Chapter 1

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Marketing:
Managing Profitable Customer
Relationships
ROAD MAP: Previewing the Concepts
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•
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•
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•
What is marketing?
Key steps in the marketing process.
Consumers’ needs and wants.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-2
What is Marketing?
Marketing is an organizational function
and a set of processes for creating,
communicating, and delivering value
to customers and for managing
customer relationships
in ways that benefit the
organization and its stakeholders.
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What is Marketing Management?
Marketing management is the
art and science
of choosing target markets
and getting, keeping, and growing
customers through
creating, delivering, and communicating
superior customer value.
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1-4
Selling is only the tip of the iceberg
“There will always be need for
some selling. But the aim of marketing
is to make selling superfluous. The aim
of marketing is to know and understand
the customer so well that the product or
service fits him and sells itself. Ideally,
marketing should result in a customer
who is ready to buy. All that should be
needed is to make the product or
service available.”
Peter Drucker
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Designing the “Right”
Product
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Only the best is good enough for Lexus
customers
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Key Customer Markets
Consumer Markets
Global Markets
Business Markets
Nonprofit/ Government
Markets
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ROAD MAP:
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs, wants, and demands.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-9
A Simple Model of the Marketing Process
Create value for customers and
build customer relationships
Understand the
marketplace and
customer needs
and wants
Design a customerdriven marketing
strategy
Construct a
marketing program
that delivers superior
value
Capture value from
customers in return
Build profitable
relationships and create
customer delight
Professor Takada
Capture value from
customers to create
profits and customer
equity
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ROAD MAP: Previewing the Concepts
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs, wants, and demands.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-11
Needs - state of felt deprivation including
physical, social, and individual needs.
Types of Needs
• Physical:
– Food, clothing, shelter, safety
• Social:
– Belonging, affection
• Individual:
– Learning, knowledge, self-expression
Wants - form that a human need takes, as
shaped by culture and individual
personality.
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I want it, I need it…
5 Types of Needs
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•
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Stated needs
Real needs
Unstated needs
Delight needs
Secret needs
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What is Marketed?
Goods
Services
Events & Experiences
Persons
Places & Properties
Organizations
Information
Ideas
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Marketing Goods
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Marketing Ideas:
Friends Don’t Let
Friends Drive Drunk
This is the watch
Stephen Hollingshead,
Jr. was wearing when he
encountered a drunk
driver.
Time of death 6:55 p.m.
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What Satisfies Consumers’
Needs and Wants?
Products
Anything that can be Offered to a Market to Satisfy a Need or Want
Persons
Places
Information
Organizations
Ideas
Services
Activity or Benefit Offered for Sale That is Essentially
Intangible and Does Not Result in the Ownership of Anything
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Product as an Idea
Products do not
have to be physical
objects. Here the
“product” is an
idea—protecting
animals.
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Marketing Myopia
• Sellers pay more
•
attention to the specific
products they offer than
to the benefits and
experiences produced
by the products.
They focus on the
“wants” and lose sight
of the “needs.”
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1-19
Value and Satisfaction
Expectation
8
Performance
Expectation
Performance
10
8
10
If performance is lower than expectations, satisfaction is low.
If performance is higher than expectations, satisfaction is high.
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A Simple Marketing System
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Elements of a Modern Marketing System
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Structure of Flows in a Modern
Exchange Economy
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Marketing Management
• The art and science of choosing target
markets and building profitable
relationships with them.
Questions to ask:
1. What customers will we serve?
What is our target market?
2. How can we best serve these customers?
What is our value proposition?
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Segmentation and Target Marketing
#1
#2
Market Segmentation:
Divide the market into
segments of customers
Target Marketing:
Select the segment to
cultivate
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Marketing Management
Demand
Management
Demarketing
Finding and increasing
demand, also changing or
reducing demand, such as in
demarketing.
Temporarily or permanently
reducing the number of
customers or shifting their
demand.
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ROAD MAP:
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs and wants.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-27
Marketing Management Philosophies
Societal Marketing Concept
Marketing Concept
Selling Concept
Product Concept
Production Concept
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Marketing and Sales Concepts Contrasted
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Societal Marketing Concept
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Corporate Social Initiatives
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Corporate Social Initiatives
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Holistic Marketing Dimensions
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1-33
ROAD MAP:
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs and wants.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-34
The Marketing Mix
Product
Price
Customer
Needs
Promotion
Distribution
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Marketing-Mix Strategy
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Marketing Mix and the Customer
Four P’s
• Product
• Price
• Place
• Promotion
Four C’s
• Customer solution
• Customer cost
• Convenience
• Communication
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Factors Influencing Marketing Strategy
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Marketing Management Tasks
• Developing marketing
• Shaping market
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•
•
•
•
strategies
Capturing marketing
insights
Connecting with
customers
Building strong
brands
•
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offerings
Delivering value
Communicating
value
Creating long-term
growth
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ROAD MAP:
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs and wants.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-40
Customer Relationship Management
• The process of building and maintaining
profitable customer relationships by
delivering superior customer value and
satisfaction.
Customer Perceived Value
• Customer’s evaluation of the difference
between all the benefits and all the costs of a
marketing offer relative to those of
competing offers.
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Customer Relationship Levels
Basic
Relationship
Continuum
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Full
Partnership
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Loyalty and Retention
Social
Benefits
Financial
Benefits
Structural
Ties
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Partner Relationship Marketing
Partners Inside the Firm
1. All employees customer
focused
2. Teams coordinate efforts
toward customers
Partners Outside the Firm
1. Supply chain management
2. Strategic alliances
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Customer Loyalty & Retention
• Customer Lifetime Value
– The entire stream of purchases that the customer
would make over a lifetime of patronage.
• Share of Customer
– The share a company gets of the customers
purchasing in their product categories.
Customer Equity
• Customer equity is the total combined
customer lifetime values of all the
company’s customers.
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Customer Relationship Groups
Butterflies
High
Good fit between
company’s offerings and
customer’s needs; high
profit potential
True Friends
Good fit between
company’s offerings and
customer’s needs; highest
profit potential
Profitability
Strangers
Low
Little fit between company’s
offerings and customer’s
needs; lowest profit
potential
Barnacles
Limited fit between
company’s offerings and
customer’s needs; low
profit potential
Short-term
customers
Long-term
customers
Projected loyalty
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1-46
ROAD MAP:
•
•
•
•
•
•
What is marketing?
Key steps in the marketing process.
Consumers’ needs and wants.
Five core marketplace concepts.
Key elements of a customer-driven marketing strategy.
Marketing management orientations that guide
marketing strategy.
• Customer relationship management and strategies.
• Major trends and forces that are changing the
marketing landscape in this new age of relationships.
Professor Takada
1-47
The Internet
• The Internet has been hailed as the
technology behind a New Economy.
• Marketing applications include:
– “Click-and-mortar” companies
– “Click-only” companies
– Business-to-business e-commerce
• Business-to-business transactions online
are expected to reach $4.3 trillion in 2005.
• By 2005, 500,000 companies will use the
Internet to do business.
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New Marketing Landscape
Rapid Globalization
Not-for-Profit
Marketing
Ethics & Social
Responsibility
New World of Marketing
Relationships
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Global Markets
Coke is
represented at the
first China
International
Beverage Festival
in Beijing in 2003
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The marketplace isn’t what it used to be…
Changing technology
Globalization
Deregulation
Privatization
Empowerment
Customization
Convergence
Disintermediation
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Core Concepts
• Needs, wants, and
•
•
•
demands
Target markets,
positioning,
segmentation
Offerings and brands
Value and
satisfaction
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•
•
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•
Professor Takada
Marketing channels
Supply chain
Competition
Marketing
environment
Marketing planning
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Rest Stop: Reviewing the Concepts
1. Define marketing and outline the steps in the
2.
3.
4.
5.
marketing process.
Explain the importance of understanding customers and
the marketplace, and identify the five core marketplace
concepts.
Identify the key elements of a customer-driven
marketing strategy and discuss marketing management
orientations that guide marketing strategy.
Discuss customer relationship management and
strategies for building lasting customer relationships.
Describe the major trends and forces that are changing
the marketing landscape in this new age of
relationships.
Professor Takada
1-53
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