PHK 5e Ch11

11
Building Customer
Relationships
Through Effective
Marketing
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Learning Objectives
11-1 Understand the meaning of marketing and the

importance of management of customer
relationships.
11-2 Explain how marketing adds value by creating
several forms of utility.
11-3 Trace the development of the marketing concept
and understand how it is implemented.
11-4 Understand what markets are and how they are
classified.
11-5 Understand the two major components of a
marketing strategy—target market and marketing
mix.
1
Learning Objectives (continued)
11-6 Explain how the marketing environment affects

strategic market planning.
11-7 Understand the major components of a marketing
plan.
11-8 Describe how market measurement and sales
forecasting are used.
11-9 Distinguish between a marketing information
system and marketing research.
11-10 Identify the major steps in the consumer buying
decision process and the sets of factors that may
influence this process.
Marketing
Marketing is the activity, set of institutions, and

processes for…
• Creating
• Communicating
• Delivering
• Exchanging
…offerings that have value for customers,
clients, partners, and society at large
2
Eight Major Marketing Functions
Managing Customer Relationships
§ Relationship marketing
• Establishing long-term, mutually satisfying buyer-
seller relationships
§ Customer relationship management (CRM)
• Using information about customers to create
marketing strategies that develop and sustain
desirable customer relationships
§ Customer lifetime value
• Measure of a customer’s worth (sales minus costs)
to a business over one’s lifetime
3
Customer Loyalty
What do customers want?

Sometimes it’s more profitable to retain
customers by offering them big rewards than
attracting new customers who may never develop
the same loyalty.
Utility: The Value Added by Marketing
§ The ability of a good or service to satisfy a

human need
§ Kinds of utility:
• Form utility: Created by converting production
inputs into finished products
• Place utility: Created by making a product
available at a location where customers wish to
purchase it
• Time utility: Created by making a product available
when customers wish to purchase it
• Possession utility: Created by transferring title
(ownership) of a product to a buyer
4
Types of Utility
Utility: Putting Products at

Customer’s Fingertips
Firms try to provide

customers with products
whenever and wherever
they need them
5
The Marketing Concept
§ A business philosophy that a firm should

provide goods and services that satisfy
customers’ needs through a coordinated set of
activities that allows the firm to achieve its
objectives
§ To achieve success, a business must:
• Communicate with potential customers to
assess their needs
• Develop a good or service to satisfy those needs
• Continue to seek ways to provide customer
satisfaction
Evolution of the Marketing Concept
§ Industrial revolution through the early

twentieth century
• Business effort directed toward production
to meet great demand
• Production orientation –
Emphasis on increased output
6
Evolution of the Marketing Concept:
1920s and 1950s
§ 1920s
• Production began to exceed demand
• Business efforts included selling goods
than just producing them
• Sales orientation - Increased advertising,
enlarged sales forces, and occasionally,
high-pressure selling techniques
§ 1950s
• Business efforts focused on satisfying
customers’ needs
Evolution of Customer Orientation
7
Implementing the Marketing Concept
§ Obtain information Tell us what you really think.

Surveys can be
about present and conducted in a variety of ways: in-
potential customers person, by mail or fax, or online.
Online surveys have made it very
• Their needs inexpensive for firms to gather
• Satisfaction of the customer feedback
needs
• Improving products
• Customer opinions
about the firm
Implementing the Marketing Concept

(continued)
§ Provide a product that will satisfy customers

§ Price the product at an acceptable and profitable
level
§ Promote the product to potential customers
§ Ensure distribution for product availability when
and where wanted
§ Obtain information on the effectiveness of the
marketing effort and modify efforts as necessary
8
Markets and Their Classification
§ Market: Group of individuals or organizations, or both,

that need products in a given category and that have
the ability, willingness, and authority to purchase such
products
§ Consumer markets: Purchasers and/or households
members who intend to consume or benefit from the
purchased products and who do not buy products to
make a profit
Types of Markets
§ Business-to-business (industrial) markets: Purchase

