“Marketing”:What does it mean?

Principles of Marketing – Spring 2008Dr. Hila Riemer

Unit 1

Agenda

Introduce ourselves What is “marketing? Course matters

Foundations of Marketing

What We Will Cover What is Marketing? The Marketplace and Customer Needs Marketing Management Marketing Management Philosophies Building Customer Relationships

What is Marketing?

Founded ~1965 –with a unique concept of drip irrigation- a revolutionary irrigation practice.

Today: • Sales of more than 350 million dollars a year, • 32 subsidiaries • Operating in more then 110 countries• 12 manufacturing facilities worldwide, • The largest low-volume irrigation company in the world. Netafim's continuously-expanding lineup of innovative products are used in every type of

agricultural venture - from high tech corporate farms to traditional family owned farms in developing countries.

Today, Netafim is a well-known global leader in the field of innovative irrigation-based solutions and water technologies that solve problems and raise productivity, while protecting the environment and saving water.

Creating Value• Netafim sells the knowledge and

advanced solutions – in irrigation.

• Netafim engages customers via knowledge and service.

• Netafim’s 40 years of worldwide experience in irrigation and agro- solutions allows our agronomists to provide answers to any challenge in a wide variety of local growing conditions. 

• Success has been achieved by creating lasting customer relationships.

Netafim – What is its secret?Netafim – What is its secret?Case StudyCase Study

Capturing Value• Netafim is the largest low-volume

irrigation company in the world.

• More the 350 Million US dollars a year in more then 110 countries.

• Netafim's continuously-expanding lineup of innovative products are used in every type of agricultural venture - from high tech corporate farms to traditional family owned farms in developing countries.

• Today, Netafim is a well-known global leader in the field of innovative irrigation-based solutions and water technologies that solve problems and raise productivity, while protecting the environment and saving water.

What Is Marketing?

Simple Definition: Marketing is managing profitable customer relationships.

Goals: 1. Attract new customers by promising

superior value. 2. Keep and grow current customers by

delivering satisfaction.

Marketing Defined A social and managerial process by

which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

OLD Viewof Marketing:

Making a Sale –“Telling & Selling”

New View of Marketing:

Satisfying customer needs

NEW View of Marketing:

Satisfying Customer Needs

“…the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product of service available…”

Peter Drucker

Marketing Defined (cont’d)

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

The Marketplace and Customer Needs

What Motivates a Consumer to Take Action?

Needs Wants Demands

Needs, Wants, & Demands

Need: State of felt deprivation including physical, social, and individual needs. Physical needs:

Food, clothing, shelter, safety

(e.g., I am thirsty.) Social needs:

Belonging, affection Individual needs:

Learning, knowledge, self-expression

Needs, Wants, & Demands

Wants: Form that a human need takes, as shaped by culture and individual personality.(e.g., I want a Coke.)

Wants + Buying Power = Demand

Let’s apply.… Consumers usually choose from a

tremendous variety of products and services to satisfy a given need or want. Consider your need for nourishment. How does that need translate into

different wants? What marketing offers are available to

satisfy your needs that also appeal to your wants?

How might other consumers in different market segments meet the same need for nourishment?

Need / Want Fulfillment

Needs and wants are fulfilled through a Marketing Offer: Some combination of products, services,

information, or experiences offered to a market to satisfy a need or want.

Need / Want Satisfiers Products:

Persons Places Organizations Information Ideas

Services Activity or

benefit offered for sale that is essentially intangible and does not result in ownership.

Products Can Be Ideas

Products do not have to be physical objects. Here the “product” is an idea -- protecting animals.

Products can also be people, organizations, places, or information.

Marketing in Action

Need / Want Satisfiers Products:

Persons Places Organizations Information Ideas

Services Activity or

benefit offered for sale that is essentially intangible and does not result in ownership. Brand Experiences:

“. . . dazzle their senses, touch their hearts, stimulate their minds.”

Brand Experiences: “. . . dazzle their senses, touch their hearts, stimulate their minds.”

Brand Experiences:

“. . . dazzle their senses, touch their hearts, stimulate their minds.”

Let’s Talk!

Does the ad shown at right promote consumer experiences? Explain.

