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Chapter One

Marketing: Managing ProfitableCustomer Relationships


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Roadmap: Previewing the Concepts

Prentice Hall, Inc. Copyright 2007 1-2

1. Define marketing and the marketingprocess.

2. Explain the importance of understanding

customers and identify the five coremarketplace concepts.

3. Identify the elements of a customer-drivenmarketing strategy and discuss themarketing management orientations.

4. Discuss customer relationship managementand creating value for and capturing valuefrom customers.

5. Describe the major trends and forceschanging the marketing landscape.


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What Is Marketing?

Simple Definition:

Marketing is managing profitable

customer relationships.

Goals:

1.Attract new customers by promisingsuperior value.

2. Keep and grow current customers bydelivering satisfaction.


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Marketing Defined

A social and managerial process bywhich individuals and groups obtain

what they need and want throughcreating and exchanging products andvalue with others.

OLD View

of Marketing:Making a Sale

Telling & Selling

New View

of Marketing:

Satisfying

customer needs

NEW View

of Marketing:Satisfying

Customer Needs


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The Marketing Process

A simple model of the marketing process:

Understand the marketplace and customer needs

and wants. Design a customer-driven marketing strategy.

Construct a marketing program that delivers

superior value.

Build profitable relationships and create customerdelight.

Capture value from customers to create profits

and customer quality.


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Needs, Wants, & Demands

Need:State of felt deprivation including

physical, social, and individual needs. Physical needs:

Food, clothing, shelter, safety

Social needs:

Belonging, affection

Individual needs:

Learning, knowledge, self-expression


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Needs, Wants, & Demands

Wants:

Form that a human need takes, as

shaped by culture and individualpersonality.

Wants + Buying Power = Demand


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Need /Want Fulfillment

Needs and wants are fulfilled through a

Marketing Offer:

Some combination of products, services,

information, or experiences offered to a

market to satisfy a need

or want.


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Need /Want Satisfiers

Products:

Persons

Places

Organizations

Information

Ideas

Services

Activity or benefit

offered for sale

that is essentiallyintangible and

does not result in

ownership.

Brand Experiences:

. . . dazzle their senses, touch their hearts,stimulate their minds.


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Marketing Myopia

Marketing myopia occurs when sellers

pay more attention to the specific

products they offer than to the benefitsand experiences produced by the

products.

They focus on the wants and lose

sight of the needs.


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Value & Satisfaction

Care must be taken when setting

expectations:

If performance is lowerthan expectations,

satisfaction is low.

If performance is higherthan expectations,

satisfaction is high.


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Exchange vs. Transaction

Exchange:

Act of obtaining

a desired object

from someone

by offering

something in

return.

Transaction:

A trade of

values betweentwo parties.

One party givesX to another

party and gets Yin return. Caninclude cash,credit, or check.


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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.


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Modern Marketing Systems

Main elements in a modern marketing

system include:

Suppliers

Company (marketer)

Competitors

Marketing intermediaries Final users


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Marketing Management

The art and science of choosing target

markets and building profitable

relationships with them. Requires that consumers and the

marketplace be fully understood


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Designing a winning marketing

strategy requires answers to the

following questions:

1. What customers will we serve?What is our target market?

2. How can we best serve thesecustomers?

What is our value proposition?


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Segmentation & Target Marketing

Market Segmentation:

Divide the market into segments of

customers

Target Marketing:

Select the segment to cultivate


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Demand

Management

Finding andincreasing

demand, also

changing or

reducingdemand, as in

demarketing.

Demarketing

Temporarily orpermanently

reducing the

number of

customers orshifting their

demand.


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Value Proposition

The set of benefits or values a

company promises to deliver to

consumers to satisfy their needs. Value propositions dictate how firms will

differentiate and position their brands in

the marketplace.


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The Marketing Plan

Transforms the marketing strategy into

action

Includes the marketing mix and 4 Ps of

marketing:

Product

Price

Place (Distribution)

Promotion


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Customer Relationship Management

The overall process of building and

maintaining profitable customer

relationships by delivering superiorcustomer value and satisfaction.

Acquiring customers

Keeping customers Growing customers


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Customer PerceivedValue

Customers evaluation of the difference

between all of the benefits and all of the

costs of a marketing offer relative tothose of competing offers.


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Customer Satisfaction

Dependent on the products perceived

performance relative to a buyers

expectations. Customer satisfaction often leads to

consumer loyalty.

Some firms seek to DELIGHT customers

by exceeding expectations.


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Customer Relationships

Loyalty and retention programs buildrelationships and may feature:

Financial Benefits EX: Frequency marketing programs

Social Benefits

EX: Club marketing programs

Structural Ties

Focus is on relating directlytoprofitable customers, for the longterm.


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Partner Relationship Marketing

Marketing partners help create customer

value and assist in building customer

relationships. Partners inside the firm:

All employees customer focused

Teams coordinate efforts toward customers

Partners outside the firm: Supply chain management

Strategic alliances


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CustomerEquity

The combined discounted customer

lifetime values of all the companys

current and potential customers. Classify customers by loyalty and

potential profitability

Manage accordingly


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The New Digital Age

Technology impacts the ways firms bring

value to their customers.

Greater connectivity means greater access toinformation, faster travel and communication.

The Internet allows anytime, anywhere

connections between firms and customers.

Click-and-mortar companies Click-only companies

Business-to-business e-commerce


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New MarketingLandscape

Rapid Globalization

Ethics and Social Responsibility

Not-for-Profit Marketing

New World of Marketing Relationships


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Chapter Two

Company and Marketing

Strategy:

Partnering to BuildCustomer Relationships


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Explain companywide strategic planning andits four steps.

