Marketing:

Developing

Relationships

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 11 Customer Driven Marketing

CHAPTER 12 Dimensions of Marketing Strategy

CHAPTER 13 Digital Marketing and Social Networking

11-2

Enter the World of Business

Amazon Challenges Apple

•Amazon’s launch of the Kindle Fire is designed to compete against the iPad’s 68% market share in the tablet industry

•Amazon offers music downloads, cloud computing services, e- books, and an online app store

•Many of these products cost significantly less than Apple’s

•Kindle Fire has less storage and lacks features such as a camera, microphone, and a 3G cellular connection

? How is Amazon’s Kindle Fire challenging the iPad’s dominance in the tablet computer industry?

? Compare and contrast the Kindle Fire and the iPad on price and product features?

? How might the Kindle Fire and the Apple iPad appeal to different target markets?

11-3

Nature of Marketing

Create value by allowing individuals and organizations to

obtain what they need and want

Other functional areas of the business (operations,

finance, and all areas of management) must be

coordinated with marketing decisions

Marketing

• A group of activities designed to expedite transactions by creating, distributing, pricing, and promoting goods, services, and ideas

11-4

Nature of Marketing

Marketing is not:

Manipulating consumers to get them to buy products

they do not want

Just selling and advertising

Marketing is:

A systematic approach to satisfying consumers

11-5

The Exchange Relationship

Each participant must be willing to give up his or her

respective ―something of value‖ to receive the

―something‖ held by the other

Exchange

• The act of giving up one thing (money, credit, labor, goods) in return for something else (goods, services, or ideas)

11-6

The Exchange Relationship

The tangible product itself may not be as important as

the image or the benefits associated with the product

This intangible ―something of value‖ may be:

Capability gained from using a product

The image evoked by it

The brand name

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The Exchange Process:

Giving Up One Thing in Return for Another

11-8

Due to his large

following on Twitter,

different companies

have hired Ashton

Kutcher to represent

their brands on Twitter

Companies hope that celebrity promotion will create

additional value for consumers by extending their positive

perceptions of the celebrity to their products

11-9

Functions of Marketing

Marketing Activities

Buying

Selling

Transporting

Storing

Grading

Financing

Marketing Research

Risk Taking

11-10

Creating Value with Marketing

Benefits – Anything a buyer receives in an exchange

Costs – Anything a buyer must give up to obtain the

product’s benefits

Monetary costs and time and effort expended to procure the

product

Customer

Benefits

Customer

Costs

Customer

Value = –

Value

• A customer’s subjective assessment of benefits relative to costs in determining the worth of a product

11-11

The Marketing Concept

A business must find out what consumers desire and

then develop the good, service, or idea that fulfills their

needs or wants

The business must then get the product to the customer

The business must continually alter, adapt, and develop

products to keep pace with changing consumer needs

and wants

Marketing Concept

• The idea that an organization should try to satisfy customers’ needs through coordinated activities that also allow it to achieve its own goal

11-12

The Marketing Concept

Determining customers’ true needs is increasingly

difficult because no one fully understands what

motivates people to buy things

A business must also achieve its own objectives:

Boosting productivity

Reducing costs

Achieving a percentage of a specific market

A firm must have good information about what

consumers want, adopt a consumer orientation, and

coordinate its efforts throughout the entire organization

11-13

The Marketing Concept

Customer-contact employees must know what

customers want

The are not just selling goods and services, but:

Ideas

Benefits

Philosophies

Experiences

Customers’ perception of value = Level of success

11-14

• Trader Joe’s, which sells

many different lines of

organic and natural food

products, is often

thought to have better

deals than some of its

competitors

• The grocery chain

attempts to meet

consumer demands for

high-quality food at

reasonable prices

11-15

Evolution of the

Marketing Concept

Our society and economic system have changed over

time, and marketing has become more important as

markets have become more competitive

Production orientation

19th century

Manufacturing efficiency

Sales orientation

Early 20th century

Supply exceeds demand; a need to ―sell‖ products grew

11-16

Evolution of the

Marketing Concept

Today some people still inaccurately equate marketing

with a sales orientation

Market Orientation

• An approach requiring organizations to gather information about customer needs, share that information throughout the firm, and use that information to help build long-term relationships with customers

Began in the 1950s and continues today

New technologies are helping firms to improve

communication and learn what customers want

11-17

The Nissan Leaf meets the needs of consumers who

care about the environment and wish to improve their

environmental footprint by driving an electric vehicle

11-18

Responding to Business Challenges

Campgrounds Reach Out to a New Breed of Camper

•The glamper is someone who shuns roughing it, loves to vacation, and enjoys some exposure to nature

•In response to the recent recession, this traveler is sticking closer to home and saving money

•Many campsites offer magic shows, arts and crafts, themed hikes, heated pools, water parks, Wi-Fi, onsite laundry, deluxe bathrooms, dinner shows, and more

•Revenue for campgrounds and RV parks has risen 3% in a one- year period

?What is a glamper?

