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Introduction to Business. Marketing Function. Module Learning Outcomes. Explain the key components of marketing function 13.1: Explain the role of customers in marketing 13.2: Explain the role of segmentation and targeting in marketing 13.3: Explain the marketing mix. Role of Customers.
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Introduction to Business Marketing Function
Module Learning Outcomes Explain the key components of marketing function 13.1: Explain the role of customers in marketing 13.2: Explain the role of segmentation and targeting in marketing 13.3: Explain the marketing mix
Learning Outcomes: Role of Customers 13.1: Explain the role of customers in marketing 13.1.1: Define the term marketing 13.1.2: Explain the marketing concept 13.1.3: Identify and describe an organization’s value proposition 13.1.4: Explain the importance of managing the customer relationship 13.1.5: Explain the factors that influence customer decisions 13.1.6: Explain the consumer buying process
Marketing Defined Marketing is a set of activities related to creating, communicating, delivering, and exchanging offerings that have value for others. In business, the function of marketing is to bring value to customers, whom the business seeks to identify, satisfy, and retain.
The Exchange Process The Exchange Process is the act of obtaining a desired object from someone by offering something of value in return. • customer (buyer): a person or organization with a want or need who is willing to give money or other personal resource to address this need • product: a physical good, a service, experience or idea designed to fill the customer’s want or need • provider (seller): the company or organization offering a need-satisfying thing • transaction: the terms around which both parties agree to trade value-for-value Individuals on both sides try to maximize rewards and minimize costs in transactions in order to gain the most profitable outcomes. Marketing creates a bundle of goods and services that the company offers at a price to its customers. The bundle consists of a tangible good, an intangible service or benefit, and the price of the offering.
Understanding the Marketing Concept Marketing generates value by creating the connections between people and products, customers and companies. The role of marketing is to identify, satisfy, and retain customers.
Understanding Company Orientations Companies’ marketing efforts can focus on customer, product, sales, or production. Types of Company Orientations • The Marketing Concept focuses on knowing as much about the consumer as possible and bases marketing, product, and strategy decisions on this information. • The Product Concept focuses on building and showcasing impressive features and product advances. • The Sales Concept emphasizes the sale process and tries to make it as effective as possible. • The Production Concept focuses on low-production costs, highly efficient processes, and mass distribution.
What is Value? Value is the measure of the benefit gained from a product or service relative to the full cost of the item. Value is more than price. The process of determining the value of an offering and then aligning it with the wants and needs of a target customer is challenging. Value = benefit – cost
Competition and Substitutes The presence of competitors further complicates perceptions of value. Customers instinctively make choices between competitive offerings based on perceived value. Alternatives generally fall into two categories • Competitors: provides the same offering but is accentuating different features and benefits • Substitutes: Not a perfect replication of the offering, which means it will provide different value to customers.
Differentiation and Competitive Advantage Differentiation: the process of identifying and optimizing the elements of an offering that provide unique value to a customer. Competitive Advantage: an advantage in the marketplace whereby an organization’s offering provide greater value because of a unique strategy, asset, or approach that others cannot easily copy
Value Proposition • A value proposition is a clear and succinct statement to the customer of the value being offered by a company’s products or services. • It should set the offering apart or differentiate it from other offerings.
Elements of the Value Proposition Why should someone buy what you are offering? The value proposition should address: • Who? The value proposition does not name the target buyer, but it must show clear value to the target buyer. • What? The offering needs to be defined in the context of that buyer. • Why? It must show that the offering is uniquely valuable to the buyer. How do you create an effective value proposition? • Clear: short and direct • Compelling: conveys the benefit in a way that motivates the buyer to act • Differentiating: sets the offering apart from other offerings
Class Activity: Making a Value Proposition Divide into groups of 3–4. Imagine that you’re on the marketing team for a small start-up providing one of the following services: • Custom-tailored clothes, ordered online • Symptom tracking app for chronic illness • Language exchange program matching native speakers with learners • Or come up with your own!
