Building Customer Relationships Through Effective Marketing Chapter Twelve Building Customer Relationships Through Effective Marketing Copyright © Cengage Learning. All rights reserved

Chapter Overview https://www.youtube.com/watch?v=i1xz5Kv-7VY Copyright © Cengage Learning. All rights reserved 12 | 2

Copyright © Cengage Learning. All rights reserved Marketing The activity, set of institutions and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Marketing is more than just selling… Copyright © Cengage Learning. All rights reserved

Managing Customer Relationships Relationship marketing: Establishing long-term mutually satisfying buyer-seller contact Customer relationship management (CRM): Using information about customers to create marketing strategies that develop and sustain desirable customer relationships Customer lifetime value: a combination of purchase frequency, average value of purchases, and brand-switching patterns over the entire span of a customer’s relationship with a company RELATIONSHIPS ARE IMPORTANT BECAUSE THE FIRM DESIRES TO RETAIN CUSTOMERS AND NOT JUST ATTRACT NEW ONES IF YOU ARE GOOD TO YOUR CUSTOMERS, THEY WILL BE GOOD TO YOUR FIRM MARKETERS NEED TO RESEARCH AND VIEW TRENDS TO SEE WHAT SEGMENT (OR TARGET) THEY DESIRE TO SELL TO Why is it important to create relationships? Copyright © Cengage Learning. All rights reserved

Exchange Between Buyer and Seller Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason. Ohio: South-Western/Cengage Learning, 2010. Adapted with permission. Copyright © Cengage Learning. All rights reserved

Major Marketing Functions EXCHANGE FUNCTIONS BUYING: OBTAINING MATERIALS TO MAKE PRODUCTS, KNOWING HOW MUCH MERCHANDISE IS ON HAND SELLING: CREATES POSSESION UTILITYBY TRANSFERING TITLE PHYSICAL DISTRIBUTION FACTORS: THE FLOW OF GOODS FROM PRODUCERS TO CONSUMERS. TRANSPORTING: INVOLVES SELECTING THE MODE OF TRANSPORT AND PROVIDES AN ACCEPTABLE DELIVERY SCHEDULE AND PRICE STORING: NECESSARY TO SELL IN A GIVEN TIME (IE Perishable) Facilitating Function: FUNCTIONS THAT HELP OTHER FUNCTIONS TAKE PLACE FINANCING: PROVIDING CAPITAL TO FUND RESEARCH, LOGISTICS, AND PROJECTS STANDARDIZING: SETS UNIFORM SPECIFICATIONS FOR PRODUCTS OR SERVICES. MAKING SURE PRODUCTS/SERVICES ARE UP TO PAR RISK TAKING: OBSOLETE PRODUCTS, BAD RESEARCH METHODS, LAWSUITS Copyright © Cengage Learning. All rights reserved

Evolution of the Marketing Concept Production Orientation Sales Orientation Marketing Orientation NOW COMPANIES ARE BEGINNING TO INTERTWINE MARKETING AND SALES. WHY? MAIN ANSWER: TO INCREASE BOTTOM LINE 1950 1850 1900 2000 The year Source: Adapted from William M. Pride and O.C. Ferrell, Foundations of Marketing, 3rd ed., © 2009 by Houghton Mifflin Company. All rights reserved. Copyright © Cengage Learning. All rights reserved

