Marketing in 21 Century What Is Marketing Is an organizational function and a set of processes for creating, communicating, and delivering value

e to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Meeting needs profitably. Activity set of institutions and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. What is Marketing Management? As the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. What Is Marketed? GOODS Physical goods constitute the bulk of most countries production and marketing efforts. SERVICES include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors, software programmers, and management consultants. EVENTS Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. EXPERIENCES By orchestrating several services and goods, a firm can create, stage, and market experiences. PERSONS Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers. PLACES Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters. PROPERTIES intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds). They are bought and sold, and these exchanges require marketing. Real estate agents work for property owners or sellers, or they buy and sell residential or commercial real estate. Investment companies and banks market securities to both institutional and individual investors. ORGANIZATIONS work to build a strong, favorable, and unique image in the minds of their target publics. INFORMATION The production, packaging, and distribution of information are major industries. IDEAS Every market offering includes a basic idea. Charles Revson of Revlon once observed: In th e factory we make cosmetics; in the drugstore we sell hope. Products and services are platforms for delivering some idea or benefit. Who Markets? MARKETERS AND PROSPECTS A marketer is someone who seeks a responseattention, a purchase, a vote, a donationfrom another party, called the prospect. If two parties are seeking to sell something to each other, we call them both marketers.

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Eight demand 1. Negative demandConsumers dislike the product and may even pay to avoid it. 2. Nonexistent demandConsumers may be unaware of or uninterested in the product. 3. Latent demandConsumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demandConsumers begin to buy the product less frequently or not at all. 5. Irregular demandConsumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demandConsumers are adequately buying all products put into the marketplace. 7. Overfull demandMore consumers would like to buy the product than can be satisfied. 8. Unwholesome demandConsumers may be attracted to products that have undesirable social consequences. 5 Basic Markets

Figure 1.1 Structure of Flows in a Modern Exchange Economy

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KEY CUSTOMER MARKETS Consumer Markets selling mass consumer goods and services Business Markets selling business goods and services often face well-informed professional buyers skilled at evaluating competitive offerings. Global Markets Companies in the global marketplace must decide which countries to enter; how to enter each (as an exporter, licenser, joint venture partner, contract manufacturer, or solo manufacturer); how to adapt product and service features to each country; how to price products in different countries; and how to design communications for different cultures. Nonprofit and Governmental Markets selling to nonprofit organizations marketplace is physical, marketspace is digital, as when you shop on the Internet, metamarket to describe a cluster of complementary products and services closely related in the minds of consumers, but spread across a diverse set of industries.

Core Marketing Concepts Needs are the basic human requirements such as for air, food, water, clothing, and shelter. Humans also have strong needs for recreation, education, and entertainment. Wants are shaped by our society, 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. Target Markets, Positioning, and Segmentation Marketers start by dividing the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioral differences among buyers. After identifying market segments, the marketer decides which present the greatest opportunities which are its target markets. For each, the firm develops a market offering that it positions in the minds of the target buyers as delivering some central benefit(s). Offerings and Brands Value proposition, a set of benefits that satisfy those needs. Intangible value proposition is made physical by an offering, which can be a combination of products, services, information, and experiences. Brand is an offering from a known source. Value and Satisfaction Customer value triad: quality, service, and price (qsp), Value= benefit + cost Value perceptions increase with quality and service but decrease with price. Satisfaction reflects a persons judgment of a products perceived performance in relationship to expectations. Performance falls short of expectations, the customer is disappointed. If it matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted. Marketing Channels Communication channels deliver and receive messages from target buyers Distribution channels to display, sell, or deliver the physical product or service(s) to the buyer or user Service channels that include warehouses, transportation companies, banks, and insurance companies. Supply Chain Longer channel stretching from raw materials to components to finished products carried to final buyers. Competition Includes all the actual and potential rival offerings and substitutes a buyer might consider. Marketing Environment Consists of the task environment and the broad environment. Task environment includes the actors engaged in producing, distributing, and promoting the offering.

