Marketing Principles - Lecture notes PDF

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Lecturer was Monica Hope. ...

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Lecture 1: Introduction to Marketing and Consumer Behaviour — 1, 5 Marketing principles — overview Services Marketing

International Marketing

Marketing Strategy 4/7ps STP

Consumer Behaviour

Digital Marketing Technology

• Product

B2B Marketing

• Price

Relationship Marketing

• Place • Promotion Market Research

Marketing Ethics

Key Issues

What is marketing? Definitions “Marketing is the management process responsible for identifying anticipating and satisfying customer requirements profitably” (2001 — The Chartered Institute of Marketing) “Marketing is managing profitable customer relationships. The aim of marketing is to create value for customers and to capture value in return” (Armstrong et al 2015) “Marketing consists of individual and organisational activities that facilitate and expedite satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas” (Dibb, Simkin, et. al) —> “CUSTOMERS” Definition in the book: marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

Companies’ visions “Customers are at the centre of what we do” — Tesco’s vision “Create a better everyday life for the many people” — IKEA’s vision “There is only one boss, the customer and they can fire everybody in the company from the chairman on down, simply by spending their money somewhere else” — Sam Walton founder of Walmart

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A simple model of the marketing process

Understand the marketplace and customer needs and wants

Collate customer data Tesco Clubcard

Market research

Design a customer-driven marketing strategy

Choosing target markets

Segmentation, targeting and positioning

Build profitable relationships and create customer delight

Construct a programme that delivers superior value

The 4P’s

Customer satisfaction

Marketing mix

Relationship marketing

Capture value from customers to create profits and customer equity

Customer retention

Brand loyalty

In the first four steps, companies work to understand consumers, create customer value and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. By creating value for customers, they in turn capture value from consumers in the form of sales, profits, and long-term customer equity.

Introducing the marketing concepts 1. Understanding the marketplace and customer needs Marketing offerings — products, services, and experiences Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. These are not limited to physical products. Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs. Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products. Customer value and satisfaction Consumers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many market offerings? Customers form expectations about the value and satisfaction that various marketing offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers often switch to competitors and disparage the product to others.

Customers • Value and satisfaction

Marketers • Set the right level of expectations

Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they raise expectations too high, buyers will be disappointed. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

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2. Elements of a customer-driven marketing strategy Once it fully understands consumers and the marketplace ,marketing management can design a customer-driven marketing strategy. To design a winning marketing strategy, the marketing manager must answer two important questions: 1. What is our target market? Which customers will I focus on? The company must first decide who it will servce. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). For example, Aldi profitably targets families with modest means. 2. What is our value proposition? Why do customers buy my brand rather than a competitors’? What does it promise? The company must also decide how it will serve targeted customers — how it will differentiate and position itself in the marketplace. A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. Porsche promises driving performance an excitement: “what a dog feels like when its leash breaks”. Such value propositions differentiate one brand from another. They answer the customer’s question mentioned in the first line. Companies must design strong value propositions that give them the greatest advantage in their target markets. Virgin: “To be genuine, fun, contemporary and different in everything we do at a reasonable price”

3. Creating customer value Product benefits

Perceived benefits

Relational benefits

Service benefits

Positive

Image benefits

Monetary costs

Customer value

Negative

Energy costs

Time costs

Perceived sacrifice

Psychological costs

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Attracting and retaining customers can be a difficult task. Customers often face a bewildering array of products and services from which to choose. A customer buys from the firm that offers the highest customer perceived value — the customer’s evaluation of the difference between all the benefits and all of the costs of a market offering relative to those of competing offers. For example, Toyota Prius hybrid car owners gain a number of benefits: • Fuel efficiency and hence reduced running costs • Status and image values — makes owners feel and appear more environmentally responsible When deciding whether to purchase a Prius, customers will weight these and other perceived values of owning the car against the money, effort and psychic costs of acquiring it. Moreover, they will compare the value of owning a Prius to that of owning another hybrid or non-hybrid car. They will select the brand that gives them the greatest perceived value. Delivering superior value To deliver the value proposition a company must first create: • A need satisfying market offering — product • How much it will charge for the product — price • How it will make it available to the customer — place • Tell the customer about the offer — promotion These 4 points are the 4 P’s of marketing, also known as the marketing mix.

