Ch: 01 What is Marketing

Marketing Intro
 Marketing, is more than any other business function.
 Core of Modern Marketing is building CR on:
 Customer value and Satisfaction.
 “Managing Profitable Relationship with Customer”
 Two Folds Goals:
 -Attract new customers.
 -Promise Superior value.
 -Keep & Grow Current Customers by Delivering
Satisfaction.
 E.g. Wal-Mart, Dell, Microsoft.
Marketing Intro
 You already know a lot about marketing, its all around
you.
 Fill your TV.
 Spice Your Magazines.
 Stuff Your Mailbox.
 Enliven your web-pages.
 At home, At school, Where you work, Where you play.
 You see marketing in almost everything you do.
 But marketing these days is more than just catching
consumers eyes.
 Behind it all is a massive network of people, activities
for your attention and purchases.
Marketing Intro.

 People think of marketing only as selling and advertising.

 However selling and advertising are just tip of marketing iceberg.
 Things have moved beyond the concept of:
 Tell & Sell.
 Its an era of Sense and Respond.
 If a marketer:
 Understand consumer needs.
 Develops Product that provide superior value.
 Price.
 Distributes &
 Promotes effectively.
 Then we can guarantee a good position in a market place.
 So now one can say that Selling/Adv are just chunks of:
 Marketing Mix.
 “Set of tools that work together to affect the market place”
Marketing Intro
 Marketing as a:
 “Social & Managerial Process by which individuals &
Groups obtain what they need & want through:
▪ Creating & Exchanging products, value with others”
 To explain this definition we will have to look into
core marketing concepts:
 Needs, Wants & Demands
 Marketing offers; Products, Services & Experiences.
 Values & Satisfaction.
 Exchange Transaction & Relationship.
 Markets.
Need-Want-Demand.
 Underlining concept of marketing is “Human Need”
 Need:
 “A state of felt deprivation”
 Basic Physical needs: Food, Clothing, Warmth, Safety.
 Social Needs: Belonging & affection.
 Individual needs: Knowledge- Self Expression.
 These needs are not necessarily been created by marketers, they exist
naturally.
 Wants:
 “Form taken by a human need, as shaped by culture and individual personality”
 Food: Burger, French Fries, Soft Drink.
 Wants are shaped by one’s society.
 Backed by purchasing power, wants become demands.
 Given their wants and resources, people demand products with benefits
that add up to:
 Value & Satisfaction.
Marketing offers (Products, Services &
Experience)
 Companies Address needs by offering Values Proposition (Set of
benefits)
 Value proposition is fulfilled through Marketing offer:
 ‘Combination of Product, Services, Information or Experiences, offered to a
market to satisfy a need or want.
 Many marketers make mistake of paying more attention to a product:
 Rather than the benefits & experiences produced by them.
 They see them as a seller of a product.
 Than that of “Providing a solution to need”
 This short sightedness is termed as “Marketing Myopia”
 These sellers will have trouble if a new product comes along that serves the
Customer’s need better/less expensively.
 Smart marketers look beyond attributes of products & service they sell.
 They create Brand Meaning & Brand Experience for consumers.
 E.g. Coca Cola, Nike, Harley Davidson, Disney World, All these are now
more than a just a product for them.
Value & Satisfaction Exchange, Transaction &
Relationship..

 Customer Value:
 “Is the difference b/w the value customer gains from owning &
using a product &
 Cost of owning a product”
 Customer expectations are based on:
 Past Experience, opinion of friends, marketers & competitors
information & promises.
 Customers Satisfaction depends on how well product’s
performance lives up to their expectations.
 Marketers must also be careful to set right level of
expectations:
 Too low expectations.
 Too High expectations.
Value & Satisfaction Exchange,
Transaction & Relationship..
 Exchange:
 “Is the act of obtaining a desired object from someone by offering
something in return”
 Transaction:
 “Consists of a trade of values between two parties”
 So marketing consists of actions taken to build and maintain
desirable “Exchange Relationships with Target Audience.
 Marketers want to build both strong:
 Economic & Social Connections.
 By promising & Consistently delivering superior value.
 Markets:
 Concept of exchange relationship lead to concept of market.
 “Market is a place where actual & Potential Buyers of a product meet the
sellers”
Demand Management.
 Demand Management:
 Obviously Marketers want to serve selected customers that
they can serve well & Profitably.
 Organizations has a desired level of demand for its products.
 At any point there can be:
 No Demand, Adequate Demand, Irregular Demand, or Too
much Demand.
 So its not about only: Finding & Increasing Demand, but also
with changing and reducing it.
 Demarcating:
 “To Reduce demand temporarily or permanently; Aim here is
not to destroy demand but only to reduce or shift it”
Concepts of Marketing
 1) Production Concept:
 Consumer favor available & affordable products
 Management focus production/Distribution
 Favorable in two situations:
 Demand exceeds supply
 Product cost is high/ Requires productivity
 Can Cause Marketing Myopia

