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Chapter 13 Marketing: Building Customer Relationships.

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1 Chapter 13 Marketing: Building Customer Relationships

2 What is Marketing The Process of Planning Executing the concept Pricing Promotion Distribution

3 The Evolution of Marketing Production Era – prior to 1930 Sales Era – 1920 to 1970 Marketing Concept Era – 1950 to 1990 Customer Relationship Era – after 1990

4 Production Era Produce as much as you can Limitless markets Production capabilities small compared to demand Most business owners were farmers, carpenters & other trade workers (silversmith, etc.) Production, Distribution & Storage was businesses greatest need

5 Sales Era Mass Production Techniques in use: assembly lines Production exceeded market demand Emphasis on selling & advertising Sale after sale rare

6 Marketing Concept Era After WWII Demand for Goods & Services Grew Baby boomers increased consumer spending Need for businesses to be responsive to customers to attract consumer spending A Customer Orientation  A Service Orientation  A Profit Orientation

7 Customer Relationship Era CRM = Customer Relationship Management Enhanced Customer Service Exceed consumer expectations to grow customer loyalty

8 Nonprofits & Marketing Charities: to raise funds for social initiatives Red Cross Churches: to new members & raise funds Politicians: to get votes States: to attract new businesses & tourists

9 The Marketing Mix 4 “P”s Product: design & make a want satisfying product Price: Set a price Place: Put the product where people will buy it Promotion: Advertising

10 Steps to Marketing Find Opportunities Conduct Research Identify Target Market Design Product to Meet a Need Product Testing Choose Brand Name Design Package & Set Price Select Distribution System Design Promotion Program Build a Relationship with Customers

11 Marketing Research Good Decisions depend on Good Information Demographic Information Trends in purchasing by consumers Ecological Impact (& social impact)

12 Marketing Research Process Define the question Collect Data : secondary or primary data Analyze the Data Choose Best Solution & Do It

13 Primary Data Interviews Surveys/Online Surveys Observations Focus Groups Questionnaires Customer Comments Letters from Customers

14 Secondary Data Government Publications (many online) Commercial Publications: A C Nielsen, MRCA Magazines: Fortune, Forbes, Inc., etc. Newspapers: WSJ, Barron’s Internal Sources: Firm’s Records General Source: Internet Searches

15 The Marketing Environment Global FactorsPrice & Promotion Technological FactorsPrice & Product Sociocultural FactorsProduct Competitive FactorsPlace Economic FactorsPlace & Promotion All these surround the consumer & their needs.

16 2 Markets Consumer Market Market Segmentation Target Marketing Geographical Segmentation Demographic Segmentation Psychographic Segmentation Benefit Segmentation Volume Segmentation Business to Business Market = B2B

17 Smaller Market Segments Niche Marketing One-to-one Marketing

18 Relationship Marketing Industrial Revolution  Mass Production  Mass Marketing  Mass Media  One-way Messages Relationship Marketing  Customer Loyalty  Long term relationships & response to customer input  Two-way Messages

19 Consumer Decision-making Learning/Experience Didn’t like product  never buy it again Liked product  consistent customer Reference Group Norms & expectations of peer group Culture Values, attitudes & customs/traditions, ways of doing things Subculture Ethnic, age, religious or other group a consumer strongly identifies with Cognitive Dissonance/Buyers Remorse

20 Business 2 Business Small # of Customers - Potentially larger transactions Firm size & market utilization of goods or services Geographic concentration Products tend to be more complex & B2B; sales require more rational & less emotion than consumer market, greater need for direct sales More formal process, negotiated detail, closer buyer/seller relationship

21 Your Prospects in Marketing A skill that can be learned Mentoring/Internship Who can you work for in the field?


23 Chapter 14 Developing & Pricing Products & Services

24 Product Development The Whole Product Offer Design Products of Quality at a Fair Price Replacement/Returns Service & Repair Exceeding the Customers Expectations VALUE is more important than Price

25 Change to Match the Desires of your Customers Surveys & Comment Cards Expanded Menus & Services Experimenting & Variety

26 Total Product Offer PriceBrand Name ConveniencePackage Store Surroundings ServiceInternet Access Buyer’s Past Experience GuaranteeSpeed of Delivery Image Created by Advertising Reputation of producer

27 Grouping Products Product Lines Brand Name Detergents or Cereals Product Mix All the Product Lines of P & G or General Mills

28 Marketing Goods & Services to Different Kinds of Consumers Product Differentiation Convenience: Time or work saving Shopping: Variety & Choices Specialty: Luxury or no reasonable substitute Unsought: Consumers are unaware of need planning ahead: emergency car-towing, insurance, or burial services, etc.

