Module:3

Connecting with Customers and Building Strong

Brands
 Customer Lifetime Value (CLV)
Marketing Management
What is Customer Lifetime Value (CLV)? - Understanding the value of long-term
customer relationships.

• CLV estimates total revenue a business can expect from a single

customer over time.

• Focuses on long-term relationships instead of single transactions.

• Helps firms decide how much to invest in acquiring and retaining

customers.
 Why CLV Matters
• Guides marketing budget allocation.
• Identifies high-value customer segments.
• Supports strategic decision-making.
• Encourages retention and loyalty initiatives.
• Increases profitability and sustainable growth.
 Basic CLV Formula
• CLV = (Average Purchase Value × Purchase Frequency ×
Customer Lifespan)

• Advanced models also consider profit margin and discount

rates.
CLV Example
• If a customer spends ₹1,000 per purchase, buys 6 times a year, and stays for 3
years:
• CLV = 1,000 × 6 × 3 = ₹18,000
• This helps managers decide acquisition and retention budgets.

CLV vs Customer Acquisition Cost (CAC)

• CLV shows long-term value.
• CAC shows cost to acquire a customer.
• Ideal: CLV should be significantly higher than CAC.
Drivers of CLV
• Customer satisfaction
• Loyalty and engagement
• Frequency of purchases
• Product quality and value
• Retention strategies
• Cross-selling and upselling

Strategies to Improve CLV

• Deliver exceptional service.
• Personalize marketing efforts.
• Introduce loyalty programs.
• Encourage repeat purchases.
• Reduce churn with proactive support.
• Build strong brand relationships.
Applications of CLV in Marketing
• Segmentation and targeting
• Resource allocation
• Pricing strategies
• Campaign evaluation
• Forecasting revenue

Limitations of CLV
• Based on assumptions and estimates.
• Data quality affects accuracy.
• Rapid market changes can alter projections.
• CLV is a powerful tool in marketing management that shifts focus
from short-term sales to long-term profitable relationships.
Organizations that understand and manage CLV can build stronger,
more sustainable customer bases.
 Consumer Buying Decision Process
The process through which consumer proceed while making their buying decisions is
known as the consumer buying decision process. This process consist of five stage as
shown below
This arrow connects all the elements in the decision process and show the impact of dempgraphic,social factors, and psychological factors
This arrow indicates the feedback where
a) Shows the impact of social and psychological factors on certain demographic such as family size, occupation and marital status
b) Shows the impact of a purchase on social and psychological factors such as social class, social performance ,and attitudes.

Problem Information Evalaution of Post-Purchase

Purchase Decision
Awareness Search Alternatives Behaviour

b
Person Roles and Family
Social Psychological
Demographic Specific References and Groups
Influences
influences a Social Classes

Situational Culture and sub-culture

Perception/Motives /Learning
Attitudes Personality
[Link] Recognition

▪ A buyer recognise the problem ,when he become aware of the desire state and
an actual condition, for e.g. A housewife who has been cooking food on her gas
stove starts feeling the need for a microoven,where she recognises that a
difference exists between the desired state-a microoven and the actual condition
– a gas [Link],therefore desired to buy a microoven

▪ The speed in which the a consumer recognises the problem can be quite fast or
[Link],a person has a problem or need but is unaware of it,Marketers
use advertising, personal selling and other methods to help trigger recognition
of such needs or problems.
[Link] Search
After recognising the problem or need, a buyer searches for product information
that can resolve the problem or satisfy the need.
Types of information search
[Link] search: searches the memory for information with her knowledge

[Link] search : In case necessary information is not retrieved or available in

her memory recognition she seeks additional information through external search
which consist of friends, relatives and media. Studies shows that WOM
communication has shown strong impact on consumer judgements than print
media, also repeated advertisements and visuals increases consumer learning
information.
[Link] of Alternatives
▪ A successful information search yields a number of brands that a buyer views
as possible alternatives, This group of products/brands is called the buyers
evoked set. For e.g. an evoked set of microovens might include those made by
LG,Whirlpool,Samsung and Philips.

