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- Philip Kotler Authentic marketing is not the art of selling what you make but knowing what to make. It is the art of identifying and understanding customer needs and creating solutions that deliver satisfaction to the customers, profits to the producers and benefits for the stakeholders.
Chapter 1 Marketing: Managing Profitable Customer Relationship
Objectives • Defined marketing, and marketing process. • Examine five core customer and marketplace concepts. • Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations. • Discuss customer relationship management and creating value for and capturing value from customers • Describe the major trends and forces changing the marketing landscape
What is Marketing • The simplest definition of marketing is : “ managing profitable customer relationship” • The two main goals of marketing is: • Attract new customer by promising superior value • To keep and grow current customer by delivering satisfaction. The key is delivering your promise Wal-Mart “Always low price Always” AT&T “it’s within your reach” Dell “be direct”
Marketing Defined • Kotler’s definition: “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” • Marketing definition in the scope of business: The process by which companies create value for customers and build a strong customer relationship in order to capture value from customer in return. • In the sense of satisfying customer needs, • Marketers should understand consumer needs, develops products that provide superior value, and price, distributes, and promotes them effectively.
The Marketing Process Create value for the customer and build customer relationship Capture value from customer in return
Needs, Wants, and Demand • Needs • The state of deprivation • Example: Food • Wants • The form human needs take as shaped by culture and individual personality • Example: Want a big Mac • Demands • Human wants that are backed by buying power • To understand customer needs wants and demands marketers conduct consumer research and analyze customer data
Market offerings • Customers’ needs and wants are fulfilled through a market offering • Marketing offering are “Some combination of products, services, information, or experiences offered to a market to satisfy a need or want." • Marketing offers are not limited to physical products, it includes services, activities, or benefits offered for sale that are intangible and do not result in the owner ship of anything“ Example: banking, airline, hotel…”. • Market offers It also includes other entities, such as persons, place, organization, information, and ideas.
Market Offers • Marketing myopia “the mistake of paying more attention to the specific product a company offers then to the benefits and experiences produced by these products” (the drill) • Marketers shouldn’t focus only on existing wants and lose sight of underlying customer needs … … … … …... they should create brand meaning and brand experiences (Example: Coca-Cola, Nike) • The product is only a tool to solve a consumer problem.
Customer Value and Satisfaction • Customer form expectations about the value of various marketing offers and buy accordingly. • How do buyers form there expectations? • Past buying experience. • The opinions of friends. • market and competitor information and promises • Customer satisfaction depend on how well the product’s performance lives up to the customer’s expectations. Marketers must be careful to set the right level of expectation.
Exchanges and Relationship • The act of obtaining a desired object from someone by offering something in return • The marketer tries to bring about a response to some market offering. The response may be more then buying (example: political candidate wants votes, orchestra wants an audience, and a social action group wants idea acceptance) • One exchange is not the goal, relationships with several exchanges are the goal • Relationships are built through delivering value and satisfaction
Markets • The Market is: “ The set of actual and potential buyers of a product or service, who share a particular need or want.” • Marketers should work to: • understand the needs and wants of specific markets. • Select the market they can serve best. • Developing products and services to satisfy customers in this market.
Markets Markets: Marketers often use the term markets to cover various grouping of customers. • Need markets (the diet-seeking market) • Product markets (shoe market) • Demographic markets (the youth market) • Geographic markets (the French market) They view sellers as constituting the industry and the buyers as constituting the market
Marketing Means Managing Markets To Bring About Profitable Customer Relationship
Elements Of A Modern Marketing System • Marketing involves serving a market of final consumer in the face of competitors • Each party in the system adds value for the next level • All the arrows represent relationship that must be developed and managed, thus a company’s success at building profitable relationship depends not only on its own action but also on how well the entire system serves the needs of final consumer • All the actors in the system are affected by major environmental forces Suppliers Company (marketer) Marketing intermediaries Final users Competitors Major environmental forces
Designing a Customer-Driven Marketing Strategy • Marketing management “is the art and science of choosing target markets and building profitable relationships with them.” This definition must include answer to two questions • What customers will we serve? (segmentation and targeting) • How can we serve these customers best? (value proposition)
Select Customer to Serve • Marketers decide who they will serve by dividing the market into segments of customers. And select which segment they will go after (target marketing). • Market segmentation: “ dividing a market into different groups with similar needs, characteristics, or behaviors” • Target marketing: the process of evaluating each market segment’s attractiveness and selecting one or more segment to enter.
