MARKETING: Managing Profitable Customer Relationships CHAPTER 1 MARKETING: Managing Profitable Customer Relationships

Roadmap: Previewing the Concepts Define marketing, outline the steps in the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy & marketing management orientations that guide marketing strategy. Discuss customer relationship management and identify strategies for creating value for customers & capturing value from customers. Describe the major trends and forces that are changing the marketing landscape. Copyright 2007, Prentice-Hall Inc.

NASCAR – A Marketing Success Story Creating Value NASCAR sells the experience – in-car cameras, wholesome family orientation. NASCAR.com engages fans via content. Success has been achieved by creating lasting customer relationships. Capturing Value NASCAR is the second highest rated sport on TV. Fans are young, affluent, family oriented, & spend nearly $700 annually on NASCAR merchandise. NASCAR fans are three times as likely to seek out sponsors’ products than are nonfans. Copyright 2007, Prentice-Hall Inc.

What Is Marketing? Simple Definition: Marketing is managing profitable customer relationships. How? By accomplishing the following: Attracting NEW customers by promising superior value. KEEPING and GROWING current customers by delivering satisfaction. Copyright 2007, Prentice-Hall Inc.

Marketing Defined A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Old View: “Telling and Selling” New View: Satisfying Needs Copyright 2007, Prentice-Hall Inc.

Figure 1-1 A Simple Model of the Marketing Process Copyright 2007, Prentice-Hall Inc.

Core Customer and Marketplace Concepts Creating value for customers requires that we first understand the marketplace and customer needs, including five core customer and marketplace concepts: Needs, wants, and demands Marketing offers (products, services, and experiences) Value and satisfaction Exchanges and relationships Markets Copyright 2007, Prentice-Hall Inc.

Needs, Wants, and Demands A state of felt deprivation including physical, social, and individual needs. Name some specific examples of each need type. Copyright 2007, Prentice-Hall Inc.

Needs, Wants, and Demands Types of Needs: Physical: Food, clothing, shelter, safety Social: Belonging, affection Individual: Self-expression, learning, knowledge Copyright 2007, Prentice-Hall Inc.

Needs, Wants, and Demands Form that a human need takes, as shaped by culture and individual personality. Preferences for brands are wants. Copyright 2007, Prentice-Hall Inc.

Needs, Wants, and Demands Given their wants and resources, people will demand products with benefits that add up to the greatest value and satisfaction. Copyright 2007, Prentice-Hall Inc.

Needs and wants are fulfilled through a marketing offer. Marketing Offers Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Needs and wants are fulfilled through a marketing offer. Copyright 2007, Prentice-Hall Inc.

Marketing Offers Products: Services: Consumer Experiences: Anything that can be offered to a market to satisfy a need or want. Services: Activity or benefit offered for sale that is essentially intangible and does not result in the ownership of anything. Consumer Experiences: “Dazzle their senses, touch their hearts, and stimulate their minds.” Copyright 2007, Prentice-Hall Inc.

Marketing in Action Products Can Be Ideas Products do not have to be physical objects. Here the “product” is an idea -- protecting animals. Products can also be people, organizations, places, or information. Copyright 2007, Prentice-Hall Inc.

Let’s Talk! Does the ad shown at right promote consumer experiences? Explain. Offer a different example of a current advertising campaign that promotes a “consumer experience.” Do you believe the campaign is effective? Why or why not? Copyright 2007, Prentice-Hall Inc.

Marketing Myopia Successful marketers avoid Marketing Myopia when constructing offers: Marketing myopia occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the “wants” and lose sight of the “needs.” Copyright 2007, Prentice-Hall Inc.

Marketing Myopia in the Recording Industry Marketing in Action Marketing Myopia in the Recording Industry Focused on selling prerecorded CDs, the record industry missed early opportunities to partner with music downloading services and manufacturers of digital MP3 type recording devices. Copyright 2007, Prentice-Hall Inc.

Value and Satisfaction Setting proper expectations is critical: If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high. Advertising is one of the primary methods by which consumer expectations are formed. Copyright 2007, Prentice-Hall Inc.

Setting Expectations Marketing in Action This tongue in cheek ad pokes fun at the advertising industry’s tendency toward hyperbole when setting consumer expectations for goods and services. Who is being targeted? Does this ad set the proper expectations? Copyright 2007, Prentice-Hall Inc.

Exchanges and Relationships Act of obtaining a desired object from someone by offering something in return. Relationships based on several exchanges are the goal, and are built by delivering value and satisfaction. Transaction: A trade of values between two parties. Party 1 gives X to Party 2 and gets Y in return. X = cash, credit, check, or barter. Copyright 2007, Prentice-Hall Inc.

Bartering Via the Web Marketing in Action The Internet helps brings buyers, sellers, and those interested in bartering together. SWAPACE and The Barter Company are two Web sites that enable individuals or businesses to barter, swap, or buy products and services. swapace.com barterco.com Copyright 2007, Prentice-Hall Inc.

