Chapter 01 - Creating Customer Relationships and Value Through Marketing

Chapter 01 - Creating Customer Relationships and Value Through Marketing

CHAPTER CONTENTS

PAGE

POWERPOINT RESOURCES TOChapter 01 Creating Customer Relationships and Value through Marketing USE WITH LECTURES 1-2

LEARNING OBJECTIVES (LO)...... 1-3

KEY TERMS...... 1-3

LECTURE NOTES

Chapter Opener: Discovering How College Students Study Helps Launch a New
Product at 3M...... 1-4

What Is Marketing? (LO1)...... 1-5

How Marketing Discovers and Satisfies Consumer Needs (LO2; LO3)...... 1-8

The Marketing Program: How Customer Relationships Are Built (LO4)...... 1-11

How Marketing Became So Important (LO5)...... 1-14

APPLYING MARKETING KNOWLEDGE...... 1-19

BUILDING YOUR MARKETING PLAN...... 1-22

VIDEO AND APPENDIX D CASES

Video Case 1: 3M’s Post-it® Flag Highlighter: Extending the Concept!...... 1-24

Appendix D Case D-1: Nike MaxSight Contact Lenses: Seeing a Need...... 1-28

IN-CLASS ACTIVITIES (ICA): See the ICA CD in the Instructor’s Survival Kit Box

ICA 1-1: Designing a Candy Bar

ICA 1-2: What Makes a Better Mousetrap?

POWERPOINT RESOURCES TO USE WITH LECTURES[1]

PowerPoint

Textbook FiguresSlide[2]

Figure 1-1The see-if-you’re-really-a-marketing-expert test (p. 4)...... 1-7

Figure 1-2A marketing department relates to many people, organizations, and environmental
forces (p. 7)...... 1-11

Figure 1-3Marketing seeks to discover and then satisfy consumer needs through research and
a marketing program (p. 10)...... 1-19

Figure 1-4Marketing programs for two 3M Post-it® brand products targeted at two distinct
customer segments: college students and office workers (p. 14)...... 1-26

Figure 1-5Four different market orientations in the history of American business (p. 16).....1-28

Selected Textbook Images of Ads, Photos, and Products for Lecture Notes

Chapter Opener: Photo of a student studying (p. 2)...... 1-4

Chapter Opener: Photos of 3M Post-it® Notes, Post-it® Flags and plain felt tip highlighters:
How did a student project lead 3M to develop a new product for college students? (p. 4)...... 1-5

Photo of Dr. Care vanilla mint-flavored aerosol toothpaste: What benefits & showstoppers? (p. 8)1-14

Photo of Hot Pockets Snackers microwaveable snack: What benefits & showstoppers? (p. 8)...1-15

Photo of Terrafugia Transition flying car: What benefits & showstoppers? (p. 8)...... 1-16

Photo of Pepsi Max diet cola: What benefits & showstoppers? (p. 8)...... 1-17

Print ads for Southwest Airlines (best price), Starbucks (best product), and Home Depot
(best service): What customer value strategy? (p. 12)...... 1-23

Video Case 1: Photos of 3M’s Post-it® Flag Highlighter inventor David Windorski and
several products in the Post-it® line (pp. 22-23)...... 1-33

Marketing Matters, Making Responsible Decisions, and/or Going Online

Marketing Matters—Entrepreneurship: When Your College Instructor Says You “Didn’t Do
Very Well,” … There’s Still Hope! And Maybe a Fortune! (p. 6)...... 1-8

Quick Response (QR) Codes3

QR 1-1: Terrafugia Transition Video (p. 8)

QR 1-2: Pepsi Max Ad (p. 9)

QR 1-3: 3M Flag Highlighters Ad (p. 14)

QR 1-4: Hermitage Tour Video (p. 18)

QR 1-5: 3M Flag Highlighters Video Case (p. 22)

LEARNING OBJECTIVES (LO)

After reading this chapter students should be able to:

LO1:Define marketing and identify the diverse factors influencing marketing activities.

LO2:Explain how marketing discovers and satisfies consumer needs.

LO3:Distinguish between marketing mix factors and environmental forces.

LO4:Explain how organizations build strong customer relationships and customer value through marketing.

LO5:Describe how today’s customer relationship era differs from prior eras.

