D.

Bandopadhyay
Professor (Marketing) & DirectorManagement Training & Development

Marketing Management

Needs, Wants & Demands

Needs are the basic human requirements. People need food, air, water, clothing and shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and really able to buy one because of its high cost.

Marketers do not create needs: Needs pre-exist marketers. Marketers, along with other societal factors, influence wants. Marketers might promote the idea that a Mercedes would satisfy a persons need for social status. They do not, however, create the need for social status.

We can distinguish among five types of needs:

1. Stated needs (the customer wants an inexpensive car). 2. Real needs (the customer wants a car whose operating cost, not its initial price, is low). 3. Unstated needs (the customer expects good service from the dealer). 4. Delight needs (the customer would like the dealer to include an onboard navigation system). 5. Secret needs (the customer wants to be seen by friends as a savvy consumer).

What is Marketing?
Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is meeting needs profitably.

Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders.

Marketing Management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, communicating and delivering superior customer value. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then, is to make the product or service available.

What is Marketed?
Goods Services Events Experiences Persons Places Properties (real or financial properties) Organizations Information Ideas

Who Markets?
A marketer is someone who seeks a response (attention, a purchase, a vote, a donation) from another party, called the prospect.
Marketers are responsible for demand management. Marketing managers seek to influence the level, timing and composition of demand to meet the organizations objectives.

Eight demand states are possible: Negative demand Nonexistent demand Latent Demand Declining Demand Irregular Demand Full Demand Overfull Demand Unwholesome Demand

Structure of Flows in a Modern Exchange Economy

Resources
Money Resource Markets Taxes, Goods Services, Money Manufacturer Markets Government Markets Services, Money Taxes Consumer Markets

Resources
Money

Taxes, Goods
Services, Money Money Taxes, Goods

Services

Money

Goods and Services

Intermediary Markets

Goods and Services

Key Customer Markets

Consumer Markets Business Markets Global Markets Nonprofit and Governmental Markets

A Simple Marketing System

Communication

Goods/Services Industry (a collection of sellers) Money Market ( a collection of buyers)

Information

MARKETPLACES, MARKETSPACES & METAMARKETS

The marketplace is physical as when you shop in a store; marketspace is digital, as when you shop on the Internet. Metamarket is the concept to describe a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries, e.g., automobile metamarket, travel metamarket etc.

HOW BUSINESS AND MARKETING ARE CHANGING

Changing Technology Globalization Deregulation Privatization Customer empowerment Customization Heightened Competition Industry Convergence Retail Transformation Disintermediation

THE MARKETING CONCEPT

Production Concept Product Concept Marketing Concept

The job is not to find the right customers for your products, but the right products for your customers. The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering and communication superior customer value to its chosen target markets. Selling focuses on the needs of the seller; marketing on the needs of the buyer.

Reactive market orientation understanding and meeting customers expressed needs. Proactive marketing orientation - high-level innovation is possible if the focus is on customers latent needs. Companies that practice both a reactive and proactive marketing orientation are implementing a total market orientation and are likely to be the most successful.

MARKETING OVERVIEW
Marketing Orientation

Marketing Issues

Markets & Marketing

The Marketing Mix

Marketing Management

Marketing & Society

Arriving at a definition of Marketing

Customer Needs Identifying Marketing Anticipating Supplying

Mutually beneficial exchange

Firms objectives

DEFINITION - MARKETING

Marketing is the management process responsible for: identifying anticipating & satisfying customer requirements and profitably.

efficiently

SELLING & MARKETING CONCEPTS CONTRASTED

Starting point Sales Factory Orientation Marketing Market Orientation

Focus Existing Products Customer needs

Means Selling + Promoting Integrated Marketing

End Profit through sales volume Profit through customer satisfaction

Relationship of Marketing & other departments

Holistic Marketing Concept

Relationship Marketing Integrated marketing Internal Marketing Social Responsibility Marketing

Holistic Marketing Dimensions

Marketing Management Senior Management Communications Other Departments

Products & Services

Channels

Internal Marketing Holistic Marketing Socially Responsible Marketing Ethics Environment Legal Community Customers

Integrated Marketing

Relationship Marketing

Channel

Partners

Relationship Marketing
The operating principle is simple: Build an effective network of relationships with key stakeholders, and profits will follow.

