Customer and Creating Marketing Strategy Understanding the Customer and Creating Marketing Strategy Chapter 13 THE FUTURE OF BUSINESS Gitman & McDaniel 5th Edition Prepared by Deborah Baker Texas Christian University

Learning Goals What are the market concept and relationship building? How do managers create a marketing strategy? What is the marketing mix? How do consumers and organizations make buying decisions? What are the five basic forms of market segmentation? How is marketing research used in marketing decision making? What are the trends in understanding the customer? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Marketing—The “Right” Principle Chapter 1 Chapter 13 Marketing—The “Right” Principle Getting The “Right’ Goods or Services to The “Right’ People at The “Right’ Place, Time, and Price Marketing is the process of getting the right goods to the right people at the right place, time, and price, using the right promotion techniques. This concept is referred to as the “right” principle. using” The “Right’ Promotion Techniques Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Marketing Marketing Exchange Chapter 1 Chapter 13 Marketing The process of discovering the needs and wants of potential buyers and customers and then providing goods and services that meet or exceed their expectations Marketing The process in which two parties give something of value to each other to satisfy their respective needs Exchange Marketing is finding out the needs and wants of potential buyers and customers and then providing goods and services that meet or exceed their expectations. An exchange takes place when two parties give something of value to each other to satisfy their respective needs. In a typical exchange, a consumer trades money for a good or service. To encourage exchanges, marketers use the “right” principle. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

What are the marketing concept and relationship building? Learning Goal 1 1 What are the marketing concept and relationship building? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 1 Chapter 13 The Marketing Concept 1 Focusing on customer wants so the organization can distinguish its products from competitors’ offerings. Integrating all of the organization’s activities to satisfy these wants. Achieving long-term goals for the organization by satisfying customer wants and needs, legally and responsibly. The best organizations have adopted the marketing concept, which involves identifying consumer needs and then producing the goods or services that will satisfy them while making a profit. The marketing concept is oriented toward pleasing consumers by offering value. Specifically, the market concept involves the strategies shown on this slide. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

The Marketing Concept 1 Customer Value Customer Satisfaction Chapter 1 Chapter 13 The Marketing Concept 1 Customer Value The ratio of benefits to the sacrifice necessary to obtain those benefits, as determined by the customer. Customer Satisfaction The customer’s feeling that a product has met or exceeded expectations. Firms have not always followed the marketing concept. Around 1860-1910, firms had a production orientation, which meant that they worked to lower production costs without a strong desire to satisfy the needs of their customers. Creating customer value is a core business strategy of many successful firms. It is rooted in the belief that price is not the only thing that matters. Relationship Marketing A strategy that focuses on forging long-term partnerships with customers by offering value and providing customer satisfaction. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

How do managers create a marketing strategy? Learning Goal 2 2 How do managers create a marketing strategy? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Creating a Marketing Strategy Chapter 1 Chapter 13 Creating a Marketing Strategy 2 Understanding the External Environment Defining the Target Market Creating a Competitive Advantage Developing a Marketing Mix Creating a customer-focused marketing strategy involves understanding the external environment, defining the target market, creating a competitive advantage, and developing a marketing mix. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

The External Environment Chapter 1 Chapter 13 The External Environment 2 Environmental Scanning Demographic Forces Economic Forces Technological Forces Political & Legal Forces Competitive Forces Social Forces Environmental scanning is the process in which a firm continually collects and evaluates information about its external environment. Six categories of environmental data shape marketing decisions: Social forces: values of potential customers and the changing roles of families and women working outside the home. Demographic forces: ages, birth and death rates, and locations of various groups of people. Economic forces: changing incomes, inflation, and recession. Technological forces: advances in communication, and data retrieval capabilities. Political and legal forces: changes in laws and regulatory agency activities. Competitive forces: from domestic and foreign-based firms. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

The Target Market 2 Target Market Chapter 1 Chapter 13 The Target Market 2 Target Market The specific group of consumers toward which a firm directs its marketing efforts. Identifying a target market helps a company focus its marketing efforts on those who are most likely to buy its products or services. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Competitive Advantage Chapter 1 Chapter 13 Competitive Advantage 2 Cost Competitive Advantage A firm’s ability to produce a product or service at a lower cost than its competitors. Differential Competitive Advantage A firm’s ability to provide a unique product or service that offers something of value besides a lower price. Competitive advantage is a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition. Competitive advantage is the factor that causes customers to patronize a firm and not the competition. There are three types of competitive advantage: cost, product/service differential, and niche. Niche Competitive Advantage A firm’s ability to target and effectively serve a single segment of the market within a limited geographic area. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

