Principles of Marketing

Session 1
Defining Marketing and Market
Process
 Lecture Plan
• What is marketing?
• Goals of marketing
• Marketing process
 Steps of creating and capturing value
• Relationship marketing
 Dimensions
 Goals
 Benefits
• Transaction vs. Relationship Marketing
• Lost customer program
• Right strategy for right customer
• Some basic terms and issues
 What is Marketing?
• Only selling or advertising?- No!!
• The concept has turned into “Satisfying
customer need and want” from “Telling
and selling”-
• Marketing involves building profitable,
value-laden exchange relationships with
customers
 Marketing

Marketing is a total system of

business activities designed to plan,
price, promote and distribute want-
satisfying goods and services to
present and potential customers.
 • Kotler’s definition:
A process by which companies create value for
customers and build strong relationships to capture
value from customers in return.

• A simple model of ‘Marketing Process’:

Create value for customers and

build customer relationships
Capture value
from
Understand Design a Construct a Build profitable
customers in
marketplace, customer - marketing relationships and
return
and customer driven program that create customer
needs & marketing delivers superior delight
Capture value
wants strategy value
from
customers to
create profits
and customer
loyalty
• Marketing is managing profitable customer relationships by:

– Attracting new customers

– Retaining and growing current customers

– Reclaiming lost customers

• The process by which companies create value for the

customers and build strong customer relationship in order to
capture value from the customers in return
 Goal of Marketing?
To Get Customers
–Purchase
–Use, and
–Re-purchase (both repeat & cross
selling) Your products!
Understanding the Marketplace and
Customer needs: Core Customer and
Marketplace Concept
• Customer needs, wants and demands
• Market offerings
• Customer value and satisfaction
• Exchange and relationships
• Markets
 Designing Customer Driven Marketing
Two important questions:
Strategy
• Whom to serve? (Market segmentation and targeting)
• How to serve? (Differentiation and positioning)
The art and science of choosing target markets and building
profitable relationships with them.
• Selecting customers to serve
• Choosing a value proposition to deliver
• Management orientations (Concepts)

1. The Production Concept: widely available products with low costs.

2. The Product Concept: Quality, performance and innovative products.
3. The Selling Concept: Aggressive selling & promotion effort
4. The Marketing Concept: Determining needs & wants of target market, delivering
desired satisfaction more effectively & efficiently than competitors
5. The Societal Concept: Enhancing consumer’s & society’s well-being
 Marketing’ is NOT synonymous
with ‘sales’ or ‘advertising’
A. MARKETING CONCEPT
Starting Point Focus Means Ends

Target Customer Integrated Profit by

Market Needs Marketing Customer
Satisfaction
B. SELLING CONCEPT
Starting Point Focus Means Ends

Factory Products Selling & Profit by

Promoting Sales
Revenue
 Preparing an Integrated Marketing
Plan and Program
• Product
• Price
• Place
• Promotion
 Building Customer Relationship
• CRM is the overall process of building and
maintaining profitable customer relationships
by delivering superior customer value and
satisfaction.

• Marketers must be concerned with the

lifetime value of the customer.

• It costs 5 to 10 times MORE to attract a new

customer than it does to keep a current
customer satisfied.
 Customer Relationship
Management (CRM)
• Establishing & Maintaining a Customer
Information File
• ‘Blue-printing’ or Planning Customer Contact
Points
• Analyzing Informal Customer Feedback
• Conducting Customer Satisfaction Surveys
• Managing Communication Programs
• Hosting Special Events Programs for
Customers
• Auditing and Reclaiming Lost Customers
 CRM

• Customer value/satisfaction
Key Concepts – Meeting (exceeding) expectations
creates satisfaction (Customer
Delightness!)
• Attracting, retaining and
– Perceptions are key
growing customers
• Loyalty and retention
• Building customer
– Benefits of loyalty
relationships and – Loyalty increases with satisfaction levels
customer equity – Delighting consumers should be the goal

