Lecture 1 - Managing Profitable Customer Relationships and Marketing Environment

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    Introduction to Marketing andMarketing Environment

    Lecture 1

    Learning Goals

    1. Define marketing and the marketingprocess.

    2. Explain the importance of understandingcustomers and identify the five coremarketplace concepts

    3. Identify the elements of a customer-drivenmarketing strategy and discuss themarketing management orientations.

    4. Discuss customer relationship managementand creating value for and capturing valuefrom customers

    5. Describe the major trends and forceschanging the marketing landscape

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    What is Marketing?

    Marketing Defined:

    Marketing is a social and managerialprocess by which individuals and groupsobtain what they need and want throughcreating and exchanging value with others

    Marketing is about managing profitablecustomer relationships

    Attracting new customers

    Retaining and growing current customers

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    Understanding the Marketplace

    Needs, wants, and demands

    Marketing offers: includingproducts, services andexperiences

    Value and satisfaction

    Exchange, transactions andrelationships

    Markets

    Value

    Customers form expectationsregarding value

    Marketers must deliver value to

    consumers

    Satisfaction

    A satisfied customer will buy

    again and tell others about their

    good experience

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    Core Concepts

    Understanding the Marketplace

    Needs, wants, and demands

    Marketing offers: includingproducts, services andexperiences

    Value and satisfaction

    Exchange, transactions andrelationships

    Markets

    Exchange

    The act of obtaining a desired

    object from someone by

    offering something in return

    One exchange is not the goal,

    relationships with several

    exchanges are the goal

    Relationships are built through

    delivering value and satisfaction

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    Core Concepts

    Understanding the Marketplace

    Needs, wants, and demands

    Marketing offers: includingproducts, services andexperiences

    Value and satisfaction

    Exchange, transactions andrelationships

    Markets

    Market

    Set of actual and potential

    buyers of a product

    Marketers seek buyers that are

    profitable

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    Core Concepts

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    Marketing Management

    Marketing management is the art andscience of choosing target markets and

    building profitable relationships withthem.

    This definition must include answers to twoquestions:

    What customers will we serve?

    How can we serve these customers best?

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    Selecting Customers and Creating

    Value Customer Management

    What customers will we serve?

    Marketers select customers that can be served

    profitably

    Value Proposition

    How can we serve these customers best?

    Includes the set of benefits or values a company

    promises to deliver to consumers to satisfy their

    needs

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    Marketing Management

    Production concept

    Product concept

    Selling concept

    Marketing concept

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    Societal marketing concept

    Marketing Orientations

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    The Marketing Plan

    Transforms the marketing strategy into

    action

    Includes the marketing mix and the 4Psof marketing

    Product

    Price

    Place

    Promotion

    1 - 13

    Building Customer Relationships

    CRMCustomer relationshipmanagement

    The overall process of building andmaintaining profitable customerrelationships by delivering superiorcustomer value and satisfaction. It dealswith all aspects of acquiring, keeping andgrowing customers.

    1 - 14

    Value and Satisfaction

    Perceived Value

    The customers evaluation of the difference

    between benefits and costs.

    Customers often do not judge values and

    costs accurately or objectively.

    Customer Satisfaction

    Products perceived performance relative to

    customers expectations.

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    Not All Customers

    are Equal

    Basic Relationships

    Low-margin customers

    Full Partnerships

    Key customers

    Selective relationship management

    Weeding out unprofitable customers

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    Capturing Value from Customers

    Customer Loyalty

    and Retention

    Share of Customer

    Customer Equity

    Customer delight

    leads to emotional

    relationships and

    loyalty

    Customer Lifetime

    Value shows true

    worth of a customer

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    Key Concepts

    Capturing Value from Customers

    Customer Loyalty

    and Retention

    Share of Customer

    Customer Equity

    Share of customerspurchase in a product

    category.

    Achieved through

    offering greater

    variety, cross-sell and

    up-sell strategies.

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    Key Concepts

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    Capturing Value from Customers

    Customer Loyalty

    and Retention

    Share of Customer

    Customer Equity

    The combined customer

    lifetime values of all current

    and potential customers.

    Measures a firms

    performance, but in a

    manner that looks to the

    future.

