ECONOMICS 50. LATEST SUMMARY. 117 PAGES. GRADED A+

Contents 1. Marketing – creating and capturing value.................................................................................... 2 2. Strategy – partnering to build customer relationships ...................... ...

Contents 1. Marketing – creating and capturing value.................................................................................... 2 2. Strategy – partnering to build customer relationships ............................................................... 8 3. Analyzing the marketing environment........................................................................................ 13 4. Managing marketing information ................................................................................................ 19 5. Consumer markets and buyer behavior...................................................................................... 26 6. Business markets and buyer behavior......................................................................................... 33 7. Customer-driven marketing strategy .......................................................................................... 38 8. Products, services and brands ...................................................................................................... 44 9. New product development........................................................................................................... 51 10. Pricing ............................................................................................................................................ 56 11. Pricing strategies.......................................................................................................................... 60 12. Marketing channels...................................................................................................................... 65 13. Retailing and wholesaling ........................................................................................................... 72 14. Communicating customer value ................................................................................................ 78 15. Advertising and public relations................................................................................................. 83 16. Personal selling and sales promotion........................................................................................ 88 17. Direct and online marketing ....................................................................................................... 95 18. Creating competitive advantage.............................................................................................. 100 19. Global marketplace.................................................................................................................... 105 20. Sustainable marketing ............................................................................................................... 111 Distributing prohibited lOMoARcPSD © StuDocu.com 2 1. Marketing – creating and capturing value 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 marketing process involves five steps. The core marketplace concepts are needs, wants, and demands; market offerings (products, services, and experiences); value and satisfaction; exchange and relationships; and markets. Wants are the form taken by human needs when shaped by culture and individual personality. To design a winning marketing strategy, the company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will cultivate (target marketing). Next, the company must decide how it will serve targeted customers (how it will differentiate and position itself in the marketplace).Today, marketers of all kinds are taking advantage of new opportunities for building relationships with their customers, their marketing partners, and the world around them. Example Amazon: its success lies in being customer needs driven. Even in company meeting attention is always paid to the customers’ voice. Such customer focus leads to taking risks and innovating differently from other companies and focusing not just on products, but how they are sold. The latter makes customers’ experiences more personal through collaborative filtering (“recommendations for you” feature). Lastly, Amazon allows for a discovery experience with its huge product variety attracting more customers (by offering products of competing retailers as well as used items). Objective 1: Definition of marketing and steps in marketing process Marketing – (simple definition) – managing valuable customer relationships. 2 goals of marketing: (1) attract new customers by greater value and (2) maintain and expand current customers by providing satisfaction. Nowadays marketing includes not only “telling and selling”, but fulfilling customer needs. Marketing mix includes tools that are combined to satisfy consumers’ needs and manager relationships with customers. 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”. Distributing prohibited lOMoARcPSD © StuDocu.com 3 Marketing process consists of 5 steps, in 4 of which companies create value for their customers, whereas in the last step they capture the value from the customers. The figure below summarizes the process. Objective 2: Understanding marketplace and customer needs (five core marketplace concepts) Step 1: consists of 5 core customer and market concepts - (1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets. Needs – are states of deprivation of humans; they include physical (e.g. food, warmth), social (e.g. affection), and individual (e.g. knowledge). Wants – are needs that have been shaped by culture and personality; they can be described by an objects that is able to satisfy them (need for food can be satisfied with pizza). When wants are supported by buying power they turn into demands. Companies analyse customer data and perform marketing research to find out more about needs, wants and demands of their customers. Market offerings – are combinations of products (physical), services (e.g. banking), information (e.g. ideas) or experiences that fulfil customers’ needs and wants. Marketing myopia occurs when sellers suffer from paying more attention to products than to benefits and experiences provided by them to the customers. It occurs when companies think that customer needs their product instead of the actual need of what the product provides (e.g. customer needs a hole in the wall, not a drill). Needs stay the same, whereas products change. Brand experiences can be created by combining several service and products to satisfy the needs. Customers choose and buy based on formed expectations about value and satisfaction provided by market offerings. Marketers should carefully adjust levels of expectation as low levels fail to attract new buyers, whereas high ones disappoint. Exchange involves obtaining something (satisfying