Broad environment consists of six components: demographic environment, economic environment, socialcultural environment, natural environment, technological environment, and political- legal environment. The New Marketing Realities Network information technology Globalization. Deregulation Privatization Heightened competition Industry convergence Retail transformation Disintermediation Consumer buying power Consumer information Consumer participation Consumer resistance Marketing planning process consists of analyzing marketing opportunities, selecting target markets, designing marketing strategies, developing marketing programs, and managing the marketing effort. Company Orientation toward the Marketplace Production concept is one of the oldest concepts in business. It holds that consumers prefer products that are widely available and inexpensive. Managers of productionoriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. Product concept proposes that consumers favor products offering the most quality, performance, or innovative features. A new or improved product will not necessarily be successful unless its priced, distributed, advertised, and sold properly. Selling concept holds that consumers and businesses, if left alone, wont buy enough of the organizations products. Marketing concept emerged in the mid-1950s41 as a customer-centered, sense-and-respond philosophy. The job is to find not the right customers for your products, but the right products for your customers. Holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing acknowledges that everything matters in marketingand that a broad, integrated perspective is often necessary.

Holistic Marketing Dimension

Marketing Depatment Senior Management Other Department Products & Services Communications Integrated Marketing Holistic Marketing Channels

Internal Marketing

Socially Responsible Marketing

Ethics

Relationship Marketing Community Customers Channel Partners

Environment

Legal

Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. Four key constituents for relationship marketing are customers, employees, and marketing partners (channels, suppliers, distributors, dealers, agencies), and members of the financial community (shareholders, investors, analysts). The ultimate outcome of relationship marketing is a unique company asset called a marketing network, consisting of the company and its supporting stakeholderscustomers, employees, suppliers, distributors, retailers, and others with whom it has built mutually profitable business relationships. Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that the whole is greater than the sum of its parts. Two key themes are that (1) many different marketing activities can create, communicate, and deliver value and (2) marketers should design and implement any one marketing activity with all other activities in mind. All company communications also must be integrated. Using an integrated communication strategy means choosing communication options that reinforce and complement each other. A marketer might selectively employ television, radio, and print advertising, public relations and events, and PR and Web site communications so each contributes on its own as well as improving the effectiveness of the others. Each must also deliver a consistent brand message at ever contact. Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It ensures that everyone in the organization embraces appropriate marketing principles, especially senior management. Performance marketing requires understanding the financial and nonfinancial returns to business and society from marketing activities and programs. Top marketers are increasingly going beyond sales revenue to examine the marketing scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures. FINANCIAL ACCOUNTABILITY Marketers are increasingly asked to justify their investments in financial and profitability terms, as well as in terms of building the brand and growing the customer base. SOCIAL RESPONSIBILITY MARKETING Because the effects of marketing extend beyond the company and the customer to society as a whole, marketers must consider the ethical, environmental, legal, and social context of their role and activities. Updating the Four Ps People reflect, in part, internal marketing and the fact that employees are critical to marketing success. Marketing will only be as good as the people inside the organization.

Processes reflect all the creativity, discipline, and structure brought to marketing management. Marketers must avoid ad hoc planning and decision making and ensure that stateof-the-art marketing ideas and concepts play an appropriate role in all they do. Programs reflect all the firms consumer-directed activities. It encompasses the old four Ps as well as a range of other marketing activities that might not fit as neatly into the old view of marketing.

Marketing Management Tasks Marketers are fundamentally rethinking their philosophies, concepts, and tools: a. From organizing by product units to organizing by customer segment b. From emphasizing tangible assets to emphasizing intangible assets, ex brand, customer base, relationship marketing c. From focusing on profitable transaction to focusing on customer lifetime value (customer retention) Capturing marketing insights: marketers need marketing information system to monitor task environment and broad environment Communicating value: about the brand they sell Creating long term growth by initiating new product development and global opportunities and challenges

