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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
11-7
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