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Kotler, Armstrong Principles of Marketing 4e Session 2 and Chapter 1 Marketing: Creating Customer Value and Satisfaction, Profitably Agenda • Revision on Session 2 • Identify core activities, customer base, business values and direction • The marketing process • Understanding the market and customer needs 2 Philip Kotler (the author) • Philip Kotler is an American academic focused on marketing • The author of Marketing Management among dozens of other textbooks and books, he is the S.C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University 3 Chapter Objectives 1. Define marketing, employing such key elements as value, customer relationships, needs, wants and demands 2. Discuss marketing management and elaborate on the basic ideas of demand management and building profitable customer relationships 3. List the marketing management philosophies and be able to distinguish between them. 4. Analyse the key marketing challenges of this century and reflect on the ways these might be overcome 4 What Is Marketing? • An activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large 5 The Marketing Process 6 Selling and Promotion are: A. are synonymous with the term marketing B. are only the tip of the marketing iceberg C. are the most important marketing functions D. are the least important marketing functions E. are not part of marketing 7 Understanding the Marketplace and Customer Needs • Marketers need to understand customer needs, wants and demands and the marketplace within which they operate 8 Needs, Wants and Demands (1) • Human needs are the most basic concept underlying marketing. – Humans have many complex needs including physical, social and individual needs – Marketers stimulate rather than create these needs, they are part of human make up 9 Needs, Wants and Demands (2) – When a need is not satisfied, a person will either try to reduce the need or look for an object that will satisfy it – People in less economically developed societies might try to reduce their desires and satisfy them with what is available – People in industrial societies might try to develop objects that will satisfy their needs 10 Needs, Wants and Demands (3) • Wants are the form taken by human needs and are shaped by culture and individual personality. – For example, a hungry person in Australia, Singapore or Hong Kong might want something different for lunch from a hungry person in the South Pacific 11 Needs, Wants and Demands (4) – As a society evolves, the wants of its members expand – Marketers try to provide more want-satisfying goods and services 12 Needs, Wants and Demands (5) • Demands are the human wants that are backed up by buying power – Customers view products as bundles of benefits and choose the products that give them the best bundle for their money – Outstanding companies go to great lengths to learn about and understand their customers’ needs, wants and demands 13 Needs, Wants and Demands (6) – They conduct customer research, analyse and monitor customer behaviour, complaints, inquiry, warranty and service performance data – Understanding customer needs, wants, and demands in detail provides important input for designing marketing strategies 14 Wants supported by buying power is best described as a(n): A. B. C. D. E. need desire demand exchange manifestation of greed 15 Market Offerings: Goods, Services and Experiences • A market offering is a product that is some combination of goods, services and experiences that can be offered to a market to satisfy a need or want • A product includes physical objects, services, persons, places, ideas and organisations • Anything that satisfies a need can be called a product 16 Market Offerings: Goods, Services and Experiences (2) • Marketers often use the expression goods and services to distinguish between tangible and intangible ones • However these should be viewed as continuum and not as a basic dichotomy 17 Customer Perceived Value and Satisfaction • Customer perceived value is the difference between the values the customer gains in owning and using a product and the costs of obtaining the product • Customer Satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectations 18 Exchange, Transactions and Relationships (1) • Exchange is the act of obtaining a desired object from someone by offering something in return • Exchange means that people do not need to prey on others, depend on donations or possess the skills to produce every necessity for themselves 19 Exchange, Transactions and Relationships (2) • Exchange is the core concept of marketing. For an exchange to take place, several conditions must be satisfied: • At least two parties must participate and each must have something of value to the other • Each party must want to deal with the other and be free to accept or reject an offer • Each party must be able to communicate and deliver 20 Exchange, Transactions and Relationships (3) • A transaction is marketing’s unit of measurement • A transaction consists of a trade of value between two parties • In transactions it must be possible to state that what each party is giving and gaining 21 Exchange, Transactions and Relationships (3) • Relationship marketing is the process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders 22 Markets • Market - A set of all actual and potential buyers of a product 23 A Simple Marketing System 24 Marketing • Marketing means managing markets to bring about exchanges for the purpose of satisfying human needs and wants • Marketing is carried out by both sellers and buyers, and company purchasing agents 25 Elements of a Modern Marketing System 26 Designing a Customer-Driven Marketing Strategy • Marketing management is: The analysis, planning, implementation and control of programs designed to create, communicate and deliver value to customers and facilitate managing customer relationships in ways that enable the organisation to meet its objectives and those of its stakeholders 27 A Customer-Driven Marketing Strategy • A winning marketing strategy asks ‘what customers will we serve?’ and ‘Who is our target market? 