MARKETING MANAGEMENT

MARKETING MANAGEMENT

1 1 Defining Defining

Marketing Marketing for the for the

2121stst Century Century

Marketing: Creating Marketing: Creating and Capturing and Capturing

Customer ValueCustomer Value

Chapter 1Chapter 1

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Objectives•Be able to define marketing Be able to define marketing

and discuss its core concepts.and discuss its core concepts.•Be able to define marketing Be able to define marketing

management and compare management and compare the five marketing the five marketing management orientations.management orientations.

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Objectives•Understand customer Understand customer

relationship management relationship management and strategies.and strategies.

•Realize the major Realize the major challenges facing marketers challenges facing marketers in the new “connected” in the new “connected” millennium.millennium.

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1. Introduction• aa. Today’s successful companies . Today’s successful companies

at all levels have one thing in at all levels have one thing in common.common.

• 1). All successful companies 1). All successful companies are:are:

• a). Strongly customer focused. a). Strongly customer focused. • b). Heavily committed to b). Heavily committed to

marketing.marketing.

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• b- b- To be successful an organization To be successful an organization motivates everyone in the motivates everyone in the organization to produce superior organization to produce superior value for their customers, leading to value for their customers, leading to high levels of customer satisfaction.high levels of customer satisfaction.

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What is Marketing?• Marketing is managing profitable Marketing is managing profitable

customer relationshipscustomer relationships Attracting new customersAttracting new customers Retaining and growing current Retaining and growing current

customerscustomers• ““Marketing” is NOT synonymous Marketing” is NOT synonymous

with “sales” or “advertising”with “sales” or “advertising”

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2. What is Marketing?

• a. Creating customer a. Creating customer value and satisfaction are value and satisfaction are at the very heart of modern at the very heart of modern marketing thinking and marketing thinking and practice practice

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•A very simple definition of A very simple definition of marketing is managing marketing is managing profitable customer profitable customer relationships.relationships.

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•1). The twofold goal of 1). The twofold goal of marketing is to attract new marketing is to attract new customers by promising customers by promising superior value and to keep and superior value and to keep and grow current customers by grow current customers by delivering delivering

satisfaction. satisfaction.

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• 2). Sound marketing is 2). Sound marketing is critical to the success of critical to the success of every organization.every organization.

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•c. c. You already know a lot about You already know a lot about marketing—it’s all around you.marketing—it’s all around you.

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Marketing Defined • d. Many people think of d. Many people think of

marketing only as selling and marketing only as selling and advertising.advertising.

• 1). Marketing is no longer 1). Marketing is no longer “telling and selling.”“telling and selling.”

• 2). Today, marketing’s new 2). Today, marketing’s new sense is concerned with sense is concerned with satisfying customer needs.satisfying customer needs.

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What is Marketing?•Kotler’s social definition:Kotler’s social definition:

““Marketing is a social and Marketing is a social and managerial process by which managerial process by which individuals and groups obtain individuals and groups obtain what they need and want what they need and want through creating and through creating and exchanging products and exchanging products and value with others.”value with others.”

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Selling is only the tip of the iceberg

“There will always be need for some selling. But the aim of marketing But the aim of marketing is to make selling superfluousis to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be

needed is to make the product or service available.”

Peter Drucker

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Needs, Wants, and Demands

•-Human needs are the -Human needs are the most basic concept most basic concept underlying marketing.underlying marketing.

• - human - human needneed is a state of is a state of felt deprivation felt deprivation

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1). Humans have many complex needs.

• a). Basic, physical needs for a). Basic, physical needs for food, clothing, warmth, and food, clothing, warmth, and safety.safety.

• b). Social needs for belonging b). Social needs for belonging and affection.and affection.

• c). Individual needs for c). Individual needs for knowledge and self-expression.knowledge and self-expression.

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•22). These needs are part of ). These needs are part of

the basic human makeup.the basic human makeup.

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Human Wants• g. Another concept in marketing g. Another concept in marketing

is human wants. A human is human wants. A human wantwant is is the form that a human need the form that a human need takes as shaped by culture and takes as shaped by culture and individual personality.individual personality.

• h. h. DemandsDemands are human wants are human wants that are backed by buying power.that are backed by buying power.

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•1). 1). Consumers view products as Consumers view products as bundles of benefits and choose bundles of benefits and choose products that give them the best products that give them the best bundle for their money .bundle for their money .Examples:Examples:An American needs food but wants a hamburger, French An American needs food but wants a hamburger, French

fries and soft drink.fries and soft drink.Many people want a Mercedes, only a few are able and Many people want a Mercedes, only a few are able and

willing to buy one.willing to buy one.

