[MUSIC]
Hello, I'm Barbara Kahn, and I'm a
professor of marketing at the Wharton School.
And, I'm here to talk to you about marketing.
So this, this segment is Marketing 101, the basics, the principles of marketing.
And my focus is going to be on building strong brands because of
course the essence of marketing is to have a very strong brand.
So, let's start off with the first
question, a very basic question but maybe not
as obvious as you might think. Which is what is marketing?
And I'm going to argue that marketing is the studies of a market.
So what's a market?
A market is an exchange between two partners, frequently a buyer and a seller,
but marketing also, applies to non-profit or
things where there isn't necessarily money being transacted.
But what you need for marketing to exist or for a market to
exist is to have an exchange.
And what I'm going to argue is that what marketing means is
going to differ as a function of different aspects of those exchange.
So let's let's look at the basic exchange.
You have one buyer and one seller.
And I'm going to give a very simplified view to
make a point no markets were ever quite this
simple and I'm going to look at the two extremes
just to get get a a make my point here.
and the real markets
are somewhere in the middle.
But you'll see when I start defining this, that
it's very useful to use this, this kind of simplification.
So if we think of an exchange between buyers and sellers.
On one extreme we could have what's called a seller's market.
And in the seller's market what that means is the seller has a
product, and if you want that product, you have to come to the seller.
So the seller has all the power.
The opposite of that would
be a buyer's market where there's lots of competition, a
lot of products out there, and the buyer has the power.
And what I would argue, and I think would make sense to you too if you think
about it, is marketing should not be the same
in the seller's market as in the buyer's market.
So, in the seller's market, what marketing tends
to be is what we call product focus market.
You have the product.
If the customers want it, they're going to come to you.
In that case, you should develop that product to the best of your ability.
You should innovate in that product, you should try to
reduce cost and you should really focus on the product.
Your business objective in a product-focused
market is to sell as much as
you can, and profitability from a product-focused
market is going to come from volume.
Selling as much as you can.
In the past when we've studied product focus market,
we've shown that profitability is tied to market share.
So market share becomes your business objective.
And why does market share increase profitability?
Because the bigger your market share, the more your revenues.
And the bigger your market share, and your
volume, the lower the product cost and hint profitability.
Higher revenues, lower cost, more profit.
That's really the goal
of a product focused market and when
you're product focused, where do you get growth?
Will you develop new products based on your
product experience or you go to new markets?
That's product focused marketing.
So what's customer focused marketing? Is it the opposite?
And the, and the answer's going to be no, not exactly.
In fact, it's quite a different type of marketing.
Let's think about it.
Customer focused marketing means that I need
to focus on the customer to get that
customer to buy from me rather than the competition.
Well, what's the best way to get the customer
to buy from you rather than from the competition?
The best way to do it is to look at what that
customer wants, and deliver a product that meets the needs of that customer.
So where is in product-focused market, I'm the expert, and I
create the very best product I can based on my expertise.
In a customer-based market, what I'm going to do is look at what
the customer wants, and try to create product to meet that customer's need.
That's a very different point of view.
Some people call it inside-out, this
product focus, and outside-in is customer focus.
Okay, so now we're going to look at what
the customer wants to deliver value to that customer.
But, think about it.
What does the customer want?
Well, the first question is which customer?
You can't give every customer what they want, and we know
customers are going to want all different things, so the reason why
a buyer's market or customer focused marketing is so different than
product focus, is that every customer out there, wants something different.
If we try to give everybody what they want, we'll go out of business.
That's too hard to do.
So the intuition of customer focus
marketing, is to pick and choose customers.
Deliver value to some customers.
Say yes to some customers and no to other customers.
That's the process of segmentation and they call that,
I'm going to talk about that in the next section.
But the idea here is that I go after some customers and I say no to other customers.
Well, then, how do I become profitable in that?
Understand that in a product focused marketing, what
we did is sell as much as we can.
We sold that product to anybody who wanted that product.
In the customer focused market, we're saying
no to some customers and yes to others.
So, how do we make that profitable?
And, the answer is you pick and choose the customers you want to deliver.
You deliver value to that customer, give them exactly
what they want and that they're willing to pay for,
and where the profitability comes from is
not from volume, but it's from creating value.
How can, how can value-based marketing be profitable?
Well, first thing is if I give you exactly what you
want, many times, you'd be willing to pay a premium price.
Then the profitability comes in not from reduced cost, which we
saw in the seller's market side, but from increased price premium.
If you give me exactly what I want, I'll be willing to pay a higher price for it.
So that's one way.
The other way, customer based marketing is profitable is by
giving the customer what they want time after time after time.
I don't think about just one transaction, I think about building customer loyalty.
And, delivering value to that customer over time.
That concept is called customer share.
Rather than market share, while I try to get a little
bit from everybody, the idea of customer share, or share of
wallet is that I go after a more narrow market and
try to get more from each of that, their, those customer's wallets.
And it turns out that loyalty is very, can,
if you do it right can be very profitable.
And why is loyalty more profitable? Because it's the cost
of delivering value to the customer.
When I'm doing a customer based marketing it's actually
quite expensive to give the customer exactly what they want.
Once I figure out what that customer wants and I deliver it to them
the first time, it's cheaper to deliver it to them time after time after time.
So it's more difficult and more expensive to acquire new customers, but
its cheaper to retain those customers over time, and that's where the profitability
comes from. It comes from loyalty.
The other thing, if you're thinking about building share of wallet in
the customer-focused market, is that I not only sell one product to you.