Integrated Marketing
Four Ps Four Cs

Product Price Place Promotion

Customer Solution Customer Cost Convenience Communication

Marketing Mix

Product Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns

Target Market

Place Channels Coverage Assortments Locations Inventory Transport Promotion Sales Promotion Advertising Sales Force Public Relations Direct Marketing Personal Selling

Price List Price Discounts Allowances Payment Period Credit Terms

Communications Mix
Advertising

Sales Promotion

Offering Mix
Company Products Services Prices

Events and Experiences Public Relations Direct Marketing Personal Selling

Distribution Channels

Target Customers

INTERNAL MARKETING Internal marketing is the task of hiring, training and motivating able employees who want to serve customers well. Other than various marketing functions working together, the various departments should also work together to serve the customers well. Xerox goes so far as to include in every job description an explanation of how that job affects the customer.

SOCIAL RESPONSIBILITY MARKETING Are companies that do an excellent job of satisfying customer wants, necessarily acting in the best long term interests of consumers and society? Example: selling ammonia free hair dye. Marketers should understand ethical, environmental, legal and social context of marketing activities.

Many consumers do not know what they want in a product. Consumers did not know much about cellular phones when they were first introduced. Nokia and Ericsson fought to shape consumer perceptions of cellular phones. Consumers were in a learning mode and companies forged strategies to shape their wants. Simply giving customers what they want isnt enough any more to gain an edge, companies must help customers learn what they want.

Target Markets, Positioning & Segmentation

A marketer can rarely satisfy everyone in a market. The marketer decides which segments present the greatest opportunity - which are its target markets. For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefit.

Offerings & Brands

Companies address needs by putting forth a value proposition, a set of benefits they offer to customers to satisfy their needs. A brand is an offering from a known source. A brand name carries many associations in the minds of people. These associations make up the brand image.

Value & Satisfaction

The Offering will be successful if it delivers value and satisfaction to the target buyer. Value reflects the perceived tangible and intangible benefits and costs to customers. Value can be seen as primarily a combination of Quality, Service and Price (QSP), called the Customer Value Triad. Value increases with quality and service and decreases with price, although other factors can also play an important role. Satisfaction reflects a persons comparative judgments resulting from a products perceived performance (or outcome) in relation to his or her expectations. If the performance falls short of expectations, the customer is dissatisfied and disappointed. If the performance matches the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied or delighted.

Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels. Communication channels deliver and receive messages from target buyers, and include newspapers, magazines, radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes and the Internet. Beyond these, communications are conveyed by facial expressions and clothing, the look of retail stores, and many other media. Marketers are increasingly adding dialogue channels(e-mail and toll-free numbers) to counterbalance the more normal monologue channels (such as ads).

The marketer uses distribution channels to display, sell or deliver the physical product or service to the buyer or user. They include distributors, wholesalers, retailers and agents.

The marketer also uses service channels to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks and insurance companies that facilitate transactions.

Supply Chain
Whereas marketing channels connect the marketer to the target buyers, the supply chain describes a longer channel stretching from raw materials to components to final products that are ultimately carried to final buyers.

Competition
Competition includes all the actual and potential rival offerings and substitutes that a buyer might consider.

Marketing Environment
The marketing environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers, and the target customers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation companies and telecommunications companies. Included with distributors and dealers are agents, brokers, manufacturer representatives and others who facilitate finding and selling to customers.

The broad environment consists of six components:

demographic environment, economic environment, physical environment, technological environment, political-legal environment and social-cultural environment.

