Chapter1

Marketing: Managing Profitable Customer Relationships

Copyright 2008 Pearson Education Canada Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

NASCAR What is their secret?

NASCAR is the #1 televised motorsport in Canada Compelling blend of live racing events, media coverage and Web sites Show the customer a good time To develop customer relationship NASCAR creates a wholesome family-oriented environment.
Copyright 2008 Pearson Education Canada 1-3

Fans are passionate about NASCAR Fans spend nearly $700 a year on NASCAR merchandise Second highest regular season sport on TV NASCAR attracts over 250 big-name sponsors Big part of the NASCA experience is the feeling of accessibility

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

What is Marketing?
Marketing is about managing profitable customer relationships
Attracting new customers Retaining and growing current customers

Marketing Defined:
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others

Copyright 2008 Pearson Education Canada

1-5

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

1-6

Principles of Marketing, Seventh Canadian Edition

Understanding the Marketplace

Core Concepts
Understand the marketplace and customer wants and needs Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

Need
State of felt deprivation

Wants
The form of needs as shaped by culture and the individual

Demands
Wants which are backed by buying power

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Understanding the Marketplace

Core Concepts
Understand the marketplace and customer wants and needs (cont.) Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

Marketing offer
Combination of products, services, information or experiences that satisfy a need or want Offer may include services, activities, people, places, information or ideas

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Understanding the Marketplace

Core Concepts
Understand the marketplace and customer wants and needs (cont.) Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

Value
Customers form expectations regarding value Marketers must deliver value to consumers

Satisfaction
A satisfied customer will buy again and tell others about their good experience
1-9 Principles of Marketing, Seventh Canadian Edition

Copyright 2008 Pearson Education Canada

Discussion Questions Customer Satisfaction

When have you, personally, been extremely satisfied or dissatisfied with a product? Why? Why is it so difficult for companies to deliver value to consumers?

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Understanding the Marketplace

Core Concepts
Understand the marketplace and customer wants and needs (cont.) Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

Exchange
The act of obtaining a desired object from someone by offering something in return One exchange is not the goal, relationships with several exchanges are the goal Relationships are built through delivering value and satisfaction

Copyright 2008 Pearson Education Canada

1-11

Principles of Marketing, Seventh Canadian Edition

Understanding the Marketplace

Core Concepts
Understand the marketplace and customer wants and needs (cont.) Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality

Market
Set of actual and potential buyers of a product Marketers seek buyers that are profitable

Copyright 2008 Pearson Education Canada

1-12

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

1-13

Principles of Marketing, Seventh Canadian Edition

Designing a Customer-Driven Marketing Strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with them. A winning marketing strategy
What customers will we serve? How can we serve these customers best?

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Designing a Customer-Driven Marketing Strategy

What customers will we serve?
Market segmentation and target marketing Marketers select customers that can be served profitably Known as customer management and demand management

How can we serve these customers best?

By defining a value proposition that will differentiate and position the brand in the marketplace Is set of benefits or values a company promises to deliver to consumers in order to satisfy their needs
Copyright 2008 Pearson Education Canada 1-15 Principles of Marketing, Seventh Canadian Edition

Netflix DVDs by mail

Netflix began in early 2000 DVDs are delivered to your home with return mail envelope Monthly charge with unlimited rentals limited amount out at one time

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Discussion Questions Netflix

1. 2. 3. 4. How might Netflix define its target market? What need or want does it fulfill? What is its marketing offer? What is its value proposition? Is it a strong value proposition for its target market?

Copyright 2008 Pearson Education Canada

1-17

Principles of Marketing, Seventh Canadian Edition

Marketing Management Orientations

The Production Concept
Consumers will favour products that are available and highly affordable

The Product Concept

Consumers will favour products that offer the most in quality, performance, and innovative features

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Marketing Management Orientations

The Selling Concept
Consumers will not buy enough of the firms products unless it undertakes a large-scale selling effort.

