Marketing: Managing Profitable Customer Relationships

1. 1 Marketing: Managing Profitable Customer Relationships

2. ROAD MAP: Previewing the Concepts • Define marketing and outline the steps in the marketing process. • Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. • Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. • Discuss customer relationship management and strategies for building lasting customer relationships. • Describe the major trends and forces that are changing the marketing landscape in this new age of relationships.

3. What Is Marketing? • Simple Definition: Marketing is managing profitable customer relationships. Goals: • Attract new customers by promising superior value. • Keep and grow current customers by delivering satisfaction.

4. Marketing Old vs. New Old view of marketing: Making a sale -- “Telling and Selling” New view of marketing: Satisfying customer needs

5. Marketing Defined A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

6. Construct a marketing program that delivers superior value Understand the marketplace and customer needs and wants Design a customer-driven marketing strategy Build profitable relationships and create customer delight Capture value from customers to create profits and customer equity A Simple Model of the Marketing Process Create value for customers and build customer relationships Capture value from customers in return

7. What are Consumers’ Needs, Wants, and Demands?

8. This Is a Need Needs - state of felt deprivation including physical, social, and individual needs.

9. Types of Needs • Physical: • Food, clothing, shelter, safety • Social: • Belonging, affection • Individual: • Learning, knowledge, self-expression

10. This Is a Want Wants - form that a human need takes, as shaped by culture and individual personality.

11. Wants Buying Power This Is Demand “Demand”

12. Need / Want Fulfillment • Needs and Wants Fulfilled through a Marketing Offer : • Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.

13. What Satisfies Consumers’ Needs and Wants? Products Anything that can be Offered to a Market to Satisfy a Need or Want Persons Places Organizations Information Ideas Services Activity or Benefit Offered for Sale That is Essentially Intangible and Does Not Result in the Ownership of Anything

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

15. Marketing Myopia • Sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. • They focus on the “wants” and lose sight of the “needs.”

16. Performance Expectation Performance Expectation 8 10 10 8 Value and Satisfaction If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high.

17. Exchange vs. Transaction • Exchange: • Act of obtaining a desired object from someone by offering something in return. • Transaction: • A trade of values between two parties. • One party gives X to another party and gets Y in return. Can include cash, credit, check, or barter.

18. What is a Market? • The set of actual and potential buyers of a product. • These people share a need or want that can be satisfied through exchange relationships.

19. Elements of a Modern Marketing System

20. Marketing Management • The art and science of choosing target markets and building profitable relationships with them. Questions to ask: • What customers will we serve? What is our target market? • How can we best serve these customers? What is our value proposition?

21. Market Segmentation: Divide the market into segments of customers Target Marketing: Select the segment to cultivate Segmentation and Target Marketing #1 #2

22. Interactive Student Assignment • Pair up with another student and share your thoughts with one another on the following items: • To what market segments do you think you belong? • What personal traits, variables, or factors characterize you as belonging to those segments?

23. Demarketing Temporarily or permanently reducing the number of customers or shifting their demand. Marketing Management Demand Management Finding and increasing demand, also changing or reducing demand, such as in demarketing.

24. Value Proposition • The set of benefits or values a company promises to deliver to consumers to satisfy their needs. It cleans and freshens like sunshine! www.gainlaundry.com

25. Marketing Management Philosophies Customer-Driven Societal Marketing Concept Marketing Concept Selling Concept Product Concept Production Concept

26. Marketing and Sales Concepts Contrasted

27. 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.

28. Societal Marketing Concept

29. Interactive Student Assignment • Pair up with another student and share your thoughts with one another on the following topic: • Based on your personal experience, discuss with your partner ways you have seen organizations implement the societal marketing concept.

30. Product Price Customer Needs Promotion Distribution The Marketing Mix

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

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

33. 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.”

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

35. Customer Relationship Levels Full Partnership Continuum Basic Relationship

36. Financial Benefits Social Benefits Structural Ties Loyalty and Retention Focus on Profitable Customers

37. Partners Inside the Firm • All employees customer focused • Teams coordinate efforts toward customers Partner Relationship Marketing • Partners Outside the Firm • Supply chain management • Strategic alliances

38. Customer Lifetime Value The entire stream of purchases that the customer would make over a lifetime of patronage. Share of Customer The share a company gets of the customers purchasing in their product categories. Customer Loyalty & Retention

39. 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.

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

41. Customer Relationship Groups Butterflies True Friends Good fit between company’s offerings and customer’s needs; high profit potential Good fit between company’s offerings and customer’s needs; highest profit potential High Profitability Strangers Barnacles Little fit between company’s offerings and customer’s needs; lowest profit potential Limited fit between company’s offerings and customer’s needs; low profit potential Low Long-term customers Short-term customers Projected loyalty

42. The Internet • The Internet has been hailed as the technology behind a New Economy. • Marketing applications include: • “Click-and-mortar” companies • “Click-only” companies • Business-to-business e-commerce • Business-to-business transactions online are expected to reach $4.3 trillion in 2005. • By 2005, 500,000 companies will use the Internet to do business.

43. 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.

44. New Marketing Landscape Rapid Globalization Not-for-Profit Marketing Ethics & Social Responsibility New World of Marketing Relationships

45. Rest Stop: Reviewing the Concepts • Define marketing and outline the steps in the marketing process. • Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts. • Identify the key elements of a customer-driven marketing strategy and discuss marketing management orientations that guide marketing strategy. • Discuss customer relationship management and strategies for building lasting customer relationships. • Describe the major trends and forces that are changing the marketing landscape in this new age of relationships.