specific kinds of products for use in making other
products for resale or for day-to-day operations
§ Governmental markets: Buy goods and services to
maintain internal operations and to provide citizens with
such products as highways, education, water, energy,
and national defense
§ Institutional markets: Churches, not-for-profit private
schools and hospitals, civic clubs, fraternities and
sororities, charitable organizations, and foundations
9
Developing Marketing Strategies
§ Marketing strategy: Plan that will enable

an organization to make the best use of its
resources and advantages to meet its
objectives
§ Consists of:
• The selection and analysis of a target market
• The creation and maintenance of an appropriate
marketing mix (product, price, distribution, and
promotion)
Target Market Selection and Evaluation
Target market: Group of

Women
individuals, organizations, Teenagers
or both, for which a firm

develops and maintains a New
College
marketing mix suitable for Students Parents
the specific needs and
preferences of that group Baby Men
Boomers
10
Undifferentiated Approach
§ Directing a single marketing mix at the entire

market for a particular product
§ Useful in only a limited number of situations
Market Segmentation Approach
Group of individuals or organizations within a

market that share one or more common
characteristics
11
Reaching the Right Market Segments
The market for fragrances is segmented based on

gender. Some fragrances are aimed at men,
while others, such as the perfume featured in this
Gucci advertisement, are aimed at women.
Differentiated Target Strategies
Two types of vitamins, two different differentiated targeting strategies.

Both Bayer Flintstones Gummies and Alive! Women’s multivitamins
are using a differentiated targeting strategy to aim at a different, single
market segment. Although both products are vitamins, they are not
competing for the same customers.
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THE ADVERTISING except for
©J use as perm
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12
Differentiated Market Segmentation
Class Exercise
Identify one or several characteristics or variables that

could be used to segment the markets for each of these
products.
• Recreational vehicles (RVs)
• Baby food
• Rolls Royce automobiles
• Snow tires
• Hotel rooms
• Magazines
• Soft drinks
• Movies
• Shoes
• Bicycles
13
Common Bases of Market Segmentation
Creating a Marketing Mix
A business firm controls four important elements

of marketing that it combines in a way that
reaches the firm’s target market
§ Product
§ Price
§ Distribution
§ Promotion
14
Marketing Mix
Developing the Right Marketing Mix
Firms have little control over the marketing environment.

However, they can control the marketing mixes for their
products—that is, the nature of the products themselves
and how they are priced, distributed, and promoted.
Marketers at Coca-Cola have developed a specific

marketing mix for Coca-Cola Classic.
15
Marketing Strategy and the
Marketing Environment
§ The marketing mix consists of elements that a

firm controls and uses to reach its target market
§ Forces that make up the external marketing
environment
• Economic forces
• Sociocultural forces
• Political forces
• Competitive forces
• Legal and regulatory forces
• Technological forces
Developing a Marketing Plan
§ A marketing plan is a written document that

specifies an organization’s resources,
objectives, strategy, and implementation and
control efforts to be used in marketing a specific
product or product group
§ Developing a clear, well-written marketing plan:
• Helps establish a unified vision for an organization
• Used for communication among employees
• Covers responsibilities, tasks, and scheduled
• Specifies how resources are allocated
• Helps marketing managers monitor and evaluate the
performance of the marketing strategy
16
Components of the Marketing Plan
Market Measurement and

Sales Forecasting
§ Sales forecast: Estimate of the amount of a

product that an organization expects to sell
during a certain period of time based on a
specified level of marketing effort
§ Organizations use several forecasting methods
• Executive judgments
• Surveys of buyers or sales personnel
• Time-series analyses
• Correlation analyses
• Market tests
17
Marketing Information Systems
System for managing marketing information that

is gathered continually from internal and external
sources
• Internal data sources
§ Sales figures, product and marketing costs, inventory
levels, and sales force activities
• External data sources
§ Suppliers, intermediaries, customers, competitors, and
economic conditions
• Outputs
§ Sales reports, sales forecasts, buying trends,
market share
Marketing Information Systems
Can you hear me now?

