Understanding Marketing Basics

What is Marketing?

• Marketing focuses on engaging customers and managing profitable relationships.
• The marketing process involves creating customer value, building strong relationships to in return capture value from customers.
• Marketing aims to attract new customers by promising superior value.
• Marketing also aims to retain and grow the existing customer base by ensuring customer satisfaction.

Factors for Business Success

• Strategy
• Dedicated employees
• Information systems
• Excellent implementation
• Strong market orientation

The Marketing Process

• A five-step model begins with understanding customer needs and the marketplace.
• Marketing organizations design a customer-driven strategy.
• Integrated marketing programs deliver value.
• Strong relationships are built, resulting in customer rewards like sales and loyalty.

Understanding Customer Needs

• Core concepts include needs, wants, demands, market offerings, value, satisfaction, exchanges, relationships, and markets.

Customer Needs, Wants and Demands

• Needs are states of felt deprivation, including physical, social, and individual needs.
• Marketers stimulate needs but do not create them.
• Wants are needs shaped by culture and personality, described in terms of objects that satisfy needs.
• Demands are wants backed by buying power, influenced by the availability of resources.

Market Offerings

• Market offerings fulfill consumer needs and wants with goods, services, information, or experiences.
• Market offerings includes people, places, organizations, and ideas.
• Products are anything capable of satisfying a need, including physical objects and intangible services
• The importance of physical products lies in the benefits they provide.

Customer Value and Satisfaction

• Companies offer a value proposition, a promise of value through quality products or services.
• Customer expectations about value and satisfaction influence buying decisions.
• Setting expectations too low may not attract enough buyers.
• Setting expectations too high leads to disappointment.
• Customer value and satisfaction are key to managing customer relationships.

Exchanges, Transactions and Relationships

• Exchange is obtaining a desired object by offering something in return.
• Transaction is a trade of values between parties and agreed conditions.

Markets

• Market is the set of actual and potential buyers of a product or service.
• Each party in the marketing system adds value for the next level.

Designing a Customer-Driven Marketing Strategy

• Marketing management chooses target markets and builds relationships.
• Marketers must select customers they can serve well and profitably via target marketing.
• Demarketing temporarily or permanently reduces demand.
• Marketing management involves customer management and demand management.
• Value proposition communicates how the organization will serve targeted customers.

Marketing Management Orientations

• Alternative concepts include production, product, selling, marketing, and societal marketing.

Production Concept

• Consumers favor available and affordable products.
• Focus should be on improving production and distribution efficiency.

Product Concept

• Consumers favor products with the most quality, performance, and features.
• Devote energy to continuous product improvements, however this can lead to marketing myopia.

Selling Concept

• Consumers will not buy enough without large-scale selling and promotion.
• Typically practiced with unsought goods, focusing on sales transactions over relationships.

Marketing Concept

• Achieving goals depends on knowing the needs/wants of target markets, delivering satisfaction better than competitors.
• It starts with the market, focuses on customer needs, integrates marketing activities, and creates lasting relationships based on value and satisfaction.
• Customer-driven marketing involves researching current customers deeply, gathering ideas, and testing product improvements.
• Customer-driven marketing understands needs better than customers themselves do.

Societal Marketing Concept

• Marketing strategy must deliver value while improving customer and society's well-being.
• Sustainable marketing is environmentally and socially responsible, meeting current needs without compromising future generations.
• Companies must balance profits, consumer wants, and society's interests.

Preparing an Integrated Marketing Plan

• Marketing strategy outlines the target customers and how value will be created.
• An integrated marketing program delivers the intended value through the marketing mix.
• Main marketing tools: product, price, place (distribution), and promotion.
• The marketing organization must create a need-satisfying market offering (product) at a specific price (price), make it available to the customers (place), communicate with the customers and persuade them of its merits (promotion), develop and maintain consumer relationships (people) and manage customer expectations (physical evidence).

Customer Relationship Management (CRM)

• CRM builds and maintains relationships by delivering value and satisfaction, managing all customer touch points.

Relationship Building Blocks

• Superior customer value and customer satisfaction are key building blocks.
• Customer-perceived value is the evaluation of benefits versus costs of a market offering.
• Customer satisfaction is the extent to which perceived performance matches expectations.

