Value Based Marketing: Company’s primary obligation is to maximize: (i) return from capital
appreciation; and (ii) dividends earned by common shareholders….. Stock’s market value depends on
investors’ expectations of the cash-generating abilities of a firm’s business units. Value is created when
the financial benefits of a strategic activity exceed the costs.
Balanced Score Card: Vision and Strategy:Financial, Internal Business Process, Learning and Growth,
Customer… Measuring and Managing Metrics: 1. Learning and Change Measures (employee retention),
2. Key Internal Business Process and Measures (process output/costs/waste/speed), 3. Customer
Outcome Measures (customer satisfaction), 4. Owner Outcome Measure (valuation of company)
Product Profitability: Operating Leverage = CM/EBIT (Contribution Margin / Operating Income
Breakeven = Total Fixed Costs (TFC) = Contribution Margin & Operating Income = zero
Marketing Cost Management: Easier to control and manage the supply side (e.g. costs and resources)
than it is to control and manage consumer demand. Why? Consumer demand is influenced by external
factors. ….Cost control is an important principle of marketing systems control and its metrics. Why?
Good marketing MUST consider cost and profit metrics and the bottom-line profitability implications.
COSTS - Variable Cost- cost that varies directly with the quantity sold (direct costs)….all costs which do
not vary with sales (overhead costs)…. Sunk Costs- past costs that cannot affect the future decisions….
Common Costs- OH or FC costs that cannot be attributed to any specific product or segment of
business… Incremental Costs – additional V/F costs that will influence future decisions.
Situational Analysis - Market Segmentation: (STP) Segmentation, targeting, positioning. (decision
making, profitable customers, highest potential)
STEEP (MACRO)- Sociocultural & Demograhic (values), Technology (innovation), Economic (interest,
GDP) , Ecology & Physical (Climate, fuel), Political & Legal (Taxes, Policy)
SWOT (MICRO/MACRO) – Stregths (internal - Expertise) Weaknesses (internal -location) Opportunities
(external – Developing Market) Threats (external – new competition)
Porter’s 5 Competitive Forces (Micro) – 1. Rivalry among competitors, 2. New entrants, 3.Bargaining
Power of Buyers, 4. Bargaining power of suppliers, 5. Substitutes.
Forrester’s Social Technological Ladder: Creators, Critics, Collectors, Joiners, Spectators, Inactives
Four P’s of Marketing: Product (variety, quality), Price (list price, discount), Promotion (advertising),
Place (coverage, inventory)
RFM (Recency (latest purchase), Frequency (# of purchases), Monetary (purchase value)
Decile- 80/20 rule (80% of sales from 20% of customers.)
Share of Wallet (SOW)- Cross analyzing current loyalty/spend with potential value Segmentation Categories: Geographic Seg., Demographic Seg (most popular), Psychographic Seg
(lifestyle, social class), Geodemographic Seg (census data crossed with behaviours and values)
Shareholder Value: Discounted Cash Flow (DCF) model =
Shareholder Value= (A)PV of Net or Operating Cash Flows + (B)PV of Residual Value + (C)Non-Operating
Assets – (D) Market Value of Debt
Value Based Marketing: DCF Equation: NPV= Sum (Expected Cash flows / (1+RRR) …..Rule*NPV should
be equal to or greater than the incremental investment required for that initiative. (Customer Net
Present Value or CLV Customer Lifetime Value)
CAPM(Capital Asset Pricing Model) – Risk Adjusted Rate of Return – E = R + B (s -Rf) s m f
Es- expected return of a security, Rf- risk free rate of return, Bs- Security sensitivity to expec. Returns,