1. Customer-Driven Marketing11
Chapter
Customer-Driven Marketing

2. Learning Objectives
LO 11.1 Summarize the ways in which marketing creates utility.
LO 11.2 Discuss the marketing concept.
LO 11.3 Describe not-for-profit marketing, and identify the five major categories of nontraditional marketing.
LO 11.4 Outline the basic steps in developing a marketing strategy.
LO 11.5 Describe the marketing research function.
LO 11.6 Identify and explain each of the methods available for segmenting consumer and business markets.
LO 11.7 Outline the determinants of consumer behaviour.
LO 11.8 Discuss the benefits and tools for relationship marketing.

3. What Is Marketing?
Marketing: An organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders
Discover unmet customer needs; research potential market; produce a good/service capable of satisfying targeted customers; promote, price, and distribute good/service.
Successful organizations focus on building customer relationships throughout.
Best marketers give consumers what they want and anticipate consumers’ needs before they surface.
Exchange process: An activity in which two or more parties trade something of value (such as goods, services, or cash) that satisfies each other’s needs.
Every organization (profit and non-profit) must market. Marketing is more than just selling; it is research, production, promotion, pricing, and distribution. The exchange process is much more complicated than buying a product you “need.” Facilitating and creating this exchange process is a big part of marketing.
Lecture Enhancer: Can you think of a company that anticipates customer needs particularly well?
Lecture Enhancer: Which of these marketing steps seems to be the most important? Why?

4. How Marketing Creates Utility
Utility: The power of a good or service to satisfy a want or need
Create time utility by making a good or service available when customers want to purchase it.
Create place utility by making a product available in a location convenient for customers.
Create ownership utility through an organized transfer of goods and services from the seller to the buyer.
Many organizations are attempting to create all three types of utility through the marketing function. A company’s production function creates form utility by converting raw materials, component parts, and other inputs into finished goods and services.
Lecture Enhancer: Can you think of an example where a firm created a need for its product or service?

5. Evolution of the Marketing Concept
Marketing has always been a part of business, but it has changed over the centuries. In the 1950s, the marketing era started and organizations began to adopt a consumer orientation. This focus has intensified in recent years, leading to the emergence of the relationship era in the 1990s, which continues to this day. In the relationship era, companies emphasize customer satisfaction and building long-term business relationships.
Lecture Enhancer: How do you think marketing might further change in the 21st century?

6. Emergence of the Marketing Concept
Marketing concept: A companywide consumer focus on promoting long-term success
Firm starts with analysis of customers’ needs and works backward to offer products that fulfill them.
Explained by shift from sellers’ market, in which goods and services are scarce, to buyers’ market, in which they are plentiful.
The basic idea of the marketing concept is that marketplace success begins with the customer.There is strong competition to satisfy customers. Therefore, organizations must focus on the long-term value of customers and their needs.
Class Activity: Discuss how the success of e-book readers (such as Kobo, iPad, Nook, and Kindle) have affected bricks-and-mortar sellers such as Chapters and smaller retailers.

7. Nontraditional Marketing
Not-for-Profit and
Nontraditional Marketing
Approximately 20 million not-for-profits exist worldwide.
Canada leads the world in contributions to its gross domestic product by not-for-profit organizations.
Apply marketing tools to reach audiences, secure funding, and accomplish their overall missions.
Not-for-profit organizations operate in both public and private sectors.
Sometimes partner with a profit-seeking company to promote a message.
Not-for-profit marketing is as important as marketing for other organizations and products. Non-profits compete for dollars (funding) and people (donors or volunteers) and need to communicate their purpose.
Class Activity: Ask students to identify local not-for-profit organizations that have used effective marketing.

