Understanding the Customer and Creating Goods and Services that Satisfy Chapter 11

Chapter 11 Learning Goals What are the marketing concept and relationship building? How do managers create a marketing strategy? What is the marketing mix? How do consumers and organizations make buying decisions?

Chapter 11 Learning Goals (cont’d.) 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 consumer?

Learning Goal 1 What are the marketing concept and relationship building? –Marketing concept involves Identifying consumer needs and wants Producing goods or services that will satisfy consumers while making a profit –Relationship marketing entails Forging long-term relationships with customers Can lead to repeat sales, reduced costs, and stable relationships

Marketing Concept: Identifying consumer needs and then producing the goods or services that will satisfy them while making a profit for the organization

Elements of the Marketing Concept Customer value Customer satisfaction Building relationships

Deere’s Customer Orientation Understand needs of the agricultural farmer customer Provide good products that rarely fail Quickly repair any problem equipment Develop products based on what farmers want Extend credit to farmers if needed; build trust and loyalty Provide information that increases customer value Source: Neff & Citrin, Lessons from the Top, 1999, p

Learning Goal 2 How do managers create a marketing strategy? –Marketing strategies are created by UUnderstanding the external environment –Using environmental scanning DDefining the target market –Specific group of consumers toward which a firm directs its marketing efforts DDetermining a competitive advantage –Set of unique features of a company and its products –Perceived by target market as significant and superior to those of the competition DDeveloping a marketing mix

Creating a Marketing Strategy Understanding the external environment Defining the target market Creating a competitive advantage –cost –cost competitive advantage –differential –differential competitive advantage –niche –niche competitive advantage

Learning Goal 3 What is the marketing mix? –Marketing mix is a blend of Products Distribution systems Prices Promotion –Marketing mix is used by marketing managers to satisfy target consumers –Mix can be applied to non-business or business situations

Marketing Mix: p pp p The blend of ‘4 Ps’: product offering, pricing, promotional methods, and place (distribution system) that brings a specific group of consumers superior value

Developing a Marketing Mix Product strategy Pricing strategy Distribution strategy Promotion strategy

360° Branding 360° branding: 360° branding: making a strong brand impact on the customer every time contact is made Opportunities for 360° branding: –showrooms, advertisements, web pages, retail locations, packaging, customer service Ogilvy & Mather advertising agency applies 360° branding to its clients Source: Neff & Citrin, Lessons from the Top, 1999, p

Learning Goal 4 How do consumers and organizations make buying decisions? –Consumer decision making process consists of: Responding to a stimulus Recognizing a problem or opportunity Seeking information and evaluating alternatives Purchasing the product and judging the purchase outcome Engaging in post-purchase behavior –Factors that influence the process Individual factorsIndividual factors – unique to each person Social factorsSocial factors – family, social classes, and culture

Learning Goal 4 (cont’d.) How do consumers and organizations make buying decisions? –Differences between consumer and business markets: Purchase volume Number of customers Location of buyers Direct distribution Rational purchase decisions

Buyer Behavior: Consumer Decision-Making 1. Sense stimulus 2. Recognize problem 3. Search for information 4. Evaluate alternatives 5. Purchase product 6. Evaluate outcome 7. Post-purchase behavior Memory Individual & Social factors

When the Buyer is a Business (Not a Customer) Higher purchase volume Fewer buyers More concentrated location of buyers Direct distribution Rational purchase decisions

Top 10 Business-to-Business Advertisers 1. AT&T Corp. 2. IBM Corp. 3. Microsoft Corp. 4. Compaq Computer Corp. 5. MCI Communications Corp. 6. Hewlett-Packard Co. 7. Sprint Corp. 8. American Express Co. 9. Canon 10. 3Com Corp. Source: Business Marketing,

Learning Goal 5 What are the five basic forms of market segmentation? –Demographic –Demographic (population statistics) –Geographic –Geographic (location) –Psychographic –Psychographic (personality or lifestyle) –Benefit –Benefit (product features) –Volume –Volume (amount purchased)

Market Segmentation: The process of separating, identifying, and evaluating the layers of a market in order to design a marketing mix

Types of Market Segmentation TypeGeneral characteristics Demographicage, education, gender, income, race, family, size Geographicregional location (I.e., midwest), population density, city/county size, climate Psychographiclifestyle, personality, interests, values, attitudes Benefitbenefits provided by the good or service Volumeamount of use (light to heavy)

Learning Goal 6 How is marketing research used in marketing decision making? –Much can be learned about consumers through marketing research by Collecting, recording, and analyzing data important in marketing goods and services Communicating results to management –Primary data –Primary data is Collected in these ways: –Door-to-door –Mall-intercept –Telephone –Internet –Mail interviews

Learning Goal 6 (cont’d.) How is marketing research used in marketing decision making? –Secondary data Available from these associations: –Government –Trade –Commercial Saves time and money but may not meet researchers’ needs –Both primary and secondary data give researchers a better idea of how market will respond to a product –Reduces the risk of producing something the market doesn’t want

Marketing Research Process Define the marketing problem Choose a method of research survey, observation, experiment Collect the data primary data, secondary data Analyze the data Make recommendations to management

Learning Goal 7 What are the trends in understanding the consumer? –New technology has: Increased the sophistication of observation research techniques Improved the accuracy of data Researchers are analyzing the brain to better understand how people think –Growing use of decision support systems Enable managers to make decisions quickly and accurately –Growing use of databases for micromarketing

Trends in Marketing  Advanced observation research methods  Decision support systems (DSS)  Use of databases for micromarketing  allows customized marketing to individuals  Amazon.com  Amazon.com records what every customer buys; this gives them a sense of every customer’s taste & preferences, which can be used to target specific customers with customized purchase suggestions & special offers (Source: Fortune, Sept. 28, 1998, p. 124)