higher prices without impacting greatly on sales volumes.
Value-based pricing is predicated upon an understanding of customer value. In business-to-
consumer markets, sellers should understand the impact their products or services have on end
user utility. In the business-to-business environment, companies must know how their offering
helps customers, that is other businesses, become more profitable.
In many settings, gaining
this understanding requires primary research. This may include evaluation of customer
operations and interviews with customer personnel. Survey methods are sometimes used to
determine the value a customer attributes to a product or a service. Purchase intent, won/loss
analysis and financial value measurement are examples of basic research methods that can
unearth customer insights during the pricing process. The results of such surveys often depict a
customer's 'willingness to pay.'
The manufacturer will charge dealers Rs.20 per toaster and make profit of Rs. 4. If dealer wants
to earn 50 percent on their selling price they will markup the toster 100 percent to Rs.40.
Target- return pricing:
The process of setting an item's price by using an equation to compute the price that
will result in a certain level of planned profit given the sale of a specified amount of items. By
using a target return pricing method, a business is able to set its products' prices at such levels
that its corporate profit objectives are likely to be met if sales continue to run at or above the
amount specified.
Perceived value pricing :
The valuation of good or service according to how much consumers are willing to pay for it,
rather than upon its production and delivery costs. Using a perceived
value pricing technique might be somewhat arbitrary, but it can greatly assist in
the effective marketing of a product since it sets product pricing in line with its perceived value
by potential buyers.
Value based pricing:
Value-based pricing (also value optimized pricing) is a pricing strategy which sets prices
primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than
on the cost of the product or historical prices. Where it is successfully used, it will improve
profitability due to the higher prices without impacting greatly on sales volumes.
Value-based pricing is predicated upon an understanding of customer value. In business-to-
consumer markets, sellers should understand the impact their products or services have on end
user utility. In the business-to-business environment, companies must know how their offering
helps customers, that is other businesses, become more profitable.
In many settings, gaining
this understanding requires primary research. This may include evaluation of customer
operations and interviews with customer personnel. Survey methods are sometimes used to
determine the value a customer attributes to a product or a service. Purchase intent, won/loss
analysis and financial value measurement are examples of basic research methods that can
unearth customer insights during the pricing process. The results of such surveys often depict a
customer's 'willingness to pay.'
Going rate pricing:
In going rate pricing, the firm sets its price largely on the competitor’s prices. In oligopolistic
industries that sell a commodity such as steel, paper or fertilizer all firms normally charge the
same price. Smaller firms “follow the leader”, changing their prices when the market leader’s
prices change rather than when their own demand or cost change.
Auction type pricing:
An auction is a process of buying and selling goods or services by offering them up for bid,
taking bids, and then selling the item to the highest bidder. In economic theory, an auction may
refer to any mechanism or set of trading rules for exchange.
English auction, also known as an open ascending price auction. This type of auction is
arguably the most common form of auction in use today. Participants bid openly against
one another, with each subsequent bid required to be higher than the previous bid. An
auctioneer may announce prices, bidders may call out their bids themselves (or have a
proxy call out a bid on their behalf), or bids may be submitted electronically with the
highest current bid publicly displayed. In some cases a maximum bid might be left with the
auctioneer, who may bid on behalf of the bidder according to the bidder's instructions. The
auction ends when no participant is willing to bid further, at which point the highest bidder
pays their bid. Alternatively, if the seller has set a minimum sale price in advance (the
'reserve' price) and the final bid does not reach that price the item remains
unsold. Sometimes the auctioneer sets a minimum amount by which the next bid must
exceed the current highest bid. The most significant distinguishing factor of this auction
type is that the current highest bid is always available to potential bidders. The English
auction is commonly used for selling goods, most prominently antiques and artwork, but
also secondhand goods and real estate.
Dutch auction also known as an open descending price auction. In the traditional Dutch
auction the auctioneer begins with a high asking price which is lowered until some
participant is willing to accept the auctioneer's price. The winning participant pays the last
announced price. The Dutch auction is named for its best known example, the
Dutch tulip auctions. ("Dutch auction" is also sometimes used to describe online auctions
where several identical goods are sold simultaneously to an equal number of high bidders.)
In addition to cut flower sales in the Netherlands, Dutch auctions have also been used for
perishable commodities such as fish and tobacco. The Dutch auction is not widely used.
Sealed first-price auction, also known as a first-price sealed-bid auction (FPSB). In this type
of auction all bidders simultaneously submit sealed bids so that no bidder knows the bid of
any other participant. The highest bidder pays the price they submitted.
This type of auction
is distinct from the English auction, in that bidders can only submit one bid each.
Furthermore, as bidders cannot see the bids of other participants they cannot adjust their
own bids accordingly. This kind of bid produces the same outcome as Dutch auction. What
are effectively sealed first-price auctions are commonly
In going rate pricing, the firm sets its price largely on the competitor’s prices. In oligopolistic
industries that sell a commodity such as steel, paper or fertilizer all firms normally charge the
same price. Smaller firms “follow the leader”, changing their prices when the market leader’s
prices change rather than when their own demand or cost change.
Auction type pricing:
An auction is a process of buying and selling goods or services by offering them up for bid,
taking bids, and then selling the item to the highest bidder. In economic theory, an auction may
refer to any mechanism or set of trading rules for exchange.
English auction, also known as an open ascending price auction. This type of auction is
arguably the most common form of auction in use today. Participants bid openly against
one another, with each subsequent bid required to be higher than the previous bid. An
auctioneer may announce prices, bidders may call out their bids themselves (or have a
proxy call out a bid on their behalf), or bids may be submitted electronically with the
highest current bid publicly displayed. In some cases a maximum bid might be left with the
auctioneer, who may bid on behalf of the bidder according to the bidder's instructions. The
auction ends when no participant is willing to bid further, at which point the highest bidder
pays their bid. Alternatively, if the seller has set a minimum sale price in advance (the
'reserve' price) and the final bid does not reach that price the item remains
unsold. Sometimes the auctioneer sets a minimum amount by which the next bid must
exceed the current highest bid. The most significant distinguishing factor of this auction
type is that the current highest bid is always available to potential bidders. The English
auction is commonly used for selling goods, most prominently antiques and artwork, but
also secondhand goods and real estate.
Dutch auction also known as an open descending price auction. In the traditional Dutch
auction the auctioneer begins with a high asking price which is lowered until some
participant is willing to accept the auctioneer's price. The winning participant pays the last
announced price. The Dutch auction is named for its best known example, the
Dutch tulip auctions. ("Dutch auction" is also sometimes used to describe online auctions
where several identical goods are sold simultaneously to an equal number of high bidders.)
In addition to cut flower sales in the Netherlands, Dutch auctions have also been used for
perishable commodities such as fish and tobacco. The Dutch auction is not widely used.
Sealed first-price auction, also known as a first-price sealed-bid auction (FPSB). In this type
of auction all bidders simultaneously submit sealed bids so that no bidder knows the bid of
any other participant. The highest bidder pays the price they submitted.
This type of auction
is distinct from the English auction, in that bidders can only submit one bid each.
Furthermore, as bidders cannot see the bids of other participants they cannot adjust their
own bids accordingly. This kind of bid produces the same outcome as Dutch auction. What
are effectively sealed first-price auctions are commonly
called tendering for procurement by companies and organisations, particularly for
government contracts and auctions for mining leases.
6) What is the role of “Place” in a Marketing Mix? What is a VMS and an HMS? What are different
format of retail stores found in India? (You may refer to my class slides of RMS)
Role of Place:
The important factor to note about the importance of place in the marketing mix is that it does
not refer to the location of the business itself, but rather to the location of the customers. The
place deals with strategies the business can employ to get its goods from its present location to
the location of the customers. Such a project must of necessity entail a study of the
demographic that constitutes the customers with the aim of finding out their location. In an
increasingly global economy, the location of the customers of a company located in Singapore
could span the different continents of the world.
As such, the company must figure out the best way to channel its products from Singapore to
its customers in Africa, Europe and other continents. In this way, it is easy to see the role of
place in the marketing mix. This allows such companies to come up with the best methods for
achieving maximum distribution of goods to the customers. One of the examples of a place or
channel includes the retailer. After identifying the target market, retail stores located nearby
could serve as a place for reaching these customers.
