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Marketing: Managing profitable customer
relationships
2
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Real Marketing around us
4
Where is marketing? Shopping malls? Super markets? TV
commercials? Magazines? Web pages?
What is Marketing in your opinion? keywords? Selling?
Advertising?
Real Marketing around us
5
Why and how to do Marketing?
Successful companies know that if they take good care of their customers, market share and profits will follow.
Wal-mart, the world’s largest retailer, “Always low prices, Always!”
Disney theme parks, “make a dream come true today.”
Dell makes it easy for customers to design their own “personal ”computers.
Marketing defined
6
Rethink of the keywords: Management? Customer? Relationships? Profit?
Marketing is managing profitable customer relationships, or, the process by which companies create value for customers and build strong customer relationships in order to capture value from customer in return.
selling and advetising are only the tip of marketing iceberg- a set of marketing tools that work together to satisfy customer needs and build customer relationships.
The Marketing Process
7
In the first four steps to understand customers, to create customer
value, and to build strong customer relationships. In the final step to
capture value from customers in turn.
Understand the
Marketplace and
customer needs
and wants
Design a
Customer-driven
Marketing
strategy
Construct an
integrated
marketing program
that delivers
superior value
Build profitable
Relationships and
create customer
delight
Creat value for customers and build customer relationships
Capture value from
customers to
create profits and
customer equity
Capture value from customers in return
FIGURE A simple model of
marketing process
Marketing: Managing Profitable Customer
Relationships
8
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Understanding the Marketplace and
Customer Needs
9
Customer Needs, Wants, and Demands
Market Offerings (Products, Services, and Experinces)
Customer Value and Satisfaction
Exchange and Relationships
Markets
Customer Needs, Wants&Demands
10
Needs: states of felt deprivation. Basic physical needs for food, clothing, warmth and safety. Social needs for belonging and affection. Individual needs for knowledge and self-expression.
Wants: the form human needs take as shaped by culture and individual personality. Needs for food, American V.S. Chinese.
Demands: human wants backed by buying power.
Consumer research is conducted, why?
Market Offerings
11
Consumer’s needs and wants are fulfilled through a market offering.
Market Offering: a certain combination of products, services, information, or experinces offered to satisfy a need or want.
Market myopia: the mistake of paying more attention to the specific products a company offers than to the benefits and experinces produced by these products.
Smart marketers look beyond the attributes of the products and services they sell, but create brand experinces for consumers.
“Consumers want more than attributes and benefits, and even solutions. They want delightful shopping, usage, and service experiences they look forward to, time after time.”---A.G.Lafey, CEO of Procter&Gamble
Customer Value and Satisfaction
12
How do Customers choose among market offerings?
Expectations are formed about the value and
satisfaction that various market offerings will deliver.
Marketers must be careful to set the right level of
expectations.
Customer value and customer satisfaction are key
building blocks for developing and managing
relationships.
Exchanges and Relationships
13
Marketing occurs when people decide to satisfy needs and
wants through exchange relationships.
Exchange: the act of obtaining a desired object from someone by offering something in return.
Beyond simply attracting new customers and creating
transactions, the goal of marketing is to retain customers
and to maintain exchange relationships.
Marketers want to build strong relationships by consistently
delivering superior customer value.
Markets
14
Market: the set of all actual and potential buyers of a product or service.
Marketing means managing markets to bring about profitable customer relationships.
Activities such as product development&research, communication, distribution, pricing and service are core marketing activities.
15
All of the factors in the system are affected by major environment forces(demographic, economic, techlological, polictical/legal, social/cultural).
The arrows represent relationships that must be developed and managed.
FIGURE Elements of a modern
marketing system
suppliers
Company
(marketer) Competitors
Marketing
intermediaries
Final users
Major environment forces
Marketing: Managing Profitable Customer
Relationships
16
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Designing a Customer-Driven Marketing
Strategy
17
Two questions: Who(target market)?How(value proposition)?