Developing Marketing Strategies & Plans Marketing and Customer Value The task of any business is to deliver customer value at a profit. The Value Delivery Process Three phases 1. Choosing the value represents the homework marketing must do before any product exists. Marketers must segment the market, select the appropriate target, and develop the offerings value positioning. The formula segmentation, targeting, positioning (STP) is the essence of strategic marketing. 2. Providing the value. Marketing must determine specific product features, prices, and distribution. 3. Communicating the value by utilizing the sales force, Internet, advertising, and any other communication tools to announce and promote the product. The value delivery process begins before there is a product and continues through development and after launch. The Value Chain As a tool for identifying ways to create more customer value. Every firm is a synthesis of activities performed to design, produce, and market, deliver, and support its product. Nine strategically relevant activities Primary inbound logistics, or bringing materials into the business operations, or converting materials into final products outbound logistics, or shipping out final products marketing, which includes sales service Support activities procurement technology development human resource management Firm infrastructure (Infrastructure covers the costs of general management, planning, finance, accounting, legal, and government affairs.) Core business processes The market-sensing process. All the activities in gathering and acting upon information about the market The new-offering realization process. All the activities in researching, developing, and launching new high-quality offerings quickly and within budget The customer acquisition process. All the activities in defining target markets and prospecting for new customers The customer relationship management process. All the activities in building deeper understanding, relationships, and offerings to individual customers The fulfillment management process. All the activities in receiving and approving orders, shipping the goods on time, and collecting payment

A core competency is a concept in management theory originally advocated by C. K. Prahalad and Gary Hamel, two business authors. In their view a core competency is a specific factor that a business sees as being central to the way the company or its employees work. Three characteristics It is a source of competitive advantage and makes a significant contribution to perceived customer benefits. It has applications in a wide variety of markets. It is difficult for competitors to imitate. A Holistic Marketing Orientation and Customer Value Integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and coprosperity among key stakeholders. The Central Role of Strategic Planning 3 Key Areas (1) Managing a companys businesses as an investment portfolio. (2) Assessing each businesss strength by considering the markets growth rate and the companys position and fit in that market. (3) Establishing a strategy. Four organizational levels (1) Corporate (2) Division (3) Business unit (4) Product Corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise; it makes decisions on the amount of resources to allocate to each division, as well as on which businesses to start or eliminate. Each division establishes a plan covering the allocation of funds to each business unit within the division Each business unit develops a strategic plan to carry that business unit into a profitable future. Finally, each product level (product line, brand) develops a marketing plan for achieving its objectives. Marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the firms value proposition, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service.

Corporate and Division Strategic Planning Four planning activities 1. Defining the corporate mission- through developing mission statement. 2. Establishing strategic business units- develop separate strategies and assign appropriate funding 3. Assigning resources to each strategic business unit4. Assessing growth opportunities Good mission statements have five major characteristics. 1. They focus on a limited number of goals. The statement We want to produce the highest quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices claims too much. 2. They stress the companys major policies and values. They narrow the range of individual discretion so employees act consistently on important issues. 3. They define the major competitive spheres within which the company will operate. Summarizes some key competitive dimensions for mission statements. 4. They take a long-term view. Management should change the mission only when it ceases to be relevant. 5. They are as short, memorable, and meaningful as possible. Marketing consultant Guy Kawasaki advocates developing three- to four-word corporate mantras rather than mission statements, like Enriching Womens Lives for Mary Kay 3 Characteristics of SBUs 1. It is a single business, or a collection of related businesses, that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3. It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit. Strategic Planning Gap

The first option is to identify opportunities for growth within current businesses (intensive opportunities). The second is to identify opportunities to build or acquire businesses related to current businesses (integrative opportunities). The third is to identify opportunities to add attractive unrelated businesses (diversification opportunities). Organization and Organizational Culture A companys organization consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment. Corporate culture the shared experiences, stories, beliefs, and norms that characterize an organization. The Business Unit Strategic- Planning Process