needs) by offering something else in return. Marketing includes actions that help create, maintain and expand exchange relationships with target segments. Distributing prohibited lOMoARcPSD © StuDocu.com 4 Markets grow from exchange and include actual and potential buyers of product or service. Marketing involves managing markets, searching for customers and their needs, designing and pricing market offerings, promoting and delivering them. Furthermore, in modern days customers are empowered by technology and marketers need to manage customer-managed relationships, allowing customers to reach companies. Companies’ success in building valuable relationships depends on the marketing system which includes suppliers, competitors, marketing intermediaries and consumers. Objective 3: Designing marketing strategy and integrated marketing plan Customer-driven marketing strategy can be designed once consumers’ needs and markets are understood. Marketing management consists of “choosing target markets and building profitable relationships with them”. For a successful strategy 2 questions need to be answered: (1) what is the target market and (2) how will it be served/what is the value proposition? Selecting customers to serve: the company needs to segment the market and choose target segments, customers the can be served well and bring most profit when their demand is managed. Choosing value proposition: this involves deciding on how to differentiate and position the company; value proposition is the benefit the company promises to customers to fulfil their needs helping to differentiate and giving advantage in target markets. Marketing management orientations: 5 concepts around which organizations can create and implements their marketing strategies. 1. Production concept: if consumers prefer products that are available and affordable, company improves production and distribution efficiency (can lead to marketing myopia). 2. Product concept: if consumers prefer innovative products of high quality, and superior performance, company focuses on continuous product improvement (can lead to marketing myopia). 3. Selling concept: consumers will not buy the products unless the company launches a selling and promotion effort (e.g. insurance, donations); this is a risky concept as it aims at creating sales (profits through sales volume), not high quality relationships with customers. 4. Marketing concept: the outside-in perspective (opposite of inside-out perspective of selling concept) where achieving company objectives depends on identifying the needs and wants of consumers to fulfil them in a better manner than competitors. In many cases consumers do not know what they want and what is possible; then such consumer-driven marketing may even allow understanding the consumers better than they do themselves. 5. Societal marketing concept: considers possible conflicts between short-run wants and long-run welfare. It suggests that value should be provided to Distributing prohibited lOMoARcPSD © StuDocu.com 5 customers to improve their own and society’s well-being. Sustainable marketing is included in the concept and involves socially and environmentally responsible strategies while considering ability of future generations to meet the same needs. Shared value recognizes societal needs and not only economic ones. Companies should balance human welfare, want satisfaction and profits. Integrated marketing program outlines how value will be delivered to target consumers. It involves transforming marketing strategy into action with the marketing mix tools. The latter are grouped into 4 Ps: product, price, place and promotion. These are integrated into marketing program. Objective 4: CRM and creating & capturing value Customer Relationship Management - the “process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction”. Relationship Building Blocks: customer value and satisfaction Customer value: highest customer-perceived value, evaluation of benefits and costs that are judged subjectively, leads to a customer buying from the company. Customer satisfaction: this depends on whether the bought product meets expectations. More satisfied customers are more loyal leading to better company performance. Smart companies deliver even more than they promise to delight customer, who in turn buy again and spread the word. However, the goal is not to maximize customer satisfaction, but to generate customer value profitability. Customer relationship levels and tools: companies with low margin customers develop basic relationships through brand building ads, websites and etc. companies with high margin customers create full partnerships though personal approach. Other tools include: frequency marketing programs to reward those who buy often, club marketing programs that benefit members and create communities. Changing nature of customer relationships – important trends in relationships: 1. Relating with more carefully selected customers: important customers are identified and targeted for pampering (e.g. potentially unprofitable customers are preselected and weeded out). 2. Relating more deeply and interactively: a. New technology allows relating in multiple ways, with deeper customer involvement and sense of community. The challenge is to be able to manage with great power, control and informedness of customers. Customer-managed relationships allow customers to interact with each other and brands shaping their relationships. Therefore, marketing should practice attraction, involving customers in market offerings. When using social media, companies should find ways to join social conversations and provide relevant and engaging brand information. Distributing prohibited lOMoARcPSD © StuDocu.com 6 b. Consumer-generated marketing is created by the consumers where they influence, intendedly or unintendedly, their own and others’ experiences with the brand by using blogs, sharing videos, reviewing. Some companies make use of this by inviting consumers to participants in marketing efforts by collecting new ideas or generating ads. The danger of this is the high costs and difficulty in identifying good solutions. Partner relationship management - involves close collaboration with partners inside and outside to generate more value for the consumers. Internally, firms must connect all departments with a customer-focus objective. Additionally, close links are required outside, along the whole supply chain, as the success of delivering greater value is dependent on all partners. Capturing value from customers (outcomes of creating customer value)  Creating customer loyalty and retention: good CRM leads to satisfaction of customers, making them loyal and generating retention. Therefore, this adds to the customer lifetime value, all the purchases a customer makes over a lifetime of patronage.  