?How has the uncertain economic climate affected glampers?

?How are campgrounds accommodating glampers?

11-19

Developing a Marketing Strategy

Has two major components:

Selecting a target market

Developing an appropriate marketing mix to satisfy

that target market

Marketing Strategy

• A plan of action for developing, pricing distributing, and promoting products that meet the needs of specific customers

11-20

Selecting a Target Market

Market

• A group of people who have a need, purchasing power, and the desire and authority to spend money on goods, services, and ideas

Target Market

• A specific group of consumers on whose needs and wants a company focuses its marketing efforts

11-21

Selecting a Target Market

Sellers of salt, sugar, and many agricultural products

use a total-market approach because everyone is a potential consumer of these products

Total-Market Approach

• An approach whereby a firm tries to appeal to everyone and assumes that all buyers have similar needs

11-22

Selecting a Target Market

Women are the largest market segment, with 51% of

the U.S. population

Marketers are focusing on the growing Hispanic population

Market Segmentation

• A strategy whereby a firm divides the total market into groups of people who have relatively similar product needs

Market Segment

• A collection of individuals, groups, or organizations who share one or more characteristics and thus have relatively similar product needs and desires

11-23

U.S. Buying Power

Statistics by Race (billions)

11-24

Market Segmentation Approaches

Concentration Approach

• A market segmentation approach whereby a company develops one marketing strategy for a single market segment

• Porsche directs all its marketing efforts toward high-income individuals who want to own high-performance vehicles

Multisegment Approach

• A market segmentation approach whereby the marketer aims its efforts at two or more segments, developing a marketing strategy for each

• Raleigh bicycles has designed separate marketing strategies for racers, tourers, commuters, and children

11-25

Target Market Strategies

11-26

Market Segmentation Approaches

Niche segments are usually very small compared to the

total market for the product

Many airlines cater to first-class flyers, who comprise

only 10% of international air travelers

To meet the needs of these elite customers, airlines

include special perks along with spacious seats

Niche Marketing

• Is a narrow market segment focus when efforts are on one small, well-defined group that has a unique, specific set of needs

11-27

Market Segmentation Approaches

For a firm to successfully use a concentration or

multisegment approach to market segmentation:

1. Consumers’ needs for the product must be heterogeneous

2. The segments must be identifiable and divisible

3. The total market must be divided in a way that allows

estimated sales potential, cost, and profits of the segments

to be compared

4. At least one segment must have enough profit potential to

justify developing and maintaining a special marketing

strategy

5. The firm must be able to reach the chosen market segment

with a particular market strategy

11-28

Bases for Segmenting Markets

• Companies segment markets on the basis of several

variables:

Demographic Geographic Psychographic Behavioristic

11-29

Developing a Marketing Mix

The buyer or the target market is the central focus of

all marketing activities

Marketing Mix

• The four marketing activities—product, price, promotion, and distribution—that the firm can control to achieve specific goals within a dynamic marketing environment

11-30

The Marketing Mix:

Product, Price, Promotion, and Distribution

11-31

Product

A product whether a

Good – A physical entity you can touch (a car,

computer, or adopted kitten)

Service – The application of human and mechanical

efforts to people or objects to provide intangible benefits

to customers (Air travel, dry cleaning, or haircuts)

Idea – Can be a concept, philosophy, image, or issue

(attorney advise or political parties)

Is a complex mix of tangible and intangible attributes that

provide satisfaction and benefits

11-32

Price

The buyer usually exchanges purchasing power—

income, credit, wealth—for the satisfaction of utility

associated with a product

Key element of the marketing mix because it relates

directly to the generation of revenue and profits

Can be changed quickly to stimulate demand or

respond to competitors’ actions

Price

• A value placed on an object exchanged between a buyer and a seller

11-33

Distribution

Sometimes referred to as ―place‖ because it helps to

remember the marketing mix as the ―4 Ps‖

Product, price, place, and promotion

Intermediaries—usually wholesalers and retailers—

perform many of the activities required to move products

efficiently from producers to consumers or industrial

buyers

Involves transporting, warehousing, materials handling,

and inventory control

Distribution

• Making products available to customers in the quantities desired

11-34

Redbox departed

from the more

traditional brick-and-

mortar rental stores

by choosing to

distribute its DVD

rentals through

vending machines

11-35

Promotion

Includes advertising, personal selling, publicity, and

sales promotion

Digital advertising on websites and social media sites

are growing

Promotion

• A persuasive form of communication that attempts to expedite a marketing exchange by influencing individuals, groups, and organizations to accept goods, services, and ideas

11-36

Marketing Research and

Information Systems

Guides marketing decisions

May include data on age, income, ethnicity,

educational level, etc. of the target market and how

frequently they purchase the product

Marketing Research

• A systematic, objective process of getting information about potential customers to guide marketing decisions

11-37

Marketing Research and

Information Systems

Marketing information system – A framework for

accessing information about customers from sources both

inside and outside the organization

Inside the organization

Continuous flow of information on prices, sales, and

expenses

Outside the organization

Data are available through public and private reports, census

statistics, digital media sources, etc.

