Chapter One Marketing: Managing Profitable Customer Relationships Marketing: An Introduction Second Canadian Edition Armstrong, Kotler, Cunningham, Mitchell and Buchwitz Chapter One Marketing: Managing Profitable Customer Relationships

Looking Ahead Define marketing and the marketing processes. Explain the importance of understanding customers and the marketplace. Identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy. Discuss customer relationship management and ways of creating and obtaining value. Describe the major trends and forces changing today’s marketing landscape.

What is Marketing? Attracting new customers by promising and delivering superior value. Building long-term relationships with customers by delivering continued customer satisfaction. Creating, building and managing these relationships profitably over time. Chapter 1 pages 6 and 7

The Marketing Process Understand the marketplace and customer needs and wants. Design a customer-driven marketing strategy. Construct a marketing program that delivers superior value. Build profitable relationships and create customer delight. Capture value from customers to create profits and customer equity. Chapter 1 page 7

Needs, Wants and Demands Needs are states of felt deprivation. Physical: Food, clothing, shelter, safety. Social: Belonging, affection. Individual: Learning, knowledge, self-expression. Chapter 1 page 8

Needs, Wants and Demands Wants are needs shaped by culture and individual personality. Jeans vs a sari. Individual expression vs. collective good. Demands are wants combined with buying power. Hilfiger vs. Giant Tiger. Jetta vs. Jaguar. Chapter 1 page 8

Fulfilling Needs and Wants Marketers create marketing offers in response. A combination of goods, services, information or experiences offered to a market to satisfy a need or want. Chapter 1 page 8

Products, Services, Experiences Anything that can be offered for. Acquisition, attention, use or consumption. That might satisfy a need or want. Services. Activities or benefits offered. Essentially intangible. Do not result in ownership of anything. Experiences. Create, stage and market brand experiences. Attending live theatre, music concert. Chapter 1, pages 8-10

Marketing Myopia Sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the “wants” and lose sight of the “needs.” The great railroads lost out to the exploding trucking industry. They forgot that their business was solving transportation problems, not running railroads. Chapter 1, page 9

Value and Satisfaction If the performance and the customer’s experience is lower than expectations, than customer satisfaction is low. If the performance and the customer’s experience meets expectations, than the customer is satisfied. If the performance and the customer’s experience exceeds expectations, than the customer is delighted.

Exchange and Transactions The act of obtaining a desired object from someone by offering something in return. Transaction. A trade between two parties that involves: two things of value. agreed upon conditions. time of agreement. place of agreement. Chapter 1, Page 10

What is a Market? The set of actual and potential buyers of a product. These people share a need or want that can be satisfied through exchange relationships. Chapter 1, Page 10 Chapter 1, page 10 - 12

Core Marketplace Concepts Customers have needs, wants and demands. Marketers offer products or services. Customers seek value and satisfaction from offers. Demands and offers result in transactions and relationships. Markets are all potential customers with a similar demand. Chapter 1, page 12

Customer-Driven Marketing Divide markets into segments. Choose the right segment to target. Offer a unique value proposition. Differentiate your offer from competitor offers. Build customer value and satisfaction. Nurture long-term customer relationships. Chapter 1, 13-14

Marketing Management The art and science of choosing target markets and building profitable relationships with them. Chapter 1, page 14

Segmentation and Targeting Segmentation divides the market into groups of customers with varying needs and wants. Targeting selects the right segment to nurture. Chapter 1, page 13-14

Demand Management Marketing management seeks to control demand. Increasing demand is the norm. Demarketing seeks to reduce demand in certain circumstances. Chapter 1, page 13

Value Proposition The set of benefits or values the company promises to deliver to its target markets to satisfy their needs. Chapter 1, 13-14

Marketing Concepts Production – affordability and availability. Product -- quality and innovation. Selling -- promotion and hard selling. Marketing -- customer satisfaction and relationships. Societal – long-term value to both customer and society. Chapter 1, pages 14-18

The Selling Concepts The production concept. The product concept. Consumers will favour products that are available and highly affordable. The product concept. Consumers favour products that offer the most in quality, performance and innovative features. The selling concept. Consumers will not buy unless it undertakes a large-scale selling and promotional effort. Chapter 1, pages 14 - 15

The Marketing Concepts Determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently then the competitors. An “outside-in” perspective. Customers are the paths to sales and profits. See next slide for a comparison. Chapter 1, pages 15 - 18

The Marketing Concepts The societal marketing concept. Generating customer satisfaction and long-run societal well-being are the keys to both achieving the company’s goals and fulfilling its responsibilities. Balances human welfare, company profits and consumer satisfaction. Addresses broader social issues. Chapter 1, pages 15 - 18

Relationship Marketing Customer relationship management. The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Chapter 1, page 19

The Customer’s Experience Customer perceived value. Customer’s subjective view of the offer’s value compared to competitive offers. Customer satisfaction. Customer’s subjective view of the value received in return for the purchase price. Customer delight. Customer’s subjective view of the increased value received above the purchase price. Chapter 1, pages 20-21

Building Relationships Relationships span from the basic to tight integrated relationships. Successful relationships are built on: Financial benefits. Social benefits. Structural ties. Chapter 1, pages 22-23

Partner Relationship Marketing Working with partners in other company departments and outside the company to jointly bring greater value to the customers. Every department in an organization contributes to customer satisfaction. Suppliers are carefully controlled through supply chain management. Strategic alliances create new opportunities to delight customers. Chapter 1, page 24

Capturing Value In Return Customer lifetime value. The value of the entire stream of purchases that the customer would make over a lifetime of patronage. Chapter 1, page 25

Capturing Value In Return Share of customer. Share of customer is the percentage of customers that buy a company’s product of all customers purchasing in that product category. Companies continuously strive to grow their share of customer. Creating brand extensions is a favoured method of growing share of customer. Chapter 1, page 25-26

Building Customer Equity The total combined customer lifetime value of all of the company’s customers. Often a more accurate measure of a company’s value than sales or market share. Combination of market share, share of customer and lifetime customer value. Chapter 1, page 26

Customer Relationship Groups Targeting the right customers at the right time. Butterflies have high profitability with low loyalty. True Friends have high profitability with high loyalty. Strangers have low profitability with low loyalty. Barnacles have low profitability with high loyalty. Challenge: make the Butterflies more loyal and make the Barnacle more profitable. Keep the True Friends and “fire” the Strangers.

New Marketing Technologies Technology has changed how marketers build value. Internet and e-commerce/e-business. Fast and global communications. Wireless technologies. Relational databases. Instant, highly targeted communication with customers and suppliers. Chapter 1, page 29

New Global Markets International trade is the new frontier. Export is critical to Canada’s economic growth. Difficult decision: Delay means risking loss of growing global markets. Proceed means high risk but potentially high reward. Chapter 1, pages 30-32

Ethics and Responsibility Worldwide consumerism and environmentalism movements exert. pressure for greater responsibility Notion of “caring capitalism” tied to societal marketing concepts. Seeking ways to make a profit by serving the best long-run interests of customers and communities. Chapter 1, pages 32-33

Not-For-Profit Marketing Marketing of ideas, values and institutions. Increasing awareness that these organizations must build relationships with constituents and stakeholders. Challenge of using new marketing techniques for not-for-profit initiatives. Chapter 1, pages 33-34

Looking Back Define marketing and the marketing processes. Explain the importance of understanding customers and the marketplace. Identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy. Discuss customer relationship management and ways of creating and obtaining value. Describe the major trends and forces changing today’s marketing landscape.