29 Industrial Goods & Services B2B Sales people/internet sales: Installation Heavy Equipment Capital Goods = Durables Accessory Equipment Production or Support Goods

30 Packaging Protect the Product: Morton’s Salt Attracts the Consumer: Colorful, Artwork, Information Holds & Dispenses the Product: Tooth Paste Tracking the Product: UPC Code

31 6 Functions of Packaging 1)Protect Goods/Withstand Handling/Deter Theft 2)Attract the buyer 3)Describe contents 4)Explain the products benefits 5)Provide warrantee & other information 6)Give indication of price, value & uses

32 Branding & Brand Equity Brand = a name, symbol or design (or combination) Trademark = legal protection to exclusive use of a brand name or design

33 Manufacturer & Private Label Brands Manufacturer: (makers name) Xerox, Kodak, Sony, Chevrolet, etc Dealer/Distributor (private-label) Kenmore (made by …) Sears Paint (made by Sherwin-Williams) Brand Names can become generic aspirin, nylon, kerosene, zipper, linoleum What about Scott Towel & Kleenex?

34 Generic Goods & Knockoff Brands Generic Goods: Pharmaceuticals, Cereals lack of advertising, quality ?, lower priced Knockoff Brands: Do you want to buy a Rolex watch? How about a Bolex? Price ?, Discounts ? What would it take for you to by a knockoff, instead of the real one?

35 Brand Equity Brand Equity = awareness+loyalty+perceived quality+images+emotions Brand Loyalty = customer satisfaction & commitment to future purchases Brand Awareness Car Racing  NASCAR Shoes & Sports Apparel  Nike Golf balls  Titleist Jewelers  Zales, Jareds

36 Brand Association Linkage between a Brand Name item & something or someone else Nike  Tiger Woods Buick  Tiger Woods Quaker Oats  the 1812 Overture Muscular Dystrophy Association  Jerry Lewis

37 Brand Management Product Manager responsible for one line or brand Marketing Mix product, price, place, promotion

38 New Product Development Idea Generation Product Screening Product Analysis Development Testing Commericialization

39 Product Life Cycle IntroductionPrice lower GrowthPrice reaches zenith MaturityProfit maximized Sales Crest DeclinePrice & Sales both drop

40 Competitive Pricing Pricing Objectives Achieve largest return on investment The Profit Motive Building Traffic Achieve greater market share Create an image Furthering social objectives

41 3 major approaches to pricing Cost-based Pricing Demand-based Pricing Competition-based Pricing Price Leadership Low Price

42 Break Even Analysis Break-Even Point (BEP) = revenues & cost are equal BEP = Total Fixed Cost (TFC). Price of a unit – Variable Cost of a unit (P) (VC) BEP = TFC/(P – VC)

43 Other Pricing Strategies Skimming Price Strategy Every day low prices = EDLP High-low pricing strategy = higher prices than EDLP store with many special sales; internet sales may reduce the frequency of this strategy Bundling Psychological Pricing: Why set a price of $19.99 or $199.99?

44 Demand-Oriented Pricing Compared with Demand-based Pricing (DBP) DBP is also called Target Costing Price is an input for production and the target cost + profit margin = DBP Demand oriented pricing (DOP) is reflected in theater seat prices, where highly desire seats cost more than less desirable one.

45 Nonprice Competition Attributes other than price features convenience service durability style Remaining competitive does always mean meeting or beating the price at Walmart. Why is Nordstrom’s successful?