 2) Product Concept:
 Favor Quality, performance & features
 Require, Continuous product Improvement
 Market myopia:
 Trains not Transportation
 Kodak
Concepts of Marketing
 3) Selling Concept:
 Only large scale selling and promo efforts can do the trick.
 E.g Insurance products which users don’t really buy in
routine.
 Need Aggressive selling.
 Over Capacity:
 Sell What they make
 Make what they sell
 Its quite risky:
 Not, Sales Transaction
 Long term relations
Concepts of Marketing
 4) Marketing Concept:
 “Achieving organizational goals depends on knowing the needs and wants
of customers and delivering satisfaction better than their competitors”
 Here customer focus and value are the directing variables.
 It takes “Outside-in perspective”
 Have Customer Department in place of Marketing Department.

 Determine needs, wants of Target Market

 Delivering desired satisfaction
 Efficiently & Effectively
 Better Than competitors

 Sense & Respond

 Marketing as Gardening & Hunting
Concepts of Marketing

 Right Product/Service for customers

 Right customers for your product/Service
 Customer Driven companies:
 Clear Need exits
 Customer Know What they want
 Customer Driving Companies:
 Understand needs better than customers
 Cant rely on customers
 Customers cant predict the possibilities
Societal Marketing Concept

 Its all about creating a balance b/w:

 Society (Human Welfare)
 Consumers (Want, Satisfaction)
 Company (Profits)
 It Arises a question that whether sometimes,
companies, while marketing, over looks, possible
conflicts between:
 Individuals Short-term wants and
 Consumers Long-Term Welfare.
 E.g. Some See Fast Food Chains as a source of:
 Convenient Food at Reasonable Price.
Societal Marketing Concept
 While, See them as source of high:
 Fat & Salt.
 Convenient Packages lead to increase in waste/Pollution.
 So one can say they are becoming source of:
 Harm for Consumer’s Health & Causing Environmental
Problems.
 Initially companies, were more towards profits at the cost
of Customers welfare,
 But now many pressure groups have forced them go
Social.
CRM.
 “The overall Process of building & Maintaining profitable
Relationship, delivering Superior customer value &
Satisfaction”
 Previously it was narrowly defined, and involved only:
 Customer Database Management activity.
 But now it includes just tracking who visited and why.
 But now its much more broader in nature and includes:
 Building, maintaining profitable relationships by delivering
superior customer value & Satisfaction.
 So now companies are going beyond, just designing strategies
for attracting customers & create transactions.
 They are using CRM, to retain customers for long-term
relationships.
CRM.
 Reason for this change:
 Previously Companies took customers for granted.
 Markets were expanding, companies afforded “Leaky Bucket”
Approach.
 But now, realities have changed:
 More sophisticated competitors.
 Over-capacity is in industries.
 All this means, now customers are fewer. Markets are fading.
 So does, cost of attracting new customers is rising.
 Companies now have also realized, that losing one customer means,
losing the entire stream of purchases, that a customer would have
made, over given life.
 Customer lifetime Value.
Attracting, Retaining & Growing
Customers.
 Relationship Building Blocks:
 -Customer Value:
 “Difference between total customer values, and
total customer cost”
 Customer prefers to buy from a firm which offers:
▪ Highest Customer Perceived Value.
▪ Customer not always necessarily judge product values &
Costs accurately or objectively.
▪ They act on perceived Value.
Attracting, Retaining & Growing
Customers.
 -Customer Satisfaction:
 “The extent to which a product’s perceived
performance, matches buyer’s expectations”
 Fall short- Dissatisfied customer.
 Matches- Satisfied.
 Exceeds Expectations- Delighted.
 Outstanding companies, go out of their way to
keep their customers satisfied.
 Satisfied customers repeat purchases, and tell
others about their good experiences.
Customer Loyalty & Retention.
 Highly satisfied customer produce several benefits for companies:
 Less price sensitive.
 Talk favorably to others.
 Remain loyal for longer period.
 However this relation b/w customer satisfaction and loyalty varies from
industries/Competitive situations.
 Types of Satisfactions:
 Less Satisfied.
 Somewhat Satisfied.
 Completely satisfied.
 Even a slight drop from complete satisfaction can create
enormous drop in loyalty.
 This means that companies must aim high if they want to hold on
to their customers.
Growing “Share of Customers”
 Beyond simply retaining good customers, marketers want
to, constantly increase their:
 Share of customer.
 That’s why following companies, want share of following
aspects of customers:
 Banks: “Share of Wallet”
 Supermarket: “Share of Stomach”
 Car Companies: “Share of Garage”
 Airlines: “Share of Travel”
 One of the best way to increase customer base is through
“Cross-Selling”
 Means getting more business from current customers of one
product, by selling them additional offerings.
Customer Equity !!
 “The Total Combined Customer Lifetime Values of all
of the company’s Customers (Current & Potential
Customers)”
 The More loyal the firms profitable customers, the
higher the firms customer equity.
 It can also be the better measure of firms
performance (Current ales and Market Share)
 Market Share reflects the past, Customer Equity
reflects the future.
Building Relations With Right
Customers.
 Firm Must Consider Customers as Assets, which need to be
managed and maximized.
 Not all customers, even all loyal customers, are good
investments.
 Some loyal ones can also be unprofitable.
 Company can classify customers According to their
potential profitability and manage relationship with them
accordingly.
 Four Relationship Groups:
 (1) Butterflies.
 (2) Strangers.
 (3) True Friends.
 (4) Barnacles.
Relationship Groups !!

