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Table of Contents
1. Introdution - Value Based Marketing ………………………….3
2. The Marketing Pentadigm in the context of Cadbury India…………..4
2.1.Discover & Commitment to Customer Value Drivers………...4
2.2.Customer Value System Model by IBM ………............................5
2.3.Customer Value Engineering Model by Oliver Wyman-NY……..6
2.4.Lessons in CVE through competitors failures & success…………7
2.5.Create Customer Value………………………………………………8
2.6.Porter’s Value Chain…………………………………………………8
2.7.Benchmark Practices of Competitors…………………………...8
2.8.Customer feedback & improvement of value proposition………8
3. VBM at the Marketing- Finance Interface…………………………..........9
3.1.Market based Intagible Assets…………………………………..9
3.2.How Market Based Assets create Shareholder Value……………….9
3.3.Linking Marketing Activities to Shareholder Value………………10
3.4.Marketing Performance & Dupont Analysis………………………11
4. Conclusion………………………………………………………..11
5. List of Reference……………………………………………………..12
6. Annexture-I……………………………………………………13
7. Annexture-II…………………………………………………..14
Word Count: 1642 words ( Excluding- list of references, table of content, cover page, referencing of sources,
schematics diagrams, and Annextures)
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
Value Based Marketing is a marketing Lexicon, used to conceptualise the process of value
creation, in the firm, for the customers , without loosing focus on profitability and thus
increasing shareholder value.
De Bonis, Balinski & Allen approach to value based marketing is, essentially focusing on
customer value, through the concept of - Marketing Pentadigm.
Kolter defines,
Customer Value = Perceived Customer Benefits (product, services, quality and
personal or image benefits) – Customer Cost
Marketing metrics used for evaluating marketing performance, such Brand Equity, CLV, repeat
purchase rate etc, generally fall shy of management needs - due to lack of conformity with
dominant accounting-finance language of the firm, making it difficult to compare with
alternative expenditures undertaken in the firm, humorously reflected in:
“ I know I am wasting half of my advertisement budget, but I just don’t know which half”
Hence the the concept of VBM has evolved further. Peter Doyle conceptualises it as the
Marketing-Finance Interface and attempts to link marketing activities to financial
consiquences and creation of intangible assets.
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
(II).Commitment to find the critical cutomer value factors & quantify them, develop customer
value commitment superior to competitors, then align orgnisational capability - sales, service,
supply chain, to deliver value, so to make economic profit (EVA).
In (Fig 1) we discuss a model to identify and maximise a set of hypothetical customer value
drivers in the context of Cadbury India. In practice customer value drivers are identified by co-
joint analysis. Customer value drivers & their relative importance – would depends on the type
of industry/product and also on market factors like demographics, culture, income levels etc.
The customer value commitments must be communicated by means of both marketing
communications, and internal communications processes. Repurchase behaivior in customers is
caused by the diffrential between promised and perceived value.
Customer value drivers are important to formulate Marketing Strategy. Since marking is the art
of attracting and retaining profitable customers- the company should ideally target the market
segment in which it’s value proposition has competative advantage. It has to communicate
effectively the value proposition of a particular product category and brand, which in turn would
help enhance the total customer perceived values/benefits.
Define key performance indicators like - Brand awareness and position, customer acquisition
& retention figures, proportion of total sales/profit from new customers/products. Some external
indicators are customer satisfaction ratings, status in the industry as a value creator, customer
referrals etc.
Oliver Wyman’s Customer Value Engineering (TM) –model, allows companies to identify and
quantify the true emerging drivers of customer value––those things that customers are actually
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
willing to pay for in a competitive environment ––and evaluate the profitability of alternative
strategies. In (Fig 2) we try to adapt this model to FMCG Products in the context of Cadbury.
ESTEEM: Childrens height increases with Bournvita Drinks, he’s able to do better in academics.
Chocolates appeal to women , Sextuality.
SURVIVAL: Ex: Bournvita- Drinks complements diets, bridges gap in intake of vital nutrients.
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
CUSTOMER VALUE =
(Source: Adapted & Applied in the context of Cadbury from IBM Institute for Business Value analysis; partially adapted
from Retail Forward and “Retailing”, Dale M. Lewison)
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
30 Safety
Both in
Production &
Storage
in Channels
Product Price Brand Influencer Sales Process Time to Ongoing
Specification Value Support
15 40 60 70 75 80 100
ACTUAL & EMERGING VALUE DRIVERS
(Source : Adapted and Applied in the context of Cadbury India from Oliver Wyman Client Example – of CVE in technology
products company)
The values given here are notional based on judjement, however actual weightages of value
drivers and their component is dependent on –market surveys and data analytics. It’s important
to note that from Cadbury’s point of veiw both the end consumers and distribution channels- like
stockist, retailers are customers, so some of the value drivers are not pertaining to end
consumers.
Lessons in CVE through competitor’s failures & success:
Branding: Nestle can be credited for revolutionizing the snack market in India - both Maggi and
Nescafe, has attained generic brand status. However Milo has failed in India, despite being the
No.1 malted drink brand globally. The reason I believe is that – Milo is also a sorghum grain
used as horse fodder, 50% of Milo production is still eaten by the world’s poorest, and during the
great famine Indians had to eat Milo imported from USA, as we didn’t have dollars to import
wheat.
