The document discusses key concepts in marketing including: 1. Marketing is managing profitable customer relationships by attracting new customers, retaining current customers, and growing current customers. It is not the same as sales or advertising. 2. The marketing process involves understanding customer needs, designing a customer-driven strategy, capturing value from customers to create profits, and constructing a marketing program to deliver superior value. 3. Key concepts in understanding customers include needs, wants, demands, marketing offers, customer value, satisfaction, and markets. Marketing aims to satisfy customer needs through value and exchange.

1. Marketing: Managing Profitable Customer Relationships Lecture # 1 26-09-2010

2. 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”

3. Marketing Defined Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return

4. The Marketing Process

5. The Marketing Process Build profitable relationships and Create customer delight Design a customer driven marketing strategy Capture value from customers to create profits and customer quality Construct a marketing program that delivers superior value Understand the market place and Customer needs and wants

6. 1. Understanding the Marketplace and Consumer Needs

7. Core Customer and Marketplace Concepts Needs, Wants, and Demands Marketing Offers Value and Satisfaction Exchange, Transactions, and Relationships Markets

8. Needs, Wants, and Demands Needs A state of felt deprivation. The basic human requirements Wants The form taken by a human needs as shaped by culture and individual personality. Wants are described in terms of objects that will satisfy needs Demands Human wants that are backed by buying power

9. Needs, Wants, and Demands People need food, air, water, clothing, and shelter to survive. People also have strong needs for creation, education, and entertainment The above needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want a hamburger, French fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by one's society and are described in terms of objects that will satisfy needs Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one

10. Marketing Offers Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Marketing offers also include persons, places, organizations, ideas Marketing Myopia? Focus only on existing wants and lose sight of underlying customer needs. Forgetting the fact that product is only the tool to solve consumer problem

11. Customer Value and Satisfaction Key building blocks for developing and managing customer relationships Customer Value is the difference between the values the customer gains from owning and using the product and the costs of obtaining the product Customer Satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectation

12. Markets “ The set of all actual and potential buyers of a product or service.” Types of Market Pure competition Many buyers and many seller trading in a uniform commodity e.g. wheat, vegetables etc Monopolistic competition Many buyers and sellers who trade over a range of prices Oligopolistic competition Few sellers who are highly sensitive to each other pricing and marketing strategies Pure Monopoly Market consist of one seller

13. Exchange, Transactions, and Relationships Exchange The act of obtaining a desired object from someone by offering something in return. Transactions A trade of values between two parties

14. 2. Designing a Customer Driven Marketing Strategy

15. Marketing Management Marketing management is “the art and science of choosing target markets and building profitable relationships with them.” Creating, delivering and communicating superior customer value is key. Demarketing Marketing to reduce demand temporarily or permanently; the aim is not to destroy the demand but only to reduce or shift it.

16. What customers will we serve? (Target Market) How can we serve these customers best? (Value proposition) Value Proposition The set of benefits or values it promises to deliver to consumers to satisfy their needs. Answers the customer’s question “Why should I buy your brand rather than a competitor’s?” e.g. Nestle Pure drinking water, BlackBerry connectivity on the go, K&N’s healthy and safe chicken etc

17. Marketing Management Orientations Product Concept The product philosophy holds that the organization knows its product better than anyone or any organization. The company knows what will work in designing and producing the product and what will not work. This confidence in their ability is not a radical concept, but the confidence leads to the consumer being overlooked. Dominant era: Prior to the Industrial Revolution and continued to the 1920s

18. Marketing Management Orientations Production Concept Demand for a product is greater than supply. To increase profit, focus on production efficiencies knowing all output can be sold. Also useful concept when increasing production raises economies of scale etc. to reduce price. Henry Ford, "Doesn't matter what color car you want, as long as it is black."...A typical quote during the production era. Dominant era: From mid C19th to early C20th, industrial revolution etc.

19. Marketing Management Orientations Selling Concept Demand for a product is equal to supply. - Emphasis is needed to sell the product to increase profits. Focus on advertising . - Useful for unsought goods , i.e., encyclopedias, funeral plots. Political candidates, selling important, not post consumer satisfaction. - Dominant era: 1920's to Mid 1930's WWII to early 1950's

20. Marketing Management Orientations Marketing Concept Supply for a product is greater than demand, creating intense competition among suppliers. - Company first determines what the consumer wants, then produces what the consumer wants, then sells the consumer what it wants. - Dominant era: 1930's to WWII 1950's to present.

21. Marketing Concept LL Bean 1912, founded on the marketing concept, in his first circular: "I do not consider a sale complete until goods are worn out and the customer still satisfied. We will thank anyone to return goods that are not perfectly satisfactory...Above all things we wish to avoid having a dissatisfied customer."

22. Marketing Concept To illustrate the marketing era/concept Peter Drucker, in 1954 said: “ if we want to know what business is we must first start with its purpose...There is only one valid definition of business purpose: to create a customer. What business thinks it produces is not of first importance-especially not to the future of the business or to its success. What the customer thinks he/she is buying, what he/she considers "value" is decisive-it determines what a business is, what it produces, and whether it will prosper." -Peter Drucker, The Practice of Management, 1954, P.37

23. Marketing Concept John B McKitterick, President of General Electric, 1957, addressing the AMA said: “ It is customer oriented, integrated, profit oriented philosophy of business." “ The Customer is King”

24. Marketing Management Orientations The Societal marketing concept Focus on other stakeholders, as well as the business and its customers. Need to balance 3 items Company profits Customer wants Society's interests The difference between short term consumer wants and long term consumer welfare.

25. Marketing Management Orientations What era are we in now? We are still essentially in the marketing era, since that is the dominant concept, but increasing pressure is being put on to companies to adopt the societal concept. Importance of the marketing concept According to the Customer Service Institute, it costs as much as five times as much to acquire a new customer than it does to service an existing one. Customers tell twice as many people about a bad experience over a good one. According to the American Marketing Association (AMA), for an average company, 65% of its business comes from its presently satisfied customers.

26. Preparing a Marketing Plan and Program

28. Building Customer Relationships

29. CRM CRM - Customer Relationship Management “ is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction ”

30. 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.

31. Capturing Value from Customers

32. Key Concepts Attracting, retaining and growing customers 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 Creating Customer Loyalty and Retention

33. CRM Key Concepts 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.

34. CRM Key Concepts Building customer relationships and customer equity Customer relationship levels and tools Target market typically dictates type of relationship Basic relationships Full relationships Customer loyalty and retention programs Adding financial benefits Adding social benefits

35. The New Marketing Landscape Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. Major marketing developments can be grouped under the theme of Connecting

36. Marketing Challenges Connecting Via technology With customers With marketing partners With the world Advances in computers, telecommunications, video-conferencing, etc. are major forces. Databases allow for customization of products, messages and analysis of needs. The Internet Facilitates anytime, anywhere connections Facilitates CRM Creates market spaces

37. 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 Supply chain management Strategic alliances

38. 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 public-sector entities Social marketing campaigns