MARKETING: BUILDING PROFITABLE CUSTOMER

CONNECTIONS BUSN11, CHAPTER 11

Getting Value by Giving Value

■  Marketing: the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. –  Marketing can provide long-term profitability for

businesses when value to customers is established

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Getting Value by Giving Value

■  Utility: the ability of goods and services to satisfy consumer wants. –  Form Utility: Converting raw materials into a finished good ■  Ex. Jamba Juice turns fresh fruits and veggies into smoothies

–  Time Utility: Providing goods and services at a convenient time ■  Ex. McDonald’s has a 24-hour drive-through

–  Place Utility: Providing goods and services at a convenient place ■  Ex. Redbox machines inside McDonald’s and outside Walgreens

–  Ownership Utility: Smoothly transferring ownership of goods and services from seller to buyer ■  Ex. Car dealerships offering financing options

The Scope of Marketing: It’s Everywhere! ■  People Marketing: Dominated by sports, politics, and art

–  Ex. Paris Hilton built her early career on promotion alone

■  Place Marketing: Drawing people to a particular place –  Ex. “What happens in Vegas stays in Vegas”

■  Event Marketing: Sponsoring athletic, cultural, or charitable events –  Ex. The Super Bowl

■  Idea Marketing: Spreading ideas with the intention of changing how people think or act

–  Ex. “Reduce, Reuse, Recycle”

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The Evolution of Marketing: From the Product to the Customer

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The Evolution of Marketing: From the Product to the Customer ■  Production Focus: Top business priority was to produce large

quantities of goods as efficiently as possible

■  Selling Focus: Production capacity increased, making supply exceed demand, resulting in the need for the “hard sell”

■  Marketing Focus: Post WWII, companies made customer satisfaction the central focus of the entire organization

■  Relationship Focus (current): Focuses on building long-term customer relationships

The Customer: Front and Center Customer Relationship Management (CRM) ■  CRM: Ongoing process of acquiring, maintaining, and growing

profitable customer relationships by adding value –  Ex. Amazon greets customers by name, recommends specific products, and

provides streamlined checkout –  Can’t do CRM without C.I.S.

■  Value: Consumers believe a product has a better relationship between cost and benefit than any other competitor

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Customer Satisfaction ■  Customer Satisfaction: When customers perceive that a good or

service delivers value above and beyond their expectations

■  2 traps less savvy marketers fall into: –  1) Overpromising ■  Don’t give consumers overly high expectations because it will result in

disappointment

–  2) Underpromising ■  If you don’t set expectations high enough, too few customers will want to

try your product

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Marketing Strategy: Where Are You Going and How Will You Get There?

■  Marketing Plan: A formal document that defines marketing objectives and the specific strategies for achieving those objectives

■  Market Segmentation: Dividing potential customers into groups of similar people or segments

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Target Market

■  Target Market: the group of people who are most likely to buy your product

■  There are 4 keys to establishing a target market: –  Size: Must be enough people to support a business –  Profitability: People must be willing and able to purchase your product –  Accessibility: Target must be reachable through channels your business can

afford –  Limited Competition: A crowded market is much tougher to crack

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Consumer Markets vs Business Markets ■  Consumer Marketers (B2C): direct their efforts to people who are

buying products for personal consumption –  Ex. Toothpaste

■  Business Marketers (B2B): direct their efforts to customers who are buying products to use either directly or indirectly to produce other products

–  Ex. Lumber

■  The difference is how the buyer will use the product

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Consumer Market Segmentation

■  There are 4 main categories used for segmenting potential consumers: –  Demographic Segmentation –  Geographic Segmentation –  Psychographic Segmentation –  Behavioral Segmentation

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Demographic Segmentation ■  Dividing the market based on measurable characteristics such

as: –  Age –  Income –  Ethnicity –  Gender

Ex. GMC has a commercial out that shows a professional biker riding through the country. The advertisement then shows the biker loading his bike into the back of his pickup truck, showcasing the space. The slogan “like a pro” appears at the end. The target market of this ad is bikers, specifically ones who want to ride “like a pro”.

Geographic Segmentation ■  Dividing the market based on where consumers live,

incorporating key factors such as: –  Counties –  Cities –  Population density

Ex. A surfboard company would be more likely to focus marketing efforts in Hawaii as opposed to South Dakota. In Hawaii, the waves are close-by thus creating a need for the perfect surfboard.

Psychographic Segmentation ■  Dividing the market based on consumer:

–  Attitudes –  Interests –  Values –  Lifestyles

Ex. Toyota Prius targets consumers who care about protecting the environment by using slogans like “the planet’s favorite hybrid”.

