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Chapter Fourteen

PRIDE HUGHES KAPOOR INTRODUCTION TO BUSINESS ELEVENTH EDITION. Chapter Fourteen. Building Customer Relationships Through Effective Marketing. 14 | 1. Learning Objectives. Understand the meaning of marketing and the importance of management of customer relationships.

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Chapter Fourteen

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  1. PRIDE HUGHES KAPOOR INTRODUCTION TO BUSINESS ELEVENTH EDITION Chapter Fourteen Building Customer Relationships Through Effective Marketing 14 | 1

  2. Learning Objectives • Understand the meaning of marketing and the importance of management of customer relationships. • Explain how marketing adds value by creating several forms of utility. • Trace the development of the marketing concept and understand how it is implemented. • Understand what markets are and how they are classified. • Identify the four elements of the marketing mix and be aware of their importance in developing a marketing strategy. 14 | 2

  3. Learning Objectives (cont’d) • Explain how the marketing environment affects strategic market planning. • Understand the major components of a marketing plan. • Describe how market measurement and sales forecasting are used. • Distinguish between a marketing information system and marketing research. • Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process. 14 | 3

  4. Marketing • The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large 14 | 4

  5. Major Marketing Functions Table 14.1 14 | 5

  6. Managing Customer Relationships • Relationship marketing: Establishing long-term, mutually satisfying buyer-seller relationships • Customer relationship management (CRM): Using information about customers to create marketing strategies that develop and sustain desirable customer relationships • Customer lifetime value: a combination of purchase frequency, average value of purchases, and brand-switching patterns over the entire span of a customer’s relationship with a company 14 | 6

  7. Utility: The Value Added by Marketing • The ability of a good or service to satisfy a human need • Form utility: Created by converting production inputs into finished products • Place utility: Created by making a product available at a location where customers wish to purchase it • Time utility: Created by making a product available when customers wish to purchase it • Possession utility: Created by transferring title (OR ownership) of a product to a buyer 14 | 7

  8. Types of Utility Figure 14.1 14 | 8

  9. The Marketing Concept • A business philosophy that a firm should provide goods and services that satisfy customers’ needs through a coordinated set of activities that allows the firm to achieve its objectives • To achieve success, a business must • Communicate with potential customers to assess their needs • Develop a good or service to satisfy those needs • Continue to seek ways to provide customer satisfaction 14 | 9

  10. The Marketing Concept (cont’d) • Evolution of the Marketing Concept • Industrial revolution through the early twentieth century • Business effort directed toward production to meet great demand • 1920s • Production began to exceed demand • Business efforts included selling goods by advertising, hiring larger sales people • 1950s • Business efforts also focused on satisfying customers’ needs 14 | 10

  11. The Marketing Concept (cont’d) • Implementing the Marketing Concept • Obtain information about present and potential customers • Their needs; how well those needs are being satisfied; how products might be improved; customer opinions about the firm • Pinpoint specific needs and potential customers toward which to direct marketing activities and resources 14 | 11

  12. The Marketing Concept (cont’d) • Implementing the Marketing Concept (cont’d) • Mobilize marketing resources to • Provide a product that will satisfy customers • Price the product at an acceptable and profitable level • Promote the product to potential customers • Ensure distribution for product availability when and where wanted • Obtain information on the effectiveness of the marketing effort and modify efforts as necessary 14 | 12

  13. Markets and Their Classification • Market • A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products • Consumer markets • Purchasers and/or households members who intend to consume or benefit from the purchased products and who do not buy products to make a profit • Business-to-business (industrial) markets • Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations 14 | 13

  14. Markets and Their Classification (cont’d) • Producer markets • Individuals and business organizations that buy products to use in the manufacture of other products • Reseller markets • Intermediaries such as wholesalers and retailers that buy finished products and sell them for a profit • Governmental markets • Buy goods and services to maintain operations and provide citizens with products such as highways, education, utilities, defense • Institutional markets • Churches, not-for-profit private schools and hospitals, civic clubs, charitable organizations 14 | 14

