CUSTOMER VALUE ANALYSIS
The second phase of the customer value analysis follows: Once the customer value profile has
been established, it is possible to draw a customer value map.
Very few companies have developed customer value analysis/profiles, and fewer still have
customer value maps, but executives often argue that most operating managers have an
“implicit model” in their heads. Managers supposedly have a “feel” for who their competitors
are, for what is important to purchases, and for how their company performs versus
competitors.
Sometimes in organizations with exceptionally good leadership, these implicit models work
well and are truly aligned to the real needs of customers. But marketers should check the
situation in their organizations. This can be done via the Delphi Technique by simply asking
top-ranking members of the management team to produce, individually, a picture of the
customer value profile for the business and its key competitors.
If it is determined that all top managers have similar opinions, there is a reasonable chance that
the implicit models in their heads are accurate. This is particularly true if several members of
the top-management team spend most of their time with customers. But the firm should check
management perceptions carefully to ensure that the purchase-selection criteria, weights, and
relative performance scores are appropriately aligned within the management group—and with
customers in the targeted market.
Most organizations find that when they make this implicit model check there is much less
alignment within the organization than was expected. Thus, if the managers can’t agree among
themselves about the purchase criteria and desires of the customers, it is unlikely they can
achieve rapid progress toward fulfilling those needs.
CONCLUSION
A key implication is that firms that tend to base their business strategy more on the basis of
accounting principles alone fundamentally hamstring their efforts. An income statement
provides only a financial history. It tells much about the components of sales and costs, and
tells the amount of resulting profit, but the accounting data will not tell much about why sales
are growing or shrinking.
By contrast, the customer value map shows where the firm ranks with the customer, compared
to the competition. The customer value profile shows why customers rank one firm higher or
lower than the competitors. Thus, the income statement looks at the past while customer value
maps and customer value profiles look to the future.
A. “Reorganizing Marketing Management—Media Neutrality”
There is a new direction emerging in marketing management and planning. It begins with
clients and agencies seeking new ways to connect with consumers. Product and service
marketing plans increasingly call for adoption of non-conventional patterns of advertising
support. While the Internet has been a significant causal factor in this change, the
economy and the level of consumer and advertising client knowledge and frustration also
are key elements in the process.
Teaching Objectives
Recognize where and how firms are striking out toward new marketing and advertising
vehicles and messages, and how budgetary and other issues are making them more media
neutral.
Develop an awareness of the changes needed to achieve better strategic focus in marketing
and advertising plans and objectives.
Discussion
INTRODUCTION
wide range of media options. Internet based Social Media capabilities such as Twitter and
Facebook are being used by companies to provide up-to-date information on company
offerings and other news that consumers may be informative. .
SPOILED FOR CHOICE
provided solely in the traditional broadcast and print media.
Despite this, the actual pattern of total media spending has not yet changed significantly. In
recent years, TV’s percentage of total ad expenditure has been squeezed slightly, radio has
gained a larger share, and direct marketing has moved itself up a few percentage points. In
beneficial media-neutral approach.
First, there is considerable cultural resistance against changing a formula that has worked in the
past and from which revenue patterns have been established. Another factor is the need for
brand clients to ensure that they are giving out the right message in all their marketing efforts.
On the one hand, they claim they want integrated planning, but on the other hand most have
their budgets and plans.
MEDIA: NEUTRAL OR NOT?
The gradual movement from commission to fee-based systems encourages marketing planners
and advertising agencies to be bolder and broader in their media schedules. The view is that as
the process becomes more fee-based, marketing and media decisions also will be more
impartial.
is sadly a rarity. Public relations campaigns frequently operate in total isolation from paid-for
media communications. It seems that while media-neutral planning may be a no-brainer in
principle, actually putting it into practice is proving to be much more challenging. One solution
may be to simplify the agency relationship, so that client and agencies can work closer
together.
continuity group to ensure that everyone takes part in the early discussions. In this manner,
they determine that if the consumer business is doing X, it is shared with the B2B people, and
the creative agencies work with the media agency before the brief is even formulated.
The bottom line is that Canon gets more “bang for the buck” by integrating the marketing and
NEW COORDINATION?