▪ Various objective and subjective characteristics that are important to the buyer
are used to evaluate the alternatives, cost and warranty are examples of
objective criteria whereas brand image and style are example of subjective
characteristics
[Link]
▪ In this stage the buyer chooses the product or brand to be bought. Product
availability may influence which brand is purchased, For e.g. if the brand
ranked highest isn’t available ,the buyer may be purchase the brand ranked
second.

▪ During this stage the buyer also chooses the seller from whom he or she will
buy the product.

▪ All terms like price,warranty,delivery maintenance agreement etc comes into

place.
5. Post purchase Behaviour:
▪ After the purchase the buyer begins evaluating the product to ascertain if its
actual performance meets the expectations.

▪ Outcome of this stage is either satisfaction or Dissatisfaction, shortly after

purchasing an expensive product, a buyer doubts whether the right decision has
been made. This is called cognitive Dissonance. For e.g. house wife purchased
a microoven for Rs.10000 she might wonder whether she purchased the right
brand and quality.

▪ Also a buyer experiencing cognitive Dissonance may attempt to return product

or seek a positive information about it justify her choice, marketers sometimes
attempt to reduce cognitive dissonance by sending results showing that
consumers are very satisfied with the brand, such results are send ti new
buyers.
Conclusion
▪ It becomes necessary to understand some important points in consumer decision
process, first the actual act of purchasing is only one stage in the process and
usually not the buying process.

▪ Second, all consumers do not necessarily pass through all stages in the buying
process, Buyer may end the process at any stage.

▪ Finally, persons engaged in extended problem solving usually go through all five
stages, but those who engaged in limited problem solving and routine response
behaviour may omit some stages.
 Market Segmentation
What is Market segmentation
▪ Markets are Heterogeneous; Segmentation divides them into
Homogeneous Sub-Units

▪ The market for a product is nothing but the aggregate of the

consumer of that product

▪ Markets break up the heterogeneous market for product into

several sub units, or sub markets, each relatively more homogeneous
within itself, compared to market into a number of sub markets/
distinct sub units of buyer , each with relatively more homogeneous
characteristics, is known as market segmentation
Continued
▪ It would be useful to provide one important clarification right at the beginning.

▪ Markets, sometime, speaks of product segments and price segments and use
these expressions as synonymous with market segments.

▪ This can leads to a wrong understanding of what market segments, or for that
matter, the process of market segmentation as a whole, actually connote

▪ We have to be clear that in market segmentation, it is the consumers who are

segmented, not the product, nor price. Market is about people who consume the
product, not about the product that's gets consumed
Titan Watches Arrives in three broad Segments For the youth / the outdoor lovers

• The Rich
• The Middle
• The Lower class
The Lower For the Gold lovers For Children Segment For Designer Segment
Why segment the market
• Facilitates Right Choice of Target Market Facilitates Effective
Tapping of the Chosen Market
• Makes the Marketing Effort More Efficient and Economic
• Helps Identify Less Satisfied Segments and Concentrate onThem
Bases for segmentation
• A market/ consumer population for a product can be
segmented using several relevant bases. The major ones
include:
• Geographic
• Demographics
• Socio-cultural
• Psychographic
• Buying Behavior
Geographical segmentation

• Segmentation of consumer based on factors like climate zone, continent

country, region, state, district, and urban/rural area, constitutes geographic
segmentation.

• Marketer, who operate globally, often segment the market segments the market
by continents/ country/ region in the first instance, and then go for
segmentation on other bases.

