Principles of marketing chapter 1 Marketing is: managing profitable customer relationships. The twofold goal is: 1. To attract new customers by promising superior value. 2. Keep and grow current costumers by delivering satisfaction. Old marketing sense: telling and selling New marketing sense: satisfying customer needs Marketing starts before the product is produced and goes on throughout the product’s life. Definition marketing in the business context: a process by which companies create value for customers and build strong customer relationships in order to capture value from the customer in return.
The five steps in Marketing: 1. Understand the marketplace and the customer’s needs and wants. 2. Design a customer driven marketing strategy 3. Construct a marketing programme that delivers superior value. 4. Build profitable customer relationships and create customer delight 5. Capture value from customers to make profits and customer equity B2B ( the similar groups or individuals exchange products of value to each other B2C ( not an exchange, this is to fulfill each other’s needs and wants. What is marketing? A managerial process deployed by an organization
What is the objective? To fulfill the needs and wants of the deploying organization How is this achieved? A social process whereby other individuals or groups obtain their needs and wants by creating and exchanging products and value. Understanding marketplace and customer value Needs: the basic physical social and individual needs Wants: specialized needs, developed by culture and individual personality Demands: Human wants backed up by paying ability (buying power) The market offering: Products, Services and experiences.
Companies address needs by putting forth a value proposition, a set of benefits that they promise to customers to satisfy their needs. The value proposition is fulfilled by a market offering. Market offering: a combination of product, services, information and experience to satisfy the customers wants and needs. Sellers don’t have to sell a product, they have to sell a solution to a need or want. Value, satisfaction and quality Customer value: the difference between the values the customer gains and the costs that come along with gaining the product.
Customer’s satisfaction depends on the perceived value and what the gained value actually is. The buyer is delighted when the performance of the product perceives the customer’s expectations. Exchanges, transactions and relationships Exchange is the act of obtaining a desired object from someone by offering something in return. Transaction is a trade between two parties that at least two things of value, agreed-upon conditions, a time of agreement and a place of agreement. Relationships marketing is creating, maintaining and enhancing profitable relationships with customers and other stakeholders.
Principles of Marketing chapter 3 ‘Failing to plan means planning to fail’ Companies usually prepare the following plan: ? The annual plan = current situation, company objectives, the strategy for that year etc. ? The long-term plan = Described the primary factors and forces affecting the organization during the next few years. ? The strategic plan = involves adapting the organization to take advantage of opportunities in its constantly changing environment. Marketing planning occurs at the business-unit, product and market levels. These plans support the strategic plan. The planning process: Analysis ? Planning ? Implementation; turns the strategic plan into action. ? Control A mission states the purpose of a company. Sometimes the mission fades away because it is forgotten or the mission doesn’t fit in the current environment. When a mission becomes formal it is called: Mission statement, the mission statement is a statement of the organization’s purpose; what it wants to accomplish in the wider environment. Mission statements have to be market-oriented. Aspects of a mission statement: ? It defines the business based on satisfying basic customer needs. ? Relevant to the target group. Not too narrow or too broad. ? Realistic ? Specific ? Based on distinctive competencies ? Motivating Visions guide the best missions. And also, the mission statement should provide the company a vision and direction for the following 10-20 years. A mission statement has to change into strategic objectives. The biggest difference between the mission statement and the strategic goals is that the mission statement states the philosophy and direction of the company, whereas the strategic objectives are measurable goals. Strategic audit covers the gathering of vital information. It has two parts: 1.
External audit = a detailed examination of the markets, competitors, business and economic environment in which the organization operates. 2. Internal audit = an evaluation of the firm’s entire value chain. The balance sheet and the operational statement are the two most important financial statements used by companies. The balance sheet shows the assets, liabilities and net worth of a company. The operational statement (income statement) shows company sales, cost of goods sold and expenses. Gross sales (total amount charged to customers) Returns and allowances – Net sales = Cost of goods sold – Gross margin SWOT analysis Opportunities ? Threats ? Strengths ? Weaknesses Green = external Blue = internal Opportunities and Threats: D- demographic = population E – ecological P – political E – economical S – Social- cultural T – technological Strengths and Weaknesses: The most important strengths and weaknesses that have the most effect on a company are called the critical success factors. This list shouldn’t be long, that shows that the company doesn’t know what are the most important strengths and weaknesses. Strengths should be based on facts. The business portfolio is the collection of businesses and products that make up a company.