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• i. Outstanding marketing i. Outstanding marketing companies go to great companies go to great lengths to learn about and lengths to learn about and understand their understand their customer’s needs, wants, customer’s needs, wants, and demands.and demands.

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Many Things Can Be Many Things Can Be Marketed!Marketed!

Goods

Services

Events & Experiences

Persons

Places & Properties

Organizations

Information

Ideas

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Marketing Offers—Products, Services, and Experiences

• j. j. Companies address needs Companies address needs by putting forth a value by putting forth a value proposition, a set of benefits proposition, a set of benefits that they promise to consumers that they promise to consumers to satisfy their needs.to satisfy their needs.

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• 1). The value proposition is 1). The value proposition is fulfilled through a fulfilled through a marketing offermarketing offer—some combination of products, —some combination of products, services, information, or services, information, or experiences offered to aexperiences offered to a

market to satisfy a need or want.market to satisfy a need or want.

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• 2). The concept of product 2). The concept of product is not limited to physical is not limited to physical objects and can include objects and can include experiences, persons, experiences, persons, places, organizations, places, organizations, information, and ideas.information, and ideas.

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• 3). Be careful of paying 3). Be careful of paying attention to the product and not attention to the product and not the benefit being satisfied.the benefit being satisfied.

• 4). “Marketing myopia” is 4). “Marketing myopia” is caused by shortsightedness or caused by shortsightedness or losing sight of underlying losing sight of underlying customer needs by only customer needs by only focusing on existing wants focusing on existing wants

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• 5). Smart marketers 5). Smart marketers create brand meaning and create brand meaning and brand experiences for brand experiences for consumers.consumers.

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• Needs, wants, Needs, wants, and demandsand demands

• Marketing Marketing offers: including offers: including products, products, services and services and experiencesexperiences

• Value and Value and satisfaction satisfaction

• Exchange, Exchange, transactions transactions and and relationshipsrelationships

• MarketsMarkets

Core Marketing ConceptsCore Marketing Concepts

What is Marketing?

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Value and Satisfaction

• k. Customer k. Customer valuevalue is the is the difference between the values difference between the values that the customer gains from that the customer gains from owning and using a product and owning and using a product and the costs of obtaining the the costs of obtaining the product. Customers product. Customers

form expectations about the form expectations about the value of various marketing value of various marketing offers and buy accordingly.offers and buy accordingly.

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• l. Customer l. Customer satisfactionsatisfaction depends on a product’s depends on a product’s perceived performance in perceived performance in delivering value relative to a delivering value relative to a buyer’s expectations. Customer buyer’s expectations. Customer satisfaction is a key influencesatisfaction is a key influence

on future buying behavior on future buying behavior

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• 1). Marketers must be careful to 1). Marketers must be careful to set the right level of expectations.set the right level of expectations.

• 2). Customer value and customer 2). Customer value and customer satisfaction are key building blocks satisfaction are key building blocks for for

developing and managing customer developing and managing customer relationships.relationships.

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Exchanges, Transactions, and Relationships

• -Marketing occurs when -Marketing occurs when people decide to satisfy needs people decide to satisfy needs and wants through exchange. and wants through exchange. ExchangeExchange is the act of is the act of obtaining a desired object obtaining a desired object from someone by offering from someone by offering something in return.something in return.

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• n. Whereas exchange is a n. Whereas exchange is a core concept of marketing, a core concept of marketing, a transaction transaction (a trade of values (a trade of values between two parties) is between two parties) is marketing’s unit of marketing’s unit of measurement. Most involve measurement. Most involve money, a response, and money, a response, and action.action.

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• o. Marketing consists of o. Marketing consists of actions taken to build and actions taken to build and maintain desirable exchange maintain desirable exchange relationships with target relationships with target audiences involving a product, audiences involving a product, service, idea, or otherservice, idea, or other

object.object.

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Markets •p. The concepts of p. The concepts of

exchange and relationships exchange and relationships lead to the concept of a lead to the concept of a market. market. marketmarket is the is the set of actual and potential set of actual and potential buyers of a product. buyers of a product.

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Markets • 1). Originally a “market” was a 1). Originally a “market” was a

place where buyers and sellers place where buyers and sellers gathered to exchange goods gathered to exchange goods (such as a village square).(such as a village square).

• 2). Economists use the term to 2). Economists use the term to designate a collection of buyers designate a collection of buyers and sellers who transact in a and sellers who transact in a particular product class (as in the particular product class (as in the grain or housing market).grain or housing market).