These environments contain forces that can have a major impact on the actors in the task environment. Market actors must pay close attention to the trends and developments in these environments and make timely adjustments to their marketing strategies.

Marketing Planning
The marketing planning process consists of:
analyzing marketing opportunities selecting target markets designing marketing strategies developing marketing programs managing the marketing effort.

Shifts in Marketing Management

Here are 14 major shifts in marketing management that smart companies have been making in the twenty-first century. From Marketing does the marketing - to everyone does the marketing From organizing by product units - to organizing by customer segments From making everything - to buying more goods and services from outside. From using many suppliers - to working with fewer suppliers in a Partnership

 From relying on old market positions - to uncovering new ones. From emphasizing tangible assets - to emphasizing intangible assets From building brands through advertising - to building brands through performance and integrated communications From attracting customers through stores and salespeople - to making products available online. From selling to everyone - to trying to be the best firm serving well-defined target markets.

 From focusing on profitable transactions - to focusing on customer lifetime value. From a focus on gaining market share - to a focus on building customer share From being local - to being Glocal both global and local From focusing on the financial scorecard - to focusing on the marketing scorecard. From focusing on shareholders - to focusing on stakeholders.

Marketing Management Tasks

Developing Marketing Strategies and Plans Capturing Marketing Insights Connecting with Customers

Building Strong Brands

Shaping the Marketing Offerings Delivering Value Communicating Value Creating Long Term Growth

4 Ps of Marketing
Product (or, service) Price Place Promotion

Product
Tangible product Intangible product (service)
Combination of both

Price
When setting prices, companies must think about the following aspects. Costs The level of competitors prices. The effect of price on consumers perceptions. Market conditions

Place
If you cannot get in touch with your customers, you cannot sell anything. For many products, organizations must rely on third parties to reach the customer. These third parties are collectively known as middlemen and the access they provide is called distribution channels. a) Merchants take title to the goods, that is they become owners of the goods. They then resell them. Wholesalers and retailers are in this category. b) Agents and brokers do not own the goods, but merely assist in the transfer of ownership from, say, the manufacturer to the customer.

Promotion
Marketing Communications :
Sales promotion activities Advertising Personal selling Publicity

Direct mailing etc.

The Marketing Mix for Services

A service is any activity or benefit offered by one party to another which is essentially intangible and does not result in the ownership of anything physical. An example is a seat on an aircraft, which the customer uses for the duration of the flight but does not own.

The special characteristics of Services

Intangibility Variability Inseparability

Lack of Ownership

Additional 3Ps

Process
User-Friendly systems for selling and buying are essential.

Physical Evidence
Services tend to suffer from the intangible nature of the offering. Organizations in the service sector are increasingly using devices such as newsletters (often via e-mail) to maintain the customers desire to have the service.

People
For most services, a key element is the people who are an integral part of the process. If the staff who deal with customers are poorly motivated or badly trained, this can greatly affect the quality of the service.

The Value Chain

Michael Porter of Harvard has proposed the vale chain as a tool for identifying ways to create more customer value.
The firms success depends not only on how well each department performs its work, but also on how well the various departmental activities are coordinated to conduct core business processes.

The Value Delivery Process

The smart competitor must design and deliver offerings for well-defined target markets.
Instead of emphasizing making and selling, these companies see themselves as part of a value delivery process.

The value delivery process begins before there is a product and continues while it is being developed and after it becomes available.

 Zero customer feedback time Zero product improvement time. Zero Purchasing time. Zero setup time. Zero defects.

3 Vs approach to marketing: Define the value segment or customers (and his/her needs) Define the value proposition Define the value network that will deliver the promised service.

Two Views of the Value Delivery Process

The market sensing process. The new offering realization process. The customer acquisition process. The customer relationship management process. The fulfillment management process.

