MARKETING PRINCIPLE #4: ALL RESOURCES ARE LIMITED
There is a need to balance marketing resource across: Customers (segmenting,
targeting, positioning)
Acquisition, Expansion and Retention stages
Brand Offering, Relationships, Marketing Mix Elements
 Introduction
 Approaches for Managing Resource Trade-Offs
 Evolution of Approaches for Managing Resource Trade-Offs
 Anchoring – Adjusting Heuristics Attribution
 Attribution Approach
 Response Models
 Marketing Metrics
 Framework for Managing Resource Trade-Offs
 Inputs to the Managing the Resource Trade-Offs Framework
 Outputs of the Managing the Resource Trade-Offs Framework
 Process for Managing Resource Trade-Offs
 The final and perennial issue facing managers is that all resources are limited and often
interdependent
 Managing resources optimally is critical, because marketing resources provide
the primary action levers that firms can use to implement what they have learned
from the previous three Marketing Principles
 The previous 3 Mkt. Principles all involve tradeoffs inherent in making strategic
decisions (STP, AER, BOR) while also providing input for the 4th Mkt. Principle,
which determines the annual budget to specific marketing actions (plan, budgets,
and metrics)
 Specifically, we need to balance marketing resources across:
 Customer segments: targeting & positioning (STP)
 Lifecycle stages: acquisition, expansion, and retention (AER)
 Customer equity and marketing mix elements: brand, offering, and
relationships (BOR, 7Ps)
 Other: SCAs now and for future, product categories, R&D projects, geographies,
sales territories, etc.
Source of Needing to Change Resource Tradeoffs
 Resource slack refers to the “potentially utilizable resources a firm possesses that it
could divert or redeploy to achieve organizational goals”
 Changes in customers’ needs
 Changes in the lifecycle stage of a firm’s products
 Changes in the product market landscape, due to entries and exits by competitors
 Changes in the effectiveness of marketing activities
Sources of Resource Trade-Offs
Source
Idea
Limited resources
and resource
slack
Firms have some given level of resource slack, or potentially usable
resources that can be diverted or redeployed to achieve organizational
goals. However, this slack must be shared among many different marketing
needs. Resource allocation therefore needs to find ways to optimize the
return on marketing investments
Changes in
customers’ needs
Market segmentation provides a description of the industry
segments. A firm then moves from the overall market
landscape to the specific segment(s) of interest to the firm.
Yet, over time, the size and attractiveness of each of the
industry segments changes, which means that the number
of targeted segments may change, and a firm’s commitment
to segments will change.
Changes in the
lifecycle stage of
a firm’s products
Firms try to balance their product portfolios to have
products in all lifecycle stages, to help offset resource
needs. Introductory stage products require larger resource
allocations to their launch, testing, and advertising to create
awareness. They require different allocations as they
enter the growth, maturity, and decline stages. Changes in
technology and the success or failure of new products also
alter any firm’s product portfolio constantly.
Source
Idea
Changes in the
When the firm moves into a reasonably advantageous
product market
market position, competitors quickly make a countermove.
landscape, due to
Such counterattacks have the potential to negate the impact
the entry and exit
of the incumbent’s advantage, and often create jostling for
of competitors
secondary demand – firms stealing market share from one
another rather than creating primary demand. Firms have
to constantly change their resource trade-off decisions
during competitive counterattacks. In some cases, resource
trade-offs have to be made in anticipation of new entrants.
Changes in the
Even if a firm is operating during a stable economic window,
effectiveness
with fixed consumer segments, homogeneous preferences
of marketing
for products across different lifecycle stages, and no major
activities
competitive entry, the effectiveness of marketing activities
change over time, such that the aggregated market
becomes less or more responsive to marketing efforts.
For example, sales cycles have lengthened due to more
relationship selling, product complexity, and informed and
demanding customers.
Need For Resource Tradeoffs Across First Principles
1. Selecting the who and what to “sell” across all potential customers in the market
 Approach: segment and target like customers (STP)
 Decision criteria & allocation process: Attractiveness and competitive
strength using GE matrix
 Improvements: Smaller segments and CLV
2. Selecting who and what to “do” across portfolio of your existing customers
 Approach: segment across stages (AER)
 Decision criteria & allocation process: CLV of customer personas
 Improvements: Individual customer-level analysis, HMM for dynamic
segmentation
Need For Resource Tradeoffs Across First Principles (con’t)
3. Deciding how to use brand, offering, and relationships to achieve positioning
objectives from STP and AER
 Approach: customer equity stack (BOR)
 Decision criteria & allocation process (within domain): elasticities,
partworth utilities, and CLV from choice models, conjoint analysis,
experiments, and regression
 Improvements: Multivariate (simultaneous) models
4. Determining annual budgets, plans, and metrics to execute BOR marketing
strategies and support positionings
 Approach: act, measure metric, evaluate, adjust (iterative)
 Decision criteria & allocation process: MROI, CLV, elasticities and
partworth utilities using choice models, conjoint analysis, response
models, and Solver
 Improvements: More refined metrics and more inclusive
response/optimization models (variables and time)
Process for Managing Resource Trade-Offs
 Five-step process for managing resource trade-offs:
1. Identify strategically relevant metrics
2. Assess the relationship between metrics and marketing resources
3. Assess the optimality of the resource allocation decisions
4. Finalize the resource allocation decisions
5. Integrate across different marketing activities
Evolution of Approaches for Managing Resource Trade-offs
 Heuristics Era - firms constantly decide how to allocate resources across different
customer segments, different customer stages, different offerings, different regions, and
different marketing communication formats
1. No hard data about resource allocation options
2. Managers used simple rules of thumb for allocating resources
 Data Era - firms started using historical data that revealed the link between their past
resource trade-off decisions and outcomes, such that they could determine the actual
effects of certain resources on specific outcomes
1. Scientific approaches, based on data and empirical models, reveal whether firm
should continue its level of resource commitments or adjust them.