A Global Perspective 1 Marketing Managing Profitable Customer

A Global Perspective 1 Marketing: Managing Profitable Customer Relationships Philip Kotler Gary Armstrong Swee Hoon Ang Siew Meng Leong Chin Tiong Tan Oliver Yau Hon-Ming 1 -

Learning Objectives After studying this chapter, you should be able to: 1. Define marketing and outline the steps in the marketing process 2. Explain the importance of understanding customers and the marketplace, and identify the five core marketplace concepts 3. Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy 4. Discuss customer relationship management, and identify strategies for creating value for customers and capturing value from customers in return 5. Describe the major trends and forces that are changing the marketing landscape in this age of relationships 1 -2

Chapter Outline 1. What Is Marketing? 2. Understanding the Marketplace and Customer Needs 3. Designing a Customer-Driven Marketing Strategy 4. Preparing an Integrated Marketing Plan and Program 5. Building Customer Relationships 6. Capturing Value from Customers 7. The New Marketing Landscape 8. So, What Is Marketing? Pulling It All Together 1 -3

What Is Marketing? Marketing Defined Marketing is the process by which companies create value for customers and build strong customer relationships to capture value from customers in return. 1 -4

What Is Marketing? The Marketing Process • • • Understand the marketplace and customer wants and needs Design a customer-driven marketing strategy Construct a marketing plan that delivers superior value Build profitable relationships and create customer satisfaction Capture value from customers to create profit and customer equity 1 -5

Understand the marketplace and customers’ needs/wants Create customer driven marketing strategy Build profitable relationships & create customer delight Construct a marketing program that delivers superior value Capture value from customers to create profits & customer quality 1 -6

Understanding the Marketplace and Customer Needs, Wants, and Demands Needs are states of deprivation: • Physical—food, clothing, warmth, safety • Social—belonging and affection • Individual—knowledge and self-expression 1 -7

Understanding the Marketplace and Customer Needs, Wants, and Demands • • Wants are the form that needs take as they are shaped by culture and individual personality. Demands are wants backed by buying power. 1 -8

Understanding the Marketplace and Customer Needs Market Offerings—Products, Services, and Experiences • Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. • Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs. 1 -9

Understanding the Marketplace and Customer Needs Customer Value and Satisfaction is derived from comparing performance with expectations Expectations • Customers make choices according to • • Values and satisfaction of various market offerings Marketers • • Set the right level of expectations Not too high or too low 1 -10

Understanding the Marketplace and Customer Needs Exchanges and Relationships • Exchange is the act of obtaining a desired object from someone by offering something in return. • Marketing consists of actions to build and maintain desirable exchange relationships. 1 -11

Understanding the Marketplace and Customer Needs • • Markets are the set of actual and potential buyers of a product. Marketing system consists of all of the actors (suppliers, company, competitors, intermediaries, and end users) in the system who are affected by major environmental forces: Demographic; Economic; Physical; Technological; Political-legal; Socio-cultural 1 -12

Elements of a Modern Marketing System 1 -13

Designing a Customer-Driven Marketing Strategy Marketing Management • Marketing management is the art and science of choosing target markets and building profitable relationships with them. • What customers will we serve? • How can we best serve these customers? 1 -14

Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve • • Market segmentation: Dividing the markets into segments of customers Target marketing: Which segments to go after 1 -15

Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve • De-marketing • Marketing to reduce demand temporarily or permanently • The aim is not to destroy demand but to reduce or shift it. 1 -16

Designing a Customer-Driven Marketing Strategy Selecting Customers to Serve Marketing management is: • Customer management • Demand management 1 -17

Designing a Customer-Driven Marketing Strategy Choosing a Value Proposition The value proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs. 1 -18

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations • • • Production concept Product concept Selling concept Marketing concept Societal concept 1 -19

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations The production concept is the idea that consumers will favor products that are available or highly affordable. 1 -20

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Product concept is the idea that consumers will favor products that offer the most quality, performance, and features for which the organization should therefore devote its energy to making continuous improvements. 1 -21

