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					              Block 2 - Section 5
 Marketing is concerned with ensuring the closest
  possible fit between what the organization does and
  what its customers need and want.
 Marketing is the management process which
  identifies, anticipates and supplies customer
  requirements requirement efficiently and profitable
  (UK Chartered Institute of Marketing)
 Marketing is the process of planning and executing
  the conception, pricing, promotion and distribution
  of ideas, goods and services to create, exchange
  and satisfy individual and organizational objectives
  (American Marketing Association)


                                                     1
                        Reminders

 Customers: people or firms who buys products
 Consumer: use the product or consume it

 Need : is a perceived lack
 Want : is a specific satisfier

 Price is what something cost
 Value is what it is worth
 Value > price  the customer buy the product


                                                 2
                  Marketing environment


The marketing environment can be divided into two areas:
1. The internal environment: concerned with those
    marketing factors that happens within the organization
2. The external environment: concerned with
    everything that happens outside the organization
   1.   Micro environment (Near environment): factors close to the
        organization
   2.   Macro environment (Far environment): factors common to
        society as a whole




                                                                     3
                Type of competitive structure
1.   Perfect competition: A large number of suppliers, no one of
     which is powerful enough to influence the supply level overall.
     Easy entry to the market. Everybody in the market has full
     knowledge of what everybody else is doing
2.   Monopoly: exists when a single firm has a product with no
     close substitutes.
3.   Monopolistic competition: A situation where one major
     supplier has obtained a large share of the market by the use
     of a differentiated marketing approach, but other competitors
     can still enter. Ex. Coca-cola & Pepsi-cola
4.   Oligopoly: Few companies control the market almost entirely.
     Typically this happens when costs of entry to the market are
     high; very often the size of the market is not great enough to
     repay the capital cost of entry of a new firm.

                                                                4
                 Transaction approach
Marketing mix or the 4 P’s of marketing
 Product: it should be what the consumer expected to
    get
 Place: available wherever the firm’s target group of
    customers find it easiest to shop.
 Promotion:         the organization message that fits what
    the particular group of consumers would like to hear.
 Price: product should be seen as representing good
    value for money

Marketing has traditionally focused on the relationship
between the manufacturer or supplier and the customer. It
treated this relationship as a series of transactions, based
on the concept of exchange.

                                                               5
               Transaction approach

Marketing mix or the 7 P’s of marketing
Used in services: The previous four P’s and :
•   People: all services relies on people to perform them.
    Ex.: in a restaurant the waiter role
•   Process : the service depending on what the
    customer would be paying. Example: a restaurant
    upscale with silver service meal vs. fast food
    restaurant.
•   Physical evidence: ex. In a restaurant : décor,
    atmosphere, waiters, dishwashers etc.



                                                         6
         Limitation of transaction approach

• Traditional marketing is concerned with the exchanges
  between organizations and their customers. The
  emphasis has always been on producing products that
  will satisfy customer needs, and the focus has tended to
  be on the single transaction. This has led to an over-
  emphasis on acquiring new customers, at the expense of
  ensuring that the firm keeps its old ones.
• The focus is on volume growth as the key business to
  success. Critics had long argued that these models
  were inappropriate for industrial and service contexts
  where relationships with customers were often ongoing .

                                                         7
       Limitation of transaction approach

• Inadequate when applied to international arena.
• In mature and highly competitive markets the search for
  additional profit through customer acquisition can be self
  defeating. The cost of gaining even an extra percentage
  point in such markets can be prohibitive and it is not so
  much the absolute market share that counts but rather
  the quality of that share.
• What type of customers do the organization serve?
   – Persuaded to buy through heavy promotional activity, large
     discounts
   – Expensive to serve retain.


                                                                  8
            Transaction approach

The four C model:
1. Customer needs and wants
2. Cost
3. Convenience
4. Communication




                                   9
                Transaction approach

Why transaction approach may not be adequate?
1. It is driven by the interests of the producer or supplier
2. It assumes the customer is passive, somebody to
   whom something is done
3. It is not driven by customer interests
4. It does not allow for interactions between customer
   and supplier
5. It implies that the power is with the supplier- that it is a
   sellers market.



                                                              10
                Relationship marketing
• Relationship marketing is an approach in which suppliers
  view their relationship with customers/users as long-
  term, involving multiple interactions over a considerable
  period of time.
• Establish, maintain and enhance the relationship so that
  the objectives of both parties are met.
• Its objective is to move customers up the ‘loyalty ladder’,
  from prospects, customer, client, supporter & advocate.
• All staff are responsible for ensuring customer
  satisfaction. This appreciation that all staff have
  marketing aspects to their job.
• Example 5.3 & 5.4


                                                           11
                 Relationship marketing

• Marketing becomes more a philosophy and attitude of
  mind than a function or department
• It involves all part of the organization. The telephone
  receptionist, the delivery driver, the installation or repair
  engineer are as important in establishing and
  maintaining the relationship with the customer as the
  marketing department
• Non marketing staff will be involved in interaction with
  customers. These staff should regard themselves as
  part time marketers.
• A successful relationship between supplier & customer
  may reduce costs for both parties.

                                                                  12
                   Relationship marketing

• There is high element of trust in successful relationships,
  leading to a willingness to rely on the partner’s intent.
• Establishing a relationship can be divided into two parts:
   – Attracting the customer thru promises
   – Building the relationship thru promises that are fulfilled.

