BMA 1B (CHP 11)

BUILDING CUSTOMER RELATIONSHIPS THROUGH EFFECTIVE

MARKETING

11.1) MANAGING CUSTOMER RELATIONSHIPS

 Marketing: the activity, set of institutions and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners
and society at large.
 Value: a customer’s estimation of the worth of a product based on a comparison of its
costs and benefits, including quality, relative to other products.
 Relationship marketing: establishing long-term mutually satisfying buyer-seller
relationships; deepens and reinforces the buyer’s trust in the company, which, as the
customer’s loyalty grows, increases a company’s understanding of the customer’s
needs and desires.
 Customer Relationship Management: focuses on using information about customers
to create marketing strategies that develop and sustain desirable customer
relationships.
 By increasing customer value over time, organisations try to retain and increase long-
term profitability through customer loyalty (through rewards programmes and their
apps)
 Since CRM is an important part of creating and building customer loyalty, many
companies offer high-tech products aimed at helping businesses identify good
customers and to manage relations with them over the long-term.
 Managing customer relationships require identifying patterns of buying behavior and
using this information to focus on the most promising and profitable customers.
 Customer Lifetime Value: is a measure of a customer’s worth (sales – costs) to a
business over one’s lifetime; also includes the intangible benefits of retaining
lifetime-value customers, such as ability to provide feedback to a company and refer
new customers of similar value

11.2) UTILITY: THE VALUE ADDED BY MARKETING

 Utility: is the ability of a good or service to satisfy a human need.

 Four kinds of utility: Form (indirectly), (directly) place, time and possession.
 Form utility: created by converting production inputs into finished products;
marketing efforts may influence form utility indirectly because the data gathered as
part of marketing research are frequently used to determine the size, shape and
features of a product.
 Place utility: created by making a product available at a location where customers
wish to purchase it; a pair of shoes is given place utility when it is shipped from a
factory to a shop.
 Time utility: created by making a product available when customers wish to purchase
it; Christmas decorations may be manufactured in April but not displayed until
October, when consumers start buying them.
  Possession utility: created by transferring title (or ownership) of a product to a buyer;
ownership is transferred by means of a sales slip or receipt, such as cars and homes.
 Place, time and possession utility have real value in terms of both money and
convenience; only the most fundamental applications of marketing activities.

11.3) THE MARKETING CONCEPT

 Marketing concept: a business philosophy that a business should provide goods and
services that satisfy customer’s needs through a coordinated set of activities that allow
the business to achieve its objectives.
 Initially, the business communicates with potential customers to assess their product
needs, then, the business develops a good or service to satisfy those needs, finally, the
business continues to seek ways to provide customer satisfaction; this process is an
application of the marketing concept or marketing orientation.
 Evolution of the marketing concept: Business effort was directed towards the
production of goods (start of the industrial revolution until the early 20th century)
since businesses had a strong production orientation and could sell everything that
they produced because of consumer demand; 1920s, production caught up with and
began to exceed demand, producers had to direct their efforts towards selling goods
rather than just producing them (new sales orientation was characterized by increased
advertising, enlarged sales forces and occasionally high-pressure selling techniques;
1950s, business managers noticed that they had to satisfy customers’ needs, not just
being producers or sellers.

PRODUCTION SALES ORIENTATION CUSTOMER

ORIENTATION ORIENTATION
Take orders Increase advertising Determine customer needs
Distribute goods Enlarge sales force Develop products to fill these
needs
Intensify sales techniques Achieve the organisation’s
goals

 Implementing the marketing concept: Steps in implementing the marketing concept:

1) A business must first obtain information about its present and potential customers,
not only what customers’ needs are but also how well these needs are satisfied by
products currently in the market (both its own products and competitors); 2) Then the
business must use this information to pinpoint the specific needs and potential
customers towards which it will direct its marketing activities and resources; 3) The
business must mobilise its marketing resources to: provide a product that will satisfy
its customers; price the product a level that is acceptable to buyers and will yield a
profit; promote the product so that potential customers will be aware of its existence
and its ability to satisfy their needs; ensure that the product is distributed so that it is
available to customers where and when it is needed; 4) Finally, the business must
again obtain marketing information- this time regarding the effectiveness of its
 efforts. Can the products be improved? Is it being promoted effectively? Is it being
distributed efficiently? Is the price too high or too low?
 The business must be ready to modify any or all of its marketing activities based on
information about its customers and competitors.

