Marketing:Marketing:

Managing Profitable Managing Profitable Customer RelationshipsCustomer Relationships

1

1-2

ROAD MAP: Previewing the Concepts

• Define marketing and outline the steps in the Define marketing and outline the steps in the marketing process.marketing process.

• Explain the importance of understanding Explain the importance of understanding customers and the marketplace, and identify the customers and the marketplace, and identify the five core marketplace concepts.five core marketplace concepts.

• Identify the key elements of a customer-driven Identify the key elements of a customer-driven marketing strategy and discuss the marketing marketing strategy and discuss the marketing management orientations that guide marketing management orientations that guide marketing strategy.strategy.

• Discuss customer relationship management and Discuss customer relationship management and strategies for building lasting customer strategies for building lasting customer relationships.relationships.

• Describe the major trends and forces that are Describe the major trends and forces that are changing the marketing landscape in this new age changing the marketing landscape in this new age of relationships.of relationships.

1-3

What Is Marketing?

• Simple Definition: Marketing is Simple Definition: Marketing is managing profitable customer managing profitable customer relationships.relationships.

Goals: Goals: 1.1. Attract new customers by Attract new customers by

promising superior value. promising superior value. 2.2. Keep and grow current Keep and grow current

customers by delivering customers by delivering satisfaction.satisfaction.

1-4

Marketing Old vs. New

Old view of marketing:Old view of marketing:

Making a sale Making a sale ---- “Telling and Selling” “Telling and Selling”

New view of marketing:New view of marketing:

Satisfying customer needsSatisfying customer needs

1-5

Marketing Defined

A A socialsocial and and managerialmanagerial process by which process by which

individuals and groups individuals and groups obtain what they need and obtain what they need and want through want through creatingcreating and and exchanging products and exchanging products and

value with others.value with others.

1-6

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

(value)

Capture value from customers to create profits and customer equity

(value)

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

(pleasure)

Build profitable relationships and

createcustomer delight

(pleasure)

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

What are Consumers’ Needs, Wants, and

Demands?

1-8

This Is a Need

NeedsNeeds - state of - state of felt deprivation felt deprivation (deficiency) (deficiency) including including physical, social, physical, social, and individual and individual needs.needs.

1-9

Types of Needs

• Physical:Physical:– Food, clothing, shelter, safetyFood, clothing, shelter, safety

• Social:Social:– Belonging, affectionBelonging, affection

• Individual:Individual:– Learning, knowledge, self-expressionLearning, knowledge, self-expression

1-10

This Is a Want

WantsWants - form - form that a human that a human need takes, as need takes, as shaped by shaped by culture and culture and individual individual personality.personality.

1-11

This Is Demand

“Demand”

Wants Buying Power

1-12

Need / Want Fulfillment

• Needs and Wants Needs and Wants Fulfilled through a Fulfilled through a Marketing Offer Marketing Offer ::– Some combination of Some combination of

products, services, products, services, information, or information, or experiences offered experiences offered to a market to satisfy to a market to satisfy a need or want.a need or want.

1-13

ProductsAnything that can be Offered to a Market to Satisfy a Need or Want

ProductsAnything that can be Offered to a Market to Satisfy a Need or Want

PersonsPersons PlacesPlaces OrganizationsOrganizations

IdeasIdeasInformationInformation

What Satisfies Consumers’ Needs and Wants?

ServicesActivity or Benefit Offered for Sale That is Essentially

Intangible and Does Not Result in the Ownership of Anything

ServicesActivity or Benefit Offered for Sale That is Essentially

Intangible and Does Not Result in the Ownership of Anything

1-14

Product as an Idea

Products do not have to be physical objects. Here the “product” is an idea—protecting animals.

1-15

Value and Satisfaction

Expectation

Performance810

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

Expectation

Performance

108

1-16

Exchange vs. Transaction

• Exchange:Exchange:– Act of obtaining a desired object from Act of obtaining a desired object from

someone by offering something in someone by offering something in return.return.

