logo copy.tif Social Definition of Marketing Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. Scope of Marketing A good marketer must be able to answer the following questions: Understanding Marketing Management Chapter 1 What is Marketing? Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha SUMMARY by Marketing is an essential art and science that is engaged in a vast number of activities by both persons and organizations. It has become an increasingly vital ingredient in the success of a business. Good marketing is the result of careful planning and execution. There are two sides to marketing – the formulated side and the creative side. It is important to lay the foundation in marketing concepts, tools, frameworks and issues of the formulated side while at the same time instil the real creativity and passion for marketing, as we shall come to see in this chapter. Marketing is increasingly becoming an important function in all organizations to ensure that demand for a product or service persists along with customer retention. The formal definition of marketing is, Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationship in ways that benefit the organization and its stakeholders. Some of the common entities that are marketed are goods, services, events, experiences, persons, places, properties, organizations, information and ideas. What is Marketed?
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Social
Definition of
Marketing
Marketing is a
societal process by
which individuals
and groups obtain
what they need and
want through
creating, offering
and freely
exchanging
products and
services of value
with others.
Scope of Marketing A good marketer must be able to answer the following questions:
Understanding Marketing Management
Chapter 1
What is Marketing?
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Marketing is an essential art and science that is engaged in a vast number of activities
by both persons and organizations. It has become an increasingly vital ingredient in the
success of a business. Good marketing is the result of careful planning and execution.
There are two sides to marketing – the formulated side and the creative side. It is
important to lay the foundation in marketing concepts, tools, frameworks and issues of
the formulated side while at the same time instil the real creativity and passion for
marketing, as we shall come to see in this chapter.
Marketing is increasingly becoming an important function in all organizations to ensure
that demand for a product or service persists along with customer retention.
The formal definition of marketing is, Marketing is an organizational function and a set
of processes for creating, communicating and delivering value to customers and for
managing customer relationship in ways that benefit the organization and its
stakeholders.
Some of the common entities that are marketed are goods, services, events,
experiences, persons, places, properties, organizations, information and ideas.
What is Marketed?
A marketer is someone who seeks a response, attention, purchase, vote, donation etc
from another party called the prospect. Marketing managers are responsible for demand
management.
Eight demand states are possible:
• Negative demand
• Nonexistent demand
• Latent demand
• Declining demand
• Irregular demand
• Full demand
• Overfull demand
• Unwholesome demand
The key customer markets are consumer markets, business markets, global markets,
non-profit and governmental markets.
Chapter 1 - Understanding Marketing Management
• Needs - state of felt deprivation for basic items such as food and clothing and
complex needs such as for belonging. i.e. I am hungry.
• Wants - form that a human need takes as shaped by culture and individual
personality i.e. I want a hamburger, French fries, and a soft drink.
• Demands - human wants backed by buying power. i.e. I have money to buy this
meal.
• Target Markets are the market segments identified by the marketer which
present the greatest opportunity.
• Value Proposition is a set of benefits that companies offer to customers to
satisfy their needs. The intangible value proposition is made physical by as
offering. A brand is an offering from a known source.
• Value reflects the sum of the perceived tangible intangible benefits and costs to
customers. Satisfaction reflects a person’s judgements of a product’s perceived
performance.
• To reach a target market a marketer uses different marketing channels like
communication channels, distribution channels and service channels.
• Supply chain is a longer channel stretching from raw materials to components
to final products that are carried to final buyers.
Who Markets?
Core Marketing Concepts:
The five key
functions of a
marketing
manager or
CMO are:
• Strengthening
the brand
• Measuring
marketing
effectiveness
• Driving new
product
development
based on
customer needs
• Gathering
meaningful
customer
insights
• Utilizing new
marketing
technology
New
Marketing
Realities:
Some of the major
societal forces that
marketers have to
deal with today are
network
information
technology,
globalization,
deregulation,
privatization,
heightened
competition,
industry
convergence,
consumer
resistance, retail
transformation and
disintermediation.
The major marketing philosophies are:
• The Production Concept
o Consumers favor products that are available and highly affordable.
o Improve production and distribution.
• Product Concept
o Consumers favor products that offer the most quality, performance, and
innovative features.
