6. MARKETING CONCEPTION A PHILOSOPHY OF BUSINESS, CUSTOMERS AND CONSUMERS, MARKETING AND SELLING, PRODUCT DEVELOPMENT PROCESS - STRATEGY, TACTICS

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1 6. MARKETING CONCEPTION A PHILOSOPHY OF BUSINESS, CUSTOMERS AND CONSUMERS, MARKETING AND SELLING, PRODUCT DEVELOPMENT PROCESS - STRATEGY, TACTICS

2 What is Marketing Marketing encompasses a wide array of business decisions that are essential to the success of nearly all organizations. 2 main targets: Profit Satisfied customer 2

3 Marketing Philosophy Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer. Marketing Principles Customer is in the center of attention The customer is concerned with utility (benefit) Marketing is being done by all members of the company The markets are heterogenous The markets keep on changing 3

4 The Role of Marketing Key objective to develop satisfying relationships with customers Developing products that satisfy needs, including products that enhance society s quality of life Creating a competitive environment that helps lower product prices Developing product distribution systems that offer access to products to a large number of customers and many geographic regions Building demand for products that require organizations to expand their labour force Offering techniques that have the ability to convey messages that change societal behaviour in a positive way (e.g., anti-smoking advertising) 4

5 What Marketers Do Target Markets markets consist of customers identified as possessing needs the marketer believes can be addressed by its marketing efforts Products consists of tangible (e.g., goods) or intangible (e.g., services) solution to the market s needs Promotion a means for communicating information about the marketing organization s products to the market Distribution the methods used by the marketer that enable the market to obtain products Pricing ways for the marketer to set and adjust the cost paid by the market to obtain products Supporting Services additional options that enhance a product s value 5

6 Marketing Functions Strategies and Tactics Identify Create Maintain Satisfying Relationships Value for Both Customer and Marketer 6

7 Marketing Strategies Development Production strategy Product strategy Selling strategy Marketing strategy Social marketing 7

8 Criticisms of Marketing Marketing encourages people to purchase what they do not need Marketers embellish product claims Marketing discriminates in customer selection Marketing contributes to environmental waste Marketing encroaches on customers right to privacy 8

9 Managing Customers Understanding customers is a never-ending challenge Not all customers are the same Marketers must continually conduct marketing research to: Evaluate customers Determine what they want CUSTOMER = purchaser CONSUMER = user 9

10 Customers - Consumers Existing Customers Who have purchased or otherwise used an organization s goods or services Question of time Represent the best market for future sales Former Customers Those who have formerly had relations with the marketing organization Was customer s previous relationship satisfactory Potential Customers Possess what the marketer believes are the requirements to eventually become existing customers A need for a product, possessing the financial means to buy, and having the authority to make a buying decision 10

11 Customers and the Organization Direct contact with customers (e.g., salespeople, delivery drivers, telephone customer service representatives) Indirect contact (e.g., production, accounting) All members of an organization must appreciate the role customers play in helping the organization meets its goals. Customer is most important Good customer = one who holds the potential to undertake activities that offer long-term value to an organization The activities performed by customers: Offering feedback on company performance Making prompt payment Offering suggestions for new products Voluntarily promoting the company s products to others 11

12 Customer Relationship Management CRM = everyone in an organization to recognize the importance of customers Under CRM the key driver is to treat "good" customers in a way that they will stay "good" customers Identification of Former Customers that may hold potential to become customers again Information contained in CRM help to determine important characteristics Use information to pursue new customers in untapped customer markets who have similar characteristics 12

13 Consumer Buying Behaviour Understanding why buyers do what they do (or don t do) What is important to the customer Suggest the important influences on customer decision-making Using this information, marketers can create marketing programs that they believe will be of interest to customers. Factors are extremely complex. Psychology with dashes of sociology thrown in just to make things more interesting. 13

14 What Influences Purchasing External Influences: Culture Group Membership Purchase Situation Internal Influences: Perceptual Filter Knowledge Attitude Personality Lifestyle Roles Motivation 14

15 How Consumers Buy 1. Need/Want/Desire is Recognized 2. Search for Information 3. Evaluate Options 4. Purchase 5. After-Purchase Evaluation 15

16 Targeting Markets The process of addressing customers needs through actions undertaken by the marketer Marketers determine which groups of customers to target All additional marketing decisions are going to be directed toward satisfying the markets selected Using a target market approach an organization attempts to get the most from its resources by following a planned procedure for identifying customers that appear to be the best 16

17 Targeting Markets What approach should be taken to select markets the company will target? A very broad level by identifying the market as consisting of qualified customers who have a basic need that must be satisfied Divide broad markets, consisting of customers possessing different characteristics, into smaller market segments in which customers are grouped by characteristic shared by others in the segment. Three-step process: 1. Identify segments within the overall market 2. Choose the segment(s) that fits best with the organization s objectives and goals 3. Develop a marketing strategy that appeals to the selected target market(s) 17

18 Stage 1 Segmentation Variables Segmentation Variables Consumer Markets Demographics age group (e.g., teens, retirees, young adults), gender, education level, ethnicity, income, occupation, social class, marital status Geographics location (e.g., national, regional, urban/suburban/rural, international), climate Segmentation Variables Business Markets Demographics type (e.g., manufacturer, retailer, wholesaler), industry, size (e.g., sales volume; number of retail outlets), age (e.g., new; young growth, established growth, mature) Geographics location (e.g., national, regional, urban/suburban/rural, international), climate Business Arrangement ownership (e.g,. private versus public, independent versus chain), financial condition (e.g., credit rating, income growth, stock price, cash flow)