1. Business Mission Each business unit needs to define its specific mission within the broader company mission. 2. SWOT Analysis The overall evaluation of a companys strengths, weaknesses, opportunities, and threats is called SWOT analysis. Its a way of monitoring the external and interna l marketing environment. 3. Goal Formulation Developing specific goals for the planning period. Goals are objectives that are specific with respect to magnitude and time. Criteria to meet in formulating goal (MBO) 1. they must be arranged hierarchically, from most to least important. The business units key objective for the period may be to increase the rate of return on investment. Managers can increase profit by increasing revenue and reducing expenses. They can grow revenue, in turn, by increasing market share and prices. 2. Objectives should be quantitative whenever possible. The objective to increase the return on investment (ROI) is better stated as the goal to increase ROI to 15 percent within two years. 3. Goals should be realistic. Goals should arise from an analysis of the business units opportunities and strengths, not from wishful thinking. 4. Objectives must be consistent. Its not possible to maximize sales and profits simultaneously. 4. Strategic 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. Firms work to achieve the lowest production and distribution costs so they can under price competitors and win market share. Differentiation. The business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. Focus. The business focuses on one or more narrow market segments, gets to know them intimately, and pursues either cost leadership or differentiation within the target segment. Program Formulation and Implementation If the unit has decided to attain technological leadership, it must strengthen its R&D department, gather technological intelligence, develop leading-edge products, train its technical sales force, and communicate its technological leadership. A dynamic relationship connects the stakeholder groups. A smart company creates a high level of employee satisfaction, which leads to higher effort, which leads to higher-quality products and services, which create higher customer satisfaction, which leads to more repeat business, which leads to higher growth and profits, which leads to high stockholder satisfaction, which leads to more investment, and so on. This virtuous circle spells profits and growth. 7. Feedback and Control A companys strategic fit with the environment will inevitably erode, because the market environment changes faster than the companys seven Ss. Thus, a company might remain efficient yet lose effectiveness. Peter Drucker pointed out that it i s more important to do the right thingto be effectivethan to do things rightto be efficient. Product Planning: The Nature and Contents of a Marketing Plan 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. Sections of Marketing Plan Executive summary and table of contents. The marketing plan should open with a table of contents and brief summary for senior management of the main goals and recommendations. Situation analysis. This section presents relevant background data on sales, costs, the market, competitors, and the various forces in the macroenvironment Marketing strategy. Here the marketing manager defines the mission, marketing and financial objectives, and needs the market offering is intended to satisfy as well as its competitive positioning. Financial projections. Financial projections include a sales forecast, an expense forecast, and a break-even analysis. 5. 6.

Implementation controls. Typically, it spells out the goals and budget for each month or quarter, so management can review each periods results and take corrective action as needed. The Role of Research To develop innovative products, successful strategies, and action programs, marketers need up-to-date information about the environment, the competition, and the selected market segments. Often, analysis of internal data is the starting point for assessing the current marketing situation, supplemented by marketing intelligence and research investigating the overall market, the competition, key issues, threats, and opportunities. As the plan is put into effect, marketers use research to measure progress toward objectives and identify areas for improvement. The Role of Relationships Although the marketing plan shows how the company will establish and maintain profitable customer relationships, it also affects both internal and external relationships. First, it influences how marketing personnel work with each other and with other departments to deliver value and satisfy customers. Second, it affects how the company works with suppliers, distributors, and partners to achieve the plans objectives. Third, it influences the companys dealings with other stakeholders, including government regulators, the media, and the community at large. Marketers must consider all these relationships when developing a marketing plan. From Marketing Plan to Marketing Action Marketers start planning well in advance of the implementation date to allow time for marketing research, analysis, management review, and coordination between departments. As each action program begins, they monitor ongoing results, investigate any deviation from plans, and take corrective steps as needed. Some prepare contingency plans; marketers must be ready to update and adapt marketing plans at any time. The marketing plan should define how progress toward objectives will be measured. Managers typically use budgets, schedules, and marketing metrics for monitoring and evaluating results.

