Chapter 1: An Overview of Strategic Marketing

1. Chapter 1:An Overview of Strategic Marketing • Defining Marketing • Understanding the Marketing Concept • Managing Customer Relationships • Value-Driven Marketing • Marketing Management L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

2. Defining Marketing • Marketing • The process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment • Customers • The purchasers of organizations’ products; the focal point of all marketing activities L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

3. Components of Strategic Marketing FIGURE 1.1 L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

4. Marketing Focuses on Customers • Target Market • A specific group of customers on whom an organization focuses its marketing efforts • Large or small customer groups • Single or multiple product markets • Single or multiple products • Local to global markets L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

5. TargetMarket Product Distribution Promotion Pricing Marketing Deals with Products, Distribution, Promotion, and Price • The Marketing Mix • Four marketing activities - product, distribution (placement), promotion, and pricing - that a firm can control to meet the needs of customers within its target market L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

6. Marketing Mix Variables Product Goods, services, or ideas that satisfy customer needs Distribution The ready, convenient, and timely availability of products Promotion Activities that inform customers about the organization and its products Pricing Decisions and actions that establish pricing objectives and policies and set product prices L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

7. FIGURE 1.2 Marketing Builds Satisfying Exchange Relationships • Exchange • The provision or transfer of goods, services, or ideas in return for something of value L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

8. Marketing Builds Satisfying Exchange Relationships (cont’d) • Exchange Conditions • Two or more participants have something of value that the other party desires. • Exchange provides mutual benefit/satisfaction. • Each party has confidence in the exchange value of the other party’s offering. • Each party must meet the expectations of the exchange to become trusted by the other parties. L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

9. Marketing Occurs in a Dynamic Environment • Marketing Concept • A philosophy that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals • Customer satisfaction • Analysis of customers’ current and long-term needs • Analysis of competitors’ capabilities • Integration of firm’s resources L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

10. FIGURE 1.3 Evolution of the Marketing Concept ProductOrientation Late 19th century: efficient production of goods allowed firms to meet strong customer demand. Mid-1920s–early 1950s: weakened demand required that products would have to be “sold.” (personal selling, advertising, and distribution was the focus) SalesOrientation MarketingOrientation Early 1950s–2000s: adopting a customer focus means a commitment to researching and responding to customer needs. L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

11. Managing Customer Relationships • Relationship Marketing • Establishing long-term, mutually satisfying buyer-seller relationships allowing for cooperation and mutual dependency • Increased value of customer (loyalty) over time results in increased profitability. L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

12. Managing Customer Relationships (cont’d) • Customer Relationship Management (CRM) • Using information about customers to create marketing strategies that develop and sustain desirable customer relationships • Identifying buying-behavior patterns of customers • Using behavioral information to focus on the most profitable customers L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

13. By offering its coffee in grocery stores, Starbucks practices relationship marketing—it acquires new customers and enhances the profitability of existing customers. Reprinted with permission of Starbucks. L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

14. Value-Driven Marketing • Value • A customer’s subjective assessment of benefits relative to the costs in determining the worth of a product • Customer value = customer benefits – customer costs • Customer benefits • Anything desired by the customer that is received in an exchange • Customer costs • Anything a customer gives up in an exchange for benefits • Monetary price of the benefit • Search costs (time and effort) to locate the product • Risks associated with the exchange L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

15. How much does marketing and profit cost for some of your favorite products? Percent Marketing Product Category and Profit Soft drinks 70% Breakfast cereals 70% Potato chips and snacks 55% Beer 50% Canned fruits and vegetables 50% What is the role of marketing in selling these products? L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

16. Marketing Management • Marketing Management • The process of planning, organizing, implementing, and controlling marketing activities to facilitate exchanges effectively and efficiently • Effectiveness • The degree to which an exchange helps an organization achieve its objectives • Efficiency • The process of minimizing the resources an organization must spend to achieve a specific level of desired exchanges L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

17. Marketing Management (cont’d) • Planning • Assessing opportunities and resources • Determining marketing objectives • Developing a marketing strategy and plans for implementation and control • How, when and by whom are marketing activities performed? • Organizing • Developing the internal structure of the marketing unit • Functions, products, regions, customer types L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

18. Marketing Management (cont’d) • Implementation • Coordinating marketing activities • Motivating marketing personnel • Developing effective internal communications within the unit • Control • Establishing performance standards • Comparing actual performance to established standards • Reducing the difference between desired and actual performance L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.

19. Effective Marketing Control Process • Provides for quick detection of differences in planned vs. actual performance • Accurately monitors activities and is flexible enough to accommodate changes • Incurs low process costs relative to the costs of a “no-control” situation • Is understandable by both managers and subordinates. L. Bruhn MKTG 3050 Copyright © Houghton Mifflin Company. All rights reserved.