• Selling Concept
o Consumers will buy products only if the company promotes/ sells these
products.
• Marketing Concept
o Focuses on needs/ wants of target markets & delivering satisfaction better
than competitors.
• Societal Marketing Concept
o Focuses on needs/ wants of target markets & delivering superior value.
• Holistic Marketing Concept
o Based on the development, design and implementation of marketing
programs, processes and activities that recognize their breadth and
interdependencies.
• Relationship Marketing
o Aims to build mutually satisfying long-term relationships with key
constituents in order to earn and retain their business.
Chapter 1 - Understanding Marketing Management
Company orientation towards Marketplaces:
Marketing Management Tasks: The following are the most important marketing management tasks:
• Developing Marketing Strategies and Plans
• Capturing Marketing Insights
• Connecting with Customers
• Building Strong Brands
• Shaping the Marketing Offerings
• Delivering Value
• Communicating Value
• Creating Long-Term Growth
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Supply
Chain
Many companies
today outsource less
critical resources if
they can obtain
better quality or
lower cost. Also,
many companies
partner with specific
suppliers and
distributors to
create a superior
value delivery
network, also
known as Supply
Chain.
Developing Marketing
Strategies And Plans
Chapter 2
The Value Delivery Process
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
In this chapter, mainly the following points have been discussed
• How does marketing affect customer value?
• How is strategic planning carried out at different levels of the organization?
• What does a marketing plan include?
Developing the right marketing strategy over time, through discipline and a creative
thought process can go a long way in the marketing management process. Firms must
constantly strive to improve every aspect of their strategy and the plans to guide the
marketing process.
In the new view of business processes, marketing is viewed at the beginning of the
planning stage. A smart competitor must design and deliver products for well-defined
micro-markets and cater to their specific wants, perceptions and preferences. The Value
Creation and Delivery Sequence can be divided into two segments of marketing:
Strategic Marketing and Tactical Marketing.
Core Competencies Core Competency refers to areas of special technical and production expertise, whereas
distinctive capability describes excellence in broader business processes. Market-driven
organizations generally excel in three distinctive capabilities: market sensing, customer
linking and channel bonding.
Holistic
Marketing
Holistic marketing
orientation means,
integrating the
value exploration,
value creation and
value delivery
activities with the
purpose of building
long-term,
mutually satisfying
relationships and
co-prosperity
among key
stakeholders. It
helps manage a
superior value
chain that delivers
a high level of
product quality,
service and speed,
in addition to
expanding
customer share,
building customer
loyalty and
capturing customer
lifetime value.
The value chain is a tool which is used for identifying ways to create more customer
value. There are 9 strategically relevant activities – 5 primary and 4 support.
Chapter 2 - Developing Marketing Strategies And Plans
Companies need to focus on the customer and organize to respond effectively to their
changing needs, to be known as master marketers. The marketing plan is the central
instrument for directing and coordinating the marketing effort. The marketing plan
operates at two levels: strategic and tactical.
• The strategic marketing plan lays out the target markets and the value
proposition the firm will offer, based on an analysis of the best market
opportunities.
• The tactical marketing plan specifies the marketing tactics, including product
features, promotion, merchandising, pricing, sales channels and service.
A firm must coordinate all the department activities to conduct its core business
processes, through cross-functional teams
• Market-sensing process
• New-offering realization process
• Customer Acquisition process
• Customer Relationship Management Process
• Fulfillment Management Process
Strategic Planning
Value Chain
Corporate Headquarters
All corporate headquarters undertake four planning activities
• Defining the corporate mission
• Establishing strategic business units
• Assigning resources to each Strategic Business Unit
• Assessing growth opportunities
Innovation in marketing is critical. Senior management should identify and encourage
fresh ideas from a youth perspective, from people new to the field and organization, to
gain an understanding and a new approach to marketing.
The best Mission Statement reflects a vision, an almost impossible dream that provides
a direction for the company for the next 10 or 20 years. A good mission statement
focuses on limited number of goals, links the company’s policies and values and gives a
long term view. It is as short, relevant and meaningful as possible.
Chapter 2 - Developing Marketing Strategies And Plans
Mission Statement
Business Unit Strategic Planning
The Business Unit Strategic Planning process consists of the following steps
1. The Business Mission: Each business unit needs to define its specific mission
within the broader company mission.
