Chapter 1

 The art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value.

2

 Marketing is a very important aspect in business since it contributes greatly to the success of the organization. Production and distribution depend largely on marketing.  Finance, operations, accounting and other business functions will not really matter if there isn’t sufficient demand for products and services so the company can make a profit.



Marketing Concept: The marketing management

concept is that achieving organizational goal depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors do.



Customer Value. The customer’s evaluation of

the difference between all the benefits and all the costs of a market offering relative to those of competing offers.

 Customer Value= All benefits of a product – All costs of a product



Customer Satisfaction: Is a person’s feelings

of pleasure or disappointment resulting from comparing a product’s perceived performance in relation to his or her expectations from the product.



Customer Satisfaction= product’s perceived

performance – customer’s expectations from the product

 High performance business can be possible with the following four factors: 1- Stakeholders: customers, employees, suppliers, distributors.

2- Processes: high performance companies are increasingly focusing on the need to manage core business process such as new product development, customer attraction, retention.

3- Resources: To carry out its business processes, a company needs resources-labour power, materials, machines, information, and energy.

4- Organization: A company’s organization consists of its structure, policies, and corporate culture.

 Marketing involves satisfying customers needs and wants.

 The task of any business is to deliver customer value at a profit while being socially responsible.

 In a competitive environment a company can win and deliver value only by these two important implementations in business;

1- The value delivery process 2- The Value Chain



1.

2.

3.

The value delivery process:

The process through which an organization delivers the value customers are expecting. It consists of the following stages.

Choosing the value. The marketing staff must segment the market, select the appropriate market target, and develop the offering’s value positioning.

Providing the value. Marketing must determine specific product features, prices, and distribution.

Communicating the value. Through sales force, sales promotion, advertising to announce and promote the product.

Choose the value Provide the value Communicate the value

 Michael Porter in 1985 introduced in his book ‘ The Competitive Advantage’ the concept of the “Value Chain”. He suggested that activities within the organization add value to the services and products that the organization produces, and all these activities should be run at optimum level, if the organization want to gain any real competitive advantage.  If these activities run efficiently, the value obtained from them should exceed the costs of running those activities i.e. customers should return to the organization and transact freely and willingly.  Michael Porter suggested in the value chain that the organization is split into ‘primary activities’ and ‘support activities’.

 Supportive activities Firm infrastructure Human Resource Management Technology Development Procurement Inbound logistics seseee Operations Outbound logistics Marketin g & sales service  Primary activities

Primary activities:

Primary activities are compulsory in an organization for running that. These are five as follows;  Inbound logistics : It refers to goods being obtained from the organizations/suppliers as raw materials. These obtained goods are then ready to be used in business for producing the end product.

 Operations : The raw materials and goods obtained are manufactured into the final product. Value is added to the product at this stage as it moves through the production line.  Outbound logistics : Once the products have been manufactured they are ready to be distributed to distribution centers like wholesalers, retailers or customers.

 Marketing and Sales: Marketing and sales department must make sure that the product is targeted towards the correct customer group or target market.  Services: After the product/service has been sold/delivered so what support services does the organization have to offer? This may come in the form of after sales services like guarantees and warranties from the organization side or some other services as an incentives like free trainings and installation etc.

Supportive Activities

The support activities assist the primary activities in helping the organization achieve its competitive advantage. These are four and they include:  Firm Infrastructure: Every organization needs to ensure that their finance, legal structure and management structure works efficiently and helps drive the organization forward.

 Technology development: The use of technology to obtain a competitive advantage within the organization. This is very important in today’s technological driven environment. Technology can be used in production to reduce cost thus add value.

 Human Resource Management: The organization will have to recruit, train and develop the correct people for the organization if they are to succeed in their objectives. Staff will have to be motivated and paid the ‘market rate’ if they are to stay with the organization and add value to it over their duration of employment. Within the service sector e.g. airlines it is the ‘staff’ who may offer the competitive advantage that is needed within the field.

 Procurement: This department must source raw materials for the organization and obtain the best price for doing so. For the price they must obtain the best possible quality.

 Attracting Customers: now a days its very hard to please the customers. They are smarter, more price conscious, more demanding, less forgiving, and they are approached by many more competitors with equal or better offers. Its very challenging to produce delighted and loyal customers.

 Customer Retention: once company’s find its customers, then its very important to retain them, to keep them for a longer period, make them loyal customers.

 Loosing a customer is more than a single customer or transaction, It means loosing the entire stream of purchases that a customer would make over a life time.



Show your customers that they are important to your business so then they will return:

 Offer a special incentive to repeat customers in order to make them feel like they are a value to your business. A rewards program or discount for regular customers can be an excellent way to retain customers.



Know your customers by name and greet them as

often as you can.  Customers like to feel like they are important and something as simple as knowing their name or what specific product they like can make all the difference in how often they choose to return to your business.



Show your employees how important it is to treat the customer with the respect and service that the customer values.

 Your employees are sometimes the only contact, your customer has with your business. Be sure that your employees have the same respect and treatment of your customers as you would yourself.   Offer your employees incentives such as “employee of the month” or “customer’s favourite employee” to gain their interest in treating customers well. Be sure that your employees make an effort to greet the customer by name.

 Settle disputes in a timely manner.  Customer issues do arise from time to time. How you handle this dispute will determine if you lose a customer or retain them.    Listen to what your customer has to say about the issue at hand. Be sure to hear them out before making a conclusion. See if there is some way to appease your customer in order to have them happy to return to your business. Settle disputes amicably and with a positive attitude. Let the customer know you are more than happy to make them satisfied.



Customer Profitability:

 According to Philip Kotler,"a profitable customer is a person, household or a company that overtime, yields a revenue stream that exceeds by an acceptable amount the company's cost stream of attracting, selling and servicing the customer”  All customers are not profitable, there are customers, the cost on them is greater than their revenue. There are only two solutions to handle unprofitable customers  Raise fees  Reduce service support



The company should classify their customer according to the profitability.

 For example: Platinum Customers (most profitable), Gold customers (Profitable), iron customer (low profitability but desirable), and lead customers (unprofitable).

 Company should turn Gold customer to Platinum, Iron to Gold and should drop the lead customer or make them more profitable by raising the pricing or lowering the cost of serving them.



Company Profitability:

 Company should deliver customer value better than competitor.  Companies can deliver superior customer value if they have competitive advantage.

  Any company competitive advantage must be seen as customer advantage.

For example: if a company delivers faster than its competitors, this will not be customer advantage if customer do not value speed.



Total Quality Management (TQM):

 TQM is an organization-wide approach to continuously improving the quality of all the organization’s processes, products and services.

 According to the GE’s former chairman “ Quality is our best assurance of customer allegiance, our strongest defence against foreign competition and the only path to sustain growth and earnings”.