DB 5

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Kelly_BUSN_12e_PPT__CH11.pptx

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Marketing:

Building Profitable

Customer Connections

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Learning Objectives

By the end of this chapter, you should be able to:

11-1 Discuss the objectives, the process, and the scope of marketing

11-2 Identify the role of the customer in marketing

11-3 Explain each element of marketing strategy

11-4 Describe the consumer and business decision-making process

11-5 Discuss the key elements of marketing research

11-6 Explain the roles of social responsibility and technology in marketing

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Encourage students to look for answers to these learning objectives as you move through the lecture.

11-1

Marketing: Getting Value by Giving Value

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11-1 Marketing: Getting Value by Giving Value (1 of 3)

Marketing*: An organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders

Utility*: The ability of goods and services to satisfy consumer “wants”

* Words accompanied by an asterisk are key terms from the chapter.

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The American Marketing Association defines marketing as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Long-term profitability is the ultimate benefit that most businesses seek from marketing.

This benefit can be attained only when value is delivered to customers and other stakeholders.

As customers have a number of wants, different products provide various utilities.

11-1 Marketing: Getting Value by Giving Value (2 of 3)

Types of Utility

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The vast majority of products provide some kind of form utility.

Virtually every product provides some degree of ownership utility, but some offer more than others.

Form

utility

Satisfies wants by converting inputs into a finished form

Time

utility

Satisfies wants by providing goods and services at a convenient time for customers

Place

utility

Satisfies wants by providing goods and services at a convenient place for customers

Ownership

utility

Satisfies wants by smoothly transferring ownership of goods and services from seller to buyer

11-1 Marketing: Getting Value by Giving Value (3 of 3)

The Scope of Marketing: It’s Everywhere!

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Sports, politics, and art dominate people marketing, but even some businesspeople merit mentioning.

Consider, for example, Paris Hilton, who appeared to build her early career on promotion alone, eventually parlaying the media attention into a successful line of perfumes and fashion items.

Cities and states use place marketing to attract businesses.

Partnerships between the public and private sectors are increasingly common in event marketing.

In idea marketing, a whole range of public and private organizations market ideas that are meant to change how people think or act.

People Marketing

Place Marketing

Event Marketing

Idea Marketing

Exhibit 11.1 The Evolution of Marketing

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This slide shows the evolution of marketing and the number of overlaps that have taken place through the years.

Despite these changes, a few fundamental ones have remained constant.

The marketing concept emerged in the 1950s.

Marketing concept*: A business philosophy that makes customer satisfaction—now and in the future—the central focus of the entire organization

Discussion Activity 1

What are the four different kinds of utility that marketers can provide? Give an example (not from the book) of a product that delivers each type of utility.

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Answers will vary.

Form utility

Example: IKEA transforms lumber into furniture

Time utility

Example: Costco offers one-hour photo service

Place utility

Example: Starbucks has stores on virtually every corner

Ownership utility

Example: Ford offers a low-cost car financing program

Discussion Activity 1 Debrief

In what ways do you think about utility when you are consuming goods?

Which of the types of utility discussed is most annoying if it is absent from your shopping/consuming experience?

Consider one product or service (e.g., Tide laundry detergent, Netflix). How does it provide utility?

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Answers will vary.

11-2

The Customer: Front and Center

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11-2 The Customer: Front and Center (1 of 2)

Customer Relationship Management (CRM)

Customer relationship management (CRM)*: The ongoing process of acquiring, maintaining, and growing profitable customer relationships by delivering unmatched value

Value*: A customer perception that a product has a better relationship than its competitors between the cost and the benefits

Companies can either have limited relationships or pursue full partnerships with clients

* Words accompanied by an asterisk are key terms from the chapter.

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The most important aspect of marketing these days is customer relationship management.

When products are able to deliver perceived value above or beyond the customers’ expectations, customer satisfaction is achieved.

11-2 The Customer: Front and Center (2 of 2)

Perceived Value versus Actual Value

Helping customers believe that your product is uniquely qualified to meet their needs

Customer Satisfaction

Customer satisfaction*: When customers perceive that a good or service delivers value above and beyond their expectations

Customer Loyalty

Customer loyalty*: When customers buy a product from the same supplier again and again—sometimes paying even more for it than they would for a competitive product

* Words accompanied by an asterisk are key terms from the chapter.

