Professional Documents
Culture Documents
Chapter Overview
Marketing is all about customer relationshipsprofitable customer relationships.
Whether your company sells expensive systems to a few key customers or toothpaste to
millions, understanding the customer is the heart of a successful business. Although
everyone within a company must be obsessed with making sure the customer is happy,
one of the many roles of marketing is growing current customers and acquiring new ones.
Marketing is defined as a social and managerial process by which individuals and
groups obtain what they need and want through creating and exchanging value with
others. Figure 1-1 of the text shows a model of the marketing process that includes
understanding the marketplace and customer needs and wants; designing a customerdriven marketing strategy; constructing a marketing program that delivers superior value;
building profitable relationships and creating customer delight; and capturing value from
customers to create profits and customer quality. The chapter reviews these five steps,
focusing on the relationship aspect of marketing.
Chapter Outline
1.
Introduction
a.
NASCAR is a great marketing organization. It is the second highest-rated
regular season sport on television.
b.
It has a single-minded focus: creating lasting customer relationships.
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c.
d.
2.
A big part of the NASCAR experience is the feeling that the sport itself is
personally accessible. Because of this, NASCAR has attracted more than
250 big-name sponsors.
Todays successful companies have one thing in common: they are
strongly customer focused and heavily committed to marketing.
What Is Marketing?
a. A simple definition of marketing is managing profitable customer
relationships.
b. Marketing must both attract new customers and grow the current customers.
c. Every organization must perform marketing functions, not just for-profit
companies. Non-profits also must also perform marketing.
Marketing Defined
d. Most people think of marketing as selling and/or advertisingtelling and
selling.
e.
Marketing must focus on satisfying customer needs.
f.
The formal definition of marketing is a social and managerial process by
which individuals and groups obtain what they need and want through
creating and exchanging value with others.
Use Key Term Marketing here.
Use Chapter Objective 1 here.
The Marketing Process
g.
Figure 1-1 shows the five-step marketing process.
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Markets.
Needs, Wants, and Demands
c. Human needs are felt deprivation.
d. They include physical needs (food, clothing, safety); social needs (belonging,
affection); and individual needs (knowledge, self-expression).
e. These needs are not created by marketing; they are intrinsic to humans.
f. Human needs take the form of wants when culture and personality are applied.
They are shaped by society.
g. Wants become demands when they are backed by buying power.
h. Value and satisfaction are the motives for people to demand products.
i.
Marketing research helps companies understand customers needs, wants,
and demands.
Use Key Terms Needs, Wants, and Demands here.
Use Discussing the Issues 1 here.
Use Application Questions 1 here.
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n.
Figure 1-3 illustrates the differences between the selling concept and the
market concept.
Use Key Terms Production Concept, Product Concept, Selling Concept, Marketing
Concept, and Societal Marketing Concept here.
Use Figures 1-3 and 1-4 here.
Use Chapter Objective 3 here.
Use Discussing the Issues 4 here.
5. Preparing a Marketing Plan and Program
a.
The marketing strategy outlines which customers the company will serve.
b.
Guided by that strategy, marketing programs are developed to deliver
value to the target customers.
c.
The marketing mix is the set of tools the company uses to implement the
strategy.
d.
The marketing tools are classified into four categories, called the four Ps
of marketing: product, price, place, and promotion.
Use Linking the Concepts here.
6. Building Customer Relationships
a.
The previous discussion covered the first three steps in the marketing
processunderstanding the marketplace and customer needs; designing a
customer-driven marketing strategy; and constructing marketing programs.
b.
The fourth and most important step is building profitable customer
relationships.
Customer Relationship Management
c. Customer Relationship Management (CRM) is the overall process of building
and maintaining profitable customer relationships by delivering superior
customer value and satisfaction.
d. A customer evaluates the difference between all the benefits and all the costs
of a marketing offer; this is the customer perceived value.
e. The perceived values and costs may not be accurate or objective.
f. Customer satisfaction depends on the products perceived performance
relative to a buyers expectations.
g. The key is to match customer expectations with company performance.
h. The marketer must balance customer satisfaction level with profitability.
i. There are levels of customer relationships.
j. The basic relationship level is at one extreme and is exhibited in markets with
many low-margin customers.
k. Full partnerships are developed in markets that have few customers and high
margins.
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j.
k.
l.
m.
Customer equity forecasts the future, whereas sales and market share tell
what happened in the past.
Companies can classify their customers as to whether they are profitable
or not, and then manage the relationships accordingly.
