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Summary Principles of Marketing chapters 1-12
Marketing Principles (MKTG1025)
Royal Melbourne Institute of Technology
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Chapter 1 – Marketing: creating & capturing customer value
What is marketing?
Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients and partners, and society itself.
Steps of the Marketing Process
1 the marketplace and customer needs, wants and demands. 2 a customer-driven marketing strategy. 3 an integrated marketing program that delivers superior value. 4 profitable relationships and create customer delight. 5 value from customers to create profits and customer equity.
THE MAIN GOAL IS TO CREATE VALUE FOR CUSTOMERS AND BUILD RELATIONSHIPS!
Understanding the marketplace and customer needs
Needs: a state of felt deprivation
Physical – food, clothing, warmth & safety Social – need for belonging and affection Individual – need for knowledge and self-expression
Wants: the form human needs take, as shaped by our culture and individual personality.
Eg. A hungry person in China may want to indulge in some peking duck whereas, and American may want to eat some KFC.
PEOPLE HAVE ALMOST UNLIMITED WANTS, BUT HAVE LIMITED RESOURCES (TIME + MONEY)
Demands: human wants that are backed by buying power – these revolve around satisfaction.
Market offering: some combination of products, services, information or experiences offered to a market to satisfy a need or want.
Market myopia: the mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products.
Exchange: the act of obtaining a desired object from someone by offering them something in return.
Transaction: a trade between two parties that involves at least two things of value, agreed-upon conditions, and a time and place of engagement. Eg. Buying shoes at the shop (shoes for money), conditions may include the ability to return the item if unsatisfied and the place would be the shoe shop.
Markets: set of actual and potential buyers of a product. Elements of the market include; suppliers, company (marketer), marketing intermediaries, consumers & competitors –
whereby each party in the system adds value for the next level.
Designing a customer - driven marketing strategy
Marketing management: the art and science of choosing target markets and building profitable relationships with them.
> the marketing manager’s aim is to find, attract, keep and grow target customers by creating, delivering and communication superior customer value.
> marketing management is concerned not only with finding and increasing demand but also with changing or even reducing it. e. Uluru may have too many people wanting to climb it.
> de-marketing: marketing in which the task is to temporarily or permanently reduce demand.
> greater emphasis has been placed on retaining existing customers via building lasting customer relationships. The key to this is creating superior customer value and satisfaction.
Demand management ready-reckoner Includes; negative demand, no demand, latent demand, declining demand, irregular demand, full demand, overfull demand and unwholesome demand.
Marketing management orientations
Production concept: the notion that consumers will favour products that are available and highly affordable, and that the organisation should therefore focus on improving production and distribution efficiency. However, this may lead to market myopia.
Product concept: the idea that consumers will favour products that offer the most quality, performance and features, and that the organisation should therefore devote its energy to making continuous product improvements. This may also lead to market myopia.
Selling concept: the idea that consumers will not buy enough of the firm’s products unless it undertakes a large scale selling & promotion effort.
> Usually for unsought goods i.. blood donations & life insurance policies. > not focused on building long lasting customer relationships. Less emphasis on catering to a particular market’s needs or wants. More emphasis on selling what they have rather than what the customer wants/needs.
Marketing concept: the marketing management philosophy which holds that achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.
>the marketing concept starts with a well-defined market, focuses on the customers needs, and integrates all the marketing activities that affect customers. In turn, it yields profits by creating long lasting relationships with the right customers based on customer value and satisfaction.
deals with all aspects of acquiring, keeping and growing demand.
customer-perceived value: 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. eg. is buying a Toyota Prius really that beneficial to saving the environment as well as money?
customer satisfaction: the extent to which a product’s perceived performance matches or exceeds a buyer’s expectations.
smarter companies aim to delight customers not only to retain them but, for the idea that they will ‘preach’ to others, their delight experienced with the company.
however, they do no seek to maximise customer satisfaction as the relationship must be profitable. Therefore, businesses must balance customer satisfaction but maintain profitability. In other words, they need to continue to strive for customer value and satisfaction but not ‘give away the house’ as such.
The changing nature of relationships
In today’s world, more emphasis has been placed on building deeper, more direct and lasting relationships with more carefully selected customers rather than mass marketing. the goal is to target fewer, more profitable customers.
