Principles Of Marketing Ch 1

Principles of Marketing

Dr. Karim

Chapter 1: Creating Customer Value and Engagement

Ke y w o r d s • Process: a series of actions or steps taken in order to achieve a particular end. • Stakeholders: A party that has an interest in an enterprise or project. The primary stakeholders in a typical corporation are its investors, employees, customers and suppliers.

Ke y w o r d s • Value: The worth that a product has in the mind of the consumer. The consumer's perceived value of a good or service affects the price that he or she is willing to pay for it. For the most part, consumers are unaware of the true cost of production for the products they buy. Instead, they simply have an internal feeling for how much certain products are worth to them. Thus, in order to obtain a higher price for their products, producers may pursue marketing strategies to create a higher perceived value for their products. Value, a central marketing concept, is primarily a combination of quality, service, and price (qsp), called the customer value triad. Value perceptions increase with quality and service but decrease with price.

W h a t is M a rke t ing? • One of the good definitions of marketing is: “The process

by

which

companies

create

value

for

customers and build strong customer relationships in order to capture value from customers in return” Kotler.

• Another definition: “ Marketing is an organizational function

and a set of processes for creating,

communicating, and delivering value to customers and for managing customer relationships in ways

A Simplified Model of The Marketing Process

Goals of Marketing • To satisfy customers’ needs • To attract new customers by promising superior value. • To keep & grow current customers by delivering satisfaction.

What Is Marketed?

ETC……..

1-18

Who Markets?

A marketer is someone who seeks a response—attention, a purchase, a vote,

a

donation—from

party, called the prospect.

another

Core Definitions • Market:

The set of actual and

potential buyers of a product. These people share a need or want that can be satisfied through exchange relationships. • Exchange: Process of obtaining a

desired product from someone by offering something in return.

Core Definitions - Need

Needs - basic human requirements

Types of Needs • Physical: – Food, clothing, shelter, safety

• Social: – Belonging, affection

• Individual: – Learning, knowledge, self-expression

Core Definitions - Want Wants - needs become wants when they

are

objects

directed

that

might

to

specific

satisfy

the

need. Wants are shaped by the society.

A U.S. consumer needs food but may want a Philly cheesesteak and an iced tea. A person in Afghanistan needs food but may want rice,

Core Definitions - Demands Demands are wants for specific

products

backed by an ability to pay. Many people want a Ferrari ; only a few are able to buy one.

Core Definitions – Market Offering For each target market, the firm develops a tangible market

offering

-

a

combination of products, information, experiences -

and that it

positions in the minds of the target buyers.

Core Definitions– Brand • A brand is a name, term, sign, symbol, design, or a

combination

of

these,

that

identifies

the

products or services of one seller or group of sellers and differentiates them from those of competitors. • A brand name such as McDonald’s carries many associations in people’s minds that make up its image: hamburgers,

cleanliness,

convenience,

courteous

service, and golden arches. All companies strive to build a brand image with as many strong, favorable, and unique brand associations as possible.

Core Defi nitions - Competition Competition includes all the actual and potential and

rival offerings

substitutes a buyer might consider.

An automobile manufacturer can buy steel from U.S. Steel in the United States, from a foreign firm in Japan or Korea, or it can buy aluminium for certain parts from Alcoa to reduce the car’s weight, or engineered plastics from Saudi Basic Industries Corporation (SABIC) instead of steel.

Core Definitions– Customer Satisfaction • Customer satisfaction depends

on

the

product’s

perceived

performance relative to

a

expectations.

buyer’s

Satisfaction Expectatio n 8

Performance 10

Expectatio n 10

Performance 8

If performance is higher than expectations, satisfaction is high. If performance is lower than expectations, satisfaction is low.

