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Marketing: Managing Profitable Customer Relationships

•Chapter 1

•Powerpoint slides

•Extendit! version

•Instructor name

•Course name

•School name

•Date

Principles of Marketing: 6th Canadian Edition

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Learning Objectives

• After studying this chapter, you should be able to:– Define what marketing is and discuss its core concepts

– Define marketing management and compare the five marketing management orientations

– Discuss customer relationship management and strategies for building lasting customer relationships

– Analyze the major challenges facing marketers heading into the new “connected” millennium

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Opening Vignette: VanCity Credit Union

• Founded in 1946 in Vancouver, British Columbia

• In 2003: 286,000 members in 39 branches

• Credit unions are cooperatives, owned by members• Profits returned as dividends or improved

services/prices

• Triple bottom line

• Measures success by:– Customer satisfaction

– Profits

– Community impact

– Member involvement

– Environmental sustainability

– Growth in new members

• Uses non-traditional marketing tools

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Marketing Defined

• Marketing: – Social and managerial process

– Individuals and groups obtain what they need– Creating and exchanging

– Products and values with others

• Needs:– Felt deprivation

• Wants:– Form of needs shaped by culture

and personality

• Demands:– Wants backed by buying power

Figure 1.1

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Products, Services, and Experiences

• Marketing offer: – Address needs with a value proposition

– Set of benefits promised to customers to satisfy needs

– Can include:– Products

– Services

– Persons

– Places

– Organizations

– Information

– Ideas

Figure 1.1

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Value and Satisfaction

• Value: – Benefits gained versus costs of obtaining product

• Satisfaction:– Degree of meeting consumer’s expectations– Expectations formed from:

• Previous experience

• Opinions of others

• Marketing information

• Competitive information and promises

– Satisfied customers buy again and tell others

– Dissatisfied customers switch and tell others

Figure 1.1

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Exchange, Transactions, and Relationships

• Exchange:– Obtaining a desired object

– By offering something in return

• Transaction:– Two things of value

– Agreed-upon conditions

– Time/place of agreement

• Exchange relationships:– Want to build strong economic

and social connections

– Consistently delivering superior value

Figure 1.1

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Marketing Management

• Market:– A physical place where buyers and sellers gather

– Set of actual or potential buyers of a product

• Marketing management:– Choosing target markets

– Building profitable relationships with them

• Demarketing:– Reduce, not destroy

demand

– Temporarily or permanently

Figure 1.2

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Marketing Management Orientations

• Production concept:– Consumers will favour available/affordable products

– Focus on improving production/distribution efficiency

– Still useful when demand exceeds supply

• Product concept:– Consumers favour products

with the best:• Quality

• Performance

• Features

– Focus on continuous product improvements

Figure 1.3

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Marketing Management Orientations

• Selling concept:– Products need large-scale selling/promotion effort

– Focus on the hard sell

– Unsought goods, or when company has overcapacity

• The marketing concept:– Achieve organizational

objectives by

– Determining needs and wants of target consumers

– Delivering satisfaction

– Better than competitors

Figure 1.3

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Societal Marketing Concept

• Societal marketing concept:– The marketing concept focuses on short-run wants

– May be in conflict with consumer long-run welfare

– Determine needs/wants of target markets– Deliver desired satisfactions

– More efficiently and effectively than competitors

– In a way that maintains or improve consumer’s and society’s well-being

Figure 1.4

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Customer Relationship Management

• Customer relationship management:– Process of building/maintaining profitable customer relationships

– Delivering superior customer value and satisfaction

• Customer lifetime value:– Value of the entire purchase stream

– Customer makes over a lifetime

– Focus on the long-term

– Very few new customers, just someone else’s

– More efficient to look after your own customers

– Than to try to find new ones

Figure 1.5

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Customer Satisfaction and Loyalty

• Customer perceived value:– Difference between total customer value

– And total customer cost

– To the customer, perception is reality

• Customer satisfaction:– Extent a product’s perceived

performance

– Matches expectations

– Maximizing customer satisfaction may not be possible or will be cost prohibitive

Figure 1.5

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Customer Satisfaction and Loyalty

• Customer loyalty:– Highly satisfied customers are less price sensitive

– Speak favourably about the company and products

– Remain loyal for longer period of time– Link between satisfaction

and loyalty is positive, but

– Different for some industries

– To the customer, slight changes in satisfaction may trigger switching

– Companies need to aim high

– Focus on greater “share of wallet”

Figure 1.5

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Building Customer Relationships

• Customer equity:– Total combined customer lifetime values

– Of all of the company’s customers

• Relationship tools:– Levels from developing basic

relationships to creating full partnerships

– Financial benefits: frequency marketing programs

– Social benefits: club marketing

– Adding structural ties

– Focus on profitable customers

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Today’s Marketing Connections

• Single theme: connecting• The Internet

• One to one marketing

• Selective relationship management

• Increase share of customer

• Partner relationship management

• Supply chain management

• Strategic alliances

Figure 1.6

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Marketing Connections in Transition (Table 1.1)

Old marketing thinking:• Sales/product centered…

• Practice mass marketing…

• Focus on product/sales…

• Make sales to customers…

• Get new customers…

• Grow share of market…

• Serve any customer…

• Use mass media…

• Standardized products…

• Sales/marketing responsible for customer satisfaction/value…

• Go it alone…

• Market locally…

• Profit responsibility…

• Corporations…

• Use marketplaces…

New marketing thinking:• Market/customer centered

• Selected market segments

• Focus on customer satisfaction/value

• Develop customer relationships

• Keep old customers

• Grow share of customer

• Serve profitable customers

• Connect with customers directly

• Customized products

• Enlist all departments to deliver customer satisfaction/value

• Partner with others

• Market locally and globally

• Social/environmental responsibility

• Non-profits

• Use marketspaces

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In Conclusion…

• The learning objectives for this chapter were:– Define what marketing is and discuss its core concepts

– Define marketing management and compare the five marketing management orientations

– Discuss customer relationship management and strategies for building lasting customer relationships

– Analyze the major challenges facing marketers heading into the new “connected” millennium