Interactive customer relationships
new communication approaches let markets create deeper consumer involvement and a sense of community surrounding a brand to make the brand a meaningful part of consumer’s conversations and lives.
customer managed relationships: marketing relationships in which customers, empowered by technological advances, interact with companies and others to shape their relationships with brands.
less intrusion by companies, more attraction through creating offerings and messages that involve customers rather than interrupt them.
consumer-generated marketing: brand exchanges created by consumers themselves - both invited and uninvited by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers.
partner relationship management: working closely with partners in other company departments and outside the company to jointly bring value to customers. eg. supply chain management.
Capturing value from customers
customer lifetime value: the value of the entire stream of purchases that the customer would make over a lifetime of patronage to the company.
companies realise that losing a customer is more than losing a single sale, it means losing the entire amount of purchases that they would make over their lifetime at the company.
share of customer: the portion of the customer’s purchasing that a company gets in its product categories.
a good way of achieving this is by; offering a greater variety of products & training staff to upset and cross-sell (eg. offering software and accessories to a customer when they buy a computer or recommending a more expensive model in relation to their needs)
customer equity: the total combined customer lifetime values of all the company’s customers.
different types of customers require different relationship management strategies, their ultimate goal is to build the right relationships with the right customers.
The changing marketing landscape
economic events such as the Global Financial Crisis have huge impacts on consumer spending. Often economic turmoil tarnishes consumer confidence to spend lavishly due to falling wages, falling house prices and unemployment. As such, marketing managers may need to change or alter their approaches to particular specific markets.
not-for-profit marketing: marketing as practiced by a variety of organisations (universities, hospitals, private schools & museums) whose aim is to make surpluses so as to continue their operations, but who do not seek to make profits for share holders.
technology has introduced great opportunity for marketers as they now have more ways of reaching people. Furthermore, technological advances have enabled companies to expand significantly, their market coverage, purchasing and manufacturing monitoring.
despite the economic prosperity that globalisation has brought to many countries. it has also been a major cause of environmental problems such as climate change and global warming. eg. China & smog
So, what is marketing? Putting it all together
a company focuses on creating value and satisfaction for the consumers of their respective markets. they know that they cannot serve all customers in the way (ie. profitable vs. less profitable). Thus, they need to balance their resources and focus on the customers that they can serve best and most profitably. the marketing manager outlines value propositions that spells out what values the company will deliver in order to win the target market. marketers focus on building lasting profitable relationships with customers and make it their goal to satisfy and delight them in order to retain their business and be a part of their conversations. the company reaps the benefits (customer equity) from the relationships and satisfaction that its products or services provide. focus on technological advances, globalisation & partnerships.
Chapter 3 - Analysing the marketing environment
Publics
public: any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its objectives.
financial publics: this group influences the company’s ability to obtain funds. Banks, investment houses, and shareholders are main financial publics.
media publics: this group carries news, features and editorial opinion. It includes newspapers, magazines and radio and television stations.
government publics: management must take government developments into account. Marketers must often consult the company’s legal advisors on issues of product safety, truth in advertising and other matters.
citizen-action publics: a company’s marketing decisions may be questioned by consumer organisations, environmental groups, minority groups and others. Its PR department can help it stay in touch with consumer and citizen groups.
local publics: includes local residents and community organisations. Large companies usually appoint a community relations officer to deal with the community, attend meetings, answer questions and contribute to worthwhile causes.
general public: a company needs to be concerned about the general public’s attitude towards its products and activities. The public’s image of the company affects its buying.
internal publics: this group includes workers, managers, volunteers and the board of directors. Large companies use newsletters, a company website and other means to inform and motivate their internal publics. When employees feel good about their company, this positive attitude spills over to external publics.
Customers
customers are the most important actors in the company’s microenvironment.
consumer markets: consist of individuals and households that buy goods and services for personal consumption.
business markets: buy goods and services for the purpose of further processing or for use in the production process.
reseller markets: buy goods and services for resell at a profit.
government markets: are made upon government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them.
international markets: consists of buyers in other countries including consumers, producers, resellers and governments.
