MARKETING MANAGEMENT 14th edition Defining Marketing for the 21st Century Kotler Keller

Good Marketing is No Accident Boston Beer Company, maker of Samuel Adams, constantly innovates

What is Marketing? Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

What is Marketing? Marketing Defined: “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others” Marketing is about managing profitable customer relationships Attracting new customers Retaining and growing current customers

What is Marketing Management? Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

Selling is only the tip of the iceberg “There will always be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed is to make the product or service available.” Peter Drucker

Core Marketing Concepts

Understanding the Marketplace Need State of felt deprivation Example: Need food Wants The form of needs as shaped by culture and the individual Example: Want a Big Mac Demands Wants which are backed by buying power Core Concepts Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

Understanding the Marketplace Core Concepts Marketing offer Combination of products, services, information or experiences that satisfy a need or want Offer may include services, activities, people, places, information or ideas Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

Understanding the Marketplace Core Concepts Value Customers form expectations regarding value Marketers must deliver value to consumers Satisfaction A satisfied customer will buy again and tell others about their good experience Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

Value and Satisfaction Perceived Value The customer’s evaluation of the difference between benefits and costs. Customers often do not judge values and costs accurately or objectively. Customer Satisfaction Product’s perceived performance relative to customer’s expectations.

Understanding the Marketplace Core Concepts Exchange The act of obtaining a desired object from someone by offering something in return One exchange is not the goal, relationships with several exchanges are the goal Relationships are built through delivering value and satisfaction Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

For an exchange to occur…. There are at least two parties. Each party has something that might be of value to the other party. Each party is capable of communication and delivery. Each party is free to reject the exchange offer. Each party believes it is appropriate or desirable to deal with the other party.

Understanding the Marketplace Core Concepts Market Set of actual and potential buyers of a product Marketers seek buyers that are profitable Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

What is Marketed? Goods Services Events & Experiences Persons Places & Properties Organizations Information Ideas

Demand States Nonexistent Latent Negative Irregular Declining Full Overfull Unwholesome

Structure of Flows in a Modern Exchange Economy

A Simple Marketing System

The marketplace isn’t what it used to be… Changing technology Globalization Deregulation Privatization Empowerment Customization Convergence Disintermediation

Company Orientations Production Product Selling Marketing

Marketing Management Philosophies Consumers favor products that are available and highly affordable. Improve production and distribution. 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. markets & delivering superior value. Production Concept Product Concept Selling Concept Marketing Concept Holistic Marketing Concept

The Selling and Marketing Concepts Contrasted

Holistic Marketing Dimensions

The Four P’s

Marketing Mix and the Customer Four P’s Product Price Place Promotion Four C’s Customer solution Customer cost Convenience Communication

The New Four Ps People Processes Programs Performance If we update them to reflect the holistic marketing concept, we arrive at a more representative set that encompasses modern marketing realities: people, processes, programs, and performance, as in Figure 1.5. People reflects, in part, internal marketing and the fact that employees are critical to marketing success. Processes reflects all the creativity, discipline, and structure brought to marketing management. Programs reflects all the firm’s consumer-directed activities. It encompasses the old four Ps as well as a range of other marketing activities that might not fit as neatly into the old view of marketing. We define performance as in holistic marketing, to capture the range of possible outcome measures that have financial and nonfinancial implications (profitability as well as brand and customer equity), and implications beyond the company itself (social responsibility, legal, ethical, and community related). Performance CHP: 1&5-26

Marketing-Mix Strategy

Factors Influencing Marketing Strategy

Marketing Management Tasks Developing marketing strategies Capturing marketing insights Connecting with customers Building strong brands Shaping market offerings Delivering value Communicating value Creating long-term growth

Create or Satisfy Needs? Marketing Debate Does Marketing Create or Satisfy Needs?

MARKETING MANAGEMENT 14th edition 5 Creating Customer Value, Satisfaction, and Loyalty Kotler Keller

Value and Satisfaction Perceived Value The customer’s evaluation of the difference between benefits and costs. Customers often do not judge values and costs accurately or objectively. Customer Satisfaction Product’s perceived performance relative to customer’s expectations.

Determinants of Customer Perceived Value Total customer benefit Total customer cost Product benefit Monetary cost Services benefit Time cost Personal benefit Energy cost Image benefit Psychological cost

Determinants of Customer-Delivered Value Total customer value Product value Personal value Customer- delivered value Total customer cost Monetary cost Energy cost

Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

The Value Proposition The whole cluster of benefits the company promises to deliver

Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance

Product and Service Quality Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Total Quality Management TQM is an organization-wide approach to continuously improving the quality of all the organization’s processes, products, and services.

Maximizing Customer Lifetime Value Profitability Customer Equity Lifetime Value

Customer-Product Profitability Analysis

Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

Mass vs. One-to-One Marketing Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising One-way message Economies of scale One-to-One Individual customer Customer profile Customized market offering Customized production Economies of scope Share of customer

Customer Retention Acquisition of customers can cost 5 times more than retaining current customers. The average company loses 10% of its customers each year. A 5% reduction to the customer defection rate can increase profits by 25% to 85%. The customer profit rate increases over the life of a retained customer.

The Marketing Funnel Figure 5.4 shows the main steps in attracting and retaining customers in terms of a funnel. The marketing funnel identifies the percentage of the potential target market at each stage in the decision process, from merely aware to highly loyal. Consumers must move through each stage before becoming loyal customers. Some marketers extend the funnel to include loyal customers who are brand advocates or even partners with the firm. CHP: 1&5-46

The Customer-Development Process Suspects Prospects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers

Building Loyalty Partnership Proactive Accountable Reactive Basic

Forming Strong Customer Bonds Add financial benefits Add social benefits Add structural ties