1. Copyright 2011 John Wiley & Sons, Inc. Chapter 4 Marketing 4-1

2. Lecture Outline 4-2 What is Marketing? Customer-Driven Supply Chains Delivering Value to Customers Channels of Distribution Copyright 2011 John Wiley & Sons, Inc.

3. What is Marketing? 4-3 Marketing is the function responsible for linking the organization to its customers and is concerned with the “downstream” part of the supply chain Copyright 2011 John Wiley & Sons, Inc.

4. 4-4 Copyright 2011 John Wiley & Sons, Inc.

5. The Marketing Function Marketing Task: –identify what customers want and need –create demand for a company’s current and new products –identify market opportunities 4-5 Copyright 2011 John Wiley & Sons, Inc.

6. Marketing Segmentation Marketing segmentation distinguishes markets Mass Marketing –treats the entire market as a homogenous group Target Marketing –does not try to please all customers with the same product 4-6 Copyright 2011 John Wiley & Sons, Inc.

7. Evolution of Marketing 4-7 Copyright 2011 John Wiley & Sons, Inc.

8. Evolution of Marketing Continued Three Perspectives: –Production Concept –Selling Concept –Marketing Concept Two Eras: –Transactional Marketing –Relational Marketing 4-8 Copyright 2011 John Wiley & Sons, Inc.

9. Evolution of Marketing -- The Production Concept The Production Concept dominated the early part of the 20 th Century –unfulfilled demand for products –products easily sold –challenge to sell at a price that exceeded the cost 4-9 Copyright 2011 John Wiley & Sons, Inc.

10. Evolution of Marketing -- The Selling Concept The Selling Concept dominated the middle of the 20 th century –increased competition –mass production was commonplace –less unfulfilled demand –marketing used to persuade customers –little attention to customers needs 4-10 Copyright 2011 John Wiley & Sons, Inc.

11. Evolution of Marketing -- The Marketing Concept The Marketing Concept began in the 1970s –greater product variety and customer selectiveness –increased discretionary income –increasingly global environment –focus on identifying customers needs and keeping customers satisfied 4-11 Copyright 2011 John Wiley & Sons, Inc.

12. Evolution of Marketing -- Transactional Marketing Era The Marketing perspectives prior to the 1970s were part of the era of Transactional Marketing –focus on obtaining successful exchanges with customers –sell existing products using promotional techniques –Production and Selling Concept marketing perspective eras 4-12 Copyright 2011 John Wiley & Sons, Inc.

13. Evolution of Marketing -- Relational Marketing Era The Marketing Concept perspective beginning in the 1970s is a part of the era of Relational Marketing –focus on building long-term relationships –marketing research –cost-effective to retain current customers 4-13 Copyright 2011 John Wiley & Sons, Inc.

14. Impact on the Organization 4-14 Copyright 2011 John Wiley & Sons, Inc. Marketing brings the voice of the customer into the decision making process of the company Customer desires are then translated into viable and profitable products

15. Marketing Decisions 4-15 Copyright 2011 John Wiley & Sons, Inc. Marketing decisions fall into four categories: Product Price Place (Distribution) Promotion These decisions directly involve SCM

16. Customer-Driven Supply Chains An empowered customer is the driving force of the supply chain Knowledgeable buyers –product choices, costs, consumer reviews Buyers demand choices in products and services –shift in power from companies to customers 4-16 Copyright 2011 John Wiley & Sons, Inc.

17. Who is the Customer? Typically there are two types of end users: End Customer –purchases are made by an individual or household to satisfy personal needs Organizational End User –purchases are made by an organization in order for employees to perform their jobs 4-17 Copyright 2011 John Wiley & Sons, Inc.

18. Types of Customer Relationships Common strategies used to satisfy customers in target markets: Standardized Strategy Customized Strategy Niche Strategy Micro-Marketing 4-18 Copyright 2011 John Wiley & Sons, Inc.

19. Standardized Strategy –All customers are viewed in the same way –Minimal product customization –Products developed for the average customer –Cost advantages 4-19 Copyright 2011 John Wiley & Sons, Inc.

20. Customized Strategy –Utilizes information from market segmentation –Different versions of the product are developed –Producing and coordinating multiple products adds complexity –Complexity adds costs 4-20 Copyright 2011 John Wiley & Sons, Inc.

21. Niche Strategy –Targets only one segment of the overall market –Very precise products –Typically small firms or new companies –Results in higher priced products 4-21 Copyright 2011 John Wiley & Sons, Inc.

22. Micro-Marketing –Product is designed to meet the needs of an individual customer –Can reduce supply chain intermediary transaction costs –Also called one-to-one marketing –High degree of customization possible with customer relationship management software 4-22 Copyright 2011 John Wiley & Sons, Inc.

23. Customer Relationship Management (CRM) Software CRM uses automated customer transactions to gather data –Data captured by ERP Software modules –Aids market segmentation –Creates customized customer communication 4-23 Copyright 2011 John Wiley & Sons, Inc.

24. Delivering Value to Customers The central focus of SCM is to create value for the customer Responsibility of marketing to understand what the customer perceives as value Voice of the Customer is the process of capturing customer needs and preferences 4-24 Copyright 2011 John Wiley & Sons, Inc.