What is the marketing mix? Learning Goal 3 3 What is the marketing mix? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Elements of the Marketing Mix Chapter 1 Chapter 13 The Marketing Mix 3 Elements of the Marketing Mix “The Four Ps” Product Price Promotion Place The marketing mix is the blend of product offering, pricing, promotional methods, and distribution system that brings a specific group of consumers superior value. The marketing mix is often called the “four Ps”--product, price, promotion, and place. Every target market requires a unique marketing mix to satisfy the needs of the target consumers and meet the firm’s goals. The marketing mix is only as good as its weakest part. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

“Product” -- The “Heart” of the Marketing Mix Chapter 1 Chapter 13 Product Strategy 3 “Product” -- The “Heart” of the Marketing Mix Brand name Packaging Colors Warranty Accessories Service program Marketing strategy starts with the product. Creating a product strategy involves choosing a brand name, packaging, colors, a warranty, accessories, and a service program. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Promotion Strategy Personal selling Advertising Public relations Chapter 1 Chapter 13 Promotion Strategy 3 Personal selling Advertising Public relations Sales promotion Promotion strategy covers personal selling, advertising, public relations, and sales promotion. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Not-for-Profit Marketing Chapter 1 Chapter 13 Not-for-Profit Marketing 3 Goals of Social Marketing Evaluate the relationship between marketing and society Effect social change Further social causes Not-for-profit organizations do not seek to make a profit, rather their focus is often on generating enough funds to cover expenses. Not-for-profit marketing is also concerned with social marketing—the application of marketing to social issues and causes. The goals of social marketing are to effect change, further social causes, and evaluate the relationship between marketing and society. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

How do consumers and organizations make buying decisions? Learning Goal 4 4 How do consumers and organizations make buying decisions? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Consumer Decision-Making Process Chapter 1 Chapter 13 Consumer Decision-Making Process 4 Postpurchase Behavior Purchase Evaluation of Alternatives Information Search Need Recognition Cultural, Social, Individual and Psychological Factors affect all steps Buyer behavior is the actions people take in buying and using goods and services. To understand buyer behavior, marketers must understand how consumers make buying decisions. The consumer decision-making process is shown here. It is affected by cultural, social, individual, and psychological factors, which are described on the next slide. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Influences on Consumer Decision Making Chapter 1 Chapter 13 Influences on Consumer Decision Making 4 Psychological Influences Individual Influences Social Factors Cultural Factors Culture is the set of values, ideas, attitudes, and symbols created to shape human behavior. Social factors: consumers interact with reference groups, opinion leaders, and family members to obtain product information and decision approval. Individual influences are personal characteristics that are unique to each individual, such as personality, gender, and self-concept. Psychological influences include perception, beliefs, and attitudes. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Types of Consumer Buying Decisions Chapter 1 Chapter 13 Types of Consumer Buying Decisions 4 Low Involvement Short Decision Time Low Cost Internal Information Search One Alternative Routine Response Behavior Limited Decision Making Extensive More Involvement Long Decision Time High Cost Internal/External Search Many Alternatives All consumer buying decisions generally fall along a continuum of three broad categories: routine response behavior, limited decision making, and extensive decision making. Routine response behavior: frequently purchased, low-cost goods and services Limited decision making: previous product experience, but unfamiliar with current available brands. Extensive decision making: unfamiliar, expensive products or an infrequently bough t item. Most complex type of consumer buying decision. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

The Business-to-Business Market Chapter 1 Chapter 13 The Business-to-Business Market 4 Characteristics of the Business- to-Business Market Location of Buyers Purchase Volume Number of Customers Direct Distribution Business buyer behavior and business markets are different from consumer markets. Business markets include institutions, such as hospitals and schools, manufacturers, wholesalers and retailers, and various branches of government. The key difference between a consumer product and a business product is the intended use. The main differences are listed on this slide. Purchase volume: Business customers buy in much larger quantities than consumers. Number of customers: Business marketers usually have fewer customers than consumer marketers. Location of buyers: Business customers tend to be more geographically concentrated than consumers. Direct distribution: Business sales tend to be made directly to the buyers because such sales frequently involve large quantities or custom-made items. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

