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Customer-Driven Marketing

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1 Customer-Driven Marketing
11 Chapter Customer-Driven Marketing

2 Learning Objectives Define marketing.
Discuss the evolution of the marketing concept. Describe not-for-profit marketing and nontraditional marketing. Outline the basic steps in developing a marketing strategy. Describe marketing research. Discuss market segmentation. Summarize consumer behavior. Discuss relationship marketing. 1 5 2 6 3 7 4 8

3 What Is Marketing? Marketing- set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing begins with discovering unmet customer needs and continues with researching the potential market; producing a good or service capable of satisfying the targeted customers; and promoting, pricing, and distributing that good or service. Throughout the entire marketing process, a successful organization focuses on building customer relationships. The best marketers not only give consumers what they want but even anticipate consumers’ needs before those needs surface. Exchange process- activity in which two or more parties give something of value to each other to satisfy perceived needs. Every organization (profit and non-profit) must market. Marketing is more than just selling. It is research, production, promotion, pricing, and distribution. The exchange process is much more complicated than buying a product you “need.” Facilitating and creating this exchange process is a big part of marketing. Lecture Enhancer: Can you think of a company that serves customers’ needs particularly well? Lecture Enhancer: Which of these steps seems to be the most important? Why?

4 How Marketing Creates Utility
Utility: power of a good or service to satisfy a want or need Create time utility by making a good or service available when customers want to purchase it. Create place utility by making a product available in a location convenient for customers. Create ownership utility through an orderly transfer of goods and services from the seller to the buyer. Many organizations are attempting to create by the marketing function all three types of utility. A company’s production function creates form utility by converting raw materials, component parts, and other inputs into finished goods and services.

5 Evolution of the Marketing Concept
Marketing has always been a part of business, but it has changed over the centuries. In the 1950s, the marketing era started and organizations began to adopt a consumer orientation. This focus has intensified in recent years, leading to the emergence of the relationship era in the 1990s, which continues to this day. In the relationship era, companies emphasize customer satisfaction and building long-term business relationships. Lecture Enhancer: Can you envision how marketing might further evolve in the 21st century?

6 Emergence of the Marketing Concept
Marketing concept- company-wide consumer orientation to promote long-run success. Firm starts with analysis of customers’ needs and works backward to offer products that fulfill them. Explained by shift from sellers’ market in which goods and services are relatively scarce to buyers’ market in which they are relatively plentiful. There is strong competition to satisfy customers. Therefore, organizations must focus on the long-term value of customers and their needs. Lecture Enhancer: Can you think of an example where a firm created a need for its product? Class Activity: Discuss how the success of e-book readers (such as the iPad, Nook, and Kindle) and iTunes has affected Barnes & Noble and Sony Records.

7 Not-for-Profit Marketing
20 million not-for-profits exist worldwide. Apply marketing tools to reach audiences, secure funding, improve their images, and accomplish their overall missions. Not-for-profit organizations operate in both public and private sectors. Sometimes partner with a profit-seeking company to promote a message. Not-for-profit marketing is as important as marketing for other organizations and products. Non-profits compete for dollars (funding) and people (donors or volunteers) and need to communicate their purpose. Class Activity: Ask students to name not-for-profit organizations in the local community they think have used effective marketing.

8 Non-Traditional Marketing
Lecture Enhancer: Choose one of the categories and think of products or services that might be marketed by using the selected method.

9 Developing a Marketing Strategy
1. Study and analyze potential target markets and choose among them. 2. Create a marketing mix to satisfy the chosen market. Marketers must focus on these two steps to develop a marketing strategy and take into account the marketing environment. The marketing plan is a key component of the firm’s overall business plan.

10 Selecting a Target Market
Target market- group of people toward whom an organization markets its goods, services, or ideas with a strategy designed to satisfy their specific needs and preferences. Types of Markets consumer (B2C) product: good or service that is purchased by end users business (B2B) product: good or service purchased to be used, either directly or indirectly, in the production of other goods for resale Selecting the target market is very important as then an organization can concentrate its financial and time resources in going after this market. Markets can be classified by type of product– consumer and business.

