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Chapter 1 Marketing: Managing Profitable Customer Relationships PowerPoint by Kotler & Armstrong (and modified by me) 1-1 Copyright © 2003 Prentice-Hall, Inc. Chapter Big Ideas The Big Ideas in this chapter are: Marketing is…. Major concepts and tools of marketing Market orientations CRM 1-2 Copyright © 2003 Prentice-Hall, Inc. Marketing So what’s Marketing? Function: noun Etymology: Middle English, from Old North French, from Latin mercatus --trade or marketplace 1-3 Copyright © 2003 Prentice-Hall, Inc. Marketing Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment. (AMA) 1-4 Copyright © 2003 Prentice-Hall, Inc. Marketing Marketing is the process of planning and executing (Management function) the conception, pricing, promotion, and distribution (4 P’s) of goods, services and ideas (Product) to facilitate satisfying exchange relationships (buying and selling) with customers (Target/Segment) in a dynamic environment. (External factors) 1-5 Copyright © 2003 Prentice-Hall, Inc. Factors Influencing Company Marketing The Four P’s 1-6 Copyright © 2003 Prentice-Hall, Inc. Elements of a Modern Marketing System 1-7 Copyright © 2003 Prentice-Hall, Inc. Core Marketing Concepts 1-8 Copyright © 2003 Prentice-Hall, Inc. Marketing Concepts and Tools Core Marketing Concepts 1. Target Markets and Segmentation 2. Marketers and Prospects 3. Needs, Wants, and Demands 1-9 Copyright © 2003 Prentice-Hall, Inc. Marketing Concepts and Tools 4. Product, Offering, and Brand 5. Value and Satisfaction Value Value = Benefits / Costs = (Functional benefits + Emotional benefits) / (Monetary costs + Time costs + Energy costs + Psychic costs) 1-10 Copyright © 2003 Prentice-Hall, Inc. Marketing Concepts and Tools 6. Exchange and Transactions 7. Relationships and Networks Relationship marketing Marketing network 8. Marketing Channels 9. Supply Chain 10. Competition Brand competition Industry competition Form competition Generic competition 1-11 Copyright © 2003 Prentice-Hall, Inc. Marketing Concepts and Tools 11. Marketing Environment 12. Marketing Mix (4 P’s) 13. Marketing Program 1-12 Copyright © 2003 Prentice-Hall, Inc. Management Orientations Toward the Marketplace Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept 1-13 Copyright © 2003 Prentice-Hall, Inc. CRM CRM is what? Customer relationship management (also called CRM) is defined as: “the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.” 1-14 Copyright © 2003 Prentice-Hall, Inc. CRM It costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied. Marketers must be concerned with the lifetime value of the customer. 1-15 Copyright © 2003 Prentice-Hall, Inc. Marketing Challenges Source of marketplace changes: Technological advances Rapid globalization Continuing social and economic shifts 1-16 Copyright © 2003 Prentice-Hall, Inc. Chapter 2 company and Marketing Strategy: Partnering to Build Customer Relationships PowerPoint by Kotler & Armstrong (and modified by me) 1-17 Copyright © 2003 Prentice-Hall, Inc. Chapter 2 – Big Ideas Strategic planning Value creation (in many forms) 1-18 Copyright © 2003 Prentice-Hall, Inc. Strategic Planning Strategic Planning is? The Process of Developing and Maintaining a Strategic Fit Between the Organization’s Goals and Capabilities and Its Changing Marketing Opportunities. 1-19 Copyright © 2003 Prentice-Hall, Inc. Steps in Strategic Planning 1-20 Copyright © 2003 Prentice-Hall, Inc. The Mission Statement What’s Mission Statement? A statement of the organization’s purpose What it wants to accomplish in the larger environment Should be market oriented and defined in terms of customer needs. 1-21 Copyright © 2003 Prentice-Hall, Inc. Questions a Mission Statement Should Answer What is our Business? Who is the Customer? What do Consumers Value? What Should our Business Be? 1-22 Copyright © 2003 Prentice-Hall, Inc. Mission Statements Should: Be Realistic Be Specific Fit the Market Environment Be Based on Distinctive Competencies Be Motivating 1-23 Copyright © 2003 Prentice-Hall, Inc. Designing the Business Portfolio A business portfolio is what? The business portfolio is the collection of businesses and products that make up the company. During the strategy process a company must do what? analyze its current business portfolio or Strategic Business Units (SBUs), decide which SBUs should receive more, less, or no investment, develop growth strategies for growth or downsizing. 1-24 Copyright © 2003 Prentice-Hall, Inc. Portfolio Analysis A portfolio analysis is what? An evaluation of the products and business making up the company. Resulting in? Identifying where resources are directed or taken away Invest in to more profitable businesses and Divest in weaker ones (phased down or dropped). 1-25 Copyright © 2003 Prentice-Hall, Inc. Strategic Business Unit A SBU is what? (hint: ) A unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. Can be a company division, a product line within a division, or sometimes a single product or brand. 