The best business portfolio fits the company’s strengths and weaknesses to opportunities in the environment. The company has to analyze the current portfolio and decide which businesses should receive, more, less or no investments. The company also has to develop growth strategies for adding new products of businesses to the portfolio. Analyzing the current business portfolio: ? Identify key businesses that make up the company, these are strategic business units(SBU) = a unit of the company that has separate missions and objectives and that can be planned independently from other company businesses. Management decides which SBU’s are attractive and how much support they get. SBU’s are evaluated by two things: o The attractiveness of the SBU’s position in the market or industry. o Strength of the SBU’s position in the market or industry. The Boston Consulting group box [pic] ? Stars: need much investment and will turn in to cash cows when the market growth goes down. ? Cash cows: used to pay the bills ? Question marks: management has to decide if the QM will turn into a star or if they want to drop the SBU. ? Dogs: generate enough to maintain themselves
There are four strategies for each SBU: 1. Invest so the share of the SBU will grow. 2. Invest so the share of the SBU will hold. 3. Harvest the SBU, so the company gets money in short term, regardless of the long term. 4. Divest the SBU by selling it or phasing it out. The General Electric Grid [pic] Zone A: Strong SBU’s where the company must invest in. Zone B: medium in attractiveness, maintain level of investments. Zone C: low attractiveness, the company had to harvest or divest the SBU’s If there are circles that indicate the SBU’s: The bigger the circle, the bigger the market of industry o The bigger the slice that can be seen in the circle, the bigger the market share of the company in this market of industry. Problems with the BCG and GE matrixes: ? Costs time ? Difficult ? Costly to implement ? Looks at current businesses, not at the future. Product/market expansion grid [pic] Market penetration: increase sales in current market without changing the product. Product development: offer modified products in current market Market development: identifying and developing new market segments with current products.
Diversification: Start up or acquire businesses outside the company’s current products of markets. Downsizing the business portfolio is just as important as expanding the business portfolio. Marketing plays a key role in the company’s strategic planning in several ways: ? Provides the marketing concept, building profitable relationships. ? Provides inputs, attractive market opportunities. ? Designs strategies to accomplish objectives. Partnering with customers Marketers in addition to customer relationships management also have to know partnership management.
They have to work closely with other departments to create an effective value chain. But they also have to work close with other companies to create a superior value-delivery system. Every department that adds value to a product is part of the value chain. Value-delivery network is the network made up of the company, the suppliers, the distributers and ultimately the customers. The marketing plan [pic] Marketing audit ? The target market and the position of the company in it ? Market description ? Product review ? Section on competition ? Market shares ? Distribution
Read the rest in the book, hard to summarize SWOT analysis Draws from the marketing audit. o Opportunities o Threats o Strengths o Weaknesses Objectives and issues The company determines the objectives and issues after studying the strengths, weaknesses, opportunities and threats. Marketing strategy = the marketing logic by which the business unit hopes to achieve its marketing objectives. The company decides which customers they will serve and how. Each company has to divide up the total market in segments and decide which one’s they are targeting, this process involves: ?
Market segmentation ? Target marketing ? Differentiation ? Market positioning Market segmentation = dividing up a market into distinct groups of buyers who have distinct needs, characteristics or behavior and who might require separate products or marketing programs. Market segment = a group of customers who respond in a similar way to a given set of marketing offers. Market targeting = the process of evaluating the different market segments and decide in which the company will enter. A company can also choose to enter a curtain market and its related markets (e. g.
