Part 1
STRATEGIC MARKETING
AND ITS ENVIRONMENT
Dr. Chen, Principle of Marketing
1: Customer-Driven Strategic
Marketing
2: Planning, Implementing, and
Evaluating Marketing
Strategies
3:The Marketing Environment,
Social Responsibility, and Ethics
Dr. Chen, Principle of Marketing
Chapter 1
Customer-Driven Strategic
Marketing
Professor Jason C. H. Chen, Ph.D.
School of Business Administration
Gonzaga University
Spokane, WA 99258
chen@jepson.gonzaga.edu
Dr. Chen, Principle of Marketing
Question
 What is marketing? How did you define
the term before you read/ we discuss this
chapter?
Dr. Chen, Principle of Marketing
4
Objectives
 To be able to define marketing as focused on
customers
 To identify some important marketing terms, including
target market, marketing mix, marketing exchanges,
and marketing environment
 To understand the relationship between marketing and
value
 To become aware of the marketing concept and market
orientation
 To understand the importance of building customer
relationships
 To recognize the role of marketing in our society
Dr. Chen, Principle of Marketing
Defining Marketing
 The process of creating, distributing,
promoting, and pricing goods, services,
and ideas to:


Dr. Chen, Principle of Marketing
facilitating satisfying exchange
relationships with customers
developing and maintaining favorable
relationships with stakeholders in a
dynamic environment
Marketing Strategies/Decisions
Select a
Target Market
Develop a
Marketing Mix
To Satisfy
Market Needs
• A marketing strategy is the selection of a target market and the creation of a
marketing mix that will satisfy the needs of target market members.
• A marketing strategy articulates the best use of the company’s resources to
accomplish its marketing objectives.
7
Dr. Chen, Principle of Marketing
A Marketing Strategy
The
Marketing Mix
C
Dr. Chen, Principle of Marketing
8
A Marketing Strategy – showing the 4 P’s of a
Marketing Mix
Product
Place
C
Price
Dr. Chen, Principle of Marketing
Promotion
9
Marketing Mix Decisions
Product Decisions
Integrated Marketing
Communications Decision
(Promotion)
Marketing
Mix
Price Decisions
Distribution Decisions
Place Time
(_______+
______)
Dr. Chen, Principle of Marketing
10
Figure 1.1 - Components of
Strategic Marketing
(place+time)
Dr. Chen, Principle of Marketing
Marketing Focuses on Customers
 Customers
 The
purchasers of organizations’ products
 The
focal point of all marketing activities
 Target Market

A specific group of customers on whom an
organization focuses its marketing efforts
Dr. Chen, Principle of Marketing
12
Marketing Mix Variables
 Four marketing activities a firm can control
to meet the needs of customers in its target
market
 Product
 Distribution
 Promotion
 Price
 Marketing mix variables are often viewed
as controllable but have their limits
Dr. Chen, Principle of Marketing
Product Variable
 A product can be:
 A good
 A service
 An idea
 Involves creating/modifying:
 Brand
names
 Packaging
 Product variable decisions are important because
they are directly involved with creating products
that address customers’ needs and wants
Dr. Chen, Principle of Marketing
14
Distribution Variable
 Marketing managers need to make products
available in quantities desired to as many target
market customers as possible
 While minimizing these three costs:



Inventory
Transportation
Storage
 Ensures availability of products:
 At
the right time
 In convenient locations
Dr. Chen, Principle of Marketing
Distribution Variable
 Marketing managers may



Select/motivate intermediaries (wholesalers and
retailers)
Establish/maintain inventory control procedures
Develop/manage transportation and
storage systems
? How has the Internet and electronic
commerce influenced the distribution
variable?

