EXAM 1 STUDY GUIDE Chapter 1 Marketing Creating and Capturing Customer Value What is marketing o The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return o The Marketing Process o Marketing is managing profitable customer relationships o Broadly defined marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others o Narrower business context marketing involves building profitable value laden exchange relationships with customers o Satisfying customer needs If the marketer understands consumer needs develops products that provide superior customer value and prices distributes and promotes them effectively these products will sell easily o Marketing mix A set of marketing tools that work together to satisfy customer Define Customer Needs Wants and Demands needs and build customer relationships o Human Needs States of felt deprivation Physical food clothing warmth safety Social belonging and affection Individual knowledge and self expression o Wants Form that needs take as they are shaped by culture and individual personality and a soft drink Ex an American needs food but wants a Big Mac French fries Wants are shaped by one s society and are described in terms of objects that will satisfy those needs Wants backed by buying power Given their wants and resources people demand products with benefits that add up to the most value and satisfaction o Demands What is Marketing Myopia o Is focusing only on existing wants and losing sight of underlying consumer needs o The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products o Buying a product to fulfill their need o Ex blockbuster Customer dissatisfaction satisfaction and delight o o Satisfied customers buy again and tell others about their good o Dissatisfied customers often switch to competitors and disparage the experiences product to others o Delight customers Not only make repeat purchases but also become willing marketing partners and customer evangelists who spread the word about their good experiences to others Better then what they were expecting o Don t over promise under deliver Define customer equity and customer lifetime value o Customer equity The total combined customer lifetime values of all of the company s customers The ultimate aim of customer relationship management is to produce high customer equity It s a measure of the future value of the company s customer base Suggests the future Ex managing customer equity to increase customer lifetime value Cadillac is trying to make the Caddy cool again with edgier high performance designs that target a younger generation of consumers o Customer lifetime value The value of the entire stream of purchases a customer makes over a lifetime of patronage Ex losing a customer means losing more than a single sale If this customer has an unhappy experience and switches to another supermarket Stew Leonard s has lost 50 000 in lifetime revenue The loss can be much greater if the disappointed customer shares the bad experience with other customers and causes them to defect What role does creating and capturing customer value play in marketing o Create customer value by delivering superior customer value and satisfaction You want their perceived value to be greater than their expected value to create delight This creates customer lifetime value and finally customer equity Know and be able to identify the different market orientations o Production concept the idea that consumers will favor products that are available and highly affordable therefore the organization should focus on improving production and distribution efficiency o Product concept the idea that consumers will favor products that offer the most quality performance and features therefore the organization should devote its energy to making continuous product improvements o Selling concept the idea that consumers will not buy enough of the firm s products unless the firm undertakes a large scale selling and promotion effort o Marketing concept a philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do o Societal marketing concept the idea that a company s marketing decisions should consider consumers wants the company s requirements consumers long run interest and society s long run interests What is customer driven marketing o Understanding customer needs even better than customers themselves do and creating products and services that meet both existing and latent needs now and in the future Chapter 2 Company and Marketing Strategy Partnering to Build Customer Relationships What is a firm s mission o Step 1 define the organization s mission A mission may begin with these questions What business are we in What customers should we serve How should we develop the firm s capabilities and focus its efforts o Ex the mission of Southwest Airlines customer service o Ex Ben Jerry s social product economics mission How do an organization s goals relate to its mission o Goals or objective measure how well the organization s mission is being accomplished What is the BCG Matrix How why would you use it o Tool to answer where are we now o SBUs Strategic Business units o BCG Boston Consulting Group Approach o The BCG Growth Share Matrix o Growth share matrix a portfolio planning method that evaluates a company s SBUs in terms of market growth and relative market share Market growth rate provides a measure of market attractiveness Relative market share serves as a measure of company strength in the market Four types of SBUs Stars o High growth high share businesses or products o Often need heavy investments to finance their rapid growth o Eventually their growth will slow down and they will turn into cash cows o Low growth high share businesses or products o These established and successful SBUs need less investment to hold their market share Cash cows o They produce a lot of cash that the company uses to pay its bills and support other SBUs that need investment Question marks o Low share business units in high growth markets o They require a lot of cash to hold their share let alone increase it o Management has to think hard about which question marks
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