Principles of marketing chapter 1 theory
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The document discusses key aspects of marketing including defining marketing, outlining the marketing process, and identifying elements of a customer-driven marketing strategy. It also summarizes strategies for creating customer value and capturing value in return through customer relationship management. Major trends changing the marketing landscape are new technologies that allow customized products/services, global competition, greater focus on ethics and societal impact, and expanded use of marketing in non-profit organizations.
Principles of marketing chapter 1 theory
- 1. CHAPTER 1 Marketing: Creating and capturing customer value Question 1:Define marketing and outline the steps in the marketing process? Ans: Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. The marketing process involves five steps. The first four steps create value for customer. First steps, marketers need to understand the market place and customer needs and wants. Second steps, markets designs a customer –driven marketing strategy with the goal of getting, keeping, and growing target customers. Third steps, marketers construct a marketing program that actually delivers superior value. Fourth steps, building profitable customer relationships and creating customer delight. Final steps, the company reaps the rewards of strong customer relationships by capturing value from customers. Question 2: Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide marketing strategy? Ans: To design a winning marketing strategy , the company must first decide who it will serve.It does this by dividing the market into segments of customers (market segmentation)and selecting which segments it will cultivate(target marketing).Next, the company must decide how it will serve targeted customers. Marketing management can adopt one of five competing market orientations. 1.The production concept: The production concept holds that consumers will favor product that are available and highy affordable.Therefore, management should force on improving production and distribution efficiency. 2.The product concept: The product concept holds that managements task is to improve production efficiency and bring down price.The product concept holds that consumers favor products that offer the most in quality, performance, and innovative features. 3.The selling concept: The selling concept holds that consumers will not buy enough of the organizations product unless it under takes a large scale selling and promotion effort.
- 2. 4.The marketing concept: The marketing concept holds that achieving organizational goal depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently then competitors do. 5.The societal concept: The societal concept holds that generating customer satisfaction and long run societal well being are the to both achieving the companys goal and fulfilling its responsibilities. Question 3:Discusses Customer Relationship Management And Identify Strategies For Creating Value For Customers And Capturing Value From Customer In Return. Ans.Customer relationship management (CRM) is the most important concept of modern marketing. Customer relationship management is the process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. The aim of customer relationship management is to produce high customer equity the total combined customer lifetime values of all of the company’s customers. The key to building lasting relationships is the creation of superior customer satisfaction and value. Companies want not only to acquire profitable customers but also to build relationships that will keep them and grow share of customers. Different types of customers require different customer relationship management strategies. The marketers aim is to build the right relationships to the right customers. In return for creating captures value from customers in the form of profits and customer equity. In building customer relationships good marketer realize that they cannot go it alone. They must work closely with marketing partners inside and outside the company. Question 4:Briefly Discuss About Customer Value And Satisfaction. Ans.The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Customer value means the difference between what a customer gets from a product and what he or she has to give in order to get it. The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.
- 3. Customers often do not judge product values and costs accurately or objectively.For example, FedEx customers gain a number of benefits. The most obvious is fast and reliable package delivery.They will select the service that gives them the greatest perceived value. Customer satisfaction is the degree of satisfaction provided by the goods or services of a company as measured by the number of repeat customers. Outstanding marketing companies go out of their way to keep important customers satisfied. Highly satisfied customers make repeat purchases and tell others about their good experience with the product. Question 5: What Do You Mean By Partner Relationship Management? Ans: Working closely with partners in other company departments and outside the company to jointly bring greater value to customers.In addition to being good at customer relationship management ,marketers must also be good at partnership management. Changes are occurring in how marketers partner with others inside and outside the company jointly bring more value to customers. Traditionally ,marketers have been charged with understanding customers and representing customers’ needs to different company departments. The old thinking was that marketing is done only bymarketing ,sales and customers support people. However ,intoday’s more connected world. Every functional area can interact with customers. The new thinking is that every employee must be customer focused. Changes are also occurring in how markerters connect with their suppliers,channel partners and even competitors. Most companies today are networked companies, relying heavily on partnerships with other firms. Supply chain management many companies today are strengthening their connections with partners all along the supply chain. The supply chain describes a longer channel. Success at building customer relationships also rests on how well their entire supply chain performs against competitors supply chain .On the other hand it works with its franchise dealers to provide top grade sales and service support that will bring customer s in the door and keep them coming back.
- 4. Question 6: What is share of customer & customer equity? Briefly discuss about this. Ans: Share of customer: The portion of the customer’s purchasing that a company gets in its product categories is called share of customer. Many marketers are now spending less time figuring out how to increase share of market and more time trying to grow share of customer. To increase share of customer, firms can leverage customer relationships by offering greater variety to current customers. Or they can train employees to cross-sell and up-sell in order to market more products and services to existing customers. For example, Amazon.com is highly skilled at leveraging relationships with its 35 million customers to increase its share of each customer’s purchases. Originally an online bookseller, Amazon now offers customers music, videos, gifts, toys, consumer electronics, office products, home improvement items, lawn and garden products, apparel and accessories, and an online auction. In addition, based on each customer’s purchase history, the company recommends related books, CDs, or videos that might be of interest. In this way, Amazon.com captures a greater share of each customer’s leisure and entertainment budget. Customer equity: The total combined customer lifetime values of all the company’s current and potential customers. The more loyal the firm’s profitable customers, the higher the firm’s equity. Customer equity may be a better measure of a firm’s performance than current sales or market share. Sales and market share reflect the past, customer equity suggests the future. To increase customer lifetime value and customer equity, Cadillac’s highly break through ads target a younger generation of customers. Question 7: Describe the characteristics of different types of customer relationship groups that build the right relationships with the right customers. Ans: The Company can classify customers according to their potential profitability and manage its relationships with them accordingly. Customers can be classified into four relationship groups, according to their profitability and projected loyalty. Each group requires a different relationship management strategy. They are-
- 5. “Strangers” show low profitability and little projected loyalty. There is little fit between the company’s offerings and their needs. The relationship management strategy for these customers is simple: don’t invest anything in them. “Butterflies” are profitable but not loyal. There is a good fit between the company’s offerings and their needs. Like butterflies, we can enjoy them for only a short while and then they are gone. “True friends” are both profitable and loyal. There is a strong fit between their needs and the company’s offerings. The firm wants to make continuous relationship investments to delight these customers and nurture, retain and grow them. It wants to turn true friends into “true believers” who come back regularly and tell others about their good experiences with the company. “Barnacles” are highly loyal but not profitable. There is a limited fit between their needs and the company’s offerings. Barnacles are the most problematic customers. If they cannot be made profitable, they should be fired. Question 8: Describe the major treads and forces that are changing the marketing landscape in this new age of relationships. Ans: As the world spins into the twenty-first century, dramatic changes are occurring in the marketing arena. The boom in computer, telecommunications, information, transportation, and other technologies has created exciting new ways to learn about and track customers, and to create products and services tailored to individual customer needs. In an increasingly smaller world, many marketers are now connected globally with their customers and marketing partners. Today, almost every company, large or small, is touched in some way by global competition. Today’s marketers are also reexamining their ethical and societal responsibilities. Marketers are being called upon to take greater responsibility for the social and environmental impact of their actions. Finally, in the past, marketing has been most widely applied in the for-profit business sector. In recent years, however, marketing also has become a major part of the strategies of many not-for-profit organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches.