Marketing: Developing Relationships

Marketing: Developing Relationships McGraw-Hill/Irwin Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 11 Customer Driven Marketing CHAPTER 12 Dimensions of Marketing Strategy CHAPTER 13 Digital Marketing and Social Networking 11-2

Enter the World of Business Amazon Challenges Apple Amazon s launch of the Kindle Fire is designed to compete against the ipad s 68% market share in the tablet industry Amazon offers music downloads, cloud computing services, e- books, and an online app store Many of these products cost significantly less than Apple s Kindle Fire has less storage and lacks features such as a camera, microphone, and a 3G cellular connection? How is Amazon s Kindle Fire challenging the ipad s dominance in the tablet computer industry?? Compare and contrast the Kindle Fire and the ipad on price and product features?? How might the Kindle Fire and the Apple ipad appeal to different target markets? 11-3

Nature of Marketing Marketing A group of activities designed to expedite transactions by creating, distributing, pricing, and promoting goods, services, and ideas Create value by allowing individuals and organizations to obtain what they need and want Other functional areas of the business (operations, finance, and all areas of management) must be coordinated with marketing decisions 11-4

Nature of Marketing Marketing is not: Manipulating consumers to get them to buy products they do not want Just selling and advertising Marketing is: A systematic approach to satisfying consumers 11-5

The Exchange Relationship Exchange The act of giving up one thing (money, credit, labor, goods) in return for something else (goods, services, or ideas) Each participant must be willing to give up his or her respective something of value to receive the something held by the other 11-6

The Exchange Relationship The tangible product itself may not be as important as the image or the benefits associated with the product This intangible something of value may be: Capability gained from using a product The image evoked by it The brand name 11-7

The Exchange Process: Giving Up One Thing in Return for Another 11-8

Due to his large following on Twitter, different companies have hired Ashton Kutcher to represent their brands on Twitter Companies hope that celebrity promotion will create additional value for consumers by extending their positive perceptions of the celebrity to their products 11-9

Functions of Marketing Buying Risk Taking Selling Marketing Research Marketing Activities Transporting Financing Storing Grading 11-10

Creating Value with Marketing Value A customer s subjective assessment of benefits relative to costs in determining the worth of a product Customer = Customer Value Benefits Customer Costs Benefits Anything a buyer receives in an exchange Costs Anything a buyer must give up to obtain the product s benefits Monetary costs and time and effort expended to procure the product 11-11

The Marketing Concept Marketing Concept The idea that an organization should try to satisfy customers needs through coordinated activities that also allow it to achieve its own goal A business must find out what consumers desire and then develop the good, service, or idea that fulfills their needs or wants The business must then get the product to the customer The business must continually alter, adapt, and develop products to keep pace with changing consumer needs and wants 11-12

The Marketing Concept Determining customers true needs is increasingly difficult because no one fully understands what motivates people to buy things A business must also achieve its own objectives: Boosting productivity Reducing costs Achieving a percentage of a specific market A firm must have good information about what consumers want, adopt a consumer orientation, and coordinate its efforts throughout the entire organization 11-13

The Marketing Concept Customer-contact employees must know what customers want The are not just selling goods and services, but: Ideas Benefits Philosophies Experiences Customers perception of value = Level of success 11-14

Trader Joe s, which sells many different lines of organic and natural food products, is often thought to have better deals than some of its competitors The grocery chain attempts to meet consumer demands for high-quality food at reasonable prices 11-15

Evolution of the Marketing Concept Our society and economic system have changed over time, and marketing has become more important as markets have become more competitive Production orientation 19 th century Manufacturing efficiency Sales orientation Early 20 th century Supply exceeds demand; a need to sell products grew 11-16

Evolution of the Marketing Concept Today some people still inaccurately equate marketing with a sales orientation Market Orientation An approach requiring organizations to gather information about customer needs, share that information throughout the firm, and use that information to help build long-term relationships with customers Began in the 1950s and continues today New technologies are helping firms to improve communication and learn what customers want 11-17

The Nissan Leaf meets the needs of consumers who care about the environment and wish to improve their environmental footprint by driving an electric vehicle 11-18