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Achieving customer satisfaction is tricky, and less savvy marketers tend to fall into two traps—overpromising and underpromising.

Customer loyalty is the payoff for delivering value and generating satisfaction.

A loyal customer is the one who buys from a particular brand again and again, forgives the brand’s mistakes, and provides valuable feedback.

Lecture Booster: Sam Walton, founder of Walmart, once said, “The goal as a company is to have customer service that is not just the best, but legendary.” Discuss with students how companies today should focus on achieving the highest levels of customer satisfaction and loyalty. Go on to give some interesting examples of companies striving to achieve the same.

Source: customerthink.com/12_customer_service_quotes_to_inspire_you_in_2013/ (accessed October 5, 2017).

Polling Activity

Which of the following scenarios do you see as the most convincing example of customer loyalty?

Santana drives an extra five miles every day to pick up a customized cup of coffee from a specific Starbucks.

Taylor only buys Ford trucks—four of them in the past 20 years.

Lee vacations every year at Ocean Key Resort in Key West, Florida.

Rahel will use no other soap than Ivory.

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Answers will vary.

All answers are equally valid; discussion could focus on what made these consumers so loyal to a given brand and what competing marketers could do to change their minds.

11-3

Marketing Strategy: Where Are You Going,

and How Will You Get There?

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11-3 Marketing Strategy (1 of 8)

Marketing plan*: A formal document that defines marketing objectives and the specific strategies for achieving those objectives

Market segmentation*: Dividing potential customers into groups of similar people, or segments

Determining strategies to reach the target market

Anticipating and responding to changes in the external environment

* Words accompanied by an asterisk are key terms from the chapter.

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A successful marketing strategy aims at developing a marketing plan that identifies the target audience and a way to reach out to them.

Once the target market has been identified, the next step is to determine how one can make the best use of the marketing tools to reach them.

Exhibit 11.2 Marketing Strategy

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This exhibit shows the different elements that help in shaping an effective marketing strategy.

11-3 Marketing Strategy (2 of 8)

Target Market

Target market*: The group of people who are most likely to buy a particular product

Characteristics of a well-chosen target market

Size

Profitability

Accessibility

Limited competition

* Words accompanied by an asterisk are key terms from the chapter.

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Size: Enough people in your target group to support a business.

Profitability: Consumers must be willing and able to spend more than the cost of producing and marketing your product.

Accessibility: Your target must be reachable through channels your business can afford.

Limited competition: Look for markets with limited competition; a crowded market is much tougher to crack.

11-3 Marketing Strategy (3 of 8)

Consumer Markets versus Business Markets

Consumer marketers (also known as business-to-consumer or B2C)*: Marketers who direct their efforts toward people who are buying products for personal consumption

Business marketers (also known as business-to-business or B2B)*: Marketers who direct their efforts toward people who are buying products to use either directly or indirectly to produce other products

* Words accompanied by an asterisk are key terms from the chapter.

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A similarity between business-to-consumer (B2C) and business-to-business (B2B) marketers is that both need to select the best target; however, their approaches to achieve this objective differ slightly.

11-3 Marketing Strategy (4 of 8)

Consumer Market Segmentation

Demographic segmentation*: Dividing the market into smaller groups based on measurable characteristics about people, such as age, income, ethnicity, and gender

Geographic segmentation*: Dividing the market into smaller groups based on where consumers live. This process can incorporate countries, cities, or population density as key factors

Psychographic segmentation*: Dividing the market into smaller groups based on consumer attitudes, interests, values, and lifestyles

Behavioral segmentation*: Dividing the market based on how people behave toward various products. This category includes both the benefits that consumers seek from products and how consumers use the products

* Words accompanied by an asterisk are key terms from the chapter.

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Selecting the target market for products is vital.

The first step is to divide prospective customers into groups based on similarities.

Because people can be similar in a number of different ways, marketers have several options for segmenting potential consumers.

The different ways in which consumers use the product and benefit from using it are included in this process.

11-3 Marketing Strategy (5 of 8)

Business Market Segmentation

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B2B marketers typically follow a similar process in segmenting their markets, but they use slightly different categories.

