Lecture

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Lecture 1

• Chapter 1
• Marketing Managing Profitable Customer
  Relationships

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What is Marketing?

• www.amazon.com

• Discovery factorAdvantages

• Ability to develop personalized relationships
  with customerslots of customers

• Selling on the Web

• Built a model that interacts with millions of
  customers, one at a time

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What is Marketing?

• More than a business function

• It deals with customers

• It builds customer relationships based on

• Customer value

• Customer Satisfaction

• Profitability

• Attracts new customersPromises superior value

• Keep grow current customers by delivering
• Satisfaction

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Examples

• www.walmart.com Always Low Prices
• www.ritzcarlton.com truly memorable
  experiences
• www.att.com Its all within your reachone
  connection across town, across the country,
  across the world
• www.disney.go.com/park/homepage/today/flash
  make a dream come true today
• www.dell.com/us/en/gen/default.htm be direct

Sound Marketing is critical to the success of
every organizationlarge or small, for profit or
not-for-profit!
Its more than Selling and Advertising!
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What is Marketing?

• Its satisfying customer needs by

• Understanding the consumers needs
• Products/Services provide superior value
• Products/Services are priced, distributed, and
  promoted right

Its a social and managerial process by
which Individuals and groups obtain what they
need want through creating exchanging
products and value with others
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Marketing Defined

• satisfying customer needs
• a social and managerial process by which
  individuals and groups obtain what they need and
  want through creating and exchanging products and
  value with others

most basic concept underlying marketing is that
of human needs states of felt deprivation
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Marketing Defined

• Needs include
• basic physical needsfood, clothing, warmth, and
  safety
• social needsfor belonging and affection
• individual needsfor knowledge and self-expression

These needs were not created by marketers they
are a basic part of the human makeup
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Wants, needs demands
Markets
Marketing Offers- Products, Services, Experiences
Core Marketing Concepts
Value Satisfaction
Exchange Transactions Relationships
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Products Services - Experiences

• Value Proposition set of benefits that promise
  to consumers to satisfy their needs
• Marketing offer Some combination of products,
  services, information, or experiences offered to
  a market to satisfy a need or want. (also
  includes persons, places, organizations,
  information ideas)

If you were planning a sales meeting event for
your company and had to choose one of these two
service providers, which one would you choose for
your business event? Explain your answer.
Continents Hotels
Marriott International
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Answer

• Marriott because it offers a variety of
  value-added tools and services that make your
  business event less risky. Companies that
  effectively market services take a customer's
  point of view. For example, if you're planning a
  business meeting, you need to make sure the space
  you rent is big enough, that it doesn't make you
  go over budget, and that you can arrange to have
  food and beverages when needed. Marriott's event
  checklists and planning tools such as budget
  calculators help you achieve these goals.
  Moreover, Marriott's partnerships with other
  companies broaden the services offered to you. By
  choosing Marriott, you get access to providers of
  online event registrations, surveys, etc.

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Marketing Offers (contd)

• Smart marketers look beyond the attributes of the
  products and services they sell
• Create brand meaning brand experiences
• ExampleHonda Motorcycle vs. Harley Davidson
• Starbucks www.starbucks.com
• www.Southwest.com

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Value Satisfaction

• Consumers make choices based on their perceptions
  of the value and satisfaction that various
  products and services deliver

Customer value difference between the values
the customer gains from owning and using a
product and the costs of obtaining the product

• Expectations are formed by

• Past buying experiences

• Opinions of friends

• Promises info from marketers competitors

Customer Satisfaction how well the product
lives up to its advertised performance the
expectations of the customer with its perceived
value a key building block for developing and
managing customer relationships
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Exchange, Transactions, Relationships

• Exchange act of obtaining a desired object from
  someone by offering something in return (money,
  object/service, trade, etc)

• Transaction consists of a trade of values
  between two parties

Therefore, Marketing consists of actions taken to
build and maintain desirable exchange
relationships with target audiences involving a
product, service, idea, or other objectthe
goalto attract new and retain existing customers
to grow their business with the company
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Markets

• Marketing means managing markets to bring about
  profitable exchange relationships by creating
  value and satisfying needs and wants.

