Marketing: An Introduction Armstrong, Kotler 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? Marketing is building profitable customer relationships. The aim of marketing is to create value for customers and to capture value in return. Companies know if they take care of their customers ( delivering on their promises) , market share and profits will follow. Definition: We define marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others.

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. Figure 1 Chapter 1 page 7

Marketing process Figure 1 Capture value from Customers to Create profits and Customer quality Figure 1 Build profitable Relationships and Create customer delight Construct a Marketing program That delivers Superior value Design a Customer-driven Marketing strategy Understand The marketplace And customer needs And wants

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; 1- Needs, wants, and demands; Needs are states of felt deprivation. All humanity have the same needs; Physical needs: Food, clothing, shelter, safety. Social needs: Belonging, affection. Individual needs: Learning, knowledge, self-expression

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; Wants; are needs shaped by culture and individual personality. Example; An American needs for food but wants a Big Mac. A Chinese needs for food but wants frog legs. Demands are wants combined with buying power. Example; Porsche or Kia. Marketers spends time and money for a market research to understand the customer’s needs, wants, and demands.

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; 2- Products, Services, Experiences consumer needs and wants are fulfilled through a marketing offer, which is some combination of products, services, or experiences offered to a market to satisfy a need. Products; tangible, like food, goods…etc. Services; intangible, banking, telecom…etc. Experiences; Brand experiences, like theater.

Understanding the marketplace and consumer needs: 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.” An article published by Harvard Business school defined the term “marketing Myopia”; Marketing myopia is true for all companies who define their markets too narrowly. urging organizations to define their industries broadly to take advantage of growth opportunities. Experience shows that when a business has redefined its market, it has continued to grow as new targets are set .

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; 3- Value and Satisfaction If the performance and the customer’s experience is lower than expectations, then customer satisfaction is low. If the performance and the customer’s experience meets expectations, then the customer is satisfied. If the performance and the customer’s experience exceeds expectations, then the customer is delighted.

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; 4- Exchange, transactions, and relationships Exchange. The act of obtaining a desired object from someone by offering something in return. Transaction - consists of a trade values between two parties. The goal of marketers is to build solid relationship with customers and retaining them by delivering superior value.

There are five core marketplace concepts; Understanding the marketplace and consumer needs: There are five core marketplace concepts; 5- Markets The set of all actual and potential buyers of a product. Sellers must search for buyers, both buyers and sellers are carried out by marketing. - Elements of a Modern Marketing systems Figure 2

Elements of a Modern Marketing systems Figure 2 Company Supplier Final Consumers Marketing Intermediaries Competitors

Designing a customer- driven marketing strategy Once it fully understands consumers and the marketplace, marketing management can design a customer-driven marketing strategy. 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. Building long-term customer relationships

Two questions should be asked here; Designing a customer- driven marketing strategy Marketing Management The art and science of choosing target markets and building profitable relationships with them. Two questions should be asked here; _ What customers will we serve? (our target) _ How can we serve them best? ( Value)

Segmentation and Targeting Designing a customer- driven marketing strategy Segmentation and Targeting Selecting customer to serve; first dividing the market into segments, Second select the segment to be our target market. Porsche company target customers with high income. Deciding on a value proposition; A set of benefits or values it promises to deliver to consumers to satisfy their needs. means the company must decide how it will differentiate itself from other competitors. Porsche promises driving performance and excitement. They say” what a dog feels when the leash breaks”.

Production; affordability and availability. A philosophy should guide the marketing strategy to any company. The philosophy could be one or more of the following; 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.

-When a demand for a product exceeds the supply. 1- Production philosophy; it holds that consumers will favor products that are available and highly affordable. It’s effective strategy in two situations: -When a demand for a product exceeds the supply. -When the product cost is too high, and improve productivity is needed to reduce the cost, to gain market share. Example; Evian water, McDonalds.

In this case the company should focus on the continuous improving. 2- Product philosophy; holds that consumers will favor a products that offer the most in quality, performance, and innovative features. In this case the company should focus on the continuous improving. Examples; Nokia Mobile, Motorola, Sony..

Example; Life-Insurance 3- Selling philosophy; Holds that the customer will not buy enough of the firm’s products unless it under-takes a large-scale selling and promotion effort. Example; Life-Insurance 4- Marketing philosophy; Holds that achieving organizational goals depends on knowing the needs and wants of target markets and deliver value to compete in the marketplace. The job is not to find the right customers for your product, but the right products for your customers. Dell, Marriott, Disney… Figure 3.

5-Societal marketing philosophy; Balances human welfare, company profits and consumer satisfaction Example; Johnson & Johnson Credo “ honesty, integrity, and people before profit”. Figure 4 Many calls from the Healthy Associations warn people form the consequences results from Fast Food chains.

Figure 3 Starting point Focus Means Ends Selling philosophy Selling Promoting Existing products Profits Through Sales volume Factory Marketing philosophy Customer needs Integrated Marketing Market Profits Through Customer Satisfaction

Social Marketing philosophy Figure 4 Society (Human being) Company (profits) Consumers Want satisfaction

Building Relationships Relationships span from the basic to tight integrated relationships. Successful relationships are built on: Financial benefits; like VIP, Airline frequent miles Social benefits; like member of clubs, magazines Structural ties; like tracking orders online. Partner Relationship Marketing 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.

Outcomes of creating customer value; 1- Customer loyalty and retention; delighted customers remain loyal and talk favorably to others about the company and its products, and turn to be life-time value. 2- share of market and share of customer; many companies are increasing their variety of products and services to increase their profits form existing customers. Amazon offer videos, toys, electronics, beside books. 3- customer equity; is the total combined customer life-time values of all the company’s customers. They view customers as an assets need to be maximized. Figure 5

less loyalty high loyalty Figure 5 less loyalty high loyalty High Profitability Low profitability Butterflies Good fit between company’s Offerings and customer’s Needs. High profit potential True friends Good fit between company’s Offerings and customer’s Needs, highest profit potential Strangers Little fit between company’s Offerings and customer’s Needs, lowest profit potential Barnacles Limited fit between company's Offerings and customer’s Needs, low profit potential

New Marketing Technologies Technology has changed how marketers build value. Internet and e-commerce/e-business. Fast and global communications. Wireless technologies. International trade is the new frontier. Globalization “Capitalism” Chapter 1, page 29

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