Lecture 1

1. 0 Lecture 1 Marketing: creating customer value

2. 0 Lecture Objectives By the end of this lecture, you should be able to • Define marketing and outline the concepts of needs, wants and demands • Explain marketing management and express the basic ideas of demand management and building profitable customer relationships. 2

3. 0 Lecture Objectives • Understand the concepts of: • Production • Product • Selling • Marketing • Societal Marketing • Understand the trends and the forces changing the marketing landscape: • Non-Profit Marketing • Rapid Globalisation • Changing World Economy • Ethical Behaviour

4. 0 What Is Marketing? 4

5. The Marketing Process • Know the marketplace and your customers • Design a customer driven strategy • Construct an IMP • Build profitable customer relationships • Capture value and create customer equity

6. 0 The Core Marketing Concepts- important terms Needs, wants, and demands Products Core Marketing Concepts Markets Value, satisfaction, and quality Exchange, transactions, and relationships 6

7. Do you know? What is the difference between needs, wants and demands? Give specific examples 7

8. 0 Needs, Wants and Demands (1) • Human needs arethe most basic concept underlying marketing • Humans have many complex needs including physical, social and individualneeds • Marketers do not invent these needs, they are part of human make up • When a need is not satisfied, a person will either try to reduce the need or look for an object that will satisfy it • People in less economically developed societies might try to reduce their desires and satisfy them with what is available • People in industrial societies try to develop objects that will satisfy their needs 8

9. 0 Needs, Wants and Demands (2) • Wants are the form taken by human needs and are shaped by culture and individual personality. • A hungry person in Hong Kong may want something different from a hungry person in Sydney because each person will think of different objects that will satisfy this need. • As a society evolves, the wants of its members expand. • Marketers try to provide more want-satisfying goods and services

10. 0 Needs, Wants and Demands (3) • Demands are the human wants that are backed up by buying power • Customers view products as bundles of benefits and choose the products that give them the best value for money. • Outstanding companies go to great lengths to learn about and understand their customers’ needs, wants and demands. • They conduct customer research, analyse and monitor customer behaviour, complaints, inquiry, warranty and service data. • Understanding customer needs, wants, and demands in detail provides important input for designing marketing strategies.

11. A market offering is a product that is some combination of goods, services and experiences that can be offered to a market to satisfy a need or want. Market offerings: Goods, services and experiences In the broadest sense, market offerings include… Goods Services/experiences Persons Places Organisations Information Ideas

12. Market offerings: Products, services and other market offerings Social causes Services Products & brands

13. 0 Example:Quitline: “Need a holiday?” Quitline combines a rational and emotional appeal

14. Exchanges, transactions and relationships Exchangeis the act of obtaining a desired object from someone by offering something in return. A transaction is atrade between two parties that involves at least two things of value, agreed-upon conditions, and a time and place of agreement.

15. The value proposition is the set of benefits or values that it promises to deliver to customers to satisfy their needs The marketing organisation’s value proposition… should differentiate brands and position them in the marketplace

16. Designing a customer-driven marketing strategy • To design a winning marketing strategy, the marketing manager must answer two important questions: 1. What customers will we serve? (i.e. Who is our target market?) 2. How can we serve these customers best? (i.e. What is our value proposition?)

17. What do you think? Why is it important to a marketer to decide which customers they will serve?

18. Managing customer demand: Sources of demand New customers (potential customers) A marketing organisation’s demand comes from two groups… Repeat customers (existing customers)

19. 0 Demand management • Negative demand: a major part of the market dislikes the product and may even pay a price to avoid it e.g. dental surgery, vaccinations. • No demand: Target consumers may be unaware of or uninterested in the product. Need to link. • Latent demand: Many consumers share a strong need that cannot be satisfied by existing products • Declining demand: every organisation will face a decline in demand for one or more of its products sooner or later

20. 0 Demand management • Irregular demand: many organisations face demand that varies on a seasonal, daily or hourly basis • Full demand: organisations face full demand when they are satisfied with their volume of business. Need for sustainable programs. • Overfull demand: organisations may face a demand level that is higher than they can or want to handle • Unwholesome demand: unwholesome products will attract organised efforts to discourage their consumption. E.g. tobacco, drugs.

21. Managing customer demand: De-marketing Many service firms & not-for-profit organisations need to engage in de-marketing… Permanently: to discourage anti-social behaviours. Temporarily: to cope with peak demand periods & overfull demand.

22. Marketing management orientations The product concept • Co.s focus their efforts on research and development in order to produce improved and/or innovative products. Philosophy is that ‘consumers favour products that offer the most quality, performance and features’ Selling Concept • Co.s focus their efforts on the sales process in order to sell large quantities of the product. The philosophy is that ‘consumers will not buy enough of the organisation’s products unless the organisation undertakes a large scale selling and promotion effort’ The marketing Concept • Based upon the satisfaction of both parties to the exchange – customer value within the capabilities of the company. The societal marketing concept • Co.s dominated by this concept are following the marketing orientation. The key difference is that the interests of society are also factored into the equation

23. Factory ExistingProducts Sellingandpromoting Profits throughsales volume Market Customerneeds IntegratedMarketing Profits throughcustomer satisfaction 0 1. The Selling Concept The selling and marketing concepts contrasted StartingPoint Ends Focus Means 2. The Marketing Concept Notion of Customer Lifetime Value pull-through system

24. Preparing an integrated marketing program builds customer relationships by transforming the marketing strategy into action The marketing program… consists of the firm’s marketing mix – that is, the set of marketing tools the firm uses to implement its marketing strategy

25. The extended marketing mix Armstrong, Adam, Denize, Kotler (2016) p 14

26. 0 Building profitable customer relationships • The current marketing emphasis is on building good customer relationships that will last • The ‘leaky-bucket’ approach is no longer viable as it costs five times as much to attract a new customer than to keep an existing one satisfied • Losing a customer may be more than losing one sale • One transaction may result in loss, but there may be gain in a long term relationship • The key to customer retention is superior customer value and satisfaction

27. Perceived value Customer satisfaction Relationship building blocks: Customer value and satisfaction The customer’s evaluation of the difference between all the benefits and the costs of a market offering relative to those of competing offerings. Depends on the product’s perceived performance relative to a buyer’s expectations.

28. Frequency marketing programs Frequency marketing/Loyalty marketing programs Operate on a quasi-club basis. Members are issued with a card and accrue points for every purchase made using the card. These points can subsequently be exchanged for goods, bonuses or cash.

29. What do you think? How many loyalty cards do you carry in your wallet? Of these, how many do you personally feel relate to you deeply and interactively?

30. The changing nature of relationships Relating more carefully with selected customers Relating more deeply and interactively Customer-managed relationships Online social networks Consumer-generated marketing

31. Relationship marketing: Customer lifetime value Customer lifetime value (CLV): refers to the value of an entire stream of purchases that the customer would make over a lifetime of patronage

32. Capturing value from customers Building the right relationship with customers Creating customer loyalty & retention Building customer equity Growing share of customer

33. The uncertain world economy The changing marketing landscape Measuring marketing’s contribution to organisational performance Growth of not-for-profit marketing The digital age Rapid globalisation Sustainable marketing: the call for social responsibility

34. The changing marketing landscape: The digital age The IT explosion is accelerating the rate of change and the emergence of new global competitors as various markets become attractive due to the lower costs offered to many industries by technology such as the internet.

35. Summary • Marketing’s role in the company • What marketing is and how it provides value to everyone involved in the marketing process • The goods and services continuum • Value from the perspectives of the customers, producers, and society • Marketing management and the marketing mix tools used in the marketing process • The changing marketing landscape