As Wal-Mart stores sell their goods, sales information flows via computer not only to Wal-Marts headquarters, but also to Wal-Marts suppliers, who ship replacement merchandise to the stores almost at the rate it moves off the shelf.
At Xerox, a Customer Operations Group links sales, shipping, installation, service and billing so that these activities flow smoothly into one another. Winning companies are those that excel at managing core business processes through cross-functional teams.

Core Competencies
Many companies today outsource less critical resources if they can be obtained at better quality or lower cost.

Nike, for example, does not manufacture its own shoes, because certain Asian manufacturers are more competent in this task; Nike nurtures its superiority in shoe design and shoe merchandising, its two core competencies. We can say that a core competency has three characteristics: It is a source of competitive advantage in that it makes a significant contribution to perceived customer benefits It has applications in a wide variety of markets It is difficult for competitors to imitate.

Competitive advantage ultimately derives from how well the company has fitted its core competencies and distinctive capabilities into tightly interlocking activity systems.
Competitors find it hard to imitate companies such as Dell, or IKEA because they are unable to copy their activity systems.

A Holistic Marketing Orientation & Customer Value

The holistic marketing framework is designed to address three key management questions: Value exploration How can a company identify new value opportunities (Customer/Co. /Collaborator). Value creation How can a company efficiently create more promising new value offerings? (Business Concept/Business Scope/Re-positioning) Value delivery How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently? (CRM/Internal Resource management/Business Partnership management)

Value Exploration
The customers cognitive space Existing and latent needs such as the need for participation, stability, freedom and change. The companys competence space Breadth: broad versus focused scope of business Depth: physical versus knowledge-based capabilities The collaborators resource space Horizontal partnerships, where companies choose partners based on their ability to exploit related market opportunities and vertical partnerships, where companies choose partners based on their ability to serve their value creation.

Value Creation
Defining the business concept (the big idea) Shaping the business scope (the lines of business) Positioning the companys brand identity (how customers should see the company)

Value Delivery
Customer Relationship Management Internal Resource Management Business partnership Management

Building Customer Value, Satisfaction and Loyalty

Customer Perceived Value

Customer perceived value (CPV): It is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Total customer value: It is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering. Total customer cost: It is the bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering, including monetary, time, energy and psychic costs.

Determinants of Customer-Delivered Value

The marketer can increase the value of the customer offering by some combination of raising functional or emotional benefits and /or reducing one or more of the various types of costs.

Delivering High Customer Value

The Value Proposition consists of the whole cluster of benefits the company promises to deliver; it is more than the core positioning of the offering. For example, Volvos core positioning has been safety, but the buyer is promised more than just a safe car; other benefits include a long-lasting car, good service and a long warranty period. Too many companies create a value gap by failing to align brand value with customer value.

Total Customer Satisfaction

Whether the buyer is satisfied after purchase depends on the offers performance in relation to the buyers expectations.

Ultimately, the company must operate on the philosophy that is trying to deliver a high level of customer satisfaction subject to delivering acceptable levels of satisfaction to the other stakeholders, given its total resources.

Customer Expectations
Some of todays most successful companies are raising expectations and delivering performances to match.

A customers decision to be loyal or to defect depends on the sum total of a large number of small encounters with the company. These encounters need to result in positive outcome and should lead to some memorable customer experience.

Measuring Satisfaction
A company would be wise to measure customer satisfaction regularly because one key to customer retention is customer satisfaction.

Periodic surveys can track customer satisfaction directly.

Companies can monitor the customer loss rate and contact customers who have stopped buying or who have switched to another supplier to learn why this happened.

Companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the companys and competitors products. Such practice should also be done by company executives, keeping their identity secret. For customer-centered companies, customer satisfaction is both a goal and a marketing tool.

Total Quality Management

Total Quality Management (TQM) is an organization-wide approach to continuously improving the quality of all the organizations processes, products and services. Product and service quality, customer satisfaction and company profitability are intimately connected. Higher levels of quality result in higher levels of customer satisfaction. Which support higher prices and (often) lower costs. Studies have shown a high correlation between relative product quality and company profitability.

