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Elegant Report

Extracts from this document...

Introduction

HOW TO REDEFINE MARKETING BY CREATING EXCEPTIONAL VALUE FOR BOTH SHAREHOLDERS AND CUSTOMERS EXECUTIVE SUMMARY This report redefines marketing in terms of share holders and customers as: "Marketing is a management process that seeks to maximize return to shareholders by developing and implementing strategies to build customer relationships of trust with high value customers and creating a competitive advantage." The report also tells us how value can be created for customers and shareholders by using value based marketing principle and taking Cadbury Schweppes as an example which became successful by creating value proposition for both customers and shareholders. Cadbury Schweppes followed the four principles by setting the right ambition, distinctive advantage, selective resource allocation, finding win-win for customer and shareholder. Creating shareholder value is then essentially about building a sustainable competitive advantage-a reason why customer prefer to buy from one company rather then the other. The only route to more shareholder value is to create more value for customers. The value to customer is created by using value proposition which are Customer Benefit- Customer must see value to them in their own terms, Unique- Customer must recognize their benefit. Profitable- The Company has to deliver at a profit; Sustainable- The advantage should be difficult to copy. The report also tells us how BCG matrix can be used as a guide for companies to think about different investment needs and Ansoff model to develop competitive strategies since they relate to actions regarding products and markets which are to be implemented to achieve the most specific objectives of the organization. ...read more.

Middle

It also stresses the need to re-invest income to provide long term sources of revenue. It is essential that four strategies emerge from this matrix. Firstly, to 'build' - increase market share, turning question marks into stars. Secondly, 'hold' - preserve market share, ensuring cash cows remain cash cows. Thirdly, 'harvest'- increase short-term cash flow by using cash cows to fund other business products. Lastly to 'divest' - eliminate those businesses whose use of resources is inefficient. Value based marketing is about creating value for shareholders which makes the marketing more effective. It is fundamentally about decision making - choice of markets and positioning, choice of products and customers, choice of offering and price, choice of activities and investment. Figure-2 shows the value of shareholders. In 1996 John Sunderland CEO of Cadbury Schweppes started a campaign under the banner of "managing for value" and followed the principle of value based marketing and became successful with 4-years.4 The four disciplines which were followed by Cadbury Schweppes were as follows: * Setting the right ambition. * Distinctive advantage. * Selective resource allocation. * Finding win-win for customer and shareholder. All the above discipline was to create a strategic planning in order to create the value for both customers and shareholders which were done by Cadbury Schweppes successfully. II. Setting the Right Ambition Companies that are serious about translating revenue growth into value growth tend to take a different, more considered approach to target setting. ...read more.

Conclusion

Value based marketing not only focus on satisfying customer needs but also focuses on competitive dimension. Companies must seek a value proposition that seeks the need of the target customer more effectively then competitors. The differential advantage is necessary for two reasons; one marketing the other is financial. First the differential advantage attracts the new customer and for the existing customers buy again and again. Second a differential advantage is necessary if the business is to maintain earnings above the cost of capital i.e. to generate shareholder value. Without the differential advantage the company can easily enter the market by copying the company's offer and compete away its premium profit margin. Figure #3, Developing the Differential Advantage, Source: Adapted from Doyle,P. (2000) Value-Based Marketing,, John Wiley & Sons, Ltd. A differential advantage is carried out by offering superior value to customers. Value can be increased by offering customers more performance or benefits for the same cost or the same benefit for a lower cost. Competitive strategies should be the most precise level of strategic planning since they relate to actions regarding products and markets which are to be implemented to achieve the most specific objectives of the organization. The organization here could acquire or develop new products to sell its existing customers, mapped out in the Ansoff matrix.6 The Ansoff matrix indicates the appropriate types of strategies which should be implemented depending on which box the organization decides to select as its preferred method of growth. The fourth alternative that this matrix suggests is new products for new customers, otherwise described as a diversification strategy or questionable strategy, because it doesn't build on any obvious existing competitive advantage of the business. ...read more.

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