Another element that could serve as a place for reaching the customers is the Internet. If the
company is located in an industrialized country, then it is logical to assume that a large number
of its customers use the Internet in some form. This element illustrates the importance of place
in the marketing mix because such customers can order from the company directly through
Web sites, which the company has set up in advance for such a purpose. In this sense, the
Internet serves as a place for the purpose of reaching the customers. The place could also refer
to the methods and channels for the effective and expeditious distribution of the product to
the target customers. Such channels may include the distributors of the product. It may also
include well-coordinated methods for the transportation of the goods to the final consumers.
VMS : Vertical Marketing system
A vertical marketing system (VMS) is one in which the main members of a distribution channel—
producer, wholesaler, and retailer—work together as a unified group in order to meet consumer
needs. In conventional marketing systems, producers, wholesalers, and retailers are separate
businesses that are all trying to maximize their profits. When the effort of one channel member
to maximize profits comes at the expense of other members, conflicts can arise that reduce
profits for the entire channel. To address this problem, more and more companies are forming
vertical marketing systems.
Vertical marketing systems can take several forms. In a corporate VMS, one member of the
distribution channel owns the other members. Although they are owned jointly, each company in
government contracts and auctions for mining leases.
6) What is the role of “Place” in a Marketing Mix? What is a VMS and an HMS? What are different
format of retail stores found in India? (You may refer to my class slides of RMS)
Role of Place:
The important factor to note about the importance of place in the marketing mix is that it does
not refer to the location of the business itself, but rather to the location of the customers. The
place deals with strategies the business can employ to get its goods from its present location to
the location of the customers. Such a project must of necessity entail a study of the
demographic that constitutes the customers with the aim of finding out their location. In an
increasingly global economy, the location of the customers of a company located in Singapore
could span the different continents of the world.
As such, the company must figure out the best way to channel its products from Singapore to
its customers in Africa, Europe and other continents. In this way, it is easy to see the role of
place in the marketing mix. This allows such companies to come up with the best methods for
achieving maximum distribution of goods to the customers. One of the examples of a place or
channel includes the retailer. After identifying the target market, retail stores located nearby
could serve as a place for reaching these customers.
Another element that could serve as a place for reaching the customers is the Internet. If the
company is located in an industrialized country, then it is logical to assume that a large number
of its customers use the Internet in some form. This element illustrates the importance of place
in the marketing mix because such customers can order from the company directly through
Web sites, which the company has set up in advance for such a purpose. In this sense, the
Internet serves as a place for the purpose of reaching the customers. The place could also refer
to the methods and channels for the effective and expeditious distribution of the product to
the target customers. Such channels may include the distributors of the product. It may also
include well-coordinated methods for the transportation of the goods to the final consumers.
VMS : Vertical Marketing system
A vertical marketing system (VMS) is one in which the main members of a distribution channel—
producer, wholesaler, and retailer—work together as a unified group in order to meet consumer
needs. In conventional marketing systems, producers, wholesalers, and retailers are separate
businesses that are all trying to maximize their profits. When the effort of one channel member
to maximize profits comes at the expense of other members, conflicts can arise that reduce
profits for the entire channel. To address this problem, more and more companies are forming
vertical marketing systems.
Vertical marketing systems can take several forms. In a corporate VMS, one member of the
distribution channel owns the other members. Although they are owned jointly, each company in
the chain continues to perform a separate task. In an administered VMS, one member of the
channel is large and powerful enough to coordinate the activities of the other members without
an ownership stake. Finally, a contractual VMS consists of independent firms joined together by
contract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which
a group of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a
franchise organization, in which a producer licenses a wholesaler to distribute its products.
The concept behind vertical marketing systems is similar to vertical integration. In vertical
integration, a company expands its operations by assuming the activities of the next link in the
chain of distribution. For example, an auto parts supplier might practice forward integration by
purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice
backward integration by purchasing a steel plant to obtain the raw materials needed to
manufacture its products. Vertical marketing should not be confused with horizontal marketing,
in which members at the same level in a channel of distribution band together in strategic
alliances or joint ventures to exploit a new marketing opportunity.
HMS – Horizontal Marketing system
A horizontal marketing system is a distribution channel arrangement whereby two or more
organizations at the same level join together for marketing purposes to capitalize on a new
opportunity. For example: a bank and a supermarket agree to have the bank’s ATMs located at
the supermarket’s locations, two manufacturers combining to achieve economies of scale,
otherwise not possible with each acting alone, in meeting the needs and demands of a very
large retailer, or two wholesalers joining together to serve a particular region at a certain time
of year.
According to businessdictionary.com, Horizontal Marketing System is a merger of firms on the
same level in order to pursue marketing opportunities. The firms combine their resources such
as production capabilities and distribution in order to maximize their earnings potential.
An example is of Apple and Starbucks announced music partnership in 2007. The purpose of
this partnership was to allow Starbucks customers to wirelessly browse, search for, preview,
buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac
running iTunes. Apple’s leadership in digital music together with the unique Starbucks
experience synergized a partnership to offer customers a world class digital music experience.
Apple benefits from this partnership with higher iTunes sales because Starbucks has a lot of
mug punters. When Apple first introduced its iTunes music store, it hoped to sell one million
songs in six months, but to its surprise, Apple sold over one million songs within the first six
days of its iTunes music store opening. With such loyal online music consumers, Starbucks
benefit’s from higher sales, increase in market share, and stronger customer loyalty. This
example demonstrates how two companies can join forces to follow a new market opportunity.
channel is large and powerful enough to coordinate the activities of the other members without
an ownership stake. Finally, a contractual VMS consists of independent firms joined together by
contract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which
a group of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a
franchise organization, in which a producer licenses a wholesaler to distribute its products.
The concept behind vertical marketing systems is similar to vertical integration. In vertical
integration, a company expands its operations by assuming the activities of the next link in the
chain of distribution. For example, an auto parts supplier might practice forward integration by
purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice
backward integration by purchasing a steel plant to obtain the raw materials needed to
manufacture its products. Vertical marketing should not be confused with horizontal marketing,
in which members at the same level in a channel of distribution band together in strategic
alliances or joint ventures to exploit a new marketing opportunity.
HMS – Horizontal Marketing system
A horizontal marketing system is a distribution channel arrangement whereby two or more
organizations at the same level join together for marketing purposes to capitalize on a new
opportunity. For example: a bank and a supermarket agree to have the bank’s ATMs located at
the supermarket’s locations, two manufacturers combining to achieve economies of scale,
otherwise not possible with each acting alone, in meeting the needs and demands of a very
large retailer, or two wholesalers joining together to serve a particular region at a certain time
of year.
According to businessdictionary.com, Horizontal Marketing System is a merger of firms on the
same level in order to pursue marketing opportunities. The firms combine their resources such
as production capabilities and distribution in order to maximize their earnings potential.
An example is of Apple and Starbucks announced music partnership in 2007. The purpose of
this partnership was to allow Starbucks customers to wirelessly browse, search for, preview,
buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac
running iTunes. Apple’s leadership in digital music together with the unique Starbucks
experience synergized a partnership to offer customers a world class digital music experience.
Apple benefits from this partnership with higher iTunes sales because Starbucks has a lot of
mug punters. When Apple first introduced its iTunes music store, it hoped to sell one million
songs in six months, but to its surprise, Apple sold over one million songs within the first six
days of its iTunes music store opening. With such loyal online music consumers, Starbucks
benefit’s from higher sales, increase in market share, and stronger customer loyalty. This
example demonstrates how two companies can join forces to follow a new market opportunity.
This opportunity allowed Starbucks and Apple to both gain something of greater, than
otherwise would be possible if they somehow attempted this strategy independently
7) What is Brand Equity? How can you Build Brand Equity? . How can you measure Brand Equity?
Brand equity:
Brand equity is which describes the value of having a well-known brand name, based on the
idea that the owner of a well-known brand name can generate more money from products with
that brand name than from products with a less well-known name, as consumers believe that a
product with a well-known name is better than products with less well-known names.
How to build brand equity?
Brand equity is built by choosing right set of brand equity drivers.
1. Initial choices of brand elements or identities that make up the brand. Like brand
names, URL’s , logos, symbols, characters, spokes people, slogans, jingles packages and
signage.
2. The products or service and all accompanying marketing activities and supporting
marketing programs-
For e.g. Vodafone came up with zoo-zoo campaign which was edgy and humorous.
