 Let's now look at what is value-based marketing, and value-based marketing has got three key components. The first is for you as a business to create value, create value not only for the customer but also create value for yourselves because if you create a lot of value for the customers and you are not able to capture some of that value as pricing, you will not be a profitable business. So look at how do you create value? Once you have created value, you have to communicate to millions of customers and consumers and companies, your value equation. So how do you communicate value? We'll look at that. Then how do you actually deliver the value to the business, your customer business, or your customer or your individual consumer? So three key components, creating value, communicating value, and delivering value. Let's dive deeper into each of those pillars. So what are the components of creating value? Creating value for the customer is a winning customer value proposition, which means like I talked in the last module, that the product or the service that your company or your startup is providing solves the problem for the customer, meets an unmet need, does something which is better, faster, or cheaper than any other option that the customer has. If you can do that, if you're better, faster, cheaper, then anything that the customer has, you've got a customer value proposition which will get to the business. But it's not enough to give value to the customer because, you can give a lot of value to the customer because, if you don't capture some of that value for your company or your startup, you'd run at losses and your company and your startup will shut down. The way you capture value for yourself is through pricing. You offer value to the customer, but in return, the customer pays a price, and you look at both of these elements. In communicating value, the two key elements are creating a very popular well-known customer brand, and then creating a great advertising campaign. We'll look at that in the next module, and then the third pillar is around delivering value, which is around customer channels, customer sales, supply chain logistics, etc., which we'll talk in the last week. Because ultimately, the customer has to be able to access your product or your service through an offline or an online channel. So that's delivering value. So today, let's talk about creating value. So how do you create value? We talked a little bit about it in the last module, and if you look at what Jeff Bezos says, the founder and the chairman of Amazon, you can read on the screen that he says that we are obsessed with the customer. You start with the customer, and you create a great value proposition for the customer, and you work backwards to deliver that value. So it all starts with the customer. Because if your customer, as we saw in my first module, if your customer is not willing to buy your product or pay a price for your product, you will not have a business left. You will not have any sales or profits, and soon no people, your business will die. So you have to understand the customer, and then work backwards for everything else. And as I said in the last module, customer have needs, different kinds of needs. And I talked about this in the last module. Basic needs, psychological needs, and then higher order needs. We also talked about depending on the customer needs, what is being met and what is not being met by other products or other competitors, you will have a great value proposition if you can do what the customer wants to be done better, faster, or cheaper. So with that let's look at a mini case study of the Apple iPhone 15 Pro. And these are screenshots from their webpage. The link is given on the slide. Remember the iPhone 15 Pro has a fantastic value proposition, therefore it is priced very high. It's a very expensive phone. But why will people and customers pay that large amount of money unless the iPhone 15 Pro does something which is faster, better, or cheaper? In this case it's not cheaper, but is it faster and better than anything else in the world today? So let's take a closer look as to whether they're faster and better and how do they market themselves? So first this talks about the chip, the chip that powers the phone. And it talks about a monster win for gaming because gamers use such expensive phone. And basically, and this is from the website, basically they're marketing themselves as a monster win. It's big, it's powerful, it helps you win. So it helps you if you're a gamer using iPhone 15 Pro to win against others. Let's move on. Gigablast your gigabits. And look at what's on the right, 20 times faster. Yes, it's expensive, but what Apple is saying is the iPhone 15 Pro is also faster, 20 times faster. And it's giving some examples. Let's move on and see how they market themselves. Is it better? And the way they market themselves is that it's 122 millimeters of pure zoom, which means you can zoom in to very distant objects. Again, they're marketing themselves as something better than anything else out there. Photography. And if you look at the marketing page out there, it says even if you have wild imaginations, wildest, the iPhone 15 Pro can do it for you. Is it tough and durable? Apple markets it as forged in titanium, which is a very lightweight and a very durable product. Again, trying to prove from a marketing angle that iPhone 15 Pro is a rock solid product. And then the battery life. That's positively pro, professional. And then you say designed to make a difference. It's different. And if you look at the right, it says recycled aluminum, 100% recycled aluminum. So it's also got an element of sustainability