2. SWOT Analysis: The overall analysis of a company’s Strengths, Weaknesses,
Opportunities and Threats is called SWOT analysis. It is a way of monitoring the
external and internal marketing environment.
To evaluate opportunities, companies can use Market Opportunity Analysis.
3. Goal Formulation: Developing specific goals for a short term is known as Goal
Formulation. They are specific with respect to magnitude and time. Goals must
be consistent and realistic and could be a mix of various objectives.
4. Strategy Formulation: Strategy is a game plan for achieving the goals. It consists
of a Marketing Strategy, Technology Strategy and a Sourcing Strategy.
5. Program Formulation: The unit must plan programs in accordance with its goals
and strategy and thus work upon the various departments, to strengthen them
and integrate all of them together.
6. Implementation: Even a great marketing strategy can be sabotaged by a poor
implementation. It must coordinate its tasks to implement its plan properly.
These tasks must be in line with the interests of the stakeholders as well.
7. Feedback and Control: The key to organizational health is willingness to
examine the changing environment and adopt new goals and behaviors. In the
rapidly changing market environment, even large organizations which are
subject to inertia can be changed through strong leadership.
Strategic
Business Unit
A Strategic
Business Unit is a
single business (or
a collection of
similar businesses)
that can be
planned
separately from
the rest of the
company. By
identifying the
company’s SBUs, it
is easy to develop
separate strategies
and assign
appropriate
funding.
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MIS
(Marketing
Information
System)
Consists of people,
equipment and
procedures, to
gather, sort,
analyze, evaluate
and distribute
needed, timely and
accurate
information to
marketers.
Capturing Marketing insights
and Spotting Market Trends
Chapter 3
MIS (Marketing Information System)
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
To provide insight into an inspiration for marketing decision making, companies must
possess comprehensive, up-to-date information about macro trends as well as micro
trends particular to their business. This chapter deals with various modes of obtaining
this information and also looks into the major macroeconomic forces that affect
marketing decisions.
MIS can provide data e.g. Swiss eat most chocolates, Greeks eat most cheese. It relies
on internal company records, marketing intelligence activities and Market Research.
MIS provides information on market happenings and changes in environment. Purposes
of MIS have been noted below.
• Train the sales force for intelligence gathering by observing competitors
activities and listening to customer comments.
• Motivate retailers and distributors to pass intelligence. E.g. mystery shoppers to
identify customer treatment and possible flaws.
• Network externally using competitor’s annual reports, talking with their
retailers, distributors and employees, attending shareholder meetings. It should
be done ethically and legally.
• Use government sources (Census, NSSO reports) or purchase data from outside
suppliers (AC-Nielsen, etc)
• Create a panel of largest, sophisticated and important customers for feedback.
• Use online forums, sites offering customer and expert reviews, Customer
compliant sites,
Analyzing the
Macro
Environment
Fad –
Unpredictable,
short-lived, without
any economic or
social significance
Trend -
Sequence of events
that have
momentum and
durability, reveals
the future.
Megatrend –
Large social and
economic influence,
slow in formation
but has lasting
effect.
Demographic 16.7% of World population in India; Male to Female ratio of 933:1000
Population Age mix : median age of 23.8 years, 34% b/w 12 and 25yrs, 24% b/w 25 and
34 years
Literacy level: 65.38% literate, 75.8% males and 54.16% females, 76% literacy between
15-24yrs age group, 64.5% literacy between 25-34yrs age group.
Economic Purchasing Power depends on income, savings, prices, credit availability. India’s GDP is
$1.2 trillion, per capital income of $3100
Income distribution: 77.7% of urban households have income up to Rs3000/month while
only 2.1% have income more than Rs 10,000/month.
Categories of Indian consumers: Destitute ( less than Rs16,000 annually, inactive
participants in market exchange), Aspirants ( Rs 16,000 to Rs22,000, new entrants in
consumption system), Climbers, (Rs 22,000 to Rs 45,000, have desire and willingness to
buy but has limited cash), Consuming Class ( Rs 45, 000 to Rs 2,15,000, majority have
money and are willing to pay), Rich ( more than Rs 2,15 000, have money and own a
variety of products).