• Transaction:Transaction:– A trade of values between two parties.A trade of values between two parties.– One party gives X to another party and One party gives X to another party and

gets Y in return. Can include cash, gets Y in return. Can include cash, credit, check, or barter.credit, check, or barter.

1-17

What is a Market?

• The The set of actual set of actual and potential and potential buyersbuyers of a product. of a product.

• These people share These people share a need or want that a need or want that can be satisfied can be satisfied through exchange through exchange relationships.relationships.

1-18

Elements of a Modern Marketing System

1-19

Marketing Management

• The art and science of choosing The art and science of choosing target markets and building target markets and building profitable relationships with them.profitable relationships with them.

1-20

Segmentation and Target Marketing

Market Segmentation:

Divide the market into segments of customers

Target Marketing:

Select the segment to cultivate (promote)

#1 #2

1-21

Marketing Management

Finding and increasing Finding and increasing demand, also changing or demand, also changing or reducing demand, such as reducing demand, such as in demarketing.in demarketing.

DemandDemandManagementManagement

Temporarily or Temporarily or permanently reducing the permanently reducing the number of customers or number of customers or shifting their demand.shifting their demand.

DemarketingDemarketing

1-22

Marketing and Sales Concepts Contrasted

1-23

The Marketing Mix

CustomerCustomerNeedsNeeds

ProductProduct PricePrice

PromotionPromotion DistributionDistribution

1-24

Customer Relationship Management

• The process of The process of building and building and maintaining maintaining profitable profitable customer customer relationships by relationships by delivering delivering superior superior customer value customer value and satisfaction.and satisfaction.

1-25

Customer Perceived Value(comparing the marketing offer with competition)

• Customer’s Customer’s evaluation of evaluation of the the difference between difference between all the benefits and all the benefits and all the costsall the costs of a of a marketing offer marketing offer relative to those of relative to those of competing offers. competing offers.

1-26

Customer Perceived Value

Is FedEx’s service worth the higher price? FedEx thinks so. It promises reliability, speed, and peace of mind. FedEx ads say “Need to get it there or else? Don’t worry. There’s a FedEx for that.”

1-27

Customer Satisfaction

• Dependent on the Dependent on the product’s product’s perceived perceived performance performance relative to a relative to a buyer’s buyer’s expectations.expectations.

1-28

Customer Relationship Levels

Basic Relationship

Full Partnershi

p

Continuum (range)

1-29

Partner Relationship Marketing

Partners Inside the Firm

1. All employees customer focused

2. Teams coordinate efforts toward customers

Partners Outside the Firm

1. Supply chain management

2. Strategic alliances

1-30

• Customer Lifetime ValueCustomer Lifetime Value– The entire stream of The entire stream of

purchases that the customer purchases that the customer would make over a lifetime of would make over a lifetime of patronage (investment)patronage (investment)

• Share of CustomerShare of Customer– The share a company The share a company

gets of the customers gets of the customers purchasing in their purchasing in their product categories.product categories.

Customer Loyalty & Retention (preservation)

1-31

Customer Lifetime Value

To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.” Rule #1—the customer is always right. Rule #2—if the customer is ever wrong, reread Rule #1.

1-32

Customer Equity

•Customer Customer equity: is the equity: is the total combined total combined customer customer lifetime values lifetime values of all the of all the company’s company’s customers.customers.

1-33

Customer Relationship Groups

Projected loyalty

High

Profitability

Low

Long-term customers

Short-term customers

Good fit between company’s offerings and customer’s needs; high

profit potential

Limited fit between company’s offerings and customer’s needs; low

profit potential

Little fit between company’s offerings and customer’s

needs; lowest profit potential

Good fit between company’s offerings and

customer’s needs; highest profit potential

Strangers

Butterflies True Friends

Barnacles