1. Part 5 Marketing: Developing Relationships McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Nature of Marketing  Create value by allowing individuals and organizations to obtain what they need and want  Other functional areas of the business (operations, finance, and all areas of management) must be coordinated with marketing decisions  Marketing is not:  Manipulating consumers to get them to buy products they do not want  Just selling and advertising  Marketing is:  A systematic approach to satisfying consumers Marketing A group of activities designed to expedite transactions by creating, distributing, pricing, and promoting goods, services, and ideas 11-2

3. The Exchange Relationship  Each participant must be willing to give up his or her respective “something of value” to receive the “something” held by the other Exchange The act of giving up one thing (money, credit, labor, goods) in return for something else (goods, services, or ideas) 11-3

4. The Exchange Relationship  The tangible product itself may not be as important as the image or the benefits associated with the product  This intangible “something of value” may be: Capability gained from using a product The image evoked by it The brand name 11-4

5. Due to his large following on Twitter, different companies have hired Ashton Kutcher to represent their brands on Twitter Companies hope that celebrity promotion will create additional value for consumers by extending their positive perceptions of the celebrity to their products 11-5

6. Functions of Marketing Marketing Activities Buying Selling Transporting StoringGradingFinancing Marketing Research Risk Taking 11-6

7. Creating Value with Marketing  Benefits – Anything a buyer receives in an exchange  Costs – Anything a buyer must give up to obtain the product’s benefits  Monetary costs and time and effort expended to procure the product Customer Benefits Customer Costs Customer Value = – Value A customer’s subjective assessment of benefits relative to costs in determining the worth of a product 11-7

8. The Marketing Concept  A business must find out what consumers desire and then develop the good, service, or idea that fulfills their needs or wants  The business must then get the product to the customer  The business must continually alter, adapt, and develop products to keep pace with changing consumer needs and wants Marketing Concept The idea that an organization should try to satisfy customers’ needs through coordinated activities that also allow it to achieve its own goal 11-8

9. The Marketing Concept  Determining customers’ true needs is increasingly difficult because no one fully understands what motivates people to buy things  A business must also achieve its own objectives: Boosting productivity Reducing costs Achieving a percentage of a specific market  A firm must have good information about what consumers want, adopt a consumer orientation, and coordinate its efforts throughout the entire organization 11-9

10. The Marketing Concept  Customer-contact employees must know what customers want  They are not just selling goods and services, but: Ideas Benefits Philosophies Experiences  Customers’ perception of value = Level of success 11-10

11. Trader Joe’s, which sells many different lines of organic and natural food products, is often thought to have better deals than some of its competitors The grocery chain attempts to meet consumer demands for high-quality food at reasonable prices 11-11

12. Evolution of the Marketing Concept Today some people still inaccurately equate marketing with a sales orientation Market Orientation An approach requiring organizations to gather information about customer needs, share that information throughout the firm, and use that information to help build long-term relationships with customers  Began in the 1950s and continues today  New technologies are helping firms to improve communication and learn what customers want 11-12

13. Developing a Marketing Strategy  Has two major components: Selecting a target market Developing an appropriate marketing mix to satisfy that target market Marketing Strategy A plan of action for developing, pricing distributing, and promoting products that meet the needs of specific customers 11-13

14. 11-14 Business to Business (B2B) Markets  Depending on the type of business you work for, other businesses can be your customer  Businesses buy products to resell, use in the production of other products, or for use in operations  While the marketing concepts are the same for both businesses and consumers, there are complexities to the business market that need to be considered  Customer populations in the business market are smaller than in the consumer market, products tend to be highly technical as does the buyer, and how the product affects the rest of the businesses marketing channel are all important characteristics of the business market  Businesses also tend to buy in larger quantities than consumers and long-term relationships are seen as necessary

15. Selecting a Target Market Market A group of people who have a need, purchasing power, and the desire and authority to spend money on goods, services, and ideas Target Market A specific group of consumers on whose needs and wants a company focuses its marketing efforts 11-15 Total-Market Approach An approach whereby a firm tries to appeal to everyone and assumes that all buyers have similar needs Sellers of salt, sugar, and many agricultural products use a total- market approach because everyone is a potential consumer of these products