and care for the planet. So this is a great example of a very expensive phone, but customers probably willing to pay that very high price because they see a winning value proposition. And the value proposition is because they can do what they're doing already faster or better, but not cheaper in this case. So this is actually an essence of how great market years, market great products, but not necessarily always the cheaper product. So it has to be one of the three, better, faster or cheaper. And then this is a template, which I shared in my last module. And you should be able in this very simple template to capture the value proposition, especially the last line, the last line, which is better than anybody else because of certain features and benefits that you offer. So the first step of value-based marketing in creating value for the customer is to create a willing value proposition. But it's not enough to just talk about it, as I showed you in the iPhone 15 Pro example, your product has to measure up in reality to what you are promising in your marketing campaign. Now, if you have created a lot of benefits for the customer, you have to capture some of that value. So if you have created, let's say, 100 units of value or 100 units of benefits for the price, for the customer, you need to charge a price which is commensurate with the benefits that a customer will get. And therefore it's a fine balance between the customer benefits, which benefits the customer versus price, which actually is your revenue. The price that you charge becomes your revenue for the business that you are in or for your startup. And therefore you have to balance both. We talked about customer value proposition. Let's talk a little bit about customer pricing. So what are the key elements of customer pricing? And here are some thoughts that you should think about when you decide on your pricing strategy. First, are you a premium or an economic product? iPhone 15 Pro is a premium product, but it offers premium value. A Mercedes car or a BMW or a Rolls-Royce is a premium car at a premium price. A Maruti car, a hatchback or a Hyundai may not be as premium. If you buy a designer cloth or a designer accessory, it's a premium product and you can charge a premium pricing. And it goes back to which need you are fulfilling. The basic need, so economy products, economically priced products basically will meet the basic needs of customers. The premium products with premium pricing will meet higher order needs or esteem needs or prestige needs or social welfare needs. The next aspect is dynamic and promotional pricing. So if you look at airlines, the prices vary. So if you book a lot in advance, you'll get low prices. But as you get closer to the flight date, the prices go up. That's dynamic pricing. If there's a lot of demand, prices go up. If there's no demand, the company may give a promotion and prices go down. Service and features, the more service, and we'll see that later on, the more service, more features, more price. Fixed versus subscription. All of you would have taken some subscription for magazine or software, et cetera. Or a fixed price when you have paid something and bought straight away. And then value versus cost price. Let's talk about some of these aspects. One other aspect of pricing is how are you positioned compared to the other products and competitors in the market? So here's an example. So if you have to draw a map on the x-axis, if you put, let's say, low price to high price, and on the next axis, the vertical axis, you put low quality to high quality, you can actually map various chocolate brands on that matrix. For example, Cadbury's, which most of us have, would probably somewhere in the center because it's got a wide range. It's not that expensive, but it's not cheap. It's not the best quality, but it's not bad quality. So it's probably somewhere in the center. And some of you would have seen chocolates like Ferrero Rocher, which, if you look at the screen, are probably higher priced, but may not or may be as good as what's in the market. And they've got products like Lint, which are generally higher quality and higher price than what's in the market. And then we've got some mass products. Which are comparatively lower price and comparatively maybe not as good a quality as fine chocolates. So what you see on the screen, is actually from a marketing study and the link is there and you can go and have a look. Chocolates, of course, are a matter of personal preference. And some of you may like some brands, some of you may not like the brands and may have different opinions. But the key point is that you can always for any product comparison, you can actually plot a couple of axes, high quality, not so high quality, high price, not so high price and plot it. And that becomes your price position. Now let's look at different modes or architectures or pricing. Most of you will be familiar with many of the pricing architecture put on the screen. So let's go down the list. Value-based pricing. More value, higher the price. Less value, lower the price. And the easiest example is if you buy a large pack, it's more expensive because there's more value. And if you buy a small pack, it's cheaper, it's a less value. But it could also be not just the size, it could be also levels of quality or features or products, benefits. Basically more value or low value, more price or lower price. Cost plus pricing. This is basically used a lot in B2B businesses, which means if you're building a bridge or doing a construction activity, if you cost me 100, if the bridge takes me 100 rupees or 100 crores or 100 million dollars to make, I do cost plus, which