4. Building customer relationships The key to building and maintaining profitable customer relationships is by creating and delivering superior customer value and satisfaction. Satisfied customers are more likely to be loyal customers and will give the company a larger share of their business for longer. For example, loyalty cards and apps allows market research to be done so that information can be gained on customers, and then new strategies approached to market to these customers better. To build customer relationships, companies can add structural ties as well as financial and social benefits. A business marketer might supply customers with a special equipment or online linkages that help them manage their orders, payroll or inventory. Engaging customers Today, the internet links individuals and businesses of all types to each other and to information all around the world. It allows anytime, anywhere connections to information, entertainment and communication. Companies are using the internet to build closer relationships with customers and marketing partners. Beyond competing in traditional marketplaces, they now have access to exciting new marketspaces. These days, its hard to find a company that doesn’t use the web in a significant way — or one that doesn't have new opportunities and challenges for marketers. For example, Hertz uses social media as a marketing tool. Its “Share It Up” social media campaign was used to create customer engagement.

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Consumer behaviour Consumer buyer behaviour refers to the buying behaviour of final consumers — individuals and households who buy goods and services for personal consumption. All of these final consumers combine to make up the consumer market. It makes good business sense for companies to want to understand their customers’ needs. It is an input into the marketing strategy — consumer response may often be the ultimate test of whether or not a marketing strategy will succeed. Maslow’s hierarchy of needs

Understanding customers: the key questions

Where do they buy?

Affluent Has more information

More demanding

What are their choice criteria?

Who is important?

Customers

How do they buy?

Many sources for purchases

Wants more choice

Consumer

When do they buy? Easily bored

More knowledgeable

The modern consumer

Complex, emotional reasons behind purchase

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Characteristics influencing consumer behaviour Consumer purchases are influenced strongly by cultural, social, personal and psychological characteristics, as shown below. For the most part, marketers cannot control such factors, but they must take them into account. The process that creates changes in behaviour is called learning. Perception is the way in which something is regarded, understood, or interpreted and it is not part of the consumer proposition acquisition process.

Consumer Cultural • Culture • Sub-culture • Social class

Social • Reference groups • Family • Roles and status

Personal • Age and lifestyle • Occupation • Economic situation • Personality and selfconcept

Psychological • • • •

Motivation Perception Learning Beliefs and attitudes

Cultural factors Cultural factors exert a broad and deep influence on consumer behaviour. The marketer needs to understand the role played by the buyer’s culture, subculture and social class. Culture Culture is the most basic cause of a person’s wants and behaviour. Human behaviour is largely learned. Growing up in a society, a child learns basic values, perceptions, wants and behaviours from the family and other important institutions. Every group or society has a culture, and cultural influences on buying behaviour may vary greatly from country to country. Failure to adjust to these differences can result in ineffective marketing or embarrassing mistakes. Marketers are always trying to spot cultural shifts in order to discover new products that might be wanted. For example, a cultural shift towards greater concern about health and fitness has created a huge industry for health and fitness services, exercise equipment and clothing, more natural foods and a variety of diets. Subculture Each culture contains smaller subcultures, known as groups of people within a culture with shared value systems based on common life experiences and situations. Subcultures include nationalities, religions, racial groups and geographic regions. Many subcultures make up important market segments, and marketers often design products and marketing programmes tailored to their needs. Ethnic minorities are an example of subculture groups. Social class Almost every society has some form of social class structure. Social classes are society’s relatively permanent and ordered divisions whose members share similar values, interests and behaviours. Social class is not determined by a single factor, such as income, but is measured as a

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combination of occupation, income, education, wealth and other variables. Marketers are interested in social class because people within a given social class tend to exhibit similar buying behaviour. Social classes show distinct product and brand preferences in areas such as clothing, home furnishings, leisure activity and cars. Social factors A consumer’s behavior is also influenced by social factors, such as the consumer’s small groups, family, and social roles and status. Reference roups A person’s behaviour is influenced by many small groups. Some of these groups include: • • • • • •

Online social networks Buzz marketing Social media sites Virtual worlds Word of mouth Opinion leaders

