Chapter 13 Marketing: Building Customer Relationships.
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Transcript of Chapter 13 Marketing: Building Customer Relationships.
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Chapter 13
Marketing:Building
Customer Relationships
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What is Marketing
The Process ofPlanningExecuting the conceptPricingPromotionDistribution
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The Evolution of Marketing
Production Era – prior to 1930
Sales Era – 1920 to 1970
Marketing Concept Era – 1950 to 1990
Customer Relationship Era – after 1990
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Production EraProduce as much as you can
Limitless marketsProduction capabilities small compared to
demandMost business owners were farmers, carpenters
& other trade workers (silversmith, etc.)Production, Distribution & Storage was
businesses greatest need
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Sales EraMass Production Techniques in use: assembly lines
Production exceeded market demandEmphasis on selling & advertising
Sale after sale rare
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Marketing Concept EraAfter WWII Demand for Goods & Services Grew
Baby boomers increased consumer spending
Need for businesses to be responsive to customers to attract consumer spending
A Customer Orientation A Service Orientation A Profit Orientation
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Customer Relationship EraCRM = Customer Relationship Management
Enhanced Customer ServiceExceed consumer expectations to grow customer loyalty
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Nonprofits & Marketing
Charities: to raise funds for social initiativesRed Cross
Churches: to new members & raise funds
Politicians: to get votes
States: to attract new businesses & tourists
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The Marketing Mix
4 “P”s
Product: design & make a want satisfying product
Price: Set a price
Place: Put the product where people will buy it
Promotion: Advertising
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Steps to MarketingFind Opportunities Conduct Research
Identify Target MarketDesign Product to Meet a Need Product Testing Choose Brand Name
Design Package & Set Price Select Distribution System Design Promotion Program
Build a Relationship with Customers
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Marketing Research
Good Decisions depend on Good Information
Demographic InformationTrends in purchasing by consumers
Ecological Impact(& social impact)
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Marketing Research Process
Define the question
Collect Data: secondary or primary data
Analyze the Data Choose Best Solution & Do It
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Primary Data
InterviewsSurveys/Online SurveysObservationsFocus GroupsQuestionnairesCustomer CommentsLetters from Customers
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Secondary Data
Government Publications (many online)Commercial Publications: A C Nielsen, MRCAMagazines: Fortune, Forbes, Inc., etc.Newspapers: WSJ, Barron’sInternal Sources: Firm’s RecordsGeneral Source: Internet Searches
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The Marketing Environment
Global Factors Price & PromotionTechnological Factors Price & ProductSociocultural Factors ProductCompetitive Factors PlaceEconomic Factors Place & Promotion
All these surround the consumer & their needs.
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2 Markets
Consumer MarketMarket Segmentation
Target MarketingGeographical SegmentationDemographic SegmentationPsychographic SegmentationBenefit SegmentationVolume Segmentation
Business to Business Market = B2B
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Smaller Market Segments
Niche Marketing
One-to-one Marketing
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Relationship MarketingIndustrial Revolution Mass Production
Mass Marketing Mass Media One-way Messages
Relationship Marketing Customer Loyalty Long term relationships & response to customer input Two-way Messages
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Consumer Decision-makingLearning/Experience
Didn’t like product never buy it againLiked product consistent customer
Reference GroupNorms & expectations of peer group
CultureValues, attitudes & customs/traditions, ways of doing things
SubcultureEthnic, age, religious or other group a consumer strongly identifies with
Cognitive Dissonance/Buyers Remorse
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Business 2 Business
Small # of Customers - Potentially larger transactionsFirm size & market utilization of goods or servicesGeographic concentrationProducts tend to be more complex & B2B; sales require
more rational & less emotion than consumer market, greater need for direct sales
More formal process, negotiated detail, closer buyer/seller relationship
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Your Prospects in Marketing
A skill that can be learnedMentoring/Internship
Who can you work for in the field?