47 Chapter 15 Distributing Products Quickly & Efficiently

48 Marketing Intermediaries Middlemen Do they increase or lower the cost of business? A Channel of Distribution = a set of intermediaries: agents/brokers/wholesalers/retailers Agent/Broker = bring buyers & seller together a Broker may manage many agents or just (him/her)self Wholesaler = sells to other firms; B2B Retailer = sells to consumers (people)

49 Why do we need Middlemen? Middlemen can do things faster, at lower cost & give the producer more time to concentrate on what they do best. Storage Transport Advertising Selling Relationship building

50 5 Sellers & 5 Buyers How many contact need to be made? Seller Buyer

51 Using middlemen: 5 Seller & 5 Buyers One Middleman Seller Buyers

52 Value versus Cost If middlemen save time and/or money for a product heading to market, it make sense to use them. If about half the cost of a product goes to middlemen, then getting rid of middlemen would reduce the price of goods & services… RIGHT?! Wrong!!! It would reduce product availablitiy & increase costs & prices!!!

53 Six Utilities of Intermediaries (middlemen) Formturning wheat into flour Timeget it when you want it Placelocal outlets Possessiontransfer ownership/credit installation/follow-up InformationConsumer Reports, BBB internet ServicesEducation on use, repair

54 Wholesale – B2B Merchant Wholesalers: take possession of goods they handle Rack Jobbers: keep title until good is sold Cash-and-carry Wholesalers: now use credit too Drop Shippers: have product shipped directly from maker to buyer

55 Agents & Brokers Arrange transfer of possession without taking possession of a product. Wholesalers make profit from sale of products, but agents & brokers make commissions that are a percentage of the sales revenue.

56 Retail Intermediaries Department StoreSear, JC Penney, Nordstrom Discount StoreWalmart, Target, Kmart SupermarketSafeway, Kroger, Albertson’s Warehouse ClubCostco, Sam’s Club Convenience Store7-Eleven Outlet StoreTJ Maxx, Marshall’s Specialty StoreShoe Stores, Foot Locker Category KillerToys R Us, Office Depot, Staples

57 Retail Distribution Strategy Intensive Distributionas many outlet as Starbuck’spossible Selective Distributiona few outlets Mary Kay Exclusive Distributionone retail outlet Sax 5 th Avenuein a local area

58 Nonstore Retailing Telemarketing: No Call List Laws Vending Machines Kiosks Carts Direct Selling: Primerica/Avon/Kirby/SW Books Multilevel Marketing: MLM/Independent Contractors Direct Marketing: Direct mail/Catalog Sales Internet Marketing: Virtual stores

59 Channel Systems Corporate Distribution Systems GE, Firestone, Xerox, Walmart Contractual Distribution Systems Franchises: McDonald’s, KFC, AAMCO Wholesalers: Ace Hardware, IGA Retail Cooperatives: Associated Grocers Administrative Distribution Systems Kraft Foods, Scott’s Lawncare

60 Supply Chains Linked activities that transfer products to consumers Supplier’s plant  Manufacturers  Wholesalers  Retailers  Consumers Supply Chain Channel of Distribution

61 Supply Chain Management Managing the movement of raw materials parts work in progress finished goods related information through all the organization SCM is Interfirm & International

62 Logistics Shipping or Physical Distribution Speed of delivery Cost effective Taxes, Tariffs & Duties Labor Law FDA & Bureau of Alcohol, Tobacco & Firearms

63 Inbound or Outbound Logistics Control of the physical flow of materials involves planning, implementing, moving Inbound: raw material, packaging, G & S from suppliers to producers & information Outbound: finished products Reverse Logistics: Return of defective or recycled products

64 Choosing the right mode Train: Great for large shipments on land 30-40% of volume in USA Trucks: Good for smaller shipments or where rail is not available; >25% of volume in USA Water: Inexpensive, but slower Pipelines: Fast & Efficient for fluids Air: Fast, but expensive Intermodal Shipping: use two or more of the above

65 Storage Storage Warehouses: Longer term holding of goods Distribution Warehouses: gather & redistribute products Tracking of Goods: RFID (radio frequency ID) & UPS (uses a Bluetooth short-range radio)

66 What it all means 10am-7pm A successful firm has product to sell, it takes orders, processes the orders, keeps customers informed about a shipment’s progress and gets the right goods to their customers as quickly as possible. There are many new jobs in this area of managent.


