Chapter 13

Marketing:Building

Customer Relationships

What is Marketing

The Process ofPlanningExecuting the conceptPricingPromotionDistribution

The Evolution of Marketing

Production Era – prior to 1930

Sales Era – 1920 to 1970

Marketing Concept Era – 1950 to 1990

Customer Relationship Era – after 1990

Production EraProduce as much as you can

Limitless marketsProduction capabilities small compared to

demandMost business owners were farmers, carpenters

& other trade workers (silversmith, etc.)Production, Distribution & Storage was

businesses greatest need

Sales EraMass Production Techniques in use: assembly lines

Production exceeded market demandEmphasis on selling & advertising

Sale after sale rare

Marketing Concept EraAfter WWII Demand for Goods & Services Grew

Baby boomers increased consumer spending

Need for businesses to be responsive to customers to attract consumer spending

A Customer Orientation A Service Orientation A Profit Orientation

Customer Relationship EraCRM = Customer Relationship Management

Enhanced Customer ServiceExceed consumer expectations to grow customer loyalty

Nonprofits & Marketing

Charities: to raise funds for social initiativesRed Cross

Churches: to new members & raise funds

Politicians: to get votes

States: to attract new businesses & tourists

The Marketing Mix

4 “P”s

Product: design & make a want satisfying product

Price: Set a price

Place: Put the product where people will buy it

Promotion: Advertising

Steps to MarketingFind Opportunities Conduct Research

Identify Target MarketDesign Product to Meet a Need Product Testing Choose Brand Name

Design Package & Set Price Select Distribution System Design Promotion Program

Build a Relationship with Customers

Marketing Research

Good Decisions depend on Good Information

Demographic InformationTrends in purchasing by consumers

Ecological Impact(& social impact)

Marketing Research Process

Define the question

Collect Data: secondary or primary data

Analyze the Data Choose Best Solution & Do It

Primary Data

InterviewsSurveys/Online SurveysObservationsFocus GroupsQuestionnairesCustomer CommentsLetters from Customers

Secondary Data

Government Publications (many online)Commercial Publications: A C Nielsen, MRCAMagazines: Fortune, Forbes, Inc., etc.Newspapers: WSJ, Barron’sInternal Sources: Firm’s RecordsGeneral Source: Internet Searches

The Marketing Environment

Global Factors Price & PromotionTechnological Factors Price & ProductSociocultural Factors ProductCompetitive Factors PlaceEconomic Factors Place & Promotion

All these surround the consumer & their needs.

2 Markets

Consumer MarketMarket Segmentation

Target MarketingGeographical SegmentationDemographic SegmentationPsychographic SegmentationBenefit SegmentationVolume Segmentation

Business to Business Market = B2B

Smaller Market Segments

Niche Marketing

One-to-one Marketing

Relationship MarketingIndustrial Revolution Mass Production

Mass Marketing Mass Media One-way Messages

Relationship Marketing Customer Loyalty Long term relationships & response to customer input Two-way Messages

Consumer Decision-makingLearning/Experience

Didn’t like product never buy it againLiked product consistent customer

Reference GroupNorms & expectations of peer group

CultureValues, attitudes & customs/traditions, ways of doing things

SubcultureEthnic, age, religious or other group a consumer strongly identifies with

Cognitive Dissonance/Buyers Remorse

Business 2 Business

Small # of Customers - Potentially larger transactionsFirm size & market utilization of goods or servicesGeographic concentrationProducts tend to be more complex & B2B; sales require

more rational & less emotion than consumer market, greater need for direct sales

More formal process, negotiated detail, closer buyer/seller relationship

Your Prospects in Marketing

A skill that can be learnedMentoring/Internship

Who can you work for in the field?

Chapter 14

Developing & PricingProducts & Services

Product Development

The Whole Product OfferDesign Products of Quality at a Fair PriceReplacement/ReturnsService & RepairExceeding the Customers Expectations

VALUE is more important than Price

Change to Match the Desires of your Customers

Surveys & Comment Cards

Expanded Menus & Services

Experimenting & Variety

Total Product OfferPrice Brand

NameConvenience Package

Store Surroundings

Service InternetAccess

Buyer’sPast

Experience

Guarantee Speed of Delivery

Image Createdby Advertising

Reputation of producer

Grouping Products

Product LinesBrand Name Detergents or Cereals

Product MixAll the Product Lines of P & G or General Mills

Marketing Goods & Services to Different Kinds of Consumers

Product DifferentiationConvenience: Time or work savingShopping: Variety & ChoicesSpecialty: Luxury or no reasonable substituteUnsought: Consumers are unaware of need

planning ahead: emergency car-towing, insurance, or burial services, etc.

