Chapter 12Customer-Driven Marketing

Learning Goals

Summarize the ways in which marketing creates utility.

Explain the marketing concept and relate how customer satisfaction contributes added value.

Describe not-for-profit marketing, and identify the five major categories of nontraditional marketing.

Outline the basic steps in developing a marketing strategy.

Describe the marketing research function.

Identify and explain the methods available for segmenting consumer and business markets.

Outline the determinants of consumer behavior.

Discuss the benefits and tools for relationship marketing.

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WHAT IS MARKETING?

Marketing Organizational function and set of processes for creating, communicating, and delivering value to customers and for man- aging customer relationships in ways that benefit the organization and its stakeholders.

• Best marketers not only give consumers what they want but even anticipate consumers’ needs before those needs surface.

• Create a link in consumers’ minds between the new need and the fulfillment of that need by the marketers’ products.

Exchange process Activity in which two or more parties give something of value to each other to satisfy perceived needs.

How Marketing Creates Utility

Utility Want-satisfying power of a good or service.

• Marketing function can create three kinds of utility:

•  Create time utility by making a good or service available when customers want to purchase it.

•  Create place utility by making a product available in a location convenient for customers.

•  Create ownership utility through an orderly transfer of goods and services from the seller to the buyer.

• Can create all three.

• Fastest trend in casual dining (Applebee’s, Ruby Tuesday) is offering curbside service, which combine all three.

EVOLUTION OF THE MARKETING CONCEPT

Emergence of the Marketing ConceptMarketing concept Company-wide consumer orientation

to promote long-run success.

• Firm starts with analysis of customers’ needs and works backward to offer products that fulfill them.

• Explained by shift from sellers’ market in which goods and services are relatively scarce to buyers’ market in which they are relatively plentiful.

Delivering Added Value Through Customer Satisfaction and Loyalty

• Firm starts with analysis of customers’ needs and works backward to offer products that fulfill them.

Customer satisfaction Ability of a good or service to meet or exceed a buyer’s needs and expectations.

• Increasing customer loyalty just five percent equals significant increases in lifetime profits per customer.

• Value-added good or service is offered when a company exceeds value expectations by

• Adding features

• Lowering its price

• Enhancing customer service

• Making other improvements that increase customer satisfaction

Customer Satisfaction and Feedback• To determine whether customers are satisfied, can get

feedback in a variety of ways:

• Toll-free telephone hotlines

• Customer satisfaction surveys

• Web site message boards

• Written correspondence

• Customer complaints

• Customers often feel a greater loyalty after a conflict has been resolved.

EXPANDING MARKETING’S TRADITIONAL BOUNDARIES

Not-for-Profit Marketing• 20 million not-for-profits worldwide.

• Account for five percent of GDP worldwide.

• Apply marketing tools to reach audiences, secure funding, improve their images, and accomplish their overall missions.

• Sometimes partner with a profit-seeking company to promote a message.

Nontraditional Marketing

Person Marketing

• Efforts designed to attract the attention, interest, and preference of a target market toward a person.

Place Marketing

• Attempts to attract people to a particular area, such as a city, state, or nation.

Event Marketing

• Marketing or sponsoring short-term events such as athletic competitions and cultural and charitable performances.

Cause Marketing

• Promotes a cause or social issue, such as preventing child abuse, antilittering efforts, and antismoking campaigns.

Organization Marketing

• Influences consumers to accept the goals of, receive the ser- vices of, or contribute in some way to an organization.

DEVELOPING A MARKETING STRATEGY

• First, study and analyze potential target markets and choose among them.

• Second, create a marketing mix to satisfy the chosen market.

Selecting a Target MarketTarget market Group of people toward whom an organization markets its goods,

services, or ideas with a strategy designed to satisfy their specific needs and preferences.

Marketing mix Blending the four elements of marketing strategy—product, distribution, promotion, and pricing—to satisfy chosen customer segments.

• Product strategy involves the nature of the product and its package design, brand names, trademarks, product image, customer service, and other elements.

• Distribution strategy ensures that customers receive their purchases in the proper quantities at the right times and locations.

• Promotional strategy blends advertising, personal selling, sales promotion, and public relations to achieve its goals of informing, persuading, and influencing purchase decisions.

• Pricing strategy is setting profitable and justifiable prices for the firm’s product offerings, sometimes subject to government scrutiny.

Developing a Marketing Mix for International Markets

• Standardization Offering the same marketing mix in every market.

• Works best with B2B goods such as steel, chemicals, and aircraft that require little cultural sensitivity.

• Adaptation Developing a unique marketing mix to fit each market’s local competitive conditions, consumer preferences, and government regulations.

