ADVANCED MARKETING MANAGEMENT

Value Based Marketing Submitted By:

A Swathi (10202)
Siva Chebrolu (10209)
Kovali Karthik (10252)
Bhargava R (10307)
Siva M (10344)
C D HariPriya (10353)
 VALUE BASED MARKETING

Table of Contents
Introduction:...............................................................................................................................................3
Defining Value:...........................................................................................................................................3
Creating Value:...........................................................................................................................................3
Communicating Value:................................................................................................................................4
Marketing Pentadigm:.................................................................................................................................6
The Marketing Pentadigm in the context of Cadbury India:........................................................................7
(I).Discover..................................................................................................................................................7
(II).Commitment..........................................................................................................................................7
Lessons in CVE through competitor’s failures & success:............................................................................9
Branding..................................................................................................................................................9
Ethics:......................................................................................................................................................9
Product Innovation by Listening to Customers:.......................................................................................9
(III).Create customer value commitment culture:.....................................................................................10
(IV &V). Asses customer feedbacks & Improve customer value ratio:.......................................................11
Conclusion:................................................................................................................................................13
LIST OF REFERENCES:.................................................................................................................................13

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Introduction:

Value Based Marketing is a marketing Lexicon, used to conceptualize the process of value
creation, in the firm, for the customers, without losing focus on profitability and thus
increasing shareholder value.

Value based marketing is a concept comprises of knowledge of three of its components:

a) Defining value
b) Creating value
c) Communicating the value

In this competitive era one has to be very much cleared about the concept and sense of the
expression ‘marketing'! People consider it as just to dispose off what they make rather than
understanding product or service and that ought to be clearer to our customer as well, therefore
the value lies in the values of what they make. Deeds have to have the apparent view of what
value we have for our customers in our point of fact requires to be well defined for customer
understanding, created for customer ease and to end with well communicated to give the clearer
depiction of what we made for our customers.

Defining Value:
This is a first step and a critical research to pick the target market that includes several
imperative points such as target market's demographic and the taste they essentially belongs to.
And what we make is according to those several diverse aspects.
Example: A pen has feature of sharpen color with wet shiny ink while writing. Sharpen and
shiny color is a value which a pen contains with it!

Creating Value:
The next step is how to create value? Now that's in addition give some hard-hitting time. The
value will be created through distributors. In this step, we need to make our target market realize

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that what they wonder we have just made with respect to that and for the sake of their ease and
benefit.
Example: It is doubtful that 15 years ago a large number of consumers would have said they
would like to spend more time on the phone. But in the age of wireless cellular service, a
majority of consumers are now always connected and spend far more minutes talking via phone
than ever before.

Communicating Value:
This the third and last step of the term ‘marketing' is communicating the value which has been
defined and created for the target customer now this can be done through advertisement,
promotion, direct marketing etc. But the point is that how that ‘value' can be delivered so
effectively that directly accomplish customer's mind? And the exceptionally simple answer is the
delivery of value in what we have made, should be incredibly captivating and no long stories
rather just a short and sharp message which openly hit the customer's attention. This really
sounds interesting!
Example: Surf excel delivers the value of their product very well in just a short sentence "Stains
are good (Daagh tou achay hotay hain)" and this single sentence they delivered through an
assortment of channels of communication. They actually extraordinarily hit the target! Just
Wow! In this single sentence they quoted the whole idea of their product very ingeniously.

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Kolter defines,

Customer Value =
Perceived Customer
Benefits (product, services,
De quality and personal or Bonis, Balinski & Allen approach to value based
image benefits) – Customer marketing is, essentially focusing on customer
Cost value, through the concept of - Marketing
Pentadigm.

Marketing metrics used for evaluating marketing performance, such Brand Equity, CLV, repeat
purchase rate etc, generally fall shy of management needs - due to lack of conformity with
dominant accounting-finance language of the firm, making it difficult to compare with
alternative expenditures undertaken in the firm, humorously reflected in:

“I know I am wasting half of my advertisement budget, but I just don’t know which half”

Hence the concept of VBM has evolved further. Peter Doyle conceptualizes it as the Marketing-
Finance Interface and attempts to link marketing activities to financial consequences and
creation of intangible assets.

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Marketing Pentadigm:

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Pentadigm: 5 steps to Customer Value

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The Marketing Pentadigm in the context of Cadbury India:

(I).Discover:

Market segment, based on customers having similar value ratios, Assess competitive position
and only serve customers with high Customer Lifetime Value.