Responding to Business Challenges Campgrounds Reach Out to a New Breed of Camper The glamper is someone who shuns roughing it, loves to vacation, and enjoys some exposure to nature In response to the recent recession, this traveler is sticking closer to home and saving money Many campsites offer magic shows, arts and crafts, themed hikes, heated pools, water parks, Wi-Fi, onsite laundry, deluxe bathrooms, dinner shows, and more Revenue for campgrounds and RV parks has risen 3% in a oneyear period?what is a glamper??how has the uncertain economic climate affected glampers??how are campgrounds accommodating glampers? 11-19

Developing a Marketing Strategy Marketing Strategy A plan of action for developing, pricing distributing, and promoting products that meet the needs of specific customers Has two major components: Selecting a target market Developing an appropriate marketing mix to satisfy that target market 11-20

Selecting a Target Market Market A group of people who have a need, purchasing power, and the desire and authority to spend money on goods, services, and ideas Target Market A specific group of consumers on whose needs and wants a company focuses its marketing efforts 11-21

Selecting a Target Market Total-Market Approach An approach whereby a firm tries to appeal to everyone and assumes that all buyers have similar needs Sellers of salt, sugar, and many agricultural products use a total-market approach because everyone is a potential consumer of these products 11-22

Selecting a Target Market Market Segmentation A strategy whereby a firm divides the total market into groups of people who have relatively similar product needs Market Segment A collection of individuals, groups, or organizations who share one or more characteristics and thus have relatively similar product needs and desires Women are the largest market segment, with 51% of the U.S. population Marketers are focusing on the growing Hispanic population 11-23

U.S. Buying Power Statistics by Race (billions) 11-24

Market Segmentation Approaches Concentration Approach A market segmentation approach whereby a company develops one marketing strategy for a single market segment Porsche directs all its marketing efforts toward high-income individuals who want to own high-performance vehicles Multisegment Approach A market segmentation approach whereby the marketer aims its efforts at two or more segments, developing a marketing strategy for each Raleigh bicycles has designed separate marketing strategies for racers, tourers, commuters, and children 11-25

Target Market Strategies 11-26

Market Segmentation Approaches Niche Marketing Is a narrow market segment focus when efforts are on one small, well-defined group that has a unique, specific set of needs Niche segments are usually very small compared to the total market for the product Many airlines cater to first-class flyers, who comprise only 10% of international air travelers To meet the needs of these elite customers, airlines include special perks along with spacious seats 11-27

Market Segmentation Approaches For a firm to successfully use a concentration or multisegment approach to market segmentation: 1. Consumers needs for the product must be heterogeneous 2. The segments must be identifiable and divisible 3. The total market must be divided in a way that allows estimated sales potential, cost, and profits of the segments to be compared 4. At least one segment must have enough profit potential to justify developing and maintaining a special marketing strategy 5. The firm must be able to reach the chosen market segment with a particular market strategy 11-28

Bases for Segmenting Markets Companies segment markets on the basis of several variables: Demographic Geographic Psychographic Behavioristic 11-29

Developing a Marketing Mix Marketing Mix The four marketing activities product, price, promotion, and distribution that the firm can control to achieve specific goals within a dynamic marketing environment The buyer or the target market is the central focus of all marketing activities 11-30

The Marketing Mix: Product, Price, Promotion, and Distribution 11-31

Product A product whether a Good A physical entity you can touch (a car, computer, or adopted kitten) Service The application of human and mechanical efforts to people or objects to provide intangible benefits to customers (Air travel, dry cleaning, or haircuts) Idea Can be a concept, philosophy, image, or issue (attorney advise or political parties) Is a complex mix of tangible and intangible attributes that provide satisfaction and benefits 11-32

Price Price A value placed on an object exchanged between a buyer and a seller The buyer usually exchanges purchasing power income, credit, wealth for the satisfaction of utility associated with a product Key element of the marketing mix because it relates directly to the generation of revenue and profits Can be changed quickly to stimulate demand or respond to competitors actions 11-33

Distribution Distribution Making products available to customers in the quantities desired Sometimes referred to as place because it helps to remember the marketing mix as the 4 Ps Product, price, place, and promotion Intermediaries usually wholesalers and retailers perform many of the activities required to move products efficiently from producers to consumers or industrial buyers Involves transporting, warehousing, materials handling, and inventory control 11-34

Redbox departed from the more traditional brick-andmortar rental stores by choosing to distribute its DVD rentals through vending machines 11-35

