Chapter 1 An Overview of Strategic Marketing

Objectives Define marketing as focused on customers Identify important marketing terms Become aware of the marketing concept and marketing orientation Understand importance of building customer relationships Learn the process of marketing management Recognize role of marketing in society

Definition of Marketing True or False? Marketing= Advertising + Sales. Marketing is an optional function in organizations. OLD view of marketing Making a sale—“telling and selling” NEW view of marketing Satisfying customer needs

Understanding the Marketplace and Customer Needs Marketers must understand five core customer and marketplace concepts: Needs, wants, and demands Market offerings ( products , services , and experiences ) Value and satisfaction Exchanges and relationships Markets

Needs, wants, and demands States of felt deprivation Needs The form human needs take as they are shaped by culture and individual personality Wants Human wants that are backed up by buying power Demands

Customer Needs, Wants, and Demands Types of needs Physical needs Food, clothing, warmth, and safety Social needs Belonging and affection Individual needs Learning, knowledge, and self-expression

Market offerings Market Offerings—Products, Services, and Experiences Some combination of products, services, information, or experiences offered to a market to satisfy a need or want Market Offerings—Products, Services, and Experiences - Not limited to physical products. - Include entities such as persons , places , organizations, information, and ideas

Markets The set of all actual and potential buyers of a product or service Markets

Value Create value for customers by improving benefits or reducing price: Value=Benefits/Costs.

Defining Marketing the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers and to develop and maintain favorable relationships with stakeholders in a dynamic environment

Marketing focuses on customers Customers, who are buyers of organization’s products, are the focal point of all marketing activities. The essence of marketing is to develop satisfying exchanges from which both customers and marketers benefit. Organizations generally focus their marketing efforts on a specific group of customers, or target market.

Target Market A specific group of customers on whom an organization focuses its marketing efforts.

Components of Strategic Marketing

Marketing deals with “Marketing Mix” Marketing is more than simply advertising or selling a product; it involves developing and managing a product, making the product available in the right place and at a price acceptable to buyers, and communicating information to help customers determine if the product will satisfy their needs. These activities — product, distribution, promotion, and pricing — are known as the marketing mix because marketers decide what type of each element to use and in what amounts. (each will be briefed in the followings slides)

Product Variable The product variable deals with researching customers’ needs and wants and designing a product that satisfies them. A product can be a good, a service, or an idea: Good—a physical entity you can touch Service—the application of human and mechanical efforts to people or objects to provide intangible benefits to customers Idea—concept, philosophy, image, or issue The product variable also involves creating or modifying brand names and packaging and may include decisions regarding warranty and repair services.

Distribution Variable Makes products available in the right quantities to the target market, and Yet, keeps the following costs under control: Inventory Transportation Storage It also involves Selecting/Motivating intermediaries

Promotion Variable It relates to activities used to inform individuals or groups about an organization and its products. It can also increase public awareness of an organization and of new or existing products. Promotional activities can also educate customers about product features

Price Variable Decisions and actions associated with establishing pricing objectives and policies and determining product prices. Price is often used as a competitive tool. And intense price competition sometimes leads to price war. High prices can be used competitively to establish product’s image. Price is a critical component of the marketing mix because customers are concerned about the value obtained in an exchange.

The Marketing Mix – the control issue The marketing mix variables are often viewed as controllable because they can be modified. But, Economic conditions, competitive structure, or government regulations may limit how much marketing managers can alter them (uncontrollable).

Marketing Builds Relationships with Customers and Other Stakeholders Individuals and organizations engage in marketing to facilitate exchanges. (see next slide for illustration) Exchange is “the provision or transfer of goods, services, or ideas in return for something of value”.

Exchange Between Buyer and Seller

Conditions of Exchange Two or more must participate and possess something of value other party desires Exchange should provide benefit/ satisfaction to both parties Parties have confidence in the promise of “something of value” held by the other Parties must meet expectations to build trust. Note: marketing doesn’t necessarily result in an exchange i.e. selling may not take place ( ‘facilitate’ exchange)

Stakeholders Marketers are also concerned with building relationships with relevant stakeholders, Stakeholders: those who have a “stake,” or claim, in some aspect of a company’s products, operations, markets, industry, and outcomes”. Stakeholders may include customers, employees, investors and shareholders, suppliers, governments, communities, and many others. Developing and maintaining favorable relations with stakeholders is crucial to the long term growth of an organization and its product.

Marketing Occurs in a Dynamic Environment The marketing environment includes competitive, economic, legal and regulatory, technological, and socio-cultural forces. It affects marketer’s ability to facilitate exchanges Marketing environment forces can fluctuate quickly and dramatically. Changes in the marketing environment produce uncertainty for marketers and at times hurt marketing efforts, but they also create opportunities. (The effects of these forces on buyers and sellers can be dramatic and hard to predict).

Marketing Occurs in a Dynamic Environment How marketing environment forces affect exchange: Influence customers by affecting their lifestyle, standards of living, and preferences and needs for products. Help to determine whether and how a marketing manager can perform marketing activities. Affect marketing manager’s decision and actions by influencing buyer’s reaction to the firms marketing mix.