Industrial Goods & Services

B2BSales people/internet sales:

InstallationHeavy EquipmentCapital Goods = DurablesAccessory Equipment

Production or Support Goods

Packaging

Protect the Product: Morton’s Salt

Attracts the Consumer: Colorful, Artwork, Information

Holds & Dispenses the Product: Tooth Paste

Tracking the Product: UPC Code

6 Functions of Packaging

1) Protect Goods/Withstand Handling/Deter Theft2) Attract the buyer3) Describe contents4) Explain the products benefits5) Provide warrantee & other information6) Give indication of price, value & uses

Branding & Brand Equity

Brand = a name, symbol or design (or combination)

Trademark = legal protection to exclusive use of a brand name or design

Manufacturer & Private Label Brands

Manufacturer: (makers name)Xerox, Kodak, Sony, Chevrolet, etc

Dealer/Distributor (private-label)Kenmore (made by …)Sears Paint (made by Sherwin-Williams)

Brand Names can become genericaspirin, nylon, kerosene, zipper, linoleum

What about Scott Towel & Kleenex?

Generic Goods & Knockoff BrandsGeneric Goods: Pharmaceuticals, Cereals

lack of advertising, quality ?, lower priced

Knockoff Brands: Do you want to buy a Rolex watch?

How about a Bolex?Price ?, Discounts ? What would it take for you to by a knockoff, instead of the real one?

Brand Equity

Brand Equity = awareness+loyalty+perceived quality+images+emotions

Brand Loyalty = customer satisfaction & commitment to future purchases

Brand AwarenessCar Racing NASCARShoes & Sports Apparel NikeGolf balls TitleistJewelers Zales, Jareds

Brand AssociationLinkage between a Brand Name item & something or

someone else

Nike Tiger WoodsBuick Tiger Woods

Quaker Oats the 1812 Overture

Muscular Dystrophy Association Jerry Lewis

Brand Management

Product Managerresponsible for one line or brand

Marketing Mixproduct, price, place, promotion

New Product Development

Idea GenerationProduct ScreeningProduct AnalysisDevelopmentTestingCommericialization

Product Life CycleIntroduction Price lower

Growth Price reaches zenith

Maturity Profit maximizedSales Crest

Decline Price & Sales both drop

Competitive Pricing

Pricing ObjectivesAchieve largest return on investment

The Profit MotiveBuilding TrafficAchieve greater market shareCreate an imageFurthering social objectives

3 major approaches to pricing

Cost-based Pricing

Demand-based Pricing

Competition-based PricingPrice LeadershipLow Price

Break Even Analysis

Break-Even Point (BEP) = revenues & cost are equal

BEP = Total Fixed Cost (TFC) . Price of a unit – Variable Cost of a

unit (P) (VC)

BEP = TFC/(P – VC)

Other Pricing Strategies

Skimming Price Strategy

Every day low prices = EDLP

High-low pricing strategy = higher prices than EDLP store with many special sales; internet sales may reduce the frequency of this strategy

Bundling

Psychological Pricing: Why set a price of $19.99 or $199.99?

Demand-Oriented Pricing

Compared with Demand-based Pricing (DBP)DBP is also called Target Costing

Price is an input for production and the target cost + profit margin = DBP

Demand oriented pricing (DOP) is reflected in theater seat prices, where highly desire seats cost more than less desirable one.

Nonprice Competition

Attributes other than pricefeaturesconvenienceservicedurabilitystyle

Remaining competitive does always mean meeting or beating the price at Walmart.

Why is Nordstrom’s successful?

Chapter 15

Distributing Products

Quickly & Efficiently

Marketing Intermediaries

MiddlemenDo they increase or lower the cost of business?