Promotion Promotion A persuasive form of communication that attempts to expedite a marketing exchange by influencing individuals, groups, and organizations to accept goods, services, and ideas Includes advertising, personal selling, publicity, and sales promotion Digital advertising on websites and social media sites are growing 11-36

Marketing Research and Information Systems Marketing Research A systematic, objective process of getting information about potential customers to guide marketing decisions Guides marketing decisions May include data on age, income, ethnicity, educational level, etc. of the target market and how frequently they purchase the product 11-37

Marketing Research and Information Systems Marketing information system A framework for accessing information about customers from sources both inside and outside the organization Inside the organization Continuous flow of information on prices, sales, and expenses Outside the organization Data are available through public and private reports, census statistics, digital media sources, etc. 11-38

Marketing Research and Information Systems Primary Data Marketing information that is observed, recorded, or collected directly from respondents Mystery shoppers, surveys, and focus groups Passive observation of consumer behavior and open-ended questions techniques Secondary Data Information that is compiled inside or outside an organization for some purpose other than changing the current situation Information compiled by the U.S. Census Bureau and other government agencies, databases created by marketing research firms, as well as sales and other internal reports 11-39

Companies with the Best Customer Service 11-40

Online Marketing Research New information technologies are changing how businesses learn about consumers and market their products Digital media and online social networks Opportunity to reach new markets via the Internet Online surveys are becoming an important part of marketing research Virtual testing Interactive multimedia research that combines sight, sound, and animation to improve testing of products and their features 11-41

Buying Behavior Buying Behavior The decision processes and actions of people who purchase and use products Marketers analyze buying behavior because a firm s marketing strategy should be guided by an understanding of buyers 11-42

Starbucks hopes to influence consumers' buying behavior by offering them incentives, such as free coffee or tea if you bring your own cup on Earth Day 11-43

Psychological Variables of Buying Behavior Perception The process by which a person selects, organizes, and interprets information received from his or her senses Motivation Inner drive that directs a person s behavior toward goals Learning Changes in a person s behavior based on information and experience Attitude Knowledge and positive or negative feelings about something Personality The organization of an individual s distinguishing character traits, attitudes, or habits 11-44

Going Green Monsanto Faces Threats from New Superweeds Monsanto s Roundup is the best-selling herbicide in the nation Due to wide-scale use, superweeds (weeds that are resistant to herbicides) are becoming a major challenge to farmers Competitors have begun promoting older herbicides and herbicide mixtures to combat superweeds, but the problem is not the herbicides themselves, but the way they are used Because Roundup was so effective, farmers would rotate one Roundup Ready crop with another? Why are superweeds becoming a problem for Monsanto?? How are competitors capitalizing on Roundup resistant superweeds?? What are some of the reasons weeds have become resistant to Roundup herbicide? 11-45

Social Variables of Buying Behavior Social Roles A set of expectations for individuals based on some position they occupy Reference Groups Groups with whom buyers identify and whose values or attitudes they adopt Social Classes A ranking of people into higher or lower positions of respect Culture The integrated, accepted pattern of human behavior, including thought, speech, beliefs, actions, and artifacts 11-46

People s cultures have a big impact on what they buy Goya Foods sells more than three dozen types of beans to U.S. supermarkets because people with different cultural roots demand different types of beans Which products are delivered to which stores depends on the heritage of those living in each area 11-47

Understanding Buying Behavior Trying to understand consumers is the best way to satisfy them Tools and techniques for analyzing consumers are not exact To combat declining gum sales, companies have begun to turn gum into a fashion statement Kraft is engaging young artists to create designs for its gum packaging Rockstar Iced Mint Energy is touting its energy-boosting caffeine and taurine content These overhauls are an attempt to reconnect with the teen market, which is the largest purchaser of gum products 11-48

The Marketing Environment External forces directly or indirectly influence the development of marketing strategies: Political, legal, and regulatory forces Social forces Competitive and economic forces Technological forces Marketing requires creativity and consumer focus because environmental forces can change quickly and dramatically 11-49

The Marketing Mix and the Marketing Environment 11-50

Importance of Marketing to Business and Society Marketing is a necessary function to reaching consumers, establishing relationships, and driving sales Marketing is essential in communicating the value of products and services Nonprofits, government institutions, and even people must market themselves to spread awareness and achieve desired outcomes All organizations must reach their target markets, communicate their offerings, and establish high-quality services 11-51