16. Selecting a Target Market  Women are the largest market segment, with 51% of the U.S. population  Marketers are focusing on the growing Hispanic population Market Segmentation A strategy whereby a firm divides the total market into groups of people who have relatively similar product needs Market Segment A collection of individuals, groups, or organizations who share one or more characteristics and thus have relatively similar product needs and desires 11-16

17. U.S. Buying Power Statistics by Race (billions) 11-17

18. Market Segmentation Approaches Concentration Approach A market segmentation approach whereby a company develops one marketing strategy for a single market segment Porsche directs all its marketing efforts toward high-income individuals who want to own high-performance vehicles Multisegment Approach A market segmentation approach whereby the marketer aims its efforts at two or more segments, developing a marketing strategy for each Raleigh bicycles has designed separate marketing strategies for racers, tourers, commuters, and children 11-18

19. Target Market Strategies 11-19

20. Market Segmentation Approaches  Niche segments are usually very small compared to the total market for the product  Many airlines cater to first-class flyers, who comprise only 10% of international air travelers  To meet the needs of these elite customers, airlines include special perks along with spacious seats Niche Marketing Is a narrow market segment focus when efforts are on one small, well-defined group that has a unique, specific set of needs 11-20

21. Market Segmentation Approaches  For a firm to successfully use a concentration or multisegment approach to market segmentation: 1.Consumers’ needs for the product must be heterogeneous 2.The segments must be identifiable and divisible 3.The total market must be divided in a way that allows estimated sales potential, cost, and profits of the segments to be compared 4.At least one segment must have enough profit potential to justify developing and maintaining a special marketing strategy 5.The firm must be able to reach the chosen market segment with a particular market strategy 11-21

22. Bases for Segmenting Markets Companies segment markets on the basis of several variables: DemographicGeographicPsychographicBehavioristic 11-22

23. Developing a Marketing Mix  The buyer or the target market is the central focus of all marketing activities Marketing Mix The four marketing activities—product, price, promotion, and distribution—that the firm can control to achieve specific goals within a dynamic marketing environment 11-23

24. Product A product whether a Good – A physical entity you can touch (a car, computer, or adopted kitten) Service – The application of human and mechanical efforts to people or objects to provide intangible benefits to customers (Air travel, dry cleaning, or haircuts) Idea – Can be a concept, philosophy, image, or issue (attorney advise or political parties) Is a complex mix of tangible and intangible attributes that provide satisfaction and benefits 11-24

25. Price  The buyer usually exchanges purchasing power— income, credit, wealth—for the satisfaction of utility associated with a product  Key element of the marketing mix because it relates directly to the generation of revenue and profits  Can be changed quickly to stimulate demand or respond to competitors’ actions Price A value placed on an object exchanged between a buyer and a seller 11-25

26. Distribution  Sometimes referred to as “place” because it helps to remember the marketing mix as the “4 Ps”  Product, price, place, and promotion  Intermediaries—usually wholesalers and retailers— perform many of the activities required to move products efficiently from producers to consumers or industrial buyers  Involves transporting, warehousing, materials handling, and inventory control Distribution Making products available to customers in the quantities desired 11-26

27. Redbox departed from the more traditional brick-and- mortar rental stores by choosing to distribute its DVD rentals through vending machines 11-27

28. Promotion  Includes advertising, personal selling, publicity, and sales promotion  Digital advertising on websites and social media sites are growing Promotion A persuasive form of communication that attempts to expedite a marketing exchange by influencing individuals, groups, and organizations to accept goods, services, and ideas 11-28

29. 11-29 Expeditionary Marketing Expeditionary marketingExpeditionary marketing is a strategy that both small and large companies use to find untapped markets In the case of a startup, The goal is to find emerging markets where there is little competition, design a product for that market, and establish themselves as a leader For more established businesses, both large and small, the goal of expeditionary marketing is to find new areas for growth in markets that are small but growing Internal and external research is done to find markets that are complementary to the skills of the company and the needs of the market, as is extensive planning for new products or services © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

