"A strong market orientation does not occurs by mere proclamation. To attain a strong orientation, a business needs to adopt a market-based management philosophy. This means implementing a process for tracking market performance and restructuring an organization around market rather than products or factories and creating employee culture that is responsive to customers and changing market condition." -Robert J. Best

1. Market –Based Management
Roger J Best
Synopsys by Michael Hong

2. Ultimate Marketing Objectives
The ultimate objective of any given marketing strategy should be attract, satisfy
and retain target customers.
• Attract: Brand Reputation, Customer Preference, Lifestyle etc.
• Satisfaction: Quality, Value, Usability, Stature etc.
• Retention: Added value, Habituation, lack of alternative
How are you going to deliver them?

3. Who does marketing in your company?
MK
Market based business with a
Dept
strong market orientation are more CS
C
profitable. Dept
• Implement process of tracking
market performance
• Structure organization around RD
E v
market not product or factory Dept
MF AC
Dept Dept
LG
Dept
Marketing isn’t somebody’s responsibilities;
Marketing is everybody’s responsibilities.
-Jack Welch - 0

4. Market is constantly changing and so should you.
The only thing that is constant is change.
• Customer changes: Demographic, life style, and consumption behavior
• Competitor changes: Innovation
• Environment changes: Economic, Politic, Social, Technology
If you are not Market Poor Understanding of of
Poor Understanding
Customers and Competition
Customers and Competition
Oriented
Stagnant Unfocused Competitive
Shareholders Value Position
Short Term
Short Term Me-Too
Sales Tactics
Sales Tactics Customer Value
Sporadic Business
Sporadic Business Excessive
Unit Profits
Unit Profits Customer Turnover
High Cost of Customer
High Cost of Customer Market Share
Retention and Acquisition
Retention and Acquisition Instability

5. Marketing Driven Company
Marketing driven organization have different behaviors, systems and
measurements. Market oriented organization sells products that customers want
rather than what you can make or sell.
Market Market Profit
Orientation Metrics Metrics
Behaviors Measurement Performance
Key Questions
• Are we market oriented or sales oriented?
• Customer satisfaction or sales revenue?
“Marketing is too important to leave to
the marketers.” – David Packard (HP)

6. Winning Strategy for the changing
Three management characteristics that make Market Oriented company.
• Customer Focus: An obsession with understanding customer needs and
delivery customer satisfaction
• Competitor Orientation: Continues recognition of competitors’ sources of
advantage, competitive position, and marketing strategies.
• Team Approach: Cross-functional team dedicated to developing and
delivering customer solutions.

7. Marketing Impact on Customer Satisfaction
Replacing the dissatisfied customers with new customers will cost 3 to 5 times
more than retaining them.
A market based business looks at customer as lifetime partner
Customer
Base 100%
Satisfied Dissatisfied New
70% 30% customers
70% Retained
Make it easy To make up the lost,
Complain Do not
for customers marketing must
10% to complain complain 90%
acquire 24.9% new
customers to stay even.
Acquisition cost is 3-5X
over retention
Retained
Lost Lost Remained
Care provided
20% 90% loyal 10%
80%
0.6% Lost 2.4% Retained 24.3% Lost 2.7% Retained

8. Customer Retention Considerations
Not all customers are same.
• Core Customers – Brand loyal customers
• At-Risk Customer – Profitable but not loyal to your brand
• Non-profit Customers- Satisfied and retained but not profitable
• Spinners – Sales promotion driven customer

9. Measuring Market Based Performance
Both Internal and External Performance Metrics are needed to understand
marketing effectiveness and business performance.
Internal Performance External Performance
Unit Cost Market Share
Manufacturing Overhead Relative Share
Marketing Expenses Customer satisfaction
R&D Expenses Market Coverage
Sales/Employee Product Awareness
Inventory Turn Relative Quality
Days Account Receivable Relative Price
Return on sales Customer Preferences
Asset Turnover Relative New Product Sales
ROI and ROE Response Time to Problem