Trend shows increasing % of Consumers and Climbers while a decreasing % of Destitute
and Aspirants.
Social-Cultural Society shapes beliefs, values, demands, and requirements. It affects dress codes, food
habits, brand preferences. Trend shows an increasing role of children on purchasing
decisions e.g. bicycles, computers, wrist watches, shoes and other FMCG goods.
Chapter 3 - Capturing Marketing insights and Spotting Market
Trends
• Order to Payment cycle - Customer places order for goods -> Sales team sends
invoice to various departments -> Sales team back orders out of stock items ->
Suppliers send goods and sales team pays suppliers -> Sales team delivers order and
receives payment. Purpose is to minimize number and duration of cycles.
• Sales Information System - Keeping constant track of sales, customers, etc. It can
help in identifying trends.
• Database / Data warehousing / Data Mining - Separate databases are there for
products, salespersons and customers. Purpose is to analyze (mine) data using
statistical methods and discover trends.
Major Macro Environmental Forces
Internal Company Records
Natural Deterioration of environment is a significant concern e.g. Greenhouse Effect, Ozone
layer and fossil fuel depletion. Government concerns in this aspect are Euro-2
emissions norms and CNG.
Although majority feels necessity of environmental friendly products, they do not buy
because
(a) Perception of green good being of inferior quality and (b) Perception that good does
not contribute majorly to the environment.
Corporate Environmentalism is recognizing the importance of environmental issues
affecting the firm and integrating those in its strategic plans is fast gaining ground. E.g.
Focus on Non-renewable sources like Jatropha oil, Pollution Control Systems like
landfills, recycling centers and focus on CNG initiatives.
Technological Four major trends are
(a) Accelerated Pace of Change: e.g. Apple selling 23.5 million in 2006
(b) Unlimited Opportunities for Innovation e.g. Developments in Bio-tech,
telecommunication, Robotics, aid vaccines, contraceptive pills.
(c) Varying R & D Budget: e.g. Increasing R & D in Pharmaceutical companies like Cipla,
Dr. Reddy’s, and Ranbaxy
(d) Increasing regulation of technological change e.g. Drugs and cosmetic act, control
on clinical trial, standard for drugs.
Political and Legal Two major trends are
(a) Increase in business legislation: to protect companies from unfair competition, to
protect consumers from unfair business practices, to protect society from unbridled
business behavior and to charge businesses with social costs created by their products
or processes
(b) Growth of special interest groups and improvements like the Consumer Protection
Act.
Chapter 3 - Capturing Marketing insights and Spotting Market
Trends
What is the
difference
between a
Fad and a
Trend?
A fad becomes a
trend when it
affects a large
number of people,
has functional
value, has lesser
number of
substitutes, and has
other trends
promoting it.
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What is
Marketing
Research?
Systematic Design,
collection, analysis
and reporting of
data and findings
relevant to a
specific marketing
situation facing the
company.
Why Marketing Research? Successful Marketing Managers need timely, accurate and actionable information about
consumers, competition and their brands to assess past performance, plan future
activities and take strategic decisions leading to successful product launch or increase
growth of a brand.
Conducting Marketing Research
and Forecasting Demand
Chapter 4
What are the major steps of Marketing Research
Process?
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Step 6 : Make the decision
Step 5 : Present the findings
Step 4 : Analyze the information
Step 3 : Collect the information
Step 2 : Develop the research plan
Step 1 : Define the problem, the decision alternative and the research objective
Secondary
Data:
Already existing
somewhere which
was collected for
some other
purpose
Primary
Data:
Freshly gathered
data for research
only. Expensive to
collect.
Step 1:
Achieve clarity on the content, the scope of market research and what all decisions
to be made on the basis of research.
Step 2:
Primary Data c
Chapter 4 - Conducting Marketing Research and Forecasting
Step 3:
Data collection is one of the most expensive, time
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
Step 4:
This is the process to extract findings by tabulating the data and developing frequency
distributions in hope of discovering additional findings.
Step 5:
The researcher presents finding relevant to the major marketing decisions facing
management
Research Methods
•Observational Research: Observing
consumers, informal interviews, using
tools from anthropology to provide
deeper understanding of consumers.