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Markets • 3). Marketers see buyers 3). Marketers see buyers

as constituting a market as constituting a market and sellers constituting an and sellers constituting an industry.industry.

•4). Marketers are keenly 4). Marketers are keenly interested in markets interested in markets

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Marketing•q. The concept of markets q. The concept of markets

brings one full circle to the brings one full circle to the concept of marketing.concept of marketing.

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Marketing• 1). Sellers must search for buyers, 1). Sellers must search for buyers,

identify their needs, design good identify their needs, design good products and services, set prices for products and services, set prices for them, promote them, and store and them, promote them, and store and deliver them. deliver them.

• 2). A modern marketing system includes 2). A modern marketing system includes all of the elements necessary to bring all of the elements necessary to bring buyers and sellers together. This buyers and sellers together. This might include such activities as product might include such activities as product development, research, communication, development, research, communication, distribution, pricing, and service. distribution, pricing, and service.

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• 3). 3). Each of the major actors Each of the major actors in a marketing system adds in a marketing system adds value for the next level of the value for the next level of the system. There is often critical system. There is often critical interdependency among interdependency among network members.network members.

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Marketing Management

• Marketing managementMarketing management is is “the art and science of “the art and science of choosing target markets and choosing target markets and building profitable building profitable relationships with them.”relationships with them.” Creating, delivering and Creating, delivering and

communicating superior communicating superior customer value is key.customer value is key.

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•1). 1). Marketing management Marketing management involves managing demand, involves managing demand, which in turn involves which in turn involves managing customer managing customer relationships relationships

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• Customer Management:Customer Management: Marketers select customers Marketers select customers

that can be served well and that can be served well and profitably.profitably.

• Demand Management:Demand Management: Marketers must deal with Marketers must deal with

different demand states different demand states ranging from no demand to ranging from no demand to too much demand.too much demand.

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Customer and Demand Management

• b. Marketing management b. Marketing management is concerned not only with is concerned not only with finding and increasing finding and increasing demand, but also with demand, but also with changing or even reducing changing or even reducing it.it.

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• 1). 1). Demarketing’sDemarketing’s aim is to reduce aim is to reduce demand temporarily or permanently demand temporarily or permanently (move traffic away from a popular (move traffic away from a popular tourist attraction during peak tourist attraction during peak demand times). demand times).

• 2). In reality, marketing anagement 2). In reality, marketing anagement is customer management and is customer management and demand demand

management management

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• Production Production conceptconcept

• Product Product conceptconcept

• Selling Selling conceptconcept

• Marketing Marketing conceptconcept• Societal marketing conceptSocietal marketing concept

Management OrientationsManagement Orientations


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4. Marketing Management Orientations • a. There are five alternative a. There are five alternative

concepts under which concepts under which organizations conduct their organizations conduct their marketing activities: the marketing activities: the production, product, selling, production, product, selling, marketing, and societal marketing, and societal marketing concepts.marketing concepts.

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The Production Concept

• b. The b. The production conceptproduction concept holds holds that consumers will favor products that consumers will favor products that are available and highly that are available and highly affordable and that management affordable and that management should, therefore, focus on should, therefore, focus on improving production and improving production and distribution efficiency. This is one distribution efficiency. This is one of the oldest philosophies that of the oldest philosophies that guides sellers guides sellers

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• c. The production concept is c. The production concept is useful when:useful when:

• 1). Demand for a product 1). Demand for a product exceeds the supply.exceeds the supply.

• 2). The product’s cost is too 2). The product’s cost is too high and improved productivity high and improved productivity is needed to bring it down.is needed to bring it down.

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• d. The risk with this concept d. The risk with this concept is in focusing too narrowly on is in focusing too narrowly on company operations. Do not company operations. Do not ignore the desires of the ignore the desires of the market. This concept can lead market. This concept can lead to “marketing myopia.”to “marketing myopia.”

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The Product Concept• e. The e. The product conceptproduct concept states states

that consumers will favor products that consumers will favor products that offer the most quality, that offer the most quality, performance, and features, and performance, and features, and that the organization should, that the organization should, therefore devote its energy to therefore devote its energy to making continuous product making continuous product improvements.improvements.

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The Product Concept• 1). Some manufacturers 1). Some manufacturers

mistakenly believe that if they mistakenly believe that if they “build a better “build a better mousetrap,”consumers will beat a mousetrap,”consumers will beat a path to their door just for their path to their door just for their product.product.

• 2). The product concept can also 2). The product concept can also lead to “marketing myopia,” the lead to “marketing myopia,” the failure to see the challenges being failure to see the challenges being presented by other products.presented by other products.

