marketing management - pgdm-ppts
TRANSCRIPT
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D. BandopadhyayProfessor (Marketing)
&
DirectorManagement Training & Development
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Marketing Management
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Needs, Wants & Demands
Needs are the basic human requirements. People needfood, air, water, clothing and shelter to survive. People
also have strong needs for recreation, education, and
entertainment. These needs become wants when they are
directed to specific objects that might satisfy the need.
Demands are wants for specific products backed by an
ability to pay. Many people want a Mercedes; only a few
are willing and really able to buy one because of its high
cost.
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Marketers do not create needs: Needs pre-exist
marketers. Marketers, along with other societal factors,
influence wants.
Marketers might promote the idea that a Mercedes
would satisfy a persons need for social status. They do
not, however, create the need for social status.
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We can distinguish among five types of needs:
1. Stated needs (the customer wants an inexpensive car).
2. Real needs (the customer wants a car whose operating
cost, not its initial price, is low).
3. Unstated needs (the customer expects good service
from the dealer).
4. Delight needs (the customer would like the dealer to
include an onboard navigation system).5. Secret needs (the customer wants to be seen by friends
as a savvy consumer).
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What is Marketing?
Marketing deals with identifying and meeting human
and social needs. One of the shortest definitions of
marketing is meeting needs profitably.
Marketing is an organizational function and a set of
processes for creating, communicating, and delivering
value to customers and for managing customer
relationships in ways that benefit the organization and
its stake holders.
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Marketing Management is the art and science of
choosing target markets and getting, keeping, andgrowing customers through creating, communicating
and delivering superior customer value.
The aim of marketing is to know and understand thecustomer so well that the product or service fits him
and sells itself. Ideally, marketing should result in a
customer who is ready to buy. All that should be
needed then, is to make the product or serviceavailable.
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What is Marketed?
Goods
Services
Events
Experiences Persons
Places
Properties (real or financial properties)
Organizations Information
Ideas
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Who Markets?
A marketer is someone who seeks a response (attention,
a purchase, a vote, a donation) from another party, called
the prospect.
Marketers are responsible for demand management.
Marketing managers seek to influence the level, timing
and composition of demand to meet the organizationsobjectives.
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Eight demand states are possible:
Negative demand
Nonexistent demand
Latent Demand
Declining Demand
Irregular Demand
Full Demand
Overfull Demand Unwholesome Demand
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Structure of Flows in a Modern
Exchange Economy
Resource Markets
Manufacturer Markets Consumer MarketsGovernment Markets
Intermediary Markets
ResourcesResources
Money Money
Money Money
Services,
Money
Taxes,
Goods
Services, MoneyTaxes
Taxes, Goods Services
Services,
Money
Goods and ServicesGoods and Services
Taxes,
Goods
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Key Customer Markets
Consumer Markets
Business Markets
Global Markets Nonprofit and Governmental Markets
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Industry(a collection of sellers)
Market( a collection of buyers)
Communication
Information
Money
Goods/Services
A Simple Marketing System
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MARKETPLACES, MARKETSPACES
&
METAMARKETS
The marketplace is physical as when you shop in a store;
marketspace is digital, as when you shop on the Internet.
Metamarket is the concept to describe a cluster of
complementary products and services that are closely
related in the minds of consumers but are spread across adiverse set of industries, e.g., automobile metamarket,
travel metamarket etc.
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HOWBUSINESS AND MARKETING
ARE CHANGING
Changing Technology
Globalization
Deregulation
Privatization
Customer empowerment
Customization
Heightened Competition Industry Convergence
Retail Transformation
Disintermediation
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THE MARKETING CONCEPT
Production Concept
Product Concept
Marketing Concept
The job is not to find the right customers for your
products, but the right products for your customers. The
marketing concept holds that the key to achievingorganizational goals consists of the company being more
effective than competitors in creating, delivering and
communication superior customer value to its chosen
target markets.Selling focuses on the needs of the seller; marketing on
the needs of the buyer.
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Reactive market orientation understanding and meetingcustomersexpressed needs.
Proactive marketing orientation - high-level innovation is
possible if the focus is on customers latent needs.
Companies that practice both a reactive and proactive
marketing orientation are implementing a total market
orientation and are likely to be the most successful.
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Marketing
Orientation
Markets &Marketing
The MarketingMix
MarketingIssues
Marketing
& Society
Marketing
Management
MARKETING OVERVIEW
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Marketing
Identifying
Anticipating
Supplying
Customer Needs
Mutually beneficial
exchange
Firms objectives
Arriving at a definition of Marketing
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DEFINITION - MARKETING
Marketing is the management process
responsible for:
identifying
anticipating &
satisfying customer requirements efficientlyand profitably.
