Unit I

Introduction to Marketing

MEANING AND DEFINITION

Marketing is a form of communication between a business house and its customers with the goal
of selling its products or services to them. Goods are not complete products until they are in the
hands of customers. Marketing is that management process through which goods and services
move from concept to the customer. Marketing has less to do with getting customers to pay for a
product as it does with developing a demand for that product and fulfilling the customer’s needs.
According to the American Marketing Association (AMA) Board of Directors, Marketing is the
activity, set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at large. Dr.
Philip Kotler defines marketing as “the science and art of exploring, creating and delivering
value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and
desires. It defines, measures and quantifies the size of the identified market and the profit
potential. It pinpoints which segments the company is capable of serving best and it designs and
promotes the appropriate products and services.” Thus, marketing refers to all the activities
involved in the creation of place, time, possession and awareness utilities and beyond.
MARKETING CONCEPTS

TRADITIONAL AND MODERN

Concept is a philosophy, attitude, a line of thinking, an idea or notion relating to any aspects of
divine and human creations. The philosophy of an organization in the dynamic creation of
marketing is referred to as a marketing concept. Thus, the marketing concept is a way of life in
which the resources of an organization are mobilized to create, stimulate and satisfy the
consumer at a profit.

TRADITIONAL/ CLASSICAL CONCEPT

According to this concept, marketing consists of those activities which are concerned with the
transfer of ownership of goods from producers to consumers. Here, the role of physical
distribution and marketing channels is over emphasized. It refers to marketing as the process by
which goods are made available to ultimate consumers from their place of origin. The emphasis
of marketing is on sale of goods and services. Consumer satisfaction is overlooked.

MODERN CONCEPT

According to this concept, marketing is concerned with the creation of consumers. According to
the modern thinker Peter Drucker, Marketing is so basic that it cannot be considered as a
separate function. It is the whole business seen from the customers’ point of view…business
success is not determined by the producer but the customer. Thus, the modern concept lays
greater emphasis on customers and considers them as kings. Marketing is not merely a physical
process but is something beyond that. It is the managerial philosophy which centres around the
wants and desires of customers.

TRADITIONAL CONCEPT vs. MODERN CONCEPT

1. Traditional marketing starts from production and ends with sale but modern marketing
includes planning, product, price, promotion, place, people, after sale service etc. 2. Traditional
marketing concentrate on favorable products, but modern marketing concentrates on customer
needs, wants and satisfaction.

3. In traditional marketing, only those products are sold which the producer produces. No focus
is laid on consumer preference. On the other hand, modern marketing indulge in production only
after analyzing consumer demands.

4. Traditional marketing is product and production oriented while modern marketing is consumer
oriented.

5. The target of traditional marketers was to earn maximum profit by maximizing sales. But, the
main motive of modern marketers is to earn profits through satisfaction of consumer needs.

6. The principle of traditional market was “caveat emptor” i.e., “let the buyer beware”. Whereas,
the principle followed by modern market is “caveat venditor” i.e., “let the vendor beware”.

Importance and Scope of Marketing

1. Customer Needs Identification

○ Marketing helps companies understand what their customers truly need and
desire. This understanding is achieved through market research techniques such as
surveys, focus groups, and data analysis.

○ Example: Apple conducts extensive market research to understand customer

preferences, which leads to innovative product features in new iPhone models.

2. Creating Value

○ By identifying customer needs, marketing creates value through products and

services that satisfy those needs. Value is not just in the product itself but also in
the benefits and experiences associated with it.

○ Example: Tesla creates value by offering electric vehicles that provide

environmental benefits and cutting-edge technology, attracting eco-conscious
consumers.

3. Building Relationships
 ○ Effective marketing builds and maintains strong relationships with customers
through consistent engagement and delivering on promises, leading to brand
loyalty and repeat business.

4. Example: Starbucks builds strong customer relationships with its rewards program,
personalized service, and community involvement.

5. Enhancing Sales

○ Marketing drives sales by promoting products and services to potential customers.

Various promotional techniques like advertising, sales promotions, and public
relations are used to boost sales.

○ Example: Coca-Cola’s widespread and continuous advertising campaigns

contribute to its consistent sales growth and global presence.

6. Brand Awareness

○ Marketing activities increase brand visibility and awareness. A strong brand is

easily recognizable and trusted by consumers, which can influence their
purchasing decisions.

○ Example: Nike’s use of iconic slogans, endorsements from famous athletes, and
memorable advertising campaigns has made its brand one of the most recognized
in the world.

7. Competitive Advantage

○ Strategic marketing gives companies a competitive edge by differentiating their

products from those of competitors. Unique selling propositions (USPs) and
branding are key components.

○ Example: Amazon’s competitive advantage comes from its extensive product

range, fast delivery services (Prime), and customer-centric approach.

8. Market Expansion

○ Marketing helps businesses identify and enter new markets. It involves

understanding local needs and adapting products and marketing strategies to fit
different regions.

○ Example: McDonald's adapts its menu items to cater to local tastes in different
countries, such as offering vegetarian options in India.

FUNCTIONS OF MARKETING
Marketing functions are those specialized activities that a marketer must perform in order to
identify and source potentially successful products for the market place and then promote them
by differentiating them from similar products. The important functions of marketing are
discussed briefly below:

1. Research & Development Function- A marketer has to carry out adequate research to identify
the size, behavior, culture, gender, demands etc. of the target market segment, and then develop
the products/services accordingly to meet and satisfy the needs of target customers.

2. Buying Function- The marketing department has to assist the purchase and supply department
by sending specifications of the materials required so as to get timely and quality materials for
production.

3. Standardization & Grading- Standardization means setting quality standards to achieve

uniformity in the product. It provides consistent quality assurance to consumers. Grading means
classifying the product on certain accepted benchmarks or bases such as size, quality etc.
Through grading, the marketer can get higher price for quality product.

4. Packaging and Labeling- Packaging is traditionally done to protect the goods from damage in
transit and to facilitate easy transfer of goods to customers. But now it is also used by the
manufacturer to establish his brand image as distinct from those of his rivals.

Another activity involved with packaging is labeling. It means putting identification marks on
the package. Label is that part of a product which contains information about the producer and
the product.

5. Branding- It is the process of stamping a product with some identification name or mark or a
combination of both. Branding means giving a distinct individuality to a product. Some popular
brands are Airtel, Sony, Lux, Nirma etc.

6. Pricing- Determination of price of a product is an important task of a marketing manager.

Price is influenced by cost of product and service offered, profit margin desired, prices fixed by
rival firms, government policy, etc.

7. Promotion Function- The marketing manager must design adequate strategies to make known
to consumers about the availability of products in the market. Without this function, products
will remain in the hands of producers and will never reach the consumers. Four important
methods of promotion are advertising, personal selling, publicity and sales promotion.

8. Physical Distribution- This function involves the activities which are necessary to transfer
ownership of goods to customers and also making available goods at the right place and time.
9. Transportation- It provides the physical needs which facilitate the movement of persons, goods
and services from one place to another.

10. Warehousing- To meet the expected demands of consumers, goods are produced or procured
well in advance and stored in warehouses till they are transferred to customers. Warehouses
protect the goods from any damage which may be caused by any rodents, moisture, sun, theft,
etc.

11. Risk- taking function- Risks are involved in almost all levels of marketing process. Risk
taking in marketing refers to the financial risk that is inherent in producing and handling goods,
including the possible loss due to a fall in prices and the losses from spoilage, depreciation,
obsolescence, fire and floods etc.

12. Customer Support Services- This function relates to developing customer support services
such as after sales services, handling customer complaints and adjustments, providing credit
facilities, maintenance services, technical services etc. These services provide maximum
customer satisfaction and develop brand loyalty for a product.

2. Core Marketing Concepts

https://arpitsrivastava.com/core-concepts-of-marketing-philip-kotler-summary/

1. Needs, Wants, and Demands

○ Needs are essential for survival (e.g., food, water).

○ Wants are desires shaped by culture and personality (e.g., craving Italian cuisine).

○ Demands are wants backed by purchasing power (e.g., dining at an upscale

Italian restaurant).

○ Example: A person needs food, wants a specific type of food like sushi, and
demands sushi from a popular high-end restaurant.

2. Market Offerings/Products

○ Market offerings include products, services, information, or experiences provided

to meet customer needs and wants.

○ Example: Netflix offers a streaming service that provides entertainment through

movies, TV shows, and documentaries.

3. Value(Utility) and Satisfaction

 ○ Value is the customer's perceived benefit from a product compared to its cost.

○ Satisfaction is the feeling of contentment when a product meets or exceeds

customer expectations.

○ Example: Customers perceive high value in an iPhone due to its quality, brand
prestige, and innovative features, leading to high satisfaction.

4. Exchange and Transactions

○ Exchange involves obtaining a desired product by offering something in return,

typically money.

○ Transaction is a trade between two parties involving at least two items of value.

○ Example: Purchasing a laptop from an electronics store involves exchanging

money for the laptop, completing a transaction.

5. Markets

○ A market consists of actual and potential buyers of a product or service. It can be

segmented based on demographics, geography, behavior, etc.

