Marketing:Marketing:

Managing Profitable Managing Profitable Customer RelationshipsCustomer Relationships

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ROAD MAP: Previewing the Concepts

• Define marketing and outline the steps in the Define marketing and outline the steps in the marketing process.marketing process.

• Explain the importance of understanding Explain the importance of understanding customers and the marketplace, and identify the customers and the marketplace, and identify the five core marketplace concepts.five core marketplace concepts.

• Identify the key elements of a customer-driven Identify the key elements of a customer-driven marketing strategy and discuss the marketing marketing strategy and discuss the marketing management orientations that guide marketing management orientations that guide marketing strategy.strategy.

• Discuss customer relationship management and Discuss customer relationship management and strategies for building lasting customer strategies for building lasting customer relationships.relationships.

• Describe the major trends and forces that are Describe the major trends and forces that are changing the marketing landscape in this new age changing the marketing landscape in this new age of relationships.of relationships.

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What Is Marketing?

• Simple Definition: Marketing is Simple Definition: Marketing is managing profitable customer managing profitable customer relationships.relationships.

Goals: Goals: 1.1. Attract new customers by Attract new customers by

promising superior value. promising superior value. 2.2. Keep and grow current Keep and grow current

customers by delivering customers by delivering satisfaction.satisfaction.

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Marketing Old vs. New

Old view of marketing:Old view of marketing:

Making a sale Making a sale ---- “Telling and Selling” “Telling and Selling”

New view of marketing:New view of marketing:

Satisfying customer needsSatisfying customer needs

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Marketing Defined

A social and managerial A social and managerial process by which process by which

individuals and groups individuals and groups obtain what they need and obtain what they need and want through creating and want through creating and exchanging products and exchanging products and

value with others.value with others.

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A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

What are Consumers’ Needs, Wants, and

Demands?

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This Is a Need

NeedsNeeds - state of - state of felt deprivation felt deprivation including including physical, social, physical, social, and individual and individual needs.needs.

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Types of Needs

• Physical:Physical:– Food, clothing, shelter, safetyFood, clothing, shelter, safety

• Social:Social:– Belonging, affectionBelonging, affection

• Individual:Individual:– Learning, knowledge, self-expressionLearning, knowledge, self-expression

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This Is a Want

WantsWants - form - form that a human that a human need takes, as need takes, as shaped by shaped by culture and culture and individual individual personality.personality.

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This Is Demand

“Demand”

Wants Buying Power

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Need / Want Fulfillment

• Needs and Wants Needs and Wants Fulfilled through a Fulfilled through a Marketing Offer Marketing Offer ::– Some combination of Some combination of

products, services, products, services, information, or information, or experiences offered experiences offered to a market to satisfy to a market to satisfy a need or want.a need or want.

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ProductsAnything that can be Offered to a Market to Satisfy a Need or Want

ProductsAnything that can be Offered to a Market to Satisfy a Need or Want

PersonsPersons PlacesPlaces OrganizationsOrganizations

IdeasIdeasInformationInformation

What Satisfies Consumers’ Needs and Wants?

ServicesActivity or Benefit Offered for Sale That is Essentially

Intangible and Does Not Result in the Ownership of Anything

ServicesActivity or Benefit Offered for Sale That is Essentially

Intangible and Does Not Result in the Ownership of Anything

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Product as an Idea

Products do not have to be physical objects. Here the “product” is an idea—protecting animals.

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Marketing Myopia

• Sellers pay more Sellers pay more attention to the attention to the specific products they specific products they offer than to the offer than to the benefits and benefits and experiences produced experiences produced by the products.by the products.

• They focus on the They focus on the “wants” and lose sight “wants” and lose sight of the “needs.”of the “needs.”

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Value and Satisfaction

Expectation

Performance810

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

Expectation

Performance

108

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Exchange vs. Transaction

• Exchange:Exchange:– Act of obtaining a desired object from Act of obtaining a desired object from

someone by offering something in someone by offering something in return.return.

• Transaction:Transaction:– A trade of values between two parties.A trade of values between two parties.– One party gives X to another party and One party gives X to another party and

gets Y in return. Can include cash, gets Y in return. Can include cash, credit, check, or barter.credit, check, or barter.

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What is a Market?

• The set of actual The set of actual and potential and potential buyers of a product.buyers of a product.

• These people share These people share a need or want that a need or want that can be satisfied can be satisfied through exchange through exchange relationships.relationships.

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Elements of a Modern Marketing System

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Marketing Management

• The art and science of choosing target The art and science of choosing target markets and building profitable markets and building profitable relationships with them.relationships with them.

Questions to ask:Questions to ask:

1.1. What customers will we serve?What customers will we serve?What is our target market?What is our target market?

2.2. How can we best serve these How can we best serve these customers?customers?

What is our value proposition?What is our value proposition?

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Segmentation and Target Marketing

Market Segmentation:

Divide the market into segments of customers

Target Marketing:

Select the segment to cultivate

#1 #2

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•Pair up with another student and Pair up with another student and share your thoughts with one share your thoughts with one another on the following items:another on the following items:– To what market segments do you think To what market segments do you think

you belong?you belong?– What personal traits, variables, or What personal traits, variables, or

factors characterize you as belonging to factors characterize you as belonging to those segments?those segments?

Interactive Student Assignment

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Marketing Management

Finding and increasing Finding and increasing demand, also changing or demand, also changing or reducing demand, such as reducing demand, such as in demarketing.in demarketing.

DemandDemandManagementManagement

Temporarily or Temporarily or permanently reducing the permanently reducing the number of customers or number of customers or shifting their demand.shifting their demand.

DemarketingDemarketing

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Value Proposition

• The set of benefits The set of benefits or values a or values a company promises company promises to deliver to to deliver to consumers to consumers to satisfy their needs.satisfy their needs. It cleans and freshens

like sunshine!

www.gainlaundry.com

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Marketing Management Philosophies

Production ConceptProduction Concept

Product ConceptProduct Concept

Selling ConceptSelling Concept

Marketing ConceptMarketing Concept

Societal Marketing ConceptSocietal Marketing Concept

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Marketing and Sales Concepts Contrasted

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Customer-Driven Marketing

How many of us would have thought to ask for a “wearable” PC? Marketers must often understand customer needs even better than customers themselves do.

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Societal Marketing Concept

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•Pair up with another student and Pair up with another student and share your thoughts with one share your thoughts with one another on the following topic:another on the following topic:– Based on your personal experience, Based on your personal experience,

discuss with your partner ways you discuss with your partner ways you have seen organizations implement the have seen organizations implement the societal marketing concept.societal marketing concept.

Interactive Student Assignment

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The Marketing Mix

CustomerCustomerNeedsNeeds

ProductProduct PricePrice

PromotionPromotion DistributionDistribution

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Customer Relationship Management

• The process of The process of building and building and maintaining maintaining profitable profitable customer customer relationships by relationships by delivering delivering superior superior customer value customer value and satisfaction.and satisfaction.

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Customer Perceived Value

• Customer’s Customer’s evaluation of the evaluation of the difference between difference between all the benefits and all the benefits and all the costs of a all the costs of a marketing offer marketing offer relative to those of relative to those of competing offers.competing offers.

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Customer Perceived Value

Is FedEx’s service worth the higher price? FedEx thinks so. It promises reliability, speed, and peace of mind. FedEx ads say “Need to get it there or else? Don’t worry. There’s a FedEx for that.”

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Customer Satisfaction

• Dependent on the Dependent on the product’s product’s perceived perceived performance performance relative to a relative to a buyer’s buyer’s expectations.expectations.

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Customer Relationship Levels

Basic Relationship

Full Partnershi

p

Continuum

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Loyalty and Retention

Financial Benefits

Social Benefits

Structural Ties

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Partner Relationship Marketing

Partners Inside the Firm

1. All employees customer focused

2. Teams coordinate efforts toward customers

Partners Outside the Firm

1. Supply chain management

2. Strategic alliances

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• Customer Lifetime ValueCustomer Lifetime Value– The entire stream of The entire stream of

purchases that the customer purchases that the customer would make over a lifetime of would make over a lifetime of patronage.patronage.

• Share of CustomerShare of Customer– The share a company The share a company

gets of the customers gets of the customers purchasing in their purchasing in their product categories.product categories.

Customer Loyalty & Retention

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Customer Lifetime Value

To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.” Rule #1—the customer is always right. Rule #2—if the customer is ever wrong, reread Rule #1.

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Customer Equity

•Customer equity Customer equity is the total is the total combined combined customer customer lifetime values lifetime values of all the of all the company’s company’s customers.customers.

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Customer Relationship Groups

Projected loyalty

High

Profitability

Low

Long-term customers

Short-term customers

Good fit between company’s offerings and customer’s needs; high

profit potential

Limited fit between company’s offerings and customer’s needs; low

profit potential

Little fit between company’s offerings and customer’s

needs; lowest profit potential

Good fit between company’s offerings and

customer’s needs; highest profit potential

Strangers

Butterflies True Friends

Barnacles

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The Internet

• The The InternetInternet has been hailed as the has been hailed as the technology behind a New Economy.technology behind a New Economy.

• Marketing applications include:Marketing applications include:– ““Click-and-mortar” companiesClick-and-mortar” companies– ““Click-only” companiesClick-only” companies– Business-to-business e-commerceBusiness-to-business e-commerce

• Business-to-business transactions Business-to-business transactions online are expected to reach $4.3 online are expected to reach $4.3 trillion in 2005.trillion in 2005.

• By 2005, 500,000 companies will use By 2005, 500,000 companies will use the Internet to do business.the Internet to do business.

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The New Digital Age

The recent technology boom has had a major impact on the ways marketers connect with and bring value to their customers.

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New Marketing Landscape

Rapid Globalization

Ethics & SocialResponsibility

New World of MarketingRelationships

Not-for-ProfitMarketing

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Rest Stop: Reviewing the Concepts

1.1. Define marketing and outline the steps in the Define marketing and outline the steps in the marketing process.marketing process.

2.2. Explain the importance of understanding customers Explain the importance of understanding customers and the marketplace, and identify the five core and the marketplace, and identify the five core marketplace concepts.marketplace concepts.

3.3. Identify the key elements of a customer-driven Identify the key elements of a customer-driven marketing strategy and discuss marketing marketing strategy and discuss marketing management orientations that guide marketing management orientations that guide marketing strategy.strategy.

4.4. Discuss customer relationship management and Discuss customer relationship management and strategies for building lasting customer strategies for building lasting customer relationships.relationships.

5.5. Describe the major trends and forces that are Describe the major trends and forces that are changing the marketing landscape in this new age changing the marketing landscape in this new age of relationships.of relationships.