11-38

Marketing Research and

Information Systems

• Marketing information that is observed, recorded, or collected directly from respondents

• ―Mystery shoppers‖, surveys, and focus groups

• Passive observation of consumer behavior and open-ended questions techniques

Primary Data

• Information that is compiled inside or outside an organization for some purpose other than changing the current situation

• Information compiled by the U.S. Census Bureau and other government agencies, databases created by marketing research firms, as well as sales and other internal reports

Secondary Data

11-39

Companies with the

Best Customer Service

11-40

Online Marketing Research

New information technologies are changing how

businesses learn about consumers and market their

products

Digital media and online social networks

Opportunity to reach new markets via the Internet

Online surveys are becoming an important part of

marketing research

Virtual testing – Interactive multimedia research that

combines sight, sound, and animation to improve

testing of products and their features

11-41

Buying Behavior

Marketers analyze buying behavior because a firm’s

marketing strategy should be guided by an

understanding of buyers

Buying Behavior

• The decision processes and actions of people who purchase and use products

11-42

Starbucks hopes to

influence consumers'

buying behavior by

offering them

incentives, such as

free coffee or tea if

you bring your own

cup on Earth Day

11-43

Psychological Variables of Buying Behavior

Perception

• The process by which a person selects, organizes, and interprets information received from his or her senses

Motivation

• Inner drive that directs a person’s behavior toward goals

Learning

• Changes in a person’s behavior based on information and experience

Attitude

• Knowledge and positive or negative feelings about something

Personality

• The organization of an individual’s distinguishing character traits, attitudes, or habits

11-44

Going Green

Monsanto Faces Threats from New Superweeds

•Monsanto’s Roundup is the best-selling herbicide in the nation

•Due to wide-scale use, superweeds (weeds that are resistant to herbicides) are becoming a major challenge to farmers

•Competitors have begun promoting older herbicides and herbicide mixtures to combat superweeds, but the problem is not the herbicides themselves, but the way they are used

•Because Roundup was so effective, farmers would rotate one Roundup Ready crop with another

? Why are superweeds becoming a problem for Monsanto?

? How are competitors capitalizing on Roundup resistant superweeds?

? What are some of the reasons weeds have become resistant to Roundup herbicide?

11-45

Social Variables of

Buying Behavior

Social Roles

• A set of expectations for individuals based on some position they occupy

Reference Groups

• Groups with whom buyers identify and whose values or attitudes they adopt

Social Classes

• A ranking of people into higher or lower positions of respect

Culture

• The integrated, accepted pattern of human behavior, including thought, speech, beliefs, actions, and artifacts

11-46

• Which products are delivered to which stores depends

on the heritage of those living in each area

• People’s cultures have

a big impact on what

they buy

• Goya Foods sells

more than three dozen

types of beans to U.S.

supermarkets because

people with different

cultural roots demand

different types of

beans

11-47

Understanding Buying Behavior

Trying to understand consumers is the best way to satisfy

them

Tools and techniques for analyzing consumers are not

exact

To combat declining gum sales, companies have begun to

turn gum into a ―fashion statement‖

Kraft is engaging young artists to create designs for its gum

packaging

Rockstar Iced Mint Energy is touting its energy-boosting

caffeine and taurine content

These overhauls are an attempt to reconnect with the teen

market, which is the largest purchaser of gum products

11-48

The Marketing Environment

External forces directly or indirectly influence the

development of marketing strategies:

Political, legal, and regulatory forces

Social forces

Competitive and economic forces

Technological forces

Marketing requires creativity and consumer focus

because environmental forces can change quickly and

dramatically

11-49

The Marketing Mix and the

Marketing Environment

11-50

Importance of Marketing to

Business and Society

Marketing is a necessary function to reaching consumers,

establishing relationships, and driving sales

Marketing is essential in communicating the value of

products and services

Nonprofits, government institutions, and even people must

market themselves to spread awareness and achieve

desired outcomes

All organizations must reach their target markets,

communicate their offerings, and establish high-quality

services

11-51