• National markets within a country like India, often segment the market by
region, state, district and urban/rural area, in the first instance, and then go for
segmentation on other bases
Demographical segmentation
• Segmentation of consumer based on variables such as race,religion, community,
language, age, stage in family cycle, gender, marital status, family size,
occupation, economic position/income/purchasing capacity level, and social
status ,of the consumer demographic segmentation

• Based on age one can have the 1) Infants 2) Child Market Teen Market 3)
Youth Market 4) Middle Aged Market 5)Elders Market

• Genders: On the basis of gender, the consumer market may be classified into
male market female market.

• Social Class: Companion design their products and services for particular social
classes. There are three social classes: 1 Upper class 2. Middle class 3. Lower
class
Socia Cultural segmentation

Culture and social class are the two main bases of segmentation here.

• Culture: Culture influence consumer behavior, deeply. A given culture brings in

its own unique pattern of social conduct. A person usually acquires his cultural
attributes right at his childhood. Culture includes religious,
caste,traditional,language, pattern of social behavior .

• Social Factor: Social group of varying types exert influenced on the consumer.
Social group include family, peer group, close colleges. They adopt their
common life style.
Socio cultural segmentation

Example:
• Zee Televisions deals with variety of channels regional channel, sports channel, movie channel.
• McDonald has both veg and non veg burger. McDonald has veg burger for vegetarian and nonveg burger for non vegetarian
Psychographic segmentation
• Psychographic Segmentation groups customers according to their life-style
and buying psychology.
• Many businesses offer products based on the attitudes, beliefs and emotions
of their target market
• The desire for status, enhanced appearance and more money are examples of
psychographic variables.
• They are the factors that influence your customers' purchasing decision.
• In psychographic segmentation, elements like life style, attitude, self-concept
and value system, form the base.
• A person's pattern of interests, opinions, and activities combine to represent
his or her lifestyle
Continued
• Knowledge of lifestyle can provide a very rich and meaningful picture of a
person.
• It can indicate whether the person is interested in outdoor sports, shopping,
culture, or reading.
• It can include information concerning attitudes and personality traits.
• Lifestyle also can be used to define a segment empirically; this is often called
psychographic ( as opposed to demographic) segmentation ..
Behavioural segmentation
• The customer can also be divided into certain segments on the basis of their
knowledge, attitude, use, or response to a product Such behavioural variables
are discussed below
• Occasions : (Marriages, festival occasions)
• Benefits sought : (Colgate- White teeth stops bad breath,Cibaca Provides
Therapeutic benefits, Vicco vajradanthi and
neem gives ayurvedic benefit)
• User Status: (Ex-users, first users, regular users, Potential users)
• Usage rate: (Light, Medium, and heavy user segments)
• Loyalty status: (Hard core loyals, Split Loyals(Two r Three brans), Shifting
Loyals (Shift from one brand to another),witchers (No loyalty to any brand))
• Attitude: Customers are divided into five groups(Enthusiastic, Positive,
Indifferent, Negative and Hostile)
Advantages of segmentation
• Helps distinguish one customer group from another within agiven market
• Facilitates proper choice of target market.
• Facilitates effective tapping of the market.
• Helps divide the markets and conquer them.
• Helps crystallize the needs of the target buyers
• Makes the marketing effort more efficient and economic
• Helps spot the less satisfied segments and succeed by satisfying such segments.
• Makes the marketing effort more efficient and economic
• Helps spot the less satisfied segments and succeed by satisfying such segments
• Brings benefits not only to the marketer but also to the customeras well.
Effective market segmentation
♦ Measurability (lnterms of size and purchasing power)
♦ Accessibility (Reached and served through suitablemeans of
distribution of promotion)
♦ Substantiality(Large and profitable)
♦ Differentiability (Clearly distinguishable)
♦ Actionability.(to be effective makers of segmentation should be
compatible with the manpower, financial andmanagerial resources
 Market Targeting
To understand the Targeting process firstly we should know
the meaning of term ''Target Market''.
Target Market: It refers to that particular
market in terms of customer group
which is selected or identified by
marketers to tap it. All marketing plans
& strategies are made according to
this target market to generate revenue
which will help firm to increase market
share & profitability
Process of targeting
Once the firm has decided its market segments then it has to decide how many
segments to be selected for targeting purpose. Market targeting is a process of
capturing the target market to cultivate profits and Targeting Process consist
following steps:
Evaluate the market segments
In evaluating different market segments the firm should
consider two important factors
• Segment overall attractiveness: In this step we analyze all the
opportunities available in the market which could be tapped by
providing appropriate product and the cultivation of profit.