Conformance Quality vs. Performance Quality

Some companies now concentrate their efforts on return on quality or ROQ.

ROQ adherents advocate improving quality only on those dimensions that produce tangible customer benefits, lower costs or increased sales.
This bottom-line orientation forces companies to make sure that the quality of the product offerings is in fact the quality consumers actually want.

Maximizing Customer Lifetime Value

Ultimately, marketing is the art of attracting and keeping profitable customers. Yet every company loses money on some of its customers. The wellknown 20-80 rule says that the top 20 percent of the customers may generate as much as 80 percent of the companys profits. This rule is rather 20-80-30 rule to reflect the idea that the top 20 percent of customers generate 80 percent of the companys profits, half of which are lost serving the bottom 30 percent of unprofitable customers. The implication is that a company could improve its profits by firing its worst customers. It is also not necessary that companys largest customers will yield max. profit.

Customer Profitability
A profitable customer is a person, household or company that over time yields a revenue stream that exceeds by an acceptable amount the companys cost stream of attracting, selling and servicing that customer. Emphasis is on the lifetime stream of revenue and cost, not on the profit from a particular transaction.

Customer Profitability Analysis

More generally, marketers must segment customers into those worth pursing versus those potentially less lucrative customers that should receive less attention, if any at all. Moreover, customer portfolio should rather be managed as in case of Investment Portfolio and thus one should diversify the customer portfolio accordingly.

Competitive Advantage
Competitive advantage is a companys ability to perform in one or more ways that competitors cannot or will not match. Michael Porter urged companies to build a sustainable competitive advantage. At least it should be a leverageable advantage that can be used as springboard to new advantages.

Any competitive advantage must be seen by customers as a customer advantage.

Measuring Customer Lifetime Value

Customer lifetime value (CLV): It describes the net present value of the stream of future profits expected over the customers lifetime purchases. The company must subtract from the expected revenues the expected costs of attracting, selling and servicing that customer, applying the appropriate discount rate.
CLV calculations provide a formal quantitative framework for planning customer investment and help marketers to adopt a long-term perspective. One challenge in applying CLV concepts, however, is to arrive at reliable cost and revenue estimates.

Customer Equity
Value Equity is the customers objective assessment of the utility of an offering based on perceptions of its benefits relative to its costs. The sub-drives of value equity are quality, price and convenience objective assessment. Brand Equity is the customers subjective and intangible assessment of the brand, above and beyond its objectively perceived value. The subdrivers of brand equity are customer brand awareness, customer attitude toward the brand and customer perception of brand ethics subjective assessment.

Relationship Equity It is the customers tendency to stick with the brand, above and beyond objective and subjective assessments of its worth. Subdrivers of relationship equity include loyalty programs, special recognition and treatment program, community-building programs and knowledge-building programs. Relationship equity is especially important where personal relationships count for a lot and where customers tend to continue with suppliers out of habit or inertia.

Customer Relationship Management (CRM) Maximizing customer value means cultivating long term relationships. Customer relationship management (CRM) is the process of managing detailed information about individual customers and carefully managing all customer touch points to maximize customer Loyalty. A customer touch point is any occasion on which a customer encounters the brand and product.

For a hotel, the touch points include reservations, check-in and check-out, frequent-stay programs, room service, business services, exercise facilities, laundry service, restaurants and bars.

Based on what they know about each valued customer, companies can customize market offerings, services, programs, messages and media. CRM is important because a major driver of company profitability is the aggregate value of the companys customer base.

CRM enables companies to offer individualised market offerings through mass customisation.