Utility: The Value Added by Marketing The ability of a good or service to satisfy a human need Form :utility Created by converting production inputs into finished products Place utility: Created by making a product available at a location where customers wish to purchase it Time utility: Created by making a product available when customers wish to purchase it Possession utility: Created by transferring title (ownership) of a product to buyer WHY ARE METS TICKETS EXPENSVE NOW? Why are hot dogs so expensive at the ballpark? What kind of Utility does today’s newspaper have? Give an example of something that involves possession utility. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Types of Utility Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved The Marketing Concept A business philosophy that involves the entire organization in the process of satisfying customers’ needs while achieving the organization’s goals To achieve success, a business must Talk to its potential customers to assess their needs Develop a good or service to satisfy those needs Continue to seek ways to provide customer satisfaction LAST BULLET IS CRUCIAL BECAUSE IT FALLS INTO CUSTOMER RETENTION TO INCREASE PROFITS AND SALES VOLUMES Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved WHAT IS THIS? WHAT NEED DOES IT SATISFY? WHO CAN USE THIS PRODUCT? IF IT DOES NOT WORK, WILL THE USERS REPURCHASE THIS? Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved The Marketing Process Obtain information about present and potential customers Pinpoint specific needs and potential customers toward which to direct marketing activities and resources Mobilize marketing resources to Obtain information on the effectiveness of the marketing effort and modify efforts as necessary Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Market A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products Consumer markets Purchasers and/or households members who intend to consume or benefit from the purchased products and who do not buy products to make a profit Business-to-business (industrial) markets Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Types of Markets Market A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products Consumer markets Purchasers and/or households members who intend to consume or benefit from the purchased products and who do not buy products to make a profit Business-to-business (industrial) markets Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Marketing Strategies The selection and analysis of a target market The creation and maintenance of an appropriate marketing mix (a combination of product, price, distribution, and promotion developed to satisfy a particular target market) MARKET SEGMENT EXAMPLES: AGES 10-15 TEENAGERS MIDDLE AGE 55 PLUS SENIORS TALK ABOUT HOW THE 4 PS INFLUENCE EACH OF THESE SEGMENTS Copyright © Cengage Learning. All rights reserved

Target market selection and evaluation How do you select a target market? PRICE SENSITIVE: PRICE WILL BE CRUCIAL TO THESE SEGMENTS PLACE: IF I SELL HERE, I WILL MISS SOME CONSUMERS (INTERNET FOR YOUNG AND OLD) PRODUCT: WILL CERTAIN PEOPLE USE OR EVEN UNDERSTAND THE PRODUCT YOU ARE OFFERING PROMOTION: HOW DO WE PROMOTE…NEWSPAPER? INTERNET? BILLBOARD? IE (WILL A DEPENDS AD BE A GREAT PLACE TO MARKET IN A TEEN MAGAZINE? WHY?) Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved WHAT P IS THIS? Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Product AUDI Q5 Copyright © Cengage Learning. All rights reserved

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Copyright © Cengage Learning. All rights reserved Place THE LOUI STORE Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Describe the undifferentiated approach What kinds of prductst? ANYONE CAN USE TOOTHPASTE Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved JUSTICE IS FOR PRETEEN GIRLS THE MARKET IS CONCENTRATED ON THIS ONE SEGMENT Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved BEATS CAN BE FOR EVERYONE HOWEVER PINK BEATS MIGHT APPEAL TO MORE GIRLS THAN BOYS MORE INCOME EARNERS MIGHT PREFER BEATS STUDIO OVER THE SOLO BEATS AND BUDS Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Common Bases of Market Segmentation What are some consumer characteristics that you would use to segment your market? AGE GENDER RACE RELIGION EDUCATION INCOME Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Common Bases of Market Segmentation TALK ABOUT THE BASES OF MARKET SEGMENTATION AND HOW THEY AFFECT CONSUMER BEHAVIORS Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Advertisers’ Classification of Audiences Name Age (2003) Needs Influencer Millennials <25 Tech Savvy Grew up in dangerous times Gen Xers 25-38 Media Savvy Grew up in economic downturn Boomers 39-58 Avid Consumers Deny aging process Matures 57+ Practical, pragmatic Money conscious Copyright © Cengage Learning. All rights reserved Source: “Audience Research,” MediaKnowAll, http://www.mediaknowall.com/Advertising/research.html

Copyright © Cengage Learning. All rights reserved Class Exercise Identify one or several characteristics or variables that could be used to segment the markets for each of these products. Recreational vehicles (RVs) Baby food Rolls Royce automobiles Snow tires Hotel rooms Magazines Soft drinks Movies Shoes Bicycles Copyright © Cengage Learning. All rights reserved

Class Exercise (cont’d) Identify one or several characteristics or variables that could be used to segment the markets for each of these products. Air passenger service Cameras Swimsuits Restaurants Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved What is this diagram showing us? THE INTERNAL AND EXTERNAL MARKETING ENVIRONMENT THE INNER CIRCLE CAN BE CONTROLED WHILE THE OUTTER CIRCLE CAN BE INFLUENED BY WHAT THE MARKETING COMPANY OR DEPARTMENT DOES. Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Developing a Marketing Plan What do you think is the purpose of one of these? Copyright © Cengage Learning. All rights reserved

Developing a Marketing Plan A written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group Copyright © Cengage Learning. All rights reserved

Market Measurement and Sales Forecasting Importance of measuring sales potential Estimates should do several things Marketing information system Internal data sources External data sources Outputs What do you think is meant by a Marketing Information System? Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Title? Define the problem Make a preliminary investigation Plan the research Gather factual information Interpret the information Reach a conclusion Copyright © Cengage Learning. All rights reserved

The six steps of marketing research Define the problem Make a preliminary investigation Plan the research Gather factual information Interpret the information Reach a conclusion Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved MARKET RESEARCH TYPES https://www.youtube.com/watch?v=3E3mEKNuquQ Copyright © Cengage Learning. All rights reserved

Debate Issue: Does Marketing Research Invade a Respondent’s Privacy? YES NO Copyright © Cengage Learning. All rights reserved

Debate Issue: Does Marketing Research Invade a Respondent’s Privacy? YES A great deal of marketing research asks questions that are too personal. Some marketing research, especially telephone and personal interviews, is nothing more than a disguise for sales presentations. The information obtained from marketing research is often used to develop mailing lists that are used to sell consumers products that they may not want. Sometimes the true nature of the research is disguised to get consumers to respond. NO The right to privacy deals with an individual’s ability to restrict personal information. Individual respondents must decide for themselves how much of their personal lives they will share with others. What constitutes private information and public information is ultimately up to the individual respondent. As long as the researcher obtains the consent of the respondent, the research does not invade the respondent’s privacy. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Using the Internet http://www.marketingpower.com Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Buying Behavior What are some things that we look at when we’re looking at buyer behavior? Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Buying Behavior Copyright © Cengage Learning. All rights reserved

Internet Sources of Marketing Information Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Reprinted with permission. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved How is this diagram… Consumer Buying Decision Process and Possible Influences on the Process Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved …different from this diagram? Business Buying Decision Process and Possible Influences on the Process Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 13th ed. Copyright © 2006 by Houghton Mifflin Company, Adapted with permission. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Consumer Income How is Disposable income different from Discretionary Income? Disposable income Personal income less Social Security taxes and all additional personal taxes people must pay Discretionary income Disposable income less savings and expenditures on food, clothing, and housing Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Why Do Consumers Buy? They have a use for the product They like the convenience a product offers They believe the purchase will enhance their wealth They take pride in ownership They buy for safety Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved What Do Consumers Buy? Average Annual Expenditures Source: 2008 Statistical Abstract of the United States, Expenditures by Type, 2005; http://www.2010census.biz/compendia/statab/2008/cats/income_expenditures_poverty_wealth/consumer_expenditures.html Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Where Do Consumers Buy? Perception of the store General impressions of an establishment’s products, prices, and sales personnel Types of retail outlets Specialty store, department store, discount store Location Product assortment Services such as credit terms, return privileges, free delivery Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved When Do Consumers Buy? Why do consumers want to buy online? Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Chapter Quiz The utility created by transferring title of a product to the buyer is called __________ utility. form time production place possession J.C. Penney is considered to be a member of which type of market? Business-to-business Reseller Consumer Producer Institutional Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Chapter Quiz The ingredient of the marketing mix concerned with product design, brand names, packaging, and warranties is pricing. quality. product. distribution. promotion. All of the following are true of marketing plans except that they should not be modified. include details of task scheduling. specify task objectives. describe the firm’s current situation. focus on a particular product or product group. Copyright © Cengage Learning. All rights reserved

Copyright © Cengage Learning. All rights reserved Chapter Quiz (cont’d) In this chapter, MIS refers to _______ system. merged information major information marketing information market influential segmentation minor information Copyright © Cengage Learning. All rights reserved

Answers to Chapter Quiz The utility created by transferring title of a product to the buyer is called __________ utility. form time production place possession (Correct) J.C. Penney is considered to be a member of which type of market? Business-to-business Reseller (Correct) Consumer Producer Institutional Copyright © Cengage Learning. All rights reserved

Answers to Chapter Quiz The ingredient of the marketing mix concerned with product design, brand names, packaging, and warranties is pricing. quality. product. (Correct) distribution. promotion. All of the following are true of marketing plans except that they should not be modified. (Correct) include details of task scheduling. specify task objectives. describe the firm’s current situation. focus on a particular product or product group. Copyright © Cengage Learning. All rights reserved

Answers to Chapter Quiz (cont’d) In this chapter, MIS refers to _________ system. merged information major information marketing information (Correct) market influential segmentation minor information Copyright © Cengage Learning. All rights reserved