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SELLING & MARKETING CONCEPTS
CONTRASTED
Starting
point
Focus Means End
Sales
Orientation
Factory Existing
Products
Selling +
Promoting
Profit through
sales volume
Marketing
Orientation
Market Customer
needs
Integrated
Marketing
Profit through
customersatisfaction
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Relationship of Marketing
& other departments
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Holistic Marketing Concept
Relationship Marketing
Integrated marketing
Internal Marketing
Social Responsibility Marketing
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InternalMarketing
Socially
ResponsibleMarketing
Relationship
Marketing
Integrated
Marketing
Holistic
Marketing
Ethics
EnvironmentLegal Community Customers Channel
Partners
Communications Products &
Services ChannelsMarketing
Management
Senior
Management Other
Departments
Holistic Marketing Dimensions
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Relationship Marketing
The operating principle is simple:
Build an effective network of relationships with
key stakeholders, and profits will follow.
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Integrated Marketing
Four Ps Four Cs
Product Customer SolutionPrice Customer Cost
Place Convenience
Promotion Communication
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Marketing Mix
Target Market
Place
Channels
Coverage
AssortmentsLocations
Inventory
Transport
Product
Product
Variety
Quality
Design
Features
Brand Name
Packaging
Sizes
Services
Warranties
Returns
PriceList Price
Discounts
Allowances
Payment Period
Credit Terms
Promotion
Sales PromotionAdvertising
Sales Force
Public Relations
Direct Marketing
Personal Selling
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Advertising
Direct Marketing
Sales Promotion
Events and
Experiences
Personal Selling
Public Relations
Distribution
Channels
Target
CustomersCompany
Products
ServicesPrices
Offering Mix
Communications Mix
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INTERNAL MARKETING
Internal marketing is the task of hiring, trainingand motivating able employees who want to serve
customers well. Other than various marketing
functions working together, the variousdepartments should also work together to serve
the customers well.
Xerox goes so far as to include in every job
description an explanation of how that job affects
the customer.
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SOCIAL RESPONSIBILITY
MARKETING
Are companies that do an excellent job of
satisfying customer wants, necessarily acting in
the best long term interests of consumers andsociety? Example: selling ammonia free hair
dye.
Marketers should understand ethical,
environmental, legal and social context of
marketing activities.
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Many consumers do not know what they want in a
product. Consumers did not know much about
cellular phones when they were first introduced.
Nokia and Ericsson fought to shape consumer
perceptions of cellular phones. Consumers were in alearning mode and companies forged strategies to
shape their wants.
Simply giving customers what they want isntenough any more to gain an edge, companies
must help customers learn what they want.
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Target Markets, Positioning & Segmentation
A marketer can rarely satisfy everyone in a market. The
marketer decides which segments present the greatest
opportunity - which are its target markets.
For each chosen target market, the firm develops a
market offering. The offering is positioned in the minds
of the target buyers as delivering some central benefit.
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Offerings & Brands
Companies address needs by putting forth a value
proposition, a set of benefits they offer to
customers to satisfy their needs.
A brand is an offering from a known source. A
brand name carries many associations in the
minds of people. These associations make up the
brand image.
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Value & Satisfaction
The Offering will be successful if it delivers value and satisfaction to
the target buyer. Value reflects the perceived tangible and intangible
benefits and costs to customers. Value can be seen as primarily a
combination of Quality, Service and Price (QSP), called the
Customer Value Triad. Value increases with quality and service anddecreases with price, although other factors can also play an
important role.
Satisfaction reflects a persons comparative judgments resulting
from a products perceived performance (or outcome) in relation tohis or her expectations. If the performance falls short of
expectations, the customer is dissatisfied and disappointed. If the
performance matches the expectations, the customer is satisfied. If
the performance exceeds expectations, the customer is highly
satisfied or delighted.
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Marketing Channels
To reach a target market, the marketer uses three kinds of marketing
channels. Communication channels deliver and receive messages
from target buyers, and include newspapers, magazines, radio,
television, mail, telephone, billboards, posters, fliers, CDs,
audiotapes and the Internet. Beyond these, communications areconveyed by facial expressions and clothing, the look of retail stores,
and many other media. Marketers are increasingly adding dialogue
channels(e-mail and toll-free numbers) to counterbalance the more
normal monologue channels (such as ads).
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The marketer uses distribution channels to display, sell or
deliver the physical product or service to the buyer or
user. They include distributors, wholesalers, retailers and
agents.
The marketer also uses service channels to carry out
transactions with potential buyers. Service channels
include warehouses, transportation companies, banks
and insurance companies that facilitate transactions.