Gathering Information and Scanning the Environment Components of a Modern Marketing Information System Marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
Components of the Marketing-Information Systems

Motivate distributors, retailers, and other intermediaries to pass along important intelligence. Hire external experts to collect intelligence. Network internally and externally. Set up a customer advisory panel. Take advantage of government-related data resources. Purchase information from outside research firms and vendors. Scanning the Environment Sources of Competitive Information Independent customer goods and service review forums Distributor or sales agent feedback sites Combination sites offering customer reviews and expert opinions Customer complaint sites Public blogs Needs and Trends Fadsshort-lived and without social, economic, and political significance. Trendsdirection or sequence of events that has some momentum and durability. Megatrendslarge social, economic, political, and technological changes Environmental Forces 1. The Demographic Environment Demographic developments often move at a fairly predictable pace. The main one marketers monitor is population, including the size and growth rate of population in cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and movements. WORLDWIDE POPULATION GROWTH POPULATION AGE MIX ETHNIC AND OTHER MARKETS EDUCATIONAL GROUPS HOUSEHOLD PATTERNS 2. The Economic Environment The available purchasing power in an economy depends on current income, prices, savings, debt, and credit availability. As the recent economic downturn vividly demonstrated, trends affecting purchasing power can have a strong impact on business, especially for companies whose products are geared to high-income and price-sensitive consumers. CONSUMER PSYCHOLOGY INCOME DISTRIBUTION INCOME, SAVINGS, DEBT, AND CREDIT

Marketing-Information System

MarketingInternal Data

Marketing Intelligence

Marketing Science

Marketing Research

Accounting Records
Sales Costs Inventories Cash flows Accounts receivable and payable

Observation Outside Data Analytical Systems

Sales Force Dealers and distributors Suppliers Executive awareness Census Trade association data Trade press Syndicated awareness Statistical analysis Model building

Quantitative
Survey research Telephone Mail Personal observation Experiment

Qualitative
Projective tests Focus groups

Internal Records To spot important opportunities and potential problems, marketing managers rely on internal reports of orders, sales, prices, costs, inventory levels, receivables, and payables. The Order-to-Payment Cycle The heart of the internal records system is the order-to-payment cycle. Sales representatives, dealers, and customers send orders to the firm. The sales department prepares invoices, transmits copies to various departments, and back-orders out-of-stock items. Sales Information Systems Marketing managers need timely and accurate reports on current sales. Databases, Data Warehousing, and Data Mining Companies organize their information into customer, product, and salesperson databases and then combine their data. The customer database will contain every customers name, address, past transactions, and sometimes even demographics and psychographics (activities, interests, and opinions). Marketing Intelligence Set of procedures and sources that managers use to obtain everyday information about developments in the marketing environment. The internal records system supplies results data, but the marketing intelligence system supplies happenings data. Steps to Improve Marketing Intelligence Train and motivate the sales force to spot and report new developments.

3. The Sociocultural Environment Purchasing power is directed towards certain goods &services. People absorb, unconsciously a worldview that defines relationship to organization, to them, to society, to nature, and to universe. Views of themselves (pleasure seeker, selfrealization, etc.) Views of others (concern about homeless, crime, victims, social surrogatestelevision, home video games, etc.)

Views of organizations (company downsizing and corporate accounting scandals, etc.) Views of society (defend societypreservers; run itmakers; can get fromtakers; change it changers; looking for something deeper seekers; leave it--escapers Views of nature (natures fragility and finiteness) Views of the universe (religious, etc.)

HIGH PERSISTENCE OF CORE CULTURAL VALUES--- Core beliefs and values are passed from parents to children and reinforced by social institutionsschools, churches, businesses, and governments. Secondary beliefs and values are more open to change. Believing in the institution of marriage is a core belief; believing people should marry early is a secondary belief. EXISTENCE OF SUBCULTURES--- Each society contains subcultures, groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances. 4. Natural Environment Corporate environmentalism recognizes the need to integrate environmental issues into the firms strategic plans. Trends in the natural environment for marketers to be aware of include the shortage of raw materials, especially water; the increased cost of energy; increased pollution levels; and the changing role of governments. Keys to Avoiding Green Marketing Myopia Consumer Value Positioning (design environmental products to perform as well as alternatives; products that have health benefits; fixed price for renewable energy products) Calibration of Consumer Knowledge (connect environmental products attributes with desired consumer valuepesticide-free; solar powered); use of internet. Credibility of Product Claims (environmental product and consumer benefit claims) 5. Technological Environment Technology has released such wonders like open heart surgery. It has also released hazards like hydrogen bomb, nuclear bomb etc. Technology Trends Accelerating Pace Of Change More ideas than ever are in the works, and the time between idea and implementation is shrinking. Unlimited Opportunities For Innovation Some of the most exciting work today is taking place in biotechnology, computers, microelectronics, telecommunications, robotics, and designer materials. Varying R&D Budgets Increased Regulation Of Technological Change

