Marketing Armstrong slide

Copyright 2015 Pearson Education Ltd.


Learning ObjectivesDefine marketing and outline the steps in the marketing process.Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts.Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy.1-*


Learning ObjectivesDiscuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return.Describe the major trends and forces that are changing the marketing landscape in this age of relationships.

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First Stop: Amazon.comReason for Amazons success highly customer drivenCreates unique personal customer experience Personalized home pagesPersonalized product recommendationsDiscovery factorusers of the site are compelled to look, learn, and discoverArchetype for other companies focused on delivering customer value1-*


MarketingMarketing involves creating value for customers and building strong customer relationships in order to capture value from customers in return.Goals:Attract new customers by promising superior valueKeep and grow current customers by delivering satisfaction1-*


Forms of Marketing1-*


Figure 1.1 - The Marketing Process: Creating and Capturing Customer Value1-*


Understanding the Marketplaceand Customer NeedsCore customer and marketplace conceptsNeeds, wants, and demandsMarket offerings (products, services, and experiences)Value and satisfactionExchanges and relationshipsMarkets1-*


Customer Needs, Wants, and Demands1-*


Market OfferingsCombination of products, services, information, or experiences Offered to a market to satisfy a need or wantEntitiesproducts, services, persons, places, organizations, information, and ideasMarketing myopia: Paying more attention to the specific products a company offers than to the benefits and experiences produced by these products

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Customer Value and SatisfactionCustomers form expectations about the value and satisfaction of market offerings. Satisfied customers buy again and spread the word.Dissatisfied customers switch to competitors and criticize the product to others.Setting low expectations may satisfy those who buy but fail to attract enough buyers.Setting high expectations may disappoint buyers.1-*


Exchanges and RelationshipsExchange is the act of obtaining a desired object from someone by offering something in return.Marketing consists of creating, maintaining, and growing desirable exchange relationships with target audiences.Marketers build strong relationships by consistently delivering superior customer value.

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MarketsSet of all actual and potential buyers of a product or serviceConsumers market: Search for productsInteract with companies to obtain informationMake purchasesCustomer-managed relationships are important as customers are empowered and marketing is made a two-way affair.1-*


Figure 1.2 - A Modern Marketing System1-*


Designing a Customer-Driven Marketing ManagementMarketing management: Choosing target markets and building profitable relationships with themBasic factors to design a winning marketing strategy:Target marketValue proposition1-*


Designing a Customer-Driven Marketing StrategySelecting customers to serveChoosing a value propositionMarketing management orientationsProduction conceptProduct conceptSelling conceptMarketing conceptSocietal marketing concept1-*


Figure 1.3 - The Selling and Marketing Concepts Contrasted1-*


Figure 1.4 - Three Considerations Underlying the Societal Marketing Concept1-*


Marketing Mix Set of marketing tools the firm uses to implement its marketing strategyProductPricePlace PromotionEach tool should be blended into a comprehensive integrated marketing program.1-*


Customer Relationship ManagementDelivering superior customer value and satisfaction to build and maintain profitable customer relationships Customer-perceived value: Customers evaluation of the difference between all the benefits and costs of a marketing offer relative to those of competing offersCustomer satisfaction: Extent to which a products perceived performance matches a buyers expectations1-*


Customer Relationship Levels and Tools1-*


Customer-Engagement MarketingCustomer-engagement marketing involves fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community.Greater consumer empowerment means that companies should rely on marketing by attraction.The key is to find ways to enter consumers conversations with engaging and relevant brand messages.