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Supply Chain
Whereas marketing channels connect the marketer to
the target buyers, the supply chain describes a longer
channel stretching from raw materials to components
to final products that are ultimately carried to finalbuyers.
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Competition
Competition includes all the actual and
potential rival offerings and substitutes that a
buyer might consider.
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Marketing Environment
The marketing environment consists of the task environment and
the broad environment.
The task environment includes the immediate actors involved in
producing, distributing and promoting the offering. The main actorsare the company, suppliers, distributors, dealers, and the target
customers. Included in the supplier group are material suppliers and
service suppliers such as marketing research agencies, advertising
agencies, banking and insurance companies, transportation
companies and telecommunications companies. Included with
distributors and dealers are agents, brokers, manufacturer
representatives and others who facilitate finding and selling to
customers.
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The broad environmentconsists of six components:
demographic environment, economic environment,physical environment, technological environment,
political-legal environment and social-cultural
environment.
These environments contain forces that can have a
major impact on the actors in the task environment.
Market actors must pay close attention to the trends
and developments in these environments and make
timely adjustments to their marketing strategies.
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Marketing Planning
The marketing planning process consists of:
analyzing marketing opportunities
selecting target markets
designing marketing strategies
developing marketing programs
managing the marketing effort.
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Shifts in Marketing Management
Here are 14 major shifts in marketing management thatsmart companies have been making in the twenty-first
century.
From Marketing does the marketing - to everyone doesthe marketing
From organizing by product units - to organizing by
customer segments
From making everything - to buying more goods andservices from outside.
From using many suppliers - to working with fewer
suppliers in a Partnership
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From relying on old market positions - to uncovering
new ones.
From emphasizing tangible assets - to emphasizing
intangible assets
From building brands through advertising - to building
brands through performance and integratedcommunications
From attracting customers through stores and
salespeople - to making products available online.
From selling to everyone - to trying to be the best firmserving well-defined target markets.
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From focusing on profitable transactions - to
focusing on customer lifetime value.
From a focus on gaining market share - to a focuson building customer share
From being local - to being Glocal both global
and local
From focusing on the financial scorecard - tofocusing on the marketing scorecard.
From focusing on shareholders - to focusing on
stakeholders.
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Marketing Management Tasks
Developing Marketing Strategies and Plans
Capturing Marketing Insights
Connecting with Customers
Building Strong Brands
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Shaping the Marketing Offerings
Delivering Value
Communicating Value
Creating Long Term Growth
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4 Ps of Marketing
Product (or, service)
Price
Place
Promotion
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Product
Tangible product
Intangible product (service)
Combination of both
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Price
When setting prices, companies must think about the
following aspects.
Costs
The level ofcompetitors prices.
The effect of price on consumers perceptions.
Market conditions
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Place
If you cannot get in touch with your customers, you cannot sell
anything. For many products, organizations must rely on third
parties to reach the customer. These third parties are collectively
known as middlemen and the access they provide is called
distribution channels.
a) Merchants take title to the goods, that is they become owners of
the goods. They then resell them. Wholesalers and retailers are in
this category.b) Agents and brokers do not own the goods, but merely assist in
the transfer of ownership from, say, the manufacturer to the
customer.
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Promotion
Marketing Communications :
Sales promotion activities
Advertising
Personal selling
Publicity
Direct mailing etc.
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The Marketing Mix for Services
A service is any activity or benefit offered by one party
to another which is essentially intangible and does not
result in the ownership of anything physical. An
example is a seat on an aircraft, which the customeruses for the duration of the flight but does not own.
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The special characteristics of Services
Intangibility
Variability
Inseparability
Lack of Ownership
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Additional 3Ps
Process
User-Friendly systems for selling and buying areessential.
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Physical Evidence
Services tend to suffer from the intangible nature of the
offering. Organizations in the service sector are
increasingly using devices such as newsletters (often via
e-mail) to maintain the customers desire to have the
service.
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People
For most services, a key element is the people who
are an integral part of the process. If the staff who
deal with customers are poorly motivated or badly
trained, this can greatly affect the quality of the
service.
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The Value Chain
Michael Porter of Harvard has proposed the vale chain as
a tool for identifying ways to create more customer
value.
The firms success depends not only on how well each
department performs its work, but also on how well the
various departmental activities are coordinated to
conduct core business processes.
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The Value Delivery Process
The smart competitor must design and deliver offeringsfor well-defined target markets.
Instead of emphasizing making and selling, these
companies see themselves as part of a value deliveryprocess.
The value delivery process begins before there is a
product and continues while it is being developed and
after it becomes available.
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Zero customer feedback time
Zero product improvement time.
Zero Purchasing time.
Zero setup time.
Zero defects.