○ Example: The smartphone market includes various segments such as high-end

users (Apple), budget-conscious consumers (Xiaomi), and business users
(BlackBerry).

6. Segmentation, Targeting, and Positioning (STP)

○ Segmentation divides a market into distinct groups with common needs.

○ Targeting involves selecting specific segments to serve.

○ Positioning is creating a distinct image of the product in the customer's mind.

○ Example: Toyota targets different market segments with brands like Lexus for
luxury car buyers and Corolla for economy car buyers.

7. Marketing Mix (4 Ps)

○ Product: The actual offering to meet customer needs.

○ Price: The amount customers pay for the product.

○ Place: Distribution channels to make the product available.

○ Promotion: Activities to communicate the product’s benefits.

 ○ Example: Coca-Cola’s marketing mix includes a diverse product range (soda,
juices), competitive pricing strategies, extensive global distribution, and robust
advertising campaigns.

Marketing mix

The marketing mix is a set of controllable, tactical marketing tools that a company uses to
produce a desired response from its target market. It consists of everything that a company can
do to influence demand for its product. The traditional marketing mix is built around the four Ps:
Product, Price, Place, and Promotion. However, for services, the extended marketing mix adds
three more Ps: People, Process, and Physical Evidence. Here’s an explanation of each element
with two examples for each:

1. Product

The product is the good or service offered to the customer. It must satisfy a consumer's need or
want.

Examples:

● Apple iPhone: Apple offers a range of iPhones that meet various consumer needs, from
basic models to high-end versions with advanced features.

● Starbucks Coffee: Starbucks provides a variety of coffee beverages, from standard drip
coffee to more specialized drinks like Frappuccinos and lattes.

2. Price

Price is the amount of money customers must pay to obtain the product. It affects the product's
perceived value and demand.

Examples:

● Walmart's Everyday Low Prices: Walmart uses a pricing strategy that emphasizes
consistently low prices across a wide range of products to attract cost-conscious
consumers.

● Tesla’s Model S Pricing: Tesla prices its electric cars at a premium, reflecting the high
value and advanced technology of its products.

3. Place

Place refers to how the product is distributed and where it can be purchased. It involves
distribution channels, locations, and methods of delivering the product to the customer.

Examples:
 ● Amazon's Online Store: Amazon’s distribution strategy relies heavily on its online
platform, allowing customers to purchase products from virtually anywhere with internet
access.

● McDonald's Global Presence: McDonald's ensures its products are available globally
through a vast network of franchised and company-owned restaurants.

4. Promotion

Promotion encompasses all the ways a company communicates with customers to inform and
persuade them to buy the product.

Examples:

● Coca-Cola’s Advertising Campaigns: Coca-Cola uses various advertising methods,

including TV commercials, online ads, and sponsorships of major events, to promote its
beverages.

● Nike’s Athlete Endorsements: Nike promotes its products through endorsements by

high-profile athletes, such as LeBron James and Serena Williams, to enhance its brand
image.

5. People

People refer to all the individuals involved in the service delivery process. This includes
employees and sometimes customers.

Examples:

● Ritz-Carlton’s Customer Service: Ritz-Carlton trains its staff to provide exceptional

service, ensuring a high-quality experience for guests.

● Zappos’ Customer Support: Zappos is known for its excellent customer service, with
representatives who go above and beyond to satisfy customers.

6. Process

Process refers to the procedures and routines that deliver the product or service to the customer.
Efficient processes are crucial for ensuring service quality and customer satisfaction.

Examples:

● Domino’s Pizza Tracker: Domino’s provides a real-time pizza tracker, allowing

customers to see the progress of their order from preparation to delivery.
 ● Amazon’s One-Click Ordering: Amazon’s streamlined one-click ordering process
makes it easy for customers to make purchases quickly and efficiently.

7. Physical Evidence

Physical evidence includes the tangible elements that help to communicate and perform the
service. This can include the physical environment, packaging, branding, and other tangible cues.

Examples:

● Starbucks Store Ambiance: The physical environment in Starbucks stores, including

comfortable seating and a relaxing atmosphere, enhances the overall customer
experience.

● Apple Store Design: Apple Stores are designed with sleek, modern aesthetics and
interactive displays that reflect the high-tech nature of Apple products.

By effectively managing these seven elements, companies can create a compelling marketing
strategy that meets the needs of their target market and achieves their business objectives.
3. Company Orientations

1. Production Orientation

○ Focuses on producing goods efficiently and affordably, assuming customers will

favor available and low-cost products. Emphasizes efficient production processes
and high output. The primary goal is to produce goods in large quantities at a low
cost.

○ Example: Henry Ford’s assembly line production of the Model T made cars
affordable for many Americans.

What Is Production Orientation? | Ablison

2. Product Orientation

○ Emphasizes product quality and innovation, believing customers will choose

superior products.

○ Example: Apple focuses on product innovation and high-quality design in its

iPhones.

What Is Product Orientation? Product Orientation In A Nutshell - FourWeekMBA

3. Sales Orientation

○ Sales orientation is a business model that's focused on making the best product
and services without considering customer's wants or needs. This approach uses
aggressive, outbound sales tactics and marketing promotions to drive revenue.

○ Example: Insurance companies often employ aggressive sales tactics to sell

policies to potential customers.

What is Sales Orientation? [Definition + Examples] (hubspot.com)

4. Market Orientation

○ Prioritizes understanding and meeting customer needs better than competitors.

○ Example: Amazon’s customer-centric approach ensures it continually improves its

services based on customer feedback.

What is market orientation? Definition and stages - Market Business News

5. Societal Marketing Orientation

 ○ Balances company profits, customer desires, and societal well-being.

○ Example: TOMS Shoes’ one-for-one model donates a pair of shoes to a child in

need for every pair sold, addressing social issues while maintaining profitability.
Another example is Warby Parker, a glasses company that offers a free home
try-on program and donates a pair of glasses to someone in need for every pair
sold.

Societal Marketing Orientation Examples and Companies - Financial Falconet

6. Customer Orientation

○ All company decisions and activities aim to satisfy customer needs and desires.

○ Example: Zappos’ exceptional customer service policies, including free returns

and 24/7 support, focus entirely on customer satisfaction.

You can’t discuss customer orientation without mentioning Zappos. The company relies more on
customer service than any type of advertising.
Why?

The customers do the marketing for them—through word-of-mouth.

Zappos believes that phone calls can build close, familiar relationships between customer service
agents and customers. Chatting with customers satisfies their need to be taken care of, cements
their loyalty, and gets them talking about the Zappos brand.

This is what differentiates Zappos from, e.g., Amazon, where people are looking for a “few
clicks experience.”

The retailer’s core value is to always try to wow their customers and has a unique way of
tracking it. Their call center has a board with “flower stats” that tracks small gifts sent out to
customers.

One month, the board showed 380 gifts sent. What for?

One bouquet was sent to a lady who phoned Zappos to return shoes she had bought for her
father, who died unexpectedly. The customer service agent empathized with her and said she
needn’t return them to get a refund. After that, the customer service rep felt moved by the
conversation and sent the customer flowers.

You’ll find more examples of customer orientation by Zappos all over social media and the news.

What Is Customer Orientation In Marketing : Examples & Skills (tidio.com)

7. Holistic Marketing Orientation

○ Integrates all aspects of marketing activities to deliver value and build strong
relationships.

○ Example: Google integrates its products (search engine, ads, Android OS) and
services to create a comprehensive ecosystem that enhances user experience and
satisfaction.

What is Holistic Marketing: A Complete Guide with Examples | 2024

(simplilearn.com)

4. Marketing Realities

Market Realities refer to the current conditions, trends, and dynamics that businesses must
understand and adapt to in order to succeed in the marketplace. These realities encompass a wide
range of factors including technological advancements, consumer behavior, global economic
conditions, and regulatory environments. Understanding these realities helps businesses to
develop effective strategies, stay competitive, and meet the evolving needs and preferences of
their customers.
Market realities are crucial for businesses to navigate as they provide insight into the challenges
and opportunities present in the market. By aligning their marketing efforts with these realities,
companies can ensure they are relevant, responsive, and capable of achieving sustainable growth.

1. Digital Transformation

○ The rise of digital technologies has revolutionized marketing, enabling real-time

customer engagement, data analytics, and personalized marketing strategies.

○ Example: Social media platforms like Instagram and Facebook allow brands to
engage directly with customers and utilize influencers to reach wider audiences.

○ Nike's "Dream Crazy" campaign featuring Colin Kaepernick. This campaign

effectively used digital platforms to engage with customers and sparked
widespread conversation on social media.

2. Globalization

○ Businesses expand their operations and marketing efforts to international markets,

requiring adaptation to local cultures and preferences.

○ Example: Starbucks tailors its menu to include local flavors and preferences, such
as green tea lattes in Asia.

○ McDonald's "I'm Lovin' It" campaign, which has been adapted to various cultures
around the world, featuring local flavors and celebrities.

3. Ethical and Sustainable Marketing

○ Emphasizes responsible marketing practices and sustainability to meet consumer

demand for ethical products.