Integration may improve co-ordination of campaigns, but the key question is whether it
encourages a change in marketing planning and in media spending? It appears that over time an
entirely new budget model will evolve. There is no question that the efforts to get the right mix
will take time, and firms continually will evaluate the spending balance, trying to determine the
THE HANDS-ON CLIENT
Another development is the emerging concept of the “brand custodian.” While most marketing
analysts agree that the client has to be the custodian of the brand, there also is agreement that
there are too many firms that have abrogated the responsibility to their agencies. They can use
partners to help with the problem, but the owner of the brand has to maintain the ultimate
development and maintenance effort.
It is important to have expertise in-house because it is dangerous to rely on an external
resource for all marketing strategic development. The circumstances of the early 21st century
make it clear that there must be more two-way knowledge to maintain direction once there is
agreement on the objectives and strategy.
strategy to lead the actual creative strategy because they must put emphasis on who they are
communicating to and by what sort of channel. Further, the goal for marketers and creative
agencies should be to become better at understanding their consumers and as a result become
more confident about reaching them directly. Instead of looking at rate cards every day, they
LOW BUDGET NEUTRALITY
Another trend is the movement for smaller and medium-size firms also to engage in such
planning and control versus only the large and deep pocket firms. To assist in this process,
there are marketing firms that can “parachute” into a company to provide marketing expertise
on a short-term basis, effectively representing the client and to be neutral on the marketing
First, there is a question of money. Accountability criteria should to move away
from efficiency toward effectiveness. This is something that payment by results
or sales would encourage.
Second, there is a need for agencies to understand how all the media channels fit
together, including direct marketing and PR.
across the board.
In addition, the media are ideally positioned to take advantage of client needs, but they still do
not have the right skill sets. It is an open goal for the media agencies but they have to up their
skills. They have to find a way of managing the dichotomy between the economics of the
business and serving the client.
to come up with different solutions. This will lead, sooner than later, to media neutrality in the
implementation of marketing plans and strategies.
Source: Media Week, March 1, 2002.
III. Background Article
26-27.
Marketing cable used to be simple. When an operator came to town, eager customers chased
the trucks down the street and signed up on the spot.
Times have changed. Today, fickle consumers, demanding businesses and drill-down
marketing strategies heaped with research and behavioral data, are pushing cable marketers to
dizzying new heights of complexity. And the ascent isn’t likely to level off anytime soon.
Strategic marketing plans now must include a jigsaw puzzle of objectives and executional
tactics designed to acquire and retain a new crop of residential and business consumers—both
with increasingly savvy and sophisticated views of video, voice, and data services and a good
idea as to when and how they want them.
Add a golden opportunity for cable to snatch a sizable number of CLEC (local phone
company) customers currently without high-speed Internet service, and DSL (digital subscriber
line) users disgruntled by outages and spotty service, and cable’s strategic marketing models
are being stretched even further to include cable-modem service and commercial markets.
“Our focus is to go for market share on high-speed Internet and telephony, and that’s new to
our competitive strategy,” says the vice president of marketing for Cox Communications. “It’s
still all about the bundle, but how we talk about the bundle may be different. Single-product
marketing is almost history.”
For Cox and other multiple system operators, marketing history is being rewritten with the
advent of services such as high-speed data, Internet access, and telephony. Each requires a
marketing strategy of its own, experts say, as well as a clear view of the customer and the
marketplace.
According to the Cox Marketing, V.P., “Clearly, we’ve had to become more intelligent about
the marketplace and be careful not to overreact to it. It’s not cost-effective to market one
product at a time anymore, and we’ve had to coordinate our marketing efforts. With 20 percent
penetration in the data market and 80 percent availability for data, those customers want
bundles, so a key for Cox is to recognize the growth potential for data and business services.”
Target: DSL
The recent DSL and CLEC fallout is providing plenty of potential for MSOs to attract current
DSL customers to their high-speed data and cable-modem services—and prompting a growing
number of them to incorporate some guerrilla marketing tactics.
“The fact that some DSLs are struggling is a very big focus for us this year, and it’s a great
marketing opportunity for us,” says the marketing vice president for Charter Communications.
“But in the longer term, DSL growth will be substantial, so now is our chance to get into that
market and sew up as many high-speed Internet customers as possible. The demand for
high-speed data is very robust.”
Charter’s strategy is to offer DSL customers entry-level price points and move up from there.
