marketing management - pgdm-ppts

7/31/2019 Marketing Management - PGDM-PPTs

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D. BandopadhyayProfessor (Marketing)

&

DirectorManagement Training & Development


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Marketing Management


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Needs, Wants & Demands

Needs are the basic human requirements. People needfood, air, water, clothing and shelter to survive. People

also have strong needs for recreation, education, and

entertainment. These needs become wants when they are

directed to specific objects that might satisfy the need.

Demands are wants for specific products backed by an

ability to pay. Many people want a Mercedes; only a few

are willing and really able to buy one because of its high

cost.


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Marketers do not create needs: Needs pre-exist

marketers. Marketers, along with other societal factors,

influence wants.

Marketers might promote the idea that a Mercedes

would satisfy a persons need for social status. They do

not, however, create the need for social status.


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We can distinguish among five types of needs:

1. Stated needs (the customer wants an inexpensive car).

2. Real needs (the customer wants a car whose operating

cost, not its initial price, is low).

3. Unstated needs (the customer expects good service

from the dealer).

4. Delight needs (the customer would like the dealer to

include an onboard navigation system).5. Secret needs (the customer wants to be seen by friends

as a savvy consumer).


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What is Marketing?

Marketing deals with identifying and meeting human

and social needs. One of the shortest definitions of

marketing is meeting needs profitably.

Marketing is an organizational function and a set of

processes for creating, communicating, and delivering

value to customers and for managing customer

relationships in ways that benefit the organization and

its stake holders.


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Marketing Management is the art and science of

choosing target markets and getting, keeping, andgrowing customers through creating, communicating

and delivering superior customer value.

The aim of marketing is to know and understand thecustomer 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 or serviceavailable.


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What is Marketed?

Goods

Services

Events

Experiences Persons

Places

Properties (real or financial properties)

Organizations Information

Ideas


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Who Markets?

A marketer is someone who seeks a response (attention,

a purchase, a vote, a donation) from another party, called

the prospect.

Marketers are responsible for demand management.

Marketing managers seek to influence the level, timing

and composition of demand to meet the organizationsobjectives.


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Eight demand states are possible:

Negative demand

Nonexistent demand

Latent Demand

Declining Demand

Irregular Demand

Full Demand

Overfull Demand Unwholesome Demand


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Structure of Flows in a Modern

Exchange Economy

Resource Markets

Manufacturer Markets Consumer MarketsGovernment Markets

Intermediary Markets

ResourcesResources

Money Money

Money Money

Services,

Money

Taxes,

Goods

Services, MoneyTaxes

Taxes, Goods Services

Services,

Money

Goods and ServicesGoods and Services

Taxes,

Goods


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Key Customer Markets

Consumer Markets

Business Markets

Global Markets Nonprofit and Governmental Markets


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Industry(a collection of sellers)

Market( a collection of buyers)

Communication

Information

Money

Goods/Services

A Simple Marketing System


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MARKETPLACES, MARKETSPACES

&

METAMARKETS

The marketplace is physical as when you shop in a store;

marketspace is digital, as when you shop on the Internet.

Metamarket is the concept to describe a cluster of

complementary products and services that are closely

related in the minds of consumers but are spread across adiverse set of industries, e.g., automobile metamarket,

travel metamarket etc.


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HOWBUSINESS AND MARKETING

ARE CHANGING

Changing Technology

Globalization

Deregulation

Privatization

Customer empowerment

Customization

Heightened Competition Industry Convergence

Retail Transformation

Disintermediation


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THE MARKETING CONCEPT

Production Concept

Product Concept

Marketing Concept

The job is not to find the right customers for your

products, but the right products for your customers. The

marketing concept holds that the key to achievingorganizational goals consists of the company being more

effective than competitors in creating, delivering and

communication superior customer value to its chosen

target markets.Selling focuses on the needs of the seller; marketing on

the needs of the buyer.


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Reactive market orientation understanding and meetingcustomersexpressed needs.

Proactive marketing orientation - high-level innovation is

possible if the focus is on customers latent needs.

Companies that practice both a reactive and proactive

marketing orientation are implementing a total market

orientation and are likely to be the most successful.


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Marketing

Orientation

Markets &Marketing

The MarketingMix

MarketingIssues

Marketing

& Society

Marketing

Management

MARKETING OVERVIEW


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Marketing

Identifying

Anticipating

Supplying

Customer Needs

Mutually beneficial

exchange

Firms objectives

Arriving at a definition of Marketing


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DEFINITION - MARKETING

Marketing is the management process

responsible for:

identifying

anticipating &

satisfying customer requirements efficientlyand profitably.


