UNIT 1 STRATEGIC MARKETING - Needs, Wants, and Demands PDF

UNIT 1 STRATEGIC MARKETING 1. MARKETING: NEEDS, WANTS AND DEMANDS Simply advertising? Advertising is a part of marketing; it makes people discover products, so it has a social function. Just selling? sells are also a part of marketing. DEF: Marketing is a social and managerial process by...

UNIT 1 STRATEGIC MARKETING 1. MARKETING: NEEDS, WANTS AND DEMANDS Simply advertising? Advertising is a part of marketing; it makes people discover products, so it has a social function. Just selling? sells are also a part of marketing. DEF: 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. The marketing process: Create value for customers and build customer relationships Capture value from consumers’ side —credit value customers in return. price – cost of production = profit Understand Design a Construct an Build Capture value the customer- integrated profitable from customers marketplace driven marketing relationships to create profits and customer marketing program that and create and customer needs and strategy delivers superior customer equity wants value delight The marketing process starts with a firm that looks into the needs of customers, e.g., Amazon notices a trend that many people are looking for a videogame chair; with this information, they may add one to the “Amazon basics”. Another example: Zara looking in real time at what is being sold worldwide. Firms decide which segment they are targeting. They try to sell their product/service, and, sometimes, it becomes a relationship. Brands have a target. Everyone needs status sometimes (customers with status needs). Companies exist to create value for shareholders. The value of a company in the stock exchange depends on their future profits. The value of a brand depends on the number of sells that are going to be successful. VALUE OF A BRAND —> BRAND EQUITY. Without the creation of value there is no brand, no business. A business only makes sense if you are able to sell and make a profit. A simplification of a market system: company Suppliers Marketing Consumers e.g., supplier of intermediaries batteries Competitors e.g., Mediamarkt Major environmental forces Sometimes the consumer is another company (B2B) (def) States of deprivation: o Physical —hunger, (clothing), warmth, safety NEEDS o Social —belonging and affection o Individual —knowledge and self-expression Form that needs take as they are shaped by culture and WANTS individual personality (coffee vs. tea) DEMANDS Wants backet by buying power Discussion: - Is every want related to the same need? Sometimes you buy a sweater because it is cold, and sometimes because of self-expression. No, a sweater can be sold because of need, or status, or personal realization. The same want can solve different needs, and vice versa. - Does every want mean there will be a demand? No, it depends on the buying power of consumers, and their will to spend the money. E.g., for self-realization I want a Ferrari, but I don’t have the money; but there are other products that I’ve always wanted to have, like a camera of 900€ → I have the money, but I don’t want to spend that money on the camera. - You need customers who have the money, but also the want to spend the money.  2. GOODS, SERVICES AND EXPERIENCES e.g., Maldon Product Sea salt e.g., Disney Needs Land. wants demands Value proposition Experience* Market Service* offering e.g., haircut *Services are inseparable from consumers. Information *Experiences normally need a product e.g., Moody’s (financial and a service component. info to potential investors)//Tripadvisor “Market offering” is kind of the same as “value proposition” but it is better to use “value proposition”; it has 4 components (product, service, experience, and information). Salt is basically a commodity, but Maldon Sea salt is much more expensive (80 times the price of regular salt). Customers feel some added value (because if not, nobody will buy it). (+) Modern marketing was invented was when a soap manufactured stamped their brand name on a soap bar. Before then brands didn’t exist. Without a brand is very difficult to understand the idea of marketing. Tangibilization of services → e.g., welcome packs Products also bring services nowadays → you buy a car, and you have a warranty service, etc. Services are not pure services, and products are not pure products. Selling an experience is different from saying that a product has an experiential side → haptics in Apple. E.g., Smell of new in cars—> car sellers keep some smell in the car so that when you sit, you smell the smell of new; they are not selling an experience, but a product with an experiential side. Discussion: what is the difference between buying a handbag at: - Carolina Herrera’s corner al El Corte Inglés - Carolina Herrera’s own boutique - Carolina Herrera’s campaign on Vente-Privée The experiences are different: in the boutique you can have a personal treatment, feeling special, status. Maybe buying online you have more information, and it is also an advantage for the new generations that prefer to not have to treat with people. All of these is because customers are different. The experience is different —> in the boutique, experience is maybe more upscale, but not better (we can only see if it is better by looking at the sales of them); we cannot say that one experience is “better” than another one, because it depends on the customers’ preferences.  3. VALUE, SATISFACTION AND LOYALTY Companies make value propositions as a reply to consumers’ demands. Purpose: Consumers choose amongst market offerings based on: capturing part o Expectations on customer value of this value o Expectations on satisfaction Low cost is not the best strategy; what we actually need is companies offering a lot And turn it of value that someone would capture (offer something that customers really value). into a profit Discussion: - What is the conceptual difference between market offering and customer’s expectations? o Market offering —objective and rational o Customer’s expectations. —-(purely) subjective and perceptual expectations can be influenced by companies. Each of us interpret the offering in a different way. - Shall a company set expectations high or low for their market offering? o Too high expectations mean higher sales on the short term. They are very difficult to maintain. o If market offering does not live up to expectations, this can lead to dissatisfaction, and lower sales on the long term. It can be interesting if product is sold every 10 years, e.g., mattress. o Too low expectations mean lower sales on the short term. You don’t deceive anyone, but you may not make it to the long run. o Lower sales on short term may prevent the success on the long term. Firms have to find a balance so that pros don’t outnumber the cons. They shouldn’t promise what they cannot really deliver. If you liked a product from a brand, then you will have a higher expectation the next time Exchange- you buy a product; you will also have loyalty purchase for the brand Satisfaction: if your From expectations you perceive expectations are customer value. You compare lower than what the value you get with the you get money you have to spend. How is value created: Production concept: when a brand offers value by making the product affordable and available. E.g., when modern cars were launched: before that, cars were made to customers’ specifications, but then cars were standardized, so price went down, and cars became available. E.g., Zara: in traditional shops, if you got the trend right, you would have a lot of profit, if not, your problem. Zara is looking and trends in real time. If they detect many green trousers sold in Italy, they produce more in 10 days. Very quickly in the store. Ikea: the flat package, no empty space → efficiency of the product. Product concept: about making the product as good as possible (evolve). Every time your update, it gets more costly, so, the problem is that it loses the focus on customers, because we don’t always want the best product (maybe we don’t want a 200€ handbag, but a 20€). Quality and performance E.g., Apple Selling concept: if you don’t sell enough, you’re not pushing enough —> invest in advertising and sales forces. It cannot be the only focus. Salesforce and promotion. Marketing concept: it is about putting the customer in the center: to try to understand their needs and offer something that satisfies them. Solving customers’ needs and wants. Societal concept: adds dimension of society (aims that the sells won’t be bad for the society (pollution…) Sustainable concept: it takes into account that an exchange today shouldn’t have bad effects on the future (natural resources, pollution…) They are related to “corporate social responsibility”. Increasing present and future society’s well-being. 4. EXCHANGES, TRANSACTIONS AND RELATIONS Exchanges Def. Exchange is the act of obtaining a desired object from someone by offering something in return. On many occasions, instead of product x product, the exchange is product x money (“lucrative exchange”). Conditions that make the exchange possible: At least two parties must participate. Each must have something of value to offer the other. Each party must also want to deal with the other party. Each party is free to accept or reject the other’s offer. Exchange only takes place when both parties reach an agreement. Marketing theory is concerned with two questions: Every marketing decision can be solved by understanding: - Why do people and organizations engage in exchange relationships? - How are exchanges created, resolved, or avoided? Types of exchange: Attention entertaining Lucrative (value product more than money. At the beginning, all Money car Audience. money exchanges were lucrative, but in the 70s, they extended concept to non- Money lucrative → dating someone is an ad services exchange) - non lucrative Restricted (2 agents: seller and buyer) – generalized (scheme) – complex (not 2 parties. E.g., the town hall has no money, but they want to improve the city, and there is a construction company that wants to build a parking. The town hall offers the right to make a parking and exploit it as long as you make a beautiful spot to improve the