11 Marketing Mix Marketing Mix blends the four strategies to fit the needs and preferences of a specific target market. Product strategy involves the nature of the product and its package design, brand names, trademarks, and product image. Distribution strategy ensures that customers receive their purchases in the proper quantities at the right times and locations. Promotional strategy blends advertising, personal selling, sales promotion, and public relations to achieve its goals of informing, persuading, and influencing purchase decisions. Pricing strategy is setting profitable and justifiable prices for the firm’s product offerings, sometimes subject to government scrutiny. The marketing mix is a blend of the four elements of marketing strategy—product, distribution, promotion, and pricing—to satisfy chosen customer segments. Marketers mix these strategies to communicate to the target market. Lecture Enhancer: Which of these strategies seems to be the most crucial? What might happen if a firm were to ignore one of these strategies?

12 Marketing Mix for International Markets
Standardization- offering the same marketing mix in every market. Adaptation- developing a unique marketing mix to fit each market’s local competitive conditions, consumer preferences, and government regulations. Mass customization- allows a firm to mass produce goods and services while adding unique features to individual or small groups of orders. Standardization works best with business to business goods. Adaptation is often seen with food and restaurants. Mass customization is seen in automobiles where the manufacturer may add features to meet the needs and requirements of a specific market. Lecture Enhancer: Provide an example of a good or service that has used standardization. Lecture Enhancer: Provide an example of a good or service that has used adaptation. Class Activity: What challenges exist for Starbucks to enter and successfully sell coffee in China? Ask students their ideas for tactics to overcome these challenges.

13 Marketing Research Marketing research– the process of collecting and evaluating information to support marketing decision making. AC Nielson– Consumer Research Secondary data– Previously published data from trade associations, advertising agencies, marketing research firms, and other sources. Primary data– Data collected through observation, surveys, and other forms of observational study. Data mining– computer searches of customer data to detect patterns and relationships. Business intelligence– activities and technologies for gathering, storing, and analyzing data to make better competitive decisions Market research must be obtained and applied to aid in making good marketing decisions, creating an effective strategy, and building a strong marketing mix. Marketers may access internal or external data to make marketing decisions. The more data they have and use, the better their marketing decisions. Some organizations gather large amounts of business intelligence to help make competitive decisions. Data mining uses data warehouses, sophisticated customer databases that allow managers to combine data from several different organizational functions. Click AC Nielsen to look at the marketing research the firm offers. Lecture Enhancer: Which type of data do you think is more reliable? Why? Class Activity: Lead a class discussion on how students might collect primary and secondary data to research a potential pet grooming service in the community. Lecture Enhancer: What are some potential problems with data obtained through a focus group? Lecture Enhancer: Provide some examples of typical methods used to mine data from consumers. Lecture Enhancer: What are some potential dangers presented by data warehouses?

14 Market Segmentation Market segmentation– the process of dividing a total market into several relatively homogeneous groups. Market segmentation is often based on marketing research. Market segmentation attempts to isolate traits that distinguish a certain group of customers from the overall market. These are some criteria that marketers consider when segmenting markets. Lecture Enhancer: Name some market segments that have newly emerged within the past 10 years.

15 How Market Segmentation Works
Market segmentation depends on the product and the target market. Common bases for segmenting consumer markets are geographical, demographic, psychographic, and product-related. Business products are segmented into customer-based, end-use, and geographical. The effectiveness of a segmentation strategy depends on how well the market meets these criteria. Once marketers identify a market segment to target, they can create an appropriate marketing strategy.