Coming up with those kind of advertisements which depict mischievous acts by zoo-zoo
added fan following to Vodafone.
3. Other associates which are indirectly transferred to the brand by indirectly linking it to
some other entity:
For e.g. Airtel mobile operator uses A.R.Rehman as brand endorser. A.R.Rehman has
won Oscar awards for music composing. Also the signature tune of the brand is
composed by A.R.Rehman which is very famous. These things like person, music links
people to brand and helps in building brand equity.
How to measure brand equity?
There are many ways to measure a brand. Some measurements approaches are at the firm
level, some at the product level , and still others are at the consumer level.
Firm Level: Firm level approaches measure the brand as a financial asset. In short, a calculation
is made regarding how much the brand is worth as an intangible asset. For example, if you were
to take the value of the firm, as derived by its market capitalization—and then subtract tangible
assets and "measurable" intangible assets—the residual would be the brand equity. One high-
profile firm level approach is by the consulting firm Inter brand. To do its calculation, Inter
brand estimates brand value on the basis of projected profits discounted to a present value.
The discount rate is a subjective rate determined by Inter brand and Wall Street equity
otherwise would be possible if they somehow attempted this strategy independently
7) What is Brand Equity? How can you Build Brand Equity? . How can you measure Brand Equity?
Brand equity:
Brand equity is which describes the value of having a well-known brand name, based on the
idea that the owner of a well-known brand name can generate more money from products with
that brand name than from products with a less well-known name, as consumers believe that a
product with a well-known name is better than products with less well-known names.
How to build brand equity?
Brand equity is built by choosing right set of brand equity drivers.
1. Initial choices of brand elements or identities that make up the brand. Like brand
names, URL’s , logos, symbols, characters, spokes people, slogans, jingles packages and
signage.
2. The products or service and all accompanying marketing activities and supporting
marketing programs-
For e.g. Vodafone came up with zoo-zoo campaign which was edgy and humorous.
Coming up with those kind of advertisements which depict mischievous acts by zoo-zoo
added fan following to Vodafone.
3. Other associates which are indirectly transferred to the brand by indirectly linking it to
some other entity:
For e.g. Airtel mobile operator uses A.R.Rehman as brand endorser. A.R.Rehman has
won Oscar awards for music composing. Also the signature tune of the brand is
composed by A.R.Rehman which is very famous. These things like person, music links
people to brand and helps in building brand equity.
How to measure brand equity?
There are many ways to measure a brand. Some measurements approaches are at the firm
level, some at the product level , and still others are at the consumer level.
Firm Level: Firm level approaches measure the brand as a financial asset. In short, a calculation
is made regarding how much the brand is worth as an intangible asset. For example, if you were
to take the value of the firm, as derived by its market capitalization—and then subtract tangible
assets and "measurable" intangible assets—the residual would be the brand equity. One high-
profile firm level approach is by the consulting firm Inter brand. To do its calculation, Inter
brand estimates brand value on the basis of projected profits discounted to a present value.
The discount rate is a subjective rate determined by Inter brand and Wall Street equity
specialists and reflects the risk profile, market leadership, stability and global reach of the
brand. Brand valuation modeling is closely related to brand equity, and a number of models and
approaches have been developed by different consultancies. Brand valuation models typically
combine a brand equity measure (e.g.: the proportion of sales contributed by "brand") with
commercial metrics such as margin or economic profit.
Product Level: The classic product level brand measurement example is to compare the price of
a no-name or private label product to an "equivalent" branded product. The difference in price,
assuming all things equal, is due to the brand. More recently a revenue premium approach has
been advocated. Marketing mix modeling can isolate "base" and "incremental" sales, and it is
sometimes argued that base sales approximate to a measure of brand equity. More
sophisticated marketing mix models have a floating base that can capture changes in underlying
brand equity for a product over time.
Consumer Level: This approach seeks to map the mind of the consumer to find out what
associations with the brand the consumer has. This approach seeks to measure the awareness
(recall and recognition) and brand image (the overall associations that the brand has). Free
association tests and projective techniques are commonly used to uncover the tangible and
intangible attributes, attitudes, and intentions about a brand. Brands with high levels of
awareness and strong, favorable and unique associations are high equity brands.
All of these calculations are, at best, approximations. A more complete understanding of the
brand can occur if multiple measures are used.
8) What is Marketing ROI or Return On Marketing Investment (ROMI)?
Return on marketing investment (ROMI) is the contribution attributable to marketing (net of
marketing spending), divided by the marketing 'invested' or risked. It is not like the other
'return-on-investment' metrics because marketing is not the same kind of investment. Instead
of moneys that are 'tied' up in plants and inventories (often considered Capital Expenditure or
CAPEX), marketing funds are typically 'risked.' Marketing spending is typically expensed in the
current period (Operational Expenditure or OPEX). The idea of measuring the market’s
response in terms of sales and profits is not new, but terms such as marketing ROI and ROMI
are used more frequently now than in past periods. Usually, marketing spending will be
deemed as justified if the ROMI is positive. In a survey of nearly 200 senior marketing
managers, nearly half responded that they found the ROMI metric very useful.
The ROMI concept first came to prominence in the 1990s. The phrase "return on marketing
investment" became more widespread in the next decade following the publication of two
books Return on Marketing Investment by Guy Powell (2002) and Marketing ROI by James
Lenskold (2003).In the book "What Sticks: Why Advertising Fails And How To Guarantee Yours
Succeeds," Rex Briggs suggested the term "ROMO" for Return-On-Marketing-Objective, to
reflect the idea that marketing campaigns may have a range of objectives, where the return is
not immediate sales or profits. For example, a marketing campaign may aim to change the
perception of a brand.
Short term vs. Long term
brand. Brand valuation modeling is closely related to brand equity, and a number of models and
approaches have been developed by different consultancies. Brand valuation models typically
combine a brand equity measure (e.g.: the proportion of sales contributed by "brand") with
commercial metrics such as margin or economic profit.
Product Level: The classic product level brand measurement example is to compare the price of
a no-name or private label product to an "equivalent" branded product. The difference in price,
assuming all things equal, is due to the brand. More recently a revenue premium approach has
been advocated. Marketing mix modeling can isolate "base" and "incremental" sales, and it is
sometimes argued that base sales approximate to a measure of brand equity. More
sophisticated marketing mix models have a floating base that can capture changes in underlying
brand equity for a product over time.
Consumer Level: This approach seeks to map the mind of the consumer to find out what
associations with the brand the consumer has. This approach seeks to measure the awareness
(recall and recognition) and brand image (the overall associations that the brand has). Free
association tests and projective techniques are commonly used to uncover the tangible and
intangible attributes, attitudes, and intentions about a brand. Brands with high levels of
awareness and strong, favorable and unique associations are high equity brands.
All of these calculations are, at best, approximations. A more complete understanding of the
brand can occur if multiple measures are used.
8) What is Marketing ROI or Return On Marketing Investment (ROMI)?
Return on marketing investment (ROMI) is the contribution attributable to marketing (net of
marketing spending), divided by the marketing 'invested' or risked. It is not like the other
'return-on-investment' metrics because marketing is not the same kind of investment. Instead
of moneys that are 'tied' up in plants and inventories (often considered Capital Expenditure or
CAPEX), marketing funds are typically 'risked.' Marketing spending is typically expensed in the
current period (Operational Expenditure or OPEX). The idea of measuring the market’s
response in terms of sales and profits is not new, but terms such as marketing ROI and ROMI
are used more frequently now than in past periods. Usually, marketing spending will be
deemed as justified if the ROMI is positive. In a survey of nearly 200 senior marketing
managers, nearly half responded that they found the ROMI metric very useful.
The ROMI concept first came to prominence in the 1990s. The phrase "return on marketing
investment" became more widespread in the next decade following the publication of two
books Return on Marketing Investment by Guy Powell (2002) and Marketing ROI by James
Lenskold (2003).In the book "What Sticks: Why Advertising Fails And How To Guarantee Yours
Succeeds," Rex Briggs suggested the term "ROMO" for Return-On-Marketing-Objective, to
reflect the idea that marketing campaigns may have a range of objectives, where the return is
not immediate sales or profits. For example, a marketing campaign may aim to change the
perception of a brand.
Short term vs. Long term
Short term - The first, short-term ROMI, is also used as a simple index measuring the dollars of
revenue (or market share, contribution margin or other desired outputs) for every dollar of
marketing spend.
