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Chapter 1

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COMM 231
John C Carlson

COMM231 – Intro to Marketing Matthew Lam Chapter 1 – Marketing: Creating and Capturing Customer Value What is Marketing? - Marketing: managing profitable customer relationships o Twofold goal:  Attract new customers by promising superior value  Keep and grow current customers by delivering satisfaction Marketing Defined - Marketing must be understood in the new sense of satisfying customer needs (not in the old sense of making a sale – “telling and selling” o Peter Drucker “The aim of marketing is to make selling unnecessary” -> selling and advertising are only part of a larger “marketing mix” (marketing tools that work together to satisfy customer needs and build customer relationships) - Broadly defined - Marketing: a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others - Narrower business context – Marketing: involves building profitable, value-laden exchange relationships with customers - Textbook definition – Marketing: the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return The Marketing Process - Figure 1.1 (pp 7) - Five step model of the marketing process o 1) Understand the marketplace and customer needs and wants o 2) Design a customer-driven marketing strategy o 3) Construct an integrated marketing program that delivers superior value o 4) Build profitable relationships and create customer delight o 5) Capture value from customers to create profits and customer equity Understanding the Marketplace and Customer Needs - Five core customer and marketplace concepts: 1) needs, wants, and demands; 2) market offerings (products, services, and experiences); 3) value and satisfaction; 4) exchanges and relationships; and 5) markets Customer Needs, Wants, and Demands - Most basic concept underlying marketing – human needs o Human needs: states of felt deprivation  E.g. physical needs (food, warmth), social needs (affection), individual needs (knowledge)  Not created by marketers; basic part of the human makeup o Wants: the form human needs take as they are shaped by culture and individual personality  Shaped by one’s society as well as by marketing programs  E.g.ACanadian needs food but wants a breakfast sandwich and a large double-double from Tim Hortons. o Demands: when wants are backed by buying power, they become demands  Given their wants and resources, people demand products with benefits that add up to the most value and satisfaction. - Marketing companies – goal = learn about/understand customers’needs, wants, and demands o People at all levels (including top mgmt.) stay close to customers Market Offerings – Products, Services, and Experiences - Consumers’needs and wants are fulfilled through market offerings: combination of products, services, information, or experiences offered to a market to satisfy a need or want o MO not limited to physical products; also include services: activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything (e.g. banking, airline, hotel services) o MO also include other entities (i.e. persons, places, organizations, info, and ideas) - Common seller mistakes o Marketing myopia: pay more attention to specific products than to benefits/experiences produced by the products; focus only on existing wants and lose sight underlying customer needs  E.g. a manufacturer of quarter-inch drill bits may think a customer needs a drill bit; but the customer really needs a quarter-inch hole  Problem: if new product comes that serves needs better or less expensively; the customer will have the same need but will want the new product - Smart marketers create brand experiences for consumers o E.g. HP laptops market the computer as an intensely personal user experience ….”Your personal computer is your backup brain. It’s your life.. it’s your astonishing strategy, staggering proposal, dazzling calculation.” Customer Value and Satisfaction - Customers form expectations about the value and satisfaction MO’s deliver and buy accordingly o Marketers must set the right level of expectations; if too low – you get satisfied customers but won’t attract enough buyers; too high – disappointed buyers  Consumer value and customer satisfaction = key building blocks for developing and managing consumer relationships Exchanges and Relationships - Exchange: act of obtaining a desired object from someone by offering something in return o Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences -> by consistently delivering superior customer value Markets - Market: set of all actual and potential buyers of a product - Marketing: managing markets to bring about profitable customer relationships o Sellers jobs -> search for buyers, identify needs, design good MO’s, set prices to MO, promote MO, store and deliver them.  Example market activities: consumer research, product development, communication, distribution, pricing and service o In addition to customer relationship mgmt.., today’s marketers must also deal effectively with customer-managed relationships  “how can we reach our customers?” “how should our customers reach us?” “how can our customers reach each other?” - Marketing involves serving a market of final consumers in the face of competitors - Figure 1.2 o Acompany’s success at building profitable relationships depends not only on its own actions but also on how well the entire system serves the needs of final consumers Designing a Customer-Driven Marketing Strategy - Marketing management: the art and science of choosing target markets and building profitable relationships with them o Successful marketing strategy -> two questions  “What customers will we serve (target market)?”  “How can we serve these customers best (what’s our value proposition)?” Selecting Customers to Serve - Acompany must first decide who it will serve: o 1) market segmentation: first divide the market into segments of customers o 2) target marketing: select which segments it will go after - A company wants to select only customers that it can serve well and profitably - Marketing management = decide which customers to target and on the level, timing, and nature of their demand = customer management + demand management Choosing a Value Proposition - The company must also decide how it will differentiate and position itself in the marketplace o Abrand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs  E.g. TELUS “The future is friendly”; Infiniti “Makes luxury affordable”  Answers the consumer Q “Why should I buy your brand rather than a competitors?” o Must design strong value propositions that give the company the greatest advantage in their target market Marketing Management Orientations The Production Concept - Production concept: holds that consumers will favor products that are available and highly affordable; mgmt.. should focus on improving production + distribution efficiency o E.g. Lenovo dominates the Chinese PC market through low labour costs, high production efficiency, and mass distribution o However, production concept can lead to marketing myopia (focus too narrowly on operations and lose sight of satisfying customer needs + build relationships) The Product Concept - Product concept: holds that consumers will favour products that offer the most in quality, performance and innovative features o The marketing strategy for this concept focuses on making continuous product improvements o However, product concept can also lead to marketing myopia (neglect other more innovative solutions – too much focus on improvements on one particular solution) The Selling Concept - Selling Concept: idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort o Typically practiced with unsought goods [those buyers don’t normally think of buying – e.g. blood donations or insurance] o Carries high risk – b/c aim = sell what company makes rather than making what the market wants or building long-term profitable customer relationships The Marketing Concept - Marketing concept: achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do o Customer focus and value = paths to sales and profits ;; a customer-centred “sense and respond” philosophy ;; job is to find the right products for your customers, not to find the right customers for your product Comparison with Selling concept o Selling concept  Inside-out perspective; starts with the factory (company’s existing products) -> heavy selling + promotion -> profitable sales  primary focus: customer conquest (getting short-term sales with little concern about who buys or why) o Marketing concept  Outside-in perspective  Well defined market -> focus on customer needs -> integrates marketing activities to attract customers -> profit by lasting relationships - Implementing the marketing concept o More than just responding to customers’stated desires and obvious needs  Learn about their desires, gather new product/service ideas, test proposed product improvements o Works well when customers know what they want – if not -> companies must understand customer needs better than customers themselves (create products/services to meet existing and latent needs, now and in the future) The Societal Marketing Concept - Societal marketing concept: questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare;; o holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well-being  sustainable marketing: socially + environmentally responsible marketing -> meets present needs of consumers + businesses // preserves/enhances ability of future generations to meet their needs - companies should balance three considerations: o company profits, consumer wants, and society’s interests  e.g. of bad example: bottled water companies (satisfy short-term consumer wants // cause environmental problems against society’s long-term interests)  e.g of good example: Johnson and Johnsons credo -> people before profits Preparing an Integrated Marketing Plan and Program - marketing program: builds customer relationships through implementing marketing strategy o consists of the firm’s marketing mix: set of marketing tools used in its marketing strategy - major marketing mix tools – four broad groups: o four Ps of marketing  product: must first create a need-satisfying market offering  price: decide how much it’ll charge the offering  place: make offering available to target consumers  promotion: communicate with targets about offering’s merits Building Customer Relationships Customer Relationship Management - defining customer relationship management – two ways: o narrowly -> called “customer data management”  involves managing detailed info about individual customers and carefully managing customer “touch-points” to maximize customer loyalty o broadly -> customer relationship management  the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Relationship Building Blocks: Customer Value and Satisfaction - key factors: create superior customer value and satisfaction Customer Value - customer perceived value: customer’s evaluation of the difference between all benefits and all costs of a market offering relative to those of competing offers o customers often act on these ‘perceived values’  e.g. on how these values vary from customer to customer -> GE’s profile washer-and-dryer set Customer Satisfaction - Customer satisfaction: depends on the product’s perceived performance relative to a buyer’s expectations o higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance  e.g. Ritz-Carlton Hotel • hotel staffers discreetly observe and record even the smallest guest preferences + every morning, each hotel reviews the files of all new arrivals who have previously stayed at a Ritz-Carlton and prepares a list of suggested extra touches that might delight each guest;; once a special customer need is identified, employees go to legendary extremes to meet it. - Although a customer-centered firm seeks to deliver high customer satisfaction relative to competitors, it doesn’t attempt to maximize customer satisfaction o Needs to generate customer value profitably -> delicate balance between customer value/satisfaction and personal profit Customer Relationship Levels and Tools - Companies build different levels of customer relationships depending on the nature of the target market o Basic relationships  Companies with many low-margin customers may pursue this (e.g. create relationships through brand-building advertising, sales promotions, etc.) o Full partnerships  Companies in markets w/ few customers and high margins (e.g. personally calling to get to know each customer) o Other levels exist between these two extremes f
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