○ Example: Patagonia promotes environmental sustainability by using recycled

materials and supporting conservation efforts.

○ Patagonia's "Don't Buy This Jacket" campaign, encouraging customers to think

about the environmental impact of their purchases and promoting sustainability.

Patagonia's "Don't Buy This Jacket" Campaign: Sustainability - Marketing Trend Setters

The Strategy Behind the Campaign

○ At first glance, the campaign's message may seem baffling. After all, why would a
company tell people not to buy their products? The answer lies in Patagonia's
genuine commitment to sustainability and their desire to promote conscious
consumerism. By encouraging customers to think twice before making a
 purchase, the campaign aimed to create a shift in consumer mindset and highlight
the importance of making thoughtful choices.

○ By utilizing a paradoxical approach, Patagonia grabbed people's attention. The

campaign's main message was simple and straightforward: "Don't buy what you
don't need." They wanted customers to question their buying habits and consider
the environmental impact before making a purchase.

4. Customer Empowerment

○ Consumers today have more information and choices, leading to greater control
over their purchasing decisions.

○ Example: Amazon's "Customer Review" ads, which highlight real customer

reviews to build trust and transparency.

5. Customization and Personalization

○ Tailoring products and marketing messages to individual preferences enhances

customer satisfaction and loyalty.

○ Example: Spotify creates personalized playlists based on individual user listening

habits, improving user engagement and retention.

○ Coca-Cola's "Share a Coke" campaign, where bottles were personalized with

popular names, making each product unique to the consumer.

6. Data-Driven Marketing

○ Using data analytics to make informed marketing decisions, track performance,

and optimize strategies.

○ Example: Target uses customer purchase data to predict and market relevant
products, such as baby products to expectant mothers.

○ Netflix's personalized recommendations system, highlighted in various

promotional videos, showcasing how they use data to suggest content tailored to
individual users.

7. Omni-Channel Marketing

○ Ensures a seamless and integrated customer experience across various channels

(online, in-store, mobile).

○ What is a MagicBand? | Walt Disney World (go.com)

○ Example: Disney provides a cohesive experience through its website, mobile app,
and in-park services, allowing customers to plan and manage their visits
effortlessly.

○ Disney's "MagicBand" campaign, which integrates their website, mobile app, and
in-park services for a seamless customer experience.
Integrated marketing

Integrated Marketing Examples: 8 Best Campaigns, According to HubSpot

Integrated marketing is a strategic approach for promoting your products or services in a

consistent way across multiple channels and touchpoints. The goal is to ensure that all marketing
efforts work together to create a cohesive and impactful experience for your consumer.
Integrated marketing may involve a variety of channels including online ads, social media
marketing, direct marketing, PR or even TV commercials. By grouping your marketing ideas
into one campaign or coordinated effort, you can enjoy an easier time generating leads and
creating a strong brand identity.

Key Elements of Integrated Marketing

1. Consistent Brand Messaging

○ Example 1: Apple - Apple's brand messaging focuses on innovation, simplicity,

and premium quality across all channels, from their website to their retail stores to
their advertising campaigns.

○ Example 2: Coca-Cola - The "Taste the Feeling" campaign uses consistent

messaging and visuals across TV commercials, social media, and print ads to
create a unified brand image.

○ Example 3: Nike - The "Just Do It" slogan is consistently used across all
marketing channels, ensuring the brand's message of empowerment and athletic
excellence is always conveyed.

2. Coordinated Marketing Efforts

○ Example 1: Red Bull - Utilizes coordinated efforts through extreme sports

events, social media, and content marketing to create a cohesive brand experience
centered around energy and adventure.

○ Example 2: Starbucks - Runs coordinated campaigns like "Starbucks for Life,"

integrating in-store promotions, app notifications, email marketing, and social
media posts.

○ Example 3: L'Oréal - Uses a mix of influencer collaborations, YouTube tutorials,

and in-store promotions to create a seamless beauty marketing strategy.

3. Customer-Centric Approach

○ Example 1: Amazon - Prioritizes customer reviews and recommendations to

tailor shopping experiences and inform product development.
 ○ Example 2: Zappos - Known for its customer service, Zappos centers its
marketing strategy around customer satisfaction, including free shipping and easy
returns.

○ Example 3: Netflix - Uses viewing data to recommend personalized content to its

users, enhancing user satisfaction and engagement.

4. Data-Driven Decision Making

○ Example 1: Spotify - Uses listening data to create personalized playlists and

recommend new music, resulting in high user engagement.

○ Example 2: Google - Utilizes vast amounts of search data to inform its ad

targeting and improve user experience with personalized search results.

○ Example 3: Target - Analyzes purchase data to predict shopping habits and offer
personalized discounts and promotions.

5. Cross-Channel Collaboration

○ Example 1: Microsoft - Coordinates marketing across its products (Windows,

Office, Surface) ensuring a unified message and user experience.

○ Example 2: Disney - Synchronizes its marketing efforts across movies,

merchandise, theme parks, and streaming services, creating a cohesive brand
presence.

○ Example 3: H&M - Ensures consistency in campaigns by aligning in-store

displays, online marketing, and social media content.

Key Benefits of Integrated Marketing Techniques

1. Cost-Effective

○ Example 1: GoPro - Leverages user-generated content across social media and

advertising campaigns, reducing content creation costs while increasing
engagement.

○ Example 2: Old Spice - Repurposed its viral "The Man Your Man Could Smell
Like" campaign across multiple platforms, maximizing impact with minimal
additional costs.

○ Example 3: Dollar Shave Club - Utilized a single viral video ad across digital
platforms to create widespread brand awareness at a low cost.

2. Builds Brand Relationships

 ○ Example 1: Nike - Consistent messaging in campaigns like "Equality" builds a
strong relationship with customers by aligning the brand with social causes.

○ Example 2: Dove - The "Real Beauty" campaign consistently promotes body

positivity and self-esteem across all media, building trust and loyalty.

○ Example 3: Apple - Through consistent high-quality products and customer

service, Apple has built a loyal customer base that trusts the brand.

3. Creates Cohesion

○ Example 1: McDonald's - Uses consistent themes like the "I'm Lovin' It" slogan
globally, ensuring a cohesive brand image.

○ Example 2: BMW - Maintains a consistent luxury and performance-focused

image across all advertising and customer touchpoints.

○ Example 3: Lego - Integrates its branding across product lines, movies, and
theme parks, ensuring a unified and recognizable brand experience.

Internal Marketing

Internal marketing is a strategic approach where employees are treated as the organization's
internal customers. The goal is to ensure that employees understand and embody the company's
values, goals, and brand, thereby contributing to external growth through their engagement and
satisfaction. Here are some key strategies and types of internal marketing, explained with
examples:

Strategies of Internal Marketing:

1. Brand Awareness:

○ Example: A company organizes regular workshops or presentations to educate

employees about the company's history, mission, and values. By fostering a
deeper understanding of the brand, employees feel more connected and motivated
to contribute meaningfully.

2. Communication Apps:

○ Example: Using platforms like Slack, Microsoft Teams, or dedicated internal

communication apps, companies can disseminate important updates, share success
stories, and reinforce cultural values. For instance, a tech startup uses Slack
channels for different teams to share achievements and updates, fostering a sense
of unity and awareness of company goals.
 3. Team Bonding Activities:

○ Example: A marketing agency organizes quarterly team outings, such as

team-building exercises or off-site retreats. These activities help employees build
relationships, enhance collaboration, and strengthen the overall team spirit.

4. Employee Appreciation Programs:

○ Example: A retail chain implements a monthly "Employee of the Month"

program to recognize outstanding performance. This not only boosts morale but
also reinforces the company's values of recognizing hard work and dedication.

Types of Internal Marketing:

1. Product Marketing:

○ Example: A pharmaceutical company provides comprehensive training sessions

on new products for its sales team. By ensuring that employees understand
product features, benefits, and market positioning, they are better equipped to
engage with customers and drive sales effectively.

2. Employee Branding:

○ Example: A tech company invests in employer branding by showcasing

employee testimonials on its website and social media. These testimonials
highlight the positive work environment, career growth opportunities, and
supportive culture, thereby attracting top talent and retaining current employees
who feel valued and respected.

3. Branding:

○ Example: An outdoor apparel manufacturer promotes sustainability by

organizing internal initiatives like beach clean-ups and tree planting events. By
aligning employees with the company's environmental values, they not only
contribute to community efforts but also feel proud to work for a socially
responsible organization.

4. Internal Communication:

○ Example: A global consulting firm holds quarterly town hall meetings where
senior executives share company strategies, financial performance updates, and
upcoming initiatives. This transparent communication fosters trust, alignment,
and a shared sense of purpose among employees across different regions.

Importance and Benefits:

 ● Employee Engagement: Internal marketing strategies foster a sense of belonging and
pride among employees, leading to higher engagement levels.

● Improved Communication: Clear and consistent communication ensures that everyone

understands organizational goals and their role in achieving them.

● Enhanced Productivity: Engaged employees who are aligned with company values are
more productive and motivated to contribute positively.