Would you interested in
having a pre-recruited group
of your customers ready
and willing to participate in
your surveys at a moment’s
notice? If so, you might
want to sign up for online
software such as
PortalPanel, produced the
marketing research
company Toluna.
18
Marketing Research
§ Process of systematically gathering, recording,

and analyzing data concerning a particular
marketing problem
§ Six steps of marketing research
1. Define the problem
2. Make a preliminary investigation
3. Plan the research
4. Gather factual information
5. Interpret the information
6. Reach a conclusion
Six Steps of Marketing Research
19
Using Technology to Gather and
Analyze Marketing information
§ Database: Collection of information arranged
for easy access and retrieval, such as:
• LEXIS-NEXIS
• Reader’s Digest
§ Single-source data: Information provided by a
single firm
§ Online information services: Offer subscribers
access to e-mail, websites, mailing lists
§ Internet: Useful in accessing Web pages such
as Nielsen and Advertising Age
Sources of Secondary Information
20
Types of Buying Behavior
§ Buying behavior: Decisions and actions of

people involved in buying and using products
§ Consumer buying behavior: Purchasing of
products for personal or household use, not for
business purposes
§ Business buying behavior: Purchasing of
products by producers, resellers, governmental
units, and institutions
Consumer Buying Behavior
Consumers’ buying behaviors differ for different types

of products
21
Problem Recognition
Problem recognition is
the first stage of the
consumer buying-
decision process. This
advertisement is
attempting to stimulate
problem recognition
regarding the amount of
Tylenol pills consumers
have to take to get
results compared to
Aleve.
Consumer Buying Power
§ Personal income: The income an individual

receives from all sources less the Social Security
taxes the individual must pay
§ Disposable income: Personal income less all
additional personal taxes
§ Discretionary income
• Disposable income less savings and
expenditures on food, clothing, and housing
• Of particular interest to marketers due to choice
of how to spend it
22
Business Buying Behavior
§ Business buyers consider a product’s quality,

its price, and the service provided by suppliers
§ Business buyers are better informed than
consumers about products and generally buy in
larger quantities
§ In a business, a committee or a group of
people, rather than just one person, decides on
purchases
23

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11

11-1 Understand the meaning of marketing and the

11-6 Explain how the marketing environment affects

Marketing is the activity, set of institutions, and

Managing Customer Relationships

What do customers want?

Utility: The Value Added by Marketing

§ The ability of a good or service to satisfy a

Utility: Putting Products at

Firms try to provide

§ A business philosophy that a firm should

Evolution of the Marketing Concept

§ Industrial revolution through the early

Evolution of Customer Orientation

§ Obtain information Tell us what you really think.

Implementing the Marketing Concept

§ Provide a product that will satisfy customers

§ Market: Group of individuals or organizations, or both,

§ Business-to-business (industrial) markets: Purchase

§ Marketing strategy: Plan that will enable

Target Market Selection and Evaluation

Target market: Group of

or both, for which a firm

§ Directing a single marketing mix at the entire

Market Segmentation Approach

Group of individuals or organizations within a

The market for fragrances is segmented based on

Differentiated Target Strategies

Two types of vitamins, two different differentiated targeting strategies.

Identify one or several characteristics or variables that

Creating a Marketing Mix

A business firm controls four important elements

Developing the Right Marketing Mix

Firms have little control over the marketing environment.

Marketers at Coca-Cola have developed a specific

§ The marketing mix consists of elements that a

Developing a Marketing Plan

§ A marketing plan is a written document that

Market Measurement and

§ Sales forecast: Estimate of the amount of a

System for managing marketing information that

Marketing Information Systems

Can you hear me now?

§ Process of systematically gathering, recording,

Six Steps of Marketing Research

Sources of Secondary Information

§ Buying behavior: Decisions and actions of

Consumer Buying Behavior

Consumers’ buying behaviors differ for different types

Consumer Buying Power

§ Personal income: The income an individual

§ Business buyers consider a product’s quality,

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