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Chapter 1 Marketing: Managing Profitable Customer Relationships 1 Concept Connections Define marketing and the steps in the marketing process. Explain the core marketing concepts. Define marketing management and examine how marketers manage demand and build profitable customer relationships. Compare the five marketing management philosophies. Capturing value from customer. Jian Hong SHAO USTB What is Marketing? Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Simply put: Marketing is the delivery of customer satisfaction at a profit. Jian Hong SHAO USTB The Marketing Process Create value for customers and build customer relationships Understand the marketplace and customer needs and wants Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Capture value from customers in return Build profitable relationships and create customer delight Capture value from customers to create profits and customer equity Jian Hong SHAO USTB 1 Understanding the Marketplace and Consumer Needs Jian Hong SHAO USTB Core Marketing Concepts Needs, wants, and demands Markets Exchange, transactions, and relationships Products and services Value, satisfaction, and quality Jian Hong SHAO USTB Needs, Wants and Demands? Needs - state of felt deprivation for basic items. Such as food and clothing, and complex needs such as for belonging. Jian Hong SHAO USTB Needs, Wants and Demands? Wants - form that a human need takes as shaped by culture and individual personality. Jian Hong SHAO USTB Needs, Wants and Demands ? Demands - human wants backed by buying power. Wants Buying Power “Demands” Jian Hong SHAO USTB What Will Satisfy Consumer’s Needs & Wants? Products Anything that can be Offered to a Market to Satisfy a Need or Want Experiences Persons Places Organizations Information Ideas Services Activities or Benefits Offered for Sale That Are Essentially Intangible and Don’t Result in the Ownership of Anything Jian Hong SHAO USTB How Do Consumers Choose Products and Services? Value Gained From Owning a Product and Costs of Obtaining the Product is Customer Value Product’s Perceived Performance in Delivering Value Relative to Buyer’s Expectations is Customer Satisfaction Total Quality Management Involves Improving the Quality of Products, Services, and Marketing Processes Jian Hong SHAO USTB Value & Satisfaction If performance is lower than expectations, satisfaction is low If performance is higher than expectations, satisfaction is high Expectation 8 Performance 10 Expectation 10 Performance 8 Jian Hong SHAO USTB Quality Quality has a direct impact on product / service and performance, therefore it is closely tied to customer value and satisfaction The aim of today’s Total Quality Management is total customer satisfaction Jian Hong SHAO USTB How Do Consumers Obtain Products and Services? Exchanges Transactions Relationships Building a Marketing Network Consisting of The Company and All Its Supporting Stakeholders Jian Hong SHAO USTB Who Purchases Products and Services? Resources to Exchange Willingness to Exchange Market – Ethical Buyers who share a particular need or want that canAttitudes be satisfied through of Others or exchange relationships. Unexpected Situational Factors People Who Exhibit Need Actual Buyers Potential Buyers Jian Hong SHAO USTB Modern Marketing System Competitors Company (Marketer) Marketing Intermediaries End User Market Environment Environment Suppliers Jian Hong SHAO USTB 2. Designing a Customer-Driven Marketing Strategy Jian Hong SHAO USTB Marketing Management Marketing Management Demand Management The art and Science of Choosing target Markets & Building profitable Relationships. Finding and increasing demand, also changing or reducing demand such as in Demarketing Profitable Customer Relationships Attracting new customers and retaining and building relationships with current customers Jian Hong SHAO USTB Marketing Management Philosophies Production Concept Product Concept Selling Concept Marketing Concept •Consumers favor products that are available and highly affordable. •Consumers favor products that offer the most quality, performance, and innovative features. •Consumers will buy products only if the company promotes/ sells these products. •Focuses on needs/ wants of target markets & delivering satisfaction better than competitors. of target Societal Marketing Concept •Focuses on needs/ wants Jian Hong SHAO USTB markets & delivering superior value. Marketing and Sales Concepts Contrasted Starting Point Focus Factory Existing Products Means Ends Selling and Promoting Profits through Volume The Selling Concept Market Customer Needs Integrated Marketing Profits through Satisfaction The Marketing Concept Jian Hong SHAO USTB Societal Marketing Concept Society (Human Welfare) Societal Marketing Concept Consumers (Want Satisfaction) Company (Profits) Jian Hong SHAO USTB 3. Preparing a Marketing Plan and Program Jian Hong SHAO USTB The Marketing Mix PRODUCT PRICE TARGET CUSTOMERS - needs DISTRIBUTION PROMOTION Jian Hong SHAO USTB The 4 P’s & 4 C’s of the Marketing Mix 4 P’s - Seller’s View Product Price Place Promotion 4 C’s - Buyer’s View Customer Solution Customer Cost Convenience Communication Jian Hong SHAO USTB 4. Building Customer Relationships Jian Hong SHAO USTB Customer Relationship Management The process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Jian Hong SHAO USTB Partner Relationship Marketing Connecting Inside the Company Every employee must be customerfocused Teams coordinate efforts toward customers Connecting With Outside Partners Supply Chain Management Strategic Alliances Jian Hong SHAO USTB 5. Capturing Value from Customers Jian Hong SHAO USTB Satisfaction Satisfaction is . . . “a person’s feelings of pleasure resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.” Jian Hong SHAO USTB Customer Loyalty & Retention Loyalty is a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences. Show Behavioral & Psychological Commitments Jian Hong SHAO USTB A Loyal Customer is one Who… Show Behavioral Commitment Buys from one supplier (sole loyalty) frequently Buys a large proportion, increasingly buys more Provides constructive feedback/suggestions Exhibits Psychological Commitment Commitment-doesn’t consider terminating the relationship Has a positive attitude toward provider Say good things about provider Resist changing despite competitors’ persuasion Willing to forgive mistakes Jian Hong SHAO USTB Benefits for Increasing Customer Loyalty Reduced sales and marketing costs Lower transaction costs Increase in sales Less price competition Jian Hong SHAO USTB Customer Loyalty & Retention Customer Lifetime Value The entire stream of purchases that the customer would make over a lifetime of patronage. Share of Customer The share a company gets of the customers purchasing in their product categories. Jian Hong SHAO USTB Customer Relationship Groups Jian Hong SHAO USTB New Marketing Landscape Learn About & Track Customers With Databases Create Products & Services Tailored to Meet Customer Needs Connecting Technologies in Computers, Telecommunications, Information, & Transportation Communicate With Customers in Groups Or One-on-One Distribute Products More Efficiently & Effectively Jian Hong SHAO USTB The Internet The Internet has been hailed as the technology behind a new model for doing business. New applications include: Internet – connecting with customers Intranets – connecting with others in the company Extranets – connecting with strategic partners, suppliers, and dealers. Purchasing will be over $2.3 trillion in 2006. Jian Hong SHAO USTB Connections With Customers Most marketers are targeting fewer, potentially more profitable customers. Asking: What value does the customer bring to the organization? Are they worth pursuing? Focus has shifted to: keeping current customers building lasting relationships based on superior satisfaction Jian Hong SHAO USTB and value. New Marketing Landscape Rapid Globalization Not-for-Profit Marketing Ethics & Social Responsibility New World of Marketing Relationships Jian Hong SHAO USTB The Marketing Process Jian Hong SHAO USTB Review of Concept Connections Define marketing and the steps in the marketing process. Explain the core marketing concepts. Define marketing management and examine how marketers manage demand and build profitable customer relationships. Compare the five marketing management philosophies. Capturing value from customer. Jian Hong SHAO USTB