Customer Relationship Levels and Tools

• Relationships are built at different levels depending on the target market.
• Frequency marketing programs reward frequent purchases (e.g., frequent flyer programs).
• Club marketing programs offer special benefits and create member communities.

Engaging Customers

• The new marketing involves direct and continuous customer involvement in shaping conversations, experiences, and community.
• Make the brand meaningful
• Internet and social media boost customer-engagement marketing.
• Marketing now is creating offerings that engage consumers, not interrupt .
• Key engagement marketing is finding a way to partake in consumer conversations by making relevant and genuine contributions to consumer's lives.

Consumer-Generated Marketing

• This is brand exchanges created by consumers (both invited and uninvited).
• Consumers shape their own brand experiences and those of others.
• Engaged consumers have a say in product design, usage, packaging, messaging, pricing, and distribution.

Partner Relationship Management

• This is working with others inside and outside the company to bring more value to customers.
• Firms must link all departments to create customer value.
• Marketers partner with suppliers, channel partners, and others outside the company.
• Marketing channels connect the company to its buyers.
• Supply chain stretches from raw materials to final products.

Creating Customer Loyalty and Retention

• Satisfaction creates loyalty and positive word-of-mouth.
• Customer delight creates an emotional brand relationship.

Growing Share of Customer

• Share of customer is the portion of a customer's purchasing that a company gets in its product categories.
• Firms offer variety or train employees to cross-sell/up-sell.

Building Customer Equity

• Customer equity is the total combined customer lifetime values of all current and potential customers.
• Not all loyal customers are good investments.
• Customers are classified by potential profitability and loyalty: strangers, butterflies, true friends, and barnacles.
• Strangers have low profitability and loyalty.
• Butterflies are potentially profitable, but not loyal.
• True friends are both profitable and loyal.
• Barnacles are highly loyal, but not profitable.
• Building the right relationship with the right customers is key.

The Changing Marketing Landscape

• Marketing operates in a dynamic global environment, with developments changing the field and challenging strategies.

The Digital Age

• The digital age uses digital marketing tools (websites, social media, apps) to engage consumers.
• Social media marketing allows marketers to engage consumers in the moment via trends, events, and personal occasions.
• Mobile marketing is smartphone based, for engaging customers anytime during buying process.

The Growth of Not-for-Profit Marketing

• Not-for-profit marketing is practiced by organizations that aim to make surpluses to continue operations.

Rapid Globalization

• Global competition has increased due to tech advances.
• Companies sell more goods internationally.
• New products for specific markets are being developed.
• Strategic alliances with foreign companies are being formed.

Sustainable Marketing

• Companies are taking responsibility for social and environmental impacts, building it into their values.

Marketing Process Model Expansion

• First four steps create value: understand marketplace, design a strategy, construct a program, and build relationships.
• Firms must practice good partner relationship management.
• The final step, the company reaps the rewards of its strong customer relationships by capturing value from customers
• Taking additional factors into account, companies take harness marketing technology, take advantage ofglobal opportunities and ensure they act in an ethical and socially responsible way.

Strategic Planning

• Strategic planning develops and maintains a fit between goals/capabilities and marketing opportunities.
• At corporate level defines mission, sets objectives, and decides on business/product portfolio to support.
• Marketing planning occurs at business-unit, product, and market function levels.

Market-Oriented Mission Definition

• Must answer these questions: what is our business, who is our customer, what do customers value, what should our business be.
• A mission statement defines the organization's purpose.
• Mission satements must be market-oriented based on satisfying basic consumer needs.
• Mission statements should be meaningful, specific, motivating and should emphasize the organization's strengths.

Business Portfolio Designing

• Business portfolio is the collection of businesses and products.
• Involves analyzing the current portfolio and shaping the future portfolio.

Analyzing the Current Business Portfolio

• Portfolio analysis evaluates the products and businesses that make up the company.
• Management identifies strategic business units (SBUs) within the company.
• Management assesses attractiveness of SBUs and decides on support for each.
• Portfolio analysis methods evaluate SBUs on market attractiveness and SBU's strength.