68 Chapter 16 Using Effective Promotional Techniques

69 Promotion Mix Advertising Personal Selling Sales Ppromotion Public Relations

70 Intergrated Marketing Communication IMC: a technique that combines all the promotional tools into one comprehensive, unified promotional strategy; create a positive brand image & meet the goals of the firm

71 IMC Part 2 Identify the target market Define the objectives; make this clear & measurable Budget how much promotion will cost Develop unifying message Implement the plan Evaluate the effectiveness of the plan

72 Advertising Keep the customer’s interest Advertising is paid, nonpersonal communication through various media & individuals, who are identified in the message Propoganda is nonpersonal communication that does not have an identified sponsor

73 Advertising in USA $245 billion/yr TV Direct mail Newspapers Internet

74 Methods of Advertising Retail Ads Trade Ads B2B Ads Institutional Ads Product Ads Advocacy Ads Comparative Ads Interactive Ads Online Ads

75 Media & Product Placement Target Market: How can they reached? Readers: Newspapers/magazines/flyers Listeners: Radio Viewer: TV, internet Walk/Drive by: Billboards & Signs Receive mail or email: Direct advertising Search: Yellow pages, Craig’s List

76 Infomercials Half an hour to one hour commercials for: Bowflex Total Gym George Foreman Grill

77 Moving to Internet Advertising Nissan & Chrysler are moving money into online ads 20 to 40 increases from 2004 to 2005 That money had been going into TV or other forms of advertising. Four years age McDonald’s spent 80% of its advertising dollars on TV & now only 50%. Much of the money now goes to Internet advertising.

78 Global Advertising Something lost is translation el Papa = the Pope or la papa = potato Mist Stick Pocari Sweat Ford Probe Krapp toilet paper Global Adverting does not always work well. Regional advertising is more effective.

79 Personal Selling Face-to-face presentation & promotion not just persuading people to buy helping identify their wants & needs & finding ways to assist them later on Personalized service

80 The Selling Process Prospect & Qualify Willing to listen/Power to act Preapproach Know who you will talk to Approach Friendly professionalism Make Presentation Know the product Answer Objections More information needed Close the Sale Trial close/Commitment Follow-up Be available for more requests for help

81 Business to Consumer Selling B2C Approach Ask questions Make Presentation Close Sale Follow-up

82 Public Relations PR Management function that evaluates public attitudes, changes in policy & procedures in response to the public’s requests. Action plan executed & information used to earn public understanding & acceptance.

83 Public Relations 2 3 steps 1. Listen to the public 2. Change policies & Procedures 3.Inform people that you are responding to their needs PR department must maintain close ties to stakeholders; customers, media, community leaders, government officials, shareholders & owners

84 Publicity The talking/writing part of PR It must be interesting to get reported by the media. Publicity is free & reach people the advertising won’t. Marketer lose control of how, when, or if the media will use the story.

85 Sales Promotion The tool that stimulate consumer purchasing & dealer interest by means of short term activity DisplaysTrade shows Exhibitions Event SponsorshipsContests Free SamplesTest Drive Demo Coupons Lotteries BonusesSweepstakes % off Sales

86 Sampling & Word of Mouth How can the taste of chocolate fudge brownies be described for someone unfamiliar with the taste of chocolate (or fudge). Sampling is the easiest remedy. The best advertising is done by satisfied customers (Word of Mouth) and it’s free.

87 Viral Marketing Internet chat rooms entered and hype for a product released. Chat room visitors spread the word to their friends and other chat rooms they visit. Blogging (blog is short for Web log) Podcasting: distributing audio & video vai the internet

88 Who is watching you on the internet? Firms keep track of the number of hits on product websites & even monitor the tastes of individual web users. Then using this information they design advertising just for your kind of consumer. You may sit alone at your computer, but someone will notice where you go on the internet.

89 Matching market with promotion Push Strategy: push the product to vendors & sellers, people will see it in store/outlets & buy Pull Strategy: promotion directed toward consumers, they ask for the product & stores start stocking the product

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