• Company's objectives and resources: Once the opportunity is

identified in the market we need to match the available resources
with the firm which is required to exploit the opportunity in
desired manner.
Selecting the market segments
Single Segment Concentration: Here company is having single product and
focus is on single market. It is applicable for those sellers which has small
market and limited demand in the market.
Eg:Target Segment: Red Bull-Young, active consumers, athletes, and extreme
sports fans.
Strategy: Red Bull concentrates solely on the energy drink market rather than
diversifying into sodas or bottled water like Coca-Cola or Pepsi.

Selective Specialization: Here companies are dealing in multiple product and

multiple market but they select some specific market for specific product.
e.g: Apple
• For Business class Laptop
• For Music lovers iPod
• For phone users iPhones
Product Specialization: Here the firm specializes in marketing a certain product
that It sells to several market.
e.g: Nokia
Cheaper Price class Nokia 1100
Business class Nokia E-Series
Music lovers class Nokia X-Series

Market Specialization: Here firm concentrate on serving many needs of a

particular customer group or markets with focused strategy.
eg: Johnson & Johnson for babies only
• Powder Product/Market
• Soap
• Shampoo etc.
Full Marketing Coverage: Here firm serve all customer groups with multiple
products focused towards capturing all markets with variety of products in
product portfolio.
e.g
• Coca Cola
• Kinley
• Fanta
Full market coverage approach can be applied in 2 ways of Targeting
• Differentiated Market: It makes same strategy for all markets.
• Undifferentiated Market: It means separate strategy for each
segment but cover all segments.
Additional consideration
We should consider some more points while targeting market

(a)Ethical choice of market Targeting: It means customer decision should be

taken after considering what is right and what is wrong for market or customers.
We should be fair & honest in dealings with customers.

(b)Segment Interrelationship: All segments are interrelated and integrated that's

why we should coordinate all segments to minimize the cost of and utilize all
available resources.
Targeting Strategies

Once the Segment or segments are selected and targeting process is being started
then marketers adopt the appropriate strategy a s per market and firm suitability.
These strategies are:

(1) Undifferentiated /Standardization:-ln Undifferentiated strategy same

product is offered to all market segments with common standardized features
without keeping any difference even in the presence of difference among
customers. Here marketers launch the product with same pricing, distribution &
promotion strategies applicable to all segments.
e.g.- coke & Pepsi
(2)Differentiation:-lt is just opposite of above explained. In this strategy firms differentiates its
products for all segments according the needs& wants of that segments. Due to presence of
difference of taste & preference, buying power etc. among consumers marketers alter its
product features & other related strategy in all segments to fulfill the different needs of
consumers.
e.g.:- Airlines
•First Class
•Business Class
•Economy Class

(3)Concentrated/Focused:- It is combination of both. Here the core product and its strategies
remains the same but differentiation is made to take into account specific customers groups
requirements. Here basic product is same but minor differences are created to offer variety in
same product line.
e.g.:- Maruti
•Zen Lxi
•Zen Vxi
•Zen Zxi
 Market Positioning
Meaning & Definition
Positioning means the activity of making position or image in the minds of
customers. Positioning is the process of portraying a picture of company’s
product and its customer relation in the minds of customers.

"Positioning is the act of designing the company’s offering and image to occupy a
distinct place in the target's mind."
--Philip Kotler--
Why Positioning?

(l)To create a distinct place of product& service or corporate in the minds of

customers.

