Chapter Objectives What is marketing? Understanding the market place & customer needs. Designing a customer driven marketing strategy. Prepare a marketing plan & program building customer relationships. Capturing value from customers. The new marketing landscape. So, what is marketing pulling it all together.
What is Marketing? Marketing is the process by which companies create value for customers & build strong customer relationships in order to capture value from customers in return. Marketing is all about” satisfying customer needs”
Goal of Marketing: To attract new customers by promising superior value. To keep & grow current customers by delivering satisfaction
A simple model of the marketing process Create value for customers & Capture value from customers build customer relationships in return Construct an Capture value integrated Build profitable fromUnderstand the Design a customer marketing relationships & customers tomarketplace & driven marketing program that create customer create profitscustomer needs & strategy delivers delight & customerwants superior value equity.
Core definitions Needs: Needs are the basic human requirements e.g food, water, air, shelter. Wants: Are the form human needs take as shaped by culture and individual responsibility. Demands: Human wants that are backed by buying power. Market offering: Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Eg, banks, airlines.
Marketing Myopia: The mistake of paying more attention to the specific products a company offers than to the benefits & experiences produced by these products. Exchange: Process of obtaining a desired product from someone by offering something in return. Market: The set of all actual & potential buyers of a product or service.
Marketing Management: The art & science of choosing target markets & building profitable relationships with them. Value Proposition: A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.
Winning Marketing Strategy What customers will we serve? (what’s our target market)- Divide the market into customer segments.- Select which segments will it go after. How can we serve these customers best? (what’s our value proposition)- Differentiating & positioning the product in minds of consumers.
Five Organizational Concepts1. Production Concept2. Product Concept3. Selling Concept4. Marketing Concept5. Societal Marketing Concept
Production Concept The idea that consumers will favor products that are available & highly affordable & that the organization should therefore focus on improving production & distribution efficiency.Eg: Lenovo dominates the highly competitive, price sensitive Chinese PC market through low labor costs, high production efficiency & mass distribution. Can produce Marketing Myopia
Product Concept The idea that consumers will favor products that offer the most quality, performance, & features thereby devoting a company’s energy to making continuous product improvements. Make & sell concept Focus on making superior products No customer input Less competitor product examination. “ Marketing Myopia”
Selling Concept The idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling & promotion effort. Practiced most aggressively with unsought goods eg, insurance, encyclopedias. Focuses on creating sales-transactions rather than long term profitable relationships. “Political Relationships”
Marketing Concept The marketing management philosophy that achieving organizational goals depends on knowing the needs & wants of target markets & delivering the desired satisfactions better than competitors. Sense & respond philosophy. Finding right products for customers Customer-driving marketing – understanding customer needs even better than the customers themselves.
Contrast between Sales Concept & Marketing ConceptStarting Point Focus Means Ends Factory Products Selling &Promoting Profits through sales volume a. THE SELLING CONCEPT Target Customer Integrated Profits through Market Needs Marketing customer satisfaction b. THE MARKETING CONCEPT
Societal Marketing Concept Holds that marketing strategy should deliver value to customers in a way that maintains or improves both consumers & the societies well- being. Society (Human Welfare) Societal marketing concept Consumers Company (Want Satisfaction) (Profits)
Customer Relationship Management CRM is the process of building & maintaining profitable customer relationships by delivering superior customer value & satisfaction. Customer Perceived Value: The customers evaluation of the difference between all the benefits & all the costs of a market offering relative to those of competing products.
Customer Satisfaction depends on a product’s perceived performance relative to a buyer’s expectations. Performance = ExpectationCustomer Satisfaction= Customer Loyalty= Better Performance Customer delight- promising only what a company can deliver, & then delivering more than promised. Eg. Lexus
Changing Nature of CustomerRelationships Relating with More Carefully selected Customers: - Selective Relationship Management Weeding out losing customers & targeting & pampering winning ones Relating for the Long term: Using CRM to retain current customers & building profitable long-term relationships with them. Relating Directly: Using direct marketing tools such as telephone, mail order catalogs & kiosks. Eg Dell & Amazon.
Creating Customer Loyalty & Retention“ losing customers does not mean losing a single sale but infact losing the entire stream of purchases that the customer would make over a lifetime”. Customer lifetime value: The value of the entire stream of purchases that a customer would make over a lifetime of patronage.
Customer Equity Companies should not just acquire customers, but keep & grow them as well. The ultimate aim of customer relationship management is to produce high customer equity. Customer Equity is the combined discounted customer lifetime values of all the company’s current & potential customers. It is a better measure of a firms performance than current sales or market share.More Loyal firm’s = Higher firm’sProfitable customers Customer Equity
Building Right relationships with Right customers Which customers should the company acquire & retain? The company can classify customers according to their potential profitability & projected loyalty manage its relationships with them accordingly.
Customer Relationship Groups Strangers …. Low profitability/ Less Loyal. Butterflies …. Profitable/ not Loyal True Friends …. Profitable/ Loyal Barnacles …. Not Profitable/ Highly Loyal Different types of customers require different relationship strategies, therefore goal is to : “Build right relationships with the right customers”
Customer Relationship Groups Butterflies True FriendsHigh Good fit between Good fit between company’s offerings & company’s offerings &Profitabilit customer needs; customer needs;y High profit potential Highest profit potential Strangers BarnaclesLow Little fit between Limited fit betweenProfitabilit company’s offerings & company’s offerings &y customer needs; customer needs; Lowest profit Low profit potential potential Short- term customers Long-term customers Projected Loyalty