Chapter 1 Marketing: Managing Profitable Customer Relationships

ROAD MAP: Previewing the Concepts Chapter 1 ROAD MAP: Previewing the Concepts Define marketing and outline the steps in the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. Discuss customer relationship management and strategies for building lasting customer relationships. Describe the major trends and forces that are changing the marketing landscape in this new age of relationships.

Chapter 1 What Is Marketing? Simple Definition: Marketing is managing profitable customer relationships. Goals: Attract new customers by promising superior value. Keep and grow current customers by delivering satisfaction.

Marketing Old vs. New Old view of marketing: Chapter 1 Marketing Old vs. New Old view of marketing: Making a sale -- “Telling and Selling” New view of marketing: Satisfying customer needs

Chapter 1 Marketing Defined A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

A Simple Model of the Marketing Process Chapter 1 A Simple Model of the Marketing Process Create value for customers and build customer relationships Construct a marketing program that delivers superior value Understand the marketplace and customer needs and wants Design a customer-driven marketing strategy Capture value from customers in return Capture value from customers to create profits and customer equity Build profitable relationships and create customer delight

What are Consumers’ Needs, Wants, and Demands? Chapter 1 What are Consumers’ Needs, Wants, and Demands?

Chapter 1 This Is a Need Needs - state of felt deprivation including physical, social, and individual needs.

Types of Needs Physical: Social: Individual: Chapter 1 Types of Needs Physical: Food, clothing, shelter, safety Social: Belonging, affection Individual: Learning, knowledge, self-expression

Chapter 1 This Is a Want Wants - form that a human need takes, as shaped by culture and individual personality.

Chapter 1 This Is Demand Wants Buying Power “Demand”

Need / Want Fulfillment Chapter 1 Need / Want Fulfillment Needs and Wants Fulfilled through a Marketing Offer : Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.

What Satisfies Consumers’ Needs and Wants? Chapter 1 What Satisfies Consumers’ Needs and Wants? Products Anything that can be Offered to a Market to Satisfy a Need or Want Persons Places Organizations Information Ideas The combination of tangible products, particular people, and certain activities in a particular place creates an experience (e.g., Disneyland) We are moving toward being a less manufacturing-based society and a more service-oriented society. Services Activity or Benefit Offered for Sale That is Essentially Intangible and Does Not Result in the Ownership of Anything

Chapter 1 Product as an Idea Products do not have to be physical objects. Here the “product” is an idea—protecting animals.

Chapter 1 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.”

Value and Satisfaction Chapter 1 Value and Satisfaction Expectation Performance 10 8 Expectation Performance 8 10 If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high.

Exchange vs. Transaction Chapter 1 Exchange vs. Transaction Exchange: Act of obtaining a desired object from someone by offering something in return. Transaction: A trade of values between two parties. One party gives X to another party and gets Y in return. Can include cash, credit, check, or barter.

What is a Market? The set of actual and potential buyers of a product. Chapter 1 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.

Elements of a Modern Marketing System Chapter 1 Elements of a Modern Marketing System

Chapter 1 Marketing Management The art and science of choosing target markets and building profitable relationships with them. Questions to ask: What customers will we serve? What is our target market? How can we best serve these customers? What is our value proposition?

Segmentation and Target Marketing Chapter 1 Segmentation and Target Marketing #1 #2 Market Segmentation: Divide the market into segments of customers Target Marketing: Select the segment to cultivate

Marketing Management Demand Management Demarketing Chapter 1 Marketing Management Demand Management Finding and increasing demand, also changing or reducing demand, such as in demarketing. Temporarily or permanently reducing the number of customers or shifting their demand. Demarketing

It cleans and freshens like sunshine! Chapter 1 Value Proposition The set of benefits or values a company promises to deliver to consumers to satisfy their needs. It cleans and freshens like sunshine! www.gainlaundry.com

Marketing Management Philosophies Chapter 1 Marketing Management Philosophies Customer-Driven Societal Marketing Concept Marketing Concept Selling Concept Product Concept Production Concept

Marketing and Sales Concepts Contrasted Chapter 1 Marketing and Sales Concepts Contrasted

Customer-Driven Marketing Chapter 1 Customer-Driven Marketing How many of us would have thought to ask for a “wearable” PC? Marketers must often understand customer needs even better than customers themselves do.

The Marketing Mix Product Price Customer Needs Promotion Distribution Chapter 1 The Marketing Mix Customer Needs Product Price Promotion Distribution 1-9

Customer Relationship Management Chapter 1 Customer Relationship Management The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

Customer Perceived Value Chapter 1 Customer Perceived Value Customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.

Customer Perceived Value Chapter 1 Customer Perceived Value Is FedEx’s service worth the higher price? FedEx thinks so. It promises reliability, speed, and peace of mind. FedEx ads say “Need to get it there or else? Don’t worry. There’s a FedEx for that.”