I think about other things that you might need and I try to cross sell around it.
Let me give you an example of this notion of cross selling.
If you've ever gone into a GAP or some jeans store, and, and
you go to the cash register and you buy a pair of jeans.
The, the cashier or that person behind the
counter might say: Oh these are very nice jeans.
Do you think you'll need a belt with that?
Do you think you'll need socks? That's the notion of cross selling.
So I'm selling other things to you besides that one specific product.
All of these are the idea of increasing customer share
and that's a very important part of customer focused marketing.
Give the customer exactly what they want.
They'll be willing to pay a premium price for it.
Give them what they want, and keep delivering value over time,
they will stay loyal to you, and they'll buy over time.
And that's more profitability.
And if you understand their needs, you can not only deprut, sell them one
product, but you can cross-sell other products
that may also nee, meet their needs.
So in a customer-based market, where profitability come
from is premium price, loyalty, and cross selling.
Difference between sellers market says you
focus on the product, on what the customer does well, and you push that out.
And in a customer based market, you focus on the customer, what the customer wants.
And you deliver value to the customer better than the competition.
So that's the basic difference between
product based marketing and customer focus market.
Now in today's world the market place has changed even more.
What's changed?
Well now not only do you have an exchange
between buyers and sellers, but because of globalization and because
of the Internet and technology and social media and things
like that, it's not a one to one conversation anymore.
Customers can talk to other customers.
That's good and bad.
If you're doing a really good job and meeting the, needs of the customers,
the fact that they'll buzz to their other customers and tell their, their other
friends about what a terrific service your company is doing.
Well, that's really good news.
On the other hand, if something goes wrong, and they
tell their friends something bad, well that's not such good news.
And so you have to be really careful, in every transaction with the customer now,
that you deliver not only value, but
that you deliver a top notch customer experience.
Because although
what I've been talking about in the seller's market
and in a buyer's market has focused on transactions.
In the seller's market I've talked about a single transaction.
In a buyer's market, I talked
about transactions over time or customer loyalty.
But in a connected community, if your message is being transmitted
by customers to other customers, they talk about the customer experience.
What do I mean by customer experience?
Lemme give you an example.
It starts way before the transaction, and it goes way after the transaction.
So for example, if a customer told
another customer that their experience at a restaurant.
They might say, well I was driving to that restaurant and I hit a lot
of traffic, then I got to the parking lot and I couldn't find a parking
space, finally when I got into the
restaurant, I finally got a table, the meal
was really good but then at the end of the meal when I was leaving
I tripped and fell.
That may be the way they describe the experience at the restaurant.
And if that's the way your message about
your product is going to be transmitted from
customer to customer then you as a marketer
need to focus on the entire customer experience.
So, one of the things, and we'll talk
about this later that's changed in marketing in
this world of social media and internet and
globalization, is that the marketer has to be
completely transparent, has to be authentic, and
has to focus on the entire customer experience.
One thing else to mention, we're seemingly coming out
of a recession now, but there was a global
recession, and in the last few years, probably starting
about 2008, we had some real strong economic uncertainty.
There was a lot of scandals going on. People became skeptical
of marketing.
Marketing had some bad names, the financial services industry.
People lost trust.
And so with all those changes in the
economic environment, there's been a focus again, in marketing.
And marketing now has to focus on authentic, genuine customer value.
In order to be profitable, you not only have to
deliver customer value over time and in an experiential way,
but now because of the tightness of the economy and
the uncertainty there, you really have to cut costs and figure
out a way to deliver value in a very discipline
manner and be very flexible to changes in the market place.
So let me just summarize what I've just said.
The different types of marketing orientations.
There's the product orientation where you focus on the product and you persuade
the customer to want what the firm has. There's the marketing orientation.
Where you persu, persuade the firm to offer what the customer wants.
That's a customer focus approach.
The experience orientation says that you not only think
about the transaction, and think about the transactions over time.
But you try to manage the customer's entire experience with the firm.
And when times get tough or
customers stop trusting markets, then you need to remember to
build that relationship based on authenticity, on trust, and on discipline.
And what's the difference in these different types
of marks in terms of what you offer?
In the production orientation, you're focusing
on product innovation, but also reducing costs.
So you tend to see generic products and standardization.
When you're focusing on customer value, you see differentiated products,
and we'll talk about that, when we talk about brands also.
How you position your product to meet the needs of the customers better.
In an experience orientation you look at experiential value.
And when you're going to that tight discipline
mindframe or mindset you look at genuine value.
And what's the competitive sustainable competitive advantage in
each of these markets?
In a product orientation the bigger companies win because they tend to have
larger market share and lower cost, and lower cost is a big strategic advantage.
In a marketing orientation, when you're focusing on the customers,
the, the companies that do the best are customers, are
companies that really know their customers, that can deliver quality,
and that have a lot of customer data and know
how to use that data to deliver better value.
In an experiential market, you look at transformation.
The customer becomes a co-creator of the value, and it's really
making the customer and the product one kind of overall experience.
And in a trust orientation, the sustainable
competitive advantage are the companies that you trust.
And that means you've had a long history with them.
They're transparent, and
you trust them over time.
And what are the measurements of profitability?
In production orientation as I mentioned, market share is tied to profitability.
In marketing orientation, it's share of
wallet or customer share, customer loyalty.
In experienced market, when you're looking at customers talking to other customers,
we start measuring social networks and buzz and word of mouth and referrals.
And in a trust orientation, we really focus on reduced costs.