McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Twelve Customer-Driven Marketing

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The nature of marketing is to create value by allowing people and organizations to obtain what they need and want.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Marketing is an Exchange Relationship Exchange: –The act of giving up something (money, credit, labor, goods) in return for something else (goods, services, or ideas).

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The Exchange Process: Giving Up One Thing in Return for Another Something of Value (money, credit, labor, goods) Something of Value (goods, services, ideas) Seller Buyer

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Marketing Creates Utility Utility: A product’s ability to satisfy human needs and wants. –Place Utility –Time Utility –Ownership Utility –Form Utility

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Functions of Marketing Buying Selling Transporting Storing Grading Financing Marketing Research Risk Taking

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The Marketing Concept The idea that an organization should try to satisfy customer’s needs through coordinated activities that allow it to achieve its own goals (profit). FAST FACT: Trying to determine a customer’s true needs is difficult because no one fully understands what motivates people to buy.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Developing Marketing Strategy Marketing Strategy: –A plan of action for developing pricing, distributing and promoting products that meet the needs of specific customers. The Two Major Components: 1.Selecting a Target Market 2.Developing the Appropriate Marketing Mix

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Market / Target Market A market is a group of people who have a need, purchasing power, and the desire and authority to spend money on goods, services, and ideas. A target market is a more specific group of consumers on whose needs and wants a company focuses its marketing efforts.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Relationship Management (CRM) Using information about customers to create marketing strategies that develop and sustain desirable customer relationships.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Total-Market Approach The marketer tries to appeal to everyone and assumes that all buyers have the same needs.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Market Segmentation Market Segmentation: –A strategy to divide the total market into groups of people who have relatively similar product needs.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Market Segment A Market Segment: –A collection of individuals, groups, or organizations who share one or more characteristics and have similar product needs and desires.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Niche Market Narrow market segment focus when efforts are on one small, well-defined segment that has a unique, specific set of needs.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Bases for Segmenting Markets Demographic Geographic Psychographic Behavioristic

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Target Market Strategies Multiple Target Markets Marketing Strategy 1Company Multisegment Approach Marketing Strategy 2 Single Marketing Strategy Company Concentration Approach Single Target Market

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. How America Spends MINORITY BUYING POWER By Race, 1990 vs Buying Power*% Market Share Category: Total minority$439.9$ %12.2% Black % 8.1% Hispanic % 6.4% Asian % 3.6% Native American % 0.5% *in billions Source: Jeffery M. Humphreys, Selig Center for Economic Growth, University of Georgia in “Ethnic,” Marketing News, July 2, 2001, p. 17.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The Keys to Successful Market Segmentation 1.Consumers’ product needs must be heterogeneous. 2.Segments must be identifiable and divisible. 3.The market must be divided so segment sales, cost, and profit can be compared. 4.One segment must have enough profit potential to justify a special marketing strategy. 5.The chosen segment must be reached by the firm with a particular marketing strategy.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Developing the Marketing Mix: Product, Price, Promotion, and Distribution Customer Promotion Price Distribution Product

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Product A good, service, or idea that has tangible and intangible attributes that provide satisfaction and benefit to consumers. Products should be sold at a profit.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Price A value placed on a product or service that is exchanged between a buyer and seller.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Distribution Making products available to consumers in the quantities and locations desired.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Promotion A persuasive form of communication that attempts to expedite a marketing exchange by influencing individuals and organizations to accept goods, services, and ideas.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Marketing Research & Information Systems Marketing Research: –A systematic, objective process of getting customer information to guide marketing decisions. Marketing Information System: –A framework for assessing information about customers from internal and external sources.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Research Collects Data Primary Data Secondary Data

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Buying Behavior The decision processes and actions of people who purchase and use products.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Psychological Variables of Buying Behavior –Perception –Motivation –Learning –Attitude –Personality

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Social Variables of Buying Behavior –Social Roles –Reference Groups –Social Classes –Culture

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. How America Spends Food and Beverage Sales in the US are Increasing $309 billion $326 billion $345 billion Source: “Food and drink sales up,” USA Today, October 1, 2001, p. 1B.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. How America Spends If Americans were to reduce household spending, where would they cut back? 48% 47% 41% 40% 37% 36% 28% 24% Eat out less Forgo vacations Fewer movies at theaters Electronics purchases Fewer concerts Buy less clothing Fewer cell & phone calls Buy fewer books Source: “Staking out a comfort zone,” USA Today, October 1, 2001, p. 2D.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The Marketing Environment The external forces that directly influence the development of marketing strategies.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. The Marketing Mix and the Marketing Environment Customer Promotion Price Distribution Product Social Forces Competitive and Economic Forces Technological Forces Political, Legal, and Regulatory Forces Marketing Environment

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. How America Spends Source: “On the Internet: Buyer beware,” USA Today, April 24, Fraud On the Internet: Buyer Beware 36% 4% 25% 23% 11% Yes, Internet fraud occurs Occasionally, but not that often Significant problem, but not severe Fraud is a severe problem Internet fraud is not a problem

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Solve the Dilemma 1.What do you think were the main concerns with the Olympus 2-door sports coupe? Is there a market for a 2-seat, $32,000 sports car when the Miata sells for significantly less? 2.Evaluate the role of the marketing mix in the Olympus introduction. 3.What are some of the marketing strategies auto manufacturers use to stimulate sale of certain makes of automobiles?

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Explore Your Career Options How will a career in marketing be enhanced by knowledge about customer buying behavior and customer service?

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Additional Discussion Questions and Exercises 1.Utility is the ability of a product to satisfy human needs and wants. What are the four kinds of utility? 2.Why are intermediaries helpful in distribution? 3.What are some different forms of promotion? 4.What is the difference between primary data and secondary data? 5.What are some sources for obtaining secondary data?

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 12 Quiz 1.When a business segments markets on the basis of personality characteristics, motives, and lifestyles, that segmentation is based on a.demographics. b.geographic factors. c.psychographics. d.behavioristic characteristics. 2.The act of giving up one thing in return for something else is a.marketing. b.utility. c.an exchange. d.promotion.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 12 Quiz 3.The psychological factor described as “changes in a person’s behavior based on information and experience” is termed: a.perception. b.motivation. c.personality. d.learning. 4.In developing a marketing mix, what should be the central focus of all marketing activities? a.price b.buyer or target market c.product d.promotion

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Multiple Choice Questions about the Video 1.A(n) _______ is a network for internal communications and includes firewalls to protect information from outside viewers. a.extranet b.intranet c.World Wide Web d.virtual marketing system 2.Which of the following is included in the infrastructure for virtual marketing? a.intranet b.extranet c.Internet d.all of the above