Principles of Marketing

Priciples of Marketing 10e

Unit 1/Chapter 1 notes

CHAPTER 1

MARKETING:
MANAGING PROFITABLE CUSTOMER RELATIONSHIPS
I. LOOKING AHEAD: PREVIEWING THE CONCEPTS
A review of Amazon.com and how it has been successful so far.
II. WHAT IS MARKETING?
Marketing has two purposes
   1. attract new customers by promising superior value
   2. Grow current customers by delivering satisfaction.
      A. Marketing Defined
A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and values with each other.
               Core terms we need to know.
               " Needs, Wants, Demands
               " Marketing offers (products, services and experiences)
               " Value and satisfaction
               " Exchanges, transactions and relationships
               " Markets
      B. Needs, Wants and Demands
                   Needs - state of felt depravation
                                 Wants - the form taken by a human needs as shaped by culture and individual personality
                                 Demands - Human wants that are backed by buying power
                                 Marketing must reach out to all three of theses.
   C. Marketing Offers - Products, Services, and Experiences
                   Marketing offer - Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.
It is possible to have 'marketing myopia', thinking that you have what the customer needs (a drill bit) when he has a different need (a need to drill a whole). If something else comes along that will do job better, customer will switch. Some marketers try to build meaning or experience into their marketing so that customers stay with them.
   D. Value and Satisfaction
                   Customer value - the difference between value customer gains from owning product and the cost of obtaining the product.
                                 Customer Satisfaction - how well the product lives up to the customer's satisfaction.
                                 Marketers need to balance these. If expectation is too low they may attract some buyers but not enough. If they set to high, buyers get disappointed.
   E. Exchange, Transactions, and Relationships
                   Exchange - act of obtaining a desired object from someone by offering something in return.
                                 Transaction - a trade of values between two parties.
                                 A marketer tries to bring about a response to a marketing offer. Marketing tries to maintain desirable exchange relationships, not only getting new customers but marinating older customers.
   F. Markets
                   Market - the set of all actual and potential buyers of a product or service.
                                 Market was originally a place where buyers and sellers gathered to exchange their goods. Economists see a market as a collection of buyers and sellers. Marketers see sellers as industry and buyers as the market
   G. Marketing
                   Marketing means managing markets to bring about profitable exchange relationships. This is done by creating value and satisfying needs and wants.
This means work. Sellers need to search for buyers and identify what then need, design the goods and set prices for them as well as promote store and then deliver them.
III. MARKETING MANAGEMENT
Marketing management - the art and science of choosing target markets and building profitable relationships with them.
   A. Customer and Demand Management
                   Marketing Management - learning to serve selected customers well and profitably. This may mean that demarketing, the reduction of customers, may need to take place in order to serve your customers. The aim is not to destroy the demand, only to reduce or shift it.
   B. Marketing Management Orientations
      1. The Production Concept
                     The idea that consumers will favor products that are available and highly affordable.
                     This concept can lead to marketing myopia, focusing on their own needs and not customer satisfaction.
      2. The Product Concept
                     The idea that consumers will favor products that offer most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements.
                     The problem is that the seller will be making a better mouse trap and the buyer wants a way to get rid of rats, which the seller may or may not meet.
      3. The Selling Concept
                  The idea that consumers will not buy enough of the organization's product unless the organization undertakes a large-scale selling and promotion effort.
                  This is typically done when organization feels that it has or will have overcapacity. The focus is on creating sales rather than long term customer relations.
      4. The Marketing Concept
                  The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more efficiently and effectively than competitors do.
                  The focus is on satisfying the customer. This works when customers know what they want, but since a customer may not know what they want, the marketer may need to lead them to it.
      5. The Societal Marketing Concept
                     The idea that the organization should determine the needs, wants, and interests of target markets and deliver satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer's and society's well-being.
                     It questions customers short-run wants versus the long-run welfare.
IV. CUSTOMER RELATIONSHIP MANAGEMENT
Customer relationship management - the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
The purpose here is to stop up the 'leaky bucket' and not loose any older established customers. The reason is that is a company keeps a customer for a lifetime than there is a value there that can be replace by attracting another customer but at what cost.
   A. Attracting, Retaining, and Growing Customers
      1. Relationship building blocks: Customer value and satisfaction
         a. customer value
                  Customer Perceived Value - The difference between total customer value and total customer cost.
                  Example - Does FedEx's extra cost give a better value than the Postal Service? The Postal Service can do it cheaper but FedEx has prestige to it.
         b. customer satisfaction
                     Customer satisfaction - the extent to which a product's perceived performance matches a buyer's expectations.
                     Satisfied customers tell others about their satisfaction and make repeat purchases. Smart companies promise only what they can deliver and then deliver more than they promise. This brings customer satisfaction.
      2. Customer loyalty and retention
         A satisfied customer is less price sensitive and will talk favorably to other people. Satisfaction and loyalty vary among industries though. Non-competitive markets (monopolies or protected business) tend to have loyal customers but pay a high price for dissatisfaction in the long run.
      3. Growing "Share of Customer"
                  This is done by becoming the only supplier of the product, or by expanding your business to take on other products.
   B. Building Customer Relationships and Customer Equity
      1. Customer equity
                     Customer - Equity - The total combined customer lifetime value of all the company's customers.
                        It reflects the future of the customer and the more loyal the customers are the higher the equity will be.
      2. Customer relationship levels and tools
                  Customer relationships are built depending on the nature of the target market. But commonly a few things are done
                  Frequency marketing programs reward customers who buy frequently or in large amounts (frequent flier miles).
                  Social Benefits add value to the purchase by making the customer part of some organization promoting member communities.
                  Structural ties offer special tools to the customer (web site links for FedEx for example).
V. MARKETING CHALLENGES IN THE NEW "CONNECTED" MILLENNIUM
                     Yogi Bera - "The future ain't what it used to be." Marketing development now can be summed up in one word, connecting.
   A. Technologies for Connecting
                  Technology allows to be anyplace in the world and never set foot on a plane. Advertising can be done many new ways now (CD ROMS and cell phones for example).
         1. The Internet
                     Companies do not need to have a physical presence any more; they can be virtual on the net now. Established customers also need a presence as well.
   B. Connecting with Customers
      1. Connecting with more carefully selected customers
                  Marketers today realize they do not want to market to just anyone, they want to market to fewer more profitable customers. Once they identify these customers based on the data they have they can deliver special offers to them. But what of the other customers? Though they do not fire them they discourage them in ways.
      2. Connecting for a customer's lifetime
                     The emphasis now is connecting with a customer and then growing your share of that customer.
      3. Connecting directly
                  Direct marketing and the internet have become the model for many companied. Even ones that do not sell directly to the consumer place information on the internet that relates to the customer needs (child care information on a Papers Diaper web site).
   C. Connecting with Marketing Partners
                  Partner relationship management - Working closely with partners in other company departments and outside the company to jointly bring greater value to the customer.
      1. Connecting inside the company
                  All departments in the company need to realize that they are equally responsible for the customer's satisfaction.
      2. Connecting with outside partners
           a. Supply chain management
                        The supply chain is the channel from raw material to the final product. Companies today realize that they can only do well if the companies that feed them perform. In this respect they become partners in satisfying the customer.
            b. strategic alliances
                     This is often done though strategic alliances, partners who compliment their strengths and offset their weakness.
   D. Connecting with the World Around Us
      1. Global connections
                     All companies, large and small are touched by global competition. Questions need to be asked by the company how they are to go global.
      2. Connections with our values and social responsibilities
                     Few companies can afford to ignore the environmental movement.
      3. Broadening connections
               Marketing has become not just for products, but for non-profit organizations that do not sell anything but a sense of belonging.
   E. The New Connected World of Marketing
VI. LOOKING BACK: REVIEWING THE CONCEPTS