1. Foundations of Business 3e Pride, Hughes, & Kapoor

2. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 2 Building Customer Relationships Through Effective Marketing Chapter11

3. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 3 Learning Objectives 1.Understand the meaning of marketing and the importance of management of customer relationships. 2.Explain how marketing adds value by creating several forms of utility. 3.Trace the development of the marketing concept and understand how it is implemented. 4.Understand what markets are and how they are classified. 5.Identify the four elements of the marketing mix and be aware of their importance in developing a marketing strategy.

4. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 4 6.Explain how the marketing environment affects strategic market planning. 7.Understand the major components of a marketing plan. 8.Describe how market measurement and sales forecasting are used. 9.Distinguish between a marketing information system and marketing research. 10.Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process. Learning Objectives (cont.)

5. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 5 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 Marketing “ “

6. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 6 Exchange Between Buyer and Seller Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15 th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010.) Adapted with permission.

7. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 7 Major Marketing Functions

8. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 8  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 Managing Customer Relationships

9. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 9  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 Utility: The Value Added by Marketing

10. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 10 Types of Utility

11. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 11 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

12. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 12 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

13. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 13 Evolution of the Marketing Concept (cont.) Marketing Orientation Sales Orientation Production Orientation 18501900 1950 2000 Source: Adapted from William M. Pride and O.C. Ferrell, Foundations of Marketing, 3 rd ed., © 2009 by Houghton Mifflin Company. All rights reserved.

14. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 14 Evolution of the Marketing Concept

15. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 15 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

16. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 16  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 The Marketing Concept (cont.)

17. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 17 Markets and Their Classification  Market 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

18. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 18 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

19. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 19 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)

20. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 20  Men or Women?  Lower, Middle or Upper Class?  Young, 20’s-30”s, 40-60’s?  Buy online, Department Stores, Jewelry stores?

21. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 21  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 Developing Marketing Strategies (cont.)

22. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 22 General Approaches for Selecting Target Markets

23. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 23 General Approaches for Selecting Target Markets (cont.)

24. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 24 General Approaches for Selecting Target Markets (cont.)

25. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 25 Common Bases of Market Segmentation

26. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 26 Advertisers’ Classification of Audiences NameAgeNeedsInfluencer Millennials<30Tech Savvy Media saturated, ethnically diverse Gen Xers30-45Media Savvy More cynical than millennials Boomers45-64 Avid Consumers Deny aging process Matures65+ Practical, pragmatic Money conscious Source: “Audience Research,” MediaKnowAll, http://www.mediaknowall.com/Advertising/research.html. Accessed 10/10/11.http://www.mediaknowall.com/Advertising/research.html

27. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 27 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

28. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 28 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

29. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 29 The Marketing Mix and the Marketing Environment (test)

30. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 30 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

31. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 31 Components of the Marketing Plan

32. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 32 Market Measurement and Sales Forecasting  Sales forecast 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

33. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 33 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

34. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 34 The Six Steps of Marketing Research

35. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 35 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

36. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 36 Sources of Secondary Information

37. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 37  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 Types of Buying Behavior

38. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 38 Consumer Buying Decision Process and Possible Influences on the Process

39. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 39  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 Types of Buying Behavior (cont.)

40. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 40 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.

41. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 41  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 Where Do Consumers Buy?

42. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 42  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 When Do Consumers Buy?

43. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 43 Chapter Quiz 1. The utility created by transferring title of a product to the buyer is called __________ utility. A. form B. time C. production D. place E. possession

44. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 44 Chapter Quiz 2. J.C. Penney is considered to be a member of which type of market? A. Business-to-business B. Reseller C. Consumer D. Producer E. Institutional

45. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 45 Chapter Quiz 3. The ingredient of the marketing mix concerned with product design, brand names, packaging, and warranties is A. pricing. B. quality. C. product. D. distribution. E. promotion.

46. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 46 Chapter Quiz 4. All of the following are true of marketing plans except that they should A. not be modified. B. include details of task scheduling. C. specify task objectives. D. describe the firm’s current situation. E. focus on a particular product or product group.

47. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 11 | Slide 47 Chapter Quiz 5. In this chapter, MIS refers to _______ system. A. merged information B. major information C. marketing information D. market influential segmentation E. minor information