Marketing Managing Profitable Customer Relationships Chapter 1 Objectives

Marketing: Managing Profitable Customer Relationships Chapter 1

Objectives • Be able to define marketing and discuss its core concepts. • Be able to define marketing management and compare the five marketing management orientations. 1

Objectives • Understand customer relationship management and strategies. • Realize the major challenges facing marketers in the new “connected” millennium. 2

1. Introduction • a. Today’s successful companies at all levels have one thing in common. • • 1). All successful companies are: a). Strongly customer focused. • b). Heavily committed to marketing. 3

• b- To be successful an organization motivates everyone in the organization to produce superior value for their customers, leading to high levels of customer satisfaction. 4

What is Marketing? • Marketing is managing profitable customer relationships § Attracting new customers § Retaining and growing current customers • “Marketing” is NOT synonymous with “sales” or “advertising” 5

2. What is Marketing? • a. Creating customer value and satisfaction are at the very heart of modern marketing thinking and practice 6

2. What is Marketing? • b. A very simple definition of marketing is managing profitable customer relationships. 7

2. What is Marketing? • 1). The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering • satisfaction. 8

• 2). Sound marketing is critical to the success of every organization. 9

• c. You already know a lot about marketing—it’s all around you. 10

Marketing Defined • d. Many people think of marketing only as selling and advertising. • 1). Marketing is no longer “telling and selling. ” • 2). Today, marketing’s new sense is concerned with satisfying customer needs. 11

What is Marketing? • Kotler’s social definition: “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. ” 12

Needs, Wants, and Demands • f. Human needs are the most basic concept underlying marketing. • -a humanneed is a state of felt deprivation 13

1). Humans have many complex needs. • a). Basic, physical needs for food, clothing, warmth, and safety. • b). Social needs for belonging and affection. • c). Individual needs for knowledge and self-expression. 14

• 2). These needs are part of the basic human makeup. 15

• g. Another concept in marketing is human wants. A humanwant is the form that a human need takes as shaped by culture and individual personality. • h. Demands are human wants that are backed by buying power. 16

• 1). Consumers view products as bundles of benefits and choose products that give them the best bundle for their money 17

• i. Outstanding marketing companies go to great lengths to learn about and understand their customer’s needs, wants, and demands. 18

What is Marketing? Many Things Can Be Marketed! • Goods • Services • Places • Properties • Experiences • Events • Organizations • Information • Persons • Ideas 19

Marketing Offers—Products, Services, and Experiences • j. Companies address needs by putting forth a value proposition, a set of benefits that they promise to consumers to satisfy their needs. 20

• 1). The value proposition is fulfilled through a marketing offer—some combination of products, services, information, or experiences offered to a market to satisfy a need or want. 21

• 2). The concept of product is not limited to physical objects and can include experiences, persons, places, organizations, information, and ideas. 22

• 3). Be careful of paying attention to the product and not the benefit being satisfied. • 4). “Marketing myopia” is caused by shortsightedness or losing sight of underlying customer needs by only focusing on existing wants 23

• 5). Smart marketers create brand meaning and brand experiences for consumers. 24

What is Marketing? Core Marketing Concepts • Needs, wants, and • Value and demands satisfaction • Marketing offers: • Exchange, including transactions and products, services relationships and experiences • Markets 25

Value and Satisfaction • k. Customervalue is the difference between the values that the customer gains from owning and using a product and the costs of obtaining the product. Customers form expectations about the value of various marketing offers and buy accordingly. 26

• l. Customersatisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations. Customer satisfaction is a key influence on future buying behavior 27

• 1). Marketers must be careful to set the right level of expectations. • 2). Customer value and customer satisfaction are key building blocks for developing and managing customer relationships. 28

Exchanges, Transactions, and Relationships • m. Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering something in return. 29

• n. Whereas exchange is a core concept of marketing, a transaction (a trade of values between two parties) is marketing’s unit of measurement. Most involve money, a response, and action. 30

• o. Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences involving a product, service, idea, or other object. 31

Markets • p. The concepts of exchange and relationships lead to the concept of a market is the set of actual and potential buyers of a product. 32

• 1). Originally a “market” was a place where buyers and sellers gathered to exchange goods (such as a village square). • 2). Economists use the term to designate a collection of buyers and sellers who transact in a particular product class (as in the grain or housing market). 33

• 3). Marketers see buyers as constituting a market and sellers constituting an industry. • 4). Marketers are keenly interested in markets 34

Marketing • q. The concept of markets brings one full circle to the concept of marketing. 35

• 1). Sellers must search for buyers, identify their needs, design good products and services, set prices for them, promote them, and store and deliver them. • 2). A modern marketing system includes all of the elements necessary to bring buyers and sellers together. This might include such activities as product development, research, communication, distribution, pricing, and service. 36

• 3). Each of the major actors in a marketing system adds value for the next level of the system. There is often critical interdependency among network members. 37

Marketing Management • Marketing managementis “the art and science of choosing target markets and building profitable relationships with them. ” § Creating, delivering and communicating superior customer value is key. 38

• 1). Marketing management involves managing demand, which in turn involves managing customer relationships 39

Marketing Management • Customer Management: § Marketers select customers that can be served well and profitably. • Demand Management: § Marketers must deal with different demand states ranging from no demand to too much demand. 40

Customer and Demand Management • b. Marketing management is concerned not only with finding and increasing demand, but also with changing or even reducing it. 41

• 1). Demarketing’s aim is to reduce demand temporarily or permanently (move traffic away from a popular tourist attraction during peak demand times). • 2). In reality, marketinganagement is customer management and demand management 42

Marketing Management Orientations • Production concept • Product concept • Selling concept • Marketing concept • Societal marketing concept 43

4. Marketing Management Orientations • a. There are five alternative concepts under which organizations conduct their marketing activities: the production, product, selling, marketing, and societal marketing concepts. 44

The Production Concept • b. Theproduction concept holds that consumers will favor products that are available and highly affordable and that management should, therefore, focus on improving production and distribution efficiency. This is one of the oldest philosophies that guides sellers 45

• c. The production concept is useful when: • 1). Demand for a product exceeds the supply. • 2). The product’s cost is too high and improved productivity is needed to bring it down. 46

• d. The risk with this concept is in focusing too narrowly on company operations. Do not ignore the desires of the market. This concept can lead to “marketing myopia. ” 47

The Product Concept • e. The product concept states that consumers will favor products that offer the most quality, performance, and features, and that the organization should, therefore devote its energy to making continuous product improvements. 48

• 1). Some manufacturers mistakenly believe that if they “build a better mousetrap, ”consumerswill beat a path to their door just for their product. • 2). The product concept can also lead to “marketing myopia, ” the failure to see the challenges being presented by other products. 49

The Selling Concept • f. Many organizations follow the selling concept. Theselling concept is the idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large-scale selling and promotion effort. 50

• 1). This concept is typically practiced with unsought goods (those that buyers do not normally think of buying). • 2). To be successful with this concept, the organization must be good at tracking down the interested buyer and selling them on the product benefits. 51

• 3). Industries that use this concept usually have overcapacity. Their aim is to sell what they make rather than make what will sell in the market • 4). There are not only high risks with this approach but low satisfaction by customers. 52

The Marketing Concept • g. Themarketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. 53

• 1). Under the marketing concept, customer focus and value are paths to sales and profits 54

• h. The marketing and selling concepts are often confused. The primary differences are: • 1). The selling concept takes an “insideout” perspective (focuses on existing products and uses heavy promotion and selling efforts). • 2). The marketing concept takes an “outside-in” perspective (focuses on customer needs, values, and satisfactions). 55

• i. Many companies claim to adopt the marketing concept but really do not unless they commit to market-focused and customerdriven philosophies. • 1). Customer-driven companies research current customers to learn about their desires, gather new product and service ideas, and test proposed product improvements 56

• 2). Such customer-driven marketing usually works well when there exists a clear need and when customers know what they want. • 3). When customers do not know what they want, marketers can try customer- driving marketing—understanding customer needs even better than customers themselves do, and creating products and services that will meet existing and latent needs now and in the future. 57

The Societal Marketing Concept • j. The societal marketing concept holds that the organization should determine the needs, wants, and interests of target markets. It should then deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumer’s and the society’s well-being. 58

• 1). The societal marketing concept is the newest of the marketing philosophies. • 2). It questions whether the pure marketing concept is adequate given the wide variety of societal problems and ills. • 3). According to the societal marketing concept, the pure marketing concept overlooks possible conflicts between short-run consumer wants and long- run consumer welfare. 59

• 4). The societal concept calls upon marketers to balance three considerations in setting their marketing policies: a). Company profits. b). Customer wants. c). Society’s interests. 60

• 5). It has become good business to consider and think of society’s interests when the organization makes marketing decisions. 61

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CRM • CRM – Customer relationship management. . . “is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. ” 63

CRM • It costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied. • Marketers must be concerned with the lifetime value of the customer. 64

CRM Key Concepts • Attracting, retaining and growing customers • Building customer relationships and customer equity • Customer value/satisfaction § Perceptions are key § Meeting/exceeding expectations creates satisfaction • Loyalty and retention § Benefits of loyalty § Loyalty increases as satisfaction levels increase § Delighting consumers should be the goal • Growing share of customer § Cross-selling 65

CRM Key Concepts • Attracting, retaining and growing customers • Building customer relationships and customer equity • Customer equity § The total combined customer lifetime values of all customers. § Measures a firm’s performance, but in a manner that looks to the future. 66

CRM Key Concepts • Attracting, retaining and growing customers • Building customer relationships and customer equity • Customer relationship levels and tools § Target market typically dictates type of relationship v Basic relationships v Full relationships § Customer loyalty and retention programs v Adding financial benefits v Adding social benefits v Adding structural ties 67

Marketing Challenges • Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. • Major marketing developments can be grouped under theme of Connecting. 68

Marketing Challenges Connecting • Via technology • With customers • With marketing partners • With the world • Advances in computers, telecommunications, videoconferencing, etc. are major forces. § Databases allow for customization of products, messages and analysis of needs. • The Internet § Facilitates anytime, anywhere connections § Facilitates CRM § Creates marketspaces 69

Marketing Challenges Connecting • Via technology • With customers • With marketing partners • With the world • Selective relationship management is key. § Customer profitability analysis separates winners from losers. • Growing “share of customer” § Cross-selling and upselling are helpful. • Direct sales to buyers are growing. 70

Marketing Challenges Connecting • Via technology • With customers • With marketing partners • With the world • Partner relationship management involves: § Connecting inside the company § Connecting with outside partners v Supply chain management v Strategic alliances 71

Marketing Challenges Connecting • Via technology • With customers • With marketing partners • With the world • Globalization § Competition § New opportunities • Greater concern for environmental and social responsibility • Increased marketing by nonprofit and publicsector entities § Social marketing campaigns 72