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The Selling Concept• f. Many organizations follow the f. Many organizations follow the

selling concept. The selling concept. The selling selling conceptconcept is the idea that is the idea that consumers will not buy enough of consumers will not buy enough of the organization’s products unless the organization’s products unless the organization undertakes a the organization undertakes a large-scale selling and promotion large-scale selling and promotion effort.effort.

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The Selling Concept• 1). This concept is typically 1). This concept is typically

practiced with unsought goods practiced with unsought goods (those that buyers do not normally (those that buyers do not normally think of buying).think of buying).

• 2). To be successful with this 2). To be successful with this concept, the organization must be concept, the organization must be good at tracking down the good at tracking down the interested buyer and selling them on interested buyer and selling them on the product benefits.the product benefits.

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The Selling Concept• 3). Industries that use this concept 3). Industries that use this concept

usually have overcapacity. Their aim usually have overcapacity. Their aim is to sell what they make rather than is to sell what they make rather than make what will sell in the marketmake what will sell in the market

• 4). There are not only high risks 4). There are not only high risks with this approach but low with this approach but low satisfaction by customers.satisfaction by customers.

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The Marketing Concept

• g. The g. The marketing conceptmarketing concept holds holds that achieving organizational that achieving organizational goals depends on determining the goals depends on determining the needs and wants of target needs and wants of target markets and delivering the markets and delivering the desired satisfactions more desired satisfactions more effectively and efficiently than effectively and efficiently than competitors do. competitors do.

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The Marketing Concept

• 1). 1). Under the marketing Under the marketing concept, customer focus and concept, customer focus and value are paths to sales and value are paths to sales and profits profits

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• h. The marketing and selling concepts are h. The marketing and selling concepts are often confused. The primary differences often confused. The primary differences are: are:

• 1). The selling concept takes an 1). The selling concept takes an “inside-out” perspective (focuses on existing “inside-out” perspective (focuses on existing

products and uses heavy promotion and products and uses heavy promotion and selling efforts).selling efforts).

• 2). The marketing concept takes an 2). The marketing concept takes an “outside-in” perspective (focuses on “outside-in” perspective (focuses on customer needs, values, and customer needs, values, and satisfactions).satisfactions).

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• i. Many companies claim to adopt the i. Many companies claim to adopt the marketing concept but really do not marketing concept but really do not unless unless

they commit to market-focused and they commit to market-focused and customer-driven philosophies.customer-driven philosophies.

• 1). Customer-driven companies 1). Customer-driven companies research current customers to learn research current customers to learn about their desires, gather new product about their desires, gather new product and service ideas, and test proposed and service ideas, and test proposed product improvements product improvements

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• 2). Such customer-driven marketing 2). Such customer-driven marketing usually works well when there exists a usually works well when there exists a clear need and when customers know clear need and when customers know what they want.what they want.

• 3). When customers do not know what 3). When customers do not know what they want, marketers can try customer- they want, marketers can try customer- driving marketing—understanding driving marketing—understanding customer needs even better than customer needs even better than customers themselves do, and creating customers themselves do, and creating products and services that will meet products and services that will meet existing and latent needs now and in the existing and latent needs now and in the future. future.

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The Societal Marketing Concept

• j. j. The The societal marketing conceptsocietal marketing concept holds that the organization should holds that the organization should determine the needs, wants, and determine the needs, wants, and interests of target markets. It interests of target markets. It should then deliver the desired should then deliver the desired satisfactions more effectively and satisfactions more effectively and efficiently than competitors in a efficiently than competitors in a way that maintains or improves way that maintains or improves the consumer’s and the society’s the consumer’s and the society’s well-being. well-being.

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• 1). The societal marketing concept is 1). The societal marketing concept is the newest of the marketing philosophies.the newest of the marketing philosophies.

• 2). It questions whether the pure 2). It questions whether the pure marketing concept is adequate given the marketing concept is adequate given the wide variety of societal problems and ills.wide variety of societal problems and ills.

• 3). According to the societal 3). According to the societal marketing concept, the pure marketing marketing concept, the pure marketing concept overlooks possible conflicts concept overlooks possible conflicts between short-run consumer wants and between short-run consumer wants and long- run consumer welfare.long- run consumer welfare.

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• 4). The societal concept calls 4). The societal concept calls upon marketers to balance upon marketers to balance three considerations in setting three considerations in setting their marketing policies:their marketing policies:

a). Company profits.a). Company profits. b). Customer wants.b). Customer wants. c). Society’s interests.c). Society’s interests.