What are the five basic forms of market segmentation? Learning Goal 5 5 What are the five basic forms of market segmentation? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Forms of Market Segmentation Chapter 1 Chapter 13 Forms of Market Segmentation 5 Volume Benefit Psychographic Geographic Demographic Amount of use (light versus heavy) Benefits provided by the good or service Lifestyle, personality, interests, values, attitudes Regional location, population density, city/county size, climate Derived from individual’s position in an organization Age, education, gender, income, race, social class, household size Market segmentation is the process of separating, identifying, and evaluating the layers of a market in order to identify a target market. The five forms of consumer market segmentation are demographic, geographic, psychographic, benefit, and volume. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Example of Age Segmentation Chapter 1 Chapter 13 Example of Age Segmentation 5 Frito-Lay Product Demographic Snack Niche Frito 33-51 years males Hunger satisfaction Doritos Teens mostly males Bold and daring snacking Tostitos Upscale, born from 1946-1964 Casual interaction, social food An example of how Frito-Lay targets various age groups for three of its most popular products is shown here. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

How is marketing research used in marketing decision making? Learning Goal 6 6 How is marketing research used in marketing decision making? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

The Marketing Research Process Chapter 1 Chapter 13 The Marketing Research Process 6 3. Collect the data 2. Choose a method of research 1. Define the Marketing Problem 4. Analyze the research data 5. Make recommendations Marketing research is the process of planning, collecting, and analyzing data relevant to a marketing decision. The information collected through marketing research includes the preferences of customers, the perceived benefits of products, and consumer lifestyles. Research helps companies make better use of their marketing budgets. The marketing research process consists of the steps shown on this slide. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Define the Marketing Problem Chapter 1 Chapter 13 Define the Marketing Problem 6 Key Questions Why is the information being sought? Does the information already exist? The most critical step in the marketing research process is defining the marketing problem. The key questions to as are: Why is the information being sought? Does the information already exist? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Choose a Method of Research Chapter 1 Chapter 13 Choose a Method of Research 6 Survey Data is gathered from respondents to obtain facts, opinions, and attitudes. Observation An investigator monitors respondents’ actions without interacting directly with respondents. After the problem is defined, a research method is chosen. The three basic research methods are survey, observation, and experiment. Experiment An investigator changes one or more variables while observing the effects of these changes on another variable. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Marketing Research Data Chapter 1 Chapter 13 Marketing Research Data 6 Secondary Data Information that has already been collected for a project other than the current one, but may be used to solve the problem. Primary Data Information collected directly from the original source to solve a problem. Two types of data are used in marketing research: primary data, which are collected directly from the original source to solve a problem; and secondary, which is information that has already been collected for a project other than the current one but it may be used to help solve it. Primary data are usually gathered through some form of survey research, which often relies on interviews. Sources of secondary data include government agencies, trade associations, research bureaus, universities, the internet, commercial publications, and internal data records. Company records include sales invoices, accounting records, data from previous research studies, and historical sales data. Once the data have been collected, the next step is data analysis. The purpose of this analysis is to interpret and draw conclusions. Many software statistical programs such as SAS and SPSS are available to make this task easier. The last step is to prepare the report and communicate the conclusions and recommendations to management. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

What are the trends in understanding the consumer? Learning Goal 7 7 What are the trends in understanding the consumer? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Scanner-based research Chapter 1 Chapter 13 Trends 7 Scanner-based research Shopper loyalty cards One-to-one marketing Marketing techniques that are growing in popularity are scanner-based research, shopper loyalty cards, and one-to-one marketing. Scanner-based research is a system for gathering information from a single group of respondents by monitoring the advertising, promotion, and pricing they are exposed to and the things they buy. the variables measured are advertising campaigns, coupons, displays, and product prices. Scanner-based research provides an accurate, objective picture of the direct causal relationship between different kinds of marketing efforts and actual sales. The two major scanner-based suppliers are A. C. Nielson Company and Information Resources, Inc. Loyalty cards are cards issued by a service organization, manufacturer, or retailer that gives discounts to loyal and frequent shoppers. Retailers estimate that 20 percent of their shoppers account for 80 percent of store sales, so finding out what their best customers want is essential. One-to-one marketing is creating a unique marketing mix for every consumer, which requires having a good marketing database. Database marketing can get a customized, individual message to everyone simultaneously through direct mail. This is why database marketing is sometimes called micromarketing. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved