Understanding

Marketing Management
 Defining Marketing
Marketing is a societal process by which
individuals and groups obtain what they
need and want through creating,
offering, and freely exchanging products
and services of value with others.
- Philip Kotler (p. 7)
 Another Definition of Marketing

• Marketing is the study of an organization’s

relationship with its customers.
Marketing Strategy Planning

C
If we want to know what a business is, we have to start with its
purpose. And its purpose must lie outside the business itself. In
fact, it must lie in society since a business enterprise is an organ
of society. There is one valid definition of business purpose:
to create a customer.*

* Peter F. Drucker, The Practice of Management (New York: Harper &

Row, 12954), p. 37.
 Customer Equity
• How Much Is
A Customer
Worth
 Customer Equity
Lifetime Value of a Loyal Customer.
• Revenue Stream.
Price/unit * Total expected lifetime purchases

• Income Stream.
Margins/unit * Total expected lifetime
purchases
How does an organization create a customer?

• Identifying customer needs

• Designing goods and services that meet those needs
• Communicating information about those goods and
services to prospective buyers
• Making the goods or services available at times and
places that meet customers’ needs
• Pricing goods and services to reflect costs, competition,
and customers’ ability to buy
• Providing for the necessary service and follow-up to
ensure customer satisfaction after the purchase*

*Joseph P. Guiltianan and Gordon W. Paul, Marketing Management, 6th ed. (New York: McGraw-Hill,
1996), pp. 3-4.
 The Four Ps
The Four Cs

Marketing
Mix

Product Place

Convenience
Customer
Solution Price Promotion

Customer Communication
Cost
Marketing Manager’s Framework
Cultural and
Social Environment

Political and Resources

Product Place
Legal and
Environment Objectives
C of the Firm
Price Promotion

Economic and Competitive

Technological Environment
Environment
 Evolving Views of Marketing’s Role

Finance
Production
Production Finance
Human
resources
Marketing Human
resources Marketing

a. Marketing as an b. Marketing as a more

equal function important function
 Evolving Views of Marketing’s Role

Production on
cti

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ro
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Marketing Customer
re
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ar

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so m
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Fi tin

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c. Marketing as the d. The customer as the

major function controlling factor
Evolving Views of Marketing’s Role
Production

Marketing

Customer
re
Hu ur
so
ma ces

ce
a n
n

n
Fi

e. The customer as the controlling

function and marketing as the
integrative function
 Company Orientations
Towards the Marketplace
Consumers prefer products that are
Production Concept widely available and inexpensive

Consumers favor products that

Product Concept offer the most quality, performance,
or innovative features

Consumers will buy products only if

Selling Concept the company aggressively
promotes/sells these products

Focuses on needs/ wants of target

Marketing Concept markets & delivering value
better than competitors
 The Marketing Concept
Customer Total Company
Satisfaction Effort

The
Marketing
Concept

Profit
Societal Marketing Concept
Societal
(Human Welfare)

Consumers Company
(Satisfaction) (Profits)
 Relationship Concept
• Focus is on the development and
maintenance of long-term, cost-effective
exchange relationships with individual
customers, suppliers, employees, and
other partners for mutual benefit.
 Discussion Question
Identify two firms that you feel reflect each of
the following philosophies. Defend answers.

a Production concept
a Product concept
b Sales concept
c Marketing concept
d Relationship concept
 Marketing is Everything
• Technology is transforming choice, and choice is
transforming the marketplace.
• In the 1990’s, successful companies are becoming
market driven, adapting their products to fit their
customers’ strategies.
• In a marketplace characterized by rapid change and
potentially paralyzing choice, credibility becomes the
company’s sustaining value.
• Marketing has to be all-pervasive, part of everyone’s
job description.
• The real goal of marketing is to own the market - not
just to make or sell products.
Creating Value Through
Quality and
Customer Satisfaction
 Customer Delivered Value
Starting
point Focus Means Ends

Existing Selling and Profits through

Factory products promotion sales volume

(a) The selling concept

Customer Integrated Profits through

Market needs marketing customer
satisfaction

(b) The marketing concept

 Determinants of Customer
Delivered Value
Image value
Personnel value Total
customer
Services value value
Product value Customer
delivered
Monetary cost value

Time cost Total

customer
Energy cost cost
Psychic cost
 Quality
• Quality is the totality
of features and
#1 characteristics of a
product or service
that bear on its
ability to satisfy
stated or implied
needs.
 Five Possible Definitions
of Quality
• Innate Excellence. (You know it when you see it)
• Product-Based. (The more, the better)
• User-Based. (Quality is what the customer says it
is)
• Manufacturing-Based. (Conformance to
standards)
• Value-Based. (Excellence for the money)
Garvin’s 8 dimensions of quality
• Performance
• Features
• Reliability
• Conformance (to standards)
• Durability
• Serviceability
• Aesthetics
• Perceived quality (Image)
 Service Quality Dimensions
• Tangibles : The physical facilities, equipment, and
appearance of personnel.
• Reliability :Ability to perform the promised service
dependably and accurately.
• Responsiveness : Willingness to help customers and
provide prompt service.
• Assurance : Knowledge and courtesy of employees and
their ability to inspire trust and confidence.
• Empathy: Caring, individualized attention the firm
provides its customers.
 Discussion Question
Describe a situation in which you as a customer
experienced (1) EXCELLENCT QUALITY and
(2) POOR QUALITY in either a good or a service.
How did these experiences affect your feelings
toward the product or company? What advice
would you give to that company’s managers?
 CUSTOMER SATISFACTION

Satisfaction is a person’s
feelings of pleasure or
disappointment resulting from
comparing a product’s perceived
performance (or outcome) in
relation to his or her
expectations.
 Satisfied Customers:
• Are loyal longer
• Buy more (new products & upgrades)
• Spread favorable word-of-mouth
• Are more brand loyal (less price
sensitive)
• Offer feedback
• Reduce transaction costs
 Model of Customer Satisfaction

Perceived Customer
Quality Complaints

Perceived Customer
Value Satisfaction

Customer Customer
Expectations Loyalty
HOW CUSTOMERS FORM EXPECTATIONS
Personal Past
Needs Experience

Word of External
Mouth Communications

Customer
Expectations
 Discussion Question
According to one study, nearly half of the subscribers
to online service providers such as America Online and
CompuServe plan to switch to new service providers
within a year. Reasons given for wanting to switch
include desire for faster service (25%), preference for
flat monthly fees (20%), and availability of local dial-in
access. Assuming that service providers can find new
customers to replace lost subscribers, should they still
worry about this trend? Why? What actions would
you recommend?
Managing Quality and
Customer Satisfaction
 Service Quality Gap Model
Expected Quality
Gap 5
Perceived Quality
External
Gap 1 Communi-
Product Delivery cations to
Gap 4 Customers
Gap 3
Quality Specs
Gap 2
Management’s Perceptions
of Customer Expectations
Total Quality Management (TQM)

An effort to involve all employees in a

firm to continually improve products
and work processes with the goal of
achieving customer satisfaction and
world-class performance.
Key Components of Effective TQM Programs
• Top Management Involvement

• Employee Involvement

• Conducting a Marketing Audit

• Benchmarking

• Continuous Improvement