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• 5). It has become good 5). It has become good business to consider and think business to consider and think of society’s interests when the of society’s interests when the organization makes marketing organization makes marketing decisions.decisions.

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CRM•CRMCRM – – Customer Customer

relationship relationship managementmanagement . . .. . .“is the overall process of building “is the overall process of building and maintaining profitable and maintaining profitable customer relationships by customer relationships by delivering superior customer delivering superior customer value and satisfaction.”value and satisfaction.”

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CRM• It costs 5 to 10 times MORE It costs 5 to 10 times MORE

to attract a new customer to attract a new customer than it does to keep a than it does to keep a current customer satisfied.current customer satisfied.

•Marketers must be Marketers must be concerned with the lifetime concerned with the lifetime value of the customer.value of the customer.

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CRM

• Attracting, Attracting, retaining and retaining and growing growing customerscustomers

• Building customer Building customer relationships and relationships and customer equitycustomer equity

• Customer value/satisfactionCustomer value/satisfaction Perceptions are keyPerceptions are key Meeting/exceeding Meeting/exceeding

expectations creates expectations creates satisfactionsatisfaction

• Loyalty and retentionLoyalty and retention Benefits of loyalty Benefits of loyalty Loyalty increases as Loyalty increases as

satisfaction levels increasesatisfaction levels increase Delighting consumers Delighting consumers

should be the goalshould be the goal• Growing share of customerGrowing share of customer

Cross-sellingCross-selling

Key ConceptsKey Concepts

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CRM• Customer equityCustomer equity

The total combined The total combined customer lifetime customer lifetime values of all values of all customers.customers.

Measures a firm’s Measures a firm’s performance, but performance, but in a manner that in a manner that looks to the future.looks to the future.

Key ConceptsKey Concepts• Attracting, Attracting,

retaining and retaining and growing growing customerscustomers

• Building Building customer customer relationships relationships and customer and customer equityequity

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CRM• Customer relationship Customer relationship

levels and toolslevels and tools Target market typically Target market typically

dictates type of dictates type of relationshiprelationship

Basic relationshipsBasic relationships Full relationshipsFull relationships

Customer loyalty and Customer loyalty and retention programsretention programs

Adding financial benefitsAdding financial benefits Adding social benefitsAdding social benefits Adding structural tiesAdding structural ties

• Attracting, Attracting, retaining and retaining and growing growing customerscustomers

• Building Building customer customer relationships relationships and customer and customer equityequity

Key ConceptsKey Concepts

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Marketing Challenges• Technological advances, rapid Technological advances, rapid

globalization, and continuing globalization, and continuing social and economic shifts are social and economic shifts are causing marketplace changes.causing marketplace changes.

• Major marketing developments Major marketing developments can be grouped under the can be grouped under the theme of theme of ConnectingConnecting..

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Marketing Challenges

• Via technologyVia technology• With customersWith customers• With marketing With marketing

partnerspartners• With the worldWith the world

• Advances in computers, Advances in computers, telecommunications, telecommunications, video-conferencing, video-conferencing, etc. are major forces.etc. are major forces. Databases allow for Databases allow for

customization of customization of products, messages products, messages and analysis of needs.and analysis of needs.

• The InternetThe Internet Facilitates anytime, Facilitates anytime,

anywhere connectionsanywhere connections Facilitates CRMFacilitates CRM Creates marketspacesCreates marketspaces

ConnectingConnecting

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Marketing Challenges• Selective relationship Selective relationship

management is key.management is key. Customer profitability Customer profitability

analysis separates analysis separates winners from losers.winners from losers.

• Growing “share of Growing “share of customer” customer” Cross-selling and up-Cross-selling and up-

selling are helpful.selling are helpful.• Direct sales to Direct sales to

buyers are growing.buyers are growing.

ConnectingConnecting• Via technologyVia technology• With customersWith customers• With marketing With marketing


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Marketing Challenges• Partner relationship Partner relationship

management management involves:involves: Connecting inside Connecting inside

the companythe company Connecting with Connecting with

outside partnersoutside partnersSupply chain Supply chain

managementmanagementStrategic alliancesStrategic alliances



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Marketing Challenges• GlobalizationGlobalization

CompetitionCompetition New opportunitiesNew opportunities

• Greater concern for Greater concern for environmental and environmental and social responsibilitysocial responsibility

• Increased marketing Increased marketing by nonprofit and by nonprofit and public-sector entitiespublic-sector entities Social marketing Social marketing

campaignscampaigns



MARKETING MANAGEMENT

Documents

aim of marketing

sound marketing

marketing defined

marketing management1

simple definition of

heart of modern marketing

twofold goal of marketing

satisfying customer