(2) To provide a competitive edge to a product or an attempt to convey

attractiveness of the product to the target market.

(3) To give the target market reason of buying our product/service and then
formulation of all strategies according to the customer perception.
What is image
Image is the picture of an organization and its products & services perceived by
target group, Images are of
following types:

Types of Images

• Current Image: The way that a company is being seen by customer.

• Mirror Image: The way that a company think it is being seen by customers
• Wish Image: The way that a company would like to be seen by customers.
Errors In Positioning
There are some common errors of positioning which is committed by firms due
to in effective marketing Programmes. These errors are as follows:
(1) Under Positioning: This errors occurs when marketers take little steps for
promotion of product due to which buyers are very less aware about the brand and
its product's performance & popularity. This error is done by those company's
either do not have capacity to promote their product or do not have marketing
caliber of performing such roles.

Eg : Pepsi introduced "Pepsi A.M.“(1989) as a morning soda alternative to coffee.

However, the brand did not effectively communicate why consumers should choose
Pepsi over coffee. As a result, the product failed due to a lack of strong positioning.

Microsoft launched Zune(2006) to compete with Apple’s iPod but failed to differentiate
itself. Consumers didn’t see a compelling reason to switch from the well-established
iPod, leading to poor sales and eventual discontinuation.
(2) Over Positioning: It refers to the error when firm position itself for some
specific group but due to over positioning that particular groups believe that it is not
for their class, it is for some higher class customer group.
Fiat Cars – "European Engineering "Issue: Fiat focused heavily on its European
heritage and premium engineering but failed to address key concerns like after-sales
service, spare parts availability, and fuel efficiency—factors that matter most to Indian
consumers. Lesson: Over-positioning on one strong feature while neglecting practical
consumer needs can limit market success.

(3) Confused Positioning: Some time buyers may have confused image of the
brand. This may occur as a result of frequent changes in the positioning
statement.
EG:Pepsi Blue – Unclear Target Audience Pepsi introduced "Pepsi Blue" as a berry-
flavored cola in India, but the positioning was vague. The brand failed to explain why
consumers should choose it over regular Pepsi, leading to its quick exit.

(4) Doubtful Positioning: This error occurs when doubt arises in the minds of
buyer regarding the company’s claims of benefits through the product.
Customer have doubt whether firm can fulfill their promises or not.
e.g: "Hair Gain Oil "&"Weight Loss medicines"
Positioning Strategies
(l)Attribute Positioning: A company position itself on the basis of an
attribute which creates their separate identity such as size, no. of years of
existence etc.
e.g.: "Raymonds Since 1925“

(2)Benefit Positioning: Corporate may position itself as a leader in a

certain benefit which they provides to their customers.
e.g.: " Maruti---Service Station“

(3)Use or Application Positioning: Positioning can be done on the basis of use

or application of the product. Corporate position their product as best for some
use like cafe coffee day position itself for discussion & meeting point.
e.g: "Cafe Coffe Day-a lot can happen over a coffee
(4)User Positioning: When firm position itself and its products as best suited for
a particular user class is called user positioning
e.g.: ''Johnson & Johnson----for babies‘’

(5)Competitor Positioning: In this category firm claims to be better in some

product or service than a well-known competitor.
e.g.: ‘’Coke against Pepsi‘’

(6)Value Positioning: This strategy focuses on company's positioning as offering

the best product at lower price or we can say best valued product.
e.g.: "McDonald Burger@ Rs 25 only/''
 Brand Equity
A brand is a name or symbol used to identify the source of a product. When developing a new
product, branding is an important decision. The brand can add significant value when it is well
recognized and has positive associations in the mind of the consumer. This concept is referred
to as brand equity.
Three perspectives of viewing Brand Equity
1. Financial - One way to measure brand equity is to determine the price premium that a
brand commands over a generic product. For example, if consumers are willing to pay $100
more for a branded television over the same unbranded television, this premium provides
important information about the value of the brand. However, expenses such as promotional
costs must be taken into account when using this method to measure brand equity.

