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Fundamentals of Marketing & Customer Service

By Ashraf Ayoub

31st Mar’09

References: Business Today Book, 10th Edition by M.Mescon . C.Bovee. J.Thill

What is Marketing?

What is Marketing?

• Process of planning & executing the conception, pricing, promotion, & distribution of ideas, goods, & services to create exchanges that satisfy individual & organizational objectives

Core Marketing Concepts

• Needs• Wants• Demands• Products• Services• Values• Satisfaction• Quality• Exchanges• Transactions• Relationships• Markets

Products & Services

Markets

Needs, wants, &demands

Value, Satisfaction , &quality

Exchanges, Transactions,

&relationships

Fundamental Marketing Goal

• To direct customer’s basics needs into the desire to purchase specific brands

What is customer Service?

• Efforts a company makes to satisfy its customers to help them realize the greatest possible value from the products they are purchasing.

Marketing Applications

• Products

• Services

• Non-profit Organizations

• People (People Marketing)

• Places (Place Marketing)

• Causes (Cause Related Marketing)

Role of Marketing in Society

• Helping People satisfy their Needs & Wants by helping organizations determine what to produce.

Customer Needs

• Difference between a person’s actual & idea states; provides the basic motivation to make a purchase

• Basic human needs:– Food– Water– Air– Shelter– Clothing

Customer Wants

• Things that are desirable in light of a person’s experiences, culture, & personality

• Producers shape Wants by exposing customers to alternatives

How to enhance the appeal of products or services

• By adding a utility (power of a good or service to satisfy a human need)

The four utilities

– Form utility (consumer value created by converting raw materials and other inputs into finished goods & services)

– Time utility (consumer value added by making a product available at convenient time)

– Place utility (consumer value added by making a product available in a convenient location)

– Possession utility (consumer value added when someone takes ownership of a product)

Technology & evolution of Marketing

• Production Era

• Sales Era

• Marketing Era

Factory Existing Selling & Profits throughProducts Promoting sale volume

Market Customer integrated profits throughneeds marketing customer satisfaction

The Sales Era

The Marketing Era

Starting Point

Focus Means Ends

Production Era (until 1930s)

• Characteristics:– Demand for Products Exceed Supply– Manufacturers able to sell whatever produced– Seller’s Market (market place characterized

by a shortage of products)– Marketing Role to take orders & ship goods

Sales Era (1930s-1950s)

• Characteristics:– Supply for Products Exceed Demand – Firms spend more on advertising– Firms still focused on selling whatever

produced– Buyer’s market (marketplace characterized by

an abundance of products)

Marketing Era & Relationship Era

• Characteristics:– Marketing Concept adopting:

• Stressing customers needs & wants• Concentrating on specific target markets• Seeking long term profitability• Coordinating with marketing efforts• Maintaining long-term relationships with customers

Relationship Marketing

• Focus on developing & maintaining long-term relationships with customers, suppliers, & distributers for mutual benefit

Internet & Customer relations

• Brings the outside world closer

• Allows businesses to reach out

• Establish relationships with customers

• Market to the world

• Answer customers questions

• Better understand of customers “who & what they want”

The Importance Of Understanding Customers

• “The aim of marketing is to know & to understand the customer so well that the product or service fits him & sells itself”

Today’s customers

• Sophisticated

• Price sensitive

• Demanding

Why to satisfy customers?

• Acquiring new customer cost up to 5 times as much as keeping existing one

• Long-term customers (buy more, take less time, bring new customers, less price sensitive)

• Satisfied customers are best advertisement• With Superior customer service you can charge

customers as much as 10% more than competitor

• Dissatisfied customers tell 20 other people about bad experience

How to measure customers satisfaction?

• Analyze customer base:– Are you getting new customer?– Are you losing good customers?– What is your customer retention rate?– What are you doing to keep customer loyalty?

Why are today customers less loyal today?

• They have more (choices, styles, options, services, products)

• Have more information from (brochures, consumer publications, internet)

• Empowered & raised expectations

• Products start to look the same

• Time is scarce

• Needs & buying habits change constantly

Not every customer is worth keeping…

• “we’ve gotten a lot smarter about separating the customers we do want from the customers we don’t want” says C. Michael Armstrong

Price, Product Quality, Service quality, Innovation, Image

Customer Perceived Value

Loyalty

Market Share & Profitability

Shareholder Value

Beyond Customer Satisfaction

How to learn about customers

• Consumer buying behavior

• Marketing Research

• Virtual reality

• Database Marketing

• Relationship marketing

• One-to-one marketing

Consumer Buying Behavior

• Definition:Behavior exhibited by consumers as they consider

& purchase various products

• Consider:– Difference between organizational &

consumer markets– Buyers decision process– Factors influence buyer decision process

Organizational market

• Customers who buy goods or services for resale or for use in conducting their own operations

• 3 main subgroups:– Industrial/Commercial Market (buy to

produce)– Reseller Market (wholesalers/retailers)– Government Market (federal, states, local

agencies)

Organizational market (cont.)

