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MKTG 301 Principles of Marketing CHAPTER DEVELOPING CUSTOMER RELATIONSHIPS AND VALUE THROUGH MARKETING AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: • Define marketing and explain the importance of (1) discovering and (2) satisfying consumer needs and wants. • Distinguish between marketing mix elements and environmental factors. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: • Understand how organizations build strong customer relationships using current thinking about customer value and relationship marketing. • Describe how today’s market orientation differs from prior eras oriented to production and selling. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: • Understand the meaning of ethics and social responsibility and how they relate to the individual, organizations, and society. • Know what is required for marketing to occur and how it creates customer value and utilities for customers. Would you sell more 43-inch Hitachi Big Screen HDTV monitors for $ 1799 or $499 each? WHAT IS MARKETING? • Being a Marketing Expert: Good News-Bad News • The Good News: You Already Have Marketing Experience • The Bad News: Surprises About the Obvious How would you define marketing ? Marketing Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Products and Services Needs, wants, and demands Core Marketing Concepts Markets Value, satisfaction, and quality Exchange, transactions, and relationships WHAT IS MARKETING? • Marketing: Using Exchanges to Satisfy Needs • The Diverse Factors Influencing Marketing Activities EXCHANGE Exchange Exchange is the trade of things of value between buyer and seller so that each is better off after the trade. FIGURE 1-3 An organization’s marketing department relates to many people, groups, and forces The Organization Society Alliances Other Organizations Research and Development Manufacturing Society Ownership Human Resources Management Information Systems Partnerships Relationships Suppliers Finance Environmental Social Shareholders (owners) Economic Marketing Customers Forces Technological Competitive Regulatory Requirement for Marketing to Occur • • • • Two or More Parties with Unsatisfied Needs Desire and Ability to Satisfy These Needs A Way for the Parties to Communicate Something to Exchange HOW MARKETING DISCOVERS AND SATISFIES CONSUMER NEEDS • Discovering Consumer Needs • The Challenge of Launching Winning New Products • Consumer Needs and Consumer Wants • What a Market Is How many new products are launched each year in US? What percentage succeed in the long run ? 1. Make sure to focus on what the customer benefit is? 2. Learn key lessons from the past Marketing’s first task: discovering consumer needs and wants Organization’s marketing department Discover consumer needs and wants What Motivates a Consumer to Take Action? • Needs - states of felt deprivation including physical needs for food, social needs for belonging and individual needs for self-expression. i.e. I am thirsty. What Motivates a Consumer to Take Action? • Wants - form that a human need takes as shaped by culture and individual personality. i.e. I want a Cola. Wants- Is it enough? Popularity is NOT the objective Don’t want virtual consumption- the phenomenon that occurs when consumer love your products but don’t feel a need to buy it….. What Motivates a Consumer to Take Action? • Demands - human wants backed by buying power. i.e. I have money to buy a Coca-Cola. What is Market ? What is a Market? Potential consumers make up a market, which is: 1.people 2.with the desire and 3.with the ability to buy a specific product. Target Market One or more specific groups of potential customers toward which an organization directs its marketing program. Marketing’s first task: discovering consumer needs and wants Organization’s marketing department Discover consumer needs and wants Information about needs and wants Potential consumers: The market Do you know too much about your consumer? Marketers have always watch consumers asked questions, but what most marketer don’t do is watch consumer CLOSELY enough If you ignore a single bit of potentially valuable information about consumers you are wasting money. What should you know about your customers. • Who buys our product or service? • Who initiates and makes the decision to purchase and who influences the process? • How is the purchase decision made? • What attributes or criteria are important to customers? • What are customers’ perceptions of and attitudes toward our company, product/service or brands? • What factors influence the decision making process? • Contact points where customers can be reached? Marketing’s second task: Satisfying consumer needs Organization’s marketing department Discover consumer needs Satisfy consumer needs Find the right combination of: • Product • Price • Promotion • Place Information about needs Goods, services, ideas Potential consumers: The market Marketing Mix Product Place C Price Promotion Environmental Factors Marketing program Consumer Technological forces Concept Check 1. What is marketing? A: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Concept Check discovering 2. Marketing focuses on __________ satisfying consumer needs and ___________ Concept Check 3. What four factors are needed for marketing to occur? A: (1) Two or more parties with unsatisfied needs, (2) a desire and ability on their part be satisfied, (3) a way for the parties to communicate, and (4) something to exchange. Customer Value Customer value is the unique combination of benefits received by targeted buyers that includes quality, price, convenience, on-timer delivery and both before-sale and after-sale service. THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS ARE BUILT • Global Competition, Customer Value, and Customer Relationships • Relationship Marketing and