This lesson covers the 5 steps in the Marketing Process – from understanding customer needs to designing customer driven marketing strategies and programs, to building customer relationship’s and capturing value from them. Apart from this it discusses various basic fundamentals of marketing like customer relationship management by identifying strategies for capturing value, the company-wide strategic planning, marketing mix, marketing analysis as well as marketing by numbers.
Marketing is managing profitable customer relationship".
- Today marketing is in the new sense of understanding and satisfying customer needs, by “telling and selling”.
- Broadly defined, marketing is a social and managerial process by which individuals and companies create value for customers and build strong customer relationships in order to capture value from customers in return.
- Hence, we define marketing as the process by which companies create value for customers and building strong customer relationships in order to capture value from customers in return.
The diagram above represents the 5 step process of the marketing framework wherein value is created for customers and marketers capture value from customers in return.
It is important to understand customer needs, wants and demands in order to build want-satisfying market offerings and building value-laden customer relationships. This increases long-term customer equity for the firm.
- Needs – States of felt deprivation
They include physical need for basic necessities like food, clothing, shelter, warmth, safety and individual needs for knowledge and self-expression. These needs cannot be created by the marketers as they are a basic part of human makeup.
- Wants – The forms human needs take as shaped by culture and individual personality.
Wants are shaped by one’s society and are described in terms of objects that will satisfy needs. For example: An Indian in Kolkata needs food but wants a bowl of rice and fish.
- Demands – Human wants that are backed by buying power
Given their wants and resources, people demand products with benefits that add up to the most value and satisfaction.
For example, P&G’s global marketing officer, Jim Stengel notes, “We all go out and really spend time with consumers, just to look at the differences in how they think about brands and what is important in their lives.”
Focus areas for designing a marketing strategy:
• Selecting customers to serve –defining the target market
• Deciding how to serve customers in the best way – choosing a value proposition
Selecting customers to serve:
The company first decides whom it will serve and divides the market into segments of customer. Then it goes after specific sections of the market, or its target market. They target customers based on their level, timing and nature of demand.
Choosing a value proposition:
They decide how it will serve their customer that is how it will differentiate and position itself in the market. A brand’s value proposition is the set of values and benefits that it promises to deliver its customer. Companies need to design strong value propositions to give them greatest advantage in their target markets.
Five alternative concepts for designing a customer driven marketing strategy:
1. Production concept: Consumers will favor products that are available and highly affordable. Management should focus on improving production and distribution efficiency.
2. Product concept: Consumers will favor products that offer most in quality, performance and innovative features. Focus on making continuous product improvements.
3. Selling concept: Consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. It is typically practiced with unsought goods that the company needs to sell and generally results in aggressive selling practices. The company sells what it makes rather than what the market wants.
4. Marketing concept: organisational goals are achieved by knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do.
5. Societal concept: Marketing strategy should deliver value to customers in such a way that improves both customer as wells as society’s well being and long-run interests.
The company’s marketing strategy outlines which customers the company will serve and how it will create value for these customers. Then the marketer develops an integrated marketing plan that will actually the intended value to target customers. It consists of the firms marketing mix (4Ps), the set of marketing tools the firm uses to implement its marketing strategy.
The marketing program builds customer relationships by transforming the marketing strategy into action. For this it needs to blend all of these marketing tools into a comprehensive integrated marketing program that communicates and delivers the expected value to the customers.
Customer relationship management is the overall 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 value and satisfaction.
Companies today not only want to acquire profitable relationships but also to build relationships that will increase their share of customer –the portion of the customers purchasing that a company gets in its product categories.
The ultimate aim of customer relationship management is to produce high Customer equity - total combined lifetime values of all of the company’s current and potential customers. More loyal the company’s profitable customers, higher are the customer equity. Customer equity may even be a better way to measure the company’s performance than market share or current sales.
Marketers cannot create customer value and build customer relationships by themselves. They need to work closely with other company departments and with partners outside the firm. In addition to being good at customer relationship management they also need to be good at partner relationship management.
- Marketing is the process of building profitable customer relationships by creating value for customers and capturing value in return.
- The most important step in the marketing process involves building value-laden relationships with the targeted customers. For this marketers practice customer relationship management as well as good partner relationship management.
- The Four steps in the marketing process create value for customers and in the final step the company reaps the rewards from the customers by delivering superior customer value and creating highly satisfied customers who will then make repeat purchases. This brings brand loyalty and goodwill to the firm.
- Finally today with the changing marketing landscape companies must also take into additional 3 factors. In building customer and partner relationship’s the company must:
- Harness marketing technology
- Take advantage of global opportunities
- And ensure that they act in a ethical and socially responsible way.
Company-wide strategic planning guides marketing strategy and planning. Like marketing strategy, the company’s broad strategy must also be customer focused. Although formal planning offers a variety of benefits to companies, not all companies use it or use it well. Strategic planning helps to set up a strategy for survival and growth in the long run. Strategic planning involves 4 steps.
Marketing mix is the set of controllable tactical marketing tools- product, price, place, promotion- that the firm blends to produce the response it wants in the target market. Consumer value and relationships are the center of marketing strategy and programs. Through market segmentation, differentiation and positioning the company divides the total market into smaller segments, selects the segment which it can serve best and the decides how the company wants to bring value to the target customer. The marketing mix consists of product, price, place and promotion decisions explained below.
- Product: Product means the good and services combination that a company offers to the target market. Product is the most important element of marketing. It is the good or service, which is sold to the customers for which effective marketing is required.
- Price: Price is the amount of money that customers must pay to obtain the product. Pricing is a very sensitive decision and has to be taken with utmost care as it may affect the profits of the firm.
- Place: Place includes company activities that make the product available to target customers. Place includes the various channels of distribution and the intermediaries like dealers and retailers involved in the distribution process.
- Promotion: Promotion means activities that communicate the merits of the product and persuade target customers to buy it. It includes advertisement, online promotions, personal selling, publicity and so on.
Lately to meet the increasing technological advancement and the different needs of the people 3 more P’s have been added.
- People - The individuals involved in the sale and purchase of products or services come under people.
- Process - Process includes the various mechanisms and procedures which help the product to finally reach its target market
- Physical Evidence- With the help of physical evidence, a marketer tries to communicate the USP’s and benefits of a product to the end users.
This involves a complete analysis of the company’s situation. SWOT analysis is conducted where by the marketer evaluates the company’s Strengths, Weakness, Opportunities, and Threats. The goal of this analysis is to match the company’s strengths to the attractive opportunities in the environment as well as overcoming the weakness and minimising threats.
How much is a customer worth to a company if he/she is brand loyal and makes purchases from the same company only?
Many marketers are grappling with this question as it is difficult to determine how much a customer is worth to a company over his or her lifetime. It’s calculation may be complicated however it can be fairly simple net present value calculation. To determine a basic customer lifetime value, each stream of profit is discounted back to it’s present value (PV) and then summed.
Where,t= time of the cash flow
N= Total customer life time
i= discount rateRt= net cash flow (the profit)mat time t( the initial cost of acquiring a customer would be a negative profit at time 0. )
Measuring and managing return on marketing investment :
Measuring ROI has become a major marketing emphasis recently. ROI-Return on investment is the net return from a marketing investment divided by the costs of the marketing investment. It measures profits earned by investments in marketing activities. Today every marketer wants to know the actual return on the investments made . Beyond measuring return on marketing investment in terms of standard performance measure such as sales or market share, many companies are using customer relationship measures such as customer satisfaction, retention and equity. These are more difficult to measure, but capture both current and future performance.