Marketing 340 Exam 1 Study Guide Chapters 1-3 The Evolution of Marketing Eras of Marketing: Production Era Sales Era Marketing Era Quality Era SPC is the focus Cross-functional thinking Customer satisfaction Profit through cost reduction and quality( leads to customer satisfaction and loyalty Customer Value Era Customer is KING Top management leads the way Ease of business Keep promises to customers Meet set standards INTERNALLY( employees EXTERNALLY( customers Organization evolves to reinforce the emphasis on the customer Dynamic, adaptive corporate culture Marketing Concept A business philosophy To be consumer-oriented To stress long-run profitability To integrate and coordinate marketing with other corporate functions Customer Value A consumer is an end user when you are talking about consumer packaged goods (things you buy in a drug store). Ex: Kroger is the CUSTOMER for Aquafina?the person who buys the water and drinks it is the CONSUMER Use ?customer? as an umbrella?different for P&G Customer Value--ex: Lee jeans?comfort and ease of getting on is the realization Customer Value-basically what the customer gets out of the situation?if you get more than you give up ( CUSTOMER VALUE Customer Value Defined: Realization- what is received by the customer from the transaction Sacrifice- what is given up by the customer to be able to conduct the transaction Customer Value = Realization ? Sacrifice Marketing Problem Problems vs. Symptoms A MACRO problem causes SYMPTOMS Symptoms - runny nose, sneezing, coughing, fever, headache (Problem: Rhinovirus or the common cold) Symptoms ? declining profitability, declining sales, lower ad budget, consumers more dissatisfied with varying quality of our product in-store, sales force not selling as much of product to best retail customers (Problem: Senior management out of touch ? ?Ivory Tower syndrome) Chapter 1- Market Oriented Perspectives Customer-Focused Organization Key task: determine wants, needs, and values of target customers Shape the system to deliver the desired level of satisfaction more efficiently and effectively than competition while achieving organizations goals In order to be Customer-focused the organization needs: Attitude Structure Priority Organizational Barriers to Customer Focus Defining the Customer There could be more than one external customer group or organization seeking different things Within one external customer group, there could be several individuals with different roles Multiple ?internal? customers with conflicting needs Management Attitudes Too much focus on cost View customer knowledge as an expense, not an investment Managers feel they don?t have time, money, and know how Organizational Myths Customers don?t know or can?t tell what they want Customer research is worthless We already know what our customers want Structural/ Communication Barriers No systematic process in place for transferring customer value knowledge within the organization Lack of information systems Politics Traditions ?In the Box? thinking Strategy A fundamental pattern of present and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors Embodies a firm?s objectives and its reasons for being in business. A firm?s view of the future A well formulated Marketing Strategy: Creates economic and psychological value Achieves one or more shareholder value goals Secures a stronger position than comptetiors Components of Strategy: 1. Scope The breadth of the organizations strategic domain The number and types of industries, product lines, and market segments it competes in or plans to enter Defines the essential nature of what its business is and what it should be 2. Goals and Objectives Desired levels of accomplishment on one or more dimensions of performance over specified time periods for each of those businesses and product-markets and for the organization as a whole. 3. Resource Deployments Deciding how financial and human resources are to be obtained and allocated, across businesses, product-markets, functional departments, and activities within each business or product-market 4. Identification of a sustainable competitive advantage A specification of how the organization will compete in each business and product-market within its domain How it positions itself to develop and sustain a differential advantage over current and potential competitors 5. Synergy Synergy exists when the firm?s businesses, product-markets, resource deployments, and competencies complement and reinforce one another The whole becomes greater than the sum of its parts. Strategic Decisions Deal with the long-run future 3 Characteristics: Rare - Strategic decisions are unusual and typically have no precedent to follow. Consequential - Strategic decisions commit substantial resources and demand a great deal of commitment. Directive - Strategic decisions set precedents for lesser decisions and future actions throughout the organization. Three Levels of Strategy (Look @ chart on pg. 11) Corporate Strategy Business-Level Strategy Marketing Strategy Market Opportunity Analysis The 4C?s (pg 23) The COMPANY?S internal resources, capabilities, and strategies The environmental CONTEXT in which the firm will compete The relative strengths and weaknesses of COMPETITORS and trends in the competitive environment The needs, wants, and characteristics of CUSTOMERS Customer Relationship Management A comprehensive approach for creating, maintaining and expanding customer relationships Helps an enterprise to identify and target best customers