Lecture Booster: The blog DataCracker claims that the success of Dropbox lies in how the company has focused on customer value segmentation. Discuss the various ways a business can be segmented, and weigh the pros and cons of the various techniques.

Source: “They Say ‘Know Your Target Market,’ but Which Target Market?”

B2B Geographic segmentation

Dividing the market based on concentration of customers

B2B Customer-based segmentation

Dividing the market based on customers’ characteristics

B2B Product-use‒ based segmentation

Dividing the market based on how customers will use the product

11-3 Marketing Strategy (6 of 8)

The Marketing Mix

Marketing mix*: The blend of marketing strategies for product, price, distribution, and promotion

The Global Marketing Mix

Firms need to reevaluate their marketing mix for each new country they enter

* Words accompanied by an asterisk are key terms from the chapter.

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The various elements of a marketing mix include product strategy, pricing strategy, distribution strategy, and promotion strategy.

In the product strategy, the product involves far more than a specific service.

In the pricing strategy, the prices must be fair to deliver customer value relative to the benefits of the product.

In the distribution strategy, the goal is to deliver the product to the right people, in the right quantities, at the right time, and in the right place.

In the promotion strategy, promotion includes all of the ways that marketers communicate about their products.

11-3 Marketing Strategy (7 of 8)

The Marketing Environment

Environmental scanning*: The process of continually collecting information from the external marketing environment

COMPETITIVE

Market share*: The percentage of a market controlled by a given marketer

ECONOMIC

Identify and respond to change as soon as possible

SOCIAL/CULTURAL

Covers a vast array of factors, including lifestyle, customs, language, attitudes, interests, and population shifts

* Words accompanied by an asterisk are key terms from the chapter.

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To avoid ambushes—and to uncover new opportunities—one must continually monitor how both dominant and emerging competitors handle each element of the marketing mix.

One’s goal as a marketer is to identify and respond to changes as soon as possible, keeping in mind that a sharp eye sees opportunity even in economic downturns.

Anticipating and responding to trends can be especially important in industries such as entertainment, fashion, and technology.

11-3 Marketing Strategy (8 of 8)

TECHNOLOGICAL

Often affects marketers in ways that are less directly visible

POLITICAL/LEGAL

Laws, regulations, and political climate

The Global Marketing Environment

The Internet has made the world market virtually accessible to everyone

Understand each element of the marketing mix for each of your markets

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Technology often affects marketers in ways that are less directly visible.

The political climate includes changing levels of governmental support for various business categories.

Clearly, the political/legal issues affect heavily regulated sectors (e.g., telecommunications and pharmaceuticals) more than others.

Discussion Activity 2

What are the different ways to segment a consumer market? Does it make sense to use more than just a single segmentation variable? Why or why not? What are the key characteristics of a high-potential target market?

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Answers will vary.

Key ways to segment a target market:

Demographic: Segmentation based on measurable characteristics about people such as age, income, ethnicity, and gender

Geographic: Segmentation based on where consumers live, typically incorporating countries, cities, or population density as key factors

Psychographic: Segmentation based on consumer attitudes, interests, values, and lifestyles

Behavioral: Segmentation based on how people behave toward various products, including usage patterns and benefits sought

Most successful marketers use multiple segmentation bases (almost always including demographics) in order to zero in more precisely on the people who are most likely to buy their product. With a well-defined target, marketing efforts typically become more efficient and effective. A high potential target market is typically either large or growing, doesn’t currently support too many competitors, and can be reached by reasonably priced promotional messages. Often the biggest target markets are not desirable because they already have too many competitors.

Discussion Activity 2 Debrief

How might you define a market segment that you are in, say for your school or your favorite leisure activity?

What do you see as the most difficult aspect of segmenting a target market?

Is the biggest target market the best? Why or Why not?

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Answers will vary.

11-4

Customer Behavior:

Decisions, Decisions, Decisions!