10. Measuring Market Based Performance
For financial performance, in-progress market metrics and end-result metrics
can be used.
Measurement In-Progress Metrics End-Result Metrics
Perspective
Product Defects Net Profit/Earning
Late Delivery Return on Sales
Internal
Billing Errors Margin per Unit
(in-company)
Account Receivable Return on Assets
Inventory Turnover Asset Turnover
Customer Satisfaction Market Share
Relative Product Quality Customer Retention
External
Relative Service Quality Relative new Product Sales
(in-market)
Intension of Purchase Revenue per Customer
Product awareness Market Growth Rate

11. Profitability by market based accounting
By articulating Net Marketing Contribution, we can produce Market based
accounting which will help marketing impacts in all performance metrics.
Net Profit = Revenue - Expense
Net Profit = Revenue - Cost of Good Sold – Operating Cost
Net Profit = Revenue - Cost of Good Sold – Marketing Cost – Other Operating cost
Net Profit = NMC - Other Operating cost
Strategies to grow Strategies to Strategies to grow
Market Demand Increase Market Customer
Share Purchase
Market Market Revenue Variable Cost Marketing
NMC = X X Customer - per customer
-
Demand Share Expenses
Strategies to Strategies to Lower Strategies to Increase
Enter or Exit Variable Cost per Marketing Efficiency
Markets customer

12. Market Potential
Ay any given point in time, there are existing customers who make up current
market demand and potential customers who provide the opportunity for
growing market demand
• Narrow Market: Articulated needs of Served customer
• Un-served Market: Undiscovered customer’s need
• Vertical Market: Whole sales to Retail distribution
• Horizon Market: Product line extension
Not Affordable
Untapped Lack Benefits
Market Unable to use
Opportunity
Market Demand
Not Available
Not Aware
Market
Penetration
Market
Potential
Start Now

13. Customer Adoption and Market Development
The rate at which customer enter a market depends on product
attractiveness, customer characteristic and marketing effort.
Market development pattern can be projected based on Market Potential, Market
Penetration and Rate of Entry.
To successfully reach mainstream market, marketer must deliver complete
solution that market can accept.
100% Full market Development
Market
Development
Gap
Early Mainstream
Market Market
Early Adopter Early Majority Late
innovator Laggards
Majority

14. Product Life Cycle and Marketing Profitability
Market
Demand (Unit)
Market Demand
Volume Units
Market Share
Time Gross Profit
Dollar per (Unit)
Price Margin per Unit
Cost
NET
Time MARKETING
Marketing Expenses CONTRIBUTION
Marketing
Expenses
Time

15. Market Share Development
Market Share can be estimated with a simple method of research.
Market Share = Promotion X Product X Price X Place X Service
% of
% of Brand % of Price % of % of
Product
Awareness Acceptance Availability Repurchase
Preference
100%
Market Development Index (MDI)
MDI = (Market Demand / Market Potential) x100
Future Share Development Index(SDI)
MDI
SDI= (Current Share / Potential share) x 100
Current
0% SDI 100%

16. Customer Value
Greater the customer value, greater the competitive edge. Value does not
necessary reflects reality. Prioritize value creation based on cost structure.
Product
Customer
Benefit
Value
Brand
Benefit
Price
Service
Benefit
(Perceived) (Perceived) Cost
Benefits of Purchase
Customer Value = Benefits – Cost

17. Challenges of Market Segmentation
“I will know when our
business are doing a
good job of market
segmentation when
they can articulate
who we should not sell
to.”
-Chuck Lillis, CEO
MediaOne Group
Usage
Behavior
Demographic
? Lifestyle
Needs-Based

18. Market Segmentation process
Need-Based Segmentation Group customers based on similar needs
Determine Demographics, lifestyles and Usage
Segment Identification Behaviors.
Determine market Growth, Competitive Intensity and
Segment Attractiveness Market Access.
Determine Net Marketing Profitability
NMC= [Segment Demand x Segment Share. X
Segment Profitability (Revenue per customer –Cost per customer)]
Marketing Expenses
Segment Positioning Determine Value Proposition for each segment
Segment “Acid Test” Test story “Segment Story” Board
Marketing Mix Strategy Develop 4P strategy for each segments

