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CHAPTER 13 Marketing: Helping Buyers Buy McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved. WHAT’S MARKETING? LO 13-1 According to the American Marketing Association… Marketing – the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large 13-2 MARKETING?: A Better Definition Process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to facilitate exchanges that satisfy customer needs and organization objectives Product Pricing Ideas Promotion Services LO 13-1 Place Goods 2 Important Functions Facilitate Exchanges (Encourage Purchase) Satisfy Customer Needs 13-3 MARKETING FUNDAMENTALS LO 13-1 13-4 FOUR ERAS of U.S. MARKETING LO 13-1 • Production Era • Selling Era • Marketing Concept Era • Customer Relationship Era 13-5 The PRODUCTION and SELLING ERAS LO 13-1 • The general philosophy was “Produce what you can because the market is limitless.” • After mass production, the focus turned from production to persuasion. 13-6 The MARKETING CONCEPT ERA LO 13-1 • After WWII, a consumer spending boom developed. • Businesses knew they needed to be responsive to consumers if they wanted their business. 13-7 APPLYING the MARKETING CONCEPT • The Marketing Concept is a business philosophy that a firm should continually try to offer products that satisfy customers needs while also making a business profit • The Marketing Concept includes three parts: 1. Customer Orientation -- Finding out what customers want and then providing it. 2. Service Orientation -- Making sure everyone in an organization is committed to customer satisfaction. 3. Profit Orientation -- Focusing on the goods and services that will earn the most profit. LO 13-1 13-8 The CUSTOMER RELATIONSHIP ERA LO 13-1 CRM is the process of establishing mutually-beneficial long-term relationships with individual customers to foster loyalty and repeat business Good CRM incorporates technologies and information that allows businesses to develop marketing strategies to sustain long-term customer relationships 13-9 SERVICE with a SMILE LO 13-1 Six Steps for Keeping Your Customers Happy • The cost of acquiring a new customer is 5x the cost of retaining one. Here’s how to keep them: 1. Build trust 2. Emphasize the long term 3. Listen 4. Treat your customers like stars 5. Show appreciation 6. Remember employees are customers too! Source: Inc. Guidebook, Vol. 2 No. 5. 13-10 UNDERSTANDING TODAY’S CUSTOMERS LO 13-1 Today’s Customers are: •Sophisticated •Demanding •Price Sensitive Why is Customer Satisfaction Important? •Getting new customers costs more than keeping them. •Long-term customers boost profits. •Satisfied customers tell their friends. •Customers pay more for good service. •Unhappy customers spread the word. 13-11 The EMERGING MOBILE MARKETING ERA LO 13-1 • As digital technology continues to grow, consumer demands are expected to rise in: 1. Now: Consumers want to interact anywhere, anytime. 2. Can I?: They want to use information in new ways that create value for them. 3. For me: Consumers expect personalized experiences. 4. Simply: Consumers want all interactions to be easy. 13-12 NONPROFIT MARKETING LO 13-1 • Nonprofit marketing tactics include: - Fundraising - Public Relations - Special Campaigns - Ecological practices - Changing public opinions and attitudes - Increasing organizational membership 13-13 The FOUR P’s of Marketing (AKA THE MARKETING MIX) LO 13-2 13-14 THE MARKETING MIX Product Price Promotion Place • Product differentiation • Brand • Cover costs • Competitively priced • Inform and persuade customers to buy • Build positive customer relationships • Distribution channel • Distributors and wholesalers LO 13-2 Product Decisions about product’s design, purpose, brand name, packaging, and warranties Price Decisions based on price setting (what to charge for product) including rebates, and discounts Promotion Decisions that sellers use to persuade and communicate to people to buy their products / services Place (Distribution) Decisions based on moving products from producers to consumers (marketing channels) 13-15 DEVELOPING a PRODUCT LO 13-2 • Product -- A good, service, or idea that satisfies a consumer’s want or need. • Test Marketing -- Testing product concepts among potential product users. • Brand Name -- A word, letter, or a group of words or letters that differentiates one seller’s goods from a competitor’s. 13-16 PRICING and PLACING a PRODUCT LO 13-2 • Pricing products depends on many factors: - Competitors’ prices - Production costs - Distribution - High or low price strategies • Middlemen are important in place strategies because getting a product to consumers is critical. 