Mass Marketing Versus One-to-One Marketing

1-to-1 marketing Marketing:

principles

applied

to

CRM

Identify your prospects and customers Differentiate customers in terms of : - Their needs - Their value to your company. Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships. Customize products, services and messages to each customer

Increasing relationship.

the

longevity

of

the

customer

Enhancing the growth potential of each customer through share-of-wallet, cross selling and upselling. Harley-branded merchandise amounted to more than $211 million in company sales in 2003. Making low-profit customers more profitable or terminating them. Focusing disproportionate effort on high-value customers.

Attracting, Retaining and Growing Customers

Suspects are people or organizations who might conceivably have an interest in buying the companys product or service, but may not have the means or real intention to buy. The next task is to identify which suspects are really good prospects customers with the motivation, ability and opportunity to make a purchase by interviewing them, checking on their financial standing and so on. Too many companies suffer from high customer churn high customer defection. It is like adding water to a leaking bucket.

The Customer-Development Process

There are two main ways to strengthen customer retention. One is to erect high switching barriers. Customers are less inclined to switch to another supplier when this would involve high capital costs, high search costs or the loss of loyalcustomer discounts. The better approach is to deliver high customer satisfaction. This makes it harder for competitors to offer lower prices or inducements to switch. The best thing a company can do is to make it easy for the customer to complain. Suggestion forms, toll-free numbers, Web sites and e-mail addresses allow for quick, two-way communication. The 3M Company claims that over two-thirds of its product improvement ideas come from listening to customer complaints. Customers who have complained to an organization and had their complaints satisfactorily resolved tell an average of five people about the good treatment they received.

Interesting facts that bear on customer retention.

Acquiring new customers can cost five times more than the costs involved in satisfying and retaining current customers. It requires a great deal of effort to induce satisfied customers to switch away from their current suppliers. The average company loses 10 percent of its customers each year. A 5 percent reduction in the customer defection rate can increase profits by 25 percent to 85 percent, depending on the industry. The customer profit rate tends to increase over the life of the retained customer.

Building Loyalty
How much should a company invest in building loyalty so that the costs do not exceed the gains? We need to distinguish five different levels of investment in customer relationship building.

Basic Marketing Reactive Marketing Accountable Marketing. Proactive Marketing Partnership Marketing.

Levels of Relationship Marketing

Reducing Customer Defection

The company must define and measure its retention rate. The company must distinguish the causes of customer attrition and identify those that can be managed better.

The company needs to estimate how much profit it loses when it loses customers. In the case of an individual customer, the lost profit is equal to the customers lifetime value.
The company needs to figure out how much it would cost to reduce the defection rate. As long as the cost is less than the lost profit, the company should spend the money.

Forming Strong Customer Bonds

Adding Financial Benefits

Frequency programs (FPs) are designed to provide rewards to customers who buy frequently and in substantial amounts. Frequency marketing is an acknowledgment of the fact that 20 percent of a companys customers might account for 80 percent of its business. Frequency programs are seen as a way to build long-term loyalty with these customers, potentially creating cross-selling opportunities in the process. Airlines run tiered loyalty programs in which they offer different levels of rewards to different travelers. They may offer one frequent-flier mile for every mile flown to occasional travelers and two frequent-flier miles for every mile flown to top customers.

Adding Social Benefits

Company personnel work on cementing social bonds with customers by individualizing and personalizing customer relationships. Many companies have created Club Membership Programs. Club membership can be open to everyone who purchased a product or service, or it can be limited to an affinity group or to those willing to pay a small fee. Harley Davidson The world-famous motorcycle company sponsors the Harley owners Group (H.O.G), which now numbers 650, 000 members in over 1200 chapters. The first time buyer of a Harley-Davidson motorcycle gets a free one year membership. H. O. G. benefits include a magazine called Hog Tales, a touring handbook. Emergency road service, a specially designed insurance program, discount hotel rates and a Fly & Ride program enabling members to rent Harleys while on vacation. The company also maintains an extensive Web site devoted to H. O. G., which includes information on club chapters, events and a special members-only section.