● Talent Retention and Recruitment: Strong internal branding and employee satisfaction
contribute to lower turnover rates and attract top talent who resonate with the company
culture.

In conclusion, internal marketing is crucial for building a cohesive, motivated workforce that
drives external success through their commitment and alignment with the organization's goals
and values. Effective implementation of internal marketing strategies not only boosts employee
morale but also strengthens the overall brand and market position of the company.

Performance Marketing

Performance marketing is a strategy where companies only pay for marketing efforts if they
achieve specific results. This means advertisers pay for concrete actions like clicks, sales, or
leads, rather than simply for ad placement. Here’s a deeper dive with examples:

Key Elements of Performance Marketing

1. Pay-Per-Click (PPC): Advertisers pay each time someone clicks on their ad.

2. Pay-Per-Sale: Advertisers pay when a sale is made as a result of the ad.

3. Pay-Per-Lead: Advertisers pay when a lead form is filled out.

4. Pay-Per-Impression (CPM): Advertisers pay based on the number of times an ad is

viewed.

Examples of Performance Marketing

1. Google Ads (PPC)

○ Example: A travel agency runs a Google Ads campaign to promote vacation

packages. They bid on keywords like “summer vacation deals” and only pay
when someone clicks on their ad. This ensures they’re paying for direct interest in
their offerings.

2. Affiliate Marketing (Pay-Per-Sale)

 ○ Example: An e-commerce store partners with bloggers and influencers who
promote their products through unique affiliate links. The store only pays a
commission when a sale is made through one of these links. This aligns payment
with actual sales generated by the affiliates.

3. Social Media Ads (Pay-Per-Lead)

○ Example: A software company runs a lead generation campaign on LinkedIn.

They offer a free e-book in exchange for filling out a contact form. They only pay
for the ads when someone completes the form, ensuring they’re paying for
tangible leads.

Benefits of Performance Marketing

● Cost Efficiency: Companies only pay for measurable outcomes, reducing wasteful
spending.

● Measurable ROI: Clear metrics and KPIs make it easier to track the effectiveness of
campaigns.

● Flexibility: Campaigns can be quickly adjusted based on performance data.

Channels of Performance Marketing

Performance marketing leverages various channels to reach target audiences and achieve specific
business goals. Let's delve into each channel with examples to illustrate their effectiveness.

#1 – The Use of Native Advertising

Explanation: Native advertising refers to ad content that seamlessly blends with the surrounding
media, making it appear less like an ad and more like regular content. This form of advertising is
designed to match the look, feel, and function of the media format in which it appears.

Example: Imagine you're reading an online article about healthy living on a popular lifestyle
website. Within the article, there is a section discussing nutritious snacks, featuring a detailed
recommendation for a specific brand of protein bars. This section looks and reads like part of the
article, but it is actually a native ad paid for by the protein bar company. Because it provides
valuable and relevant information, readers are more likely to engage with it compared to
traditional banner ads.

Effectiveness:

● Contextual Relevance: The ad is related to the content the user is already interested in,
making it more engaging and less intrusive.
 ● Higher Engagement: Users are more likely to read and interact with native ads because
they offer value and integrate smoothly with the content they are consuming.

#2 – Internet Marketing Via Affiliates

Explanation: Affiliate marketing involves individuals or companies (affiliates) promoting

another business's products or services in exchange for a commission. Affiliates earn a
commission for every click, lead, or sale generated through their marketing efforts.

Example: A popular tech blog writes a review about a new smartphone. In the review, they
include affiliate links to an online retailer where readers can purchase the phone. Each time a
reader clicks on the affiliate link and buys the phone, the tech blog earns a commission from the
retailer.

Effectiveness:

● Cost-Effective: Businesses only pay for actual sales or leads generated, minimizing
financial risk.

● Wider Reach: Affiliates can reach diverse audiences across different platforms,
expanding the brand’s reach without direct advertising efforts.

#3 – Social Media Advertising

Explanation: Social media advertising involves creating and displaying ads on social media
platforms. These platforms offer various ad formats, pricing models, and targeting options to
reach specific audiences effectively.

Example: A fashion brand wants to promote its summer collection. They create visually
appealing ads and target them to users based on demographics, interests, and behaviors on
Instagram and Facebook. The ads appear in users' feeds, stories, and even as sponsored posts in
influencer content.

Effectiveness:

● Targeted Reach: Social media platforms provide advanced targeting options, allowing
advertisers to reach specific audiences based on detailed criteria.

● Engagement: Social media ads can drive high engagement rates through likes, shares,
comments, and direct interactions with the brand.

#4 – Internet Marketing Using Search Engines (SEM)

Explanation: Search Engine Marketing (SEM) involves paying for ads to appear in search
engine results pages (SERPs). Advertisers bid on keywords relevant to their products or services,
and ads appear when users search for those keywords. This is often referred to as Pay-Per-Click
(PPC) advertising.

Example: A local bakery wants to attract more customers to their online store. They create a
Google Ads campaign and bid on keywords like "fresh bread delivery" and "artisan pastries near
me." When users search for these terms, the bakery's ads appear at the top of the search results.
They pay for each click on their ads, driving traffic to their website.

Effectiveness:

● Immediate Visibility: SEM provides instant visibility in search results, driving targeted
traffic to the website.

● Performance-Based: Advertisers only pay when users click on their ads, ensuring
budget is spent on actual engagement.

Summary

Each of these performance marketing channels offers unique benefits and can be tailored to meet
specific business objectives. By using a combination of these channels, businesses can
effectively reach and engage their target audiences, driving measurable results.
Real-World Case Study

Case Study: Adidas

● Campaign: Adidas wanted to boost online sales during the holiday season. They used a
combination of PPC ads on Google and affiliate marketing.

● Outcome: They only paid for clicks on Google Ads and for sales generated through
affiliate links. This approach led to a significant increase in ROI, as they effectively
reached and converted interested customers.

Performance marketing is highly adaptable and can be tailored to fit various business goals,
making it a valuable strategy in the digital marketing toolkit.

Case Study: Adidas

Campaign Overview: Adidas aimed to significantly boost their online sales during the holiday
season, a critical period for retail businesses. To achieve this goal, they implemented a
comprehensive performance marketing strategy utilizing both Pay-Per-Click (PPC) ads on
Google and affiliate marketing.

1. Google Ads (PPC) Campaign

Strategy:

● Keyword Selection: Adidas identified high-performing keywords related to holiday

shopping, such as "holiday sportswear sale," "Adidas Christmas deals," and "gift ideas
for athletes."

● Ad Creation: They created engaging and visually appealing ads that highlighted their
holiday promotions, discounts, and new product lines. These ads were designed to attract
immediate attention and encourage clicks.

● Targeting: The campaign targeted specific demographics, including sports enthusiasts,

fitness buffs, and gift shoppers, using Google’s sophisticated targeting options to ensure
the ads reached the most relevant audience.

● Bidding Strategy: Adidas used a mix of manual and automated bidding strategies to
maximize their budget. They focused on maximizing their clicks within a set budget,
optimizing for high conversion keywords.

Execution:

● Launch: The ads were launched across Google’s search network and display network to
capture a broad audience. The search ads appeared in Google search results, while
display ads were shown on relevant websites within Google’s display network.
 ● Monitoring and Optimization: Adidas continually monitored the performance of the
ads, using real-time data to make adjustments. They tweaked ad copy, keywords, and bids
to improve click-through rates (CTR) and conversion rates.

Outcome:

● Increased Traffic: The PPC ads drove a significant amount of traffic to the Adidas
website. By paying only for clicks, Adidas ensured that their budget was spent on
potential customers who showed interest in their products.

● Higher Conversions: The targeted approach and optimized ads led to higher conversion
rates, translating the increased traffic into sales.

2. Affiliate Marketing Campaign

Strategy:

● Partner Selection: Adidas collaborated with a network of affiliates, including bloggers,

influencers, and popular review sites, who had audiences that matched their target
market.

● Affiliate Links: Unique affiliate links were provided to partners, which they integrated
into their content. These links tracked all the sales generated through affiliate referrals.

● Commission Structure: Adidas set up a commission-based payment model where

affiliates earned a percentage of each sale made through their referral links. This
incentivized affiliates to actively promote Adidas products.

Execution:

● Content Creation: Affiliates created content tailored to their audiences, such as holiday
gift guides, product reviews, and promotional posts, all featuring Adidas products.

● Promotion Channels: The affiliates promoted Adidas products through various

channels, including blogs, social media, email newsletters, and YouTube videos.

● Performance Tracking: Adidas used tracking tools to monitor the performance of each
affiliate. They analyzed which affiliates generated the most traffic and sales, allowing
them to optimize the program by rewarding top-performing affiliates and adjusting
commissions if needed.

Outcome:

● Broader Reach: By leveraging the audiences of various affiliates, Adidas was able to
reach a wider audience than they could through direct advertising alone.
 ● Sales Growth: The affiliate marketing campaign drove substantial sales, as affiliates
effectively engaged their followers and encouraged them to make purchases.

● Cost Efficiency: Adidas only paid for actual sales generated, ensuring that their
marketing spend was directly tied to revenue.