28 Selecting Customers to Serve • Marketers cannot serve all customers in every way with a single market offering • It is necessary to select customers that can be served well and profitably • De-marketing is marketing in which the task is to temporarily or permanently reduce demand 29 Selecting Customers to Serve • Managing demand means managing customers who come from two groups: new and repeat customers • Keeping existing customers is important as the cost to attract new customers is five times as much 30 Selecting Customers to Serve • Marketers retain customers by ensuring that branded goods, services and experiences offer intrinsic value and that there is a sense of excitement or enjoyment associated with the marketing offering and communication used • Context is important - excitement is not always appropriate • The key to offering excitement is involvement and interactivity 31 32 Emotional Engagement 33 Choosing a Value Proposition • The organisation must decide how it will serve targeted customers - how it will differentiate and position itself in the marketplace • A value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs 34 Marketing Management Orientations (1) • The Production Concept – Consumers favour products that are available and highly affordable • The Product Concept – Consumers favour products that offer the most quality, performance and innovative features 35 Marketing Management Orientations (2) • The Selling Concept – Consumers won’t buy enough of the organisation’s products unless the organisations undertakes a large-scale selling and promotion effort • The Marketing Concept – Achieving organisational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors 36 Societal Marketing • Organisations should determine the needs, wants and interests of target markets and deliver the desired satisfaction more effectively and efficiently than competitors in a way that maintains or improves the customer’s and society’s well-being 37 Considerations Underlying the Societal Marketing Concept 38 Preparing an Integrated Marketing Program • The company’s marketing strategy outlines which customers the company will serve and how it will create value • The integrated marketing program is developed to actually deliver the value to target customers • The program builds relationships by transforming the strategy into action, it consists of the marketing mix 39 The Extended Marketing Mix 40 Building Customer Relationships • The first three steps in the marketing process: 1. Understanding the marketplace and customer needs (research) 2. Designing a customer-driven strategy 3. Marketing programs lead to the most important step: Building profitable customer relationships 41 Customer Relationship Management (CRM) • CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction • CRM deals with all aspects of acquiring, keeping and growing customers 42 Relationship Building Blocks: Customer Value and Satisfaction • The key to building long lasting relations is to create superior customer value and satisfaction. 1. Customer Perceived Value is the evaluation of the difference between the benefits and all the costs of a market offering relative to those of competing offers 43 Relationship Building Blocks: Customer Value and Satisfaction (2) 2. Customer Satisfaction depends on the product’s perceived performance matches a buyer’s expectations 3. If the product’s performance falls short of expectations, the buyer is dissatisfied 4. If the performance matches or exceeds expectations, the buyer is satisfied or delighted 44 The Changing Nature of Customer Relationships • Companies are building more direct and lasting relationships with more carefully selected customers 1. Companies now use customer profitability analysis to identify losing customers and relate to winning customers (selective relationship management) 45 The Changing Nature of Customer Relationships (2) 2. CRM is used to retain current customers and build long term relationships with them 3. Companies aim to connect more deeply with customers and more directly 4. Direct marketing is booming 46 Direct Marketing • The practice of delivering promotional messages directly to potential customers on an individual basis as opposed to through a mass medium e.g. telemarketing, emails, texts, online display ads, flyers etc • Mass media is a means of public communication reaching a large audience 47 Capturing Value from Customers • Creating Customer Loyalty and Retention – Good CRM creates customer delight – Delighted customers remain loyal and talk favourably about the company. • Growing Share of Customer – Good CRM can help marketers to increase their share of customer 48 Capturing Value from Customers (2) • Building Customer Equity – This is the combined discounted customer lifetime values of all the company’s current and potential customers 49 Building the Right Relationship with the Right Customers 50 The New Marketing Landscape • Marketing operates within a dynamic global environment • Rapid changes can quickly make a winning strategy out of date 51 The New Marketing Landscape (2) • Today’s companies deal with changing customer values and orientations • market maturity in many industries, movement of manufacturing to least cost countries • environmental degradation • increased global competition, and many other economic, political and social problems 52 The New Marketing Landscape (3) • Problems can also become marketing opportunities • New trends include: growth of not for profit marketing rapid globalisation IT changing world economy the call for more socially responsible actions 53 The New Marketing Landscape • The growth of not-for-profit marketing: – Including philanthropic organisations, universities, hospitals, museums, symphony orchestras and even churches 54 The New Marketing Landscape • Rapid Globalisation: – Most marketing organisations are touched by global competition • Customer Information and Digital Marketing: – The IT explosion is accelerating the rate if change and emergence of global competitors 55 The New Marketing Landscape • The changing world economy: – Many countries have grown poorer; around the world people’s needs are greater but many lack the means to pay for necessary goods • The call for more ethical behaviour and social responsibility: – There is an increased call for companies to take responsibility for the social and environmental impact of their actions 56 Next session • • • • Revision Q&A Activity – Stranded on an Island Strategic Marketing See you tomorrow at 5pm 57