Adding Structural Ties Create long-term contracts. Charge a lower price to consumers who buy larger supplies. Turn the product into a long-term service.

Customer Database and Database Marketing

Marketers must know their customers. And in order to know the customer, the company must collect information and store it in a database and do database marketing. A customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, maintenance of customer relationships.

Database marketing is the process of building, maintaining and using customer database and other databases (products, suppliers, resellers) for the purpose of contacting, transacting and building customer relationships.

Using the Database

To identify prospects. To decide which customers should receive a particular offer. To deepen customer loyalty To reactivate customer purchases To avoid serious customer mistakes.

Database marketing is most frequently used by business marketers and service providers (hotels, banks, airlines; and insurance, credit card and telephone companies) that normally and easily collect a lot of customer data. Other types of companies that are in the best position to invest in CRM are companies that do a lot of cross-selling and up-selling (e.g., GE and Amazon) or companies whose customers have highly differentiated needs and are of highly differentiated value to the company. It is used less often by packaged-goods retailers and consumer packaged goods companies.

The Central Role of Strategic Planning

Successful marketing requires companies to have capabilities such as understanding & capturing customer value, creating customer value, delivering customer value, and sustaining customer value. We start the process with Strategic Planning. Strategic planning calls for action in three key areas: The first is managing a companys businesses as an investment portfolio. The second involves assessing each businesss strength by considering the markets growth rate and the companys position and fit in that market. The third is establishing a strategy. For each business, the company must develop a game plan for achieving its long-run objectives.

The Strategic Planning, Implementation & Control Processes

Planning
Corporate Planning Corporate Planning

Implementing
Organizing Organizing

Controlling
Measuring results Measuring results

Division Planning Division Planning

Implementing Implementing Diagnosing results Diagnosing results

Business Unit Business Unit Planning Planning Product Planning Product Planning

Taking Corrective Taking Corrective Action Action

The marketing plan is the central instrument for directing and coordinating the marketing effort. Strategic marketing plan lays out the target markets and the value proposition that will be offered, based on an analysis of the best market opportunities.

Tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels and service.

Corporate and Division Strategic Planning

All corporate headquarters undertake four planning activities:

Defining the corporate mission Establishing strategic business units Assigning resources to each SBU Assessing growth opportunities

Defining the Corporate Mission

Good mission statements have three major characteristics:
They focus on a limited number of goals. Mission statements stress the companys major policies and values. They define the major competitive spheres within which the company will operate. Industry Products and Applications. Competence Market Segment Vertical Geographical

Defining the Business

A business must be viewed as a customer-satisfying process, not a goods-producing process. Levitt encouraged companies to redefine their businesses in terms of needs, not products. It highlights the difference between a target market definition and a strategic market definition.

Product-Oriented Versus Market Oriented Definitions of a Business

Company

Product Definition

Market Definition

Missouri-Pacific Railroad Xerox

We run a railroad.

We are a people-and-goods mover. We help improve office productivity

We make copying equipment.

We sell gasoline. We make movies. We sell encyclopedias. We make air conditioners and furnaces.

Standard Oil
Columbia Pictures Encyclopaedia Britannica Carrier

We supply energy.
We market entertainment. We distribute information. We provide climate control in the home

Large Companies normally manage quite different businesses, each requiring its own strategy. Such different businesses are arranged as strategic business units (SBUs). An SBU has three characteristics: It is a single business or collection of related businesses that can be planned separately from the rest of the company. It has its own set of competitors. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit. The purpose of identifying the companys strategic business units is to develop separate strategies and assign appropriate funding.

Assessing Growth Opportunities

Intensive Growth Strategies Ansoffs Product-Market Expansion Grid

Current Products Current Markets New Markets Market-penetration strategy New Products Product-development strategy

Market-development strategy

(Diversification strategy)

Integrative Growth
Sales and profits of a business can be increased through backward, forward or horizontal integration within its industry.