6. The Political-Legal Environment The political and legal environment consists of laws, government agencies, and pressure groups that influence various organizations and individuals. Sometimes these laws create new business opportunities. Mandatory recycling laws have boosted the recycling industry and launched dozens of new companies making new products from recycled materials. Two major trends are the increase in business legislation and the growth of special-interest groups. Increase In Business Legislation Business legislation is intended to protect companies from unfair competition, protect consumers from unfair business practices, protect society from unbridled business behavior, and charge businesses with the social costs of their products or production processes. Each new law may also have the unintended effect of sapping initiative and slowing growth. Growth Of Special-Interest Groups The consumerist movement organized citizens and government to strengthen the rights and powers of buyers in relationship to sellers. Consumerists have won the right to know the real cost of a loan, the true cost per standard unit of competing brands (unit pricing), the basic ingredients and true benefits of a product, and the nutritional quality and freshness of food.

Conducting Marketing Research and Forecasting Demand Marketing research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. 3 Marketing Research Firm 1. Syndicated-service research firmsthese firms gather consumer and trade information, which they sell for a fee. Examples include the Nielsen Company, Kantar Group,Westat, and IRI. 2. Custom marketing research firmsthese firms are hired to carry out specific projects. They design the study and report the findings. 3. Specialty-line marketing research firmsthese firms provide specialized research services. The best example is the field-service firm, which sells field interviewing services to other firms. The Marketing Research Process

Research Approaches Marketers collect primary data in five main ways: through observation, focus groups, surveys, behavioral data, and experiments. Observational Research Researchers can gather fresh data by observing the relevant actors and settings unobtrusively as they shop or consume products. Focus Group Research Gathering of 6 to 10 people carefully selected by researchers based on certain demographic, psychographic, or other considerations and brought together to discuss various topics of interest at length Survey Research Companies undertake surveys to assess peoples knowledge, beliefs, preferences, and satisfaction and to measure these magnitudes in the general population. Behavioral Research Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Experimental Research the most scientifically valid research is experimental research, designed to capture cause-andeffect relationships by eliminating competing explanations of the observed findings. Research Instruments marketing researchers have a choice of three main research instruments in collecting primary data: questionnaires, qualitative measures, and technological devices. Questionnaires consist of a set of questions presented to respondents. Because of its flexibility, it is by far the most common instrument used to collect primary data. Closed-ended questions Open-ended questions Qualitative Measures relatively unstructured measurement approaches that permit a range of possible responses. Word association Projective techniques Visualization Brand personification Laddering Technological Devices Galvanometers can measure the interest or emotions aroused by exposure to a specific ad or picture. The tachistoscope flashes an ad to a subject with an exposure interval that may range from less than one hundredth of a second to several seconds. After each exposure, the respondent describes everything he or she recalls. Eye cameras study respondents eye movements to see where their eyes land first, how long they linger on a given item, and so on. Sampling Plan After deciding on the research approach and instruments, the marketing researcher must design a sampling plan. Contact Methods Now the marketing researcher must decide how to contact the subjects: by mail, by telephone, in person, or online. 1. Mail contacts 2. Telephone Contacts

Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives Marketing managers must be careful not to define the problem too broadly or too narrowly for the marketing researcher. Step 2: Develop the Research Plan The second stage of marketing research is where we develop the most efficient plan for gathering the needed information and what that will cost. To design a research plan, we need to make decisions about the data sources, research approaches, research instruments, sampling plan, and contact methods. Data Sources the researcher can gather secondary primary data, or both. Secondary data are data that collected for another purpose and already somewhere. Primary data are data freshly gathered specific purpose or for a specific research project. data, were exist for a

3. 4.