“We have several packages and we’re finding many entry-level customers electing to move up
to faster services,” Lang says. “We also plan to shed some light on the DSL issue and the ease
of installation of cable-modem service.”
Charter’s high-speed data service, called Charter Pipeline, is the company’s entry in the data
market. It currently has 343,000 data customers, and nearly 600,000 are projected to be online
by year-end. Customers pay anywhere from $25 to $50 a month, depending on speed. The
company is also conducting IP-telephony trials in two markets and plans to deploy service later
this year.
Other MSOs, such as Cablevision Systems, are paying closer attention to the DSL market as
well, and are crafting various in-your-face-DSL messages to pry loose a fair share of DSL
customers.
“All of our messaging is about faster cable-modem service, but we’ve employed a broader
marketing approach to DSL customers through specific radio and print ads that stress our
stability and that we’re ready to hook-up immediately,” says the vice president of product
strategy for Cablevision Systems. “It’s a more pointed marketing strategy.”
The MSO’s marketing strategy targets not only the DSL crowd, but also high-speed data
consumers as a whole need ongoing education and various degrees of hand-holding. “We
always address DSL, but the primary thrust of our marketing strategy is to educate the
marketplace about a new category. There’s lots of confusion, so our messaging must inform,
educate and demonstrate.”
What Is Broadband?
It better help define the term broadband as well, since an alarming number of consumers show
signs of being broadband-challenged. A recent survey found that of the 40 percent of
consumers who have even heard the term broadband, and out of the 40 percent only 45 percent
know what it means.
According to another industry vice president of marketing: “Marketers need to understand the
technology to be able to write positioning and marketing strategies, because it’s now at another
level, and cable operators and programmers should work together to generate brand strengths
and new benefits they’ll see with broadband messaging.”
Yet with that messaging comes a whole new set of marketing challenges, and it includes, first
and foremost, keeping it simple. These are fairly complicated products, so the industry will
have to craft messages to consumers that indicate that the products are very simple. That’s a
tough marketing challenge. So tough, in fact, that Cox will adjust its branding message to
include all three of its “trifecta” of services—video, voice, and data—into one cohesive brand.
At least, that’s the idea. According to a Cox official: “For Cox’s business services to be
successful, it has to be on the street with products and leverage the Cox brand. We’ll rebrand it
with a strong message that will help both residential and business and tie all three products
together.”
The message is a market-by-market emphasis on the company’s strengths, not the weaknesses
of competitors such as DSL. Cox wants to be in a higher place in customers’ minds. But
reaching that higher place will require some marketing shifts if cable operators are serious
about gaining a palatable market share of the high-speed data market. A recent Harris
Interactive report shows the number of high-speed households grew 41 percent from April
2000 to January 2001, and DSL accounted for 75 percent of that growth, narrowing the cable
modem’s market share from 65 percent to 51 percent.
“If cable operators can vertically integrate services and design targeted marketing messages to
reach all consumers, that’s very smart,” says the president of a media research firm. “But PC
and Internet penetration can’t move past the 50–60 percent penetration levels and that’s a major
issue.” However, this may be a short-lived situation since the cable operators are in a great
position to break that barrier with cable modems in homes and businesses. But they have to do
more to get into the consumer market.
A big chunk of that market is urban. “An average of $135 a month is spent on triple-play
services in the urban market. These people will continue to spend that money as broadband
services tap into the urban markets. Most operators are now conducting considerable research
on those markets.
Branding and Bundling
But as vital as that urban research may be, most marketers for the major systems get the
message that brand equity and bundled services still rule, particularly with the explosion of
new services and customer demands, both residential and commercial. “We’ve made progress
to develop a consistent look and feel of our brand, and made huge steps in creating a brand
position,” says a senior vice president of marketing and sales for AT&T Broadband. “But this is
a complicated business and it’s difficult to execute flawlessly all of the time. The challenges
are mostly within these walls.”
Broadband is pressing ahead with its digital, telephony, and high-speed data marketing strategy
of bundled services, but not as aggressively. The firms are in a “go” mode for high-speed data,
but they have figured out how to do it less expensively by pulling back on the aggressiveness
of their offers and through smarter marketing.
As part of that smarter marketing, a fully integrated business and direct sales force is dedicated
to each of the three triple-play services. Their main activities? Demos, demos, and more
demos. They are concerned, however, that the customer experience must be positive at every
touch point, and they working closely with their operational counterparts all the way through
the customer experience.