Family Family members can strongly influence buyer behaviour. The family is the most important consumer buying organisation in society, and it has been researched extensively. Marketers are interested in the roles and influence the husband, wife and children on the purchase of different products and services. It is important for marketers to pay close attention to changing trends, as for example, the gender roles have changed as more women are now working and as a result buy less than they used to typically. Roles and status A person belongs to many groups — family, clubs, organisations. The person’s position in each group can be defined in terms of both role and status. A role consists of the activities people are expected to perform according to the persons around them. Each role carries a status reflecting the general esteem given to it by society. People usually choose products appropriate to their roles and status. Consider the various roles a working mother plays. In her company, she plays the role of a brand manager; in her family, she plays the role of wife and mother; at her favorite sporting events, she plays the role of avid fan. As a brand manager, she will buy the kind of clothing that reflects her role and status in her company. Personal factors A buyer’s decisions are also influenced by personal characteristics such as the buyer’s age and life-cycle stage, occupation, economic situation, lifestyle and personality and self-concept. Age and life cycle stage People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture and recreation are often age-related. Buying is also shaped by the stage of the family life cycle — the stages through which families might pass as they mature over time. Marketers often define their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage.

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Occupation A person’s occupation affects the goods and services bought. Blue-collar workers tend to buy more rugged work clothes, whereas executives buy more business suits. Marketers try to identify the occupational groups that have an above-average interest in their products and services. A company can even specialize in making products needed by a given occupational group. Economic situation A person’s economic situation will affect product choice. Marketers of income-sensitive goods watch trends in personal income, savings, and interest rates. If economic indicators point to a recession, marketers target consumers who have lots of money and resources, charging prices to match. Lifestyle People coming from the same subculture, social class and occupation may have quite different lifestyles. Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumers’ major AIO dimensions — activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation) and opinions (about themselves, social issues, businesses, products). Lifestyle captures something more than the person’s social class or personality. It profiles a person’s whole pattern of acting and interacting in the world. Personality and self-concept Each person’s distinct personality influences his or her buying behaviour. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Personality is usually described in terms of traits such as self-confidence, dominance, sociability, autonomy, defensiveness, adaptability and aggressiveness. Personality can be useful in analysing consumer behaviour for certain product or brand choices. For example, coffee marketers have discovered that heavy coffee drinkers tend to be high on sociability. Thus, to attract customers, Starbucks and other coffeehouses create environments in which people can relax and socialize over a cup of steaming coffee. Psychological factors A person’s buying choices are further influence by four major psychological factors: motivation, perception, learning and beliefs and attitudes. Motivation A person has many needs at any given time. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. Perception A motivated person is ready to act. How the person acts is influenced by his or her own perception of the situation. All of us learn by the flow of information through our five senses: sight, hearing, smell, touch and taste. However, each of us receives, organizes and interprets this sensory information in an individual way. Perception is the process by which people select, organise, and interpret information to form a meaningful picture of the world.

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Learning When people act, they learn. Learning describes changes in an individual’s behaviour arising from experience. Learning theorists say that most human behaviour is learned. Learning occurs through the interplay of drives, stimuli, cues, responses and reinforcement. Suppose the consumer buys a Samsung digital camera. If the experience is rewarding, the consumer will probably use the camera more anymore, and his or her response will be reinforced. Beliefs and attitudes Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their buying behaviour. A belief is a descriptive thought that a person has about something. Marketers are interested in the beliefs that people formulate about specific products and services, because these beliefs make up product and brand images that affect buying behaviour. People have attitudes regarding religion, politics, clothes, music, food, and slot everything else. Attitude describes a person’s relatively consistent evaluations, feelings, and tendencies towards an object or idea. Attitudes are difficult to change. A person’s attitude fit into a pattern, an dot change one attitude may require difficult adjustments in any others. Thus, a company should usually try to fit its products into existing attitudes rather than attempt to change attitudes.

Types of buying decision behaviour

Complex buying behavior Habitual buying behavior Variety-seeking buying behavior Complex buying behaviour Typically: • Significant differences between brands and high involvement Customers spend more time and effort in information search and evaluation • Complex products • Perceived risk • Personal/emotional significance Examples include cars, computers, clothes.

Habitual behaviour Typically: • Few perceived differences between brands, low involvement ‘Boring’ products • Functional

• No emotional/personal significance • Frequent purchase Examples include toilet rolls, rice, matches.

Variety seeking behaviour Typically: • Low involvement, but significan...