8. Nontraditional Marketing
Person marketing refers to efforts designed to attract the attention, interest, and preference of a target market toward a person. Place marketing attempts to attract people to a particular area, such as a city, region, or country. Event marketing refers to marketing or sponsoring short-term events such as athletic competitions and cultural and charitable performances. Cause marketing is marketing that promotes awareness of a cause or social issue or raises money for a cause or social issue, such as drug abuse prevention or childhood hunger. Organization marketing influences consumers to accept the goals of an organization, receive the services of an organization, or contribute in some way to an organization.
Lecture Enhancer: Choose one of the five marketing categories. Identify a few products or services that might be marketed by using the marketing method you chose.

9. Developing a Marketing Strategy
1. Study and analyze potential target markets and choose among them.
2. Create a marketing mix to satisfy the chosen market.
A marketing plan is a key part of a firm’s overall business plan. The marketing plan outlines a firm’s marketing strategy. It also includes information about the target market, sales
and revenue goals, the marketing budget, and the timing for implementing the elements of the marketing mix.

10. Selecting a Target Market
Target market: A group of people that an organization markets its goods, services, or ideas toward, using a strategy designed to satisfy this group’s specific needs and preferences
Types of markets
Consumer (B2C) product: A good or service that is purchased by end users
Business (B2B) product: A good or service purchased to be used, either directly or indirectly, in the production of other goods for resale
A firm’s marketers study the individuals and business decision-makers in its potential market to find a need. A market consists of people who have purchasing power, a willingness to buy, and the authority to make purchase decisions. Some products can fit either the B2C or B2B classification, depending on who buys them and why. For example, a computer and a credit card can be used by both a business and a consumer.

11. Selecting a Target Market
Marketing mix: A blending of the four elements of marketing strategy to fit satisfy chosen customer segments
Product strategy involves the nature of the product and its package design, brand names, trademarks, and product image.
Distribution strategy ensures that customers receive their purchases in the proper quantities at the right times and locations.
Promotional strategy blends advertising, personal selling, sales promotion, and public relations to achieve its goals of informing, persuading, and influencing purchase decisions.
Pricing strategy sets profitable and justifiable prices for the firm’s product offerings, sometimes subject to government scrutiny.
The marketing mix is a blend of the four elements of marketing strategy—product, distribution, promotion, and pricing—to satisfy chosen customer segments. Marketers mix these strategies to communicate to the target market. Marketing success depends not on the four individual strategies but on their unique combination.
Lecture Enhancer: Which of these strategies seems to be the most crucial? What might happen if a firm ignores one of these strategies?

12. Test Your Knowledge
Which of the following is not part of the marketing mix?
a. Production
b. Price
c. Distribution
d. Promotion

13. Test Your Knowledge
Which of the following is not part of the marketing mix?
a. Production
b. Price
c. Distribution
d. Promotion
Answer: A

14. Developing a Marketing Mix for International Markets
Standardization means offering the same marketing mix in every market.
Adaptation means developing a unique marketing mix to fit each market’s local competitive conditions, consumer preferences, and government regulations.
Mass customization allows a firm to mass-produce goods and services while adding unique features to individual or small groups of orders.
Standardization works best with business to business goods, which need little sensitivity to a nation’s culture. Consumer products tend to be more culture-dependent than business products; adaptation is often seen with food and restaurants. Mass customization allows marketers to try to build adaptability into the designs of standardized goods and services
for international and domestic markets.
Class Activity: What challenges does Starbucks face to enter China and successfully sell coffee there? Ask students their ideas for tactics to overcome these challenges.

15. Marketing Research
Marketing research: The process of collecting and evaluating information to support marketing decision-making
Internal data is generated within the organization; includes financial records, inventory levels, sales, profitability
External data comes from outside sources; includes trade associations, advertising agencies, national marketing research firms
Secondary data is previously published data.
Low-cost and easy to obtain.
Government publications provide data sources (e.g., census statistics).
Primary data is collected through observation, surveys, and other forms of observational study.
Market research must be obtained and applied to aid in making good marketing decisions, creating an effective strategy, and building a strong marketing mix. Marketers may access internal or external data to make marketing decisions. The more data they have and use, the better their marketing decisions.
Lecture Enhancer: Which type of data is more reliable, internal data or external data? Why?