Selecting a customer to serve
Choosing a value proposition
Marketing management orientations The production concept
The product concept
The selling concept
The marketing concept
The social marketing concept
Selecting Customers to Serve
18
Marketing management: the art and science of choosing target markets and building profitable relationships with them.
Marketers must decide first who it will serve, by
dividing the market into segments of customers(market
segmentation) and selecting which segments it will go
after(target marketing).
Simply put, marketing management is customer
management and demand management.
Choosing a Value Proposition
19
To decide how it will serve targeted customer-how it will
differentiate and position itself in the marketplace.
A company’s value propostition is the set of benefits or
values it promises to deliver to consumers to satisfy their
needs.
Value propostitions differentiate one brand from another,
by answering the customer’s question, “why should I buy
your brand rather than a competitor’s ?”
“it gives you wings!”
Marketing Management Orientations(1/4)
20
What philosophy should guild to design marketing
strategies, for example, how to put the weight of interests
of customers, the organization, and society?
Five alternative concepts, the production, product, selling,
marketing, and societal marketing.
Marketing Management Orientations(2/4)
21
Production Concept: the concept that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency.
Product Concept: the idea that consumers will favor products that offer the most quality, perfomance, and features and that continuous product improvements should be made.
Selling Concept: the idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion. The aim often is to sell what the company makes rather than making
what the market wants.
Marketing Management
Orientations(3/4)
Marketing concpet: the philosophy of the importance of knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.
Focus Means Ends
Older orientations
Products Production and selling
Profits through sales volume
Marketing concept
Customer needs
Integrated marketing
Profits though customer satisfaction
22
Table 1.1 Maketing orientations contrasted
Marketing Management Orientations(4/4)
23
Societal marketing concept: The principle that maketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and the society’s well-being.
Society(Human welfare)
Company(Profits) Consumers(Want Satisfaction)
Figure Three
Considerations
underlying the
societal marketing
concept
The oil leak was first detected on June 4, 2011, but COPC and CNOOC remained silent until the spill was exposed to the public by the media late in July, 2011.
康菲石油中国有限公司
Marketing: Managing Profitable Customer
Relationships
24
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Preparing an Integrated Marketing Plan
and Program
25
An integrated Marketing program starts to deliver the intended value and build customer relationships by transforming the marketing strategy into action.
The marketing program consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement its marketing strategy.
The major tools are called the four Ps of marketing: product, price, place and promotion.
The firm must blend these mix tools into a comprehensive, integrated marketing program that communicates and delivers the intended value to chosen customers.
Marketing: Managing Profitable Customer
Relationships
26
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Building Customer Relationships
27
Customer Relationship Management
The changing Nature of Customer Relationships
Partner Relationship Management
Customer Relationship Management
28
Relationship Building Block: Customer Value and
Satisfaction.
Customer Relationship Levels and Tools
Relationship Building Blocks: Customer
Value and Satisfaction
29
Customer perceived value: customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Value proposition: intended value at the company’s side;
evaluation: subjective and personal; difference among;
How we make a purchase decision; select brand with greatest CPV.
Customer satisfaction:the extent to which a product’s perceived performance matches a buyer’s expectations.
an extent of match, between; highly satisfied and delighted;
Higher levels of CS lead to greater customer loyalty,better company performance in turn.
CRM: process of building and maintaining profitable customer relationships by delivering superior customer value & satisfaction.
“Superior”, two levels of meanings.
Customer Relationship Levels and Tools
30
Companies build appropriate cumstomer relationships at different levels, depending on the nature of the market. low-margin customers, basic relationships;
high-margin customers, full partnerships.
There are tools developed for gaining customer loyalty and retention, such as frequency marketing program, club marketing programs, etc.. Reward customers who buy frequently or in large amounts.
Offer members special benefits and create member communities.
Case: Bike Friday
31
What did you learn from the story? What does the story try to explain in the language of Marketing?