                       Definitions
Mass customization is the ability to adapt a product or
service to customer needs while retaining scale economies

Direct marketing is when suppliers or manufacturers
communicate or sell directly to the consumer. It is based
on mail, and emails.
                                                                   13
             Why relationship marketing?

The needs to place greater emphasis on relationships
within these markets has been driven by changes in the
external environment since the 1980’s:
1. The emergence of a surplus of goods and services.
     The economic power has shifted from the producer to
     the consumer (buyer’s market)
2. The growing dominance of services over goods.
     Product service package has grown to the extent that it
     is often the determining factor in buyer decisions
3. The importance of quality
4. Consumer protection legislation increasingly places
     responsibility for quality and safety.
                                                          14
             Why relationship marketing?

5.   Internationalization of trade. The reduction of trade
     barriers has increased competition & removed the
     protection previously enjoyed by manufacturers and
     service providers.
6.   The expansion of information systems. Utilization of
     customer databases to understand and communicate
     with customers.
7.   Japanese companies in the 70’s & 80’s emphasized
     on quality and long term relationships with both
     customers and suppliers, established new standards
     for western organizations.

                                                             15
                  Relationship marketing

Suppliers & manufacturer in poorer countries need to look
beyond the transaction in their relationships with suppliers,
customers & employees?
There is no simple answer for this question.

Public services, enjoy a monopoly position and therefore
are not subject to the discipline of competition. Public services
need to balance the interests of different stakeholders (service
users, taxpayers, politicians) and are rarely in a position to
focus primarily on the interests of service users.

                                                                16
             The benefits of relationships

Relationship marketing will only be successful if it brings
benefits to both the supplier and the customer. It is easy to
see how the development of a relationship approach based
on improved quality and high levels of customer service is
beneficial to the consumer, but how does it help suppliers?
1. Customers are more likely to take their business to
    organizations that offer these high level of service.
2. Consumers have shown that they like to reduce the
    choices available to them by engaging in a continuing
    loyalty relationship with suppliers. They can save time
    & money that is incurred in shopping around.
                                                           17
             The benefits of relationships

3.   The customer loyalty is at its strongest in the
     commitment that is shown to brands.
4.   Switching the emphasis from gaining new customers
     to customer retention. Studies have shown that the
     cost of generating new customers is several times
     higher than that of retaining existing customers.
5.   Reducing expenditure on advertising and promotion
6.   Data processing allows appropriate information to be
     gathered, and even in large-scale markets information
     technology is increasingly enabling mass
     customization to be achieved

                                                         18
                     Relationship & loyalty
   Loyalty will be achieved by consistent performance &
    delivery. Many organizations seek to reinforce this
    process by the development of loyalty programs.
    example, reward customers with points redeemable for
    prizes or discounts.
 Whereas traditional advertising and promotion programs
    are intended to acquire new customers, and so to
    increase market share, loyalty programs seek to raise
    average purchase frequency. They aim to lock
    customers into buying from the same supplier
Loyalty programs should meet the following conditions:
    1.   Loyalty programs must attract the best customers
    2.   The value created must exceed the value delivered
    3.   They must be designed with the long-term view       19
            Transaction Vs. Relationship

 Marketing based on transactions relies heavily on the
  features of the product or service to achieve competitive
  advantage, and to attract customers. However, this
  leaves it vulnerable to the introduction of competitive
  products that match these features: when this happens it
  is likely that price and profitability will fall as both
  companies fight for market share.
 Relational marketing, however, will create added value
  for the customer above and beyond the core product
  features, and so will be less vulnerable to price-based
  competition.

                                                          20
              Transaction Vs. Relationship
 Transactions where convenience is need of the
  purchaser or consumer. We go to supermarkets that
  involves least travel time.
 Transaction where the supplier has a monopoly position.
  Water supply, electricity supply etc are guaranteed
  repeat business by the nature of their monopoly.
 Example of purchasing petrol from a place where the
  customer does not expect to return. The purchase is
  accidental, a relationship does not exist because it is
  unprofitable to seek to establish a relationship, but the
  customer might have a relationship with the petrol brand.
 Refer to Table 5.1 & figure 5.3 page 71 for discussion.
 Example 5.5 page 67 & 5.7 page 73
                                                            21
                The six market models

Christopher (1991) argue that organizations operate in six
    markets. They should be aware of & seek to meet the
    needs of each of these markets:
•   Customers markets
•   Referral markets
•   Supplier markets
•   Internal markets
•   Employee or recruitment market
•   Influencer market (financial market, governments etc.)


                                                         22
                   Purchasing relationships

Good relationship will contribute to the competitive
advantage of both parties:
1. Economic dimension: there may be the opportunity for a
    supplier to invest in product quality, storage or distribution in
    order to suit a particular customer.
2. Social dimensions: a history of trust, knowledge and
    friendship to build on. This reduces the risks for both parties.
 Adversarial approach: The buying department is driven by
    cost and pressurizes suppliers to minimizes prices. The
    purchaser will rarely need special products, and will not be
    willing to pay for special service

                                                                23
                   Purchasing relationships

   Collaboration approach: this builds ties between buyer &
    seller. This can lead to improved quality, flexible scheduling
    and delivery advanced processes etc.
   Discuss Table 5.2 & example 5.8 page 75
Critique of the relationship approach:
The limited success may be explained by changes in consumer
expectations. Expectation levels are likely to rise as the outcomes
from the relationship progressively increase & vice versa.

Discuss in book     page 250 figure 12.1, page 252, 254
                    page 255 to 257 about quality, TQM, benchmarking

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