 (1) Butterflies:
 Potentially Profitable but not loyal.
 There is a good fit between the companies offerings and
their needs.
 E.g. Stock Market investors, who trade share often.
 Effort to convert butterflies into loyal customers are
rarely successful.
 Instead firm should enjoy butterflies for moment.
 Should attract hem satisfy them and then cease
investing in them until next time around.
Relationship Groups !!

 (2) Strangers:
Customer Equity & Building CR.
 “Total combined customer lifetime values of
all of the company’s customers”
 CR Levels & Tools:
 Some specific benefits being offered,
includes:
 -By adding financial benefits:
 e.g. frequency marketing programs, Airlines offer
Frequent flier-program.
 Same is the case with hotels, and retailers, they
reward their frequent purchasers.
Customer Equity & Building CR.

 -Adding Social benefits:

 Member communities.
 -Structural ties:
 Providing online linkages, Web-site facilities etc
 So CR is all about managing customers and their
products.
 At a same time, companies don’t want relationship
with every customer at hand.
 There always remain some undesirable customers for
every company.
Marketing Challenges in New
Connected Millennium.
 Its believed that in this world of rapid change, competitive
advantage lies in one’s:
 Ability to change.
 Future has not remained, as it use to be, due to:
 Technological Advances.
 Rapid Globalization.
 Call for more Ethics and Social Responsibility
 The Growth of Not-for-profit Marketing.
 Continuing Social & Economic Shifts.
 Causing profound changes in market places.
 Major marketing development of present era is of a simple theme:
 “Connecting”
 Now more than ever before, we are all connected to each other, &
to things, & far world around us.
Marketing Challenges in New
Connected Millennium.
 Moreover this connection is through new/different ways.
 E.g. Live Satellite Broadcasts.
 Its kind of opportunity & challenge for marketers at a same time.
 Technologies for connecting:
 Major force behind new connectedness is this explosion of:
 Advances in computers, Telecommunications, Info, Transportation etc.
 Technological boom has created new ways to:
 Learn about customers.
 Create products & services as per their needs.
 Helps distribute more efficiently.
 Also to communicate with customers.
 E.g. Videoconferencing.
 Helps creating detailed database.
 Internet.
Connecting With World
 Connecting With Partners:
 Connecting within organization.
 Connecting Outside:
 Supply Chain Management.
 Strategic Alliances.
 Connecting with World Around:
 Global Connections.
 Connection with values and social responsibilities:
 Broadening Connections:
 Previously marketing was only the goal of profit seeking organizations.
 Now even non-profit organizations are trying to use them:
 Hospitals, Museums, Churches, NGO’s etc.
 Even Government agencies offices are rapidly using marketing tools:
 E.g. Army use tools to attract people for being recruited.
 Social Messages for prohibiting from use of:
 Smoking, Drinking, Drugs, Wapda, Gas Companies.