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Chapter 14
Developing & PricingProducts & Services
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Product Development
The Whole Product OfferDesign Products of Quality at a Fair PriceReplacement/ReturnsService & RepairExceeding the Customers Expectations
VALUE is more important than Price
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Change to Match the Desires of your Customers
Surveys & Comment Cards
Expanded Menus & Services
Experimenting & Variety
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Total Product OfferPrice Brand
NameConvenience Package
Store Surroundings
Service InternetAccess
Buyer’sPast
Experience
Guarantee Speed of Delivery
Image Createdby Advertising
Reputation of producer
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Grouping Products
Product LinesBrand Name Detergents or Cereals
Product MixAll the Product Lines of P & G or General Mills
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Marketing Goods & Services to Different Kinds of Consumers
Product DifferentiationConvenience: Time or work savingShopping: Variety & ChoicesSpecialty: Luxury or no reasonable substituteUnsought: Consumers are unaware of need
planning ahead: emergency car-towing, insurance, or burial services, etc.
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Industrial Goods & Services
B2BSales people/internet sales:
InstallationHeavy EquipmentCapital Goods = DurablesAccessory Equipment
Production or Support Goods
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Packaging
Protect the Product: Morton’s Salt
Attracts the Consumer: Colorful, Artwork, Information
Holds & Dispenses the Product: Tooth Paste
Tracking the Product: UPC Code
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6 Functions of Packaging
1) Protect Goods/Withstand Handling/Deter Theft2) Attract the buyer3) Describe contents4) Explain the products benefits5) Provide warrantee & other information6) Give indication of price, value & uses
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Branding & Brand Equity
Brand = a name, symbol or design (or combination)
Trademark = legal protection to exclusive use of a brand name or design
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Manufacturer & Private Label Brands
Manufacturer: (makers name)Xerox, Kodak, Sony, Chevrolet, etc
Dealer/Distributor (private-label)Kenmore (made by …)Sears Paint (made by Sherwin-Williams)
Brand Names can become genericaspirin, nylon, kerosene, zipper, linoleum
What about Scott Towel & Kleenex?
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Generic Goods & Knockoff BrandsGeneric Goods: Pharmaceuticals, Cereals
lack of advertising, quality ?, lower priced
Knockoff Brands: Do you want to buy a Rolex watch?
How about a Bolex?Price ?, Discounts ? What would it take for you to by a knockoff, instead of the real one?
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Brand Equity
Brand Equity = awareness+loyalty+perceived quality+images+emotions
Brand Loyalty = customer satisfaction & commitment to future purchases
Brand AwarenessCar Racing NASCARShoes & Sports Apparel NikeGolf balls TitleistJewelers Zales, Jareds
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Brand AssociationLinkage between a Brand Name item & something or
someone else
Nike Tiger WoodsBuick Tiger Woods
Quaker Oats the 1812 Overture
Muscular Dystrophy Association Jerry Lewis
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Brand Management
Product Managerresponsible for one line or brand
Marketing Mixproduct, price, place, promotion
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New Product Development
Idea GenerationProduct ScreeningProduct AnalysisDevelopmentTestingCommericialization
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Product Life CycleIntroduction Price lower
Growth Price reaches zenith
Maturity Profit maximizedSales Crest
Decline Price & Sales both drop
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Competitive Pricing
Pricing ObjectivesAchieve largest return on investment
The Profit MotiveBuilding TrafficAchieve greater market shareCreate an imageFurthering social objectives
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3 major approaches to pricing
Cost-based Pricing
Demand-based Pricing
Competition-based PricingPrice LeadershipLow Price
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Break Even Analysis
Break-Even Point (BEP) = revenues & cost are equal
BEP = Total Fixed Cost (TFC) . Price of a unit – Variable Cost of a
unit (P) (VC)
BEP = TFC/(P – VC)
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Other Pricing Strategies
Skimming Price Strategy
Every day low prices = EDLP
High-low pricing strategy = higher prices than EDLP store with many special sales; internet sales may reduce the frequency of this strategy
Bundling
Psychological Pricing: Why set a price of $19.99 or $199.99?
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Demand-Oriented Pricing
Compared with Demand-based Pricing (DBP)DBP is also called Target Costing
Price is an input for production and the target cost + profit margin = DBP
Demand oriented pricing (DOP) is reflected in theater seat prices, where highly desire seats cost more than less desirable one.
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Nonprice Competition
Attributes other than pricefeaturesconvenienceservicedurabilitystyle
Remaining competitive does always mean meeting or beating the price at Walmart.
Why is Nordstrom’s successful?
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Chapter 15
Distributing Products
Quickly & Efficiently
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Marketing Intermediaries
MiddlemenDo they increase or lower the cost of business?
