Marketing Concepts:

Managing Profitable Customer

Relationships

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.

Examples of Product

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.

Marketing is meeting needs profitably.

Marketing Philosophy

The Production Concept

The Product Concept

The Selling Concept

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The Marketing Concept

The Customer Concept

The Societal Marketing Concept

The Production Concept

Consumers will prefer products that are widely available and inexpensive.

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 product’s cost is too high.

Examples: Standard Raw Materials and Components, CD, LCD.

The Product Concept

Consumers will favor those products that

offer the most quality, performance, or

innovative features.

Focus: making superior products and

improving them over time.

Examples: Digital Camera, CPU.

Better Mousetrap Fallacy

Marketing Myopia. (Theodoes Levitt, 1965)

The Selling Concept

Consumers and businesses, if left alone, will ordinarily not buy enough of organization’s products.

Focus: undertake an aggressive selling and promotion effort.

Examples: unsought goods: encyclopedias, funeral plots, foundations.

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, We do it all for you (Toyota).

Four pillars: target market, customer needs,

integrated marketing and profitability.

Contrasts Between the Sales Concept and the

Marketing Concept

The Customer Concept

The Societal Marketing

Concept

The organization’s task is to determine the needs,

wants, and interests of target markets and to deliver

the desired satisfactions more effectively and

efficiently than competitors in a way that preserves

or enhances the consumer’s and society’s well-

being.

Examples: Body Shop; HSBC; Johnson &

Johnson’s Tylenol

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.

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 &

Hammer’s baking soda → deodorizer; school.

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.

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.

Customer Perceived Value

The difference between total customer value

and total customer cost.

Value chain, e.g. Wal-Mart.

Value-delivery network, e.g. Honda.

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.

Customer equity: the total combined

customer lifetime values of all of the

company’s customers.

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.

Customer Relationship Groups

Profitability

Projected loyalty

High

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

Share of Customer

The portion of the customer’s 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.

Customer Satisfaction

The extent to which a product’s perceived

performance matches a buyer’s 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.

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.

Satisfying Customer Complaints

Rate of complainant repurchase

Resolved Resolved

quickly

Major

complaints

34% 52%

Minor

complaints

52% 95%

Customer Relationship Levels

and Tools

Level of relationship: basic＜ reactive (e.g.

P&G)＜accountable＜proactive＜partnership

(e.g. Boeing).

Tools:

Add financial benefits, ex. frequent-flier program.

Add social benefits, ex. club marketing program.

Add structural ties, ex. McKesson; FedEx.