3 Vs approach to marketing:
Define the value segment or customers (and his/her
needs)
Define the value propositionDefine the value network that will deliver the promised
service.
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Two Views of the Value Delivery Process
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The market sensing process.
The new offering realization process.
The customer acquisition process.
The customer relationship management process.
The fulfillment management process.
l ll h i d l i f i
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As Wal-Mart stores sell their goods, sales information
flows via computer not only to Wal-Marts headquarters,
but also to Wal-Marts suppliers, who ship replacement
merchandise to the stores almost at the rate it moves off
the shelf.
At Xerox, a Customer Operations Group links sales,shipping, installation, service and billing so that these
activities flow smoothly into one another. Winning
companies are those that excel at managing core
business processes through cross-functional teams.
Core Competencies
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Core CompetenciesMany companies today outsource less critical resources if
they can be obtained at better quality or lower cost.
Nike, for example, does not manufacture its own shoes,
because certain Asian manufacturers are more competent
in this task; Nike nurtures its superiority in shoe design
and shoe merchandising, its two core competencies. We
can say that a core competency has three characteristics:
It is a source of competitive advantage in that it makes
a significant contribution to perceived customerbenefits
It has applications in a wide variety of markets
It is difficult for competitors to imitate.
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Competitive advantage ultimately derives from how
well the company has fitted its core competencies
and distinctive capabilities into tightly interlockingactivitysystems.
Competitors find it hard to imitate companies such
as Dell, or IKEA because they are unable to copytheir activity systems.
A Holistic Marketing Orientation &
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A Holistic Marketing Orientation &
Customer Value
The holistic marketing framework is designed to addressthree key management questions:
Value exploration How can a company identify new
value opportunities (Customer/Co. /Collaborator).
Value creation How can a company efficiently createmore promising new value offerings? (Business
Concept/Business Scope/Re-positioning)
Value delivery How can a company use its capabilities
and infrastructure to deliver the new value offerings
more efficiently? (CRM/Internal Resource
management/Business Partnership management)
Value Exploration
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Value ExplorationThe customers cognitive space
Existing and latent needs such as the need for
participation, stability, freedom and change.
The companys competence space
Breadth: broad versus focused scope of business
Depth: physical versus knowledge-based capabilities
The collaborators resource space
Horizontal partnerships, where companies choosepartners based on their ability to exploit related market
opportunities and vertical partnerships, where
companies choose partners based on their ability to
serve their value creation.
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Value Creation
Defining the business concept (the bigidea)
Shaping the business scope (the lines of business)
Positioning the companys brand identity
(how customers should see the company)
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Value Delivery
Customer Relationship Management
Internal Resource Management
Business partnership Management
Building Customer Value, Satisfaction and Loyalty
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Building Customer Value, Satisfaction and Loyalty
Customer Perceived Value
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Customer Perceived Value
Customer perceived value (CPV):
It is the difference between the prospectivecustomers evaluation of all the benefits and all thecosts of an offering and the perceived alternatives.Total customer value:
It is the perceived monetary value of the bundle ofeconomic, functional, and psychological benefitscustomers expect from a given market offering.Total customer cost:It is the bundle of costs customers expect to incurin evaluating, obtaining, using and disposing of thegiven market offering, including monetary, time,
energy and psychic costs.
Determinants of Customer-Delivered Value
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Determinants of Customer-Delivered Value
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The marketer can increase the value of thecustomer offering by some combination of raising
functional or emotional benefits and /or reducingone or more of the various types of costs.
Delivering High Customer Value
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Delivering High Customer Value
The ValuePropositionconsists of the whole cluster
of benefits the company promises to deliver; it ismore than the core positioning of the offering. Forexample, Volvos core positioning has been safety,but the buyer is promised more than just a safe car;other benefits include a long-lasting car, good serviceand a long warranty period.
Too many companies create a value gap by failingto align brand value with customer value.
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Total Customer Satisfaction
Whether the buyer is satisfied after purchasedepends on the offers performance in relation tothe buyers expectations.
Ultimately, the company must operate on thephilosophy that is trying to deliver a high level ofcustomer satisfaction subject to delivering
acceptable levels of satisfaction to the otherstakeholders, given its total resources.
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Customer Expectations
Some of todays most successful companies areraising expectations and delivering performancesto match.
A customers decision to be loyal or to defectdepends on the sum total of a large number ofsmall encounters with the company. These
encounters need to result in positive outcome andshould lead to some memorable customerexperience.
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Measuring Satisfaction
A company would be wise to measure customersatisfaction regularly because one key to customerretention is customer satisfaction.
Periodic surveys can track customer satisfactiondirectly.
Companies can monitor the customer loss rate andcontact customers who have stopped buying or whohave switched to another supplier to learn why thishappened.