What is the nature of the target market? What kind of market offering does the company provide? How does it differentiate and position itself?
Why did the company decide to cultivate the “community”? How did the company cultivate its loyalty and brand?
Did the company benefit from its customer delight? How?
Case: Bike Friday
32
What does the story try to explain in terms of Marketing?
How to create customer delight and build customer
relationships.
“brands need to be built for the long haul”.
“Customer evangelism strategy has been crucial to the
company’s success”.
33
What is the nature of the target market?
“40-something, well-heeled professionals who travel extensively
and cherish personalized service”.
What kind of market offering does the company provide?
How does it differentiate and position itself?
The unusual styling of the custom-fit, high-end travel bikes;
Bike Friday bikes fold in seconds, pack into airline suitcase, and
ride like a full-size performance bike.
Curiosity factor: a powerful way to reach new customers.
34
Why did the company decide to cultivate the “community”?
Why is it important to its success?
Small company with small marketing budget;
Creating relationships and community makes sense, given the nature
of the company’s taget customer.
“We get key customers excited to be involved”, and “They attract
others and this create community”
How did the company cultivate its loyalty and brand?
Bike clubs: 30 Clubs of America to generate referrals; free to anyone,
regardless of brands;
Newsletters & catalogs: pictures of happy owners biking all over the
world;
Web forums: “community” page welcomes new owners; send photos
and share travel stories; e-mail discussion list creates interactions;
Referral rewards program: prepaid postage cards; Bonus provided
when a successful purchase happens.
35
Did the company benefit from its customer delight? How?
Customer delight creates a voluntary customer sales force;
1/3 of its 10,000 customers and 29% of the company’s sales
came from the referral program;
“Our customers were our best advertisers-if we made them
happy”!
Building Customer Relationships
36
Customer Relationship Management
The changing Nature of Customer Relationships
Partner Relationship Management
The changing nature of customer
relationships(1/2)
37
Relating with more carefully selected customers
Yesterday’s companies practiced mass marketing: selling in a standarlized way to any customer who comes along.
Companies now are targeting fewer, more profitable customers: selective relationship management.
Once identifying profitable customers, firms create attractive offers and special handling to capture these customers and earn their loyalty.
The changing nature of customer
relationships(2/2)
38
Relating for the long term
Companies today face some new marketing realities, changing demographics, more sophisticated competitors, and overcapacity in many industries.
On average, it costs 5 to 10 times to attract a new customer as to keep a current customer satisfied.
Firms are using CRM to retain current customers and build profitable, long-term relationships. The new view is that marketing is the science and art of finding, retaining, and growing profitable customers.
Building Customer Relationships
39
Customer Relationship Management
The changing Nature of Customer Relationships
Partner Relationship Management
Partner Relationship Management(1/2)
40
PRM: Working closely with partners in other company departments and outside the company to jointly bring greater value to customers.
Partners Inside the Company
Rather than assigning only sales and marketing people to
customers, cross-functional customer teams are needed, and
every employee must be customer focused.
Partner Relationship Management(2/2)
41
Marketing Partners Outside the Firm
Supply chain management works to strengthen the connections with
partners along the supply chain from raw materials to components
to final products.
Companies may work with suppliers to improve quality and
operation efficiency, and with distributors or retailers for service
support.
Competitors work together for mutual benefit.
From “if u can’t beat them, join them”, to “join them and you can’t
be beat”.
Strategic alliances is a relationship between two or more parties to
pursue a set of agreed goals or to meet a critical business need while
remaining independent organizations.
Marketing: Managing Profitable Customer
Relationships
42
What is Marketing?
Understanding the Marketplace and Customer Needs
Designing a Customer-Driven Marketing Strategy
Preparing an Integrated Marketing Plan and Program
Building Customer relationships
Capturing Value from Customers
Capturing Value from Customers
43
The outcome of creating customer value: customer
loyalty and retention, share of customer, and customer
equity.