A Channel of Distribution = a set of intermediaries: agents/brokers/wholesalers/retailers
Agent/Broker = bring buyers & seller togethera Broker may manage many agents or just (him/her)self
Wholesaler = sells to other firms; B2B
Retailer = sells to consumers (people)
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Why do we need Middlemen?
Middlemen can do things faster, at lower cost & give the producer more time to concentrate on what they do best.
StorageTransportAdvertisingSellingRelationship building
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5 Sellers & 5 Buyers
How many contact need to be made?
Seller Seller Seller Seller Seller
Buyer Buyer Buyer Buyer Buyer
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Using middlemen: 5 Seller & 5 Buyers
One Middleman
Seller
Seller
Seller
Seller
Seller
Buyers
Buyers
Buyers
Buyers
Buyers
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Value versus Cost
If middlemen save time and/or money for a product heading to market, it make sense to use them.
If about half the cost of a product goes to middlemen, then getting rid of middlemen would reduce the price of goods & services…
RIGHT?!Wrong!!! It would reduce product availablitiy & increase costs & prices!!!
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Six Utilities of Intermediaries(middlemen)
Form turning wheat into flourTime get it when you want itPlace local outletsPossession transfer ownership/credit
installation/follow-upInformation Consumer Reports, BBB
internetServices Education on use, repair
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Wholesale – B2B
Merchant Wholesalers: take possession of goods they handle
Rack Jobbers: keep title until good is sold
Cash-and-carry Wholesalers: now use credit too
Drop Shippers: have product shipped directly from maker to buyer
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Agents & Brokers
Arrange transfer of possession without taking possession of a product.
Wholesalers make profit from sale of products, but agents & brokers make commissions that are a percentage of the sales revenue.
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Retail Intermediaries
Department Store Sear, JC Penney, NordstromDiscount Store Walmart, Target, KmartSupermarket Safeway, Kroger, Albertson’sWarehouse Club Costco, Sam’s ClubConvenience Store7-ElevenOutlet Store TJ Maxx, Marshall’sSpecialty Store Shoe Stores, Foot LockerCategory Killer Toys R Us, Office Depot,
Staples
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Retail Distribution Strategy
Intensive Distribution as many outlet asStarbuck’s possible
Selective Distribution a few outletsMary Kay
Exclusive Distribution one retail outletSax 5th Avenue in a local area
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Nonstore Retailing
Telemarketing: No Call List LawsVending MachinesKiosksCartsDirect Selling: Primerica/Avon/Kirby/SW BooksMultilevel Marketing: MLM/Independent ContractorsDirect Marketing: Direct mail/Catalog SalesInternet Marketing: Virtual stores
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Channel Systems
Corporate Distribution SystemsGE, Firestone, Xerox, Walmart
Contractual Distribution SystemsFranchises: McDonald’s, KFC, AAMCOWholesalers: Ace Hardware, IGARetail Cooperatives: Associated Grocers
Administrative Distribution SystemsKraft Foods, Scott’s Lawncare
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Supply Chains
Linked activities that transfer products to consumers
Supplier’s plant Manufacturers
Wholesalers Retailers
Consumers
Supply Chain
Channel of Distribution
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Supply Chain Management
Managing the movement ofraw materialspartswork in progressfinished goodsrelated information through all the organization
SCM is Interfirm & International
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Logistics
Shipping or Physical DistributionSpeed of deliveryCost effectiveTaxes, Tariffs & DutiesLabor LawFDA & Bureau of Alcohol, Tobacco & Firearms
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Inbound or Outbound Logistics
Control of the physical flow of materialsinvolves planning, implementing, moving
Inbound: raw material, packaging, G & S from suppliers to producers & information
Outbound: finished products
Reverse Logistics: Return of defective or recycled products
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Choosing the right mode
Train: Great for large shipments on land30-40% of volume in USA
Trucks: Good for smaller shipments or where rail is not available; >25% of volume in USA
Water: Inexpensive, but slowerPipelines: Fast & Efficient for fluidsAir: Fast, but expensiveIntermodal Shipping: use two or more of the above
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Storage
Storage Warehouses: Longer term holding of goods
Distribution Warehouses: gather & redistribute products
Tracking of Goods: RFID (radio frequency ID)& UPS (uses a Bluetooth short-range radio)
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What it all means
10am-7pmA successful firm has product to sell, it takes orders, processes the orders, keeps customers informed about a shipment’s progress and gets the right goods to their customers as quickly as possible. There are many new jobs in this area of managent.