The company’s macro-environment
Demographic Environment
demography: the study of human population in terms of size, density, location, age, gender, race, occupation and other statistics.
changes in the world demographic environment have major implications for businesses. Therefore, marketers need to keep close track of demographic trends and developments in their markets, both at home and abroad. They track changing age and family structures, geographic population shifts, educational characteristics and population diversity.
Changing structure of the environment
Baby Boomers - people born during the period following World War II - 1946 - 1964.
after years of prosperity, free spending and saving little, economic downturn hit this group hard as share prices plunged and there was a sharp decline in house prices, eating into their nest eggs. however, many baby boomers are debt free and happily working with secure savings. Among the wealthiest of Australians and hold nearly half of all Australia’s total household wealth. today’s boomers think young, no matter how old they are. Rather than viewing themselves as phasing out, they see themselves entering new life phases. boomers are wealthy and want to maintain their lifestyles as they move into retirement. In the aftermath of the recession, they will require a lot of money management help. marketers must transform their websites of financial services and make them more baby boomer friendly so that they can access the information that they need.
Generation X - people born between 1965 - 1976, in the ‘birth dearth’ that followed the baby boom.
increasing parental divorce rates and higher employment for their mothers made them the first generation of latchkey kids. they are increasingly displacing the lifestyles, culture and values of the baby boomers. they are the most educated generation to date and they posses heavy annual spending and purchasing power. spending more money each month than any other generation and most of this is online. Makes up a quarter of Australian online sales.
Millennials (Generation Y) - the children of baby boomers born between 1977 - 2000.
most technological advanced group given that they have grown up with it. Technology for them is simply a way of life. Generation Y consists of three main groups - teens (13-18), youth (19-24) and young adults (25-36). given that Generation Y’s purchasing power will soon eclipse that of the baby boomers, this makes them a huge and attractive market.
Generational Marketing
and services as family income rises. with warning, businesses can take advantage of the changes in the economic environment and avoid being wiped out.
Natural Environment
natural environment: natural resources that are needed as inputs but marketers or that are affected by marketing activities.
over the last 30 years, the world has become much more polluted (air and water). Global warming is now endemic and many environmentalists fear that we may be seen buried in our own trash.
trends
growing shortages of raw materials - air is becoming heavily polluted due to rapid industrialization of developing nations. Some countries are experiencing water shortages also. non-renewable resources such as coal, oil and various minerals may indie huge costs increases for firms that use as these materials become more scarce. increased pollution - disposal of wastes and inappropriate recycling and non- biodegradable packaging post serious threats to the environment. increase government intervention - richer and political willed countries are doing more to combat pollution. Poorer nations are neglecting. hope that multinational companies will accept more social responsibility also. instead of opposing regulation, marketers should develop solutions to the material and energy problems faced by the world. concern for the natural environment has spawned the so called go green movement as people have become more conscious about environmental issues. environmental sustainability: developing strategies and practices that create a world economy that the planet can support indefinitely. thus, marketers are pushing more environmentally friendly and sustainable products to market. more companies are opting for biodegradable and recycled packaging.
Technological Environment
technological environment: forces that create new technologies, creating new products and market opportunities.
radio-frequency identification (RFID) transmitters are becoming more common as companies track their products more closely. technological environment is very progressive and is rapidly changing. businesses must approach new technologies positively or face being left behind in today’s world. investment in research and development will be crucial for companies and nations.
Political and Social Environment
political environment: laws, government agencies and pressure groups that influence or limit various organisations and individuals in a given society.
legislation and regulating business
governments develop public policy to guide commerce - sets of laws and regulations that limit business for the good of society as a whole.
increasing legislation
new legislation is always being implemented. marketers must work hard to keep up with the changing nature of laws and regulations.
#1 - Business legislation was enacted to protect companies from each other. laws are passed to define and prevent unfair competition (ACCC).
#2 - Another purpose of legislation is to protect consumers. protect consumers from unfair business practices like - poor product quality, deceptive advertising, invasions of consumer privacy, misleading packaging and labelling.
#3 - A third purpose of government regulation is to protect the interests of society against unrestrained business behaviour. regulation aims to ensure that firms take responsibility for the social costs of their production or products.
changing government agency enforcement
things like the ACL and FSANZ (Food Standards Australia and New Zealand) and Environmental Protection in each Australian state all set the bar high. these organisations impact businesses processes and can have a significant impact on marketing performance, and effective managers will keep up with developments and changes in these authorities. new laws and their enforcement will continue to coiners. Business executives must monitor these developments when planning their products and marketing programs. Marketers need to know about the main laws protecting competition, consumers and society. Must understand these laws at the local, state, national and international levels.
