Chapter 12 Understanding the Customer 1. Introduction Brands like Apple, and Coca-Cola are famous. Branding is trust between companies and customers. Interbrand is the world’s leading brand consultancy company. Interbrand values top brands at $2 trillion. Canadian brands include TD Bank Group and RBC; both are valued at approximately $11 billion. The Bell Canada, Shoppers Drug Mart, Rogers, and Lululemon brands are each valued at approximately $3 billion. But a company does not have to be famous to have brand value. 2. What Is Marketing? Marketing is the entire process of creating relationships with customers by offering goods, services, and experiences that they value. - Marketing makes people interested. - Advertising is a visible part of marketing. - People often link marketing to advertising. 1. Production vs Customer Orientation: Two approaches: production and customer focus. Production: Efficient product making. Customer: Fulfilling customer needs. 2. Advertising's Significance: Ads are highly visible and hard to avoid. Canada spends over $13 billion annually on ads. Shifting from traditional to digital media. 3. Marketing's Scope: Marketing is more than ads. It's about building relationships by offering value. Involves creating, pricing, and selling products. 4. Importance of Marketing: Companies' success hinges on effective marketing. Marketing sets businesses apart in the modern economy. 3. EVOLUTION OF MARKETING 1. Early 20th century - Focus on mass production. - Strong production orientation: Emphasis on efficiency. - Marketing was about orders and distributing goods. 2. 1920s - Shift to Sales Orientation: - Production exceeded demand. - Sales orientation emerged. - Increased advertising, bigger sales teams. - Manufacturers promoted products through ads and selling. - Technologies like radio and TV spread product info. 3. 1950s - Customer Orientation: - Realization: Focus on customer satisfaction. - Shift from producers/sellers to customer needs. - Teams formed: market researchers, product/brand managers. - Meeting customer needs became the priority. Reasons for Change: - Lower production costs, global trade increased competition. - More choices for consumers. - Technology allowed comparing prices and reviews. Customer-Centric Approach: - Customer orientation is adopting the marketing concept. - Business provides goods/services satisfying customer needs. - Philosophy: Coordinated activities to achieve objectives. Implementing the Marketing Concept: 1. Gather Customer Information: - Identify existing and potential customers. - Understand their needs and satisfaction levels. - Evaluate competitors' products. 2. Target Audience: - Identify specific needs and potential customers. - Focus on marketing efforts and resources. 3. Marketing Resource Mobilization: - Design satisfying products. - Set acceptable prices for profit. - Promote product awareness. - Ensure proper distribution. 4. Feedback and Adaptation: - Continuously gather marketing info. - Modify strategies based on customer and competitor insights. 4. Customer Relationship Management (CRM): It tracks and organizes information about current and prospective customers to create marketing strategies that develop and sustain desirable customer relationships - It uses marketing research and technology for customer relationships. - CRM uses customer info for lasting relationships. - Aim: Increase customer value, loyalty, and profitability. Advantages of Technology in CRM: Internet's Impact on Relationship Marketing: The Internet has significantly enhanced the landscape of relationship marketing. Real-time Interaction via Digital Technologies: The advent of digital technologies, such as chatbots, facilitates real-time and interactive dialogues with customers. Focus on Personalization: The utilization of data empowers one-to-one marketing strategies, tailoring offerings to individual preferences. Loyalty Cards and Personalization: Loyalty Cards and Purchase Tracking: Loyalty cards (e.g., Air Miles) allow meticulous tracking of customer purchases. Encouraging Additional Purchases: Personalized discounts encourage more purchases. Example: Offering discounts on preferred products. Branding and Trust: - Branding involves names, symbols, and meanings. - Brand promise: Core benefits a brand offers. - Trust forms the basis of brand loyalty, contributing to heightened brand value. - Trustworthy brands like Mother Earth Essentials gain loyalty. - Satisfied customers boost brand value. Value Provided by Marketing: Shift from Production to Customer Orientation: The transition from production-oriented strategies to customer-centric approaches is fundamental. Focus on the 4Ps: A customer-centric approach emphasizes getting the right product, place, price, and timing. Customer-oriented approach adds value in four ways: - Right product: Satisfies needs and wants. - Right place: Convenient product access. - Right price: Fair market value. - Right time: Availability when needed. 5. Utility and Value: Utility refers to a product's capacity to fulfill human needs. There are four distinct types of utility: I. Form Utility: Converting inputs into finished products. II. Place Utility: Making products available at desired locations. III. Time Utility: Making products available when wanted. IV. Possession Utility: Transferring ownership to buyers. Marketing's Role in Utility: Marketing plays a pivotal role in enhancing utility and value for customers: - Marketing creates place, time, and possession utility. - Adds convenience and value to products. - Various activities involved: Marketing encompasses an array of activities such as research, management, and leveraging social media to effectively meet customer needs. Integrated Business Effort: - Accounting, finance, and HR contribute to success. - Top management coordinates functional areas for customer value. Continuous Improvement: - Challenges may arise (e.g., high demand, low production). - Dedicated companies work to overcome challenges. - Building strong customer relationships through value. 6. The Marketing Mix: - Marketing activities deliver four types of value. - Four elements (4 P's): Product, Price, Placement (Distribution), and Promotion. - Customer is at the center of the marketing mix. I. Product Element: - This involves decisions related to product design, features, branding, packaging, warranties, and more. II. Pricing Element: - Prices are strategically set to achieve specific goals, such as profit maximization or gaining market share. - The challenge lies in finding the equilibrium between generating profit and capturing market share. III. Placement (Distribution) Element: - Involves transportation, storage, intermediaries. - Intermediaries distribute products to customers. IV. Promotion Element: - Communicates value to customers. - Major forms: advertising, personal selling, sales promotion, public relations. - Promotion itself provides value by informing customers. Creating Marketing Mix: - Marketing mix enables delivering value: right product, price, place, and time. - May have different mixes for different customer groups. Marketing Strategy: - Plan for best resource use to meet objectives. - Involves target market selection and marketing mix creation. Evaluating Marketing Strategy: - The 4 P's framework serves as a tool to assess the completeness and integration of a marketing strategy. - Weakness in one area can affect overall success. Marketing mix and Brand Promise: -Marketing mix is the foundation of branding. - Consistency in the marketing mix builds trust in the brand. - Strong customer relationships when value is understood and consistent. 7. Consumer Decision Process: - Consumer Purchase decisions vary based on effort and expense. - Five steps in the consumer decision process: 1. Recognizing need/opportunity. 2. Searching for information, and evaluating alternatives. 3. Applying criteria to narrow options. 4. Considering influences on decisions. 5. Making purchases and evaluating future purchases. Influences on Purchase Decisions: Purchase decisions are influenced by various factors: Cultural, social, personal, and psychological elements. Situational influences, including context and timing. Role of Branding: Branding simplifies the complex purchase decision process. Brands serve as frames of reference for evaluating products. Accumulated preferences and experiences with brands guide consumers' choices. Brands make the decision process efficient by acting as filters for products. Establishing trust in a brand lead to loyalty and willingness to pay a premium. Business Buyer Decision Process: - Business buyers follow similar steps, more complex. - Their purchases are informed and often involve larger quantities - Committees within businesses decide, considering objectives, and resources. - Business buying involves description, inspection, sampling, and negotiation. - Branding plays a vital role in connecting businesses with products. - The brand experience significantly influences business purchasing decisions. Benefits of Branding: - Branding eases decisions and simplifies options. - Reduces risk and saves time during purchase. - Brand loyalty helps introduce new products. - Successful brand experiences lead to trust and loyalty. Market Segmentation: - Market segmentation subdivides the market into smaller groups. - Groups with common characteristics and needs are market segments. - Market segmentation allows a better understanding of customer needs. - Optimizes marketing mix for each segment. Benefits of Market Segmentation: o Product Development: Companies can develop products that cater to the unique needs of specific segments. o Pricing, Distribution, and Promotion: The marketing mix can be customized to suit the preferences of each segment. o Examples: Brands like Mercedes-Benz and Toyota adeptly target distinct segments with different needs. Common Dimensions for Market Segmentation: 1. Demographic: Age, gender, and income provide insights into customer profiles. 2. Geographic: Location and regional differences impact consumer behavior. 3. Psychographic: Lifestyle, values, and attitudes play a role in purchase decisions. 4. Behavioral: Usage patterns, loyalty, and desired benefits influence choices. 5. Occasion-based: Consideration of buying occasions and timing assists in targeting. External Influences on Marketing: - Economic forces (customer ability and willingness to buy). - Sociocultural forces (changes in attitudes, lifestyles). - Political forces (laws and regulations). - Competitive forces (competitor actions). - Legal and regulatory forces (consumer protection, competition). - Technological forces (technological changes, opportunities). The Marketing Research Process: 1. Define the Research Goal: Clearly define the problem or information gap that needs to be addressed through research. This step ensures that the research is focused and aligned with specific objectives. 2. Gather Data: Collect relevant data to address the research goal. Data can come from various sources, including secondary research (existing research studies, reports, etc.) and primary research methods (surveys, focus groups, interviews). 3. Interpret the Data: Process and analyze the gathered data to derive meaningful insights and information. Identifying patterns, trends, and correlations in the data is essential for drawing conclusions. 4. Use the Data to Make Decisions: Apply the insights gained from data interpretation to make informed marketing decisions. The research should provide actionable information that can guide marketing strategies and initiatives. Social Media and Market Research: Social media has significantly transformed market research practices: It has led to a shift in marketing budgets towards digital initiatives. Social media platforms provide a space for customers to share their opinions. Real-time feedback and targeted research are now feasible. Companies actively monitor social media to gauge public perception. - Market Research: Important for businesses to make smart choices with accurate data. By defining research goals, gathering, interpreting, and applying data, companies can gain valuable insights to improve marketing strategies and offerings. Social media changed how research is done, offering quick feedback and focused strategies. - Building Brand Value: Is a dynamic process that involves the interaction between consumers and companies. Consumers want products that suit their needs, while companies aim to provide those products. This happens through the consumer decision process and the company's marketing process. Key Concepts in Market Research: 1. Importance of Market Research: Businesses use market research to make informed decisions using accurate data. This process involves defining research goals, collecting, interpreting, and applying data to improve marketing strategies and offerings. 2. Steps in Market Research: The market research process includes defining research goals, gathering relevant data, interpreting the data to extract insights, and applying these insights to make informed decisions. 3. Influence of Social Media: Social media has revolutionized market research by allowing real-time feedback and targeted approaches. Companies can engage with customers directly and receive instant responses, enhancing the accuracy and speed of research. Example: Social Media Impact on Market Research: Real-Time Feedback: Companies can use platforms like Twitter and Facebook to gather opinions and reactions from customers instantly. This helps in adjusting strategies promptly and staying connected with consumer preferences.