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SELLING & MARKETING CONCEPTS

CONTRASTED

Starting

point

Focus Means End

Sales

Orientation

Factory Existing

Products

Selling +

Promoting

Profit through

sales volume

Marketing

Orientation

Market Customer

needs

Integrated

Marketing

Profit through

customersatisfaction


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Relationship of Marketing

& other departments


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Holistic Marketing Concept

Relationship Marketing

Integrated marketing

Internal Marketing

Social Responsibility Marketing


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InternalMarketing

Socially

ResponsibleMarketing

Relationship

Marketing

Integrated

Marketing

Holistic

Marketing

Ethics

EnvironmentLegal Community Customers Channel

Partners

Communications Products &

Services ChannelsMarketing

Management

Senior

Management Other

Departments

Holistic Marketing Dimensions


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Relationship Marketing

The operating principle is simple:

Build an effective network of relationships with

key stakeholders, and profits will follow.


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Integrated Marketing

Four Ps Four Cs

Product Customer SolutionPrice Customer Cost

Place Convenience

Promotion Communication


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Marketing Mix

Target Market

Place

Channels

Coverage

AssortmentsLocations

Inventory

Transport

Product

Product

Variety

Quality

Design

Features

Brand Name

Packaging

Sizes

Services

Warranties

Returns

PriceList Price

Discounts

Allowances

Payment Period

Credit Terms

Promotion

Sales PromotionAdvertising

Sales Force

Public Relations

Direct Marketing

Personal Selling


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Advertising

Direct Marketing

Sales Promotion

Events and

Experiences

Personal Selling

Public Relations

Distribution

Channels

Target

CustomersCompany

Products

ServicesPrices

Offering Mix

Communications Mix


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INTERNAL MARKETING

Internal marketing is the task of hiring, trainingand motivating able employees who want to serve

customers well. Other than various marketing

functions working together, the variousdepartments should also work together to serve

the customers well.

Xerox goes so far as to include in every job

description an explanation of how that job affects

the customer.


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SOCIAL RESPONSIBILITY

MARKETING

Are companies that do an excellent job of

satisfying customer wants, necessarily acting in

the best long term interests of consumers andsociety? Example: selling ammonia free hair

dye.

Marketers should understand ethical,

environmental, legal and social context of

marketing activities.


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Many consumers do not know what they want in a

product. Consumers did not know much about

cellular phones when they were first introduced.

Nokia and Ericsson fought to shape consumer

perceptions of cellular phones. Consumers were in alearning mode and companies forged strategies to

shape their wants.

Simply giving customers what they want isntenough any more to gain an edge, companies

must help customers learn what they want.


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Target Markets, Positioning & Segmentation

A marketer can rarely satisfy everyone in a market. The

marketer decides which segments present the greatest

opportunity - which are its target markets.

For each chosen target market, the firm develops a

market offering. The offering is positioned in the minds

of the target buyers as delivering some central benefit.


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Offerings & Brands

Companies address needs by putting forth a value

proposition, a set of benefits they offer to

customers to satisfy their needs.

A brand is an offering from a known source. A

brand name carries many associations in the

minds of people. These associations make up the

brand image.


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Value & Satisfaction

The Offering will be successful if it delivers value and satisfaction to

the target buyer. Value reflects the perceived tangible and intangible

benefits and costs to customers. Value can be seen as primarily a

combination of Quality, Service and Price (QSP), called the

Customer Value Triad. Value increases with quality and service anddecreases with price, although other factors can also play an

important role.

Satisfaction reflects a persons comparative judgments resulting

from a products perceived performance (or outcome) in relation tohis or her expectations. If the performance falls short of

expectations, the customer is dissatisfied and disappointed. If the

performance matches the expectations, the customer is satisfied. If

the performance exceeds expectations, the customer is highly

satisfied or delighted.


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Marketing Channels

To reach a target market, the marketer uses three kinds of marketing

channels. Communication channels deliver and receive messages

from target buyers, and include newspapers, magazines, radio,

television, mail, telephone, billboards, posters, fliers, CDs,

audiotapes and the Internet. Beyond these, communications areconveyed by facial expressions and clothing, the look of retail stores,

and many other media. Marketers are increasingly adding dialogue

channels(e-mail and toll-free numbers) to counterbalance the more

normal monologue channels (such as ads).


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The marketer uses distribution channels to display, sell or

deliver the physical product or service to the buyer or

user. They include distributors, wholesalers, retailers and

agents.

The marketer also uses service channels to carry out

transactions with potential buyers. Service channels

include warehouses, transportation companies, banks

and insurance companies that facilitate transactions.


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Supply Chain

Whereas marketing channels connect the marketer to

the target buyers, the supply chain describes a longer

channel stretching from raw materials to components

to final products that are ultimately carried to finalbuyers.