    Choosing the best

    customers is key

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    Key Concepts

    Marketing Landscape

    Digital age

    Globalization

    Ethics and social

    responsibility

    Not-for-profit marketing

    Marketing relationships

    Growth of the Internet

    Advances intelecommunications,information,transportation Customer research and tracking

    Product development

    Distribution

    New advertising tools

    24/7 marketing through theInternet

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    Challenges

    Marketing Landscape

    Digital age

    Globalization

    Ethics and social

    responsibility

    Not-for-profit marketing

    Marketing relationships

    Geographical and

    cultural distances have

    shrunk

    Greater market coverage

    More options for purchasing

    and manufacturing

    Increased competition from

    foreign competitors

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    Challenges

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    Marketing Landscape

    Digital age

    Globalization

    Ethics and social

    responsibility

    Not-for-profit marketing

    Marketing relationships

    Marketers need to

    take greatresponsibility for the

    impact of their actions

    Caring capitalism is a way to

    differentiate your company

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    Challenges

    Marketing Landscape

    Digital age

    Globalization

    Ethics and social

    responsibility

    Not-for-profit marketing

    Marketing relationships

    Many organizations are

    realizing the

    importance of strategic

    marketing

    Performing arts

    Government agencies

    Colleges

    Hospitals

    Churches

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    Challenges

    Marketing Landscape

    Digital age

    Globalization

    Ethics and social

    responsibility

    Not-for-profit marketing

    Marketing relationships

    Profits through

    managing long-term

    customer equity

    Improve customer knowledge

    Target profitable customers

    Keep profitable customers

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    Challenges

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    What is Marketing?

    The process of building profitable customer

    relationships by creating value for

    customers and capturing value in return

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    Strategic Planning &

    Marketing Environment

    Strategic Planning

    The process of developing andmaintaining a strategic fit between the

    organizations goals and capabilities and its

    changing marketing opportunities.

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    Steps in Strategic Planning

    1. Defining the company mission.

    2. Setting company objectives and goals.3. Designing the business portfolio.

    4. Planning marketing and other functional

    strategies.

    The Mission Statement

    A statement of the organizations

    purpose.

    What it wants to accomplish in the larger

    environment.

    Should be market oriented and defined in

    terms of customer needs.

    The Mission Statement

    Questions the mission statement shouldanswer include:

    What is our business?

    Who is our customer?

    What do consumers value?

    What should our business be?

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    The Mission Statement:

    Should be realistic.

    Should be specific. Should fit the market environment.

    Should be based on distinctive

    competencies.

    Should be motivating.

    Designing the Business Portfolio

    The business portfolio is the collection of

    businesses and products that make up the

    company.

    The company must:

    analyze its current business portfolio or Strategic

    Business Units (SBUs),

    decide which SBUs should receive more, less, or no

    investment,

    develop growth strategies for growth or downsizing.

    Strategic Business Unit (SBU)

    A unit of the company that has a separate

    mission and objectives and that can be

    planned independently from other

    company businesses.

    Can be a company division, a product line

    within a division, or sometimes a single

    product or brand.

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    Marketings Role

    in Strategic Planning

    Provide a guiding philosophy

    Identify attractive opportunities

    Design effective strategies

    Build strong value chains

    Form superior value delivery networks

    Product/Market Expansion Grid

    Market Penetration

    Existing markets, existing products

    Market Development

    New markets, existing products

    Product Development

    Existing markets, new products

    Diversification

    New products, new markets

    Customers grouped by: Geographic

    Demographic

    Psychographic

    Behavioral

    Market segment is agroups of consumers whorespond in similar ways tomarketing efforts.

    1. MarketSegmentation

    2. Target marketing

    3. MarketPositioning

    Marketing Strategy

    Strategy

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    Evaluation of eachsegments attractiveness

    Selection of segments withgreatest long-termprofitability

    A company can chooseone or several segmentsto target

    Marketing Strategy

    Strategy

    1. MarketSegmentation

    2. Target marketing

    3. MarketPositioning

    The place the productoccupies in the consumersmind

    Products are positionedrelative to competingproducts

    Marketers look for clear,distinctive and desirable

    place in positioning

    Marketing Strategy

    Strategy

    1. MarketSegmentation

    2. Target marketing

    3. MarketPositioning

    Marketing Mix

    The marketing mix includes controllableand tactical marketing tools known as the

    4Ps

    The 4Ps include Product

    Place

    Promotion

    Price

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    SWOT Analysis

    Strengths:

    Internal capabilities that may help a

    company reach its objectives.