KEY TERMS

customer experience p. 16 / marketing mix p. 11
customer relationship management
(CRM) p. 15 / marketing program p. 13
customer value p. 12 / organizational buyers p. 19
customer value proposition p.11 / product p.18
environmental forces p. 11 / relationship marketing p. 12
exchange p. 5 / societal marketing concept p. 17
market p. 10 / target market p. 10
market orientation p. 15 / ultimate consumers p. 19
marketing p. 5 / utility p. 20
marketing concept p. 15

LECTURE NOTES

DISCOVERING HOW COLLEGE STUDENTS STUDY
HELPS LAUNCH A NEW PRODUCT AT 3M

3M’s David Windorski’s marketing problem: Designing a useful product to help students study.

His solution: Offer students a product that uses 3M’s technology and is manufactured and marketed by 3M.

Windorski took several years to move the ideas gleaned from marketing research on students to an actual Post-it® brand product.

A.Discovering Student Study Needs

As a Post-it® brand products inventor, Windorski sought ways to design new products under 3M’s “15% Rule,” which:

a.Allows 3M’s inventors to use 15 percent of their time to conduct unfunded research.

b.Might lead to marketable 3M products.

Windorski worked with a team of four college students, who observed and questioned dozens of students about how they:

a.Used their textbooks.

b.Wrote and used their lecture notes.

c.Did research and wrote papers.

d.Reviewed for exams.

Students often highlighted a passage on a page in their book or notes and then marked the page with a Post-it® Note or Post-it® Flag.

So it was reasonable to put Post-it® products together with a highlighter to have two functions in one product.

B.Satisfying Student Study Needs

Windorski used wood blocks and modeling clay to create a prototype, which showed how the 2-in-1 product would feel.

In the final prototype, Windorski put small Post-it® Flags inside the barrel of the highlighter, creating a 3M product that students could actually use in studying.

I. WHAT IS MARKETING? [LO1]

You’re already a marketing expert because you do many marketing activities every day, such as shopping for products (HDTVs).

However, you may not have much experience developing products to reach different groups of people or segments.

Marketing isn’t always easy to do—thousands of new offerings fail each year.

[ICA 1-1: Designing a Candy Bar]

[Figure 1-1]: The See-If-You’re-Really-A-Marketing-Expert Test

Test your marketing expertise by answering the following questions:

1.True or False: You can now buy a flying car for about $250,000 that takes off or lands at most airports, has a safety parachute, drives on any roadway, gets 35 mpg, and can fill up at most gasoline stations.

Answer: true (pp. 8-9).

2.True or False: The 60-year lifetime value of a loyal Kleenex customer is $994.

Answer: true (p. 12).

3.To be socially responsible, 3M put what recycled material into its ScotchBrite®
Never Rust™ soap pads? (a) aluminum cans, (b) steel-belted tires, (c) plastic bottles, (d) computer screens.

Answer:(c) plastic bottles (p. 17).

A.Marketing and Your Career

Marketing affects all individuals, corporations, industries, and countries.

You will learn and “do” marketing. Learning about marketing:

a.How it affects our lives through its many applications.

b.How it will make you a better consumer and a more informed citizen.

Hopefully, you will find marketing exciting and maybe find a career in the field!

Doing sales and marketing can be satisfying and rewarding.

Small businesses are the source of most new jobs, including marketing careers.

And being an entrepreneur can be exciting and profitable!

However, over half of new businesses fail within the first five years!

MARKETING MATTERS

Entrepreneurship: When Your College Instructor Says You “Didn’t Do Very Well,”…There’s Still Hope! And Maybe a Fortune!

Mark Zuckerberg “didn’t do very well” in an artificial intelligence course in 2004, according to his instructor, Andrew “Boz” Bozworth (now employed by Zuckerberg as director of engineering).

Zuckerberg was busy inventing Facebook.

Thefacebook.com began as a social network site for Harvard students.

a.900 of whom signed up in the first four days after launch.

b.By the second week, there were almost 5,000 members.

c.After the website was rolled out to other colleges, membership jumped to close to 50,000 in two months.

The offices of Facebook are built on an open plan, reflecting the company’s approach to privacy and sharing of information.

The global impact of Facebook is just beginning.