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Competition

Competition includes all the actual and

potential rival offerings and substitutes that a

buyer might consider.


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Marketing Environment

The marketing environment consists of the task environment and

the broad environment.

The task environment includes the immediate actors involved in

producing, distributing and promoting the offering. The main actorsare the company, suppliers, distributors, dealers, and the target

customers. Included in the supplier group are material suppliers and

service suppliers such as marketing research agencies, advertising

agencies, banking and insurance companies, transportation

companies and telecommunications companies. Included with

distributors and dealers are agents, brokers, manufacturer

representatives and others who facilitate finding and selling to

customers.


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The broad environmentconsists of six components:

demographic environment, economic environment,physical environment, technological environment,

political-legal environment and social-cultural

environment.

These environments contain forces that can have a

major impact on the actors in the task environment.

Market actors must pay close attention to the trends

and developments in these environments and make

timely adjustments to their marketing strategies.


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Marketing Planning

The marketing planning process consists of:

analyzing marketing opportunities

selecting target markets

designing marketing strategies

developing marketing programs

managing the marketing effort.


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Shifts in Marketing Management

Here are 14 major shifts in marketing management thatsmart companies have been making in the twenty-first

century.

From Marketing does the marketing - to everyone doesthe marketing

From organizing by product units - to organizing by

customer segments

From making everything - to buying more goods andservices from outside.

From using many suppliers - to working with fewer

suppliers in a Partnership


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From relying on old market positions - to uncovering

new ones.

From emphasizing tangible assets - to emphasizing

intangible assets

From building brands through advertising - to building

brands through performance and integratedcommunications

From attracting customers through stores and

salespeople - to making products available online.

From selling to everyone - to trying to be the best firmserving well-defined target markets.


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From focusing on profitable transactions - to

focusing on customer lifetime value.

From a focus on gaining market share - to a focuson building customer share

From being local - to being Glocal both global

and local

From focusing on the financial scorecard - tofocusing on the marketing scorecard.

From focusing on shareholders - to focusing on

stakeholders.


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Marketing Management Tasks

Developing Marketing Strategies and Plans

Capturing Marketing Insights

Connecting with Customers

Building Strong Brands


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Shaping the Marketing Offerings

Delivering Value

Communicating Value

Creating Long Term Growth


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4 Ps of Marketing

Product (or, service)

Price

Place

Promotion


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Product

Tangible product

Intangible product (service)

Combination of both


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Price

When setting prices, companies must think about the

following aspects.

Costs

The level ofcompetitors prices.

The effect of price on consumers perceptions.

Market conditions


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Place

If you cannot get in touch with your customers, you cannot sell

anything. For many products, organizations must rely on third

parties to reach the customer. These third parties are collectively

known as middlemen and the access they provide is called

distribution channels.

a) Merchants take title to the goods, that is they become owners of

the goods. They then resell them. Wholesalers and retailers are in

this category.b) Agents and brokers do not own the goods, but merely assist in

the transfer of ownership from, say, the manufacturer to the

customer.


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Promotion

Marketing Communications :

Sales promotion activities

Advertising

Personal selling

Publicity

Direct mailing etc.


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The Marketing Mix for Services

A service is any activity or benefit offered by one party

to another which is essentially intangible and does not

result in the ownership of anything physical. An

example is a seat on an aircraft, which the customeruses for the duration of the flight but does not own.


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The special characteristics of Services

Intangibility

Variability

Inseparability

Lack of Ownership


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Additional 3Ps

Process

User-Friendly systems for selling and buying areessential.


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Physical Evidence

Services tend to suffer from the intangible nature of the

offering. Organizations in the service sector are

increasingly using devices such as newsletters (often via

e-mail) to maintain the customers desire to have the

service.


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People

For most services, a key element is the people who

are an integral part of the process. If the staff who

deal with customers are poorly motivated or badly

trained, this can greatly affect the quality of the

service.


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The Value Chain

Michael Porter of Harvard has proposed the vale chain as

a tool for identifying ways to create more customer

value.

The firms success depends not only on how well each

department performs its work, but also on how well the

various departmental activities are coordinated to

conduct core business processes.


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The Value Delivery Process

The smart competitor must design and deliver offeringsfor well-defined target markets.

Instead of emphasizing making and selling, these

companies see themselves as part of a value deliveryprocess.

The value delivery process begins before there is a

product and continues while it is being developed and

after it becomes available.


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Zero customer feedback time

Zero product improvement time.

Zero Purchasing time.

Zero setup time.

Zero defects.

3 Vs approach to marketing:

Define the value segment or customers (and his/her

needs)

Define the value propositionDefine the value network that will deliver the promised

service.


