Foundations of Business 3e Pride, Hughes, & Kapoor

Building Customer Relationships Through Effective Marketing Chapter 11

Learning Objectives Understand the meaning of marketing and the importance of management of customer relationships. Explain how marketing adds value by creating several forms of utility. Trace the development of the marketing concept and understand how it is implemented. Understand what markets are and how they are classified. Identify the four elements of the marketing mix and be aware of their importance in developing a marketing strategy.

Learning Objectives (cont.) Explain how the marketing environment affects strategic market planning. Understand the major components of a marketing plan. Describe how market measurement and sales forecasting are used. Distinguish between a marketing information system and marketing research. Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process.

Marketing “ The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large “

Exchange Between Buyer and Seller Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010.) Adapted with permission.

Major Marketing Functions

Managing Customer Relationships Relationship marketing: establishing long-term, mutually satisfying buyer-seller relationships Customer relationship management (CRM): using information about customers to create marketing strategies that develop and sustain desirable customer relationships Customer lifetime value: a combination of purchase frequency, average value of purchases, and brand- switching patterns over the entire span of a customer’s relationship with a company

Utility: The Value Added by Marketing The ability of a good or service to satisfy a human need Form utility: created by converting production inputs into finished products Place utility: created by making a product available at a location where customers wish to purchase it Time utility: created by making a product available when customers wish to purchase it Possession utility: created by transferring title (or ownership) of a product to a buyer

Types of Utility

The Marketing Concept “A business philosophy that a firm should provide goods and services that satisfy customers’ needs through a coordinated set of activities that allows the firm to achieve its objectives” To achieve success, a business must: Communicate with potential customers to assess their needs Develop a good or service to satisfy those needs Continue to seek ways to provide customer satisfaction

The Marketing Concept (cont.) Evolution of the marketing concept Industrial revolution through the early twentieth century Business effort directed toward production to meet great demand 1920s Production began to exceed demand Business efforts included selling goods by advertising and hiring larger sales force 1950s Business efforts also focused on satisfying customers’ needs

Evolution of the Marketing Concept (cont.) Production Orientation Sales Orientation Marketing Orientation 1950 1850 1900 2000 Source: Adapted from William M. Pride and O.C. Ferrell, Foundations of Marketing, 3rd ed., © 2009 by Houghton Mifflin Company. All rights reserved.

Evolution of the Marketing Concept

The Marketing Concept (cont.) Implementing the marketing concept Obtain information about present and potential customers Their needs, how well those needs are being satisfied, how products might be improved, customer opinions about the firm Pinpoint specific needs and potential customers toward which to direct marketing activities and resources

The Marketing Concept (cont.) Implementing the marketing concept (cont.) Mobilize marketing resources to: Provide a product that will satisfy customers Price the product at an acceptable and profitable level Promote the product to potential customers Ensure distribution for product availability when and where wanted Obtain information on the effectiveness of the marketing effort and modify efforts as necessary

Markets and Their Classification A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products Consumer markets Purchasers and/or household members who intend to consume or benefit from the purchased products and who do not buy products to make a profit Business-to-business (industrial) markets Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations

Markets and Their Classification (cont.) Producer markets Individuals and business organizations that buy products to use in the manufacture of other products Reseller markets Intermediaries such as wholesalers and retailers that buy finished products and sell them for a profit Governmental markets Buy goods and services to maintain operations and provide citizens with products such as highways, education, utilities, defense Institutional markets Churches, not-for-profit private schools and hospitals, civic clubs, charitable organizations

Developing Marketing Strategies Marketing strategy “A plan that will enable an organization to make the best use of its resources and advantages to meet its objectives” Consists of: The selection and analysis of a target market The creation and maintenance of an appropriate marketing mix (a combination of product, price, distribution (place), and promotion developed to satisfy a particular target market)

Developing Marketing Strategies (cont.) Target market selection and evaluation Target market A group of individuals, organizations, or both for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group Market segment A group of individuals or organizations within a market that share one or more common characteristics Market segmentation The process of dividing a market into segments and directing a marketing mix at a particular segment or segments rather than at the total market

General Approaches for Selecting Target Markets

General Approaches for Selecting Target Markets (cont.)