Market for Harley-Davidson Markets What Is a Market? The set of actual and potential buyers of a product. These people share a need or want that can be satisfied through exchange relationships. Market for Harley-Davidson Copyright 2007, Prentice-Hall Inc.

Figure 1-2 Elements of a Modern Marketing System Copyright 2007, Prentice-Hall Inc.

Designing Marketing Strategies Marketing Management: The art and science of choosing target markets and building profitable relationships with them. Designing a winning customer-driven marketing strategy requires answers to the following questions. What customers will we serve? What is our target market? How can we best serve these customers? What is our value proposition? Copyright 2007, Prentice-Hall Inc.

Segmentation and Target Marketing Market Segmentation Divides the market for a product category into segments of consumers. Target Marketing Process of selecting one or more segments to target. Copyright 2007, Prentice-Hall Inc.

Let’s Talk! Pair up with another student and discuss the ad shown at right. Are you part of the target market for this product? List the personal traits, variables, or factors that characterize members of this market segment. Copyright 2007, Prentice-Hall Inc.

Marketing Management Demand Management Demarketing Finding & increasing demand Also changing or reducing demand, such as in demarketing. Demarketing Temporarily or permanently reducing the number of customers or shifting their demand. Copyright 2007, Prentice-Hall Inc.

Demarketing Marketing in Action Demarketing is often used to discourage undesirable behaviors. Is this ad effective? Visit the Office of National Drug Control Policy ad gallery. mediacampaign.org Copyright 2007, Prentice-Hall Inc.

It cleans and freshens like sunshine! Value Proposition The set of benefits or values a company promises to deliver to consumers to satisfy their needs. It cleans and freshens like sunshine! www.gain.com Copyright 2007, Prentice-Hall Inc.

Marketing Management Philosophies Five key marketing management philosophies: Production Concept Product Concept Selling Concept Marketing Concept Customer driven Societal Marketing Concept Customer and society driven Copyright 2007, Prentice-Hall Inc.

Figure 1-3 Marketing and Sales Concepts Contrasted Copyright 2007, Prentice-Hall Inc.

Customer-Driven Marketing Marketing in Action Customer-Driven Marketing Twenty years ago, how many consumers would have thought to ask for laptops, wireless headsets, cell phones, MP3 players, PDAs, and digital cameras? Marketers must often understand customer needs even better than customers themselves do; customers often can’t articulate what they really need. Copyright 2007, Prentice-Hall Inc.

Figure 1-4 The Societal Marketing Concept Copyright 2007, Prentice-Hall Inc.

The Marketing Mix The marketing plan transforms the marketing strategy into action. The marketing plan includes the marketing mix: Product Price Promotion Place Product Price Buyer Needs Place Promotion Copyright 2007, Prentice-Hall Inc.

Customer Relationship Management The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Copyright 2007, Prentice-Hall Inc.

Perceived Value vs. Satisfaction The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers. Customer Satisfaction: Dependent on the product’s perceived performance relative to a buyer’s expectations. Don’t promise more than the product can deliver! Copyright 2007, Prentice-Hall Inc.

Customer Relationships Relationships can be built at many levels using a variety of tools Selective relationship management is key Creating long-term profitable relationships with customers is the goal Direct marketing Video Snippet Harley-Davidson builds customer relationships by means of the social benefits of HOGS, the Harley-Davidson owners group. Copyright 2007, Prentice-Hall Inc.

Partner Relationship Marketing Partners . . . Inside the Firm All employees customer focused Teams coordinate efforts toward customers Partners . . . Outside the Firm Supply chain management Strategic alliances Copyright 2007, Prentice-Hall Inc.

Capturing Value from Customers Superior customer value results in: Customer loyalty and retention A growing share of customers Customer equity Copyright 2007, Prentice-Hall Inc.

Customer Loyalty & Retention Customer Lifetime Value The entire stream of purchases that the customer would make over a lifetime of patronage. Share of Customer The share a company gets of the customers purchasing in their product categories. Copyright 2007, Prentice-Hall Inc.

Focus on Customer Lifetime Value Marketing in Action Focus on Customer Lifetime Value To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.” Copyright 2007, Prentice-Hall Inc.

Customer Equity Customer equity is the total combined customer lifetime values of all the company’s customers. Copyright 2007, Prentice-Hall Inc.

Figure 1-5 Customer Relationship Groups Copyright 2007, Prentice-Hall Inc.

The New Marketing Landscape Trends and forces constantly change the marketing landscape and create marketing strategy challenges. Major developments impacting marketers include: The new digital age Rapid globalization Call for more ethics and social responsibility Growth of not-for-profit marketing Copyright 2007, Prentice-Hall Inc.

Figure 1-6 Expanded Model of the Marketing Process Copyright 2007, Prentice-Hall Inc.

Rest Area: Reviewing the Concepts Define marketing, outline the steps in the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy & marketing management orientations that guide marketing strategy. Discuss customer relationship management and identify strategies for creating value for customers & capturing value from customers. Describe the major trends and forces that are changing the marketing landscape. Copyright 2007, Prentice-Hall Inc.