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PRINCIPLE OF MARKETING

Chapter 01

Marketing: Managing Profitable Customer Relationships

Learning Objectives
1. 2.

3.

4.

5.

After studying this chapter, you should be able to: Define marketing and outline the steps in the marketing process Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy Discuss customer relationship management, and identify strategies for creating value for customers and capturing value from customers in return Describe the major trends and forces that are changing the marketing landscape in this age of relationships

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Chapter Concepts
1. 2. 3. 4. 5. 6. 7. 8.

What Is Marketing? Understanding the Marketplace and Customer Needs Designing a Customer-Driven Marketing Strategy Preparing an Integrated Marketing Plan and Program Building Customer Relationships Capturing Value from Customers The New Marketing Landscape So, What Is Marketing? Pulling It All Together

What Is Marketing?

Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customers in return

What Is Marketing?
The Marketing Process
1. 2. 3. 4. 5.

Understand the marketplace and customer wants and needs Design a customer-driven marketing strategy Construct a marketing plan that delivers superior value Build profitable relationships and create customer satisfaction Capture value from customers to create profit and customer equity

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What Is Marketing?
The Marketing Process

Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands Needs are states of deprivation

Physicalfood, clothing, warmth, safety Socialbelonging and affection Individualknowledge and self-expression

Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands Wants are the form that needs take as they are shaped by culture and individual personality Demands are wants backed by buying power

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Understanding the Marketplace and Customer Needs

Market OfferingsProduct, Services, and Experiences

Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want

Understanding the Marketplace and Customer Needs

Market OfferingsProducts, Services, and Experiences Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs

Understanding the Marketplace and Customer Needs

Customer Value and Satisfaction

Expectations

Customers

Value and satisfaction Set the right level of expectations

Marketers

Not too high or low

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Understanding the Marketplace and Customer Needs Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering something in return Marketers want to build and maintain strong relationships by consistently delivering superior customer value

Understanding the Marketplace and Customer Needs

Markets are the set of actual and potential buyers of a product Marketing system consists of all of the actors (suppliers, company, competitors, intermediaries, and end users) in the system affected by major environmental forces Demographic Technological Economic Politicallegal Socio-cultural Physical

Understanding the Marketplace and Customer Needs Elements of a Marketing System

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Designing a Customer-Driven Marketing Strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with them
What customers will we serve? How can we best serve these customers?

Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve Market segmentation refers to dividing the markets into segments of customers Target marketing refers to which segments to go after

Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve Demarketing is marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it.

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Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve Marketing management is:

Customer management Demand management

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Production concept Product concept Selling concept Marketing concept Societal concept

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations Production concept is the idea that consumers will favor products that are available or highly affordable

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Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations Product concept is the idea that consumers will favor products that offer the most quality, performance, and features that the organization should therefore devote its energy to making continuous improvements

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations Selling concept is the idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling and promotion effort

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do

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Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers wants, the companys requirements, consumers long-term interests, and societys long-run interests

Preparing an Integrated Marketing Plan and Program

Marketing Mix The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy Product Price Promotion Place

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Preparing an Integrated Marketing Plan and Program

4Cs model of Lautheborn euquavelance correspond to 4Ps of Mc Carthy

4 Ps P1: Product P2: Price P3: Place P4: Promotion

4 Cs C1: Customer needs and wants C2: Cost to the customer C3: Convenience C4: Communication

Building Customer Relationships

Customer Relationship Management (CRM)
The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction

Building Customer Relationships

Customer Relationship Management (CRM)
Relationship Building Blocks: Customer Value and Satisfaction Customer perceived value is the difference between total customer value and total customer cost Customer satisfaction is the extent to which a products perceived performance matches a buyers expectations

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Building Customer Relationships

Customer Relationship Management (CRM)
Customer Relationship Levels and Tools

Basic relationship Full partnerships Frequency marketing programs Club marketing programs

Building Customer Relationships

The Changing Nature of Customer Relationships
Relating with more carefully selected customers uses selective relationship management to target fewer, more profitable customers Relating for the long-term to retain current customers and build profitable, long-term relationships Relating directly uses direct marketing tools (telephone, mail-order, kiosks, Internet) to make direct connections with customers

Building Customer Relationships

Partner Relationship Management
Partner relationship management involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers

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Capturing Value from Customers

Creating Customer Loyalty and Retention Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage

Capturing Value from Customers

Building Customer Equity Customer equity is the total combined customer lifetime values of all of the companys customers

Capturing Value from Customers

Building Customer Equity Building the right relationships with the right customers involves treating customers as assets that need to be managed and maximized Different types of customers require different relationship management strategies
Build the right relationship with the right customers

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The New Marketing Landscape

Major Developments

Digital age Rapid globalization Ethics and social responsibility Not-for-profit marketing

The New Marketing Landscape

The New Digital Age
Recent technology and the growth in computers, telecommunications, information, and transportation have had a major impact on the ways marketers connect with and bring value to their customers Market research Distribution Communication
Video conferencing Online data services

The New Marketing Landscape

The New Digital Age Internet creates marketplaces and marketspaces
Information Entertainment Communication