Notethis takes a lot of work and energy
Marketing core activities include product
development, research, Communications,
distribution, pricing, service
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• You're interested in purchasing the latest CD by
  your favorite band. You surf the Internet,
  checking out Amazon.com, CDNow, and other e-tail
  sites to compare prices. This process is a part
  of marketing. True or False?

Answer True  (A variety of actors engage in
the marketing process, including consumers like
you who search for what they need and want, at
the prices they want to pay.)    
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• Another reason why consumers tend to prefer
  your bikes is the success of your marketing
  campaigns. They appeal to your customers' desire
  to be perceived as owning the best in bicycle
  technology. Your marketing campaigns successfully
  appeal to consumers' 
• a. needs
• b. wants
• c. satisfactions
• d. demands

Answer B. (The desire to be perceived in a
particular way is a cultural factor that shapes
your customers' sense of their needs. In other
words, that culturally determined desire turns
their needs into wants.)   
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• A third reason for the success of your
  company is that you offer free maintenance and
  repair for the first two years after the purchase
  of a bicycle. That is, you offer, along with the
  physical product, an attractive package of 
• a. values
• b. ideas
• c. events
• d. services

Answer d. services.  (Along with the tangible
product, the bicycle, you are offering intangible
products in the form of services.)
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• You are a campaign manager for a candidate to
  your county's legislature. In addition to
  defining the candidates positioning among
  voters, youre working on a pre-election rally
  during which your candidate and several prominent
  supporters will deliver speeches. Broadly
  speaking, you are planning a 
• a. product
• b. service
• c. satisfaction
• d. promotional campaign

Answer AProduct(The broadest definition of a
product includes experiences such as political
rallies, organizations such as political parties,
and people such as political candidates)
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Botox

• Invented by?
• Allergan Laboratories in Irvine, California
• What was it originally used for?
• specialty drug aimed at a small market (treatment
  of cross-eye) it also effectively treats
  migraine headaches, chronic neck and back pain,
  excessive sweating, and possibly spastic
  disorders
• What did it originally do?
• eliminated ocular problems
• When injected, what did it produce?
• it erased frown lines
• What was the downside to using Botox?
• loss of expression - drooping eyelids - slurred
  speech (a droopy mouth, and constant drooling ) -
  nausea, allergic reactions, headaches,
  respiratory infections, flu symptoms, and redness
  and swelling around the injections

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Botox

• What are the needs, wants, and demands of
  consumers of Botox products in its different
  treatment markets? What value does Botox deliver
  in each market? How does value affect price for
  Botox?
• When Allergan sold Botox as a specialty drug for
  ocular problems, what marketing management
  orientation was it employing? When it sells Botox
  as a cosmetic treatment, is it employing the same
  or a different orientation?
• When doctors treat patients with Botox in their
  office, is that an example of a selling concept
  or a marketing concept? Which concept applies
  when they hold parties for patients in private
  homes?
• Apply the concepts of customer lifetime value and
  customer equity to Botox. How do doctors and
  Allergan improve the way they manage customer
  relationships?
• How does Allergan connect with its customers
  (doctors)? How does it connect with final
  consumers? How does it connect with the world
  around it? What could it do to improve these
  connections?

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Marketing Management

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

- It includes both customer management demand
management
There are 5 alternative concepts that firms
conduct their marketing activities

• Production
• Product
• Selling
• Marketing
• Societal

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Production Concept

• Holds that consumers will favor products that are
  available highly affordable.
• Management should focus on improving production
  and distribution efficiency (the oldest
  orientation that guides sellers)

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Product Concept

• holds that consumers will favor products that
  offer the most in quality, performance, and
  innovative features.
• organization should devote energy to making
  continuous product improvements (build a better
  mousetrap)

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Selling Concept

• holds that consumers will not buy enough of the
  firms products unless it undertakes a
  large-scale selling and promotion effort
• typically practiced with unsought goodsthose
  that buyers do not normally think of buying,
  (insurance, blood donations)
• These industries must be good at tracking down
  prospects and selling them on product benefits.