B.Marketing: Delivering Benefits to the Organization, Its Stakeholders, and Society [LO1]

An abridged version of the new AMA definition of marketing:

“Marketing is the activity for creating, communicating, delivering, and exchanging offerings that benefit its customers, the organization, its stakeholders, and society at large.”

a.Marketing is NOT advertising or personal selling!

b.Organizations MUST deliver genuine benefits to customers through offerings!

c.The organization, its customers, its stakeholders, and society all must benefit!

To serve both buyers and sellers, marketing seeks to:

a.Discover the needs and wants of prospective customers.

b.Satisfy these needs and wants.

Prospective customers include:

a.Individuals buying for themselves and their households.

b.Organizations that buy for their own use or for resale.

Exchange:

a.Is the trade of things of value between buyer and seller so that each is better off after the trade.

b.Is the key to discovering and satisfying consumer needs and wants.

C.The Diverse Factors Influencing Marketing Activities

[Figure 1-2] A variety of other people, groups, and forces interact with marketing to shape the nature of its activities. These include:

a.The organization itself, whose mission and objectives determine what business it is in and what goals it seeks.

b.Management, which is responsible for establishing these goals.

c.The marketing department, which works with other departments to develop products and facilitate relationships with customers, shareholders, suppliers, and other organizations.

Environmental forces:

a.Shape an organization’s marketing activities.

b.Include social, economic, technological, competitive, and regulatory forces.

Marketing is affected by and impacts society.

The organization must strike a continual balance among competing interests of:

a.Customers (low price; high quality; value).

b.Suppliers (high price).

c.Employees (high salaries and wages; benefits).

d.Shareholders (dividends).

D.What is Needed for Marketing to Occur

Four factors are required for marketing to occur:

Two or more parties with unsatisfied needs. A consumer who wants something, and a seller who wants to sell something.

A desire and ability to satisfy these needs. Consumer can afford the time and money involved in purchase, and seller has item in stock.

A way for the parties to communicate. The consumer learns about the product and where to get it.

Something to exchange. For a transaction to occur between a buyer and seller, money or something else of value must be exchanged.

LEARNING REVIEW

1.What is marketing?

Answer: Marketing is the activity for creating, communicating, delivering, and exchanging offerings that benefit its customers, the organization, its stakeholders, and society at large.

2.Marketing focuses on ______and ______consumer needs.

Answer: discovering; satisfying

3.What four factors are needed for marketing to occur?

Answer: The four factors are: (1) two or more parties (individuals or organizations) with unsatisfied needs; (2) a desire and ability to have their needs satisfied; (3) a way for the parties to communicate; and (4) something to exchange.

II. HOW MARKETING DISCOVERS AND
SATISFIES CONSUMER NEEDS [LO2]

Discovering and satisfying consumer needs is critical to marketing.

A.Discovering Consumer Needs

Marketing’s first objective: discover the needs of prospective consumers.

Consumers may not always know or be able to describe what they need or want. Effective marketing research can help.

B.The Challenge: Meeting Consumer Needs with New Products

About 94% of the 40,000+ new consumable products (food, beverage, health, beauty, etc.) introduced in the U.S. each year will fail over the long run.

Key principles for new product launches:

a.Focus on the consumer benefit.

b.Learn from the past.

Solution to preventing product failures:

1. Find out what consumers need and want.

1. Produce what they need and want.

1. Don’t produce what they don’t need or want.

What are the potential benefits and “showstoppers” (factors that might doom the offering) for the following products:

a.Dr. Care vanilla-mint-flavored aerosol toothpaste.

Benefits: taste, easy to use, and sanitary.

Showstopper: messy aerosol application.

b.Hot Pockets Snackers (bite-sized microwaveable snacks).

Benefits: convenience, variety, and taste.

Showstopper: ice crystals form on product in grocery freezer.

[QR Code 1-1: Terrafugia Transition Video]

c.Terrafugia Transition [Figure 1-1, question 1].

Benefits: flexibility; ability to land at airports or drive on roadway; parachute; ease and lower expense of fueling.

Showstoppers: price; perceived lack of safety.

[QR Code 1-2: Pepsi Max Ad]

d.Pepsi Max diet cola.

Benefits: reduced carbs; taste.

Showstopper: targeted at males, thus limiting its appeal to and sales from women.

Firms spend billions of dollars on marketing and technical research to reduce new-product failures.

