Marketing: Creating and Capturing Customer Value

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Marketing Creating and Capturing Customer Value
Chapter 1
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Market Product

• A market is the set of actual and potential
  buyers of a product. These buyers share a
  particular need or want that can be satisfied
  through exchange relationships.
• Product (Marketing Offer) physical product,
  service, information, experience, person, place,
  organization, and ideas.

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Examples of Product
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National Milk Processors Education Program
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Definition of Marketing

• Marketing is the process of planning and
  executing the conceptions, pricing, promotion and
  distribution of ideas, goods, and services to
  create exchanges that satisfy individual and
  organizational goals. (AMA)
• Marketing is meeting needs profitably.

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Marketing Philosophy

• The Production Concept
• The Product Concept
• The Selling Concept
• --------------------------------------------------
  ------
• The Marketing Concept
• The Customer Concept
• The Societal Marketing Concept

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The Production Concept

• The idea that consumers will favor products that
  are widely available and highly affordable.
• Focus achieving high production efficiency, low
  costs, and mass distribution.
• It is useful when (1) the demand for a product
  exceeds the supply (2) the products cost is too
  high.
• Examples Fords Model-T, standard raw materials
  and components, CD, LCD.

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The Product Concept

• The idea that consumers will favor products that
  offer the most quality, performance, and
  features.
• Focus making superior products and improving
  them over time.
• Examples Digital Camera, CPU.
• Better Mousetrap Fallacy
• Marketing Myopia (Theodoes Levitt, 1960)

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Product-Oriented vs. Market-Oriented Definition
Company Product-Oriented Definition Market-Oriented Definition
Disney We run theme parks. We create fantasies a place where America still works the way its supposed to.
Nike We sell shoes. We help people experience the emotion of competition, winning, and crushing competitors.
Revlon We make cosmetics. We sell lifestyle and self-expression success and status memories, hopes, and dreams.
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The Selling Concept

• The idea that consumers will not buy enough of
  the firms products unless it undertakes a
  large-scale selling and promotion effort.
• Sergio Zyman (Coca-Colas former vice president
  of marketing) the purpose of marketing is to
  sell more stuff to more people more often for
  more money to make more profit.

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The Selling Concept

• Focus undertake an aggressive selling and
  promotion effort.
• Examples unsought goods (e.g. funeral plots,
  encyclopedias, and foundations), election.
• The selling concept assumes that customers who
  are coaxed into buying the product will like it.
  Or, if they dont like it, they will possibly
  forget their disappointment and buy it again
  later.

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The Marketing Concept

• The key to achieving its organizational goals
  consists of the company being more effective than
  competitors in creating, delivering, and
  communicating superior customer value to its
  chosen target markets.
• Slogans Find wants and fill them, Love the
  customer, not the product, and We do it all for
  you (Toyota).

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Contrasts Between the Sales Concept and the
Marketing Concept

• Theodore Levitt selling focuses on the needs of
  the seller marketing on the needs of the buyer.
• Selling the manufacturer This is what I make,
  wont you please buy it marketing the
  consumer This is what I want, wont you please
  make it
• Selling inside-out perspective marketing
  outside-in perspective.

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Contrasts Between the Sales Concept and the
Marketing Concept
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The Marketing Concept

• Four pillars
• Target market
• Customer needs
• Integrated marketing
• Profitability.

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Target Market

• Companies do best when they choose their target
  market(s) carefully and prepare tailored
  marketing program.

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Case Veterinary Pet Insurance

• Facts
• More than 60 of all U.S. households own one dog
  or one cat or both.
• There are more than 60 million dogs, 68million
  cats, and 2 million rabbits in U.S..
• Spend 28.5 billion a year on the pets.
• Nearly 75 of pet owners are willing to go into
  debt to pay for veterinary care.
• Sales have grown 40 in each of the past year,
  reaching nearly 72million last year.

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Customer Needs

• Five types of needs
• Stated needs, e.g. the customer wants an
  inexpensive car.
• Real needs, e.g. the customer wants a car whose
  operating cost, not its initial price, is low.
• Unstated needs, e.g. the customer expects good
  service from the dealer.
• Delight needs, e.g. the customer would like the
  dealer to include an onboard navigation system.
• Secret needs, e.g. the customer wants to be seen
  by friends as a savvy consumer.

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Customer Needs

• Responsive, anticipative, and creative marketing
• A responsive marketer finds a stated need and
  fills it.
• An anticipative marketer looks ahead into what
  needs customers may have in the near future.
• A creative marketer discovers and produces
  solutions customers did not ask for but to which
  they enthusiastically respond.
• Akio Morita once proclaimed that Sony doesnt
  serve markets Sony creates markets. The Walkman
  is a classic example.
• 3M Our goal is to lead customers where they
  want to go before they know where want to go.

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Marketing Debate
Does Marketing Create or Satisfy Needs? Take a
position Marketing shapes consumer needs and
wants versus Marketing merely reflects
the needs and wants of consumers.
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Integrated Marketing

• When all the companys departments work together
  to serve the customers interests, the result is
  integrated marketing.
• Two levels
• Integrating the various marketing functions.
• Integrating marketing with other departments
  (production, finance, human resource).
• External marketing and Internal marketing

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The Four P Components of the Marketing Mix
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Marketing-Mix Strategy
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The Customer Concept
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The Societal Marketing Concept

• A principle of enlightened marketing that holds
  that a company should make good marketing
  decisions by considering consumers wants, the
  companys requirements, consumers long-run
  interests, and societys long-run interests.
• Examples Body Shop, HSBC, Dell Asia, Bata
  Indonesia.
• Johnson Johnsons Tylenol (240 million), ?????
  (NT 120 million), ??????.

