Why study marketing? help. society. satisfy. customers

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1 Topic 1 Why study marketing? understand understand improve help improve develop consumers my consumption behaviour organisational performance society my employability my creative and critical thinking make provide behave satisfy make pro9its sustainable offers sustainably customers better choices Marketing = everything - ideas - the balance between cost and value - sustainability Marketing - Dynamic - Great variety of interesting and exciting jobs - Hugely important function in business - Creative - Challenging - Relevance to small and large businesses - Competitive market place Needs, wants and demands Human needs: states of felt deprivation - When a need is not satisfied, a person will either try to reduce the need or look for an object that will satisfy it. Wants: are the form taken by human needs and are shaped by culture and individual personality - A hungry person in Hong Kong may want something else than a hungry person in Sydney because each person will think of different objects that will satisfy this need. Demands: are the human wants that are backed up by buying power - Customers view products as bundles of benefits and choose the products that give them the best value for money. Market Offerings Services Intangible products that are exchanged directly from the producer to the customer. Consumer goods The (tangible) goods purchased by individual consumers for personal or family use. Business-to-business From one organisation to another. Industrial goods are bought for use in business operations Not-for-profit Includes charities, zoos, churches, museums, governments

2 Ideas, places and people Ideas include community behaviour (e.g. Don t drink and drive) Places include tourist locations and attractions People include musicians, models, athletes and other celebrities Value, satisfaction and quality 1. Consumers are exposed to a multitude of products and services that might satisfy a given need. 2. Consumers make buying decision based on their perceptions of value delivered by various products and services. 3. Customer satisfaction is the extent to which a product s perceived performance matches buyer s expectations. 4. Product quality is defined in terms of customer needs, expectations and customer satisfaction. The goal of marketing is to own the market! Marketers do this by surpassing the competition at the task of creating perceived value for customers. Value: The tangible and intangible benefits/utilities a customer recieves from buying, owning or consuming a product (e.g. in form, time, place, possession) Compared with what the price/costs they have paid to obtian it, e.g. money, time, efforts Value from a seller s perspective Shift in focus to see customers as partners Some companies calculate the lifetime value of a customer ---> This is the profit they expect to make from a customer in the future Value to shareholders Competitive Advantage A company s ability to outperform the competition, thereby providing customers with a benefit the competition cannot provide Distinctive Competency A company s superior capability in comparison to its direct competitors Differential Benefit Properties of products that set them apart from competitors products by providing unique benefits Exchange, transaction & relationships Exchange: o a trade between two parties o that involves at least two things of value, o each party is capable of communication and delivery o each party is free to accept or reject the exchange offer o each party believes it is appropriate/desirable to do deal with the other party o agreed-upon conditions, a time of agreement and place of agreement Relationship Marketing o The process of creating, maintaining and enhancing strong, value-laden relationship with customers and other stakeholders.

3 Market o Market - A set of all actual and potential buyers of a product A simple marketing system Communication Industry (a collection of sellers) Products and Services Market (a collection of buyers) Money Information Peter Drucker, a well-known name in management theory circles, takes this concept one step further. He looks at the goals of marketing: The aim of marketing is to make selling superfluous. The aim is to know and understand the customer so well that the product or services fits... and sells itself. Evolution of marketing s Production era Producing the product as efficiently as possible. Goal to be most efficient producer in a mass market. 1930s-1960s Selling era Where marketing is primarily viewed as a sales function. 1960s Consumer era A philosophy focused on satisfying customers wants and needs. 1970s-1990s Mid 1990s onwards New era (target marketing) New millennium Improving products so that they meet needs better than competitors. Also sought to benefit employees, shareholders and communities. Building long-term bonds with customers. Customers exchange two things of value: money and information Five marketing management orientations (key marketing philosophies) 1. Production 2. Product 3. Selling 4. Marketing (consumer, STP) 5. Societal