Marketing Concept The marketing concept is “a philosophy that an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals. The marketing concept is not a second definition of marketing. It is a management philosophy that guides an organization’s overall activities. Customer satisfaction is the major focus of the marketing concept. The marketing concept is not a philanthropic philosophy, it should benefit the organization as well as customers To implement this concept, an org. focuses on customer analysis, competitor analysis, and integration of the firm’s resources to provide customer value and satisfaction, as well as long-term profits.

Evolution of the Marketing Concept

The Production Orientation (1850-1900) During the second half of the nineteenth century, the Industrial Revolution was at its peak in the United States. The attention was fully focused on production As a result of new technology and new ways of using labor, products poured into the market, where consumer demand for the new manufactured goods was strong.

The Sales Orientation (1900-1950) Between 1900 and 1950, businesspeople viewed sales as the major means of increasing profits. [sell what you can make] During this era, businesspeople believed that the major marketing activities were personal selling, advertising, and distribution.

Marketing Orientation 1950-now By the early 1950s, some businesspeople recognized that they must first determine what customers want and then produce it, rather than make products and try to persuade customers that what they need is what was produced. [make what you can sell] Marketing orientation is “an organization-wide commitment to researching and responding to customer needs”

Implementing the Marketing Concept marketing orientation requires an “organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it.” This means that: Management must first establish an information system to discover customers’ real needs and then use the information to create satisfying products.

Relationship Marketing It refers to “establishing long-term, mutually satisfying buyer-seller relationships”. Relationship marketing continually deepens the buyer’s trust in the company, and as the customer’s confidence grows, this in turn increases the firm’s understanding of the customer’s needs. Eventually this interaction becomes a solid relationship that allows for cooperation and mutual dependency. Relationship marketing can be developed through: Acquire new customers Enhance profitability of existing customers Extend duration of customer relationship

Customer Relationship Management (CRM) Using information about customers to create marketing strategies that develop and sustain desirable customer relationships. By increasing customer value over time, organizations try to retain and increase long-term profitability through customer loyalty.

Value-Driven Marketing To manage customer relationships, organizations must develop marketing mixes that create value for customers. Value is “a customer’s subjective assessment of benefits relative to costs in determining the worth of a product” (customer value = customer benefits – customer costs). Customer benefits include anything a buyer receives in an exchange. While, Customer costs include anything a buyer must give up to obtain the benefits provided by the product. Costs include the monetary price of the product as well as non-monetary costs such as time and effort.

Value-Driven Marketing (continued) The process people use to determine the value of a product is not highly scientific (subjective). In developing marketing activities, it is important to recognize that customers receive benefits based on their experiences. The marketing mix can be used to enhance perceptions of value.

Marketing Management Marketing management is “the process of planning, organizing, implementing, and controlling marketing activities to facilitate exchanges effectively and efficiently. “Effectiveness” is the degree to which an exchange helps achieve an organization’s objectives. While, “Efficiency” refers to minimizing the resources an organization must spend to achieve a specific level of desired exchanges (objectives). Review Page 16 for more details.

The Importance of Marketing in Global Economy Marketing Costs Consume a Sizable Portion of Buyers’ money About one-half of a buyer’s money goes to pay the costs of marketing. Because marketing expenses consume such a significant portion of our money, we should know how this money is used.

The Importance of Marketing in Global Economy (continued) 2. Marketing Is Used in Nonprofit Organizations Marketing is also important in nonprofit organizations. For example, government agencies use marketing activities to fulfill their goals. In the private sector, nonprofit organizations also employ marketing activities to create, distribute, promote, and even price programs that benefit particular segments of society.

The Importance of Marketing in Global Economy (continued) 3. Marketing Is Important to Business and the Economy Businesses must sell products to survive and grow, and marketing activities help sell their products. Marketing activities help individual business make healthy profits, and this is important for the health and ultimate survival of the global economy.

The Importance of Marketing in Global Economy (continued) 4. Marketing Fuels Our Global Economy Profits from marketing products contribute to the development of new products and technologies. Advances in technology lead to a higher standard of living, and this stimulates global economic growth.

The Importance of Marketing in Global Economy (continued) 5. Marketing Knowledge Enhances Consumer Awareness Studying marketing allows us to assess a product’s value more effectively. Understanding marketing enables us to understand measures (i.e. laws and regulations) that could stop unfair, damaging, or unethical marketing practices.

The Importance of Marketing in Global Economy (continued) 6. Marketing Connects People Through Technology New communication technology helps marketers understand and satisfy more customers than ever before. (E-marketing, E-shopping) The Internet has become a vital tool for marketing to consumers and businesses.

The Importance of Marketing in Global Economy (continued) 7. Socially Responsible Marketing Can Promote the Welfare of Customers and Society The success of economic system depends on marketers who promote trust and treat customers with respect. By being socially responsible, a firm can protect the interests of the general public and the natural environment.

The Importance of Marketing in Global Economy (continued) 8. Marketing Offers Many Exciting Career Prospects For example, 25 to 33 percent of all civilian workers in the United States perform marketing activities. Whether a person earns a living through marketing activities or otherwise, marketing knowledge and skills are valuable assets.