Part 5
Marketing:
Developing
Relationships
© 2015 McGraw-Hill Education.
11-2
CHAPTER 11
Customer-Driven Marketing
CHAPTER 12
Dimensions of Marketing Strategy
CHAPTER 13
Digital Marketing and Social Networking
11-3
Learning Objectives
LO 11-1 Define marketing and describe the exchange process.
LO 11-2 Specify the functions of marketing.
LO 11-3 Explain the marketing concept and its implications for
developing marketing strategies.
LO 11-4 Examine the development of a marketing strategy,
including market segmentation and marketing mix.
LO 11-5 Investigate how marketers conduct marketing research
and study buying behavior.
LO 11-6 Summarize the environmental forces that influence
marketing decisions.
11-4
The Nature of Marketing
Marketing
• A group of activities designed to expedite transactions
by creating, distributing, pricing, and promoting goods,
services, and ideas
 Create value by allowing individuals and organizations to
obtain what they need and want
 Other functional areas of the business (operations, finance,
and all areas of management) must be coordinated with
marketing decisions
 Marketing is not:
 Manipulating consumers to get them to buy products they do
not want
 Just selling and advertising
11-5
The Exchange Relationship
Exchange
• The act of giving up one thing (money, credit, labor,
goods) in return for something else (goods, services,
or ideas)
 Each participant must be willing to give up his or her
respective “something of value” to receive the “something”
held by the other
 The tangible product itself may not be as important as the
image or the benefits associated with the product
 This intangible “something of value” may be:
 Capability gained from using a product
 The image evoked by it
 The brand name
11-6
The Exchange Process:
Giving Up One Thing in Return for Another
11-7
Functions of Marketing
Buying
Risk
Taking
Marketing
Research
Selling
Marketing
Activities
Financing
Transporting
Storing
Grading
11-8
Creating Value with Marketing
Value
• A customer’s subjective assessment of benefits
relative to costs in determining the worth of a product
Customer
Value
=
Customer
Benefits
–
Customer
Costs
 Benefits – Anything a buyer receives in an exchange
 Costs – Anything a buyer must give up to obtain the
product’s benefits
 Monetary costs and time and effort expended to procure
the product
11-9
The Marketing Concept
Marketing Concept
• The idea that an organization should try to satisfy
customers’ needs through coordinated activities that
also allow it to achieve its own goal
 A business must find out what consumers desire and
then develop the good, service, or idea that fulfills their
needs or wants
 The business must then get the product to the
customer
 The business must continually alter, adapt, and
develop products to keep pace with changing
consumer needs and wants
11-10
•
Trader Joe’s, which sells
many different lines of
organic and natural food
products, is often
thought to have better
deals than some of its
competitors
•
The grocery chain
attempts to meet
consumer demands for
high-quality food at
reasonable prices
11-11
Evolution of the Marketing Concept
Our society and economic system have changed over
time, and marketing has become more important as
markets have become more competitive
 Production orientation
 19th century
 Manufacturing efficiency
 Sales orientation
 Early 20th century
 Supply exceeds demand; a need to “sell” products
grew
11-12
Evolution of the Marketing Concept
 Today some people still inaccurately equate marketing
with a sales orientation
Market Orientation
• An approach requiring organizations to gather
information about customer needs, share that
information throughout the firm, and use that information
to help build long-term relationships with customers
 Began in the 1950s and continues today
 New technologies are helping firms to improve
communication and learn what customers want
11-13
Developing a Marketing Strategy
Marketing Strategy
• A plan of action for developing, pricing distributing, and
promoting products that meet the needs of specific
customers
 Has two major components:


Selecting a target market
Developing an appropriate marketing mix to
satisfy that target market
11-14
Business to Business (B2B) Markets

Depending on the type of business you work for, other businesses
can be your customer

Businesses buy products to resell, use in the production of other
products, or for use in operations

While the marketing concepts are the same for both businesses
and consumers, there are complexities to the business market that
need to be considered

Customer populations in the business market are smaller than in
the consumer market, products tend to be highly technical as does
the buyer, and how the product affects the rest of the businesses
marketing channel are all important characteristics of the business
market