4 Marketing Myopia (reading 1.1) By Thedore Levitt (1960) A famous article in the literature of Marketing, which identified the FAILINGS of companies in oil, railways, movies in terms of: Focusing on their product, rather than the fundamental need Placing mistaken faith in population growth, indispensability of their product, and obsession with engineering R&D Levitt urged a focus on customer need: o Oil > energy o Railways > transporation o Movies > entertainment What the hell is market oriented? By Shapiro HBR 1998 No meaningful difference between market driven and customer-oriented A self-examination checklist: o Are we easy to do business with? - Easy to contact - Fast to provide information - Easy to order from - Make reasonable promises o o o o Do we keep our promises? - On product performance - Delivery - Installation - Training - Service Do we meet the standards we set? - Specifics - General tone - Do we even know the standards Are we responsive? - Do we listen - Do we follow-up - Do we ask why not, not why - Do we treat customers as individual companies and individual people Do we work together? - Share blame - Share information - Make joint decisions - Provide satisfaction Market-oriented Narrower Focuses on segmenting the market place and targeting potential buyers Focusess on the market, but not really on understanding the customer Less balanced; tends to emphasise customer demands Information and decision making tends to be siloed Market-oriented or marketing-oriented? Marketing-oriented Broader Looks at the whole marketing system and the process therein Strives for ongoing profits through satifcation of customers and other stakeholders (e.g. employees, channel members, communities) More balanced; gives equal weight to customer demands and a companies requirements Market information is shared throughout the organisationl; decisions ar made interfunctionally

5 A market(ing)-oriented organisation is one which has implemented the marketing concept, i.e. it emphasises: 1. Understanding and meeting customers needs and wants 2. Sharing of information and knowledge in relation to customers and the marketplace 3. Interfunctional coordination to deliver customer value 4. Action-taking (i.e. being responsive to the marketplace) 6 steps to building a brand of customer centricity 1. Empower your employees - Leads to happy customers 2. Know your brand 3. Keep your brand simple be clear on what it is and what it stands for 4. Personalise your loyalty programs - Drives customers engagement 5. Be hyper-relevant to your customers 6. Align your customer engagement strategy to overall organisational KPIs. Marketing Management Philosophies Four competing philosophies strongly influence an organization's marketing processes. These philosophies are commonly referred to as production, sales, market, and societal marketing orientations. Product Orientation o A philosophy that focuses on the internal capabilities of the firm rather than on the desires and needs of the marketplace. o A production orientation means that management assesses its resources and asks these questions: What can we do best? What can our engineers design? What is easy to produce, given our equipment? In the case of a service organization, managers ask, What services are most convenient for the firm to offer? and Where do our talents lie? Sales Orientation o Based on the belief that people will buy more goods and services if aggressive sales techniques are used and that high sales result in high profits. o Not only are sales to the final buyer emphasized, but intermediaries are also encouraged to push manufacturers' products more aggressively. To sales-oriented firms, marketing means selling things and collecting money. Market Orientation o The marketing concept is a simple and intuitively appealing philosophy that articulates a market orientation. It states that the social and economic justification for an organization's existence is the satisfaction of customer wants and needs while meeting organizational objectives. What a business thinks it produces is not of primary importance to its success. Instead, what customers think they are buying the perceived value defines a business. The marketing concept includes the following: - Focusing on customer wants and needs so that the organization can distinguish its product(s) from competitors' offerings - Integrating all the organization's activities, including production, to satisfy customer wants - Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly Social Marketing Orientation o Extends the marketing concept by acknowledging that some products that customers want may not really be in their best interests or the best interests of society as a whole. o This philosophy states that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals' and society's longterm best interests.