the Marketing Program • Relationship Marketing: Easy to Understand • Relationship Marketing: Difficult to Implement • The Marketing Program Relationship Marketing The hallmark of developing and maintaining effective customer relationships is today called relationship marketing, linking the organization to its individual customers, employees, suppliers, and other partners for their long term benefit. Marketing Program The marketing program is a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers. THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS ARE BUILT • A Marketing Program for Rollerblade • Expanding the Market for Rollerblade Skates • Exploiting Strengths in Technology Concept Check 1. An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, target markets which are its ____________. Concept Check 2. What are the four marketing mix elements that make up the organization’s marketing program? A: product, price, promotion, place Concept Check 3. What are uncontrollable variables? A: Environmental factors the organization’s marketing department can’t control. These include social, economic, technological, competitive, and regulatory forces. FIGURE 1-7 Four different orientations in the history of American business Company Orientations Towards the Marketplace Production Era Get out production, cut the price. If we can built a better product , the world will beat a path to our door. Marketing Myopia The Marketing Myopia Marketers should NEVER sell products to consumers! • People buy holes, not drills! • Fashion, status, reference groups approval, and warmth, but not coats! Company Orientations Towards the Marketplace Selling Concept Era Get the customers to the fit the company’s offering. Marketing Concept The marketing concept is the idea that an organization should strive to satisfy the needs of consumers, while also trying to achieve the organization’s goals. Company Orientations Towards the Marketplace Marketing Concept Era Find wants and feel them Marketing Concept WE MAKE IT HAPPEN FOR YOU HAVE IT YOUR WAY TO FLY, TO SERVE WE ARE NOT SATISFIED UNTIL YOU ARE Starting point Focus Means Ends Factory Existing products Selling and promotion Profits through sales volume (a) The selling concept Market Customer needs Integrated marketing Profits through customer satisfaction (b) The marketing concept Market Orientation An organization that has a market orientation focuses its efforts on continuously collecting information about customers’ needs and competitors capabilities, sharing this information across departments, and using the information to create customer value. Company Orientations Towards the Marketplace Market Orientation Customer Competition Balancing Customer and Competitor Orientation Competitor Driven Moves mainly based on competitors’ actions and reactions Customer Driven Market Orientation Pays balanced attention both customers and competitors in designing its marketing strategies Focuses on customer developments in designing its marketing strategy and on delivering superior value to its target customers. Customer Relationship Management (CRM) Customer relationship management is the process of identifying prospective buyers, understanding them intimately, and developing long-term perceptions of the organization and its offering so that buyers will choose them in the marketplace. HOW MARKETING BECAME SO IMPORTANT • Ethics and Social Responsibility: Balancing the Interests of Different Groups • Ethics • Social Responsibility Societal marketing concept Macromarketing Micromarketing Societal Marketing Concept The societal marketing concept is the view that an organization should discover and satisfy the needs of its consumer in a way that also provides for society’s wellbeing. Macromarketing Macromarketing looks at how the aggregate flow of a nation’s goods and services benefits society. Micromarketing Micromarketing is how an individual organization directs its marketing activities and allocates its resources to benefit its customers. HOW MARKETING BECAME SO IMPORTANT • The Breadth and Depth of Marketing • Who Markets? • What is Marketed? Let’s watch some commercials (Almost) Anything Can be Marketed Consumer Goods and Services BusinesstoBusiness Marketing Not-ForProfit Marketing Idea, Place, People Marketing HOW MARKETING BECAME SO IMPORTANT • The Breadth and Depth of Marketing (cont) • Who Buys and Uses What is Marketed? Ultimate consumers Organizational buyers • Who Benefits? • How Do Consumers Benefit? Utility Ultimate Consumer Ultimate consumers are the people who use the goods and services purchased for a household. Organizational Buyers Organizational buyers are units such as manufacturers, retailers, or government agencies that buy goods and services for their own use of for resale. Who Benefits? Consumers Company Society Utility Utility is the benefit or customer value received by uses of a product. UTILITIES PROVIDING by MARKETING Utility Examples of Marketing Actions that Create Utility Form benefit provided by transforming raw materials into the finished (PRODUCTION) Place benefit provided by making the products available where consumers want them Time benefit provided by storing products until they need Possession benefit provided by allowing the consumer to own, use and enjoy the product Concept Check 1. Like Pillsbury and General Electric, many firms have gone through four distinct orientations for their businesses: starting production era and ending with with the __________ today’s ________________ market orientation era. Concept Check 2. What are the two key characteristics of the marketing concept? A: An organization should (1) strive to satisfy the needs of consumers (2) while also trying to achieve the organization’s goals. Concept Check 3. In this book the term product refers to what three things? A: Goods (physical products), services, and ideas