Overall Results:

The combination of PPC ads on Google and affiliate marketing resulted in a highly effective
performance marketing campaign for Adidas. The strategy allowed them to maximize their
marketing budget by paying only for measurable outcomes, such as clicks and sales, which
directly contributed to their revenue growth during the crucial holiday season.

● Significant Increase in ROI: The focused and result-oriented approach led to a

significant increase in return on investment (ROI) as every dollar spent was tied to
specific performance metrics.

● Enhanced Brand Visibility: The extensive reach through both PPC and affiliate
channels increased brand visibility and awareness among a broad and relevant audience.

● Customer Acquisition and Retention: The campaigns not only attracted new customers
but also encouraged repeat purchases through targeted ads and engaging affiliate content.

By employing a performance marketing strategy, Adidas effectively boosted their online sales,
optimized their marketing spend, and achieved their business goals during the holiday season.
Value Delivery: Definition, Process, and Preparation

Value Delivery is the process of providing value to customers by means of a product or

service. This involves developing the product, packaging it, promoting it, and distributing it
to customers in a manner that not only meets but also surpasses their expectations.

The essence of a value delivery system lies in comprehending the requirements of customers
and furnishing them with products and services that cater to those needs. The objective is to
construct something valuable for customers and explore means of delivering it promptly and at a
reasonable cost.

Value delivery is a way of providing clients with solutions that go above and beyond what
they anticipated and add value to their lives while assuring complete satisfaction and a high
return on investment. For example, when a consumer purchases a laptop, value delivery may
entail giving them free software updates and longer warranties.

A business strategy that consistently works to provide its existing and potential customers extra
value frequently benefits from more income, faster growth, and better loyalty. It entails
comprehending consumer demands and providing timely, cost-effective, and personalized goods
and services that address those needs.

In order to optimize value, developing a value delivery system necessitates thorough planning
and evaluation of each business unit. It begins with a simple and clear company plan that is
created with the target market’s demands and preferences in mind.

Value Delivery at Different Levels of a Business

To successfully deliver value, businesses must address the needs of customers at multiple
organizational levels. Let's explore these three levels with examples to illustrate how value
delivery is implemented effectively.

1. At the Level of an Organization or a Business

Explanation: Value delivery at the organizational level involves achieving the company’s
overarching goals and ensuring that the business understands and meets customer needs. This
requires providing the right tools, processes, and support systems to enhance customer
satisfaction.

Example: A multinational technology company, TechCorp, aims to be a leader in customer

satisfaction in the electronics market. To achieve this, TechCorp focuses on:

● Customer-Centric Innovation: Developing products based on extensive market research

and customer feedback to ensure they meet evolving customer needs.
 ● Robust Customer Support: Implementing a comprehensive support system that
includes 24/7 helplines, live chat, and a vast network of service centers worldwide.

● Quality Assurance: Establishing stringent quality control measures to ensure all

products are reliable and meet high standards.

Outcome: By aligning its goals with customer needs and investing in strong support systems,
TechCorp ensures high customer satisfaction and loyalty, reinforcing its market leadership.

2. At the Level of a Department within an Organization

Explanation: Value delivery at the departmental level involves each department having
specific objectives that contribute to overall organizational goals. Departments such as sales,
customer service, and marketing must have clear strategies to achieve their objectives and
enhance customer satisfaction.

Example: In TechCorp’s marketing department, the goal is to increase brand awareness and
drive product adoption. To deliver value, the department:

● Conducts Targeted Campaigns: Launches marketing campaigns tailored to different

customer segments, ensuring relevant messaging and offers.

● Engages in Content Marketing: Produces valuable content like tutorials, product

reviews, and customer testimonials to educate and engage potential customers.

● Utilizes Data Analytics: Analyzes customer data to refine marketing strategies and
personalize communication.

Outcome: These focused efforts by the marketing department help in attracting and retaining
customers, thus contributing to the company’s overall growth and customer satisfaction.

3. At the Level of an Individual Employee

Explanation: Value delivery at the individual employee level involves each employee providing
the best possible customer experience. Employees must understand customer needs and be
equipped to offer the right products or services.

Example: A customer visits a TechCorp retail store looking for a new laptop. The sales
associate:

● Conducts a Needs Assessment: Engages with the customer to understand their

requirements, such as usage, budget, and preferred features.

● Provides Expert Advice: Recommends laptops that match the customer’s needs,
explaining the benefits and differences of each option.
 ● Offers Personalized Service: Assists the customer with setup and provides information
on additional services like extended warranties and tech support.

Outcome: By offering knowledgeable and personalized service, the sales associate ensures the
customer finds the right product, enhancing their shopping experience and satisfaction.

Summary

Value delivery in a business operates at three levels:

1. Organizational Level: Achieving broad business goals and ensuring overall customer
satisfaction through strategic planning and robust support systems.

2. Departmental Level: Each department having specific objectives and strategies that
contribute to delivering value and meeting customer expectations.

3. Individual Employee Level: Employees providing personalized and knowledgeable

service to meet individual customer needs effectively.

By focusing on these three levels, businesses can create a cohesive and comprehensive approach
to delivering value, ensuring customer satisfaction and business success.

Levels of Value Delivery with Examples

Value delivery in a business context can be understood at three distinct levels: the organizational
level, the departmental level, and the individual employee level. Each level plays a crucial role in
ensuring that the customer receives value that meets or exceeds their expectations.

1. Organizational Level

Explanation: At the organizational level, value delivery involves the overall strategies and goals
of the company to ensure that it meets the needs and preferences of its customers. This includes
the company's vision, mission, and the tools, processes, and support systems in place to achieve
its objectives.

Example: Company: Apple Inc.

● Vision and Mission: Apple's mission is to bring the best user experience to its customers
through its innovative hardware, software, and services.

● Value Delivery: Apple focuses on delivering high-quality, innovative products like the
iPhone, iPad, and Mac, combined with seamless integration across its ecosystem (iOS,
macOS, iCloud). They also provide exceptional customer support and service through
Apple Stores and online support.
 ● Outcome: By aligning their organizational goals with customer needs and focusing on
innovation and quality, Apple delivers significant value, leading to high customer loyalty
and satisfaction.

2. Departmental Level

Explanation: At the departmental level, each department within the organization has specific
objectives that contribute to the overall value delivery. Departments such as sales, customer
service, marketing, and product development must have clear goals and strategies to meet those
goals.

Example: Company: Amazon

● Marketing Department:

○ Objective: Increase customer engagement and drive sales.

○ Strategy: Utilize data-driven marketing strategies to personalize customer

experiences. Run targeted advertising campaigns and use recommendation
algorithms to suggest relevant products.

○ Outcome: By focusing on personalized marketing, Amazon enhances customer

engagement and satisfaction, driving higher sales and loyalty.

● Logistics Department:

○ Objective: Ensure timely delivery of products to customers.

○ Strategy: Develop a robust logistics network with strategically placed fulfillment

centers, efficient supply chain management, and partnerships with delivery
services.

○ Outcome: Amazon's logistics department ensures quick and reliable delivery,

which is a significant value driver for its customers.

3. Individual Employee Level

Explanation: At the individual employee level, value delivery involves each employee
providing the best possible customer experience. Employees need to understand customer needs
and be equipped to offer the right products or services effectively.

Example: Company: Ritz-Carlton Hotel

● Front Desk Staff:

○ Scenario: A guest checks into the hotel and mentions it's their anniversary.
 ○ Employee Action: The front desk staff congratulates the guest and arranges for a
complimentary upgrade to a suite, along with a bottle of champagne and a
personalized note.

○ Outcome: The guest feels valued and receives a memorable experience that
exceeds their expectations, enhancing their loyalty to the Ritz-Carlton brand.

● Housekeeping Staff:

○ Scenario: A guest requests extra pillows and an early room cleaning.

○ Employee Action: The housekeeping staff promptly delivers the extra pillows
and ensures the room is cleaned at the requested time, leaving a personalized note
to make the guest feel special.

○ Outcome: The guest's needs are met promptly and thoughtfully, contributing to a
positive overall experience.

Summary

Value delivery operates at multiple levels within an organization, each playing a vital role in
ensuring customer satisfaction and loyalty:

1. Organizational Level: Focuses on broad strategic goals, innovation, and overall

customer satisfaction.

○ Example: Apple's commitment to innovation and quality.

2. Departmental Level: Each department has specific objectives that align with the
company's goals and customer needs.

○ Example: Amazon's marketing and logistics departments working to personalize

customer experiences and ensure timely deliveries.

3. Individual Employee Level: Employees provide personalized and attentive service to

meet individual customer needs.

○ Example: Ritz-Carlton's front desk and housekeeping staff delivering exceptional

customer experiences.

By addressing value delivery at these three levels, businesses can create a cohesive approach that
ensures every aspect of the organization contributes to delivering value to customers, leading to
increased satisfaction, loyalty, and business success.
6. Marketing Management Tasks

1. Market Research

○ Involves collecting and analyzing data about consumers, competitors, and market
conditions to inform marketing strategies.

○ Example: Conducting surveys and focus groups to understand customer

preferences for a new product launch.