Select Customer to Serve • Demand management Marketers must deal with different demand states ranging from no demand to too much demand. Marketing managers must decide which customer they want to target, and on level, timing, and nature of their demand to meet the organization objectives. Simply Marketing management is: customer management and demand management
Choosing the Value Proposition • The company then must decide how it will serve targeted customer-how it will differentiate and position it self. • Differentiation: the way that you make your business or product more desirable than all the others like it. (Example: Mercedes “Unlike any other” – BMW “Ultimate Driving Machine”) • Positioning: Is the process by which marketers try to create an identity in the minds of their target market for its product, brand, or organization. It is the image their product occupies in a given market as perceived by the target market. (Example: Honda – BMW)
Choosing the Value Proposition • Value Proposition: “Is the set of benefits or values a company promises to deliver to consumers to satisfy their needs. It answer the customer’s question: “why should I buy your brand rather than a competitor’s?” (Red Bull Gives You Wiiings)
Marketing Management Orientations • The production concept: The philosophy that consumers will favor products that are available and highly affordable and that management therefore should focus on improving production and distribution efficiency. (Example: Ford, model T 1908-1927) • The product concept: The idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote energy to making continuous product improvements. (Example: the mousetrap)
Marketing Management Orientations • The selling concept The idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large scale selling and promotion effort. (Example: unsought products - blood donation) • The marketing concept The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively than competitors do. The job is not to find the right customer for your product, but to fined the right product for your customer. (Example: Dell, Wal-Mart)
The Selling And Marketing Concept Contrasted Starting point Focus Means Ends The selling concept “Inside-out” Make and sell Hunting Finding the right customer for your product The marketing concept “Outside-in” Gardening Find the right product for your customers Sense and respond
Marketing Management Orientations • The societal marketing concept The idea that the organization should determine the needs, wants and interests of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer’s and society’s well being.(Example: fast-food industry) Society (human welfare) Consumer (want satisfaction) company (profit)
Preparing a Marketing Plane and Program • The marketing plane actually deliver the value to the target customer, by transforming the marketing strategy into actions. • The marketing plane consists of the firm’s marketing mix, which called the four Ps • Product: to deliver on it’s value proposition the firm must first create a need-satisfying market offering. • Price: it must decide how much it will charge for the offer. • Place: and how it will make the offer available to target customer. • Promotion: it must communicate with target customer about the offer and persuade them of its merits.
Marketing Mix and the Customer • Product • Price • Place • Promotion • Customer solution • Customer cost • Convenience • Communication • Every marketing tool is designed to deliver a customer benefit and value Four P’s Four C’s
Building Customer Relationships • Customer relationship management CRM “The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.”
CRM • Why the emphasis on retaining and growing customers? • There is fewer customers to go around due to sophisticated competitors, and overcapacity in most industries • costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied. • The lifetime value of the customer. Is “the value of the entire stream of purchases that the customer would make over a life-time of patronage” (Example: Stew Leonard) • The key in building lasting customer relationship is to create superior value, and satisfaction.
Customer Rule Everyone is committed to Rock Rule
CRMAttracting, Retaining, And Growing Customers • Customer value • Customer perceived value: • The difference between total customer value and total customer cost. TCV – TCC = CPV • The customer evaluation of the difference between all the benefits and all the cost of a marketing offer relative to those of competing offers. • Customers often do not judge values and costs accurately or objectively. • Customer often act on perceived value (Example: FedEx)
CRM • Customer satisfaction: • Depend on the product’s perceived performance relative to buyer’s expectations • Performance matches expectations the customer is satisfied, performance exceeds expectations the customer is delighted. • Satisfied customer repeat purchases, and tell others.
Capturing Value From Customer • Customer loyalty and retention: • Loyalty increases as satisfaction levels increase • Customer delight leads to emotional relationships and loyalty • loyal customers are less price sensitive. • Customer Lifetime Value shows true worth of a customer
Capturing Value From Customer • Growing share of customer • Share of customer’s purchase in a product category. • Cross-selling and up-selling (Example: Vodafone& mobile phones – TE-Data, the wireless modem)
Capturing Value From Customer • Building customer equity • The total combined customer lifetime values of all current and potential customers. • Measures a firm’s performance, but in a manner that looks to the future. • Customer lifetime value and customer equity are the name of the game. (Example: Cadillac and BMW)
Customer relationships levels and tools • Target market nature decide the type the relationship • Basic relationship / low-margin customers • Full partnership / high margin customers • Customer loyalty and retention tools • Adding financial benefits – frequency marketing programs (Example: Marie Louis) • Adding social benefits – club marketing programs (Example: Swatch) • Adding structural ties – special equipments (Example: FedEx)
Marketing Challenges in the 21st Century • The new digital age • Growth of the Internet • Advances in telecommunications, information, transportation • Customer research and tracking • Product development • Distribution • New advertising tools • 24/7 marketing through the Internet • Rapid globalization • Geographical and cultural distances have shrunk • Greater market coverage • More options for purchasing and manufacturing • Increased competition from foreign competitors
Marketing Challenges in the 21st Century • The call for more ethics and social responsibility • Marketers need to take great responsibility for the impact of their actions • Caring capitalism is a way to differentiate your company • The growth of not-for-profit marketing • Many organizations are realizing the importance of strategic marketing • Performing arts • Government agencies • Colleges • Hospitals
Marketing Process • Research customer and the market place Select customer to serve: market segmentation and targeting Product and service design: building a strong brand Customer relationship management: build strong relationship with chosen customers Create satisfied loyal customer Capture customer life time value • Managing marketing information and customer data Price Create real value Decide on value proposition: differentiation and positioning Partner relationship management : build a strong relationship with marketing partners Increase share of market and share of customer Distribution manage demand and supply chain Promotion Communicating the value
What Is Marketing?Pulling It All Together The process of building profitable customer relationships by creating value for customers and capturing value in return