  15. Developing Marketing Strategies • Marketing strategy • A plan that will enable an organization to make the best use of its resources and advantages to meet its objectives. • Consists of: • The selection and analysis of a target market • The creation and maintenance of an appropriate marketing mix (a combination of product, price, distribution, and promotion developed to satisfy a particular target market) 14 | 15

  16. Developing Marketing Strategies (cont’d) • Target market selection and evaluation • Target market • A group of individuals, organizations, or both, for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group • Market segment • A group of individuals or organizations within a market that share one or more common characteristics • Market segmentation • The process of dividing a market into segments and directing a marketing mix at a particular segment or segments rather than at the total market 14 | 16

  17. General Approaches for Selecting Target Markets Figure 14.2 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. 14 | 17

  18. General Approaches for Selecting Target Markets (cont’d) Figure 14.2 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. 14 | 18

  19. General Approaches for Selecting Target Markets (cont’d) Figure 14.2 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. 14 | 19

  20. Common Bases of Market Segmentation Table 14.3 Source:William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 16th ed. (Mason, Ohio: South-Western/Cengage Learning, 2012). Adapted with permission. 14 | 20

  21. The Marketing Mix and the Marketing Environment Figure 14.3 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. 14 | 21

  22. When You Are 12-17 Years Old,What is a Necessity? 14 | 22

  23. Developing a Marketing Plan • A written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group • Elements of a marketing plan • Executive summary • Environmental analysis • Strengths and weaknesses • Opportunities and threats • Marketing objectives • Marketing strategies • Marketing implementation • Evaluation and control 14 | 23

  24. Market Measurement and Sales Forecasting • Sales forecast • An estimate of the amount of a product that an organization expects to sell during a certain period of time based on a specified level of marketing effort • Importance of measuring sales potential • Evaluate feasibility of enter new segments • Decide how best to allocate marketing resources and activities • Estimates should do several things • Identify the relevant time frame covered by the forecast • Define the geographic boundaries of the forecast • Indicate for which products the forecasts are relevant 14 | 24

  25. Marketing Information • Marketing information system • A system for managing marketing information that is gathered continually from internal and external sources • Internal data sources • Sales figures, product and marketing costs, inventory, sales force activities • External data sources • Suppliers, intermediaries, customers, competitors, economic conditions • Outputs • Sales reports, sales forecasts, buying trends, market share 14 | 25

  26. Marketing Information (cont’d) • The six steps of marketing research • Define the problem • Make a preliminary investigation • Plan the research • Gather factual information • Interpret the information • Reach a conclusion 14 | 26

  27. Marketing Information (cont’d) • Using technology to gather and analyze marketing information • Databases such as LEXIS-NEXIS, Reader’s Digest • Online information services offer subscribers access to e-mail, websites, mailing lists • The internet to access useful Web pages such as Nielsen and Advertising Age 14 | 27

  28. Sources of Secondary Information Table 14.6 Source: Adapted from “Tutorial: Finding Information for Market Research,” KnowThis.com, http://www.knowthis.com/tutorials/principles-of-marketing/finding-secondary-research.htm (accessed March 23, 2009). 14 | 28

  29. Types of Buying Behavior • The decisions and actions of people involved in buying and using products • Consumer buying behavior • The purchasing of products for personal or household use, not for business purposes • Business buying behavior • The purchasing of products by producers, resellers, governmental units, and institutions 14 | 29

  30. Consumer Buying Decision Process and Possible Influences on the Process Figure 14.4 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 15th ed. (Mason, Ohio;: South-Western/Cengage Learning 2010). Adapted with permission. 14 | 30

  31. Types of Buying Behavior (cont’d) • Consumer income • Personal income • The income an individual receives from all sources less the Social Security taxes the individual must pay • Disposable income • Personal income less all additional personal taxes • Discretionary income • Disposable income less savings and expenditures on food, clothing, and housing • Of particular interest to marketers due to choice of how to spend it 14 | 31

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