Customer Satisfaction Chapter 1 Customer Satisfaction Dependent on the product’s perceived performance relative to a buyer’s expectations.

Customer Relationship Levels Chapter 1 Customer Relationship Levels Full Partnership Basic Relationship Continuum

Focus on Profitable Customers Chapter 1 Loyalty and Retention Social Benefits Financial Benefits Structural Ties Focus on Profitable Customers

Partner Relationship Marketing Chapter 1 Partner Relationship Marketing Partners Inside the Firm All employees customer focused Teams coordinate efforts toward customers Partners Outside the Firm Supply chain management Strategic alliances

Customer Loyalty & Retention Chapter 1 Customer Loyalty & Retention Customer Lifetime Value The entire stream of purchases that the customer would make over a lifetime of patronage. Share of Customer The share a company gets of the customers purchasing in their product categories.

Customer Lifetime Value Chapter 1 Customer Lifetime Value To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.” Rule #1—the customer is always right. Rule #2—if the customer is ever wrong, reread Rule #1.

Chapter 1 Customer Equity Customer equity is the total combined customer lifetime values of all the company’s customers.

Customer Relationship Groups Chapter 1 Customer Relationship Groups Butterflies True Friends Good fit between company’s offerings and customer’s needs; high profit potential Good fit between company’s offerings and customer’s needs; highest profit potential High Profitability Strangers Barnacles Little fit between company’s offerings and customer’s needs; lowest profit potential Limited fit between company’s offerings and customer’s needs; low profit potential Low Short-term customers Long-term customers Projected loyalty

Chapter 1 The Internet The Internet has been hailed as the technology behind a New Economy. Marketing applications include: “Click-and-mortar” companies “Click-only” companies Business-to-business e-commerce Business-to-business transactions online are expected to reach $4.3 trillion in 2005. By 2005, 500,000 companies will use the Internet to do business.

Chapter 1 The New Digital Age The recent technology boom has had a major impact on the ways marketers connect with and bring value to their customers.

New Marketing Landscape Chapter 1 New Marketing Landscape Rapid Globalization Not-for-Profit Marketing Ethics & Social Responsibility New World of Marketing Relationships

Rest Stop: Reviewing the Concepts Chapter 1 Rest Stop: Reviewing the Concepts Define marketing and outline the steps in the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. Identify the key elements of a customer-driven marketing strategy and discuss marketing management orientations that guide marketing strategy. Discuss customer relationship management and strategies for building lasting customer relationships. Describe the major trends and forces that are changing the marketing landscape in this new age of relationships.

Q: Your marketing campaigns appeal to your customers' desire to be perceived as owning the best in bicycle technology. Your marketing campaigns successfully appeal to consumers': 1. needs. 2. wants. 3. satisfactions. 4. demands. AK, 7e – Chapter 1

Q: Your company is also successful because you offer free maintenance and repair for the first two years after the purchase of a bicycle. Therefore, along with the physical product, you offer an attractive package of: 1. values. 2. ideas. 3. events. 4. services. AK, 7e – Chapter 1

Q: As a campaign manager for a candidate to your county's legislature, you are defining the candidate’s positioning among voters and are working on a pre-election rally during which your candidate and several prominent supporters will deliver speeches. You are planning a: 1. product. 2. service. 3. satisfaction. 4. promotional campaign AK, 7e – Chapter 1

Q: Your firm has perfected a process that reduces the overall cost of producing custom-made bikes. As a result, you adopt the ________ concept of marketing, whereby you offer your products to consumers at prices well below those of your competitors. 1. production 2. product 3. marketing 4. societal marketing AK, 7e – Chapter 1

Q: You favor a marketing approach that emphasizes the quality and new features of your bicycles, yet your assistant prefers an approach that emphasizes innovative promotion strategies. Which of the two following marketing concepts are exhibited here? 1. Marketing and selling 2. Production and societal marketing 3. Product and marketing 4. Product and selling AK, 7e – Chapter 1

Q: To reduce the large capacity of bikes in your warehouse, you adopt the _________ concept and attempt to push your products into the market through heavy advertising. 1. production 2. product 3. selling 4. marketing AK, 7e – Chapter 1

Q: In anticipation of high demand, you build a factory in Mexico, where you can save on labor and production costs. However, you still provide benefits to the Mexican workers comparable to those many American workers receive, illustrating that you have successfully practiced the: 1. marketing concept. 2. product concept. 3. societal marketing concept. 4. selling concept. AK, 7e – Chapter 1

Q: Are you more inclined to buy from a company that is socially responsible? 1. Yes 2. No AK, 7e – Chapter 1

Q: Would you be willing to pay more for a product because it was from a socially-responsible company? Yes No AK, 7e – Chapter 1

Q: The most important new technology for connecting is: 1. the Internet. 2. the database. 3. the laptop computer. 4. the fiber optic telephone. AK, 7e – Chapter 1