• Buy raw materials

• Buy highly technical products

• Complex products

• Buy consumer products

• Larger Quantities

• Complex buying process

Consumer Market

• Individuals of households that buy goods or services for personal use

• Purchase smaller quantities than organizations

• Simple buying process (identify problem, look for solution, gather information, select alternatives, buy, reassure purchase)

Consumer Decision Process

Need Recognition

Information search

Evaluation of alternatives

Purchase Post purchase

evaluation

Cognitive Dissonance

• Anxiety following a purchase that prompts buyers to seek reassurance about the purchase, commonly known as buyer’s remorse

• Used to enforce sales by:

Guarantees, phone calls, hotlines, follow-up letters

Factors influence buyer’s decision process

• Culture (values, attitudes, beliefs)• Social Class (upper, middle, lower) different in

(activities, goals, shopping places)• Reference groups (Family, friends, co-workers,

sport enthusiasts, music lovers, computer buffs) • Self-Image “you are what you buy”• Situational factors (having coupon, being in

hurry, celebrating holiday, be in bad mod)

Marketing research

• Definition: The collection & analysis of information for making marketing decisions

When to conduct Marketing Research

– Set product goals– Develop new products– Plan future marketing programs– Monitor a program effectiveness– Keep eye on competition– Track industry trends– Measure customer satisfaction

Marketing Research Tools

• Used for probing customers wants & needs• Tools:

– Personal observations– Customer surveys– Questionnaires– Experiments– Telephone or personal interviews– Studies of small groups of population– Focused interviews of 6 to 10 people (focus groups)– Virtual reality

Limitations of marketing researchToolDesignLimitations

Surveys

Administered in artificial settings

Not accurately represent marketplace

Measures the level of service currently provided

Doesn’t identify ways beyond current states

If not carefully worded & administered

misleading

-Poor indicator of future buying

behavior

Suggest what people might prefer or dislike

Not good predictor of what will excite consumers in the future

-Not a substitute for good

judgment

-Source of expensive mistakes

Virtual reality

• It’s a three dimensional modeling• Advantages:

– Realistic settings– Quick setup– Easy reconfiguration of (brand, pricing, & shelf space)– Fast & error-free data collection– Low costs & flexibility– Ability to test new concepts before manufacturing or

advertising costs– Simulations identify competitors threat to business

Virtual reality Design

• Marketers: recreate atmosphere of actual retail store on a screen

• Consumers: – View shelves stocked with any kind of product– Pick up the package for examination– Move the product to virtual shopping cart

• Computer:– Record time spent on shopping– Examining package– Quantity of product purchased– Order of purchase

Database marketing

• Process of building, maintaining & using customer databases for the purpose of contacting customers & transacting business

• How?– Recording & analyzing (customer interactions,

preferences, & buying behavior)– Gathering data about customers transactions,

requests, & preferences– Determine target customers– Customize marketing offers for the best response

Customer relationship management software

Used to:• Interact with customers• Remember customer preferences & priorities• Capture insights about customers in great detail• Calculate customers profitability & future

potential• Build sophisticated but easily accessible

customer profiles• Share data throughout the organization

Relationship marketing

• Focus on conducting two-way communication between company & customer

• Used for building long-term relationships

One-to-one marketing

• Individualizing firm’s marketing efforts for a single customer to accommodate specific customer’s need

• Key Steps:– Identifying your customers– Differentiating among them– Interacting with them– Customize your product or service to fit each

individual customer needs

How To Plan Your Marketing Strategies

Competitive advantage

• Something set you apart from your rivals & makes your product more appealing to customers

Strategic marketing planning

• Involves:– Examining current market situation– Assessing opportunities & setting objectives– Developing marketing strategy to reach

objectives

• Purpose:– Help to identify & create competitive

advantage

• Results: “Marketing Plan”

Strategic marketing planning process

Examine Current Marketing Situation

Review past/current Performance

Evaluate competition

Examine internal strengths & weaknesses

Analyze external environment

Develop Marketing Strategy

Segment Market

Choose Target Market

Position Product

Develop Marketing Mix (4P’s)

Assess Opportunities & Set Objectives

Assess product & market opportunities

Set specific & measurable objectives

Step1: Examining Your Current Marketing Situation

• Reviewing Performance (how well each product is doing in each market where it sold)

• Evaluating Competition• Examining internal strengths & weaknesses• Analyzing external environment & tomorrow

changes

Reviewing Performance

• Use history of marketing performance to explore:– Slowed sales– Prices cut & profit rate– Improved sales– Cash investment in new marketing activities

• Review where you are• Review how you got there• Repeat successes & learn from mistakes