means I put a 10% or a 20% markup and I price it. So that's cost plus. Competitive, which means looking at what the competitors are doing and pricing yourself so that you're not too high or too low. Premium pricing we talked about, a Rolls-Royce car versus a Maruti car. Penetration pricing. A lot of new brands, when they first come to the market or a country, they price themselves very low to penetrate the market. And it could be a service like a Uber or an Ola, when they first come in, they would have kept the prices low just to get market share. And then as they succeed and get market share, they take up the price to more sustainable levels because penetrative pricing is not a long-term strategy. It's a short-term strategy to penetrate or enter a market, but it may lead to losses and not be sustainable. Dynamic pricing, I talked about airlines. As you get closer and seats fill up, the prices of the airline ticket can go up. Also, the flip side is if there's no demand, you can run a promotion and reduce the price. So it's dynamic, it's not fixed. Price skimming. Many tech products do that. They launch at a very high price, a list price of, let's say, a thousand rupees or 10,000 rupees. And a few customers buy it. People who really want that product want to be the first to buy the product. But after three months, six months, the company drops the price. And it's very common in things like smartphones, et cetera. Very high list price. Launch at list price for a short period of time. Some customers buy it. So the company has skimmed the market and then the prices drop. Flash pricing, very common in e-commerce. It's open for one day or one hour or five minutes, et cetera. And it's basically a fixed amount of product that's being sold at that price. Just to create excitement in the market and everybody rushes to buy the product. And it's over in a flash. So it's called flash pricing. Promotional pricing, you see that all the time. If you look at Amazon or Flipkart, you'll have billion dollar sales, so Diwali sales. If you walk into a star bazaar or hypermart or reliance shops, large shops, you will find that there are always promotions running. So that's promotional pricing. Bundle pricing is one plus one. If you buy this, you get this free. Or it could be that if you buy a full bottle of detergent or a pack of detergent, you can get a refill free. Targeted pricing, which means that you choose target a customer segment and you price it to the customer side. So a lot of companies and products and services have discounts for students. So if you're a student, you get it at a lower price. But if you're a working pro, you pay the full price. So it's targeted. Freemium pricing means it's free for a few features, but if you want more features, you have to pay for it. So for example, if you go to LinkedIn, LinkedIn, the professional network, you can list yourself and put your bio data up there and you can access and reach others' bio data. But beyond that, if you need more services, so example, if you want to do a lot of search and find new contacts, beyond a point of pay for it. So it's a mix of free and premium. It's called freemium. Subscription pricing, typically used for magazines or for electronics, softwares. For example, Microsoft 365, you subscribe to it every year you have to redo it. So even for apps, Android or iPhone apps, you have to pay every year, that's subscription. Project pricing is B2B. You do a big projects, build a big road or an airline or an aircraft carrier or a plane. The project cost you a billion dollars and you price it for the project. It's very complex pricing. Open Book pricing basically is when the supplier opens his book to the customer and says, here is my cost, I'm being transparent and honest and I'll charge you 10% extra on top of my cost. That's open book pricing. Often common in project implementation, logistics, et cetera. So this is a great example of a pricing architecture and this is for a Toyota car. So for that particular car, Toyota has different models, engine size, the trim, the spatial features, et cetera. And if you'll see on the screen that every of this variants have a slightly different price. So that's the pricing for the variants and then if you look across the table, you'll find the build-up, the X showroom price and then the taxes come in and road tax and everything comes in till you come to the end price that you have to pay as a customer if you want to buy that car. And this is a great example of a pricing architecture, bivariant and then by components, taxes, road tax, et cetera. Value pricing, so for example, Subway used to run a sub of their day, which means each day of the week, there was one variety of Subway sandwich which you could get at a discount. And basically many stores, e-commerce sites give away some products at a very low price. So that gets the customers in and the hope is if you buy the value pricing products, you look around the store or the e-commerce sites and you buy other products which are fully priced. So that's value pricing. This is promotional pricing like I talked about. So here you'll find that the price is reduced from 150 to 130. Sometimes you get a pack which says X percent extra. So if you buy four kilos of a product, you get two kilos extra or you get 33% extra. This is a promotional pricing, a price reduction or some extra quantity that you get. And it's called promotion because it doesn't run for the entire period of time. The pricing runs every day, every year and carries on, but promotions maybe one day, two day, one week, two weeks, one month or so. So these are promotional pricing. I talked about subscription pricing and here's a great