For example, if a company spends $100,000 on a direct mail piece and it delivers $500,000 in
incremental revenue, then the ROMI factor is 5.0. If the incremental contribution margin for
that $500,000 in revenue is 60%, then the margin ROMI (the incremental margin for $100,000
of marketing spent is $300,000 (= $500,000 x 60%). Of which, the $100,000 spent on direct mail
advertising will be subtracted and the difference will be divided by the same $100,000 . Every
dollar expended in direct mail advertising translates an additional $2 on the company's
bottomline.
The value of the first ROMI is in its simplicity. In most cases a simple determination of revenue
per dollar spent for each marketing activity can be sufficient enough to help make important
decisions to improve the entire marketing mix.
The most common Short Term approach to measuring ROMI is by applying Marketing Mix
Modeling techniques to separate out the incremental sales effects of marketing investment.
Long term - In a similar way the second ROMI concept, long-term ROMI can be used to
determine other less tangible aspects of marketing effectiveness. For example, ROMI could be
used to determine the incremental value of marketing as it pertains to increased brand
awareness, consideration or purchase intent. In this way both the longer-term value of
marketing activities (incremental brand awareness, etc.) and the shorter-term revenue and
profit can be determined. This is a sophisticated metric that balances marketing and business
analytics and is used increasingly by many of the world's leading organizations (Hewlett-
Packard and Procter & Gamble to name two) to measure the economic (that is, cash-
flow derived) benefits created by marketing investments. For many other organizations, this
method offers a way to prioritize investments and allocate marketing and other resources on a
formalized basis.
Long term ROMI models will often draw on Customer lifetime value models to demonstrate the
long term value of incremental customer acquisition or reduced churn rate. Some more
sophisticated Marketing Mix Modeling approaches include multi-year long term ROMI by
including CLV type analysis.
Long term ROMI models have sometimes used Brand valuation techniques to measure how
building a brand with marketing spend can create balance sheet value for brands (or at least for
brands that have been transacted, and therefore under accounting rules can have a balance
sheet value). The ISO 10668 standard sets out the appropriate process of valuing brands and
sets out six key requirements, transparency, validity, reliability, sufficiency, objectivity and
financial, behavioral and legal parameters. Brand valuation is distinguished from brand
equity by placing a money value on a brand, and in this way a ROMI can be calculated.
revenue (or market share, contribution margin or other desired outputs) for every dollar of
marketing spend.
For example, if a company spends $100,000 on a direct mail piece and it delivers $500,000 in
incremental revenue, then the ROMI factor is 5.0. If the incremental contribution margin for
that $500,000 in revenue is 60%, then the margin ROMI (the incremental margin for $100,000
of marketing spent is $300,000 (= $500,000 x 60%). Of which, the $100,000 spent on direct mail
advertising will be subtracted and the difference will be divided by the same $100,000 . Every
dollar expended in direct mail advertising translates an additional $2 on the company's
bottomline.
The value of the first ROMI is in its simplicity. In most cases a simple determination of revenue
per dollar spent for each marketing activity can be sufficient enough to help make important
decisions to improve the entire marketing mix.
The most common Short Term approach to measuring ROMI is by applying Marketing Mix
Modeling techniques to separate out the incremental sales effects of marketing investment.
Long term - In a similar way the second ROMI concept, long-term ROMI can be used to
determine other less tangible aspects of marketing effectiveness. For example, ROMI could be
used to determine the incremental value of marketing as it pertains to increased brand
awareness, consideration or purchase intent. In this way both the longer-term value of
marketing activities (incremental brand awareness, etc.) and the shorter-term revenue and
profit can be determined. This is a sophisticated metric that balances marketing and business
analytics and is used increasingly by many of the world's leading organizations (Hewlett-
Packard and Procter & Gamble to name two) to measure the economic (that is, cash-
flow derived) benefits created by marketing investments. For many other organizations, this
method offers a way to prioritize investments and allocate marketing and other resources on a
formalized basis.
Long term ROMI models will often draw on Customer lifetime value models to demonstrate the
long term value of incremental customer acquisition or reduced churn rate. Some more
sophisticated Marketing Mix Modeling approaches include multi-year long term ROMI by
including CLV type analysis.
Long term ROMI models have sometimes used Brand valuation techniques to measure how
building a brand with marketing spend can create balance sheet value for brands (or at least for
brands that have been transacted, and therefore under accounting rules can have a balance
sheet value). The ISO 10668 standard sets out the appropriate process of valuing brands and
sets out six key requirements, transparency, validity, reliability, sufficiency, objectivity and
financial, behavioral and legal parameters. Brand valuation is distinguished from brand
equity by placing a money value on a brand, and in this way a ROMI can be calculated.
9) What is BCG Matrix and what is the purpose of BCG Matrix? What is Ansoff Matrix and the purpose
of such a Matrix? What is McKinsey 7’s Framework?
BCG is a useful tool for developing marketing objectives. The growth–share matrix is a chart
that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help
corporations to analyze their business units, that is, their product lines. This helps the company
allocate resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.
Cash cows is where company has high market share in a slow-growing industry. These units
typically generate cash in excess of the amount of cash needed to maintain the business.
They are regarded as staid and boring, in a "mature" market, and every corporation would
be thrilled to own as many as possible. They are to be "milked" continuously with as little
investment as possible, since such investment would be wasted in an industry with low
growth.
Dogs, more charitably called pets, are units with low market share in a mature, slow-
growing industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides the social
benefit of providing jobs and possible synergies that assist other business units, from an
accounting point of view such a unit is worthless, not generating cash for the company.
They depress a profitable company's return on assets ratio, used by many investors to
judge how well a company is being managed. Dogs, it is thought, should be sold off.
Question marks (also known as problem children) are business operating in a high market
growth, but having a low market share. They are a starting point for most businesses.
Question marks have a potential to gain market share and become stars, and eventually
cash cows when market growth slows. If question marks do not succeed in becoming a
market leader, then after perhaps years of cash consumption, they will degenerate into
of such a Matrix? What is McKinsey 7’s Framework?
BCG is a useful tool for developing marketing objectives. The growth–share matrix is a chart
that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help
corporations to analyze their business units, that is, their product lines. This helps the company
allocate resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.
Cash cows is where company has high market share in a slow-growing industry. These units
typically generate cash in excess of the amount of cash needed to maintain the business.
They are regarded as staid and boring, in a "mature" market, and every corporation would
be thrilled to own as many as possible. They are to be "milked" continuously with as little
investment as possible, since such investment would be wasted in an industry with low
growth.
Dogs, more charitably called pets, are units with low market share in a mature, slow-
growing industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides the social
benefit of providing jobs and possible synergies that assist other business units, from an
accounting point of view such a unit is worthless, not generating cash for the company.
They depress a profitable company's return on assets ratio, used by many investors to
judge how well a company is being managed. Dogs, it is thought, should be sold off.
Question marks (also known as problem children) are business operating in a high market
growth, but having a low market share. They are a starting point for most businesses.
Question marks have a potential to gain market share and become stars, and eventually
cash cows when market growth slows. If question marks do not succeed in becoming a
market leader, then after perhaps years of cash consumption, they will degenerate into
dogs when market growth declines. Question marks must be analyzed carefully in order to
determine whether they are worth the investment required to grow market share.
Stars are units with a high market share in a fast-growing industry. They are
graduated question marks with a market or niche leading trajectory, for example:
amongst market share front-runners in a high-growth sector, and/or having
a monopolistic or increasingly dominant USP with
burgeoning/fortuitous proposition drive(s) from: novelty (e.g. Last.FM upon CBS
Interactive due diligence), fashion/promotion (e.g. newly prestigious celebrity branded
fragrances), customer loyalty (e.g. greenfield or military/gang enforcement backed,
and/or innovative, grey-market/illicit retail of addictive drugs, for instance the British
East India Company's, late-1700s opium-based Qianlong Emperor embargo-busting,
Canton System), Stars require high funding to fight competitions and maintain a growth
rate. When industry growth slows, if they remain a niche leader or are amongst market
leaders it’s have been able to maintain their category leadership stars become cash
cows, else they become dogs due to low relative market share.