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Companies can hire mysteryshoppers to pose
as potential buyers and report on strong and weakpoints experienced in buying the companys andcompetitors products.
Such practice should also be done by companyexecutives, keeping their identity secret.
For customer-centered companies, customersatisfaction is both a goal and a marketing tool.
Total Quality Management
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Total Quality ManagementTotal Quality Management (TQM) is anorganization-wide approach to continuouslyimproving the quality of all the organizationsprocesses, products and services.
Product and service quality, customer satisfactionand company profitability are intimately connected.
Higher levels of quality result in higher levels ofcustomer satisfaction. Which support higher prices
and (often) lower costs. Studies have shown a highcorrelation between relative product quality andcompany profitability.
Conformance Quality vs. Performance Quality
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Some companies now concentrate their effortson return on quality or ROQ.
ROQ adherents advocate improving quality onlyon those dimensions that produce tangiblecustomer benefits, lower costs or increased sales.
This bottom-line orientation forces companies tomake sure that the quality of the product offerings
is in fact the quality consumers actually want.
MaximizingCustomer Lifetime ValueUltimatel k ti is the art of attracting and
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Ultimately, marketing is the art of attracting andkeeping profitable customers. Yet every company
loses money on some of its customers. The well-known 20-80 rule says that the top 20 percent of thecustomers may generate as much as 80 percent ofthe companys profits.
This rule is rather 20-80-30 rule to reflect the ideathat the top 20 percent of customers generate 80percent of the companys profits, half of which are lostserving the bottom 30 percent of unprofitable
customers. The implication is that a company couldimprove its profits by firing its worst customers.It is also not necessary that companys largestcustomers will yield max. profit.
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Customer Profitability
A profitable customer is a person, household orcompany that over time yields a revenue streamthat exceeds by an acceptable amount thecompanys cost stream of attracting, selling and
servicing that customer.
Emphasis is on the lifetime stream of revenue
and cost, not on the profit from a particulartransaction.
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Customer Profitability Analysis
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More generally, marketers must segment
customers into those worth pursing versus thosepotentially less lucrative customers that shouldreceive less attention, if any at all.
Moreover, customer portfolio should rather bemanaged as in case of Investment Portfolio andthus one should diversify the customer portfolioaccordingly.
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Competitive Advantage
Competitive advantage is a companys ability toperform in one or more ways that competitorscannot or will not match. Michael Porter urgedcompanies to build a sustainable competitive
advantage. At least it should be a leverageableadvantage that can be used as springboard to newadvantages.
Any competitive advantage must be seen bycustomers as a customer advantage.
Measuring Customer Lifetime Value
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Measuring Customer Lifetime Value
Customer lifetime value (CLV):
It describes the net present value of the stream offuture profits expected over the customers lifetimepurchases. The company must subtract from theexpected revenues the expected costs of attracting,
selling and servicing that customer, applying theappropriate discount rate.
CLV calculations provide a formal quantitative
framework for planning customer investment andhelp marketers to adopt a long-term perspective.One challenge in applying CLV concepts, however,
is to arrive at reliable cost and revenue estimates.
Customer Equity
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Customer Equity
Value Equity is the customers objective
assessment of the utility of an offering based onperceptions of its benefits relative to its costs. Thesub-drives of value equity are quality, price andconvenience objective assessment.
Brand Equity is the customers subjective andintangible assessment of the brand, above and
beyond its objectively perceived value. The sub-drivers of brand equity are customer brandawareness, customer attitude toward the brand andcustomer perception of brand ethics subjective
assessment.
Relationship Equity
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p q y
It is the customers tendency to stick with the
brand, above and beyond objective andsubjective assessments of its worth. Sub-drivers of relationship equity include loyaltyprograms, special recognition and treatmentprogram, community-building programs andknowledge-building programs.
Relationship equity is especially importantwhere personal relationships count for a lot and
where customers tend to continue withsuppliers out of habit or inertia.
Customer Relationship Management (CRM)Maximizing customer value means cultivating long
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Maximizing customer value means cultivating longterm relationships.
Customer relationship management (CRM) is theprocess of managing detailed information aboutindividual customers and carefully managing allcustomer touchpoints to maximize customer Loyalty.
A customer touch point is any occasion on which acustomer encounters the brand and product.
For a hotel, the touch points include reservations,check-in and check-out, frequent-stay programs, roomservice, business services, exercise facilities, laundry
service, restaurants and bars.
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Based on what they know about each valued
customer, companies can customize marketofferings, services, programs, messages andmedia.
CRM is important because a major driver ofcompany profitability is the aggregate value ofthe companys customer base.
CRM enables companies to offer individualisedmarket offerings through masscustomisation.
