What is marketing

What is Marketing?

(Chapter 1)

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Objectives To define marketing and outline steps in

marketing process. To explain the importance of understanding

customers, and to identify the core marketplace concepts.

To identify key elements of a customer-driven marketing strategy and the marketing management orientations.

To discuss customer relationship management.

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Marketing: Managing profitable customer relationships What is Marketing? Understanding the Marketplace and

Customer Needs Designing a Customer-Driven

Marketing Strategy Preparing an Integrated Marketing

Plan and Program Building Customer relationships Capturing Value from Customers

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What is Marketing? Real Marketing around us Marketing definition Five steps in Marketing process

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Real Marketing around us Where is marketing? Shopping malls? Super markets? TV commercials? Magazines? Web pages? What is Marketing in your opinion? keywords? Selling? Advertising?

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Real Marketing around us Why and how to do Marketing? Successful companies know that if they take good care of their customers, market share and profits will follow. Wal-mart, the world’s largest retailer, “Always low prices, Always!” Disney theme parks, “make a dream come true today.” Dell makes it easy for customers to design their own “personal ”computers.

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Marketing defined Rethink of the keywords: Management? Customer? Relationships? Profit? Marketing is managing profitable customer relationships, or, the process by which companies create value for customers and build strong customer relationships in order to capture value from customer in return. selling and advetising are only the tip of marketing iceberg- a set of marketing tools that work together to satisfy customer needs and build customer relationships.

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The Marketing Process In the first four steps to understand customers, to

create customer value, and to build strong customer relationships. In the final step to capture value from customers in turn.

Understand theMarketplace andcustomer needsand wants

Design a Customer-driven Marketing strategy

Construct an integrated marketing program that delivers superior value

Build profitableRelationships and create customer delight

Creat value for customers and build customer relationships

Capture value fromcustomers to create profits andcustomer equity

Capture value from customers in return

FIGURE 1.1 A simple model of marketing process

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Marketing: Managing Profitable Customer Relationships What is Marketing? Understanding the Marketplace and




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Understanding the Marketplace and Customer Needs Customer Needs, Wants, and Demands Market Offerings (Products, Services, and Experinces) Customer Value and Satisfaction Exchange and Relationships Markets

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Customer Needs, Wants&Demands Needs: states of felt deprivation. Basic

physical needs for food, clothing, warmth and safety. Social needs for belonging and affection. Individual needs for knowledge and self-expression.

Wants: the form human needs take as shaped by culture and individual personality. Needs for food, American V.S. Chinese.

Demands: human wants backed by buying power.

Consumer research is conducted, why?

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Market Offerings Consumer’s needs and wants are fulfilled through a market offering. Market Offering: a certain combination of products, services, information, or experinces offered to satisfy a need or want. Market myopia: the mistake of paying more attention to the specific products a company offers than to the benefits and experinces produced by these products. Smart marketers look beyond the attributes of the products and services they sell, but create brand experinces for consumers. “Consumers want more than attributes and benefits, and even solutions. They want delightful shopping, usage, and service experiences they look forward to, time after time.”---A.G.Lafey, CEO of Procter&Gamble

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Customer Value and Satisfaction How do Customers choose among

market offerings? Expectations are formed about the value and satisfaction that various market offerings will deliver.

Marketers must be careful to set the right level of expectations.

Customer value and customer satisfaction are key building blocks for developing and managing relationships.

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Exchanges and Relationships Marketing occurs when people decide to satisfy

needs and wants through exchange relationships.

Exchange: the act of obtaining a desired object from someone by offering something in return.

Beyond simply attracting new customers and creating transactions, the goal of marketing is to retain customers and to maintain exchange relationships.

Marketers want to build strong relationships by consistently delivering superior customer value.

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Markets Market: the set of all actual and potential buyers of a product or service. Marketing means managing markets to bring about profitable customer relationships. Activities such as product development&research, communication, distribution, pricing and service are core marketing activities.

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All of the factors in the system are affected by major environment forces(demographic, economic, techlological, polictical/legal, social/cultural). The arrows represent relationships that must be developed and managed.

FIGURE 1.2 Elements of a modern marketing system

suppliers

Company(marketer) Competitors

Marketingintermediaries

Final users

Major environment forces

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Designing a Customer-Driven Marketing Strategy Two questions: Who(target market)?How(value proposition)? Selecting a customer to serve Choosing a value proposition Marketing management orientations

The production concept The product concept The selling concept The marketing concept The social marketing concept

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Selecting Customers to Serve Marketing management: the art and science of choosing target markets and building profitable relationships with them. Marketers must decide first who it will serve, by dividing the market into segments of customers(market segmentation) and selecting which segments it will go after(target marketing). Simply put, marketing management is customer management and demand management.

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Choosing a Value Proposition To decide how it will serve targeted customer-how it will differentiate and position itself in the marketplace. A company’s value propostition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. Value propostitions differentiate one brand from another, by answering the customer’s question, “why should I buy your brand rather than a competitor’s ?”

“it gives you wings!”

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Marketing Management Orientations(1/4) What philosophy should guild to design marketing strategies, for example, how to put the weight of interests of customers, the organization, and society? Five alternative concepts, the production, product, selling, marketing, and societal marketing.

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Marketing Management Orientations(2/4)

Production Concept: the concept that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency. Product Concept: the idea that consumers will favor products that offer the most quality, perfomance, and features and that continuous product improvements should be made. Selling Concept: the idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion.

The aim often is to sell what the company makes rather than making what the market wants.

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Marketing Management Orientations(3/4) Marketing concpet: the philosophy of the importance of knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.

Focus Means Ends

Older orientations

Products Production and selling

Profits through sales volume

Marketing concept

Customer needs

Integrated marketing

Profits though customer satisfaction

Table 1.1 Maketing orientations contrasted

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Marketing Management Orientations(4/4) Societal marketing concept: The principle that maketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and the society’s well-being.

Society(Human welfare)

Company(Profits)Consumers(Want Satisfaction)

Figure 1.4 Three Considerations underlying the societal marketing concept

The oil leak was first detected on June 4, 2011, but COPC and CNOOC remained silent until the spill was exposed to the public by the media late in July, 2011.

康菲石油中国有限公司

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Preparing an Integrated Marketing Plan and Program An integrated Marketing program starts to

deliver the intended value and build customer relationships by transforming the marketing strategy into action.

The marketing program consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement its marketing strategy.

The major tools are called the four Ps of marketing: product, price, place and promotion.

The firm must blend these mix tools into a comprehensive, integrated marketing program that communicates and delivers the intended value to chosen customers.

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Building Customer Relationships Customer Relationship Management The changing Nature of Customer

Relationships Partner Relationship Management

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Customer Relationship Management Relationship Building Block: Customer Value and Satisfaction. Customer Relationship Levels and Tools

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Relationship Building Blocks: Customer Value and Satisfaction

Customer perceived value: customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Value proposition: intended value at the company’s side; evaluation: subjective and personal; difference among; How we make a purchase decision; select brand with greatest CPV.

Customer satisfaction:the extent to which a product’s perceived performance matches a buyer’s expectations. an extent of match, between; highly satisfied and delighted; Higher levels of CS lead to greater customer loyalty,better company performance in turn.

CRM: process of building and maintaining profitable customer relationships by delivering superior customer value & satisfaction. “Superior”, two levels of meanings.

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Customer Relationship Levels and Tools Companies build appropriate cumstomer relationships at different levels, depending on the nature of the market.

low-margin customers, basic relationships; high-margin customers, full partnerships.

There are tools developed for gaining customer loyalty and retention, such as frequency marketing program, club marketing programs, etc.. Reward customers who buy frequently or in large amounts. Offer members special benefits and create member communities.

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Case: Bike Friday What did you learn from the story? What

does the story try to explain in the language of Marketing?

What is the nature of the target market? What kind of market offering does the company provide? How does it differentiate and position itself?

Why did the company decide to cultivate the “community”? How did the company cultivate its loyalty and brand?

Did the company benefit from its customer delight? How?

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Case: Bike Friday What does the story try to explain in

terms of Marketing? How to create customer delight and build

customer relationships. “brands need to be built for the long

haul”. “Customer evangelism strategy has been

crucial to the company’s success”.

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What is the nature of the target market? “40-something, well-heeled professionals

who travel extensively and cherish personalized service”.

What kind of market offering does the company provide? How does it differentiate and position itself? The unusual styling of the custom-fit, high-

end travel bikes; Bike Friday bikes fold in seconds, pack into

airline suitcase, and ride like a full-size performance bike.

Curiosity factor: a powerful way to reach new customers.

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Why did the company decide to cultivate the “community”? Why is it important to its success? Small company with small marketing budget; Creating relationships and community makes sense, given the nature of the company’s taget customer. “We get key customers excited to be involved”, and “They attract others and this create community”

How did the company cultivate its loyalty and brand? Bike clubs: 30 Clubs of America to generate referrals; free to anyone, regardless of brands; Newsletters & catalogs: pictures of happy owners biking all over the world; Web forums: “community” page welcomes new owners; send photos and share travel stories; e-mail discussion list creates interactions; Referral rewards program: prepaid postage cards; Bonus provided when a successful purchase happens.

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Did the company benefit from its customer delight? How? Customer delight creates a voluntary

customer sales force; 1/3 of its 10,000 customers and 29% of

the company’s sales came from the referral program;

“Our customers were our best advertisers-if we made them happy”!

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The changing nature of customer relationships(1/2) Relating with more carefully selected customers

Yesterday’s companies practiced mass marketing: selling in a standarlized way to any customer who comes along. Companies now are targeting fewer, more profitable customers: selective relationship management. Once identifying profitable customers, firms create attractive offers and special handling to capture these customers and earn their loyalty.

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The changing nature of customer relationships(2/2)

Relating for the long term Companies today face some new marketing

realities, changing demographics, more sophisticated competitors, and overcapacity in many industries.

On average, it costs 5 to 10 times to attract a new customer as to keep a current customer satisfied.

Firms are using CRM to retain current customers and build profitable, long-term relationships. The new view is that marketing is the science and art of finding, retaining, and growing profitable customers.

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Partner Relationship Management(1/2) PRM: Working closely with partners in other

company departments and outside the company to jointly bring greater value to customers.

Partners Inside the Company Rather than assigning only sales and

marketing people to customers, cross-functional customer teams are needed, and every employee must be customer focused.

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Partner Relationship Management(2/2) Marketing Partners Outside the Firm

Supply chain management works to strengthen the connections with partners along the supply chain from raw materials to components to final products. Companies may work with suppliers to improve quality and operation efficiency, and with distributors or retailers for service support.

Competitors work together for mutual benefit. From “if u can’t beat them, join them”, to “join them and you can’t be beat”.

Strategic alliances is a relationship between two or more parties to pursue a set of agreed goals or to meet a critical business need while remaining independent organizations.

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Capturing Value from Customers

The outcome of creating customer value: customer loyalty and retention, share of customer, and customer equity. Creating Customer Loyalty and Retention Growing Share of Customer Building Customer Equity

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Creating Customer Loyalty and Retention Even a slight drop from complete

satisfaction can create an enormous drop in loyalty, which result in losing a customer.

Customer lifetime value: the value of the entire stream of purchases that a customer would make over a lifetime of patronage. Assessing customer lifetime value makes sense that

working to retain and grow customers makes good economic sense.

The aim of CRM is to create not just customer satisfaction, but customer delight which results in customer loyalty and brings good company performance. How to keep customer coming back---Rule 1: The

customer is always right; Rule 2: If the customer is ever wrong, reread Rule 1!---Stew Leonard.

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Growing Share of Customer Share of customer: the portion of the customer’s purchasing that a company gets in its product categories.

Share of wallet, share of stomach, etc.. To increase the share of customers, firms can offer greater variety to current customers, or cross-sell and up-sell in order to market more products and services to existing customers.

Cross-sell: to provide existing customers the opportunity to purchase additional (complemental) items offered by the company. Up-sell: to induce the customer to purchase more expensive items, upgrades or other add-ons.

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Building Customer Equity Companies want not only to create

profitable customers, but to “own” them for life, and that comes to Customer Equity.

What is Customer Equity? CE: the total combined customer lifetime values

of all the company’s customers. The ultimate aim of CRM is to produce high

customer equity. Customer equity is a better measure of a firm’s

performance than current sales or market share.

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Building the right relationships with the right customers Different types of customer require different

relationship management strategies. The goal is to build right relationships with right customers.

Butterflies: Good fit between offerings and customer’s needs; high profit potential-Create profitable transactions and cease investing next round.

True friends: Good fit between company’s offerings and customer’s needs; highest profit potential-Continuous relationship investment

Strangers: Little fit between offerings and customer’s needs; lowest profit potential-No investment

Barnacles: Limited fit between offerings and customer’s needs; low profit potential-Problematic; Improve profitability or “fire”

Short-term customers long-term customersProjected loyalty

High

profitability

low

profitability

Potential profitability

Figure 1.5 Customer relationship groups

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What is Marketing?Pulling it all together Marketing is the process of building

profitable customer relationships by creating value for customers and capturing value in return.

The first 4 steps of the marketing process focus on creating value for customers. In the final step, the company reaps the rewards of its strong customer relationships by capturing value from customer.

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Understanding maprketplace and customer

needs and wants

Design a customer-driven

marketing strategy

Construct an integrated marketing program

that delivers supurior value

Build profitablerelationship

andcreate customer

delight

Research customers and

marketplace

Manage marketing information

and customer data

Select customers:

marketsegmentationand targeting

Decide on a value

proposition:differentiation and positioning

Product and service design-build strong

brands

Pricing-create

real value

Distribution-manage

demand andsupply chains

Promotion-communicate

the valuepropostition

Customerrelationship

management-build strongrelationshipswith chosencustomersPartner

relationshipmanagement-build strongrelationships

with marketingpartners

Capture value from customerto create profitsand customer

equity

Creat satisfiedloyal

customers

Capture customer

lifetime value

Increaseshare of

market andshare of customer

Create value for customer and build customer relationshipsCreate value for customer and build customer relationshipsCapture value Capture value from customer from customer in returnin return

Figure 1.5 An expanded model of the marketing

process

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The company first gains a full understanding of the marketplace by researching customer needs and managing marketing information. Design a customer-driven strategy by answering, “what consumers will we serve?”(market segmentation and targeting) and “how can we best serve targeted customer?”(differentiation and positioning) Construct an integreated marketing program-4Ps Build value-laden profitable relationships with target customers(CRM for customer satisfaction and delight). Reap the rewards of strong customer relationships by capturing value from customers, resulting in increased long-term customer equity for the firm.

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Objectives achieved? To define marketing and outline steps in

marketing process. To explain the importance of understanding

customers, and to identify the core marketplace concepts.

To identify key elements of a customer-driven marketing strategy and the marketing management orientations.

To discuss customer relationship management.

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Reviewing the Key Terms Customer equity, Customer lifetime value,

Customer perceived value, Customer relationship management, Customer satisfaction, Demands, Exchange

Market, Marketing, Marketing Concept, Marketing Management, Marketing myopia, Marketing offering, Needs,

Partner relationship management, Product Concept, Production concept, Selling concept, Share of customer, Social Marketing Concept, Wants

Date post:	14-Sep-2014
Category:	Marketing
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