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Selling concept is the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort. 1 -22

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Marketing concept is the idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do. 1 -23

Customer Driven vs. Customer Driving Marketing 1 -24

Designing a Customer-Driven Marketing Strategy Marketing Management Orientations Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests. 1 -25

Preparing an Integrated Marketing Plan and Program Marketing Mix The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy: • Product – create a need-satisfying market offering • Price – decide how much it will charge for the offer • Promotion – communicate with target customers about the offer and persuade them of its merits • Place – decide how it will make the offer available to target consumers 1 -26

Preparing an Integrated Marketing Plan and Program Integrated Marketing Program An integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers. 1 -27

Building Customer Relationships Customer Relationship Management (CRM) Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior value and satisfaction. 1 -28

Building Customer Relationships Customer Relationship Management (CRM) Customer perceived value is the difference between total customer value and total customer cost of a market offering relative to those of competing offers. Customer satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectations. 1 -29

A Customer’s Perception of Value 1 -30

Building Customer Relationships Customer Relationship Management (CRM) Customer Relationship Levels and Tools • Basic relationship (with low-margin customers) • Full relationships (with high-margin/key customers) Developing strong bonds with customers through • Frequency marketing programs • Club marketing programs 1 -31

Building Customer Relationships The Changing Nature of Customer Relationships § § § Relating with more carefully selected customers uses selective relationship management to target fewer, more profitable customers. Relating for the long term uses customer relationship management to retain current customers and build profitable, long-term relationships. Relating directly uses direct marketing tools (telephone, mail order, kiosks, Internet) to make direct connections with customers. 1 -32

Building Customer Relationships Partner Relationship Management Partner relationship management refers to working closely with partners in other company departments and outside the company to jointly bring greater value to customers. 1 -33

Building Customer Relationships Partner Relationship Management • Partners inside the company is every function area interacting with customers. • Electronically • Cross-functional teams • Partners outside the company is how marketers connect with their suppliers, channel partners, and competitors by developing partnerships. 1 -34

Building Customer Relationships Partner Relationship Management • The supply chain is a channel that stretches from raw materials to components to final products to final buyers. • Supply management Strategic partners Strategic alliances • • 1 -35

Capturing Value from Customers Creating Customer Loyalty and Retention Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. 1 -36

Capturing Value from Customers Growing Share of Customer Share of customer is the portion of the customer’s purchasing that a company gets in its product categories. 1 -37

Capturing Value from Customers Building Customer Equity Customer equity is the total combined customer lifetime values of all of the company’s customers. 1 -38

Capturing Value from Customers Building Customer Equity • Building the right relationships with the right customers involves treating customers as assets that need to be managed and maximized. • Different types of customers require different relationship management strategies Build the right relationship with the right customers • 1 -39

The New Marketing Landscape Major Developments Digital age • Globalization • Ethics and social responsibility • Not-for-profit marketing • The new world of marketing relationships 1 -40

The New Marketing Landscape The New Digital Age • • • Recent technology has had a major impact on the ways marketers connect with and bring value to their customers Market research • Learning about and tracking customers Create new customized products Distribution Communication • Video conferencing • Online data services 1 -41

The New Marketing Landscape The New Digital Age Internet—creates marketplaces and Marketspaces • Information • Entertainment • Communication 1 -42

The New Marketing Landscape Rapid Globalization • • The world is smaller Think globally, act locally 1 -43

The New Marketing Landscape The Call for More Ethics and Social Responsibility Marketers are being called upon to take greater responsibility for the social and environmental impact of their actions in a global economy. 1 -44

The New Marketing Landscape The Call for More Ethics and Social Responsibility Social marketing campaigns encourage energy conservation and concern for the environment or discourage smoking, excessive drinking, and drug use. 1 -45

The New Marketing Landscape The Growth for Not-for-Profit Marketing • Colleges • Hospitals • Museums • Zoos • Orchestras • Religious groups 1 -46

Pulling it All Together 1 -47