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Exhibit 11.5 Elements That Influence the Consumer Decision-Making Process

Influence	Description
Cultural	Culture: The values, attitudes, and customs shared by members of a society Subculture: A smaller division of the broader culture Social Class: Societal position driven largely by income and occupation
Social	Family: A powerful force in consumption choices Friends: Another powerful force, especially for high-profile purchases Reference Groups: Groups that give consumers a point of comparison
Personal	Demographics: Measurable characteristics such as age, gender, or income Personality: The mix of traits that determines who you are
Psychological	Motivation: Pressing needs that tend to generate action Attitudes: Lasting evaluations of (or feelings about) objects or ideas Perceptions: How people select, organize, and interpret information Learning: Changes in behavior based on experience

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Understanding the customer is critical. Why do people buy one product, but not another? How do they use the products they buy? When do they get rid of them? Knowing the answers to these questions will clearly help you better meet customer needs.

11-4 Customer Behavior (1 of 3)

Consumer Behavior

Consumer behavior*: Description of how people act when they are buying, using, and discarding goods and services for their own personal consumption. Consumer behavior also explores the reasons behind people’s actions

Cognitive dissonance*: Consumer discomfort with a purchase decision, typically for a higher-priced item

* Words accompanied by an asterisk are key terms from the chapter.

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If successful marketing begins with the customer, then understanding the customer is critical.

The decisions they make often seem spontaneous (After all, how much thought do people give to buying a pack of gum?), but they often result from a complex set of influences.

11-4 Customer Behavior (2 of 3)

Steps in the Consumer Decision Process

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Marketing can influence every step of a purchase decision, from helping consumers identify needs, to resolving feelings of cognitive dissonance after a major purchase.

Specific programs that help customers validate their purchase choices are part of a marketing effort to overcome cognitive dissonance.

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-Purchase Decision

11-4 Customer Behavior (3 of 3)

Business Buyer Behavior

Business buyer behavior*: Describes how people act when they are buying products to use either directly or indirectly to produce other products

Decision-making process is based on purchasing training and application of rational criteria

Input is integrated from a number of internal sources based on a formal process

Customers seek highly customized goods, services, and prices

* Words accompanied by an asterisk are key terms from the chapter.

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The four key factors that act as a major influence on business buying decisions are as follows: environmental factors, organizational factors, interpersonal factors, and individual factors.

However, understanding the business market is not necessarily as complicated as understanding the consumer market.

Business buyers typically buy according to purchase specifications and objective standards, without the personal judgment or whim more characteristic of consumer buyer behavior.

Knowledge Check

Which of the following statements best defines cognitive dissonance?

It occurs during each step in the consumer decision process.

It involves the feeling consumers get whenever they purchase a high-priced item.

It is a discomfort with a decision that comes after a purchase is made.

It occurs during the evaluation of alternatives portion of the consumer decision process.

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The correct answer is (c) It is a discomfort with a decision that comes after a purchase is made.

Incorrect. Cognitive dissonance occurs during the post-purchase behavior step in the consumer decision process.

Incorrect. Cognitive dissonance involves the feeling of discomfort consumers may get, but do not always, when they purchase a high-priced item.

Correct. It is a discomfort with a decision that comes after a purchase is made.

Incorrect. Cognitive dissonance, if it occurs, happens during the post-purchase behavior portion of the consumer decision process.

11-5

Marketing Research:

So, What Do They Really Think?

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11-5 Marketing Research (1 of 3)

Marketing research*: The process of gathering, interpreting, and applying information to uncover marketing opportunities and challenges, and to make better marketing decisions

Used to:

Identify external opportunities and threats

Monitor and predict customer behaviors

Evaluate and improve each area of the marketing mix

* Words accompanied by an asterisk are key terms from the chapter.

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When marketing begins with the customer, marketing research often leads to a successful business.

The goal is to make better marketing decisions that provide more value for consumers and more profits for businesses that deliver.

11-5 Marketing Research (2 of 3)

Types of Data

Secondary data*: Existing data that marketers gather or purchase for a research project

Primary data*: New data that marketers compile for a specific research project

* Words accompanied by an asterisk are key terms from the chapter.

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On a cost/investment basis, it makes sense to gather secondary data first.

Based on the data from the secondary research, primary research may be unnecessary.

The secondary research data should guide and focus the primary research, keeping it relevant and as time- and cost-effective as possible.