Ansoff matrix :
To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused
on the firm's present and potential products and markets (customers). By considering ways to
grow via existing products and new products, and in existing markets and new markets, there
are four possible product-market combinations. Ansoff's matrix is shown below:
Ansoff Matrix
Existing Products New Products
Existing
Markets
Market Penetration
Product Development
New
Markets
Market Development
Diversification
determine whether they are worth the investment required to grow market share.
Stars are units with a high market share in a fast-growing industry. They are
graduated question marks with a market or niche leading trajectory, for example:
amongst market share front-runners in a high-growth sector, and/or having
a monopolistic or increasingly dominant USP with
burgeoning/fortuitous proposition drive(s) from: novelty (e.g. Last.FM upon CBS
Interactive due diligence), fashion/promotion (e.g. newly prestigious celebrity branded
fragrances), customer loyalty (e.g. greenfield or military/gang enforcement backed,
and/or innovative, grey-market/illicit retail of addictive drugs, for instance the British
East India Company's, late-1700s opium-based Qianlong Emperor embargo-busting,
Canton System), Stars require high funding to fight competitions and maintain a growth
rate. When industry growth slows, if they remain a niche leader or are amongst market
leaders it’s have been able to maintain their category leadership stars become cash
cows, else they become dogs due to low relative market share.
Ansoff matrix :
To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused
on the firm's present and potential products and markets (customers). By considering ways to
grow via existing products and new products, and in existing markets and new markets, there
are four possible product-market combinations. Ansoff's matrix is shown below:
Ansoff Matrix
Existing Products New Products
Existing
Markets
Market Penetration
Product Development
New
Markets
Market Development
Diversification
Ansoff's matrix provides four different growth strategies:
Market Penetration - the firm seeks to achieve growth with existing products in their
current market segments, aiming to increase its market share.
Market Development - the firm seeks growth by targeting its existing products to new
market segments.
Product Development - the firms develops new products targeted to its existing market
segments.
Diversification - the firm grows by diversifying into new businesses by developing new
products for new markets.
Selecting a Product-Market Growth Strategy
The market penetration strategy is the least risky since it leverages many of the firm's existing
resources and capabilities. In a growing market, simply maintaining market share will result in
growth, and there may exist opportunities to increase market share if competitors reach
capacity limits. However, market penetration has limits, and once the market approaches
saturation another strategy must be pursued if the firm is to continue to grow.
Market development options include the pursuit of additional market segments or
geographical regions. The development of new markets for the product may be a good strategy
if the firm's core competencies are related more to the specific product than to its experience
with a specific market segment. Because the firm is expanding into a new market, a market
development strategy typically has more risk than a market penetration strategy.
A product development strategy may be appropriate if the firm's strengths are related to its
specific customers rather than to the specific product itself. In this situation, it can leverage its
strengths by developing a new product targeted to its existing customers. Similar to the case of
new market development, new product development carries more risk than simply attempting
to increase market share.
Diversification is the most risky of the four growth strategies since it requires both product and
market development and may be outside the core competencies of the firm. In fact, this
quadrant of the matrix has been referred to by some as the "suicide cell". However,
diversification may be a reasonable choice if the high risk is compensated by the chance of a
high rate of return. Other advantages of diversification include the potential to gain a foothold
in an attractive industry and the reduction of overall business portfolio risk.
Market Penetration - the firm seeks to achieve growth with existing products in their
current market segments, aiming to increase its market share.
Market Development - the firm seeks growth by targeting its existing products to new
market segments.
Product Development - the firms develops new products targeted to its existing market
segments.
Diversification - the firm grows by diversifying into new businesses by developing new
products for new markets.
Selecting a Product-Market Growth Strategy
The market penetration strategy is the least risky since it leverages many of the firm's existing
resources and capabilities. In a growing market, simply maintaining market share will result in
growth, and there may exist opportunities to increase market share if competitors reach
capacity limits. However, market penetration has limits, and once the market approaches
saturation another strategy must be pursued if the firm is to continue to grow.
Market development options include the pursuit of additional market segments or
geographical regions. The development of new markets for the product may be a good strategy
if the firm's core competencies are related more to the specific product than to its experience
with a specific market segment. Because the firm is expanding into a new market, a market
development strategy typically has more risk than a market penetration strategy.
A product development strategy may be appropriate if the firm's strengths are related to its
specific customers rather than to the specific product itself. In this situation, it can leverage its
strengths by developing a new product targeted to its existing customers. Similar to the case of
new market development, new product development carries more risk than simply attempting
to increase market share.
Diversification is the most risky of the four growth strategies since it requires both product and
market development and may be outside the core competencies of the firm. In fact, this
quadrant of the matrix has been referred to by some as the "suicide cell". However,
diversification may be a reasonable choice if the high risk is compensated by the chance of a
high rate of return. Other advantages of diversification include the potential to gain a foothold
in an attractive industry and the reduction of overall business portfolio risk.
10) What is an SBU? What is a Value Chain? What is Supply Chain Management?
SBU- Strategic business unit:
In business, a strategic business unit (SBU) is a profit center which focuses on product offering
and market segment. SBUs typically have a discrete marketing plan, analysis of competition,
and marketing campaign, even though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business unto itself or
a branch. Corporations may be composed of multiple SBUs, each of which is responsible for its
own profitability. General Electric is an example of a company with this sort of business
organization. SBUs are able to affect most factors which influence their performance. Managed
as separate businesses, they are responsible to a parent corporation. General Electric has 49
SBUs.
Companies today often use the word segmentation or division when referring to SBUs or an
aggregation of SBUs that share such commonalities.
Value chain:
A value chain is a chain of activities that a firm operating in a specific industry performs in order
to deliver a valuable product or service for the market. The concept comes from business
management and was first described and popularized by Michael Porter in his 1985 best-
seller, Competitive Advantage: Creating and Sustaining Superior Performance
SBU- Strategic business unit:
In business, a strategic business unit (SBU) is a profit center which focuses on product offering
and market segment. SBUs typically have a discrete marketing plan, analysis of competition,
and marketing campaign, even though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business unto itself or
a branch. Corporations may be composed of multiple SBUs, each of which is responsible for its
own profitability. General Electric is an example of a company with this sort of business
organization. SBUs are able to affect most factors which influence their performance. Managed
as separate businesses, they are responsible to a parent corporation. General Electric has 49
SBUs.
Companies today often use the word segmentation or division when referring to SBUs or an
aggregation of SBUs that share such commonalities.
Value chain:
A value chain is a chain of activities that a firm operating in a specific industry performs in order
to deliver a valuable product or service for the market. The concept comes from business
management and was first described and popularized by Michael Porter in his 1985 best-
seller, Competitive Advantage: Creating and Sustaining Superior Performance
Supply chain management:
Supply chain management is a cross-function approach including managing the movement of
raw materials into an organization, certain aspects of the internal processing of materials into
finished goods, and the movement of finished goods out of the organization and toward the
end-consumer. As organizations strive to focus on core competencies and becoming more
flexible, they reduce their ownership of raw materials sources and distribution channels. These
functions are increasingly being outsourced to other entities that can perform the activities
better or more cost effectively. The effect is to increase the number of organizations involved in
satisfying customer demand, while reducing management control of daily logistics operations.
Less control and more supply chain partners led to the creation of supply chain management
concepts. The purpose of supply chain management is to improve trust and collaboration
among supply chain partners, thus improving inventory visibility and the velocity of inventory
movement.
Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply chain
management model promoted by the Supply Chain Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into
strategic, tactical, and operational levels . The CSCMP has adopted The American Productivity &
Quality Center (APQC) Process Classification Framework a high-level, industry-neutral
enterprise process model that allows organizations to see their business processes from a
cross-industry viewpoint
.
Strategic
Strategic network optimization, including the number, location, and size of
warehousing, distribution centers, and facilities.
Strategic partnerships with suppliers, distributors, and customers, creating communication
channels for critical information and operational improvements such as cross docking,
direct shipping, and third-party logistics.
Product life cycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management activities.
Tactical
Sourcing contracts and other purchasing decisions.
Production decisions, including contracting, scheduling, and planning process definition.
Supply chain management is a cross-function approach including managing the movement of
raw materials into an organization, certain aspects of the internal processing of materials into
finished goods, and the movement of finished goods out of the organization and toward the
end-consumer. As organizations strive to focus on core competencies and becoming more
flexible, they reduce their ownership of raw materials sources and distribution channels. These
functions are increasingly being outsourced to other entities that can perform the activities
better or more cost effectively. The effect is to increase the number of organizations involved in
satisfying customer demand, while reducing management control of daily logistics operations.