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Two Views of the Value Delivery Process


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The market sensing process.

The new offering realization process.

The customer acquisition process.

The customer relationship management process.

The fulfillment management process.

l ll h i d l i f i


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As Wal-Mart stores sell their goods, sales information

flows via computer not only to Wal-Marts headquarters,

but also to Wal-Marts suppliers, who ship replacement

merchandise to the stores almost at the rate it moves off

the shelf.

At Xerox, a Customer Operations Group links sales,shipping, installation, service and billing so that these

activities flow smoothly into one another. Winning

companies are those that excel at managing core

business processes through cross-functional teams.

Core Competencies


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Core CompetenciesMany companies today outsource less critical resources if

they can be obtained at better quality or lower cost.

Nike, for example, does not manufacture its own shoes,

because certain Asian manufacturers are more competent

in this task; Nike nurtures its superiority in shoe design

and shoe merchandising, its two core competencies. We

can say that a core competency has three characteristics:

It is a source of competitive advantage in that it makes

a significant contribution to perceived customerbenefits

It has applications in a wide variety of markets

It is difficult for competitors to imitate.


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Competitive advantage ultimately derives from how

well the company has fitted its core competencies

and distinctive capabilities into tightly interlockingactivitysystems.

Competitors find it hard to imitate companies such

as Dell, or IKEA because they are unable to copytheir activity systems.

A Holistic Marketing Orientation &


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A Holistic Marketing Orientation &

Customer Value

The holistic marketing framework is designed to addressthree key management questions:

Value exploration How can a company identify new

value opportunities (Customer/Co. /Collaborator).

Value creation How can a company efficiently createmore promising new value offerings? (Business

Concept/Business Scope/Re-positioning)

Value delivery How can a company use its capabilities

and infrastructure to deliver the new value offerings

more efficiently? (CRM/Internal Resource

management/Business Partnership management)

Value Exploration


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Value ExplorationThe customers cognitive space

Existing and latent needs such as the need for

participation, stability, freedom and change.

The companys competence space

Breadth: broad versus focused scope of business

Depth: physical versus knowledge-based capabilities

The collaborators resource space

Horizontal partnerships, where companies choosepartners based on their ability to exploit related market

opportunities and vertical partnerships, where

companies choose partners based on their ability to

serve their value creation.


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Value Creation

Defining the business concept (the bigidea)

Shaping the business scope (the lines of business)

Positioning the companys brand identity

(how customers should see the company)


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Value Delivery

Customer Relationship Management

Internal Resource Management

Business partnership Management

Building Customer Value, Satisfaction and Loyalty


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Building Customer Value, Satisfaction and Loyalty

Customer Perceived Value


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Customer Perceived Value

Customer perceived value (CPV):

It is the difference between the prospectivecustomers evaluation of all the benefits and all thecosts of an offering and the perceived alternatives.Total customer value:

It is the perceived monetary value of the bundle ofeconomic, functional, and psychological benefitscustomers expect from a given market offering.Total customer cost:It is the bundle of costs customers expect to incurin evaluating, obtaining, using and disposing of thegiven market offering, including monetary, time,

energy and psychic costs.

Determinants of Customer-Delivered Value


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Determinants of Customer-Delivered Value


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The marketer can increase the value of thecustomer offering by some combination of raising

functional or emotional benefits and /or reducingone or more of the various types of costs.

Delivering High Customer Value


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Delivering High Customer Value

The ValuePropositionconsists of the whole cluster

of benefits the company promises to deliver; it ismore than the core positioning of the offering. Forexample, Volvos core positioning has been safety,but the buyer is promised more than just a safe car;other benefits include a long-lasting car, good serviceand a long warranty period.

Too many companies create a value gap by failingto align brand value with customer value.


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Total Customer Satisfaction

Whether the buyer is satisfied after purchasedepends on the offers performance in relation tothe buyers expectations.

Ultimately, the company must operate on thephilosophy that is trying to deliver a high level ofcustomer satisfaction subject to delivering

acceptable levels of satisfaction to the otherstakeholders, given its total resources.


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Customer Expectations

Some of todays most successful companies areraising expectations and delivering performancesto match.

A customers decision to be loyal or to defectdepends on the sum total of a large number ofsmall encounters with the company. These

encounters need to result in positive outcome andshould lead to some memorable customerexperience.


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Measuring Satisfaction

A company would be wise to measure customersatisfaction regularly because one key to customerretention is customer satisfaction.

Periodic surveys can track customer satisfactiondirectly.

Companies can monitor the customer loss rate andcontact customers who have stopped buying or whohave switched to another supplier to learn why thishappened.