2. Strategic Planning

○ Developing long-term marketing strategies aligned with the company’s goals and
market opportunities.

○ Example: Unilever’s strategic focus on sustainability and social responsibility as

part of its overall marketing plan.

3. Product Development

○ Creating new products or improving existing ones to meet customer needs and
stay competitive.

○ Example: Tesla’s ongoing development of new electric vehicle models with

advanced features and extended range.

4. Pricing Strategy

○ Determining the right price for products based on costs, competition, and
customer perceived value.

○ Example: Apple’s premium pricing strategy positions its products as high-quality

and desirable, attracting a specific market segment.

5. Distribution Management

○ Ensuring products are available to customers through effective supply chain and
distribution strategies.

○ Example: Amazon’s sophisticated logistics network enables fast and reliable

delivery of products to customers worldwide.

6. Promotion and Communication

○ Creating and implementing promotional campaigns to communicate the product’s

value proposition to the target audience.
 ○ Example: Nike’s “Just Do It” campaign uses inspirational messaging and athlete
endorsements to connect with its audience.

7. Sales Management

○ Directing and controlling the sales team and processes to achieve sales targets and
build customer relationships.

○ Example: Salesforce’s CRM tools help manage sales activities, track customer
interactions, and improve sales performance.

8. Customer Service

○ Providing support and services to ensure customer satisfaction and address any
issues promptly.

○ Example: Zappos’ exceptional customer service includes free returns and 24/7
support to enhance customer satisfaction.

These detailed explanations and examples provide a comprehensive understanding of

fundamental marketing concepts, illustrating their application in real-world scenarios.

Understanding the Value Philosophy

1. Customer-Centric Approach: Focus on understanding and meeting the needs and

desires of customers.

○ Example: Apple designs products based on extensive customer research to ensure

they meet user needs effectively.

2. Value Over Price: Emphasis on the benefits and quality rather than just the cost.

○ Example: Starbucks justifies its higher prices with superior quality coffee and a
comfortable ambiance.

3. Long-Term Relationships: Building sustainable relationships with customers for

long-term loyalty.

○ Example: Amazon's Prime membership encourages repeat purchases through

exclusive benefits.

4. Holistic Experience: Delivering a complete experience, from product quality to

customer service.
 ○ Example: Disney theme parks offer an immersive experience, combining
entertainment, quality service, and unique attractions.

5. Brand Trust and Reputation: Establishing trust through consistent and reliable
performance.

○ Example: Toyota's reputation for reliable cars builds customer trust and loyalty.

6. Ethical Practices: Adopting ethical business practices to build a positive brand image.

○ Example: Patagonia's commitment to environmental sustainability resonates with

eco-conscious consumers.

Meaning of Value

1. Perceived Benefits: The advantages a customer believes they will receive from a product
or service.

○ Example: Consumers may perceive organic foods as healthier, thus valuing them
more highly.

2. Utility: The usefulness and functional benefits of a product.

○ Example: A smartphone provides communication, internet access, and

entertainment, adding multiple utilities.

3. Emotional Value: The emotional response or attachment a customer has to a product or

brand.

○ Example: Coca-Cola’s nostalgic advertising taps into customers’ emotions,

increasing its perceived value.

4. Social Value: The product's ability to enhance social status or peer approval.

○ Example: Wearing high-end fashion brands can enhance one’s social standing
among peers.

5. Economic Value: The monetary savings or economic benefit a product provides.

○ Example: Energy-efficient appliances reduce electricity bills, offering economic

value to consumers.

6. Symbolic Value: The meaning or identity a product represents to the customer.

○ Example: Luxury cars like a Rolls-Royce symbolize wealth and status.

Value Innovation vs value imitation

Value Innovation

Value innovation is the cornerstone of Blue Ocean Strategy. It involves creating new value for
customers by offering products or services that provide superior value or by eliminating elements
that do not add value. This approach focuses on both differentiation and low cost to create a leap
in value for both the company and its customers. The goal is to make the competition irrelevant
by delivering unprecedented value.

Blue Ocean Strategy

Blue Ocean Strategy, developed by W. Chan Kim and Renée Mauborgne, is a business strategy
that suggests companies are better off searching for ways to gain "uncontested market space"
(blue oceans) rather than competing in traditional markets (red oceans). The key principles
include:

1. Reconstruct Market Boundaries: Look across alternative industries, strategic groups,

buyer groups, complementary products/services, the functional-emotional orientation of
an industry, and time to identify new market spaces.

2. Focus on the Big Picture, Not the Numbers: Develop a clear, compelling strategic
vision that goes beyond mere quantitative analysis.

3. Reach Beyond Existing Demand: Identify noncustomers and understand why they are
not currently part of the market. Convert these noncustomers into customers by offering
unprecedented value.

4. Get the Strategic Sequence Right: Ensure that the new offering achieves high utility, a
strategic price, cost efficiency, and adoption.

Implementing Value Innovation and Blue Ocean Strategy

1. Eliminate-Reduce-Raise-Create (ERRC) Grid: This tool helps companies

systematically pursue value innovation by identifying which factors of competition
should be eliminated, reduced, raised, or created to break the trade-off between
differentiation and low cost.

2. Strategy Canvas: A visual representation that helps to understand the current state of
play in the market and to chart a course towards creating a blue ocean by focusing on the
factors that matter most to customers.

Examples of Value Innovation and Blue Ocean Strategy

 ● Cirque du Soleil: By combining elements of circus, theater, and opera, Cirque du Soleil
created a unique form of entertainment that drew from the strengths of each, capturing a
new audience that traditional circuses couldn't.

● Nintendo Wii: Instead of competing with other gaming consoles on graphics and power,
Nintendo focused on a new user experience with motion controls, attracting a broader
demographic including families and non-gamers.

These strategies emphasize looking beyond conventional competition and exploring innovative
ways to deliver unique value, thereby creating new demand and expanding market boundaries.

1. Reconstruct Market Boundaries

Value innovation and Blue Ocean Strategy are closely related concepts in marketing and strategic
management. Here's an overview of each:

This principle involves looking beyond the existing market structures and exploring untapped
opportunities by considering six different perspectives:

Alternative Industries:

● Look at adjacent or unrelated industries that might offer complementary products or

services. For example, the automotive industry and telecommunications could intersect in
the future with the rise of connected vehicles and smart infrastructure.

Strategic Groups:

Analyze different strategic groups within an industry. Each group may have distinct needs or
preferences that are not fully addressed by existing offerings. For instance, within the fitness
industry, traditional gyms and boutique fitness studios serve different segments based on
preferences for community, specialized training, or convenience.

Buyer Groups:

● Consider different buyer segments within an industry and their varying needs and
behaviors. For example, in healthcare, pharmaceutical companies traditionally target
doctors and hospitals. However, with the rise of patient empowerment,
direct-to-consumer healthcare solutions are emerging where patients have more influence
over their treatment decisions.

Complementary Products/Services:

● Explore opportunities to integrate or bundle complementary products or services. For

instance, the convergence of home automation and energy management systems offers
 opportunities for integrated solutions that enhance efficiency and convenience for
consumers.

Functional-Emotional Orientation:

● Evaluate industries or products based on their functional and emotional dimensions. For
example, traditional cleaning products focus on functional benefits like cleanliness, but
eco-friendly cleaning products emphasize emotional benefits such as sustainability and
health.

Time Dimension:

● Consider how market dynamics evolve over time and identify emerging trends or
technologies that could disrupt existing industries. For example, the rise of artificial
intelligence is transforming industries ranging from healthcare to finance by enabling
personalized services and predictive analytics.

2. Focus on the Big Picture, Not the Numbers

Instead of getting bogged down by detailed metrics and financial figures, this principle
emphasizes developing a compelling strategic vision:

● Example: Southwest Airlines focused on creating a strategic vision of offering "low-cost,

no-frills, point-to-point air travel" which guided their decisions and differentiated them
from traditional airlines with hub-and-spoke models.

3. Reach Beyond Existing Demand

This involves tapping into noncustomers and understanding why they haven't entered the market.
There are three tiers of noncustomers:

● First Tier: Soon-to-be noncustomers who are on the edge of your market.

○ Example: Salesforce.com targeted small businesses and individuals who found

traditional CRM software too complex and expensive, offering a simplified,
cloud-based solution.

● Second Tier: Refusing noncustomers who consciously choose against your market.

○ Example: The Nintendo Wii targeted non-gamers and casual gamers who found
traditional gaming consoles too complex and intimidating, offering an accessible
and engaging gaming experience.

● Third Tier: Unexplored noncustomers who are in markets distant from yours.
 ○ Example: Grameen Bank provided microloans to the rural poor in Bangladesh, a
group traditionally ignored by conventional banks.

4. Get the Strategic Sequence Right

To ensure a successful Blue Ocean Strategy, follow this sequence: buyer utility, price, cost, and
adoption.

● Buyer Utility: Ensure the product or service offers exceptional utility.

○ Example: Uber provided high utility by offering a more convenient, reliable, and
often cheaper alternative to traditional taxis.

● Price: Set a strategic price that attracts the mass of target buyers.