Creating Customer Loyalty and Retention
Growing Share of Customer
Building Customer Equity
Creating Customer Loyalty and Retention
44
Even a slight drop from complete satisfaction can create an enormous drop in loyalty, which result in losing a customer.
Customer lifetime value: the value of the entire stream of purchases that a customer would make over a lifetime of patronage. Assessing customer lifetime value makes sense that working to retain
and grow customers makes good economic sense.
The aim of CRM is to create not just customer satisfaction, but customer delight which results in customer loyalty and brings good company performance. How to keep customer coming back---Rule 1: The customer is always
right; Rule 2: If the customer is ever wrong, reread Rule 1!---Stew Leonard.
Growing Share of Customer
45
Share of customer: the portion of the customer’s purchasing that a company gets in its product categories.
Share of wallet, share of stomach, etc..
To increase the share of customers, firms can offer greater variety to
current customers, or cross-sell and up-sell in order to market more
products and services to existing customers.
Cross-sell: to provide existing customers the opportunity to
purchase additional (complemental) items offered by the company.
Up-sell: to induce the customer to purchase more expensive items,
upgrades or other add-ons.
Building Customer Equity
46
Companies want not only to create profitable customers,
but to “own” them for life, and that comes to Customer
Equity.
What is Customer Equity?
CE: the total combined customer lifetime values of all the company’s customers.
The ultimate aim of CRM is to produce high customer equity.
Customer equity is a better measure of a firm’s performance than
current sales or market share.
47
Building the right relationships with the right customers
Different types of customer require different relationship
management strategies. The goal is to build right
relationships with right customers.
Butterflies: Good fit between offerings and customer’s needs; high profit potential -Create profitable transactions and cease investing next round.
True friends: Good fit between company’s offerings and customer’s needs; highest profit potential -Continuous relationship investment
Strangers: Little fit between offerings and customer’s needs; lowest profit potential -No investment
Barnacles: Limited fit between offerings and customer’s needs; low profit potential -Problematic; Improve profitability or “fire”
Short-term customers long-term customers Projected loyalty
High
profitability
low
profitability
Po
ten
tial p
rofita
bility
Figure
Customer
relationship
groups
What is Marketing?Pulling it all together
48
Marketing is the process of building profitable customer
relationships by creating value for customers and
capturing value in return.
The first 4 steps of the marketing process focus on
creating value for customers. In the final step, the
company reaps the rewards of its strong customer
relationships by capturing value from customer.
49
Understanding
maprketplace
and customer
needs
and wants
Design a
customer-driven
marketing
strategy
Construct an
integrated
marketing
program
that delivers
supurior value
Build profitable
relationship
and
create customer
delight
Research
customers and
marketplace
Manage
marketing
information
and
customer data
Select
customers:
market
segmentation
and targeting
Decide on a
value
proposition:
differentiation
and positioning
Product and service design -build strong
brands
Pricing -create
real value
Distribution -manage
demand and supply chains
Promotion -communicate
the value propostition
Customer
relationship
management
-build strong
relationships
with chosen
customers
Partner
relationship
management
-build strong
relationships
with marketing
partners
Capture value
from customer
to create profits
and customer
equity
Creat satisfied
loyal
customers
Capture
customer
lifetime value
Increase
share of
market and
share of
customer
Create value for customer and build customer relationships
Capture value
from customer
in return
Figure An expanded model of the
marketing process
50
The company first gains a full understanding of the marketplace by researching customer needs and managing marketing information.
Design a customer-driven strategy by answering, “what consumers will we serve?”(market segmentation and targeting) and “how can we best serve targeted customer?”(differentiation and positioning)
Construct an integreated marketing program-4Ps
Build value-laden profitable relationships with target customers(CRM for customer satisfaction and delight).
Reap the rewards of strong customer relationships by capturing value from customers, resulting in increased long-term customer equity for the firm.