Noted marketing professors Philip Kotler and Gary Armstrong offer a definition that does a great job of highlighting the contemporary flavor of customer-focused marketing: Marketing is “the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.” The ideas of value, the exchange of value, and lasting relationships are essential elements of successful marketing.
Place marketing describes efforts to market geographic areas ranging from neighborhoods to entire countries. Cause-related marketing promotes a cause or a social issue—such as physical fitness, cancer awareness, or environmental sustainability—while also promoting a company and its products.
Needs create the motivation to buy products and are, therefore, at the core of any discussion of marketing. Your wants are based on your needs but are more specific. Producers do not create needs, but they do try to shape your wants by exposing you to attractive choices. For instance, when you need some food, you may want a Snickers bar, an orange, or a seven course dinner at the swankiest restaurant in town. If you have the means, or buying power, to purchase the product you want, you create demand for that product
When you participate in the exchange process, you trade something of value (usually money) for something else of value. When you make a purchase, you encourage the producer of that item to create or supply more of it. In this way, supply and demand tend toward balance, and society obtains the goods and services that are most satisfying. When the exchange actually occurs, it takes the form of a transaction. Party A gives Party B $1.29 and gets a medium Coke in return. A trade of values takes place.
When organizations change raw materials into finished goods, they are creating form utility desired by consumers. In other cases, marketers try to make their products available when and where customers want to buy them, creating time utility and place utility. The final form of utility is possession utility—the satisfaction that buyers get when they actually possess a product, both legally and physically.
The utility of a good or service has four aspects, each of which enhances the product’s value to the consumer.
today’s most successful companies tend to embrace the marketing concept, the idea that companies should respond to customers’ needs and wants while seeking long-term profitability and coordinating their own marketing efforts to achieve the company’s long-term goals (see Exhibit 13.2)
These customer-focused companies build their marketing strategies around the goal of long-term relationships with satisfied customers. The term relationship marketing is often applied to these efforts to distinguish them from efforts that emphasize production or sales transactions. One of the most significant goals of relationship marketing is customer loyalty, the degree to which customers continue to buy from a particular retailer or buy the products offered by a particular manufacturer.
Firms that practice the selling concept sell what they make rather than making what the market wants. In contrast, firms that practice the marketing concept determine the needs and wants of a market and deliver the desired product or service more effectively and efficiently than competitors do.
A central element in the marketing concept is involving the customer as a partner in a mutually beneficial relationship rather than treating the customer as a passive recipient of products and promotional messages. The challenge has been to replicate this level of intimacy on a broader scale, when a company has thousands of customers spread across the country or around the world.
Customer relationship management (CRM) systems capture, organize, and capitalize on all the interactions that a company has with its customers, from marketing surveys and advertising through sales orders and customer support. A CRM system functions like an institutional memory for a company, allowing it to record and act on the information that is pertinent to each customer relationship.
The process of gathering and analyzing market intelligence about customers, competitors, and related marketing issues through any combination of methods is known as marketing research. As markets grow increasingly dynamic and open to competition from all parts of the globe, today’s companies realize that information is the key to successful action. Without it, they’re forced to use guesswork, analogies from other markets that may or may not apply, or experience from the past that may not correspond to the future.
In permission-based marketing, marketers invite potential or current customers to receive information in areas that genuinely interest them. Many websites now take this approach, letting visitors sign up for specific content streams with the promise that they won’t be bombarded with information they don’t care about.
A major issue in business communication transparency is stealth marketing, which involves attempting to promote products and services to customers who
don’t know they’re being marketed to. A common stealth marketing technique is rewarding someone for promoting products to his or her friends without telling them it’s a form of advertising. Critics—including the U.S. Federal Trade Commission (FTC) and the Word of Mouth Marketing Association—assert that such techniques are deceptive because they don’t give their targets the opportunity to raise their instinctive defenses against the persuasive powers of marketing messages.
The first step toward understanding customers is recognizing the purchase and ownership habits of the consumer market, made up of individuals and families who buy for personal or household use, and the organizational market, composed of companies and a variety of noncommercial institutions, from local school districts to the federal government.
Marketers can use a wide variety of techniques to learn more about customers, competitors, and threats and opportunities in the marketplace.
At one time or another, all consumers suffer from cognitive dissonance, which occurs when one’s beliefs and behaviors don’t match. A common form of this situation is buyer’s remorse, in which one makes a purchase and then regrets doing so—sometimes immediately after the purchase.
The purchasing behavior of organizations is easier to understand than the purchasing behavior of consumers because it’s more clearly driven by economics and influenced less by subconscious and emotional factors. Here are some of the significant ways in which organizational purchasing differs from consumer purchasing
With insights into your customers’ needs and behaviors, you’re ready to begin planning your marketing strategies. Strategic marketing planning is a process that involves three steps: (1) examining the current marketing situation, (2) assessing opportunities and setting objectives, and (3) crafting a marketing strategy to reach those objectives (see Exhibit 13.6). Companies often record the results of their planning efforts in a formal marketing plan.
The steps buyers go through on the way to making a purchase vary widely, based on the magnitude of the purchase and the significance of the outcome. In general, businesses and other organizations use a more formal and more rational process than consumers, and non-routine decisions in either sector require more time and energy than routine decisions. Defining routine is not a simple matter, however; a company might make huge resupply purchases automatically while a consumer spends days agonizing over a pair of jeans.