Facilitates managing marketing campaigns Generates quality leads for the sales team Recognizes that keeping customers over the long-term is the road to profitability The Ultimate Process: Acquire, Satisfy, Retain Elements of CRM Business Strategy Process, Way of Working Enabling technologies The Basics of CRM Identify your customers Differentiate them in terms of both their needs and their value to your company Interact with them in ways that improve cost efficiency, customer satisfaction and loyalty, and the effectiveness of your interaction Customize some aspect of the products or services you offer that customer. Treat the customer differently based on what you have learned from your interaction. ( helps you establish a learning relationship CRM = Market Orientation, Customer Satisfaction, and Profitability Market Orientation Allows the firm to outperform competition Customer Satisfaction and Retention Determine % of customers experiencing levels of dissatisfaction and satisfaction Encourage dissatisfied customers to complain The more alternatives and lower the cost of switching for the consumer, the more important satisfaction will be to retention Profitability Must be Engineered into the Relationship(it is not guaranteed Lifetime Value of the Customer Customers are more valuable than what they spend in any given time period and some customers are much more valuable. Calculations: Multiply a customer?s expected number of visits times the average amount of money spent per visit. Deduct your costs of acquiring and servicing that customer. Add in the value of accounts this customer refers to you, and discount the sum appropriately for the time period you're analyzing. Share of Customer The strategic or potential value of a particular customer over and above that customer?s current estimated lifetime value The opportunity for increasing lifetime value by offering the customer more than you offer now To calculate share of customer, just divide: If the current estimated lifetime value is $1,000 and estimated potential lifetime value is $10,000, your share of customer is 10%. Types of Customers Profitable Not Profitable Core Customers Nonprofit Customers At-Risk Customers Spinners Four Potential Perils of CRM (Look @ examples of each on powerpoint) 1. Implementing CRM before creating a customer strategy. Before even considering CRM technology, create customer acquisition and retention strategies. Segment customers from most to least profitable Decide whether to invest in profitable relationships, manage costs to improve margins, or divest unprofitable customers 2. Installing CRM technology before creating a customer-focused organization. Take time before a CRM rollout to make your organization customer-focused Reconfigure all processes and systems (job descriptions, performance measures, compensation systems) to better meet customer needs ? this can take years 3. Assuming that more CRM technology is better. Some companies fulfill their CRM objectives with low-tech approaches, then phase in higher-tech solutions. 4. Stalking, not wooing, customers. Identify the right customers: those who want a relationship with you Contact them in ways they value Chapter 2 ? Corporate Strategy Decisions and Their Marketing Implications **Know Strategic Planning Model in Slides** Strategic Planning Model Purpose-Why? (we are in business/ why we exist) Values-What we believe in Vision-What we want to become Objectives-What we want to achieve Goals- How we will measure progress toward objectives Strategies How we will achieve competitive advantage How we will build capability to achieve objectives Tactics (Action Plans)- Specific Activites Hierarchy of Strategic Intent Corporate Mission What customer needs are to be satisfied and the functions the firm must perform to satisfy them ?Levitt Should clearly define the organization?s strategic scope Characteristics of Effective Corporate Mission Statements Functional Based on customer needs Physical Based on existing products or technology Broad Specific Most useful type of mission statement: Focuses on the customer need to be satisfied and the functions that must be performed to satisfy that need, and they are specific as to the customer groups and the products or technologies on which to concentrate Corporate Goals (Objectives) To be useful as decision criteria and evaluative benchmarks, corporate goals must be specific and measurable. Four components: A measure or index for evaluating progress. A target or hurdle level to be achieved. A performance dimension or attribute sought. A time frame within which the target is to be accomplished. SMART Used when specifying objectives at all levels Specific Measurable Attainable Relevant Time-bound Common Performance Criteria and Measures that Specify Corporate, Business-Unit, and Marketing Goals (Objectives) Growth Competitive Strength Innovativeness Profitability Utilization of Resources Contribution to: Owners Customers Employees Society Product Market (Corporate Growth) Strategies Market Penetration Same product, same market Market Development Same product, new market Product Development Line Extension Modified product, same and/ or new market New Product Development New product, same market Diversification New product, new market Expansion by diversifying: Vertical integration Forward vertical integration Occurs when a firms moves downstream in terms of product flow Ex: manufacturer integrates by acquiring a wholesale distributor or retail outlet Backward integration