Increase emphasis on ethics and socially responsible actions
as written laws cannot cover all aspects, business is also governed by social codes and rules of professional ethics.
socially responsible behaviour
companies must be sure that they do no infringe upon the privacy of consumers without consulting them.
cause-related marketing
many companies sponsor events for good causes in order to promote positive public image. Often their reasoning is to use business to help make the world a better place.
people’s views of nature
people now are more concerned about the environment and healthy living.
people’s views of the universe
people are ditching church for more permanent values - family, earth, community and faith - and a more certain grasp of right and wrong. consequently, these all influence changes in buying habits.
Responding to the marketing environment
companies must be proactive and take aggressive steps to affect the actions and forces in their marketing environments. Chapter 4 - Managing marketing information to gain customer insights
Marketing information and customer insights
customer insights: fresh understandings of customers and the marketplace derived from marketing information that becomes the basis for creating customer value and relationships.
marketing information system (MIS): people and procedures dedicated to assessing information needs, developing the needed information, and helping decision makers use the needed information to generate and validate actionable customer and market insights.
Assessing marketing information needs
What types of decisions are you regularly called upon to make? What types of information do you need in order to make these decisions? What types of information do you regularly get? What types of special studies do you periodically request? What types of information would you like to get that you are now not getting? What information do you want? Daily? Yearly? Monthly? Weekly? What magazine and trade reports would like to see on a regular basis? What specific topics would you like to be kept informed of? What types of data analysis programs would you like to see made available? What do you think would be the four most helpful improvements that could be made in the present marketing information system?
Furthermore, the value of the information must outweigh the costs of obtaining and storing it.
Developing Marketing Information
internal databases: electronic collections of consumer and market information obtained from data sources within the company network.
competitive marketing intelligence: the systematic collection and analysis of publicly available information about consumers, competitors and developments in the marketing environment.
Marketing Research
marketing research: the systematic design, collection, analysis and reporting of data
relevant to a specific situation facing an organisation.
qualitative research: studies involving a small number of individuals such a focus groups or in-depth one-to-one interviews. The primary tool in qualitative research is the focus group, but this includes modern variations such as online focus groups and teleconferences. One- on-one interviews are used to delve deeply into the topic.
quantitative research: studies involving ‘a lot’ of people. It uses statistical average techniques such as mean ratings, and statistical tools such as sampling error and standard error, to analyse data. There is no stated number of people who must be interviewed to make a study quantitative, but samples of 100 or more are usually considered quantitative.
Marketing Research Process
Defining the problem and research objectives Developing the research plan for collecting information Implementing the research plan - collecting and analysing the data Interpreting and reporting the findings
Defining the problem and research objectives
exploratory research: marketing research used to gather preliminary information that will help to define problems and suggest hypotheses.
descriptive research: marketing research used to better describe marketing problems, situations or markets.
causal research: marketing research used to test hypotheses about cause and effect relationships.
Developing the research plan
The demographic, economic and lifestyle characteristics of current consumers of the product in question. The characteristics and usage patterns of the broader population of consumers. Retailer reactions to the proposed product line Forecast sales of both new and current products.
Gathering Data
secondary data: information that already exists and was collected for another purpose.
primary data: information collected for the specific purpose at hand.
Secondary ~
companies start with secondary data and con buy secondary data reports from external suppliers.
Chapter 5 - Understanding consumer & business buyer behaviour
Consumer markets and consumer buyer behaviour
consumer buyer behaviour - refers to the buying behaviour of final consumers which are individuals and households that buy goods and services for personal consumption.
consumer market - all the individuals and households that buy or acquire goods and services for personal consumption.
Model of buyer behaviour
Characteristics affecting consumer behaviour
Cultural -
culture: set of basic values, perceptions, wants and behaviours learned from family and society.
cultural groups: those that share common cultural values & perceptions. Eg. Asians, Australians & Americans
social class: relatively permanent and ordered divisions in societies whose members share similar values, interests and income. Eg. Toorak vs. Dallas
Social -
groups: two or more people who interact to accomplish individual or mutual goals
family: can strongly influence behaviour in buyers. roles & status: people belong to many groups - sporting clubs, organisations. Roles in society predict how people will act.
