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Marketing
Marketing Framework
The 5Cs and 4Ps for strategic market analysis
Overview
Marketing strategy begins with understanding the market through the 5Cs framework and executing through the 4Ps marketing mix. The 5Cs help analyze the competitive landscape, while the 4Ps provide tactical tools for creating, delivering, capturing, and communicating value.
Key Concepts
The 5Cs (Market Analysis)
Company (objectives, competencies, resources), Customers (what they value, why/how they buy), Competitors (who competes, differentiation), Collaborators (who helps deliver value), Context (external market factors).
The 4Ps (Marketing Mix)
Product (creating value), Place (delivering value), Price (capturing value), Promotion (communicating value). These tactical tools execute your strategy.
Value Creation vs Value Capture
Creating value for customers is necessary but not sufficient. Firms must also capture part of the value they create through pricing and business model design.
Customer-Centric Approach
Start with customer needs, not product features. Understanding what customers value and how they make decisions is fundamental to effective marketing.
Key Formulas
Key Takeaways
- •Marketing is about creating and capturing value for customers
- •The 5Cs provide a structured framework for market analysis
- •The 4Ps translate strategy into tactical decisions
- •Always consider all five Cs before making marketing decisions
Common Mistakes
- •Focusing on product features instead of customer benefits
- •Ignoring competitive context when setting strategy
- •Not considering all 5Cs before making decisions
CLV and CRM
Measuring and maximizing customer lifetime value
Overview
Customer Lifetime Value (CLV) quantifies the total value a customer brings over their entire relationship. Understanding CLV helps prioritize customer segments, set acquisition budgets, and design retention strategies. The margin multiple formula provides a practical way to calculate CLV.
Key Concepts
CLV Formula
CLV = m × [r / (1 + i - r)] - AC. The margin multiple [r / (1 + i - r)] captures the present value of the customer relationship stream.
Margin Multiple
r / (1 + i - r) where r is retention rate and i is discount rate. Higher retention dramatically increases the multiple - small retention improvements have big CLV impacts.
Three CRM Strategies
Acquisition (getting new customers), Retention (keeping customers longer, increases r), Expansion (increasing value from customers, increases m). Each lever affects CLV differently.
CLV/AC Ratio
VCs often look for CLV/AC ratio of 3:1 or higher. This ensures the business captures enough value to justify acquisition investments.
Customer Heterogeneity
Not all customers have the same value. Some segments are profitable, others are not. Understanding this heterogeneity is crucial for targeting and resource allocation.
Key Formulas
Key Takeaways
- •CLV is forward-looking and represents an expectation, not guaranteed value
- •Small improvements in retention have outsized effects on CLV
- •Different customer segments have vastly different CLVs
- •Acquisition cost must be justified by expected lifetime value
Common Mistakes
- •Using historical profitability instead of forward-looking CLV
- •Treating all customers as equally valuable
- •Setting acquisition budgets without considering CLV
- •Ignoring the impact of retention on lifetime value
Value to Customers
Understanding customer benefits and the purchase funnel
Overview
Customers buy products for the benefits they provide, not the features. Understanding the different types of benefits (economic, functional, psychological) and how customers move through the purchase funnel helps design more effective value propositions and marketing strategies.
Key Concepts
Types of Customer Benefits
Economic (cost savings, efficiency), Functional (performance, features), Psychological (status, identity, emotional connection). Different segments value these differently.
Purchase Funnel (AIDA)
Awareness → Interest → Desire → Action → Repurchase. Marketing efforts should be designed to move customers through each stage of the funnel.
Features vs Benefits
Features are product attributes. Benefits are what customers actually care about. Always translate features into customer benefits.
Value Proposition Design
Articulate why customers should buy from you, not competitors. Focus on the benefits that matter most to your target segment.
Key Formulas
Key Takeaways
- •Customers buy benefits, not features
- •Different customer segments value different types of benefits
- •The purchase funnel helps diagnose where marketing is failing
- •Effective value propositions clearly articulate customer benefits
Common Mistakes
- •Describing features instead of benefits in marketing
- •Assuming all customers value the same benefits
- •Not tracking where customers drop off in the funnel
- •Creating value propositions that don't differentiate from competitors
STP Framework
Segmentation, Targeting, and Positioning
Overview
The STP framework answers two fundamental questions: Where will we play? (Segmentation & Targeting) and How will we win? (Positioning). Effective segmentation recognizes that customers are heterogeneous, targeting selects the most attractive segments, and positioning defines how to compete in chosen segments.
Key Concepts
Why Segment?
Averages can be misleading (Simpson's Paradox). Heterogeneity exists in customer needs. Segments are predictors of behavior that enable more effective marketing.
3Cs for Target Selection
Customer Value (size, growth, reachability), Company Fit (objectives, competencies, resources), Competitive Intensity (underserved needs, competitor strengths).
Strategic vs Tactical Segmentation
Strategic: Few broad segments for positioning decisions. Tactical: Many granular segments for execution (promotions, pricing). Both have their place.
Positioning Statement
For (target) who (need), the (product) is a (category) that (benefit). Unlike (competitors), our product (point of difference).
Targeting is Saying No
Effective targeting means deliberately NOT targeting some segments. Trying to serve everyone usually means serving no one well.
Key Formulas
Key Takeaways
- •Segmentation reveals heterogeneity hidden by averages
- •Target selection requires evaluating Customer Value, Company Fit, and Competition
- •Positioning defines how you will win in your chosen segments
- •Saying no to some segments is as important as saying yes to others
Common Mistakes
- •Using aggregate data instead of segmented analysis
- •Targeting too many segments without sufficient resources
- •Creating positioning that doesn't differentiate from competitors
- •Ignoring segments that seem small but have high CLV