(II).Commitment

To find the critical customer value factors & quantify them, develop customer value commitment
superior to competitors, then align organizational capability - sales, service, supply chain, to
deliver value, so to make economic profit (EVA).

In (Fig 1) we discuss a model to identify and maximize a set of hypothetical customer value
drivers in the context of Cadbury India. In practice customer value drivers are identified by co-
joint analysis. Customer value drivers & their relative importance – would depend on the type of
industry/product and also on market factors like demographics, culture, income levels etc.

The customer value commitments must be communicated by means of both marketing

communications and internal communications processes. Repurchase behavior in customers is
caused by the differential between promised and perceived value.

Customer value drivers are important to formulate Marketing Strategy. Since marking is the art
of attracting and retaining profitable customers- the company should ideally target the market
segment in which its value proposition has competitive advantage. It has to communicate
effectively the value proposition of a particular product category and brand, which in turn would
help enhance the total customer perceived values/benefits.

Define key performance indicators like - Brand awareness and position, customer acquisition
& retention figures, proportion of total sales/profit from new customers/products. Some external
indicators are customer satisfaction ratings, status in the industry as a value creator, customer
referrals etc.

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Oliver Wyman’s Customer Value Engineering (TM) –model, allows companies to identify and
quantify the true emerging drivers of customer value––those things that customers are actually
willing to pay for in a competitive environment ––and evaluate the profitability of alternative
strategies.

(Figure : 1) CUSTOMER VALUE SYSTEM:

SELF ACTUALIZATION: Not applicable

ESTEEM: Children’s height increases with Bournvita Drinks; he’s able to do better in academics.
Chocolates appeal to women, Sexuality.

SOCIAL: Chocolates mostly satisfies this need.

SURVIVAL: Ex: Bournvita- Drinks complements diets, bridges gap in intake of vital nutrients.

PRODUCT /NEED CATAGORYOCCATIONS

CONVENIANCE: related
CUSTOMER VALUE =
to distribution/channels
PRICE: Price of Cadbury Chocolates/Bournvita with respect to
DISCOVERY: N.A
Nestle. Margins given to vendors compared to nestle for pushing
products. REPLENISHMENT:
Notion of quick & easy
QUALITY: Customer perceived taste compared Nestle products.
food value. Ex: Nestle Kit
PRODUCT BENEFIT: its health benefits- nutrients, sugar content, Kat, Cadbury Perk
differentiation- Ex: Fruit & Nuts variants, choco shakes/ice-creams.
SELF EXPRESSION:
CONVENIENCE: Easy availability- emphasize on channels Ex: Moments of happiness
vending machines, packaging & size, Easy: Nescafe (3 in 1), Maggi rewarded with chocolates,
Insta-Noddles. Ex: Adv showing fans
having chocolates after
SERVICE: taking care of vendor interest- flexibility in supply, buy winning a cricket match.
back of defects, credit/financing of stocks, and ease of payments. Students having chocolates
after passing an exam
ENTERTAINMENT : Create a product association with fun, family,
festivity. Ex: Cadbury Celebrations gift packs as substitute to sweets.

ETHICS & SUCURITY: Parents favor Cadbury for their children as SOLUTIONS: Ex:
we are safe, healthy. Ex: Audit Storage Facility of 8
Solution to nutrients
Distributors/Channels deficiency, child growth via
Bournvita.
 VALUE BASED MARKETING

The values given here are notional based on judgement; however actual weightings of value
drivers and their component are dependent on –market surveys and data analytics? It’s important
to note that from Cadbury’s point of view both the end consumers and distribution channels- like
stockiest, retailers are customers, so some of the value drivers are not pertaining to end
consumers.

Lessons in CVE through competitor’s failures & success:

Branding: Nestle can be credited for revolutionizing the snack market in India - both Maggi
and Nescafe, has attained generic brand status. However Milo has failed in India, despite being
the No.1 malted drink brand globally. The reason I believe is that – Milo is also a sorghum grain
used as horse fodder, 50% of Milo production is still eaten by the world’s poorest, and during the
great famine Indians had to eat Milo imported from USA, as we didn’t have dollars to import
wheat.

Ethics: Nestle has helped farmers of Moga district in India, to developing good dairy practices
in this area with concepts like high-yield cows, quality fodder and balanced cattle feed. Kraft
Foods- became the first to stop advertising junk food to children, CEO-Roger Deromedi said,
“Our relationship with consumers is about trust. If you don’t align with society and you get out
of step with that, then you’re going to destroy shareholder value.”