19 Stage 2 Segmentation Variables Segmentation Variables Consumer Markets Current Purchasing Situation brands used, purchase frequency, current suppliers Purchase Ready possess necessary equipment, property, knowledge and skill sets Local Environment cultural, political, legal Segmentation Variables Business Markets Current Purchasing Situation brands used, purchase frequency, current suppliers Purchase Ready possess necessary equipment, property, knowledge and skill sets Local Environment cultural, political, legal Customers Served by the Business identify the business market Business Perceived Image identify how targeted businesses are perceived by their customers

20 Stage 3 Segmentation Variables Segmentation Variables Consumer Markets Benefits Sought price, overall value, specific feature, ease-of-use, service, etc. Product Usage how used, situation when used, etc. Purchase Conditions time of day/month/year when purchased, credit terms, tradein option, etc. Characteristics of Individual Buyer purchase experience, how purchase is made, influencers on purchase decision, importance of purchase Psychographics personality, attitudes, and lifestyle combined with demographics Segmentation Variables Business Markets Benefits Sought price, overall value, specific feature, services, profit margins, promotional assistance; etc. Product Usage how used (e.g., raw material, component product, major selling item at retail level), situation when used, etc. Purchase Conditions length of sales cycle, set product specifications, bid pricing, credit terms, trade-in option, product handling, etc. Characteristics of Buying Centre purchase experience, number of members, make-up of key influencers, willingness to assume risk;

21 Supply Chain A system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer Transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer 21

22 Supply Chain Market Supply Chain Member What They Do Example Raw Material Suppliers These companies are generally considered the first stage in the supply chain and provide basic products through mining, harvesting, fishing, etc., that are key ingredients in the production of higher-order products. Copper is mined and extracted from copper ore. Copper is then refined to remove impurities. Processed Materials or Basic Component Manufacturers Firms at this level use raw materials to produce more advanced materials or products contained within more advanced components. Copper is purchased by electrical wire manufacturers. Advanced Component Manufacturers These companies use basic components to produce products that offer a significant function needed within a larger product. Electrical wire is purchased by a manufacturer of electrical power supplies. Product Manufacturers This market consists of companies that purchase both basic and advanced components and then assemble these components into a final product designated for a user. These products may or may not be sold as stand-alone products. Some may be included within larger products. Power supplies are purchased by manufacturers of desktop computers. Support Service Firms These companies offer services at almost any point in the supply chain and also to the business user market. Some services are directly related to the product while others focus on areas of the business not directly related to production. Distribution companies, such as truck firms and storage facilities, assist in moving products from one supply chain member to another. However, in most cases they do not take ownership of products that pass through the supply chain. 22

23 Product Solutions to a target market s problems Tangible or intangible (or both) product offerings marketed by an organization It is how organizations generate revenue 23

24 Components of a Product The Total Product consists of more than what is consumed The total product offering and the decisions facing the marketer can be broken down into three key parts: Core Benefits Actual Product Augmented Product 24

25 Product Life Cycle 1. Development stage 2. Introduction stage 3. Growth stage 4. Maturity stage 5. Decline stage 25

26 Managing Existing Products Marketing strategies need to be revised Commercialization the beginning of managing the product Adjusting the product s marketing strategy is required for many reasons including: Changing customer tastes Domestic and foreign competitors Economic conditions Technological advances 26

27 PRODUCT LIFE CYCLE EXTENSION??? 27

28 PRODUCT LIFE CYCLE EXTENSION The product should get new design, new properties The packaging can be changed Increase or change the sales promotion Find the new usage of the product Find brand new market for the product Find new benefit of the product Make promotion campaign Consider the price change or the terms of payment and shipment 28

29 How New Products Are Obtained Products can be developed within an organization s own research operations. Purchase the Product License the Product Purchase Another Firm 29

30 Categories of New Products Creates New Market with Radically New Product or Product Line Enters Existing But Not Previously Targeted Market with New-Product or Product Line Stays in Existing and Previously Targeted Market by Enhancing Existing Product or Product Line 30

31 New Product Development Process Step 1. IDEA GENERATION Step 2. SCREENING Step 3. CONCEPT DEVELOPMENT AND TESTING Step 4. BUSINESS ANALYSIS Step 5. PRODUCT AND MARKETING MIX DEVELOPMENT Step 6. MARKET TESTING Step 7. COMMERCIALIZATION 31

32 Adoption Process Stage Knowledge Persuasion Decision Implementation Confirmation Definition The individual is first exposed to an innovation, but lacks information about the innovation. During this stage the individual has not yet been inspired to find out more information about the innovation. The individual is interested in the innovation and actively seeks related information/details. The individual takes the concept of the change and weighs the advantages/disadvantages of using the innovation and decides whether to adopt or reject the innovation. Due to the individualistic nature of this stage, Rogers notes that it is the most difficult stage on which to acquire empirical evidence. The individual employs the innovation to a varying degree depending on the situation. During this stage the individual also determines the usefulness of the innovation and may search for further information about it. The individual finalizes his/her decision to continue using the innovation. This stage is both intrapersonal (may cause cognitive dissonance) and interpersonal, confirmation the group has made the right decision. 32

33 Adopter Categories 33

34 Thank you. 34