Figure 1-5 shows one model of customer classification by profitability and
projected loyalty.
A key point is that different types of customers require different
management strategies to maintain and increase profitability.
Use Key Term Customer Equity here.
Use Figure 1-5 here.
Use Marketing at Work 1-2 here.
Use Linking the Concepts here.
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j.
Many companies form strategic alliances and joint ventures with foreign
companies to build global networks.
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Travel Log
Discussing the Issues
1. Review the definitions of marketing discussed at the beginning of the chapter. Which
definition most closely aligns with your own definition of marketing before reading
the chapter? Why?
Student responses will vary based on personal experiences and opinions. The text
explains that many people think of marketing only as selling and advertising. But, today
marketing must be understood not in the old sense of making a saletelling and
sellingbut in the new sense of satisfying customer needs. Broadly defined, marketing
is a social and managerial process by which individuals and organizations obtain what
they need and want through creating and exchanging value with others. In a narrower
business context, marketing involves building profitable, value-laden exchange
relationships with customers. Hence, the text defines marketing as the process by which
companies create value for customers and build strong customer relationships in order to
capture value from customers in return.
2. Why is understanding customer wants so critical for marketers? How are the
concepts of value and satisfaction related to each other? Explain the difference
between transactions and relationships.
Human needs are states of felt deprivation. Given their wants and resources, people
demand products with benefits that add up to the most value and satisfaction. Perceived
value drives satisfaction. If the value of a product or service does not meet or exceed
customer expectations, the customer is likely to be dissatisfied. A transaction is a one
time event, while many transactions between the same customer and company create a
relationship.
3. Why is target market selection important for a customer-driven marketing strategy?
How might target market selection impact customer satisfaction?
Selecting a target market allows marketers to develop offerings that satisfy specific
consumers wants. Catering to specific wants increases the chance that the offering with
create customer satisfaction.
4. Compare and contrast the Marketing Concept and the Societal Marketing Concept.
Do you agree that marketers have an obligation to consider societys long-run wellbeing when creating marketing offers?
The marketing concept holds that achieving organizational goals depends on knowing
the needs and wants of target markets and delivering the desired satisfactions better than
competitors do. Under the marketing concept, customer focus and value are the paths to
sales and profits. The marketing concept is a customer-centered sense and respond
philosophy. It views marketing not as hunting, but as gardening. The job is not to
find the right customers for your product, but to find the right products for your
customers. The societal marketing concept questions whether the pure marketing
concept overlooks possible conflicts between consumer short-run wants and consumer
long-run welfare. The societal marketing concept holds that marketing strategy should
deliver value to customers in a way that maintains or improves the well- being of both
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consumers and society. According to the societal marketing concept, companies should
balance three considerations in setting their marketing strategies: company profits,
consumer wants, and societys interests. Student responses to the second part of this
question will vary.
5. How does a company benefit from building relationships with its customers and
partners? What are some ways in which a company can build more profitable
customer relationships?
Building relationships often creates more loyal customers who interact more with the
company, spend more on the companys products and services, and encourage friends
and family to consider doing the same. Relationships therefore create more customer
equity. Companies can build relationships by tracking interactions with customers,
listening to customer concerns and interests, improving customer service, and developing
marketing offers that meet customer needs.
6. What recent changes in the marketing landscape do you think have had the most
significant impact on creating customer value and building marketing relationships?
Student responses will vary. Changes in the marketing landscape include technological
advancements, rapid globalization, the call for more ethics and social responsibility, and
the growth of not-for-profit marketing.
Application Questions
1. Consumers usually choose from a tremendous variety of products and services to
satisfy a given need or want. Consider your need for nourishment. How does that
need translate into different wants? What marketing offers are available to satisfy
your needs that also appeal to your wants? How might other consumers in different
market segments meet the same need for nourishment?
Student responses will vary. The need for nourishment creates different wants at different
times. Those wants are influenced by many things, including culture, income, and
personal preferences. Some might choose to satisfy hunger by eating at McDonalds;
others might cook a meal at home. Consumers with more financial resources may choose
to eat out more often; those with less time may choose to rely on ready to eat meals from
the grocery store.
2. Companies measuring customer lifetime value determine the potential profit from the
stream of purchases a customer makes throughout a lifetime of patronage. When
banks began tracking the profitability of individual customers, some found that a
subset of their customers actually cost them money, rather than generating profits.