Duplo and Lego). Most companies enter a new market by serving a single segment, this proves successful. Market differentiation and positioning Positioning a product in a market means that a company places a product on the market that is clear, distinctive and desirable to competitor’s products in the minds of the target consumers. Positioning starts with differentiation, because differentiation in giving your product superior customer value. When you did this, you can position your product on the market because the consumers will buy it because it gives them more value han the competitor’s products. Marketing mix, the four P’s: ? Product, includes the services and packaging. ? Price ? Place ? Promotion A well structured marketing program blends all the four P’s in it. Marketing implementation Marketing implementation is the process of turning the marketing plans into marketing actions to achieve strategic marketing objectives. Successful marketing implementation depends on how well the company blends its people, organizational structure, decision and reward system and company culture into cohesive action programs that support its strategies.
Marketing budgets Return on marketing investment (marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. It measures the profits generated by investments in marketing activities. This is really hard to measure, because it is hard to measure the extra profit an investment made and showing it in monetary terms. Many companies set the measures in marketing dashboards (marketing performance metrics) which gives the marketers detailed measures they need to asses and adjust their marketing strategies.
Also the marketing ROI is measured in customer acquisition, customer retention and customer lifetime value in the form of profitable customer relationships. So there are three ways of measuring marketing ROI. Because of the marketing ROI there is a P added to the 4 P’s, Performance. Marketing controls Marketing control is the process of measuring and evaluating the results of marketing strategies and plans, and taking corrective action to ensure that marketing objectives ate attained. There are four steps in this process: 1. Management sets specific marketing goals 2.
It then measures its performance in the marketplace 3. Then evaluate the differences between the expected and actual performance 4. Finally management takes corrective measures Operational control involves checking ongoing performance against the annual plan and taking corrective action when necessary. Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities. There are different kinds of marketing organizations: ? Functional organization ( different marketing activities are headed by functional specialists ?
Geographical organization ( sales and marketing people assigned to different countries, regions or districts. ? Product management organization ( for companies with many very different kinds of products. ? Market or customer management organization ( for companies with many different kinds of customers and markets. ? Or a combination of the above ( usually for large companies. Principles of marketing chapter 4 ‘To be successful, a company must provide greater customer value and satisfaction than its competitors’. Companies have to be aware of the actors in the environment that can affect their business like: ?
Suppliers ? Intermediates ? Customers ? Competitors ? Publics ? Etc. Also, they have to be aware of the major environmental factors, like: ? Demographic ? Economical ? Natural ? Technological ? Political ? Cultural These actors and factors together form the Marketing environment, the definition is: the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers. A lot of companies have the problem that they don’t see change as an opportunity, this way their systems, structures and strategies become outdated.
Marketing uses marketing intelligence and marketing research to observe the business environment. The marketing environment consists of Microenvironment and Macroenvironment. Microenvironment consists of the actors close to the company that affect its ability to serve its customers and the Macroenvironment consists of the larger societal factors which I mentioned earlier. The company’s Microenvironment Marketing consists of building up profitable relationships with customers, but also building up relationships with the actors. ? The company ( creating and maintaining internal relationships.
Marketing has to make sure that every department in the company ‘think customer’. ? Suppliers ( supplier developments can seriously affect marketing, price changes , supply availability, supply shortages and delays etc. ? Marketing intermediates ( are firms that help the company promote, sell and distribute its goods to final buyers. (resellers, physical distribution firms, marketing services agencies and financial intermediates). *1 ? Customers ( consumer markets, business markets, reseller markets, institutional markets, government markets and international markets. Competitors ( knowing the competitor means you can use that knowledge be gain advantages in the market. ? Publics *2 ( financial publics, media publics, government publics, citizen action publics and local publics, general public, internal publics. *1 = physical distribution firms help the company stock and move goods from their point of origin to their destinations. Marketing services agencies are the marketing research firms, advertisement agencies, media firms and marketing consultancies that help the company target and promote its products to the right markets. Financial intermediates (e. g. anks) help the company with financial transactions and insurances. They also finance the company. *2 = any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. The company’s Macroenvironment ? Demographic ( really important to companies because it involves people, and people make up markets. The major demographic trends are: population growth, changing age and household structures, educational characteristics and increasing diversity in the population. *3 ? Economical ( The economic environment consists of factors that affect consumers buying power and spending pattern.
There are subsistence economies who consume most of their own agricultural and industrial outputs. At the other extreme there are industrial economies which constitute rich markets for different kinds of goods. *4 ? Natural ( natural resources that are needed as inputs by marketers or that are affected by marketing activities. *5 ? Technological ( Forces that create new technologies, creating new products and market opportunities. *6 ? Political ( laws, government agencies and pressure groups that influence and limit various organizations and individuals in given society. *7 ?
Cultural ( made up of institutions and other forces that affect society’s basic values, perceptions, preferences and behaviors. *8 *3 = ? first we will explain the population growth trends: Changing population, with the example China: one child policy. Because of the policy the parents (six-pocket syndrome) spend 40% of their income on their only child. This gives opportunities in that market. Also the population is ageing, so this gives a whole other market too. ? Second, changing age structure of the population: The changing age structure is all about the different kind of people that were born over the decades.
The changing age structure began with the baby boomers (born in 1946-1964), these people were moving targets, they created new markets (yuppies, yummies, dinkies ( DEWKs, SLORPIES). The next age structure are called the Generation X (GenXers), they grew up during the recession what influenced them. They became more economical cautious, they are less materialistic. The Genxers that are no parent think their jobs come first, than family and the ones that are parents think the other way around. They are conscious buyers! Third, the generation Y, The echo boomers (1977-1994).
These people are good with computers and are a great generation for marketers. Although the generations are different, the marketers don’t have to have a different marketing plan for each. It’s better if they make different market plans for the different lifestyles. The rapid ageing in Europe and other developing countries has been influenced by two trends: 1. The declining birth rate 2. Life expectancy increases Read ‘changing age structure of the population’ carefully in the book, because it is really hard to summarize. ? Third, Changing households: ? Less traditional households More single living and live-togethers of one or both sexes. ? More people are divorcing ? Less people get married ? More woman who work ? Fourth, pressures for migration ? Migration for work ? Easier migrating policies. (inside the EU and also people from outside the EU) ? Migration can slow down ageing populations ? Immigration can help rise the fertility level, because EU outsiders tend to have larger families. ? Fifth, increasing diversity ? Countries vary in ethnic and racial groups ? US ( melting pot ( salad bowl. ? In every market they get into marketers must remember: identify consumer needs and respond to them.
This is why in every country the advertisements are different from the same company. ? Population migration across Europe and from outside of Europe are also making parts of Europe more diverse ? The different languages make the marketing more diverse ? Early generations of ethnic businesses first start with serving their community and then expand. ? Also Gay and lesbian groups are different markets, especially the gay travel and tourism is important. *4 = ? Firstly, the European Union enlargement and integration ? When countries are added to the EU the market changes.
The EU is now the largest economy in the world, the largest exporter in the world and the second largest importer. ? A goal of the European unification is the achievement of greater economic integration among member states. Of great importance to marketers is the progress to a single market, with common policies on product regulation, and freedom of movement of the three factors of production: land, capital and labour. ? Transition into a single market can have short term negative impacts due to the increased competition. ? The Euro is really important too. Secondly, income distribution and changes in purchasing power. ? The global upheaval in technology and communication shifted the balance of power from the West, North American and western European towards rapidly expanding economies of Asia and the Pacific Rim. ? Value marketing is offering financially cautious buyers greater value, by just finding the right combination of product quality and good service at a fair price. ? The income distribution: upper, middle, and lower strata (and sometimes the underclass). ? Finally, the changing consumer spending pattern. Engel’s law: differences noted over a century ago by Ernst Engel in how people shift their spending across food, housing, healthcare, transportation and other goods and services categories as family income rises. *5 = ? Growing shortages of raw materials. ? Increased cost of energy. ? Increased pollution and climate change ( Kyoto protocol; reduce emissions. ? Government intervention in natural resource management *6 = ? Fast pace of technological change, the technology lifecycle is getting shorter. ? Increased regulations, to make sure the products that are produced are safe. *7 = Legislation regulating business ( public policy ? Many laws created at different levels ? The regulations are changing constantly ? The legislations had been enacted for a number of reasons: ? To protect the businesses from each other ? To protect the consumers ? To protect the interests of society ? Increased emphasis on ethics and socially responsible actions ? Social codes and rules of professional ethics in the companies themselves. ? The internet created a new set of social and ethical issues. Personal information available online! ? Companies tie themselves to worthwhile causes to improve their image. 8 = ? Persistence of cultural values ? Core beliefs and values ? Secondary beliefs and values ( more open to change) ? Shift in secondary cultural values ? The major cultural values of a society are expressed in people’s views of themselves, other, as well as in their views of organizations, society, nature and universe. ? Themselves: people vary in their emphasis on serving themselves versus serving others. ? Other: people going out less and staying more at home (cocooning), that suggests that there is more demand for home improvement and entertainment products.
Mollycoddlers: parents that are overprotective. ? Organizations: loyal to company or not, don’t see work as satisfaction or do see it that way etc. ? Society: patriots, reformers or malcontents. ? Nature: ? Universe: People vary in their beliefs about the origin of the universe and their place in it. Religions really effect people on how they think about the universe. Principles of marketing summary chapter 5 Customer buying behavior refers to the buying behavior of the final consumers- individuals and households who buy products or services for personal consumption.
All the final customers make up the consumer market. Analyzing consumer behavior with the following questions: – What – Where – When – Why – How – Who Model of buyer behavior: 1. Marketing and other stimulants: Product, Price, Place and Promotion (marketing), economic, technical, political and cultural (others). 2. Buyer’s black box (buyer characteristics and decision making process) 3. Buyer responses Neuromarketing is the use of neuro-technology to improve marketing decision making. Customer purchases are strongly affected by: Cultural factors ? Culture ? Subculture ? Social class ? Social factors ? Reference groups ? Family ? Roles and Status ? Personal factors ? Age and lifecycle stage ? Occupation ? Economic situation ? Lifestyle ? Personality and self-concept ? And Physical factors ? Motivation ? Perception ? Learning ? Beliefs and attitudes Cultural Factors: Culture: The set of basic values, perceptions, wants and behaviors learned by a member of society from family and other important institutions. Cultural shifts ( more concern about health.
Subculture: A group of people with shared value systems based on common life experiences and situations (nationalities, religions, racial groups and geographic regions). Mature customers are getting a more important market. Social classes: Relatively permanent and ordered divisions in a society whose members share similar values, interests and behavior. They are primarily divided by the labor market. Social factors: Groups: groups influence a person’s behavior. The groups who have direct influence on a person are called the membership groups, some are primary groups, who’s interactions are informal (family, friends, etc. . Secondary groups have formal interactions. Reference groups are groups that have face-to-face influence or indirect influence on a person’s attitude and behavior. The reference groups that people don’t belong to influence them (aspirational groups). Opinion leaders are the persons in a reference group who extra influence the people. Social networking: social interaction carried out over internet media. Family: Two families in a buyers life: 1. Family of orientation: family give person orientation towards religion, politics, a sense of personal ambition, self worth and love. 2.
Family of procreation: influence on daily purchases. Consumer buying roles: The decision making unit (DMU): all the individuals who participate, and influence, the consumer buying-decision making process. The roles are: • Initiator: • Influencer: a person who’s view are advice influences the person’s decision. • Decider: • Buyer: • User: Roles and status: Role: the activities a person is expected to do by the people around him. Status: the general esteem given to a role by society. Personal Factors: Age and life-cycle stage ( family life-cycle. Occupation: Economic circumstances: Lifestyle:
Lifestyle is a person’s pattern of living as expressed in his or her activities, interests and opinions. The technique of measuring lifestyles is known as psychographics (activities, interests, opinions and demographics) Personality and self-concept: Personality: self-confidence, dominance, sociability, autonomy, defensiveness, adaptability and aggressiveness. Self-conception is the image a person has of him-or herself. Psychological factors (arising from the need for recognition, esteem and belonging) Motivation: A need becomes a motive when it is aroused to a sufficient level of intensity.
Sigmunt Freud theory of motivation: a person’s buying decisions are affected by subconscious motives that even the buyer may not fully understand. Maslow’s theory of motivation: Maslow arranged people’s needs in a pyramid: 1. Physiological needs (hunger, thirst) 2. Safety needs (security, protection) 3. Social needs (sense of belonging, love) 4. Esteem needs (self-esteem, recognition, status) 5. Cognitive needs (comprehension, understanding) 6. Aesthetic needs (order, beauty) 7. Self-actualization needs (self-development and realization) 1 being the lowest and 7 being the highest.
The pyramid isn’t internationally the same. Perception: the process of which people select, organize and interpret information to form a meaningful picture of the world. People can form different perceptions because of: • Selective attention: The tendency of people to screen out most of the information that they are exposed to. • Selective distortion: The tendency of people to adapt the information to personal meaning. • Selective retention: the tendency of people to retain only the part of the information to which they are exposed, usually information that supports their attitudes or beliefs.
Subliminal advertising: customers get massages without knowing it. Learning: changes in an individual’s behavior arising from experience. Beliefs and attitudes: a belief is a descriptive thought that a person holds about something. A attitude is a person’s consistently favorable or unfavorable evaluations, feeling and tendencies towards an object or idea. Types of buying decision behavior ? Complex buying behavior: high customer involvement and many different brands. ? Dissonance-reducing buying behavior: high customer involvement and little significant brand difference. Habitual buying behavior: low customer involvement and little significant brand difference ? Variety-seeking buying behavior: low customer involvement but significant perceived brand difference. The buying decision process: 1. Need recognition 2. Information search: obtain information from: personal sources, commercial sources, public sources or experiential sources. 3. Evaluation of alternatives; brand image: the set of beliefs that consumers hold about a particular brand. 4. Purchase decision 5. Post-purchase behavior; cognitive dissonance: buyer discomfort that is caused by post-purchase conflict.
The buyer decision process for new products: A new product is a good, service or idea that is perceived by some potential customers as new. The adoption process is the mental process through which an individual passes from first hearing about an innovation to final adoption. ? Awareness ? Interest ? Evaluation ? Trial ? Adoption Individual differences in innovativeness: Innovators: Early adopters: Early majority: Late majority: Laggards: Influence of product characteristics on rate of adoption: Relative advantage: Compatibility: Complexity: Divisibility: Communicability: Principles of marketing chapter 6 summary
Business buying behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented or supplied to others. The business buying process is the decision making process by which business buyers establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers. A Business market comprises all the organizations that buy goods or services to use in the production of other products and services, or for the purpose of reselling or renting them to others to make a profit.
The major differences between customer markets and business markets are: • Marketing structure and demand ? Fewer buyers, but far lager buyers ? Geographically concentrated ? Business demand in derived demand: The business demand is derived from the demand of consumer goods. ? Business markets have inelastic demands: the total demand for a product that is not much affected by price fluctuations, especially on the short term. ? Business markets have more fluctuating demand. • Nature of buying unit ? More decision participant ? A more professional purchasing effort Types of decisions and decision process ? More complex decisions ? More formalized ? Buyer and seller are more dependent on each other Business buyer behavior Model of business buyer behavior: • The environment (marketing stimuli and other stimuli) • The buying organization (the buying center makes the buying decision process) • Buyer responses. Major types of buying situations: Straight rebuy: a business buying situation in which the buyer routinely reorders something without any modifications. Modified rebuy: with modifications
New task (greatest opportunity and challenge): a business buying situation in which the buyer purchases a product or service for the first time. Systems selling: selling a packaged solution to a problem, without all the separate decisions involved. Participants in the business buying process: Users: members of organization who use the product or service, in many cases they initiate the buying process. Influencers: often help define specifications and also provide information for evaluating alternatives, often technical staff. Buyers: have the authority to select the suppliers and arrange terms of purchase.
Deciders: have formal and informal power to select or approve the final suppliers. Gatekeepers: control the flow of information to others. Buying centre: all the individuals and units that play a role in the business purchase decision-making process. Major influences on business buyers ? Environmental factors ? Organizational factors ? Interpersonal factors ? Individual factors Business buying process 1. Problem recognition 2. General need description 3. Product specification 4. Supplier search 5. Proposal solicitation 6. Supplier selection 7. Order-routine specification 8. Performance review
Institutional markets and government markets Principles of Marketing chapter 8 Sellers markets are markets where companies don’t put extra effort in pleasing customers (near-monopolies and shortages). In a buyers market they do. Nowadays companies have to customer-centered. Customer delivered value is the difference between total customer value and total customer cost. Total customer value can be judged by: image, product, services and personnel. Total customer cost can be judged by: monetary, time, energy and physic costs. Producing costs – selling price = total added value.
Expectations of customers are formed by: past buying experiences, other opinions, marketer and competitor information and promises. A company has to meet the customers’ expectations to create customer satisfaction. A customer-centered company does not strive for maximalization of the customer satisfaction. They do strive for achieving high customer satisfaction. Systems to track customer satisfaction and dissatisfaction: 1. Complaint and suggestion systems 2. Customer satisfaction surveys (because less than 5 per cent of the dissatisfied customers really complaint) 3. Ghost shopping . Lost customer analysis ( exit interviews and monitor the customer loss rate. What does it take to produce and deliver customer value? Value Chain The value chain breaks a company up into nine value-creating activities. This includes 5 primary activities and four support activities. Primary activities: 1. Inbound logistics 2. Operations 3. Outbound logistics 4. Marketing and sales 5. Service Support activities: 1. Firm infrastructure 2. Human resource management 3. Technology department 4. Procurement Problems can occur when departments only think about their own interests.
To avoid these problems companies should pay more attention to smooth management of the core business processes: ? Product developing process ? Inventory management process ? Order-to-payment process ? Customer service process Internet companies often fail at the last process, because the company doesn’t have a face. There are no people that the customers do business with. Solution ( click to talk (chat) system. Customer value delivering system = the system made up of the value chains of the company and it’s suppliers, distributers and ultimately the customer, who work together to deliver value to customers.
Marketing is responsible for designing and managing a superior value delivery system to reach target customer segments. Quality from a customer-centered point of view: The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Six Sigma is a name that is closely associated with the practice of quality management. It is a set of practices to systematically improve processes by eliminating defects. Performance quality ( refers to the level at which a product performs its functions.
Conformance quality ( refers to freedom of defects and consistency with which a product delivers a specified level of performance. A quality-centered company has two major types of responsibilities: 1. Formulating the strategies and policies that direct resources and strive for quality excellence. 2. Deliver marketing quality. Within quality programs, marketing has several rolls: ? Correctly identify the wants and needs of customers ? Marketing must arrange that orders are properly filled in and on time, and must check if the customer gets proper instruction, training and technical assistance in the use of their product. Marketing has to keep in touch with the customers ? Marketing has to gather idea’s of improving products and services of customers Total quality management: programs designed to constantly improve the quality of products, services and marketing processes. Companies invest money in customers because they hope they will turn into a profitable customer: A person, household or company whose revenues in time exceed, by an acceptable amount, the companies costs of attracting, selling and servicing that customer. Customer churn ( Losing customers Customer retention (renewal, magazine.. epurchase rate, packaged-good company). Steps to reduce the customer retention: 1. Measure the company’s retention rate. 2. Identify the causes of customer defection 3. determine which can be reduced or eliminated Customer defection is the amount of customers a company loses to alternative suppliers of a similar of the same service. By reducing this by 5%, a company can gain profit from 25 to a 100 per cent. Relationship marketing Marketing is moving away from a focus on individual transactions and towards a focus on building value-laden relationships and marketing networks.
Relationship marketing involves creating, maintaining and enhancing strong relationships with customers and other stakeholders. The different kind of relationships: ? Basic: sale, no follow-up ? Reactive: sale, encourage the customer to call ? Accountable: sale, salesman calls to check ? Proactive: company calls customer from time to time for new products etc. ? Partnership: company works continuously with customer to discover ways to deliver better value. M2M (machine to machine) marketing and morphing products. Update systems and products by machine, like new software updates etc.
How does a company develop stronger customer bonding and satisfaction? ? Financial benefits ? Social benefits ? Structural ties The main steps in establishing a relationship-marketing programme: 1. Identify the key customers meriting relationship managing 2. Assign a skilled relationship manager to each key customer 3. Develop a clear job description for relationship managers 4. Have each relationship manager develop annual and long-range customer relationship plans. 5. Appoint an overall manager for the relationship managers. Selective relationship marketing is really important.
Companies will only establish and maintain a relationship with (the best) profitable customers. Relating to customers directly is getting more popular, direct marketing should be the ‘marketing model of the next century’. The customers will by the products directly from the companies, without any retail stores. Customer relationship management can be really profitable. A company gets a lot of information from customer’s trough all different kinds of touch points, the problem is that all of this information is scattered throughout the company. With customer relationship management the company gets all this information together in a database.
From this database they will get the important information from (possible) profitable customers. This way they will understand the customer better and provide a higher level of customer service and develop deeper customer relationships. CRM does fail a lot! The main reason for the failures is that companies see CRM as the solution for building profitable relationships, but it is just a part of the overall customer relationship strategy. Transaction marketing is more appropriate the relationship marketing when customers have low switching costs and short time horizons (short-term relationships with the company).
For example: steel. And with relationship marketing the other way around, with an example: office automation systems. Customer relationships: | | | |Sleeping |Power | |Giants |Traders | | | | | | | |Pets |Delinquents | High (Relationship
Revenue) Low Low High (relationship costs) Sleeping giants: Very profitable Power trader: as profitable as pets, lots of revenue but also a lot of costs. Pets: little revenue, little relationships costs. Delinquents: very demanding, but little revenue. Two ways to solve this, send the customers to the competition or option these customers to shift to easier to use products. The 8 Cs competitive domain: By establishing relationships with the following 8 Cs, a company can increase its marketing power: 1. Competitors 2. Challengers 3. Collaborators . Corporation 5. Commodities 6. Components 7. Customers (retailers) 8. Customers (final customers) Principles of marketing chapter 9 summary Target marketing: directing a company’s marketing effort towards one or more groups of customers sharing common needs or characteristics. Targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers.
Market segmentation The steps in market segmentation, targeting and positioning: 1. Segmentation (select customers to serve) 2. Targeting (select customers to serve) 3. Differentiation (decide the value proposition) 4. Positioning (decide the value proposition) Segmenting consumer markets ? Geographic ? Demographic ? Life cycle segmentation: offering products or marketing approaches that recognize the consumer’s changing needs at different stages of their life. ? Gender segmentation: dividing a market into different groups based on gender. Income segmentation: dividing a market into different income groups ? Psychographic = dividing a market into different groups based on social class, lifestyle or personality characteristics. ? Behavioral variables = Behavioral segmentation: dividing a market into groups based on consumer’s knowledge, attitude, use or response to a product. ? Occasion segmentation: dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase or use the purchased item. User status: non-users, ex-users, potential users, first-time users and regular users of a product. ? Usage rate: light, medium or heavy users. ? Loyalty status: degree of loyalty. But the companies can also use multiple segmentation bases such as geodemographics: the study of the relationship between geographical location and demographics. Segmenting business markets The same as consumer markets + business customer demographics, operating characteristics, buying approaches, situational factors and personal characteristics.
Segmenting international markets All above + economic factors, cultural factors, political or geographical. Intermarket segmentation: forming segments of consumers who have similar needs and buying behavior even though they are from different countries. The requirements for effective segmentation ? Measurable ? Accessible ? Substantial ? Differentiable ? Actionable Market targeting Evaluating market segments, three factors are important: • Segment size and growth • Segment attractiveness • Company objectives and sources [pic]