25. Voice of the Customer (VOC) Three levels of customer needs: Basic Needs –minimum customer expectations Performance Needs –differentiate one product from another Excitement Needs –elicit delight over the product 4-25 Copyright 2011 John Wiley & Sons, Inc.

26. Voice of the Customer Process 1.Divide customers into market segments 2.Conduct market research 3.Utilize Quality Function Deployment (QFD) 4-26 Copyright 2011 John Wiley & Sons, Inc.

27. Voice of the Customer Process Continued 4-27 Copyright 2011 John Wiley & Sons, Inc.

28. Quality Function Deployment Matrix Example 4-28 Copyright 2011 John Wiley & Sons, Inc.

29. What is Customer Service? Customer service can be defined as a process of enhancing the level of customer satisfaction by meeting or exceeding customer expectations 4-29 Copyright 2011 John Wiley & Sons, Inc.

30. What is Customer Service? Customer service can be viewed in three ways: An Activity –activities at transactional level, limited opportunity to add value A Set of Performance Measures –objective measure of service performance, not sufficient to create service excellence A Philosophy –firm-wide commitment to customers, consistent with today’s quality management 4-30 Copyright 2011 John Wiley & Sons, Inc.

31. Impact on the Supply Chain Customer service impacts the supply chain on four dimensions: Time –speed at which the company responds Dependability –consistency in meeting promises to customers Communications –providing real time order status Convenience –providing more customization to customers 4-31 Copyright 2011 John Wiley & Sons, Inc.

32. Measuring Customer Service Effective customer service performance measures focus on the viewpoint of the customer rather than the supplier Measures permit the company to benchmark their performance against others in their industry Most companies rely on multiple measures of customer service 4-32 Copyright 2011 John Wiley & Sons, Inc.

33. Supplier vs. Customer - Oriented Standards 4-33 Copyright 2011 John Wiley & Sons, Inc.

34. Global Customer Service Issues Different parts of the world have different customer service needs Factors contributing to differences in customer service globally: –road infrastructure –communication networks –power availability –time differences –local congestion 4-34 Copyright 2011 John Wiley & Sons, Inc.

35. What are Channels of Distribution? A channel of distribution is the way products and services are passed from the manufacturer to the final customer Includes intermediary firms such as wholesalers, distributors, and retailers 4-35 Copyright 2011 John Wiley & Sons, Inc.

36. Direct and Indirect Channels Direct Channels –the transaction is directly from the producer to end-user or final customer Indirect Channels –intermediaries such as wholesalers and retailers are used to sell to final customers 4-36 Copyright 2011 John Wiley & Sons, Inc.

37. Designing a Channel of Distribution Three factors that influence the structure of the distribution channel: Market Coverage Objectives –intensive, selective, or exclusive distribution Product Characteristics –such as high-value, technical, or perishable Customer Service Objectives –carefully balance customer needs and costs 4-37 Copyright 2011 John Wiley & Sons, Inc.

38. Distribution vs. Logistics Channel Distribution Channel –refers to transactional entities such as distributors, dealers, and wholesalers Logistics Channel –refers to the physical movement of products from where they are available to where they are needed 4-38 Copyright 2011 John Wiley & Sons, Inc.

39. Distribution vs. Logistics Channel 4-39 Copyright 2011 John Wiley & Sons, Inc.

40. Impact of E-Commerce E-Commerce requires changes in the channel of distribution Pricing Structure –common to underestimate shipping costs Shipping of Small Bundles –small packages shipped to individual customers vs. shipping in bulk to one location Efficient Handling of Returns –high rate of return, “bricks-and-mortar” option 4-40 Copyright 2011 John Wiley & Sons, Inc.

41. Review 1.Marketing is the function responsible for linking the organization to its customers and is concerned with the “downstream” part of the supply chain. It is responsible for identifying customer needs, determining how to create value for customers, and building strong customer relationships. 2.Marketing decisions drive all of the actions of the organization and the supply chain. These decisions fall into four distinct categories known as the marketing mix or the 4Ps. They are: product, price, place (distribution), and promotion. 3.The traditional marketing approach has been to pursue a strategy of increasing the number of customer transactions in order to increase revenues and profits- transactional marketing. Today’s approach to marketing is to develop long-term relationships with customers- relational marketing. 4-41 Copyright 2011 John Wiley & Sons, Inc.

42. Review Continued 4.CRM is sophisticated technology that gathers data and customizes communication from automated customer transactions. This data is captured through suites of software modules that are part of larger enterprise resource planning systems (ERP). 5.Customer service is the process of enhancing the level of customer satisfaction by meeting or exceeding customer expectations. It can be viewed in three distinct ways: an activity, a set of performance measures, and an overarching philosophy. 6.A channel of distribution is the way products and services are passed from manufacturer to final customer. It is made up of the entities involved in getting products and services to final customers and can involve a variety of intermediary firms, including wholesalers, distributors, or retailers. 4-42 Copyright 2011 John Wiley & Sons, Inc.

43. Review Continued 7.Channels of distribution can be direct or indirect, and are part of the overall supply chain. 8.E-commerce requires changes in the channel of distribution through changes in pricing structure, shipping small bundles, and handling returns. 4-43 Copyright 2011 John Wiley & Sons, Inc.

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