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The New Marketing Landscape

Rapid Globalization

The world is smaller Think globally, act locally

The New Marketing Landscape

The Call for More Ethics and Social Responsibility
Marketers are being called upon to take greater responsibility for the social and environmental impact of their actions in a global economy

The New Marketing Landscape

The Call for More Ethics and Social Responsibility Social marketing campaigns encourage energy conservation and concern for the environment or discourage smoking, excessive drinking, and drug use

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The New Marketing Landscape

The Growth for Not-for-Profit Marketing

Colleges Hospitals Museums Zoos Orchestras Religious groups

The Marketing Environment

Marketing Environment The marketing environment includes the actors and forces outside marketing that affect marketing managements ability to build and maintain successful relationships with customers

The Companys Microenvironment

Marketing Environment Macroenvironment consists of the larger societal forces that affect the microenvironment Demographic Economic Natural Technological Political Cultural

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The Companys Macroenvironment

The Companys Microenvironment

Marketing Environment Microenvironment consists of the actors close to the company that affect its ability to serve its customers, the company, suppliers, marketing intermediaries, customer markets, competitors, and publics

The Companys Microenvironment

Actors in the Microenvironment

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Porters Five Forces Model of Competition

Threat of New Entrants

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Assessing Marketing Information Needs

Marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers

Assess the information needs Develop needed information Analyze information Distribute information

Assessing Marketing Information Needs

MIS provides information to the companys marketing and other managers and external partners such as suppliers, resellers, and marketing service agencies

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Assessing Marketing Information Needs

Characteristics of a good MIS balances the information users would like to have against what they need and what is feasible to offer

Assessing Marketing Information Needs

Developing Marketing Information

Marketers can obtain information from:

Internal data Marketing intelligence Marketing research

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Developing Marketing Information

Internal Data
Internal databases are electronic collections of consumer and market information obtained from data sources within the company network, including accounting, marketing, customer service, and sales departments

Developing Marketing Information

Advantages and Disadvantage of Internal Databases

Advantages Can be accessed more quickly Less expensive

Disadvantages Incomplete information Wrong form for decision making Timeliness of information Amount of information Need for sophisticated equipment and techniques

Developing Marketing Information

Marketing Intelligence Marketing intelligence is the systematic collection and analysis of publicly available information about competitors and developments in the marketplace The goal is to improve strategic decision making, assess and track competitors actions, and provide early warning of opportunities and threats

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Developing Marketing Information

Marketing Research
Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization

Developing Marketing Information

Marketing Research Steps in the marketing research process Defining the problem and research objectives 1. Developing the research plan 2. Implementing the plan 3. Interpreting and reporting the findings 4.

Developing Marketing Information

Steps in the Marketing Research Process

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Developing Marketing Information

Marketing Research
Defining the Problem and Research Objectives

Types of objectives Exploratory research Descriptive research Causal research

Developing Marketing Information

Marketing Research
Defining the Problem and Research Objectives Exploratory research is the gathering of preliminary information that will help to define the problem and suggest hypotheses Descriptive research is to describe things such as market potential for a product or the demographics and attitudes of consumers who buy the product Causal research is to test hypotheses about cause-andeffect relationships

Developing Marketing Information

Marketing Research
Developing the Research Plan

Research plan outlines sources of existing data and spells out the specific research approaches, contact methods, sampling plans, and instruments that researchers will use to gather data

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Developing Marketing Information

Marketing Research
Developing the Research Plan Research plan is a written proposal that includes: Management problem Research objectives Information needed How the results will help management decisions Budget

Developing Marketing Information

Marketing Research
Developing the Research Plan

Secondary data consists of information that already exists somewhere, having been collected for another purpose Primary data consists of information gathered for the special research plan

Developing Marketing Information

Marketing Research
Gathering Secondary Data

Advantages

Disadvantages

Speed Cost Provides data that a company cannot collect on its own

Availability Relevance Accuracy Impartial

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Developing Marketing Information

Marketing Research
Primary Data Collection

Research approaches Contact methods Sampling plan Research instruments

Table 4.2 Planning Primary Data Collection

Analyzing Marketing Information1

Customer Relationship Management (CRM)
CRM consists of sophisticated software and analytical tools that integrate customer information from all sources, analyze it in depth, and apply the results to build stronger customer relationships

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Analyzing Marketing Information

Customer Relationship Management (CRM)
Data warehouses are comprehensive companywide electronic databases of finely tuned detailed customer information Uses

To To To To

understand customers better provide higher levels of customer service develop deeper customer relationships identify high-value customers

Analyzing Marketing Information

Customer Relationship Management
Touch points are every contact between the customer and company Customer purchases Sales force contacts Service and support calls Web site visits Satisfaction surveys Credit and payment interactions Research studies

Distributing and Using Marketing Information

Information distribution involves entering information into databases and making it available in a time-useable manner Intranet provides information to employees and other stakeholders Extranet provides information to key customers and suppliers

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Other Marketing Information Considerations

Marketing Research in Small Businesses and Nonprofit Organizations Need information about their industry, competitors, potential customers, and reactions to new offers Must track changes in customer needs and wants, reactions to new products, and changes in the competitive environment

Other Marketing Information Considerations

Public Policy and Ethics in Marketing Research
Intrusions on consumer privacy Consumer resentment Misuse of research findings

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