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Introduction to Marketing and Marketing Environment

Lecture 1

Learning Goals
1. 2. 3. 4. 5.

Define marketing and the marketing process. Explain the importance of understanding customers and identify the five core marketplace concepts Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations. Discuss customer relationship management and creating value for and capturing value from customers Describe the major trends and forces changing the marketing landscape
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What is Marketing?
Marketing Defined: Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others Marketing is about managing profitable customer relationships

Attracting new customers Retaining and growing current customers

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The Marketing Process A Five-Step Process

1. 2. 3. 4. 5.

Understand the marketplace and customer needs and wants Design a customer-driven marketing strategy Construct a marketing program that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create profits and customer quality
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Understanding the Marketplace

Core Concepts

Need
State of felt deprivation Example: Need food

Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

Wants
The form of needs as shaped by culture and the individual Example: Want a Big Mac

Demands
Wants which are backed by buying power

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Understanding the Marketplace

Core Concepts

Marketing offer
Combination of products, services, information or experiences that satisfy a need or want Offer may include services, activities, people, places, information or ideas

Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

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Understanding the Marketplace

Core Concepts

Value
Customers form expectations regarding value Marketers must deliver value to consumers

Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

Satisfaction
A satisfied customer will buy again and tell others about their good experience

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Understanding the Marketplace

Core Concepts

Exchange
The act of obtaining a desired object from someone by offering something in return One exchange is not the goal, relationships with several exchanges are the goal Relationships are built through delivering value and satisfaction

Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

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Understanding the Marketplace

Core Concepts

Market
Set of actual and potential buyers of a product Marketers seek buyers that are profitable

Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets

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Marketing Management

Marketing management is the art and science of choosing target markets and building profitable relationships with them.
This definition must include answers to two questions:
What customers will we serve? How can we serve these customers best?

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Selecting Customers and Creating Value

Customer Management
What customers will we serve? Marketers select customers that can be served profitably

Value Proposition
How can we serve these customers best? Includes the set of benefits or values a company promises to deliver to consumers to satisfy their needs

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Marketing Orientations Marketing Management

Production concept Product concept

Selling concept Marketing concept

Societal marketing concept

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The Marketing Plan

Transforms the marketing strategy into action Includes the marketing mix and the 4Ps of marketing

Product Price Place Promotion

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Building Customer Relationships

CRM Customer relationship management The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping and growing customers.

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Value and Satisfaction

Perceived Value
The customers evaluation of the difference between benefits and costs. Customers often do not judge values and costs accurately or objectively.

Customer Satisfaction
Products perceived performance relative to customers expectations.

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Not All Customers are Equal

Basic Relationships
Low-margin customers

Full Partnerships
Key customers

Selective relationship management

Weeding out unprofitable customers

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Capturing Value from Customers

Key Concepts
Customer Loyalty and Retention Share of Customer Customer Equity

Customer delight leads to emotional relationships and loyalty Customer Lifetime Value shows true worth of a customer

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Capturing Value from Customers

Key Concepts
Customer Loyalty and Retention Share of Customer Customer Equity

Share of customers purchase in a product category. Achieved through offering greater variety, cross-sell and up-sell strategies.

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Capturing Value from Customers

Key Concepts
Customer Loyalty and Retention Share of Customer Customer Equity

The combined customer lifetime values of all current and potential customers. Measures a firms performance, but in a manner that looks to the future. Choosing the best customers is key

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Marketing Landscape
Challenges

Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships
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Growth of the Internet Advances in telecommunications, information, transportation

Customer research and tracking Product development Distribution New advertising tools 24/7 marketing through the Internet

Marketing Landscape
Challenges

Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships
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Geographical and cultural distances have shrunk

Greater market coverage More options for purchasing and manufacturing Increased competition from foreign competitors

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Marketing Landscape
Challenges

Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships
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Marketers need to take great responsibility for the impact of their actions
Caring capitalism is a way to differentiate your company

Marketing Landscape
Challenges

Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships
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Many organizations are realizing the importance of strategic marketing

Performing arts Government agencies Colleges Hospitals Churches

Marketing Landscape
Challenges

Digital age Globalization Ethics and social responsibility Not-for-profit marketing Marketing relationships
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Profits through managing long-term customer equity

Improve customer knowledge Target profitable customers Keep profitable customers

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What is Marketing?

The process of building profitable customer relationships by creating value for customers and capturing value in return

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Strategic Planning & Marketing Environment

Strategic Planning

The process of developing and maintaining a strategic fit between the organizations goals and capabilities and its changing marketing opportunities.

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Steps in Strategic Planning

1. 2. 3. 4.

Defining the company mission. Setting company objectives and goals. Designing the business portfolio. Planning marketing and other functional strategies.

The Mission Statement

A statement of the organizations purpose.

What it wants to accomplish in the larger environment.

Should be market oriented and defined in terms of customer needs.

The Mission Statement

Questions the mission statement should answer include:

What is our business? Who is our customer? What do consumers value? What should our business be?

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The Mission Statement:

Should be realistic. Should be specific. Should fit the market environment. Should be based on distinctive competencies. Should be motivating.

Designing the Business Portfolio

The business portfolio is the collection of businesses and products that make up the company. The company must:
analyze its current business portfolio or Strategic Business Units (SBUs), decide which SBUs should receive more, less, or no investment, develop growth strategies for growth or downsizing.