11.4) MARKETS AND THEIR CLASSIFICATION

 Market: is a group of individuals or organisations, or both, that need products in a

given category and has the ability, willingness and authority to purchase them;
broadly classified as consumer or business-to-business, and marketing efforts vary
depending on the intended market.
 Marketers should understand these six characteristics of these two groups/ Major
types of market:
 (1) Consumer markets: consist of purchases and/or household members who intend to
consume or benefit from the purchased products and who do not but products to make
profits.
 (2) Business-to-business markets: also called industrial markets, are grouped broadly
into producer, reseller, governmental and institutional categories; purchase specific
kinds of products for use in making other products for resale or for day-to-day
operations.
 (3) Producer markets: consist of individuals and business organisations that buy
certain products to use in the manufacture of other products.
 (4) Reseller markets: consist of intermediaries, such as wholesalers and retailers, who
buy finished products and sell them for a profit.
 (5) Governmental markets: consist of national, provincial and local governments, who
buy goods and services to maintain internal operations and to provide citizens with
such products as highways, education, water, energy and national defence.
 (6) Institutional markets: include churches. Not-for-profit private schools and
hospitals, civic clubs, charitable organisations and foundations, whose goals are
different from the typical business goals of profit, market share, or return on
investments.

11.5) DEVELOPING MARKETING STRATEGY

 Marketing strategy: is a plan that will enable the organization to make the best of its
resources and advantages to meet its objectives; consist of (1) the selection and
analysis of a target market and (2) the creation and maintenance of an appropriate
marketing mix.
 Marketing mix: a combination of product, price, distribution and promotion
developed to satisfy a particular target market.
 Target market selection and evaluation:
 Target market: is a group of individuals or organisations, or both, for which a business
develops and maintains a marketing mix suitable for the specific needs and
preferences of that group.
 In selecting a target market, marketing managers:
Examine potential markets for their possible
effects on the business’s sales, costs and
profits.
Analyse the strengths and number of
competitors already marketing to the target
market.
 General approaches for selecting target markets:
Attempt to determine whether the
organization has resources to produce a
marketing mix that meets the needs of a
particular target market and whether
satisfying these needs is consistent with the
business’s overall objectives.

UNDIFFERENTIATED APPROACH MARKET SEGMENTATION

Directing a single marketing mix at the entire Market segmentation: the process of dividing
market for a particular product.
This approach assumes that individual
customers in the target market for a specific or organisations within a market that share
kind of product have similar needs and that
the organization can satisfy most customers
with a single marketing mix, which consists
of one type of product with little or no
variation, one price, one promotional
programme aimed at everyone, and one
distribution system to reach all customers in
the total market.
Examples: staple food items like sugar and
salt.
 Bases for segmentation:
APPROACH
a market into segments and directing a
marketing mix at a particular segment or
segments rather than at the total market.
Market segment: it is a group of individuals
one or more common characteristics.
There are two market segmentation
approaches: concentrated and differentiated.
When an organization uses a concentrated
market segmentation, a single marketing mix
is directed at a single market segment.
When the differentiated market segmentation
is used, multiple marketing mixes are
focused on multiple market segments.
When choosing a basis for segmentation, it is
important to select a characteristic that
related to differences in customers’ needs for
a product.

GEOGRAPHIC DEMOGRAPHIC PSYCHOGRAPHI BEHAVIOURAL

C
Regional variables Variables such as Variables such as Variables such as
such as religion, gender, age, values, attitudes and usage rate and
climate, population ethnicity, education, lifestyle. patterns, price
density and occupation income sensitivity, brand
population growth and family status. loyalty and benefits
rate. sought.
  Creating a marketing mix: The four elements that the business combines in a way that
reaches the business’s target market are the product itself, the price of the product, the
means chosen for its distribution and the promotion of the product.