C o r e D e fi n i t i o n s - M a r ke t i n g Environment

- The Marketing Environment refers to the actors and forces

outside

of

the

marketing

department

marketing management ability to build

that

affect

and maintain

successful relationships with target customers. - The Marketing Environment is made up of: 1. The microenvironment consists of the actors close to the

company that affect its ability to serve its customers. These forces are partially controllable by the company. 2. The macroenvironment consists of the larger societal

forces that affect the microenvironment. These forces are uncontrollable by the company.

Core Definitions - Marketing Myopia Marketing

Myopia:

The

mistake

of

paying more attention to the specific products a company offers than to the benefits & experiences produced by these products. The fundamental concept to take away from

marketing

marketers

should

myopia look

is

towards

that the

market and modify the company and products looking

accordingly towards

the

rather company,

than its

potential and then catering the market. 

An Example of Marketing Myopia: Kodak Polaroid

Five Organizational Concepts

There are five alternative concepts under which organizations design and carry out their marketing strategies: 1. 2. 3. 4. 5.

Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

Production Concept • The production concept holds that consumers will favor products that are available and highly affordable.

Therefore,

management

should

focus on improving production and distribution efficiency. • This concept is one of the oldest orientations that guides sellers and it is still a useful philosophy in some

situations.

For

example,

computer

maker

Lenovo dominates the highly competitive, pricesensitive Chinese PC market through low labor costs,

Product Concept • The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements. • Product quality and improvement are important parts of most marketing strategies. However, focusing only on the company’s products can also lead to marketing myopia. For example, some manufacturers believe that if they can “build a better mousetrap, the world will beat a path to their doors.” But they are often rudely shocked. Buyers may be looking for a better solution to a mouse problem but not necessarily for a better mousetrap. The better solution might be a chemical spray, an exterminating service, a house cat, or something else that works even better than a mousetrap.

Selling Concept • The selling concept holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. • The selling concept is typically practiced with unsought goods— those that buyers do not normally think of buying, such as insurance. These industries must be good at tracking down prospects and selling them on a product’s benefits. Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships. The aim often is to sell what the company makes rather than making what the market wants. It assumes that customers who are coaxed into buying the product will like it.

Marketing Concept • The

marketing

concept

holds

that

achieving organizational goals depends on knowing the needs and wants of target markets

and

delivering

the

desired

satisfactions better than competitors do. • Under the marketing concept, customer focus and value are the paths to sales and profits.

Societal Marketing Concept • The

societal

whether

the

marketing pure

concept

marketing

questions

concept

overlooks

possible conflicts between consumer short-run wants and consumer long-run welfare. • The

societal

marketing

marketing

strategy

concept

should

holds

deliver

that

value

to

customers in a way that maintains or improves both the

Society (Human consumer’s Welfare) and society’s

Consumers (Want

Societal marketi ng

well-being.

Company (Profits)

Societal Marketing Concept- An Applied Example: Bottled Water

Customer Relationship Management • CRM is the process of building & maintaining profitable customer relationships by delivering superior customer value & satisfaction. • Customer Perceived Value: The customers evaluation of the difference between all the benefits & all the costs of a market offering relative to those of competing products.

Changing Nature of Customer Relationships • Relating with More Carefully selected Customers: - Selective Relationship Management Weeding out losing customers & targeting & pampering winning ones •

Relating for the Long term: Using CRM to retain current customers & building profitable long-term relationships with them.

•

Relating Directly: Using direct marketing tools such as telephone, mail order catalogs & kiosks. Eg Dell & Amazon.

Creating Customer Loyalty & Retention “ losing customers does not mean losing a single sale but in fact losing the entire stream of purchases that the customer would make over a lifetime”. • Customer lifetime value: The value of the entire stream of purchases that a customer would

Customer Equity • Companies should not just acquire customers, but keep & grow them as well. • The ultimate aim of customer relationship management is to produce high customer equity. • Customer Equity is the combined discounted customer lifetime values of all the company’s current & potential customers. • It is a better measure of a firms performance than current sales or market share. More Loyal firm’s Profitable customers

=

Higher firm’s Customer Equity