    Weaknesses:

    Internal limitations that may interfere

    with a companys ability to achieve its

    objectives.

    SWOT Analysis

    Opportunities:

    External factors that the company may be

    able to exploit to its advantage.

    Threats:

    Current and emerging external factors

    that may challenge the companys

    performance.

    Finding opportunities

    Avoiding threats

    Understandingstrengths

    Analyzing weaknesses

    Analysis

    Planning

    Implementation

    Control

    Managing the Marketing Effort

    Marketing Functions

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    Marketing plans include:

    Executive summaryAnalysis of current situation

    Objectives

    Targets and positioning

    Marketing mix

    Budget

    Controls

    Managing the Marketing Effort

    Marketing Functions

    Analysis

    Planning

    Implementation

    Control

    Plans are turned intoaction with day-to-dayactivities

    Good implementationis a challenge

    Managing the Marketing Effort

    Marketing Functions

    Analysis

    Planning

    Implementation

    Control

    Evaluation of theresults of marketingstrategies

    Checks for differencesbetween goals andperformance

    Managing the Marketing Effort

    Marketing Functions

    Analysis

    Planning

    Implementation

    Control

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    Measuring Effectiveness

    Return on marketing (marketing ROI)

    The net return from a marketing investment

    divided by the costs of the investments

    The Marketing Environment

    The Marketing Environment

    Marketing Environment:

    The actors and forces outside marketing that affectmarketing managements ability to build and maintainsuccessful relationships with target customers

    Microenvironment

    Includes the actors close to the company

    Macroenvironment

    Involves larger societal forces

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    Marketing must consider

    other parts of the

    organization including

    finance, R&D, purchasing,

    operations and accounting

    Marketing decisions must

    relate to broader company

    goals and strategies

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors

    6. Publics

    Marketers must watch

    supply availability and

    pricing

    Effective partnership

    relationship management

    with suppliers is essential

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors

    6. Publics

    Help to promote, sell and

    distribute goods to final

    buyers

    Include resellers, physical

    distribution firms, marketing

    services agencies and financial

    intermediaries

    Effective partner relationship

    management is essential

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors

    6. Publics

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    The five types of customermarkets

    Consumer

    Business

    Reseller

    Government

    International

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors

    6. Publics

    Conducting competitor

    analysis is critical for

    success of the firm

    A marketer must monitor

    its competitors offerings

    to create strategic

    advantage

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors6. Publics

    A group that has an actualor potential interest in orimpact on an organization

    Seven publics include:

    Financial

    Media

    Government

    Citizen-action

    Local

    General

    Internal

    Microenvironment

    Actors

    1. The company

    2. Suppliers

    3. Marketingintermediaries

    4. Customers

    5. Competitors

    6. Publics

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    Macroenvironmental Forces

    The Macroenvironment

    Demographic

    Economic

    Natural

    Technological

    Political

    Cultural

    Demographic Environment

    Demographic Environment:

    The study of human populations in terms of

    size, density, location, age, gender, race,

    occupation and other statistics

    Economic Environment

    Changes in Income

    1980sconsumption

    frenzy

    1990ssqueezed

    consumer

    2000svalue marketing

    Income Distribution

    Upper class

    Middle class

    Working class

    Underclass

    Consists of factors that affect consumerpurchasing power and spending patterns.

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    Natural Environment

    Natural Environment:

    Involves the natural resources that are

    needed as inputs by marketers or that are

    affected by marketing activities

    Trends

    Shortages of raw materials

    Increased pollution

    Increased government intervention

    Technological Environment

    The most dramatic force shaping our destiny

    Rapidly changing force which creates many

    new marketing opportunities but also turns

    many existing products extinct

    Political Environment

    Consists of laws, government agencies andpressure groups that influence or limit variousorganizations and individuals in a given society

    Legislation affecting businesses worldwide hasincreased

    Laws protect companies, consumers and the interestsof society

    Increased emphasis on socially responsible actions

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    Cultural Environment

    Made up of institutions and other forces

    that affect a societys basic values,perceptions, preferences and behaviors.

    Responding to the

    Marketing Environment

    There are three kinds of companies:

    those who make things happen, those

    who watch things happen, and those who

    wonder whats happened.