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Companies can hire mysteryshoppers to pose

as potential buyers and report on strong and weakpoints experienced in buying the companys andcompetitors products.

Such practice should also be done by companyexecutives, keeping their identity secret.

For customer-centered companies, customersatisfaction is both a goal and a marketing tool.

Total Quality Management


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Total Quality ManagementTotal Quality Management (TQM) is anorganization-wide approach to continuouslyimproving the quality of all the organizationsprocesses, products and services.

Product and service quality, customer satisfactionand company profitability are intimately connected.

Higher levels of quality result in higher levels ofcustomer satisfaction. Which support higher prices

and (often) lower costs. Studies have shown a highcorrelation between relative product quality andcompany profitability.

Conformance Quality vs. Performance Quality


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Some companies now concentrate their effortson return on quality or ROQ.

ROQ adherents advocate improving quality onlyon those dimensions that produce tangiblecustomer benefits, lower costs or increased sales.

This bottom-line orientation forces companies tomake sure that the quality of the product offerings

is in fact the quality consumers actually want.

MaximizingCustomer Lifetime ValueUltimatel k ti is the art of attracting and


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Ultimately, marketing is the art of attracting andkeeping profitable customers. Yet every company

loses money on some of its customers. The well-known 20-80 rule says that the top 20 percent of thecustomers may generate as much as 80 percent ofthe companys profits.

This rule is rather 20-80-30 rule to reflect the ideathat the top 20 percent of customers generate 80percent of the companys profits, half of which are lostserving the bottom 30 percent of unprofitable

customers. The implication is that a company couldimprove its profits by firing its worst customers.It is also not necessary that companys largestcustomers will yield max. profit.


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Customer Profitability

A profitable customer is a person, household orcompany that over time yields a revenue streamthat exceeds by an acceptable amount thecompanys cost stream of attracting, selling and

servicing that customer.

Emphasis is on the lifetime stream of revenue

and cost, not on the profit from a particulartransaction.


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Customer Profitability Analysis


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More generally, marketers must segment

customers into those worth pursing versus thosepotentially less lucrative customers that shouldreceive less attention, if any at all.

Moreover, customer portfolio should rather bemanaged as in case of Investment Portfolio andthus one should diversify the customer portfolioaccordingly.


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Competitive Advantage

Competitive advantage is a companys ability toperform in one or more ways that competitorscannot or will not match. Michael Porter urgedcompanies to build a sustainable competitive

advantage. At least it should be a leverageableadvantage that can be used as springboard to newadvantages.

Any competitive advantage must be seen bycustomers as a customer advantage.

Measuring Customer Lifetime Value


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Measuring Customer Lifetime Value

Customer lifetime value (CLV):

It describes the net present value of the stream offuture profits expected over the customers lifetimepurchases. The company must subtract from theexpected revenues the expected costs of attracting,

selling and servicing that customer, applying theappropriate discount rate.

CLV calculations provide a formal quantitative

framework for planning customer investment andhelp marketers to adopt a long-term perspective.One challenge in applying CLV concepts, however,

is to arrive at reliable cost and revenue estimates.

Customer Equity


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Customer Equity

Value Equity is the customers objective

assessment of the utility of an offering based onperceptions of its benefits relative to its costs. Thesub-drives of value equity are quality, price andconvenience objective assessment.

Brand Equity is the customers subjective andintangible assessment of the brand, above and

beyond its objectively perceived value. The sub-drivers of brand equity are customer brandawareness, customer attitude toward the brand andcustomer perception of brand ethics subjective

assessment.

Relationship Equity


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p q y

It is the customers tendency to stick with the

brand, above and beyond objective andsubjective assessments of its worth. Sub-drivers of relationship equity include loyaltyprograms, special recognition and treatmentprogram, community-building programs andknowledge-building programs.

Relationship equity is especially importantwhere personal relationships count for a lot and

where customers tend to continue withsuppliers out of habit or inertia.

Customer Relationship Management (CRM)Maximizing customer value means cultivating long


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Maximizing customer value means cultivating longterm relationships.

Customer relationship management (CRM) is theprocess of managing detailed information aboutindividual customers and carefully managing allcustomer touchpoints to maximize customer Loyalty.

A customer touch point is any occasion on which acustomer encounters the brand and product.

For a hotel, the touch points include reservations,check-in and check-out, frequent-stay programs, roomservice, business services, exercise facilities, laundry

service, restaurants and bars.


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Based on what they know about each valued

customer, companies can customize marketofferings, services, programs, messages andmedia.

CRM is important because a major driver ofcompany profitability is the aggregate value ofthe companys customer base.

CRM enables companies to offer individualisedmarket offerings through masscustomisation.