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Chapter 16
Using Effective Promotional Techniques
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Promotion Mix
Advertising
Personal Selling
Sales Ppromotion
Public Relations
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Intergrated Marketing Communication
IMC: a technique that combines all the promotional tools into one comprehensive, unified promotional strategy; create a positive brand image & meet the goals of the firm
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IMC Part 2
Identify the target marketDefine the objectives; make this clear & measurable
Budget how much promotion will costDevelop unifying message
Implement the planEvaluate the effectiveness of the plan
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Advertising
Keep the customer’s interest
Advertising is paid, nonpersonal communication through various media & individuals, who are identified in the message
Propoganda is nonpersonal communication that does not have an identified sponsor
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Advertising in USA
$245 billion/yrTVDirect mailNewspapersInternet
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Methods of Advertising
Retail AdsTrade AdsB2B AdsInstitutional AdsProduct AdsAdvocacy AdsComparative AdsInteractive AdsOnline Ads
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Media & Product Placement
Target Market: How can they reached?Readers: Newspapers/magazines/flyersListeners: RadioViewer: TV, internetWalk/Drive by: Billboards & SignsReceive mail or email: Direct advertisingSearch: Yellow pages, Craig’s List
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Infomercials
Half an hour to one hour commercials for:BowflexTotal GymGeorge Foreman Grill
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Moving to Internet Advertising
Nissan & Chrysler are moving money into online ads 20 to 40 increases from 2004 to 2005
That money had been going into TV or other forms of advertising.
Four years age McDonald’s spent 80% of its advertising dollars on TV & now only 50%.
Much of the money now goes to Internet advertising.
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Global Advertising
Something lost is translationel Papa = the Pope or la papa = potatoMist StickPocari SweatFord ProbeKrapp toilet paper
Global Adverting does not always work well.Regional advertising is more effective.
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Personal Selling
Face-to-face presentation & promotionnot just persuading people to buy
helping identify their wants & needs& finding ways to assist them later on
Personalized service
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The Selling Process
Prospect & QualifyWilling to listen/Power to act
Preapproach Know who you will talk to
Approach Friendly professionalism
Make Presentation Know the product
Answer Objections More information needed
Close the Sale Trial close/Commitment
Follow-up Be available for more
requests for help
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Business to Consumer Selling
B2CApproach
Ask questionsMake Presentation
Close SaleFollow-up
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Public Relations
PRManagement function that evaluates public attitudes, changes in policy & procedures in response to the public’s requests.
Action plan executed & information used to earn public understanding & acceptance.
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Public Relations 2
3 steps1. Listen to the public
2. Change policies & Procedures
3. Inform people that you are responding to their needs
PR department must maintain close ties to stakeholders; customers, media, community leaders, government officials, shareholders & owners
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Publicity
The talking/writing part of PR
It must be interesting to get reported by the media.
Publicity is free & reach people the advertising won’t.
Marketer lose control of how, when, or if the media will use the story.
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Sales Promotion
The tool that stimulate consumer purchasing & dealer interest by means of short term activity
Displays Trade shows ExhibitionsEvent Sponsorships Contests
Free Samples Test Drive DemoCoupons Lotteries
Bonuses Sweepstakes % off Sales
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Sampling & Word of Mouth
How can the taste of chocolate fudge brownies be described for someone unfamiliar with the taste of chocolate (or fudge).
Sampling is the easiest remedy.
The best advertising is done by satisfied customers (Word of Mouth) and it’s free.
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Viral Marketing
Internet chat rooms entered and hype for a product released. Chat room visitors spread the word to their friends and other chat rooms they visit.
Blogging (blog is short for Web log)
Podcasting: distributing audio & video vai the internet
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Who is watching you on the internet?
Firms keep track of the number of hits on product websites & even monitor the tastes of individual web users.
Then using this information they design advertising just for your kind of consumer.
You may sit alone at your computer, but someone will notice where you go on the internet.
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Matching market with promotion
Push Strategy: push the product to vendors & sellers, people will see it in store/outlets & buy
Pull Strategy: promotion directed toward consumers, they ask for the product & stores start stocking the product