BUAD 307—MARKETING FUNDAMENTALS MARKETING OVERVIEW

Note: Topic summaries are available

What purposes—other than immediate sales— do these machines serve?

Learning Objectives Identifying The scope and basic objectives of the marketing function Customer value Obstacles to delivering the value to the customer Benefits of and opportunities for relationship marketing

Usage and Reach of Marketing Who markets? Businesses Government units Non-profit organizations Cause related organizations What is marketed? Goods Services Ideas Who buys? Ultimate consumers Organizational buyers For internal use For resale (wholesalers, retailers) Manufacturers (components) Customer benefits? Utility Consumption Convenience

2007 American Marketing Association (AMA) Definition Marketing: “The (1) activity, (2) set of institutions, and (3) processes for (4) creating, (5) capturing, (6) communicating, (7) delivering, (8) and exchanging (9) offerings that have (10) value for (11) customers, (12) clients, (13) partners, and (14) society at large.” (Numbering added.) Definition not needed for the exam!

MARKETING ACTIVITY INSTITUTIONS PROCESSES CREATION COMMUNICATION DELIVERY EXCHANGE CUSTOMERS OFFERINGS VALUE CLIENTS PARTNERS SOCIETY

Marketing As an Exchange Each side receives something more valuable than what it gave up  “win-win” deal and customer value Part of the value may be assurance of continued quality over time (value of the brand) In principle, money does not have to be exchanged. For goods and services, this is usually the most convenient way of trade. For ideas, there may be no monetary exchange as such. E.g., Voting for a candidate Engaging in recycling

Customer Benefits and Value IS THE CUSTOMER BENEFIT GREATER THAN THE SACRIFICE (COST)? YES NO POOR VALUE POTENTIAL GOOD VALUE

Myth vs. Reality Imitating successful competitors is usually NOT an effective strategy Selling things online is usually MORE expensive than selling through conventional retailers (Amazon is estimated to lose some $5-6 billion per year on tangible merchandise shipped to customers!) Products with high value-to-bulk ratio and high absolute (dollar) margins tend to be better suited for online sale Having a great product does NOT necessarily mean you will be successful—you also need Awareness by customers Access to distribution

Communicating value to customers Customers must know that the product exists Awareness through advertising requires a very elaborate, lengthy, and expensive campaign Social media and “guerilla” marketing Exposure through retail setting Retailers must carry the product—for every new one they take on, they generally must sacrifice an existing one Even if carried, a product may “drown” among the “sea” of other products For some products, the customer must see what the product actually does in order to recognize value (e.g., a Pillow Pet is not just “another stuffed animal.”

Delivering value to the customer in a convenient and cost effective manner Brick-and-mortar stores Existing stores must generally drop an existing product to make room for a new one (and retailers may have relationships with existing brands) Some stores—e.g., convenience stores—have room for few brands in each category. Stores in many foreign countries are smaller than typical U.S. stores The customer must be able to find the product Online Delivery to customer must be cost effective The customer must know where to order (easier if carried at major sites such as Amazon) The product must be findable at the site Showed up in search if done by customer Specific brand (requires awareness) General category Featured product Suggested--e.g., “Customers who bought this also bought…” Individualized recommendation based on prior purchases

Relationship Marketing Selling (selling existing products with whatever methods are necessary) vs. marketing orientation (serving customer needs whether in current or new forms) Maintaining a relationship with the customer over time rather than just focusing on immediate sales Anticipating customer needs Providing solutions Investing in products and services optimized for the customer

Products vs. Solutions NETFLIX STARTED OUT SHIPPING DVDs TO CUSTOMERS ABILITY TO WATCH MOVIES ORIGINAL PRODUCT OFFERING ACTUAL CUSTOMER BENEFIT PRACTIVE OF CUSTOMER RATINGS BROUGHT RECOMMENDATION DATA BASE NOW MOST MOVIES ARE OFFERED THROUGH STREAMING EXISTING CUSTOMER BENEFIT BROUGHT ALONG TO NEW FORM (COMPETITIVE ADVANTAGE) ENHANCED WAY OF PROVIDING THE CUSTOMER BENEFIT (SOLUTION) You will NOT be asked to reproduce this specific model on the exam!

Value Benefits—perceived by the customer (may not be objectively accurate) Convenience In delivery In usage Reliability Durability Performance Style/aesthetics Prestige Service component Sacrifices—examples Money Time Risk

Creating, Communicating, and Capturing Customer Value AVAILABILITY EASE OF USE DELIVERY: DISTRIBUTION, EXECUTION OF SERVICES UTILITY CONVENIENCE EXCHAGE OFFERINGS: PRODUCTS, SERVICES, AND IDEAS COMMUNICATION VALUE: CUSTOMER BENEFITS BUYER CAPTURE SECURITY EFFECTIVENESS CREATION: RESEARCH, DESIGN, MANUFACTURING SELLER PLEASURE MONEY, BEHAVIOR Exact model is NOT needed for exam!

Creating Customer Value PERCEIVED NEEDS OF OTHERS INSTINCTS BELIEFS ABOUT WHAT IS “RIGHT” MARKET RESEARCH, ANALYSIS, AND DEVELOPMENT CUSTOMER DESIRES SELLER OFFERINGS COSTS OF OFFERINGS (NEGATIVE) BELIEFS ABOUT THE WORLD BELIEFS ABOUT OFFERINGS Exact model is NOT needed for exam! CUSTOMER VALUE

Customer Value: AFLAC Insurance

Customer Value, Part I Value is the ratio of the benefits received (usually goods or services) to what is given up (usually money) For a transaction to take place, the benefits received must usually be greater than the sacrifice for both parties—usually The customer values the goods and services received more than the money spent The seller values the money received more than the goods or services given up (i.e., it is worthwhile to produce these in order to get this payment)

Customer Value, Part II A low priced product may not represent value to a customer if the benefits received are perceived to be low, too E.g., bargain garbage bag that does not last Different customer segments will have different value perceptions and desires E.g., “tough truck” vs. “sporty car” A product which is adapted to the needs of a particular segment can be very valuable to that segment even if the overall “quality” is not seen as superior by most other consumers E.g., some people like a “clumsy” Hummer Cost may be in terms of money or other sacrifice (e.g., travel time, delay)

Examples of Customer Value to Different Customers

Tools to Provide Customer Value (4Ps) Product (both the tangible item and associated services) Price (different segments of customers will pay different amounts depending on their product needs and preferences) Place (distribution—making the product available where it is convenient to the customer) Promotion (advertising, sales promotion, publicity, selling, special events)

Customer Value: Raw Fish (Ugh!)

Customer Value: Ziploc Bags

Customer Value: iPhone 7 Many customers are willing to pay a large premium on the iPhone relative to competing Android based brands offering very similar features Part of the value is supplied by Cell phone service providers Distributors App developers Online tutorial makers and info produced by others Some sources of value: Ease of use Multiple functions within one easy-to-carry device Elegance of design Prestige Reliability Integration with iPad and Apple computers

Customer Value: Sally Hansen Nail Polish Cost Reduction Choice Convenience Durability Performance Risk reduction

Value: Nordstrom’s

Value: Walmart

Value Engineering Increasing offering value by Decreasing cost Improving Durability Performance Reliability Convenience Aesthetics No box  lower cost, less waste, less bulk, less hassle

Some VERY high-tech products with carefully engineered value

Customer Value: Soda Vending

Customer Value: Netflix

Customer Value: Starbucks

Value: Recap A low quality, low price product represents poor value for many customers A very high benefit product at a high price can represent value for some segments Customer segments differ in what they find valuable