6 Differences Between Sales and Market Orientations The differences between sales and market orientations are substantial. The two orientations can be compared in terms of five characteristics: the organization's focus, the firm's business, those to whom the product is directed, the firm's primary goal, and the tools used to achieve the organization's goals. Relationship marketing is a strategy that focuses on keeping and improving relationships with current customers. It assumes that many consumers and business customers prefer to have an ongoing relationship with one organization rather than switch continually among providers in their search for value. Customer Relationship Management Beyond knowing to whom they are directing their products or services, companies must also develop a deeper understanding of their customers. One way of doing this is through customer relationship management. Customer relationship management (CRM) is a company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups. Business Objectives The fundamental objectives of most businesses are survival, profits, and growth. Marketing contributes directly to achieving these objectives. Key Terms Marketing The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Exchange People giving up something in order to receive something else they would rather have Production orientation A philosophy that focuses on the internal capabilities of the firm rather than on the desires and needs of the marketplace Sales orientation The belief that people will buy more goods and services if aggressive sales techniques are used and that high sales result in high profits Marketing concept the idea that the social and economic justification for an organization's existence is the satisfaction of customer wants and needs while meeting organizational objectives Market orientation A philosophy that assumes that a sale does not depend on an aggressive sales force but rather on a customer's decision to purchase a product; it is synonymous with the marketing concept Societal marketing orientation The idea that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals' and society's long-term best interests Customer value The relationship between benefits and the sacrifice necessary to obtain those benefits Customer satisfaction Customers' evaluation of a good or service in terms of whether it has met their needs and expectations Relationship marketing A strategy that focuses on keeping and improving relationships with current customers

7 Empowerment Delegation of authority to solve customers' problems quickly usually by the first person the customer notifies regarding a problem Teamwork Collaborative efforts of people to accomplish common objectives Customer relationship management (CRM) A company wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups Define the term marketing. Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Marketing also requires all facets of a company to work together to pool ideas and resources. One major goal of marketing is to create an exchange. An exchange has five conditions, as listed below. Even if all five conditions are met, however, an exchange might not occur. People engage in marketing whether or not an exchange happens. Five conditions of exchange 1. There must be at least two parties. 2. Each party has something that might be of value to the other party. 3. Each party is capable of communication and delivery. 4. Each party is free to accept or reject the exchange offer. 5. Each party believes it is appropriate or desirable to deal with the other party. Describe four marketing management philosophies. The role of marketing and the character of marketing activities within an organization are strongly influenced by the organization's marketing philosophy and orientation. A production-oriented organization focuses on the internal capabilities of the firm rather than on the desires and needs of the marketplace. A sales orientation is based on the beliefs that people will buy more products and services if aggressive sales techniques are used and that high sales volumes produce high profits. A market-oriented organization focuses on satisfying customer wants and needs while meeting organizational objectives. A societal marketing orientation goes beyond a market orientation to include the preservation or enhancement of individuals' and society's long-term best interests. Discuss the differences between sales and market orientations. First, sales-oriented firms focus on their own needs; market-oriented firms focus on customers' needs and preferences. Second, sales-oriented companies consider themselves to be deliverers of goods and services, whereas market-oriented companies view themselves as satisfiers of customers. Third, sales-oriented firms direct their products to everyone; market-oriented firms aim at specific segments of the population. Fourth, sales-oriented organizations place a higher premium on making a sale, while market-oriented businesses seek a long-term relationship with the customer. Finally, sales-oriented businesses pursue maximum sales volume through intensive promotion, whereas market-oriented businesses pursue customer satisfaction through coordinated activities. Describe several reasons for studying marketing. First, marketing affects the allocation of goods and services that influence a nation's economy and standard of living. Second, an understanding of marketing is crucial to understanding most businesses. Third, career opportunities in marketing are diverse, profitable, and expected to increase significantly during the coming decade. Fourth, understanding marketing makes consumers more informed. 4 Ps of Marketing Price Charging customers the right price for the product Place Providing the product at a place convenient for consumers to access Product Anything that satisfies the target market s needs and wants Promotion The methods of communication used to provide information to the target market about the product.

