Understanding the Customer and Creating Goods and Services that Satisfy

1. Understanding the Customerand Creating Goods and Services that Satisfy Chapter 13

2. Chapter 13 Learning Goals • What are the marketing concept and relationship building? • How do managers create a marketing strategy? • What is the marketing mix? • How do consumers and organizations make buying decisions?

3. Chapter 13 Learning Goals (cont’d.) • What are the five basic forms of market segmentation? • How is marketing research used in marketing decision making? • What are the trends in understanding the consumer?

4. Learning Goal 1 • What are the marketing concept and relationship building? • Marketing concept involves • Identifying consumer needs and wants • Producing goods or services that will satisfy consumers while making a profit • Relationship marketing entails • Forging long-term relationships with customers • Can lead to repeat sales, reduced costs, and stable relationships

5. Marketing Concept: Identifying consumer needs and then producing the goods or services that will satisfy them while making a profit for the organization

6. Elements of the Marketing Concept • Customer value • Customer satisfaction • Building relationships

7. Deere’s Customer Orientation • Understand needs of the agricultural farmer customer • Provide good products that rarely fail • Quickly repair any problem equipment • Develop products based on what farmers want • Extend credit to farmers if needed; build trust and loyalty • Provide information that increases customer value Source: Neff & Citrin, Lessons from the Top, 1999, p. 47-53.

8. Learning Goal 2 • How do managers create a marketing strategy? • Marketing strategies are created by • Understanding the external environment • Using environmental scanning • Defining the target market • Specific group of consumers toward which a firm directs its marketing efforts • Determining a competitive advantage • Set of unique features of a company and its products • Perceived by target market as significant and superior to those of the competition • Developing a marketing mix

9. Creating a Marketing Strategy • Understanding the external environment • Defining the target market • Creating a competitive advantage • cost competitive advantage • differential competitive advantage • niche competitive advantage

10. Learning Goal 3 • What is the marketing mix? • Marketing mix is a blend of • Products • Distribution systems • Prices • Promotion • Marketing mix is used by marketing managers to satisfy target consumers • Mix can be applied to non-business or business situations

11. Marketing Mix: The blend of ‘4 Ps’: product offering, pricing, promotional methods, and place (distribution system) that brings a specific group of consumers superior value

12. Developing a Marketing Mix • Product strategy • Pricing strategy • Distribution strategy • Promotion strategy

13. 360° Branding 360° branding: making a strong brand impact on the customer every time contact is made Opportunities for 360° branding: • showrooms, advertisements, web pages, retail locations, packaging, customer service Ogilvy & Mather advertising agency applies 360° branding to its clients Source: Neff & Citrin, Lessons from the Top, 1999, p. 221-227.

14. Learning Goal 4 • How do consumers and organizations make buying decisions? • Consumer decision making process consists of: • Responding to a stimulus • Recognizing a problem or opportunity • Seeking information and evaluating alternatives • Purchasing the product and judging the purchase outcome • Engaging in post-purchase behavior • Factors that influence the process • Individual factors – unique to each person • Social factors – family, social classes, and culture

15. Learning Goal 4 (cont’d.) • How do consumers and organizations make buying decisions? • Differences between consumer and business markets: • Purchase volume • Number of customers • Location of buyers • Direct distribution • Rational purchase decisions

16. Buyer Behavior:Consumer Decision-Making 1. Sense stimulus 2. Recognize problem 3. Search for information Individual & Social factors Memory 4. Evaluate alternatives 5. Purchase product 6. Evaluate outcome 7. Post-purchase behavior

17. When the Buyer is a Business (Not a Customer) • Higher purchase volume • Fewer buyers • More concentrated location of buyers • Direct distribution • Rational purchase decisions

18. Top 10Business-to-Business Advertisers 1. AT&T Corp. 2. IBM Corp. 3. Microsoft Corp. 4. Compaq Computer Corp. 5. MCI Communications Corp. 6. Hewlett-Packard Co. 7. Sprint Corp. 8. American Express Co. 9. Canon 10. 3Com Corp. Source: Business Marketing,www.businessmarketing.com

19. Learning Goal 5 • What are the five basic forms of market segmentation? • Demographic (population statistics) • Geographic (location) • Psychographic (personality or lifestyle) • Benefit (product features) • Volume (amount purchased)

20. Market Segmentation: The process of separating, identifying, and evaluating the layers of a market in order to design a marketing mix

21. Types of Market Segmentation Type General characteristics Demographic age, education, gender, income, race, family, size Geographic regional location (I.e., midwest), population density, city/county size, climate Psychographic lifestyle, personality, interests, values, attitudes Benefit benefits provided by the good or service Volume amount of use (light to heavy)

22. Learning Goal 6 • How is marketing research used in marketing decision making? • Much can be learned about consumers through marketing research by • Collecting, recording, and analyzing data important in marketing goods and services • Communicating results to management • Primary data is • Collected in these ways: • Door-to-door • Mall-intercept • Telephone • Internet • Mail interviews

23. Learning Goal 6 (cont’d.) • How is marketing research used in marketing decision making? • Secondary data • Available from these associations: • Government • Trade • Commercial • Saves time and money but may not meet researchers’ needs • Both primary and secondary data give researchers a better idea of how market will respond to a product • Reduces the risk of producing something the market doesn’t want

24. Marketing Research Process 1. Define the marketing problem 2. Choose a method of research survey, observation, experiment 3. Collect the data primary data, secondary data 4. Analyze the data 5. Make recommendations to management

25. Importance of Marketing Research Bob Tillman, CEO of Lowe’s, emphasizes the value of market research: • retailers often fail because they second guess the market research • market research is the only direct source of information about what the customer wants • it must be protected from internal politics or adverse influence Source: Neff & Citrin, Lessons from the Top, 1999, p. 377.

26. Learning Goal 7 • What are the trends in understanding the consumer? • New technology has: • Increased the sophistication of observation research techniques • Improved the accuracy of data • Researchers are analyzing the brain to better understand how people think • Growing use of decision support systems • Enable managers to make decisions quickly and accurately • Growing use of databases for micromarketing

27. Trends in Marketing • Advanced observation research methods • Decision support systems (DSS) • Use of databases for micromarketing • allows customized marketing to individuals • Amazon.com records what every customer buys; this gives them a sense of every customer’s taste & preferences, which can be used to target specific customers with customized purchase suggestions & special offers (Source: Fortune, Sept. 28, 1998, p. 124)