Offer a different example of a current advertising campaign that promotes a “consumer experience.”

Do you believe the campaign is effective? Why or why not?

Marketing Myopia

Marketing myopia occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products.

They focus on the “wants” and lose sight of the “needs.”

Marketing in Action

Focused on selling prerecorded CDs, the record industry missed early opportunities to partner with music downloading services and manufacturers of digital MP3 type recording devices.

Marketing Myopia in the Recording Industry

How Do Consumers Obtain Products and Services?

Exchanges: act of obtaining a desired object from someone by offering something in return

Transactions: trade of values between two parties (usually involve money and a response)

Relationships: building long-term interactions with consumers, dealers, distributors, and suppliers

What is a Market?

The set of actual and potential buyers of a product.

These people share a need or want that can be satisfied through exchange relationships.

Modern Marketing Systems

Main elements in a modern marketing system include: Suppliers Company (marketer) Competitors Marketing intermediaries Final users

Elements of a Modern Marketing System

To summarize what we have discussed so far…

Why is understanding customer wants so critical for marketers?

How are the concepts of value and satisfaction related to each other?

What is the difference between transactions and relationships?

Marketing Management

Marketing Management

The process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organization objectives.

Marketing Management

The art and science of choosing target markets and building profitable relationships with them.

Questions to ask What customers will we serve?

What is our target market? How can we best serve these customers?

What is our value proposition?

Segmentation & Target Marketing

Market Segmentation: Divide the market into segments of

customers

Target Marketing: Select the segment to cultivate

Pair up with another student and discuss the ad shown at right.

Are you part of the target market for this product?

List the personal traits, variables, or factors that characterize members of this market segment.

Let’s Talk!

Let’s discuss

Why is target market selection important for a customer-driven marketing strategy? How might target market selection impact customer satisfaction?

Marketing Management

The task of influencing the level, timing, and composition of demand in a way that will help the organization achieve its objectives.

Demand Management Finding and increasing demand, also

changing or reducing demand, as in demarketing.

The basic Marketing TasksDemand state Marketing Task Formal NameNegative demand Disabuse demand Conversional marketing

No demand Create demand Stimulational marketing

Latent demand Develop demand Developmental marketing

Faltering demand Revitalize demand Remarketing

Irregular demand Synchronize demand Synchoromarketing

Full demand Maintain demand Maintenance marketing

Overfull marketing Reduce demand Demarketing

Unwholesome demand Destroy demand Countermarketing

Marketing in Action

Demarketing is often used to discourage undesirable behaviors.

Is this ad effective?

Visit the Office of National Drug Control Policy ad gallery.

mediacampaign.org

Demarketing

Marketing Management Orientations

Marketing Management Philosophies

Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

Marketing Management Philosophies Production Concept

Consumers favor products that are available and highly affordable.

Focus on improving production and distribution efficiency

Product Concept Consumers favor products that offer the

most quality, performance, and innovative features.

Focus on making continuous product improvements

Question

What is a limitation (or drawback) of having a product orientation?

Marketing Myopia Paying more attention to the specific

products than to the benefits and experiences produced by the products

Focus more on the “wants” and lose sight of the “needs”

Marketing Management Philosophies (cont’d) Selling Concept

Consumers will buy products only if the company promotes or sells these product.

Focus on promotions and advertising Marketing Concept

Knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors

Customer-centered “sense and respond” philosophy

Finding the right products for your customers (not vice versa)

Marketing and Sales Concepts Contrasted

Customer-Driven MarketingTwenty years ago, how many consumers would have thought to ask for laptops, wireless headsets, cell phones, MP3 players, PDAs, and digital cameras?

Marketers must often understand customer needs even better than customers themselves do; customers often can’t articulate what they really need.