Mass Marketing Versus One-to-One Marketing


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1-to-1 marketing principles applied to CRM


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Marketing:

Identify your prospects and customers

Differentiate customers in terms of :- Their needs

- Their value to your company.

Interact with individual customers to improve yourknowledge about their individual needs and to buildstronger relationships.

Customize products, services and messages to

each customer


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Increasing the longevity of the customerrelationship.

Enhancing the growth potential of each customerthrough share-of-wallet, cross selling and up-

selling. Harley-branded merchandise amounted tomore than $211 million in company sales in 2003.

Making low-profit customers more profitable or

terminating them.

Focusing disproportionate effort on high-valuecustomers.

Attracting, Retaining and Growing Customers


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Attracting, Retaining and Growing Customers

Suspects are people or organizations who mightconceivably have an interest in buying thecompanys product or service, but may not have themeans or real intention to buy.

The next task is to identify which suspects are reallygood prospects customers with the motivation,ability and opportunity to make a purchase byinterviewing them, checking on their financial

standing and so on.Too many companies suffer from high customerchurn high customer defection. It is like addingwater to a leaking bucket.

The Customer-Development Process


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There are two main ways to strengthen customer retention.One is to erect high switching barriers Customers are less


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One is to erect high switching barriers . Customers are lessinclined to switch to another supplier when this would involvehigh capital costs, high search costs or the loss of loyal-

customer discounts. The better approach is to deliver highcustomersatisfaction. This makes it harder for competitors tooffer lower prices or inducements to switch.

The best thing a company can do is to make it easy for the

customer to complain. Suggestion forms, toll-free numbers,Web sites and e-mail addresses allow for quick, two-waycommunication. The 3M Company claims that over two-thirdsof its product improvement ideas come from listening tocustomer complaints.

Customers who have complained to an organization and hadtheir complaints satisfactorily resolved tell an average of five

people about the good treatment they received.

Interesting facts that bear on customer retention.


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Acquiring new customers can cost five times more than thecosts involved in satisfying and retaining current

customers. It requires a great deal of effort to inducesatisfied customers to switch away from their currentsuppliers.

The average company loses 10 percent of its customerseach year.

A 5 percent reduction in the customer defection rate can

increase profits by 25 percent to 85 percent, depending onthe industry.

The customer profit rate tends to increase over the life ofthe retained customer.

Building Loyalty


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g y y

How much should a company invest in building

loyalty so that the costs do not exceed the gains?We need to distinguish five different levels ofinvestment in customer relationship building.

Basic MarketingReactive MarketingAccountable Marketing.

Proactive MarketingPartnership Marketing.

Levels of Relationship Marketing


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Reducing Customer Defection


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The company must define and measure its retention

rate.

The company must distinguish the causes of customerattrition and identify those that can be managed better.

The company needs to estimate how much profit it loseswhen it loses customers. In the case of an individualcustomer, the lost profit is equal to the customerslifetime value.

The company needs to figure out how much it wouldcost to reduce the defection rate. As long as the cost isless than the lost profit, the company should spend the

money.

Forming Strong Customer Bonds


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Adding Financial Benefits

Frequency programs (FPs) are designed to providerewards to customers who buy frequently and in substantialamounts. Frequency marketing is an acknowledgment ofthe fact that 20 percent of a companys customers mightaccount for 80 percent of its business. Frequency programsare seen as a way to build long-term loyalty with thesecustomers, potentially creating cross-selling opportunities inthe process.

Airlines run tiered loyalty programs in which they offerdifferent levels of rewards to different travelers. They mayoffer one frequent-flier mile for every mile flown tooccasional travelers and two frequent-flier miles for every

mile flown to top customers.

Adding Social Benefits


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Company personnel work on cementing social bonds with customers byindividualizing and personalizing customer relationships.

Many companies have created Club Membership Programs. Clubmembership can be open to everyone who purchased a product or service,or it can be limited to an affinity group or to those willing to pay a small fee.Harley DavidsonThe world-famous motorcycle company sponsors the Harley owners Group(H.O.G), which now numbers 650, 000 members in over 1200 chapters. Thefirst time buyer of a Harley-Davidson motorcycle gets a free one yearmembership. H. O. G. benefits include a magazine called Hog Tales, atouring handbook. Emergency road service, a specially designed insuranceprogram, discount hotel rates and a Fly & Ride program enabling members

to rent Harleys while on vacation. The company also maintains an extensiveWeb site devoted to H. O. G., which includes information on club chapters,events and a special members-only section.

Adding Structural Ties


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Create long-term contracts. Charge a lower price to consumers who buy larger

supplies. Turn the product into a long-term service.

Customer Database and Database Marketing


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Marketers must know their customers. And in order to know

the customer, the company must collect information and storeit in a database and do database marketing.