Discuss how to design business portfolios and

growth strategies.

Explain marketings role in strategic planningand how marketing works with its partners tocreate and deliver customer value.

Describe the elements of a customer-drivenmarketing strategy and mix, and the forces thatinfluence it.

List the marketing management functions,including the elements of a marketing plan.


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Strategic Planning

The process of developing and

maintaining a strategic fit between the

organizations goals and capabilitiesand its changing marketing

opportunities.


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Steps in Strategic Planning

1. Defining the company mission.

2. Setting company objectives and

goals.

3. Designing the business portfolio.

4. Planning marketing and other

functional strategies.


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The Mission Statement

Questions the mission statement

should answer include:

What is our business?

Who is our customer?

What do consumers value?

Whatshouldour business be?


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The Mission Statement:

Should be realistic.

Should be specific.

Should fit the market environment.

Should be based on distinctive

competencies.

Should be motivating.


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Designing the Business Portfolio

The business portfolio is the collection of

businesses and products that make up the

company.

The company must:

analyze its current business portfolio or Strategic

Business Units (SBUs),

decide which SBU

s should receive more, less, orno investment,

develop growth strategies for growth or

downsizing.


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Portfolio Analysis

An evaluation of the products and

business making up the company.

Resources are directed to more

profitable businesses and weaker ones

are phased down or dropped.


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Strategic Business Unit (SBU)

A unit of the company that has a

separate mission and objectives and

that can be planned independently fromother company businesses.

Can be a company division, a productline within a division, or sometimes a

single product or brand.


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BCG Growth-Share Matrix

Stars High share of low growth market.

Build into cash cow via investment.

Cash Cows High share of low growth market.

Maintain or harvest for cash to build STARS.

Question Marks Low share of high growth market.

Build into STAR via investment if warranted, orreallocate financing and let slip into DOG status.

Dogs Low share of low growth market. Maintain or

divest.


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Problems with Matrix Approaches

Can be difficult, time consuming, and costly

to implement.

Difficult to define SBUs and measure marketshare and growth rate.

Focus is on current businesses; gives little

help with future planning.

Can place too much emphasis on growth.

Can lead to poorly planned diversification.


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Product/MarketExpansion Grid

Market Penetration

Existing markets, existing products

Market Development

New markets, existing products

Product Development

Existing markets, new products

Diversification

New products, new markets


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Value Delivery Network

Components include:

Companys value chain

Each department is a link

Distributors

Suppliers

Customers Improved performance in delivery value

to customers is the goal.


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Target Marketing

Involves evaluating each market

segments attractiveness and selecting

one or more segments to enter.

Target segments that can sustain

profitability.


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Market Positioning

Arranging for a product to occupy a

clear, distinctive, and desirable place

relative to competing products in theminds of target consumers.

Begins with differentiating thecompanys marketing offer so it gives

consumers more value.


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The Marketing Mix

The set of controllable, tactical

marketing tools that the firm blends to

produce the response it wants in thetarget market.

Product

Price

Place (distribution)

Promotion


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The Marketing Mix

Product:

Variety, quality,

design, features,

brand name,

packaging and

services.

Promotion:

Advertising, salespromotion, public

relations and

personal selling.

Place:

Channels, coverage,

logistics, locations,

transportation,

assortments and

inventory.

Price:

List price, discounts,allowances, payment

period and credit

terms.


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The 4 Ps & the 4 Cs

of the Marketing Mix

4 Ps

Sellers View

Product

Price

Place

Promotion

4 Cs

Buyers View

Customer Solution

Customer Cost

Convenience

Communication


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Managing the MarketingEffort

Four marketing management functions:

Marketing Analysis

SWOT analysis is key.

Marketing Planning

Create brand marketing plan.

Marketing Implementation

Determine who, where, when, and how. Marketing Control

Evaluate results, take corrective action.


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SWOT Analysis

Strengths:

Internal capabilities that may help a

company reach its objectives.

Weaknesses:

Internal limitations that may interferewith a companys ability to achieve its

objectives.


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SWOT Analysis

Opportunities:

External factors that the company may

be able to exploit to its advantage.

Threats:

Current and emerging external factorsthat may challenge the companys

performance.


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Brand / Product Marketing Plan

1. Executive summary

2. Current marketing situation

3. Analysis of threats and opportunities4. Objectives for the brand

5. Marketing strategy

6. Action programs7. Marketing budget

8. Controls


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Marketing Department

Organization

Functional Organization:

Each marketing activity is headed by a

functional specialist. Sales Manager

Advertising Manager

Director of Marketing Research

Customer Service Manager

New Product Manager


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Organization

Geographic Organization:

Sales and marketing people are

assigned to specific countries, regions,and districts.

Product Management Organization:One person given responsibility for

complete strategy and marketing program

for a single product.


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Organization

Market or Customer Organization:

Manager responsible for particular

market or customer.

Combination Organization:

Use some combination of the previous

four approaches.

This is especially true in large companies

(e.g., Procter & Gamble)


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Marketing Control Process

Set Goals

Measure Performance

Evaluate Performance

Take Corrective Action


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Marketing Control Process

Operating Control

Evaluates performance against the plan

and takes corrective action. Strategic control

Evaluates whether strategies match

opportunities.

The marketing audit is major tool.


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Return on Marketing

Assessed using one or more methods:

Standard marketing performance

measures Brand awareness, sales, market share

Customer-centered measures

Customer acquisition, customer

retention, customer lifetime value

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