Strategic marketing planning can involve a range of major decisions that fall into three general steps: (1) examining the current marketing situation, (2) assessing opportunities and setting objectives, and (3) developing a marketing strategy. The nature of these steps can vary widely depending on the products and markets involved; for example, emerging markets and mature markets have very different sets of customer and competitor dynamics.
Every company has four basic options when it comes to pursuing market opportunities. The arrows show the increasing level of risk, from the lowest to the highest.
Using the current marketing situation and your objectives as your guide, you’re ready to develop a marketing strategy, which consists of dividing your market into segments, choosing your target markets and the position you’d like to establish in those markets, and then developing a marketing mix to help you get there.
A market contains all the customers who might be interested in a product and can pay for it. However, most markets contain subgroups of potential customers with different interests, values, and behaviors. To maximize their effectiveness in reaching these subgroups, many companies subdivide the total market through market segmentation, grouping customers with similar characteristics, behaviors, and needs. Each of these market segments can then be approached by offering products that are priced, distributed, and promoted in a unique way that is most likely to appeal to that segment. The overall goal of market segmentation is to understand why and how certain customers buy what they buy so that one’s finite resources can be used to create and market products in the most efficient manner possible.
Demographics. When you segment a market using demographics, the statistical analysis of a population, you subdivide your customers according to characteristics such as age, gender, income, race, occupation, and ethnic group.
Psychographics. Whereas demographic segmentation is the study of people from the outside, psychographics is the analysis of people from the inside, focusing on their psychological makeup, including attitudes, interests, opinions, and lifestyles. Psychographic analysis focuses on why people behave the way they do by examining such issues as brand preferences, media preferences, values, self-concept, and behavior.
Geography. When differences in buying behavior are influenced by where people live, it makes sense to use geographic segmentation. Segmenting the market into geographic units such as regions, cities, counties, or neighborhoods allows companies to customize and sell products that meet the needs of specific markets and to organize their operations as needed.
Behavior. Behavioral segmentation groups customers according to their relationship with products or response to product characteristics. To identify behavioral segments, marketers study such factors as the occasions that prompt people to buy certain products, the particular benefits they seek from a product, their habits and frequency of product usage, and the degree of loyalty they show toward a brand.
After you have segmented your market, the next step is to find appropriate target segments, or target markets, on which to focus your efforts. Marketers use a variety of criteria to narrow their focus to a few suitable market segments, including the magnitude of potential sales within each segment, the cost of reaching those customers, the fit with a firm’s core competencies, and any risks in the business environment.
Four alternative market-coverage strategies are undifferentiated marketing, differentiated marketing, concentrated marketing, and micromarketing.
Positioning is the process of designing a company’s offerings, messages, and operating policies so that both the company and its products occupy distinct and desirable competitive positions in your target customers’ minds. For instance, for every product category that you care about as a consumer, you have some ranking of desirability in your mind—you believe that certain colleges are more prestigious than others, that certain brands of shoes are more fashionable than others, that one video game system is better than the others, and so on.
A firm’s marketing mix consists of product, price, distribution, and customer communication (see Exhibit 13.9). (You might also hear references to “the four Ps” of the marketing mix, which is short for products, pricing, place or physical distribution, and promotion. However, with the advent of digital goods and services, distribution is no longer exclusively a physical concern. And many companies now view customer communication as a broader and more interactive activity than the functions implied by promotion.)
The marketing mix consists of four key elements: the products a company offers to potential buyers, the price it asks in return, its methods of distributing those products to customers, and the various efforts it makes to communicate with customers before and after the sale
In common usage, product usually refers to a tangible good, whereas service refers to an intangible performance. However, for the purposes of studying marketing, it is helpful to define product as the bundle of value offered for the purpose of satisfying a want or a need in a marketing exchange. In this expanded definition, both tangible goods and intangible services are considered products. The reason for taking this broader view of product is that it encourages a more holistic look at the entire offering, which can include the brand name, design, packaging, support services, warranty, ownership experience, and other attributes.
Price, the amount of money customers pay for the product (including any discounts), is the second major component of a firm’s marketing mix. Looking back at Kotler and Armstrong’s definition of marketing, price is the value captured from customers in exchange for the value offered in the product. Setting and managing a product’s price is one of the most critical decisions a company must make because price is the only element in a company’s marketing mix that produces revenue; all other elements represent costs.
Distribution is the third marketing-mix element. It covers the organized network of firms and systems that move goods and services from the producer to the customer. This network is also known as marketing channels, marketing intermediaries, or distribution channels. As you can imagine, channel decisions are interdependent with virtually everything else in the marketing mix. Key factors in distribution planning include customer needs and expectations, market coverage, distribution costs, competition, positioning, customer support requirements, and sales support requirements.
In traditional marketing thought, the fourth element of the marketing mix is promotion, all the activities a firm undertakes to promote its products to target customers. The goals of promotion include informing, persuading, and reminding. Among these activities are advertising in a variety of media, personal selling, public relations, and sales promotion. Promotion may take the form of direct, face-to-face communication or indirect communication through such media as television, radio, magazines, newspapers, direct mail, billboards, transit ads, social media, and other channels.
Forward-thinking companies have moved beyond the unidirectional approach of promotion to interactive customer communication. By talking with their customers instead of at their customers, marketers get immediate feedback on everything from customer service problems to new product ideas.