General Approaches for Selecting Target Markets (cont.)

Common Bases of Market Segmentation

Advertisers’ Classification of Audiences Name Age Needs Influencer Millennials <30 Tech Savvy Media saturated, ethnically diverse Gen Xers 30-45 Media Savvy More cynical than millennials Boomers 45-64 Avid Consumers Deny aging process Matures 65+ Practical, pragmatic Money conscious Source: “Audience Research,” MediaKnowAll, http://www.mediaknowall.com/Advertising/research.html. Accessed 10/10/11.

Class Exercise Identify one or several characteristics or variables that could be used to segment the markets for each of these products. Recreational vehicles (RVs) Baby food Rolls Royce automobiles Snow tires Hotel rooms Magazines Soft drinks Movies Shoes Bicycles

Class Exercise (cont.) Identify one or several characteristics or variables that could be used to segment the markets for each of these products. Air passenger service Cameras Swimsuits Restaurants

The Marketing Mix and the Marketing Environment (test)

Developing a Marketing Plan A written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group Elements of a marketing plan Executive summary Environmental analysis Strengths and Weaknesses Opportunities and Threats Marketing objectives Marketing strategies Marketing implementation Evaluation and control

Components of the Marketing Plan

Market Measurement and Sales Forecasting An estimate of the amount of a product that an organization expects to sell during a certain period of time based on a specified level of marketing effort Importance of measuring sales potential Evaluate feasibility of entering new segments Decide how best to allocate marketing resources and activities Estimates should do several things Identify the relevant time frame covered by the forecast Define the geographic boundaries of the forecast Indicate for which products the forecasts are relevant

Marketing Information Marketing information system A system for managing marketing information that is gathered continually from internal and external sources Internal data sources Sales figures, product and marketing costs, inventory, sales force activities External data sources Suppliers, intermediaries, customers, competitors, economic conditions Outputs Sales reports, sales forecasts, buying trends, market share

The Six Steps of Marketing Research

Marketing Information (cont.) Using technology to gather and analyze marketing information Databases such as LEXIS-NEXIS, Reader’s Digest Online information services offer subscribers access to e-mail, websites, mailing lists Useful websites such as Nielsen, Advertising Age

Sources of Secondary Information

Types of Buying Behavior The decisions and actions of people involved in buying and using products Consumer buying behavior The purchasing of products for personal or household use, not for business purposes Business buying behavior The purchasing of products by producers, resellers, governmental units, and institutions

Consumer Buying Decision Process and Possible Influences on the Process

Types of Buying Behavior (cont.) Consumer income Personal income The income an individual receives from all sources less the Social Security taxes the individual must pay Disposable income Personal income less all additional personal taxes Discretionary income Disposable income less savings and expenditures on food, clothing, and housing Of particular interest to marketers due to choice of how to spend it

Why Do Consumers Buy? They have a use for the product. They like the convenience a product offers. They believe the purchase will enhance their wealth. They take pride in ownership. They buy for safety.

Influences on where to buy Where Do Consumers Buy? Influences on where to buy Perception of the store General impressions of an establishment’s products, prices, and sales personnel Types of retail outlets Specialty store, department store, discount store Location Product assortment Services such as credit terms, return privileges, free delivery

When Do Consumers Buy? When buying is most convenient Hours have stretched to include evenings, holidays, and Sundays Many online catalog companies now offer access twenty-four hours a day, seven days a week

Chapter Quiz The utility created by transferring title of a product to the buyer is called __________ utility. form time production place possession

Chapter Quiz J.C. Penney is considered to be a member of which type of market? Business-to-business Reseller Consumer Producer Institutional

Chapter Quiz The ingredient of the marketing mix concerned with product design, brand names, packaging, and warranties is pricing. quality. product. distribution. promotion.

Chapter Quiz All of the following are true of marketing plans except that they should not be modified. include details of task scheduling. specify task objectives. describe the firm’s current situation. focus on a particular product or product group.

Chapter Quiz In this chapter, MIS refers to _______ system. merged information major information marketing information market influential segmentation minor information