• Growing share of customer

– Cross-selling
 CRM
• Customer relationship levels and tools
–Target market typically dictates type
Key Concepts of relationship
• Basic relationships
• Attracting, retaining and • Full relationships
growing customers –Customer loyalty and retention
programs
• Adding financial benefits
• Building customer
• Adding social benefits
relationships and
customer equity • Customer equity
–The total combined customer lifetime
values of all customers.
–Measures a firm’s performance, but
in a manner that looks to the future.
 Lifetime Value of a Customer
Creates Life-time Revenue and thus the
Profitability of the Customer to the
Organization.
• Length of average ‘lifetime’
• Average revenues generated per relevant time
period over the lifetime
• Sales of additional products/services over time
• Referrals generated by the customer over time
Lifetime Value of a Customer: an example
• If a 10-persons’ organization had Tk. 1,000 per month business
for the organization, assuming 10 year lifetime for a customer,
the value of the customer to the organization will become:
Tk. 1,000/month X 12/year X 10 years = Tk. 120,000

• If the happy customer creates at least one new customer via

word-of-mouth,
Tk. 120,000 X 2 new customers = Tk. 240,000

• If an average sales person serves 50 customers each day,

Tk. 240,000 X 50 Customers = Tk. 12,000,000

• Thus an average employee of the organization is managing a

Tk. 12,000,000 portfolio of lifetime business for it.
 Relationship Marketing
Relationship Marketing is
A philosophy of doing business, a strategic
orientation that focuses on keeping and
improving current customers, rather than on
acquiring new customers only.
The development and maintenance of long-
term, cost-effective relationships with
individual customers, suppliers, employees,
and other partners, perhaps even with
competitors, for mutual benefit.
 Four Dimensions: Relationships Marketing

Bonding: two parties must bond to one

another in order to develop a long-term
relationship.
In other words, mutual interests or
dependencies between the parties must be
strong enough to tie them together.

Empathy: the ability to see situations

from the perspective of the other party.

Empathy is another key emotional link in

the development of relationships.
 Four Dimensions: Relationships Marketing
Reciprocity: every long-term relationship
includes some give-and-take between the
parties.

This process, termed reciprocity, becomes a

web of commitments among the parties in
the relationship– binding them ever closer
together

Trust: reflects the extent of one party’s

confidence in another party’s integrity.

When parties follow-through on

commitments, they enhance trust and
strengthen relationships.

When parties do not follow-through on

commitments, the opposite is true.
 Goals of Relationship Marketing
To build & maintain a
base of committed Enhancing

customers who are Retaining

Satisfying
profitable for the
Getting
Organization

• Attract them first through Market Segmentation, the loyal

customers then will attract newer ones by their word-of-mouth,
• Retain them by responding their changing needs, and constantly
improving & evolving the product mix,
• Enhance relationship by selling more products to them.
 Benefits for Customers
 Confidence Benefits:Feelings of trust in
provider, reduced anxiety, great comfort in
knowing what to expect.

 SocialBenefits: A sense of familiarity, social

relationship with providers.

 Special Treatment Benefits: Getting benefit of

the doubt, a special deal or price, preferential
treatment.
 Benefits for the Organization
 Increasing Sells Lower Costs
 Free Advertising Employee
through word-of-mouth Retention
Customer Satisfaction

Customer Retention Quality Services

And Increased Profits

Employee Loyalty
Transaction & Relationship Marketing

Transaction-based marketing
involves limited communications
between buyer & seller and little or
no ongoing relationship between the
parties.
 Transaction vs. Relationship
Characteristic Transaction Marketing Relationship Marketing
Focus Single-sell Customer Retention

Orientation Product feature Product benefit

Time Short-term Long-term

Customer service Relatively low Key component

priority

Customer contact Low to moderate Frequent

Quality concern Moderate High

Degree of customer Low High

commitment
 Your Customers
1. Existing Customers 2.Potential Customers
3. Lost Customers
“Lost Customer” Programs
• Know who the lost customers are
• Find out why they left
• Establish if the problem can be fixed
– Apologize if its our own fault
– If the problem can be fixed, fix it
– If can not, monitor the situation to see if:
• Our own abilities change
• Customer’s preferences or personnel change
 Customer is NOT Always Right
All customer relationship may not be beneficial,
and that every customer is not right all the time:

• Customer from the Wrong Segment

• If the customer is NOT Profitable in long-run

• If the customer is difficult to work with, placing

stress on organization and its employees by:
– Refusing to follow policies of organization
– Verbal/physical abuse of employees
 Right Relationship With Right
Customer
Loyalty

Low High

True
High
Profitability

Butterflies
Friends
Low

Strangers Barnacles