Chapter 1
Marketing is the activity, set of institutions and processes for creating, communicating, and delivering
offerings that have value for customers, clients, partners and society.
Consumer behaviours is the study of consumers’ choices during searching, evaluating, purchasing,
and using products and services that they believe would satisfy their needs.
Sometimes marketing is weird. The presence of healthy food on a menu, will make the customer
order more unhealthy food (because the presence of a healthy option licensed eating unhealthy
food).
The marketing concept means that marketers must satisfy consumer needs effectively by making
only those products that consumers are likely to buy and make product that satisfy consumer needs
ánd meet organizational goals. This is the opposite of the production concept (Henry Ford) which
states that companies must make inexpensive cars, produced uniformly, and at the lowest possible
costs.
The product concept means that companies are trying to offer the most features and ignore buyers
who would rather buy simpler and easier-to-use products. This leads to marketing myopia (focus on
the product rather than on the needs it presumes to satisfy).
As a last concept, there is the selling concept – a premise that companies should sell what they had
already made instead of making only those products that they could sell. Hard selling (which is part
of this concept) does not work efficiently.
There are biological needs (nourishment, water, shelter) and psychological needs (shaped by
upbringing, culture, financial resources, education and social stratum(=lagen)).
Positioning takes place when a company creates a distinct image and identity for its products in
consumers’ minds. The image must differentiate the company’s offering from that of the
competition.
Segmenting, targeting and positioning are implemented across the marketing mix (4 p’s): product,
promotion, place (distribution), price.
The switch from traditional advertising to digital media, will make the marketing more of a two-way-
communication. Nowadays, marketers don’t have to rely on delayed feedback of the customers.
There is interactivity between marketer and consumer. However, marketers need to alter long-
established marketing strategies, since consumers can easily skip ads using advanced time-shifting
and recording devices. Now marketers put promotional messages directly into TV shows.
A click-to-call-add is when you search on Google for a product and you reach out to the
producer/restaurant/hotel. Google earns money when a consumer clicks on that link. Technology
creates a value exchange, because based on detailed data (such as location), targeting is much more
effective. In exchange for the effective shopping, consumers give away their details.
Online shoppers buy less on impulse than in real life, since consumers can check out all the reviews
and lowest prices. Marketers have been offering more and more personalized products (e.g.
customizing your own shoes).
Consumers have, via the internet, way more information about products they buy. Marketers, on the
other hand, are now more observing shoppers rather than relying on responses by post-purchase
surveys. By using cookies, marketers can target individual consumers instead of large segments.
,Cross-screen marketing consists of tracking and targeting users across their computers, mobile
phones and tablets. Then they send them personalized ads based on their interests. Advertising
across media platforms is essential, since a lot of consumers are on their phone, while watching TV.
Simultaneous commercial blanketing is aimed at capturing the attention of consumers who watch
television while surfing the internet, by showing the same advertisements at the same time on both
of the electronical devices.
Customer value is the ratio between customers’ perceived benefits (economic, functional and
psychological) and the resources (monetary, time, effort, psychological) they use to obtain those
benefits.
Customer satisfaction refers to customers’ perceptions of the performance of the product or service
in relation to their expectations.
Customer retention involves turning individual consumer transactions into long-term customer
relationships by making it in the best interests of customers to stay with the company rather than
switch to another firm. It is more expensive to win new customers than to retain existing ones. This is
because:
- Loyal customers buy more products and they are also a ready-made market for new models
of products. Also they represent an opportunity for cross-selling. Additionally long-term
customers often purchase high-margin supplemental products.
- Loyal customers are less price-sensitive and pay less attention to competitors’ advertising.
So, they make it harder for competitors to enter markets.
- Servicing existing customers who are familiar with the firm’s offerings and processes is less
expensive than ‘training’ new customers. The cost of acquisition occurs only at the beginning
of a relationship.
- Loyal customers spread positive word-of-mouth.
- Marketing efforts aimed at attracting new customers are expensive.
- Increased customer retention and loyalty make the employees’ jobs easier and more
satisfying. Happy employees feed back into higher customer satisfaction.
Customer retention is created by marketers through: (1) monitoring customer’s consumption volume
and patterns, (2) creating tiers of customers according to profitability levels, and (3) developing
distinct strategies for each group of customers. The classification of customers can be done by:
- Diamonds: frequent purchasing in highest-margin product.
- Emeralds: normal purchasing in highest-margin product OR frequent purchasing in second-
highest-margin product.
- Sapphires: normal purchasing in second-highest-margin product
- Elite: frequent purchasing in second-lowest-margin product.
- Select: normal/frequent purchasing in lowest-margin product.
Frequent purch. Normal purch. Seldom purch.
Highest margin prod. Diamonds Emeralds Emeralds
Emeralds Sapphires Sapphires
Elite Select Select
lowest margin prod. Select - -
, You should give diamonds and emeralds special treatment, since those are the most profitable
segments.
It is risky to demote (degraderen) customers just because of just not reaching the bar of becoming a
diamond/emerald, since they might have gotten used to the special treatment. Sometimes
companies send those ‘almost-demoted’ customers a message that they should pay a little bit more,
in order to stay a diamond/emerald.
There are three retention measurement methods. (1) customer valuation: value customers and
categorize them according to their financial and strategic worth, so that the company can decide
where to invest for deeper relationships. (2) retention rates: calculate the retention rate by
examining the percentage of customers at the beginning of the year who are still customers by the
end of the year. (3) analysing defections: look for the root causes, not the symptoms. This involves
probing for details when talking to former customers, an analysis of customers’ complaints and
benchmarking against competitors’ defection rates.
Companies can improve these results of those measurements by erecting barriers to customer
switching, bundling products in packages, cross-selling, cross-promotions, providing incentives for
frequent purchases, and impose termination costs (encourage paying later).
There are two types of customer engagement. Emotional bonds (1) represent a customer’s high level
of personal commitment and attachment to the company. Transactional bonds (2) are the mechanics
and structures that facilitate exchanges between consumers and sellers. Social media is a good tool
to create emotional bonds.
There are 11 determinants of customer satisfaction with online websites and merchants:
1. Adaptation: merchants purchase recommendations match customer’s needs. Unique and
valued customer
2. Interactivity: tools that make comparisons easy by giving useful information. Ability to view
merchandise offerings from different perspectives.
3. Nurturing: receiving reminders about making purchases. Cultivates a relationship with the
customer.
4. Commitment: delivers goods on time, responds to problems, customer-friendly policy.
5. Network: customers sharing experiences about their product purchases. Shoppers benefit
from the community of prospects and customers.
6. Assortment: merchant provides one-stop shopping for most online purchases (wide
assortment)
7. Transaction ease: merchant’s website can be navigated intuitively.
8. Engagement: attractive website design. Enjoyable shopping at the website.
9. Loyalty: not considering switching to another merchant.
10. Inertia: unless very dissatisfied, changing to a new merchant would not be worth the bother.
The cost in time, money and effort to change merchants is high.
11. Trust: believes that the merchant is reliable and honest.
Some of these determinant are primarily driven by emotions, others are factors stemming from the
mechanics of the transaction. You can categorize this in four.