A Channel of Distribution = a set of intermediaries: agents/brokers/wholesalers/retailers

Agent/Broker = bring buyers & seller togethera Broker may manage many agents or just (him/her)self

Wholesaler = sells to other firms; B2B

Retailer = sells to consumers (people)

Why do we need Middlemen?

Middlemen can do things faster, at lower cost & give the producer more time to concentrate on what they do best.

StorageTransportAdvertisingSellingRelationship building

5 Sellers & 5 Buyers

How many contact need to be made?

Seller Seller Seller Seller Seller

Buyer Buyer Buyer Buyer Buyer

Using middlemen: 5 Seller & 5 Buyers

One Middleman

Seller

Seller

Seller

Seller

Seller

Buyers

Buyers

Buyers

Buyers

Buyers

Value versus Cost

If middlemen save time and/or money for a product heading to market, it make sense to use them.

If about half the cost of a product goes to middlemen, then getting rid of middlemen would reduce the price of goods & services…

RIGHT?!Wrong!!! It would reduce product availablitiy & increase costs & prices!!!

Six Utilities of Intermediaries(middlemen)

Form turning wheat into flourTime get it when you want itPlace local outletsPossession transfer ownership/credit

installation/follow-upInformation Consumer Reports, BBB

internetServices Education on use, repair

Wholesale – B2B

Merchant Wholesalers: take possession of goods they handle

Rack Jobbers: keep title until good is sold

Cash-and-carry Wholesalers: now use credit too

Drop Shippers: have product shipped directly from maker to buyer

Agents & Brokers

Arrange transfer of possession without taking possession of a product.

Wholesalers make profit from sale of products, but agents & brokers make commissions that are a percentage of the sales revenue.

Retail Intermediaries

Department Store Sear, JC Penney, NordstromDiscount Store Walmart, Target, KmartSupermarket Safeway, Kroger, Albertson’sWarehouse Club Costco, Sam’s ClubConvenience Store7-ElevenOutlet Store TJ Maxx, Marshall’sSpecialty Store Shoe Stores, Foot LockerCategory Killer Toys R Us, Office Depot,

Staples

Retail Distribution Strategy

Intensive Distribution as many outlet asStarbuck’s possible

Selective Distribution a few outletsMary Kay

Exclusive Distribution one retail outletSax 5th Avenue in a local area

Nonstore Retailing

Telemarketing: No Call List LawsVending MachinesKiosksCartsDirect Selling: Primerica/Avon/Kirby/SW BooksMultilevel Marketing: MLM/Independent ContractorsDirect Marketing: Direct mail/Catalog SalesInternet Marketing: Virtual stores

Channel Systems

Corporate Distribution SystemsGE, Firestone, Xerox, Walmart

Contractual Distribution SystemsFranchises: McDonald’s, KFC, AAMCOWholesalers: Ace Hardware, IGARetail Cooperatives: Associated Grocers

Administrative Distribution SystemsKraft Foods, Scott’s Lawncare

Supply Chains

Linked activities that transfer products to consumers

Supplier’s plant Manufacturers

Wholesalers Retailers

Consumers

Supply Chain

Channel of Distribution

Supply Chain Management

Managing the movement ofraw materialspartswork in progressfinished goodsrelated information through all the organization

SCM is Interfirm & International

Logistics

Shipping or Physical DistributionSpeed of deliveryCost effectiveTaxes, Tariffs & DutiesLabor LawFDA & Bureau of Alcohol, Tobacco & Firearms

Inbound or Outbound Logistics

Control of the physical flow of materialsinvolves planning, implementing, moving

Inbound: raw material, packaging, G & S from suppliers to producers & information

Outbound: finished products

Reverse Logistics: Return of defective or recycled products

Choosing the right mode

Train: Great for large shipments on land30-40% of volume in USA

Trucks: Good for smaller shipments or where rail is not available; >25% of volume in USA

Water: Inexpensive, but slowerPipelines: Fast & Efficient for fluidsAir: Fast, but expensiveIntermodal Shipping: use two or more of the above

Storage

Storage Warehouses: Longer term holding of goods

Distribution Warehouses: gather & redistribute products

Tracking of Goods: RFID (radio frequency ID)& UPS (uses a Bluetooth short-range radio)

What it all means

10am-7pmA successful firm has product to sell, it takes orders, processes the orders, keeps customers informed about a shipment’s progress and gets the right goods to their customers as quickly as possible. There are many new jobs in this area of managent.