The Marketing Concept

Achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.
Copyright 2008 Pearson Education Canada 1-19 Principles of Marketing, Seventh Canadian Edition

Marketing Management Orientations

The Societal Marketing Concept
The marketing strategy should deliver value to customers and other stakeholders affected by marketing decisions in a way that maintains or improves the consumers and the societys well-being.

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Preparing a Marketing Plan and Program

Build customer relationships by transforming the marketing strategy into action Includes the marketing mix and the 4Ps of marketing
Product Price Place Promotion
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Copyright 2008 Pearson Education Canada

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

1-22

Principles of Marketing, Seventh Canadian Edition

Building Customer Relationships

CRM Customer relationship management . . . is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Relationship Building Blocks: Value and Satisfaction

Customer Perceived Value
The customers evaluation of the difference between benefits and costs. Customers often do not judge values and costs accurately or objectively.

Customer Satisfaction
Products perceived performance relative to customers expectations.

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Customer Relationship Levels and Tools

Basic relationships
low margin customers

Full partnerships
key customers

Frequency marketing programs

Reward customers who buy frequently or in large amounts

Club marketing programs

Offer members special discounts and create member communities

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

The Changing Nature of Customer Relationships

Relating with more Carefully Selected Customers Relating for the Long-Term Relating Directly

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Partnership Relationship Management

Working closely with partners in other company departments and outside the company to jointly bring greater value to customers Partners Inside the Company Partners Outside the Firm
Strategic partners Supply chain management

Copyright 2008 Pearson Education Canada

1-27

Principles of Marketing, Seventh Canadian Edition

Capturing Value from Customers

Creating Customer Loyalty and Retention
Customer delight leads to emotional relationships and loyalty Customer lifetime value shows true worth of a customer

Growing Share of Customer

Share of customers purchase in a product category Achieved through offering greater variety, cross-sell and up-sell strategies
Copyright 2008 Pearson Education Canada 1-28 Principles of Marketing, Seventh Canadian Edition

Capturing Value from Customers

Building Customer Equity
The combined customer lifetime values of all current and potential customers Measures a firms performance, but in a manner that looks to the future Choosing the best customers is key

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Capturing Value from Customers

The company can classify customers according to their potential profitability and manage its relationships accordingly.

Copyright 2008 Pearson Education Canada

1-30

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

1-31

Principles of Marketing, Seventh Canadian Edition

The New Marketing Landscape

Challenges
The Digital Age Rapid Globalization Ethics and Social responsibility Not-for-profit Marketing

Advances in computers, telecommunications information, transportation

Customer research and tracking Product development Distribution New advertising tools 24/7 marketing through the Internet
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Copyright 2008 Pearson Education Canada

Principles of Marketing, Seventh Canadian Edition

The New Marketing Landscape

Challenges
The Digital Age Rapid Globalization Ethics and Social responsibility Not-for-profit Marketing

Geographical and cultural distances have shrunk

Greater market coverage More options for purchasing and manufacturing Increased competition from foreign competitors
1-33 Principles of Marketing, Seventh Canadian Edition

Copyright 2008 Pearson Education Canada

The New Marketing Landscape

Challenges
The Digital Age Rapid Globalization Ethics and Social responsibility Not-for-profit Marketing

Marketers need to take great responsibility for the impact of their actions
Caring capitalism is a way to differentiate your company

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

The New Marketing Landscape

Challenges
The Digital Age Rapid Globalization Ethics and Social responsibility Not-for-profit Marketing

Many non-profit organizations are realizing the importance of strategic marketing

Performing arts Government agencies Colleges Hospitals Churches

Copyright 2008 Pearson Education Canada

1-35

Principles of Marketing, Seventh Canadian Edition

What is Marketing?
The process of building profitable customer relationships by creating value for customers and capturing value in return

Copyright 2008 Pearson Education Canada

1-36

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. 2. 3. 4. 5. Define marketing and outline the marketing process. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and identify strategies for creating and capturing value from customers. Describe the major trends and forces changing the marketing landscape.

Copyright 2008 Pearson Education Canada

1-37

Principles of Marketing, Seventh Canadian Edition