Diversification Growth
Diversification makes sense when a company finds a highly attractive new industry where it can leverage its strengths. The company could seek new products that have technological or marketing synergies with existing product lines appealing to a new group of customers (concentric diversification). The company can develop new products that are technologically unrelated to its current product line and could appeal to its current customers (horizontal diversification) The company may seek new opportunities which have no relation with its current technology, products or markets (conglomerate diversification).

Business Unit Strategic Planning

The Business Mission

Each business unit needs to define its specific mission within the broader company mission.

SWOT Analysis
The overall evaluation of a companys strengths, weaknesses, opportunities and threats is called SWOT analysis.

It involves monitoring the external and internal marketing environment.

External Environment (Opportunity and Threat) Analysis

A business unit has to monitor key macro-environment forces (demographic-economic, natural, technology competitors, suppliers, distributors, dealers) that affect its ability to earn profits. The business unit should set up a marketing intelligence system to track trends and important developments. For each trend or development, management needs to identify the associated opportunities and threats.

A marketing opportunity is an area of buyer need and interest in which there is a high probability that a company can profitably satisfy that need.
There are three main sources of market opportunities. The first is to supply something that is in short supply. The second is to supply an existing product or service in a new or superior way. The third source often leads to a totally a new product or service.

To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to determine the attractiveness and probability of success:
Can the benefits involved in the opportunity be articulated convincingly to a defined target market (s)? Can the target market (s) be located and reached with costeffective media and trade channels? Does the company possess or have access to the critical capabilities and resources needed to deliver the customer benefits? Can the company deliver the benefits better than any actual or potential competitors? Will the financial rate of return meet or exceed the companys required threshold for investment?

Internal Environment (Strengths/Weaknesses) Analysis

Each business needs to evaluate its internal strengths and weaknesses.

The business should limit itself to those opportunities where it possesses the required strengths or whether it should consider opportunities that means it might have to acquire or develop certain strengths.

Goal Formulation
Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. This stage of the process is called goal formulation. Managers use the term goals to describe objectives that are specific with respect to magnitude and time.

 They must be arranged hierarchically, from the most to the least important.

Objectives should be stated quantitatively whenever possible. Goals should be realistic based on opportunities & strengths.
Objectives must be consistent increasing R & D activities and simultaneously reducing product development costs may not be possible.

Strategy Formulation
Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there.

Every business must design a strategy for achieving its goals, consisting of a marketing strategy; and a compatible technology strategy and sourcing strategy. Porters Generic Strategies: Overall cost leadership Differentiation Focus.
According to Porter, firms pursuing the same strategy directed to the same target market constitute a strategic group. The firm that carries out that strategy best will make the most profits.

Porter defines strategy as the creation of a unique and valuable position involving a different set of activities. A company can claim that it has a strategy when it performs different activities from rivals or performs similar activities in different ways.

Strategic Alliances
Many strategic alliances take the form of marketing alliances. These fall into four major categories. Product or service alliances HUL vs. Pepsi. Promotional alliances P&G (Ariel) vs. Bombay Dyeing Logistics alliances TCI & Mitsui vs. Toyota Kirloskar Pricing collaborations airlines, hotels etc.

Program Formulation and Implementation

Once the business unit has developed its principal strategies, it must work out detailed support programs. A great marketing strategy can be sabotaged by poor implementation.

In Implementing strategy, companies also must not lose sight of their multiple stakeholders and their needs.

Feedback and Control

As it implements its strategy, a firm needs to track the results and monitor new developments. The marketplace will change; and when it does, the company will need to review and revise its implementation programs, strategies, or even objectives.

Nature and Contents of a Marketing Plan

A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives.

It contains tactical guidelines for the marketing programs and financial allocations over the planning period. It is one of the most important outputs of the marketing process.

Contents of the Marketing Plan Executive summary and table of contents. Situation analysis

Marketing strategy.
Financial Projections. Implementation controls.