Chapter 1.pdf

PRINCIPLES OF MARKETING MKT204 CHAPTER 1 JUHI SURYAVANSHI NAVRACHNA UNIVERSITY BASICS CONCEPTS OF MARKETING  Marketing can be de ined as the process by which companies create value for customers and build strong customer relatio...

PRINCIPLES OF MARKETING MKT204 CHAPTER 1 JUHI SURYAVANSHI NAVRACHNA UNIVERSITY BASICS CONCEPTS OF MARKETING  Marketing can be de ined as the process by which companies create value for customers and build strong customer relationships to capture value from customers in return. Simply put, marketing is managing pro itable relationships, by attracting new customers by superior value and keeping current customers by delivering satisfaction. Marketing must be understood in the sense of satisfying customer needs. A ive-step model of the marketing process will provide the structure of this chapter. Understanding the marketplace and customer needs Designing a customer-driven marketing strategy Constructing an integrated marketing plan Building customer relationships Capturing customer value f f f  UNDERSTANDING THE MARKETPLACE AND CUSTOMER NEEDS  HERE ARE FIVE DIFFERENT CORE CUSTOMER AND MARKETPLACE CONCEPTS. 1. Customer needs, wants and demands. Human needs are states of felt deprivation and can include physical, social and individual needs. Wants are the form human needs take as they are shaped by culture and individual personality. Demands are human wants that are backed by buying power. 2. Market offerings are a combinations of products, services and experiences offered to a market to satisfy a need or want. These can be physical products, but also services – activities that are essentially intangible. The phenomenon of marketing myopia is paying more attention to company products, than to the underlying needs of consumers. 3. Value and satisfaction are key building blocks for customer relationships. 4. Exchanges are the acts of obtaining a desired object form someone by offering something in return. Marketing consists of actions trying to build an exchange relationship with an audience. 5. A market is the set of all actual and potential buyers of a product or service. Marketing involves serving a market of inal consumers in the face of competitors. f DESIGNING A CUSTOMER- DRIVEN MARKETING STRATEGY Marketing management is the art and science of choosing target markets and building pro itable relationships with them. The aim is to ind, attract, keep and grow the targeted customers by creating and delivering superior customer value. The target audience can be selected by dividing the market into customer segments (market segmentation) and selecting which segments to go after (target marketing). A company must also decide how to serve the targeted audience, by offering a value proposition. A value proposition is the set of bene its or values a company promises to deliver. f f f  THERE ARE FIVE ALTERNATIVE CONCEPTS THAT COMPANIES USE TO CARRY OUT THEIR MARKETING STRATEGY. 1. The production concept: the idea that consumers will favour products that are available and highly affordable and that the organisation should therefore focus on improving production and distribution ef iciency. 2. The product concept: the idea that consumers will favour products that offer the most quality, performance, and features and that the organisation should therefore devote its energy to making continuous product improvements. 3. The selling concept: the idea that consumers will not buy enough of the irm’s product, unless it undertakes a large-scale selling and promotion effort. 4. The marketing concept: the idea that achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. It can be regarded as an “outside-in view”. 5. The societal marketing concept is the idea that a company’s marketing decisions should consider consumer wants, the company’s requirements, consumers’ long-term interests and society’s long-term interests. Companies should deliver value in a way that maintains consumers and society’s well-being. f f  CONSTRUCTING AN INTEGRATED MARKETING PLAN A marketing strategy outlines which customers it will serve and how it will create value. The marketer develops an integrated marketing plan that will deliver value to customers. It contains the marketing mix: the tools used to implement the strategy, which are the four Ps: product, price, place and promotion. BUILDING CUSTOMER RELATIONSHIPS  The irst three steps all lead to this one: building pro itable customer relationships. Customer relationship management (CRM) is the overall process of building and maintaining pro itable customer relationships by delivering superior customer value and satisfaction. The crucial part here is to create superior customer-perceived-value, which is the customer’s evaluation of the difference between all the bene its and all the costs of a marketing offer, in relation to those of competing offers and superior customer satisfaction, which is the extent to which a product’s perceived performance matches a buyer’s expectations. Customer delight can be achieved by delivering more than promised. f f f f Customer relationships exist at multiple levels. Customer-managed relationships: marketing relationships in which customers, empowered by today’s new digital technologies, interact with companies and with each other to shape their relationships with brands. consumer-generated marketing: brand exchanges created by consumers themselves, by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers. Partner relationship management means working closely with partners in other company departments and outside the company to jointly bring greater value to customers. supply chain is a channel, from raw material to inal product, and the companies involved can be partners through supply chain management. f CAPTURING CUSTOMER VALUE  The inal step of the model involves capturing value. Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Companies must aim high in building customer relations, to make sure that customers are coming back. Good CRM can help increase the share of customer, the portion of the customer’s purchasing that a company gets in its product categories. Customer equity is the total combined customer lifetime values of all of the company’s customers. It is the future value of the company’s customer base. f When building relationships, it is important to build the right relationships with the right customers. Customers can be high- or low-pro itable and short-term or long-term oriented. When putting these on two axes, a matrix of four terms appears. 1. Butter lies are pro itable, but not loyal and have a high pro it potential. 2. True friends are both pro itable and loyal and the irm should invest in a continuous relationship. 3. Barnacles are loyal, but unpro itable. If they can’t be improved, the company should try to get rid of them. 4. Strangers are not loyal and unpro itable, the company should not invest in them. f f f f f f f f CUSTOMERS RELATIONSHIP GROUP