Customer-Driven Marketing Chapter 12 Customer-Driven Marketing

Learning Goals Summarize the ways in which marketing creates utility. Discuss the marketing concept. Describe not-for-profit marketing, and identify the five major categories of nontraditional marketing. Outline the basic steps in developing a marketing strategy. Describe the marketing research function. Identify and explain the methods available for segmenting consumer and business markets. Outline the determinants of consumer behavior. Discuss the benefits and tools for relationship marketing. 1 5 2 6 3 7 4 8 2

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. Best marketers create a link in consumers’ minds between the new need and the fulfillment of that need by the product. Exchange process - activity in which two or more parties give something of value to each other to satisfy perceived needs. Every organization must market. Marketing is more than just selling. The exchange process is much more complicated than buying a product that you “need.” Facilitating and creating this exchange process is a big part of marketing. 3

How Marketing Creates Utility Utility - want-satisfying power of a good or service. 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 like Papa Johns are attempting to create all three types of utility. 4

Evolution of the Marketing Concept Marketing has always been a part of business. It has changed over the centuries. What has emerged is the marketing concept. 5

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. 6

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. 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. 7

Non-Traditional Marketing Organization marketing, cause marketing, place marketing, event marketing and person marketing are all nontraditional marketing categories. Many not-for-profits often engage in one of these strategies although they can be used to market products, too. 8

Developing a Marketing Strategy Study and analyze potential target markets and choose among them. 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. 9

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. 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. Marketing mix is blending 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. 10

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 - firms mass produce goods and services and add 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. 11

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. 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. 12

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. There are some criteria that marketers consider when segmenting markets. 13

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. 14

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. Product-Related Segmentation Divides market based on buyer’s relationship to the good or service. Common demographic measures include gender, income, age, occupation, household size, stage in family life cycle, education, race, and ethnicity. 15

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 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. 16

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. 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. 17

Steps in Consumer Behavior Process Consumer decisions follow sequential steps while being influenced by interpersonal and personal determinants. 18

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. Better-informed consumers require a beneficial relationship when they make investments. They demand benefits from the companies that supply them. 19

Benefits of Relationship Marketing Lower costs and higher profits for the business. Efficient targeting of best customers increases the lifetime value of a 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. 20

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. 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 denote 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. 21

Customizing products and marketing and rapidly delivering goods. 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. 22