Managing Customer Relationships The Internet and digital social media have created new platforms for customers and product providers to find and communicate with one another. Marketing applies a customer-oriented mindset and, through particular marketing activities, tried to make initial contact with customers and move them through various stages of the relationship – all with the goal of increasing lifetime customer value.
What is Customer Lifetime Value? • Customer lifetime value predicts how much profit the company will make from the customer during his or her lifetime relationship with the company.
More on Customer Relationships Customer Relationship as Competitive Advantage When customers feel satisfaction with and affinity for a specific company or product, it simplifies their buying choices. A consistently positive customer experience matures into a relationship in which the customer becomes increasingly receptive to the company and its products. When Customers Become Your Best Marketing Tools Customer testimonials and recommendations often work to persuade new customers to give something a try. In today’s digital media landscape there is unprecedented opportunity for companies to engage customers as credible advocates. When people take a public stance on a product or issue, they tend to become more committed to that position.
Factors that Influence Consumer Decisions The factors that influence the consumer problem-solving process are many and complex. We can group these influencing factors into four sets: • Situational Factors • Personal Factors • Psychological Factors • Social Factors
Buying-Process Stages • Need Recognition: recognizing there is a problem or unmet need and that this need warrants some action. • Information Search: seeking information to help identify and evaluate alternative products, services, experiences, and outlets that will meet that need. • Evaluation of Alternatives: Identify alternative products, services, and outlets that are viable options, evaluate these alternatives, and make a choice. • The Purchase Decision: Consumers must decide whether they are going to buy. Anything marketers can do to simplify the decision will be attractive to buyers. • Postpurchase Behavior: A consumers feelings and evaluations after the sale are significant because they influence repeat sales and what the customer tells others about the product or the brand.
Complex and Simple Decision Making Complex decision making: The six stage buying process represents the steps customers undergo when they make a conscious effort to learn about the options and select a product. This can happen when a customer purchases a product for the first time. Simple decision making: the customer has learned from past experiences what will best satisfy their need, so they can bypass the second or third stage of the processes.
Practice Question 1 You have just been hired as a marketing manager at one of the Acme Corps product lines. What are the primary questions you would ask in order to get yourself up to speed on the marketing efforts for this product line? A. How many stores/sites feature out products? How does our pricing compare with the competition? When is the next major delivery to our warehouses? B. Who is the customer for our products? How happy are the customers based based on our latest surveys? How strong is the repeat business? What is our value proposition? C. What is the gross margin of the product line? How many style items are in the product assortment? How many engineers do we have working on the development side? D. Are we getting needed support from senior management for our ad campaign? What are the sizes and colors of our new release? Can we increase production for next quarter sales?
Practice Question 2 The difference between the marketing concept versus the production concept or the sale concept is in the marketing concept: A. the customer drives the business strategy. B. the market drives the business strategy. C. the revenue goals drive the business strategy. D. Fortune 500 companies drive the business strategy.
Practice Question 3 The following describe/explain the four factors that influence customer decisions EXCEPT: A. Social Factors: the influence of culture, social class, family and reference groups. B. Situational Factors: consumer’s level of involvement in a buying task and the market offerings available. C. Personal Factors: the consumer’s attitude towards the company and prior experiences with their products and services. D. Psychological Factors: the consumer’s motivation, learning, socializing attitudes and beliefs.
Learning Outcomes: Segmentation and Targeting 13.2: Explain the role of segmentation and targeting in marketing 13.2.1: Explain the concepts of segmentation and targeting 13.2.2: Explain how segmentation and targeting relate to marketing strategy 13.2.3: Explain the process and goal of market research 13.2.4: Explain how market research helps marketers validate their target markets
Defining a Target Market • Identify the customer need you address • Segment your total market • Profile your target customer segment(s) • Research and validate your market opportunity
Segmentation and Profile for Your Target Customer Segmentation:Once you define your total market, you can break down your total market into segments. You can use a variety of approaches to segment your total market into groups with common wants or needs. In this case, we can segment by vehicle ownership and related behavior. Specific segments might include the following: • People who restore classic automobiles. • People who drive old clunkers and run them through the car wash occasionally. • People who own “status” cars. • Truck drivers. • Motorcycle owners. Profile your target customer segment(s): Develop a profile for your target customer(s) using a number of categories including but not limited to geographic, demographic, psychographic, and behavioral traits.