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Consumer-Generated MarketingBrand exchanges created by consumers Consumers play an increasing role in shaping their own brand experiences and those of other consumers.Occurs through:Uninvited consumer-to-consumer exchangesInvitation of consumers by companiesAsking for new product and service ideasAsking to play an active role in shaping ads1-*


Partner Relationship ManagementWorking closely with partners both inside and outside the company to jointly bring more value to customersPartners inside the firmcross-functional teamsPartners outside the firmsuppliers, channel partners

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Creating Customer Loyalty and RetentionKeeping customers loyal proves economical to the company. Customer lifetime value: Value of the entire stream of purchases a customer makes over a lifetime of patronageCustomer defections can be costlyCan lose that customers lifetime value

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Share of CustomerPortion of the customers purchasing that a company gets in its product categoriesIncreased by:Having good customer relationship managementOffering greater variety to current customersCreating programs to cross-sell and up-sell to market more products and services to existing customers

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Customer EquityTotal combined customer lifetime values of all of the companys current and potential customersHelps to measure the future value of the companys customer baseIncreases when the loyalty of the firms profitable customers increasesBetter measure of a firms performance than current sales or market share1-*


Figure 1.5 - Customer Relationship Groups1-*


The Changing Marketing LandscapeDigital ageChanging economic environmentGrowth of not-for-profit marketingRapid globalizationCall for more ethics and social responsibility1-*


The Digital Age: Online, Mobile, and Social Media MarketingDigital and social media marketing: Engaging consumers via their digital devices using digital marketing tools and social mediaMobile marketing: Using mobile channels to stimulate immediate buying, make shopping easier, and enrich the brand experienceBlending the new digital approaches with traditional marketing creates a smoothly integrated marketing strategy and mix.

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Changing Economic EnvironmentThe Great Recession from 2008 to 2009 undermined consumer confidence.Post-recession eraConsumers have become more frugal.New consumer spending values emphasize simpler living.Marketers are focusing on practicality and durability in their product offerings and marketing pitches.

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Growth of Not-for-Profit MarketingNot-for-profits face stiff competition for support and membership.Sound marketing can help them attract membership, funds, and support.1-*


Rapid Globalization and Societal MarketingManagers around the world are taking both local and global views of the companys:IndustryCompetitorsOpportunitiesCorporate ethics and social responsibility have become important for every business.1-*


Figure 1.6 - An Expanded Model of the Marketing Process1-*


Learning ObjectivesDefine marketing and outline the steps in the marketing process.Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts.Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy.1-*


Learning ObjectivesDiscuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return.Describe the major trends and forces that are changing the marketing landscape in this age of relationships.

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.Copyright 2015 Pearson Education Ltd.

**This chapter defines marketing and outlines the steps in the marketing process, explains the importance of understanding the marketplace and customers and identifies the five core marketplace concepts. It also identifies the key elements of a customer-driven marketing strategy and discusses the marketing management orientations that guide marketing strategy.

*The chapter further discusses customer relationship management and identifies strategies for creating value for customers and capturing value from customers in return. Finally, this chapter describes the major trends and forces that are changing the marketing landscape in this age of relationships.

*Amazon.com is the online pioneer in selling books, but it now sells everything from music, electronics, tools, housewares, apparel, and groceries to clothing, loose diamonds, and Maine lobsters. The success of Amazon is attributed to its customer-driven policy that starts with the customer and works backward. For example, the Amazon.com site greets customers with their very own personalized home pages, and its Recommendations for You feature offers personalized product recommendations.

Amazons discovery factor makes buying experiences special. Once on the Amazon.com site, youre compelled to stay for a whilelooking, learning, and discovering. Thus, it creates direct, personalized customer relationships and satisfying online experiences.

Amazon has become the model for companies that are obsessively and successfully focused on delivering customer value. The company believes that if it creates superior value for customers, it will earn their business and loyalty, and success will follow in terms of company profits and returns.*Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. The dual goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.

Sound marketing is critical to the success of every organization, be it large for-profit firms, such as Google, Target, Procter & Gamble, Toyota, and Microsoft or not-for-profit organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches.*Marketing comes in two formstraditional and contemporary.

In the traditional form, marketing is seen in abundance at shopping malls and in magazine, television, and direct-mail advertisements. Therefore, marketing in the old sense refers to making a saletelling and selling.