○ Example: IKEA offers stylish furniture at a price point that is accessible to a

broad audience, driving mass adoption.

● Cost: Ensure that you can produce at a cost that allows profitability at your strategic
price.

○ Example: Southwest Airlines kept costs low by flying to secondary airports, using
a single type of aircraft, and eliminating in-flight frills, enabling it to offer
ultra-low-cost flights.

● Adoption: Overcome adoption hurdles for customers and stakeholders.

○ Example: Netflix overcame adoption hurdles by initially offering a DVD rental

service with no late fees, gradually transitioning customers to a streaming model.

Implementing Tools

Eliminate-Reduce-Raise-Create (ERRC) Grid

This tool helps companies determine which factors they need to eliminate, reduce, raise, or
create to differentiate their offerings and lower costs simultaneously.

● Example: The yellow tail wine brand simplified the wine selection process (eliminate
confusing wine jargon), reduced the range of wines offered, raised the quality and fun
aspect of wine drinking, and created an accessible, non-traditional wine brand that
appealed to non-wine drinkers.

Strategy Canvas

A strategy canvas is a diagnostic and action framework for building a compelling blue ocean
strategy.
 ● Example: Southwest Airlines' strategy canvas compared its offering against traditional
airlines and car travel, focusing on factors like price, convenience, and speed. By
identifying gaps, Southwest could position itself uniquely in the market.

By understanding and applying these principles and tools, businesses can innovate in ways that
create new market spaces and leave competition behind, unlocking new demand and growth
potential.

ERRC model with examples

The Eliminate-Reduce-Raise-Create (ERRC) Grid is a strategic tool used in the Blue Ocean
Strategy framework. It helps companies systematically analyze and reshape their offerings by
identifying which factors of competition should be eliminated, reduced, raised, or created to
unlock new value and make the competition irrelevant. Here's a breakdown of each element with
examples:

1. Eliminate

This involves identifying which factors the industry takes for granted and should be eliminated.
These are features or services that have been around for a long time but add little value to
customers.

● Example: Cirque du Soleil

○ Eliminate: Star performers, animal shows, and aisle concessions. Traditional

circuses relied heavily on these elements, but they were costly and added limited
value to the audience's overall experience.

2. Reduce

This involves determining which factors should be reduced well below the industry standard.
These are features or services that are important but over-delivered.

● Example: Cirque du Soleil

○ Reduce: Fun and humor. Traditional circuses placed a heavy emphasis on clown
acts, but Cirque du Soleil reduced this element, opting for a more sophisticated
and artistic form of entertainment.

3. Raise

This involves identifying which factors should be raised well above the industry standard. These
are elements that the industry undervalues but which are crucial to enhancing customer
experience.

● Example: Cirque du Soleil

 ○ Raise: Unique venues, refined environment, and multiple productions. Cirque du
Soleil significantly raised the quality and ambiance of the circus environment,
offering a more theatrical experience with sophisticated themes and storylines.

4. Create

This involves identifying which factors should be created that the industry has never offered.
These are entirely new features or services that provide new value to customers.

● Example: Cirque du Soleil

○ Create: A unique blend of circus, theater, and opera. Cirque du Soleil created a
new form of entertainment by combining elements from various performing arts,
which was previously unseen in traditional circuses.

The blue ocean diagram

The Blue Ocean Strategy Diagram, also known as the Strategy Canvas, is a visual tool used to
compare a company's offering with that of its competitors across key factors of competition. It
helps identify opportunities for value innovation by highlighting areas where a company can
differentiate itself or find unmet needs in the market. Here's an explanation of the key
components and how to use the diagram, with an example for clarity.

Components of the Strategy Canvas

1. Horizontal Axis (Factors of Competition):

○ The horizontal axis lists the factors that the industry competes on and invests in,
such as price, features, quality, customer service, etc.

2. Vertical Axis (Offering Level):

○ The vertical axis indicates the level of offering that buyers receive across these
factors, ranging from low to high.

3. Value Curve:

○ The value curve is a graphical representation of a company’s relative performance

across the industry's factors of competition. Each line or curve represents the
performance of a different company or product.

How to Use the Strategy Canvas

 1. Identify Key Competitive Factors:

○ List the key factors that companies in your industry compete on and invest in.
These factors should be relevant to customers and impact their purchasing
decisions.

2. Plot Competitors’ Offerings:

○ For each factor, plot the performance of key competitors. This helps visualize the
current state of competition and where companies are focusing their efforts.

3. Draw Your Own Value Curve:

○ Plot your own company’s performance across the same factors. This will highlight
your strategic positioning in the market.

4. Analyze the Canvas:

○ Look for areas where you match the competition, areas where you lag, and areas
where you outperform. This analysis can reveal opportunities to differentiate and
innovate.

5. Apply the ERRC Grid:

○ Use the Eliminate-Reduce-Raise-Create (ERRC) Grid to reshape your value curve

by eliminating, reducing, raising, and creating factors to unlock new value and
create a blue ocean.

Another Example: Yellow Tail Wine

Yellow Tail, an Australian wine brand, used the ERRC Grid to create a blue ocean in the wine
industry.

● Eliminate: Enological terminology and distinctions. Traditional wine brands used

complex wine terminology that confused many consumers. Yellow Tail eliminated this,
simplifying the language around their product.

● Reduce: Wine complexity and range. Instead of offering a wide variety of wines, Yellow
Tail reduced its range to a few key products that were easy to choose from.

● Raise: Retail store involvement and retail friendly. Yellow Tail raised the involvement of
retail partners by making their product more accessible and easier to stock and sell.
 ● Create: Easy drinking and fun. Yellow Tail created a wine that was easy to drink and
approachable for those who felt intimidated by traditional wine culture. They focused on
making wine fun and enjoyable without the pretentiousness.

Another Example: Nintendo Wii

Nintendo Wii transformed the gaming console market by using the ERRC Grid:

● Eliminate: High-end graphics and complex controls. While other gaming consoles
focused on high-definition graphics and complex gameplay, Nintendo eliminated the
need for these, targeting a broader audience.

● Reduce: Game complexity. Nintendo reduced the complexity of games, making them
more accessible to casual gamers and non-gamers.

● Raise: User engagement and interactivity. By raising the level of physical interactivity
through motion-sensing technology, Nintendo enhanced user engagement.

● Create: New gaming experience. The Wii created a new market for family-friendly,
interactive games that appealed to a wider demographic, including non-traditional
gamers.

The ERRC Grid helps businesses rethink their competitive factors and systematically innovate to
create unique value propositions, opening up new market spaces and making the competition
irrelevant.

Example: Southwest Airlines

In the airline industry, traditional competitive factors might include price, meals, seat class
variety, hub connectivity, and in-flight entertainment. Here's how Southwest Airlines used the
strategy canvas to create a blue ocean:

1. Identify Key Competitive Factors:

○ Price, meals, seat class variety, hub connectivity, flight frequency, speed, and
convenience.

2. Plot Competitors’ Offerings:

○ Traditional airlines: High on meals, seat class variety, and hub connectivity;
medium on price and in-flight entertainment; low on speed and convenience due
to hub-and-spoke models.

3. Draw Southwest’s Value Curve:

 ○ Southwest Airlines: High on price (low fares), flight frequency, and convenience
(point-to-point routes); eliminated meals and seat class variety; reduced hub
connectivity and in-flight entertainment.

4. Analyze the Canvas:

○ Southwest’s value curve shows significant differentiation. It matches or exceeds

competitors on price, frequency, and convenience while eliminating or reducing
less valued factors like meals and seat classes.

5. Apply the ERRC Grid:

○ Eliminate: Meals, seat class variety.

○ Reduce: Hub connectivity, in-flight entertainment.

○ Raise: Flight frequency, convenience.

○ Create: A no-frills, low-cost airline model with high efficiency and

customer-friendly policies.

By using the Strategy Canvas, Southwest Airlines was able to identify areas where they could
reduce costs and enhance customer value, ultimately creating a new market space (blue ocean)
that attracted a wide range of customers who valued low cost and convenience.

Conclusion

The Strategy Canvas is a powerful tool for visualizing a company’s competitive landscape and
identifying opportunities for differentiation and value innovation. By analyzing the value curves
and applying the ERRC Grid, companies can develop strategies that create new market spaces
and make the competition irrelevant.

Value Delivery and Upstream Marketing

https://indiafreenotes.com/value-delivery-and-upstream-marketing/

Examples of Upstream Marketing

1. Apple

Apple excels in upstream marketing by focusing on customer insights and innovation. Before
launching a new product, Apple deeply analyzes customer needs and market trends. For
example, the development of the iPhone involved understanding the limitations and pain points
of existing mobile phones and creating a value proposition that combined phone, iPod, and
internet browsing capabilities.

2. Procter & Gamble (P&G)

P&G invests heavily in market research to understand consumer behavior and preferences. This
upstream marketing effort led to the creation of the Swiffer cleaning products. P&G identified a
need for more convenient and efficient cleaning solutions, which guided the innovation and
development of the Swiffer line.