Marketing in Action

Marketing Management Philosophies (cont’d)

Societal Marketing Concept Delivering value to customers in a way

that maintains or improves both the consumer’s and the society’s well-being

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

The Marketing Plan Transforms the marketing strategy

into action

Includes the marketing mix and 4 P’s of marketing…

C

The Marketing Mix - The Four Ps

C

Product Place

Price Promotion

The Marketing Mix - The Four Ps

C

Product Place

Price Promotion

The Marketing Mix - The Four Ps

• Total Product Concept

• Branding

• Packaging

• Warranties

• Product-line assortment

• New product development

C

Product Place

Price Promotion

The Marketing Mix - The Four Ps

• Pricing objectives

• Pricing Policies

• Price Flexibility

• Levels over PLC

• Discounts and allowances

• Geographic terms

• Legal factors

• Markup chain in channels

• Costs

• Demand (price sensitivity)

• Competition/Substitutes

• Price of other products in line

C

Product Place

Price Promotion

The Marketing Mix - The Four Ps

Two Perspectives:

• Distribution Channels

• Logistics

C

Product Place

Price Promotion

The Marketing Mix - The Four Ps

Strategy decisions to blend:

• Personal Selling

• Advertising

• Publicity

• Sales Promotion

TargetConsumers

Product

Place Price

Promotion

Mar

ketin

g

Im

plem

enta

tion

Marketing

Planning

Marketing

Control

Mar

ketin

g

Analys

is

Competitors

MarketingIntermediaries

PublicsSuppliers

Demographic-Economic

Environment

Technological-Natural

Environment

Political-Legal

Environment

Social-Cultural

Environment

The Marketing Process

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

Customer Relationship Management (CRM) The overall process of building and

maintaining profitable customer relationships by delivering superior customer value and satisfaction

Customer Perceived Value Customer’s evaluation of the difference between

all the benefits and all the costs of a marketing offer relative to those of competing offers

Customer Satisfaction Extent to which a product’s perceived

performance matches a buyer’s expectations Actual performance > expectations satisfied

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

Customer Loyalty and Profitability Customer Lifetime Value (CLV)

The value of the entire stream of purchases that the customer would make over a lifetime of patronage

Share of Customer The share of a company gets of the

customer’s purchasing in their product categories

Customer Equity The total combined customer lifetime

values of all of the company’s customers

Customer Relationship Groups

Projected loyalty

High

Profitability

Low

Long-term customers

Short-term customers

Good fit between company’s offerings and customer’s needs; high

profit potential

Limited fit between company’s offerings and customer’s needs; low

profit potential

Little fit between company’s offerings and customer’s

needs; lowest profit potential

Good fit between company’s offerings and

customer’s needs; highest profit potential

Strangers

Butterflies True Friends

Barnacles

Marketing in Action

To keep customers coming back, Stew Leonard’s has created the “Disneyland of dairy stores.”

Focus on Customer Lifetime Value

Let’s apply Companies measuring customer lifetime value

determine the potential profit from the stream of purchases a customer makes throughout a lifetime of patronage. When banks began tracking the profitability of individual customers, some found that a subset of their customers actually cost them money, rather than generating profits. Should banks “fire” their unprofitable customers? What are the consequences of such an action? How might considering the lifetime value of a customer

impact a bank’s perspective on these customers? How might eliminating unprofitable customers affect a

bank’s customer equity both positively and negatively?

So, What is Marketing? Pulling it all together….

A Simple Model of the Marketing Process

A Simple Model of the Marketing Process

Understand the marketplace

and customer needs and

wants

Understand the marketplace

and customer needs and

wants

Capture value from customers to create profits and customer equity

Capture value from customers to create profits and customer equity

Create value for customers and build customer

relationships

Capture value from customers

in return

Design a customer-driven

marketingstrategy

Design a customer-driven

marketingstrategy

Build profitable relationships and

createcustomer delight

Build profitable relationships and

createcustomer delight

Construct a marketing program

that delivers superior value

Construct a marketing program

that delivers superior value

Expanded Model of the Marketing Process

New Marketing Landscape

Rapid Globalization Ethics and Social Responsibility Not-for-Profit Marketing New World of Marketing Relationships

1. Define marketing and the marketing process.

2. Explain the importance of understanding customers and identify the core marketplace concepts.

3. Identify the elements of a customer-driven marketing strategy and discuss the marketing management orientations.

4. Discuss customer relationship management and creating value for and capturing value from customers.

5. Describe the major trends and forces changing the marketing landscape.

Rest Stop: Reviewing the Concepts