Chapter 11 Building Customer Relationships Through Effective Marketing

Learning Objectives 1. Understand the meaning of marketing and the importance of management of customer relationships. 2. 3. Explain how marketing adds value by creating several forms of utility. 4. 5. Understand what markets are and how they are classified. 6. 7. 8. 9. 10. Explain how the marketing environment affects strategic market planning. Trace the development of the marketing concept and understand how it is implemented. Identify the four elements of the marketing mix and be aware of their importance in developing a marketing strategy. Understand the major components of a marketing plan. Describe how market measurement and sales forecasting are used. Distinguish between a marketing information system and marketing research. Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 2

Marketing …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. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 3

Table 11. 1: Major Marketing Functions Copyright © Cengage Learning. All rights reserved. Chapter

Exchange Between Buyer and Seller Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15 th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 5

Relationship Marketing …establishing long-term, mutually satisfying buyerseller relationships. Successful marketers respond to customer needs and strive to continually increase value to buyers over time. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 6

Customer Relationship Marketing …using information about customers to create marketing strategies that develop and sustain desirable customer relationships. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 7

Customer Lifetime Value …a combination of purchase frequency, average value of purchases, and brandswitching patterns over the entire span of a customer’s relationships with a company. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 8

Utility …the ability of a good or service to satisfy a human need. Copyright

Types of Utility § Form: converting production inputs into finished products § Place: making a product available at a location where customers wish to purchase it § Time: making a product available when customers wish to purchase it § Possession: transferring title (or ownership) of a product to a buyer Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 10

Figure 11. 1: Types of Utility Copyright © Cengage Learning. All rights reserved. Chapter

Marketing Concept …a business philosophy that a firm should provide goods and services that satisfy customers’ needs through a coordinated set of activities that allows the firm to achieve its objectives. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 12

Table 11. 2: Evolution of Customer Orientation Copyright © Cengage Learning. All rights reserved.

Evolution of the Marketing Concept 1850 1900 1950 2000 Source: Adapted from William M. Pride and O. C. Ferrell, Foundations of Marketing, 3 rd ed. , © 2009 by Houghton Mifflin Company. All rights reserved. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 14

Implementing Marketing Concept § Obtain information § Determine needs § Determine how needs are currently satisfied § Learn how products might be improved § Find out opinions customers have of firm and marketing efforts § Use information to pinpoint specific needs and potential customers Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 15

Mobilize Marketing Resources ü Provide product ü Price product ü Promote product ü Distribute

Market …a group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 17

Market Classifications Ø Business-to-Consumer (B 2 C) Ø Business-to-Business (B 2 B) Copyright ©

Business-to-Consumer Markets …consist of purchasers and/or household members who intend to consume or benefit from the purchased products and who do not buy products to make profits. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 19

Business-to-Business Markets …are grouped broadly into producer, reseller, governmental, and institutional categories…. They purchase specific kinds of products for use in making other products, for resale, or for day-to-day operations. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 20

B 2 B Markets § Producer : buys certain products to use in manufacture of other products § Reseller: buys finished products and sells them for profit § Governmental: buys goods and services to maintain internal operations and to provide products to citizens § Institutional: buys goods for goals unrelated to profit, market share, or return on investment Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 21

Marketing Strategy …a plan that will enable an organization to make the best use of its resources and advantages to meet its objectives. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 22

Using the Internet • The American Marketing Association’s website is an excellent resource for marketing information. http: //www. marketingpower. com Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 23

Parts of Marketing Strategy § Select/analyze target market § Create/maintain appropriate marketing mix Copyright

Marketing Mix …a combination of product, price, distribution, and promotion developed to satisfy a

Target Market …a group of individuals or organizations, or both, for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 26

Marketing Managers ü Examine potential markets for possible effect on firm’s sales, costs, and profits ü Determine if organization has the resources to produce a marketing mix that meets the needs of a target market ü Determine if satisfying those needs is consistent with firm’s objectives ü Analyze competitors Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 27

Approaches of Selecting Target Market Ø Undifferentiated Company designs a single marketing mix and directs it at the entire market for a particular product Ø Market segmentation Company divides a market into segments and directs marketing mix at particular segment or segments rather than the total market Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 28

Market Segment …a group of individuals or organizations within a market that shares one

Figure 11. 2: Selecting Target Markets The letters in each target market represent potential customers. Customers that have the same letters have similar characteristics and similar product needs. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 30

Table 11. 3: Common Bases of Market Segmentation Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15 th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Adapted with permission. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 31

Advertisers’ Classification of Audiences Name Millennials Gen X-ers Boomers Matures Age Needs Influencer Tech Savvy Grew up in prosperous times Media Savvy Grew up in economic downturn Avid Consumers Deny aging process (2003) <25 25– 38 39– 58 57+ Practical, pragmatic Money conscious Media. Know. All, “Audience Research”, http: //www. mediaknowall. com/Advertising/research. html Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 32

Figure 11. 3: The Marketing Mix and the Marketing Environment Copyright © Cengage Learning.