In the contemporary form, marketers have assembled a host of new marketing approachesimaginative Web sites, mobile phone apps, blogs, online videos, and social media. Thus, marketing in the new sense involves satisfying customer needs.*This figure presents a simple, five-step model of the marketing process for creating and capturing customer value. In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. The rewards are in the form of sales, profits, and long-term customer equity.*Marketers need to understand customer needs and wants and the marketplace in which they operate. The five core customer and marketplace concepts are needs, wants, and demands, market offerings that include products, services, and experiences, value and satisfaction, exchanges and relationships, and markets. Each of these core concepts are discussed in detail in the following slides.*Customer needs are the states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression.

Wants are the form human needs take as they are shaped by culture and individual personality. For example, an American needs food but wants a Big Mac, French fries, and a soft drink. Wants are shaped by ones society and are described in terms of objects that will satisfy those needs.

When backed by buying power, wants become demands. Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.*Consumers needs and wants are fulfilled through market offerings. Market offerings are a combination of products, services, persons, places, organizations, information, ideas, or experiences offered to a market to satisfy a need or want. For example, the Ad Council and the National Highway Traffic Safety Administration created a Stop the Texts. Stop the Wrecks. campaign that markets the idea of eliminating texting while driving. The campaign points out that a texting driver is 23 times more likely to get into a crash than a non-texting driver.

Marketing myopia refers to paying more attention to the specific products a company offers than to the benefits and experiences produced by these products. These sellers will have trouble if a new product comes along that serves the customers need better or less expensively. The customer will have the same need but will want the new product.*Consumers face a broad array of products and services that might satisfy a given need. Customers form expectations about the value and satisfaction that various market offerings will deliver. Satisfied customers buy again and tell others about their good experiences. While, dissatisfied customers switch to competitors and criticize the product to others.

Marketers should set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they set expectations too high, buyers will be disappointed.

*Marketing occurs when people decide to satisfy their needs and wants through exchange relationships. Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing consists of actions taken to create, maintain, and grow desirable exchange relationships with target audiences involving a product, service, idea, or other object. Companies want to build strong relationships by consistently delivering superior customer value.*A market is the set of actual and potential buyers of a product or service. Sellers must search for buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them. Although marketing was traditionally carried out by sellers, the concept now also includes consumers. Consumers engage in marketing when they search for products, interact with companies to obtain information, and make their purchases. Thus, customer-managed relationships are important as customers are empowered and marketing is made a two-way affair.*This figure shows the main elements in a marketing system. Each party in the system adds value for the next level. The arrows represent relationships that must be developed and managed. Thus, a companys success at building profitable relationships depends not only on its own actions but also on how well the entire system serves the needs of final consumers.*Marketing management is the art and science of choosing target markets and building profitable relationships with them. To design a winning marketing strategy, the marketing manager must answer two important questions. First, whats the target market? And second, whats the value proposition?*The company must first select the customers to serve, which is done through market segmentation.

Next, the company must decide how it will differentiate and position itself in the marketplace. A brands value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.

There are five alternative concepts under which organizations design and carry out their marketing strategies. The first alternative is the production concept. This refers to the idea that consumers will favor products that are available and highly affordable. The second alternative is the product concept. This refers to the idea that consumers will favor products that offer the most quality, performance, and features. The third alternative is the selling concept. This refers to the idea that consumers will not buy enough of the firms products unless the firm undertakes a large-scale selling and promotion effort. The fourth alternative is the marketing concept. This refers to a philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. The final alternative is the societal marketing concept. This refers to the idea that a companys marketing decisions should consider consumers wants, the companys requirements, consumers long-run interests, and societys long-run interests.*This figure contrasts the selling concept and the marketing concept. The selling concept takes an inside-out view that focuses on existing products and heavy selling. The aim is to sell what the company makes rather than make what the customer wants.

