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

2. 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.

3. 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.

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

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. Market A sphere where exchange takes place. Examples?
Copyright 2007, Prentice-Hall Inc.

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

21. 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.

22. 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.

23. Let’s Talk! 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.

24. 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.

25. 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.

26. 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!
Copyright 2007, Prentice-Hall Inc.

27. 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.

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

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

30. 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.

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

32. 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.

33. 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.

34. 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.

35. 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.

36. 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.

37. 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.

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

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

40. 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.

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