Foundations in Business: Chapter 11
—The long-term benefit most businesses seek from marketing is long-term profitability
—For Example: Jamba Juice blends fruit, frozen yogurt, sherbet, and juice into delicious smoothies, and UGG Australia stretches, treats, and sews sheepskins and wool into comfortable stylish boots.
—For Example: FedEx offers evening and Saturday residential delivery times, many dry cleaners offer one-hour service, 24 hour fitness is virtually always open, and most fast-food restaurants offer 24-hour drive-through windows.
—For Example: ATM’s offer banking services in many large supermarkets, Motel 6 offers budget lodging at the bottom of many freeway off ramps, and vending machines refuel tired students on virtually every college campus.
—Apple, for example, has created a hassle-free purchase process that customers can follow by phone, by computer, and in person. And many car dealerships offer financing options.
“What happens in Vegas, stays in Vegas”
—Examples include the Olympics, the Super Bowl, and NBC’s 2012 benefit telethon concert to benefit the victims of Hurricane Sandy.
—Recycle, don’t drink and drive, buckle your seat belt, support our political party, donate blood, and don’t smoke are all good examples of popular causes.
—Often, idea marketing and event marketing are combined, as we see in the annual Avon Walk for Breast Cancer. The planners actively market the idea of annual mammograms, as they solicit contributions for breast cancer research and participation in the event itself.
To compete for the consumer’s dollar, marketers attempted to provide goods and services that met customer needs better than anything else on the market—> As a result, the *marketing concept* materialized in the 1950’s.
Companies that embrace this philosophy strive to delight customers, integrating this goal into all business activities.
—This marketing concept holds that delivering unmatched value to customers is the only effective way to achieve long-term profitability.
Retaining your current customers—and getting them to spend additional dollars—is clearly cost-effective—> Moreover, satisfied customers can develop into advocates for your business, becoming powerful generators of positive “word-of-mouth”
—The centerpiece of successful, twenty-first century marketing. CRM works best when marketers combine marketing communication with one-on-one personalization.
(Amazon is a champion player at CRM, greeting customers by name, recommending specific products, and providing streamlined checkout)
Clearly, information is an integral part of this process.. —> you can’t simply do CRM without collecting, managing, and applying the right data at the right time for the right person
Colgate-Palmolive, for example, can’t forge a close personal bond with every person who buys a bar of Irish Spring soap. However, the company does invite customers to call its toll-free line with questions or comments, and it maintains a vibrant website with music, an e-newsletter, special offers, and an invitation to contact the company. You can bet that the company actively gathers data and pursues a connection with customers who initiate contact.
Colgate-Palmolive, for instance, has dedicated to customer service teams working with key accounts such as Walmart and Costco. With a full partnership, the marketer gathers and leverages extensive information about each customer and often includes the customer in key aspects of the product development process.
—By this definition, low cost does not always mean high value. In fact, a recent survey suggests that loyal customers are often willing to pay more for their products rather than switch to lower-cost competitors.
(Apple provides a clear example)
Can be tricky—>less savvy marketers frequently fall into one of the two traps:
—The first trap is over promising. Even if you deliver more value than anyone else, your customers will be disappointed if your product falls short of overly high expectations.
—The second trap is under promising. If you don’t set expectations high enough, too few customers will be willing to try your product. Result will be a tiny base of highly satisfied customers, which isn’t enough to sustain a business.
When customers buy a product from the same supplier again and again—sometimes paying even more for it than they would for a competitive product.
-They forgive your mistakes
-They provide valuable feedback
-They may require less service
-They refer their friends
Moreover, studying your loyal customers can give you a competitive edge for acquiring new ones, since people with a similar profile would likely be a great fit for your products.
Can answer the question: Who is your target audience, and how will you reach them?
—The first step in panning your marketing strategy should be to determine where to target your efforts. Who are those people who are most likely to buy your products? The first step is *marketing segmentation*
—Once you’ve identified your target market, your next step is to determine how you can best use marketing tools to reach them.
—And finally, you need to anticipate and respond to changes in the external environment.
This section will define target market, explain market segmentation, introduce the marketing mix, and review the key factors in the marketing environment—>Taken together, these elements will shape an effective marketing strategy.
—The marketer creates the marketing mix but responds to the marketing environment with a single-minded focus on the target market.
A well-chosen target market embodies the following characteristics:
*Size*: There must be enough people in your target group to support a business
*Profitability*: The people must be willing and able to spend more than the cost of producing and marketing your product
*Accessibility*: Your target must be reachable through channels that your business can afford
*Limited Competition*: Look for markets with limited competition; a crowded market is much tougher to crack
Demographics are a vital starting point for most marketers. Chapstick, for instance, targets young women with the Shimmer version of its lip balm, and Chevy Camaro targets young men with money.
Sometimes the demographic makeup of a given market is tough to discern; African American artists, for instance, create the bulk of rap music, yet Caucasian suburban males form the bulk of the rap music market.
—For instance, Ford Expedition does not concentrate on European markets, where tiny, winding streets and nonexistent parking are common in many cities. Cosmetic surgeons tend to market their services more heavily in urban rather than rural areas. And finding the perfect surfboard is easy in Hawaii but more challenging in South Dakota
—Toyota Prius, for instance, targets consumers who care about protecting the environment. A number of companies have found a highly profitable niche providing upscale wilderness experiences for people who seek all the pleasure with none of the pain. Both magazine racks and the Internet are filled with products geared toward pschographic segments, including adventure travel sites, Adventure Center.com, shoe-selling mega site Zappos.com, and business and financial powerhouse WallStreetJournal.com.