AT&T Broadband’s introduction of digital value packages, its dish buy-back programs, and a
recently launched Web site are playing major roles in the rollout of digital video and data
services. They admit there is much to be learned about bundle marketing. It’s an ongoing
process to try and bring all the services, technologies, engineering, and new-product
development together, and they are learning on a daily basis.
Next: High-Speed Data
Partnered or not, cable operators are intent on pushing ahead with their bundled service
marketing plans mixed with traditional marketing strategies, and the high-speed data segment
is next in line.
Cable operators have good leverage to provide CLEC services and many are going after
business markets with those types of services. “If they’re able to leverage the infrastructure, it
will open new revenue sources, and if they can bundle, they could capture a significant amount
of the telecommunications market.” By 2005, the Internet-access business is expected to
generate $8.2 billion in revenue, with the local voice market in the business sector projected to
bring $38 billion in revenue.
Voice and data markets are very large versus video to business. “Business customers want
multiple core services and cable operators are going after those. If operators can make it work,
that’s the place to be.” This is where Charter Communications and other MSOs are targeting
their marketing dollars. When they can offer simple services with multi-service messages of
value to commercial markets, that’s the goal.
Blending a group of 13 different cable systems into one marketing strategy is a goal for Charter
as well—albeit an ambitious one. The “one brand” strategy is a real challenge, they admit.
“However, the branding strategy remains simple: Go to the consumer with the message that the
service is reliable and stable. There’s still a tremendous amount of marketing dollars in digital
services, and that will allow them to deploy new services on the digital platform.”
As for DSL and cable’s ability to exploit that stumbling marketplace, most experts are
convinced the demand for high-speed Internet access, data and cable modems, will drive the
marketing plans at many MSOs and stretch them to include highly targeted segments. The
demand is there, and the strategy is a natural for DSL-marketing opportunities for modems and
DSL services.
But whether the cable industry can seize the opportunity will most likely depend on the
effectiveness of its marketing campaigns designed to capture DSL and high-speed data
customers. One thing is certain, however, more marketing attention will be shown in the DSL
segment than ever before as cable operators scramble to plug in a growing crop of disengaged
high-speed customers.
IV. Case
Matching Dell
HBS Case: 799-158 TN: 700-084
Teaching Perspectives
Dell Computer Corporation has enjoyed enormous success in the structurally unattractive
market for personal computers by means of its “Direct Model”: Dell takes PC orders directly
from customers, builds PCs to order, and ships machines right to end users. Other PC makers,
which have traditionally used distributors, resellers, and retail channels to reach customers,
now struggle to match Dell’s performance. The case examines in detail the largely futile
attempts of four rivals to catch up with Dell.
This case describes the evolution of the personal computer industry, Dell’s “Direct Model” for
computer manufacturing, marketing, and distribution, and efforts by competitors to match its
strategy. Students must formulate strategic plans of action for Dell and its various rivals.
The case is designed to serve a variety of purposes in a course on business-unit strategy. In
declining order of importance:
1. Examines barriers to imitation. Specifically, it illustrates how fit among
2. Illustrates different types of imitation attempts: “straddling” by Compaq and
the channel.
3. Permits a rich discussion of competitive dynamics. One can see, for instance,
moves of PC makers spark consolidation in the channel and the possibility of
backward integration by channel players.
5. Illustrates a highly consistent and richly elaborated set of activities that together
yield advantage.
Business School Working Paper 98-066, 1998.
824-844.
Michael E. Porter, “What Is Strategy?” Harvard Business Review (74:6), November-December
1996, pp. 61-80.
Business Landscape (Reading: Addison-Wesley, 1999), pp. 75-110.
For further background on Dell, please see:
Das Narayandas and V. Kasturi Rangan, “Dell Computer Corporation,” Harvard Business
School Case 596-058, 1996.
Pankaj Ghemawat, “Creating Competitive Advantage” (HBS 798-062).
The quantitative analysis of competitive advantage in the case is potentially quite involved. To
navigate through it smoothly in class, I find it useful to have several student volunteers submit
Questions:
profitability?
industry?
3. Prior to the recent efforts by competitors to match Dell (1997-1998), how big was