MOS 2320 Marketing: Midterm Notes

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Western University
Management and Organizational Studies
Management and Organizational Studies 2320A/B
John White

Lecture 1: Chapter One Marketing: Creating and Capturing Customer Value What is marketing? Marketing is a process by which companies create value for customers and build strong customer relationships to capture value from customer in return 1. Understanding the Marketplace and Customer Needs Customer Needs, Wants and Demands Need is a state of felt deprivation - Physical: food, clothing, warmth, safety - Social: belonging and affection - Individual: knowledge and self-expression Wants are the forms human needs take as shaped by culture and individual personality Demands are wants that are backed up by buying power Maslows Hierarchy of Needs Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want Marketing myopia is focusing only on existing wants and losing sight of underlying customer needs Customer Value and Satisfaction Expectations - Marketers set the right level of expectations, not too high or low - Customers value and satisfaction Exchange is the act of obtaining a desired object from someone by offering something in return Markets are the set of actual and potential buyers of a product 1 2. Designing a Customer-Driven Marketing Strategy Marketing Management is the art and science of choosing target markets and building profitable relationships with them (What customers will we serve and how can we best serve these customers?) Selecting Customers to Serve Marketing segmentation refers to dividing the markets into segments of customers Target Marketing refers to which segments to go after Demarketing is marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it Choosing a Value Proposition The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs. Marketing Management Orientations Production concept is the idea that consumers will favor products that are available or highly affordable, example- Wal-Mart and Target Product concept is the idea that consumers will favor products that offer the most quality, performance, and features. Organization should therefore devote its energy to making continuous product improvements. 2 Selling concept is the idea that consumer will not buy enough of the firms products unless it undertakes a large scale selling and promotion effort, example- would you like fires with that? Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do Societal marketing concept is the idea that a company should make good marketing decision by considering consumers wants, the companys requirements, consumers long-term interests and societys long-run interests 3. Preparing an Integrated Marketing Plan and Program The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy. It includes product, place, price, and promotion. Integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers. 4. Building Customer Relationships Customer Relationship Management (CRM) The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Relationships Building Blocks: Customer Value and Satisfaction Customer Perceived Value- the difference between total customer value and total customer cost Customer Satisfaction- the extent to which a products perceived performance matches a buyers expectations Customer Relationship Levels and Tools Basic Relationships vs. Full Partnerships The Changing Nature of Customer Relationships - Relating with more carefully selected customers uses selective relationship management to target fewer, more profitable customers - Relating more deeply and interactively by incorporating more interactive two way relationships through blogs, Websites, online communities and social networks Partner Relationship Management 3 - Partners inside the company is every function area interacting with customer o Electronically o Cross-Functional Teams - Partners outside the company is how marketers connect with their suppliers, channel partners and competitors by developing partnerships 5. Capture Value from Customers Creating Customer Loyalty and Retention - Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage What is a customer worth? - Customer spends $150 a week - Retailer makes a 5% margin - Customer is loyal for 10 years - Interest rates are 5% - No initial cost to acquire the customer o Calculate the yearly profit: $150 x 52 x 5% = $390 o Discount the stream out ten years Growing Share of Customer Share of customer is the portion of the customers purchasing that a company gets in its product categories - Whats your favorite Brand? - What products would you like to see your favorite brand come out with? Customer equity is the total combined customer lifetime values of all of the companys customers Building the Right Relationship with the Right Customers High Profitability Butterflies- good fit True Friends- good fit between companys between companys offerings and offerings and customers needs; customers needs; high profit potential highest profit potential Low Profitability Strangers- little fit Barnacles- limited fit between companys between companys offerings and offerings and customers needs; customers needs; low lowest profit potential profit potential Short-Term Customers Long-Term Customers 4
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