Should banks fire their unprofitable customers? What are the consequences of such
an action? How might considering the lifetime value of a customer impact a banks
perspective on these customers? How might eliminating unprofitable customers
affect a banks customer equity both positively and negatively?
All companies must decide which customers they can profitably serve. Banks, too, should
consider which consumers are profitable, now and in the future. By considering
customer lifetime value, banks make a more accurate assessment of which customers
should be fired, if any. Some customers who are not currently profitable, like students,
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may be profitable over a lifetime of patronage as they accrue more wealth and require
more financial assistance (loans for cars, homes, and education).
3. Think of a company in your town with which you have a relationship. Review figure
1.5. Which relationship group do you fall into? What value do you get from the
relationship and how does that company capture value from you in return?
Student responses will vary.
Focus on Ethics
The marketing concept focuses on satisfying customers needs and wants, but what if
doing so places the consumer at risk? Although marketed and sold legally, the health
impacts of tobacco and alcohol are well known. In addition, the impact of poor nutrition
has recently come into the national spotlight. More specifically, the Food and Drug
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Administration (FDA) has issued warnings about the level of trans-fatty acids present in
some food products. In response, companies including McDonalds, Kraft Foods, and
Frito-lay, have recently been re-evaluating their products and making changes. For
example, McDonalds now offers either french fries or a bag of sliced fruit with each
Happy Meal.
1. What ethical responsibilities do companies producing products that have potentially
adverse health effects have to consumers?
Student responses will vary.
2. Can a company truly consider the long-term welfare of the consumer and of society
while also maximizing profits?
Student responses will vary. However, many companies have managed to balance longterm welfare with growing profits. Wild Planet, Honest Tea, and many others focus on
the double bottom line with profitable results.
3. Break into small groups. Divide into teams within each group and debate whether or
not marketing potentially unhealthy products is ethical.
After the students debate in small groups, the debate could be continued using the entire
class. Have the students switch sides of the issue for the large class debate. Also have
students debate as different stakeholders (e.g., consumers, government, shareholders,
company management, etc.).
4. What ethical concerns exist behind a McDonalds order taker asking all customers if
they want to supersize their meal? Is this giving consumers what they want, or is this
inducing many overweight people to eat more than necessary? Debate the issue.
This question is likely to raise some heated debate regarding the purpose of the
organization. At its core, the question gets at the idea of doing what the customer wants
versus doing what is best for the customer. This question highlights that sometimes these
may be different things.
GREAT IDEAS
Barriers to Effective Learning
1.
2.
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3.
4.
5.
6.
Student Projects
1. Clip or photocopy three current print advertisements and identify the marketing
orientation that, in your opinion, the companies appear to be following.
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2. Develop a listtry for 10 eachof your needs and wants. How are they different?
What appeals on the part of companies seem to get your interest and attention?
What do you think would be the most successful way for a company to appeal to
you if you were considering the purchase of (a) a computer; (b) a car; (c) a college
education; and (d) a soft drink?
3. Find an article from a contemporary business publication that describes a companys
commitment to relationship marketing or connecting with consumers. Abstract the
article and share your findings with the class.
4. Think of a company or brand that you buy from over and over. What might your
customer lifetime value be, assuming they continue to delight you?
5. The American Cancer Society is a nonprofit organization. Its Web site is at
www.cancer.org. How might they market their services? Who would their target
market be? How could they build lasting relationships with their customers?
6.
What segment of potential buyers does Wal-Mart target? What about Nordstrom?
7.
Many years ago, American Airlines created a new business must have by
offering frequent flier miles. All the airlines followed, and hotels werent far
behind. Most of these programs only offer a tracking system and upgrades to their
best customers, but Wyndham hotels are different. Go to the Wyndham Web site
(www.wyndham.com) and find the Wyndham ByRequest tab. Fill out the form
for membership, and then discuss how Wyndham is creating a relationship with
customers far and above what the typical hotel does in their frequency marketing
program. Discuss how this could create increased customer equity.
8.
Identify the major variables of the marketing mix. Discuss how they might differ
between a for-profit business and a non-profit organization.
Interactive Assignments
Small Group Assignment
1. Form students into groups of three to five. Each group should read the opening
vignette to the chapter on NASCAR. Each group should answer the following
questions:
a. Why would NASCAR want to change its image to that of a familyfriendly organization?
b. How has this image change helped the organization in its marketing
efforts?
c. Why would fans be so loyal, as described in the vignette, to the point of
always buying sponsors brands?
d. How important is the use of technology to NASCARs strategy?
