Chapter 12
Customer-Driven Marketing
4 Outline the basic steps in
developing a marketing strategy.
1
Summarize the ways in which
marketing creates utility.
5
Explain the marketing concept and
6 Identify and explain the methods
2 relate how customer satisfaction
contributes added value.
Describe not-for-profit marketing,
and identify the five major
3
categories of nontraditional
marketing.
Describe the marketing research
function.
available for segmenting
consumer and business markets.
7 Outline the determinants
of consumer behavior.
8 Discuss the benefits and
tools for relationship
marketing.
WHAT IS MARKETING?
Marketing Organizational function and set of processes for creating,
communicating, and delivering value to customers and for man- aging
customer relationships in ways that benefit the organization and its
stakeholders.
• Best marketers not only give consumers what they want but even anticipate
consumers’ needs before those needs surface.
• Create a link in consumers’ minds between the new need and the fulfillment of
that need by the marketers’ products.
Exchange process Activity in which two or more parties give something of
value to each other to satisfy perceived needs.
How Marketing Creates Utility
Utility Want-satisfying power of a good or service.
• Marketing function can create three kinds of utility:
• Create time utility by making a good or service available when customers
want to purchase it.
• Create place utility by making a product available in a location convenient
for customers.
• Create ownership utility through an orderly transfer of goods and services
from the seller to the buyer.
• Can create all three.
• Fastest trend in casual dining (Applebee’s, Ruby Tuesday) is offering
curbside service, which combine all three.
EVOLUTION OF THE MARKETING
CONCEPT
Emergence of the Marketing Concept
Marketing concept Company-wide consumer orientation
to promote long-run success.
• Firm starts with analysis of customers’ needs and works
backward to offer products that fulfill them.
• Explained by shift from sellers’ market in which goods
and services are relatively scarce to buyers’ market in
which they are relatively plentiful.
Delivering Added Value Through Customer
Satisfaction and Loyalty
• Firm starts with analysis of customers’ needs and works backward to offer
products that fulfill them.
Customer satisfaction Ability of a good or service to meet or exceed a buyer’s
needs and expectations.
• Increasing customer loyalty just five percent equals significant increases in
lifetime profits per customer.
• Value-added good or service is offered when a company exceeds value
expectations by
• Adding features
• Lowering its price
• Enhancing customer service
• Making other improvements that increase customer satisfaction
Customer Satisfaction and Feedback
• To determine whether customers are satisfied, can get feedback in a variety of
ways:
• Toll-free telephone hotlines
• Customer satisfaction surveys
• Web site message boards
• Written correspondence
• Customer complaints
• Customers often feel a greater loyalty after a conflict has been resolved.
EXPANDING MARKETING’S
TRADITIONAL BOUNDARIES
Not-for-Profit Marketing
• 20 million not-for-profits worldwide.
• Account for five percent of GDP worldwide.
• Apply marketing tools to reach audiences, secure funding, improve their images,
and accomplish their overall missions.
• Sometimes partner with a profit-seeking company to promote a message.
Nontraditional Marketing
Person Marketing
• Efforts designed to attract the attention, interest, and preference of a target market
toward a person.
Place Marketing
• Attempts to attract people to a particular area, such as a city, state, or nation.
Event Marketing
• Marketing or sponsoring short-term events such as athletic competitions and
cultural and charitable performances.
Cause Marketing
• Promotes a cause or social issue, such as preventing child abuse, antilittering
efforts, and antismoking campaigns.
Organization Marketing
• Influences consumers to accept the goals of, receive the ser- vices of, or
contribute in some way to an organization.
DEVELOPING A MARKETING
STRATEGY
• First, study and analyze potential target markets and choose among them.
• Second, create a marketing mix to satisfy the chosen market.
Selecting a Target Market
Target market Group of people toward whom an organization markets its goods,
services, or ideas with a strategy designed to satisfy their specific needs and
preferences.
Marketing mix Blending the four elements of marketing strategy—product,
distribution, promotion, and pricing—to satisfy chosen customer segments.
• Product strategy involves the nature of the product and its package design,
brand names, trademarks, product image, customer service, and other elements.
• Distribution strategy ensures that customers receive their purchases in the
proper quantities at the right times and locations.
• Promotional strategy blends advertising, personal selling, sales promotion,
and public relations to achieve its goals of informing, persuading, and
influencing purchase decisions.
• Pricing strategy is setting profitable and justifiable prices for the
firm’s product offerings, sometimes subject to government scrutiny.
Developing a Marketing Mix for International
Markets
• Standardization Offering the same marketing mix in every market.
• Works best with B2B goods such as steel, chemicals, and aircraft that require
little cultural sensitivity.
• Adaptation Developing a unique marketing mix to fit each market’s local
competitive conditions, consumer preferences, and government regulations.
• Example: KFC restaurants in China offer bamboo shots and rice porridge as
side dishes.
• Mass customization Firms mass produce goods and services and add unique
features to individual or small groups of orders.
• Example: Zap, which imports Smart Cars from Europe with
different-colored doors that snap off and on.
MARKETING RESEARCH
Marketing research Collecting and evaluating information to support marketing
decision making. – AC Nielson – Consumer Research
Obtaining Marketing Research Data
• Internal data comes from within the organization.
• Firm’s financial records, such as sales, profitability, comparisons of sales
territories.
• External data comes from outside the organization.
• Secondary data: Previously published data from trade associations,
advertising agencies, marketing research firms, and other sources.
• Low cost and easy to obtain
• Primary data: Data collected through observation, surveys, and
other forms of observational study.
Applying Marketing Research Data
• As accuracy of research information increases, so does
the effectiveness of the marketing strategies.
• Example: GM’s H3 Hummer research
Data Mining
Data mining Computer searches of customer data to detect
patterns and relationships.
• Uses data warehouses, sophisticated customer databases that allow managers to
combine data from several different organizational functions.
• Example: Walmart’s use to determine local preferences and tailor its
inventory appropriately.
MARKET SEGMENTATION
Market segmentation Process of dividing a total market into several relatively
homogeneous groups.
How Market Segmentation Works
Segmenting Consumer Markets
Geographic Segmentation
• Divides market into homogeneous groups on the basis of their locations.
• Also consider size and characteristics of the population, such as age, ethnicity,
and income level.
Demographic Segmentation
• Divides market on the basis of various demographic or socioeconomic
characteristics.
• Common characteristics include gender, income, age, occupation, household
size, stage in the family life cycle, education, and ethnic group.
• Marketers avoid stereotyping by breaking large groups into smaller segments.
Psychographic Segmentation
• Divides consumer market into groups with similar psychological characteristics,
values, and lifestyles.
• Develop AIO statements about customers’ activities, interests, and opinions.
• Start blogs to learn more about consumers’ lifestyles.
• Rely on the research of sociologists and psychologists.
Product-Related Segmentation
• Divides market based on buyers’ relationship to the good or service.
• Benefits sought focuses on the attributes that people seek in a good or service
and the benefits they expect to receive from it.
• Product usage rate defines such categories as heavy users, medium users,
and light users.
• 80/20 principle: 80 percent of revenue comes from 20 percent
of customers.
• Brand loyalty focuses on the degree to which consumers recognize,
prefer, and insist on a particular brand.
Segmenting Business Markets
• Resembles segmentation for consumer markets, but some methods differ.
• Geographic segmentation is similar in business and consumer markets.
• Demographic, or customer-based, segmentation
• North American Industry Classification System Used by member nations of
NAFTA.
• Divides industries in categories and further subdivides the categories
into segments.
• End-use segmentation focuses on the precise way a B2B purchaser will use a
product.
• Resembles benefits-sought segmentation for consumer markets.
CONSUMER BEHAVIOR:
DETERMINING WHAT CUSTOMERS
WANT
Consumer behavior Actions of ultimate consumers directly involved in
obtaining, consuming, and disposing of products and the decision processes
that precede and follow these actions.
Determinants of Consumer Behavior
• Personal factors: Needs and motives, perceptions, attitudes, self-concept.
• Interpersonal factors: Cultural, social, and family influences.
Determinants of Business Buying Behavior
• Often a variety of influences from multiple decision makers.
Steps in the Consumer Behavior Process
CREATING, MAINTAINING, AND
STRENGTHENING MARKETING
RELATIONSHIPS
Relationship marketing Developing and maintaining long-term, cost-effective
exchange relationships with partners.
• Consumers enter into relationships only
if there is some benefit to them.
Benefits of Relationship Marketing
• Lower costs and higher profits for the business.
• Efficient targeting of best customers that increases the lifetime value of a
customer.
• LVC = (revenues + intangible benefits) – (cost of acquiring
and serving that customer)
• Stronger relationships with business partners and opportunities to combine
capabilities and resources to better accomplish goals.
Tools for Nurturing Customer Relationships
• 80/20 principle: Frequent customers have a higher lifetime value, so businesses
allocate resources accordingly.
Frequency Marketing and Affinity-Marketing Programs
• Frequency marketing Reward purchasers with cash, rebates, and other
premiums.
• Affinity programs Solicit involvement based on common interest.
Example: Credit card with baseball team logo
• Comarketing Businesses jointly market each others’ products.
• Cobranding Firms link their names in a single product.
One-on-One Marketing
• Customizing products and marketing and rapidly delivering goods.
• Example: Amazon.com’s use of suggested books based on
user preferences and past purchases.
• Customer relationship management software helps companies gather, sort, and
interpret data about specific customers.