16. Marketing Research
Focus groups gathers 8 to 12 people in a room or over the Internet to discuss a specific topic.
Can lead to new ideas, address consumer needs, and point out flaws in existing products.
Business intelligence: A field of research that uses activities and technologies for gathering, storing, and analyzing data to make better competitive decisions
Data mining: The use of computer searches of customer data to detect patterns and relationships.
Some organizations gather large amounts of business intelligence to help make competitive decisions. Data mining uses data warehouses, sophisticated customer databases that allow managers to combine data from several different organizational functions.
Lecture Enhancer: What potential problems can result from data obtained through a focus group?
Lecture Enhancer: Provide examples of typical methods used to mine data from consumers.
Class Activity: Lead a class discussion on how students might collect primary and secondary data to research a potential pet grooming service in the community.

17. Test Your Knowledge
Statistics Canada is a major source of ______ for marketers.
a. primary data
b. internal data
c secondary data
d proprietary data

18. Test Your Knowledge
Statistics Canada is a major source of ______ for marketers.
a. primary data
b. internal data
c secondary data
d proprietary data
Answer: C

19. Market Segmentation
Market segmentation: The process of dividing a total market into several relatively similar groups
Market segmentation is often based on marketing research results. Market segmentation attempts to isolate traits that distinguish a certain group of customers from the overall market. These are some criteria that marketers consider when segmenting markets. The effectiveness of a segmentation strategy depends on how well the market meets these criteria. Marketers need to first link a market segment to a target, and then they can create a suitable marketing strategy.
Lecture Enhancer: Name some market segments that have emerged in the past 10 years.

20. How Market Segmentation Works
Market segmentation depends on the product and the target market. Common bases for segmenting consumer markets are geographical, demographic, psychographic, and product-related. Business products are segmented into customer-based, end-use, and geographical. The effectiveness of a segmentation strategy depends on how well the market meets these criteria. Once marketers identify a market segment to target, they can create an appropriate marketing strategy.
Lecture Enhancer: What are the upsides and downsides of each method of segmentation?

21. Segmenting Consumer Markets
Geographic segmentation: Dividing an overall market into similar groups on the basis of their locations
Demographic segmentation: Dividing markets on the basis of various demographic or socioeconomic characteristics, such as gender, age, income, occupation, household size, stage in family life cycle, education, or ethnic group
Psychographic segmentation: Dividing consumer markets into groups with similar attitudes, values, and lifestyles
AIO statements are people’s verbal descriptions of various attitudes, interests, and opinions
VALS
Product-related segmentation: Dividing consumer markets into groups that are based on benefits sought by buyers, usage rates, and loyalty levels
In addition to demographic and geographical segmentation, today ’s marketers also define customer groups based on product-related differences and criteria that are psychographic—relating to lifestyle and values. Have students take the VALS survey (click on link) to learn about psychographic segmentation. The three most popular approaches to product-related segmentation are based on benefits sought, usage rates, and brand loyalty levels.
Class Activity: Ask students what type of businesses might use religion as a key segmentation criterion.
Lecture Enhancer: Provide a specific example of a psychographic segment.

22. Test Your Knowledge
The most common form of consumer market segmentation is
a. geographic.
b. product-related.
c. demographic.
d. psychographic.

23. Test Your Knowledge
The most common form of consumer market segmentation is
a. geographic.
b. product-related.
c. demographic.
d. psychographic.
Answer: C

24. Segmenting Business Markets
Geographic segmentation targets geographically concentrated industries.
Demographic, or customer-based, segmentation designs a good or service intended for a specific organizational market (e.g., healthcare institutions).
End-use segmentation: A marketing strategy that focuses on the precise way a B2B purchaser will use a product
Geographic segmentation for the business market resembles segmentation for consumer markets, but some methods differ. Demographic segmentation is more focused on industries, while end-use segmentation focuses on how the product will be used.
Class Activity: Lead a discussion of why furniture manufacturers would likely treat colleges and universities as a distinct segment.