Each group should then share its findings with the class.
Individual Assignment
1. Read the opening vignette to the chapter. Think about answers to the following
questions:
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a. How does NASCAR develop and maintain relationships with its customers, when over 200,000 could attend a single event?
b. How has NASCAR proven that it is a family-friendly organization?
c. How has NASCAR utilized technology to extend its relationships?
Share your findings with the class.
Think-Pair-Share
Consider the following questions, formulate an answer, pair with the student on your
right, share your thoughts with one another, and respond to the questions from the
instructor. These questions could also be given as out-of-class assignments.
1. How is marketing different than selling or advertising?
2. How many companies or brands do you feel you have a relationship with?
Describe them.
3. Think about your need when you were exploring which college to attend. What
was the marketing offer at your school that attracted you?
4. What type of company or organization might be required to practice
demarketing, other than the examples in the text?
5. How is your college positioned in the marketplace?
Classroom Exercise/Homework Assignment
If the classroom has Internet access, this is a good classroom exercise. Otherwise, it can
be assigned as homework.
Sean P. Diddy Combs knows how to tap into a cultural phenomenon. Already a star in
the world of Hip Hop, in 1998 he launched a line of sports clothing for men, women and
children. He sells his clothes in virtually all marketsfrom stores located in inner cities
to Bloomingdales. The Web site for Sean John clothing combines fashion with Hip Hop
music, and appeals to those who enjoy urban culture with his tag line, Its not just a
label, its a lifestyle. Visit the Web site at www.seanjohn.com for more information.
1. What is Sean Johns marketing offer, as exhibited on the Web site?
Sean John offers a bit of urban culture on the Internet. Featuring music from P. Diddy
himself, as well as the stars of his BadBoy Entertainment label, the Web site evokes the
inner city culture the clothing line represents. Thus, Sean Johns marketing offer contains
both the product itself as well as the experience of being a bad boy. There is also
information about the company on the Web site, including a discussion of how vendors
are selected and the companys infrastructure. Finally, there is a store locator link, and if
you cant find anything close by, Sean John very helpfully sends you to the
www.macys.com site where you can buy online.
So, the marketing offer includes the clothes themselves, popular music, and information
about the company as well as stars of the music world.
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Application in class. If shorter, you can either break the chapter over two sessions, or
shorten each topics allotted discussion time.
1.
2.
3.
4.
5.
6.
Ten minutes should be spent on discussing what marketing really is. Many
students will come into class thinking they are going to be learning all about
advertising, or all about selling. Ask students to talk about what they think
marketing is, and to use examples of what theyve encountered in their own lives.
Ten minutes can also be spent on the second major topic of the chapter,
understanding the marketplace and consumer needs. Discussing the differences of
needs, wants, and demands, and how they relate to marketing, can greatly enhance
the students understanding of the basis of marketing. Also included in this section
are the notions of marketing offers, satisfaction, and relationships. You can
discuss the various ways companies develop relationships with their customers.
Using Amazon.com, the company discussed in the opening pages of the chapter,
can really help the students understand that a company with millions of customers
can still easily develop relationships with each and every one of them.
Another 10 minutes can be spent on designing customer-driven marketing
strategies. Many students will still not understand how needs, wants, and demands
can drive companies product development, but this section of the chapter will
help them see it a little more clearly.
Preparing a marketing plan and program can be covered in 5 minutes. This section
shows how everything they learn in marketing will be pulled together, but it is too
soon in the semester to be spending a lot of time on the topic.
Customer relationships are the heart of the chapter and the entire text. Spend 15
minutes discussing this topic, and use examples that the students will appreciate.
Discussing the difference in the relationships they have with their hairdresser or
barber and that of www.bn.com or another one of the Internet merchants can drive
home the importance of holding on to good customers. Students will also be well
aware of frequency marketing programs, and examples of those will also be
beneficial.
The final 10 minutes can be spent discussing the future of marketing and the
development of customer relationships. The majority of students will never have
known an era without the Internet. Asking them how they would have developed
relationships with their customers without the assistance of technology is a good
way to get a discussion started on how marketing programs are developed. Then
you can talk about how the advent of email and the Internet has opened the entire
world for even a small retailer, as well as raised some ethical issues, such as the
marketing of the American culture to the entire world, regardless of their
societies mores and culture.
If time permits, revisit the question of what is marketing? The students should now
have a greater appreciation of the science behind marketing, as well as the creativity
necessary to develop successful marketing programs.
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