Businesses also tend to buy in larger quantities than consumers
and long-term relationships are seen as necessary
SOURCE: William M. Pride and O.C. Ferrell. Foundations of Marketing. Fifth ed. South-Western Cengage Learning: Mason, OH. 2013. Page
178.
11-15
Selecting a Target Market
Market
• A group of people who have a need, purchasing power,
and the desire and authority to spend money on goods,
services, and ideas
Target Market
• A specific group of consumers on whose needs and
wants a company focuses its marketing efforts
Total-Market Approach
• An approach whereby a firm tries to appeal to everyone
and assumes that all buyers have similar needs

Sellers of salt, sugar, and many agricultural products use a total-market
approach because everyone is a potential consumer of these products
11-16
Selecting a Target Market
Market Segmentation
• A strategy whereby a firm divides the total market into
groups of people who have relatively similar product
needs
Market Segment
• A collection of individuals, groups, or organizations
who share one or more characteristics and thus have
relatively similar product needs and desires
 Women are the largest market segment, with 51% of
the U.S. population
 Marketers are focusing on the growing Hispanic
population
11-17
Market Segmentation Approaches
Concentration Approach
• A market segmentation approach whereby a company
develops one marketing strategy for a single market
segment
• Porsche directs all its marketing efforts toward high-income
individuals who want to own high-performance vehicles
Multisegment Approach
• A market segmentation approach whereby the marketer
aims its efforts at two or more segments, developing a
marketing strategy for each
• Raleigh bicycles has designed separate marketing
strategies for racers, tourers, commuters, and children
11-18
Market Segmentation Approaches
Niche Marketing
• Is a narrow market segment focus when efforts are on
one small, well-defined group that has a unique,
specific set of needs
 Niche segments are usually very small compared to the
total market for the product
 Many airlines cater to first-class flyers, who comprise
only 10% of international air travelers
 To meet the needs of these elite customers, airlines
include special perks along with spacious seats
11-19
Market Segmentation Approaches
 For a firm to successfully use a concentration or
multisegment approach to market segmentation:
1.
Consumers’ needs for the product must be
heterogeneous
2.
The segments must be identifiable and divisible
3.
The total market must be divided in a way that allows
estimated sales potential, cost, and profits of the
segments to be compared
4.
At least one segment must have enough profit potential
to justify developing and maintaining a special marketing
strategy
5.
The firm must be able to reach the chosen market
segment with a particular market strategy
11-20
Bases for Segmenting Markets
•
Companies segment markets on the basis of
several variables:
Demographic
Geographic
Psychographic
Behavioristic
11-21
Developing a Marketing Mix
Marketing Mix
• The four marketing activities—product, price,
promotion, and distribution—that the firm can control to
achieve specific goals within a dynamic marketing
environment
 The buyer or the target market is the central focus of
all marketing activities
11-22
The Marketing Mix:
Product, Price, Distribution, and Promotion
11-23
Product
A product whether a

Good – A physical entity you can touch (a car,
computer, or adopted kitten)

Service – The application of human and mechanical
efforts to people or objects to provide intangible
benefits to customers (Air travel, dry cleaning, or
haircuts)

Idea – Can be a concept, philosophy, image, or
issue (attorney advise or political parties)
Is a complex mix of tangible and intangible attributes
that provide satisfaction and benefits
11-24
Price
Price
• A value placed on an object exchanged between a
buyer and a seller
 The buyer usually exchanges purchasing power—
income, credit, wealth—for the satisfaction of utility
associated with a product
 Key element of the marketing mix because it relates
directly to the generation of revenue and profits
 Can be changed quickly to stimulate demand or
respond to competitors’ actions
11-25
Distribution
Distribution
• Making products available to customers in the
quantities desired
 Sometimes referred to as “place” because it helps to
remember the marketing mix as the “4 Ps”
 Product, price, place, and promotion
 Intermediaries—usually wholesalers and retailers—
perform many of the activities required to move products
efficiently from producers to consumers or industrial
buyers
 Involves transporting, warehousing, materials
handling, and inventory control
11-26
Promotion
Promotion
• A persuasive form of communication that attempts to
expedite a marketing exchange by influencing
individuals, groups, and organizations to accept
goods, services, and ideas
 Includes advertising, personal selling, publicity, and
sales promotion
 Digital advertising on websites and social media sites
are growing
11-27
Expeditionary Marketing
Expeditionary marketing is a strategy that both small and
large companies use to find untapped markets