• Example: KFC restaurants in China offer bamboo shots and rice porridge as side dishes.

• Mass customization Firms mass produce goods and services and add unique features to individual or small groups of orders.

• Example: Zap, which imports Smart Cars from Europe with

different-colored doors that snap off and on.

MARKETING RESEARCH

Marketing research Collecting and evaluating information to support marketing decision making. – AC Nielson – Consumer Research

Obtaining Marketing Research Data• Internal data comes from within the organization.

• Firm’s financial records, such as sales, profitability, comparisons of sales territories.

• External data comes from outside the organization.

• Secondary data: Previously published data from trade associations, advertising agencies, marketing research firms, and other sources.

• Low cost and easy to obtain

• Primary data: Data collected through observation, surveys, and other forms of observational study.

Applying Marketing Research Data• As accuracy of research information increases, so does

the effectiveness of the marketing strategies.

• Example: GM’s H3 Hummer research

Data MiningData mining Computer searches of customer data to detect

patterns and relationships.

• Uses data warehouses, sophisticated customer databases that allow managers to combine data from several different organizational functions.

• Example: Walmart’s use to determine local preferences and tailor its inventory appropriately.

MARKET SEGMENTATION

Market segmentation Process of dividing a total market into several relatively homogeneous groups.

How Market Segmentation Works

Segmenting Consumer MarketsGeographic Segmentation

• Divides market into homogeneous groups on the basis of their locations.

• Also consider size and characteristics of the population, such as age, ethnicity, and income level.

Demographic Segmentation

• Divides market on the basis of various demographic or socioeconomic characteristics.

• Common characteristics include gender, income, age, occupation, household size, stage in the family life cycle, education, and ethnic group.

• Marketers avoid stereotyping by breaking large groups into smaller segments.

Psychographic Segmentation

• Divides consumer market into groups with similar psychological characteristics, values, and lifestyles.• Develop AIO statements about customers’ activities, interests, and opinions.• Start blogs to learn more about consumers’ lifestyles.• Rely on the research of sociologists and psychologists.

Product-Related Segmentation

• Divides market based on buyers’ relationship to the good or service.• Benefits sought focuses on the attributes that people seek in a good or service and the benefits they expect to receive from it.• Product usage rate defines such categories as heavy users, medium users, and light users.

• 80/20 principle: 80 percent of revenue comes from 20 percent

of customers.• Brand loyalty focuses on the degree to which consumers recognize, prefer, and insist on a particular brand.

Segmenting Business Markets• Resembles segmentation for consumer markets, but some

methods differ.• Geographic segmentation is similar in business and

consumer markets.• Demographic, or customer-based, segmentation

• North American Industry Classification System Used by member nations of NAFTA.

• Divides industries in categories and further subdivides the categories

into segments.• End-use segmentation focuses on the precise way a B2B

purchaser will use a product.• Resembles benefits-sought segmentation for consumer markets.

CONSUMER BEHAVIOR: DETERMINING WHAT CUSTOMERS WANT

Consumer behavior Actions of ultimate consumers directly involved in obtaining, consuming, and disposing of products and the decision processes that precede and follow these actions.

Determinants of Consumer Behavior• Personal factors: Needs and motives, perceptions, attitudes, self-concept.

• Interpersonal factors: Cultural, social, and family influences.

Determinants of Business Buying Behavior• Often a variety of influences from multiple decision makers.

Steps in the Consumer Behavior Process

CREATING, MAINTAINING, AND STRENGTHENING MARKETING RELATIONSHIPS

Relationship marketing Developing and maintaining long-term, cost-effective exchange relationships with partners.

• Consumers enter into relationships only if there is some benefit to them.

Benefits of Relationship Marketing• Lower costs and higher profits for the business.

• Efficient targeting of best customers that increases the lifetime value of a customer.

• LVC = (revenues + intangible benefits) – (cost of acquiring

and serving that customer)

• Stronger relationships with business partners and opportunities to combine capabilities and resources to better accomplish goals.

Tools for Nurturing Customer Relationships• 80/20 principle: Frequent customers have a higher

lifetime value, so businesses allocate resources accordingly.

Frequency Marketing and Affinity-Marketing Programs

• Frequency marketing Reward purchasers with cash, rebates, and other premiums.

• Affinity programs Solicit involvement based on common interest. Example: Credit card with baseball team logo

• Comarketing Businesses jointly market each others’ products.

• Cobranding Firms link their names in a single product.

One-on-One Marketing

• Customizing products and marketing and rapidly delivering goods.• Example: Amazon.com’s use of suggested books based on user preferences and past purchases.

• Customer relationship management software helps companies gather, sort, and interpret data about specific customers.