Exhibit 11.7 Research Data Comparison

Secondary data	Primary data
Existing data that marketers gather or purchase	New data that marketers compile for the first time
Tends to be lower cost	Tends to be more expensive
May not meet your specific needs	Customized to meet your needs
Frequently outdated	Fresh, new data
Available to your competitors	Proprietary—no one else has it
Examples: U.S. Census, The Wall Street Journal, Time magazine, your product sales history	Examples: Your own surveys, focus groups, customer comments, mall interviews

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11-5 Marketing Research (3 of 3)

Primary Research Tools

Observation research*: Marketing research that does not require the researcher to interact with the research subject

Survey research*: Marketing research that requires the researcher to interact with the research subject

An International Perspective

Research firms with a strong local presence (often based in-country) are better able to carry out international marketing research projects

* Words accompanied by an asterisk are key terms from the chapter.

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An advantage of using observation research is that the researcher does not have to worry about inaccurate or dishonest answers from respondents.

When it comes to survey research, one can secure information about the way people feel and think—things that cannot be observed.

Group Activity

Form groups of 3‒5 people. Choose a product you all are familiar with, and imagine your company is planning to come out with a competing product. As the marketing team for your company, make a list of the marketing research you will need to do. What questions will the marketing team need to answer before going forward? What types of research will your team need to conduct?

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Answers will vary.

Instructors note: The focus here is how complex marketing research can get. Once you have reconvened the class and asked for some of their answers to the questions posed, determine how many have a budget or strategy for proceeding with the research.

Group Activity Debrief

What product did you choose, and why?

How much time and money did you determine you would need to carry out your marketing research?

What was the main question you needed to answer with your marketing research? And how will you go about answering it?

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Answers will vary.

11-6

Social Responsibility and Technology:

A Major Marketing Shift

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11-6 Social Responsibility and Technology

Marketing and Society: It’s Not Just about You!

Green marketing*: Developing and promoting environmentally sound products and practices to gain a competitive edge

Technology and Marketing: Power to the People!

Technology has created opportunities for marketers

Mass customization*: The creation of products tailored for individual consumers on a mass basis

* Words accompanied by an asterisk are key terms from the chapter.

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Through the past couple of decades, the social responsibility movement has accelerated in the United States, demanding that marketers actively contribute to the needs of the broader community.

Lecture Booster: The optimist says, “The glass is half full.”

The pessimist says, “The glass is half empty.”

The marketing consultant says, “Your glass needs resizing.”

The quote focuses on how uniquely a marketing consultant thinks. Discuss with the students how marketing consultants need to think differently to build profitable relationships without massive marketing budgets.

Discussion Activity 3

“Green is my favorite color.” —anonymous marketer

With greater emphasis being placed on concern for the environment, the green movement is demanding business better address green issues. What is your familiarity with “green marketing”? How important do you think it is that marketers focus on green marketing? How might green marketing slide into “greenwashing”?

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Answers will vary.

Instructors note:

Green marketing is relevant in many areas: consumer goods and services, as well as business and industrial goods and services. It can range from modifying products, packaging, processes, and advertising. Because economics is “the study of how people use their limited resources to try to satisfy their unlimited wants” (McTaggert et al., 1992), green marketing runs up against this limitation all the time. Its goal is to conduct marketing activities in ways that satisfy consumer desires in the face of those limitations and in ways that meet the company’s goals, namely those of being profitable.

Greenwashing happens when companies make claims of being environmentally friendly and promoting sustainability while their environmental record doesn’t support those claims.

Sources: M. Polonsky, “An Introduction to Green Marketing,” Electronic Green Journal, 1994, escholarship.org/uc/item/49n325b7 (accessed October 2021); Bruce Watson, “The troubling evolution of corporate greenwashing,” The Guardian, August 20, 2016, theguardian.com/sustainable-business/2016/aug/20/greenwashing-environmentalism-lies-companies (accessed October 2021); McTaggert et al., Economics, 1992.

Discussion Activity 3 Debrief

How aware are you of “green” marketing in the products and services you use every day?

What examples can you give of green marketing?

How prevalent do you think greenwashing is?

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Answers will vary.

Self-Assessment

If you were to choose a career in marketing, what type of work would you most want to do?

To what parts of the consumer decision-making process do you give the most attention?

How important is the goal of green marketing to you and how you choose products and services?

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Instructors note: Can be used for in-class reflection or as written assignment for review.

DB 5

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