In the case of a startup, The goal is to find emerging
markets where there is little competition, design a product
for that market, and establish themselves as a leader
For more established businesses, both large and small, the
goal of expeditionary marketing is to find new areas for
growth in markets that are small but growing
Internal and external research is done to find markets that
are complementary to the skills of the company and the
needs of the market, as is extensive planning for new
products or services
SOURCE: Marketing-Schools.org. “Expeditionary Marketing”. www.marketing-schools.org. http://www.marketing-schools.org/types-ofmarketing/expeditionary-marketing.html. (accessed September 25, 2013).
11-28
Marketing Research and Information Systems
Marketing Research
• A systematic, objective process of getting information
about potential customers to guide marketing
decisions
 Guides marketing decisions
 May include data on age, income, ethnicity,
educational level, etc. of the target market and how
frequently they purchase the product
11-29
Marketing Research and Information Systems
Marketing information system – A framework for
accessing information about customers from sources
both inside and outside the organization
 Inside the organization
 Continuous flow of information on prices, sales, and
expenses
 Outside the organization
 Data are available through public and private reports,
census statistics, digital media sources, etc.
11-30
Marketing Research and Information Systems
Primary
Data
• Marketing information that is observed,
recorded, or collected directly from respondents
• “Mystery shoppers”, surveys, and focus groups
• Passive observation of consumer behavior and
open-ended questions techniques
Secondary
Data
• Information that is compiled inside or outside an
organization for some purpose other than
changing the current situation
• Information compiled by the U.S. Census
Bureau and other government agencies,
databases created by marketing research firms,
as well as sales and other internal reports
11-31
Online Marketing Research
 New information technologies are changing how
businesses learn about consumers and market
their products
 Digital media and online social networks
 Opportunity to reach new markets via the Internet
 Online surveys are becoming an important part of
marketing research
 Virtual testing – Interactive multimedia research
that combines sight, sound, and animation to
improve testing of products and their features
11-32
Buying Behavior
Buying Behavior
• The decision processes and actions of people who
purchase and use products
 Marketers analyze buying behavior because a
firm’s marketing strategy should be guided by an
understanding of buyers
11-33
Psychological Variables of Buying Behavior
Perception
• The process by which a person selects, organizes, and interprets
information received from his or her senses
Motivation
• Inner drive that directs a person’s behavior toward goals
Learning
• Changes in a person’s behavior based on information and
experience
Attitude
• Knowledge and positive or negative feelings about something
Personality
• The organization of an individual’s distinguishing character traits,
attitudes, or habits
11-34
Social Variables of Buying Behavior
Social Roles
• A set of expectations for individuals based on some position
they occupy
Reference Groups
• Groups with whom buyers identify and whose values or
attitudes they adopt
Social Classes
• A ranking of people into higher or lower positions of respect
Culture
• The integrated, accepted pattern of human behavior,
including thought, speech, beliefs, actions, and artifacts
11-35
•
People’s cultures
have a big impact on
what they buy
•
Goya Foods sells
more than three
dozen types of beans
to U.S. supermarkets
because people with
different cultural roots
demand different
types of beans
•
Which products are delivered to which stores depends on
the heritage of those living in each area
11-36
Understanding Buying Behavior
 Trying to understand consumers is the best way to
satisfy them
 Tools and techniques for analyzing consumers are not
exact
 To combat declining gum sales, companies have begun
to turn gum into a “fashion statement”

Kraft is engaging young artists to create designs for its
gum packaging

Rockstar Iced Mint Energy is touting its energy-boosting
caffeine and taurine content

These overhauls are an attempt to reconnect with the
teen market, which is the largest purchaser of gum
products
11-37
The Marketing Environment
 External forces directly or indirectly influence the
development of marketing strategies:




Political, legal, and regulatory forces
Social forces
Competitive and economic forces
Technological forces
 Marketing requires creativity and consumer focus
because environmental forces can change quickly
and dramatically
11-38
The Marketing Mix and the Marketing
Environment
11-39
Importance of Marketing to
Business and Society
 Marketing is a necessary function to reaching
consumers, establishing relationships, and driving sales
 Marketing is essential in communicating the value of
products and services
 Nonprofits, government institutions, and even people
must market themselves to spread awareness and
achieve desired outcomes
 All organizations must reach their target markets,
communicate their offerings, and establish high-quality
services
11-40
Discussion
?
?
What is the marketing
concept? Why is it so
important?
List the variables in
the marketing mix.
How is each used in a
marketing strategy?