2. Brand extensions - A successful brand can be used as a platform to launch related products.
The benefits of brand extensions are the leveraging of existing brand awareness thus reducing
advertising expenditures, and a lower risk from the perspective of the consumer.
[Link]-based - A strong brand increases the consumer's attitude strength toward the
product associated with the brand. Attitude strength is built by experience with a product. This
importance of actual experience by the customer implies that trial samples are more effective
than advertising in the early stages of building a strong brand.

Building and Managing Brand Equity

Peter H. Farquhar outlined the following three stages that are required in order to
build a strong brand

1. Introduction
2. Elaboration
3. Fortification
Alternative Means to Brand Equity
In some cases, especially when there is a perceptual connection between the products, such
extensions are successful. In other cases, the extensions are unsuccessful and can dilute the
original brand equity.
Managing Multiple Brands: Different companies have opted for different brand
strategies for multiple products. These strategies are:
[Link] brand identity - a separate brand for each product. For example, in laundry detergents
Procter & Gamble offers uniquely positioned brands such as Tide, Cheer, Bold, etc.

[Link] - all products under the same brand. For example, Sony offers many different
categories under its brand.

3. Multi-brand categories - Different brands for different product categories. Campbell Soup
Company uses Campbell's for soups, Pepperidge Farm for baked goods and V8 for juices.

[Link] of names - Different brands having a common name stem. Nestle uses Nescafe,
Nesquik, and Nestea for beverages.
Measurement of Brand equity
[Link] Level: Firm level approaches measure the brand as a financial asset. In short, a calculation is made
regarding how much the brand is worth as an intangible asset. For example, if you were to take the value of the
firm, as derived by its market capitalization - and then subtract tangible assets and "measurable" intangible assets-
the residual would be the brand equity.
Market Capitalization of TCS Suppose
TCS has a market capitalization of ₹14 lakh crore (market value of all its shares).
Less: Tangible Assets, these include buildings, campuses, IT infrastructure, equipment, etc. Assume tangible assets
= ₹1.5 lakh crore
Less: Measurable Intangible Assets, these include software platforms, patents, contracts, and other identifiable
intangibles recorded in the balance sheet.
Assume measurable intangibles = ₹2 lakh crore
Value (Brand Equity)
Brand Equity = Market Capitalization−(Tangible Assets + Measurable Intangibles)
=14−(1.5+2)=₹10.5 lakh crore
2. Product Level: The classic product level brand measurement example is to compare the price of a no-
name or private label product to an "equivalent" branded product. The difference in price, assuming all
things equal, is due to the brand. More recently a revenue premium approach has been advocated.

Price Comparison (illustrative):

Tata Salt (1 kg): ₹28
Private-label iodized salt (1 kg): ₹18
Illustration:
Tata Salt sells - 10 million kg per month × ₹28 = ₹280 million
Private label sells - 10 million kg per month × ₹18 = ₹180 million
Revenue Premium due to brand = ₹100 million per month
[Link] Level: This approach seeks to map the mind of the consumer to find out what associations
with the brand that the consumer has. This approach seeks to measure the awareness (recall and
recognition) and brand image (the overall associations that the brand has).

Brand Recall - When Indian consumers are asked “Name a butter brand”
Brand Recognition - When consumers are shown multiple butter packs, they instantly recognize the
yellow Amul Butter pack - The Amul Girl mascot
 KEY NOTES
Market Segmentation – What is segmentation and why – Bases of segmentation –
Advantages of segmentation- effective segmentation.

Market Targeting – what is targeting, process and evaluate the market segment –
selecting the market segments for targeting- Targeting Strategies

Market Positioning – Meaning and definition, why Positioning and what is Image
& its types- Errors in positioning – Positioning strategies

Brand Equity – Three perspective of viewing brand equity- alternative means to

brand equity-Measurement of brand equity.