3. Tesla

Tesla's upstream marketing involves anticipating future trends and needs in the automotive
industry. By focusing on sustainability and electric vehicles, Tesla positioned itself as a leader in
the green transportation sector. The company’s value proposition centers around innovation,
performance, and environmental consciousness, which was established well before their products
were mass-marketed.

Benefits of Upstream Marketing

1. Better Alignment with Market Needs:

○ By understanding the market and customer needs, companies can develop

products and services that are more likely to succeed.

2. Competitive Advantage:

○ Differentiating through unique value propositions and innovative offerings can

create a significant competitive edge.

3. Strategic Focus:

○ Upstream marketing ensures that marketing efforts are aligned with the
company’s long-term strategic goals.

4. Risk Mitigation:

○ By thoroughly researching and planning, companies can avoid costly mistakes

and reduce the risk of product failures.

Conclusion

Upstream marketing is crucial for setting a strong strategic foundation for a company’s
marketing efforts. By focusing on market research, segmentation, value proposition
development, innovation, and strategic planning, companies can create products and services that
meet customer needs, differentiate from competitors, and achieve long-term success.
Value Creation and Delivery

1. Identifying Customer Needs: Research and analyze what customers want and need.

○ Example: Nike uses customer feedback and market research to design new
athletic shoes that meet specific sports needs.

2. Product Development: Creating products that meet identified needs.

○ Example: Tesla develops electric cars to meet the growing demand for
eco-friendly vehicles.

3. Pricing Strategy: Setting prices that reflect the value provided and are acceptable to
customers.

○ Example: Netflix’s subscription pricing is set to balance perceived entertainment

value and affordability.

4. Distribution Channels: Ensuring products are available where and when customers want
them.

○ Example: Amazon uses efficient logistics and multiple distribution centers to

deliver products quickly.

5. Promotion and Communication: Effectively communicating the value to customers

through marketing and advertising.

○ Example: Apple’s advertisements highlight the innovative features and quality of

their products.

6. Customer Support and Service: Providing post-purchase support to enhance the overall
value experience.

○ Example: Zappos is renowned for its exceptional customer service, ensuring a

positive shopping experience.

Value Delivery Process

1. Market Segmentation: Dividing the market into distinct groups with common needs.

○ Example: Coca-Cola segments its market by demographics, offering different

products for teens and adults.

2. Targeting: Selecting specific segments to focus marketing efforts on.

○ Example: Rolex targets affluent individuals seeking luxury timepieces.

 3. Positioning: Creating a distinct image and identity for the product in the minds of
consumers.

○ Example: Volvo positions itself as the safest car brand.

4. Product Offering: Developing a product that meets the needs of the target segment.

○ Example: L’Oréal offers various beauty products tailored to different skin types
and preferences.

5. Customer Interaction: Engaging with customers through various touchpoints to ensure

satisfaction.

○ Example: Sephora’s in-store beauty advisors help customers find the right
products, enhancing the shopping experience.

6. Feedback and Improvement: Continuously seeking customer feedback to improve the

product and delivery process.

○ Example: Amazon regularly surveys customers to improve its shopping

experience and product offerings.

Value Delivery and Upstream Marketing

https://indiafreenotes.com/value-delivery-and-upstream-marketing/

1. Supplier Relationships: Collaborating with suppliers to ensure quality materials and

timely delivery.

○ Example: Toyota works closely with its suppliers to maintain high standards in its
supply chain.

2. Innovation and R&D: Investing in research and development to create innovative

products.

○ Example: Samsung’s investment in R&D leads to cutting-edge technology in its

smartphones.

3. Sustainability Practices: Implementing sustainable practices to enhance long-term

value.

○ Example: Unilever’s sustainable sourcing initiatives improve supply chain

efficiency and brand image.

4. Quality Control: Ensuring products meet high-quality standards before reaching the
market.
 ○ Example: Apple’s rigorous quality control processes ensure its products are
reliable and durable.

5. Cost Management: Efficiently managing costs to offer competitive pricing without

compromising quality.

○ Example: Walmart’s focus on cost management allows it to offer low prices to

customers.

6. Strategic Alliances: Forming partnerships to enhance value delivery.

○ Example: Starbucks and Barnes & Noble’s partnership provides a combined

experience of books and coffee.

Upstream marketing

Upstream marketing focuses on the strategic activities that occur early in the marketing process.
It involves understanding market needs, defining target segments, and creating value
propositions to shape the future direction of the company’s offerings. Unlike downstream
marketing, which is more about executing strategies (like advertising, promotions, and sales),
upstream marketing is about setting the strategic foundation.

Key Components of Upstream Marketing

1. Market Research and Analysis:

○ Understanding customer needs, preferences, and behaviors.

○ Identifying market trends, opportunities, and potential disruptions.

○ Analyzing competitors and their strategies.

2. Segmentation and Targeting:

○ Dividing the market into distinct segments based on various criteria

(demographics, psychographics, behavior, etc.).

○ Selecting the most viable and profitable segments to target.

3. Value Proposition Development:

○ Creating a compelling value proposition that addresses the needs and pain points
of the target segments.

○ Ensuring the value proposition differentiates the product or service from

competitors.
 4. Product and Service Innovation:

○ Developing new products or services or improving existing ones based on insights

gained from market research.

○ Focusing on innovation that aligns with the strategic goals and customer needs.

5. Brand Strategy:

○ Defining the brand’s positioning, mission, vision, and values.

○ Ensuring consistent messaging and branding across all touchpoints.

6. Go-to-Market Strategy:

○ Planning how to introduce and deliver the product or service to the market.

○ Deciding on distribution channels, pricing strategy, and promotional tactics.

Examples of Upstream Marketing

1. Apple

Apple excels in upstream marketing by focusing on customer insights and innovation. Before
launching a new product, Apple deeply analyzes customer needs and market trends. For
example, the development of the iPhone involved understanding the limitations and pain points
of existing mobile phones and creating a value proposition that combined phone, iPod, and
internet browsing capabilities.

2. Procter & Gamble (P&G)

P&G invests heavily in market research to understand consumer behavior and preferences. This
upstream marketing effort led to the creation of the Swiffer cleaning products. P&G identified a
need for more convenient and efficient cleaning solutions, which guided the innovation and
development of the Swiffer line.

3. Tesla

Tesla's upstream marketing involves anticipating future trends and needs in the automotive
industry. By focusing on sustainability and electric vehicles, Tesla positioned itself as a leader in
the green transportation sector. The company’s value proposition centers around innovation,
performance, and environmental consciousness, which was established well before their products
were mass-marketed.

Benefits of Upstream Marketing

5. Better Alignment with Market Needs:

 ○ By understanding the market and customer needs, companies can develop
products and services that are more likely to succeed.

6. Competitive Advantage:

○ Differentiating through unique value propositions and innovative offerings can

create a significant competitive edge.

7. Strategic Focus:

○ Upstream marketing ensures that marketing efforts are aligned with the
company’s long-term strategic goals.

8. Risk Mitigation:

○ By thoroughly researching and planning, companies can avoid costly mistakes

and reduce the risk of product failures.

Conclusion

Upstream marketing is crucial for setting a strong strategic foundation for a company’s
marketing efforts. By focusing on market research, segmentation, value proposition
development, innovation, and strategic planning, companies can create products and services that
meet customer needs, differentiate from competitors, and achieve long-term success.

Value Innovation

1. Blue Ocean Strategy: Creating new market spaces rather than competing in existing
ones.

○ Example: Cirque du Soleil combines elements of circus and theater, creating a

unique entertainment experience.

2. Differentiation: Offering unique features or services that set the product apart.

○ Example: Dyson’s vacuum cleaners are differentiated by their innovative cyclone

technology.

3. Cost Leadership: Providing similar benefits at a lower cost.

○ Example: IKEA offers stylish and functional furniture at affordable prices through
efficient production.

4. Disruptive Innovation: Introducing products that disrupt existing markets.

 ○ Example: Uber disrupted the traditional taxi industry with its ride-sharing app.

5. Value Network: Creating a network of partners to enhance the overall value.

○ Example: Apple’s ecosystem of devices and services creates a seamless

experience for users.

6. Customer Engagement: Actively involving customers in the innovation process.

○ Example: Lego’s Ideas platform allows fans to submit and vote on new set ideas.

Co-creation of Value

1. Customer Involvement: Engaging customers in the product development process.

○ Example: Dell allows customers to customize their computers before purchase.

2. Collaborative Platforms: Using platforms where customers can contribute ideas and
feedback.

○ Example: Threadless allows artists to submit t-shirt designs, which are then voted
on by the community.

3. Personalization: Tailoring products and services to individual customer preferences.

○ Example: Nike By You (formerly NikeiD) lets customers design their own shoes.

4. Community Building: Creating communities where customers can interact and share
experiences.

○ Example: GoPro’s online community encourages users to share videos shot with
their cameras.

5. Customer Support Integration: Involving customers in support and troubleshooting

processes.

○ Example: Microsoft’s user forums allow customers to help each other with
software issues.

6. Feedback Loops: Implementing systems for continuous customer feedback and

improvement.

○ Example: Airbnb continuously updates its platform based on host and guest
feedback to improve user experience.