Less control and more supply chain partners led to the creation of supply chain management
concepts. The purpose of supply chain management is to improve trust and collaboration
among supply chain partners, thus improving inventory visibility and the velocity of inventory
movement.
Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply chain
management model promoted by the Supply Chain Council. Another model is the SCM Model
proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into
strategic, tactical, and operational levels . The CSCMP has adopted The American Productivity &
Quality Center (APQC) Process Classification Framework a high-level, industry-neutral
enterprise process model that allows organizations to see their business processes from a
cross-industry viewpoint
.
Strategic
Strategic network optimization, including the number, location, and size of
warehousing, distribution centers, and facilities.
Strategic partnerships with suppliers, distributors, and customers, creating communication
channels for critical information and operational improvements such as cross docking,
direct shipping, and third-party logistics.
Product life cycle management, so that new and existing products can be optimally
integrated into the supply chain and capacity management activities.
Tactical
Sourcing contracts and other purchasing decisions.
Production decisions, including contracting, scheduling, and planning process definition.
Inventory decisions, including quantity, location, and quality of inventory.
Transportation strategy, including frequency, routes, and contracting.
Benchmarking of all operations against competitors and implementation of best
practices throughout the enterprise.
Milestone payments.
Focus on customer demand.
Operational
Daily production and distribution planning, including all nodes in the supply chain.
Production scheduling for each manufacturing facility in the supply chain (minute by
minute).
Demand planning and forecasting, coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.
11) What is CRM? What is “Share of Wallet”? What is Customer Life Time Value?
CRM- Customer relationship management (CRM) is a model for managing a company’s interactions
with current and future customers. It involves using technology to organize, automate, and
synchronize sales, marketing, customer service, and technical support.
Types of CRM:
Marketing and customer service
CRM systems for marketing track and measure campaigns over multiple contact channels, such
as call centers, email, chat, social networking services, inbound/outbound calling, and direct
mail. These systems track clicks, responses, leads and deals.
CRM in customer contact centers
CRM systems are Customer Relationship Management platforms. Their goal is to track, record,
store in databases, and then data mine the information in a way that increases customer
relations (predominantly increased ARPU, and decreased churn) The CRM codifies the
interactions between you and your customers, so you can maximize sales and profits using
analytics, KPIs, to give the users as much information on where to focus your marketing,
customer service to maximize revenue, and decrease idle and unproductive contact with your
customers. The contact channels (now aiming to be Omni-Channel from Multi-Channel, uses
such operational methods as contact centers The CRM software is installed in the contact
centers, and help direct customers to the right agent or self-embowered knowledge . CRM
software can also be used to identify and reward loyal customers over a period of time.
Transportation strategy, including frequency, routes, and contracting.
Benchmarking of all operations against competitors and implementation of best
practices throughout the enterprise.
Milestone payments.
Focus on customer demand.
Operational
Daily production and distribution planning, including all nodes in the supply chain.
Production scheduling for each manufacturing facility in the supply chain (minute by
minute).
Demand planning and forecasting, coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.
11) What is CRM? What is “Share of Wallet”? What is Customer Life Time Value?
CRM- Customer relationship management (CRM) is a model for managing a company’s interactions
with current and future customers. It involves using technology to organize, automate, and
synchronize sales, marketing, customer service, and technical support.
Types of CRM:
Marketing and customer service
CRM systems for marketing track and measure campaigns over multiple contact channels, such
as call centers, email, chat, social networking services, inbound/outbound calling, and direct
mail. These systems track clicks, responses, leads and deals.
CRM in customer contact centers
CRM systems are Customer Relationship Management platforms. Their goal is to track, record,
store in databases, and then data mine the information in a way that increases customer
relations (predominantly increased ARPU, and decreased churn) The CRM codifies the
interactions between you and your customers, so you can maximize sales and profits using
analytics, KPIs, to give the users as much information on where to focus your marketing,
customer service to maximize revenue, and decrease idle and unproductive contact with your
customers. The contact channels (now aiming to be Omni-Channel from Multi-Channel, uses
such operational methods as contact centers The CRM software is installed in the contact
centers, and help direct customers to the right agent or self-embowered knowledge . CRM
software can also be used to identify and reward loyal customers over a period of time.
Appointments
CRM systems can automatically suggest suitable times to contact customers via phone, e-mail,
chat, email, or calendar invitations or web. These can then be synchronized with the
representative or agent's calendar.
CRM in B2B market
The modern environment requires one business to interact with another via the web. According
to a Sweeney Group definition, CRM is “all the tools, technologies and procedures to manage,
improve, or facilitate sales, support and related interactions with customers, prospects, and
business partners throughout the enterprise” It assumes that CRM is involved in
every B2Btransaction.
Despite the general notion that CRM systems were created for the customer-centric businesses,
they can also be applied to B2B environments to streamline and improve customer
management conditions. B2C and B2B CRM systems are not created equally and different CRM
software applies to B2B and B2C conditions. B2B relationships usually have longer maturity
times than B2C relationships. For the best level of CRM operation in a B2B environment, the
software must be personalized and delivered at individual levels.
Share of wallet:
Share-of-wallet (SOW) is a survey method used in performance management that helps
managers understand the amount of business a company gets from specific customers.
Share of Wallet is the percentage ("share") of a customer's expenses ("of wallet") for a product
that goes to the firm selling the product. Different firms fight over the share they have of a
customer's wallet, all trying to get as much as possible. Typically, these different firms don't sell
the same but rather ancillary or complementary product.
Customer lifetime value:
Customer lifetime value lifetime customer value (LCV), or user lifetime value (LTV) is a
prediction of the net profit attributed to the entire future relationship with a customer. The
prediction model can have varying levels of sophistication and accuracy, ranging from a
crude heuristic to the use of complex predictive analytics techniques.
Customer lifetime value (CLV) can also be defined as the dollar value of a customer relationship,
based on the present value of the projected future cash flows from the customer relationship.
Customer lifetime value is an important concept in that it encourages firms to shift their focus
from quarterly profits to the long-term health of their customer relationships. Customer
lifetime value is an important number because it represents an upper limit on spending to
acquire new customers.
CLV applies the concept of present value to cash flows attributed to the customer relationship.
Because the present value of any stream of future cash flows is designed to measure the single
lump sum value today of the future stream of cash flows, CLV will represent the single lump
CRM systems can automatically suggest suitable times to contact customers via phone, e-mail,
chat, email, or calendar invitations or web. These can then be synchronized with the
representative or agent's calendar.
CRM in B2B market
The modern environment requires one business to interact with another via the web. According
to a Sweeney Group definition, CRM is “all the tools, technologies and procedures to manage,
improve, or facilitate sales, support and related interactions with customers, prospects, and
business partners throughout the enterprise” It assumes that CRM is involved in
every B2Btransaction.
Despite the general notion that CRM systems were created for the customer-centric businesses,
they can also be applied to B2B environments to streamline and improve customer
management conditions. B2C and B2B CRM systems are not created equally and different CRM
software applies to B2B and B2C conditions. B2B relationships usually have longer maturity
times than B2C relationships. For the best level of CRM operation in a B2B environment, the
software must be personalized and delivered at individual levels.
Share of wallet:
Share-of-wallet (SOW) is a survey method used in performance management that helps
managers understand the amount of business a company gets from specific customers.
Share of Wallet is the percentage ("share") of a customer's expenses ("of wallet") for a product
that goes to the firm selling the product. Different firms fight over the share they have of a
customer's wallet, all trying to get as much as possible. Typically, these different firms don't sell
the same but rather ancillary or complementary product.
Customer lifetime value:
Customer lifetime value lifetime customer value (LCV), or user lifetime value (LTV) is a
prediction of the net profit attributed to the entire future relationship with a customer. The
prediction model can have varying levels of sophistication and accuracy, ranging from a
crude heuristic to the use of complex predictive analytics techniques.
Customer lifetime value (CLV) can also be defined as the dollar value of a customer relationship,
based on the present value of the projected future cash flows from the customer relationship.
Customer lifetime value is an important concept in that it encourages firms to shift their focus
from quarterly profits to the long-term health of their customer relationships. Customer
lifetime value is an important number because it represents an upper limit on spending to
acquire new customers.