Personal -
age and life cycle stage: as people age, their lives change. Maturity brings different tastes in products and services.
Life cycle change with demographics and life changing events - university, children an marriage for example.
occupation: what kind of job people have will govern what they will buy. Eg. white collar workers will buy suits and trades will buy work boots and work clothes.
economic situation: the economic situation of a country will determine whether consumers will spend or save.
lifestyle: a person’s pattern of living as expressed in his or her activities, interests and opinions. Eg. Mercedes does not just sell a car, they sell status.
personality & self concept: traits applied to brands. Apple = innovative, Dove = caring, IKEA = affordability
self concept: idea that people’s possessions contribute to and reflect their personalities. eg. bright clothing = fun person, dark clothing = depressed person.
Psychological -
motivation: motive or drive that is a need and is driving a person to seek satisfaction. eg. a baby boomer buying a Ferrari to show off their success in life.
perception: how we make sense of the world around us.
Marketers using different forms of advertising in order to draw attention to their products.
Laggards (16%)
Eg. first day > few weeks after > few months after > more than 6 months after > just before new model comes out
Influence of product characteristics on rate of adoption (RCCDC)
Relative Advantage: superiority over previous model Compatibility: user ability and compatible with everything Complexity: ease of use Divisibility: price Communicability: how consumers will recommend to others
Business markets and business buyer behaviour
business buyer behaviour: the buying behaviour of the organisations that buy goods and services for use in the production of other products and services or to resell or rent them to others at a profit. Wholesaling & retailing firms.
business markets: resellers and manufacturers
Business markets differ in many ways from consumer markets. The main differences are in market structure and demand, the nature of the buying unit, the size (business = huge, consumer = large), the nature of the buying unit and the types of decisions and buying processes involved.
Market structure and demand
derived demand: business demand that ultimately comes from the demand for consumer goods. eg. high demand for PCs = high demand for the microprocessors that power them.
nature of the buying unit: business purchases involves more people whom are trained to buy better and get the best deals.
Types of decisions and the decision process
supplier development: systematic development of networks of supplier partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others.
Business buyer behaviour
Four questions to be considered -
What buying decisions do business buyers make? Who participates in the buying process? What are the main influences on buyers? How do business buyers make their buying decisions?
Main types of buying situations
straight re-buy: a business buying situation in which the buyer routinely reorders something
without any modifications.
modified re-buy: a business buying situation in which the buyer wants to modify product specifications, prices, terms or suppliers.
new task: a business buying situation in which the business purchases a product or service for the first time.
systems selling (or solutions selling): buying a packaged solution to a problem from a single seller. I. home, car, contents, health insurances from the same provider. Thus, avoiding all the separate decisions involved in a complex buying situation.
buying centre: all the individuals and units that play a role in the business purchase decision-making process.
The business buying process
Problem recognition > general need description > product specification > supplier search > proposal solicitation > order-routine specification > performance review
value analysis: carefully analysing a product’s or service’s components to determine if they can be redesigned and made more effectively and efficiently to provide greater value.
e-procurement: purchasing through electronic connections between buyers and sellers - usually online.
Chapter 6 - Customer-driven marketing strategy - creating value for target customers
market segmentation: the process of analysing a market with the aim of directing marketing focus towards smaller segments of buyers with distinct characteristics or behaviours that might require separate marketing strategies or mixes.
market target (targeting): the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
differentiation: differentiating the market offering to create superior customer value.
positioning: arranging for a market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers.
Market Segmentation
geographical - region, city size, density and climate. demographic - age, sex, family size, family life cycle, income, occupation, education, religion and nationality. psychographic - socioeconomic status, values, attitudes, lifestyle groupings and personality. behavioural - purchase occasion, benefits sought, user status, usage rate, loyalty status, readiness, stage, attitude towards products.
inter-market segmentation: forming segments of consumers who have similar needs and buying behaviour even though they’re located in different countries.
Summary Principles of Marketing chapters 1-12
Course: Marketing Principles (MKTG1025)
University: Royal Melbourne Institute of Technology
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