Ethics: Nestle has helped farmers of Moga district in India, to developing good dairy practices in
this area with concepts like high-yield cows, quality fodder and balanced cattle feed. Kraft
Foods- became the first to stop advertising junk food to children, CEO-Roger Deromedi said,
“Our relationship with consumers is about trust. If you don’t align with society and you get out
of step with that, then you’re going to destroy shareholder value.”
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
Product Innovation by Listening to Customers: Food habits are influenced by local tastes and
flavors – Nestle India has customised its products to satisfy customer needs. This has allowed
them to command higher price premium.
PRIMARY ACTIVITIES
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
Procurement : Nestle faces stiff competition from Amul Dairy, which can operate on very thin
margins owing to it’s co-operative structure. Milk, constitutes 47% of Nestle's total raw material
costs. The company has replicated Amul’s procurement system - in Moga district, it sources 1.1
m lts of milk per day from 980,000 farmers through 2,250 collection centers.
Technology : Nestle India has access to global technology, brands and product development
skills of the parent, Nestle SA, which spends more than US$1.5b on R&D every year. Nestle
India now uses its own ERP- Application Software for supply chain management.
(Source Of Data : Motilal Oswal Securities, India –Oct 2007 Investment Report, Nestle Annual Report )
(IV &V). Asses customer feedbacks & Improve customer value ratio:As customer value needs
and expectations are dynamic, so anticipate change and redefine customer value commitments
through innovation.
(Source: Adapted from, Linking Market-Based Assets to Shareholder Value (Srivastava, Shervani and Fahey
1998)
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
(Source:Rust et. al. The Chain of Marketing Productivity, Rust, et. Al, 2004),
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A HOLISTIC APPROACH TO VALUE BASED MARKETING
Conclution: VBM tools enables managers to integrate data on customer benefits and costs in a
systematic manner, analyse relative importance of attributes & anticipate market value of their
products to multiple targets groups. It’s also a management system for marketing to grow it’s
fianacial contribution.
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LIST OF REFERENCES:
Value-Based Marketing for Bottom-Line Success by De Bonis, Balinski, and Allen
Linking Marketing Metrics to Financial Performance- by Rajendra Srivastava, David J.
Reibstein and Yogesh V. Joshi. A Technical Report , Zymen Institute of Brand Science –Emory
Goizueta Business School.
"Measuring Marketing Productivity: Current Knowledge and Future Directions" October 2004,
Journal of Marketing article by Roland T. Rust, Tim Ambler, Kumar, and Rajendra K.Srivastava
Roland T. Rust, Katherine N. Lemon, & Valarie A. Zeithaml, : Return on Marketing: Using
Customer Equity to Focus Marketing Strategy, Journal of Marketing 68(1), 2004, 109-127)
Value Based Marketing by Peter Doyle
Marketing Essentials by Philip Kotler
NESTLE Report: Return of Golden Era – by Motilal Oswal Securities, Bombay 9th October
2007
IBM Institute for Business Value quick read, undated by Steve Ballou, Julian Chu, Gina Paglucia
Morrison.
Oliver Wyman New York, Customer Value Engineering
http://www.oliverwyman.com/ow/pdf_files/Uncover_Drivers_Cust_Demand.pdf
From Customer Lifetime Value to Shareholder Value: Theory, Empirical Evidence.Paul D
Berger; Naras Eechambadi; Morris George; Donald R Lehmann; et alJournal of Service
Research : JSR; Nov 2006; 9, 2; ABI/INFORM Global.
High Performance Marketing , by Naras Eechambadi, Chapter 4, THE MEASURE OF
MARKETING.
Calculating EVA,Principles of Corporate Finace by Brealey & Myers.
JOURNAL OF MANAGERIAL ISSUES Vot. X\7I 2005: 11-25 Customer Lifetime Value,
Customer Profitability, andthe Treatment of Acquisition Spending Phillip K. Pleifer.
Bombay Stock Exchange www.bse.com
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CAGR)
12.2 10.0 10.7
R = Rf + Beta( Rm-Rf) 11.76 11.40 12.24 4 12.12 5 9.50 8 10.78 10.60
12.4 10.4 10.4
WACC 11.87 11.80 12.40 9 12.35 6 9.51 2 10.46 10.73
5 2 2
236.0 126. 2.8 90.8 52. 41. 289.1 253.2
Capital Employed 8 149.32 92 2 1 5 138.4 2 4 1
6 2 2
28.01 15.7 .59 11.2 6.4 5.1 30.23 27.16
WACC*Capital Emp 73 17.618 33 5 18 2 13.16 3 58 83
92.0 112.9 284. 326.
NOPAT=OPIBT (1-tax) 57.01 54.56 65.48 3 6 3 281.4 7 346.29 445.25
8 2 3
28.99 49.7 5.4 101. 57. 01. 316.0 418.0
EVA 27 36.942 47 3 74 9 268.2 6 54 82
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