Evaluating Competition

• Keep an eye on competition• Pay attention to another ways customers

satisfied with• Watch horizon for not-existed competitors

Examining internal strengths & weaknesses

• Look at: management, financial resources, production capabilities, distribution networks, managerial expertise, promotional capabilities, ability to adjust your operation to different (cultures, customs, legal requirement & product specifications), technological expertise, & business commitment

• Identify sources of competitive advantage (strengths)• Identify areas need improvement (limitations)• Analyze & decide whether:

– Limit your business to opportunities which possess the required strengths

– Challenge your business to reach higher goals by acquiring & developing new strengths

Analyzing external environment & tomorrow changes

Factorsspecificsimpact

Economic conditionsinterest rates, inflation, unemployment, personal

income, saving rates

put off buying expensive items, pent-up demand

Natural environmentinterruptions in the supply of raw materials, floods, droughts, &

cold weather

Affect product availability, affect behavior of target

customers

Social & cultural trends

Trends against product, change in tastes

Needs more advertising to build awareness about

product benefit, products modifications to respond

Laws & regulationsOn product design, pricing, advertising, activities

Control the marketing

TechnologyChange in technologyChange in marketing approaches

Step2: Assessing your Opportunities & Setting your objectives

• New marketing opportunities:– market penetration (Selling more of your existing products in

current markets)– Product development (creating new products for your current

markets)– Geographic expansion (selling your existing products in new

markets)– Diversification (creating new products for new markets)

• Set SMART objectives (eg.certain level of market share,…etc) understood & known by employees

Market Share

• A firm’s portion of the total sales in a market

Step3: Developing Your marketing Strategy

• Divide your market into segments & niches• Choosing your target customers• Position to be established in these markets• Developing a marketing mix to help you get

there

Definitions

• Marketing Strategy: overall plan for marketing a product

• Market: people or businesses who need or want a product & have the money to buy it

• Market segmentation: division of total market into smaller relatively homogeneous groups

Dividing Markets Into Segments

• Objective: to group customers with similar characteristics, behavior, & needs then target them by offering products Priced, distributed & promoted differently.

Factors to Identify Market SegmentsFactorsspecificsEffects

DemographicsStudy of statistical characteristics of a population (age, gender, income, race, occupation, ethnic group)

Poor indicator of behavior

GeographicsCategorization of customers according to geographical location (such as regions, cities, counties or

neighborhoods) to customize & sell products meet needs of specific markets (assuming buying behavior influenced by

people location)

-

PsychographicsClassification of customers on the bases of their psychological makeup, by focusing on:

* psychological makeup (including activities, attitudes, interests, opinions, & lifestyles)

** why people behave the way they do (by examining brand preferences, media preferences, reading habits, values,

self-concept)

-

GeodemographicsMethod of combining geographical data with demographics data to develop profiles of neighborhood segments

Ease the customiztion

Behavior Categorization of customers according to their relationship with products (knowledge, attitude) or response to product

characteristics

-

Choosing Your Target Markets

• Deciding which segment to target & when• Target markets: specific customer groups or segments to

whom a company wants to sell a particular product• Criteria to narrow the focus into suitable market

segments:– Size of segment– Competition in the segment– Sales & profit potential– Compatibility with company resources– Strengths– Costs– Growth potential– Risks

Strategies To Reach Target Markets

• Undifferentiated marketing (mass marketing)• Differentiated marketing• Concentrated marketing

Undifferentiated marketing

• Ignore differences among buyers & offer only one product or product line to satisfy the entire market

• Concludes:– All buyers have similar needs– All buyers can be served with same standardized

product

Differentiated marketing

• Sell a variety of products to several target customer groups

• Requires Substantial resources, why?

Marketing have to tailor products, prices, promotional efforts & distribution arrangements for each group

Concentrated marketing

• Acknowledge that different market segments exist & choose to target just one

• Useful when company resources are limited• Allows to focus time & resources on single type

of customer• Risky strategy (stake company fortune on one

segment)

Positioning Your Product

• Using promotion, product, distribution & price to differentiate a good or service from those of competitors in the mind of prospective buyer

• Factors:– Features– Performance– Quality– Durability– Reliability– Style– Design– Customer service (ordering ease, delivery, installation methods,

& customer support)

Developing The Marketing Mix

• The four key elements of marketing strategy: product, price, distribution (place), & promotion

• Product covers Product itself + brand name, design, packaging, services, quality, & warranty.

• Price: amount of money paid for product (include discounts)

• Distribution: organized network of firms move goods & services from producer to consumer

• Promotion: includes communication & promoting activities of product to target markets (e.g. advertising, personal selling, public relations, sales promotion)

TargetMarket

Ethics

Social responsibility

Society

Tec

hnol

ogy

Politics

Regulation

Nat

ure

Econom

ics

Competition

Distribution

Price

Promotion

Product

Positioning & the Marketing Environment