Behavioral Segmentation ■  Dividing the market based on how people behave toward various

products, including both: –  Benefits consumers seek from products –  How consumers use products

Ex. Miller Lite targets the low-carbohydrate beer consumer.

Business Market Segmentation

■  Business to business marketers typically use 3 categories: –  Geographic Segmentation –  Customer-Based Segmentation –  Product-Use-Based Segmentation

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Geographic Segmentation

■  Dividing the market based on the concentration of customers –  Many industries tend to be highly clustered in certain areas ■  Ex. Technology in Northern California a.k.a. “silicon valley”

–  Especially common on an international basis where language, culture, income, and regulatory differences play crucial roles

Customer-Based Segmentation ■  Dividing the market based on the characteristics of customers ■  This approach includes a range of possibilities:

–  Customer Size –  Customer Type ■  Ex. Johnson & Johnson has a group of salespeople dedicated just to retail

accounts like Target and another group of salespeople dedicated to motivating doctors to recommend their products

–  Institutions/Government ■  Ex. Schools and hospitals are key segments for Heinz Ketchup

Product-Use-Based Segmentation

■  Dividing the market based on how customers will use the product, possibilities include: –  The ability to support certain software packages or production

systems –  The desire to serve certain customer groups ■  Ex. Long-distance truckers

The Marketing Mix 11-3e

Product Strategy ■  Product strategy decisions include:

–  Brand name –  Product image –  Package design –  Customer service –  Guarantees –  New product development

Pricing Strategy

■  To deliver customer value, your prices must be fair and relative to the benefits of your product

■  Other factors include: –  Competition –  Regulation –  Public opinion

■  Ex. A low-cost desk would be fine, but would you want a discount-priced knee surgery?

Place/Distribution Strategy !  Goal is to deliver the product to the right people, in the right

quantities, at the right time, in the right place !  Key decisions include:

–  Shipping –  Warehousing –  Selling outlets ■  Ex. Web vs Network Marketing vs Brick-and-Mortar stores

Promotion Strategy ■  Includes all the ways marketers communicate about their

products ■  Key elements:

–  Advertising –  Personal selling –  Sales promotion –  Public relations –  Word-of-mouth –  Product placement

The Marketing Environment ■  There are 5 factors of the external environment that marketers

must be aware of and plan for: –  Competitive: Affects the day-to-day life of marketers the most. Marketers

need to be aware of how emerging and dominant competitors handle each aspect of the marketing mix.

–  Economic: Your goal as a marketer is to identify and respond to changes in the economy as quickly as possible. A sharp eye can see opportunity even in economic downturn.

–  Social/Cultural: Covers changes in lifestyle, customs, language, attitudes, interests, and population shifts.

–  Technological: Booms in technology can indirectly affect marketers in terms of production and inventory management, especially now that everything can be ordered with a single “click”

–  Political/Legal: Includes changes in laws, regulations, and political climate

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Customer Behavior: Decisions, Decisions, Decisions! ■  Elements that influence the consumer decision-making process

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Marketing Research: So What Do They Really Think? ■  Marketing Research: gathering, interpreting, and applying

information to uncover opportunities and challenges. It is used by companies to:

–  Identify external opportunities and threats –  Monitor and predict customer behavior –  Evaluate and improve each area of the marketing mix

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Types of Data ■  2 main types: Primary & Secondary

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Primary Research Tools ■  2 Basic categories:

–  Observation research: researcher does not directly interact with the research subject ■  Scanner data from retail sales ■  Traffic counters to determine where to place billboards ■  Garbage analysis to measure recycling compliance

–  Survey research: researcher does interact with research subjects ■  Telephone and online questionnaires ■  Door-to-door interviews ■  Mall-intercept interviews ■  Focus groups

Social Responsibility and Technology: A Major Marketing Shift ■  Two key factors have had a dramatic impact on marketing in the

past couple decades: –  A surge in the social responsibility movement –  The dramatic emergence of the internet and digital technology

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Marketing and Society: It’s Not Just About You! ■  Green Marketing: Developing and promoting environmentally

sound products and practices to gain a competitive edge

Ex. H&M released a “Conscious Collection” consisting of more sustainable clothing to appeal to the “green” movement

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Technology and Marketing: Power to the People! ■  The power has shifted from the producers to consumers with the

rise of the internet ■  Technology has also opened the door for Mass Customization ■  Mass Customization: creating products tailored for individual

consumers on a mass basis

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THE BIG PICTURE

■  The ultimate goal of marketing is long-term profitability ■  The customer must come first for every department, including

finance, accounting, manufacturing, engineering, and human resources

■  Competition will only intensify as time goes on as globalization and technology march forward