Marketing Information Systems
Dr. Chen, Principle of Marketing
Promotion Variable
 Relates to activities used to inform
individuals or groups about the organization
and its products
Can aim to increase public awareness of the
organization and of new or existing products
Can educate customers about product features
Can urge people to take a stance on a political or
social issue
Can help sustain interest in established products
Dr. Chen, Principle of Marketing
Price Variable
 Relates to decisions and actions associated with
establishing pricing objectives and policies and
determining product prices
 Price
is
 a critical component of the marketing mix as
customers are concerned about value obtained in an
exchange
 used as a competitive tool

Intense price competition sometimes leads
to price wars
Dr. Chen, Principle of Marketing
Marketing Creates Value
Value
=
Customer
Benefits
–
Customer
Costs
 Value is a customer’s subjective assessment of
benefits relative to costs in determining the worth
of a product



Customer benefits include anything a buyer
receives in an exchange
Customer costs include anything a buyer must give
up to obtain the benefits the product provides
including cost, time, effort and risk
The marketing mix can be used to enhance
perceptions of value (p.8)
Dr. Chen, Principle of Marketing
19
Costs
 Monetary costs
 Non-monetary costs
 Time
and efforts customers expend to find and
purchase desired products
 Risk-reduction strategy
• an offer of a 100 percent satisfaction guarantee and
becomes popular in today’s
catalog/telephone/Internet shopping environment.
Dr. Chen, Principle of Marketing
20
Figure 1.2 - Marketing Builds Relationships
 Exchanges are the provision or transfer of goods,
services, or ideas in return for something of value
Exchange
(and with other stakeholders)
Dr. Chen, Principle of Marketing
Relationships with Customers
 For an exchange to take place, four conditions
must exist:
Two or more parties must participate, and each
must possess something of value that the other
party desires
 The exchange should provide a benefit or
satisfaction to both parties
 Each party must have confidence in the promise of
the “something of value” held by the other
 To build trust, the parties to the exchange must
meet expectations
 Marketing activities should attempt to create and
maintain satisfying exchange relationships.

Dr. Chen, Principle of Marketing
Relationships with Stakeholders
 Stakeholders are constituents who have a
“stake,” or claim, in some aspect of a
company’s products, operations, markets,
industry, and outcomes
 Stakeholders include:

Customers
Employees
Investors and shareholders
Suppliers

Governments, communities and more



Dr. Chen, Principle of Marketing
Marketing Environment
 The marketing environment is dynamic and
includes the following forces:







Competitive
Economic
Political
Legal and regulatory
Technological
Socio-cultural
The marketing environment forces surround
the customer and affect the marketing mix
Dr. Chen, Principle of Marketing
Figure 1.1 - Components of
Strategic Marketing
#2
#1
#3
(place+time)
#6
#4
#5
Dr. Chen, Principle of Marketing
Marketing Environment





Effects of these forces on buyers/sellers can be
dramatic and difficult to predict
The impact on value can be extensive as market
changes can easily impact how stakeholders perceive
certain products
Unlike marketing-mix variables, an organization has
little to no control over marketing environment forces.
Marketing environment forces can fluctuate quickly and
dramatically, which is one reason why marketing is so
interesting and challenging.
Changes in the marketing environmen produce
uncertainty for marketers and at times hurt marketing
efforts.
Dr. Chen, Principle of Marketing
Marketing Environment

The forces of the marketing environment affect
a marketer’s ability to facilitate value-driven
marketing exchanges in three ways:
 They influence customers by affecting their
lifestyle, standards of living, and preferences and
needs for products
 They help to determine whether and how a
marketing manager can perform certain marketing
activities
 They may affect a marketing manager’s decisions
and actions by influencing buyers’ reactions to the
firm’s marketing mix.
Dr. Chen, Principle of Marketing
Marketing Concept
 According to the marketing concept, an
organization should try to provide products that
satisfy customers’ needs through a coordinated set
of activities that also allows the organization to
achieve its goals

The marketing concept is a management philosophy
guiding an organization’s overall activities

A firm that adopts the marketing concept must satisfy
not only its customers’ objectives but also its own
objectives

Customers are the main focus
Dr. Chen, Principle of Marketing
Evolution of the Marketing Concept
Production Orientation

Second half of the nineteenth century, the Industrial Revolution
improved speed and efficiency

Large increases in availability of products and consumer
response was strong
Dr. Chen, Principle of Marketing
Evolution of the Marketing Concept
Sales Orientation

During the first half of the 20th century competition increased and focus
shifted to selling products to buyers

Marketers were able to learn that many products did not meet consumers
needs

Businesses viewed sales and selling as the main means of increasing
profits
Dr. Chen, Principle of Marketing
Evolution of the Marketing Concept
Market Orientation

Emerged in the mid-20th century

Market orientation requires an organization-wide commitment to
researching and responding to customer needs and dissemination of the
marketing intelligence across departments

New-product innovation by developing a strategic focus to explore and
develop new products to serve target markets

Involves being responsive to ever-changing customer needs and wants
Dr. Chen, Principle of Marketing
Implementing the Marketing Concept
Establish an information system to discover
customers’ real needs (e.g., BI – data mining)
Use the information to create satisfying
products
Company must coordinate all its activities to
satisfy objectives
Listen and respond to consumers frustrations
and appreciation is the key in implementing
the marketing concept
Dr. Chen, Principle of Marketing
32
BUSINESS VALUE & FOCUS –
IS Perspective
IS/E-BUSINESS
•SCM
•CRM
•BPR
•ERP
Customer
centric
Who are the customers?
Where are the customers?
Their purchasing habits
Demands
Products/
Services
Value
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
•SCM: Supply Chain Management
•CRM: Customer Relationship Management
•BPR: Business Process Reengineering Business
•ERP: Enterprise Resources Planning
Models & Strategies
33
Dr. Chen, Principle of Marketing
33
Customer Relationship
Management (CRM)
???
Marketing
Strategy
Information
Technology
(what is a
strategic bridge?)
Dr. Chen, Principle of Marketing
34
Customer Relationship
Management (CRM)
CRM
Marketing
Strategy
Information
Technology
(CRM provides a strategic
bridge between marketing
strategy and IT aimed at
long-term relationships)
Dr. Chen, Principle of Marketing
35
Customer Relationship Management
 Customer relationship management (CRM) means using
information about customers to create marketing strategies
that develop and sustain desirable customer relationships
 Marketing relationships with customers are the lifeline of all
businesses
 Profits can be obtained through relationships in the
following ways:
 1) By acquiring new customers
 2) By enhancing profitability of existing customers
 3) By extending the duration of customer relationships
 How?
 We will learn BI – RapidMiner a dataming tool for exploring
“Market Basket” and “Target Market” if time is allowed.
Dr. Chen, Principle of Marketing
Customer Relationship
Management
(CRM)
 CRM



Suite of applications, a database, and a set of inherent processes
Intended to support customer-centric organization
Integrates all primary activities of value chain
• Manage all interactions with customer though four phases
of customer life cycle:
1.
2.
3.
4.
Marketing - marketing sends messages to target market
Acquisition - customer prospects order and need to
Customer ___________
be supported
Relationship Management - support and resale processes
___________
increase value to existing customers
Loss/churn - win-back processes categorize customers according
to value and attempt to win back high-value customers
37
Dr. Chen, Principle of Marketing
37
Four Phases of Customer Life Cycle

Figure below depicts the four phases of the customer life cycle and
shows how a CRM system integrates them into three major
processes: solicitation, lead-tracking, and relationship management.
Dr. Chen, Principle of Marketing
Fig 1-Extra: The Customer Life Cycle
38
CRM Applications

Customer Relationship Management (CRM) systems store data
in a single database and link CRM processes to one another.
Fig (Extra): CRM Applications
Dr. Chen, Principle of Marketing
39
39
Customer Relationships
40
Dr. Chen, Principle of Marketing
40
Relationship Marketing
 “Long-term and mutually beneficial
arrangement in which both the buyer and seller
focus on value enhancement through the
creation of more satisfying exchanges.”
 Deepens the buyers trust
 Building satisfying exchange relationships
between buyers and sellers requires:
 Gathering
useful data at all customer contact points
 Analyzing that data to better understand customers’
needs, desires, and habits
Dr. Chen, Principle of Marketing
41
Importance of Marketing in a Global Economy
Summary
 Marketing costs (50% - 60%) consume a sizable
portion of buyers’ dollars
 Used in nonprofit organizations
 Important to businesses and the economy
 Fuels global economy
 Marketing knowledge enhances consumer awareness
 Connects people through technology