Pricing Decisions § Base Price Spotlight § Discounts § Goals • Maximize profit • Make room for new models Source: Bayer Consulting for Deloitte LLP survey of 1, 006 people ages 17 to 28. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 35

Distribution Decisions § Transportation § Storage § Selection of Intermediaries • Number of levels

Promotion Decisions § Advertising § Personal Selling § Sales Promotion § Public Relations Copyright

Controllable Elements of Mix Can Also Be Varied for. . . § Organizational goals

Forces of External Marketing Mix § Economic § Sociocultural § Political § Competitive §

Marketing Plan …a written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 40

Marketing Plan ü Describes firm’s current position ü Establishes marketing objectives for product ü Specifies how the organization will attempt to achieve these objectives ü Time frame • Short-range = 1 year or less • Medium-range = 1 to 5 years • Long-range = 5+ years Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 41

Marketing Plan Is Used for. . . § Communication among employees § Assignment of responsibilities/tasks § Schedules for implementation § How resources allocated § Monitor/evaluate performance Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 42

Table 11. 4: Components of Marketing Plan Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15 th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Reprinted with permission. . Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 43

Sales Forecast …an estimate of the amount of a product that an organization expects to sell during a certain period of time based on a specified level of marketing effort. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 44

Forecasting Methods § Executive judgments § Surveys of buyers/sales personnel § Time-series analyses § Correlation analyses § Market tests Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 45

Marketing Information System …a system for managing marketing information that is gathered continually from internal and external sources. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 46

Sources of Information Internal § Sales figures External § Organization’s suppliers § Product/marketing costs § Inventory levels § Activities of sales force § § Copyright © Cengage Learning. All rights reserved. Intermediaries Customers Competitors’ activities Economic conditions Chapter 11 | Slide 47

Information Can Include Ø Daily sales reports Ø Forecasts of sales/buying trends Ø Reports

Marketing Research …the process of systematically gathering, recording, and analyzing data concerning a particular marketing problem. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 49

Table 11. 5: The Six Steps of Market Research Copyright © Cengage Learning. All

Technology and Marketing Information § § Database Single-Source Data Online Information Services Internet • Nielsen • Advertising Age § Intranet Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 51

Table 11. 6: Internet Sources of Marketing Information Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15 th ed. (Mason, Ohio: South-Western/Cengage Learning, 2010). Reprinted with permission. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 52

Buying Behavior …the decisions and actions of people involved in buying and using products.

Consumer Buying Behavior …the purchasing of products for personal or household use, not for

Figure 11. 4: Consumer Decision Process and Influences Copyright © Cengage Learning. All rights

Business Buying Decision Process and Possible Influences on the Process Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 13 th ed. Copyright © 2006 by Houghton Mifflin Company. Adapted with permission. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 56

Personal Income …the income an individual receives from all sources less the Social Security

Disposable Income …personal income less all additional personal taxes. Copyright © Cengage Learning. All

Discretionary Income …disposable income less savings and expenditures on food, clothing, and housing. Copyright

Business Buying Behavior …the purchasing of products by producers, resellers, governmental units, and institutions.

Business Buyers § Consider • Quality • Price • Service provided § Usually •

Business Buying Occurs Through. . . § Description § Inspection § Sampling § Negotiation

Chapter Quiz 1. The utility created by transferring title of a product to the buyer is called _____ utility. a) b) c) d) e) form time production place possession Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 63

Chapter Quiz 2. J. C. Penney is considered to be a member of which type of market? a) b) c) d) e) Business-to-business Reseller Consumer Producer Institutional Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 64

Chapter Quiz 3. The ingredient of the marketing mix concerned with product design, brand names, packaging, and warranties is a) b) c) d) e) pricing. quality. product. distribution. promotion. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 65

Chapter Quiz 4. All of the following are true of marketing plans except that they should a) b) c) d) e) not be modified. include details of task scheduling. specify task objectives. describe the firm’s current situation. focus on a particular product or product group. Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 66

Chapter Quiz 5. In this chapter, MIS refers to _____ system. a) b) c) d) e) merged information major information marketing information market influential minor information Copyright © Cengage Learning. All rights reserved. Chapter 11 | Slide 67