•Focus Group Research: A meeting of a
group of people who represent potential
customers or important actors for
research discussing issues relevant to
research
•Survey Research: Companies undertake
descriptive research to learn about
people’s beliefs, preferences and
satisfaction.
•Behavioral Data: Customer’s actual
purchases do not match their
statements made in surveys always
hence certain techniques help in
exposing these discrepancies
•Experimental Research: This captures
cause and effect relationship in
observed findings.
Achieve clarity on the content, the scope of market research and what all decisions
to be made on the basis of research.
Primary Data can be collected through following:
Conducting Marketing Research and Forecasting
Data collection is one of the most expensive, time-taking and most error prone phase of
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
This is the process to extract findings by tabulating the data and developing frequency
stributions in hope of discovering additional findings.
The researcher presents finding relevant to the major marketing decisions facing
management.
Research Methods
Observational Research: Observing
consumers, informal interviews, using
tools from anthropology to provide
deeper understanding of consumers.
Focus Group Research: A meeting of a
group of people who represent potential
customers or important actors for
research discussing issues relevant to
Survey Research: Companies undertake
descriptive research to learn about
people’s beliefs, preferences and
satisfaction.
Behavioral Data: Customer’s actual
purchases do not match their
statements made in surveys always
hence certain techniques help in
exposing these discrepancies
Experimental Research: This captures
cause and effect relationship in
observed findings.
•Questionnaires: A set of questions
soliciting responses that is of relevance
to market situation. They can be either
open-ended or closed
•Qualitative Measures: Relatively
unstructured measurement approach
for exploring consumer’s responses
•Technological Devices: devices like skin
sensors brain wave scanners to
capture consumer’s response.
•Sampling Plan: A plan addressing
questions like whom all to survey, how
many people to survey, how should we
select people for survey.
•Contact Methods: Mail Questionnaire,
Telephone Interview, Personal
Interview, Online Interview.
Achieve clarity on the content, the scope of market research and what all decisions are
Conducting Marketing Research and Forecasting
taking and most error prone phase of
market research as it entirely depends on availability, honesty and consistency of
respondents. However technology has eased the problem to a great extent.
This is the process to extract findings by tabulating the data and developing frequency
The researcher presents finding relevant to the major marketing decisions facing
Research Tools
Questionnaires: A set of questions
soliciting responses that is of relevance
to market situation. They can be either
ended or closed-ended.
Qualitative Measures: Relatively
unstructured measurement approach
for exploring consumer’s responses
Technological Devices: devices like skin
sensors brain wave scanners to
capture consumer’s response.
Sampling Plan: A plan addressing
questions like whom all to survey, how
many people to survey, how should we
select people for survey.
Contact Methods: Mail Questionnaire,
Telephone Interview, Personal
Interview, Online Interview.
Step 6:
Market research is just a tool to provide insight to the managers. Depending on their
confidence in the findings, managers decide to use it
Barriers to Marketing Research
• Narrow approach to Marketing Research
• Uneven Caliber of researchers
• Poor framing of problem
• Late and occasionally erroneous findings
• Personality & presentational differences
Measuring Marketing Productivity
To assess the efficiency and effectiveness of marketing of marketing activities there are
• Marketing metrics to assess marketing effects
• Marketing mix modeling to estimate casual relationships and measure how
marketing activity affect outcomes
• Marketing Dashboard are a structured way to disseminate the insights gleaned
from these two approaches within the organizations
Types of Demand
Market Demand
• It is the total volume that would be bought by a defined customer group in a
defined geographical area in a defined time period in a defined marketing
environment under a defined marketing program
Company Demand
• It is the company’s estimated share of the market demand at alternative levels of
company marketing effort in a given time period
Current Demand
• It is the demand that companies attempt to determine by measuring total
market potential, area market potential industry sales and market share
Future Demand
• It is the demand that companies determine by surveying buyer’s intentions,
solicit their sales force’s input, gather expert opinions, analze past sales or
engage in market testing mathematical models, advanced statistical techniques
and computerized data collection procedures
To estimate current demand companies attempt to determine total market potential,
area market potential industry sales and market share
To estimate future demand companies’ survey buyer’s intentions solicit their sales
force’s input, gather expert opinions, analyze past sales or engage in market testing
mathematical models, advanced statistical techniques and computerized data collection
procedures are essential to all types of demand and sales forecasting.
