1 Chapter 1 Marketing: Managing Profitable Customer Relationships

Jian Hong SHAO USTB Concept Connections Define marketing and the steps in the marketing process. Explain the core marketing concepts. Define marketing management and examine how marketers manage demand and build profitable customer relationships. Compare the five marketing management philosophies. Capturing value from customer.

Jian Hong SHAO USTB What is Marketing? need want exchanging products Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Simply put : Marketing is the delivery of customer satisfaction at a profit.

Jian Hong SHAO USTB The Marketing Process Understand the marketplace and customer needs and wants Design a customer-driven marketing strategy Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Build profitable relationships and create customer delight Capture value from customers to create profits and customer equity Create value for customers and build customer relationships Capture value from customers in return

Jian Hong SHAO USTB 1 Understanding the Marketplace and Consumer Needs

Jian Hong SHAO USTB Core Marketing Concepts Needs, wants, and demands Products and services Value, satisfaction, and quality Exchange, transactions, and relationships Markets

Jian Hong SHAO USTB Needs Needs - state of felt deprivation for basic items. Such as food and clothing, and complex needs such as for belonging. Needs, Wants and Demands?

Jian Hong SHAO USTB Needs, Wants and Demands? Wants Wants - form that a human need takes as shaped by culture and individual personality.

Jian Hong SHAO USTB Demands Demands - human wants backed by buying power. Needs, Wants and Demands ? Wants Buying Power “Demands”

Jian Hong SHAO USTB Products Anything that can be Offered to a Market to Satisfy a Need or Want Experiences Persons Places Organizations Ideas Information What Will Satisfy Consumer’s Needs & Wants? Services Activities or Benefits Offered for Sale That Are Essentially Intangible and Don’t Result in the Ownership of Anything

Jian Hong SHAO USTB How Do Consumers Choose Products and Services? Total Quality Management Involves Improving the Quality of Products, Services, and Marketing Processes Product’s Perceived Performance in Delivering Value Relative to Buyer’s Expectations is Customer Satisfaction Value Gained From Owning a Product and Costs of Obtaining the Product is Customer Value

Jian Hong SHAO USTB ExpectationPerformance 108 Expectation Performance 810 If performance is lower than expectations, satisfaction is low If performance is higher than expectations, satisfaction is high Value & Satisfaction

Jian Hong SHAO USTB Quality  Quality has a direct impact on product / service and performance, therefore it is closely tied to customer value and satisfaction  The aim of today ’ s Total Quality Management is total customer satisfaction

Jian Hong SHAO USTB ExchangesTransactions Relationships Building a Marketing Network Consisting of The Company and All Its Supporting Stakeholders How Do Consumers Obtain Products and Services?

Jian Hong SHAO USTB Who Purchases Products and Services? People Who Exhibit Need Resources to Exchange Willingness to Exchange Unexpected Situational Factors Attitudes of Others Ethical Potential Buyers Market – Buyers who share a particular need or want that can be satisfied through exchange or relationships. Actual Buyers

Jian Hong SHAO USTB Suppliers End User Market End User Market Marketing Intermediaries Marketing Intermediaries Competitors Company (Marketer) Company (Marketer) Environment Modern Marketing System

Jian Hong SHAO USTB 2. Designing a Customer-Driven Marketing Strategy

Jian Hong SHAO USTB Marketing Management The art and Science of Choosing target Markets & Building profitable Relationships. Demand Management Finding and increasing demand, also changing or reducing demand such as in Demarketing Profitable Customer Relationships Attracting new customers and retaining and building relationships with current customers Marketing Management

Jian Hong SHAO USTB Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Consumers favor products that are available and highly affordable. Consumers favor products that offer the most quality, performance, and innovative features. Consumers will buy products only if the company promotes/ sells these products. Focuses on needs/ wants of target markets & delivering satisfaction better than competitors. Focuses on needs/ wants of target markets & delivering superior value. Marketing Management Philosophies

Jian Hong SHAO USTB Marketing and Sales Concepts Contrasted Factory Existing Products Selling and Promoting Profits through Volume The Selling Concept Starting Point FocusMeansEnds Market Customer Needs Integrated Marketing Profits through Satisfaction The Marketing Concept

Jian Hong SHAO USTB Societal Marketing Concept Societal Marketing Concept Company (Profits) Consumers (Want Satisfaction) Society (Human Welfare)

Jian Hong SHAO USTB 3. Preparing a Marketing Plan and Program

Jian Hong SHAO USTB The Marketing Mix TARGET CUSTOMERS - needs PRODUCT PRICE DISTRIBUTION PROMOTION

Jian Hong SHAO USTB The 4 P’s & 4 C’s of the Marketing Mix 4 P’s - Seller’s View 4 P’s - Seller’s View Product Product Price Price Place Place Promotion Promotion 4 C’s - Buyer’s View 4 C’s - Buyer’s View Customer Solution Customer Solution Customer Cost Customer Cost Convenience Convenience Communication Communication

Jian Hong SHAO USTB 4. Building Customer Relationships Relationships

Jian Hong SHAO USTB Customer Relationship Management The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

Jian Hong SHAO USTB Partner Relationship Marketing Connecting Inside the Company Every employee must be customer- focused Teams coordinate efforts toward customers Connecting With Outside Partners Supply Chain Management Strategic Alliances

Jian Hong SHAO USTB 5. Capturing Value from Customers

Jian Hong SHAO USTB Satisfaction Satisfaction is... “a person’s feelings of pleasure resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.”

Jian Hong SHAO USTB Customer Loyalty & Retention Loyalty is a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences. Show Behavioral & Psychological Commitments

Jian Hong SHAO USTB A Loyal Customer is one Who… Show Behavioral Commitment Buys from one supplier (sole loyalty) frequently Buys a large proportion, increasingly buys more Provides constructive feedback/suggestions Exhibits Psychological Commitment Commitment-doesn’t consider terminating the relationship Has a positive attitude toward provider Say good things about provider Resist changing despite competitors’ persuasion Willing to forgive mistakes

Jian Hong SHAO USTB Benefits for Increasing Customer Loyalty Reduced sales and marketing costs Lower transaction costs Increase in sales Less price competition

Jian Hong SHAO USTB 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.

Jian Hong SHAO USTB Customer Relationship Groups

Jian Hong SHAO USTB Learn About & Track Customers With Databases Communicate With Customers in Groups Or One-on-One Create Products & Services Tailored to Meet Customer Needs Distribute Products More Efficiently & Effectively Connecting Technologies in Computers, Telecommunications, Information, & Transportation New Marketing Landscape

Jian Hong SHAO USTB The Internet The Internet has been hailed as the technology behind a new model for doing business. New applications include: Internet – connecting with customers Intranets – connecting with others in the company Extranets – connecting with strategic partners, suppliers, and dealers. Purchasing will be over $2.3 trillion in 2006.

Jian Hong SHAO USTB Connections With Customers Most marketers are targeting fewer, potentially more profitable customers. Asking : What value does the customer bring to the organization? Are they worth pursuing? Focus has shifted to: keeping current customers building lasting relationships based on superior satisfaction and value.

Jian Hong SHAO USTB New Marketing Landscape Rapid Globalization New World of Marketing Relationships Not-for-Profit Marketing Ethics & Social Responsibility

Jian Hong SHAO USTB The Marketing Process

Jian Hong SHAO USTB Review of Concept Connections Define marketing and the steps in the marketing process. Explain the core marketing concepts. Define marketing management and examine how marketers manage demand and build profitable customer relationships. Compare the five marketing management philosophies. Capturing value from customer.