city; the town hall get admiration, the constructor makes a profit, and citizens get an improvement of the city). e.g., complex exchange: TOWN HALL Profits from the Re-election parking A beautiful square CONSTRUCTION CITIZENS (upgrade of town) COMPANY Transactions and relations Transactional exchange: happens only once, separated from past and future. Def. one in which there are no social elements, no further communication (if you’re talking about a bottle of water, you only talk about quantity, composition, etc., nothing apart. No expectations for the future: the brand is irrelevant, you haven’t tasted the brand before, you don’t commit to anything in the future. Pure: only matters what you get and pay today. o One time exchange with no social elements: ▪ No further communication. ▪ Not expectations for the future. Only relevant thing is what I am getting for my contribution to the exchange. ▪ Money as a convention? You do it because you trust the money will allow you to buy something in the future. Money is a convention, actually. Relational exchange: the communication goes beyond the product’s basic characteristics. E.g., you go into a store where you have been buying for years, and a salesperson knows you very well: he knows what he is going to show you based on your previous purchases, and they know that you will come back. Maybe the salesperson adds a little belt free of charge, because you are a good customer, and he wants to show appreciation. Maybe you have loyalty, with every purchase you get some points which may led to a discount, or something free, etc. maybe he knows your family and he asks you about them (how is your mother? → further communication).  o Includes communication beyond basic characteristics of the exchanged values. o Considers future expected returns. Discussion - Can exchanges be other thing but pure transactions or relations? We define it for the limit, but most are in between. - Propose a pure transactional exchange. Vending machines, changes in currencies, buying unbranded petrol in a road you don’t plan to go to again. Pure relationship: you partner with a supplier … - Is a relational exchange always better than a transactional exchange? No, it depends on what does the customer want. - When a customer buys repeatedly from a company, can we say that a relational exchange is happening? It is difficult to have a relation before having a few transactions. Maybe it is not sufficient, but it is necessary. After transactions maybe you start to feel attached to the brand. The share of wallet gives info about loyalty of customer: if Apple wants to keep growing the brand with a customer whose share of wallet is 1 (all of his/her products are from the same brand, in this case Apple), they would have to invent something new. However, if it wants to sell to a customer with shared wallet (his/her products are from different brands), it can still sell something they have. Knowing the share of wallet of customers, you are facing is important to set your strategy. To sell more products to customers you already have is more difficult than getting new ones. Transactions and relations are different for: - B2C (business to consumers): many customers with low margins. - B2B (business to business): less customers with margins. Interested in having a good relationship with businesses. B2C: lot of customers but only sell once. o Customer delight o Loyalty o Share of wallet Customer o Engagement equity Customer-engagement marketing: - Fostering direct and continuous customer involvement in shaping brand conversations, brand experiences and brand community. - Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumers’ conversations and lives. Ambiguous: do I have a lot of products of the same brand (e.g., Logitech)? Yes, but do I talk about the brand much? Do I think it is part of myself? Maybe not. Apple watch could be, but Logitech projector not so much. Are all customers worth our dedication? not all customers are the same, therefore, not all customers are equally profitable. butterflies: good fit with needs. They hunt a lot and always look for the best deal. We try to capture as much value from them on s/t* it is not profitable to invest in customer relationships. Strangers: little fit with their needs. Shouldn’t invest in a relationship, just make money at every transaction. Barnacles: very loyal but not profitable. Fire them! They keep coming to the business, they give you a lot of work but buys very little. E.g., client who tries lots of clothes but then buys nothing. True friend: strong fit with their needs. Invest in the relationship until they become endorsers of the brand. High engagement in B2C, partnership in B2C). They are good customers, they trust you… You need to know what customer you are dealing with to know how to treat them. You should try to push away only barnacles. E.g., banks with bank fees → they set up fees to push away barnacles because they are no profitable (they “fire” them). 