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BUS 243BUS 243Introduction to Introduction to

Marketing & DistributionMarketing & Distribution

Professor MarshallProfessor Marshall

Queens CollegeQueens College

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What is Marketing?What is Marketing?

Simple Definition: Marketing is managing Simple Definition: Marketing is managing profitable customer relationships.profitable customer relationships.

Goals: Goals:

1.1. Attract new customers by promising Attract new customers by promising superior value. superior value.

2.2. Keep and grow current customers by Keep and grow current customers by delivering satisfaction.delivering satisfaction.

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What is Marketing?What is Marketing?

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Marketing DefinedMarketing Defined

A social and managerial process by A social and managerial process by which individuals and groups obtain which individuals and groups obtain what they need and want through what they need and want through creating and exchanging products and creating and exchanging products and value with others.value with others.

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Marketing has ChangedMarketing has Changed

Marketing used to be thought of as Marketing used to be thought of as telling telling & selling& selling

Today marketing is more about satisfying Today marketing is more about satisfying customer needs through the creation and customer needs through the creation and management of profitable relationships.management of profitable relationships.

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Amazon.comAmazon.com

Good example of a company which sees the Good example of a company which sees the importance of managing customer relationships.importance of managing customer relationships.

Tracks your purchases.Tracks your purchases.

Simplifies the act of making a purchase.Simplifies the act of making a purchase.

Notifies you of similar books or related items Notifies you of similar books or related items through use of ‘collaborative filtering’ technology through use of ‘collaborative filtering’ technology to examine past purchasing experiences and fit to examine past purchasing experiences and fit you to profiles of similar customers.you to profiles of similar customers.

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Careers in MarketingCareers in Marketing

SalesSales

AdvertisingAdvertising

Brand ManagementBrand Management

Public RelationsPublic Relations

Logistics (distribution)Logistics (distribution)

Marketing ResearchMarketing Research

See Appendix 4 for more information.See Appendix 4 for more information.

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5-Step Marketing Process5-Step Marketing Process

Understand Marketplace & Customer needs/wants

Design Customer-Driven Marketing Strategy

Construct Marketing Program

Build Profitable Relationships

Capture value from Customers & Generate Profits

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Step 1: Understand the MarketplaceStep 1: Understand the Marketplace

Marketers must understand customer needs Marketers must understand customer needs and wants.and wants.

NeedsNeedsPhysical: Food, clothing, shelter, safetyPhysical: Food, clothing, shelter, safetySocial: Belonging, affectionSocial: Belonging, affectionIndividual: Learning, knowledge, self-expressionIndividual: Learning, knowledge, self-expression

Wants Wants Form that a human need takes, as shaped by culture and Form that a human need takes, as shaped by culture and individual personality.individual personality.

Wants + Buying Power = DemandWants + Buying Power = Demand

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People demand products with benefits that People demand products with benefits that add up to the most value and satisfaction add up to the most value and satisfaction (provide the greatest utility).(provide the greatest utility).

These needs and wants are fulfilled These needs and wants are fulfilled through a through a Marketing OfferMarketing Offer – a – a combination of products, services, combination of products, services, information, and/or experiences.information, and/or experiences.

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Marketing MyopiaMarketing Myopia

When sellers pay more attention to the When sellers pay more attention to the specific product they are selling and lose specific product they are selling and lose sight of benefits produced by the products. sight of benefits produced by the products. They focus on the ‘wants’ and lose sight They focus on the ‘wants’ and lose sight of the ‘needs’. These sellers will have of the ‘needs’. These sellers will have trouble if a new product comes along that trouble if a new product comes along that can serve the customers needs better.can serve the customers needs better.

Example: a consumer of a ½ inch drill bit really needs a ½ inch hole.

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Exchange: the act of obtaining a desired Exchange: the act of obtaining a desired object by offering something in return.object by offering something in return.

Transaction: trade of values between two Transaction: trade of values between two parties (unit of measurement).parties (unit of measurement).

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What is a Market?What is a Market?

The set of actual and potential buyers of a The set of actual and potential buyers of a product.product.

These people share a need or want that These people share a need or want that can be satisfied through exchange can be satisfied through exchange relationships. relationships.

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Step 2: Design a Customer-Driven Marketing Strategy

Once they understand their customers, Once they understand their customers, marketing managers can design a marketing managers can design a customer-driven strategy.customer-driven strategy.

Marketing Management is the art and Marketing Management is the art and science of choosing target markets and science of choosing target markets and building profitable relationships with them.building profitable relationships with them.

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Marketing Managers’ QuestionsMarketing Managers’ Questions

What customers will we serve (what is our What customers will we serve (what is our target market)?target market)?

How can we serve these customers best How can we serve these customers best (what is our value proposition)?(what is our value proposition)?

Marketing Managers cannot serve all customers in every way, this may result in not serving any customers well. Instead, the company wants to select only those customers that it can serve well and profitably. Example: Porsche verses Family Dollar

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Segmentation & Target MarketingSegmentation & Target Marketing

Market SegmentationMarket Segmentation– Divide the market into segments of customersDivide the market into segments of customers

Target MarketingTarget Marketing– Select the target to cultivateSelect the target to cultivate

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Value PropositionValue Proposition

The set of benefits or values a company The set of benefits or values a company promises to deliver to satisfy consumers’ promises to deliver to satisfy consumers’ needs.needs.