Strategic Business Unit (SBU)

A unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. Can be a company division, a product line within a division, or sometimes a single product or brand.

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Marketings Role in Strategic Planning

Provide a guiding philosophy Identify attractive opportunities Design effective strategies Build strong value chains Form superior value delivery networks

Product/Market Expansion Grid

Market Penetration
Existing markets, existing products

Market Development
New markets, existing products

Product Development
Existing markets, new products

Diversification
New products, new markets

Marketing Strategy
Strategy
1. Market
Customers grouped by:
Geographic Demographic Psychographic Behavioral

Segmentation

2. Target marketing 3. Market

Positioning

Market segment is a groups of consumers who respond in similar ways to marketing efforts.

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Marketing Strategy
Strategy
1. Market
Evaluation of each segments attractiveness Selection of segments with greatest long-term profitability A company can choose one or several segments to target

Segmentation

2. Target marketing 3. Market

Positioning

Marketing Strategy
Strategy
1. Market
The place the product occupies in the consumers mind Products are positioned relative to competing products Marketers look for clear, distinctive and desirable place in positioning

Segmentation

2. Target marketing 3. Market

Positioning

Marketing Mix
The marketing mix includes controllable and tactical marketing tools known as the 4Ps The 4Ps include

Product Place Promotion Price

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The Marketing Mix

Product:
Variety, quality, design, features, brand name, packaging and services.

Place:
o

Promotion:
Advertising, sales promotion, public relations and personal selling.

Channels, coverage, logistics, locations, transportation, assortments and inventory. List price, discounts, allowances, payment period and credit terms.

Price:
o

The 4 Ps & the 4 Cs of the Marketing Mix

4 Ps Sellers View
Product Price Place Promotion

4 Cs Buyers View
Customer Solution Customer Cost Convenience Communication

Managing the Marketing Effort

Four marketing management functions:

Marketing Analysis
SWOT analysis is key.

Marketing Planning
Create brand marketing plan.

Marketing Implementation
Determine who, where, when, and how.

Marketing Control
Evaluate results, take corrective action.

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SWOT Analysis

Strengths: Internal capabilities that may help a company reach its objectives. Weaknesses: Internal limitations that may interfere with a companys ability to achieve its objectives.

SWOT Analysis

Opportunities: External factors that the company may be able to exploit to its advantage. Threats: Current and emerging external factors that may challenge the companys performance.

Managing the Marketing Effort

Marketing Functions Finding opportunities Avoiding threats Understanding strengths Analyzing weaknesses

Analysis Planning Implementation Control

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Managing the Marketing Effort

Marketing Functions
Marketing plans include: Executive summary Analysis of current situation Objectives Targets and positioning Marketing mix Budget Controls

Analysis Planning Implementation Control

Managing the Marketing Effort

Marketing Functions Plans are turned into action with day-to-day activities Good implementation is a challenge

Analysis Planning Implementation Control

Managing the Marketing Effort

Marketing Functions Evaluation of the results of marketing strategies Checks for differences between goals and performance

Analysis Planning Implementation Control

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Measuring Effectiveness

Return on marketing (marketing ROI)

The net return from a marketing investment divided by the costs of the investments

The Marketing Environment

The Marketing Environment

Marketing Environment:
The actors and forces outside marketing that affect marketing managements ability to build and maintain successful relationships with target customers

Microenvironment

Includes the actors close to the company Involves larger societal forces

Macroenvironment

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Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
Marketing must consider other parts of the organization including finance, R&D, purchasing, operations and accounting Marketing decisions must relate to broader company goals and strategies

intermediaries

Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
Marketers must watch supply availability and pricing Effective partnership relationship management with suppliers is essential

intermediaries

Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
Help to promote, sell and distribute goods to final buyers Include resellers, physical distribution firms, marketing services agencies and financial intermediaries Effective partner relationship management is essential

intermediaries

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Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
The five types of customer markets Consumer Business Reseller Government International

intermediaries

Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
Conducting competitor analysis is critical for success of the firm A marketer must monitor its competitors offerings to create strategic advantage

intermediaries

Microenvironment
Actors
1. The company 2. Suppliers 3. Marketing 4. Customers 5. Competitors 6. Publics
A group that has an actual or potential interest in or impact on an organization Seven publics include: Financial Media Government Citizen-action Local General Internal

intermediaries

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The Macroenvironment
Macroenvironmental Forces
Demographic Economic Natural

Technological Political Cultural

Demographic Environment

Demographic Environment:
The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics

Economic Environment
Consists of factors that affect consumer purchasing power and spending patterns.

Changes in Income
1980s consumption frenzy 1990s squeezed consumer 2000s value marketing

Income Distribution
Upper class Middle class Working class Underclass

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Natural Environment

Natural Environment:
Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities

Trends
Shortages of raw materials Increased pollution Increased government intervention

Technological Environment
The most dramatic force shaping our destiny Rapidly changing force which creates many new marketing opportunities but also turns many existing products extinct

Political Environment

Consists of laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society
Legislation affecting businesses worldwide has increased Laws protect companies, consumers and the interests of society Increased emphasis on socially responsible actions

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Cultural Environment

Made up of institutions and other forces that affect a societys basic values, perceptions, preferences and behaviors.

Responding to the Marketing Environment

There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder whats happened.

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