CLV applies the concept of present value to cash flows attributed to the customer relationship.
Because the present value of any stream of future cash flows is designed to measure the single
lump sum value today of the future stream of cash flows, CLV will represent the single lump
sum value today of the customer relationship. Even more simply, CLV is the dollar value of the
customer relationship to the firm. It is an upper limit on what the firm would be willing to pay
to acquire the customer relationship as well as an upper limit on the amount the firm would be
willing to pay to avoid losing the customer relationship. If we view a customer relationship as
an asset of the firm, CLV would present the dollar value of that asset.
One of the major uses of CLV is customer segmentation, which starts with the understanding
that not all customers are equally important. CLV-based segmentation model allows the
company to predict the most profitable group of customers, understand those customers'
common characteristics, and focus more on them rather than on less profitable customers.
CLV-based segmentation can be combined with a Share of Wallet (SOW) model to identify "high
CLV but low SOW" customers with the assumption that the company's profit could be
maximized by investing marketing resources in those customers.
12) What is a Value Proposition? Explain in detail with Examples?
A value proposition is a promise of value to be delivered and a belief from the customer that
value will be experienced. A value proposition can apply to an entire organization, or parts
thereof, or customer accounts, or products or services.
Creating a value proposition is a part of business strategy. Kaplan and Norton say "Strategy is
based on a differentiated customer value proposition. Satisfying customers is the source of
sustainable value creation.
Developing a value proposition is based on a review and analysis of the benefits, costs and
value that an organization can deliver to its customers, prospective customers, and
other constituent groups within and outside the organization. It is also a positioning of value,
where Value = Benefits - Cost (cost includes economic risk).
13) What is a Promotional Mix?
A promotion mix is the act of combining promotional methods such as advertising, new media,
direct mail marketing, selling, use of retail displays, and merchandising for the sale of products
and services. Promotional mix is the marketing strategies used by a company to market and
promote its products and services. These strategies include personal selling, advertising, public
relations
What is IMC and what are its tools?
customer relationship to the firm. It is an upper limit on what the firm would be willing to pay
to acquire the customer relationship as well as an upper limit on the amount the firm would be
willing to pay to avoid losing the customer relationship. If we view a customer relationship as
an asset of the firm, CLV would present the dollar value of that asset.
One of the major uses of CLV is customer segmentation, which starts with the understanding
that not all customers are equally important. CLV-based segmentation model allows the
company to predict the most profitable group of customers, understand those customers'
common characteristics, and focus more on them rather than on less profitable customers.
CLV-based segmentation can be combined with a Share of Wallet (SOW) model to identify "high
CLV but low SOW" customers with the assumption that the company's profit could be
maximized by investing marketing resources in those customers.
12) What is a Value Proposition? Explain in detail with Examples?
A value proposition is a promise of value to be delivered and a belief from the customer that
value will be experienced. A value proposition can apply to an entire organization, or parts
thereof, or customer accounts, or products or services.
Creating a value proposition is a part of business strategy. Kaplan and Norton say "Strategy is
based on a differentiated customer value proposition. Satisfying customers is the source of
sustainable value creation.
Developing a value proposition is based on a review and analysis of the benefits, costs and
value that an organization can deliver to its customers, prospective customers, and
other constituent groups within and outside the organization. It is also a positioning of value,
where Value = Benefits - Cost (cost includes economic risk).
13) What is a Promotional Mix?
A promotion mix is the act of combining promotional methods such as advertising, new media,
direct mail marketing, selling, use of retail displays, and merchandising for the sale of products
and services. Promotional mix is the marketing strategies used by a company to market and
promote its products and services. These strategies include personal selling, advertising, public
relations
What is IMC and what are its tools?
IMC stands for Integrated Marketing Communication. Companies use IMC to set company goals
and objectives using this as a form of communication. IMC is the abbreviated term for
Integrated Marketing Communication. IMC is the practice of unifying all marketing
communications to convey the company's objectives and goals to all.
One of the most common and early IMC objectives is brand awareness. Before a company can sell
specific products and services, it has to create brand awareness among its target market.
Various integrated marketing communication tools: Integrated marketing communication
effectively integrates all modes of brand communication and uses them simultaneously to
promote various products and services among customers effectively and eventually yield higher
revenues for the organization.
Advertising
Advertising is one of the most effective ways of brand promotion. Advertising helps
organizations reach a wider audience within the shortest possible time frame. Advertisements
in newspaper, television, Radio, billboards help end-users to believe in your brand and also
motivate them to buy the same and remain loyal towards the brand. Advertisements not only
increase the consumption of a particular product/service but also create brand awareness
among customers. Marketers need to ensure that the right message reaches the right
customers at the right time. Be careful about the content of the advertisement, after all you are
paying for every second.
Sales Promotion
Brands (Products and services) can also be promoted through discount coupons, loyalty clubs,
membership coupons, incentives, lucrative schemes, attractive packages for loyal customers,
specially designed deals and so on. Brands can also be promoted effectively through newspaper
inserts, danglers, banners at the right place, glorifiers, wobblers etc.
Direct Marketing
Direct marketing enables organizations to communicate directly with the end-users. Various
tools for direct marketing are emails, text messages, catalogues, brochures, promotional letters
and so on. Through direct marketing, messages reach end-users directly.
Personal Selling
Personal selling is also one of the most effective tools for integrated marketing communication.
Personal selling takes place when marketer or sales representative sells products or services to
clients. Personal selling goes a long way in strengthening the relationship between the
organization and the end-users.
Personal selling involves the following steps:
and objectives using this as a form of communication. IMC is the abbreviated term for
Integrated Marketing Communication. IMC is the practice of unifying all marketing
communications to convey the company's objectives and goals to all.
One of the most common and early IMC objectives is brand awareness. Before a company can sell
specific products and services, it has to create brand awareness among its target market.
Various integrated marketing communication tools: Integrated marketing communication
effectively integrates all modes of brand communication and uses them simultaneously to
promote various products and services among customers effectively and eventually yield higher
revenues for the organization.
Advertising
Advertising is one of the most effective ways of brand promotion. Advertising helps
organizations reach a wider audience within the shortest possible time frame. Advertisements
in newspaper, television, Radio, billboards help end-users to believe in your brand and also
motivate them to buy the same and remain loyal towards the brand. Advertisements not only
increase the consumption of a particular product/service but also create brand awareness
among customers. Marketers need to ensure that the right message reaches the right
customers at the right time. Be careful about the content of the advertisement, after all you are
paying for every second.
Sales Promotion
Brands (Products and services) can also be promoted through discount coupons, loyalty clubs,
membership coupons, incentives, lucrative schemes, attractive packages for loyal customers,
specially designed deals and so on. Brands can also be promoted effectively through newspaper
inserts, danglers, banners at the right place, glorifiers, wobblers etc.
Direct Marketing
Direct marketing enables organizations to communicate directly with the end-users. Various
tools for direct marketing are emails, text messages, catalogues, brochures, promotional letters
and so on. Through direct marketing, messages reach end-users directly.
Personal Selling
Personal selling is also one of the most effective tools for integrated marketing communication.
Personal selling takes place when marketer or sales representative sells products or services to
clients. Personal selling goes a long way in strengthening the relationship between the
organization and the end-users.
Personal selling involves the following steps:
1. Prospecting - Prospecting helps you find the right and potential contact.
2. Making first contact - Marketers need to establish first contact with their prospective
clients through emails, telephone calls etc.An appointment is essential and make sure
you reach on time for the meeting.
3. The sales call - Never ever lie to your customers. Share what all unique your brand has
to offer to customers. As a marketer, you yourself should be convinced with your
products and services if you expect your customers to invest in your brand.
4. Objection handling - Be ready to answer any of the client’s queries.
5. Closing the sale - Do not leave unless and until you successfully close the deal. There is
no harm in giving customers some time to think and decide accordingly. Do not be after
their life.
Public Relation Activities
Public relation activities help promote a brand through press releases, news, events, public
appearances etc.The role of public relations officer is to present the organization in the best
light.
14) What is Media Planning and Media Buying?
Media planning is one of the four key disciplines within advertising, along with account
management, brand planning and developing creative. Typically media planning is a role that
falls to an outside agency, but some companies choose to keep it in-house.