Boston Consulting Group (BCG) Approach

• Classifies SBUs by growth-share matrix: stars, cash cows, question marks, and dogs.
• Stars are high-growth, high-share businesses that need heavy investment which eventually turn to cash cows.
• Cash cows are low-growth, high-share businesses that need less in order to generate cash to support other SBUs.
• Question marks are low-share businesses in high-growth markets who require a lot of investment to hold share.
• Dogs are low-growth, low-share businesses that may maintain themselves but don't promise to be cash.
• The company must decide the future role for each SBU: build, hold, harvest, or divest.
• SBUs change positions over time.

Problems with Matrix Approaches

• Can be difficult, time-consuming, and costly to implement.
• May be hard to define SBUs or measure market share/growth.
• Focus classifying current businesses with little advise on future planning.

Developing Strategies for Growth

• Marketing identifies, evaluates, and selects market opportunities, including market penetration, market development, product development, or diversification.
• Market penetration spurs growth through marketing mix improvements, whereas market development identifies/develops new markets for current products.
• Product development offers modified/new products to current markets.
• Diversification starts up/buys businesses outside current products and markets; exercise caution!

Downsizing Strategies

• Abandon products or markets that are growing too fast, changed market environments, or simply age with time.

Planning Marketing

• Marketing plays a key role in strategic planning by providing a guiding philosophy, inputs to strategic planners and individual business unites.
• Customer engagement and value are key.
• Marketers must practice partner relationship management and work with other departments to form internal value chain.

Partnering

• Internal value chain is the series of departments that carry out activities to design, produce, market, deliver, and support.
• A value delivery network includes the company, suppliers, distributors, and customers.

Marketing Strategy

• The marketing strategy is the logic by which achieve profitable customer relationships are achieved.
• Includes market segmentation, market targeting, differentiation, and positioning.

Market Segmentation

• Market segmentation is dividing a market into distinct groups of buyers who have different needs, characteristics or behaviors.
• A market segment is consumers who respond similarly to marketing efforts
  • E.g. consumers who want the best-handling-high-performance car regardless of price

Market Targeting

• Market targeting is evaluating each market segment's attractiveness and selecting one or more segments to seve.
• Limited resource companies may decide to target a few market riches.

Market Differentiation and Positioning

• Positioning is arranging for a product to occupy a clear, distinctive, and desirable place in the minds of target consumers relative to competing products.
• Differentiation is differentiating the company's market offering from that offered by competitors so that it gives consumers more value.

Developing an Integrated Marketing Mix

• Marketing mix consists of tactical marketing tools that can influence demand.
• Product is what the company offer, Price is the amount customer must pay, Place is the distribution and Promotion communicates the merit of the product.
• Services may require a variation in the marketing mix: people, process, and physical evidence.

Managing The Marketing Effort

• Involves analysis, planning, implementation, and control.

Marketing Analysis

• A SWOT analysis evaluates strengths, weaknesses, opportunities, and threats.
• Strengths are internal capabilities,
• Weakness are internal limitations,
• Opportunities are favorable external factors and
• Threats are unfavorable extrernal factors

Marketing Planning

• Involves deciding on marketing strategies to attain objectives.

Marketing Implementation

• Process that turns plans into actions.

Marketing Department Organization

• Small companies has one person carrying out marketing work.
• Large companies contain marketing specialists, such as the chief marketing office (CMO).
• Department can be arranged as
  • Functional organisation (specialists head different marketing activities)
  • Geographic organization (for companies that sell across the country or internationally)
  • Product management organization (for companies with many different products or brands) or
  • Market or customer management organization (companies selling one product line to many different markets).

Marketing Control

• Marketing control evaluates results of strategies/plans and takes corrective action.
• The process involves setting goals, measuring performance, evaluating differences, and taking action.
• Operating control checks ongoing performance against the annual plan.
• Strategic control looks at whether basic strategies match opportunities.

Measuring and Managing Return on Marketing Investment (ROI)

• Marketing ROI (net return from marketing investment divided by the cost) measures profits generated by investments.
• Returns can be measured by brand awareness, sales, or market share.
• Marketing dashboards monitor performance.
• Customer-centered measures: acquisition, retention, lifetime value, and equity.
• These measures capture not only current marketing performance, but also future performance, resulting in stronger customer relationships.