The marketing concept takes an outside-in view that focuses on satisfying customer needs as a path to profits. It starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers.*This figure shows that companies should balance three considerations in setting their marketing strategies: company profits, consumer wants, and societys interests.*The marketing mix is the set of marketing tools the firm uses to implement its marketing strategy. The major marketing mix tools are product, price, place, and promotion. To deliver on its value proposition, the firm must first create a need-satisfying market offering (product). It must then decide how much it will charge for the offering (price) and how it will make the offering available to target consumers (place). Finally, it must communicate with target customers about the offering and persuade them of its merits (promotion). The firm must blend each marketing mix tool into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers.

*Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping, and growing customers. The key to building lasting customer relationships is to create superior customer value and satisfaction.

Customer-perceived value is the customers evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers. Importantly, customers often do not judge values and costs accurately or objectively. They act on perceived value. To some consumers, value might mean sensible products at affordable prices.

Customer satisfaction is the extent to which a products perceived performance matches a buyers expectations. Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance. Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise. For example, JetBlue creates first-rate, customer-satisfying experiences. Its sloganJetBlue: YOU ABOVE ALLtells customers that they are at the very heart of JetBlues strategy and culture. *Companies can build customer relationships at many levels, depending on the nature of the target market. At one extreme, a company with many low-margin customers may seek to develop basic relationships with them. At the other extreme, in markets with few customers and high margins, sellers want to create full partnerships with key customers.

Marketers can use specific marketing tools to develop stronger bonds with customers. Some of the tools offered include frequency marketing programs that reward customers who buy frequently or in large amounts, loyalty reward programs that offer special benefits for customers who buy frequently, and club marketing programs that offer members special benefits and create member communities.

*Todays companies are using online, mobile, and social media to refine their targeting and to engage customers more deeply and interactively. Customer engagement marketing refers to fostering direct and continuous customer involvement in shaping brand conversations, brand experiences, and brand community. Its goal is to make the brand a meaningful part of consumers conversations and lives.

Internet and social media have given a huge boost to customer-engagement marketing. Newly empowered consumers have more information about brands, and they have numerous digital platforms for sharing their brand views with others. Greater consumer empowerment means that companies must practice marketing by attraction which is creating market offerings and messages that engage consumers rather than interrupt them. For example, Starbucks has more than 34 million Facebook fans, and Coca-Cola has more than 61 million.

The key to engagement marketing is to find ways to enter consumers conversations with engaging and relevant brand messages. Simply posting a humorous video, creating a social media page, or hosting a blog isnt enough. Successful engagement marketing means making relevant and genuine contributions to consumers lives and conversations.*Consumer-generated marketing refers to brand exchanges created by consumers by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers. This might happen through uninvited consumer-to-consumer exchanges in blogs, video-sharing sites, social media, and other digital forums. But increasingly, companies themselves are inviting consumers to play a more active role in shaping products and brand content. For example, H.J. Heinz invited consumers to submit homemade ads for its ketchup brand on YouTube, and it received more than 8,000 entries.*Partner relationship management refers to working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Partners within the firm include cross-functional teams. Rather than letting each department go its own way, firms must link all departments in the cause of creating customer value. Marketers must also partner with suppliers, channel partners, and others outside the company. Through supply chain management, companies today are strengthening their connections with partners all along the supply chain.*Keeping customers loyal makes good economic sense. Loyal customers spend more and stay around longer. Customer lifetime value is the value of the entire stream of purchases a customer makes over a lifetime of patronage.

Customer defections can be costly. Losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. For example, the average customer at Stew Leonards spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Stew Leonards has lost $50,000 in lifetime revenue. The loss can be much greater if the disappointed customer shares the bad experience with other customers and causes them to defect. In fact, a company can lose money on a specific transaction but still benefit greatly from a long-term relationship. This means that companies must aim high in building customer relationships.

*Beyond simply retaining good customers to capture customer lifetime value, good customer relationship management can help marketers increase their share of customer. This refers to the portion of the customers purchasing that a company gets in its product categories. To increase share of customer, firms can offer greater variety to current customers. Or they can create programs to cross-sell and up-sell to market more products and services to existing customers. For example, Amazon.com is highly skilled at leveraging relationships with its 188 million customers to increase its share of each customers spending budget.*The aim of customer relationship management is to produce high customer equity. This refers to the total combined customer lifetime values of all of the companys customers. Its a measure of the future value of the companys customer base. Customer equity increases when the loyalty of the firms profitable customers increases.