Personal Contacts Online Contacts

Step 3: Collect the Information The data collection phase of marketing research is generally the most expensive and the most prone to error. Marketers may conduct surveys in homes, over the phone, via the Internet, or at a central interviewing location like a shopping mall. Step 4: Analyze the Information The next-to-last step in the process is to extract findings by tabulating the data and developing summary measures. The researchers now compute averages and measures of dispersion for the major variables and apply some advanced statistical techniques and decision models in the hope of discovering additional findings. They may test different hypotheses and theories, applying sensitivity analysis to test assumptions and the strength of the conclusions. Step 5: Present the Findings As the last step, the researcher presents findings relevant to the major marketing decisions facing management. Researchers increasingly are being asked to play a more proactive, consulting role in translating data and information into insights and recommendations. Step 6: Make the Decision Marketing decision support system (MDSS) as a coordinated collection of data, systems, tools, and techniques, with supporting software and hardware, by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action. Forecasting and Demand Measurement The Measures of Market Demand The potential market is the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product. The available market is the set of consumers who have interest, income, and access to a particular offer. The target market is the part of the qualified available market the company decides to pursue. The penetrated market is the set of consumers who are buying the companys product. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Market Forecast Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the market forecast. Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment.

Company demand is the companys estimated share of market demand at alternative levels of company marketing effort in a given time period. Company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Company sales potential is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. Estimating Current Demand Total market potential is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. AREA MARKET POTENTIAL Companies must allocate their marketing budget optimally among their best territories; they need to estimate the market potential of different cities, states, and nations. Market-buildup method calls for identifying all the potential buyers in each market and estimating their potential purchases. Multiple-Factor Index Method Like business marketers, consumer companies also need to estimate area market potentials, but since their customers are too numerous to list they commonly use a straightforward index. INDUSTRY SALES AND MARKET SHARES Besides estimating total potential and area potential, a company needs to know the actual industry sales taking place in its market. This means identifying competitors and estimating their sales. Estimating Future Demand Survey of Buyers Intentions. Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. Composite of Sales Force Opinions. When buyer interviewing is impractical, the company may ask its sales representatives to estimate their future sales. Expert Opinion Companies can also obtain forecasts from experts, including dealers, distributors, suppliers, marketing consultants, and trade associations. Past-Sales Analysis Firms can develop sales forecasts on the basis of past sales. Time series analysis breaks past time series into four components (trend, cycle, seasonal, and erratic) and projects them into the future. Exponential smoothing projects the next periods sales by combining an average of past sales and the most recent sales, giving more weight to the latter. Statistical demand analysis measures the impact of a set of causal factors (such as income, marketing expenditures, and price) on the sales level.

Econometric analysis builds sets of equations that describe a system and statistically derives the different parameters that make up the equations statistically.

Market-Test Method When buyers dont plan their purchases carefully, or experts are unavailable or unreliable, a direct-market test can help forecast newproduct sales or established product sales in a new distribution channel or territory.

Creating Customer Value, Satisfaction, and Loyalty BUILDING CUSTOMER VALUE AND SATISFACTION Customer perceived value (CPV) is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives

performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied; if it exceeds expectations, the customer is highly satisfied or delighted. Measuring Satisfaction Periodic surveys Customer loss rate Mystery shoppers Monitor competitive performance Product and Service Quality Quality (or grade) is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Six Roles of Marketers 1. They bear the major responsibility for correctly identifying customers needs and requirements. 2. They must communicate customer expectations properly to product designers. 3. They must be sure that orders are filled correctly and on time. 4. They must provide customers with proper instructions, training, and technical assistance. 5. They must stay in touch with customers after the sale to ensure ongoing satisfaction. 6. They must gather customer ideas for product and service improvements and convey them to the appropriate departments. MAXIMIZING CUSTOMER LIFETIME VALUE 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 for attracting, selling, and servicing that customer. Customer profitability analysis (CPA) is best conducted with an accounting technique called Activity-Based Costing (ABC). The company estimates all revenue coming from the customer, less all costs (including production, distribution, and all company resources that go into serving that customer). Measuring Customer Lifetime Value. Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customers lifetime purchases. CULTIVATING CUSTOMER RELATIONSHIPS Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty. Customer touch point is any occasion on which a customer encounters the brand and productfrom actual experience to personal or mass communications to casual observation. Framework for CRM Identify your prospects and customers. Dont go after everyone. Build, maintain, and mine a rich customer database with information derived from all the channels and customer touch points.

Total customer value is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the products, services, personnel, and image involved. Steps in a Customer Value Analysis Identify major attributes and benefits that customers value Assess the qualitative importance of different attributes and benefits Assess the companys and competitors performances on the different customer values against rated importance Examine ratings of specific segments Monitor customer values over time

Total customer cost is the perceived bundle of costs that customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychic costs. Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. Value proposition consists of the whole cluster of benefits the company promises to deliver. Total Customer Satisfaction Satisfaction is a persons feelings of pleasure or disappointment that result from comparing a products perceived performance (or outcome) to expectations. If the

Differentiate customers in terms of (1) their needs and (2) their value to your company. Spend proportionately more effort on the most valuable customers. Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships. Facilitate customer/company interaction through the company contact center and Web site.

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, and sale of a product or service, or maintenance of customer relationships. Database marketing is the process of building, maintaining, and using customer databases and other databases (products, suppliers, and resellers) to make contact, facilitate transactions, and build customer relationships. Business database should contain past purchases of business customers; past volumes, prices, and profits; buyer team member names (and their ages, birthdays, hobbies, and favorite foods); status of current contracts; an estimate of the suppliers share of the customers business; competitive suppliers; assessment of competitive strengths and weaknesses in selling and servicing the account; and buying practices, patterns, and policies. Data Warehouses and Datamining The information is collected by the companys contact center and organized into a data warehouse where marketers can capture, query, and analyze it to draw inferences about an individual customers needs and responses. Through datamining, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. Datamining uses sophisticated statistical and mathematical techniques such as cluster analysis, automatic interaction detection, predictive modeling, and neural networking. Uses of Database (1) Identify the best prospects by sorting through responses to marketing efforts; (2) Match a specific offer with a specific customer as a way to sell, cross-sell, and up-sell; (3) Deepen customer loyalty by remembering customer preferences and offering relevant incentives and information; (4) Reactivate customer purchasing through reminders or timely promotions; and (5) Avoid serious mistakes such as sending a customer two offers for the same product but at different prices. The Downside of Database Marketing and CRM Large investment in computer hardware, database software, analytical programs, communication links, and skilled personnel as well as the difficulty in collecting the right data during all company interactions with customers. Difficulty of getting everyone in the company to be customer oriented and use the available information for CRM rather than carrying on traditional transaction marketing. Not all customers want an ongoing relationship with a company and may resent having their personal data collected and stored. Assumptions behind CRM may not always hold true.

Customize products, services, and messages to each customer. Formulate customized offerings
that can be communicated in a personalized way.

CRM Strategies Reduce the rate of defection Increase longevity Enhance share of wallet Terminate low-profit customers Focus more effort on high-profit customers
Attracting and Retaining Customers The starting point is everyone who might conceivably buy the product or service (potentials). From these the company determines good prospects, people or organizations with the motivation, ability and opportunity to buy. The firm uses marketing to convert prospects into first-time customers, then into repeat customers, and then into clients, whom the company treats as special. The next challenge is to turn clients into members by starting a program that offers benefits to customers who join and then into advocates who recommend the company and its offerings to others. The ultimate challenge is to turn advocates into partners. Building Loyalty 1. Interacting with Customers. Listening to customers is crucial to customer relationship management. Some companies have created an ongoing mechanism that keeps senior managers permanently plugged in to front-line customer feedback. 2. Developing Loyalty Programs. Frequency programs (FPs) are designed to provide rewards to customers who buy frequently and in substantial amounts. Club membership programs Either opens to everyone who purchases a product or service or limited to an affinity group (or to those willing to pay a small fee). 3. Personalizing Marketing. Company personnel can create strong bonds with customers by individualizing and personalizing relationships. Creating Institutional Ties. The company may supply special equipment or computer linkages to help customers manage their orders, payroll, inventory, and so on.

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CUSTOMER DATABASES AND DATABASE MARKETING Marketers must know their customers. And in order to know the customer, the firm must collect information and store it in a database for database marketing.