Mass Marketing Versus One-to-One Marketing
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1-to-1 marketing principles applied to CRM
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Marketing:
Identify your prospects and customers
Differentiate customers in terms of :- Their needs
- Their value to your company.
Interact with individual customers to improve yourknowledge about their individual needs and to buildstronger relationships.
Customize products, services and messages to
each customer
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Increasing the longevity of the customerrelationship.
Enhancing the growth potential of each customerthrough share-of-wallet, cross selling and up-
selling. Harley-branded merchandise amounted tomore than $211 million in company sales in 2003.
Making low-profit customers more profitable or
terminating them.
Focusing disproportionate effort on high-valuecustomers.
Attracting, Retaining and Growing Customers
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Attracting, Retaining and Growing Customers
Suspects are people or organizations who mightconceivably have an interest in buying thecompanys product or service, but may not have themeans or real intention to buy.
The next task is to identify which suspects are reallygood prospects customers with the motivation,ability and opportunity to make a purchase byinterviewing them, checking on their financial
standing and so on.Too many companies suffer from high customerchurn high customer defection. It is like addingwater to a leaking bucket.
The Customer-Development Process
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There are two main ways to strengthen customer retention.One is to erect high switching barriers Customers are less
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One is to erect high switching barriers . Customers are lessinclined to switch to another supplier when this would involvehigh capital costs, high search costs or the loss of loyal-
customer discounts. The better approach is to deliver highcustomersatisfaction. This makes it harder for competitors tooffer lower prices or inducements to switch.
The best thing a company can do is to make it easy for the
customer to complain. Suggestion forms, toll-free numbers,Web sites and e-mail addresses allow for quick, two-waycommunication. The 3M Company claims that over two-thirdsof its product improvement ideas come from listening tocustomer complaints.
Customers who have complained to an organization and hadtheir complaints satisfactorily resolved tell an average of five
people about the good treatment they received.
Interesting facts that bear on customer retention.
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Acquiring new customers can cost five times more than thecosts involved in satisfying and retaining current
customers. It requires a great deal of effort to inducesatisfied customers to switch away from their currentsuppliers.
The average company loses 10 percent of its customerseach year.
A 5 percent reduction in the customer defection rate can
increase profits by 25 percent to 85 percent, depending onthe industry.
The customer profit rate tends to increase over the life ofthe retained customer.
Building Loyalty
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g y y
How much should a company invest in building
loyalty so that the costs do not exceed the gains?We need to distinguish five different levels ofinvestment in customer relationship building.
Basic MarketingReactive MarketingAccountable Marketing.
Proactive MarketingPartnership Marketing.
Levels of Relationship Marketing
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Reducing Customer Defection
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The company must define and measure its retention
rate.
The company must distinguish the causes of customerattrition and identify those that can be managed better.
The company needs to estimate how much profit it loseswhen it loses customers. In the case of an individualcustomer, the lost profit is equal to the customerslifetime value.
The company needs to figure out how much it wouldcost to reduce the defection rate. As long as the cost isless than the lost profit, the company should spend the
money.
Forming Strong Customer Bonds
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Adding Financial Benefits
Frequency programs (FPs) are designed to providerewards to customers who buy frequently and in substantialamounts. Frequency marketing is an acknowledgment ofthe fact that 20 percent of a companys customers mightaccount for 80 percent of its business. Frequency programsare seen as a way to build long-term loyalty with thesecustomers, potentially creating cross-selling opportunities inthe process.
Airlines run tiered loyalty programs in which they offerdifferent levels of rewards to different travelers. They mayoffer one frequent-flier mile for every mile flown tooccasional travelers and two frequent-flier miles for every
mile flown to top customers.
Adding Social Benefits
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Company personnel work on cementing social bonds with customers byindividualizing and personalizing customer relationships.
Many companies have created Club Membership Programs. Clubmembership can be open to everyone who purchased a product or service,or it can be limited to an affinity group or to those willing to pay a small fee.Harley DavidsonThe world-famous motorcycle company sponsors the Harley owners Group(H.O.G), which now numbers 650, 000 members in over 1200 chapters. Thefirst time buyer of a Harley-Davidson motorcycle gets a free one yearmembership. H. O. G. benefits include a magazine called Hog Tales, atouring handbook. Emergency road service, a specially designed insuranceprogram, discount hotel rates and a Fly & Ride program enabling members
to rent Harleys while on vacation. The company also maintains an extensiveWeb site devoted to H. O. G., which includes information on club chapters,events and a special members-only section.
Adding Structural Ties
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Create long-term contracts. Charge a lower price to consumers who buy larger
supplies. Turn the product into a long-term service.