subscription pricing model and tier pricing for Microsoft Business and Microsoft 365. So you can get the base model at a certain price, $5 here. You can get a bit extra features, et cetera, at $12.50. And then you get some more features if you buy and pay $20 and so on. So it's a great architecture where you're paying every year. So it's subscription based, but it's also tiered. So you get so many features for so much price, bit more features, bit more price and a lot more features, a lot more price. So this is again a pricing architecture. So now I'd like you to reflect on what I've talked so far. Think of a product or a service that you use regularly. Start with the basics. What is the name of the brand? Importantly, what need of yours does it fulfill? What problem does it solve for you, that brand or that product? Think about what is the value proposition of that product or that service which makes you use it. What is the pricing of the product? Not just the absolute pricing, but also the pricing architecture. Think also about how does it advertise? We'll talk a lot about branding and advertising in the next module. But think about how does it, the product that you have thought of, advertise and market itself? And how do you buy it? Do you buy it online or offline? Which channel do you buy it from? And again, this is something we'll talk a couple of weeks out. But as you start reflecting and you start writing down in your course journal, you're beginning to think like a marketer and what I'm encouraging you to reflect on is to use the practical day-to-day examples, your personal examples, and start the marketing behind it. Reflect on the marketing behind it. So reflect on what I've written on the screen. Now that I've talked about value-based marketing, many of you may want to choose a career in marketing or if you're a student to take a full course on marketing and MBA in marketing or a full heavy course on marketing in your college or an NPTEL. And if you are an entrepreneur, you may want to think about marketing and develop the skills to market your startup. So what are the marketing skills that you need to develop? And there are hard skills and soft skills. So I've listed down some of the skills. The first hard skill is to be able to come up with a marketing plan, a marketing strategy. You have to train yourself to think like a marketer and come up with a plan, covering some of the modules that I've talked about. How do you create value? How do you capture value? How do you communicate value? How do you deliver value? So that's marketing strategy. You then need to develop your skills around market research which I talked about in my very first module, week one, module one. How do you research the market trends, products, players, competitors, et cetera? I also talked about analytics and data sciences. Marketing looks at lots of data from the customers, from competitors, from the environment and then processes them to come up with business decisions. And if you're serious about marketing, you should enroll into an analytics and a data science course with the applications in marketing and market research. You also can develop your skills on brand management. How do you build a great brand? We'll talk about it in the next module but brand management itself is a big skill as is product management. So if you want to work for a Google or any of those tech product companies, you have to develop your skills in product management. And if you want to work for a high marketing company like an FMCG company like Procter & Gamble, Adidas, Reebok, Samson, you have to develop your brand management skills. Advertising management, which is also a skill by itself and the very sophisticated advertising techniques which we'll talk about soon. You can train yourself on digital and social media marketing. I took you through the history of marketing evolution and right now digital and social media marketing is top of the list. And there are specific tools and techniques that you can learn about. And then omni-channel management because as customer you can buy your product from anywhere. You can look for information from anywhere and you can get market ears to target you from any medium. It could be an OTT platform. It could be a television channel. It could be a newspaper. It could be a radio. It could be a pamphlet. So how to create the omni-channel which means omni-channel means different channels management in the context of marketing. So these are all hard skills that you can learn. Apart from this, any of you watching this video should also develop your soft skills not just for marketing, for general progress in your career. First is creativity. Whether you're in a job or whether you want to do a startup or you're a student you have to develop your creativity skills. New ideas. Thinking differently. Thinking better. Then communication. You have to practice communication skills if necessary take training on communication. It can be public speaking. It can be business writing. You should then develop your skills on working with customers because ultimately if you are in the corporate sector which means in the business sector you have to work with customers because if there's no customers there's no business and therefore you have to be able to work with different kinds of customers almost every day of the week and then working in teams. It doesn't have to be only a marketing team. It could be a finance team and operations team and HR team or a sales team. So these are the soft skills that you should develop to be a successful marketer and in general progress in life. So with that we come to the end of this module. Namaskar. Thank you.