PRODUCT PRICING DISTRIBUTION PROMOTION

The product The pricing The distribution The promotion
ingredient of the ingredient is ingredient involves ingredient focuses on
marketing mix concerned with both not only providing
includes decisions base prices and transportation and information to target
about the product’s discounts. storage, but also markets.
design, brand name, selecting
packaging and intermediaries.
warranties.
Pricing decisions are Major forms of
intended to achieve promotion are
particular goals, such advertising, personal
as to maximize profit selling, sales
or to make room for promotion and public
new models. relations.
Careful planning and
implantation of
promotional tools is
crucial.
11.6) MARKETING STRATEGY AND THE MARKETING ENVIRONMENT

 All of a business’s marketing activities can be affected by external forces, which are
generally uncontrollable.
 These forces make up the external marketing environment:
 (1) Economic forces: the effects of economic conditions on customers’ ability and
willingness to buy; business cycles.
 (2) Sociocultural forces: influences in a society and its culture that result in changes in
attitudes, beliefs, norms, customs and lifestyles.
 (3) Political forces: influences that arise through the action of political figures.
 (4) Competitive forces: the actions of competitors, who are in the process of
implementing their own marketing plans.
 (5) Legal and regulatory forces: laws that protect consumers and competition and
government regulations that affect marketing.
 (6) Technological forces: technological changes that can create new marketing
opportunities or cause products to become obsolete rapidly.
 Changes in the environment can affect existing marketing strategies and may lead to
abrupt shifts in customers’ needs and wants.

11.7) DEVELOPING A MARKETING PLAN

 Marketing plan: is a written document that specifies an organisation’s resources,

objectives, marketing strategy, and implementation and control efforts to be used in
 marketing a specific product or product group; have to be updated frequently because
the forces of the marketing environment are subject to change.
 Describes the business’s current position or situation, establishes marketing objectives
for the product, and specifies how the organization will attempt to achieve these
objectives.
 Developing a well-written marketing plan is important because it helps establish a
unified vision for an organization and is used for communication among the
business’s employees; it covers responsibilities, tasks and schedules for
implementation, specifies how resources are to be allocated to achieve marketing
objectives, and helps marketing managers monitor and evaluate the performance of
the marketing strategy.
 Major components of a marketing plan are:

EXECUTIVE ENVIRONMENTA SWOT ANALYSIS MARKETING

SUMMARY L ANALYSIS OBJECTIVES

One-to-two-page Information about Assessment of the Specification of the

synopsis of the entire the company’s organisation’s business’s marketing
marketing plan. current situation with strengths, objectives.
respect to the weaknesses,
marketing opportunities and
environment. threats.
1) Stress key 1)Assessment of 1) Strengths and 1) Qualitative and
points marketing weaknesses of the quantitative
2) Include one environment factors, company measures of what is
to three key target market (s), 2) Opportunities and to be accomplished
points that current marketing threats in the
make the objectives and environment and
company performance industry
unique

MARKETING MARKETING PERFORMANCE

STRATEGIES
Outline of how the business
will achieve the objectives.
1) Target market (s)
2) Marketing mix
IMPLEMENTATION EVALUATION
Outline of how the business Explanation of how the
will implement its marketing business will measure and
strategies. evaluate the results of the
implemented plan.
1) Marketing 1) Performance
organization standards
2) Activities and 2) Financial controls
responsibilities 3) Monitoring
3) Implementation procedures (audits).
timetable

11.8) MARKET MEASUREMENT AND SALES FORECASTING

  An accurate measure of a market segment can help a business to determine the
feasibility of entering new segments and how best to allocate marketing resources and
activities among market segments in which it is already active.
 All such estimates should identify the relevant time frame- short-range (<year),
medium-range (a year>5 years), long-range (>5 years).
 Estimates should also define the geographic boundaries of the forecast such as a city,
province, or group of countries.
 Finally, analysts should indicate whether their estimates are for a specific product
item, a product line, or an entire product category.
 Sales forecast: is an 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.
 Since the accuracy of a sales forecast is important, organisations often use several
forecasting methods which are executive judgements, surveys of buyers or sales
personnel, time-series analyses, correlation analyses and market tests, whereby these
methods depend on the costs involved, type of product, characteristics of the market,
time span of the forecasts, etc.