NOTE: Marketers typically use psychographics to complement other segmentation approaches rather than to provide the core definition
—The Neutrogena Corporation, for example, built a hair care business by targeting consumers who wanted an occasional break from their favorite shampoo. Countless products such as Miller Lite actively target the low-carbohydrate consumer.
—But perhaps the most common type of behavioral segmentation is based on usage patterns—>Fast-food restaurants, for instance, actively target heavy users (who, ironically, tend to be slender): young men in their 20’s and 30’s. This group consumes about 17% of their total calories from fast food, compared to 12% for adults in general.
Understanding the usage patterns of your customer base gives you the option of either focusing on your core users or trying to pull light users into your core market.
Many industries tend to be highly clustered in certain areas, such as technology in California, and auto suppliers in the “auto corridor” that stretches south from Michigan to Tennessee.
—Geographic segmentation, of course, is especially common on an international basis, where variables such as language, culture, income, and regulatory differences can play crucial roles.
—Johnson & Johnson, for example, has a group of salespeople dedicated exclusively to retail accounts such as Target and Publix, while other salespeople focus solely on motivating doctors to recommend their products.
—Other potential B2B markets include institutions–schools and hospitals, for instance, are key segments for Heinz Ketchup– and the government.
Possibilities include: the ability to support certain software packages or production systems, or the desire to serve certain customer groups, such as long-distance truckers or restaurants that deliver food.
—Designing the best product clearly begins with understanding the needs of your target market—
—Other factors include competition, regulation, and public opinion. Your product category plays a critical role as well—>A low-cost desk, for instance, might be appealing, but who would want discount-priced knee surgery?
—The implications of these decisions for product image and customer satisfaction can be significant—
—Key elements today include advertising, personal selling, sales promotion, public relations, word-of-mouth, and product placement. Successful promotional strategies typically evolve in response to both customer needs and competition. A number of innovative companies are even inviting their customers to participate in creating their advertisement through venues such as YouTube—
The key elements of the external environment include the following components:
—The process of continually collecting information form the external marketing environment—
—To avoid ambushes, and to uncover new opportunities, you must continually monitor how both dominant and emerging competitors handle each element of their marketing mix. And don’t forget indirect competitors, who meet the same consumer needs as you but with a completely different product (Altoids vs. Scope)—
—Your goal as a marketer is to identify and respond to changes as soon as possible, keeping in mind that a sharp eye sees opportunity even in economic downturns. For instance, affordable luxuries and do-it-yourself enterprises can thrive during recessions—
—Anticipating and responding to trends can be especially important industries such as entertainment, fashion, and technology—
However, technology often affects marketers in ways that are less directly visible.
—For example, technology allows mass customization of Levi’s blue jeans at a reasonable price and facilitates just-in-time inventory management for countless companies that see the results in their bottom lines—
—Political climate includes changing levels of governmental support for various business categories. Clearly, the political/legal issues affect heavily regulated sectors (telecommunications and pharmaceuticals) more than others—
Subculture: A smaller division of the broader culture
Social Class: Societal position driven largely by income and occupation
Friends: Another powerful force, especially for high-profile purchases
Reference Groups: Groups that give consumers a point of comparison
Personality: The mix of traits that determines who you are
Attitudes: Lasting evaluations of (or feelings about) objects or ideas
Perceptions: How people select, organize, and interpret information
Learning: Changes in behavior based on experience
2. *Information Search*: horrified, your friend not only checks out your style but also notices what the cool girls on campus are wearing.
3. *Evaluation of Alternatives*: your friend compares the prices and styles of the various brands of blue jeans that she identifies.
4. *Purchase Decision*: after a number of conversations, your friend finally decides to buy True Religion jeans for $215.
5. *Postpurchase Behavior*: three days later, she begins to kick herself for spending so much money on jeans because she can no longer afford her daily Starbucks habit
(chemicals, copy paper, computer servers)
-Typically have purchasing training and apply rational criteria to their decision-making process
-Usually buy according to purchase specifications and objective standards, with a minimum of personal judgement or whim
-Often, business buyers are integrating input from a number of internal sources, based on a relatively formal process
-Finally, business buyers tend to seek (and often secure) highly customized goods, services, and prices
—The goal, of course, is better marketing decisions: more value for consumers and more profits for business that deliver—
2. Monitor and predict customer behavior
3. Evaluate and improve each area of the marketing mix
-Tends to be lower cost
-May not meet your specific needs
-Available to your competitors
Examples: U.S. census, The Wall Street Journal, Time Magazine, your product sales history
-Tends to be more expensive
-Customized to meet your needs
-Fresh, new data
-Proprietary: no one else has it
Examples: your own surveys, focus groups, customer comments, mall interviews
—The key advantage of watching versus asking is that what people actually do often differs from what they say—
-Scanner data from retail sales
-Traffic counters to determine where to place billboards
-Garbage analysis to measure recycling compliance
—The key advantage is that you can secure information about what people are thinking and feeling, beyond what you can observe—
—The key downside is that many people aren’t honest or accurate about their experiences, opinions, and motivations, which can make survey research quite misleading.
-Telephone and online questionnaires
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