Market Information Marketing research is the process of identifying marketing opportunities and solving marketing problems using customer insights. A marketing information system is a combination of people, technologies, and processes for managing marketing information, overseeing market research activities, and using customer insights to guide marketing decisions and broader management and strategy decisions. Marketing information and research are essential tools for marketers and the management team as they align strategy with customer wants and needs.
Questions for Market Research • Who is the customer? • What problems is the customer trying to solve with a given purchase? • What does the customer desire in the way of satisfaction? • How does the customer get information about available choices? • Where does the customer choose to purchase? • Why does the customer buy or not buy? • When does the customer make a purchase? • How does the customer go about seeking satisfaction in the market?
Class Discussion: Market Research Consider the market research questions on the prior slide. As a group, walk-through those questions for the following markets: • Luxury shoes (e.g. Jimmy Choo, Prada, Kate Spade). • D-I-Y home repair. • Business travel. • Prepared meal services (e.g. Hello Fresh, Sun Basket, Home Chef).
Understanding The Marketing Research Process • Identify the Problem: Start by stating the marketing or business problem you need to address. Next, articulate the objectives for the research. • Develop a Research Plan: Identify what information you need to answer your question and achieve your objective. • Conduct the Research: Conducting research begins to generate information that helps answer your urgent marketing questions. This process could include reviewing existing research and conducting primary research. • Analyze and Report Findings: Transform the data into useful information and insights that answer the research question. • Take Action: Help managers understand the research and take action based on research findings.
Practice Problem 4 In marketing, segmentation and targeting refer to: A. the process of abbreviating customer data so that it can be easily captured and input B. the process of narrowing, refining, and “boiling down” your potential target market to the point where your can construct an actionable profile C. the process of selecting which budget items can best be served with additional investment D. the process of narrowing job candidates and deciding which ones to hire
Practice Problem 5 Marketing strategy follows from _____. A. direct response to competitor activities. B. direction from the CEO. C. the segmentation and targeting process. D. what has worked in the past.
Practice Problem 6 How does market research help businesses validate their target markets? A. Market research “boils down” the larger population into manageable target customer groups. B. Market research dictates advertising campaigns to appeal to the broadest set of customers. C. Market research helps businesses confirm which are their most popular products D. Market research helps businesses implement appropriate CRM systems.
Learning Outcomes: Marketing Mix Introduction 13.3: Explain the marketing mix 13.3.1: Define product 13.3.2: Define promotion 13.3.3: Define place 13.3.4: Define price 13.3.5: Give examples of the marketing mix 13.3.6: Evaluate how marketing strategies align with corporate strategies
The Marketing Mix There are multiple factors that can influence a customer’s decision about what to buy—a mix of factors. The marketing mix, also known as the four Ps: • Product: the goods and services offered • Promotion: communication and information • Place: distribution or delivery • Price: ensuring fair value in the transaction
The Four Cs Over time, new categories of the marketing mix have been proposed. Most are more consumer oriented and attempt to better fit the movement toward a marketing orientation and a greater emphasis on customer value. One example is the four Cs, proposed by Robert F Lauterborn in 1990: • Customer solution: what the customer wants and needs • Communication: a two-way dialogue with the customer • Convenience: an easy process to act or buy • Cost: the customer’s cost to satisfy that want or need[2] The four Cs include a greater focus on the customer but align nicely with the older four Ps. They also enable one to think about the marketing mix for services, not just products.