Types of
Market
Potential
market
Set of consumers who
profess a sufficient
level of interest in a
market offer.
Available
market
Set of consumers who
have interest income
and access to a
particular offer.
Target market
The part of the
qualified available
market the company
decides to pursue.
Penetrated
market
Set of consumers who
are buying the
company's product.
Chapter 4 - Conducting Marketing Research and Forecasting
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Customer
Perceived
Value:
Customer
Perceived Value: It
is the difference
between the
prospective
customer’s
evaluation of all the
benefits and all the
costs of an offering,
and the perceived
alternatives.
Creating Customer Value, Satisfaction and Loyalty
Chapter 5
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
In the face of increasing competition, companies today face their toughest test of
survival. Moving from a product-to-sales philosophy to a holistic marketing philosophy,
however, may provide a better chance of outperforming competition. And at the
cornerstone of this philosophy are strong customer relations.
This chapter discusses the importance and various methods of creating customer value
and sustaining customer loyalty. As customers have become more informed and
educated than ever, organisations have started to adopt business models where the
customer is at the top.
Total Customer Benefit It is the perceived monetary value of the bundle of economic, functional, and
psychological benefits customers expect from a given market offering because of the
products, services, personnel and image involved.
Total Customer Cost It is the perceived bundle of costs customers expect to incur in evaluating, obtaining,
using, and disposing of the given market offering, including monetary, time, energy, and
psychological costs.
Very often, a customer value analysis is undertaken by managers to better understand
the company’s strengths and weaknesses in comparison with competition. It follows the
pattern below
1. Identify the major attributes and benefits that customers value.
2. Assess the quantitative importance of the different attributes and benefits.
Total
Customer
Satisfaction:
It is the measure of
a customer’s
feelings of pleasure
or disappointment
that results from
comparing a
product’s perceived
performance to
their expectations.
Satisfaction is
usually measured
with the help of
customer surveys.
The two major
factors involved in
customer
satisfaction are
complaint handling
and product/service
quality.
Chapter 5 - Creating Customer Value, Satisfaction and Loyalty
Trends
3. Assess the company’s and competitors’ performances on the different customer
values on each attribute and benefit.
4. Assess how customers in a specific segment rate the company’s performance
against a major competitor on an individual attribute or benefit basis.
5. Monitor customer values over time as the economy, technology, and features
change.
Customer profitability
A profitable customer is one that over time yields a revenue stream that is significantly
greater than that company’s cost stream for attracting, selling and servicing that
customer.
150-20 Rule The 20% most profitable customers generate as much as 150% of the profits of the
company; the 20% least profitable customers lose 100% of the profits.
Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV).
CLV describes the net present value of the future stream of profits expected over the
customer’s lifetime purchases. CLV calculations are generally used by marketers to
develop a long-term perspective.
Customer Relationship Management (CRM) It is the process of carefully managing detailed information about individual customers
and all occasions where a customer encounters a brand/product to maximise customer
loyalty.
CRM can be conducted using the following 4 steps –
1. Identify your prospects and customers.
2. Differentiate customers in terms of their needs and their value to your
company.
3. Interact with individual customers to improve your knowledge about their
needs and to build stronger relationships.
4. Customize products, services, and messages to each customer.
The value of the customer base can be increased by improved by measures such as
reducing the rate of customer defection, increasing the longevity of the customer
relationship, making low-profit customers more profitable or terminating them, etc.
Building Customer Loyalty
It involves the following procedures –
1. Interacting with customers
2. Developing loyalty programs
3. Personalising marketing
4. Creating institutional ties
Database marketing It is the process of building, maintaining and using customer databases and other
databases to contact, transact and build customer relationships.
Customer Database It contains customers’ past purchases, past volumes, past prices and profits; buyers’
personal details, status of current contacts, the company’s share of the buyer’s
business, competitive suppliers, etc.
Datamining Through datamining, marketers can extract information about individuals, trends, etc.
from the customer database. It uses techniques such as cluster analysis, predictive
modelling, etc.