13-17 PROMOTING the PRODUCT LO 13-2 • Promotion -- All the techniques sellers use to inform people about their products and motivate them to purchase those products. • Promotion includes: - Advertising - Personal selling - Public relations - Word of mouth Photo Courtesy of: Uri Baruchin - Sales promotions 13-18 MARKETING: HOW TO GET INFORMATION • Marketing Research -- Analyzing markets to determine challenges and opportunities, and finding the information needed to make good decisions. • Research is used to identify products consumers have used in the past and what they want in the future. • Research uncovers market trends and attitudes held by company insiders and stakeholders. FOUR STEPS IN MARKETING RESEARCH PROCESS LO 13-3 Marketing research involves gathering, interpreting, and applying information to uncover opportunities and challenges Identify external opportunities Monitor and predict customer behavior Evaluate and improve marketing mix Why to find information? 1. Defining the problem or opportunity and determining the present situation. 1.Secondary Data – Information that already exists, has already been collected 2. Collecting research data. 3. Analyzing the data. 2.Primary Data – Information collected specific to the problem 4. Choosing the best solution and implementing it. 13-19 THE MARKETING ENVIRONMENT LO 13-4 • Environmental Scanning -- The process of identifying factors that affect marketing success. • Factors involved in the environmental scan include: - Global factors - Technological factors - Sociocultural factors - Competitive factors - Economic factors 13-20 The MARKETING ENVIRONMENT LO 13-4 13-21 MARKETS AND THEIR CLASSIFICATION LO 13-4 Market A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products 2 Main Types of Markets 1. Consumer markets Purchasers and/or household members who intend to consume or benefit from the purchased products and who do not buy products to make a profit 2. Business-to-business (B2B) (industrial) markets Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations 13-22 MARKETING STRATEGY: A formal plan that will enable an organization to make the best use of its resources and advantages to meet its objectives LO 13-4 Consists of 2 Basic Steps: 1.Identify your Target Market – the specific group of potential customers on which a firm directs its marketing efforts 1.Create your Marketing Mix – the combination of controllable elements of a marketing plan designed to serve a target market, including product, price, distribution and promotion 13-23 MARKETING to CONSUMERS LO 13-5 Target market selection and evaluation •Target market –A group of individuals, organizations, or both for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group •Market segment –A group of individuals or organizations within a market that share one or more common characteristics •Market segmentation –The process of dividing a market into segments and directing a marketing mix at a particular segment or segments rather than at the total market 13-24 A WELL CHOSEN TARGET MARKET LO 13-5 Size: There must be enough people in your target group to support a business Profitability: The people must be willing and able spend more than the cost of producing and marketing the product Accessibility: Your target must be reachable through channels that your business can afford Limited Competition: Look for markets with limited competition; a crowded market is tough to crack 13-25 SEGMENTING the CONSUMER MARKET LO 13-5 13-26 SEGMENTING the CONSUMER MARKET LO 13-5 13-27 SEGMENTING the CONSUMER MARKET LO 13-5 13-28 MARKETING to SMALL SEGMENTS LO 13-5 • Niche Marketing -- Identifies small but profitable market segments and designs or finds products for them. • One-to-One Marketing-- Developing a unique mix of goods and services for each individual consumer. 13-29 MASS MARKETING vs. RELATIONSHIP MARKETING LO 13-5 • Mass Marketing -Developing products and promotions to please large groups of people. • Relationship Marketing-Rejects the idea of mass production and focuses toward custom-made goods and services for customers. 13-30 STEPS in the CONSUMER DECISION-MAKING PROCESS LO 13-5 1. Problem recognition 2. Search for information 3. Evaluating alternatives 4. Purchase decision 5. Postpurchase evaluation 13-31 KEY FACTORS in CONSUMER DECISION-MAKING LO 13-5 • Learning • Reference Groups • Culture • Subcultures • Cognitive Dissonance 13-32 TURNING NEGATIVES to POSITIVE • Online product reviews have changed the consumer decision-making process. • But the reviews are not always valid because they could be written about the experience instead of the product. • Amazon hopes to correct this issue and has started a program in which the site’s most trusted reviewers are sent products to write about. 13-33 TOP MARKETING CHALLENGES LO 13-5 • Marketing can be challenging in both the B2C and B2B markets. • Common issues are: - Brand awareness - Social media - Converting leads into customers - Budgeting - Increasing profit Source: Entrepreneur, www.entrepreneur.com, accessed November 2014. 13-34 BUSINESS-to-BUSINESS MARKET (B2B) LO 13-6 • B2B marketers include: - Manufacturers - Wholesalers and retailers - Hospitals, schools and charities - Government • Products are often sold and resold several times before reaching final consumers. 13-35 B2B MARKET DIFFERENCES LO 13-6 13-36