1.Consumer Needs and Consumer Wants.

1. Should marketers try to satisfy consumer needs or consumer wants? Both!

Debates center around definitions of needs and wants,…

And the amount of freedom of choice given to prospective customers to make their own buying decisions.

A need occurs when a person feels physiologically deprived of basic necessities, such as food, clothing, and shelter.

A want is a felt need that is shaped by a person’s knowledge, culture, and personality.

Marketing does not create the need for a product but does shape a person’s wants by creating an awareness of good products at convenient locations.

b.Does marketing persuade consumers to buy the “wrong” products?

Marketing does try to influence what consumers buy.

However, when should the government and society step in to protect consumers?

–There are no clear-cut answers, which is why legal and social issues are central to marketing.

–Psychologists and economists debate the exact meanings of need and want.

c.[Figure 1-3] Marketers carefully study prospective customers to understand what they need and want and the forces that shape these needs and wants.

2.What a Market Is.

a.Potential consumers make up a market, which is people with both the desire and the ability to buy a specific offering.

b.People aware of their unmet needs may have a desire for a product.

c.They must also have the ability to buy, such as the authority, time, and money.

[ICA 1-2: What Makes a Better Mousetrap?]

C.Satisfying Consumer Needs

An organization does not have the resources to satisfy the needs of all consumers.

It focuses on the needs of its target market—one or more specific groups of potential consumers toward which an organization directs its marketing program.

1.The Four Ps: Controllable Marketing Mix Factors. [LO3]

After selecting its target market consumers, the firm must take steps to satisfy their needs.

a.A marketing department must develop a complete marketing program to reach consumers. To do this, it uses “the four Ps”—a shorthand reference for:

Product. A good, service, or idea (offering) to satisfy consumers’ needs.

Price. What is exchanged for the product.

Promotion. A means of communication between the seller and buyer.

Place. A means of getting the product to the consumer.

b.These are the elements of the marketing mix, which are the marketing manager’s controllable factors—product, price, promotion, and place—that can be used to solve a marketing problem.

c.An effective marketing mix conveys to potential buyers a customer value proposition, which is the cluster of benefits that an organization promises customers to satisfy their needs.

2.The Uncontrollable, Environmental Forces.

a.Environmental forces are the uncontrollable forces in a marketing decision involving social, economic, technological, competitive, and regulatory forces.

b.Marketers can affect some of these forces, such as technology or competition, and achieve breakthroughs.

c.These five forces may expand or restrict an organization’s marketing opportunities.

III. THE MARKETING PROGRAM:
HOW CUSTOMER RELATIONSHIPS ARE BUILT [LO4]

A marketing program connects the organization with its customers.

A.Customer Value and Customer Relationships

Intense competition in domestic and global markets has caused massive restructuring of many U.S. industries and businesses.

Firms now focus on providing customer value, which:

a.Is the unique combination of benefits received by targeted buyers.

b.Includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price.

Firms calculate the dollar value of a loyal, satisfied customer. Example:
Kleenex = $994 [Figure 1-1, question 2].

Firms cannot succeed by being all things to all people. Instead, they must build long-term customer relationships to provide unique value that they alone can deliver to targeted markets.

Three strategies used to deliver customer value include:

a.Best price: Southwest Airlines

b.Best product: Starbucks

c.Best service: Home Depot

B.Relationship Marketing and the Marketing Program

Customer relationships are achieved when an organization creates meaningful connections with its customers through specific marketing mix actions implemented in its marketing program.

1.Relationship Marketing: Easy to Understand.

a.Relationship marketing links the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefits.

b.Relationship marketing is more effective when there is a personal, ongoing relationship between the organization and its individual customers that begins before and continues after the sale.

2.Relationship Marketing: Hard to Do.

a.Purchasing that is made easier online can eliminate the need for personal interaction with employees of an organization, thereby reducing the effect of the connection.

b.However, this loss of “tender-loving-care” can impact consumer purchase decisions since the human assistance is reduced or eliminated.

C.The Marketing Program

Product concepts must be converted into a tangible marketing program—a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers.

Consumer needs trigger product concepts that are translated into actual products that stimulate further discovery of consumer needs.

LEARNING REVIEW

4.An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its ______.

Answer: target market

5.What are the four marketing mix elements that make up the organization’s marketing program?