Product Innovation by Listening to Customers: Food habits are influenced by local

tastes and flavors – Nestle India has customized its products to satisfy customer needs. This has
allowed them to command higher price premium.

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(III).Create customer value commitment culture:

As an expected, normative behavior throughout the organization. (Refer to Fig: 2) Invest in

appropriate resources & infrastructure to deliver value cost-effectively and efficiently, since a
customer may not choose to buy even if, the perceived customer benefits are higher than the
competitors, due to higher price proposition.

Value = Desired Benefits /Relative Costs. The components of Relative Costs are, Acquisition
costs, Possession costs like, inventory management cost and Usage costs like, product shelf life,
replacement costs, etc. The less value you deliver, the more price is commoditized.

Fig-2: Value Chain Within an Organization by M.E Porter.

SUPPORT ACTIVITIES

FIRM INFRASTRUCTURE HR TECHNOLOGY PROCUREMENT

INBOUND OUTBOUND MARKETING &

OPERATIONS SERVICES
LOGISTICS LOGISTICS SALES

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PRIMARY ACTIVITIES:

Benchmark practices of Competitors:

Procurement: Nestle faces stiff competition from Amul Dairy, which can operate on very thin
margins owing to it’s co-operative structure. Milk, constitutes 47% of Nestle's total raw material
costs. The company has replicated Amul’s procurement system - in Moga district, it sources 1.1
m lts of milk per day from 980,000 farmers through 2,250 collection centers.

Technology : Nestle India has access to global technology, brands and product development
skills of the parent, Nestle SA, which spends more than US$1.5b on R&D every year. Nestle
India now uses its own ERP- Application Software for supply chain management.

(IV &V). Asses customer feedbacks & Improve customer value ratio :

As customer value needs and expectations are dynamic, so anticipate change and redefine
customer value commitments through innovation.

Conceptual Framework: VBM as the Marketing – Finance Interface

Market
/Shareholder
Value

Intangible-
Market Driven Tangible Assets
Assets

Channel Intellectual Plant,Cash,&

Brand Equity Customer Equity
Relationship Property Inventory,

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(Individual Marketing Activities: Advertisement, Customer Satisfaction, Customer Value,

Branding, Promotions, Product Innovation)

Marketing is viewed as an investment that produces an improvement in the drivers of customer

equity. This leads to improved customer perceptions which result in increased customer
attraction and retention, better attraction and retention lead to increased CLV and customer
equity.

ASSETS PARTNER RELATIONS: CHANNELS, CO-BRANDING, NETWORKS

BASED CUSTOMER RELATIONS: BRANDS
MARKET

MANCE CUSTOMER LOYALTY/RETENTION, SALES/SERVICE COST

PERFOR FASTER MARKET PENETRATION, MARKET SHARE, PRICE PREMIUM,
MARKET
VALUE OF CF.
VALUE REDUCED VOLATILITY & VUNERABILITY OF CASH FLOW, ENHANCED RESIDUAL
OLDER ACCELARATED CASH FLOW, ENHANCED CF
SHAREH

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Conclusion:

The purpose of business is to create and retain customer. But, the question is how? While
business thinks in terms of products and derived values, customer is looking at satisfaction. The
key question is whether all the strategy, product features, additional offers and value creation
lead to ultimate customer satisfaction. The customer is buying satisfaction. And highest value is
derived when the customer is fully satisfied with his purchase. The key here is to rollout more
value propositions with the very basic of the requirement whether the value proposed gives
satisfaction to the customers. Therefore, value is essentially to be thought at every point of
marketing function, and dynamic strategic models can create value in dynamic form to give
customer more satisfaction in different dimensions

VBM tools enables managers to integrate data on customer benefits and costs in a systematic
manner, analyse relative importance of attributes & anticipate market value of their products to
multiple targets groups. It’s also a management system for marketing to grow it’s fianacial
contribution.

LIST OF REFERENCES:

 Value-Based Marketing for Bottom-Line Success by De Bonis, Balinski, and Allen

 "Measuring Marketing Productivity: Current Knowledge and Future Directions" October
2004, Journal of Marketing article by Roland T. Rust, Tim Ambler, Kumar, and Rajendra
K.Srivastava
 Roland T. Rust, Katherine N. Lemon, & Valarie A. Zeithaml, : Return on Marketing:
Using Customer Equity to Focus Marketing Strategy, Journal of Marketing 68(1), 2004,
109-127)
 Value Based Marketing by Peter Doyle
 Marketing Essentials by Philip Kotler
 www.investopedia.com

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