Computers and telecommunications helps marketers understand
and satisfy more customers than ever before
The Internet provides information about products and allows
customer interaction
As more consumers adopt smartphones, mobile marketing is also
becoming a major trend
42
Dr. Chen, Principle of Marketing
People, Process and Technology
Start with People
43
Dr. Chen, Principle of Marketing
43
The Importance of Marketing in Our Global Economy
 Socially responsible marketing – Promoting the
welfare of customers and stakeholders
 Green marketing – A strategic process involving
stakeholder assessment to:

create meaningful long-term relationships with customers
while maintaining, supporting, and enhancing the natural
environment (Safeway Whole Foods)
 Market orientation combined with social responsibility
improves overall business performance.
 All organizations engage in some kind of marketing

The field offers interesting and challenging career
opportunities throughout the world
 25-33% of civilian workers in the U.S. perform marketing
activities and marketing skills are valuable in every field
Dr. Chen, Principle of Marketing
Video Case 1.1: CRUISING TO SUCCESS:
THE TALE OF NEW BELGIUM BREWING
• Summary
• This case illustrates how New Belgium Brewing’s
market orientation has helped the company grow from a
small business to America’s third largest brewery. Since
its founding, New Belgium has emphasized the
importance of meeting the needs of its many stakeholder
groups, and that philosophy continues to guide the
company’s marketing activities. While students may be
familiar with the company’s corporate social
responsibility activities, it is important for them to realize
that those activities are part of the company’s marketing
strategy and thus its profitability.
Dr. Chen, Principle of Marketing
45
 1. How has New Belgium implemented the marketing concept?

 According to the marketing concept, an organization should try to provide
products that satisfy customers’ needs through a coordinated set of
activities that also allow the organization to achieve its goals. New
Belgium considers its customers and other stakeholders at every level of
its marketing activities, which has led to the company’s popularity and
success. Students may cite examples related to each part of the marketing
mix, so make sure they focus on how the marketing mix contributes to
customer satisfaction and the marketing concept.
 To ensure customer satisfaction, New Belgium focuses on creating quality
products. The company engages in market research when creating its
beers. It continually creates new products to keep customers engaged and
excited about the brand. Even the company’s focus on sustainability
reflects what is important to their customers. However, New Belgium’s
corporate social responsibility activities are not just philanthropic—they
are strategic. Because New Belgium beers provide more value, customers
are willing to pay premium prices, which leads to higher profits for the
company and its impressive 15 percent growth rate.
Dr. Chen, Principle of Marketing
46
 2. What has Kim Jordan done to create success at New
Belgium?

 Kim Jordan created a unique marketing mix for New
Belgium. Under her direction, the company crafted quality
beers (product), placed them on shelves and in bars
(distribution), created a unique indie brand (promotion), and
increased their profit by providing more value and charging a
higher price.
 In addition, Jordan’s vision for New Belgium’s corporate
culture creates value for all stakeholder groups, including
employees, customers, the environment, and the community
and fosters loyalty to the New Belgium brand
Dr. Chen, Principle of Marketing
47
 3. How does New Belgium’s focus on sustainability as a core
value contribute to its corporate culture and success?

 Sustainability has been a major part of the company’s vision
since its founding. For this reason, NBB strives to incorporate
environmental responsibility directly into its business
strategies. Sustainability is important to several of New
Belgium’s stakeholder groups, which increases customer and
employee loyalty.
 Because of this, the company’s environmental philosophy
creates a competitive advantage. Environmentally conscious
consumers are more likely to do business with a company that
incorporates green practices into its business activities.
Sustainable practices also increase consumers’ perceptions of
the value of New Belgium’s prices, which results in higher
prices and better financial returns for the company.
Dr. Chen, Principle of Marketing
48