Customer Database and Database Marketing
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Marketers must know their customers. And in order to know
the customer, the company must collect information and storeit in a database and do database marketing.
A customer database is an organized collection ofcomprehensive information about individual customers orprospects that is current, accessible and actionable for suchmarketing purposes as lead generation, lead qualification, saleof a product or service, maintenance of customer relationships.
Database marketing is the process of building, maintainingand using customer database and other databases (products,suppliers, resellers) for the purpose of contacting, transactingand building customer relationships.
Using the Database
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Using the Database
To identify prospects.
To decide which customers should receive a particular offer.
To deepen customer loyalty
To reactivate customer purchases
To avoid serious customer mistakes.
Database marketing is most frequently used byb i k t d i id (h t l
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business marketers and service providers (hotels,banks, airlines; and insurance, credit card and
telephone companies) that normally and easilycollect a lot of customer data.
Other types of companies that are in the bestposition to invest in CRM are companies that do a lotof cross-selling and up-selling (e.g., GE andAmazon) or companies whose customers have
highly differentiated needs and are of highlydifferentiated value to the company. It is used lessoften by packaged-goods retailers and consumerpackaged goods companies.
The Central Role of Strategic Planning
f l k i i i h bili i
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Successful marketing requires companies to have capabilities
such as understanding & capturing customer value, creating
customer value, delivering customer value, and sustainingcustomer value. We start the process with Strategic Planning.
Strategic planning calls for action in three key areas:
The first is managing a companys businesses as an
investment portfolio.
The second involves assessing each businesss strength by
considering the markets growth rate and the companys
position and fit in that market.The third is establishing a strategy.
For each business, the company must develop a game plan for
achieving its long-run objectives.
The Strategic Planning, Implementation &
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Corporate Planning
Business Unit
Planning
Product Planning
Division Planning
Organizing
Implementing
Measuring results
Diagnosing results
Taking Corrective
Action
The Strategic Planning, Implementation &
Control Processes
Planning Implementing Controlling
Corporate Planning
Business Unit
Planning
Product Planning
Division Planning
Organizing
Implementing
Measuring results
Diagnosing results
Taking CorrectiveAction
The marketing plan is the central instrument for directing
d di ti th k ti ff t
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and coordinating the marketing effort.
Strategic marketing plan lays out the target markets andthe value proposition that will be offered, based on an
analysis of the best market opportunities.
Tactical marketing plan specifies the marketing tactics,
including product features, promotion, merchandising,
pricing, sales channels and service.
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Corporate and Division Strategic Planning
All corporate headquarters undertake four planning activities:
Defining the corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
Defining the Corporate Mission
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Good mission statements have three major
characteristics:
They focus on a limited number of goals.
Mission statements stress the companys major policies and
values.
They define the major competitive spheres within which the
company will operate.
Industry
Products and Applications.
Competence Market Segment
Vertical
Geographical
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Defining the Business
A business must be viewed as a customer-satisfying
process, not a goods-producing process.
Levitt encouraged companies to redefine their
businesses in terms of needs, not products.
It highlights the difference between a target marketdefinition and a strategic market definition.
Product-Oriented Versus Market
Oriented Definitions of a Business
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Missouri-Pacific Railroad
Xerox
Standard Oil
Columbia Pictures
Encyclopaedia Britannica
Carrier
We run a railroad.
We make copying equipment.
We sell gasoline.
We make movies.
We sell encyclopedias.
We make air conditioners and furnaces.
We are a people-and-goods mover.
We help improve office productivity
We supply energy.
We market entertainment.
We distribute information.
We provide climate control in the home
Company Product Definition Market Definition
Oriented Definitions of a Business
Large Companies normally manage quite different
businesses each requiring its own strategy Such different
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businesses, each requiring its own strategy. Such different
businesses are arranged as strategic business units (SBUs).
An SBU has three characteristics: It is a single business or collection of related businesses
that can be planned separately from the rest of the
company.
It has its own set of competitors. It has a manager who is responsible for strategic
planning and profit performance and who controls
most of the factors affecting profit.
The purpose of identifying the companys strategic
business units is to develop separate strategies and
assign appropriate funding.
Assessing Growth Opportunities
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Intensive Growth Strategies
A ff P d t M k t E i G id
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Ansoffs Product-Market Expansion Grid
Market-penetration strategy Product-developmentstrategy
Market-development strategy (Diversification strategy)
New ProductsCurrent Products
Current
Markets
New Markets
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Integrative Growth
Sales and profits of a business can be increasedthrough backward, forward or horizontal integration
within its industry.
