Chapter 1 Marketing: Managing Profitable Customer Relationships

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

NASCAR –What is their secret? Creating Value Compelling blend of live racing events, media coverage and Web sites Show the customer a good time Create wholesome family-oriented environment Capturing Value Fans spend nearly $700 a year on NASCAR merchandise Second highest regular season sport on TV NASCAR attracts over 250 big-name sponsors 1 - 3

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

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

The Marketing Process Figure 1-1 1 - 6

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts Identify the elements of a customer-driven marketing strategy Discuss customer relationship management and capturing value from customers Describe the major trends and forces changing the marketing landscape.

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

This very successful campaign reminds the consumer of a need 1 - 9 Marketing in Action

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

This ad offers a product to meet “sensitive” needs of the older child 1 - 11 Marketing in Action

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

Discussion Questions Customer Satisfaction When have you, personally, been extremely satisfied or dissatisfied with a product? Why? Why is it so difficult for companies to deliver value to consumers? Having students discuss their experience brings out product, pricing, promotion and distribution issues. It also highlights the importance of service and how every company is a service company. Ask them how many people they informed when dissatisfied vs. the number they informed when satisfied (dissatisfied is usually higher). You can also introduce perceived value here. It is also useful on the third question to talk about research and understanding needs, the difficulty in managing costs while delivering quality. 1 - 13 Marketing in Action

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

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

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Marketing Management Marketing management is “the art and science of choosing target markets and building profitable relationships with them.” This definition must include answers to two questions: What customers will we serve? How can we serve these customers best?

Selecting Customers and Creating Value What customers will we serve? Known as customer management Marketers select customers that can be served profitably How can we serve these customers best? By defining a value proposition Includes the set of benefits or values a company promises to deliver to consumers in order to satisfy their needs

Click on pop up ad for website Netflix – DVDs by Mail Netflix began in early 2000 DVDs are delivered to your home with return mail envelope Monthly charge with unlimited rentals – limited amount out at one time Netflix is an Internet company which send you DVD’s through the mail. A monthly subscription brings you unlimited DVD’s per month at a specific amount out per time. Click on pop up ad for website 1 - 19 Marketing in Action

Discussion Questions Netflix How might Netflix define its target market? What need or want does it fulfill? What is its marketing offer? What is its value proposition? Is it a strong value proposition for its target market? Its target market would be medium to heavy viewers of DVD. They consider a trip to the video store to be inconvenient. They probably include busy families of moderate income. They fulfill the need for relaxation/entertainment/leisure and the want for DVD’s. Their offer includes their selection of DVD’s, their shipping policies and procedures, and their customer service. Their value proposition is very strong and includes the benefit of convenience, selection, and ample supply of DVDs on hand for viewing since you can have several in your house at once. Another benefit is the absence of late fees for the consumer. 1 - 20 Marketing in Action

a strong competitor, entered this market a few years later Netflix was first to the market but a good value proposition invites competition. Walmart, a strong competitor, entered this market a few years later 1 - 21 Marketing in Action

Marketing Orientations Selling concept Marketing concept Societal marketing concept Production concept Product concept

The Marketing Plan Transforms the marketing strategy into action Includes the marketing mix and the 4P’s of marketing Product Price Place Promotion

Building Customer Relationships CRM – Customer relationship management . . . “is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.”

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Value and Satisfaction Perceived Value The customers’ 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 customers’ expectations.

This ad attempts to change the perceived value of Cheerios Cereal Bar by helping consumers evaluate its nutritional value 1 - 27 Marketing in Action

Not All Customers are Equal Basic relationships low margin customers Full partnerships key customers Selective relationship management weeding out unprofitable customers

Capturing Value from Customers Key Concepts Customer delight leads to emotional relationships and loyalty Customer lifetime value shows true worth of a customer Customer Loyalty and Retention Share of Customer Customer Equity

Capturing Value from Customers Key Concepts Share of customer’s purchase in a product category Achieved through offering greater variety, cross-sell and up-sell strategies Customer Loyalty and Retention Share of Customer Customer Equity

Capturing Value from Customers Key Concepts The combined customer lifetime values of all current and potential customers Measures a firm’s performance, but in a manner that looks to the future Choosing the “best” customers is key Customer Loyalty and Retention Share of Customer Customer Equity

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Marketing Landscape Challenges Advances in computers, telecommunications information, transportation Customer research and tracking Product development Distribution New advertising tools 24/7 marketing through the Internet Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships

Marketing Landscape Challenges Geographical and cultural distances have shrunk Greater market coverage More options for purchasing and manufacturing Increased competition from foreign competitors Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships

Marketing Landscape Challenges Marketers need to take great responsibility for the impact of their actions Caring capitalism is a way to differentiate your company Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships

This ad shows a company communicating its “Caring Capitalism” 1 - 36 Marketing in Action

Marketing Landscape Challenges Many organizations are realizing the importance of strategic marketing Performing arts Government agencies Colleges Hospitals Churches Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships

Click on screenshot for website The Internet is increasing as a channel for not-for-profit marketers to raise funds The United way uses print, direct marketing (mail and Internet) and employers for their drives. You can talk to students about whether it is ethical for companies to canvas employees. Also, the United Way has had problems in the past with high level executives overspending, and overhead charges that were excessive. You may ask students what responsibilities a not-for-profit has in addition to traditional corporate responsibility. Click on screenshot for website 1 - 38 Marketing in Action

Marketing Landscape Challenges Profits through managing long-term customer equity Improve customer knowledge Target profitable customers Keep profitable customers Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships

What is Marketing? The process of building profitable customer relationships by creating value for customers and capturing value in return

Expanded model of the marketing process Figure 1.6 1 - 41

Learning Goals Define marketing and the marketing process. Identify the five core marketplace concepts. Identify the elements of a customer-driven marketing strategy. Discuss customer relationship management and capturing value from customers. Describe the major trends and forces changing the marketing landscape.