Disadvantages of Datamining and CRM 1. Building and maintaining a database requires huge amounts of investment in
terms of computer hardware.
2. Convincing employees to be customer oriented than using traditional methods.
3. Customer attitudes about privacy of personal data.
Probability of error of CRM methods or assumptions made thereof.
Chapter 5 - Creating Customer Value, Satisfaction and Loyalty
Trends
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Analyzing Consumer Markets
Chapter 6
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Since marketing starts from the customer, it is of primary importance to understand the
psyche of the customers and their buying motives. This chapter talks about the various
behavioural patterns that govern the decision making process of a customer. A
marketer needs to understand these factors affecting the customer’s purchase
decisions so as to design an appropriate marketing strategy.
Factors affecting Consumer Buying
Behaviour 1. Cultural Factors
a. Culture - Frames traditions, values, perceptions, preferences. E.g. Child
learning from family & surroundings.
b. Sub-culture - Provides more specific identification and socialization. Include
nationalities, religions, racial groups and geographic regions.
c. Social Class – Homogeneous and enduring divisions in a society which are
hierarchically ordered. Members share similar tastes and behaviour.
2. Social Factors
a. Reference Groups – Have direct or indirect influence on person’s attitude
and behaviour. Primary groups: regular interaction, e.g. family, friends,
neighbours. Secondary groups: religious, professional, trade union groups.
Aspirational Groups: ones that a person hopes to join. Dissociative groups:
whose values or behaviour and individual rejects.
b. Family – Family of orientation: parents and siblings. Acquires orientation
towards religion, politics and economics, sense of personal ambition, self
worth and love. Family of procreation: spouse and children. More direct
influence on buying behaviour.
c. Roles and Status – Role consists of activities a person is expected to
perform. Each role carries a status. Marketers must be aware of the status
symbol of each product.
Chapter 6 - Analyzing Consumer Markets
3. Personal Factors
a. Age and Stage in the Life Cycle – Tastes are age related. Markets should also
consider critical life events or transitions.
b. Occupation and Economic Circumstances – Economic Circumstances like
spendable income, savings, assets, debts, borrowing power etc affect
consumption patterns.
c. Personality and Self Concept – Personality, set of distinguishing
characteristics that influence his/her buying behaviour. Consumers match
brand personality with their ideal self concept instead of their actual self
concept.
d. Lifestyle and Values
4. Psychological Factors
a. Motivation: Freud’s theory of id, ego and super ego; Maslow’s need
hierarchy theory; Herzberg’s two factor model.
b. Perception: Process by which we select, organize and interpret information
inputs. In marketing, perceptions are more important than reality.
c. Learning – Induces changes in behaviour arising from experience. Marketers
can build demand by associating the product with positive drives.
d. Memory – Short term and long term memory. Build brand knowledge and
brand recall as node in memory.
Problem Recogniton
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Behaviour
The Buying Decision Process
• Problem Recognition - Customer recognises a need triggered by internal or
external stimuli. Marketers need to identify circumstances that trigger needs.
• Information Search - Two levels of involvement – Heightened attention when
person becomes more receptive to information about the product. At next level
consumer may enter into active information search, looking for reading
material, phoning friends etc.
• Evaluation of Alternatives - Factors influencing a particular choice over the
other include attitudes, beliefs and expectancy value.
• Purchase Decision - Between purchase intention and purchase decision, 2
intervening factors come into play- Attitudes of others and Unanticipated
situational factors. Marketers should understand that these factors provoke risk
and should provide information to reduce it.
• Post purchase Behaviour - Marketers must monitor postpurchase satisfaction,
postpurchase actions, and postpurchase product uses.
Complex
Buying
Behaviour
Variety Seeking
Dissonance
Reducing
Habitual
Level of customer involvement
Chapter 6 - Analyzing Consumer Markets
Trends
Involvement
High Low
Differences in Brands
Insignificant Significant
1. Complex Buying Behaviour: When a customer purchases something for the
first time.
2. Variety Seeking: Consumers will keep switching varieties just out of
boredom. Eg- Biscuits. Marketer should keep introducing new products and
display the product prominently.