Diversification Growth
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Diversification makes sense when a company finds a highly
attractive new industry where it can leverage its strengths. The company could seek new products that have
technological or marketing synergies with existing
product lines appealing to a new group of customers
(concentric diversification). The company can develop new products that are
technologically unrelated to its current product line and
could appeal to its current customers (horizontal
diversification)
The company may seek new opportunities which have
no relation with its current technology, products or
markets (conglomerate diversification)
Business Unit Strategic Planning
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The Business Mission
Each business unit needs to define its specific
mission within the broader company mission.
SWOT Analysis
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SWOT Analysis
The overall evaluation of a companys strengths,
weaknesses, opportunities and threats is called
SWOT analysis.
It involves monitoring the external and internal
marketing environment.
External Environment
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External Environment
(Opportunity and Threat) Analysis
A business unit has to monitor key macro-environment
forces (demographic-economic, natural, technology
competitors, suppliers, distributors, dealers) that affect
its ability to earn profits. The business unit should set upa marketing intelligence system to track trends and
important developments. For each trend or development,
management needs to identify the associated
opportunities and threats.
A marketing opportunity is an area of buyer need and
i i hi h h i hi h b bili h
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interest in which there is a high probability that a
company can profitably satisfy that need.
There are three main sources of market opportunities.
The first is to supply something that is in short supply.
The second is to supply an existing product or service in
a new or superior way.
The third source often leads to a totally a new product
or service.
To evaluate opportunities, companies can use Market
O t it A l i (MOA) t d t i th
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Opportunity Analysis (MOA) to determine the
attractiveness and probability of success:
Can the benefits involved in the opportunity be articulated
convincingly to a defined target market (s)?
Can the target market (s) be located and reached with cost-
effective media and trade channels? Does the company possess or have access to the critical
capabilities and resources needed to deliver the customer
benefits?
Can the company deliver the benefits better than any actual orpotential competitors?
Will the financial rate of return meet or exceed the companys
required threshold for investment?
Internal Environment (Strengths/Weaknesses)
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Internal Environment (Strengths/Weaknesses)
Analysis
Each business needs to evaluate its internal
strengths and weaknesses.
The business should limit itself to thoseopportunities where it possesses the required
strengths or whether it should consider opportunities
that means it might have to acquire or develop
certain strengths.
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Goal Formulation
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Goal Formulation
Once the company has performed a SWOTanalysis, it can proceed to develop specific goals
for the planning period. This stage of the process
is called goal formulation.
Managers use the term goals to describe
objectives that are specific with respect to
magnitude and time.
They must be arranged hierarchically from the most to
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They must be arranged hierarchically, from the most to
the least important.
Objectives should be stated quantitatively whenever
possible.
Goals should be realistic based on opportunities &
strengths.
Objectives must be consistent increasing R & D
activities and simultaneously reducing product
development costs may not be possible.
Strategy Formulation
Goals indicate what a business unit wants to achieve; strategy
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Goals indicate what a business unit wants to achieve; strategyis a game plan for getting there.
Every business must design a strategy for achieving its goals,consisting of a marketing strategy; and a compatible
technology strategy and sourcing strategy.
Porters Generic Strategies:Overall cost leadershipDifferentiationFocus.
According to Porter, firms pursuing the same strategy directedto the same target market constitute a strategic group. Thefirm that carries out that strategy best will make the most
profits
Porter defines strategy as the creation of a
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gyunique and valuable position involving a
different set of activities.
A company can claim that it has a strategywhen it performs different activities from
rivals or performs similar activities in differentways.
Strategic Alliances
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Many strategic alliances take the form of
marketing alliances. These fall into four majorcategories.
Product or service alliances HUL vs. Pepsi.Promotional alliances P&G (Ariel) vs.
Bombay DyeingLogistics alliances TCI & Mitsui vs. Toyota
KirloskarPricing collaborations airlines, hotels etc.
Program Formulation and Implementation
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Once the business unit has developed its principal
strategies, it must work out detailed supportprograms. A great marketing strategy can besabotaged by poor implementation.
In Implementing strategy, companies also must notlose sight of their multiple stakeholders and theirneeds.
Feedback and Control
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As it implements its strategy, a firm needs totrack the results and monitor newdevelopments.
The marketplace will change; and when itdoes, the company will need to review andrevise its implementation programs,strategies, or even objectives.
Nature and Contents of a Marketing Plan
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A marketing plan is a written document that
summarizes what the marketer has learned aboutthe marketplace and indicates how the firm plans toreach its marketing objectives.
It contains tactical guidelines for the marketingprograms and financial allocations over the planningperiod. It is one of the most important outputs of the
marketing process.
Contents of the Marketing Plan
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Contents of the Marketing Plan
Executive summary and table of contents.
Situation analysis
Marketing strategy.
Financial Projections.
Implementation controls.
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