Chapter One

Marketing: Managing Profitable Customer Relationships

Roadmap: Previewing the Concepts

1. Define marketing and the marketing process. 2. Explain the importance of understanding customers and identify the five core marketplace concepts. 3. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations. 4. Discuss customer relationship management and creating value for and capturing value from customers. 5. Describe the major trends and forces changing the marketing landscape.
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Case Study
NASCAR
Creating Value
 NASCAR sells the experience in-car cameras, wholesome family orientation.  NASCAR.com engages fans via content.  Success has been achieved by creating lasting customer relationships.

What is its secret?

Capturing Value
 NASCAR is the 2nd highest rated sport on TV.  Fans are young, affluent, and family oriented, spending nearly $700 annually on NASCAR merchandise.  Fans are loyal to sport and NASCAR fans are 3 times as likely to seek out sponsors products than are nonfans.
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What Is Marketing?
Simple Definition: Marketing is managing profitable customer relationships. Goals: 1. Attract new customers by promising superior value. 2. Keep and grow current customers by delivering satisfaction.
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Marketing Defined
 A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.
OLD View of Marketing: Making a Sale Telling & Selling
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NEW View New View of Marketing: of Marketing: Satisfying Satisfying Customer Needs customer needs
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The Marketing Process

 A simple model of the marketing process:
Understand the marketplace and customer needs and wants. 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.
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Needs, Wants, & Demands

 Need: State of felt deprivation including physical, social, and individual needs.
Physical needs: Food, clothing, shelter, safety Social needs: Belonging, affection Individual needs: Learning, knowledge, self-expression
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Needs, Wants, & Demands

 Wants: Form that a human need takes, as shaped by culture and individual personality.  Wants + Buying Power = Demand

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Need / Want Fulfillment

 Needs and wants are fulfilled through a Marketing Offer:
Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.

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Need / Want Satisfiers

 Products:
Persons Places Organizations Information Ideas

 Services
Activity or benefit offered for sale that is essentially intangible and does not result in ownership.

 Brand Experiences:
. . . dazzle their senses, touch their hearts, stimulate their minds.
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Marketing Myopia
 Marketing myopia occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products.  They focus on the wants and lose sight of the needs.
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Value & Satisfaction

 Care must be taken when setting expectations:
If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high.

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Exchange vs. Transaction

 Exchange:
Act of obtaining a desired object from someone by offering something in return.

 Transaction:
A trade of values between two parties. One party gives X to another party and gets Y in return. Can include cash, credit, or check.
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What Is a Market?
 The set of actual and potential buyers of a product.  These people share a need or want that can be satisfied through exchange relationships.

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Modern Marketing Systems

 Main elements in a modern marketing system include:
Suppliers Company (marketer) Competitors Marketing intermediaries Final users

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Marketing Management
 The art and science of choosing target markets and building profitable relationships with them.
Requires that consumers and the marketplace be fully understood

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Marketing Management
 Designing a winning marketing strategy requires answers to the following questions:
1. What customers will we serve?
What is our target market?

2. How can we best serve these customers?

What is our value proposition?
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Segmentation & Target Marketing

 Market Segmentation:
Divide the market into segments of customers

 Target Marketing:
Select the segment to cultivate

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Marketing Management
 Demand Management
Finding and increasing demand, also changing or reducing demand, as in demarketing.
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 Demarketing
Temporarily or permanently reducing the number of customers or shifting their demand.
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Value Proposition
 The set of benefits or values a company promises to deliver to consumers to satisfy their needs.
Value propositions dictate how firms will differentiate and position their brands in the marketplace.

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Marketing Management Philosophies

    
Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

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The Marketing Plan

 Transforms the marketing strategy into action  Includes the marketing mix and 4 Ps of marketing:
Product Price Place (Distribution) Promotion
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Customer Relationship Management

 The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
Acquiring customers Keeping customers Growing customers

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Customer Perceived Value

 Customers evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers.

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Customer Satisfaction
 Dependent on the products perceived performance relative to a buyers expectations.
Customer satisfaction often leads to consumer loyalty. Some firms seek to DELIGHT customers by exceeding expectations.

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Customer Relationships
 Loyalty and retention programs build relationships and may feature:
Financial Benefits EX: Frequency marketing programs Social Benefits EX: Club marketing programs Structural Ties

 Focus is on relating directly to profitable customers, for the longterm.

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Partner Relationship Marketing

 Marketing partners help create customer value and assist in building customer relationships.  Partners inside the firm:
All employees customer focused Teams coordinate efforts toward customers

 Partners outside the firm:

Supply chain management Strategic alliances
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Customer Loyalty & Retention

 Customer Lifetime Value
The entire stream of purchases that the customer would make over a lifetime of patronage.
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 Share of Customer
The share a company gets of the customers purchasing in their product categories.

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Customer Equity
 The combined discounted customer lifetime values of all the companys current and potential customers.
Classify customers by loyalty and potential profitability Manage accordingly

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The New Digital Age

 Technology impacts the ways firms bring value to their customers.  Greater connectivity means greater access to information, faster travel and communication.  The Internet allows anytime, anywhere connections between firms and customers.
Click-and-mortar companies Click-only companies Business-to-business e-commerce

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New Marketing Landscape

   
Rapid Globalization Ethics and Social Responsibility Not-for-Profit Marketing New World of Marketing Relationships

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Rest Stop: Reviewing the Concepts

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