16 Segmenting Consumer Markets
Geographic Segmentation Divides market into homogeneous groups on the basis of their locations. Demographic Segmentation Divides market on the basis of various demographic or socioeconomic characteristics: gender, income, age, occupation, household size, stage in the family life cycle, education, and ethnic group Psychographic Segmentation Divides consumer market into groups with similar psychological characteristics, values, and lifestyles. (VALS) AIO statements—people’s verbal descriptions of various attitudes, interests, and opinions Product-Related Segmentation Divides market based on buyer’s relationship to the good or service. based on benefits sought by buyers, usage rates, and loyalty levels Common demographic measures include gender, income, age, occupation, household size, stage in family life cycle, education, race, and ethnicity. Have students take the VALS survey (click on link) to learn about psychographic segmentation. The three most popular approaches to product-related segmentation are based on benefits sought, usage rates, and brand loyalty levels. Lecture Enhancer: What are the advantages and disadvantages of each method of segmentation? Class Activity: Discuss food preferences by geographic region of the United States. Class Activity: Ask students what type of businesses might segment products or services using religion as a key segmentation criterion. Lecture Enhancer: Provide a specific example of a psychographic segment. Class Activity: Ask students how they would market dating services such as Lecture Enhancer: What methods might companies use to obtain information about customer purchasing habits?

17 Segmenting Business Markets
Geographic segmentation– targets geographically concentrated industries. Demographic, or customer-based, segmentation– a good or service intended for a specific organizational market (i.e. healthcare). End-use segmentation– focuses on the precise way a B2B purchaser will use a product. Geographic segmentation for the business market resembles segmentation for consumer markets, but some methods differ. Demographic segmentation is more focused on industries while end-user segmentation focuses on how the product will be used. Class Activity: Lead a discussion of why fast-food restaurants and medical offices would likely be treated as two distinct segments by furniture manufacturers.

18 Determining What Customers Want
Consumer behavior- actions of ultimate consumers directly involved in obtaining, consuming, and disposing of products and the decision processes that precede and follow these actions. Personal factors: needs and motives, perceptions, attitudes, self-concept Interpersonal factors: cultural, social, and family influences External factors: economic events Business buying behavior- often includes a variety of influences from multiple decision makers. Consumer and business behavior differ but the key focus is on determining what the customer wants, what drives the customer. There may be a combination of personal and interpersonal factors. Class Activity: Ask students how the recent recession altered their shopping habits.

19 Steps in Consumer Behavior
Consumer decisions follow sequential steps while being influenced by interpersonal and personal determinants. Lecture Enhancer: Can you think of a situation in which a consumer might skip one or more of these steps? Why?

20 Relationship Marketing
Relationship marketing- developing and maintaining long-term, cost-effective exchange relationships with partners. Consumers enter into relationships only if there is some benefit to them. Relationship marketing seeks to achieve customer satisfaction. Better-informed consumers require a beneficial relationship when they make investments. They demand benefits from the companies that supply them. Lecture Enhancer: Provide examples of how modern banking uses relationship marketing to gain customers.

21 Benefits of Relationship Marketing
Lower costs and higher profits for the business. Efficient targeting of best customers increases the lifetime value of a customer. revenues and intangible benefits (referrals and customer feedback) from a customer over the life of the relationship, minus the amount the company must spend to acquire and serve that customer. Stronger relationships with business partners and opportunities to combine capabilities and resources to better accomplish goals. The lifetime value of customers is important as current customers make referrals and provide customer feedback. Increasing lifetime value will lead to higher profits.

22 Tools for Nurturing Customer Relationships
80/20 principle: frequent customers have a higher lifetime value, so businesses allocate resources accordingly Frequency marketing: reward purchasers with cash, rebates, and other premiums (TGI Fridays reward program) Affinity programs: solicit involvement based on common interest Comarketing: businesses jointly market each others’ products Cobranding: firms link their names in a single product The 80/20 rule denotes that some customers provide more value than others. But overall, these tools help firms strengthen the relationship they have with their customers. Comarketing and cobranding help make the marketing sparks fly, nurturing complimentary relationships. Check out TGIFriday’s link for an example of a rewards program. Lays KC Masterpiece chips and Sponge Bob cereal are examples of cobranding. Lecture Enhancer: Provide examples of ways in which frequent customers are rewarded by different businesses.

23 One-to-One Marketing Customizing products and marketing and rapidly delivering goods. Customer relationship management software helps companies gather, sort, and interpret data about specific customers. One-to-one marketing allows companies to employ mass customization to meet customer needs. This strategy is another form of relationship marketing that depends on technology. Customer relationship management uses technology to efficiently manage one-to-one relationships.

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