Module 1 Understanding How Marketing Serves Customers And The Firm Kotler’s Chapters 1 and 2

Chapter One: Marketing in the Twenty-First Century Learning Objectives –1. Describe why Marketing is important to different types of contemporary organizations and in different environments. –2. Describe the core concepts of marketing and the basic tasks performed by marketing organizations and managers. –3. Discuss the differences between the various company orientations toward the marketplace.

Chapter 1/Objective 1: Why Marketing is Important Marketing is about identifying and meeting human needs profitably. Marketers need to determine what their customers want now and in the future. Marketers need to do this given the rapid changes in the environment, recognizing that their marketing strategy needs to be constantly reviewed and refined.

Chapter 1/Objective 2: Tasks of Marketing Scope of Marketing - 10 Entities/Offerings –Goods, Services, Experiences, Events, Persons, Places, Properties, Organizations, Information, and Ideas. Decisions Marketers Make - Marketers have to address a variety of variables given their market (consumer, business, global, nonprofit, government) and the environment. What variables they have to focus on may vary.

Chapter 1/Objective 2: Tasks of Marketing Definition of Marketing –Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchange that satisfy individual and organization goals. –Marketing is more than advertising and selling. –Focus on choosing target markets, getting /keeping customers and delivering value.

Chapter 1/Objective 2: Core Concepts of Marketing Target Markets and Segmentation - Module 5 –Need to find likely (profitable) customers that will make up the target market. For each target market, firms have to develop a market offering and position this offering in the minds of their potential customers based on some particular benefit the target market value. With E-Marketing those values include savings, convenience, selection, personalization, information. More details of E-Marketing in Module 9.

Chapter 1/Objective 2: Core Concepts of Marketing Needs (human requirements), Wants (specific learned means to satisfy needs), Demands (want for a specific product with an ability to pay for it). Value and Satisfaction –Value is the ratio between what the customer gets (benefits) and what they give (costs). –Satisfaction is the feeling of pleasure/ displeasure customers feel when they compare their product experiences with expectations.

Chapter 1/Objective 2: Core Concepts of Marketing Exchange and Transactions –Two parties, each with something of value –Each capable of communication and delivery –Each party free to accept/reject offer –Each party believes it is appropriate or desirable to deal with the other party. –Transaction occurs when the two parties agree to exchange values.

Chapter 1/Objective 2: Core Concepts of Marketing Relationships and Networks –It is important to build long term relationships with customers and other key stakeholders. Chapter 2 discusses value delivery networks. Competition - different levels competition –Brand competitors (similar products that serve similar customers’ needs) to generic/total budget competitors (customers have limited dollars but unlimited different wants).

Chapter 1/Objective 2: Core Concepts of Marketing Marketing Channels - Mix of 3 kinds - Details in Module 7 –Communication - deliver/receive messages –Distribution - display/deliver product –Selling - effect transactions with buyers Supply Chain - represents a value delivery system from raw materials to components to final products carried to final buyers

Chapter 1/Objective 2: Core Concepts of Marketing Marketing Environment - Module 3 –Task Environment is internal/cooperative –Broad Environment is external: demographic, economic, natural, technological, political- legal, and socio-cultural Marketing Strategy - Modules 2, 4-8 –Target market + marketing mix (product, place, promotion, and price)

Chapter 1/Objective 3: Company Orientations Of Marketplace Production Concept - make what can easily and cheaply Product Concept - focus on high tech/high quality Selling Concept - aggressive promotion to push product Marketing Concept - focus on serving needs of target market at a profit, build long term relationships with customers. The whole firm has the responsibility to serve customers’ needs, not just the marketing department. Societal Marketing Concept -focus beyond serving needs of target market but also on benefiting society.

Chapter 2: Building Customer Satisfaction, Value, + Retention Learning Objectives –1. Describes what constitutes customer value and satisfaction and how they can be measured by a firm. –2. Describe how leading companies organize to produce and deliver high customer value and satisfaction. –3. Discuss how firms can retain as well as attract customers and why this is important. –4. Compute the cost of lost customers as well as customers’ lifetime value.

Chapter 2/Objective 1: Customer Value and Satisfaction Customer Delivered Value –What one gets (value/benefits) > What one gives (cost) –Customers maximize what they get for their costs (monetary, time, energy, and psychic) Customer Satisfaction - perceptions key –Effectively manage product expectations –Track product performance vs. competition - See Table 2.1

Chp 2/Objective 2: Delivering Customer Value + Satisfaction Value Chain –Each activity a company engages in is a link in a chain (that is why key that everyone in firm focuses on customers). See Figure 2.3. Value-Delivery Networks (Supply Chain) –Suppliers, manufacturers, distributors, retailers, etc… must all work together to achieve its goals and serve customers

Chp 2/Objective 3: Attracting and Retaining Customers Dissatisfied customers will spread negative word of mouth (WOM) to others. Satisfied customers stay loyal longer, buy new products/upgrades, spread positive WOM, are less price sensitive, are less susceptible to competition, and cost less to serve than new customers.

Chp 2/Objective 3: Attracting and Retaining Customers Relationship Marketing Key –Provide structural ties to customers (ex. customer sets up long distance phone service so it is automatically billed to credit card and they get frequent flyer points). This is hard for customers to change and provides them with the greatest benefit. –There needs to be more than a financial benefit (ex. discount, as this is the easiest for competitors to copy) or a social benefit (ex. set up chat rooms for customers to discuss).

Chp 2/Objective 3: Attracting and Retaining Customers Progression Customer/Company Interdependence –Basic Marketing - sell product –Reactive Marketing - sell product plus encourage customer to call if needed –Accountable Marketing - salesperson calls customer to see if product meeting expectations –Proactive Marketing - salesperson maintains contact with customer to let them know new things –Partnership Marketing - firm works with customer to find ways to perform better

Chapter 2/Objective 4: Cost of Customers and Lifetime Value Computing Cost of Lost Customers –Define and measure retention rate/defection rate. –Determine attrition causes/what can do better. –Determine how much profit losing from this. Customer Lifetime Value - present value of profit stream that firm would have realized if profitable customer had not left. –Determine if costs to reduce defection < lost profit. If so, company needs to reduce defection rate.

Chapter 2/Objective 4: Cost of Customers and Lifetime Value Need for Customer Retention –Key to retention is customer satisfaction. –Must exceed customer expectations. 95% dissatisfied customers don’t complain, they just stop buying. Can keep up to 95% of dissatisfied customers if quickly and effectively resolves problem. Won back customers tell approximately 5 people of good treatment. Winning back lost customers cheaper than attracting new customers. See statistics of customer retention in book.

Module 1 - Conclusion Firms need to find out who are their profitable customers are and what do they need given the ever-changing environment. They must integrate what the firm is doing (along with their supply chain) to meet this target market’s needs effectively and develop a long term relationship where the customer is satisfied. Any Questions?