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Earth Tree

• ???????????????,??????????????????????????,???????
  
• ????Fair Trade?????,??????????????,???????,???????
  ???????????????????????,?????????????????,????????
  ????????????????????

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Needs, Wants and Demands

• Needs (??) the basic human requirements.
• Physical food, clothing, shelter, safety
• Social belonging, affection
• Individual learning, knowledge, self-expression
• Wants (??) when needs are directed to specific
  objects that might satisfy the need.
• Demands (??) wants for specific products backed
  by an ability to pay.

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Demand States and Marketing Tasks

• Marketing managers are responsible for demand
  management.
• Negative Demand ? Counter Marketing, e.g.
  insurance.
• No Demand ? Stimulus, e.g. encyclopedias.
• Latent Demand ? Developing, e.g. iPod ??????
  ??????.
• Declining Demand ? Remarketing, e.g. Arm
  Hammers baking soda ? deodorizer school.

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Demand States and Marketing Tasks

• Marketing managers are responsible for demand
  management.
• Irregular Demand ? Synchromarketing (????), e.g.
  ice cream museum.
• Full Demand ? Maintain Marketing
• Overfull Demand ? Demarketing (???), e.g. Mister
  Donut ??????.
• Unwholesome Demand ? Social Marketing, e.g.
  cigarettes drunk-driving seat belt anorexia.

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Customer Relationship Management (CRM)

• The overall process of building and maintaining
  profitable customer relationships by delivering
  superior customer value and satisfaction.
• On average, it costs 5 to 10 times as much to
  attract a new customer as it does to keep a
  current customer satisfied. (Sears 12 times)

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Customer Lifetime Value and Equity

• Customer lifetime value the value of the entire
  stream of purchases that the customer would make
  over a lifetime of patronage.
• Lexus 600,000 Taco Bell 12,000 Supermarket
  50,000.
• Customer equity the total combined customer
  lifetime values of all of the companys
  customers.
• Cadillac vs. BMW

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Selective Relationship Management

• Weed out losing customers and target winning ones
  for pampering.
• Examples Citibank First Chicago Bank Fidelity
  Investment.
• Risk future profits are hard to predict.

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Selective Relationship Management

• ????(Southwest Airlines)??????,?????????????,?????
  ,???????????,???????????????????????,?????????????
  ,???????????,??????????Herb Kelleher?Kelleher???,?
  ????????????,??????????????!?

????????? ??????? (p. 42, December 2007)
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Customer Relationship Groups
Profitability
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Share of Customer

• The portion of the customers purchasing in its
  product categories that a company gets.
• Methods to increase share of customer
• Offer greater variety to current consumers
• Train employees to cross-sell and up-sell in
  order to market more products and services to
  existing customers.
• Amazon books, music, videos, gifts, toys,
  consumer electronics, office products, and so on.

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Customer Satisfaction

• The extent to which a products perceived
  performance matches a buyers expectation.
• Smart companies aim to delight customers by
  promising only what they can deliver, then
  delivering more than they promise.
• Examples Lexus Southwest Airlines Seasons
  Hotels Nordstrom department store.

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Satisfying Customer Complaints

• Rate of dissatisfaction 25 rate of complaint
  in dissatisfaction 5.
• 50 of complaints report a satisfactory problem
  resolution.
• Examples Williams-Sonoma Enterprise Rent-A-Car.
• On average, satisfied ?3 people, and dissatisfied
  ? 11 people.

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????

• ??????? Customer lifetime value?
• ?????????????????????,?????????????
• ??????,????????????????????????
• ???????????,????????????????????

????????? ??????? (p. 44, December 2007)
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Satisfying Customer Complaints

• Rate of complainant repurchase

Resolved Resolved quickly
Major complaints 34 52
Minor complaints 52 95
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Customer Relationship Levels and Tools

• Level of relationship basiclt reactive (e.g.
  PG)ltaccountableltproactiveltpartnership (e.g.
  Boeing).
• Tools
• Add financial benefits, e.g. frequent-flier
  program.
• Add social benefits, e.g. club marketing program.
• Add structural ties, e.g. McKesson FedEx.

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Levels of Relationship Marketing
High margin Medium margin Low Margin
Many customers/ distributors Accountable Reactive Basic or reactive
Medium number of customers/ distributors Proactive Accountable Reactive
Few customers/ distributors Partnership Proactive Accountable
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Harley-Davidson

• Harley Owners Group (H.O.G.)
• H.O.G. benefits include Hog Tales, a touring
  handbook, emergency road service, a specially
  designed insurance program, theft reward service,
  discount hotel rates, and a Fly Ride program.
• The company also maintains an extensive Web site
  devoted to H.O.G., which includes information on
  club chapters, events, and a special members-only
  section.

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Discussion Question
In 1981, American Airlines first introduced the
AADVANTAGE frequent-flier program. When other
airlines copied this strategy, did they engage in
the prisoners dilemma?
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Prisoners Dilemma
Player 1 ? Player 2 Cooperate Fink
Cooperate 2, 2 -3, 3
Fink 3, -3 -2, -2
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Discussion Question
How can the firms escape from the prisoners
dilemma?