5. THE MARKETING PLAN No strategy is best for all companies. Each company must find the way that makes more sense given: its situation, opportunities, objectives, and resources. There are three stages of Marketing Planning: 1) the Strategic Plan, 2) the Marketing Process, 3) ways of putting the Plan into action. the Strategic Plan (it is at corporate level) business unit, product, corporate level and market level defining the setting Company designing the planning marketing Company mission objectives and business portfolio and other goals functional strategies corporate level (which is above marketing) → it is the consequence of decisions happening at the corporate level. ****** the Marketing Process The marketing process starts with an analysis: what tools and resources do we have? What are the company’s objectives? Do we need to use all our resources in order to obtain our goals? 4 Ps: Price, place, product, promotion First: know what resources you have (sales, profits…). second: where can I go with these resources? You need to know what is feasible with resources and know where you want to go. third: put the means to it. Analogy with the boat. E.g., Massimo duty analysis. Planning: you want to increase the average ticket, but not by increasing prices because we don’t want to alter them (not profitable). b. Develop: marketing plan: offer accessories at check-out. Cross-selling: when you go to the supermarket and next to the chips there is a soda; they put products which go well together, which are complements. c. Implementation: which accessories? We put socks at 9€ at the counter, and the cashier will offer them to clients. Place: displays. Promotion: “why don’t you add a pair of socks to your order? They are great and at such a good price…”. d. Control: - Measuring results: we make an average ticket comparison some months later - Evaluation: was it profitable? If so, how can we make it even more? If not, what can we change? - Corrective action: correcting or improving the plan. All this plan costs money, so you need an investment. You do marketing actions to get something: they are an investment. ways of putting the plan into action: STRATEGIC MANAGEMENT STRATEGIC MARKETING MARKETING POLICIES Mission Value proposition 4 P’s Strategic audit Environment Analysis SWOT analysis Consumer Behavior Product and Brand business portfolio Market Segmentation Distribution Channels Growth Strategies Market Targeting Price and Sales Promotion Partnering/relationships Market Differentiation Advertising and General Demand Estimation Promotion Marketing policies are a consequence of marketing strategies. What does a Marketing Plan look like? - executive summary quick overview for quick reading: main goals and recommendations in the plan. WE WRITE THIS LAST - Marketing audit: background data on the market, product, competition, and distribution - SWOT analysis  - Objectives and Issues: which are the objectives to attain during the plan’s term? what issues from two previous steps may affect them? - marketing strategy: Broad Marketing Approach. customer analysis, segmenting, differentiating, positioning. - Marketing mix: Product, Place, Price, Promotion - Budgets: resources needed to implement the plan. expected outcomes. - Controls: how will the Marketing Plan be monitored? With investments you try to create marketing returns. E.g., a customer goes to buy trousers and he finds socks that go well, so he ends up even happier. BONUS TRACK: LATEST MARKETING TRENDS latest upon latest: - emotional marketing: we can classify the brand by how much we respect (functional side). - online marketing: from commercial TV (google ads). They need to balance because they are very transactional, and it doesn’t make brand image. - viral marketing: word of mouth. Influencers. - geo-marketing: taking advantage of location of customers. - neuro-marketing: set of tools which looks for the part where the brain activity takes place. In order to study pleasure and losses. The part that activates when we feel pleasure is the nucleus account. The insula/amigdala is related with fear, losses, prices. You can track neural activity signaling pleasure and losses. e.g., experiment with wine and prices: same wine but people felt more pleasure when they were told the price was higher rather than cheaper. Tools: electroencephalograms: measure electric properties. It is difficult but very good temporal emissions (precise on time). functional magnetic resonance: it shows very easily where the act is happening. It measures magnetic properties. Every time there are connections between neurons, hemoglobin sends oxygen to that part. This emits iron which has magnetic properties. Measures actions are happening every 3 seconds by very precise on an area, but without time. Conductivity on the skin as a consequence of brain activity. eye tracking: marketing research which measures where eyes go when shopping. When a person is attracted to a product, their pupils widen as a consequence of a neural act. these last two are not NM because they are not directly from the brain. 6. CONCLUSION Share of customer = share of wallet. Customer equity = value that you are capturing from your potential customers for the future. Aggregation of customer lifetime value from potential customers.