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Marketing Concept

• holds that achieving organizational goals depends
  on knowing the needs and wants of target markets
  and delivering the desired satisfactions better
  than competitors do
• customer focus and value are the paths to sales
  and profitsinstead of a product-centered make
  and sell philosophy
• It is a customer-centered sense and respond
  philosophy
• Finding the right product for your customers
• Starts with a well-defined market, focusing on
  customer needs, integrating all the marketing
  activities that affect customers, thereby
  yielding profits by creating long-term customer
  relationships based on customer value and
  satisfaction
• Companies that utilize the Marketing
  conceptProcter Gamble, Disney, Wal-Mart,
  Marriott, Nordstrom, Dell Computer, and Southwest
  Airlines

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Societal Marketing Concept

• holds that the organization should determine the
  needs, wants, and interests of target markets,
  delivering superior value to customers in a way
  that maintains or improves the consumers and the
  societys well-being. (It questions whether the
  pure marketing concept overlooks possible
  conflicts between consumer short-run wants and
  consumer long-run welfare)

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• CRM Customer Resource Management
• Overall process of building and maintaining
  (retaining) profitable customer relationships by
  delivering superior customer value and
  satisfaction
• Why focus on CRM?
• Changing demographics
• More-sophisticated competitors
• Overcapacity of many industries
• Companies fighting for flat or fading markets
• Increase in costs of attracting new customers
  (Sears found a 12x cost to attract a customer
  than to keep an existing one)
• Losing a customer means losing more than a sale

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CRM

• Lexusa single customer is worth 600K
• Taco Bell a single customer is worth 12K
• The key to building lasting customer
  relationships
• Create superior customer value satisfaction
  (this builds customer loyalty which breeds
  continuous, repetitive business)

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Customer Value

• Customer perceived valuedifference between the
  customers evaluation of all the benefits and all
  the costs of a marketing offer relative to those
  of competing offers
• Example Benefits of
• www.fedex.com
• Fast reliable delivery
• Status/image (both sender/receiver may feel MORE
  important
• www.USPS.com
• Trying to change the consumers opinion of
  perceived value

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Customer Satisfaction

• Depends on the products perceived performance
  relative to a buyers expectations
• If performance falls short, customer is
  dissatisfied
• If performance matches expectations, customer is
  satisfied
• If performance exceeds expectations, customer is
  extremely satisfied and delighted
• The Keymatch expectations with performance while
  maintaining customer value profitability

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Customer Loyalty Retention

• Hanging onto customers is so basic, its
  scary,claims one marketing exec. We find what
  our customers needs and wants are, and then we
  over-deliver.
• Constantly strive to grow your share of
  customer (banks want a larger share of
  wallet--supermarkets want a bigger share of
  stomach, etc.)
• Accomplished via cross sellinggetting more
  business from current customers of one product by
  selling them additional offerings
  (SunAmerica/CitiBank)

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Customer Equity

• Total combined customer lifetime values of all of
  the companys customers
• Sales and market share reflect the past
• Customer equity suggests the future
• CRM levels and tools may include
• Financial benefits - frequency marketing programs
  that reward customers who buy frequentlyfrequent
  flyer miles, Safeway Discount cards (gasoline and
  grocery discounts)
• Social Benefits club discount for members
• Structural Ties computer links, supplier links

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Marketing Challenges in the New, Connected
Millenium

• The key for todays marketing executive is to get
  and stay connectedto network and maintain those
  relationships

• Connecting w/Customers
• More selectively
• For life
• Directly

• Connecting w/Marketing
• Partners
• with other co. departments
• With suppliers/distributors
• Through strategic alliances

Connecting Technologies Computer Information Commu
nication Transportation

• Connecting w/World
• Around Us
• Global connections
• Connection w/values responsibilities
• Broadened connections

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Technologies

• Internet most dramatic new technology driving
  the connected age
• 24/7
• Access from anywhere in the world
• Bricks mortar has become clicks mortar
• B-2-B e-commerce is booming
• Providing new opportunities for marketers
• Computer
• Telecommunications
• Information
• Transportation
• Other forms of connectivitiy

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Connecting with Customers

• Greater market fragmentation has led to
• Data Mining
• Direct Connection
• Cross functional teams within firms
• Strategic Alliances
• Social values responsibilities