3. Habitual: Buying the same thing out of habit and not out of loyalty.
Distribution network should be excellent in this case. Maintain consistency
in product and advertising.
4. Dissonance Reducing: In case of repeat purchase of same product.
logo copy.tif
Organizatio-
nal buying
is the decision-
making process by
which
organizations
establish the need
for purchased
products and
services and
identify, evaluate,
and choose among
alternative brands
and suppliers.
Analyzing Business Markets and Buyer Behavior
Chapter 7
Marketing Management By Philip, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha
SUMMARY by
Business buyers purchase goods and services to achieve specific goals, such as making
money, reducing operating costs, and satisfying social or legal obligations. Therefore to
provide superior customer value to the business buyers this chapter familiarizes you
with the underlying dynamics and process of business buying.
Blanket contract establishes a long-term relationship in which the supplier promises to
resupply the buyer as needed at agreed-upon prices over a specified period. Because
the seller holds the stock, blanket contracts are sometimes called stockless purchase
plans.
Product value analysis is an approach to cost reduction in which components are
carefully studied to determine if they can be redesigned or standardized or made by
cheaper methods of production.
The Business Market versus the Consumer
Market • Fewer buyers: Business marketers normally deal with far fewer buyers than do
consumer marketers.
• Larger buyers: Buyers for a few large firms do most of the purchasing in many
industries.
• Close supplier customer relationship: Smaller customer base and importance of
larger customers, suppliers have to customize offerings to meet the needs of
individual customers.
• Geographically concentrated buyers
• Derived demand: Demand for business goods is derived from demand for consumer
goods, so business marketers must monitor the buying patterns of ultimate
consumers.
• Inelastic demand: Not much affected by price changes as producers cannot make
quick production changes.
•
Three types of
Business
Buying
Situations:
Straight rebuy:
situation in which
the purchasing
department
reorders on a
routine basis (e.g.,
office supplies, bulk
chemicals).
Modified rebuy:
situation in which
the buyer wants to
modify product
specifications,
prices, delivery
requirements, or
other terms.
New task:
situation in which a
purchaser buys a
product or service
for the first time
(e.g., office
building, new
security system).
Chapter 7 - Analyzing Business Markets and Buyer Behavior
• Fluctuating demand: Demand for business products is more volatile than consumer
products.
• Professional purchasing: Organizational purchasing policies and constraints are followed
• Multiple buying influences: More people typically influence buying decisions
• Multiple sales calls: Multiple sales calls to win most business orders, and the sales cycle
can take years.
• Direct purchasing: Business buyers often buy directly from manufacturers rather than
intermediaries
• Reciprocity: Business buyers often select suppliers who also buy from them.
• Leasing: Many industrial buyers lease rather than buy heavy equipment to conserve
capital, get the latest products, receive better service, and gain tax advantages.
The Buying Center
(Decision-making unit of a buying organization)
Seven roles in the purchase decision process:
• Initiators: People who request that something be purchased
• Users: use the product or service; often, users initiate the buying proposal and help
define product requirements.
• Influencers: People who influence the buying decision, including technical personnel.
• Deciders: Those who decide on product requirements or on suppliers.
• Approvers: People who authorize the proposed actions of deciders or buyers.
• Buyers: People who have formal authority to select the supplier and arrange the
purchase
• Gatekeepers: People who have the power to prevent sellers or information from reaching
members of the buying center
Major Influences on Business Buying Environmental Factors
Attention to numerous economic factors, including interest rates and levels of production,
investment, and consumer spending. Business buyers also monitor technological, political-
regulatory, and competitive developments.
Organizational Factors
Business marketers need to be aware of the following organizational trends in purchasing:
• Purchasing department upgrading: Strategically positioned and highly
• Cross-functional roles: strategic, technical, team-oriented, and involving more
responsibility
• Centralized purchasing: recentralized their purchasing, to gain more purchasing clout and
savings.
• Decentralized purchasing of small-ticket items
• Long-term contracts: Buyers are increasingly initiating long-term contracts
• Internet purchasing: Low transaction and personnel costs reduce time between order and
delivery, purchasing companies moving towards internet purchasing.
• Purchasing-performance evaluation & incentive systems and buyers’ professional