11.9) MARKETING INFORMATION

 Marketing information system: is a system for managing marketing information that

is gathered continually (continual data collection is essential to ensure the most up-
to-date information) from internal (include sales figure, product and marketing costs,
inventory levels and activities of the sales force) and external (relate to the
organisation’s suppliers, intermediaries and customers, competitors’ marketing
activities and economic conditions) sources; most of these systems are computer
based because of the large quantities of data the system must accept, store, sort and
retrieve.
 Increasingly, businesses are using big data analytics to mine useful insights from the
huge amounts of data they collect to identify trends and patterns that can result in
more precise adjustments to marketing strategies or entirely new ones therefore it is
imperative that marketers have access to and understand how to use the latest
technologies in order to maximize the efficiency and effectiveness of marketing
information systems.
 Marketing research: is the process of systematically gathering, recording and
analyzing data concerning a particular marketing problem; important step of the
marketing process because it involves collecting and analyzing data on what
consumers want and need, their consumption habits, trends and changes in the
marketing environment; has been made easier because of social media.
 Marketers collect primary data directly from consumers through telephone, personal
interview, online, focus group or social networking surveys.
 Marketers can collect secondary data from sources compiled inside or outside of the
business for purposes other than specific marketing research, often include
commercial and government reports and internal databases.
 The six steps of marketing research are:
DEFINE THE PROBLEM
The problem is stated clearly
and accurately, as it will
determine the research issues
and approaches, the right
question to ask and the types
of solutions acceptable.
MAKE A PRELIMINARY
INVESTIGATION
Aims to develop a sharper
definition of the problem and
a set of tentative answers,
which are developed by
examining internal
information and published
data and by talking with
persons who have experience
with the problem.
PLAN THE RESEARCH
Researchers should know
what facts are needed to
resolve the identified problem
and what facts are available,
make plans on how to gather
needed but missing data.

GATHER FACTUAL INTERPRET THE REACH A CONCLUSION

INFORMATION INFORMATION
Once a plan is in place, The facts must be interpreted Once the data has been
researchers can collect and analysed to determine evaluated, researchers seek to
primary data and secondary the choices available to draw conclusions and make
data however the choice management. recommendations which may
depends on the plan and the be obvious or not, depending
available sources of on intangible factors and
information whether data used were
complete; researchers should
state if any gaps in the data
are noticed.
 Using technology to gather and analyse marketing information: technology has
allowed even small businesses an unprecedented level of access to high-quality data.
 Database: is a collection of information arranged for easy access and retrieval;
allowing marketers to tap into sources such as internal sales reports, newspaper
articles, company news releases, government economic reports and bibliographies.
 Single-source data: it is information provided by a single business on household
demographics, purchases, television viewing behavior and responses to promotions
such as coupons and free samples.
 Online information services: offer subscribers access to e-mails, websites,
downloadable files, news, databases, which improves the capability of a business’s
marketing information system and helps the company track its customers’ changing
desires and buying habits.

11.10) TYPES OF BUYING BEHAVIOUR

 Buying behavior: the decisions and actions of people involved in buying and using
products.
 Consumer buying behavior: refers to the purchasing of products for personal or
household use, not for business purposes.
 Little decision making effort: made by a consumer when buying frequently low cost
items.
 Limited decision making: used by buyer for purchases made occasionally.
  Extended decision making: made by consumer when buying an unfamiliar or
expensive item.
 The possible influences on the decision process are:

SITUATIONAL PSYCHOLOGICAL SOCIAL INFLUENCES

INFLUENCES INFLUENCES
Physical surroundings, social Perception, motives, Family, roles, peer groups,
surroundings, time, purchase learning, attitudes, social class, culture and
reason, buyer’s mood and personality, lifestyles. subcultures.
condition.
 The consumer buying decision process is: (1) Recognise problem, (2) Search for
information, (3) Evaluate alternatives, (4) Purchase, (5) Evaluate after purchase.
 Marketers consider income in 3 different ways:
 Personal income: the gross income an individual receives from all sources.
 Disposable income: personal income less all income taxes.
 Discretionary income: disposable income less savings and expenditures on food,
clothing and housing.
 Business buying behavior: refers to the purchasing of products by producers,
resellers, governmental units and institutions.
 Business buyers (which can be a committee or a group of people) are better informed
than consumers and consider a product’s quality, its price and the service provided by
suppliers which occurs through description, inspection, sampling or negotiation.