Customer equity may be a better measure of a firms performance than current sales or market share. Whereas sales and market share reflect the past, customer equity suggests the future. For example, though Cadillac had a huge share of the luxury car market, most of its buyers were in the older age brackets and average customer lifetime value was falling. In recent years, Cadillac has struggled to reinvent its target market by focusing on a younger generation of consumers to maximize the customer lifetime value of these customers.

*This figure classifies customers into one of four relationship groups, according to their profitability and projected loyalty. Each of the four customer relationship groups requires a different relationship management strategy.

The company will not gain anything by investing time and resources in developing relationships with strangers.

For butterflies, the company should create satisfying and profitable transactions, capturing as much of their business as possible in the short time during which they buy from the company. Efforts to convert butterflies into loyal customers are rarely successful.

True friends have the potential to generate good profit for the company. The firm should make continuous relationship investments to delight these customers and nurture, retain, and grow them. The company may be able to improve the profitability of barnacles by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be fired.

Barnacles are highly loyal but not very profitable. There is a limited fit between their needs and the companys offerings.*Every day, dramatic changes are occurring in the marketplace. Five major developments that are changing the marketing landscape and challenging marketing strategy include the digital age, changing economic environment, growth of not-for-profit marketing, rapid globalization, and calls for more ethics and social responsibility.*Digital and social media marketing refers to using digital marketing tools such as Web sites, social media, mobile apps and ads, online video, e-mail, and blogs that engage consumers anywhere, at any time, via their digital devices. Social media provide stimulating opportunities to extend customer engagement and get people talking about a brand.

Mobile marketing is the fastest-growing digital marketing platform. Marketers use mobile channels to stimulate immediate buying, make shopping easier, enrich the brand experience, or all of these. For example, Starbucks customers can use their mobile devices for everything from finding the nearest Starbucks and learning about new products to placing and paying for orders.

Although online, social media, and mobile marketing offer huge potential, most marketers are still learning how to use them effectively. The key is to blend the new digital approaches with traditional marketing to create a smoothly integrated marketing strategy and mix.*The Great Recession of 2008 to 2009 and its aftermath hit American consumers hard. After two decades of overspending, new economic realities forced consumers to bring their consumption back in line with their incomes and rethink their buying priorities. In the post-recession era, Americans are showing an enthusiasm for frugality. The new consumer spending values emphasize simpler living and more value for the dollar.

In response, companies in all industries have realigned their marketing strategies with the new economic realities and are emphasizing the value in their value propositions. They are focusing on value-for-the-money, practicality, and durability in their product offerings and marketing pitches.*Marketing has become a major part of the strategies of many not-for-profit organizations. They face stiff competition for support and membership. Sound marketing can help them attract membership, funds, and support. Government agencies have also shown an increased interest in marketing. For example, the U.S. military has a marketing plan to attract recruits to its different services. *Managers in countries around the world are increasingly taking a global, not just local, view of the companys industry, competitors, and opportunities. For example, a new Internet retailer finds itself receiving orders from all over the world at the same time that an American consumer goods producer introduces new products into emerging markets abroad.

Also, marketers are reexamining their relationships with social values and responsibilities. Todays marketers are being called on to develop sustainable marketing practices. Corporate ethics and social responsibility have gained in importance. They seek ways to profit by serving immediate needs and the best long-run interests of their customers and communities. *This figure represents a map for the entire marketing process.

Throughout the marketing process, marketers practice customer relationship management to create customer satisfaction and delight.

In creating customer value and relationships, a firm must work closely with marketing partners both inside the company and throughout its marketing system. Thus, beyond practicing good customer relationship management, firms must also practice good partner relationship management.****

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