30. Marketing Research and Information Systems  Guides marketing decisions  May include data on age, income, ethnicity, educational level, etc. of the target market and how frequently they purchase the product Marketing information system – A framework for accessing information about customers from sources both inside and outside the organization  Inside the organization  Continuous flow of information on prices, sales, and expenses  Outside the organization  Data are available through public and private reports, census statistics, digital media sources, etc. Marketing Research A systematic, objective process of getting information about potential customers to guide marketing decisions 11-30

31. Marketing Research and Information Systems Marketing information that is observed, recorded, or collected directly from respondents “Mystery shoppers”, surveys, and focus groups Passive observation of consumer behavior and open-ended questions techniques Primary Data Information that is compiled inside or outside an organization for some purpose other than changing the current situation Information compiled by the U.S. Census Bureau and other government agencies, databases created by marketing research firms, as well as sales and other internal reports Secondary Data 11-31

32. Companies with the Best Customer Service 11-32

33. Online Marketing Research  New information technologies are changing how businesses learn about consumers and market their products Digital media and online social networks Opportunity to reach new markets via the Internet Online surveys are becoming an important part of marketing research  Virtual testing – Interactive multimedia research that combines sight, sound, and animation to improve testing of products and their features 11-33

34. Starbucks hopes to influence consumers' buying behavior by offering them incentives, such as free coffee or tea if you bring your own cup on Earth Day 11-34 Buying Behavior The decision processes and actions of people who purchase and use products Marketers analyze buying behavior because a firm’s marketing strategy should be guided by an understanding of buyers

35. Psychological Variables of Buying Behavior Perception The process by which a person selects, organizes, and interprets information received from his or her senses Motivation Inner drive that directs a person’s behavior toward goals Learning Changes in a person’s behavior based on information and experience Attitude Knowledge and positive or negative feelings about something Personality The organization of an individual’s distinguishing character traits, attitudes, or habits 11-35

36. Social Variables of Buying Behavior Social Roles A set of expectations for individuals based on some position they occupy Reference Groups Groups with whom buyers identify and whose values or attitudes they adopt Social Classes A ranking of people into higher or lower positions of respect Culture The integrated, accepted pattern of human behavior, including thought, speech, beliefs, actions, and artifacts 11-36

37. Which products are delivered to which stores depends on the heritage of those living in each area People’s cultures have a big impact on what they buy Goya Foods sells more than three dozen types of beans to U.S. supermarkets because people with different cultural roots demand different types of beans 11-37

38. Understanding Buying Behavior  Trying to understand consumers is the best way to satisfy them  Tools and techniques for analyzing consumers are not exact  To combat declining gum sales, companies have begun to turn gum into a “fashion statement” Kraft is engaging young artists to create designs for its gum packaging Rockstar Iced Mint Energy is touting its energy-boosting caffeine and taurine content These overhauls are an attempt to reconnect with the teen market, which is the largest purchaser of gum products 11-38

39. The Marketing Environment  External forces directly or indirectly influence the development of marketing strategies: Political, legal, and regulatory forces Social forces Competitive and economic forces Technological forces  Marketing requires creativity and consumer focus because environmental forces can change quickly and dramatically 11-39

40. Social Concerns Force Businesses to Rethink Marketing Strategies 11-40 Climate change, global warming, and the impact of carbon emissions on out environment have been social concerns are causing businesses to rethink marketing strategies  Governments have instituted stricter laws of greenhouse gas emissions  U.S. government has mandated that by 2025 vehicles must be able to reach 54.5 miles per gallon  General Motors and others are investigating ways to make cars more fuel-efficient without significantly raising price  These laws are introducing opportunities for new products  Concern over the environment are encouraging automobile companies to release electric cars  Chevrolet Volt and Nissan Leaf © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

41. The Marketing Mix and the Marketing Environment 11-41

42. Importance of Marketing to Business and Society  Marketing is a necessary function to reaching consumers, establishing relationships, and driving sales  Marketing is essential in communicating the value of products and services  Nonprofits, government institutions, and even people must market themselves to spread awareness and achieve desired outcomes  All organizations must reach their target markets, communicate their offerings, and establish high-quality services 11-42