Growing share of customer: the share a company gets of the customer’s purchasing of the offered products can be increased with good CRM and by offering a variety of products  Building customer equity: this is the ultimate goal of CRM; customer equity is the combined customer lifetime values of potential and current customers creating a measure for the future customer base. Building the right relationships with the right customers: Not all customers are good investments for the company. The customers can be separated according to their potential profitability and loyalty and the relationships with them can be managed accordingly. Nothing should be invested into stranger as there is no fit between company’ offerings and their needs. The opposite good fit is true for butterflies, however, the company should invest in them in the short time of their interest. True friends are profitable and loyal, company should nurture the Distributing prohibited lOMoARcPSD © StuDocu.com 7 relationship and constantly invest into it, turning the group into true believers who purchase regularly and spread the word. Barnacles are most problematic and the company can true to raise their profitability, however, if that does not work, investments into them should be ceased. Objective 5: Trends and forces in marketing landscape  Changing economic environment: in the uncertain economic times, brand value needs to be balanced with long-term equity and market share should be build strengthening customer relationships.  Digital age: Internets provides new ways to access customer information and communicate, leading to growth of online marketing.  Growth of not-for-profit marketing: marketing helps museums, zoos, hospitals attract funds and members. Additionally, government employs social marketing to discourage smoking and increase concern for environment.  Rapid globalization: managers are increasingly focused not only on local, but global views of processes in organizations.  Call for more ethics and social responsibility: social responsibility and environmental concerns place increasingly stricter demands on organizations; marketing aims at profiting from serving current needs with a long-term outlook. Distributing prohibited lOMoARcPSD © StuDocu.com 8 2. Strategy – partnering to build customer relationships Strategic planning sets the stage for the rest of the company’s planning. Marketing contributes to strategic planning, and the overall plan defines marketing’s role in the company. Guided by the company’s mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company. Under the strategic plan, the major functional departments— marketing, finance, accounting, purchasing, operations, information systems, human resources, and others—must work together to accomplish strategic objectives. Customer value and relationships are at the centre of marketing strategy and programs. To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control. Example McDonalds: to adapt to the changing tastes and needs McDonalds changed its strategy to being the customers’ favourite restaurant, taking care of them. This helped the restaurant to change the overall direction, rediscover new opportunities and menu, as well as increase sales. Objective 1: 4 steps of company-wide strategic planning Strategic planning – the process of “developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities”. Strategic planning occurs on 2 levels: corporate level and business unit, product and market level. The first step is to define the mission, which describes the purpose of the organization and its goals in broader environment and it meant to guide the member of the organization. Mission statements should be oriented towards the market, focused on customers and described in terms of fulfilling consumers’ needs. The second step is to set company objectives and goals, dedicating responsibility to management to achieve them. Such goals are to become marketing objectives. Objective 2: Designing the business portfolio The third step is to use the mission and objectives to develop a business portfolio for the company containing its businesses and products. It needs to fit the strengths and weaknesses of the company considering environmental threats and opportunities. To plan a portfolio 2 steps need to be taken: current business portfolio should be analysed and balanced, and the future portfolio needs to be developed aiming at growth and downsizing. Distributing prohibited lOMoARcPSD © StuDocu.com 9 In portfolio analysis (evaluating products and businesses that the company consists of) the first step is to identify strategic business units (SBU). A widely used portfolio planning method was developed by BCG and uses a growth-share matrix to classify the SBU. Market growth share measures market attractiveness, and relative market share – the company strength in the market. Stars require investments for growth and eventually turn into cash cows. Cash cows are established and successful and need less investment; they provide cash for bills and other investments. Question marks require a lot of cash, and management needs to choose some that they can turn into stars. Dogs may provide enough revenue to sustain themselves but are not large sources. 4 strategies can be pursued after classifying:  Build share by investing  Hold share by investing just enough  Harvest by focusing on short-term cash flow  Divest by selling and using resources elsewhere Problems with matrix approaches: limited, difficult, time-consuming, costly, little advice for future; thus customized approaches are favoured. Strategies for growth and downsizing (future) Product market expansion grid – identifies company’s growth opportunities through 4 following categories. Market penetration involves growth by increasing current product sales to current market (no change). Market development includes identifying Distributing prohibited lOMoARcPSD © StuDocu.com 10 and developing new market segments for current products. Product development complies of offering new products to current segments. Diversification includes beginning or acquiring completely new businesses. Downsizing may be useful when it lack experience in new areas, environment changes making SKUs unprofitable, and some products or businesses may just die out. Objective 3: Planning marketing Marketing affects strategic planning in the following ways:  It provides a guiding philosophy for the strategy  It gives input about potentially attractive markets  In individual SBU marketing designs strategies reaching objectives Across the value chain (“the series of internal departments that carry out valuecreating activities”) all employees and departments need to understand marketing and creating customer value as well as remain customer focused. However, nowadays companies need to look beyond their internal value chains. The can create networks with suppliers, distributors, and customers to improve the entire system and increase create value through partnership (valu