A customer database is an organized collection ofcomprehensive information about individual customers orprospects that is current, accessible and actionable for suchmarketing purposes as lead generation, lead qualification, saleof a product or service, maintenance of customer relationships.

Database marketing is the process of building, maintainingand using customer database and other databases (products,suppliers, resellers) for the purpose of contacting, transactingand building customer relationships.

Using the Database


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Using the Database

To identify prospects.

To decide which customers should receive a particular offer.

To deepen customer loyalty

To reactivate customer purchases

To avoid serious customer mistakes.

Database marketing is most frequently used byb i k t d i id (h t l


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business marketers and service providers (hotels,banks, airlines; and insurance, credit card and

telephone companies) that normally and easilycollect a lot of customer data.

Other types of companies that are in the bestposition to invest in CRM are companies that do a lotof cross-selling and up-selling (e.g., GE andAmazon) or companies whose customers have

highly differentiated needs and are of highlydifferentiated value to the company. It is used lessoften by packaged-goods retailers and consumerpackaged goods companies.

The Central Role of Strategic Planning

f l k i i i h bili i


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Successful marketing requires companies to have capabilities

such as understanding & capturing customer value, creating

customer value, delivering customer value, and sustainingcustomer value. We start the process with Strategic Planning.

Strategic planning calls for action in three key areas:

The first is managing a companys businesses as an

investment portfolio.

The second involves assessing each businesss strength by

considering the markets growth rate and the companys

position and fit in that market.The third is establishing a strategy.

For each business, the company must develop a game plan for

achieving its long-run objectives.

The Strategic Planning, Implementation &


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Corporate Planning

Business Unit

Planning

Product Planning

Division Planning

Organizing

Implementing

Measuring results

Diagnosing results

Taking Corrective

Action

The Strategic Planning, Implementation &

Control Processes

Planning Implementing Controlling

Corporate Planning

Business Unit

Planning

Product Planning

Division Planning

Organizing

Implementing

Measuring results

Diagnosing results

Taking CorrectiveAction

The marketing plan is the central instrument for directing

d di ti th k ti ff t


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and coordinating the marketing effort.

Strategic marketing plan lays out the target markets andthe value proposition that will be offered, based on an

analysis of the best market opportunities.

Tactical marketing plan specifies the marketing tactics,

including product features, promotion, merchandising,

pricing, sales channels and service.


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Corporate and Division Strategic Planning

All corporate headquarters undertake four planning activities:

Defining the corporate mission

Establishing strategic business units

Assigning resources to each SBU

Assessing growth opportunities

Defining the Corporate Mission


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Good mission statements have three major

characteristics:

They focus on a limited number of goals.

Mission statements stress the companys major policies and

values.

They define the major competitive spheres within which the

company will operate.

Industry

Products and Applications.

Competence Market Segment

Vertical

Geographical


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Defining the Business

A business must be viewed as a customer-satisfying

process, not a goods-producing process.

Levitt encouraged companies to redefine their

businesses in terms of needs, not products.

It highlights the difference between a target marketdefinition and a strategic market definition.

Product-Oriented Versus Market

Oriented Definitions of a Business


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Missouri-Pacific Railroad

Xerox

Standard Oil

Columbia Pictures

Encyclopaedia Britannica

Carrier

We run a railroad.

We make copying equipment.

We sell gasoline.

We make movies.

We sell encyclopedias.

We make air conditioners and furnaces.

We are a people-and-goods mover.

We help improve office productivity

We supply energy.

We market entertainment.

We distribute information.

We provide climate control in the home

Company Product Definition Market Definition

Oriented Definitions of a Business

Large Companies normally manage quite different

businesses each requiring its own strategy Such different


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businesses, each requiring its own strategy. Such different

businesses are arranged as strategic business units (SBUs).

An SBU has three characteristics: It is a single business or collection of related businesses

that can be planned separately from the rest of the

company.

It has its own set of competitors. It has a manager who is responsible for strategic

planning and profit performance and who controls

most of the factors affecting profit.

The purpose of identifying the companys strategic

business units is to develop separate strategies and

assign appropriate funding.

Assessing Growth Opportunities


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Intensive Growth Strategies

A ff P d t M k t E i G id


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Ansoffs Product-Market Expansion Grid

Market-penetration strategy Product-developmentstrategy

Market-development strategy (Diversification strategy)

New ProductsCurrent Products

Current

Markets

New Markets


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Integrative Growth

Sales and profits of a business can be increasedthrough backward, forward or horizontal integration

within its industry.

