Topic 1 - Introduction To Marketing Fundamentals

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This article is a topic within the subject Marketing Fundamentals.

Contents

Required Reading

Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 2-42.

Marketing

[1]Marketing is a social & managerial process by which individuals & groups obtain what they need and want through creating, offering & exchanging products of value with others”. Micro marketing is how an individual organisation directs its marketing activities and allocates its resources to benefits customers. Macro marketing is the study of the aggregate flow of a nations G&S to benefit society. In a business context, ‘Marketing’ is process by which firms create value for customers & build strong customer relationships in order to capture value from customers in return. Utilities refer to the customer value received by users of the product:

  • Place – accessibility to potential customers (convenience)
  • Time – product available when needed (convenience)
  • Possession – created when ownership is transferred to the buyer
  • Image – the emotional value that the customer attaches to a brand or product
  • Information – created by informing prospective buyers that a product exists

The Marketing Process - Overview

[2]

  1. Understand the Marketplace, what are the customer’s needs, wants & demands?
  2. Design a Customer Driven Marketing Strategy – meet customer needs
  3. Construct an Integrated Marketing Program that delivers superior value (perceive ‘sell to the mind’) – convey information
  4. Build Profitable Relationships & create Customer Satisfaction
  5. Capture Value from customers to create profits & customer equity (potential future revenue over a lifetime)

1. Understanding The Marketplace - Needs, Wants And Demands

[3] Needs, Wants & Demands - Marketers use focus groups, customer clinics (qualitative), quantitative research (large scale), feedback, interviews etc. to gain and understanding of their targeted customers.

  • NeedsNot formed by society/marketers. Needed to live. A state of felt deprivation of some basic satisfaction.
  • WantsDesires for specific satisfiers of the deeper needs. Constantly shaped & reshaped by social forces
  • DemandsWants for specific products that are backed by the ability & willingness to buy

Market Offering

A Market Offering is a combination of products, services, information or experiences offered to a market to satisfy a need/want.

Products, Value And Satisfaction

Customers are value maximisers; their satisfaction is linked to value. Satisfaction leads to increased loyalty & positive word of mouth which ensures repeat/new customers. Competitors will try to alter customer value perceptions

  • Product – anything that can be offered to satisfy a need or want
  • Valueperceived benefits gained from having or using the product LESS the cost of obtaining it
  • Satisfactionthe level of a person’s felt state, due to comparing a products perceived performance & expectation

Exchange, Transactions And Relationships

Exchange is a way to obtain desired goods & services by offering something in return. Exchange creates value as each party willingly accepts the offer (they see value in doing the exchange). Repeat transactions are brought about by delivering superior value which can create long term relationships & loyalty. Conditions required for exchange include:

  • There must be 2 parties
  • Each must have something to offer
  • Each must be willing to deal & free to decide
  • Each must be able to communicate & deliver

2. Designing A Customer Driven Marketing Strategy

Marketing Management

Marketing Management is the 'art & science of choosing target markets & building profitable relationships with them”. The aim is to find, attract, keep & grow target customers by creating, delivering & communicating superior value. Marketing management also involves managing demand (customers). Losing a customer is equal to losing a lifetime stream of purchases. What customers will we serve (segmentation & targeting) & how can we best serve targeted customers (differentiation & positioning)

The 5 Marketing Philosophies/Concepts

  1. Production – Widely available & low cost G&S, useful when D exceeds S, or when general product costs are high (cars)
  2. Product – emphasis on high quality, innovative, and high performance goods & services. Still need to price, place effectively, hence this philosophy is flawed.
  3. Selling – emphasis on aggressive selling/promotion efforts. Consumers under buy without a serious selling effort. Very useful for marketing unsought goods e.g. blood donations
  4. Marketing – Organisational success depends on determining needs, wants & interests of target market & delivering the desired satisfactions more effectively & efficient than competitors.
    • 4 Pillars – target market, customer needs, coordinated marketing & profitability
  5. Societal Marketing – Organisational success depends on determine needs, wants & interests of target market. Than deliver the desired satisfactions more effectively & efficient than competitors to enhance the consumers & society’s well being. E.g. J&J would rather take a loss than ship a bad batch of product.
    • 3 Pillars – company profit, customer need/want satisfaction & public interest

3. Preparing An Integrated Marketing Plan

To deliver on a value proposition a firm must:

  • Product (Differentiation)– Develop a need/want satisfying market offering (quality /design/sizes/features/packaging)
  • PriceHow much to charge (strategies, methods, discounts, list prices)
  • PromotionHow to communicate to & persuade the target market to buy (advertising/personal selling/direct)
  • PlaceHow to distribute to make the product available to the target market (logistics, channel & demand chain mgmt)
  • People – Developing relationships via good service
  • Process – Possibly involve customers in the process of creating & enjoying experience (e.g. custom made)
  • Physical Evidence

4. Building Customer Relationships

Customer Relationship Management (CRM) is is the process of building & maintaining profitable customer relationships by delivering superior value & profitable satisfaction[4]. CRM involves acquiring initial customers, keeping them (milk a lifetime value stream) & obtaining new customers.

  • Customer Perceived Value - Customers evaluation of the difference between perceived benefits & all costs of the offering, relative to those competing offers
  • Customer Satisfaction - The extent to which a products perceived performance compares to the buyer’s expectations
  • Relationship Level - Targeting fewer, more profitable customers – selective relationship management
    • Transactions --> Repeated Transactions --> Long Term Relationships --> Buyer-Seller Partnerships --> Strategic Alliances --> Network Organisations --> Vertical Integration.
    • Basic Relationship – Low Margin, High Volume Strategy
    • Deep Relationship – High Margin Strategy

Selective Relationship Management is when companies relate with more carefully selected customers in a deeper & more interactive way to enhance profitability[5]. Loyalty can grow from special offerings, or by becoming more interactive via direct marketing. Customer Managed Relationships are relationships in which customers empowered by technologies/methods interact (involve themselves) with firms to shape their relationships with brands[6]. Partner Relationship Management is working with partners both inside & outside the firm to deliver superior value to the customer. 6x cheaper to retain customer than to attract a new one.[7]

5. Capturing Value From Customers

Firms must create customer loyalty to ensure a growing share of customer (share of purchases in a product category - i.e. market share) leading to higher customer equity (combined customer lifetime value), provided, the firm builds the right relationships with the right customers (efficient, effective & higher long term profitability). It is important to remember that if a firm loses a customer it loses the lifetime customer value.

Marketing Challenges And Changes Of Today

[8]

  • Challenges
  • Uncertain Economy – Balance brand’s value proposition with current times while enhancing long term equity. Must not damage brand image & LT R/Ships. Current emphasis on value for money, practicality & durability
    • Globalisation – Required to adapt to different environments, acquire a global view of competitors
    • Technological Dependence – New range of communication & relationship building tools
    • Sustainable Marketing – Consumerism/Environmentalism movements, must deliver value in a responsible way
      • Ethics, environmental issues
    • Non Profit Marketing, Changing Landscape
  • New Goals – Maximise Quality of Life, Choice, Consumption & Satisfaction
  • Perceived Bad Aspects – Wasteful, Materialism, Deception, Planned Obsolescence, Invasion of Privacy

MARK101211.jpg[9]

End

This is the end of this topic. Click Marketing Fundamentals to go back to the main subject page for Marketing Fundamentals

References

Textbook refers to Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.

  1. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 3-4
  2. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 4-25
  3. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 6-9
  4. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.
  5. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.
  6. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.
  7. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.
  8. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 26-27
  9. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.
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