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BE 200 Summary for: Principles of Marketing Done by: Wael Bu-Holigah Arab Open University - KSA / Dammam Branch Approved by: Mr. Saad Al Shahrani Marketing definitions • Marketing is: managing profitable customer relationships. • Marketing is: A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products an value with others. • Marketing is: A managerial process deployed by an organisations (individual or group). Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 2 Aim of marketing • The aim of marketing is: to make selling unnecessary. The aim is to “know and understand the customer so well that the product or service fits...and sells itself”. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 3 Figure 1.1 Page 7 Marketing process 1 2 Understand the marketplace and customer needs and wants. 5 Design a customer-driven marketing strategy. Construct an integrated marketing programme that delivers superior value. 3 4 Capture value from customers to crate profits and customer equity Build profitable relationships and create customer delight. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 4 Needs, wants and demands • Needs: States of felt deprivation. They include basic physical needs for food, clothing, warmth and safety. • Wants: The form that human needs take as shaped by culture and individual personality. • Demands: Human wants that are backed by buying power. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 5 The market offering • Market offering is: some combination of products, services, information or experiences offered to a market to satisfy a need or want. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 6 Customer Value • Customer value: The consumer’s assessment of the product’s overall capacity to satisfy his or her needs. • Customer value: is the difference between the values the customer gains from owning and using a product and the costs of obtaining the product. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 7 Customer satisfaction • Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations. So, If the product’s performance falls short of expectations, the buyer is dissatisfied. If performance matches or exceeds expectations, the buyer is satisfied or delighted. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 8 Exchange • Exchange: The act of obtaining a desired object from someone by offering something in return. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 9 Transaction & Relationship marketing • Transaction: A trade between two parties that involves at least two things of value, agreed upon conditions, a time of agreement and a place of agreement. • Relationship marketing is: the process of creating, maintaining and enhancing strong, value0laden relationships with customers and other stakeholders. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 10 Market • Market: The set of all actual and potential buyers of a product or service. Please, check Figure 1.2 page 13 in the book. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 11 Marketing management • Marketing management: The art and science of choosing target markets and building profitable relationships with them. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 12 Demarketing • Demarketing: Marketing to reduce demand temporarily or permanently. • The aim is not to destroy demand, but only to reduce or shift it. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 13 Production concept • Production concept: The philosophy that consumers will favour products that are available and highly affordable, and that management should therefore focus on improving production and distribution. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 14 Product concept • Product concept: The idea that consumers will favour products that offer the most quality, performance and features, and that the organisation should therefore devote its energy to making continuous product improvements. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 15 • Selling concept: The idea that consumers will not buy enough of the organisation’s products unless the organisation undertakes a largescale selling and promotion efforts. Starting Point: Factory Means: Selling and Promoting Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani Focus: Existing products Ends Profits through sales volume 16 Figure 1.3 page 17 Selling concept Figure 1.3 page 17 Marketing concept • Marketing concept: The marketing management philosophy which holds that achieving organisational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. Starting Point Market Focus Customer needs Means Integrated marketing Ends Profits through customer satisfaction Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 17 • Societal marketing concept: A principle of enlightened marketing which holds that an organisation should make good marketing decisions by considering consumers’ wants, the company's requirements, consumers’ long-run interests and society’s long-run interests. Society (human welfare) Consumers (wants satisfaction) SOCIETAL MARKETING CONCEPT Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani Company (profits) 18 Figure 1.4 page19 Societal marketing concept Sustainable marketing concept • Sustainable marketing concept: A principle of marketing that holds that an organisation should meet the needs of its present consumers without compromising the ability of future generations to fulfil their own needs. Please check Figure 1.5 page 21 in the book. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 19 Customer relationship management (CRM) • Customer relationship management: The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 20 Customer perceived value • Customer perceived value: The customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 21 Customer satisfaction • Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 22 Customer lifetime value • Customer lifetime value: The value of the entire stream of purchases that a customer would make over lifetime of patronage. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 23 Share of customer • Share of customer: The share of the customer’s purchasing that a company gets in its product categories. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 24 Customer equity • Customer equity: The total combined customer lifetime values of all of the company’s customers. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 25 High Profitability Low Profitability Short-term customers Long-term customers Butterflies True Friends Good fit between company’s offerings and customer’s needs; high profit potential Good fit between company’s offerings and customer’s needs, highest profit potential. Strangers Barnacles Little fit between company’s offerings and customer’s needs; lowest profit potential. Limited fit between company’s offerings and customer’s needs; low profit potential. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 26 Figure 1.6 page 30 Customer relationship groups Market Segment & Segmentation • Market Segment: A group of consumers who respond in a similar way to a given set of marketing efforts. • Market Segmentation: Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes. “ Simple criteria, like age, gender and social class, do little to inform marketers”. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 27 Market targeting • Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 28 Market positioning • Market positioning: Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. Formulating competitive positioning for a product and a detailed marketing mix. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 29 Product’s position • Product’s position: The way the product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 30 Market leader • Market leader: The firm in an industry with the largest market share; it usually leads other firms in price changers, new product introductions, distribution coverage and promotion spending. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 31 Marketing mix • Marketing mix: The set of controllable tactical marketing tools: Product, Price, Place and Promotion – that the firm blends to produce the response it wants in the target market. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 32 Product • Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organisations and ideas. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 33 Price • Price: The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 34 Place • Place: All the company activities that make the product or service available to target customers. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 35 Promotion • Promotion: Activities that communicate the product or service and its merits to target customers and persuade them to buy. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 36 Figure 1.8 page 49 The four Ps: The Marketing Mix Marketing Mix Product Variety Quality Design Features Brand name Packaging Services Warranties Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani Price List price Discounts Allowances Payment period Credit terms Promotion Place Advertising Promotions Personal selling Publicity Target market Channels Coverage Assortments Locations Inventory Transport 37 The Four Cs • Customer needs and wants. • Cost of the customer. • Communication. • Convenience. Please check Figure 1.9 “An expanded model of the marketing process” Page 52 in the book. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 38 Long-run consumer benefit Immediate satisfaction Low High High Salutary Products Desirable Products Low Deficient Products Pleasing Products Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 39 Figure 2.3 Page 100 Societal classification of new products Strategic Planning (Chapter 3) “Failing to plan means planning to fail” Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 40 Annual plan • Annual plan: A short-term plan that describes the company’s current situation, its objectives, the strategy, action programme and budgets for the year ahead, and controls. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 41 Long-range plan • Long-range plan: A plan that describes the principal factors and forces affecting the organisation during the next several years, including long-term objectives, the chief marketing strategies used to attain them and the resources required. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 42 Strategic plan • Strategic plan: A plan that describes how a firm will adapt to take advantage of opportunities in its constantly changing environment, thereby maintaining a strategic fit between the firm’s goals and capabilities and its changing market opportunities. Please check Figure 3.1, page 130 in the book. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 43 Mission Statement • Mission statement: is a statement of the organisation’s purpose – what it wants to accomplish in the wider environment. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 44 External & Internal audit • External audit: a detailed examination of the markets, competition, business and economic environment in which the organization operates. • Internal audit: an evaluation of the firm’s entire value chain. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 45 SWOT Analysis • SWOT Analysis: a distillation of the findings of the internal and external audits which draws attention to the critical organizational strengths and weaknesses and the opportunities and threats facing the company. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 46 Business portfolio • Business portfolio: The collection of businesses and products that make up the company. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 47 Portfolio Analysis • Portfolio Analysis: A tool by which the management identifies and evaluates the various businesses that make up the company. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 48 The Boston Consulting Group (BCG) Four types of Strategic business unit (SBUs) according to BCG: • Stars: High-growth, high-share businesses or products that often require heavy investment to finance their rapid growth. • Cash cows: Low-growth, high-share businesses or products; established and successful units that generate cash that the company uses to pay its bills and support other business units that need investment. • Question marks: Low-share business units in high-growth markets that require a lot of cash in order to hold their share or become stars. • Dogs: Low-growth, low-share businesses and products that may generate enough cash to maintain themselves, but do not promise to be large sources of cash. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 49 Product / Market expansion grid • Product / Market expansion grid: A portfolioplanning tool for identifying company growth opportunities through market penetration, market development, new product development or diversification. • In the next slid, Figure 3.4 page 146 from the book explaining the “Product / Market expansion grid”. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 50 Figure 3.4 page 146 Developing growth strategies Existing Products Market Penetration Existing Markets A strategy for company growth by increasing sales of current products to current market segments without changing the product. New Products Product Development A strategy for company growth by offering modified new products to current market segments. Diversification Market Development New Markets A strategy for company growth by identifying and developing new market segments for current company products. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets. 51 Downsizing • Downsizing: Reducing the business portfolio by elimination products of business units that are not profitable or that no longer fit the company’s overall strategy. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 52 Value chain • Value chain: The series of departments that carry out value-creating activities to design, produce, market, deliver and support a firm’s products. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 53 Value-delivery network • Value-delivery network: The network make up of the company, suppliers, distributors and ultimately customers who ‘partner’ with each other to improve the performance of the entire system. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 54 Table 3.2 page 152 “Contents of Marketing plan” Section Purpose Executive summary Presents a quick overview of the plan for quick management review. Current marketing situation The marketing audit that presents background date on the market, product, competition and distribution. SWOT Analysis Identifies the company’s main strengths and weaknesses and he main opportunities and threats facing the product. Objectives and issues Defines the company’s objectives in the areas of sales, market share and profits, and the issues that will affect these objectives. Marketing strategy Presents the broad marketing approach that will be used to achieve the plan’s objectives. Marketing implementation Specifies what will be done, who will do it, when it will be done and what it will cost. Budgets A projected profit-and-loss statement that forecasts the expected financial outcomes from the plan. Controls Indicates how the progress of the plan will by 55 monitored. Marketing audit • Marketing audit: A comprehensive, systematic, independent and periodic examination of a company’s environment, objectives, strategies and activities to determine problem areas and opportunities, and to recommend a plan of action to improve the company’s marketing performance. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 56 Current marketing situation • Current marketing situation: The section of a marketing plan that describes the target market and the company’s position in it. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 57 Marketing strategy • Marketing strategy: The marketing logic by which the business unit hopes to achieve its marketing objectives. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 58 Market segmentation • Market segmentation: Dividing a market into distinct groups of buyers who have distinct needs, characteristics or behaviour and who might require separate products or marketing programmes. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 59 Market segment • Market segment: A group of consumers who respond in a similar way to a given set of marketing efforts. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 60 Market targeting • Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 61 Positioning • Positioning: Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 62 Differentiation • Differentiation: Differentiating the market offering to create superior customer value. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 63 Marketing implementation • Marketing implementation: The process that turns marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 64 Marketing control • Marketing control: The process of measuring and evaluating the results of marketing strategies and plans, and taking corrective action to ensure that marketing objectives are attained. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 65 SMART Objective must be • • • • Measurable Achievable. Realistic. Timed. Done by: Wael Bu-Holigah, Arab Open University - KSA / Dammam Branch, Approved by: Mr. Saad Al Shahrani 66