Diversification Growth


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Diversification makes sense when a company finds a highly

attractive new industry where it can leverage its strengths. The company could seek new products that have

technological or marketing synergies with existing

product lines appealing to a new group of customers

(concentric diversification). The company can develop new products that are

technologically unrelated to its current product line and

could appeal to its current customers (horizontal

diversification)

The company may seek new opportunities which have

no relation with its current technology, products or

markets (conglomerate diversification)

Business Unit Strategic Planning


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The Business Mission

Each business unit needs to define its specific

mission within the broader company mission.

SWOT Analysis


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SWOT Analysis

The overall evaluation of a companys strengths,

weaknesses, opportunities and threats is called

SWOT analysis.

It involves monitoring the external and internal

marketing environment.

External Environment


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External Environment

(Opportunity and Threat) Analysis

A business unit has to monitor key macro-environment

forces (demographic-economic, natural, technology

competitors, suppliers, distributors, dealers) that affect

its ability to earn profits. The business unit should set upa marketing intelligence system to track trends and

important developments. For each trend or development,

management needs to identify the associated

opportunities and threats.

A marketing opportunity is an area of buyer need and

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interest in which there is a high probability that a

company can profitably satisfy that need.

There are three main sources of market opportunities.

The first is to supply something that is in short supply.

The second is to supply an existing product or service in

a new or superior way.

The third source often leads to a totally a new product

or service.

To evaluate opportunities, companies can use Market

O t it A l i (MOA) t d t i th


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Opportunity Analysis (MOA) to determine the

attractiveness and probability of success:

Can the benefits involved in the opportunity be articulated

convincingly to a defined target market (s)?

Can the target market (s) be located and reached with cost-

effective media and trade channels? Does the company possess or have access to the critical

capabilities and resources needed to deliver the customer

benefits?

Can the company deliver the benefits better than any actual orpotential competitors?

Will the financial rate of return meet or exceed the companys

required threshold for investment?

Internal Environment (Strengths/Weaknesses)


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Internal Environment (Strengths/Weaknesses)

Analysis

Each business needs to evaluate its internal

strengths and weaknesses.

The business should limit itself to thoseopportunities where it possesses the required

strengths or whether it should consider opportunities

that means it might have to acquire or develop

certain strengths.


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Goal Formulation


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Goal Formulation

Once the company has performed a SWOTanalysis, it can proceed to develop specific goals

for the planning period. This stage of the process

is called goal formulation.

Managers use the term goals to describe

objectives that are specific with respect to

magnitude and time.

They must be arranged hierarchically from the most to


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They must be arranged hierarchically, from the most to

the least important.

Objectives should be stated quantitatively whenever

possible.

Goals should be realistic based on opportunities &

strengths.

Objectives must be consistent increasing R & D

activities and simultaneously reducing product

development costs may not be possible.

Strategy Formulation

Goals indicate what a business unit wants to achieve; strategy


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Goals indicate what a business unit wants to achieve; strategyis a game plan for getting there.

Every business must design a strategy for achieving its goals,consisting of a marketing strategy; and a compatible

technology strategy and sourcing strategy.

Porters Generic Strategies:Overall cost leadershipDifferentiationFocus.

According to Porter, firms pursuing the same strategy directedto the same target market constitute a strategic group. Thefirm that carries out that strategy best will make the most

profits

Porter defines strategy as the creation of a


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gyunique and valuable position involving a

different set of activities.

A company can claim that it has a strategywhen it performs different activities from

rivals or performs similar activities in differentways.

Strategic Alliances


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Many strategic alliances take the form of

marketing alliances. These fall into four majorcategories.

Product or service alliances HUL vs. Pepsi.Promotional alliances P&G (Ariel) vs.

Bombay DyeingLogistics alliances TCI & Mitsui vs. Toyota

KirloskarPricing collaborations airlines, hotels etc.

Program Formulation and Implementation


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Once the business unit has developed its principal

strategies, it must work out detailed supportprograms. A great marketing strategy can besabotaged by poor implementation.

In Implementing strategy, companies also must notlose sight of their multiple stakeholders and theirneeds.

Feedback and Control


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As it implements its strategy, a firm needs totrack the results and monitor newdevelopments.

The marketplace will change; and when itdoes, the company will need to review andrevise its implementation programs,strategies, or even objectives.

Nature and Contents of a Marketing Plan


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A marketing plan is a written document that

summarizes what the marketer has learned aboutthe marketplace and indicates how the firm plans toreach its marketing objectives.

It contains tactical guidelines for the marketingprograms and financial allocations over the planningperiod. It is one of the most important outputs of the

marketing process.

Contents of the Marketing Plan


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Contents of the Marketing Plan

Executive summary and table of contents.

Situation analysis

Marketing strategy.

Financial Projections.

Implementation controls.


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