Media planning entails finding the most appropriate media platform to advertise the company
or client’s brand/product. Media planners determine when, where and how often a message
should be placed. Their goal is to reach the right audience at the right time with the right
message to generate the desired response and then stay within the designated budget
Anyone can purchase advertising time on a radio or television station but media buyers do it
better. A media buyer purchases time by researching the audience for that time spot and
placing ads at a time when they will reach the most customers. They may also purchase media
in large blocks to get better rates. Media buyers work for large corporations and advertising
agencies.
Media buying, a sub function of advertising management, is the procurement of media real
estate at optimal placement and price. The main task of media buying lies within the
negotiation of price
2. Making first contact - Marketers need to establish first contact with their prospective
clients through emails, telephone calls etc.An appointment is essential and make sure
you reach on time for the meeting.
3. The sales call - Never ever lie to your customers. Share what all unique your brand has
to offer to customers. As a marketer, you yourself should be convinced with your
products and services if you expect your customers to invest in your brand.
4. Objection handling - Be ready to answer any of the client’s queries.
5. Closing the sale - Do not leave unless and until you successfully close the deal. There is
no harm in giving customers some time to think and decide accordingly. Do not be after
their life.
Public Relation Activities
Public relation activities help promote a brand through press releases, news, events, public
appearances etc.The role of public relations officer is to present the organization in the best
light.
14) What is Media Planning and Media Buying?
Media planning is one of the four key disciplines within advertising, along with account
management, brand planning and developing creative. Typically media planning is a role that
falls to an outside agency, but some companies choose to keep it in-house.
Media planning entails finding the most appropriate media platform to advertise the company
or client’s brand/product. Media planners determine when, where and how often a message
should be placed. Their goal is to reach the right audience at the right time with the right
message to generate the desired response and then stay within the designated budget
Anyone can purchase advertising time on a radio or television station but media buyers do it
better. A media buyer purchases time by researching the audience for that time spot and
placing ads at a time when they will reach the most customers. They may also purchase media
in large blocks to get better rates. Media buyers work for large corporations and advertising
agencies.
Media buying, a sub function of advertising management, is the procurement of media real
estate at optimal placement and price. The main task of media buying lies within the
negotiation of price
What is the difference between “Above-the-line” (ATL) and “Below-the-line” (BTL) Advertising?
Above the line (ATL) is an advertising technique using mass media to promote brands.
This type of communication is conventional in nature and is considered impersonal to
customers. It differs from BTL (below the line), that believes in unconventional brand-building
strategies. The ATL strategy makes use of current traditional media:
Television, newspapers, magazines, radio, outdoor, and internet.
Below the line (BTL) is an advertising technique. It uses less conventional methods than the
usual specific channels of advertising to promote products, services, etc. than ATL (above the
line) strategy; these may include activities such as direct mail, public relations, sales promotion,
consumer promotions, consumer incentives, trade incentives
Retail promtions etc for which a fee is agreed upon and charged up front.
Below the line advertising typically focuses on direct means of communication, most commonly
direct mail and e-mail, often using highly targeted lists of names to maximize response rates.
15) What is Advertising?
Advertising is a form of communication that is used to persuade an audience to recognize
and/or support particular services, ideas or products. The advertising messages are usually paid
for by the sponsors and are transmitted through various media such as television or the
internet. Each company strives to increase sales through advertising.
What are the Principles of Advertising?
1. An advertisement should accurately reflect the nature and content of the product it
represents and the rating issued (i.e., an advertisement should not mislead the
consumer as to the product’s true character.)
2. An advertisement should not glamorize or exploit the ESRB rating of a product or a ruling
or determination made by ARC, nor misrepresent the scope of ARC’s determination.
3. All advertisements should be created with a sense of responsibility toward the public.
4. No advertisement should contain any content that is likely to cause serious or
widespread offense to the average consumer.
Above the line (ATL) is an advertising technique using mass media to promote brands.
This type of communication is conventional in nature and is considered impersonal to
customers. It differs from BTL (below the line), that believes in unconventional brand-building
strategies. The ATL strategy makes use of current traditional media:
Television, newspapers, magazines, radio, outdoor, and internet.
Below the line (BTL) is an advertising technique. It uses less conventional methods than the
usual specific channels of advertising to promote products, services, etc. than ATL (above the
line) strategy; these may include activities such as direct mail, public relations, sales promotion,
consumer promotions, consumer incentives, trade incentives
Retail promtions etc for which a fee is agreed upon and charged up front.
Below the line advertising typically focuses on direct means of communication, most commonly
direct mail and e-mail, often using highly targeted lists of names to maximize response rates.
15) What is Advertising?
Advertising is a form of communication that is used to persuade an audience to recognize
and/or support particular services, ideas or products. The advertising messages are usually paid
for by the sponsors and are transmitted through various media such as television or the
internet. Each company strives to increase sales through advertising.
What are the Principles of Advertising?
1. An advertisement should accurately reflect the nature and content of the product it
represents and the rating issued (i.e., an advertisement should not mislead the
consumer as to the product’s true character.)
2. An advertisement should not glamorize or exploit the ESRB rating of a product or a ruling
or determination made by ARC, nor misrepresent the scope of ARC’s determination.
3. All advertisements should be created with a sense of responsibility toward the public.
4. No advertisement should contain any content that is likely to cause serious or
widespread offense to the average consumer.
5. Companies must not specifically target advertising for entertainment software products
rated “Teen,” “Mature,” or “Adults Only” to consumers for whom the product is not
rated as appropriate.
What is the difference between Advertising and PR and Publicity?
1. Paid Space or Free Coverage
Advertising:
The Company pays for ad space. You know exactly when that ad will air or be published.
Public Relations:
Your job is to get free publicity for the company. From news conferences to press releases,
you're focused on getting free media exposure for the company and its products/services.
2. Creative Control Vs. No Control
Advertising:
Since you're paying for the space, you have creative control on what goes into that ad.
Public Relations:
You have no control over how the media presents your information, if they decide to use
your info at all. They're not obligated to cover your event or publish your press release just
because you sent something to them.
3. Shelf Life
Advertising:
Since you pay for the space, you can run your ads over and over for as long as your budget
allows. An ad generally has a longer shelf life than one press release.
Public Relations:
You only submit a press release about a new product once. You only submit a press release
about a news conference once. The PR exposure you receive is only circulated once. An
editor won't publish your same press release three or four times in their magazine.
4. Wise Consumers
Advertising:
Consumers know when they're reading an advertisement they're trying to be sold a product
or service.
Public Relations:
When someone reads a third-party article written about your product or views coverage of
rated “Teen,” “Mature,” or “Adults Only” to consumers for whom the product is not
rated as appropriate.
What is the difference between Advertising and PR and Publicity?
1. Paid Space or Free Coverage
Advertising:
The Company pays for ad space. You know exactly when that ad will air or be published.
Public Relations:
Your job is to get free publicity for the company. From news conferences to press releases,
you're focused on getting free media exposure for the company and its products/services.
2. Creative Control Vs. No Control
Advertising:
Since you're paying for the space, you have creative control on what goes into that ad.
Public Relations:
You have no control over how the media presents your information, if they decide to use
your info at all. They're not obligated to cover your event or publish your press release just
because you sent something to them.
3. Shelf Life
Advertising:
Since you pay for the space, you can run your ads over and over for as long as your budget
allows. An ad generally has a longer shelf life than one press release.
Public Relations:
You only submit a press release about a new product once. You only submit a press release
about a news conference once. The PR exposure you receive is only circulated once. An
editor won't publish your same press release three or four times in their magazine.
4. Wise Consumers
Advertising:
Consumers know when they're reading an advertisement they're trying to be sold a product
or service.
Public Relations:
When someone reads a third-party article written about your product or views coverage of
your event on TV, they're seeing something you didn't pay for with ad dollars and view it
differently than they do paid advertising.
5. Creativity or a Nose for News
Advertising:
In advertising, you get to exercise your creativity in creating new ad campaigns and
materials.
Public Relations:
In public relations, you have to have a nose for news and be able to generate buzz through
that news. You exercise your creativity, to an extent, in the way you search for new news to
release to the media.
differently than they do paid advertising.
5. Creativity or a Nose for News
Advertising:
In advertising, you get to exercise your creativity in creating new ad campaigns and
materials.
Public Relations:
In public relations, you have to have a nose for news and be able to generate buzz through
that news. You exercise your creativity, to an extent, in the way you search for new news to
release to the media.
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