25. Consumer Behaviour
Consumer behaviour: End consumers’ activities that are directly involved in obtaining, consuming, and disposing of products, and the decision processes before and after these activities.
Personal factors: needs and motives, perceptions, attitudes, learned experiences, self-concept
Interpersonal factors: cultural, social, and family influences
External factors: economic events
Business buying behaviour often includes a variety of influences from multiple decision makers within the organization.
Consumer and business behaviour differ, but their key focus is on determining what the customer wants. There may be a combination of personal and interpersonal factors, as well as the influence of external factors.
Lecture Enhancer: What methods might be used to gather information about customers’ purchasing habits?

26. Steps in the Consumer Behaviour Process
Consumer decisions follow sequential steps while being influenced by interpersonal and personal determinants.
Lecture Enhancer: In what situation might a consumer skip one or more of these steps? Why?

27. Relationship Marketing
Relationship marketing: Developing and maintaining long-term, cost-effective exchange relationships with partners
Consumers enter into relationships only if there is some benefit to them.
Relationship marketing seeks to achieve customer satisfaction as its ultimate goal.
Relationship marketing include partners such as individual customers, suppliers, and employees. Better-informed consumers require a beneficial relationship when they make investments. They demand benefits from the companies that supply them.
Lecture Enhancer: Provide examples of how modern banking uses relationship marketing to gain customers.

28. Benefits of Relationship Marketing
Lower costs, higher profits, and protection against competitors for the business.
Lifetime value of a customer: The revenues and intangible benefits (such as referrals and customer feedback) from a customer over the life of the relationship, minus the amount the company must spend to acquire and serve that customer
Stronger relationships with business partners and opportunities to combine capabilities and resources to better accomplish goals.
Encouraging good relationships with customers can be a vital strategy for a firm. By identifying current purchasers and maintaining positive relationships with them, organizations can
efficiently target their best customers. Studying current customers’ buying habits and preferences can help marketers to identify potential new customers and establish ongoing contact with them. Attracting a new customer can cost five times as much as keeping an existing customer. Long-term customers do not just reduce marketing costs; they usually buy more, require less service, refer other customers, and provide valuable feedback.
Lecture Enhancer: Provide examples of how different businesses reward their frequent customers.
Lecture Enhancer: From a customer ’s viewpoint, what are some upsides and downsides to CRM?

29. Customer Relationships
Tools for Nurturing
Customer Relationships
Frequency marketing: A marketing initiative that reward frequent purchases with cash, rebates, merchandise, or other premiums (TGI Fridays reward program)
Affinity programs: A marketing effort sponsored by an organization that targets people who share common interests and activities
Comarketing: A cooperative arrangement where two or more businesses jointly market each others’ products
Cobranding: A cooperative arrangement where two or more businesses team up to closely link their names on a single product
The 80/20 rule denotes that some customers provide more value than others (20 percent of a firm ’s customers account for 80 percent of its sales and profits). Frequency marketing initiatives offer more personalization and customization than in the past. Airlines, hotel groups, restaurants, and many retailers, including grocery stores, use
frequency programs. Affinity programs are common in the credit card industry. Comarketing and cobranding help make the marketing sparks fly, nurturing complimentary relationships. For example, Nike and Apple have marketed the Nike 1 iPod Sport kit. Overall, these tools help firms strengthen the relationship they have with their customers.
Click on TGIFriday’s link for an example of a rewards program..

30. One-to-One Marketing
Customizing products and marketing and rapidly delivering goods.
Customer relationship management (CRM) software helps companies gather, sort, and interpret data about specific customers.
One-to-one marketing allows companies to employ mass customization to meet customer needs. This strategy is another form of relationship marketing that depends on technology. Customer relationship management uses technology to efficiently manage one-to-one relationships.
Lecture Enhancer: From a customer ’s viewpoint, what are some upsides and downsides to CRM?