1-26 Copyright © 2003 Prentice-Hall, Inc. Strategic Planning Tools BCG’s growth share matrix Ansoff’s product/market expansion grid 1-27 Copyright © 2003 Prentice-Hall, Inc. Analyzing Current SBU’s: BCG Growth-Share Matrix Relative Market Share High Low Question Marks Low Market Growth Rate High Stars • High growth & share • May need heavy investment to grow • Eventually, growth will slow Cash Cows • Low growth, high share • Established, successful SBU’s • Produce cash ? • Low share SBUs in high growth markets • Require cash to hold market share • Build into Stars or phase out Dogs • Low growth & share • Generate cash to sustain self • Do not promise to be cash sources 1-28 Copyright © 2003 Prentice-Hall, Inc. Problems With Matrix Approaches Can be Difficult, Time Consuming, Costly to Implement Difficult to Define SBUs & Measure Market Share/Growth Focus on Current Businesses, Not Future Planning Can Place too Much Emphasis on Growth Can Lead to Poorly Planned Diversification 1-29 Copyright © 2003 Prentice-Hall, Inc. Product/Market Expansion Grid PRODUCT MARKET Existing New Existing Market Penetration Product Development New Market Development Diversification 1-30 Copyright © 2003 Prentice-Hall, Inc. Value Value is what? Function: noun Pronunciation: 'val-(")yü Etymology: past participle of Latin valEre – to be worth, be strong, be powerful, be influential, be healthy Meaning: “Relative worth, utility, or importance” 1-31 Copyright © 2003 Prentice-Hall, Inc. Value Proposition Value Proposition is what? A set of benefits offered by an organization to satisfy a customer’s needs, wants and demands 1-32 Copyright © 2003 Prentice-Hall, Inc. Value Chain So what’s a Value Chain? A Michael Porter concept A tool to conceptualize and identify ways to create more customer value 9 Activities 5 primary activities Inbound logistics, operations, outbound logistics, marketing and sales, service 4 support activities Procurement, technology development, human resources, firm infrastructure 1-33 Copyright © 2003 Prentice-Hall, Inc. The Generic Value Chain 1-34 Copyright © 2003 Prentice-Hall, Inc. Value Delivery Network So what’s a value delivery network? A network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system 1-35 Copyright © 2003 Prentice-Hall, Inc. Value Delivery Network Company’s Value Chain Distributors Suppliers Customers 1-36 Copyright © 2003 Prentice-Hall, Inc. Market Segmentation So what’s market segmentation? The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products of marketing programs. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. 1-37 Copyright © 2003 Prentice-Hall, Inc. Target Marketing So what’s target marketing? Involves evaluating each market segment’s attractiveness and selecting one or more segments to enter or target. Target segments that can sustain profitability. 1-38 Copyright © 2003 Prentice-Hall, Inc. Market Positioning Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers (e.g., Chevy Blazer: “Like a rock”) Process begins with differentiating the company’s marketing offer so it gives consumers more value. 1-39 Copyright © 2003 Prentice-Hall, Inc. The Marketing Mix The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. Consists of the 4 P’s 1. 2. 3. 4. Product Price Place Promotion 1-40 Copyright © 2003 Prentice-Hall, Inc. The 4 P’s of the Marketing Mix 1-41 Copyright © 2003 Prentice-Hall, Inc. Managing the Marketing Effort Strategic Tactical 1-42 Copyright © 2003 Prentice-Hall, Inc. Major Sections of Product/Brand Plan Executive Summary Current Marketing Situation Analysis of Threats and Opportunities Objectives for the Brand Marketing Strategy Action Programs Marketing Budget Controls 1-43 Copyright © 2003 Prentice-Hall, Inc. Marketing Control Process 1-44 Copyright © 2003 Prentice-Hall, Inc. Marketing Concept Value Creation 1-45 Copyright © 2003 Prentice-Hall, Inc. Value and Value Proposition Value The relative worth, utility or importance Value Value = Benefits / Costs = (Functional benefits + Emotional benefits) / (Monetary costs + Time costs + Energy costs + Psychic costs) Value Proposition A set of benefits offered by an organization to satisfy a customer’s needs, wants and demands 1-46 Copyright © 2003 Prentice-Hall, Inc. Value Chain A tool to conceptualize and identify ways to create more customer value 9 Activities 5 primary activities Inbound logistics, operations, outbound logistics, marketing and sales, service 4 support activities Procurement, technology development, human resources, firm infrastructure 1-47 Copyright © 2003 Prentice-Hall, Inc. The Generic Value Chain 1-48 Copyright © 2003 Prentice-Hall, Inc. Value Delivery Network A network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system 1-49 Copyright © 2003 Prentice-Hall, Inc. Value Delivery Network Company’s Value Chain Distributors Suppliers Customers 1-50 Copyright © 2003 Prentice-Hall, Inc. Market Segmentation The process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products of marketing programs. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. 1-51 Copyright © 2003 Prentice-Hall, Inc. Target Marketing So what’s target marketing? Involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. Target segments that can sustain profitability. 1-52 Copyright © 2003 Prentice-Hall, Inc. Market Positioning Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers (e.g., Chevy Blazer: “Like a rock”) Process begins with differentiating the company’s marketing offer so it gives consumers more value. 1-53 Copyright © 2003 Prentice-Hall, Inc. The Marketing Mix The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. Consists of the 4 P’s 1. 2. 3. 4. Product Price Place Promotion 1-54 Copyright © 2003 Prentice-Hall, Inc. The 4 P’s of the Marketing Mix 1-55 Copyright © 2003 Prentice-Hall, Inc.