When a firm moves upstream by acquiring a supplier Related (Concentric) diversification When a firm internally develops or acquires another business that does not have products/customers in common MIGHT contribute to internal synergy through sharing Unrelated (conglomerate) diversification Involves two businesses that have no commonalities in which the firm must seek new avenues of growth Motivations are primarily financial rather than operational Allocating Corporate Resource (Analytical Tools) Portfolio Models Growth Share Matrix / Cash flows Question Marks High growth rate (cash use) Low relative market shares Stars Market leader in a high-growth industry High growth rate (cash use) High relative market share Cash Cows High market share Low growth rate (cash use) Dogs Low market share Low growth rate Industry Attractiveness- Business Position Matrix Value-based planning A resource allocation tool that attempts to address such questions by assessing the shareholder value a give strategy is likely to create Provides a basis for comparing the economic returns to be gained from investing in different businesses, etc. Economic Value Added (EVA) The amount of return a strategy or operating program generates in excess of the cost of capital Sources of Synergy Synergy exists when two or more businesses or product-markets, and their resources and competencies, complement and reinforce one another?so that the sum is greater than its parts Knowledge-based synergies Corporate Identity and the Corporate Brand Corporate Branding Strategy Shared Resources Tonya Hinch- Guest Speaker The Intersection of Organizational Goals, Strategies, and Tactics?.it?s all about rounding to the nearest zero! **You can?t do anything with a brand (expand, etc.) unless the customer has a problem with the product Successes, Opportunities, and Lessons Learned Folgers Coffee Clairol ? Nice & Easy, ?Steel Magnolias? bust Think about how partners/competitors may take over P&G ? Citrus Hill Orange Juice Product strategy must be consumer focused and consumer desired Bristol Myers Squibb ? Clairol Win-Win-Win Tactics Umbrella marketing strategy must have strong spokes for promotion and retail performance J&J ? Neutrogena Co-existence With acquisition, leverage strengths of acquiree and acquirer Ultrafem ? INSTEAD feminine protection Launch Go into start-up environment with eyes open Edison Schools ? School Operations Know the game Understand, appreciate, and anticipate the competitive landscapers Burt?s Bees ? Acquisition Personalities and Politics always exist Strategies and tactics must fit the emotional side of business goals Family Business ? Don Hinch & Associates, LLC (insurance) Its all about Rounding Meets 2x a year with ?sweet spot? companies Easier to get business from returning (old) customer than a new customer Benchmark good practices and keep doing them Focus on most profitable customers, fire others (1 a year) Chapter 3 ? Business Strategies and Their Marketing Implications Strategic Business Units (SBUs) The components of a firm engaged in multiple industries or businesses Characteristics of SBUs: A homogeneous set of markets to serve with a limited number of related technologies. A unique set of product-market Control over those factors necessary for successful performance. Responsibility for their own pro?tability. Companies break down corporate objectives into sub-objectives for each SBU, then those are broken down further into a set of sub-objectives that occur for each product-market entry within the unit. 3 dimensions that define individual SBUs: Technical compatibility Similarity in customer needs Similarity in personal characteristics of customers Generic Business-Level Competitive Strategies (Porter) Focus strategy An organization concentrates on a specific regional market, product line, or group of buyers. Serving the needs of a specific market segment, then positions itself on either: Differentiation strategy An organization seeks to distinguish itself from competitors through the quality of its products or services. Developing an image perceived as unique. Product that customers perceive as distinct in an important way Overall cost leadership strategy An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms. Provide goods @ lower unit price than competitors Four Strategic Types of Business Units Prospectors Focuses on growth through the development of new products and new markets Ex: 3M?s drug delivery business Well suited to unstable, rapidly changing environments Defenders Concentrate on maintaining their positions while paying less attention to the new product development Ex: 3M?s industrial tape business unit Appropriate when a business has something worth defending Ex: a profitable share of one or more major segments in a relatively mature, stable industry Analyzers Focus is on maintaining a strong position in its core product-markets but also seeks new, closely related product-markets Appropriate for well-developed industries that are still adjusting to be more customer focused and technologically advanced Reactors Businesses with no clearly defined strategy Business Strategy Influences on Marketing Decisions The SBU?s choice of strategy influences: The amount of resources committed to marketing The kind of market and competitive situation entry-level companies are likely to face and; The objectives they are asked to attain ***Remember to read all of the word and PDF Files on Blackboard***
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