19. Segmentation Case Study
After 20 years in the business, Gasoline retailers found that people don’t just
buy gas for price alone.
Road Warriors Generation F3 True Blue Home Bodies Price Shopper
16% 27% 16% 21% 21%
Premium Quality Fast fuel, fast Branded Products Convenience Tight on budget
Service service and Fast and Reliable House wives
High Income food service.
Middle-aged Upwardly mobile Moderate income
Male men and women men and women

20. Understanding Competitive Position
Competitive Position
Industry Force Competitor Benchmarking Competitive Advantage
Market Entry/Exit Competitor Intelligence Cost Advantage
Buyer/Supplier Power Competitor Analysis Differentiation Advantage
Substitute/Rivalry Competitive benchmarking Marketing Advantage
FAVORABLE PERFORMANCE (Market based) COST
Barriers Entry - High Market Share Variable Cost
Barriers to Exit - Low Relative Price Marketing Expenses (ROI)
Buyer Power – Low Relative product quality Operating Expenses
Supplier Power – High Relative Service quality DIFFERENTIATION
Substitute – Low Number of distributor Product Performance
Rivalry- Low Sales Force Service Quality
Promotion (%of sales) Brand Reputation
Marketing budget (%of sales) MARKETING
PERFORMANCE (Operating) Distribution Channel
Unit Manufacturing Sales Effort
Direct materials Brand Awareness
Overhead
Return on Assets
Return of Sales
Asset Turn Over
Account Receivable
Sales per Employee

21. Marketing Mix Strategies

22. Product Positioning
Product Product Sales Physical Retailing
Differentiation Price Breath Force Distribution merchandising
Market Share = Product Positioning X Marketing Effort
New Service Brand Media Sales Customer
Product Quality Image Advertising Promotion Support
Case Study :
Gel like substance that can shaped and cured to repair worn or broken machine.
RC-601 Quick Metal
Target Production Engineers Maintenance Workers
Price $10 per Tube NA
Promotion Provide to technical data to Educate maintenance worker on
explain why RC-601 would how to use fix everyday problems
work for production engineers with Quick Metal
Behavior Engineers do not take risk. Focus on solving problems.

23. Product Positioning - Brand Differentiation
Increase occupancy rate Preference increase
by 15% by adding from 47% to 59% with
Marriott name Kellogg name
Brand Equity
Brand Asset
Performance that adds Brand Liabilities
value to the brand Performance that lowers
brand value

24. Pricing Strategy
The goal of pricing strategy should be to improve profit. Any price change will
impact volume and margin. Cost based pricing is simple and easy but Market
based pricing will impact Customer value, Market share and Profitability
Product Life Cycle Pricing Strategy
Strategic Account
Extensive
Plus-One
Customer Market Based
Customer Intelligent
Reactive Pricing Pricing
Segment
(Customer (Market
Orientation) Orientation)
Perceived
Competitive
Some
Bidding
Value in Use
Harvest
Cost Based Competitor
Pricing Based Pricing Low-Cost Producer
Skim
(Company (Competitive
Penetration
Orientation) Orientation)
None
Cost-Plus
None Some Extensive Floor
Competitor Intelligent

25. Pricing Strategy
Price elasticity is a measure of how demand for a product is influenced by price
changes. Price elasticity can help to answer questions like: If I increase my unit
price by 20%, how much unit sales volume will I lose? If I lower my unit price
by 10%, how much unit sales volume will I gain?
Price Elasticity = [(Q2-Q1) / ((Q1+Q2) / 2 )] / [(P2-P1) / ((P1+P2) / 2]
Where Q1 = initial quantity; Q2 = final quantity; P1 = initial price; P2 = final price
Price Elasticity and Performance
Price Unite Sales Unite Total
Action Volume Revenue Margin Contribution
Raise Price Decrease Increase Increase Increase
Inelasticity
(<-1)
Lower Price Increase Decrease Decrease Decrease
Unity (=-1) Hold Price No change Maximum No change No change
Raise Price Decrease Decrease Increase Inc or Dec
Elasticity
(>-1)
Lower Price Increase Increase Decrease Inc or Dec

26. Place - Channel Strategy
More manufacturers are going to direct to customer market as technology
advance in CRM and online channel.
Channel Performance
Customer Reach Operating Efficiency Service Quality
Manufacturers
Direct Channel System Indirect Channel System
Direct Online Tele- Direct Agent
Sales Sales marketing Marketing
Wholesalers
Retailers
Customer Market

27. Place - Channel Strategy
Sales force is creating a source of competitive advantage when sales effort is
valued by customers and can not be matched by competitors.
Well trained sales force can generate higher
Quality sales result
Never be short on number of sales head count
Coverage
EMPLOYE
E

28. Promotion - Advertising
Three key objectives of Advertising
• Build Awareness: Build a level of awareness with respect to brand/product
• Reinforce the message: Maintain a level of awareness
• Stimulate Action: Motivate target customers to take a specific action
Customer Response Index (CRI)
Action 90% 16%
Intension 68%
Interested 77% No Action 10% 2%
Comprehend 54% No Intension 68% 8%
Aware 77% Not Interested 23% 8%
Don’t Comprehend 46% 29%
Unaware 37% 37%
100%
Awareness Comprehension Interested Intension Action
Media Reach Frequency Benefit Price Availability
Media Frequency Content Relevancy Test/Trial Selection
Creative Ad Switching Choice
cost T&C

29. Process of Building a Marketing Plan
Situation Analysis Review market forces, competitive position & Current
performance
Assess Strength, Weakness, Opportunity and Threat
SWOT Analysis
Access market attractiveness, and competitive
Strategic market Plan advantage. Develop strategic market plan and
performance objective
Tactical Marketing Mix Develop 4P strategy: Product, Price, Place and
promotion
Strategy
Marketing Budget Adequate budget to achieve marketing objectives
Performance Timeline An estimate of profit performance is made for each year of
a 3-5 year strategic marketing planning horizon
Performance Evaluation Share, sale revenue, Profitability

30. Strategic Market Planning
Protect
Product
Diversification
Market Grow
Diversification
Offensive
Defensive
Strong
Offensive (Grow) Focus
(Protect)
(Grow) Defensive
Market Attractiveness
(Protect)
Offensive Offensive Offensive
(Grow) (Grow) (Grow)
Defensive Defensive Defensive
(Protect/Harvest) (Protect/Focus) (Protect/Focus) Harvest
Weak
Defensive Defensive Defensive
(Exit or Harvest) (Exit or Harvest) (Exit or Harvest)
11
Weak Strong
Competitive Advantage

31. Conclusion: Market is customer.
Recognizing the customer as the primary unit of focus, market-based business
will expand the focus to customers and market, not just product or unit sold.
• Attract new customers grow market share
• Grow the market demand by bring more customers into market
• Enter new market to create new source of customer
If you are Market Poor Understanding of
Passion for Customer
Customers and Competition
Satisfaction
Oriented
Grow earning & Encourage Customer
Shareholders Value Complaints
Improve Profit Address Source of
Performance Dissatisfaction
Improve Marketing Improve on Process over
Productivity Product
Lower cost of Customer Improve Customer
Acquisition Satisfaction and Retention

32. Thank You
Michael Hong Marketing Consulting
Michael is a Senior Marketing Management professional with exceptional skills and experience in e-
Commerce Marketing. Michael has 20 years of marketing and marketing communications experience
at corporations such as AT&T and LG Electronics. He is a creative marketer and a thought leader in
digital marketing and multicultural marketing industry. He spoke at numerous conferences such as
Internet Retailer and the eM9-Marketing Conference.
Specialties: Advertising Strategy, Planning and Execution, Digital Marketing (SEO, SEM, Social media,
Word-of-Mouth), Direct Marketing, Multicultural Marketing, B-B Marketing
Education: Cornell University, Ithaca, New York
B.A. 1985 School of Art, Architecture and City Planning
2 Brookstone Dr. Boonton Twps., NJ 07005 (C) 201 841 9659 njmikehong@yahoo.com