Marketing: Managing Customer Relationships

Marketing: Managing Profitable Customer Relationships

• Marketing is a social and managerial process enabling individuals and groups to obtain what they need and want through creating and exchanging products and value with others.
• Marketing involves managing profitable customer relationships. This includes attracting new customers and retaining/growing current ones.
• Marketing is NOT synonymous with sales or advertising.

Objectives

• Define marketing and discuss its core concepts.
• Define marketing management and compare the five marketing management orientations.
• Understand customer relationship management and strategies.
• Gain exposure to marketing mix variables and some marketing functions.

What is Marketing?

• Kotler's social definition: "Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others."
• Managing profitable customer relationships
  • Attracting new customers
  • Retaining and growing current customers

The Marketing Process

• Understand the marketplace and customer needs and wants.
• Create value for customers and build customer relationships.
  • Design a customer-driven marketing strategy
  • Construct an integrated marketing program that delivers superior value
  • Build profitable relationships and create customer delight
• Capture value from customers in return
  • Capture value from customers to create profits and customer equity

Marketing Management

• Marketing management is the art and science of choosing target markets and building profitable relationships with them.
• Creating, delivering, and communicating superior customer value is key.
  • Customer Management
    • Marketers select customers who can be served well and profitably.
  • Demand Management
    • Marketers deal with different demand states, ranging from no demand to too much demand.

Marketing Management Orientations

• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal concept

Marketing Myopia

• Marketing myopia is when a company focuses only on its product, failing to meet its customer's needs or look at the larger societal context of its goods or service.
• Marketing myopia focuses only on existing wants, losing sight of underlying customer needs.
• Production, Product, and Selling concepts suffer from marketing myopia.

Marketing Orientations (Selling and Marketing)

• Selling (1930s): Consumers will not buy enough of an organization's products unless the organization aggressively promotes/sells the products.
• Marketing (1950s): Achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more efficiently than competitors do.

Selling & Marketing Concepts Contrasted

• Selling: The selling concept starts with the product and ends with profits through sales volume, relying on convincing customers to buy rather than starting with customer needs.
• Marketing: The marketing concept starts with customer needs and wants and ends with profits through satisfying those needs and wants, thus understanding the customer better than the competition.

Societal Marketing Concept

• Achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more efficiently than competitors do, in a way that maintains or improves customer's and society's well-being.

Core Marketing Concepts

• Needs, wants, and demands
• Markets
• Exchange, transactions, and relationships
• Core Marketing Concepts
  • Marketing offers (products, services, and experiences)
• Value and satisfaction
• Demand
  • Human wants backed by ability and willingness to pay.

CORE MARKETING CONCEPTS

• Need: A state of felt deprivation (e.g., physical needs like food, safety, social needs for belonging, affection,individual needs for knowledge, self-expression, Maslow's Hierarchy of Needs).
• Want: The form that a human need takes, as shaped by culture and individual personality.
• Demands: Human wants backed by buying power.

MARKETING OFFERS

• Some combination of products, services, information, or experiences offered to a market to satisfy a need or want.
• Marketing offerings may include places, persons, organizations, ideas, and information.

What Can Be Marketed?

• Goods, Services, Places, Ideas, Events, Persons, Properties, Organizations, Information, and Experiences

Products and Services

• Products: Anything that can be offered to a market for attention, acquisition, use, or consumption.
• Services: Activities or benefits offered for sale that are intangible, and don't result in ownership (e.g., air travel, a hotel stay, a theatre performance).

Customer Value and Customer Satisfaction

• Customer Value: The difference between the benefit (utility) customers derive from owning and using a product and the cost of obtaining the product.
• Customer Satisfaction: The extent to which a product's perceived performance matches a buyer's expectations.

Exchange, Transactions, and Relationships

• Exchange: The act of obtaining a desired object from someone by offering something in return.
• Transaction: A trade of values between two parties.
• Relationship: Actions taken to build and maintain desirable exchange relationships with valued customers.

Markets

• A set of actual and potential buyers who share a particular need or want that can be satisfied through an exchange or relationship.
• Markets can be collections of buyers or places where goods are bought and sold (physical or virtual).

Customer Lifetime Value and Customer Equity

• Customer Lifetime Value: The stream of income generated by a single loyal customer.
• Customer Equity: The total combined customer lifetime values of all customers.
  • Measures firm performance in a manner that looks to the future.

Customer Relationship Management (CRM)

• CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
• It costs more to attract a new customer than to keep an existing one satisfied.
  • Marketers need to focus on the lifetime value of a customer.

CRM Key Concepts

• Attracting, retaining, and growing customers
• Customer value and satisfaction
• Loyalty and retention
• Delighting consumers
• Growing customer share and cross-selling
• Building relationships and customer equity
  • Customer relationship levels and tools
  • Customer loyalty and retention programs
  • Adding financial benefits
  • Adding social benefits
  • Adding structural ties

Marketing Mix (4Ps or 4Cs)

• A set of controllable tactical marketing tools: product, price, place, and promotion to produce the response the firm wants in the target market.
• From customer perspective: Customer solution, cost, convenience, communication.

Marketing Mix - Product/Customer Solution

• Products/services combination the company offers to the target market: variety, quality, features, brand name, packaging, services, and returns warranties.

Marketing Mix - Price/Cost

• The amount of money customers have to pay to obtain a product: list price, discounts, allowances, payment period, and credit terms.

Marketing Mix - Place/Convenience

• Company activities to make products available to customers: channels, coverage, assortments, locations, logistics (warehouse, inventory, transportation).

Marketing Mix - Promotion/Communication

• Activities that communicate product merits and persuade customers to buy: advertising, personal selling, sales promotion, public relations, and direct marketing.

Marketing Functions

• Marketing Planning
• Marketing Research
• Marketing Information / Intelligence Analysis
• Environmental Analysis
• Marketing Administration and Support
• Pricing
• Advertising and Sales Promotion
• Sales and Distribution
• Product/Service Development
• Marketing HR Development
• Procurement, Negotiations, and Stakeholder Relationship Management

What's Next?

• Tutorial: Review concepts, prepare tutorial week 1 questions, case application.
• Lecture: Marketing Environment.