8 Ethics in Marketing Social criticims of marketing Marketing is criticised for its negative impacts on: Individual consumers Society Other businesses Marketing s impact on (a) individual consumers High prices Poor-quality Dangerous products Misleading advertising claims Deceptive practices Breaches of privacy High-pressure selling Planned obsolescence Poor service to disadvantaged consumers Marketing s impact on (b) society False wants and too much materialism Too few social goods Cultural and environmental pollution; exploiting, dumping. Too much political power Marketing s impact on (c) other business Unfair Marketing Practices (I.e. W worth s pharmacies not rolled out) Acquisition of Competitors (i.e. Qantas busing air NZ Prohibited) Creating Barriers to Entry (through patents, heavy promotion, public ownership) a. Legal compliance in marketing A legal compliance program is a system designed to identify, manage, and reduce the risk of breaking the law o Reduces the likelihood of expensive litigation o Reduces the probability of loss of corporate reputation among stakeholders It can be a strategic asset that provides business with a competitive advantage through ethical practice and high-quality performance Fair Trade: Traditional sellers rights 1. The right to introduce any product in any size and style, provided it is not hazardous to personal health or safety; or, if it is, to include proper warnings and controls. 2. The right to charge any price for the product, provided no discrimination exists among similar kinds of buyers. 3. The right to spend any amount to promote the product, provided it is not deifned as unfair competition. 4. The right to use any product message, provided it is not misleading or dishonest in content or execution. 5. The right to use any buying incentive schemes, provided they are not unfair or misleading. Fair Trade: Traditional buyers rights

9 The right not to buy a product that is offered for sale The right to expect the product to be safe The right to expect the product to perform as claimed b. Public and private movements There are two movements that attempt to ensure the ethical business practices are adopted: o Consumerism o Environmentalism Consumerism Drivers: Consumers have become better educated Products have become more complex and hazardous Marketing organisations have raised consumers expectations as they seek to gain sustainable competitive advantage Consumerism is an organised movement of citizens and government agences to improve the rights and power of buyers in relation to sellers. Actions: Environmentalism Eco-systems Pollution Long-Term Effects Growth Issues c. Adopting ethical marketing Ethical marketing is an approach by organisations whereby they recognize that the task of marketing is to be BOTH o Enlightened to society s views o Ethicial in the organisations approach to society as a whole and to customers Ethical behavior in business Ethics: The moral principles or values that generally govern the conduct of an individual Morals: The rules people develop as a result of cultural values and norms Morals involve good and bad as well as deviant behaviours. Maketing the product safe Pricing the product fairly Promoting the product ethically Making the product available ethically Social resonsibility Marketing mix ethics Means safety testing, proper design, and not over-rushing the market This may refer to predatory pricing, which is pricing designed to drive competitors out As well as price gouging, which is exploiting by high prices This often concerns ways of promoting to children or uneducated segments of the market Supermarket chains have significant market power to negotiate better deals and allowances from suppliers Where companies seek to engage in activities that have a positive effect on society and the public good

10 Don't confuse social marketing with societal or sustainability marketing. Social marketing is less a marketing approach and more an application of marketing principles to induce behavioural change in an audience to achieve a social goal. Unlike commercial marketing, social goals are not related to profit or exchange. Causal marketing the cooperative efforts of a for-profit firm and a non-profit organisation is another distinct concept within societal marketing

11 TOPIC 2 Overview of the marketing environment MICRO-environment The forces close to the organisation that affect its ability to serve its customers: 1. The organisation (Internal) 2. Market channel firms suppliers and intermediaries (External) 3. Customer markets (External) 4. Competitors (External) 5. Publics (External) MACRO-environment The larger societal forces that affect the whole microenvironment: 1. Political/legal 2. Economic 3. Socio-cultural/demographic 4. Technological 5. Ecological Why write a marketing plan? The creation and implementation of a complete marketing plan will allow the organisation to achieve marketing objectives and succeed. Marketing or Business Plan? The business plan incorporates the plans of all functions production, R&D, finanace, human resources, IT and marketing. The marketing plan has its focus on customer acquistion, retention and the resources required. It includes the resources needed to identify target customers and to undertake marketing mix strategies. Most marketing plans cover one year, but some cover a few years. Elements of a marketing plan Business mission statement Situation or SWOT Analysis Objectives Marketing Strategy - Target Market Strategy Marketing Mix - Product - Promotion - Distribution - Price Implementation Evaluation Control Marketing plan question Where are we now? Where do we want to go? How do we get there? How do we know we got there? Marketing plan section Environment analysis: - PESTE, SWOT - Market & customer analysis Objectives (SMART): - Specific, Measurable, Achievable, Realistic, Time-related. E.g. sales, market share, profit, ROI, etc. Strategies: Target market(s), Marketing mix (7 Ps) Action programs: Who, When, How Much? Budgets Controls: - Measure & evaluate performance - Take corrective action