This differentiates one brand from another.This differentiates one brand from another.

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Targeting ExamplesTargeting Examples

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Targeting ExamplesTargeting Examples

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Targeting ExamplesTargeting Examples

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DemarketingDemarketing

Temporarily or permanently reducing the Temporarily or permanently reducing the number of customers or shifting their number of customers or shifting their demand.demand.

Example: highway department encouraging mass Example: highway department encouraging mass transit or carpooling to prevent congestion.transit or carpooling to prevent congestion.

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Step 3: Step 3: Construct a Marketing Program

In this step, the marketing strategy is In this step, the marketing strategy is transformed into action.transformed into action.

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The Marketing MixThe Marketing Mix

The set of marketing tools the firm uses to The set of marketing tools the firm uses to implement its marketing strategy. implement its marketing strategy.

The major tools are classified as the The major tools are classified as the 4 P’s4 P’s::

ProductProduct

PricePrice

Distribution (Place)Distribution (Place)

PromotionPromotion

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Step 4: Step 4: Build Profitable Relationships

Customer relationship management: the Customer relationship management: the overall process of building and maintaining overall process of building and maintaining profitable customer relationships by profitable customer relationships by delivering superior value and satisfaction. delivering superior value and satisfaction. (all aspects of acquiring, keeping and growing customers)(all aspects of acquiring, keeping and growing customers)

Customer perceived value: a customer’s Customer perceived value: a customer’s evaluation of the difference between all evaluation of the difference between all benefits and all costs of a marketing offer benefits and all costs of a marketing offer compared to competing offers. compared to competing offers. (customers act on (customers act on perceivedperceived value) value)

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Customer SatisfactionCustomer Satisfaction

Product’s perceived performance relative to a Product’s perceived performance relative to a buyer’s expectations.buyer’s expectations.

Outstanding marketing companies go out of their way to Outstanding marketing companies go out of their way to keep important customers satisfied. Smart companies try keep important customers satisfied. Smart companies try to go above and beyond the customers’ expectations by to go above and beyond the customers’ expectations by delivering more than they promise. Highly satisfied delivering more than they promise. Highly satisfied customers make repeat purchases and tell others about customers make repeat purchases and tell others about their good experiences with the product. their good experiences with the product.

Customer-centered firms only attempt to maximize Customer-centered firms only attempt to maximize customer satisfaction subject to a certain profit level. customer satisfaction subject to a certain profit level. (simply maximizing customer satisfaction would result in (simply maximizing customer satisfaction would result in lower profits).lower profits).

Have you had experiences with customer satisfaction that stand out in your mind? Have these experiences been positive or negative?

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Partner Relationship MarketingPartner Relationship Marketing

Partners inside the firmPartners inside the firm– All employees must be customer-focusedAll employees must be customer-focused– Teams coordinate efforts toward customersTeams coordinate efforts toward customers

Partners outside the firmPartners outside the firm– Supply chain management (strengthening Supply chain management (strengthening

connections with partners from raw materials connections with partners from raw materials to final products)to final products)

– Strategic alliances (for example Dell has Strategic alliances (for example Dell has partnered with Microsoft and Intel) partnered with Microsoft and Intel)

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Step 5: Step 5: Capture value from Customers

By creating highly satisfied customers who By creating highly satisfied customers who stay loyal and buy more, the firm sees stay loyal and buy more, the firm sees greater long-term returns. greater long-term returns.

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Loyalty & RetentionLoyalty & RetentionCustomer Lifetime Value: the value of the Customer Lifetime Value: the value of the entire stream of purchases a customer entire stream of purchases a customer would make over his or her lifetime.would make over his or her lifetime.Customer Equity: total customer lifetime Customer Equity: total customer lifetime values of all of the company’s customers.values of all of the company’s customers.Share of Customer: the percentage of the Share of Customer: the percentage of the customer’s purchasing in the company’s customer’s purchasing in the company’s product category. product category. Example: 30% of your beverage Example: 30% of your beverage

purchases may go to Coca-Cola.purchases may go to Coca-Cola.

Lexus estimates that every one satisfied & loyal customer is worth $600k in lifetime sales. Taco Bell estimates its customer lifetime value to be $12,000.

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Customer Relationship GroupsCustomer Relationship Groups

Butterflies

Good fit between company’s offerings and customer’s needs

True Friends

Good fit between company’s offerings and customer’s needs

Strangers

Little fit between company’s offerings and customer’s needs

Barnacles

Little fit between company’s offerings and customer’s needs

High P

rofitabilityLow

Profitability

Short-Term Customers Long-Term Customers

Spend a lot but shop around – use promotions to target them

Profitable & loyal. Come back regularly and tell others about good experiences

Don’t invest in themCustomer who doesn’t spend enough to make it worth it to keep him

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Video CaseVideo Case

SubaruSubaru(10 minutes)(10 minutes)

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ThoughtsThoughts

Can a company have a relationship with a Can a company have a relationship with a customer?customer?

How does Subaru communicate with its How does Subaru communicate with its customers?customers?

What does each party get from the What does each party get from the relationship?relationship?