Chapter 16

Using Effective Promotional Techniques

Promotion Mix

Advertising

Personal Selling

Sales Ppromotion

Public Relations

Intergrated Marketing Communication

IMC: a technique that combines all the promotional tools into one comprehensive, unified promotional strategy; create a positive brand image & meet the goals of the firm

IMC Part 2

Identify the target marketDefine the objectives; make this clear & measurable

Budget how much promotion will costDevelop unifying message

Implement the planEvaluate the effectiveness of the plan

Advertising

Keep the customer’s interest

Advertising is paid, nonpersonal communication through various media & individuals, who are identified in the message

Propoganda is nonpersonal communication that does not have an identified sponsor

Advertising in USA

$245 billion/yrTVDirect mailNewspapersInternet

Methods of Advertising

Retail AdsTrade AdsB2B AdsInstitutional AdsProduct AdsAdvocacy AdsComparative AdsInteractive AdsOnline Ads

Media & Product Placement

Target Market: How can they reached?Readers: Newspapers/magazines/flyersListeners: RadioViewer: TV, internetWalk/Drive by: Billboards & SignsReceive mail or email: Direct advertisingSearch: Yellow pages, Craig’s List

Infomercials

Half an hour to one hour commercials for:BowflexTotal GymGeorge Foreman Grill

Moving to Internet Advertising

Nissan & Chrysler are moving money into online ads 20 to 40 increases from 2004 to 2005

That money had been going into TV or other forms of advertising.

Four years age McDonald’s spent 80% of its advertising dollars on TV & now only 50%.

Much of the money now goes to Internet advertising.

Global Advertising

Something lost is translationel Papa = the Pope or la papa = potatoMist StickPocari SweatFord ProbeKrapp toilet paper

Global Adverting does not always work well.Regional advertising is more effective.

Personal Selling

Face-to-face presentation & promotionnot just persuading people to buy

helping identify their wants & needs& finding ways to assist them later on

Personalized service

The Selling Process

Prospect & QualifyWilling to listen/Power to act

Preapproach Know who you will talk to

Approach Friendly professionalism

Make Presentation Know the product

Answer Objections More information needed

Close the Sale Trial close/Commitment

Follow-up Be available for more

requests for help

Business to Consumer Selling

B2CApproach

Ask questionsMake Presentation

Close SaleFollow-up

Public Relations

PRManagement function that evaluates public attitudes, changes in policy & procedures in response to the public’s requests.

Action plan executed & information used to earn public understanding & acceptance.

Public Relations 2

3 steps1. Listen to the public

2. Change policies & Procedures

3. Inform people that you are responding to their needs

PR department must maintain close ties to stakeholders; customers, media, community leaders, government officials, shareholders & owners

Publicity

The talking/writing part of PR

It must be interesting to get reported by the media.

Publicity is free & reach people the advertising won’t.

Marketer lose control of how, when, or if the media will use the story.

Sales Promotion

The tool that stimulate consumer purchasing & dealer interest by means of short term activity

Displays Trade shows ExhibitionsEvent Sponsorships Contests

Free Samples Test Drive DemoCoupons Lotteries

Bonuses Sweepstakes % off Sales

Sampling & Word of Mouth

How can the taste of chocolate fudge brownies be described for someone unfamiliar with the taste of chocolate (or fudge).

Sampling is the easiest remedy.

The best advertising is done by satisfied customers (Word of Mouth) and it’s free.

Viral Marketing

Internet chat rooms entered and hype for a product released. Chat room visitors spread the word to their friends and other chat rooms they visit.

Blogging (blog is short for Web log)

Podcasting: distributing audio & video vai the internet

Who is watching you on the internet?

Firms keep track of the number of hits on product websites & even monitor the tastes of individual web users.

Then using this information they design advertising just for your kind of consumer.

You may sit alone at your computer, but someone will notice where you go on the internet.

Matching market with promotion

Push Strategy: push the product to vendors & sellers, people will see it in store/outlets & buy

Pull Strategy: promotion directed toward consumers, they ask for the product & stores start stocking the product